HOA Constitutional Government

CAI’s Legislative Action Committees are committees found in all CAI state chapters. The AZ Central Chapter is co-chaired by two homeowner asociation attorneys who have, in the past several years, represented CAI’s interests before the legislature. They are Curtis Ekmark and Scott Carpenter. The May 14, 2008 Call to Action by the CAI AZ Chapter argues against SB1162, stating,

This is definitely a “Pro-Litigation” bill. Currently, Boards and individual members can seek to amend documents to avoid lengthy and expensive litigation. The proponents of SB1162 want to take away an association’s ability to have the membership weigh in on a matter being litigated. That undermines democracy in associations and feeds the litigation machine. It is always ironic when a bill that appears to favor owners actually favors attorneys, but that is exactly what SB1162 does.

Actually, the bill says no such thing at all, but allows the judge to award attorney fees only in the event of unjust conduct by any party, including the attorneys. It specifically applies existing law, ARS 12-340 et seq., to HOAs and provides constitutional due process protections as applied to all contractual litigation. In furtherance of just and fair treatment of homeowners, it restricts the award of attorney fees, which will reduce, not increase litigation! Work it out! Mediate the issue!

Evidence from HOA records and statements at board meetings reveal the HOA attorney actually informing the board to proceed because the insurance will cover the bulk of the costs, and that they are allowed to bill the homeowner-violator per the CC&Rs. The HOA is using “other people’s money”, the assessments from members, in pursuit of many frivolous and trivial legal suits sometimes reaching $10,000 – $20,000 and more.

If a community adopts an amendment that “does not apply to a court action filed before the amendment is adopted”, there is the potential that the amendment would apply to all owners not involved in the litigation, but not the owner who happened to be in litigation at the time the amendment is adopted. When the Legislature changes the law, it does not exempt existing citizens and make the new law only apply to new citizens.

It appears that these astute attorneys who have “advised” legislators in the past are a bit confused with the questionable logic used in the above quote. First, once again these astute lawyers misdirect the issue by attempting to compare private, contractual agreements of governance with our free and open non-contractual civil governments. The above false argument is more CAI propaganda, because the issue is not of “new citizens” but of changing a contractual agreement without the consent of the homeowner, rendering the agreement meaningless.

Furthermore, what the bill does, reflecting the true reason for prohibiting “ex post facto” amendments, is to forbid amendments making what was “legal” now “illegal” — a cornerstone of American principles and values of justice and fair play. It puts the HOA in step with our Constitution. Too many times amendments are used by newly constituted HOA boards is to declare “illegal” what was once legal, imposing financial hardships on homeowners who acted in good faith and in accordance with the then existing CC&Rs. And many times with written or verbal approval of the HOA.

No, this is CAI attempting to protect its “turf” and opposing any legitimate and just constraint on HOA conduct and activities. Witness these two LAC attorneys, Ekmark and Carpenter, arguing that the HOA board is permitted to interpret the CC&Rs exclusively and in finality, and arguing to the courts and administrative law judges that the courts are intruding on the free and completely unrestrained right of people to contract as they wish. (See OAH petition 08F- 08F-H088015-BFS, and Maricopa County Superior Court appeal LC2007-000598).

In other words, as I’ve written many times, the HOA is held by CAI as an independent city-state, a principality, free from US and state constitutional restrictions. No, it’s the HOA attorneys who are promoting and encouraging questionable litigation under the claim that they are defending their client, the HOA, regardless of how it promotes a better community. Ask yourself, why is it necessary to have such provisions in the CC&RS that grant the board absolute authority over important contractual agreements in a one-sided violation of contract law. Do you call that democratic?

I ask, in judging the Call to Action by these attorneys, would they make the following claim before the courts? “When the Legislature changes the law, it does not exempt existing citizens and make the new law only apply to new citizens.” This is an example a frivolous claim to increase costs and to harass homeowners to not file legitimate complaints against abusive boards.

CAI’s Legislative Action Committees are committees found in all CAI state chapters. The AZ Central Chapter is co-chaired by two homeowner asociation attorneys who have, in the past several years, represented CAI’s interests before the legislature. They are Curtis Ekmark and Scott Carpenter. The May 14, 2008 Call to Action by the CAI AZ Chapter argues against SB1162, stating,

This is definitely a “Pro-Litigation” bill. Currently, Boards and individual members can seek to amend documents to avoid lengthy and expensive litigation. The proponents of SB1162 want to take away an association’s ability to have the membership weigh in on a matter being litigated. That undermines democracy in associations and feeds the litigation machine. It is always ironic when a bill that appears to favor owners actually favors attorneys, but that is exactly what SB1162 does.

Actually, the bill says no such thing at all, but allows the judge to award attorney fees only in the event of unjust conduct by any party, including the attorneys. It specifically applies existing law, ARS 12-340 et seq., to HOAs and provides constitutional due process protections as applied to all contractual litigation. In furtherance of just and fair treatment of homeowners, it restricts the award of attorney fees, which will reduce, not increase litigation! Work it out! Mediate the issue!

Evidence from HOA records and statements at board meetings reveal the HOA attorney actually informing the board to proceed because the insurance will cover the bulk of the costs, and that they are allowed to bill the homeowner-violator per the CC&Rs. The HOA is using “other people’s money”, the assessments from members, in pursuit of many frivolous and trivial legal suits sometimes reaching $10,000 – $20,000 and more.

If a community adopts an amendment that “does not apply to a court action filed before the amendment is adopted”, there is the potential that the amendment would apply to all owners not involved in the litigation, but not the owner who happened to be in litigation at the time the amendment is adopted. When the Legislature changes the law, it does not exempt existing citizens and make the new law only apply to new citizens.

It appears that these astute attorneys who have “advised” legislators in the past are a bit confused with the questionable logic used in the above quote. First, once again these astute lawyers misdirect the issue by attempting to compare private, contractual agreements of governance with our free and open non-contractual civil governments. The above false argument is more CAI propaganda, because the issue is not of “new citizens” but of changing a contractual agreement without the consent of the homeowner, rendering the agreement meaningless.

Furthermore, what the bill does, reflecting the true reason for prohibiting “ex post facto” amendments, is to forbid amendments making what was “legal” now “illegal” — a cornerstone of American principles and values of justice and fair play. It puts the HOA in step with our Constitution. Too many times amendments are used by newly constituted HOA boards is to declare “illegal” what was once legal, imposing financial hardships on homeowners who acted in good faith and in accordance with the then existing CC&Rs. And many times with written or verbal approval of the HOA.

No, this is CAI attempting to protect its “turf” and opposing any legitimate and just constraint on HOA conduct and activities. Witness these two LAC attorneys, Ekmark and Carpenter, arguing that the HOA board is permitted to interpret the CC&Rs exclusively and in finality, and arguing to the courts and administrative law judges that the courts are intruding on the free and completely unrestrained right of people to contract as they wish. (See OAH petition 08F- 08F-H088015-BFS, and Maricopa County Superior Court appeal LC2007-000598).

In other words, as I’ve written many times, the HOA is held by CAI as an independent city-state, a principality, free from US and state constitutional restrictions. No, it’s the HOA attorneys who are promoting and encouraging questionable litigation under the claim that they are defending their client, the HOA, regardless of how it promotes a better community. Ask yourself, why is it necessary to have such provisions in the CC&RS that grant the board absolute authority over important contractual agreements in a one-sided violation of contract law. Do you call that democratic?

I ask, in judging the Call to Action by these attorneys, would they make the following claim before the courts? “When the Legislature changes the law, it does not exempt existing citizens and make the new law only apply to new citizens.” This is an example a frivolous claim to increase costs and to harass homeowners to not file legitimate complaints against abusive boards.

As the foreclosure crisis reaches into those private planned communities, more and more homeowners are upset about being forced to pay special assessments and higher annual assessments to keep their HOA going. I even have been receiving questions from homeowners asking:

1. My HOA says they have no money and cannot maintain the common areas. What can I do?

2. My HOA says it will file bankruptcy if it doesn’t raise assessments. What will happen? Do I have to pay assessments to a bankrupt HOA?

3. Why do I have to pay higher assessments because of all those foreclosed homes?

Over the years homeowner rights advocates have been hearing stories about deadbeat homeowners who don’t pay their assessments, and it’s not fair for others to pay for them. So, foreclose on them! These stories have come from both the CAI supporters, and even a few misguided homeowners. Well, they got what they always wanted. Foreclosed homes for the nonpayers.

Oh, there’s no money to the HOA? That’s right. As pointed out to the pro-HOA foreclosure enthusiasts who felt strongly committed to the need for a club — the HOA right to foreclose on “deadbeats” — the HOA is in second place and must buy the mortgage and HOA debt in order to get anything out of a foreclosure. And that’s what they are up against today, except on a much larger scale.

Well, I might add to the above. Those in HOAs wanted a private community, free from government interference. Well now it comes time to pay for your own private way. However, the impact of a “cheapskate” homeowner attitude without “having to pay the piper” has now come due, and homeowners must now pay for their private government failures, and penny-pinching attitudes. There are no free lunches!

Demand competent management and sound business practices from your board, which will indeed raise the costs of living in an HOA. That’s “the cost of doing business” as an HOA.

HOA supporters cannot now ask for special “favors” from the government in terms of bailout legislation, not until the HOA legal scheme is changed and individual rights and freedoms are first restored and protected!

It appears, under the new supreme law of the land with respect to homeowners associations, the Constitution is subservient to the rewritten, “modernized” doctrine of equitable servitudes.  While the Restatement addresses constraints on the validity of covenants, such as “reasonable”, and not violating public policy or the Constitution, the Restatement states that in the event of a conflict between competing rights, the dominant right is not the constitutional right, but that expressed by the common law Restatement.

 

As for public policy protections, public policy, as reflected in state laws and court decisions, is well entrenched in favor of the association over the individual rights and freedoms of the people, the homeowners.  The standard of “reasonableness” is tied to the existing values and objectives of society, and thus, the use of this loose standard only serves to reinforce the holdings of the Restatement and the protective HOA public policy.

 

Simply stated, the sui generis nature of planned communities forced the courts to deal with a multitude of “first impressions” resulting in new laws.  As a result of the national efforts to mass merchandise and promote this new mode of housing, the special interests were influential in attaining many highly favorable decisions, serving to “lock-in” the protection of the HOA/planned community scheme.  And these special interests were supported by the property lawyers and the academics that wrote and talked about this new innovation in housing.  The opposition was at a disadvantage, as today when a homeowner still cannot get an attorney to represent him, and, consequently, a favorable body of common law developed.  That body of common law has become the “modernized” property law found in the restatement of servitudes.

While Arizona CAI lobbyists and HOA attorneys question the constitutionality of ALJ adjudication of HOA problems (see questions), the Legislature responded with a bill to reign in their attempts to thwart justice based on $$$$$.  There are many obvious instances on the OAH audiotape records, available to the public, where the harassment, delay and frivolous claims are filed to drive away homeowners from filing complaints.  Suits brought in civil court must meet the R. Civ. P. 11(a) test, found in all state rules of court, that reads (emphasis added):

 

The signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; that to the best of the signer’s knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

 

First year statistics of OAH decisions showed a surprising 42% victory by mostly Pro Per homeowners against the HOA and its attorneys. See stats.

 

Arizona bill, SB1162 attempts to reign in HOA board and attorney harassment and SLAPP suits at OAH.  It will permit attorney fees in the event the other party

1.  brought or defended a claim without substantial justification.

2.  brought or defended a claim solely or primarily for delay or harassment.

3.  Unreasonably expanded or delayed the proceeding.

4.  Engaged in abuse of discovery.

d.  if THE aDMINISTRATIVE LAW JUDGE OR COURT MAKES A FINDING PURSUANT TO SUBSECTION C OF THIS SECTION, The ADMINISTRATIVE LAW JUDGE OR COURT may allocate the payment of attorney fees among the offending attorneys and parties, jointly or severally, and may assess separate amounts against an offending attorney or party.

This important bill also restricts ex post facto amendments with the wording, “An amendment to the community documents does not apply to any court or administrative action filed before the amendment is adopted.” 

 

This past Saturday I emailed all the Representatives to urge moving this bill out of the Rules Committee where it sat for an unusual period of time, about 2 weeks.  On Tuesday, it was passed out of Rules. It is scheduled to be heard in COW on Monday where the reps get to debate it, before a formal vote on passage out of the House.