Category: Opinion

Abusive conduct and unjust actions by Arizona homeowner association attorneys in violation of ARS 12-349 and the Rules of Professional Conduct 11(a) prompted legislators to protect homeowners from these aggressive HOA attorneys. SB 1162 provides punitive awards for unjust actions and CAI is opposed to the bill. “The AZLAC will continue to work with the legislature to get this bill stopped, but we need your support!” (CAI Call To Action, May 14, 2008).

Yet, CAI claims that it has no problem with the attorney fee restrictions for administrative hearings. Of course not, they are currently prohibited. Astonishingly, CAI speaks of “certain situations” without providing clarification as to the true meaning of the legislation. What the bill does is to prohibit awarding attorney fees unless there’s a finding of unjust conduct that is “without substantial justification.” That’s entirely different from the impression given by CAI’s Call To Action.

SB1162 would do two things: (1) provide for awarding the winning party in an administrative action attorneys’ fees in certain situations, and (2) restrict certain types of amendments. The AZLAC has no objection to the portion regarding attorneys’ fees in an administrative action. We do have concerns about the amendment provisions. (CAI Call To Action, May 14, 2008; emphasis added).

Here’s what the bill actually says (emphasis added),

41-2198.02(C). In an action regarding a condominium or planned community, The administrative law judge shall not award attorney fees or costs and a court shall not award attorney fees or costs in any appeal from an administrative order unless the administrative law judge or court makes a finding that the attorney or party did the following [lists unjust actions].

If CAI has no concern for attorney fees under OAH, why has LAC co-chair Ekmark explicitly sought (as of in its May 16, 2008 Response in OAH case 08F-H088015-BFS) attorney fees under ARS 12-340 et seq., which SB 1162 seeks to impose on OAH HOA complaints? Currently, attorney fees are not awarded under OAH statutes. Could it be that, if the bill becomes law, CAI is setting the stage for another constitutional challenge to OAH authority (three decisions have already been challenged in Superior Court appeals)? Or could it be that CAI truly wants SB1162 to become law, thereby giving legitimacy to its request for fees?

Ekmark has asked for fees under ARS 12-349, presumably because he believes the homeowner’s petition failed to state a claim and should be dismissed, along with all such similar failures by Pro Per homeowners. And since the homeowner failed to state a claim, the court should penalize the petitioner, usually an average citizen without legal skills, for filing the petition “without substantial justification”. In other words, it appears that CAI believes that the poor unknowledgeable homeowner must be penalized for making an honest error, while skilled HOA attorneys know how “to make it look good.” It sounds that CAI indeed wants the bill to pass. It seems that CAI has “worked” the legislators into a no-lose situation: ALJs grant fees under the new law, or CAI continues litigation to declare the bill unconstitutional.

Another HOA attorney tactic is to immediately seek summary judgment, forcing the homeowner to respond in detail, but the Pro Per homeowner is completely unaware of how to respond under the Rules of Civil Procedure and generally loses. Will the HOA attorneys also seek fees under ARS 12-349 in these instances?

It appears that, after reading SB1162 and CAI’s Call To Action, the attorney authors seem to be violating, if the Call were filed in court, of precisely acting in a manner that the bill seeks to prevent – unjust actions. The bill quite clearly defines the unjust actions as (emphasis added),

41-2198.02(G). “[W]ithout substantial justification” means that the claim or defense constitutes harassment, is groundless and is not made in good faith.

References
“Good faith, a state of mind consisting in (1) honesty in belief or purpose, (2) faithfulness to one’s duty or obligation . . . (4) absence of intent to defraud or to seek unconscionable advantage.” (Black’s Law Dictionary).

CAI’s Legislative Action Committees are committees found in all CAI state chapters. The AZ Central Chapter is co-chaired by two homeowner asociation attorneys who have, in the past several years, represented CAI’s interests before the legislature. They are Curtis Ekmark and Scott Carpenter. The May 14, 2008 Call to Action by the CAI AZ Chapter argues against SB1162, stating,

This is definitely a “Pro-Litigation” bill. Currently, Boards and individual members can seek to amend documents to avoid lengthy and expensive litigation. The proponents of SB1162 want to take away an association’s ability to have the membership weigh in on a matter being litigated. That undermines democracy in associations and feeds the litigation machine. It is always ironic when a bill that appears to favor owners actually favors attorneys, but that is exactly what SB1162 does.

Actually, the bill says no such thing at all, but allows the judge to award attorney fees only in the event of unjust conduct by any party, including the attorneys. It specifically applies existing law, ARS 12-340 et seq., to HOAs and provides constitutional due process protections as applied to all contractual litigation. In furtherance of just and fair treatment of homeowners, it restricts the award of attorney fees, which will reduce, not increase litigation! Work it out! Mediate the issue!

Evidence from HOA records and statements at board meetings reveal the HOA attorney actually informing the board to proceed because the insurance will cover the bulk of the costs, and that they are allowed to bill the homeowner-violator per the CC&Rs. The HOA is using “other people’s money”, the assessments from members, in pursuit of many frivolous and trivial legal suits sometimes reaching $10,000 – $20,000 and more.

If a community adopts an amendment that “does not apply to a court action filed before the amendment is adopted”, there is the potential that the amendment would apply to all owners not involved in the litigation, but not the owner who happened to be in litigation at the time the amendment is adopted. When the Legislature changes the law, it does not exempt existing citizens and make the new law only apply to new citizens.

It appears that these astute attorneys who have “advised” legislators in the past are a bit confused with the questionable logic used in the above quote. First, once again these astute lawyers misdirect the issue by attempting to compare private, contractual agreements of governance with our free and open non-contractual civil governments. The above false argument is more CAI propaganda, because the issue is not of “new citizens” but of changing a contractual agreement without the consent of the homeowner, rendering the agreement meaningless.

Furthermore, what the bill does, reflecting the true reason for prohibiting “ex post facto” amendments, is to forbid amendments making what was “legal” now “illegal” — a cornerstone of American principles and values of justice and fair play. It puts the HOA in step with our Constitution. Too many times amendments are used by newly constituted HOA boards is to declare “illegal” what was once legal, imposing financial hardships on homeowners who acted in good faith and in accordance with the then existing CC&Rs. And many times with written or verbal approval of the HOA.

No, this is CAI attempting to protect its “turf” and opposing any legitimate and just constraint on HOA conduct and activities. Witness these two LAC attorneys, Ekmark and Carpenter, arguing that the HOA board is permitted to interpret the CC&Rs exclusively and in finality, and arguing to the courts and administrative law judges that the courts are intruding on the free and completely unrestrained right of people to contract as they wish. (See OAH petition 08F- 08F-H088015-BFS, and Maricopa County Superior Court appeal LC2007-000598).

In other words, as I’ve written many times, the HOA is held by CAI as an independent city-state, a principality, free from US and state constitutional restrictions. No, it’s the HOA attorneys who are promoting and encouraging questionable litigation under the claim that they are defending their client, the HOA, regardless of how it promotes a better community. Ask yourself, why is it necessary to have such provisions in the CC&RS that grant the board absolute authority over important contractual agreements in a one-sided violation of contract law. Do you call that democratic?

I ask, in judging the Call to Action by these attorneys, would they make the following claim before the courts? “When the Legislature changes the law, it does not exempt existing citizens and make the new law only apply to new citizens.” This is an example a frivolous claim to increase costs and to harass homeowners to not file legitimate complaints against abusive boards.

CAI’s Legislative Action Committees are committees found in all CAI state chapters. The AZ Central Chapter is co-chaired by two homeowner asociation attorneys who have, in the past several years, represented CAI’s interests before the legislature. They are Curtis Ekmark and Scott Carpenter. The May 14, 2008 Call to Action by the CAI AZ Chapter argues against SB1162, stating,

This is definitely a “Pro-Litigation” bill. Currently, Boards and individual members can seek to amend documents to avoid lengthy and expensive litigation. The proponents of SB1162 want to take away an association’s ability to have the membership weigh in on a matter being litigated. That undermines democracy in associations and feeds the litigation machine. It is always ironic when a bill that appears to favor owners actually favors attorneys, but that is exactly what SB1162 does.

Actually, the bill says no such thing at all, but allows the judge to award attorney fees only in the event of unjust conduct by any party, including the attorneys. It specifically applies existing law, ARS 12-340 et seq., to HOAs and provides constitutional due process protections as applied to all contractual litigation. In furtherance of just and fair treatment of homeowners, it restricts the award of attorney fees, which will reduce, not increase litigation! Work it out! Mediate the issue!

Evidence from HOA records and statements at board meetings reveal the HOA attorney actually informing the board to proceed because the insurance will cover the bulk of the costs, and that they are allowed to bill the homeowner-violator per the CC&Rs. The HOA is using “other people’s money”, the assessments from members, in pursuit of many frivolous and trivial legal suits sometimes reaching $10,000 – $20,000 and more.

If a community adopts an amendment that “does not apply to a court action filed before the amendment is adopted”, there is the potential that the amendment would apply to all owners not involved in the litigation, but not the owner who happened to be in litigation at the time the amendment is adopted. When the Legislature changes the law, it does not exempt existing citizens and make the new law only apply to new citizens.

It appears that these astute attorneys who have “advised” legislators in the past are a bit confused with the questionable logic used in the above quote. First, once again these astute lawyers misdirect the issue by attempting to compare private, contractual agreements of governance with our free and open non-contractual civil governments. The above false argument is more CAI propaganda, because the issue is not of “new citizens” but of changing a contractual agreement without the consent of the homeowner, rendering the agreement meaningless.

Furthermore, what the bill does, reflecting the true reason for prohibiting “ex post facto” amendments, is to forbid amendments making what was “legal” now “illegal” — a cornerstone of American principles and values of justice and fair play. It puts the HOA in step with our Constitution. Too many times amendments are used by newly constituted HOA boards is to declare “illegal” what was once legal, imposing financial hardships on homeowners who acted in good faith and in accordance with the then existing CC&Rs. And many times with written or verbal approval of the HOA.

No, this is CAI attempting to protect its “turf” and opposing any legitimate and just constraint on HOA conduct and activities. Witness these two LAC attorneys, Ekmark and Carpenter, arguing that the HOA board is permitted to interpret the CC&Rs exclusively and in finality, and arguing to the courts and administrative law judges that the courts are intruding on the free and completely unrestrained right of people to contract as they wish. (See OAH petition 08F- 08F-H088015-BFS, and Maricopa County Superior Court appeal LC2007-000598).

In other words, as I’ve written many times, the HOA is held by CAI as an independent city-state, a principality, free from US and state constitutional restrictions. No, it’s the HOA attorneys who are promoting and encouraging questionable litigation under the claim that they are defending their client, the HOA, regardless of how it promotes a better community. Ask yourself, why is it necessary to have such provisions in the CC&RS that grant the board absolute authority over important contractual agreements in a one-sided violation of contract law. Do you call that democratic?

I ask, in judging the Call to Action by these attorneys, would they make the following claim before the courts? “When the Legislature changes the law, it does not exempt existing citizens and make the new law only apply to new citizens.” This is an example a frivolous claim to increase costs and to harass homeowners to not file legitimate complaints against abusive boards.

As the foreclosure crisis reaches into those private planned communities, more and more homeowners are upset about being forced to pay special assessments and higher annual assessments to keep their HOA going. I even have been receiving questions from homeowners asking:

1. My HOA says they have no money and cannot maintain the common areas. What can I do?

2. My HOA says it will file bankruptcy if it doesn’t raise assessments. What will happen? Do I have to pay assessments to a bankrupt HOA?

3. Why do I have to pay higher assessments because of all those foreclosed homes?

Over the years homeowner rights advocates have been hearing stories about deadbeat homeowners who don’t pay their assessments, and it’s not fair for others to pay for them. So, foreclose on them! These stories have come from both the CAI supporters, and even a few misguided homeowners. Well, they got what they always wanted. Foreclosed homes for the nonpayers.

Oh, there’s no money to the HOA? That’s right. As pointed out to the pro-HOA foreclosure enthusiasts who felt strongly committed to the need for a club — the HOA right to foreclose on “deadbeats” — the HOA is in second place and must buy the mortgage and HOA debt in order to get anything out of a foreclosure. And that’s what they are up against today, except on a much larger scale.

Well, I might add to the above. Those in HOAs wanted a private community, free from government interference. Well now it comes time to pay for your own private way. However, the impact of a “cheapskate” homeowner attitude without “having to pay the piper” has now come due, and homeowners must now pay for their private government failures, and penny-pinching attitudes. There are no free lunches!

Demand competent management and sound business practices from your board, which will indeed raise the costs of living in an HOA. That’s “the cost of doing business” as an HOA.

HOA supporters cannot now ask for special “favors” from the government in terms of bailout legislation, not until the HOA legal scheme is changed and individual rights and freedoms are first restored and protected!

It appears, under the new supreme law of the land with respect to homeowners associations, the Constitution is subservient to the rewritten, “modernized” doctrine of equitable servitudes.  While the Restatement addresses constraints on the validity of covenants, such as “reasonable”, and not violating public policy or the Constitution, the Restatement states that in the event of a conflict between competing rights, the dominant right is not the constitutional right, but that expressed by the common law Restatement.

 

As for public policy protections, public policy, as reflected in state laws and court decisions, is well entrenched in favor of the association over the individual rights and freedoms of the people, the homeowners.  The standard of “reasonableness” is tied to the existing values and objectives of society, and thus, the use of this loose standard only serves to reinforce the holdings of the Restatement and the protective HOA public policy.

 

Simply stated, the sui generis nature of planned communities forced the courts to deal with a multitude of “first impressions” resulting in new laws.  As a result of the national efforts to mass merchandise and promote this new mode of housing, the special interests were influential in attaining many highly favorable decisions, serving to “lock-in” the protection of the HOA/planned community scheme.  And these special interests were supported by the property lawyers and the academics that wrote and talked about this new innovation in housing.  The opposition was at a disadvantage, as today when a homeowner still cannot get an attorney to represent him, and, consequently, a favorable body of common law developed.  That body of common law has become the “modernized” property law found in the restatement of servitudes.