HOAs are worse than organized crime---they're legalized crime.
It comes as no surprise to those of us in HOA Hell that one of the many issues with problem HOAs is crime. Not just crimes against people as neighbors, fellow citizens, and human beings, but flat-out, on-the-books crime. Because these groups are not consistently accountable to any governing agency that can enforce the laws they break, HOAs can run amok and get away with horrific behavior that would shut down any other corporation.
Recently, there has been a lot of action about the Corporate Transparency Act. In short, "The Corporate Transparency Act (CTA) is a federal anti-corruption act passed by Congress in 2021. It seeks to fight against financial crime by mandating reporting companies to disclose information about their beneficial owners. These companies must report to the information to the Financial Crimes Enforcement Network (FinCEN)." The article also states, "Money laundering has been a major problem in the U.S. Those behind these schemes exploit existing laws and loopholes to conduct illicit activity. The Corporate Transparency Act, while intended to limit criminal activity, also has implications on HOAs as they are often incorporated." (HOA Management).
Those of us who know how horrible the situation can be are not just applauding this measure, but are ecstatic that something is finally being done to curb out-of-control HOA members. This simple act of reporting to an overseeing government agency is a positive step to protect citizens and homeowners from some of the abuse they suffer.
The Community Associations Institute is acting to try to exempt HOAs from this accountability measure. Among other things, they cite privacy concerns for board members, state that HOAs are a "low risk of illicit financial activity," and that it is an overreach of government power to include non-profits in this Act (CAI). They have filed suit to exempt HOAs from the Corporate Transparency Act.
I have posted materials to help you understand the Act, why homeowner advocates must insist on HOAs being included in its reporting, and what CAI's arguments are for exemption. You can access my page for this information here. I have also included information if you wish to speak up about the issue.
If you feel that HOAs need to be included in CTA reporting, you MUST reach out to legislators to ask them to support it, and you must reach out to those involved in the suit to voice your concerns. I have included contact information for the judge and the defense attorney on my page. (Many thanks to Patrick Johansen, Jessica Navas, and my other HRLNG friends for finding and sharing this info.)
To offer my argument for including HOAs in the CTA, I am posting my open letter to the judge in the case as my blog today. As always, I welcome questions, corrections, and feedback. SCROLL PAST the links bar below to leave a comment.
October 4, 2024
Letter sent to the Honorable Michael S. Nachmanoff regarding the CAI lawsuit to exclude HOAs from the Corporate Transparency Act
ATTN: Honorable Michael S. Nachmanoff Case 1:24-cv-01597
Your Honor,
I am writing to you as an academic researcher, educational consultant, and advocate for homeowner and citizen rights against abusive homeowner associations. I am alarmed at the challenge that the Community Associations Institute has initiated in their lawsuit to exempt HOAs (and other similar associations) from the Corporate Transparency Act. In my extensive research, I have encountered horrifying stories of unchecked, unregulated, and highly protected abusive and illegal behavior on the part of associations across the nation. Far from being neighborhood squabbles or isolated incidents, I increasingly find that this issue is endemic in our nation, and American citizens often have to suffer in silence as abuses and criminality runs rampant through their neighborhoods, enacted by their own neighbors, and the cost of speaking against it could be their life's savings and their very homes.
The abuse must end.
The Corporate Transparency Act would do much to hold bad actors to account and expose them where they exist. Anyone who holds a position of power over others MUST have a system of checks and balances to ensure protections for those who are subject to them. This is the very reason our distinguished system of government exists, and HOAs must be held to act within it.
The objections presented by the pro-HOA lobbying group CAI are either unfounded, inapplicable, or untrue - as in the claim of "arbitrary and capricious action" in that they state there is a "low risk of illicit financial activity by such entities." Illicit financial activity is so extensive as to be almost commonplace in the HOA industry and has been documented consistently and for an extended length of time by media stories and lawsuits. And these are only the cases that have come to light.
If other corporations are held to account for themselves by the CTA, there is absolutely no reason that HOAs, as one of the most powerful entities in our very communities, cannot and should not be included in this mechanism of protection for American citizens. In fact, because it affects people's very homes, it is even more important to extend that layer of protection to include them.
HOAs which are acting legally, fairly, and honestly have absolutely no reason to be concerned about being held to the CTA. It affects them no more or less than registering with the Secretary of State or reporting to the IRS as they currently do. The force of reaction that CAI has had to this measure is deeply concerning since to protect the HOA industry, the organization should have the protection of homeowners at its foundation. Including HOAs in the requirement to comply with the CTA is a measure that would work to prove the honesty and good-will of individual groups and the institution as a whole.
According to the National Association of Realtors, 75.5 million Americans are subject to HOAs. That is approaching nearly a quarter of the population of our nation who are completely subject to an unregulated, self-governing, volunteer system with the power to ruin their lives at will.
Your Honor, you have been entrusted with the authority and responsibility to protect American citizens and the governing system put in place to ensure the promise of true democracy to all of us. For myself, my fellow advocates, and on behalf of 75.5 million Americans, I implore you to put The People first in this case. Be the one who stands up to protect all of us. We need you.
With deep respect and gratitude,
Dr. Amanda M. Dutton
Resident Evil HOA Lectures, LLC
Well written! Thank you.