Under California real estate law, all major factors that would affect a buyers decision or potential property value are supposed to be disclosed to the buyer. This is especially vital when it comes to selling a condominium, town home or any other type of deed restricted property to a first time buyer. The home owners' association laws, bylaws, rules and regulations and the CC&R (conditions, covenants and restrictions)are to be given to a buyer well in advance of the close of escrow. The buyer is then asked to sign a receipt that he/she has received copies of these documents and had read them. Please note the receipt also says that a buyer has read the huge stack of documents pertaining to the home owner's association into which the buyer is purchasing. This allegedly satisfies the DRE (Department of Real Estate) legal requirement of disclosure about the HOA (home owner association) and its CC&R's to the buyer by the seller, the real estate agent, the escrow, the lender and whoever else may be involved. There are many, many, many other disclosures to the buyers before escrow is closed, the loan funded, and title transferred. The purpose for all these disclosures is consumer protection. Realistically, I don't believe the consumer is fully protected by only those disclosures.
This is what usually happens after many buyers take possession. Finally the endless signing and initialling of mountains of papers (which the buyers typically haven't read) is over. The family joyfully take possession of their property in the deed restricted community and begin to live life happily ever after. They haven't even lived there two weeks when the unthinkable happens. They commit some unknown infraction of one of the excessive rules in the deed restricted community. The violation could have been something as innocuous as hosing the dust off the car in the driveway, or placing a potted plant at the front door. Maybe their children laughed too loud on a Saturday afternoon, or a trash can was placed two inches more from the curb than permitted. The first complaint, the new family handled graciously. When ten plus more complaints came down upon the slowly growing unhappy family due to an overly diligent effort by the HOA Board to force the family to conform to the endless petty rules of the association, the family is no longer gracious. The children are unhappy because they can't use the pool, the club house, or throw a basket ball into the movable hoop. The parents are unhappy because they can't display Christmas lights in their windows, grow roses where they planned,or do hobbies in the garage. Their children have to be constantly disciplined for doing nothing wrong. Living in the deed restricted community turns into a night mare. The beginning of hell on earth started. The family has lost all its patients. Goodwill converts to hostility. They receive smug letters from the Board or the property management company. All the letters start the same stupid assumptive way ". . .in order to keep up property values in the community. . . .you signed, read and agreed to the rules and regulations of the.. .. ". (The assumption the enforcement of the petty association rules keeps up property values is incorrect, but they have got the member convinced it is so.) The residents become indignant and claim, what did we sign? What rules were shown to us?
They call the real estate agent to clarify the situation. They are told they were were given copies of all the CC&R's, HOA laws and bylaws. The agent adds the proof of it was the receipt they signed saying they read and received them. That lets the real estate agent off the hook. They call the escrow office, the lenders, the title reps, and finally the DRE. The response is the same. All those agencies are absolved from any responsibility because there are signed by the buyers copies of the the receipts for all disclosures they received before and at the close of escrow.
The real question is-- did the real estate agent and every one else truly disclose the material facts that would affect --especially a first time buyer's decision into a deed restricted community to buy? While they did technically act in accordance with DRE laws of disclosure regarding the deed restricted community sold, I do not believe the major facts and reality of living in a deed restricted community were fully disclosed to the buyers? The receipts the buyers signed proved the buyers received the disclosure docs and all necessary others. Those signed receipts takes the agents off the legal hook. They have proof of compliance in writing they did everything right. The real question is does it take them off the moral hook? Did the agent really do the job and disclose all the details of the inconvenience and difficulty that goes with living in deed restricted communities in a way that would truly affect the buyers decision? Did the buyers get the huge pile of docs in a sufficient period of time before the close of escrow so they could have read them, asked questions, and maybe done so personal investigation? No. They did not. They are usually given those docs about three days before the close of escrow and rushed to sign them so escrow can close in time.
Once the buyers have made a choice of the unit, they begin the very complicated process of loan approval and escrow closing. The pressure becomes intense. Anxiety grows. They literally go through emotional trauma. They don't have experience in knowing what red flags to watch and which red flags to ignore. Because, all the disclosure docs are usually handed to them three days before the close of escrow and their agent tells them to sign everything including the part they have read them because they have to close escrow, the buyers did not read the docs. Their main concern is taking possession and settling into their new life. The ton of docs are immediately filed in a safe place and promptly forgotten. The family needs to get on with the business of real life and not the maze of paper work called real estate.
The reality is when prospective buyers are shown deed restricted property, they are shown a way of life they are led to believe is available to them at a much lower cost then they could afford to do themselves. They are shown the beautiful swimming pool, jacuzzi, tennis courts, club house, B.B.Q. area, resident vegetable garden area, and all the other amenities. The agent fails to tell the buyers there are so many rules and regulations involved in using any of the facilities or amenities most residents simply refrain from using them. The few residents who do use them are usually part of the select group who votes for the same board members every year. The agent fails to tell the buyers the HOA Board is run by seven popular card players unqualified to do the job. That under Davis-Sterling act there are no qualifications necessary to serve on the board except a willingness to serve. Therefore, the HOA board is an overbearing, heavy handed clique that abuses its powers. Did the agent remember to tell the buyers that if they choose to fight the association, the courts will always rule in favor of the board against the home owner and any legal recourse above that will run into hundreds of thousands of dollars. The agent didn't tell the new buyers if they become unhappy and want to sell, it is takes much longer to sell in a deed restricted community because there is a smaller demand for properties in deed restricted communities. These facts are only the tip of the iceberg of the problems and issues that go with living in deed restricted communities. Do you think if potential buyers realized these facts they might decide not to buy in a deed restricted community? Do you think if the agent told the buyers whole truth about the life style in deed restricted communities, she would have made the sale?
This buyers story has been happening for the past thirty or so years to thousands of families across America. The problems of deed restricted communities have become a secret national nightmare and a challenge to American's constitutional rights of private property ownership. The problem is so vast, a web site so big has come forward, you could not read all the material on it if you looked at every day for a year. It deals exclusively with the grief of living in a deed restricted community. The web site is AHRC.com (American Home Resource Center). Any one who is considering buying into a deed restricted community might want to look at this site and get insights into the problems of living in deed restricted communities before you buy.
Therese Daniels
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