AZ legislature fears HOA failures if homestead protection permitted?

Why is the exclusion of homestead protection for private HOAs a matter for  the AZ Senate FIN committee?  Is the committee afraid that HOAs will begin to fail in droves due to dead beat members retaining up to $400,000 in homestead exemptions if foreclosed on? (The HOA equivalent to public taxes).  That’s odd, because for years CAI has presented surveys that all is well in HOA-Land with a 70% – 80% member approval.  Or is there fear mongering going on again?

H’mmm.  Suppose now that the fear is real and down go the HOAs, mainly on the directors failure to manage the HOA’s funds.  Why then should HOAs get preferred treatment in violation of the Arizona Constitution, Article 2, Declaration of Rights? Let them fail as any other poorly run organization!

§32. Constitutional provisions mandatory. The provisions of this Constitution are mandatory, unless by express words they are declared to be otherwise.

§13. Equal privileges and immunities.. No law shall be enacted granting to any citizen, class of citizens, or corporation other than municipal, privileges or immunities which, upon the same terms, shall not equally belong to all citizens or corporations.

If the committee, and Legislature, proceed to withhold homestead protection then their act would be a clear violation of the AZ Constitution and subject to an easy challenge. It has happened in the past and the homeowners won! AZ Attorney General admits SB 1454 HOA to be invalid and without effect.

Dual HOA punishments: no homestead protection & foreclosure

The unreasonable HOA take all foreclosure right is a cruel and unusual punishment. (Courts finally realizing the gross injustice of HOA foreclosures). It is linked to the denial of the homestead exemption which in effect, crushes without exception the dastardly homeowner for not paying up! 

The Arizona Legislature is considering SB 1470 that attempts to restore homestead protection and correct this shameful treatment of good people. The opposition offers no justification, and the “general interest” argument is without merit as it denies fundamental rights. It’s a simple one-liner to be deleted. The case for the exemption was well stated in 2007 by California’s L. A. Times columnist Donie Vanitzian, JD,

“It is the titleholder’s personal asset that functions as a kind of perverse collateral, requiring the owner to pay assessments to the association-entity or lose his asset. . . . On purchase of that home and without anything more, the titleholder’s asset became a personal risk and personal liability for the owner. Instantly, the titleholder’s asset also became collateral for the association-entity.”

(California Common Interest Developments — Homeowner’s Guide, Donie Vanitzian, p. xviii, xix, Thomson – West 2006).

The Arizona 9 page, plus addendums, residential purchase agreement of some 400 lines does not inform the buyer that his home is security for the survival of the HOA. It is a statutory lien created by the state and not a voluntary agreement. On the other hand he is informed that his home is security for the mortgage.

Please protect the sanctity of the home and restore the homestead exemption to HOA homes.  Pass SB 1470!

HOA Homestead Exemption Exclusion (SB1470)

`Please pass SB 1470, homestead protection for the people.

History of Homestead Exemption HOA Exclusion (SB1470)

In 2004 ARS 33-1806(3)(h) was added to the mandatory disclosure requirements, requiring a buyer to sign an acknowledgment that he agrees to the loss of his homestead exemption (now $400,000). Just one year later, in 2005, the statute was again amended to remove any reference to the loss of the homestead exemption.  In 2007 Governor Napolitano vetoed the homestead exemption bill on a flimsy argument – to many subjects.

Today, ADRE (real estate dept)  still does not inform consumers of the loss of their homestead exemption.

In 2007 I wrote, in part,

“They [CAI] raise the issue of a consensual agreement, the unsigned CC&R ‘agreement,’ which, under Arizona statutes, is an exception to the application of the homestead protection.  The author of the S/E amendment to the bill, Representative Farnsworth, made quite clear that ARS33-1807(A), which opens with, ‘The association has a lien . . . .’ (emphasis added), is a statutory lien and not a consensual lien – the homeowner has no choice in the matter whatsoever. 

“Any reference to a consensual lien must come from a voluntarily entered agreement, and, not from a statute. Our concern here is the alleged CC&Rs consensual agreement that may contain a provision for an agreement to a lien for unpaid assessments and the right to foreclose.  No CC&R that I have been made aware of mentions a surrender or a consent to the loss of the homestead exemption.  No real estate purchase agreement that I am aware of mentions an agreement to surrender the homestead exemption. The CC&Rs have been held as binding, not as a consensual agreement per se, but by the application of the doctrine of constructive notice, or the simple posting to the county clerk’s office.” 

This is the Legislature’s second chance to restore the equal protection of the laws to homeowners in HOAs. There is no justification for denying homestead protection when.

Resources

ARS Title 33, -Ch. 8

 33 – 1101. A. Any person the age of eighteen or over, married, or single, who resides within the state may hold as a homestead exempt from attachment, execution and forced sale, not exceeding $400,000 in value, any one of the following:

1. The person’s interest in real property in one compact body upon which exists a dwelling house in which the person resides.

2. The person’s interest in one condominium or cooperative in which the person resides.

33-1103. Homestead exemption; extent of exemption; exceptions

A. Real property that is subject to the homestead exemption provided for in section 33-1101, subsection A is exempt from involuntary sale under a judgment or lien, except in connection with:

1. A consensual lien, including a mortgage or deed of trust, or contract of conveyance.

33- 1256; 33 – 1807. A. The association has a lien on a unit for any assessment levied 14 against that unit from the time the assessment becomes due.

SB1470 (Feb. 13, 2023)

C. Subsection B of this section does not affect the priority of

10 mechanics’ or materialmen’s liens or the priority of liens for other

11 assessments made by the association The lien under this section is not

12 subject to chapter 8 of this title.

The need to regulate CAI monopoly

To answer to the question I raised, “Is CAI a coercive HOA monopoly?,” required further research and analysis, which resulted in  finding extensive and strong evidence, gathered from over the years, that CAI is definitely acting in violation of the anti-trust statutes; steps need to be taken to break up the monopoly.  Below are my recommendations to regulate CAI’s activities to allow for the voice of others to be heard, especially from owners of HOA homes who suffer under the monopoly.

A.       Regulations on CAI monopolistic activities

1.       CAI to cease all references and implications that it represents HOAs before the legislature, all government bodies, before the courts and including amicus curiae briefs without express consent to do so;

2.      Require CAI to state that it is a business trade nonprofit, explicitly a 501(c)6 and not an educational entity;

3.      Inform readers that it cannot have HOAs as members since HOAs are consumers of the services provided by the trade group members;

4.      It is actively engaged in lobbying state legislatures on bills favorable to the HOA  and not necessarily to the membership;

5.      Inform owners and the public in general that its attorney members represent the HOA personified by the Board of Directors and not the member.

B.    Regulations on HOA activities in support of CAI monopoly

1.       Similar to representing employees in bargaining with management, propose federal laws that permit and protect HOA members to organize its membership to bargain in good faith for amendments to the governing documents and Rules changes;

2.      Propose legislation that allows for the creation and protection of a national HOA Homeowners Coalition, similar in intent as the National Labor Relations Board (NLRB);

3.      To restrict the HOA from interference with the newly established  organized national and state  member entities;

4.      Quarterly inform the membership of the number of directors, officers, managers, and attorneys who are members of CAI;

5.      Publish the total annual amount of spending for CAI dues paid for any HOA members, donations, other fees, and expenditures paid for by the HOA;

6.      Inform the membership that all communications with their attorney are not exempt from disclosure by state law,

7.      and all communications with the HOA attorney constitutes corporate documents that are accessible to the members, unless explicitly exempted under  “Pending or contemplated litigation” apply;

8.     The CC&Rs or Declaration for any planned community, condominium association or homeowners association shall state that, “The association hereby waivers and surrenders any rights or claims it may have, and herewith unconditionally and irrevocably agrees to be bound by the US and State Constitutions and laws of the State as if it were a local public government entity.”

Is CAI a coercive HOA monopoly?

Community Associations Institute (CAI) dominates themarket for HOA educational services and controls the market around it by means of its extensive lobbying of state legislatures and by holding seminars, conferences and publications extolling its self-serving agenda that promotes the HOA legal structure and scheme; by the support  of state agencies that sponsor CAI seminars and classes, and by private entities trained under the CAI education program – ECHO in California and CALL in Florida, as examples. It has become successful in lessening competition as a result of its “improper conduct.”

A quick review of the internet postings shows (emphasis added),

“[The]  courts ask if that leading position was gained or maintained through improper conduct—that is, something other than merely having a better product, superior management or historic accident. In the end, courts will decide whether the monopolist’s success is due to ‘the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.’”

“Coercive monopoly” is defined as:

“A monopoly that is created using extraordinary power such as a government or international agency. For example, a government that grants legal protections to firms that create barriers to entry to prevent competition. Firms commonly lobby governments for rules that protect them from competition.”

With respect to CAI, a tax-exempt nonprofit, can it be charged as a monopoly? It is a well-established fact that no state has granted  CAI a protective government monopoly exclusion —  the right to lessen competition. And that includes local governments in several states that openly support and encourage the CAI HOA program; some states have actually employed CAI as its authority to educate the public regarding HOAs.

The  answer is YES according to the following Supreme Court case. The case addresses the instance where  the state assigns a “governmental monopoly” (making it a state-actor) to an entity (which HOAs are not), but must explicitly state that the entity has the right to lessen competition,

“Under this Court’s state-action immunity doctrine, when a local governmental entity acts pursuant to a clearly articulated and affirmatively expressed state policy to displace competition, it is exempt from scrutiny under the federal antitrust laws. In this case, we must decide whether a Georgia law that creates special-purpose public entities called hospital authorities and gives those entities general corporate powers, including the power to acquire hospitals, clearly articulates and affirmatively expresses a state policy to permit acquisitions that substantially lessen competition. Because Georgia’s grant of general corporate powers to hospital authorities does not include permission to use those powers anticompetitively, we hold that the clear-articulation test is not satisfied, and state-action immunity does not apply.”

 (F.T.C. v. Phoebe Putney Health System (133 S.Ct. 1003 (2013)).

CALL TO ACTION

I believe the case can be made for a CAI monopoly and for the Feds to  investigate (Citizens Complaint Center, Antitrust Division, DOJ),  and to file an appropriate antitrust lawsuit ASAP.