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HOA (U.S. Home Owner Associations) Seem To Have Excessive Authority and Privacy Invasion Rights

As I do research for posts, I am finding a lot of stories that refer to HOAs denying the purchase of a unit, as well as demanding all sorts of information from interested purchasers in order to determine if it should deny such purchase.

NYT ran a real estate article about Steve Siddell’s attempt to find a great home in the city. There is one section of the article that caught my attention:

He submitted his application, which included an inch-thick stack of paper, in a neat binder. The co-op board requested 11 more copies …Weeks passed; his frustration grew. After about two months, he was interviewed … A few weeks later, the rejection letter arrived.

This seems both intrusive and abusive. The amount of information required and the type of information, the lack of timeliness in initiating the interview, and lack of timeliness in rejection, and even the right to review the purchaser at all seems, simply, wrong.

As each state has different legislation, there is a multitude of “but that’s not allowed in this state” arguments available but a quick search of the web seems to indicate that board intrusion into private sales seems rampant country wide.

Some states do allow HOA right of first refusal, meaning they can deny a purchaser (without reason) completion of the sale if the HOA itself buys the unit, or can find a replacement buyer at the same price.

While I disagree that such a right should even exist, in states which allow it there is ample opportunity to abuse the system and pry into people’s lives. It opens up all sorts of questions about information that can be requested – and all sorts of strange requests can be built that avoid human rights violations (race, gender, disability, sexual orientation). Many now ask for resumes, job history, references, past addresses, driver licences, social security numbers, credit reports, travel history (in the guise of how much of the year the owner will be onsite), education, marriage status, fiscal equity levels, and tax records (which might show charitable donations reflecting political or religious leanings).

As a kicker – the HOA doesn’t need to generate an explanation why they deny a sale. While racism and sexual preference bias isn’t an allowable right to say no, we know (for example after the 9/11 tragedy, the anti-Muslim expression) that people do act on those feelings. And while they might not be in the position to act on first refusal and buy the unit, they can significantly slow down the review process (say, for months) and the decision (say for weeks) in order to force the purchaser to withdraw their request because of timeliness issues.

In Canada, we have pretty strong privacy laws that would block condominiums – which are set up as not-for-profit corporations – from prying into a purchaser’s life like that.

The sale of a unit is a private transaction between two parties that the condominium has should have no right of access to, and there is no justifiable reason to review the sale and purchaser of a condominium unit.

For those that fear non-payment of monthly condominium contributions – they happen (some buildings have more than 60% delinquency) and have been happening even with new purchaser review. There’s no belief the board is better suited than a bank to determine fiscal ability to pay in the future.

There is no reason for HOAs to pry into the private life of a purchaser.