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Why the Fuss...What’s Wrong Anyway? A synopsis
When it comes to purchasing real estate in Home Owner Association (HOA) governed communities, consumer protection is virtually nonexistent in Alabama compared to many other states. Lack of disclosure and accountability of homeowner funds, coupled with delayed transfer of common property from the Declarant to the HOA, place homeowners at risk for loss in the biggest investment most of them will ever make in their lifetime.
Purchasers are uninformed, misinformed and most often perform little due diligence prior to a purchase. They more often focus on curb appeal, location, schools, and nearby amenities and make unwise, decisions while underlying issues could surface later that could ruin their investment. Most purchasers are way too trusting and unwisely assume they have the same level of protection in Alabama as in other more consumer oriented states.
Real estate professionals representing buyers are potentially at risk for not identifying and disclosing information that may be considered material in nature although they are “playing against the house” when it comes to accessibility and cooperation. But, real estate companies, their professional associations, as well as individuals Agents who realize the risk, are starting to create their own disclosure and contingent offer forms to better serve the consumer and mitigate liability. Lenders are doing likewise to insure HOA communities are well capitalized and not plagued with issues that could reduce their borrowers’ equity, risk their investment and place the loan in jeopardy.
Purchasers and Agents are often met with resistance, threats or simply dismissed for asking important questions. Purchasers have a right to Disclosure, Accountability and Protection. It should go without saying that these are rights...not privileges. The root of the problem is that Alabama lacks adequate consumer protection to protect the public regarding purchase of real estate subject to HOA control.
Fiduciary requirements can become challenging when the Developer/Declarant (hereafter referred to as Declarant) is an officer of the nonprofit board along with appointees with whom there is a business relationship, i.e. staff, associates, builders, etc. Fiduciary lines become further blurred when this Board is then paid a management fee which is arbitrarily determined by the Declarant. The business activities and control of for-profit companies and nonprofit homeowner associations should be clearly separated.
Municipalities have typically been resistant to implementing out-of-the box solutions citing that “they do not enforce covenants”; however, there are protective measures they could enact as well. Consumers must become better educated, insist on disclosure and accountability, and lobby Legislators to bring Alabama up to the standard of its peer states by enacting consumer protection laws to protect buyers and Agents. Purchasers should look for a real estate Agent who will protect their interests.
A more detailed explanation is available in the “History” section.
Ask your REALTOR®, Buyer Agent how your interests are being protected.
The Alabama Concerned Homeowners Alliance - All Rights Reserved Not Affiliated with the State of Alabama
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