Category: Opinion

Posts by GKS

Arizona HOA regulatory bill needs your support.

Last Friday, June 5th,  I emailed a revised AZ model bill to AZ legislators for sponsorship in January 2016.  It was initially drafted this past January, too late for introduction in 2015.  See model HOA regulatory agency bill.

“Summary.   This bill establishes a department of homeowners associations with full direct regulatory authority over Ch.9 and Ch. 16 associations under the direction of a commissioner. It provides for receiving complaints, investigations, filing legal actions, issuing civil penalties, rulemaking, and education as well as establishing an Advisory Board to provide recommendations to the commissioner.   Funding is provided by a $4 per unit fee per year. The processing of HOA disputes by DFBLS is stricken and processing is replaced  by the department of homeowner associations.”

Arizonans, email your legislator and demand sponsorship in 2016!  I will meet with any legislator to clarify and to answer any questions.  This bill affects the general public across the state and attempts to restore law and order to HOA-Land.  It deserves to be made law ASAP!

As you all know, HOAs are private persons and lawmaking is mandated to state legislatures as set forth in their respective constitutions. And you know that the state does not supervise HOAs, but has adopted a ‘hands off’ posture — no penalties for HOA board violations, for instance. “[i]t is a well established theory that a legislature may not delegate its authority to private persons over whom the legislature has no supervision or control.” (McLoughlin v. Pima, 58 P.3d 39 (2002).  This bill would provide constitutionally required legislative supervision and control.

Read the proposed regulatory bill:  Regulatory agency

HOAs are a throwback to medieval feudalism

Preposterous?  A wild thought?    You say that: according to the national HOA business ‘educational’ trade group, HOAs are the best example of local democracy at work [1].  So, make your point, convince me!  OK, I will!

Please see the table,  A comparison between fiefdoms and HOAs.

Note 1. “Associations are the most local form of representative democracy, with leaders elected by their neighbors to govern in the best interests of all residents.”  Community Associations Fundamentals, item 2.

CAI recognizes HOAs DO have problems

In a recent Associations Now article, “Study: Homeowners Associations Hit New Population Peaks, CAI Skiba is quoted as saying: “‘Not all associations operate as well as they should, and we’re never happy when we see a community in the news for the wrong reasons, but at least we know struggling communities are the exception to the rule,’ CAI chief executive Thomas Skiba, CAE, said in a comment on the study.”  I believe CAI is waking up to the fact that it can no longer hide the real lives of HOA members.  I expect a mia culpa (I am guilty) announcement by a repentant CAI. It has no other choice to stave off being completely discredited if it refuses to come into the light.

To assist CAI in its path to enlightenment, I have prepared another critique of CAI’s views about the HOA legal scheme and operations in reality.  CAI has published its “Community Associations Fundamentals” with the stated purpose that “CAI developed the Community Association Fundamentals to foster a better conceptual understanding of how associations function and the roles of residents and association leaders.” I will attempt to “decode” and examine what is really being said or not being said with the understanding that the word “fundamental” has the following generally accepted meanings, “forming a necessary base or core” or “of central importance.”

Please read CAI’s HOA “fundamentals” analyzed and “decoded.” You can help CAI in its hour of need — spread the word.

 

CAI background

In 2006, and followed up in 2012, I published the following analysis of CAI’s membership. In Who controls CAI and its 50 state HOA lobbying committees? I used census and CAI data to show that only 5.9% of HOAs are CAI members, based on all ‘volunteers’ belonging to different HOAs with no duplication. If all CAI members were counted then there would be only 9.8% HOA representation.  Furthermore, a miniscule .6% (.006) of Americans are CAI members. The CAI quoted “63 million Americans” is that number of people, not CAI members, living in HOAs.

On CAI’s 14 member Board of Trustees, HOA ‘volunteers’ (misguided individuals who are mainly HOA board members) hold only 2 positions. Vendor members hold the other positions as HOAs are not allowed to be a member.

In spite of the miniscule minority representation of HOAs and HOA members, CAI Legislative Action Committees (LACs) lobby and dominate HOA legislation in all states.

George Orwell’s 1984 is alive and well in HOA-Land

thought-policeIn 1949 George Orwell published 1984 where the fictional Oceania (formerly known as England) is a totalitarian state that has instituted a new society designed for the survival of the country.  Oceania had introduced methods and techniques designed to protect the government at all costs:  Big Brother is Watching You; Thought Police (don’t speak out or question, or else); Doublethink, creating the ability of the people to hold and accept two contradictory thoughts at the same time; Newspeak, the official language, replacing English, that redefines words and concepts; Ministry of Truth, the agency of propaganda and historic revisionism; and the Ministry of Love, the agency of regulations and enforcement.

Many can see the parallels and extensions of Orwell’s 1984 in the real 1984, and current world, of homeowner associations (HOAs) — authoritarian private governments.  Let’s take a look.

The principles of 1984 can be identified within the HOA regime: Ministries of Love, the boards and HOA managers, coerce compliance with outrageous fines and claims of violations.  The Thought Police, through1984_big brother the HOA vender organizations and lobbyists, use Doublethink and Newspeak to redefine everyday usage and meanings of words. Newspeak, or simply propaganda — lies and half-truths — to advance one’s interests, is extensively employed to defend the HOA regime. And, of course, there is the ever present all seeing eyes of the HOA — Big Brother is Watching You.

Of course, there are benefits to the state, the community and the residents, including the alleviation of irrational fears of the loss of property values.  But at what price?  At what cost?  At the cost of leaving the American Zone (as expressed by Shu Bartholomew in On the commons.com) and the loss of member rights, freedoms, privileges and immunities protected by the US Constitution and Bill of Rights.

The influence and acceptance of Doublethink has people believing that HOAs are democratic and not authoritarian regimes, because residents can vote – like in Cuba and China. That de facto HOA governments are businesses and not quasi-governments, because it is so declared.  That it’s the members’ fault for not making desired reforms to the HOA legal structure, which contains a very high bar to effective member participation in HOA governance. That the members’ are expressing their individual rights and freedoms by surrendering them and accepting that the authoritarian board speaks for them. However, the board is legally responsible to speak for the HOA corporation in accordance with the CC&Rs that do not recognize the rights of individuals as set forth in the Preamble to the US Constitution.

 Welcome to the New America of HOA-Land

I want you

I want YOU to

Join the HOA-Land Nation, today!

Read the complete paper at 1984

The continuing saga of Brown vs Terravita HOA. Can CC&Rs amendments violate state law?

Summary

The AZ appellate court is deciding whether or not to permit an attorney fees award resulting from an ALJ decision not involving a contract. The law says no, but Terravita’s HOA attorneys think differently and managed to get a CC&Rs amendment passed that permits just such a violation of state law.  Brown, the homeowner/plaintiff, had filed a complaint against state statutes and not against the CC&Rs. Furthermore, the amendment does not represent a majority or supermajority vote, but a minority vote based on a 2010 “minority control” CC&Rs amendment.  In other words, Terravita has become an oligarchy in fact.  Will this influence the court’s decision?

Case history

Terravita is a1300 resident, more or less, HOA in Scottsdale, AZ, with country club and golf included.  William Brown is a long-time resident who has been active in challenging the Terravita board for some time, winning cases.  In fact, Terravita’s insurance company has specifically set a $75,000 deductible for suits filed by Brown, just for him alone. Can you guess why?[1]

The ongoing case from 2012, filed with the OAH was decided against Brown on a question of failing to hold an evidentiary hearing for Brown’s position (regarding evidence that an executive meeting was not an executive meeting and Brown was entitled to the records). The ALJ felt the hearing was not necessary and granted summary judgment against Brown.

 The Court’s Order upheld the Administrative Law Judge’s grant of summary judgment in favor of Terravita. Thus, Terravita is entitled to its attorneys’ fees and costs as the prevailing party under A.R.S. §§ 12-341.01 and 12-341 as well as under the Amended and Restated Declaration of Covenants, Conditions, and Restrictions for Terravita, as amended . . . .[2]

The HOA filed for attorney fees for the OAH hearing and for appellate costs. Uncertain that, in this ongoing case, Terravita will prevail under 12-341.01 and case history, which supports nonpayment of attorney fees in ALJ cases, Ekmark (The law firm of Ekmark & Ekmark) first argues that Brown is none other than “Bad, bad [Bill] Brown, meanest guy in the whole damned town”[3] (my words).  The application for fees, in my view, character assassinates and libels Brown using Uyleman v. D.S. Rentco to defend its claim for a discretionary fee award. Brown is described as:

This lawsuit was both unfounded and trifling. It was nothing more than an attempt to harass and burden the Terravita community . . . Plaintiff proceeded to waste the resources of the Court and Terravita by appealing this meritless case. . . . The burden of defending these spurious claims should not fall on innocent homeowners. Rather, it should fall on the Plaintiff who filed this action and appeal with no legal basis and with no reason other than to harass Terravita.

Is this a case of the pot calling the kettle black?

In my view, this argument is a weak one designed to attack Brown. The second, but questionable, argument advanced by Terravita relates to the 2013 amended CC&Rs that permit such attorney fees in contradiction to state law.  (It raises questions of, who’s in charge?  The state? The municipality? The HOA? The HOA lawyers? Who??)  But in order to do so, Ekmark must claim that the OAH issue pertained contract and fees are payable under ARS  12-341.01.

Brown filed for a review and a superior court appeal of the decision, and then filed the ongoing appeal in the appellate court against the attorney fee award, CA-CV2014-000455.  He counters with, “The claim for attorneys’ fees under TCA’ s amended and restated declaration, in addition to defying credulity, is a misplaced transparent ex post facto attempt to trump well-settled Arizona law.”[4]

Brown presents his argument that the case is not a contract case but a violation of state law, having filed the OAH petition as a violation of state law, not of the CC&Rs.  (This is the question that should be before the courts, not one advanced after the fact by the attorneys in order to claim fees.) Apparently Brown’s wording was intentional, anticipating the HOA’s recourse to the 2013 amended CC&Rs.

Can CC&Rs covenants violate the Constitution or state law?

Under The Restatement (3rd) Servitudes, section 3.1,[5] the answer to the above question is NO!  As I wrote in 2005,[6]

When did “whatever the people privately contract” dominate the protections of the U.S. Constitution?

At the heart of the matter is the continued replacement of democratic local government, governments subject to the U.S. Constitution and 14th Amendment prohibitions, with contractual, authoritarian private governments that are not subject to the prohibitions of the 14th Amendment.

Can you and I contract to not pay income taxes?  Heavens no! But, can the HOA contract via amendments or rules to lower speed limits on public streets within its community? The courts would probably uphold the HOA’s position under 1) a validly adopted amendment, 2) members agreed to be bound by the governing documents, and 3) if the amendment is more restrictive than state law or ordinance.

What gives? Why the difference?  I’ve seen court decisions based on the business judgment rule,   (the board knows best), the amendment is in the best interests of the entire membership, and it’s the voice of the majority of the members.  But, this is not the case with Terravita and the attorney fees amendment.

Let’s go back to the 2010 Terravita amendment that was approved by the members allowing amendments to be passed by a minority of the membership,[7] contravening prevailing doctrine that supermajority approval was necessary for amending constitutions or charter.

Think for a moment.  If a minority can control the amendment process, it can control the HOA by enacting amendments that further strengthen the powers of the incumbent board.  Given the fact that the rogue boards are dominated by their HOA attorneys, minority control solidifies the political machines as the power elite.[8]

Consequently, as best as can be determined, the Terravita attorney fee amendment of 2013 passed with only 38% of the membership, although the board announced a misleading 90% approval. Based on Terravita’s email that 571 ballots were received, 90% would mean just 514 members approved the amendments or 38% overall membership approval.  Not even a majority!

OMG, the minority can speak for the majority, binding all of them to the amendments. So much for the board speaks for the majority of members. So much for HOAs being democratic.  Members who do not vote cannot be considered as approving the amendments.  Another democratic principal fallen by the wayside.

All brought to you under the advice and supervision of Ekmark, a CAI CCAL attorney.

Fortunately, a year later an Arizona bill, HB 2441, with similar provisions was put forth by another CAI CCAL member, Scott Carpenter, and failed. Carpenter characterized the bill as, “This change would enable community association to change their documents without onerous approval requirements that count a failure to participate as a ‘no’ vote.”[9]  In other words, create an oligarchy like Terravita with control by the few, and guided by attorneys, the HOA philosopher-kings.

In conclusion, how will the Arizona appellate court decide this case against Terravita?  For the survival of the defective  HOA regardless of the harm to the principals of our system of government, or will the court stand up and be counted, saying enough is enough?

References

[1] It would seem that the insurance company was going to pull its E & O insurance, but settled for this arrangement.

[2] Terravita’s application for attorneys’ fees  for (Ekmark & Ekmark)

[3] Jim Croce lyrics from Bad, Bad Leroy Brown:

“And it’s bad, bad Leroy Brown The baddest man in the whole damned town Badder than old King Kong And meaner than a junkyard dog.”

[4] See Brown’s 22 page opening brief, 1 CA-CV2014-000455, 9-16-2015. In addition, the amendment to § 17.08 only grants attorney fees to the HOA if it wins; the homeowner gets nothing.

[5] “A servitude . . . is valid unless it is illegal or unconstitutional or violates public policy [being]  a servitude that is arbitrary, spiteful, or capricious.”

[6] HOA reforms needed to guarantee U.S. Constitutional protections.

[7] Section 17.02 of the 2-10-2010 amended CC&Rs: “This Declaration may be amended by the affirmative vote or written consent, or any combination thereof, of the Owners holding not less than two-thirds (2/3) of the votes cast, provided that the total vote equals or exceeds Quorum.” A quorum being 1/3 of the membership.  Thus 1/3 of 2/3 = 307 affirmative votes out of 1380 members.

[8] See Beware the folly of eliminating supermajority voting for amending the HOA CC&Rs; HOA democracy at work: dysfunctional adoption of amendments by minority vote.

[9] Carpenter Hazlewood Delgado & Wood blog of Jan. 18, 2011, written by Scott Carpenter, “HB2441 – CC&R Amendments.”