HOA Constitutional Government

A survey of the number of appellate HOA lawsuits was taken from the files available on Lexis-Nexis. Six states were initially looked at: AZ, MD, VA – the small states — and CA, FL and TX – the large states. Not surprising, the percentage of cases has grown for 5 of the 6 states, and overall, with California showing a huge jump in cases. Florida shows a minor drop.

As I wrote the California Law Review Commission in March 2005, what makes you think the future will be any different? Steps must be taken to introduce a democratic form of government, with the protections of rights afforded to the people that is inherent in our system of government, and sorely lacking in the state approved and recognized private homeowner association governments.

See Appellate for a PDF file with details.

How did planned communites come to pervade the American landscape over the past 40 years? Who helped form and promote them?

Urban Land Institute (ULI), formed back in the 1936 (originally named the National Real Estate Foundation) by the National Association of Real Estate Boards (now the Nat’l Assn of Realtors) . It’s a nonprofit organization pushing land usage and planning. They are not a political science or government organization, which explains the lack of meaningful public governance concerns within these associations. Reading its joint book with CAI, Community Associations, it clearly states their profit motive and the need for mandatory membership with compulsory dues in order to make planned communities work.

ULI published the original concepts and framework for planned communites in its FHA funded, The Homes Association Handbook in 1966. In 1973, FHA, ULI and the National Association of Home Builders formed CAI because of problems encountered in trying to sell this concept to American home buyers. With growing complaints and published research by political scientists during the early 1990s, CAI revised its objectives and became a business trade organization with the goal of protecting this legal scheme or plan by heavily engaging in lobbying in almost every state legislature.

References:

Donald R. Stabile, Community Associations: The Emergence and Acceptance of a Quiet Innovation in Housing (Greenwood Press 2000)

Evan McKenzie, Privatopia: Homeowners Asociations and the Rise of Private Residential Governments (Yale University Press 1994)

Robert J. Dilger, Neighborhood Politics: Residential Community Associations in American Governance (New York University Press 1992)

The following uses Arizona laws, but most states have an Admin Proc. Act and an Office of Admin. Hearings (OAH).

The APA provides for rulemaking and adjudication procedures for state agencies. State agencies get their authority from the enabling statute and cannot exceed its authority, although agencies are granted broad powers (to be dealt with as a separate issue). Sound familiar to a private government HOA?

OAH is an independent “tribunal” that hears complaints filed with certain agencies. A simple, relaxed adjudication procedure, not requiring an attorney, is applied so the average person can get heard in an independent manner.

In regard to justice:
Essentially the “common” CC&Rs has a provision for a notice to the homeowner and an opportunity to be heard. No specifics are given as to the process, leaving the impression it would be, at least, like a muni or JP court proceeding. The homeowner may or may not get a citation as to the rule being broken, but usually no evidence is provided.

Here’s Arizona state law, ARS 33-1803B: “After notice and an opportunity to be heard . . . .” That’s it. There is no provision as to the mechanism for the judicial procedure. No statement that such HOA proceedings must follow the OAH Code (AAC §§ R2-19-101 to 122), for example.

Summary of OAH trial procedures AAC §R2-19-116, Conduct of Hearing

A. Public access
B. Judge to state nature of violation, parties involved and witnesses.
D. Opening statements.
E. Presenting of evidence.
F. Examination of witnesses and disclosure of all relevant testimony and information.
G. Closing arguments.

Why do the state legislatures feel that this adjudication process to which it holds various state agencies is not applicable to private HOA governments, denying a just and fair procedure to homeowners?

The courts hold you to the governing documents as a binding contract. Arizona statutes, A.R.S. 33-1806 and 33-1256, ask you to sign a statement that you agree that the C&RS, bylaws and Rules &Regulations are all indeed binding contracts.

DO NOT SIGN THIS AGREEMENT. Know what you are buying into, because you may face the loss of your equity or need to move to some other location.YOU MAY BE SURRENDERING YOUR CIVIL AND CONSTITUTIONAL RIGHTS. SEEK ADVICE FROM A COMPETENT ATTORNEY. Have your attorney explain your rights to you. The Arizona Assn of Realtors preprinted form will now be 11 – 18 pages!

Arizona home buyers, protect your rights by asking your licensed Realtor about:

1. Are you protected from HOA lien foreclosure by the $150,000 homestead exemption? This would protect the first $150K of your home equity.

2. Since your assessments pay for the HOA attorney, will the attorney respond to your complaints about the actions of the board? What remedies are available to you if you contest an action or decision of the board?

3. To what government agency you can file a complaint about your HOA board, as you can with doctors, lawyers, contractors, etc.?

4. If you contest a fine for an alleged violation of the CC&Rs, will you be given a notice and an opportunity to be heard by an independent tribunal and allowed to confront the accusers, demanding the evidence in support of their claims? Will this procedure be similar to the state Office of Administrative Hearings procedures for state agencies?

5. Are the HOA elections held in accordance with the same oversight procedures as are the general elections? Does the HOA follow its governing documents, or are they largely ignored?

6. Why did the Arizona Association of Realtors supported a bill that removed buyer notification of his loss of homestead protection, saying that it did not want agents explaining homestead exemption? (Licensed agents are required to pass an exam covering agency, contract and real estate law, and are required to take continuing education courses in these topics every two years).

7. Can the association foreclose on my $200,000 – $700,000 house for as little as a $200 or $500 late assessment payment? Will you get a “work-out” plan as the dreaded IRS offers those who have not paid their taxes?

If the Realtor cannot or refuses to answer these questions, ask them of the Arizona Department of Real Estate’s Consumer Affairs. Call 602-468-1414 x-225.

If the ADRE will not or cannot answer them, call the Arizona Attorney General’s Office’s Consumer Protection and ask them. Call 602-542-5025.

Excerpt from the TennesseanCom article by MATT GOURAS, Associated Press
article

Attorney General Paul Summers says the bill is probably unconstitutional on three fronts.

• First, he said, it tampers with existing contracts between homeowners and neighborhood associations.
• Second, it probably violates the right to free speech by choosing the American flag over other flags or messages people might want to display.
• Also, Summers said, it may be construed as a move by the state to interfere with private property rights without compensation.

The Tennesse AG calls it according to the law. Unfortunately, some legislatures follow the law and others, like Arizona, feel that they can do no wrong and ignore the laws of the land.

Here, we now see the AG resorting to contract interference by such a statute, prohibited by the Constitution. The only HOA bill signed by the Arizona Governor has mandatory wording that compells HOAs to remove proxies, even if they are allowed in the governng contracts of the HOA. (NOTWITHSTANDING ANY PROVISION IN THE COMMUNITY DOCUMENTS, . . . VOTES ALLOCATED TO A UNIT MAY NOT BE CAST PURSUANT TO A PROXY. THE ASSOCIATION SHALL PROVIDE FOR VOTES TO BE CAST IN PERSON AND BY ABSENTEE BALLOT . . . .)

Second, the Tennessee AG resorts to a strict interpretation of the free speech court opinions when he says that the bill only refers to flying the American flag, and not to any other flags — free speech laws must be content free if they are to be upheld. Another decision that could have easily gone the other way if any reasonable justification for allowing for the American flag was given in the bill.

Third, he resorts to the due process “takings” prohibition of a removal of property rights by the restriction on flying only the American flag(?). This ruling can be easily applied to the Arizona so-called omnibus bill, HB2154, when it removed the use of proxies without giving any reason as to why the state has decided to interfere with private contractual rights.

Laws must reflect not only our values and beliefs, but be based on achieving some goal, some ideal, that serves to improve the long-term quality and standing of society. They should not be a “gut” reaction to some perceived problem.