Category: Opinion

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?

      The Arizona Superior Court special action appeal of an administrative law judge decision upheld, and affirmed last week, the order that the  administrative hearing adjudication of HOA disputes was unconstitutional.  This affirmation was made one day before the time limit for a response set by the Superior Court Judge, and on the same day a letter introducing new facts in the case was received by the judge. The facts showed that there were no real parties in interest prior to the filing of the appeal and that the case was “fictitious.”  There is no acknowledgement of the letter nor a response to these important facts by Judge McMurdie. This is a gross miscarriage of justice!

This case, LC2008-000740 Maricopa Superior Court (Merrit), reflects an Arizona public policy that permits the denial of the equal protection of the laws in favor of private party adjudication of HOA disputes.   It appears that the Attorney General, the Legislature, and the Judiciary itself see no problem with private party adjudication of disputes that can impose financial harm on homeowners, but will not allow an independent government agency to adjudicate these disputes.  This turns the Constitution on its head!   This is but a taste of  what to expect living in the HOA-lands in the New America, in which not only the functions of government itself are privatized, but the judicial functions as well.  What, then, is the purpose of public government and the Constitution? 

This total disregard of my letter follows a flat denial, without explanation, of my February 11, 2009 Motion to Intervene, which was an abuse of discretion by Judge McMurdie.  Perhaps it was because I had included the Attorney General’s defense of the constitutionality of the statute in a prior case (which would have caused a trial and an embarrassment to the AG), LC2007-00598 (Waugaman), given that the AG and Legislature now failed to defend the statute in this case.  Why?  Maybe it was because I had made strong arguments (in my required Answer)  against the CAI-HOA attorney argument that an agency had to possess regulatory functions.  Such a requirement is not found to be a mandatory criteria in the Bennett  four-fold test that was used in the Cactus-Wren and Hancock cases.  These cases served as the basis of Judge Downey’s order in Waugaman, whose order was included as part of the Merrit complaint.

You be the judge of the events and decisions in this effort to attain a fair trial adjudication of HOA disputes. How much has politics come into play?  The relevant court filings are available at the links listed below.  A Statement of Facts summary and Timeline can be found under the “summary of events” link  below.

It is the policy of Arizona to favor the HOA industry with special laws and privileges that deny its citizens “fair trial” due process and the equal application of the law.  Perhaps in these times of financial hardship on the state, and on developers, homebuyers should speak out with their pocketbooks and buy homes at substantial discounts that are not in HOAs.  Homebuyers, avoid the mismanagement of HOAs; the blind adherence to arbitrary rules by “political machine” ruling boards; the divisiveness caused by the HOA attorneys who insist on enforcement, with no compassion; the lack of support and protection from your public government; and without having to be married to your neighbors who will not join in your just  fight for fair treatment against board abuse.  Ask yourself, “Who needs it?” 

summary of events

Court filings:

HOA declaration:                               

merrit-quitclaim                   

OAH petition                          

Complaint                                          

Summary disposition                 

Injunction order               

Intevernor motion                        

Intervernor answer                       

Intervenor-order               

Fact letter of new facts         

Judge’s Response           

time to reply                          

order affirming injunction      

Waugaman AG brief                                  

Waugaman decision

 

If I had been permitted to intervene, these facts, discovered subsequent to filing the Motion to Intervene, would have been presented appropriately. Rule 60(c) states that  “This rule does not limit the power of a court to entertain an independent action to relieve a party from judgment, order . . . or to set aside a judgment for fraud upon the court.”