Category: podcast

HOA attorneys support coercive HOA laws over member justice

Yesterday, June 24, I attended a ZOOM meeting with a number of attorneys from across the country who were debating 1) whether or not new HOA laws should be applied retroactively to all HOAs even those that were formed prior to the effective date of the new law, and 2) should draft versions of the HOA minutes, from member and board  meetings, be made available to the members and when. 

The general attitude was that new  laws should be made retroactive for the “comfort” of judges and BODs — too many old laws was a pain. But America has existed for over 234 years  with restrictions on ex post facto laws, and more generally, restrictions on civil retroactive laws. While the consensus would allow for individual pre-law HOAs  formed prior to the effective date to opt-out of retroactive application, failure to do so would automatically subject the HOA to the new version of the law a few years later, regardless. The rationale was that the HOA had an opportunity to remove itself from the law.  The general consensus was to adopt the retroactive law in spite of the fact that it was coercive in nature.  HOAs were promoted with this privacy aspect and objections to top-down government interference of one size fits all.

Allow me to explain, if an act, either by the HOA or by  member,  was valid at that time a subsequent version of that law would apply.  Applying the new law could make such a pre-law act invalid with potential financial consequences for the member.  For example, putting a then valid storage bin in the backyard is now invalid if over  a specified footage, and must be removed at the member’s expense.  Or forced to paint his home because the new law gave the HOA permission to require new painting for the good of the community. These ex post facto laws, like the ex post facto HOA amendments, make your alleged contract at closing a mere piece of paper and your rights surrendered to the whims and views of your neighbors.  These retroactive laws are coercive and do not serve member justice nor reflect a home rule doctrine where deference is given to the local community.

In regard to draft minute access, concerns centered around practicability and protecting the HOA, even though many states have laws allowing for verbatim videoing of these meetings — a growing trend toward transparency. I called to their attention that making draft versions available served as a check and balance on BOD conduct and that it would make the BOD’s actions more circumspect. I also raised my concern with regard to the timing of draft and approved minutes since delays of over a  month are an obstacle for effective member response – limiting any after the fact opposition.  In general, it was felt that the member should attend these meetings if concerned, which also raised practicality issues.  There was substantial support  for draft availability.

Overall, the attitude was toward protecting the HOA over BOD transparency.

Preface to HOA Common Sense

PREFACE

The title of this pamphlet, “Common Sense,” was chosen to identify and relate to the aims and purposes of the original 1776 pamphlet by Thomas Paine, Common Sense. Prior to the American Revolution it was Paine who provided the reasons and justifications for overthrowing the oppression government of King George III. He raised the consciousness of the colonists as to their second-class citizenship with respect to the British Empire, and something had to be done about. It was widely read by the Founding Fathers who did do something about it.

With a similar object in regard to oppressive, authoritarian HOA regimes, I present a summary of the essential issues that must be similarly remedied to bring about substantive changes to planned community/condo private governance.

Clarifications of meanings and concepts

A nation consists of a distinct population of people that are bound together by a common culture, history, and tradition who are typically concentrated within a specific geographic region. The common, binding element of HOAs is its organic law foundation, from which flow all state laws and the declarations of CC&Rs boilerplate, is based on The Homes Association Handbook of 1964.


An HOA is the governing body of a condominium or planned unit development (PUD) functioning for all intents and purposes as a de facto local political community government, but not recognized as such by state governments.

An organic law is a law, or system of laws, that form the foundation of a government, corporation or any other organization’s body of rules. A constitution is a particular form of organic law for a sovereign state. The US has indeed a set of documents constituting its organic law.

Definition of HOA-LAND: HOA-Land is a collection of fragmented independent principalities within America, known in general as “HOAs,” that are separate local private governments not subject to the constitution, and that collectively constitute a nation within the United States.

Read the book: HOA Common Sense: rejecting private government, a summary of 6 constitutional defects.

Elitist large-scale HOAs

Understanding private elitist HOAs as social welfare HOAs

Data on HOA member demographics is scare but I’ve been able to uncover  documents, 11 years apart, that lead one to believe that H-O-As are elitist for the most part.  A CAI  survey showed 79% respondents with incomes over $50,000 and 86% with some college of more.  US Census showed 24.4% and 44.9% respectively. A confirming study on a large-scale H-O-A showed 88.1% with some college or more and 76.4% with income over $45,000.

According to CAI’s LSA (large-scale associations) category of 1,000 or more units, a Nevada CAI survey showed a mere 2.0% were LSAs. This emphasis by CAI on LSAs, a small minority of HOAs across the country, impacts all H-O-As of every size in the state as a result of its intense lobbying efforts, its one size fits all policy.

These surveys are not  consistent with the totality of social welfare HOAs as contained in the IRS databases of 36,532 organizations filing under (c)4. Just 10.8% (3,931) of these organizations met the criteria for “homeowner associations” under the IRS subcategories, a far contrast with the surveys. Analyzing the justification by the IRS for one large-scale H-O-A raised concerns about the (c)4 tax-exempt process.

The absence of any discussion by SCG, a large-scale H-O-A, of it’s social welfare status  and related activities is compelling.  Based on my many years exposure to HOA legalities, I would hazard a guess that the board had advisers and assistance in preparing and filing its application.  SCG has close ties to CAI by virtue of its directors being CAI members, its attorney and CAM being CAI members, and its accounting firm, Mansperger Patterson & McMullin, also being a CAI member.

Read the full research study at elitist H-O-As.

Who’s in charge of the larger HOA? The BOD or CAI?

Over the years I’ve come to believe that the CAI member HOA attorney are really in charge and run HOAs, especially the larger ones where the money really is.  Its influence runs the gamut from its CAI School of HOA Governance,[1] to pervasive lobbying state legislatures, and its CAI Manifesto.[2] The manifesto is its “white paper,” 2020 and beyond, in which it advises its followers to influence state legislators and the courts.

QUOTE “Most legislators do not thoroughly understand common-interest communities or who their patchwork legislation is actually protecting. Legislators too often shoot from the hip, passing laws that ricochet and cause collateral damage. And they will continue to do so in the future unless the CIC interests undertake vigorous lobbying and education programs and awareness campaigns to enhance their understanding.“[p. 7][emphasis added]. UNQUOTE

In 2016 CAI published its survey[3] of large-scale associations (LSA) that revealed some insights into the strength and dominance CAI attorneys who are involved with the policies and operations of LSA HOAs. CAI  defines these associations as having more than 1,000 lots with an operating budget  of $2,000,000 or more, and that “provide municipal type services.”

QUOTE “CAI’s Large-Scale Managers (LSM) Committee . . . provides input on education curriculum, best practices, public policies related to management or operations of large-scale community associations, or identifying what is of value to the large-scale manager membership” [p. 2]. UNQUOTE

By “municipal type services,” CAI explains,

QUOTE “Many municipal governments viewed this new community housing concept as a means to transfer various public works and recreational responsibilities to a third party, which possessed the ability to assess property owners for the administration of these varied services.” UNQUOTE

The facts revealed

You may ask, so what has CAI really done or is this mere words? Based on CAI’s own data in the 2016 LSA survey, with only 94 respondents, readers can see the extent of CAI’s presence in these large scale HOAs — these master planned communities and these active-adult and retirement communities.  Reworking the data, the study revealed that 83.5% use an HOA attorney, which is not surprising for HOAs that can have as many as 9,000 homes or more and revenues that can reach upwards to $20,000,000.

Also not so surprising is that 92.5% of the HOA’s top leaders – president, CAM/COO — are CAI members in a strong case for conflict of interests.  As for senior staff, 64.9% are CAI members, and just 44.7% are on the BOD.  Understand that an HOA can have one or all three categories at the same time.

Consequences

I ask again, who runs the HOA, and where does the BOD’s advice come from if not from the teachings of the CAI School of HOA Governance? I suspect that the smaller the HOA the lower the percentages using an attorney or having CAI member HOA officials. The money isn’t there! 

This translates into follow the money that focuses legislators, the media, the political scientists, and the constitutional law think tanks on the LSA HOAs, treating the smaller HOAs as local nuisances. This is one good reason for failures in obtaining meaningful HOA reforms and even daily operational reforms.

References

[1] The foundation and principles of the School can be traced back to CAI’s Public Policies, The CAI Manifesto (its 2016 “white paper”), its numerous seminars and conferences, its Factbooks and surveys, its amicus briefs to the courts, and its advisories, letters, emails, newsletters, blogs etc. I have designated these foundations and principles collectively as the CAI School of HOA Governance.

[2]  Community Next: 2020 and Beyond (May 5, 2016).

[3] Large Scale Associations CAI study, 2016.

Desert Mountain opinion (AZ) constitutionality – part 2

Introduction

This 2-part Commentary on the H-O-A amendment boilerplate process entails a number of complex constitutional issues that are interlinked.  Discussing one results in discussing another, etc. in order to fully understand the validity of the H-O-A legal scheme.  [quote — ]You can’t see the forest for the trees[  –unquote  ] is the result of this complexity obfuscated by the Restatement and by the national pro-H-O-A special interest lobbyists.

In Part 1 I discussed 5 selected views by the appellate court that I see as constitutional challenges.   Herein Part 2 I present constitutionality challenges in regard to 1)  the bias found in the  Restatement of Servitudes,[1] a legal authority on court decisions and common law in favor of the H-O-A legal scheme, and 2) the freedom to contract doctrine[2] and its bearing on whether people are truly free to enter an H-O-A private government contract.

The Arizona appellate court ruling in Nicdon v. Desert Mountain[3] with respect to a CC&Rs amendment needs to be appealed to the AZ supreme court. In Part 1,  I raised the question of an on color of law denial of fundamental rights to property; on violations of the equal protection of the laws.   

Disclaimer: Understanding that in spite of my 20+ years reading hundreds of federal and state supreme court and appellate court opinions, I am not a lawyer nor am I employed by a lawyer; I only offer my views.

. . . .

Restatement of Property: Servitudes

In Item 5 of Part 1, I raised my concern that the Court relied on the Restatement of Servitudes quoting, [quote — ]A restrictive covenant is generally valid unless it is illegal or unconstitutional or violates public policy[  –unquote  ].[4]  The Restatement (American Law Institute) is accepted as legal authority even though it seems to be advancing ought to be or societal goals rather than reporting the law and factual court decisions.  

[quote — ]The Institute’s mission is [quote — ]to promote the clarification and simplification of the law and its better adaptation to social needs, to secure the better administration of justice, and to encourage and carry on scholarly and scientific legal work.[  –unquote  ] It achieves this goal through the development of Institute projects, which are categorized as Restatements, Codes, or Principles. . . . Restatements are primarily addressed to courts and aim at clear formulations of common law and its statutory elements, and reflect the law as it presently stands or might appropriately be stated by a court.[  –unquote  ][5]

The opening sentence above is the heart of the problem.  It presumes that justice is accomplished through ALI’s promotion of current court decisions, which in turn, are the reflection of a bias as  to what constitutes [quote — ]a better adaption to social needs.[  –unquote  ]  It flies in the face of  long standing constitutional doctrine on the legitimacy of the law and the consent of the governed.   It opens up to the controversy regarding the extent to which people may associate and establish contracts under freedom to and freedom of contract.

This 2000 update and marked rewrite began in 1987, 13 years ago. It is now another 21 years of substantive changes in the laws and public policy; H-O-As have now been institutionalized and accepted as [quote — ]this is he way it is.[  –unquote  ]  This is quite clear from the Forward (emphasis added):

 [quote — ]Professor Susan French [Reporter (chief editor/contributor) for this Restatement] begins with the assumption . . . that we are willing to pay for private government because we believe it is more efficient than [public] government  . . . . Therefore this Restatement is enabling toward private government, so long as there is full disclosure . . . .[  –unquote  ]

And we know there is an absence of full disclosure that amounts to misrepresentation.  Sadly, there is evidence of contradictory statements aiding and abetting this misrepresentation even in the Restatement that is used as legal authority by the courts. While the Court quoted comment a of §3.1[6] (see [quote — ]Contractual freedoms[  –unquote  ] below), it omitted comment h, which reads, [quote — ]in the event of a conflict between servitudes law and the law applicable to the association form [its private contractual nature], servitudes law should control.[  –unquote  ]

In addition, while the court referenced §6.10 it unbelievably failed to reject §6.13, comment a, which states: [quote — ]The question whether a servitude unreasonably burdens a fundamental constitutional right is determined as a matter of property law, and not constitutional law.[  –unquote  ]

Need I say more about securing the [quote — ]better administration of justice[  –unquote  ]?  Certainly not for the affected people — the H-O-A homeowners.  ALI is guilty of bias against the homeowners, the [quote — ]patients,[  –unquote  ] as analogous to the medical profession with its high degree of specialization where, working on the same body, the left hand doesn’t know about, or doesn’t care about, what the right hand is doing at the same time. 

If it is true and believable that laws are to provide justice, as widely proclaimed, the courts and the lawmakers must consider the effects of both hands on the patient. ALI must adjust its approach and remove these pro-H-O-A views and make references to applicable constitutional law.  ALI must also recognize that H-O-As are another form of local government that is not subject to the Constitution, and remove §6.13, comment a. 

The policy makers have failed to understand that the H-O-A CC&Rs have crossed over the line between purely property restrictions to establishing unregulated and authoritarian private governments.

Section 6 of the Restatement, Part D, Governance of Common – Interest Communities, attempts to deal with the governance of H-O-As in general. Section 6.16 addresses representative government.  It does not read at all like the Declaration of Independence, the Constitution, or the Bill of Rights.

Contractual freedoms and consent to be bound

Let’s begin with the excerpt from Desert Mountain opinion  in Part 1(1) linking the binding of the CC&Rs [quote — ]contract[  –unquote  ] by deed acceptance to the implicit consent to be bound in a single quote (emphasis added),

[quote — ]By accepting a deed in the Desert Mountain planned community, the [homeowner]  became bound by the Declaration, including properly adopted amendments. . . . when [a] homeowner takes [a] deed containing restriction allowing amendment by majority vote, homeowner implicitly consents to any subsequent majority vote to modify or extinguish deed restrictions[  –unquote  ].

By this doctrine, contract law 101 is ignored in favor of servitude law, as the Restatement advises  and an implicit waiver and surrender of a fundamental property right is accepted as valid, thereby treating the homeowner as a second-class citizen.  It does not do justice for the homeowner and should be held as an illegitimate exercise of police power by the legislature.

 In Item 5 of Part 1, I also raised the matter of the freedom to contract doctrine as contained in comment (a) of  the Restatement’s §3.1  that I now discuss in some detail here due to its constitutional complexity.

‘‘In general, parties may contract as they wish [freedom to contract] , and the courts will enforce their agreements without passing on the substance . . . The principle of freedom of contract is rooted in the notion that it is in the public interest to recognize that individuals have broad powers to order their own lives.’[  –unquote  ]   

In opposition to the above, I raised the following questions  years ago in 2005,

[quote — ]When did ‘whatever the people privately contract’ dominate the protections of the U.S. Constitution?  Please state what, if any, are the government’s interests in supporting H-O-As that deny the people their constitutional rights?[  –unquote  ]

I have not received an answer from any party including constitutional think tanks, state legislators, attorney generals, or the media.  It’s obvious that in any reply they [quote — ]would be defending the indefensible![  –unquote  ]

Freedom to contract; implied consent to be bound

The simplistic argument that remaining in the H-O-A implies consent is answered, in general,  by political scientist, professor of constitutional law, and author Randy Barnett,

Simply remaining in this country, however, is highly ambiguous. It might mean that you consent to be bound by the laws . . . or it might mean that you have a good job and could not find a better one [elsewhere] . . . or that you do not want to leave your loved ones behind. It is simply unwarranted that to conclude from the mere act of remaining . . . that one has consented to all and any of the laws thereof.[  –unquote  ][7]

I broadly address the consent issue in H-O-A Common Sense, No. 4: Consent to be governed[8]  (2008).  A deeper discussion can be found in H-O-A consent to agree vs. [quote — ]the will of the majority[  –unquote  ] (2019) wherein I quote constitutional scholars Randy Barnett, Keith E. Whittingham, and Edwin Meese.[9]

The important, selected, noteworthy quotes shown below bear directly on the defects in the top-down, take it-or leave it CC&Rs:

[quote — ]Tacit consent purports to provide a rationale for obligating those of us, by chance or choice, have not made their approval of the government explicit [Whittingham].[  –unquote  ]

[quote — ]The [quote — ]consent of the governed[  –unquote  ] stands in contrast to [quote — ]the will of the majority[  –unquote  ] . . . consent is the means whereby arbitrary power is thwarted [Meese].[  –unquote  ]

[quote — ]A law may be ‘valid’ because it was produced in accordance with all the procedures required by a particular lawmaking system, [the H-O-A amendment procedure, for example] but be ‘illegitimate’ because these procedures were inadequate to provide assurances that a law is just’ [Barnett].[  –unquote  ]

US Supreme Court must decide

I have informed readers about the  sticky-wicket that ties all these constitutional questions together as applied to the H-O-A legal structure and scheme; a sticky-wicket that must be resolved once and for all by the US Supreme Court.

References

[1] Restatement (3rd), Property: Servitudes, Susan F. French, Reporter, American Law Institute (2000).

[2] The question of  [quote — ]legitimacy of consent[  –unquote  ] is explored by Randy Barnett in his publications where he argues that there are limitations.  Restoring the Lost Constitution: The Presumption of Liberty, Randy E. Barnett, Part 1, Princeton University Press, 2004). 

[3] Nicdon v. Desert Mountain, No. 1 CA-CV 20-0129 (April 29, 2021).  

[4] Supra n.1, §3.3(1).

[5] [quote — ]How the Institute Works,[  –unquote  ] American Law Institute (ALI),website (May 3, 2011).

[6] This section of the Restatement, Validity of Servitude Arrangements, speaks to unconstitutional servitudes (§3.1(d)) and servitudes violating public policy (3.1(e)).  Worth reading.

[7] Supra n.3, p.19.

[8] See H-O-A Common Sense: rejecting private government (2008) pamphlet on Amazon.

[9] Barnett, supra n. 3; Whittingham, [quote — ]Chapter 5, Popular Sovereignty and Originalism,[  –unquote  ] Constitutional Interpretation, Univ. Press of Kansas (1999); Meese, [quote — ]What the Constitution Means,[  –unquote  ] The Heritage Guide to the Constitution (2005). Meese was the US Attorney General under Ronald Reagan.