Tag: adhesion contract

Law review article criticizes HOA public policy

In her 44-page OK Univ. Law Review “Note” (2022) the author, Saige Culbertson, concentrates on the questions of agency relationships and duty of care. However, in order to discuss the question of agency relationships, Culbertson addressed many of the issues still causing problems in HOA-Land including the status of HOAs as quasi-governments, the validity of the CC&Rs “contract,” and the reality of maintaining property values.

With respect to agreeing to be bound, the author maintains in regard to the individual homeowner subject to the CC&Rs,  that

  • “HOAs use these contracts as a basis for their decision making because courts often presume the homeowners have a full understanding of their HOA’s obligations, because they have the duty to examine their contract for real property. The typical HOA contract is overly generalized and broad.
  • “When buying a home, a homeowner does not often have the option to not join. Homeowners also have little-to-no choice of which actions the HOA may take on their behalf, or, crucially, any actions taken by the HOA for any purpose.  
  • “However, the lack of mutual assent is constant throughout the relationship with the HOA. At the beginning, the homeowner might not have agreed to a relationship with the HOA, and those who have agreed might not have a full understanding of the rules of the HOA.
  • “[S]ome courts and scholars argue that HOA contracts are a form of adhesion contracts. Adhesion contracts are exclusively pre-determined by a single party and are presented as “take it or leave it,” while the non-drafting party has no room to negotiate.”

With respect maintaining property values, Culbertson is concerned about “The Fictional Purpose of a Homeowners’ Association,”

  • “The Community Association Institute recently reported 71% of individuals believed their community association rules ‘protect and enhance property values.’ While this belief may have been true in 2005,  more recent research indicates otherwise. 
  • “[A] study found that “[p]roperties located in HOAs do not appreciate faster, on average, than properties not located in any type of neighborhood government”

 and cites this study by Robertson,

  • “[A] 2021 study conducted by former Yale Professor Leon S. Robertson found that “[c]urrent sales price[s] [are] related to property characteristics and local market conditions[,]” and that “sales prices do not reflect the efficacy of homeowners associations to protect property values.
  • “Robertson remarked that “[s]tate and local laws that sanction homeowners associations and allow their coercive practices based on the premise of property value preservation are ill founded.”

With respect to quasi or local government, the author favors making “HOAs part of local government, founded in democratic ideals, and with regulation by the state or municipality,”

  • “The nature and purpose of the HOA are so closely linked to that of local government that . . . clearly give rise to a special sense of responsibility . . . . This special responsibility is manifested in the . . . requirements of due process, equal protection, and fair dealing. The severity of the risks associated with the substantial overreach by HOAs is further shown by actions depriving individuals of their basic rights.
  • “[U]pon 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 . . . . [citing Cohen v. Kite Hill Cmty. Ass’n, 142 Cal. App. 3d 642].
  • “The lack of checks and balances on HOA actions is a national problem and homeowners are often left with no remedy for violations of their rights. The need for regulation of HOA activities, and further federal protections for individuals, is especially apparent . . . .
  • “[H]omeowners should urge their local government to increase regulations on HOAs to protect their fundamental rights as Americans. States should therefore pass legislation to make HOAs part of local government, founded in democratic ideals, and with regulation by the state or municipality.”

Source: OK Univ. Law Review (PDF download).

Advocate files AZ supreme court amicus brief fighting unjust laws

We must make the injustice visible.

We must provoke until they respond and change the laws.

(Mahatma Gandhi)

An AZ supreme court amicus brief was filed by Jonathan Dessaules on behalf of the Arizona Homeowners Coalition in CAO v. Dorsey (CA-CV 21-0275) (Waiting for the Court’s decision).  Dessaules argues that the statute in question, ARS 33-1228, conflicts with the Arizona Constitution, Article 2, Section 17, and “a statute cannot circumvent or modify constitutional requirements”.

The intricate legality and constitutionality of private entities—the HOA — taking of another party’s property rights – a homeowners — is discussed in detail.  I frequently quote the brief to ensure accuracy in my review.

ARS 33-1228 “allows condominium associations to force the sale of a nonconsenting owner’s property for someone else’s private use” and is the justification for investors to shut down the HOA. However, “When a state statute conflicts with Arizona’s Constitution, the constitution must prevail.” Furthermore, it is argued that “The legislature may not enact a statute which is in conflict with a provision of the Arizona Constitution.” Consequently, the Legislature lacked the authority to enact 33-1228.

(Stay with it!) The brief goes on to say that ARS 12-1131 provides that “eminent domain may be exercised only if the use of eminent domain is authorized by this state, whether by statute or otherwise, and for a public use as defined in this article.” Public use does not allow for “forcing the sale of a holdout owner’s property to be used by the investor who owners a majority of the other units within the condominium.”

The HOA, Dorsey, counterclaimed that it wasn’t a sovereign and § 1231 doesn’t apply to private organizations, ignoring § 12-1111 that permits individuals the right of eminent domain takings. Consequently, again, it is argued that 12-1228 is invalid.

An additional powerful argument is raised that the Declaration is an adhesion contract. “A declaration is generally a ‘standardized form offered to consumers on essentially a take it or leave it basis.’” And to my long awaited legality, the brief states that “Without the contract even being presented to the purchaser for their signature,” the contract is imposed on the buyer.

Again, we see the  doctrine of “reasonable expectations” as applied to adhesion contracts. “Contracts of adhesion will not be enforced unless they are conscionable and within the reasonable expectations of the parties.” Dessaules maintains that including unconstitutional  statutes in the Condo Act is “substantively unconscionable.” Furthermore, as I have argued many times, “a waiver of a constitutional right is not within reasonable expectations of the parties.”

This is a solid amicus brief by an advocate fighting for HOA reforms to protect members’ rights and privileges.  It does not pretend to accept unjust laws.

* * * *

I would like to thank Dennis Legere, Arizona Homeowners Coalition,  for hiring attorney Jonathan Dessaules to file this important, to the point, excellent amicus brief.