Aaron Layman's Katy Texas Real Estate Forum

Planned Community Madness In Cinco Ranch - Managment Companies Pile On The Fees When Buyers/Sellers Request A Resale Certificate

Imagine you've owned your home for four years, taking great pride in the curb appeal and overall appearance of your home, performing maintenance as needed and generally keeping things in tip top shape.  The time comes to sell your home, and your prospective buyers ask for a resale certificate from your Cinco Ranch association management.

Depending on whether you live in Cinco I or Cinco II, that could mean either PCMI or CIA Services.  Unbenownst to you, you fill out the appropriate form requesting the certificate since you know you've paid your dues on time every year.  As part of the resale certificate process, Cinco management also sends out an inspector, (although they won't provide the name of said inspector) and then they send you a notice containing the following language...

"The corner landscaping requires twenty-five 5 gallon size shrubs – there are none. Please
install twenty-five 5 gallon size shrubs."

"The front landscaping requires forty 1 gallon size shrubs – there are four. Please install
thirty-six additional 1 gallon size shrubs."

This is language is from an actual notice sent to one of my clients.  There were actually five other items listed on the notice, but these two were the most comical as they point to the absurd requests coming out of the Cinco Ranch compliance department.  I called the compliance assistant for CIA handling Cinco Ranch, and she would not provide the name of the inspector who visited the property.  One of her assistants only had this to offer:

"Thank you for your e-mail regarding the non-compliance your client received on their home. We do not provide our inspectors names as they are contracted by C.I.A. Services and not by the community."

The Addendum for homeowners associations relating to real estate purchase contracts will be changing next year, with the costs for those resale certificates shifting to the buyers.  This a long overdue change, because it will bring more attention to the overcharges by various management companies relating to the preparation of the HOA documents.

Instead of serving the residents of the neighborhoods they oversee, some management companies are tacking on unecessary fees for simple document preparation and inspections.  If you've paid your dues on time for years and maintained your home, you would think your HOA would be there to help you when it came time to sell your home.  If you live in Cinco Ranch, the operations of the compliance department call that assumption into question.

As a practicing real estate broker, I can appreciate the importance of deed restrictions.  I take a rather critical view, however, of abusive and counter-productive policies pursued under the guise of community management.

If CIA's inspectors stand behind their work,  you would think they would have no problem disclosing their names.  The fact that CIA chooses to keep their identities hidden speaks volumes about what they are doing and the lack of accountability they have to the homeowners they are supposed to be serving.

For all of it's many wonderful assets, the over-reaching compliance department of Cinco Ranch is certainly not one of them.  When Cinco's management companies flag perfectly nice, well-maintained homes for supposed non-compliance issues which have existed for years, they are practicing retro-active abuse of power.

I say this because the property in question was actually built in 2007, with the landscaping installed by Village Builders.  If the property was non-compliant, you would think the owner would have been told prior to purchase or at least within the first year of ownership.  You would be wrong in this case, because this is where the issue of resale certificates comes into play.  The order for the resale certificates is another opportunity for the management company to generate profits for the HOA by charging a few hundred dollars for the certificate, along with fees for inspections and re-inspections.

We're talking several hundred dollars in fees before you even get to costs for actually addressing the supposed compliance issues.  And if you are wondering, no, that does not include the $300 transfer fee for Cinco.  That transfer fee is on top of your certificate fee and inspection fees.  Such is the case when logic gets thrown out the window and planned community management becomes planned community madness.

Is your Cinco Ranch home compliant?  If you have to order a resale certificate, you may be surprised at the answer!

Updated 11-22-2011 - My clients receive a variance on their property after submitting various forms of evidence outlining the folly of the notice which was issued.  After doing some research and photographing various homes in the area, it appeared that none of the roughly 90 or so homes in this section would have met the guidelines requested by CIA.  While doing my research, I had the opportunity to speak with a few other homeowners as well, and they were not happy with the over-reaching hand of the HOA.

The builder/developer guidelines are meant to be just that, guidelines.  Sending an inspector to count plants and measure the caliper of tree trunks is utter nonsense.  I should also point out that the people performing the supposed compliance "inspections" have no objective way of determining a 1 gallon shrub from a 5 gallon shrub which is planted in the ground.  Plants grow differently depending on soil conditions and other factors.  Unless the inspectors are going dig the plants up and check the root bulb, the whole exercise is a joke.

The point of the matter is that the HOA exists to protect property values and maintain a semblance of order in the neighborhood.  When the HOA attempts to retroactively apply updated guidelines to homes that are several years old, a compliance inspection should be a subjective matter.  Counting the numbers and sizes of plants is just plain nonsense.  More importantly, if the homeowner has been a member in good standing with no documented compliance issues, the owner should not be punished when they decide to sell their home.

It is my opinion that the resale certificates and inspections highlight the broader problem with HOAs, in Texas.  When given the opportunity to overcharge for unnecessary services, the HOA will error on the side of revenue.  Cinco ranch is approaching a 1000 sales per year.  That translates into $175,000 of revenue generated by the resale certificates averaging the cost of Cinco I and Cinco II ($175 per certificate).  That doesn't even take into account the subsequent inspection fees which may be piled on as well.  In addition, owners are also paying $300 in transfer fees on top of the certificate fees every time a home is sold.  That translates to almost half a million dollars in fees generated by the Cinco Ranch HOAs every year due to transfer of ownership!

I have a simple suggestion for the Cinco Ranch HOA.  Why not lower the cost of the resale certificates to $50, and do away with most of the "compliance inspections" altogether.  The certificates only take about 15 minutes to prepare, and most of the inspections are unnecessary.  HAR MLS guidelines stipulate that listings must contain a minimum number of photos, and almost all listings contain photos of the front and exterior of the home.  For recent listings, a simple HAR search would tell the management company whether the owner is maintaining the yard.  If a drive-by is needed, those visual inspections only need to take a minute or two.  Getting out and measuring plants is a waste of time and money for the HOA and the homeowner.

The planned community folly in Cinco Ranch and other master-planned communities in Texas highlights the need for further reform in the industry.  When it comes to HOA's in Texas, you are presumed guilty until you prove otherwise.  That needs to change, and until it does, homeowners will likely continue to deal with unaccountable companies and individuals wasting their money.

Arrow Community Management Shuts Down, Leaves Avalon HOA Searching For Alternatives

Arrow Community Management has unexpectedly gone out of business.  The Avalon at Seven Meadows Board reports that the Arrow office is empty, and the company is no longer returning calls.  The Avalon board has been advised by their attorney to formally terminate the company and look for a new vendor.  Avalon residents have been advised to direct any correspondence in the interim to KatyAvalon@gmail.com.  Any Avalon HOA payments are to be directed to the current board treasurer.

Update (9-28-11)  ABC 13 reports that Arrow's owner, Taggert Mayfield, was sentenced earlier this month to three years deferred adjudication after pleading guilty to mishandling about $20,000 in HOA funds.  It appears the amount of money mishandled by Mayfield may continue to climb as investigators look into additional complaints.  

Arrow Management Charging $675 Cap Fees On Transactions In Avalon At Seven Meadows

Residents of Avalon at Seven Meadows should be aware that their new management company Arrow Community Management is now charging a $675 cap fee on all sales as part of an amendment to the Avalon covenants recorded in December 2009.  The developer apparently threw in the surprise charge when the community was turned over to residents a few years ago.

The $675 back-door transfer charges are a bit surprising, because the fee has not shown up on previous sales. I've sold several properties in Avalon in the past few years, and none of the settlement statements reflected a cap fee.  I asked Arrow to point out the clause in the restrictions which allowed the fee, and was pointed to section 5.3 of the declaration...

 
Cap fees such as this were an issue in recent legislation contained in HB-8 which was enacted earlier this summer.  HB-8 was proposed to limit hidden revenue streams to developers and other third-party interests.  Not surprisingly, HOA management lobbyists managed to include exemptions in the bill to protect their hidden revenue streams built into HOA covenants.

New rules will require HOAs and their management companies to disclose their deed restrictions to the public next year, but it is still up to home buyers and their agents to dig through those covenants and title commitments to see what hidden charges might be lurking.  Cap fees like the ones in Bridgeland (0.5%) and Towne Lake (1.0%) are no doubt catching many buyers and sellers by surprise when they get to the closing table.

It's unfortunate that HOA's and their management companies don't do a better job of disclosure, but when you have crony capitalists like like John Carona (owner of Associa Inc.) masquarading as impartial legislators, the mess we have in Texas is not surprising.

Senate Bill 142 Raises Concern For Powerful HOA Interests

It would seem some Katy area residents are concerned about proposed legislation in SB 142, currently pending in the Texas Legislature.  The particular message thread I noticed yesterday was soliciting a call-to-action from area homeowners, claiming that passing the legislation would cause HOA dues to increase and bring chaos to area master-planned communities like Cinco Ranch.

I find that arguement rather weak since the text of the actual bill only serves to provide some checks and balances to an already powerful HOA/property management coalition.  The provisions in Senate Bill 142 would provide much-needed transparency in Texas HOA operations.  The additional transparency and disclosure requirements of SB 142 would be a welcome change for Texas home buyers purchasing property in one of these mandatory associations.   As reported in Tuesday's Houston Chronicle, it appears homeowners will need to keep working on this needed reform, as the bill has not made it through the House in the current session.

I inquired to House Representative Bill Callegari's office yesterday for an explanation as to why the District 132 representative in Katy voted "Nay" on SB 142.  For some insight into Callegari's "nay" vote, you can look here and here.

If we have learned anything from the financial crisis of the last few years, it should be the undeniable truth that our elected officials (State and Federal) no longer represent the collective interests of their constituents.  In the modern era of politics in America, one need only follow the money to understand how elective representation has been turned on it's head by copious amounts of money and special interest lobbying. 

For more information on HOA reform efforts in Texas you can visit the HOA Reform Coalition and Texas Homeowners For HOA Reform. 

2011 NonProfit Legal Toolkit - An Excellent Resource For Texas Residents In Mandatory Homeowners Associations

Homeowners associations are a source of contention with many property owners throughout Texas.  HOAs are normally established by developers with the goal of maintaining community standards and property values.  Sometimes, however, community associations can abuse their power and create more problems than they solve.

In Texas, you don't have to look too far to see how a large association management firm can run roughshod over unsuspecting homeowners.  Associa (a.k.a. Principal Management Group of Houston) is a $400 million company operating in communities througout the U.S. Interestingly enough, it's owned by Texas Senator John Carona.  In spite of the overwhelming conflict of interest, Carona lobbies for CAI interests in legislative hearings and committees in Austin. How does that conflict of interest manifest itself?  Well, you can look here, here and here for starters.

As this San Antonio WOAI news story reveals, HOA boards and management companies are sometimes not the best stewards of the funds they are entrusted with.  After witnessing some rather questionable spending on the part of their HOA, the residents of the Long Creek Subdivision in San Antonio took matters into their own hands.  They organized their members and eventually forced their HOA board members to resign.  With a concerted effort of the voting residents, they were able to bring transparency to their HOA's operations.

Many Houston area homeowners associations contain provisions in their bylaws allowing for inspection of the books and records of the HOA finances.  If if they don't, homeowners may have other alternatives at their disposal providing for inspection of the books and records of their HOA.  Attorney Peter Kilpatrick assisted the Long Creek residents with their effort to take back their HOA.  Kilpatrick was interviewed by the WOAI Trouble Shooters, and he offered this helpful form letter for Texas residents seeking to get a look at their HOA's finances.  If you live in a neighborhood governed by an HOA and you pay HOA fees, you have the right to inspect the association's books and records.

Your Houston area homeowners association should be willing to let you inspect the books and records of the HOA, particularly if the deed restrictions provide for such inspection.  Even without such a provision in the bylaws, Texas homeowners can look to the Texas Business Organizations Code (Sec 22.351 and Sec 22.353), and the provisions of the Texas Residential Property Owners Protection Act (Sec 209.005 of the Texas Property Code).

If the association managing your community refuses to comply with your request to inspect the books and records, there are penalties for failure to disclose requested information.  As noted in the 2011 Nonprofit Legal Toolkit published by Texas C-Bar (page 24)

Penalties for failure to disclose required information are stiff.
• Federal law: $20 per day per Form 990 return.
• Federal law: $5,000 for willful failure to allow inspection or copies.
• Texas law: Class B misdemeanor.

If your HOA is being evasive or secretive about how assessment fees are being spent, you have a valid cause for concern. HOA's in Texas are normally set up as nonprofit associations and they have a fiduciary duty to manage your money wisely. As a property owner and dues-paying member, you have the right to ask questions about how your money is being spent.

Big Fat Giant Disclaimer - I do not provide legal advice, nor do I guarantee the accuracy of information cited in this post.  If you need legal advice, you are encouraged to contact a licensed attorney.

 

 

Woodcreek Reserve Homeowners Association Annual Meeting Set For May 25

The 2011 Woodcreek Reserve Homeowners meeting has been scheduled for Wednesday May 25 at the Woodcreek Elementary gym. Sign-in begins at 6:30 PM, and the meeting will start at 7:00.

Avalon at Seven Meadows Signs New Contract With Arrow Community Management

The board of Avalon at Seven Meadows has signed a new contract with Arrow Community Management.  PMG's contract was terminated effective May 1st.

Update:  Arrow has apparently shut down.  While the Avalon board looks for a new management company. correspondence can be directed to KatyAvalon@gmail.com.

Grand Lakes Home Owners Association HOA Gets New Website For 2009

The Grand Lakes Home Owners Assocation (HOA) implemented an improved website this year.  Grand Lakes home owners can now go on-line and get answers to more of their questions.  GrandLakesLife is now the official address of the Grand Lakes Home Owners Association.  It contains general information about the community, as well as documents like budgets, deed restrictions and architectural review applications.  The site is still growing, so expect it to become a more informative portal going forward as more Grand Lakes residents make use of their new communications tool.

Cinco Ranch Southwest Homeowners Association (Cinco II HOA) Now Serviced by CIA Services

Residents of Cinco Ranch Southwest received a new management company this month.  CIA Services located at 9800 Centre Parkway, Suite 625, Houston TX 77036 is now servicing Cinco II.  Cinco Southwest residents can ask for Karen Cooper, the new community manager.  The phone number is 713-981-9000 and you can reach her via email at cooper@ciaservices.com.

Residents of Cinco I will continue to be served from the Mason Road office ( Phone number 281-599-0408)

For more information about Cinco Ranch you can visit www.CincoRanchConnects.com

HOA Fee Increase For Avalon At Seven Meadows

Residents of Avalon at Seven Meadows received a larger HOA bill this year.  The HOA fee for Avalon residents will now be $800, up from the previous $650 assessment last year.  The 2008 budget calls for projected expenses of $294,000 and a budget deficit of $54,000.  This will be a concern for residents going forward as the community works toward self-sufficiency and a manageable operating budget.

The two largest items on the budget include landscape maintenance and electricity, accounting for over 63 percent of the total operating expenses.  Spectrum Association Management and the Taylor Woodrow board of directors recently approved a new contract with Reliant Energy, but after discussions with Spectrum Association staff it appears that a more favorable rate would have been possible with another electricity provider.

When Taylor Woodrow is no longer subsidizing the operating budget and residents are solely responsible for the neighborhood, more prudent fiscal management will be necessary.  Avalon residents have already experienced this with the landscaping budget when the previous landscaping company was let go due to mismanagement.  Avalon is also on its third management company.  Spectrum Association Management picked up the account after Principal Management and Houston Community dropped the ball.

It should be noted that the $800 HOA assessment from Spectrum does not include the $740 assessment that all Seven Meadows residents incur.  Avalon residents are responsible for two separate HOA assessments.