Rebuttal against the necessity of HOA foreclosure rights

 Mr. Berding, an attorney, has prepared a comprehensive and lengthy six-page justification (herein noted as “Foreclosure”)[i] for the need, and therefore the right, for HOA  foreclosure. As a non-lawyer, homeowner rights advocate of long-standing, I commend Mr. Berding for tackling this controversial issue.   The detailed attention paid to this issue, including the question of the morality of the right to foreclose, indicates how effective advocates have been in raising this legitimate act of gross injustice.  A right given to the HOA government that is embedded in the developer’s CC&R imposed adhesion “agreement”, and which is backed by state law.

HOAs are vital to our national security

The premise of Mr. Berding’s argument:  foreclosure is necessary in order for the HOA to survive.  “What any rational version of the debate centers upon is not whether we should enforce these obligations, but rather the means of that enforcement . . . . because enforcement today often means using some means of foreclosure . . .” (Foreclosure, p.2).   His justification is a very weak: “what’s the alternative?”

I ask: Why should HOAs be given “special dispensation”?

Continue reading . . . Foreclosure.

[i] The Great Foreclosure Debate: Should Community Associations use Alternatives to Foreclosure to Protect Their Cash Flow?, Berding-Weil enewsletter, January 2010, http://www.berding-weil.net/newsletter/2010/01/35/ (Jan. 8, 2010).

Can HOAs be democratic without fair elections?

A homeowner rights advocate raised this very “on point” question:  Is buying votes in an HOA election illegal?  I initially answered that I was not aware of any explicit restrictions in the statutes, the governing documents, or in case law.  However, after reflecting on it for a while, I found arguments relating to the justification of the authoritarian HOA regimes and the need for a right to vote by the members.

Restatement Third, Servitudes, Ch 6, Common-interest communities (2000):

6.16.  Representative Government.

(c) Election of governing board. . . . [E]lection procedures must provide a reasonable opportunity for eligible members to become candidates for election and to make their views known to the electorate, and a reasonable opportunity for eligible voters to cast their votes.

6.18. Meeting and elections.  [nothing here addresses the question of fair election procedures and protections of a members’ election to the board].

Comment (a) speaks to a servitude (covenant) on a member’s right to participate in the governance of the board.  It justifies the HOA control over subdivisions with,

One of the primary justifications for permitting . . . servitudes that subject property owners to the often extensive powers of the [HOAs] to affect their property values and quality of life is that the members have the power through the political process to control the actions of the association.

 

What a false and erroneous statement about the political power to effectively control the  board. It reflects  an “ought be” rather than as “is”.  This erroneous statement, relied on by the courts, was made from high above by the legal-academic aristocrats who wrote the Restatement!   There are no fair elections covenants and procedures in the HOA legal scheme to protect the people that come anywhere near the laws governing elections in the public realm.  And, in my view, deliberately ignored along with all other 14th Amendment protections of due process and the equal application of the laws. 

 

The “comment (a)” excerpt was just lip service. How on earth can homeowners be effectively empowered in a corporate form of governance, under an adhesion contract written in favor of the business interests of the developer, and one that protects the interests of the HOA corporation over the individual rights of members?  To plead ignorance of constitutional law 101 and government law 101 is ludicrous!  This treatment  with its lack of concern for constitutional protections can only be viewed as intentional.

Why do I argue that the lack of constitutional protections is deliberate?  There are several self-evident reasons, but let me trace the origins of why the “voting makes the HOA democratic” defense came about, and why it was necessary to make this misleading argument.  In several prior posts over the years I made reference to the Homes Association Handbook, Technical Bulletin #50 (published by the Urban land Institute in 1964), as the “bible” for the modern incarnation of homeowners associations.  In the Handbook we find parallel statements on voting and the need for democracy in HOAs.  Here are excerpts as can be found in The Foundations of Homeowners Associations and the New America, Part I, The Homes Association Handbook, p. 17:

The other [as opposed to a bureaucratic style of leadership] requires more participation in order to give members a feeling of satisfaction with association operations; it may be called the ‘democratic style’.   

The members can always fall back on democratic controls provided in the bylaws [the corporate governance form of bylaws] to exercise their power to correct a situation . . . . But usually members will not involve themselves in active participation.

The right of every homeowner to membership and to vote is, in our opinion, critical to the strength and success of an automatic homes association.

Because the articles and bylaws of a corporation are relatively easy to change, further strength will be lent to this arrangement [that mandatory assessments require mandatory membership] by inserting a provision governing membership and voting rights in the association in the text of the declaration of covenants and restrictions.

The above accurately reflects the lack of treatment of constitutional protections or any concerns for establishing a working form of government equivalent to public government.  This intentional disregard of the protections of individual rights has remained over the years, and its influence on the legislatures and courts can be seen in numerous incidents.

As examples:  the 2007 Twin Rivers free speech case where servitude law was given dominance over constitutional law; and in the 2009 declaration by an Arizona superior court that an independent tribunal, the state’s administrative hearings function, was unconstitutional, but the “kangaroo” HOA courts are not.

The extent of HOA intrusion into a member's life

Most members of HOAs do not realize the extent to which the courts, in their preference for the common laws of equitable servitudes over constitutional law, can affect the member’s financial obligations and freedom of choice in personal behavior.  It is only a matter of time before they will be affected, and discover, too late, the extent of the loss of their individual freedoms, and the extent of the legal power granted to the HOAs by the legislatures and courts.  Powers not spelled out in the binding CC&Rs contract that is alleged to have been openly and freely consented to by the homeowner.

A re-examination of the California appellate decision regarding the Desert Cove mobile home community is an eye-opener and a warning for all members in every state, and reveals the extent of the legal powers granted to your HOA board.  It also reveals the extent of the lack of openness or transparency by the California courts in keeping its ruling away from public awareness.  The California Supreme Court refused to hear an appeal and a request to publicize the appellate ruling.  This disturbing 2003 decision, (OSCA Development v. Blehm, E032843, Cal. App. 4th Div. 2, Oct. 14, 2003; Supreme Court denial, S120748, Feb. 4, 2004), can only be found on my website at Desert Cove.

In short, this case centered on the following question: 

To what extent can HOA members be forced to pay assessments to a country club owned by the developer, not part of the HOA subdivision, and operated as a for-profit enterprise that is open to the public?

 

Article 19 of the CC&Rs played an important role in answering this question.  Initially, Article 19 simply created a voluntary membership HOA.  And as has occurred in numerous other instances of HOA power and control over the electoral process and uneducated membership, the HOA board quickly reacted as recorded in the court decision,

Before this court issued its final opinion, the Association by majority vote adopted an amendment to article 19. The amendment includes the following paragraph: “Each owner by acceptance of the deed to the Owner’s Residential Lot, is deemed to covenant and agree to pay to OSCA Development Company or its successor in interest the maintenance assessments duly levied by OSCA Development Company pursuant to these CC&Rs.

 

The court held that,

By purchasing property within the Desert Crest community, the homeowners accepted Article 19, even as amended in accordance with the majority vote standard established by the declaration of restrictions, and are bound by the membership fees requirement. Nothing prevents the homeowners from making further attempts to change the language in either article 19 or the provision authorizing amendment.

And the court gave the following opinion,

We conclude that the CC&R’s for a residential development that require the payment of a mandatory assessment far a country club located adjacent to or within the development create a mutual relationship of corresponding benefits and burdens, and, therefore, is a covenant that touches and concerns the land. We also conclude that, upon satisfying the criteria for a covenant that runs with the land, there is no additional requirement that the recreational facilities must be owned by the homeowners or the homeowners association in order to establish its validity or enforceability. As in this case, a privately-owned country club may demand payment of the fees and enforce its lien for unpaid fees under the CC&R’s.

 

There are two important factors in this decision to be noted that have a tremendous impact on constitutional protections, and reflect a government not subject to the Constitution.  First, implicit in the above decision by the court is the legality of “ex post facto” amendments:  amendments to the CC&Rs that alter the homeowner contract and bind the homeowner without his consent to the new contract.  An action that is not permitted under the Constitution for government entities.

Second, is the reliance on “covenants running with the land”, a legal doctrine established under the real estate common laws of equitable servitudes (see Restatement Third, Property:Servitudes).  The California court applied the legalese of the equitable servitude definitions and interpretations of covenants as binding on an undemocratic governmental structure, the HOA, and on citizens being held subject to these regimes.

This is but one instance of the extent of powers granted to the HOA by the courts and state legislatures.  Powers not explicitly agreed to in the supposed CC&R contract, nor that can be found to be a reasonable expectation of board powers.

The extent of HOA intrusion into a member’s life

Most members of HOAs do not realize the extent to which the courts, in their preference for the common laws of equitable servitudes over constitutional law, can affect the member’s financial obligations and freedom of choice in personal behavior.  It is only a matter of time before they will be affected, and discover, too late, the extent of the loss of their individual freedoms, and the extent of the legal power granted to the HOAs by the legislatures and courts.  Powers not spelled out in the binding CC&Rs contract that is alleged to have been openly and freely consented to by the homeowner.

A re-examination of the California appellate decision regarding the Desert Cove mobile home community is an eye-opener and a warning for all members in every state, and reveals the extent of the legal powers granted to your HOA board.  It also reveals the extent of the lack of openness or transparency by the California courts in keeping its ruling away from public awareness.  The California Supreme Court refused to hear an appeal and a request to publicize the appellate ruling.  This disturbing 2003 decision, (OSCA Development v. Blehm, E032843, Cal. App. 4th Div. 2, Oct. 14, 2003; Supreme Court denial, S120748, Feb. 4, 2004), can only be found on my website at Desert Cove.

In short, this case centered on the following question: 

To what extent can HOA members be forced to pay assessments to a country club owned by the developer, not part of the HOA subdivision, and operated as a for-profit enterprise that is open to the public?

 

Article 19 of the CC&Rs played an important role in answering this question.  Initially, Article 19 simply created a voluntary membership HOA.  And as has occurred in numerous other instances of HOA power and control over the electoral process and uneducated membership, the HOA board quickly reacted as recorded in the court decision,

Before this court issued its final opinion, the Association by majority vote adopted an amendment to article 19. The amendment includes the following paragraph: “Each owner by acceptance of the deed to the Owner’s Residential Lot, is deemed to covenant and agree to pay to OSCA Development Company or its successor in interest the maintenance assessments duly levied by OSCA Development Company pursuant to these CC&Rs.

 

The court held that,

By purchasing property within the Desert Crest community, the homeowners accepted Article 19, even as amended in accordance with the majority vote standard established by the declaration of restrictions, and are bound by the membership fees requirement. Nothing prevents the homeowners from making further attempts to change the language in either article 19 or the provision authorizing amendment.

And the court gave the following opinion,

We conclude that the CC&R’s for a residential development that require the payment of a mandatory assessment far a country club located adjacent to or within the development create a mutual relationship of corresponding benefits and burdens, and, therefore, is a covenant that touches and concerns the land. We also conclude that, upon satisfying the criteria for a covenant that runs with the land, there is no additional requirement that the recreational facilities must be owned by the homeowners or the homeowners association in order to establish its validity or enforceability. As in this case, a privately-owned country club may demand payment of the fees and enforce its lien for unpaid fees under the CC&R’s.

 

There are two important factors in this decision to be noted that have a tremendous impact on constitutional protections, and reflect a government not subject to the Constitution.  First, implicit in the above decision by the court is the legality of “ex post facto” amendments:  amendments to the CC&Rs that alter the homeowner contract and bind the homeowner without his consent to the new contract.  An action that is not permitted under the Constitution for government entities.

Second, is the reliance on “covenants running with the land”, a legal doctrine established under the real estate common laws of equitable servitudes (see Restatement Third, Property:Servitudes).  The California court applied the legalese of the equitable servitude definitions and interpretations of covenants as binding on an undemocratic governmental structure, the HOA, and on citizens being held subject to these regimes.

This is but one instance of the extent of powers granted to the HOA by the courts and state legislatures.  Powers not explicitly agreed to in the supposed CC&R contract, nor that can be found to be a reasonable expectation of board powers.

Calif. courts hold HOAs as political second governments with public issues

A recent California opinion, Turner v. Vista Pointe Ridge HOA, Cal. App. 4th G040480,  brought to light earlier court opinions where the court defended actions taken by HOA boards and equated homeowners associations with municipal governments.  In both the cited cases we obtained important acknowledgements that HOA issues can be public issues, especially when dealing with board issues or elections since they affect all the member, that these are indeed political  issues — having to do with the regulation and control of a people within a territory —  within a sizeable community (size not defined), and that they are just like a local government.  All the cases involved the use of anti-Slapp laws not by the homeowner, but by the HOA as  a defense. 
A SLAPP suit, to make it simple, is a suit brought about by a more powerful party against an individual to stop him from speaking out against it on issues of public concern.  The defending party, which would usually be expected to be a homeowner in our area of concern, was the HOA that sought protection since its actions were a public issue. 
The two cited cases, in which the court defended the HOA’s actions, involved defamation suits against statements made and/or published by the HOA or its attorney.  In the first case (Damon v. Ocean Hills, 85 Cal.App.4th  468 (2000)), the court observed that the ant-SLAPP statute protected,
 
[A]ny written or oral statement or writing made in a place open to the public or in a public forum in connection with an issue of public interest . . . .  The definition of  public interest‟ within the meaning of the anti-SLAPP statute has been broadly construed to include not only governmental matters, but also private conduct that impacts a broad segment of society and/or that affects a community in a manner similar to that of a governmental entity….  “[M]atters of public interest . . . include activities that involve private persons and entities, especially when a large, powerful organization may impact the lives of many individuals.  
The court added,
Furthermore, the statements pertained to political matters, inasmuch as they were made in the context of homeowners association board elections and recall campaigns. The court observed that “[t]he right to speak on political matters is the quintessential subject of our constitutional protections of the right of free speech….” For many Californians, the homeowners association functions as a second municipal government . . . .
In the second case, (Ruiz v. Harbor View Community Assn.,  134 Cal.App.4th 1456 (2005)), also a victory for the HOA, the court held that a dispute involving the uneven handed enforcement of ACC rules was a public issue for the entire community.  But, considering the nature of the complaint —  the questions raised — filed by the homeowner in the recent Turner decision, the issue before the court did not involve a freedom of speech issue. It was just a number of complaints pertaining to breach of faith, contract violations, etc.  On this narrow issue, the court denied the claim by the HOA that their actions were protected by the anti-SLAPP statute.
Note that the court’s opinion also recognized the fact that HOAs are indeed a form of political government within the municipality. 
It is important for homeowners to realize that the court’s ascribing of public government status and functions to HOAs was qualified. The court was careful to say that “within the meaning of the anti-SLAPP statute“,  thereby avoiding the larger issue of the whether or not the HOA was indeed a state actor.  (I avoid use of “quasi-government” or “mini-government”  since they skirt the arguments that HOAs are not legal because they are not chartered under the municipality laws, but under corporation laws). In other court cases in which the court held that HOAs were not mini-governments or quasi-governments, the courts simply declared them as such without hearing any evidence or argument. These cases did not seek a declaratory judgment as to the status of the HOA as a state actor.  While several cases had made use of a statement that the HOAs were state actors as part of their main case, they cases did not directly address the issues of state actor.
Unfortunately, with respect to the recognition of bona fide governance, once again the benefit goes solely to the HOA private corporation  without offsetting protections of the rights and freedoms of the individual as required by the Constitution.
 
For more information on American Political Governments, see political.