NON-EXEMPTION FOR HOAS: Community Association Corporate Transparency Act

A petition and letter to: Senate Banking, Housing & Urban Affairs Members (US Senate) House Financial Services Members (US House)

I am writing with regard to the Corporate Transparency Act and related Business Ownership Information (BOI) and wish to voice my support for including Property Owners’ Associations (POAs, HOAs, COAs, Community Associations, and the like) as organizations which must report as per the provisions of this Act. Currently, there is little or no oversight or means of accountability to check and balance the power of HOA Boards and the enormous power they wield over their neighborhoods and resident members.

The examples of corruption, embezzlement, extortion, coercion, racketeering, and general abuse of power are too numerous to mention, but they are consistent and can be found dating back decades in media reports and legal proceedings. Yet as a recent example, Florida Legislators were compelled to pass FL SB1114/HB 919 this past year. Titled the “Homeowners’ Associations Bill of Rights,” this Act created sweeping reform meant to create protections for homeowners’ and attempt to return at least some of their rights as Americans to them. This type of protection and reform is needed nationwide.

As volunteer organizations that are often non-profit, Community Associations are able to circumvent corporate and municipal law by creating their own governing documents (such as Private Clubs do), aided by attorneys who profit from their practice and gain support from legislators through lobbying groups such as the Community Associations Institute, an organization which is known to only have HOA Board interests, and not resident members’ interests, as their priority. They make money if HOAs make money, and that money is usually made through petty fines and violations fees, the practice of “pyramid fees,” placing liens on residents’ homes, and foreclosing on those homes, sometimes with the HOA Board member or a relative buying the property themselves for pennies on the dollar.

The world of HOAs is rife with corruption, greed, and what would otherwise be considered criminal behavior, if not for their self-drawn contracts, often signed by home buyers without full knowledge or under duress, which includes exculpatory language to protect malevolent Board members should they ever be caught in their misdeeds. Having even one method of report and accountability to a government entity would do much to protect homeowners from bad acting and criminal HOA Board members. Having this requirement would promote honest people to serve on Boards and deter those who volunteer for those positions whose impetus is not the good of the neighborhood but their own avarice and greed.

Ultimately, any individual who is given power over other persons MUST have a mechanism of oversight and accountability over them to check and balance that power. This is typically a social and legal standard that we can all rely upon for protection and justice from those who would abuse their position, yet in the HOA industry, many of us who are at its mercy suffer from abusers who can and do willingly act with impunity.

Sec. 6402(3) of The Corporate Transparency Act declares that “it is the sense of Congress that … malign actors seek to conceal their ownership of corporations, limited liability companies, or other similar entities in the United States to facilitate illicit activity, including money laundering, the financing of terrorism, proliferation financing, serious tax fraud, human and drug trafficking, counterfeiting, piracy, securities fraud, financial fraud, and acts of foreign corruption, harming the national security interests of the United States and allies of the United States.” Subsection (4) includes “money launderers and others involved in commercial activity intentionally conduct transactions through corporate structures in order to evade detection.”

For those of us who know Community Associations and how they can operate, this description absolutely includes the potential, and for some the reality, for these criminal behaviors. The CTA is one much-needed step that would help to bring Community Associations into line and compliance with expectations and governance by U.S. Federal law as per Section 6402.5(D) “better enable critical national security, intelligence, and law enforcement efforts to counter money laundering, the financing of terrorism, and other illicit activity.” In fact, to think that a person, unqualified and earning their position by little or no other means than volunteering, is automatically trustworthy and not subject to illicit action simply by virtue of their position being within a community organization is shockingly fallacious to the point of naivety. Such objection, in fact, should rouse suspicion rather than confidence. Opponents of including Community Associations in the CTA/BOI requirements will also voice concerns over privacy and personal information, but as you are aware, the Act provides for those concerns in Sec. 6402 (6) and (7). Anyone on a Community Association Board should have no more concern for this than if they were to be on a corporate board of directors or own their own company. Benevolent actors within the Community Associations have no need to protest or have concern for required compliance to the Act and the BOI. In fact, it will benefit them, as Associations of honest practice and good standing will be revealed as such, and their reputations and practices can stand as examples for the rest.

Malevolent actors and those who support them do have reason to be concerned, and you will likely receive their protests. Yet I ask you to bear in mind that the welfare of the American people, your individual constituents, those who are vulnerable to those in positions of power, are those people who depend on you for protection and who count on you to do the right thing. Those of us who live in HOA Hells, as they are called in our community, need your help and protection. Including Community Associations under the CTA and BOI requirements would do much correct the imbalance of power so many of us are subject to. You are welcome to contact me to discuss this matter and my concerns further. Your support and leadership are appreciated.