Thoughts on Community Associations Institute

2005 November 1

POA legislation is in turmoil with many amendments proposed in the state legislatures. Lobbying appears to be intense in some states, particularly by the community associations industry and some local chapters of CAI.

The changes in legislation for property owners associations (POAs) is moving in a consistent direction — incorporating more and more democratic principles. While CAI claims to be the voice of the 54,000,000 residents living in community associations, they are not at the forefront in advocating democratic principles and members' rights. In fact, it appears that CAI in some states is actively opposing the democratic reform.

The continuation of this post discusses these interrelated issues. I am interested in your thoughts on this important issue.

Don Nordeen
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Thoughts on Community Associations Institute (continued)

CAI's Contributions

While this post is critical of CAI's claim to be the voice of individual people who live in community associations, I don't want in any way to disparage other work of CAI which has served the community associations industry (management companies, developers, real estate companies, attorneys, accountants, reserve specialists, mortgage companies, maintenance companies, and others who/that provides services to community associations) very well. With good services from this community association industry (I use the abbreviation, lower case "cai" to distinguish "industry" from "Institute"), community associations have also been well served. I use the term "property owners associations" (POAs) rather than community associations. See definitions/glossary.

I became familiar with CAI when I was president of a property owners association (POA) in the late 1990s. At my recommendation, the board voted to join CAI as a POA member. Many CAI publications were of value in improving the organizational systems and processes. I now associate those publications as those serving the cai.

In subsequent research, I was disappointed with the omission of information on rights of individual POA members and the omission of information on democratic principles for governance of POAs. I found that much of the information on these issues was general and seemed to say the right things, but in fact are equivocal and lacked the specificity to define and protect the rights of individual members and the use of democratic principles in the governance of the POA.

More recently, I have concluded that the above observations can be explained by CAI's support of the Developer's Model for governance of the POA. The developer, or the developer's attorney, crafts and records the initial governing document consistent with the developer's interests. This includes establishing a POA in which the developer can exert substantial control. A corporation governance model in which the board has almost total authority over POA affairs is consistent with the developer's interests — particularly since the governing documents can permit the developer to appoint the members of the board during the development phase of the project. When the transition to member control is completed, the POA is stuck with this model of governance, which is basically an oligarchy — prone to all of the abuses inherent therein.

The problems and complaints from individual POA members, which are based on the Developer's Model, are driving legislative changes to make the governance more democratic (open meetings with proper notice, no abuse of closed sessions, members have right to address the board on any agenda item, members' access to all records, better voting procedures, etc) — more toward the municipal or democratic model of governance. Hopefully, we are close to getting out of the "black hole" of the Developer's Model to adopt a Democratic Model of governance of the POA members, by the POA members and for the POA members.

Unfortunately, there seems to be a reluctance of the community associations industry to embrace a Democratic Model. There really shouldn't be a conflict between a model based members' rights and democracy for POA members and the interests of the cai. It is in the interest of the cai for POAs to function well and create model communities for the developers. The Democratic Model for governance should serve all interests.

The legislative pressure in many states is moving the legislative activities away from CAI's stated policies. CAI's recent change in membership structure (also the Q&A) may be CAI's first step in responding to these changes, but that hasn't been clearly stated.

CAI's Claim to be the Voice of People who live in Community Associations is Not Supported.

Their most recent document on Public Policies [URL is .] dated 2004 October states on page 3 of the pdf file, "Founded in 1973, Community Associations Institute (CAI) is the national voice for an estimated 54 million people who live in more than 270,000 community associations of all sizes and architectural types throughout the United States." No facts are given to support this claim.

Most of CAI's members are likely professionals and companies who/that provide services to POAs. Paragraph 3 on the same page of the Public Policies document states,

"In addition to individual homeowners, CAI's multidisciplinary membership encompasses community association managers and management firms, attorneys, accountants, engineers, builders/developers, and other providers of professional products and services for homeowners and their associations." (emphasis mine)

I have written to CAI through their website requesting a breakdown of the membership, but have not received a reply. Specifically, the number of individual homeowners who are members of CAI, should be known and published by CAI to support their claim to be the voice of individual members.

The arithmetic basically refutes the claim to be the national voice of individual POA members. Paragraph 3 of the same page states there are 17,000 members in CAI. Even if all of CAI's members are individual members of property owners associations (POAs) with (say) four residents per home, the representation as CAI members of the 54 million people would be only 0.13%. Since probably only a fraction of the 17,000 members of CAI are individual POA members (say one-tenth), CAI's membership of individual POA members would be only 0.013% of the 54,000,000 people.

I am unable to locate any surveys at the CAI website that deal with the substantive issues and concerns of individual POA members. The issues that have driven recent legislation in Virginia, Florida, Arizona, Nevada, Colorado, California and elsewhere are not identified at the CAI website.

Others have questioned CAI's claim to be the voice of individual POA members. Dr. Evan McKenzie, author of Privatopia: Homeowner Association and the Rise of Residential Private Government writes in his weblog [URL is .],

"This reinforces what I (and others) have been saying for many years. CAI is a 501 (c) (6) trade association that represents the interests of lawyers, property managers, and other providers of services to HOAs. It doesn't represent homeowner associations or the owners who live in them. I don't mean that as a negative comment. I think it is a good thing that such a trade association exists, because professionals need specialized training to do this work, and they should seek to represent their interests in the policy process. It is a basic constitutional liberty (freedom of association) guaranteed by the First Amendment. Owners and associations should organize on their own and not expect CAI to serve their needs. However, I have been critical of CAI representatives, such as lobbyists, for claiming to represent owners and associations, which they have done on many occasions while pushing legislation. They don't, they never really did, and it is an impossible conflict of interests for a trade association to also seek to represent consumers of their services."

I am skeptical that CAI's new membership structure is part of a change in emphasis and focus at CAI. CAI does not identify itself as a trade association in their membership information. It is not clear why the "board member" category was created and the "community association" category was eliminated. They have excluded POAs from membership (which is really the boards of POAs), but are extending membership to individual board members at a discount, presumably to be paid for from POA funds. What really changed? Will these now be counted as individual POA members and used to substantiate their claim to be the voice of individual POA members? The membership change to exclude POAs but allow POA board members to be "individual" members is not explained.

CAI's Documents do not Support a Democratic Model of Governance.

In addition to CAI's claim to be the voice for individual people living in community associations, I have concern about the recommendations in CAI's "recommended practice" and "policy" documents. The content in these CAI documents is not supportive of POA members' rights and use of democratic principles. Three examples:

• Members' Access to Records (equivalent to Freedom of Information Act in government) — CAI's Public Policies document states at page 28 of the pdf file,

Members have a Right to "Have access to association records as specified in governing documents and state law."

Obviously, compliance with state law is required. But, what is specified in the governing documents is determined initially by the developer and developer's attorney (part of cai). This is what I call the Developer's Model for governance. CAI does not define their recommended policy regarding access to records for good governance. Is CAI pandering to the cai? But CAI is also inconsistent.

The same document at page 29 states,

The Association is Responsible for "Providing members with access to corporate records (excluding those which infringe upon the privacy of other owners)."

This implies access to all information, presumably including advice from attorneys and accountants, except for the stated exclusion. CAI states in another major 2003 document Introduction to Community Association Living [URL is .] at page 31,

"Access to Association Records —All records of a homeowners’ association should be available to the association members."

CAI states in their Rights and Responsibilities document [URL is .] document,

"Homeowners Have the Right To: Access appropriate association books and records."

Note that the statement contains the equivocal word "appropriate" which basically makes the statement meaningless. The statement therefore does not reflect any CAI policy recommendation for good governance. Likely, the developer gives meaning to "appropriate" in the initial developer-drafted governing documents — the Developer's Model.

The standard defined in municipal law is the Freedom of Information Acts which makes virtually all government information available upon request.

• Alternative Dispute Resolution — CAI's Public Policies document states at page 16,

"It is also understood that ADR may not be the ideal option for resolving a dispute but if possible should be used if it does not compromise the rights of the community association."

Note that the rights of individual POA members are included. It is apparently okay to use ADR if the rights of the individual POA member are compromised.

Also, CAI does not address the question of costs. For a level playing field, I believe the costs for ADR should be paid by the POA. The individual POA member still has to spend the time and effort to prepare for the ADR. In municipal government, a citation is issued which is typically heard by a magistrate. The citizen must prepare, but the costs for the magistrate are typically paid by the municipality — part of separation of powers and cost of government.

The larger issue for ADR is enforcement, which cuts both ways: enforcement of a restriction by the board on an individual POA member, and enforcement of board's obligation to adhere to the governing documents in the management of the affairs of the POA by individual POA member(s). Again, CAI does not define a recommended policy for good governance. Is CAI pandering to the cai?

• Democracy in Community Association Living — CAI's principal document on this subject appears to be Introduction to Community Association Living [URL is .]. Read Section 8 — HOMEOWNER RIGHTS AND RESPONSIBILITIES. Note the use of the phrase "A form of democracy" which implies that democacy doesn't exist in a POA. Further, the section describes that members really only have the authority to elect a board of directors which then makes all the decisions — an oligarchy. This is confirmed by the statement on page 27 of the booklet (page 32 of the pdf file):

"But all other decisions are usually left to the board. As a result, if owners are unsatisfied with a board decision, they usually do not have the direct authority to “veto” or “undo” its action. Under such conditions, their only remedy is to elect a new board to represent them."

Put another way, no rights are reserved to the members except the election and recall of board members. It is not clear whether CAI is advocating the description in Section 8 as their recommended policy for good governance or is describing what typically exists in POA governance defined by the initial developer-drafted governing documents — the Developer's Model.

My observation is that the "waffling" — the equivocality — is pervasive in CAI documents on defining the provisions for good governance for POAs, POA members' rights, and democratic principles. Many places, the words/statements are equivocal upon critical reading. For example, read the two principal CAI documents cited above in full with regard to members' rights and democratic principles. Also read their Rights and Responsibilities document with the same perspective. The latter doesn't even recommend that members should have an exclusive vote on amendments to governing documents. Contrast the members' rights described in the CAI document with the recommendation of a California "CID Homeowner Bill of Rights Coalition" for a "CID Homeowner Bill of Rights at pp 7-8 of a CLRC Memo [URL is .]. One of the members of this group is Retired Judge Charles Egan Goff who has written several times to the California Law Revision Commission advocating democracy for homeowners associations. Those letters are available on the internet with a search on ""Charles Egan Goff".

My broad definition of good governance is protecting members' rights and using democratic principles. My broad definition for the roles and responsibilities for the board of directors is to provide good stewardship for the management of the common interests and to protect the rights of each property owner (member). The standard for both is municipal law, in my view, and is the basis of a Democratic Model of governance. This recognizes that POAs are private government. The principles in municipal law should be adapted into POA law.

CAI, and more broadly, POA Legislation are at a Crossroads.

It seems to me that CAI and POA legislation are both at a crossroads. CAI apparently wants to claim to be the voice of all the individual POA members, yet they are a trade association for the community associations industry. I have no expectation that any organization can be the voice of all the individual POA members. Individual POA members are going to respond in an organized fashion only through common grievances. This is/was what is/was driving the legislative amendments in Florida, Virginia, Nevada, Arizona, Colorado, California, and in other states.

Most of the original CID (common interest development)/POA law appears to be based on the Developer's Model including the existing Uniform Common Ownership Interest Act (UCIOA). The amendments are incorporating democratic principles. I have studied Florida HOA and Virginia POA laws as amended through 2004. Some aspects of a Democratic Model have been adopted. The same appears to be happening in California with a Davis-Stirling Act that obviously has many problems. Johnston and Johnston-Dodds report in a California Research Library study "Common Interest Developments: Housing at Risk?" at page 12 [URL is .] on the number and kind of amendments made to California's Davis-Stirling Act:

"The Act has been amended more than 40 times since its passage. The changes that have been made to Davis-Stirling over the years have moved CIDs away from a purely corporate model and closer to a municipal model. These changes mostly relate to due process issues such as notification and participation, and are aimed at providing homeowners with greater access to information about their CID management and governance."

Note the change toward the municipal model which is based on democratic principles.

The conclusion is that the reactive changes in POA legislation are moving the legislation toward a municipal or democratic model. There are also a number of papers dealing with homeowners bills of rights and democratic models directly. Now is the time to start over with a Democratic Model of governance, perhaps based on adapting the municipal model or maybe even starting all over.

If CAI acknowledges that CAI is not the voice of all POA members, they lose effectiveness in their lobbying efforts and in their amicus briefs. Is CAI prepared to make such an acknowledgment? Who can deliver such a message and have it accepted by CAI's board of trustees for serious debate? Hopefully, the trustees will be enlightened to understand the pressures for democratic reform of POA legislation.

There really shouldn't be a conflict between POA members' interests in members' rights and democracy and the interests of the community association industry (cai). It is in the interest of the cai for POAs to function well and create model communities for the developers. The Democratic Model for governance should serve all interests.

That is my thinking at this time, but I would like to hear from others. Please add your comments or send me an email by clicking on "Email Me" at the top of the left column. Your emails will be posted.

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