Texas Foreclosure Rates Boosted by Strict Homeowners' Associations

If you buy a home in Texas, pay those Homeowners Association dues: Not only can your HOA dictate what your property should look like, it can also take it away from you if you fail to pay dues.

There are four ways to lose your home in the Lone Star State:

  • Failure to pay taxes of any kind -- federal income taxes, or property taxes.
  • Mechanics liens, when you fail to pay a workman who has done work on your house, provided he correctly files a mechanics lien.
  • Purchase money mortgages, in other words, not paying your fee simple mortgage.
  • And failure to pay homeowners maintenance fees, a topic that was hotly debated in Austin during the last legislative session, as it has been for years.

In a recent session, HOA power and abuse was on the agenda again as Austin legislators listened to angry homeowners who say their homeowner associations are way out of control -- like the Houston homeowners who may end up paying $20,000 in fines because they had gray tape, not black, on their exterior waterlines.
And if you don't believe me, ask former New Orleans Mayor Ray Nagin: he failed to pay the home association dues of about $1,507 on his North Dallas "hurricane" home last March, and his home popped right on the foreclosure list.

Lawmakers may also have been influenced by a rash of recent reports on homeowners associations practicing "tough love." The Ridgewood Home Owners Association in Plano, Texas, just north of Dallas ordered a homeowner to re-sod his entire front yard after his bluebonnets, the state flower of Texas, ran amok. The HOA did at least compromise, agreeing the homeowners could keep the bluebonnets in flower beds but any that spread to the lawn had to be mowed, chopped or nuked with -- gasp -- weed killer.

Last month, a million-dollar-home developer faced foreclosure on several lots that would not sell in three of his Tarrant County developments. The reason that sales were slow could have had something to do with his home association rules, which some residents called Nazi-like and prompted a lawsuit. Developer David Bagwell controlled who built the house, pool or spa, who repaired it, what materials it could be built from, what plants homeowners planted (down to the exact day-lily count), the specifics on fences, and even the exact size, in inches, of the front door's coach lanterns and placement.

And when homeowners would submit new home or remodeling plans to Bagwell's Architecture Control Committee (a requirement, of course), Bagwell charged a fee.

As one homeowner put it: "Not only do you have to submit for approval, if it is declined, you have to pay a fee to resubmit. Basically the entire fee structure is set up to fail to keep submission payments coming in. You have to pay a fee to submit for approval to stain your garage the SAME color it currently is."

The fee schedule for review of plans, this resident told me, are located on Bagwell's website. "If you have 10 hours to waste," he said, "go read them."

One resident even called the police last October when she was home alone and caught Bagwell peering over her fence into her backyard:
"It was Bagwell. He told officers that the Cahills had not received HOA approval for a backyard landscaping project and that he was looking for 'violations,' according to the police report. An officer asked him what violations he had discovered. 'She has a new flower bed in the backyard, which is a violation,' Bagwell replied, adding that he had a right to look into her backyard because he was standing on a vacant lot that he owns behind her fence."
Some residents got so fed up they banded together to file a lawsuit against Bagwell's homeowners association and its nitpicking.

Ironically, Bagwell and his partners themselves had properties facing foreclosure in Tarrant County after failing to make the bank payments on some lot notes.

Meanwhile, a high-volume, Pennsylvania-based national home builder, Toll Brothers, has recently started operations in the Texas market and is in the process of trying to buy them. Homeowners may drop the lawsuit against Bagwell if new owners of the development take a chill pill on all the Gestapo-like rules.

See homes for sale in Dallas, Texas at AOL Real Estate.
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