The Unholy Triangle
The industry that has grown up around these private government regimes known as homeowner's associations consists of three branches: the Community Associations Institute, the property management companies, and the lawyers associations. I to refer to them collectively as "the unholy triangle." These three groups work in concert to create a legal environment which facilitates the free flow of homeowner's funds from their pockets directly into the pockets of the industry players. The system works like this:
The Community Associations Institute
The Community Associations Institute (CAI) is a trade organization which represents the interests of property management companies and lawyers associations. They collect fees in the form of membership dues from these property management companies and attorneys groups. Twenty percent of the CAI's annual budget goes toward lobbying efforts. Primarily, the goal of the CAI's legislative action committee is to block any attempts by the Texas legislature to apply any restrictions on their activities and also from passing any laws that would grant homeowners some protection from this predatory industry. The CAI, with the help of their membership, lobbied hard in 2003 to defeat Houston Senator Jon Lindsay's recommendations to the Texas legislature. As of this moment, this industry is completely unregulated - no governmental oversight can be applied.
What does this mean to you, the homeowner? It means that you live in a neighborhood where your civil and constitutional rights are severely limited. Through their lobbying efforts, the CAI has convinced the courts to regard homeowner's associations as "not-for-profit corporations," which are not required to recognize the civil and constitutional rights of its members, and you, as a homeowner, are a member of the corporation whether you like it or not. So even though it walks, talks, and acts in every way like a government, the homeowners association is legally viewed as a corporation, and in that way the industry is protected from governmental oversight, while the homeowner remains unprotected from the industry.
In this industry, there is no law requiring developers or real-estate agents to give full and timely disclosures regarding the existence and true nature of the servitudes, also known as deed restrictions, that go along with the property. They can be as deceptive as they like. The only requirement is to get the homeowner's signature on the document; how they do it is their business.
For property managers in this industry, there is no minimum requirement for education, training, or proof of competence; anyone in Texas can call themselves a property manager and go into business.
For Lawyers working in this industry, ethical standards are greatly relaxed. Procedural standards which must be observed when representing a municipality can be ignored when representing a non-profit corporation.
Management companies can thrive in this kind of environment where they can expand their list of services offered to include micro managing the property of the individual homeowners. This micro management entails a great deal of busywork patrolling the neighborhood searching for covenant violators, sending them violation notices, and dealing with irate homeowners on the phone. It all adds up to increased workloads and increased fees. Management companies will often nudge a board of directors into conflict with homeowners simply because conflict generates business, and that is where the money is.
When you get the attorneys involved, the cash register really begins to sing. When they send a violation notice to a homeowner they can charge anywhere from $50.00 to $500.00 per letter. If they are fortunate enough to get an unwitting homeowner into court, the sky's the limit. Remember, that homeowners have no protection under the law. They gave that up when they signed the CC&Rs. Under these conditions, once a homeowner enters a courtroom overcome with righteous indignation, claiming his rights as a United States citizen were violated, the two attorneys both pass go and collect...and collect...and collect...