Indiana Legislation

Legislation is passing through the Legislature in Indiana which appears to originate more from the basis of a disgruntled HOA homeowner than what is practical or beneficial for HOAs and homeowners alike. Can anyone shed any light as to what prompted this legislation?

HOAs are fairly new to Indiana. As I see it, the problems are more with realtors who are ignorant of HOAs and developers who make their money and leave the homeowners with many problems to clean up and limited funds to do so. Perhaps developers and realtors should be the focus of legislation, not complicating the HOA concept through poorly written laws.

John,

Or Possibly our George?

Joyce - please be mmore specific. Just what proposed laws are complicating things for HOAs?

Susan:

I was troubled by a couple of items in the legislation. It might be my misinterpretation rather than an issue to be concerned about.

The first deals with dissolution of the Association. When the common area is deeded to the Association, and the Association is dissolved, the common area would have to be divided somehow. Not only would it require the expense of a survey, but how does one divide a common wall?

The second had to do with language involving a civil action for failure to pay the assessment.

In part it reads....

If the member fails to pay the assessment within the time period described in subdivision (1)(b), the homeowners association may bring the civil action as follows.......

Then it says.....

A homeowners association may not expend association money prosecuting a civil action described in subsection (a) against a member.

By the way, an amendment, Section 12, was inserted at the last minute into HB 1071 (now in the Senate Judiciary Committee) that is a more sensible regulation of political signs in homeowners associations. It reads:

Sec. 12. If the governing documents contain a provision concerning the display of yard signs in a subdivision, the provision may not be more restrictive than any applicable local ordinance concerning the display of:
(1) politically related yard signs; or
(2) yard signs concerning the sale of real property.

Both bills are being sponsored by Senator Delph. Sholuld HB 1071(now in the Elections Committee) become law, HB 1085 becomes redundant. (See http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/68167/view/topic/Default.aspx)

"George," which lobbyist group pushing the various legislation do you work for?

You can start your search here for published written opinions. http://www.in.gov/judiciary/opinions/

However, the problem we all face is the number of superior/circuit court cases that are not published. Some, local court decisions can be searched for here: http://mycase.in.gov/default.aspx More numerous are the small-claims court cases that have no published record, but end up being the cases that most legislators tend to hear about, since they affect constituents directly.

If you have access to Lexis or West Law, you can do much more thorough searches.

I am pleased to see that someone is taking the initiative to do some independent research on their own.

HB1071 is not comprehensive legislation. It deals with a few key issues. Up until this time, there has not been legislation specific to homeowners associations. This bill, for the first time, adds an article entitled Homeowners Associations to the Indiana Code that is sure to be further expanded and amended in years to come.

As you saw, HB 1071 did not pass the House with an overwhelming positive vote. And I know that there is at least one key legislator who expressed an utter lack of knowledge that covenant communities even existed. (He does not live in a covenant community.) He was appalled that an association could foreclose under current law for non payment of fees.

The General Assembly has a long tradition of being reactive rather than proactive when it comes to legislation. This is not ideal legislation by any means, but it is a start. While I do not favor several of the provisions contained in HB 1071, my greatest concern is that it creates a dual system of regulation, one for associations formed before this legislation goes into effect and one for associations formed after. That is not particularly healthy. There is no motivation for an existing association to agree to be regulated by the new legislation.

This is the time for you to contact your state senator with your opinions and get your neighbors organized to express their opinions as well. The bill is currently in the Senate Judiciary Committee. There is no assurance that it will receive a hearing. (The Indiana Senate is controlled by Republicans, and there was significant number of Republican votes against this bill in the House. I am not sure whether this was party politics or otherwise. The bill had bipartisan co-authors, and it is being sponsored in the Senate by Senators Boots (R), Delph (R) and Lewis (D).)

And, by the way, it is perfectly permissible for a homeowners association through its board of directors to take a stand and express its opinion on this legislation.

Your questions about arbitration are addressed by the Supreme Court's Alternative Dispute Resolution Rules, http://www.courts.state.in.us/CourtMed.nsf/adr_rule

I do not have relevant data on the status of legislation affecting homeowners associations in the various states. I think last November I found some information that stated that 34 states were considering legislation. Community Associations Institute, the professional organization serving property managers, may track such legislation, but I am not privy to it.

My expectation is that, given the impact of poor economic conditions on housing, there will be increasing interest in new legislation affecting homeowners associations in the coming years. We are finding that the benefits of living in covenant controlled communities during good times, are becoming burdens during bad times.

As I have posted elsewhere, the notion of a private, covenant controlled homeowners association is a work in progress both on the legislative front and the social front. Equally important, as you so rightly observe, is that associations are not cut from the same cloth. One set of governing principles, one set of laws is not appropriate for all associations.

Further covenants are both too easy to amend and to difficult to amend. Many associations are saddled with poorly-written, unworkable covenants that were written to serve the developer and are no longer germane to the association or its members today.

The challenge is to achieve a balance between the rights of individual property owners and the needs of the community. Both should have equal standing, but more often than not, the balance is in favor of the association.

One approach I find particularly appealing that works toward a balance between homeowner/association, is to give individual homeowners equal rights with the association to enforce covenants and rules and regulation, and to enable associations explicit discretion in their enforcement mandate. That gets the association board out from under being the dreaded "covenant police," and it allows individual homeowners to settle such things as noise issues (that only affect a small number of units) between themselves.

I would like to see any legislative proposals recognize the extremely low participation by homeowners in association affairs, and find a way to deal with it, such as mail ballots in lieu of annual meetings.

I would like to see a prohibition on foreclosure for failure to pay assessments, but I think that would shift the burden too far toward the owners side of the balance. Without fines and without the ability to foreclose, associations have limited enforcement capabilities.

What I would like to see is the implementation of low/no cost, quick alternative dispute resolution options for both homeowners and associations. I do like the notion of a $4 per year "tax" on units to fund such programs through state consumer protection offices. Alternatively, it may be desirable to extend small claims court powers to provide injunctive relief for alleged covenant violations or for illegal association activities.

But none of this touches on issues such as developer control and turnover, obligations for disclosure to a purchaser by seller, or obligations of holders of foreclosed properties. These issues deserve consideration apart from the governing principles of homeowners associations.

If the link does not work in your browser, cut and paste the following:

http://www.in.gov/apps/lsa/session/billwatch/billinfo?year=2009&session=1&request=getBill&doctype=HB&docno=1071

The bill as it came out of the House can be found here:

http://www.in.gov/legislative/bills/2009/HB/HB1071.2.html

I continue to have many concerns about this legislation.

I maintain this to be a covert Bill that was instigated by an isolated group or groups of homeowners. This Bill impacts an entire state when the alleged problem may have been local and may have been better handled at the local level.

The reason homeowners were not represented is there is no network for homeowners in which information is disseminated. Had it not been for this forum, I would have not known about it.

Since I became aware of this legislation late into the process, I’ve had limited time to do any research. What little I was able to do, I was unable to find where it had been addressed in prior sessions of the legislature or that it was a widespread issue. Perhaps someone can provide me with links.

There are varying degrees of HOAs. They can range from 10 units to 1,110. There are varying forms of HOAs.....subdivisions with limited activity, to a community where common areas and buildings are maintained. This variation needs to be distinguished in the legislation.

Although this legislation does not impact current HOA’s, it does raise questions as to what happens when a developer creates an HOA and when it is turned over to the homeowners. If the homeowners choose to dissolve the Association, how many dollars will it take to perform the paper work to dissolve? How will the property established by the developer to be covered by the HOA be divided up and/or maintained and how many additional dollars will that take? Where is the money going to come to fund such endeavors?

If the HOA is dissolved, are local governments going to willingly pick up the tab for street maintenance and lighting which previously was covered by the HOA. It boggles my mind, the potential far reaching impact of the legislation.

The arbitration sounds noble, but given the complacency/apathy of homeowners, it makes me wonder about it.

I attended a “town hall” meeting with legislators. When the legislators were questioned about HB1071 it was disconcerting to see the puzzled looks on their faces. It was a deer in headlights moment. Upon personally speaking to the senator from my district, it was clear the senator was not familiar with the need for the legislation or its impact.

I know there are more knowledgeable individuals than I posting on this forum. I look forward to your input and putting my mind at ease.

I admit that I’m playing catch-up on this issue. This legislation will not impact my current situation, but if I choose to relocate to a newer HOA after the date indicated in the legislation, it will definitely influence my decision not to move to the newer community. What about the unsuspecting homeowner choosing to live in a newly established HOA only later finding homeowners choosing to dissolve, thus impacting their chosen lifestyle.

The "lien" issue is a whole other matter which I can't even begin to wrap my mind around.

This legislation needs more thought and research. It is my hope that it does not pass.

Joyce,
I hope George will come back with some elightenment about the formation of this legislation. From reading his posts he seems somewhat favorable to the legislation because it did have owner input.

But, I never said that, cross it off, about the only thing I am an authority on is getting out of bed, I have never failed to do that. All the rest is iffy.

I'm with Joyce - from the way the bill reads, it wouldn't apply to my HOA if it's signed into law because we were established long before 7/1/09. But some of these provisions (like permitting delinquent owners to vote unless the delinquency extends 6 months or more) are just plain silly - why should someone who isn't paying the bills have a say in how the money's spent?

And, as Joyce points out, the bill doesn't distinguish between communities consisting of common buildings (e.g. high rises or townhomes, like mine) or those with single family detatched homes. Some of the provisions in this bill may not have as much of an impact in the latter, but I shudder at how this could impact a community of the former.

(Sometimes I wonder who's worse - the idiots running the show in the Indiana General Assembly or the knuckheads that voted them in?)

I'll add another one: Or the people claiming to be for HomeOwner Rights who are actually trying to diminish or abolish HOAs altogether.

I'm attempting to Google as much info. this morning as I have time. I stumbled upon an item from www.boselaw.com/publications.cfm?new_id=133.

The item dated April 1, 2009, discloses that in 2007 an Indiana statute went into effect which "(1) allows the HOA to record a notice of lien (2) foreclose the lien; and (3) in some circumstances, preserve its rights should the real estate be sold."

For further reference:

http://www.in.gov/legislative/bills/2007/SE/SE0232.1.html

SECTION 3. IC 32-28-14 IS ADDED TO THE INDIANA CODE AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2007]

Access the proposed new "lien" language and compare the two. Draw your own conclusions.