Usury Law

I am a homeowner for 40 years in a 76-year-old Connecticut homeowners association of individual homes and roughly 10 acres of common grounds. We have 45 property owners in the community. We pay $1,903 per year in annual dues, which covers garbage collection, snowplowing, and road and property maintenance of our common properties. We are governed by a 7-seat Board of Directors, most of whom have served voluntarily on the Board for a decade and more.

Over the last 10+ years, our Board has grown increasingly entrenched and nonresponsive to member concerns, and at the same time have begun making many managerial and administrative mistakes that are severely damaging the values of all the homes in the Community as well as the Community as a whole. Through indifference and neglect,they have lost many of our most vital books and records, failed for years to file required annual reports with the Secretary of the State and thereby turned us into corporation that is "not in good standing" with the State of Connecticut. They have prepared Board meeting minutes that fail to record votes. They have produced grossly inaccurate financial reports, and spent thousands of dollars on pet projects of their own that were never authorized by recorded votes of either the Board or the general membership.

They have also -- and obstinately -- refused to take legal action (as they are authorized to do under the Association's bylaws and the laws of the State of Connecticut, to collect roughly $40,000 in delinquent dues and assessments (some dating back five years) that are owed to the Community -- in some cases by former Board members. Those delinquient dues now total roughly half our annual operating budget, and to make up the shortfall, they have raised our dues 10% annually for the last four years, resulting in a total increase of 44% in our annual dues.

A growing number of our members have been financially unable to make these payments and have now stopped paying dues entirely. So, to put pressure on them to pay up, the Board three years ago began charging an 18% interest rate, compounded monthly, on all delinquent balances. Though the usury ceiling in the State of Connecticut is fixed by statute at 12%, the Board is now claiming that usury laws don't apply in Connecticut to non-stock corporations such as our Association.

I have checked Connecticut statute law thoroughly and it is clear from the statute that usury law is fully controlling in this situation. But I'm wondering if any of you are familiar enough with situations of this sort to point me toward any controlling or relevant case law to settle this matter once and for all. Thank you.

Chris - has the HOA filed an liens?

Check your bylaws or CCRs for the dues increase rate the board can implement without a vote of the Members.

Christopher,

I just found this section, and wonder if it is applicable to your HOA.

Sec. 47-257.

(b) Except for assessments under subsections (c), (d) and (e) of this section, or as otherwise provided in this chapter, all common expenses shall be assessed against all the units in accordance with the allocations set forth in the declaration pursuant to subsections (a) and (b) of section 47-226.

The association may charge interest on any past due assessment or portion thereof at the rate established by the association, not exceeding eighteen per cent per year.

If these two statues conflict (12% and 18%), its possible a judge will refer it to a higher court.

Yes, you will be paying the lawyers to go from court, court, to court. In the end everyone looses except the lawyers.

Christopher after re-reading your original post, I have come to the conclusion that you are attempting to treat the symptom rather than the disease. If your BOD is as dysfunctional as you posted:


Instead of attempting to overturn what you see as a poor (possibly illegal)policy IMHO you should be rallying your apathetic neighbors and replacing the Board with people willing to take a few hours out of their schedule and step up and take control. Starting with you, if you have time to complain you have time to fix the problem.

Edmund Burke's quote: "All that's necessary for the forces of evil to win in the world is for enough good men to do nothing." Is especially relevant for HOA living.

Not an attorney but IMHO, yes. (Emphasis added)

Substitute House Bill No. 5434

Public Act No. 10-186

AN ACT CONCERNING THE COMMON INTEREST OWNERSHIP ACT.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 47-202 of the 2010 supplement to the general statutes, as amended by section 1 of public act 09-225, is repealed and the following is substituted in lieu thereof (Effective July 1, 2010):

In the declaration and bylaws, unless specifically provided otherwise or the context otherwise requires, and in this chapter:

(1) "Affiliate of a declarant" means any person who controls, is controlled by, or is under common control with a declarant. (A) A person "controls" a declarant if the person (i) is a general partner, officer, director, or employer of the declarant, (ii) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than twenty per cent of the voting interest in the declarant, (iii) controls in any manner the election of a majority of the directors of the declarant, or (iv) has contributed more than twenty per cent of the capital of the declarant. (B) A person "is controlled by" a declarant if the declarant (i) is a general partner, officer, director, or employer of the person, (ii) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than twenty per cent of the voting interest in the person, (iii) controls in any manner the election of a majority of the directors of the person, or (iv) has contributed more than twenty per cent of the capital of the person. Control does not exist if the powers described in this subsection are held solely as security for an obligation and are not exercised.

(2) "Allocated interests" means the following interests allocated to each unit: (A) In a condominium, the undivided interest in the common elements, the common expense liability, and votes in the association; (B) in a cooperative, the common expense liability and the ownership interest and votes in the association; and (C) in a planned community, the common expense liability and votes in the association.

(3) "Assessment" means the sums attributable to a unit and due [to] the association pursuant to section 47-257.

(4) "Association" or "unit owners' association" means the unit owners' association organized under section 47-243.

(5) "Bylaws" means the instruments, however denominated, that contain the procedures for conduct of the affairs of the association regardless of the form in which the association is organized, including any amendments to the instruments.

(6) "Common elements" means (A) in the case of (i) a condominium or cooperative, all portions of the common interest community other than the units; and (ii) a planned community, any real property within a planned community owned or leased by the association, other than a unit, and (B) in all common interest communities, any other interests in real property for the benefit of unit owners which are subject to the declaration.

(7) "Common expenses" means expenditures made by, or financial liabilities of, the association, together with any allocations to reserves.

(8) "Common expense liability" means the liability for common expenses allocated to each unit pursuant to section 47-226.

(9) "Common interest community" means real property described in a declaration with respect to which a person, by virtue of his ownership of a unit, is obligated to pay for a share of (A) real property taxes on, (B) insurance premiums on, (C) maintenance of, (D) improvement of, or (E) services or other expenses related to, common elements, other units or any other real property other than that unit described in the declaration. "Common interest community" does not include an arrangement described in section 47-219a or a covenant described in section 47-219b. For purposes of this subdivision, "ownership of a unit" includes holding a leasehold interest of forty years or more in a unit, including renewal options. "Ownership of a unit" does not include the interest which a resident holds in a mutual housing association, as defined in subsection (b) of section 8-214f, by virtue of either a state contract for financial assistance or an individual occupancy agreement. An association of property owners funded solely by voluntary payments from those owners is not a common interest community.

Right, I agree with you totally. The Board is just being protective, stubborn and self-defensive. It would be an easy matter to change the bylaws with a "technical correction" to reduce the annual rate to 12%. They just don't want to admit that they're wrong. My goal on this posting is to compel them to accept the fact that they are. Thanks.

I know that, but we were created in 1935, and according to the Act, and to come within the umbrella of the Act, we thus must have filed a so-called “Declaration” with lots and lots of details required about our organization, and we haven’t done that. Additionally, and separately, we are a non-stock corporation and as such I am not sure we have any "common onwnership interests" at all. Thanks for your inmterest in this. Regards.

The extension of a credit is the same as the granting of a loan. If you owe me $100, payable tomorrow, and I tell you that you don't have to pay be back for a year, I have just loaned you $100 for a year. But if I tell you that when you pay me back you have to do so at 18% interest, I have just charged you a usurious interest rate for that loan under Connecticut state law. That's my point.

EllieD: Sorry I didn't answer your other questions. Yes, we have an Articles of Incorporation, and we have some bylaws. But so far as I am aware, we do not have any "common" properties. We do have roughly 11 acres or so of real estate, but that real estate is owned by our "non stock corporation" and though I may be wrong, as "members" I do not think we each hold an undivided interest in any of it.