In some U.S. states (such as Texas) a HOA can foreclose a member’s house without any judicial procedure in order to collect special assessments, fees and fines, or otherwise place an enforceable lien on the property which, upon the property’s sale, allows the HOA to collect otherwise unpaid assessments. A proposed constitutional amendment in Texas would limit the power of HOAs in such matters. A case in point involves a soldier who, in 2008, was informed his fully paid-for $300,000 home in Frisco, Texas, had been foreclosed on and sold for $3,500 by his HOA over unpaid dues of $800 while he was serving in Iraq.[50] In 2010, the case was settled and the soldier regained ownership of the home. Federal laws protecting military personnel from civil action may have been his defense; however, a gag order prevents details from being known.
Other states, like Florida, require a judicial hearing. Foreclosure without a judicial hearing can occur when a “power of sale clause” exists in a mortgage or deed of trust.[51]
A self-published report by a professor at the University of Washington disputes the claim that HOAs protect property values, stating, based on a survey of Harris County, Texas (which had an unusual legal regime regarding foreclosures): “Although HOA foreclosures are ostensibly motivated by efforts to improve property values, neither foreclosure activity nor HOAs appear linked with the above average home price growth.”[52]
Homeowners association boards can also collect special assessments from its members in addition to set fees, sometimes without the homeowners’ direct vote on the matter, though most states place restrictions on an association’s ability to do so. Special assessments often require a homeowner vote if the amount exceeds a prescribed limit established in the association’s by-laws. In California, for example, a special assessment can be imposed by a board, without a membership vote, only when the total assessment is five percent or less of the association’s annual budget. Therefore, in the case of a 25-unit association with a $100,000 annual operating budget, the board could only impose a $5,000 assessment on the entire population ($5,000 divided by 25 units equals $200 per unit). A larger assessment would require a majority vote of the members.
In some exceptional cases, particularly in matters of public health or safety, the amount of special assessments may be at the board’s discretion. If, for example there is a ruptured sewer line, the Board could vote a substantial assessment immediately, arguing that the matter impacts public health and safety. In practice, however, most boards prefer that owners have a chance to voice opinions and vote on assessments.
Increasingly, HOAs handle large amounts of money. Embezzlement from associations has occurred occasionally, as a result of dishonest board members or community managers, with losses up to millions of dollars.[53][54] Again, California’s Davis-Stirling Act, which was designed to protect owners, requires that boards carry appropriate liability insurance to indemnify the association from any wrongdoing. The large budgets and expertise required to run such groups are a part of the arguments behind mandating manager certification (through Community Association Institute, state real estate boards, or other agencies).
In 2006, the AARP voiced concern that homeowners associations pose a risk to the financial welfare of their members. They have proposed that a homeowners “Bill of Rights” be adopted by all 50 states to protect seniors from rogue HOAs.[55]