Category: Opinion

Posts by GKS

protected speech concerning HOA governance

Last month I urged  all HOA members to support Arizona’s HB 2158,

“Many courts have referred to the Declaration of Covenants, Conditions and Restrictions (CC&Rs) as the HOA constitution.  Arizona’s HB 2158 is a second try (Arizona HB 2052 restores homeowner constitutional speech protections ) to prohibit restrictions on HOA members’ freedom of political speech with respect to HOA governance issues and matters.”

(Do you stand behind the US Constitution or your HOA ‘constitution’?)

The bill addresses the right of members to free political speech on matters affecting the governance of the HOA by specifying such rights and prohibiting HOA interference with these rights.  While the bill refers to “association-specific” signs, it is a giant step toward HOA democracy by creating a fair election and voting process, affecting procedures now dominated by the pro-HOA governing documents.

You can read the itemized “freedoms” here.  Just a few,

  • Defines an association-specific political sign as a sign that supports or opposes a candidate for the board or the recall of a board member or a condominium or planned community ballot measure that requires a vote of the COA or HOA owners.
  • Prohibits a COA or HOA from prohibiting or unreasonably restricting an owner’s ability to peacefully assemble and use common areas of the COA or HOA,
  • [prohibits] making any other regulations regarding the content of an association-specific political sign,
  • Allows an owner to invite one political candidate or guest to speak to an assembly of owners about matters related to the respective condominium or planned community.

The bill passed the House and will be heard all over again, as required by law, in the Senate this Monday, March 14th.  The Senate has always been a “stopper” of HOA reform bils; your continued, loud and clear support is necessary.

Email the Senate Government committee members NOW! 

Sonny BorrelliVice-Chairman
Sally Ann GonzalesMember
Theresa HatathlieMember
J.D. MesnardMember
Martin QuezadaMember
Wendy RogersMember
Kelly TownsendChairman

If familiar with the Legislature’s RTS procedure, sign on and make your voice via RTS, which is read by the committee members and made part of the record. Instructions on how to set up your RTS account can be found here.  It may look complicated but it simple, just fill in the boxes.  Your RTS can be used for any bill by just entering the bill number. 

Unfortunately, you must set up your account at a kiosk at the state capitol, after which youc can access your account from your home.

HOA ethics: the end justifies the means

Depending on what side of the fence you’re sitting on in a controversial issue, you may be arguing that the end justifies the means, Yes or NO. It is a moral and ethical decision and raises the question as to when and how.  In a culture where its values have been deteriorating over the years to, what’s in it for me, greed is good, and I want it now, a valid and acceptable “means” has consequently also deteriorated.

In general, this end-means assertion is introduced as a defensive justification for some course of action being challenged by others. It usually involves a discretionary decision by some authority entity, like a town council, board of directors, management, etc.  Not surprisingly, we find this defensive reaction in many HOA-Land situations; I discuss one such incident based on real events.

Read the full paper

Business judgment rule; understanding the courts

The intent of this title is to highlight the need to carefully read and understand legal documents –  knowing what is said and what is not said in statutes, in court decisions and opinions, and in contracts.  It is human nature for people to hear, see, or read what they want to and miss the real message.

Tutorial

If you seek to analyze, not merely read, a legal document then attentions must be paid to what I refer to as “word games.”  By that I mean the modification and extension of  the traditional meaning of words to support an argument or position; the parsing of sentences involving the effect of punctuations – commas, semi-colons, etc., — on phrases and clauses.

A simple example:

“I saw that she was busy and prepared to leave.
“I saw that she was busy, and prepared to leave.

“Without a comma, the reader is liable to think that “she” was the one who was prepared to leave.”

In the real world, documents can contain mult-line sentences with many commas and semi-colons, where your opponent will argue for one interpretation and you the other. In our example, who is right? The first or the second choice?  With many legal documents written by “writers,” the publicized author may not know at all. This happens often in complex legislative bills.

Business judgment rule (BJR)

(See below for an explanation of BJR).

Applying the above, let’s look at the wording of the WA Supreme Court’s recent opinion in Bangerter v. Hat Island that sidestepped the question of applying the business judgment rule to HOAs. 

At issue was plaintiff’s interpretation of the covenant for assessments that allowed the BOD “to charge and assess its members on an equitable basis.”  Bangerter said “equitable basis” meant at a rate based on home value, like your real estate tax; the BOD interpreted “equitable basis”  to mean the same assessment for all members.  The court held that the BOD’s interpretation was valid, deferring to the BOD as consistent with the BJR.

But here’s how the judges presented their decision:

Whether, and if so to what extent, the business judgment rule applies to homeowners’ associations is a thorny question. Given that we can affirm on any grounds, we decline to resolve that question here and wait for a case that more squarely presents it.

While courts do not owe deference to a homeowners’ association’s interpretation of its governing documents, courts do owe appropriate deference to their reasonable discretionary decisions. . . . Accordingly, there is no cause to consider whether the business judgment rule applies.

The first paragraph is, essentially, a “punt” — not going to deal with the issue.

Yet the first sentence of the second paragraph seems to be a rejection of the BJR.    What is the fine point that the court is making, the “hair splitting”? What is the effect of, the difference, in all practicality  between no “deference . . . [to] interpretations” and “deference to . . . discretionary decisions”?  

But wait! The court upheld the BJR with its deference to BOD decisions without saying so!  WOW! Go figure.

The second sentence is an astonishing declaration that the Court is not talking about the business judgment rule!  No wonder the average homeowner has a problem understanding what goes on in the mind of judges.  Confusing?  You bet!  On purpose, I wonder!

Business judgment rule explanation

The business judgment rule helps to guard a corporation’s board of directors (B of D) against frivolous legal allegations about the way it conducts business. A legal staple in common law countries, the rule states that boards are presumed to act in “good faith”—that is, within the fiduciary standards of loyalty, prudence, and care directors owe to stakeholders. Absent evidence that the board has blatantly violated some rule of conduct, the courts will not review or question its decisions. (Investopedia).

Related reading

If you wish to pursue a more detailed understanding of the pros and cons of BJR, please read   HOAs and the Business Judgment Rule: Bad Law and Reorienting the HOA board: business judgment rule

Support CO 22-1137 for HOA due process justice

Another HOA enlightenment bill has been proposed in Colorado, 22-1137, joining California’s and Arizona’s legislation to restore homeowner fundamental rights and freedoms.  Reading the bill as introduced, it addresses a number of issues designed to provide meaningful due process, to good extent, allowing for small claims adjudication and restrictions, limitations on the HOA’s right to fine, interest charges, late payments, work-out plan before foreclosure, and limits on the amount of collection to just 3 times amount owed (avoids unusual and cruel punishment charges). 

What more can a homeowner ask for to obtain justice and fairness within the HOA government? Go for the bill! Support it!  Get what you can before the evil empire strikes back and whittles the bill down!  Yet, to my disappointment, a homeowner advocacy group has found problems with this bill, all relating to how it would cost the HOA more money. 

What is needed, as I’ve repeatedly argued, is strong support for the sponsor, Rep. Naquetta Ricks, and an outpouring of emails to the legislators, especially to the committee members who will hear the bill.  If there is a Request To Speak option at the legislature, sign up and use it!

Related issues

In a broader view of HOAs as private, separate local governments keep in mind what has been ignored and bypassed by state legislatures across the country, including Colorado. Why are there private HOA governments when there are public home rule, charter governments?   

All the states have a version of home rule that varies in the degree of independence granted to a local governments and under what terms.   Given this existing legal mechanism for strong, independent  local control, why was there a need for the creation and approval of, and the support for, private government HOAs?

 (See America’s homeland: HOA law vs. Home rule law; Colorado Constitution, Art. XX, §6, Home rule for cities and towns).

HOA “bible” ignores members’ property rights

An excerpt from the HOA “bible” that was the source of the HOA legal scheme and structure, and included appendices on model CC&Rs and bylaws (Appendices F, G, and H, pages 384 – 402). While over time minor changes have appeared in governing documents, they are for the most part, and in particular on fundamental issues, boilerplate covenants contained in the Handbook.

Note that no mention is made of the homeowner, the HOA member, whose property interests are at stake and the subject of the legal scheme. “Association officers,” as we have discovered, represent the association and not the personal property interests of the members. The members are there, it seems, to fund the HOA. It is a top-down governmental structure with little concern for protecting principles of democratic government.