Category: amicus civitas

friend of the state

CAI’s early awareness of HOA constitutionality, public mini-government

It appears that CAI has adopted a “see no evil, hear no evil, speak no evil” attitude toward HOA constitutionality and public mini-government issues that are still prevalent today.  And it spread to the policy-makers.

Wayne S. Hyatt’s 1975 Emory Law Journal article, Condominium and Home Owners Associations:  Formation and Development, 2 years after the formation of CAI, presents his highly influential view on HOA constitutionality while recognizing that HOAs are mini-governments.

Wayne Hyatt “the most prominent advocate in CAI” serving as a 1975 “homeowners representative” and a former president (1978-79) (Privatopia, p. 219, 138 respectively). Hyatt  devoted his practice to working with developers of condominiums, master planned communities, resorts . . . to create community governance structures and community stewardship organizations.

While actively practicing law, he was also a member of 1) the American Law Institute (that wrote the pro-HOA Restatement of Servitudes, 2) the College of Community Association Lawyers (CAI affiliate) , the Community Associations Institute (CAI, created in 1973 by the National Association of Home Builders [grant of]  $30,000), and  3) ULI – the Urban Land Institute (sponsor of the 1964 “HOA bible,” The Homes Association Handbook) and served as a ULI Trustee.

He also served as an Advisor 1) to the Restatement of the Law (Third) Property: Servitudes, and 2)  to the Special Committees on a Uniform Condominium Act and a Uniform Planned Community Act of the National Conference of Commissioners on Uniform State Laws (Uniform Law Commission, UCIOA and UCA).  Hyatt received several awards from CAI.

Hyatt developed many of the Dell Webb’s master planned and resort/active adult association CC&Rs over the years.

His 1975 Emory Law Journal article gives readers a good idea of constitutionality and local government concerns that seemed to have evaporated over the years as CAI’s influence increased dramatically.  A few important excerpts:

  • “The California Code provides for an association and affords it the powers and duties of the mini-government.” {T]he [Georgia] legislature has in effect provided a large measure of home rule for what is in essence a category of small municipalities, and each has established a system of officers and directors in the nature of a mayor and council to oversee the exercise of this rule.” (At 988). 
  • “‘Has the state permitted, even by inaction, a private party to exercise such power over matters of a high public interest that to render meaningful’ constitutional rights, private action must be public?”(Footnote 33 at 983). [In simple terms, private government HOAs must be subject to local government protections].
  • “The Declaration is not a contract but, as a covenant running with the land, is effectively a constitution establishing a regime to govern property held and enjoyed in common.  It further sets forth procedures to administer, operate, and maintain the property. . . . the declaration and particularly the by-laws create not only a corporate structure but also a governmental authority that requires and deserves competent, experienced persons . . .” (at 990).
  • “The power of ‘levy’ is a distinctive characteristic of the association and removes it from a mere voluntary neighborhood group. . . . The imposition of penalties, whether fines . . . or a denial of use of facilities enforced by injunction, certainly represents quasi-judicial power to affect an individual’s property rights. . . . The possession and exercise of such power has substantial consequences with clear constitutional implications.  The courts have not yet considered a direct constitutional challenge to an association’s action.” (at 983).
  • “[T]he constitutional issue is most acute in rule enforcement; however the association’s established procedures, declaration, and by-laws should insure compliance with at least rudimentary constitutional principles, and there must be a procedure to protect members’ rights.” (at 984).

Nowhere will you find any equivalent discussion of HOA constitutionality, or HOAs as mini-governments or as a form of local public government. Not in its Manifesto, Community Next 2020 and Beyond (2016);  not in its Public Policies: Private Property Protection, Government regulation of Community Associations, and Rights and Responsibilities For Better Communities (July 15, 2021).

And not in any of its anti-constitution amicus briefs: Twin Rivers NJ appellate (2004), Dublirer NJ Supreme Court (2011);  Surowiecki, WA Supreme Court (2021) (business judgment rule overrides judicial review); Turtle Rock AZ appellate (2017); Foreshee WI appellate (2017).

Elitist large-scale HOAs

Understanding private elitist HOAs as social welfare HOAs

Data on HOA member demographics is scare but I’ve been able to uncover  documents, 11 years apart, that lead one to believe that H-O-As are elitist for the most part.  A CAI  survey showed 79% respondents with incomes over $50,000 and 86% with some college of more.  US Census showed 24.4% and 44.9% respectively. A confirming study on a large-scale H-O-A showed 88.1% with some college or more and 76.4% with income over $45,000.

According to CAI’s LSA (large-scale associations) category of 1,000 or more units, a Nevada CAI survey showed a mere 2.0% were LSAs. This emphasis by CAI on LSAs, a small minority of HOAs across the country, impacts all H-O-As of every size in the state as a result of its intense lobbying efforts, its one size fits all policy.

These surveys are not  consistent with the totality of social welfare HOAs as contained in the IRS databases of 36,532 organizations filing under (c)4. Just 10.8% (3,931) of these organizations met the criteria for “homeowner associations” under the IRS subcategories, a far contrast with the surveys. Analyzing the justification by the IRS for one large-scale H-O-A raised concerns about the (c)4 tax-exempt process.

The absence of any discussion by SCG, a large-scale H-O-A, of it’s social welfare status  and related activities is compelling.  Based on my many years exposure to HOA legalities, I would hazard a guess that the board had advisers and assistance in preparing and filing its application.  SCG has close ties to CAI by virtue of its directors being CAI members, its attorney and CAM being CAI members, and its accounting firm, Mansperger Patterson & McMullin, also being a CAI member.

Read the full research study at elitist H-O-As.

State legislatures must be held accountable for dereliction of duty

While U.S. Attorney General Merrick Garland announced a DOJ investigation into the Minneapolis police department, the AG must also start a sweeping investigation into the dereliction of duty by state legislatures in their unconstitutional support, promotion and encouragement of homeowner association legislation.  

(See Legislative dereliction of duty: supporting HOAs). 

Legislation, which affects some 23% of all Americans living in an HOA, that permits contractual, authoritarian private governments  (HOAs or community associations) not accountable to the US Constitution.

The DOJ must also investigate the role and extent of the influence on state legislatures by the national, self-proclaimed expert in HOA law, the Community Associations Institute (CAI) and its affiliate, The Foundation for Community Association Research.  The DOJ must examine the extent of the teachings of the CAI School of HOA Governance has had in creating longtime conditioning and indoctrination of legislators, the media, and the public.  

“CAI School” is a term that I use to describe the collection of all CAI statements, publications and including seminars, programs, classes, etc. that constitute the CAI Manifesto.

State legislatures must be held accountable for any undue influence by pro-HOA special interests.  CAI must be held accountable for the content of its pro-HOA advocacy.

Legislative dereliction of duty: supporting HOAs

I have strongly and repeatedly argued that the HOA declaration of CC&Rs is a devise — a legal maneuver — by real estate interests to avoid the application of the federal and state constitutions to HOAs.

 The word “may,” as found prolifically in HOA statutes, serves to legalize acts  and powers of the private HOA  entity in a round-about, subtle manner. Without the use of the “may clause,” an act of the HOA can be challenged as illegal even though it is stated in the declaration agreement that is treated as a contract. Thus, state legislatures avoid a constitutionally mandated enabling act that delegates authority to any agency or public-private entity.

The acceptance of home rule doctrine and statutes, by all states, would seem to negate any justification under judicial review for creating special laws for HOAs.  Home rule offers an alternative measure to satisfy any genuine government interest, thus making HOAs unnecessary.

So it appears that businesses can fail as well as cities, towns and states but, heaven forbid, not  the private HOA government.

Read the entire paper here.

HOAs are another form of local government

Listening to the events concerning the shooting in Brooklyn Center, MN I was surprised to learn that its form of government is based on the council-manager system.  We are more familiar with the mayor – council or mayor – manager forms of local government where the mayor is elected and plays a major role in governing the city.[1]

However, in the council-manager form the mayor is a figure head with the powers to rule the city are divided between the elected city council and a city manager  appointed by the council.  Sound familiar?  Many HOA Bylaws follow the council-manager form of local government, except that the Bylaws do provide for corporation laws governing the duties of officers.  This is true of the many large HOAs and the retirement/resort subdivisions.

The division of labor and authority follows the public form in that the council holds ultimate responsibility for the conduct of the government but is restricted to policy issues, while the appointed manager actually runs the HOA. A good example can be found in an Arizona active-adult HOA of some 17,000 people.

“The affairs of the Association shall be managed by a Board of Directors which shall serve as the corporate policy-making body of the Association. . . .  The Board is not responsible for nor authorized to perform day-to-day operations of the Association. The day-to-day operations of the Association shall be carried out by CAM or agents retained by the Association under the supervision of the Board.

“Subject to the Board’s responsibilities concerning operational policies, it shall be the policy of the Association . . . that the Board refrain from unreasonably interfering with the performance of delegated functions by CAM.”

The major difference between local public government Brooklyn Center, MN and the Arizona HOA lies in the private contractual nature of the HOA that absolves it from application of the US Constitution as well as the state constitution. HOA members are, as compared to non-HOA members, therefore second-class citizens lacking constitutional protections within their own state.[2]

The $64,000 question is: So why is there so much opposition to requiring the HOA to be subject to the Constitution like all other forms of local government?  BEFORE you respond, think very carefully with respect to the implication and consequences of your response.

References

[1] See in general, Roger L. Kemp, “Forms of Governance,” Managing America’s Cities: A Handbook for Local Government Productivity, McFarland & Co., (2007). They are: Strong Mayor, Council-Manager, Town Meeting (direct or representative democracy), and Commission. See also,  Home rule doctrine vs. HOA governments; CC&Rs are a devise for de facto HOA governments to escape constitutional government.

[2] See George K. Staropoli, HOA-Land Nation Within America (2019).