Category: Opinion

Posts by GKS

HOA court decisions, dicta, and activist judges

What I have discovered from my reading of hundreds of court decisions and cases on homeowner associations, from the ALJ, the trial and appellate courts, and the state and US supreme courts, is that all is not what you read in your textbooks.  In numerous instances, citations are made and taken out of context to evoke alternate interpretations; the misuse of dicta, that is simply an opinion of the judge and not material to the decision in the issue at hand, and presented as though it was, itself, the issue that was before and decided by the court; and the numerous decisions that place constitutional law secondary to equitable servitude law by, what essential are, activist judges.  These discoveries are particularly disturbing when related to homeowner association issues where 1) the body of law is not very deep, yet biased to protect the HOA, and 2) HOAs are a sui generis, a unique legal entity, not at all similar to the typical nonprofit with its ease of entry and exit.
 
With the above understanding, many HOA attorneys cite dicta as arguments for their position, which are unlike the case in most other circumstances where dicta are the result of long established doctrines and are usually correct.  That is, when a judge says so-and-so is his position or opinion as part of his reasons for his decision, and without citing case law, he is basing his opinion on long established doctrine that has been upheld over many years, after at least one court bona fide decision was handed own on the issue, or dicta.  You can say, alternatively, that his opinion is a statement of “well established doctrine and principles of law.”  But, that is not always the case with homeowners associations. 
 
For example, several court decisions have upheld the doctrine that the CC&Rs and governing documents are equivalent to contracts and will be treated as such.  So we have court after court citing, or attorneys citing, cases were this opinion was given by the judge in a decision on some other issue before the court, but never really addressed and a decision made by a court.  Of course, the basis or rational for such treatment can be challenged in court to obtain a court rendered opinion. In  Arizona Biltmore Estates, Divisio ,and Sunburst Farms (each citing the next earlier case) the court simply stated: “The deed restrictions in this case constitute a covenant running with the land [equitable servitudes law] and form a contract between the subdivision’s property owners as a whole and the individual lot owners.”  This opinion served as the basis for interpreting the CC&Rs in order for the court to decide the varying issues actually before the court. The question of a bona fide contract was not the issue before these courts, and was not decided by the court.
 
Pursuing this misuse of dicta in the courts, I asked Arizona attorney Scott Carpenter, a CAI member, a simply question on his new blog:  “Would you please provide the case law on voluntary purchases? Thank You.”  This was in response to his statement under “2010 Legislative Review” that, “The Arizona Revised Statutes, as well as case law, support the proposition that purchasing a home in a restricted community is a voluntary act and that the purchase binds the owners to the contract – the CC&Rs or restrictive covenants.”  Arizona law says no such thing in regard to voluntary acts.  If indeed it were so, then was there a need for a statutory lien to enforce HOA foreclosure rights , a supposedly a consensual lien?  A search of the eight cases provided in reply by Mr. Carpenter revealed that three did not involve HOAs (one going back to 1931), and four of the remaining five said no such thing about voluntary acts under a search for the words  “voluntary”, “agreement”, or “consent.  (The fifth HOA case, Heritage, was not searched).  
 
And, the miss-understanding of dicta is not confined to attorneys alone.  The Texas Supreme Court in Inwood v. Harris (1987) held that covenants running with the land — servitudes law — are superior to the Texas Constitution.  At the other end of the spectrum, an Arizona superior court judge, in an appeal of an administrative law judge’s decision, elevated a dictum to the level of decided law and material to the issue in her case. The superior court judge, a trial court judge, held that the cited  case’s dictum that an agency had been given regulatory functions was a material requirement for her ruling that a statute was an unconstitutional delegation for the adjudication of HOA disputes by an agency. (See Troon Village v. DFBLS (2008), aka “Waugaman“; the Carpenter law firm brought the appeal).   Yet, the test criteria used in the cited case did not require “delegated proper regulatory powers” as one of its criteria for the validity of the statute.  The judge simply included and miss-applied the opinion in the cited case, as if it were decided law material to the issue at hand.
 
This important legal doctrine of voluntary purchase has not been tested in the courts, and neither has the question of HOAs as bona fide governments regardless of the fact that they are chartered under corporation law rather than under municipality law.

Rebuttal against the necessity of HOA foreclosure rights

 Mr. Berding, an attorney, has prepared a comprehensive and lengthy six-page justification (herein noted as “Foreclosure”)[i] for the need, and therefore the right, for HOA  foreclosure. As a non-lawyer, homeowner rights advocate of long-standing, I commend Mr. Berding for tackling this controversial issue.   The detailed attention paid to this issue, including the question of the morality of the right to foreclose, indicates how effective advocates have been in raising this legitimate act of gross injustice.  A right given to the HOA government that is embedded in the developer’s CC&R imposed adhesion “agreement”, and which is backed by state law.

HOAs are vital to our national security

The premise of Mr. Berding’s argument:  foreclosure is necessary in order for the HOA to survive.  “What any rational version of the debate centers upon is not whether we should enforce these obligations, but rather the means of that enforcement . . . . because enforcement today often means using some means of foreclosure . . .” (Foreclosure, p.2).   His justification is a very weak: “what’s the alternative?”

I ask: Why should HOAs be given “special dispensation”?

Continue reading . . . Foreclosure.

[i] The Great Foreclosure Debate: Should Community Associations use Alternatives to Foreclosure to Protect Their Cash Flow?, Berding-Weil enewsletter, January 2010, http://www.berding-weil.net/newsletter/2010/01/35/ (Jan. 8, 2010).

Can HOAs be democratic without fair elections?

A homeowner rights advocate raised this very “on point” question:  Is buying votes in an HOA election illegal?  I initially answered that I was not aware of any explicit restrictions in the statutes, the governing documents, or in case law.  However, after reflecting on it for a while, I found arguments relating to the justification of the authoritarian HOA regimes and the need for a right to vote by the members.

Restatement Third, Servitudes, Ch 6, Common-interest communities (2000):

6.16.  Representative Government.

(c) Election of governing board. . . . [E]lection procedures must provide a reasonable opportunity for eligible members to become candidates for election and to make their views known to the electorate, and a reasonable opportunity for eligible voters to cast their votes.

6.18. Meeting and elections.  [nothing here addresses the question of fair election procedures and protections of a members’ election to the board].

Comment (a) speaks to a servitude (covenant) on a member’s right to participate in the governance of the board.  It justifies the HOA control over subdivisions with,

One of the primary justifications for permitting . . . servitudes that subject property owners to the often extensive powers of the [HOAs] to affect their property values and quality of life is that the members have the power through the political process to control the actions of the association.

 

What a false and erroneous statement about the political power to effectively control the  board. It reflects  an “ought be” rather than as “is”.  This erroneous statement, relied on by the courts, was made from high above by the legal-academic aristocrats who wrote the Restatement!   There are no fair elections covenants and procedures in the HOA legal scheme to protect the people that come anywhere near the laws governing elections in the public realm.  And, in my view, deliberately ignored along with all other 14th Amendment protections of due process and the equal application of the laws. 

 

The “comment (a)” excerpt was just lip service. How on earth can homeowners be effectively empowered in a corporate form of governance, under an adhesion contract written in favor of the business interests of the developer, and one that protects the interests of the HOA corporation over the individual rights of members?  To plead ignorance of constitutional law 101 and government law 101 is ludicrous!  This treatment  with its lack of concern for constitutional protections can only be viewed as intentional.

Why do I argue that the lack of constitutional protections is deliberate?  There are several self-evident reasons, but let me trace the origins of why the “voting makes the HOA democratic” defense came about, and why it was necessary to make this misleading argument.  In several prior posts over the years I made reference to the Homes Association Handbook, Technical Bulletin #50 (published by the Urban land Institute in 1964), as the “bible” for the modern incarnation of homeowners associations.  In the Handbook we find parallel statements on voting and the need for democracy in HOAs.  Here are excerpts as can be found in The Foundations of Homeowners Associations and the New America, Part I, The Homes Association Handbook, p. 17:

The other [as opposed to a bureaucratic style of leadership] requires more participation in order to give members a feeling of satisfaction with association operations; it may be called the ‘democratic style’.   

The members can always fall back on democratic controls provided in the bylaws [the corporate governance form of bylaws] to exercise their power to correct a situation . . . . But usually members will not involve themselves in active participation.

The right of every homeowner to membership and to vote is, in our opinion, critical to the strength and success of an automatic homes association.

Because the articles and bylaws of a corporation are relatively easy to change, further strength will be lent to this arrangement [that mandatory assessments require mandatory membership] by inserting a provision governing membership and voting rights in the association in the text of the declaration of covenants and restrictions.

The above accurately reflects the lack of treatment of constitutional protections or any concerns for establishing a working form of government equivalent to public government.  This intentional disregard of the protections of individual rights has remained over the years, and its influence on the legislatures and courts can be seen in numerous incidents.

As examples:  the 2007 Twin Rivers free speech case where servitude law was given dominance over constitutional law; and in the 2009 declaration by an Arizona superior court that an independent tribunal, the state’s administrative hearings function, was unconstitutional, but the “kangaroo” HOA courts are not.

The extent of HOA intrusion into a member's life

Most members of HOAs do not realize the extent to which the courts, in their preference for the common laws of equitable servitudes over constitutional law, can affect the member’s financial obligations and freedom of choice in personal behavior.  It is only a matter of time before they will be affected, and discover, too late, the extent of the loss of their individual freedoms, and the extent of the legal power granted to the HOAs by the legislatures and courts.  Powers not spelled out in the binding CC&Rs contract that is alleged to have been openly and freely consented to by the homeowner.

A re-examination of the California appellate decision regarding the Desert Cove mobile home community is an eye-opener and a warning for all members in every state, and reveals the extent of the legal powers granted to your HOA board.  It also reveals the extent of the lack of openness or transparency by the California courts in keeping its ruling away from public awareness.  The California Supreme Court refused to hear an appeal and a request to publicize the appellate ruling.  This disturbing 2003 decision, (OSCA Development v. Blehm, E032843, Cal. App. 4th Div. 2, Oct. 14, 2003; Supreme Court denial, S120748, Feb. 4, 2004), can only be found on my website at Desert Cove.

In short, this case centered on the following question: 

To what extent can HOA members be forced to pay assessments to a country club owned by the developer, not part of the HOA subdivision, and operated as a for-profit enterprise that is open to the public?

 

Article 19 of the CC&Rs played an important role in answering this question.  Initially, Article 19 simply created a voluntary membership HOA.  And as has occurred in numerous other instances of HOA power and control over the electoral process and uneducated membership, the HOA board quickly reacted as recorded in the court decision,

Before this court issued its final opinion, the Association by majority vote adopted an amendment to article 19. The amendment includes the following paragraph: “Each owner by acceptance of the deed to the Owner’s Residential Lot, is deemed to covenant and agree to pay to OSCA Development Company or its successor in interest the maintenance assessments duly levied by OSCA Development Company pursuant to these CC&Rs.

 

The court held that,

By purchasing property within the Desert Crest community, the homeowners accepted Article 19, even as amended in accordance with the majority vote standard established by the declaration of restrictions, and are bound by the membership fees requirement. Nothing prevents the homeowners from making further attempts to change the language in either article 19 or the provision authorizing amendment.

And the court gave the following opinion,

We conclude that the CC&R’s for a residential development that require the payment of a mandatory assessment far a country club located adjacent to or within the development create a mutual relationship of corresponding benefits and burdens, and, therefore, is a covenant that touches and concerns the land. We also conclude that, upon satisfying the criteria for a covenant that runs with the land, there is no additional requirement that the recreational facilities must be owned by the homeowners or the homeowners association in order to establish its validity or enforceability. As in this case, a privately-owned country club may demand payment of the fees and enforce its lien for unpaid fees under the CC&R’s.

 

There are two important factors in this decision to be noted that have a tremendous impact on constitutional protections, and reflect a government not subject to the Constitution.  First, implicit in the above decision by the court is the legality of “ex post facto” amendments:  amendments to the CC&Rs that alter the homeowner contract and bind the homeowner without his consent to the new contract.  An action that is not permitted under the Constitution for government entities.

Second, is the reliance on “covenants running with the land”, a legal doctrine established under the real estate common laws of equitable servitudes (see Restatement Third, Property:Servitudes).  The California court applied the legalese of the equitable servitude definitions and interpretations of covenants as binding on an undemocratic governmental structure, the HOA, and on citizens being held subject to these regimes.

This is but one instance of the extent of powers granted to the HOA by the courts and state legislatures.  Powers not explicitly agreed to in the supposed CC&R contract, nor that can be found to be a reasonable expectation of board powers.

The extent of HOA intrusion into a member’s life

Most members of HOAs do not realize the extent to which the courts, in their preference for the common laws of equitable servitudes over constitutional law, can affect the member’s financial obligations and freedom of choice in personal behavior.  It is only a matter of time before they will be affected, and discover, too late, the extent of the loss of their individual freedoms, and the extent of the legal power granted to the HOAs by the legislatures and courts.  Powers not spelled out in the binding CC&Rs contract that is alleged to have been openly and freely consented to by the homeowner.

A re-examination of the California appellate decision regarding the Desert Cove mobile home community is an eye-opener and a warning for all members in every state, and reveals the extent of the legal powers granted to your HOA board.  It also reveals the extent of the lack of openness or transparency by the California courts in keeping its ruling away from public awareness.  The California Supreme Court refused to hear an appeal and a request to publicize the appellate ruling.  This disturbing 2003 decision, (OSCA Development v. Blehm, E032843, Cal. App. 4th Div. 2, Oct. 14, 2003; Supreme Court denial, S120748, Feb. 4, 2004), can only be found on my website at Desert Cove.

In short, this case centered on the following question: 

To what extent can HOA members be forced to pay assessments to a country club owned by the developer, not part of the HOA subdivision, and operated as a for-profit enterprise that is open to the public?

 

Article 19 of the CC&Rs played an important role in answering this question.  Initially, Article 19 simply created a voluntary membership HOA.  And as has occurred in numerous other instances of HOA power and control over the electoral process and uneducated membership, the HOA board quickly reacted as recorded in the court decision,

Before this court issued its final opinion, the Association by majority vote adopted an amendment to article 19. The amendment includes the following paragraph: “Each owner by acceptance of the deed to the Owner’s Residential Lot, is deemed to covenant and agree to pay to OSCA Development Company or its successor in interest the maintenance assessments duly levied by OSCA Development Company pursuant to these CC&Rs.

 

The court held that,

By purchasing property within the Desert Crest community, the homeowners accepted Article 19, even as amended in accordance with the majority vote standard established by the declaration of restrictions, and are bound by the membership fees requirement. Nothing prevents the homeowners from making further attempts to change the language in either article 19 or the provision authorizing amendment.

And the court gave the following opinion,

We conclude that the CC&R’s for a residential development that require the payment of a mandatory assessment far a country club located adjacent to or within the development create a mutual relationship of corresponding benefits and burdens, and, therefore, is a covenant that touches and concerns the land. We also conclude that, upon satisfying the criteria for a covenant that runs with the land, there is no additional requirement that the recreational facilities must be owned by the homeowners or the homeowners association in order to establish its validity or enforceability. As in this case, a privately-owned country club may demand payment of the fees and enforce its lien for unpaid fees under the CC&R’s.

 

There are two important factors in this decision to be noted that have a tremendous impact on constitutional protections, and reflect a government not subject to the Constitution.  First, implicit in the above decision by the court is the legality of “ex post facto” amendments:  amendments to the CC&Rs that alter the homeowner contract and bind the homeowner without his consent to the new contract.  An action that is not permitted under the Constitution for government entities.

Second, is the reliance on “covenants running with the land”, a legal doctrine established under the real estate common laws of equitable servitudes (see Restatement Third, Property:Servitudes).  The California court applied the legalese of the equitable servitude definitions and interpretations of covenants as binding on an undemocratic governmental structure, the HOA, and on citizens being held subject to these regimes.

This is but one instance of the extent of powers granted to the HOA by the courts and state legislatures.  Powers not explicitly agreed to in the supposed CC&R contract, nor that can be found to be a reasonable expectation of board powers.