HOA Constitutional Government

The argument made by pro-HOA lobbyists and supporters, including the recent Goldwater Institute opposition to Arizona bill SB1162, is misapplied as these supporters fail to recognize the true nature of the CC&R “agreement”.

First, if indeed CC&Rs were a contract under Contract law 101, as is implied by all arguments claiming contract interference, then the CC&R agreement, held by the courts as a binding agreement, would fail the very basic requirements of a valid contract:

1. a genuine meeting of the minds — requires that the parties understood each other — full disclosure.
2. consideration for the agreement — requires a bargaining and “a give and take” between the parties.
3. cannot be an unconscionable contract — unfairness due to oppression or surprise (adhesion contracts are a “take it or leave it” agreement).
4. specificity of terms – “agreements to agree” are invalid, and open-ended amendments (no restrictions on the scope and extent of amendments appropriate to the HOA “mission”) are an example of an “agreement to agree”.

Second, the acceptance that there is an unquestionable valid consent to the CC&R agreement, as a result of the acceptance of a deed, alone, stands in sharp contrast and opposition to these public interests’ mission to protect and defend the private property rights of individuals.

Third, those who argue “freedom of contract” only present one side of this legal doctrine, freedom TO contract. Not discussed is the other side of freedom of contract, freedom FROM contract whereby contracts are imposed on the people without their consent. Freedom from contract is the true issue regarding HOAs and contractual interference, and has been avoided because the pro-HOA supporters understand the weakeness of their “voluntary consent” arguments.

Last, in their attempt to rationalize “consent to be governed” by the HOA, the pro-HOA supporters cross the line from treating the HOA as a private, contractual agreement to treating the HOA as if it were indeed a public government regulating the people within a territory. This ascribing of public government attributes to the contractual HOA allows the pro-HOA supporters to argue that living and remaining within the HOA jurisdiction reflects an implicit consent to be governed. Note, they do not argue explicit consent. Constitutional scholar Randy Barnett clearly presents the error of this argument that living and remaining within the jurisdiction is indication of a consent to be governed to all and everything that is decided by the “government”. And, there is nothing in the CC&R “contract” to support this conclusion.

Passing SB1162 will be a just and fair act that provides necessary homeowner protections, and will level the litigation playing field.

See Homeowners consent to be governed is questioned . . .

After several years of study, the California Law Review Commission, CLRC, has recommended a rewrite of the HOA/condo laws, the Davis-Striling Act, SB1921. While it has moved forward with this proposed rewrite, CLRC felt it not sufficiently important to also include a Member Bill of Rights (Chapter 2), and can add a bill of rights at some later time.

Read CLRC memorandum in regard to severe criticism of proceeding in an illogical manner, in a manner opposed to its constitutional obligations to protect the individual and private property rights of the people. It is an approach not followed in the adoption of our US Constitution.

George Staropoli objects to the lack of any substantive extension of homeowner rights. In particular he objects to the lack of any provision addressing the relationship of CID law to the state and federal constitutions. See Exhibit p. 1. As indicated at Exhibit p. 2, Mr. Staropoli first raised these issues in 2005 and was informed at that time that they were beyond the scope of the recodification project.

Read more at . . .

After several years of study, the California Law Review Commission, CLRC, has recommended a rewrite of the HOA/condo laws, the Davis-Striling Act, SB1921. While it has moved forward with this proposed rewrite, CLRC felt it not sufficiently important to also include a Member Bill of Rights (Chapter 2), and can add a bill of rights at some later time.

Read CLRC memorandum in regard to severe criticism of proceeding in an illogical manner, in a manner opposed to its constitutional obligations to protect the individual and private property rights of the people. It is an approach not followed in the adoption of our US Constitution.

George Staropoli objects to the lack of any substantive extension of homeowner rights. In particular he objects to the lack of any provision addressing the relationship of CID law to the state and federal constitutions. See Exhibit p. 1. As indicated at Exhibit p. 2, Mr. Staropoli first raised these issues in 2005 and was informed at that time that they were beyond the scope of the recodification project.

Read more at . . .

Summary

In the Goldwater Institute Daily email release of May 22, 2008, author Nick Dranias specifically opposes Arizona HOA reform bill SB1162 on the basis of contractual interference, stating, “If freedom of contract means anything in this state, it means that we shouldn’t all suffer together when the state overreaches in deciding what’s best for us”. Yet the bill seeks to apply existing contract law to HOAs. In response to a request for assistance from the Institute for Justice in 2002,

You are of course correct that members of homeowner associations have fewer rights than others-but only because they exercised essential rights in the first place, namely freedom of contract and voluntary association. To the extent that individuals entered into such contracts without full disclosure or appreciation of the consequences, that is a matter of contract law, not constitutional law.

And in Cain v. Horne (Arizona school vouchers),

To be sure, even the system of free markets recognizes some limitations upon the principle of consent in ordinary contracts between private individuals. Duress, force, misrepresentation, undue influence, and incompetence may be used to set aside contracts that otherwise meet the normal requirements of offer, acceptance, consideration, and consent.

My argument, to make my position clear, is not against “freedom to contract”, but the “freedom from contract”, as imposed by statutes that ignore the bona fide consent to be governed by the homeowners. It is against the special laws and the granting of special immunities and privileges that the state has either explicitly granted to homeowners associations, or has refused to protect the public from unforeseen and unwanted consequences, such as the loss of rights and privileges enjoyed by those not living in HOAs.

SB1162 must be made into law in order to level the litigation playing field, and to protect private property rights in support of “equal justice under the law”, including homeowners living in HOAs.

Read the complete commentary . . .

Abusive conduct and unjust actions by Arizona homeowner association attorneys in violation of ARS 12-349 and the Rules of Professional Conduct 11(a) prompted legislators to protect homeowners from these aggressive HOA attorneys. SB 1162 provides punitive awards for unjust actions and CAI is opposed to the bill. “The AZLAC will continue to work with the legislature to get this bill stopped, but we need your support!” (CAI Call To Action, May 14, 2008).

Yet, CAI claims that it has no problem with the attorney fee restrictions for administrative hearings. Of course not, they are currently prohibited. Astonishingly, CAI speaks of “certain situations” without providing clarification as to the true meaning of the legislation. What the bill does is to prohibit awarding attorney fees unless there’s a finding of unjust conduct that is “without substantial justification.” That’s entirely different from the impression given by CAI’s Call To Action.

SB1162 would do two things: (1) provide for awarding the winning party in an administrative action attorneys’ fees in certain situations, and (2) restrict certain types of amendments. The AZLAC has no objection to the portion regarding attorneys’ fees in an administrative action. We do have concerns about the amendment provisions. (CAI Call To Action, May 14, 2008; emphasis added).

Here’s what the bill actually says (emphasis added),

41-2198.02(C). In an action regarding a condominium or planned community, The administrative law judge shall not award attorney fees or costs and a court shall not award attorney fees or costs in any appeal from an administrative order unless the administrative law judge or court makes a finding that the attorney or party did the following [lists unjust actions].

If CAI has no concern for attorney fees under OAH, why has LAC co-chair Ekmark explicitly sought (as of in its May 16, 2008 Response in OAH case 08F-H088015-BFS) attorney fees under ARS 12-340 et seq., which SB 1162 seeks to impose on OAH HOA complaints? Currently, attorney fees are not awarded under OAH statutes. Could it be that, if the bill becomes law, CAI is setting the stage for another constitutional challenge to OAH authority (three decisions have already been challenged in Superior Court appeals)? Or could it be that CAI truly wants SB1162 to become law, thereby giving legitimacy to its request for fees?

Ekmark has asked for fees under ARS 12-349, presumably because he believes the homeowner’s petition failed to state a claim and should be dismissed, along with all such similar failures by Pro Per homeowners. And since the homeowner failed to state a claim, the court should penalize the petitioner, usually an average citizen without legal skills, for filing the petition “without substantial justification”. In other words, it appears that CAI believes that the poor unknowledgeable homeowner must be penalized for making an honest error, while skilled HOA attorneys know how “to make it look good.” It sounds that CAI indeed wants the bill to pass. It seems that CAI has “worked” the legislators into a no-lose situation: ALJs grant fees under the new law, or CAI continues litigation to declare the bill unconstitutional.

Another HOA attorney tactic is to immediately seek summary judgment, forcing the homeowner to respond in detail, but the Pro Per homeowner is completely unaware of how to respond under the Rules of Civil Procedure and generally loses. Will the HOA attorneys also seek fees under ARS 12-349 in these instances?

It appears that, after reading SB1162 and CAI’s Call To Action, the attorney authors seem to be violating, if the Call were filed in court, of precisely acting in a manner that the bill seeks to prevent – unjust actions. The bill quite clearly defines the unjust actions as (emphasis added),

41-2198.02(G). “[W]ithout substantial justification” means that the claim or defense constitutes harassment, is groundless and is not made in good faith.

References
“Good faith, a state of mind consisting in (1) honesty in belief or purpose, (2) faithfulness to one’s duty or obligation . . . (4) absence of intent to defraud or to seek unconscionable advantage.” (Black’s Law Dictionary).