Embezzlements from Homeowner Associations Routine

It’s incredible, really, how common embezzlements are from Homeowners Associations. With 320,000 HOAs across the country, you’d think there would be a major push to clean out the corruption that seems endemic in such HOAs as the latest one in the link below.

There are many fundamental problems with the structure of the modern HOA.  As private non-profit corporations, the HOA is typically beyond the law. Restrictions against government, the protections we’ve grown accustomed to in the U.S. Constitution, don’t apply to the average HOA. As such, dictatorial edicts against such things as freedom of speech, protection against unreasonable search and seizure, and due process happen all the time.

Homeowners in the HOA environment become apathetic.  So when the “neighborhood Nazi” gets elected as the tipping point vote on the HOA board, it’s usually by a very tiny vote by the HOA membership.

Overthrowing the “neighborhood Nazi” or overturning senseless edicts usually requires a “Super Majority” of an already apathetic membership. The idea that Homeowners Associations are “democracy at work” should really be a warning about the true meaning of “democratic tyranny.”

The typical embezzler who recognizes the truth of all the above points, feels no guilt or compunction about dipping into the till. He or she feels they’ve earned the right to help themselves, and they do just that.

How many millions of dollars (or hundreds of millions!) are stolen each year from Homeowners Associations? You just don’t want to know. But research by this writer indicates the crime happens in tens of thousands of communities.  It just gives you a sick feeling in the pit of your stomach.

Source: http://www.winknews.com/Local-Florida/2011-11-23/President-of-Homeowners-Association-Accused-of-Embezzlement

Ward Lucas
Author of
Neighbors At War: The Creepy Case Against Your Homeowners Association

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4 Comments

Filed under HOA, HOA Horror Stories, Homeowners Association

4 responses to “Embezzlements from Homeowner Associations Routine

  1. anonymous

    “Homeowners in the HOA environment become apathetic.”

    True, there is a lot of homeowner apathy in HOAs. And the industry frequently uses this as an excuse when they lobby for more power over the homeowners, or explain their actions to sympathetic judges.

    And industry professionals — the property managers and attorneys — do everything possible to disenfranchise and marginalize the homeowners. Although the HOA itself is supposedly a non-profit corporation, the HOA property management companies and HOA law firms are not, and profit greatly from strife and conflict and oppression in HOAs.

    Shu Bartholomew often points out on her radio program, OnTheCommons.net, HOAs are sold as a carefree lifestyle.

    But even those homeowners who do “get involved” face a sisophystic

    As Mike Reardon has observed, “The folks angry enough to come to a meeting and endure the patented ‘abuse them till they leave’ routine….well most normal people want even less to do with that! It really is a remarkable pathology!”

    Or as former HOA lawyer Even McKenzie put it, the HOA boards are told by the lawyers to do whatever “they can get away with it…If the lawyer tells them ‘Oh, just jack ’em around. Who cares what the rules are? Who cares what the law says?’ it doesn’t make any difference. The transaction costs of enforcing an owner’s rights are so great that they are hardly ever able to do it.”

    To add insult to injury, HOA boards frequently have the power to either (1) discard your vote, and (2) prohibit you from running for the board. All they have to do is simply declare you “not in good standing” with the HOA. And it’s perfectly legal for them to do so. Why bother getting involved?

    While the HOA corporation can penalize you without limit, up to and including taking your house for trivial amounts and reasons, do you know what the penalty is for an HOA corporation that violates the rules and laws? None whatsoever.

    To “get involved” with your HOA either means toe the party line and accept that your “rights” aren’t worth the paper they’re written on, or spend a lot of your own time, your own money, and emotional investment for very little return. Meanwhile, the industry professionals — who’s 8-to-5 job it is to make your life miserable — get to use your own money against you and go home at the end of the day.

    The system is designed to grind down homeowners into submission, and has the law on its side. Not caring becomes the rational economic and emotional health choice.

    “Homeowner apathy” is a feature, not a bug.

    • You are spot on, on every point. As long as there is a profit motive to keep homeowners and HOAs in constant litigation, money will be drained from every homeowner. Now, solutions?

  2. anonymous

    Solutions?

    According to industry professionals, such as your friend HOA2HOA — “an attorney representing HOAs” — wrote “As I’ve said before, education is key & should be free.

    What could be wrong with educating homeowners?

    Of course, by “education” these people mean “propaganda” designed to demoralize the homeowners and keep them in line and subservient to their puppet-boards. Because for all practical purposes, homeowners in HOAs have no rights. Zero. Zilch. Nada. None.

    As Shu Bartholomew, host of On The Commons, has repeatedly observed, the industry professionals instruct their members to treat homeowners like children who need to be properly controlled, disciplined, and trained to obey their “parents” : in this case, the HOA boards, HOA property managers, and HOA attorneys.

    But like the other Communist regimes, the HOA industry puts on a smiley face on its propaganda and talks in terms of “working for the people” and “making the community a better place” and “people helping each other”, etc.

    The last thing these people want is the homeowners to be truly educated.

    True education involves collecting and sharing our stories — so that every one of us who has been abused by our HOA knows that we are not alone. When one person complains, he can be dismissed as crazy. When millions of people do, there’s a problem.

    True education involves exposing how rotten and corrupt the system is; exposing the perverse incentives and moral hazards; and exposing that it’s run by and for the HOA property managers and attorneys, not the homeowners.

    True education involves informing homeowners that they have no rights, while the HOA can violate the rules and laws with impunity. No wonder there are so many embezzlement stories — the system is ripe for such abuses.

    And true education would be telling homeowners that HOA lawyers have the motive and means to take their house for trivial amounts and reasons. Stealing the homes of HOA “members” is a legal, fully institutionalized practice; the bar even offers workshops on the process.

    I don’t think anyone who is truly “educated” about what an HOA is would ever agree to be a part of one. Why would any fully-informed person make their house collateral to whatever debts and liabilities the HOA board creates: especially when that board is unregulated and unaccountable to the homeowners? It’s like co-signing a note with strangers, but far worse.

    Back in 2007, Professor Evan McKenzie, a former HOA lawyer himself, wrote:

    Here’s how I think CAI [ Community Associations Institute ] wants things to end up: The BODs [ board of directors ] would have nearly absolute power over homeowners, whose only options, if they feel they have been mistreated, would be to elect a new board or sell their home and move somewhere else. The association attorney and property manager would (and do) control the BODs. CAI trains and organizes the attorneys and property managers. The states would require certification of property managers. CAI would provide that certification. The out-of-control owner-run insurgent groups would be shut out of the policy process and branded as loons and nutcases, and their websites would be shut down. The press would get off the “HOA abuses abound” angle, and instead go to CAI for comment on community association issues, and print the PR line. Particular complaints about abuses would be conclusively presumed to be either a) lies and distortions spread by neighborhood malcontents who couldn’t get along with Mother Theresa, or b) unrepresentative anecdotes that fail to capture the true level of mass satisfaction with HOA life. And the state legislatures would pass UCIOA [ Uniform Common Ownership Interest Act ] and move on from HOA legislation to other matters, like selling the state tollway system to Spanish and Australian corporations to finance free health care and early childhood education for all. Happy ending. That’s the desired endgame as I see it.

  3. My husband complained about massive overspending and a special assessment on a tiny golf bridge, and asked for an audit once…That’s when the drama started. $100K dollars in ‘settlement’ and $80K in attorney’s fees later, for the most bogus claims you can imagine (for a flower bed border and an invisible therapeutic jacuzzi), and after we moved in terror of being forever ruined by the vicious HOA chairman, my husband learned to shut up. Think that ‘APATHY’ is the homeowner’s fault???? Puhleez. We’re beaten into apathy. Oh, he never saw the books either – duh.

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