Opinion – Page 108 – HOA Constitutional Government

To the Sovereign of Arizona: where are the checks and balances on HOA governments?

I found the following resolution by the Arizona Legislature to re-affirm its sovereignty over Arizona personnel and its right to serve as a check and balance on the Federal government very intriguing. I keep thinking about why the “Sovereign of Arizona” believes checks and balances are not needed with respect to the independent, private governments known as HOAs, to which it has given its active support and cooperation.

Apparently, this concern for government checks and balances has been found not necessary when it comes to HOA governments. Apparently, obedience to the Arizona and US Constitutions with respect to due process protections and the equal protection of the laws for citizens living within these regimes has been found not necessary. It seems that the warnings of James Madison in The Federalist Papers, #51 have been ignored: “If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary”. Somehow average people become angels who can do no wrong when they become an HOA board member.

I would think that the citizens of Arizona do indeed need the long arm of the Federal government to serve as a check and balance since Arizona, and all other state governments, has failed to standby and to uphold the US Constitution. I think it is probably necessary for the Federal government to commandeer and nationalize Arizona personnel who participate in violating the US Constitution.

See The FEDS must restore law and order in secessionist HOA governments

SENATE CONCURRENT RESOLUTION 1016 (2013)

A CONCURRENT RESOLUTION

proposing an amendment to the Constitution of Arizona; amending article II, section 3, Constitution of Arizona; relating to the rejection of unconstitutional federal actions.

Be it resolved by the Senate of the State of Arizona, the House of Representatives concurring:

1. Article II, section 3, Constitution of Arizona, is proposed to be amended as follows if approved by the voters and on proclamation of the Governor:

3. Supreme law of the land; authority to exercise sovereign authority against federal action; use of government personnel and financial resources

Section 3. A. The Constitution of the United States is the supreme law of the land to which all government, state and federal, is subject.

B. To protect the people’s freedom and to preserve the checks and balances of the United States Constitution, this state may exercise its sovereign authority to restrict the actions of its personnel and the use of its financial resources to purposes that are consistent with the constitution by doing any of the following:

1. Passing an initiative or referendum pursuant to Article IV, part 1, section 1.

2. Passing a bill pursuant to Article IV, part 2 and article V, section 7.

3. Pursuing any other available legal remedy.

C. If the people or their representatives exercise their authority pursuant to this section, this state and all political subdivisions of this state are prohibited from using any personnel or financial resources to enforce, administer or cooperate with the designated federal action or program.

2. The Secretary of State shall submit this proposition to the voters at the next general election as provided by article XXI, Constitution of Arizona.

For AZ HOAs, public roads means public laws prevail

An interesting federal case came to my attention that involved public access to public roads. In this Puerto Rican case, Watchtower Bible [Jehovah Witnesses] v. Municipality of Santa of Isabel, CIV. NO. 04-1452 (2013), the First Circuit overturned the District Court’s decision and held that the Jehovah Witnesses’ free speech rights were violated. This case was the remand from the First Circuit in Watchtower Bible v. Sagardia de Jesus, 634 F.3d 3 (2011)).

Shades of Marsh v. Alabama (326 U.S. 501), that 1946 federal case where Jehovah Witnesses attempted to distribute literature in a company town with public access. WOW! (Cited in Sagardia de Jesus). Marsh led to the US Supreme Court’s “public functions” test to determine if private organizations were state actors. (Today, there are other tests for HOA state action that nobody seems willing to pursue).

The municipality operated a Public Housing Agency, similar to the “projects” build in the 1950s in Chicago and New York City. Where there are unmanned gates (“unmanned urbanizations”), entry to the public road is based upon acceptance by a resident who answers a buzzer or gets a call from the visitor. However, Puerto Rico has explicit laws that require all roads to be public roads open to all the people, with the usual police powers exceptions for the health and safety of the residents. Like criminals don’t get access, etc.

In dealing with the remand, to tighten the rules in accordance with the laws, the court noted that,

If access to public streets can be denied to them, then access can be denied to anyone. For example . . . the press could also be prevented from entering a gated community to cover the reactions of residents to a court ruling, as that in this case.

The court made the following general statement that has direct application to private government HOA regimes (my emphasis),

Even today, many nations of the world inadequately protect, or worse, fail to protect, these rights that we often take for granted. This case demonstrates this Nation’s deep history of protecting civil liberties. Any antipathy by individual residents of gated communities towards Jehovah’s Witnesses or members of any other religious faith should yield to common sense and respect for the Rule of Law, product of the United States and Puerto Rico Constitutions.

Combatting the CAI happiness in HOAs surveys

It is the CAI sponsored/conducted surveys of overall “happiness in HOAs” (my words) that advocates must come to deal with. The surveys must be challenged and confronted, because the HOA lobbyists will show them, with a smile, to your state legislators. And then they will point out several other similar surveys. The legislators will simply glance at the data, smile, and say, “How can I help you?”

It is accepted doctrine, especially in the courts, that if a statement is not refuted it is taken as true. Same applies here when arguing for HOA reform legislation. The surveys can be challenged on several points, such as, biased surveys even though the reputable Zogby conducts the actual survey under the sponsorship of CAI; the questions asked and not asked; and the conclusions drawn from the data presented if you obtain access to the actual survey questionnaire and unedited responses. (Any reputable organization will provide this information as verification of its conclusions, as is standard operating procedure with any validly conducted research).

Take the latest CAI 2012 survey under “Association Rules” that contained an assertion that 25% — note not 5% — had a “significant” personal issue or disagreement” with their HOA. It also stated that just 42% were satisfied with the outcome. Yet, the survey concluded with the finding that just 8% dissatisfied with their board: “This strongly suggests that the vast majority of residents recognize and appreciate the net benefit of living in their communities—even when there are differences of opinion.” The survey did not go into the nature of the disputes. Were they trivial, or did they involve homeowner rights and the fair and just treatment of homeowners?

The following question was asked under “Pre-purchase Awareness:” Did the fact that your current home is in a community association make you more likely to purchase or rent your home, make you hesitant about purchasing or renting your home or have no impact? An interesting question that indicates an awareness of advocate arguments that if they knew the whole truth about HOAs they wouldn’t buy into an HOA. Of course the survey revealed that 64% indicated “no impact” and 29% indicated “more likely,” for a 93% positive view of HOAs.

However, no one was asked to read my Truth in HOAs Disclosure Agreement and its comments from readers, for example, that provided a lot of material information about HOA life. What do you think the response would have been? But, if nobody tells the legislators about the Truth in HOAs disclosure, or can get the local media to run a survey, then the legislators can pretend ignorance, or at least ignore the babblings of a few malcontents.

It seems that the predominate attitude of the vast majority of state legislators is that the overall benefits of HOA legal scheme far outweigh any concerns for homeowner constitutional protections – due process and the equal protection of the laws.

CAI’s Research Foundation makes the following broad claims in its Statistical Review (my emphasis),

Because of the fiscal challenges faced by many local municipalities, communities are often created with the stipulation that the developer will create an association that will assume many responsibilities that traditionally belonged to local and state government. This privatization allows local jurisdictions to permit the continued development of needed housing without having to pay directly for that infrastructure through property taxes. . . . Community associations not only maintain home values, but also reduce the need for government oversight and expenditures by providing services, assigning payment responsibility to homeowners and being responsive to local concerns.

Read the above carefully! Where are the protections for homeowner rights under the contractual, not public domain, nature of HOA governments? There are no protections as one would expect under our system of democratic government. That is inexcusable! And state legislators do not see any problems with private governments operating outside their state and US Constitutions.

If the above surveys and conclusions by CAI are not challenged, life will remain difficult for meaningful HOA reforms.

Ordinances: the state, municipality and HOA pecking order

Another “outside the box” opinion by the Illinois Supreme Court. In Palm v. 2800 Lake Shore Drive Condo Ass’n (No. 110505) the court held that city ordinances can trump Illinois statutes under certain circumstances. Earlier this year the Court said that HOA security people could stop and detain drivers on their private streets, Poris v. Lake Holiday POA (No. 113907), and that homeowners could withhold payment of assessments if the HOA failed to make repairs, Spanish Court Two Condominium Association v. Lisa Carlson, (No. 115342).

Palm raised several issues in regard to constitutional law, home rule powers, and whether “condominium law” should triumph both contract and real estate law. The question before the court, and the one of interest for this commentary, was the simple Chicago ordinance that omitted the pro-HOA boiler plate wording when requesting HOA records, “for a proper purpose,” which as we know can be found in many state laws and in the CC&Rs. I focus on the doctrine of home rule that has been implied in defense of the HOA legal scheme – the local voice of the community.

Home Rule

The Court explained that “Home rule is based on the assumption that municipalities [my emphasis] should be allowed to address problems with solutions tailored to their local needs.” The Illinois Constitution has some very broad home rule provisions,

Except as limited by this Section, a home rule unit [meaning a municipality] may exercise any power and perform any function pertaining to its government and affairs including, but not limited to, the power to regulate for the protection of the public health, safety, morals and welfare; to license; to tax; and to incur debt. (Ill. Const. 1970, art. VII, § 6(a)).

Home rule units [municipalities] may exercise and perform concurrently with the State any power or function of a home rule unit to the extent that the General Assembly by law does not specifically limit the concurrent exercise or specifically declare the State’s exercise to be exclusive.” (Ill. Const. 1970, art. VII, § 6(i)).

The Court addressed the constitutionality of the structure of state governments:

If the constitutional design is to be respected, the courts should step in to compensate for legislative inaction or oversight only in the clearest cases of oppression, injustice, or interference by local ordinances with vital state policies (sic).

It should be noted that the home rule doctrine applies to government entities such as incorporated and unincorporated towns and villages, but does not apply to private, contractual HOAs. HOAs have not been delegated any powers by state legislatures in a proper enabling act. Instead, statutes are merely created that either mandate regulations or, through the liberal use of the word “may,” declare certain acts and actions to be legal if undertaken by the HOA.

The HOA legal scheme ignores the US and state constitutions. The IL Supreme Court’s advisory opinion that courts should step in to stop “oppression, injustice, or interference” by HOA “ordinances” that interfere with vital state polices does not apply to HOAs. In other words, HOAs have been given special status and privileges and immunities not granted to municipalities.

Restrictive ordinances are valid, or are they?

The other aspect of this opinion addresses the case when municipal ordinances supersede statutes, which has its parallel with the validity of ordinances with respect to HOA covenants and rules. The doctrine has been that if the ordinance is more restrictive then it is valid. However, if it is silent on an aspect of the statute in question, the statute prevails. The HOA argued that without “a proper purpose” clause the ordinance was less restrictive than the statute, and that the statute prevails.

A technical legal argument followed and the Court held that, “In sum, the constitutional framework places almost exclusive reliance on the General Assembly to determine whether home rule authority should be preempted. The legislature has not specifically denied the City’s exercise of home rule power or required its exercise of that power to be consistent with statutory provisions.”

Here, somewhat unique to Illinois, the IL Supreme Court said that the home rule Chicago ordinance should prevail and if the General Assembly didn’t like it, it should explicitly restrict the municipality’s powers in new legislation. What does this opinion say about municipal ordinances and HOA contracts?

First, remember that the HOA is not a government entity, but exists by virtue of a private contract. The opinion and doctrine should have no bearing on HOA contractual agreements. Second, the reality on the other hand, is that the courts have treated the HOA on the equivalent basis as if it were a municipality, and applied the restrictive ordinance doctrine. If the HOA rule or covenant is more restrictive, it controls over the municipality’s ordinance. In other words, the HOA has been granted the legal status of a subdivision of the municipality, or the status of a government entity. The HOA stands in the same relationship to the municipality as the municipality stands to the state.

Third, not only have HOAs been viewed as sub-divisions of a municipality in this aspect, their covenants and rules are not seen to interfere with “vital state policies.” Private contracts that are not subject to the 14^th Amendment are allowed to supersede municipal ordinances and even state laws. In other words, it is state policy — in all states — to support, encourage and cooperate with, and even coerce obedience to, the acts and actions of private governments operating outside the US Constitution.

A lot of issues and problems will disappear or lessen in impact if only the state legislatures would face up to reality and provide the same protections all other citizens enjoy by declaring HOAs as either state entities or to require all CC&Rs to state,

“The association hereby waivers and surrenders any rights or claims it may have, and herewith unconditionally and irrevocably agrees to be bound by the US and State Constitutions and laws of the State as if it were a local public government entity.”

In regard to the Chicago ordinance that is a fair and just protection of condo member rights, the Court upheld the ordinance.

HOA debt and member consequences

From the April L.A. Times column, ASSOCIATIONS, by Donie Vanitzian — Can titleholders pay their share of loan directly to bank? Here’s a peek.

HOA issue

Even with an annual income of more than $2 million, our association is in a big mess. There’s a several-million-dollar loan inclusive of our reserve account the association is paying off that has a variable interest rate currently at 6.85%. The association can’t touch the reserves because the bank says it’s garnisheed as collateral for the loan.

The board says we have to pay this money back because the bank is holding our reserve account hostage. If it is borrowed and we can’t touch this high-interest money, can the association just give it back?

Response

California homeowner associations cannot declare Chapter 7 bankruptcy and wipe out their debt. California appellate courts have ruled that because the association has an unending source of money — the titleholders — with which to pay its obligations, at most it can file for Chapter 11 reorganization. The court can order an association to make an emergency assessment against all the titleholders to pay off its obligation.