Homeowner Rights are an important issue for California’s CLRC

First Supplement to Memorandum 2005-25
Statutory Clarification and Simplification of CID Law (Public Comment)

HOMEOWNER ASSOCIATION AS LOCAL GOVERNMENT

Mr. Staropoli asserts that a homeowner association has much more in common with a local government entity than it does with the typical nonprofit corporation. See Exhibit p. 6. Accordingly, he feels that a homeowner association should be subject to the same constitutional and statutory constraints that govern a state entity:

Our system of government with its checks and balances,
separation of powers, “clean elections” procedures, due process
protections in terms of sufficient notice of violations and hearings
in which the homeowner can confront the allegations, examine the
witnesses, and present evidence must be applied to CIDs.

The issue raised by Mr. Staropoli — the extent to which a CID should be subject to the sorts of constraints that apply to a governmental entity — is an important one. However, it is beyond the scope of the current project. The Commission will consider the issue in a later stage of its general study of CID law.

Brian Hebert
Assistant Executive Secretary
California Law Review Commission

See July 6, 2005 editorial, Property Interests
See March 14, 2005 CLRC letter on Rights.

HOAs cannot be viewed as a property interest only

Excerpts from my July 6, 2005 email letter to the California Law Review Commission relating to Memorandum 2005-25.
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Should public policy uphold the current doctrine that equitable servitudes are binding contracts that are agreed to by a purchaser when title to his home is accepted? Shouldn’t there be legislation to protect average citizens, home buyers and not experienced real estate investors, from this constructive notice binding of a waiver and surrender of rights enjoyed by other home buyers? Shouldn’t there be legislation that calls for an explicit waiver of such rights after being fully informed of the consequences and impact of buying in a CID? Current disclosure laws fall far short of a comprehensive “red herring” warning to perspective buyers.

A waiver of constitutional rights must be voluntary and intelligent, it must have been made knowingly, and with sufficient awareness of the relevant circumstances and likely consequences. Stated otherwise, a valid waiver connotes an intentional relinquishment or abandonment of a known right or privilege. Certainly, a waiver may not rest on mistake or ignorance. 16 C.J.S. Constitutional Law § 82.

“[A]nd upon analysis of the association’s functions, one clearly sees the association as a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government. As a ‘mini-government,’ the association provides to its members, in almost every case, utility services, road maintenance, street and common area lighting, and refuse removal.”
. . .

With power, of course, comes the potential for abuse. Therefore, the Association must be held to a high standard of responsibility: “The business and governmental aspects of the association and the association’s relationship to its members clearly give rise to a special sense of responsibility upon the officers and directors…. This special responsibility is manifested in the requirements of fiduciary duties and the requirements of due process, equal protection, and fair dealing.” (Id at p. 921.) (See Raven’s Cove Townhomes, Inc. v. Knuppe Development Co.,supra, 114 Cal.App.3d 783, 792-799.) [142 Cal.App.3d 652] Cohen v. Kite Hill Community Assn. 142 Cal.App.3d 642 , 191 Cal.Rptr. 209 (1983) (citing Hyatt and Rhodes, Concepts of Liability in the Development and Administration of Condominium and Home Owners Associations 12 Wake Forest Law Review at page 915 (1976)).

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The complete letter can be viewed at Property .

John Locke on the purpose of government

Read the excerpts below and see that the purpose of government is not to increase tax revenues as if it were a business corporation. The taking of a person’s private property, his home, for increased tax benefits diminishes the value and importance of private property rights in the American system of government. Indeed, with the Kelo decision, a new order of governance is upon us all.

The Second Treatise of Civil Government
1690
John Locke

CHAP. IX. Of the Ends of Political Society and Government.

Sec. 123. IF man in the state of nature be so free, as has been said; if he be absolute lord of his own person and possessions, equal to the greatest, and subject to no body, why will he part with his freedom? why will he give up this empire, and subject himself to the dominion and controul of any other power? To which it is obvious to answer, that though in the state of nature he hath such a right, yet the enjoyment of it is very uncertain, and constantly exposed to the invasion of others: . . . the enjoyment of the property he has in this state is very unsafe, very unsecure.

This makes him willing to quit a condition, which, however free, is full of fears and continual dangers: and it is not without reason, that he seeks out, and is willing to join in society with others, who are already united, or have a mind to unite, for the mutual preservation of their lives, liberties and estates, which I call by the general name, property.

Sec. 124. The great and chief end, therefore, of men’s uniting into commonwealths, and putting themselves under government, is the preservation of their property. To which in the state of nature there are many things wanting.

CHAP. XI. Of the Extent of the Legislative Power.

Sec. 138. Thirdly, The supreme power cannot take from any man any part of his property without his own consent: for the preservation of property being the end of government, and that for which men enter into society, . . . Men therefore in society having property, they have such a right to the goods, which by the law of the community are their’s, that no body hath a right to take their substance or any part of it from them, without their own consent: without this they have no property at all . . . . Hence it is a mistake to think, that the supreme or legislative power of any commonwealth, can do what it will, and dispose of the estates of the subject arbitrarily, or take any part of them at pleasure. . . . and so will be apt to increase their own riches and power, by taking what they think fit from the people . . . .

HOAs and "taking" your home for economic development

The Supreme Court continues in its activist reconstruction of the US Constitution with its 5 – 4 decision in Kelo v. City of New London, 04-108. In this eminent domain case, the court ruled that the taking of your home for a public purpose and giving the property over for private economic development is permitted. In reading excerpts from the opinion and dissent, you will see the slippery slope arguments with respect to the reconstruction of the Constitution, and a “where does it all end” concern by the dissenting Justices.

In regard to HOAs, we have already been subject to judicial activism when the courts allowed and refused to challlenge the provisions of these CC&Rs that take your private property rights away. These rulings have allowed HOAs to take your property rights for the benefit of a private, restricted group, the HOA, not for public use, but somehow for the public purpose of increased taxation as a result of alleged property value increases.

Excerpts from The Kelo opinion —

Held: The city’s proposed disposition of petitioners’ property qualifies as a “public use” within the meaning of the Takings Clause. Pp. 6–20.

(a) Though the city could not take petitioners’ land simply to confer a private benefit on a particular private party, see, e.g., Midkiff, 467 U.S., at 245, the takings at issue here would be executed pursuant to a carefully considered development plan, which was not adopted “to benefit a particular class of identifiable individuals,” ibid. Moreover, while the city is not planning to open the condemned land—at least not in its entirety—to use by the general public, this “Court long ago rejected any literal requirement that condemned property be put into use for the . . . public.” Id., at 244. Rather, it has embraced the broader and more natural interpretation of public use as “public purpose.” Without exception, the Court has defined that concept broadly, reflecting its longstanding policy of deference to legislative judgments as to what public needs justify the use of the takings power. Berman, 348 U. S. 26; Midkiff, 467 U. S. 229; Ruckelshaus v. Monsanto Co., 467 U. S. 986. Pp. 6–13.

[the remainder of the decison}

(b) The city’s determination that the area at issue was sufficiently distressed to justify a program of economic rejuvenation is entitled to deference. The city has carefully formulated a development plan that it believes will provide appreciable benefits to the community, including, but not limited to, new jobs and increased tax revenue. . . . Because that plan unquestionably serves a public purpose, the takings challenged here satisfy the Fifth Amendment. P. 13.

(c) . . . Promoting economic development is a traditional and long accepted governmental function, and there is no principled way of distinguishing it from the other public purposes the Court has recognized. See, e.g., Berman, 348 U. S., at 24. . . . The Court declines to second-guess the wisdom of the means the city has selected to effectuate its plan. Berman, 348 U. S., at 26. Pp. 13–20.

268 Conn. 1, 843 A. 2d 500, affirmed.

JUSTICE O’CONNOR, with whom THE CHIEF JUSTICE, JUSTICE SCALIA, and JUSTICE THOMAS join, dissenting.

Over two centuries ago, just after the Bill of Rights was ratified, Justice Chase wrote:

“An ACT of the Legislature (for I cannot call it a law) contrary to the great first principles of the social compact, cannot be considered a rightful exercise of legislative authority . . . . A few instances will suffice to explain what I mean. . . . [A] law that takes property from A. and gives it to B: It is against all reason and justice, for a people to entrust a Legislature with SUCH powers; and, therefore, it cannot be presumed that they have done it.” Calder v. Bull, 3 Dall. 386, 388 (1798) (emphasis deleted).

Today the Court abandons this long-held, basic limitation on government power. Under the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded—i.e., given to an owner whowill use it in a way that the legislature deems more beneficial to the public—in the process. To reason, as the Court does, that the incidental public benefits resulting from the subsequent ordinary use of private property render economic development takings “for public use” is to wash out any distinction between private and public use of property—and thereby effectively to delete the words “for public use” from the Takings Clause of the Fifth Amendment.

The Fifth Amendment to the Constitution, made applicable to the States by the Fourteenth Amendment, provides that “private property [shall not] be taken for public use, without just compensation.” When interpreting theConstitution, we begin with the unremarkable presumption that every word in the document has independentmeaning, “that no word was unnecessarily used, or needlessly added.” Wright v. United States, 302 U. S. 583, 588 (1938). In keeping with that presumption, we have read the Fifth Amendment’s language to impose two distinct conditions on the exercise of eminent domain: “the taking must be for a ‘public use’ and ‘just compensation’ must be paid to the owner.” Brown v. Legal Foundation of Wash., 538 U. S. 216, 231–232 (2003).

Accordingly I respectfully dissent.

From Justice Thomas’ dissent:

The deferential standard this Court has adopted for the Public Use Clause is therefore deeply perverse. It encourages “those citizens with disproportionate
influence and power in the political pro- cess, including large corporations and development firms” to victimize the weak. Ante, at 11 (O’CONNOR, J., dissenting).

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View the opinion. View the oral arguments.

HOAS no longer accepted for CAI membership

For several years, we have been informing all interested parties that the CAI business trade organization, a tax exempt 501(c)6 nonprofit organization subject to the requirement of this federal tax exemption, has no business representing homeowners or homeowner associations, since they are consumer groups.

Finally, Community Associations Institute, CAI, has removed the category “homeowner asociation” from its memebrship. Instead, it offers discount membership to individual board members of an HOA, if the HOA signs up a group of board members. However, please be aware that CAI is inducing HOAs, via their board of directors, to sign up their board members in order that the board members qualify for discount memebrship fees. This action, if taken by HOA boards, still presents them with very serious conflict of interest and breach of fiduciary dutes to the membership, the assessment paying homeowners, if assessments are used to fund memberships and not used to maintain the HOA property.

As posted here, attorneys so advising boards as to the legal aspects of funding CAI dues should take a close look at our eEditorial of June 10, 2005, “HOA attorney fiduciary duty to homeowners.”

Excerpt for CAI’s web page:

CAI’s New Membership Structure
We’re Changing

Instead of “associations” being members of CAI, volunteer community leaders and homeowners will hold individual memberships as of July 1. Member benefits, including discounts, will be available only to those who hold individual memberships.

Community association volunteers: Annual dues will be $85, with discounts available when board members are signed up as a group by the association [emphasis added] ($55 for the second member, $45 for each additional member). Each individual member will receive benefits directly from CAI. Individual homeowners who are not part of the group membership will pay $85 in dues.

See CAI Membership web page: Membership