AN  OPEN  LETTER  TO  THE

ARIZONA  STATE  LEGISLATURE

AN INSIGHT ON HOMEOWNER ASSOCIATION DISPUTES

My name is Charles (Chuck) Harman; I own a property located in the master planned community known as Greer Ranch South located in Surprise Arizona (Maricopa County).  This community has a Homeowners Association (HOA) incorporated as a Non-profit Corporation (501-C) business entity currently operated by an elected volunteer board of directors. These volunteers are required to be homeowner within the community. There are a number controlling documents which provide guidance in the administration of this corporation, of which is the CC&R's, Bylaws, Policies and Procedures etc... This community is a relatively new community built within the last 4 years. The volunteer board has continued to employ the professional management company (Associated Asset Management) and the Corporate Attorney (Roger Wood of Carpenter-Hazelwood) hired originally by the builder(s) / developer(s) prior to the Homeowners taking over the administration of the HOA through an election by the homeowners of the volunteer homeowners to the corporate  board positions. The turnover meeting where the builder(s) / developer(s) relinquished the corporate board positions was held mid October 2006.

I am currently embroiled in a legal battle with the Greer Ranch South HOA in Maricopa County Superior Court which was instigated by professionally erecting a10 x14 Palapas in my rear yard without following the outlined procedures to gain an architectural review committees' (ARC) approval prior to building the structure.  In this dispute, the erected structure has been referred to as a Tiki Hut although the correct terminology is Palapas because of its size.  Upon being notified of the mistake I immediately submitted the forms required for the ARC to review the project. The forms were submitted through the management company keeping the board of directors and The ARC completely anonymous to me all throughout this process until recently when my attorney requested the member's names through a discovery order in connection with the legal battle. The anonymous ARC denied my request for approval.  Although no instructions were provided by the management company as to an appeal process, I inquired about one and submitted a certified letter formally requesting an appeal hearing in June of ‘06. As of the writing of this letter I still have not been invited to a formal appeals hearing and am now within a few months of a jury trial in Maricopa County superior court.

I have always agreed to comply and conform to the wishes of the homeowners. The issue with what has happened in my particular situation is that I have never been given due process in accordance with the bylaws of the Greer Ranch South HOA. In addition, I personally believe there was collusion between the Builders' HOA Board and the Corporate attorney representing the HOA (Roger Wood of Carpenter- Hazelwood) to manufacturer a payday for the attorney and to place the Homeowner controlled board in a lose/  lose position with no real option but to ratify the previously filed lawsuit. Strictly as a matter of fact I inform you the attorney for builder's board of directors filed the lawsuit in this matter just fifteen days prior to the homeowner board elections. Shortly thereafter I received a notice of intent to file a lien on my property for the legal enforcement fees generated by the attorney. Those fees were in excess of $3,000. In effective that action has made my house unsalable since November of ‘06.

The current status of my dispute: I've hired an attorney after months of trying to handle this on my own and we are currently within a few months (most likely September of '08) of having a jury trial on the matter. Cumulative and consolidated legal fees are approaching the $120,000 mark and will probably exceed $200,000 should this matter goes the full course of a jury trial. This expense is that of just attorney fees. The cost of the Maricopa court system (borne by tax payers) to facilitate a jury trial is not included in this figure. All together the cost to myself, the homeowners of Greer Ranch South and the tax payers will be at least a quarter million dollars. Again, I underscore for you                  

all this over a "tiki" hut in which no formal complaint by a homeowner has been filed and I have a signed petetion by five (5) of the immediate nieghbors to the property where the hut is built stating they find it "aesthesticly acceptable".   

I have no expectations of the legislature helping in this particular case or having  any impact on this battle. However, over the past two (2) years I've gained a tremendous amount of insight on the ails of the HOA system.  My experiences with the current array of laws used to govern the HOA system has enlightened me to the fact the current laws clearly favors an attorney for an HOA who uses a predetorial approach with the homeowner and the volunteer board members of a HOA  administrated community. There are no checks and balances provided in this system while the current system acts as a sudo governmental agency, often acting as judge, jury and executioner within the community its board oversees. It is my hope this letter will be the catalyst for future legislation which will eliminate the current environment in which a predatorial attorney can continue to thrive.

This letter will suggest new legislation be enacted on a few specific systemic issues within the HOA laws and will provide you with my direct experiences with these issues.  I will stay on point offering a possible solution through the eyes of a businessman with experience at the senior executive level and only a superficial understanding of the political world you work in.  I do however; believe I offer this insight from a stable moral compass and value system that has served me well in determining the differences between right and wrong.

In beginning with my suggestions I'd like to state first the formation of an HOA within a municipality is clearly filled will many monetary advantages for the builder(s) / delevoper(s) and the municipality itself.  For example: The builder(s) / developer(s) are  asked whether the roads of the project are going to be public or private roads in the application process. The answer of private roads triggers the formation of an HOA.  The burden of care and repair of those roads within the newly formed HOA community now shifts from the municipality to the homeowners of that community.  While at the same time the builder(s) / developer (s) receives a discount on the impact fees associated with bonding the road. The big disadvantage to the homeowners is they received a tax increase (in effect) by assuming the care and repair of the private roads in their community while the individual who builds on a public road has the municipality caring and repairing his road at the same tax rate.  Systemically this is an inherent cause and effect consequence to the homeowner choosing to live in a HOA administrated community.

Secondly, the formation of an HOA in essence sets up a level of governance with no accountability. Most HOA are administrated by a group inexperienced volunteers who are now given the power through state laws to fine, enforce, and adjudicate without any governmental oversight.  In addition, should the bylaws or CC&R's  be miss-applied or be written in contradiction with federal, state, or local law as a consequence that action goes unchecked. 

THE CHALLENGE:  Make HOA documents easy to understand and reviewable prior to the sale of a property within an HOA controlled community.

In my particular case I was not given a copy of the guiding documents of the HOA prior to closing nor at closing on my property. After being told by the management company I could purchase a copy of the CC&R's for $100 several times I received a copy of the Bylaws approximately six months after my closing, mailed to me without cost. I immediately read them and have read them several times since and still do not have a clear understanding of what all the implied rights and responsibilities are for me as a homeowner. The CC&R's and the Bylaws are written in legal terminology with clever uses of such words SHALL and MAY. In my particular case I bought a newly constructed home in a new development. If I were to buy a resale located in an HOA administrated community I would have liked copies of the last years board meeting minutes, copy of the HOA's current financial statement, some  statistical data on the fines levied against the homeowners in the community ( such as how many fines and for what violations) and any pending lawsuits.

PROPOSED SOLUTION: Make it the responsibility of the state attorney general's office to review and approve all new filings of CC&R's. Make sure the language is understandable at the 8th grade level and the rights and responsibility are clearly defined.  Insure the documents do not contradict any federal, state or local laws. Mandate these documents are provided to the buyer by the seller at least ten days prior to closing and allow the buyer a review period from the time they receive these documents in which they have the right to cancel the purchase contract without recourse or penalty during this document review period.

THE CHALLENGE:  Make the HOA accountable for the incorrect administration of the guiding documents of the community.

In my particular case the guiding documents provide several distinct and mandatory dispute resolution actions required prior to filing a lawsuit against one of the homeowners of that community I.e. a mandatory 2/3 homeowners approving vote prior to filing any lawsuit against a homeowner in its HOA membership. In addition, state law requires an appeals process be communicated to a homeowner when a homeowner is cited for a violation. Those required actions never happened and board minute meetings while the HOA board was under the builder(s) control don't exist. An engagement letter or board vote authorizing the attorney (Roger Wood of Carpenter-Hazelwood) to file a laws suit in Maricopa County Superior Court simply does not exist.  Even though written or documented authorization doesn't exist the Homeowner elected volunteer board has ratified the lawsuit without taking any action to correct the previous boards' actions.

PROPOSED SOLUTION: The local municipality or a county agency should be responsible for conducting a conformity audit at least once every 2 years with each state registered HOA.  The auditor should have the authority to levy substantial fines per occurrence should an HOA be acting contrary to its state approved guiding documents. Should a HOA be managed by a professional management company that management should be required to indemnify the HOA for wrongly administering the guiding documents, in essence protecting the homeowners from any wrong doing by the management company. Repetitive violations by a professional management should restrict their ability to conduct business with new clients and / or fine(s) should be applied, much like suspending a driver's license on a DUI conviction.  This agency / governmental overseer should be akin to a state insurance commissioner in function, authority and responsibility.

THE CHALLENGE:  Eliminate the predatory environment within the HOA where attorney can intimidate homeowners by threatening large legal expenses if a homeowner chooses to challenge an HOA violation.

While I was per se in my particular case the opposing attorney (Roger Wood from Carpenter -Hazelwood) made the following statements to me in our conversations:

•1-      By not taking down the Tiki hut all you're doing is running up the legal expenses for yourself and your neighbors.

•2-      If we go to trial, our firm's legal bill will probably exceed $100,000 that you'll have to pay.

•3-      The longer you keep the Tiki hut up the more the more it's going to cost you and your neighbors.

•4-      You live in an HOA; you do not have the right to due process.

He in essence was using his own fees as intimidation. In most cases people just do whatever the HOA is asking to avoid the cost of litigation regardless of right or wrong. Often and even in my case the cost of litigation puts your home in jeopardy.

Now that my alleged violation is on a path to a jury trial I have observed some of the techniques use by Roger Wood to run up the billable hours. The most recent experience was my deposition. By law and procedural rule the opposing attorney has 5 hours to depose me. He agreed to begin the deposition at 1pm knowing he had another appointment he had to leave for at 5pm, 4 of the 5 hours available to him.  This allows him one more hour of deposition time he needs to set-up for, by splitting the time he bills another 3 to 5 hours . In addition, during the deposition he used the first 2 hours to ask me employment and background questions that my current resume would have easily answered for him.  This technique insures he uses all of his available hours and he gets nearly a double billing.

PROPOSED SOLUTION:  Enact legislation for the amount awarded for legal fee to the prevailing party in a HOA lawsuit to be no greater than 3% of the tax assessor's valuation of the property in question. I.e. if the assessed value is 500,000 the most a winning attorney can earn by litigating the case is $15,000 from the losing party.

THE CHALLENGE:  Ensure compliance with existing State Law(s) governing HOA's.

My experience with the attorney (Roger Wood) filing the lawsuit against me has lead me to conclude any law enacted by the state legislature which does not have a penalty directly corresponding to the violation of that law will be ignored and violated if it suits that attorney to do so. Case in point:  AZ statue 33-1803 specifically paragraphs c and d. - Notice of procedure to contest the violation, has been clearly and purposely violated by this attorney to expedite the filing of the lawsuit against me. There is already an inherent conflict between an HOA and an individual's personal property right, by allowing an HOA or its attorney to purposely violate a state statue without consequence will only insure it will happen again and again.

PROPOSED SOLUTION: In the event an attorney is found to have violated or endorsed / suggested a violation to a state statue in regards to homeowner's rights restrict his ability to litigate future HOA disputes. In the event an HOA has purposely violated state law mandate more frequent local government auditing and / or fines should be imposed.

I have shared with you some of my experiences with a miss guided HOA board, an aggressive predatorial attorney and a management company who is constantly in a state of justifying their existence. The few experiences I've shared with you have not been pleasant ones. What you haven't been privy to is the interaction with these entities and the people who represent them. It has been hostile from the first contact and has intensified since then.

Taking a step back to give perspective to my situation, in trying to improve my homestead I may have incurred a technical violation to a rule and in an effort to have the rules (an appeals hearing conducted) adhered to by the HOA I'm currently in jeopardy of losing my house. It's my personal belief the intent of HOA laws are to provide a mechanism for homeowners to protect the value of their properties and not a right of passage for a few board members to try and make everyone's house in the community look exactly the same.

I close with this brief story which I believe is reflective as to an attitude HOA board members, HOA attorneys, HOA management companies and state laws governing HOA's must have incorporate into their administration and guidance of  HOA matters over the individual homeowners for which the HOA has been established to protect.

 A few years ago I had the great privilege and opportunity to have lunch with Maya Angelou in a small interactive setting. During our conversation the subject of America being a melting pot was discussed. At one point Dr. Angelou had the attention of the table and offered the following perspective. I paraphrase -

"Rather than view America as a melting pot it would serve us well to view America as a salad bowl where many colors, textures, shapes and tastes retain their own individuality while coming together to form a beautiful and delicious salad".

If this attitude had been applied to my current situation there would have been no legal action taken and only a correction to a possible technical violation would have been needed.

As a footnote: The Mountain Gate HOA (administering Cooper Canyon Ranch where I currently reside  approximately 2 mile east of Greer Ranch on the same road ) has nearly the exact same guiding documents ( word for word) and their board has approved the building of the exact same "Tiki hut" in the backyard.

Contact Information :

Charles (Chuck) L Harman

HM 623 444-6104    CELL 602 702-7206   Fax 623 444-9565

Case reference #  - CV 2006-015279

Superior Court of Arizona Maricopa County - Greer Ranch South Homeowners Association Inc  Vs  Charles L Harman Jr

Greer Ranch's guiding documents can seen at the following website: www.greerranchsouthhoa.org