Arizona bill, SB 1330, restores the homestead exemption to homeowners living in HOAs, taken by a 1996 statutory lien that offered no legitimate justification for classifying these persons as second-class citizens.  It passed the Senate’s Final vote 19 – 7- 4 in spite of heavy and irrational arguments by the national lobbying organziation that opposes the extension of constitutional protections, the Community Associations Institute, CAI.

CAI has resorted to a socially irresponsible position that homeowners in HOAs should look to their own pocketbooks and not to a greater responsibility as a vibrant and productive community that is part of the municipality and the state. Its cry that “It’s not fair to pay for deadbeats” reflects a view that peope should not pay taxes because they do not like some of the programs that are paid for by their taxes.

Congratulations to the Arizona Legislature for twice supporting substantive HOA reforms in support of the state and US constitutions.  Last year, the legislature approved a due process bill that provided for an independent adjudication of disputes with HOAs, using the Office of Administrative Hearings under the state’s Administrative Procedures Act.

Why are good people living in HOAs being treated as if they were criminals without rights?  Why are HOAs allowed rights not allowed to municipal governments under the US and state Constitutions?  Why?

Because the homeowner openly and with full knowledge surrendered his rights and agreed to these provisions?  Let’s see what the homebuyer is being held subject to that is NOT included in any document signed or referenced in any HOA purchase contract.

Did you know that the following information with serious consequences is not contained in any agreement, nor is ever mentioned in any promotional advertising or in any state agency warning notices or advisories?  Here are some examples of covenants or court rulings making the agreement a meaningless piece of paper, which under contract law would never stand the light of day.

 1.      That the documents in effect at the time of purchase can be superseded without the homeowner’s consent and without compensation and still be binding on the homeowner? 

2.      That the HOA and board can pass rules or amendments that are equivalent to ex post facto laws and bills of attainder, making what was ‘legal” and proper no longer “legal” or proper, and any affected homeowner may be required to conform to the new HOA “laws of the community”?  

3.      That the homeowner is not entitled to “a right of offset” as he would be under a bona fide contract; that is, the right to withhold payments in the event the other party fails to perform as agreed.  Instead, the homeowner must continue to make payments and is not allowed to post payments to some trust or escrow account, while he fights for his rights under the kangaroo / HOA board court, or is forced to bring legal action.   

Obviously, why should the board seek a just resolution of any dispute when 1) the law doesn’t punish HOA board violators, 2) it will continue to receive the payments along with any penalties, interest, late charges and huge attorney fees, and 3) the homeowner is faced with the lose of his home without any real hope of receiving any of his home equity? Why?

And, in addition to these harsh measures against the homeowner, the homeowner is still subject to a discriminatory law that punishes him excessively with foreclosure on his home without concern for his equity, and without the homestead exemption protection available to all other homeowners.  Do the ends justify the means, or is this an injustice and a poor public policy?

  In a democracy the people come first, not the inefficient and inept government of subdivisions propped up by state laws that serve to intimidate and punish what is really a private agreement.

Why are good people living in HOAs being treated as if they were criminals without rights?  Why are HOAs allowed rights not allowed to municipal governments under the US and state Constitutions?  Why?

Because the homeowner openly and with full knowledge surrendered his rights and agreed to these provisions?  Let’s see what the homebuyer is being held subject to that is NOT included in any document signed or referenced in any HOA purchase contract.

Did you know that the following information with serious consequences is not contained in any agreement, nor is ever mentioned in any promotional advertising or in any state agency warning notices or advisories?  Here are some examples of covenants or court rulings making the agreement a meaningless piece of paper, which under contract law would never stand the light of day.

 1.      That the documents in effect at the time of purchase can be superseded without the homeowner’s consent and without compensation and still be binding on the homeowner? 

2.      That the HOA and board can pass rules or amendments that are equivalent to ex post facto laws and bills of attainder, making what was ‘legal” and proper no longer “legal” or proper, and any affected homeowner may be required to conform to the new HOA “laws of the community”?  

3.      That the homeowner is not entitled to “a right of offset” as he would be under a bona fide contract; that is, the right to withhold payments in the event the other party fails to perform as agreed.  Instead, the homeowner must continue to make payments and is not allowed to post payments to some trust or escrow account, while he fights for his rights under the kangaroo / HOA board court, or is forced to bring legal action.   

Obviously, why should the board seek a just resolution of any dispute when 1) the law doesn’t punish HOA board violators, 2) it will continue to receive the payments along with any penalties, interest, late charges and huge attorney fees, and 3) the homeowner is faced with the lose of his home without any real hope of receiving any of his home equity? Why?

And, in addition to these harsh measures against the homeowner, the homeowner is still subject to a discriminatory law that punishes him excessively with foreclosure on his home without concern for his equity, and without the homestead exemption protection available to all other homeowners.  Do the ends justify the means, or is this an injustice and a poor public policy?

  In a democracy the people come first, not the inefficient and inept government of subdivisions propped up by state laws that serve to intimidate and punish what is really a private agreement.

The CAI Arizona chapter continues to make misguided constitutional arguments in opposition to SB 1330, a bill that attempts to restore the application of the homestead exemption to homeowners living in HOAs.  This right was removed by the CAI promoted legislation in 1996 without offering any legitimate government interest as to the justification to exclude HOAs.  “The AZLAC [Arizona Legislative Action Comm.] believes the Legislature did not do anything insidious or wrong in 1996 by creating a statutory lien for planned communities.”*  This 1996 legislation was an unconstitutional government intrusion into private contracts.

  

CAI argument*	Advocate response
1.      In conclusion, SB1330 is unconstitutional as it would impair the contracts that create consensual lien rights in communities that are governed by CC&Rs that create liens.	No, it restores the 1996 intrusion into contracts. CAI acknowledges that the legislature created a statutory and not a consensual lien.
2.      SB1330 requires that the homestead exemption protection be applied to ANY association liens for condominiums and planned communities. The key word in this bill is ANY.  SB1330 states that the Homestead Exemption applies against “any lien of the association.” SB1330 would impair the contract by telling associations the provisions in their CC&Rs are no longer enforceable or applicable. It is clear that the “obligation” to pay assessments secured by a consensual lien would be “impaired” by this bill.	The CAI attorneys are attempting to create reasonable doubt with alternate, implausible interpretations of the meanings of simple sentences. The exact wording of the bill** does not make the “exemption” per se applicable to any association lien — that any HOA lien is subject to the exemption protection.  Rather, the bill simply applies the homestead exemption LAWS of Chapter 8, Article 1, title 33 to HOA liens. That is, the homestead laws prior to 1996, whatever they stated, are in effect, and Article 1 clearly excludes any consensual liens from any exemption. Yet CAI while agreeing that the HOA has a consensual lien, believes, somewhat perplexingly, that SB1330 modifies rather than applies Article 1. This item 2 argument is bogus and without merit.
3.      Arizona statute (A.R.S. 22-1103) acknowledges that property owners can consent to giving up the homestead protection. “The homestead…is exempt from process and from sale under a judgment or lien except a consensual lien, including a mortgage or deed of trust.”  Condominium and planned community liens are consensual and Arizona courts have upheld this for decades.	Yes, that’s correct. But SB1330 acknowledges the exclusion of consensual liens by the application of the Homestead Exemption laws of Chapter 8, Article 1. Actually, ARS 33-1103 contains the quoted material, not 22-1103.

 

Notes:

*    AZ CAI Call for Action email of May 4, 2007.

**  “The homestead exemption protection prescribed in chapter 8, article 1 of this title applies against any lien of the association.”

Today we again hear the unsupported allegations of “doom and gloom” if the homestead exclusion is removed, or if foreclosures are required to be at fair market value.  I think it’s time that those who are opposed to these bills take a good look at the national lobbyist organization for HOAs, CAI, that has no HOAs as members, and has members from only 5.9% of all HOAs across the country.  It’s time to take a good look at the statements and wild claims made by these interlopers with a personal agenda, the HOA lawyers and management firms, and their affiliated associations of management firms, and those board members who have identified with CAI policies against their fiduciary duties to their members.

 

Please pass SB1330 and SB1340. It is the right thing to do in support of the rights of individuals under the Arizona Constitution.

 

For the complete submitted statement, see AZ SB1330.