In my Commentary this past September (Year 2 AZ OAH statistics on HOA cases — homeowners still win 43% of the cases!) I wrote, “What else are the CAI attorneys telling the legislators that has no basis in fact? When will the legislators, the courts, the media, and the various public interest nonprofits going to wake up and face the reality before them?”
I have observed a recurrent behavior by CAI attorneys who say one thing to state legislators and government officials, and another when before the courts representing their client, the HOA (not the homeowners or any member of a nonprofit membership organization). Before the courts and administrative tribunals, one easily sees these attorneys defending their client HOA with a win-at-all-costs attitude as they proclaim is their duty to their client HOA, even contradicting statements made to the general public or, as above, to legislative committees. (Understanding that under the various state Codes of Professional Conduct (Rule 42, E.R. 1.13, in Arizona) the client is the fictitious person, the HOA, not the member-owners).
With respect to the fiduciary duties question, CAI, that self-proclaimed national HOA educational organization since 1973, has released several publicly available documents, including its policy statement document, that says:
Homeowner Rights & Responsibilities, Community Leaders Have the Responsibility To :
1. Fulfill their fiduciary duties to the community and exercise discretion in a manner they reasonably believe to be in the best interests of the community.
GAP Report #20:
Conflicts of Interest, by Tonia C. Sellers, ESQ. and Jay S. Lazega, ESQ. Published by Community Associations Institute. Provides standards for both boards and managers. Highlights areas of activity in which actual or potential conflict may arise and suggests actions to take when a conflict does arise. Covered are fiduciary duty obligations, conduct of the directors, managerial conflicts, ethics policies, board conflicts, and a host of other topics. Also contains sample policies, resolutions, code of ethics, and cases.
CAI Public Policies, Community Association Members’ & Community Associations’Rights and Responsibilities, Association Responsible For (p.24)
Diligently ensuring each board member fulfills his or her fiduciary duties.
It doesn’t take a stretch of the imagination to understand that the “community” is the homeowner-members — the owners of the HOA — and not the fictitious person. (The Restatement Third, Property: Servitudes, § 6.13, comment “a”, rejects this argument out of hand). But, how can CAI build vibrant, harmonious communities, as it advertises, if just speaking about the fictitious HOA corporation, per se, and not the people? I cannot find where CAI clarifies that it is equating “community” and “best interests of the community” to the HOA corporation, and not to the homeowner. The impression, obviously, is that CAI is speaking about the homeowners themselves.
A particularly disturbing incident came to my attention regarding the fiduciary duties, if any, that a board member, and the board as a whole, has to the membership. In an Arizona Superior Court (CV 2008-027251, Maricopa County) filing against the unreasonable interpretation of a quorum covenant by the HOA board, the HOA attorney and member of the CAI College of Community Associations Lawyers, wrote in its Motion to Dismiss,
In addition, Arizona law does not recognize a claim for breach of fiduciary duty for Associations (p. 2). Plaintiffs’ breach of fiduciary claim should be dismissed. Because neither the association nor its Board of Directors owes the Association’s members a fiduciary duty plaintiffs have not stated a claim upon which relief can be granted (p. 4).
Why shouldn’t HOA directors, and the HOA, not have a fiduciary duty to the member-owners? The HOA and directors are not even held accountable under state laws for violations of the law or of their governing documents. Yet, homeowners have statutes that impose the possible loss of finances and their homes for violations of the governing documents.
The CAI attorney then cites the Restatement, sections 6.13 and 6.14, that do not mention the term “fiduciary duty” at all. It mentions other legal concepts such as good faith, prudent person, ordinary care, act reasonably, and deal fairly. The Restatement also takes the position in favor of the superiority of servitude property law over corporate law (sec. 6.14), and over constitutional law (sec. 3.1, comment “a”) as well. CAI “Central” apparently agreed with this superiority of servitudes over the Constitution when, in its amicus brief, it warned the NJ Appellate Court (CBTW v. Twin Rivers, 2007) against, “the unwise extension of constitutional rights to the use of private property by members” (p.19).
What, then, does CAI stand for when you put aside its promotional propaganda and take a hard look at the actions of its members? Surely, it does not stand behind the values, principles and beliefs of the American system of government. And yet, our legislators across the country see no evil, no harm to America, and continue to impose top-down special laws for homeowners associations without constitutional protections for the people, the homeowners.
All legislators and government officials, as well as the media, should ask these special interest groups supporting pro-HOA legislation where they stand with respect to,
- the Constitution as the supreme law of the land, and
- that the Restatement Third, Property: Servitudes is dead wrong with its pronouncements that servitude law is the supreme law of the land.
HOA Constitutional Government 