Author: HOAGOV

There was much debate by The Founding Fathers over the structure of the government being created under the US Constitution. Was it a democracy? A republic? Was it a federation with one sovereign over the states? The consensus seemed to settle as Alexander Hamilton wrote regarding a national bank,

The powers of sovereignty are in this country divided between the National and State Governments . . . . each of the portions of powers delegated to one or the other . . . is . . . sovereign with regard to its proper objects.

John Dickinson, representative from Delaware, offered that America

could not be safely and advantageously governed, but by a combination of republics, each retaining all the rights of supreme sovereignty, excepting such as ought to be contributed to the union.

Today, we are witness to the acceptance of the quiet emergence of a layer of independent republics as a third level of government in our American federation. This layer lies within each of the state republics and shares in the sovereignty of the people in the same manner as the federal-state co-sovereignty expressed above. Areas are carved out by means of a public-private partnership that utilizes restrictive covenants, which are permitted to supercede public laws and ordinances, to regulate and control the people within their territorial bounds. This layer, creating a New America, is referred to as homeowners associations.

I cannot understand why these states have not only permitted and agreed to the secession of independent HOA “principalities”, yet continue to argue over states rights with the federal government. On one hand the states are highly protective of their sovereign rights, their sovereign powers, yet they have no concerns over the surrender of these cherished powers to private “constitutions” created by profit motivated businesses. These broad powers fall under the classification of “police powers”, or the power to regulate and control the people for their health, safety, morals and welfare in addition to the punishment for crimes and the administration of justice.

Why have the states willingly allowed this new sub-layer of government, the HOAs, to yield many of these powers without oversight or providing for the protection of not only federal constitutional rights, but state constitutional rights as well? These HOAs, this new sub-state layer of republics, which do not have to be chartered under state municipality laws, truly operate as independent principalities.

Welcome to the New American federalism in support of sub-state HOA governments.

The Goldwater Center for Constitutional Government issued a research report by its Director, Nick Dranias, that criticizes the current state of public local government, and proposes a new model for by means of a Local Liberty Charter. (See A New Charter for American Cities). These shortcomings include:

1. [the creation of numerous] special districts to engage in spending projects that would otherwise be unconstitutional under reforms enacted after the stagflation of the 1970s. . . .
2. Arizona’s local governments are functioning as if securing liberty were irrelevant to their mission. . . . If anything, the growth of local government has been a detriment to liberty.”
3. Local government bureaucracies are more intrusive, opaque and less accountable than ever, with public records request responsiveness in Arizona receiving a grade of “F” . . . .
4. Legitimate governments are meant to secure liberty. Local governments are no exception.
5. These principles of liberty [in state constitutions], however, are not reliably enforced at any level of government.
6. Our political system has led to a concentration of power at the local level that would be anathema elsewhere in government.
7. There are “too few checks on the abuse of local power” and that addressing this problem requires “systematic” reform.

All of the above criticisms of public local government apply equally well to private, contractual local HOA governments. Just extend “public local government” to that of an “indirect” delegation of legislative powers by means of a public-private governance partnership, otherwise known as the homeowners association.

The report does include a discussion of the very important and often misunderstood concept of factions and minority rights, and how our democratic principles was designed to deal with the problems of “majority rule.” I am reminded of the first inaugural speech in 1801 of that preeminent advocate of individual rights and freedoms, Thomas Jefferson, who said,

A wise and frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits . . . . This is the sum of good government.

Jefferson understood the need for regulations to prevent one faction, HOA special interests and misguided boards of directors, from injuring another faction, the homeowner-members, and from trampling on the unalienable rights of the less powerful minority. And if indeed misguided statutes have been employed in this dominance by one faction, then it is the duty of government to establish justice by correcting the mistakes of the past, and intervening to right the wrongs.

However, I am skeptical of the proposed solution to the problems of local government by means of an activist judiciary to enforce justice and the equal application of the laws. The decisions and events related to the Maricopa Superior Court in Arizona that raise serious questions of the integrity of the court, as described in prior Commentaries on this website, do not engender warm-hearted support that the judiciary will not be influenced by current public policy and politics. (See HOAs and the integrity of the AZ Superior Court).

This report is lengthy, but must be read and discussed in order to understand the alternatives for a New America. More HOA private governments, or a return to the democratic governments answerable and accountable to the supreme law of the land, the Constitution.

In view of Arizona Judge McMurdie’s March 4 Minute Entry , I firmly believe

To allow this decision to stand would be a travesty of justice.  The information provided in the letter, and contained in my Answer, go without  a response from the plaintiff and their CAI attorneys, and without a hearing as to their merits.  I believe I am, and the people are, entitled to a day in court.

I came across this letter to President Obama by Community Associations Institute (CAI) member and Florida HOA attorney Gary Poliakoff of Becker & Poliakoff who asks for a bailout for homeowners associations. Mr. Poliakoff asks,

as a condition of their receiving Federal Funds (the banks) and lower interest rates (the homeowners) [they] should be obligated to bring their obligations to their Community Associations current.

Now, I understand this public-private partnership to achieve goals in the best interest of the public where there’s a legitimate government interest, but this request goes well beyond a such an innocently portrayed goal. The argument advanced is that “to a large degree the [HOA] assessments paid by unit owners are going to maintain the collateral of banks” seems to be a stretch of the imagination. Poliakoff argues that the banks are creditors to the HOAs and that an estimated $41 billion in HOA revenues goes to this end of maintaining some $4 trillion in homes. Please understand, in Mr. Proliakoff’s own biography included as part of his news release of March 10, 2009, it states that he “has devoted a significant part of his career to the practice of Community Association law and is considered one of the foremost authorities on the subject.”

What the President is not being told is that these authoritarian, private regimes governing some 20% of Americans who live in HOAs are not subject to US Constitution. As another HOA expert and former CAI national president Wayne S. Hyatt wrote in regard to HOA violations of constitutional rights, “This is particularly true when the conduct prohibited would be constitutionally protected if the regulation were imposed by a government.” What is the necessary and compelling government interest to deny constitutional protections to homeowners, while upholding protections for the HOAs, as private parties who contract to avoid the Constitution? And the contract is an adhesion contract prepared by profit-seeking developers that are binding not as a result of the homebuyer’s explicit consent, but by simply “posting” to the county clerks office under the laws of equitable servitudes.

This cry for a bailout follows CAI “central’s” concern for Federal aid to homeowners in its March 2, 2009 Ungated Blog, “Helping Homeowners, Hurting Associations?” —

[T]he Cram Down legislation could allow bankruptcy courts to discharge past due assessments regardless of any lien or priority lien levied by the association. This would result in irresponsible homeowners getting a free pass on their past due assessments, raising the burden for everyone else or resulting in cuts to community maintenance and reserves.

CAI President Skiba goes on to express concern for the impact on “responsible” homeowners to ante up, thereby increasing the likelihood that they, too, would succumb to foreclosure. The CAI request is not to allow the bankruptcy courts to touch or reduce HOA assessment payments as part of the relief granted to homeowners. The HOA must survive!

It’s unequivocal that CAI’s interest is for the survival of the HOA, and not that of the homeowner who has come under hard times, in spite of public statements and testimony before state legislatures to the contrary. The homeowners are referred to in negative terms as “irresponsible” and, thereby are totally at fault for their dilemma. CAI and Poliakoff, failing in their duty and responsibilities as a good corporate citizens, want everyone to share in reestablishing our economy, but the HOA — it is untouchable. CAI is asking for the right for homeowners to avoid their communal obligations under the CC&Rs to fund the HOA. Yet at the same time, CAI argues that when the HOA files a foreclosure against a homeowner, the homeowner is a deadbeat and has failed to honor his obligations under the same CC&Rs. This is hypocrisy!

CAI cannot have it all their way. The contract works both ways. HOA authority and governance exist under legally binding CC&R “contracts” that, for the homeowner-member, are communal in nature just like binding community property laws, just like binding partnership agreements. Wasn’t this explained to homebuyers when they bought their HOA controlled home?

In the interest of the public in general, and in restoring a sound public policy for HOAs, neither the CAI nor Poliakoff arguments for a Federal bailout of HOAs can be granted. The CC&R contract must be enforced in a neutral manner without favoritism toward the HOA. There is no compelling and necessary government interest to support HOA private regimes that operate outside the Constitution, under which all public government is obligated. Not, at least, without a quid pro quo.

A federal bailout of homeowners associations must restore the Constitution as the supreme law of the land, and that all planned community or condominium declarations that create a homeowners association must contain mandatory wording that the HOA, although a private entity, agrees to be subject to the laws of the land, the US and state constitutions, and affirm that the Constitution is the supreme law of the land as if it were a public entity chartered and authorized as such under state laws. “As if it were a public entity” is essential to creating this obligation.

It is unthinkable that the Federal government would grant such a bailout request without such a pledge of allegiance to the United States of America, one nation, indivisible, with liberty and justice for all, and not a divided nation of independent HOA principalities.

The acclaimed and illustrious homeowner association expert, Wayne S. Hyatt, wrote on the need to reinvent homeowners associations in a September 2008 John Marshall law review article. This was somewhat surprising since Hyatt was an early Community Associations Institute (CAI) president in the 70s, and drafted several HOA declarations here in Arizona. Hyatt is also attributed with classifying HOAs as “mini-governments.”

Hyatt acknowledges the need for reinvention of HOAs with efforts

to reconcile community associations’ negative aspects [that] requires a candid admission that negative aspects exist” [and that] many [members] will be irritated by restrictions on property rights that the government traditionally protects. Residents will expect rights and processes as experienced in the public realm.

Yet, as shown by the Arizona declaration of unconstitutionality of OAH due process for HOA disputes, our government believes in supporting HOA restrictions that governments normally protect, rather than providing the expected public realm protections. The state is at fault, too, for failing to inform the public of their loss of rights and freedoms that comes with living in an HOA, while having the audacity to permit local communities to mandate such authoritarian subdivisions.

Hyatt, and others, have acknowledged that HOAs are a “sui generis”, that is, a one of a kind thing, not a public government and not a typical private nonprofit entity. “Analysts miss the essential point: community association law is a sui generis, essentially quite new, and predominately judge-made law that is itself evolving.” And it has been this judge-made new law over the past 44 plus years, argued and supported by such illustrious “legal-academic aristocrats” like Hyatt, all real estate/land use lawyers, that has resulted in an overwhelming pro-HOA decisions that can be found in the third edition (2000) of the Restatement of servitudes.

The article also addresses those questions of constitutionality and state actions that I have repeatedly raised over the years. Hyatt writes,

This is particularly true when the conduct prohibited would be constitutionally protected if the regulation were imposed by a government. The basis for these arguments generally is that the actions of the community association constitute “state action” on one or more of several theories. These theories are generally referred to as “judicial enforcement,” “sufficiently close nexus,” “symbiotic relationship,” or the “public function” theory.

Unfortunately, Hyatt reveals his true affiliations and beliefs, and rejects application of constitutional protections and state actions in his proposed “resolutions.” He prefers the violation of state constitutions approach, which is the preferred CAI approach because, as the national special interest lobbying organization, CAI dominates state legislatures. And the legislatures make the pro-HOA laws. A CAI lobbying committee exists in every state of the union! Just recall the defeat of last year’s HB2824 and SB1162 attempt to level the litigation playing field, and the superior court default decision on unconstitutional OAH adjudication.

Sadly, Hyatt did not address those fundamental questions that I had raised earlier, and that need to be addressed so we can proceed with a solid legal foundation:

1. Can a legislature delegate its functions, not government services but functions, to private entities without oversight or compliance with the Constitution, as required of all government entities?
2. Can private parties enter into contractual arrangements using adhesion contracts and a constructive notice consent, which serve to regulate and control the people within a territory (an HOA), within the state, to circumvent the application of the Constitution?
3. In 2009, should HOAs, as a sui generis private government, be held as state actors under the US Supreme Court criteria as a result of state protective statutes reflecting a cooperation, support or coercion; a symbiotic relationship; a close nexus; or an entwinement between state and HOA?