Author: HOAGOV

Community Associations Institute (CAI) is a national organization dedicated to fostering vibrant, competent, harmonious community associations. For more than 30 years, CAI has been the leader in providing education and resources to the volunteer homeowners who govern community associations and the professionals who support them.

Boards also have to operate in the business sphere. . . . Even worse, now that we are in a truly bad economy, boards are even more willing to justify holding the line on assessment increases because “times are tough”. . . . The rationale appears to be that homeowners are struggling, so the corporate association should struggle alongside them. That becomes the political reason during these times, based on apparent sensitivity for the human condition. They are ignoring the business reality of having foreclosures and bad debt than needs to be offset.

Perhaps “political” is not the right word for the third sphere. Perhaps it is “community minded”. Or, perhaps it is “short-sighted”. It is the same view that some legislators have about raising taxes even though it is necessary. They cannot do it because of fear they will look bad to the voters. However, directors have the luxury of being unpaid volunteers. They do not have to campaign or have funds to run for office.

How  long will legislators continue to close their eyes to this betrayal of American values?  How long will they accept the personal agenda propaganda that HOA regimes are good for America, and that the people, of their own free will with explicit consent, agreed to be so governed and to have openly surrendered their individual rights and freedoms?  How long will they follow the path of these self-proclaimed property lawyer philosopher-kings, these legal-academic aristocrats, who believe that that have found the utopian society for land use?   And, in doing so, have subverted the US Constitution! 

I have written about the national lobbying group,  Community Associations Institute (CAI), a business trade group, that actively and vehemently opposes constitutional protections of homeowners’ rights.  I have also written about the comments of the property lawyer “legal-academic aristocrats”, the would-like-to-be philosopher-kings in the Restatement Third, Property: Servitudes, recommending that servitudes law should dominate constitutional law.

The California Law Review Commission (CLRC), in its planned rewrite of the Davis-Stirling Act that governs HOAs/condos, added Chapter 2, Member Bill of Rights, but it was a blank entry marked “reserved.”  Around that same time, 2006, Texas real estate lawyers sought to have Texas adopt a modified version of the national model of the Uniform Common Interest Ownership Act (UCIOA), called TUPCA in Texas.   

This writer, in 2007, called this proposed UCIOA bill of rights a mockery (UCIOA amendments: a pretend homeowners bill of rights).  With the above approach taken by these real estate-property philosopher-kings, it is not too surprising not to find any section in the 2008 UCIOA or UCIOBORA acts devoted to the unalienable Rights of the Homeowner, rights that no government, nor private contract, can remove; and which would  hold the association subject to the 14th Amendment as any other government entity is held.  Or a section on HOA prohibitions.  

Have these legislators ever thought about whether there exists an ideal HOA  constitution that is compatible with the Constitution?  Well, there can be, as I have explored in Part 1 – Is there an ideal HOA constitution?.

Read the complete Commentary, No Bill of Rights.

HOA statutes as indirect government acts and devises that circumvent the Constitution 

Arizona Superior Court Judge Downie, in her decision on the unconstitutionality of OAH adjudication of homeowner association disputes,[i] summarily dismissed the legitimate intent of the legislature to attain a constitutional due process adjudication for homeowners, who sought a fair and impartial hearing of their HOA complaints.

The legislature may have had valid policy reasons for devising a different system for resolving homeowner association disputes. But it appears that the Department of Fire, Building and Life Safety is a mere figurehead or “parking lot” for those disputes.

Judge Downie had said that, in effect, DFBLS was  a devise or a scheme (“a mere figurehead or ‘parking lot'”) to get around the constitutional constraints on the delegation of legislative powers.  However, in her analysis of legislative intent, as part of the four-part Hancock test, she omitted any discussion of the actual intent of the legislature with respect to HOA adjudication, and focused solely on the original purpose to establish the DFBLS agency. In short, she failed to address the intent to modify the agency’s powers in regard to the HOA enabling statutes, summarily dismissing it as a devise.  The legislature’s intent is clearly stated in the Attorney General’s brief (not mentioned in her decision, yet the HOA’s reply to the brief is quoted as part of the judge’s reasoning),

Fourth, as a practical matter, permitting OAH to adjudicate complaints arising from the Community Planning Act is critical to the goal of ensuring compliance with the Act.  Without this remedy, an owner would be forced to go to court even if the nature of the complaint did not justify the time, effort, and expense of going to court or forego any relief from violations of the Community Planning Act. See Minutes of Meeting Before the H. Comm.. on Judiciary on Feb. 16, 2007, 471h Leg. 2nd Reg. Sess. 10 (Ariz. 2007).  (Representative Farnsworth advised that going to court was not an adequate remedy to resolve owners’ complaints against homeowners’ associations); see also J. W. Hancock, 42 Ariz. at 406,690 P.2d at 125 (noting that public policy favored permitting the Registrar of Contractors to resolve disputes between private parties because some disputes “would not justify the time and effort of going to a court”).[ii]

It is well accepted doctrine that there are several general purposes for delegating authority to and creating administrative agencies, and modifying their enabling acts.  The judiciary has long accepted the position that as long as it has the right of review, as in this instance, there is no violation of the separation of powers doctrine  “That the essential attribute of judicial power are retained [by the judiciary] so long as [it] may fully correct agency determinations on the matter of law and overturn unreasonable findings of fact.”[iii]  And, the generally reasoning of,[iv]

1.      The assignment of very limited and specific powers: DFBLS was only to process HOA complaints and forward to OAH for adjudication,

2.      Handling by specialists: ALJ judges specialized in judicial decision-making, which was the extent of the delegation of authority to hear HOA disputes, and

3.      Contributing to  “inexpensive and expeditious” administrative processes (“to avoid the hostility to labor as the courts had then shown”): OAH was a cost effective and amenable procedure — no rules of civil procedure or attorneys —  for resolving disputes; even the less costly (as compared to superior court costs) JP courts were under the rules of civil procedure giving the HOA a decidedly unfair advantage in a very practical manner.

With respect to the delegation of authority itself, in regard to state agencies, a valid intent for delegation had to show “the persons and activities potentially subject to regulations” [homeowners subject to the condo and planned community statutes], “the harm sought to be prevented” [violations of state law and the governing documents], “and the general means intended to be available . . . to prevent the identifiable harm” [DBFLS processing of complaints for OAH adjudication].[v]  Yet, these factors seemed to have escaped the judge’s attention.

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[i] Record Appeal Rule/Remand, Troon Village Master Assn v. AZ. Dept Fire, Building & Life Safety, LC2007-000598, Oct. 2, 2008, Nancy Waugaman, party in real interest.

[ii] The Attorney General’s brief in support of the constitutionality of A.R.S. §§ 41-2198 to -2198.05, Troon Village Master Assn v. AZ. Dept Fire, Building & Life Safety, LC2007-000598, June 13, 2008.

[iii] Allocation of Judicial Power, § 5.1, p. 123, Administrative Law, 2nd ed., (Thomson-West 2002).

[iv] Id, p.118.

[v] Id, The Delegation Doctrine, § 1.2, p. 29, footnote 5.

As a second thought, I wonder how Judge Downie would rule on the constitutionality of the entire CC&R legal scheme?  Where covenants are embedded in the common law of equitable servitudes running with the land, and where private parties are permitted to trespass upon constitutional rights and freedoms.   Would she rule them to be a devise to circumvent the US Constitution? Or would the Judge permit the State to do indirectly what it could not do directly?[i]  By allowing and permitting these private “contracts”, isn’t the State doing an end-run around the prohibitions and restrictions of the Constitution on government entities? 

Let’s examine how this indirect circumvention works.  In constructing and interpreting laws, the terms “shall” and “may” are clearly defined to distinguish a State mandated act from a discretionary act by the actor.  In many HOA statutes one find’s the term “may” when pertaining to an act of the board, such as when issuing fines.  In a few instances the term, “shall not” is used to prohibit an action, such as “the association shall not impose a fine . . . .” (ARS 33-1803(A)).  In a few instances the legislature does mandate a legally binding condition when it defines or declares an event, such as, “The association has a lien on a unit for any assessment when . . . .” (ARS 33-1807(A)).  However, the term “may”, although not prescribing a mandatory act or action, does carry a legal construction or interpretation that  “denotes permissible discretion[ii]“, and “‘May’ is permissive and confers a privilege or power. Normally the use of ‘may’ implies discretion or permission.[iii]“

Now, under the Ninth Amendment to the Constitution, rights not enumerated are “retained by the people“, and under the Tenth Amendment, the powers “are reserved to the people” if not delegated to the federal government or prohibited by the States.  The people have the power, and retain undeclared rights.  Often, when a dispute arises to challenge and clarify the legality of an action by the people, like, can an HOA fine a member, it often falls to the legislature to issue its standing on the matter, and either declare the act legal or not legal.  When the statute contains the word “may”, then the legislature is pronouncing the act or action as being not illegal, as consistent with the general good of the people and consistent with good public policy.  Otherwise it would use the term “may not” to prohibit and to declare the act illegal.  In other words the legislature has sanctioned or “blessed” the acts of private parties as legal by the very nature of the use of the term “may.”  (Similarly when a court rules that the act is not illegal).

Thus, the use the term “may,” in regard to discretionary board actions within a statute,  regulates who can or cannot behave, and/or the what or how-to of that behavior. In doing so, the legislature has declared the act not to be illegal, and not to be a violation of the Constitution (all statutes are presumed constitutional).  And, therefore, in the broader, cumulative picture, the legislature has declared that these private CC&R “contracts” are valid.  The legislature has declared that these bona fide governments, obviously not recognized as such by the State, yet functioning with more authority than granted to many incorporated villages and towns, are permitted to do what it, the government, cannot do directly.  HOA regimes are the surrogate entities of the State. The legislature has allowed and permitted these private agreements to circumvent the US Constitution.[iv]   The legislature could have said “may not.”  

In answering the question posed earlier, Judge Downie would not declare HOA private constitutions as a devise to circumvent the Constitution!  Judge Downie would allow the legislature to do indirectly, by means of sanctioning HOA statutes, what it cannot do directly under the prohibitions of the US and Arizona constitutions.

 Qui Pro Domina Justitia Sequitur  (“who prosecutes on behalf of Lady Justice”, DOJ seal)

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[i] Elrod v. Burns, 427 U.S. 347 (1976), “Since the government, however, may not seek to achieve an unlawful end either directly or indirectly . . . .”

[ii] Preamble, Arizona Rules of the Supreme Court, Part VII, R. 81 (2006).

[iii] “Use of Shall, Must  and May”, § 5.31, Arizona Bill Drafting Manual (2009) (Oct 11, 2009).

[iv] This is the greatest fear that evokes the strongest reaction from pro-HOA supporters, especially the national business trade group, CAI, whose members have immense influence and control over these private governments. The admission that HOA regimes are political governments and/or state actors is feared by CAI as a slippery-slope path to the severe curtailment of their power over HOAs, subjecting them to state accountability and oversight regulation.

The New America: Private homeowner association adjudication is constitutional, but administrative law court adjudication is unconstitutional. Say again?

Allow me to recall that I fought to be allowed to intervene in the Arizona superior court Merrit case that declared the Office of Administrative Hearings (OAH) adjudication of HOA complaints a violation of the separation of powers doctrine. An incredible slap at justice took place when I was ignored and orders given to the Clerk not to accept any further submissions from me. (Not even allowed to accept evidence of irregularities as to the standing of the alleged plaintiffs). This was a disgraceful act, especially when the courts lean backward to permit intervention in constitutionality cases. It was further disgraceful knowing that the courts place a heavy burden on the plaintiff to clearly show unconstitutionality, yet the courts still denied my intervention in this default decision. (My detailed filings and history can be viewed at The State of Arizona will not protect buyers of HOA homes!).

Was the establishment afraid that I would have had a public forum to raise these never before raised issues of constitutionality with respect to the HOA legal scheme itself? That I could finally ask questions in a public forum and wait for answers to my questions? The questions that no one cared to address. This was denial of my right to a hearing since I, and all other homeowner living in HOAs, was affected by Judge McMurdie’s broad decision. It was so unbelievable, so surreal. No government entity or official had come forward to defend the two year-old statute. Not only was it a gross travesty of justice, but an unethical decision violating the judiciary’s reported purpose to “secure the just . . . determination of every action.” (Ariz. R. Civ. P. 1); “a judge should not be swayed by partisan interests, public clamor or fear of criticism” and “A judge shall accord to every person who has a legal interest in the proceeding . . . the right to be heard according to law.” (Code of Judicial Conduct, R 81, Cannon 3(B)(2) and (B)(3), respectively).

I find it so laughable when an administrative law court that adjudicates disputes was found to be an unconstitutional delegation of legislative powers, yet a private regime’s adjudication of disputes is deemed OK, and ignored. Yet, there has been no delegation of legislative powers to any HOA regime! And, no one sees anything “funny” about this. It is obvious that the establishment sees no problem that a group of individuals can subvert the constitution and create private governments that adjudicate disputes, but delegation of such authority is required if the government gets involved. Go figure! The constitution has been turned on its head.

Furthermore, adjudication of disputes where there are obvious “industry interests” (the HOA in this instance) involved to preclude a fair hearing is one reason why independent administrative courts were established, separate from the control by any state agency. But, the legislature and the courts see no evil, hear no evil, speak no evil with this special “consideration” of HOA regimes. No, its those administrative courts that get in the way, not the HOA regimes. Welcome to the New America!

My main argument, as filed in my mandatory brief to the court as a Pro Per (see State of Arizona link above), was that there was no requirement for regulation stated in the cited cases, which were used as a basis for the decision, in order to validate a constitutional delegation of authority. The Administrative Procedures Act (APA), regulating state agencies themselves at the federal and state levels, and administrative law courts (like OAH) are longstanding legal doctrines.

Continuing my research for an expected reopening of the statute to permit OAH adjudication, I missed a very important argument in my brief. What does “regulation” mean? It does not only mean the authority to make rules for an industry by an administrative agency. Under the fundamental police powers doctrine to promote the general welfare, etc, regulation of the people and industry fell to the states and their legislative lawmaking long before administrative agencies entered into the picture in the 1930s.

The courts, including Judge Downie in the superior court Waugaman case that was used as the only argument in Merrit, focused on bona fide regulation, but only in terms of rulemaking (making “regulations”, which is referred to as binding administrative law). Understand that the DFBLS enabling act, see below, did not refer to existing statutes to enforce since there were none. In sharp contrast to the DFBLS act, the HOA enabling law, Ariz. Sess. L. 324 (2006), specifically granted DFBLS the authority to accept complaints and to adjudicate the existing statutes through OAH. The legislature said that it was in the public interest for an agency to adjudicate these HOA disputes subject to regulation by the named statutes.

We need to revisit this legislation and decision, either in the courts or before the legislature. The court decision cannot be allowed to stand as it is a gross miscarriage of justice.