On May 21st, after a long interruption due to the COVID-19 lockdown, the Arizona House passed SB 1412 by a unanimous vote of 11 – 0 in favor. GREAT! It joins California’s SB 323 passed into law last year.
See Authorities for protected HOA political speech — SB 1412 poll and AZ SB 1412 reflects move to HOA constitutional reforms.
Colorado’s HB 1200,[i] brought to my attention by journalist Ruthy Wexler, is an outstanding bill that provides for the long ignored, not my job, state oversight of HOA violations. It is a measure that provides the constitutional protections against depriving “a person of property without due process of law” and against denying “the equal protection of the laws.” These protections have been denied by the HOA “constitution,” its CC&Rs. Although a private contract, these protections cannot be waived.
HB 1200 is a much more protective bill of homeowner rights and freedoms as was introduced in Arizona in 2006 and adopted in the face of stringent opposition by CAI. CAI then proceeded in 3 court cases over 4 years to have the statute declared unconstitutional and have the ruling applied to all Arizona HOAs. It almost won but the Arizona Supreme Court denied it precedent value and in 2011 the statute was amended to handle CAI’s claims of unconstitutionality. It is in operation today under Arizona’s real estate department.
I was actively involved in the creation of this Office of Admin. Hearings adjudication of HOA disputes and in the defense of its constitutionality.[ii]
The role of CAI, as presented above, should not be taken lightly. Strong and active homeowner support will be necessary to carry this bill to law. I commented on former Colorado Senate President Morgan Carroll’s book:
Yes, there have been champions of HOA reform, but advocates fail to realize that these legislators must buck the powers that be at the legislature and win over the votes of a majority of other legislators. And this takes outcries by many people, not with gripes of “I wuz wronged!” but with valid arguments as to why HOAs are wrong for the state and the general public well-being. And how to fix these wrongs.[iii]
Take heed Coloradans and get behind the sponsors today!
Notes
[ii] See AZ Supreme Court accepts advocate’s amicus brief in challenge to HOA statute.
[iii] See Why HOA reform advocates fail at legislative reforms (2011).
Arizona’s SB 1088 bill seeks to invalidate CC&Rs that require approval by a homeowner to allow any visitor access to the homeowner. It specifically deals with — and is only meaningful with respect to gated communities which are gated for a very good reason — not hindering process servers access to a homeowner defendant. It is punitive with a $250 “civil penalty” for anyone violating this law.
Background
Under our laws and judicial system a plaintiff must service notice of a lawsuit upon a defendant as required by the Constitution.[1] It is well known that there are people who act to avoid being served notice, which stops any lawsuit from moving forward. However, the law does allow for posting the summons notice to the public notices page of a newspaper in the event the defendant cannot be personally contacted.[2]
Impairing the obligation of contracts
The proponents’ argument would be generally along the lines that “due process under the law” triumphs over any contract infringement violation as a matter of public policy and for the general good of the people. An HOA covenant cannot hinder constitutional due process of law and the equal application of the law to a person, not necessarily an HOA, who is suing a defendant in such an HOA. It’s not fair they would cry, referring to the greater good served outside the HOA.
But, the bill seems to be unnecessary as there are other means to satisfy civil procedure process servers. It would also not pass judicial scrutiny[3] required to deny constitutional rights under contract infringement. The bill seems to be sponsored as a request from a constituent facing some problem that lacks merit, considering the alternative methods available for service notice by process servers.
Selective enforcement of the law
It is long held doctrine that a government cannot pick and choose what laws to enforce or to ignore, and still be seen as a legitimate government. The entirety of the covenants in a declaration of CC&Rs — allegedly constituting the voice of the people in a private contract to not be bound by the Constitution and the laws of the land — contains many, many covenants that violate the protected rights of the people.
Yet the state stands idly by and does nothing to end these private contractual violations of the constitution’s requirement for the equal protection of the law. The CC&Rs are a mockery of due process protections, of fair elections, of eminent domain protections, of cruel and unusual punishment by foreclosure rights, of contract law misrepresentation and full disclosure violations, of the failure to provide civil penalties against HOA violations of the law, etc.
They are either ignored or have the “blessings” of the legislature as a result of laws that coerce compliance with the HOA, cooperate with the HOA, or closely interact with the day-to-day operations of the HOA. Any of which would make the HOA a state actor subject to the Constitution.
SB 1088 is a selective impairment of contract obligations while other infringements of the laws are allowed to stand. Adopting this bill would be a mockery of the law.
References
[1] 14th Amendment, “Nor shall any state deprive any person of life, liberty, or property, without due process of law.”
[2] Ariz. R. Civ. P., 4.1(n). “Where the person being served . . . has avoided service of process . . . then service may be by publication . . . . “ Also, Rule 4.1(m) allows for “alternative or substituted service.”
[3] Judicial scrutiny relating to constitutional rights requires a compelling and necessary government interest, not a general government interest, to deny protected rights. See, in general, Arizona’s HB 2382 is an unconstitutional violation of eminent domain law.
A recent Arizona appellate court case provides some light on the alleged “loss of property value” argument generally made by HOAs in response to a homeowner’s action. In this straight-forward decision (Mason v. Whisper Ranch HOA, CA-CV 2015-0053 (Ariz. App. Div. 2 (2015)) a homeowner objected to the addition of a detached garage by his neighbor, claiming among other things, a loss in his property value.
In spite of the approval of the HOA, the plaintiffs sued the neighbor and HOA were sued. In a memorandum decision, which means no new law was involved, the court held that the plaintiff failed to document the alleged decrease in his property value. Damages, which this was one, must be documented as to the amount. However, the appellants had to first prove damages which could only be shown by numbers. (If damages were acknowledged by both parties and a method of calculations cannot be applied, then a general number may be used).
How can the loss in value be calculated? Well, one can use real estate “comps” – comparative values – to set a value of the property. While this can be debated because of so many and, ifs or buts, it’s the only acceptable rational method. But then, can this method be used to show a loss in value (or increase for that matter)? Can a panel of “experts” be used to arrive at a change in value? Fat chance!
Must the plaintiff wait to get a bona fide offer? If so, does he have a bona fide offer before the neighbor’s new garage?
Even if the neighbor painted his house pink, how do you decide the loss in value, if any? (I am aware of a homeowner in Phoenix who did paint his house pink in an angry response to commercial development next to his property. His home did sell after, I’m sure, his price was reduced by the amount required to repaint the house an acceptable and conforming color. No impact on neighbors.)
Of, course, the HOA has other grounds for suing, like nonconformity to the overall aesthetics of the HOA. The point is, make the HOA prove any loss in value!
In Biggs v. Betlach[1] instead of an issue of public or private agency we have the question of what’s a tax and what’s an assessment. The pro – con briefs are very instructive as relating to the HOA question of: Are HOA assessments like public taxes or like fees and assessments? If HOA assessments are clearly a tax, if public, then we have one more argument that HOAs function as public entities.
The case involves a group of AZ legislators seeking to have a federal Medicaid expansion bill declared unconstitutional, because the bill deals with tax increases and requires a 2/3 vote, which did not happen. (Why it was sent to the Governor is a guess, except they probably thought Governor Brewer would veto it, but she didn’t). Skipping the other issues in this case, I deal with what’s a tax and what’s an assessment as argued in the Goldwater filings.[2]
Note the clear statement of what’s a tax and what’s an assessment. Goldwater cites several references (not provide here) in its brief presentation of the law regarding taxes:
“In Arizona, taxes are defined as levies that are mandatory and not calculated based on the service received, whereas fees are voluntary and related to the benefit received by the paying entity, and assessments are levied against property that is specially benefitted by the improvement they fund.”
For example, “[O]ne key difference between university tuition and the [Medicaid] tax – university tuition is a fee, not a tax, because it is collected in direct exchange for a service provided and benefit received – specifically, education.” Similarly, we have various license fees, registration fees, etc. that are paid for a service of personal benefit. To help make it clearer, although the term “property assessment” is used quite often, it does not refer to the valid property tax but to the monetary valuation of the property, which is used to determine the amount of tax. It is a tax.
Goldwater goes on to argue that the purpose of a law cannot trump and supersede the constitution, nor can the legislature interpret what is constitutional. The position that a law serves “To promote effective government administration and pragmatic problem solving” is viewed as “Defendant’s preferred ‘public policy’ cannot trump voter intent or supersede constitutional provisions.” Does that sound familiar? HOAs provide benefits and, implicitly, therefore the laws and Constitution can be ignored?
Particularly relevant to HOAs is the argument that,
“Constitutional restrictions on legislative authority cannot be waived by the legislature itself, especially in collusion with special interests who benefit from the unconstitutional act. . . . The legislature cannot delegate to another branch of government—least of all an unelected administrator—the quintessential legislative power: the power to tax.”
So, forgetting about under what laws HOAs are created, what say you about HOA assessments as taxes and hiding behind a corporation structure[3] whose constitutionality is defended by the legislature and not the courts. In HOA-Land, while the names have been changed to protect the guilty, their functions are basically the same. The HOA assessment is a tax hiding behind a corporation shield.
Notes
[1] CV2013-011699, Maricopa County Superior Court, yet to be decided. Biggs is the Senate President with numerous legislators as co-plaintiffs. Betlach is an agency director. Prominent constitutional lawyers from The Goldwater Institute (for plaintiffs), the Arizona Center for Law in the Public Interest, and The William E. Morris Institute for Justice (for defendants, the state) are involved,
[2] PLAINTIFFS’ REPLY IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT; PLAINTIFFS’ COMBINED RESPONSE TO DEFENDANT’S AND INTERVENORS’ MOTIONS FOR SUMMARY JUDGMENT.
[3] See corporations cannot be used to evade Constitution and CC&Rs are a devise for de facto HOA governments to escape constitutional government
HOA Constitutional Government 