Tag: Arizona

The role of the HOA apathy affliction in circumventing public policy

In my prior Commentary, See The HOA apathy affliction: a political dynamic, I wrote about the HOA attorney driven recourse to complete rewrites of the CC&Rs that works because of the apathy affliction that is thriving in HOA-Land.  I would like to now add that this approach, in general, is an intentional violation of your state’s public policy.

Public policy is expressed in many ways by the actions or inactions, and statements or non-statements by government officials in the executive, judiciary and legislative branches. What bills are made law or not passed, and the intention of the legislature, when and if explicitly stated, makes public policy. 

In Arizona, for instance, HB 2441 (2011 session) was submitted and aggressively supported by the CAI chapter. It contained, among other things, a provision for the minority control of the CC&Rs amendment process by allowing as low as 33% of the all members to approve an amendment. While the Apache Wells rewrite contains a very vague and loose requirement for amending the CC&RS in contrast to the detail by-laws amendment process, it lacks homeowner protections.  There are no requirements for notice, meeting at which the voting is to take place, no approval requirement, etc.  (The prior 1987 CC&Rs required a majority approval of all the members).  The 50% vote is misleading as to homeowner protections without all of the above in place, as has occurred in the Fourth Amendment rewrite with respect to the minority approval of special assessments (See below and the prior Commentary link)..

10.4. Amendments. At any time this Declaration may be amended by an instrument in writing, executed by the then Lot Owners of more than fifty percent (50%) of the Lots in the Project.  Any amendment approved pursuant to this Section 10.4 of this Declaration shall be signed by the President of the Association and shall become effective upon recordation of the same with the County Recorder of Maricopa County, Arizona. Any such amendment shall certify that the amendment has been approved as required by this Section 10.4.

 

But, when it comes to approving special assessments (Section 7.5 of the CC&Rs), which could be almost any amount like the assessments to pay off an $8.5 million loan for a suspect administrative building in 2007, the rewrite allows for a 25% approval of any special assessment. (The prior 1987 CC&Rs required a majority ratification of the special assessment by all the members).  The point that I wish to make is that the special assessment rewrite is only one example of how minority control fails to protect the homeowner.

Another example is the attorney self-interest covenant, 10.2, Administrative Law Proceedings, which states in part,

In the event the Association is required to incur any expense, including attorneys’ fees and costs, as a result of the direct or indirect actions of any Owner, the Association shall be entitled to recover all such expenses incurred, including all attorneys’ fees and costs, against the applicable Owner, regardless of whether formal proceedings are actually filed, pursued or awarded . . . .

 The public policy of the State of Arizona was made clear in 2006 when ALJs were permitted to hear HOA disputes, and no attorney fees were allowed to be awarded in these hearings. The CAI attorneys managed to have the law declared unconstitutional, which resulted in a reaffirmation of the legislative intent in 2011 to provide for ALJ adjudication without attorney fee.  The intent of the legislature was explicitly stated in the new bill.

 The inclusion of section 10.2 in the Apache Wells CC&Rs rewrite can only be viewed as another intentional slap at Arizona public policy, and one in the best interests of the HOA hired-hand attorney.  The covenant for minority approval of special assessments, given the history of special assessments at Apache Wells, is another act of bad faith and disregard for public policy. 

 The recourse to CC&R amendment rewrites with the reality of the apathy affliction so prevalent in HOA-Land is a devise to circumvent public policy in order to achieve goals and objectives not in the best interests of the homeowner.  The Restatement of Property: Servitudes, Section 3.1, Validity of Servitudes,    “A servitude [covenant running with the land] . . . is valid unless it is illegal or unconstitutional or violates public policy.”  It is only the acts and actions of the people within HOAs that can return them to the American way of life.

 Read the related Commentary, Why do people harm others in HOAs?

The HOA apathy affliction: a political dynamic

Everyone is unhappy with the pronounced apathy among those living in HOA-Land, where the lack of homeowner protections works for the power-elite, the board and its attorney.  CAI has complained many times about apathy when homeowners complain about the conduct of their boards.  CAI also complains how it can’t make “necessary” changes to the CC&Rs to bring them current with the laws.

Because of this apathy, homeowner advocates who are aware of the inequities of their HOA predicament cannot get their good neighbors — those who pay their dues and obey the rules — to support them in their efforts to obtain justice for all members. 

A recent approach being used by CAI in Arizona is to call for the complete rewrite of the CC&Rs to make the HOA a better place, the ostentatious reason, while including even more oppressive covenants and covenants that are highly favorable to the HOA attorney and its income stream.  In order to accomplish this, recourse is made to playing loosey-goosey with the strict Arizona laws for amending the CC&Rs. 

The law requires a written explanation of each and every change being made, which can be cumbersome, but the law is there to protect the homeowners. It’s a cost of making sweeping amendments all at once.  But the homeowners say and do nothing except to sign away their rights as good team players.

The political impact of these sweeping changes is made real by the apathy of the majority of the homeowners to agree to whatever the board proposes with the blessings of the HOA attorney, who wrote the revised CC&RS.  They can affect your pocketbook, your property rights, and your already weak voting rights.

A common change, minority control, was defeated in the 2011 legislative session that permitted minority control of the amendment process, thereby giving the political machine in power basically complete control of the HOA and over its apathetic members.  This political tactic relies on homeowner apathy to succeed.  It removes a vote of all the members and the long held doctrine of a supermajority vote, usually 67%, and replaces it with a majority vote of only those voting. 

Even with a 50% quorum as little as a 25% approval can affect the rights of ALL members, whether they agree or not.  And with the pro-HOA laws and unconscionable adhesion CC&Rs contract, the members will be just pawns in the hands of the board – just pay your dues and shut up, or else!

Homeowner apathy is a serious affliction in HOA-Land.  Under the current environment, it is the homeowner who must stand up and fight for his rights, in the HOA and at the legislature to change the laws.

Read about the Fourth Amendment to the Apache Wells CC&Rs, one real example. Just scroll down.

Beware the folly of eliminating supermajority voting for amending the HOA CC&Rs

The latest drive by pro-HOA attorneys and lobbyists has been to seek legislation to do away with supermajority amendments to the CC&Rs.  If approved, the very foundation of majority rule in a democracy, and our long standing requirement that fundamental documents must have supermajority voting in order to be amended,  would be destroyed.  The argument is, Gee, because of the apathy, we can’t make important amendments to the CC&R.  

In the 2011 Arizona legislative session, HB 2441 was defeated at the last moment.  It would have allowed for minority – as low as 1/3 of the members — to amend the CC&Rs.  The CAI lobbyists fought hard for this bill, even telling the committee that although  it was governmental intrusion, the legislature always did that. 

Think for a moment.  If a minority can control the amendment process, it can control the HOA by enacting amendments that further strengthen the powers of the incumbent board.  Given the fact that the rogue boards are dominated by their HOA attorneys, minority control solidifies the political machines as the power elite. 

Think about it!  Under a political machine minority vote regime, the regime can eliminate all and every need for member approval, except, of course, voting for directors.  And, all future amendments will have this acceptable ground for the amendment — the apathy of the membership demands minority control.  Nobody cares, so what!

However, in spite of this persuasive argument, the infinite wisdom of the California legislature shines brightly when it enacted laws in the Davis-Stirling act permitting just such amendments as valid. Section 1356 addresses minority control of an HOA.  This section 1356 is an oxymoron and is an unreasonable and illogical intrusion on the private contract and to our fundamental belief in majority rule in a democracy.

Section 1356 allows for less than supermajorities where the governing documents require more to amend the governing documents.  So a 60% voting requirement would allow for minority control.  There is no restriction in the law on the lower limit for approval except to appeal to the judge that “this ain’t right.”  In other words, like the failed Arizona bill, 1/3 can be acceptable, and even a 20% requirement would be acceptable.

The lunacy of this law is that a majority voted amendment to reduce supermajority voting requirement is valid, if approved by a judge.  Go figure!  The law has circumvented the CC&Rs private contract putting the cart before the horse!  That the members have spoken is the basis for this requirement, in spite of evidence of psychological indoctrination to obey and legal pressures of financial harm for not obeying. (See Why do people harm others in HOAs?)

But if a supermajority was needed, as currently required by the CC&Rs, the amendment to amend before the court would fail. I mean, isn’t that why the HOA is before the court?  They can’t get anything done with a supermajority! 

How to get a supermajority vote?  It’s done every day, everywhere.  The content and need for the amendment must be conveyed to the membership in an open forum, an open meeting, and be debated before the membership.  And not in some one-on-one private meetings or phone calls. 

There is no requirement in the law to hold an open meeting of the membership to debate the amendment before approving the elimination of supermajority voting.  A requirement that is found in all legislative and state agency rule-making procedures – public input.

 

In the recent court opinion (Quail Lakes Owners Assn. v. Kozina (2012) 204 Cal.App.4th 1132), the homeowner does not challenge the validity of this law, but advances procedural arguments under the law.  That was a big mistake (he lost), as I’ve repeated argued, of not seeing the ugly forest through the trees. The mandatory requirement under § 1356(c)(5), that “the amendment is reasonable” was never argued as I’ve argued above.  In fact, my arguments above were made loudly and clearly in defeating Arizona’s HB2144, and that defeat went to the very last vote.

This decision is another example of bad law becoming a detrimental precedent against homeowners.  If you think you have problems now, wait until your HOA blindly obeys the board and allows for  a minority controlled HOA.

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AZ judicial conduct comm. on hidden HOA attorney case: who let the cat out of the bag?

In my June 10th post, Judicial misconduct complaint filed for sealing records in AZ case against HOA attorney, I brought to your attention the fact that the records on a case involving a CAI member attorney sued for aiding and abetting and disgorgement could not be found on the court’s public access website.   Not even a notice that the case was sealed.  The complaint alleged that the “disappearance” of the records from public view was a violation of the Code of Judicial Conduct, Rule 123(d).

A response was received from the Commission on Judicial Conduct Staff Attorney who was more concerned with “shooting the messenger” rather than with taking a few minutes, like I did, and verify from the court records themselves the truth of my allegations.  Not even mentioned in her response.

My reply to the Staff Attorney, in part, reads,

The tone of the letter gives the impression of another angry person filing wild and unsupported accusations against a judge. It is condescending, insulting and attacks the messenger without any reference to conducting a duty bound investigation into the easily verifiable facts — the court records themselves.

The information that I provided is more than sufficient for a bona fide investigation of the facts by the Staff Attorney.  Just 10- 20  minutes on the Internet Pinal County case public information web page, followed by a call to the Pinal County Superior Court Clerk, as I undertook, would quickly and  independently verify the complaint (Exhibit B) that the court records were sealed in violation of Rule 123(d) – public access has been denied and denied without notice. 

The entire reply can be read here . . .

 

Does mandating HOAs using “shall” establish HOAs as state actors?

A common joke of the 1950s related to communist Russia’s 5-Year economic plans. It was a top-down plan that always failed.  The joke went:

In Russia You can buy any shoes you want as long as they are black.   Why is that? Because they only make black shoes.

Jump to 2012 America.

In America you can buy any new home you want so long as it’s in an HOA.  Why is that?  Because they only build new homes with an HOA.

 

A.                Does the use of the word “shall” establish the HOA as a state actor?

1.                  Monroe Township

I begin by an examination of the hard-core Monroe Township, NJ HOA ordinance[i] which states, in part, my emphasis,

“A homeowners’ association shall be established for a multifamily development or a development consisting of 100 dwellings or more. . . . The homeowners’ association shall be established for the purpose of owning and assuming maintenance responsibilities for the common open space and common property designed for or located within a development.”[ii]

Please understand that many states define an HOA as having common areas and amenities. Note the territorial implication of the HOA government, “located within”.)  But, the ordinance doesn’t stop there. It includes, “The organization shall incorporate the following provisions: (1) Membership by all property owners in the project shall be mandatory.” [iii]

Now, the ordinance is very craftily worded to pertain to owning property and “assuming maintenance responsibilities,” and not touching on any aspect or implication of governing.  Except, of course, the town must explain just what “assuming responsibilities” means if not managing or governing.  It could simply mean a hired hand, a contractor, if the word “responsibilities” were omitted.

The intent of the ordnance is clearly stated in subsection (E)(4), which says in part, “The organization shall clearly describe in its bylaws all the rights and obligations of each tenant and owner, including a copy of the covenant . . .  and the fact that every tenant and property owner shall have the right to use all common properties. . . .  These shall be set forth as a condition of approval and shall be submitted prior to the granting of final approval

Doesn’t this wording indicate an awareness that the HOA is concerned with more that performing maintenance functions?  Why would a planning board be concerned with the terms of a private contractual agreement beyond its sole authority in regard to property ownership and maintenance?  There are laws governing property rights and tenancy that surely would not be duplicated in the Declaration.

No, the planning board is fully aware, or else it’s intentionally negligent, of the legal status of HOA through state statutes and commonly used boilerplate declarations.  In other words, the planning board cannot escape its responsibility for requiring HOA governance by saying we don’t look at or approve of the governing documents. Regardless of board’s awareness, the mandate for submitting the HOA governing documents and the required approval by the planning board establishes the HOA as a state actor subject to the 14thAmendment.

 

2.                  Arizona mandates

Gilbert, AZ has a mandated HOA requirement that says, emphasis added,

A homeowners or property owners association shall be created to maintain and operate landscaping, open space, recreation facilities, private streets, utilities, and/or other facilities held in common ownership. The documents creating the association shall provide that this obligation continue in perpetuity. Evidence of compliance with this Article shall be submitted with an application for a final subdivision plat or minor subdivision.[iv]

 

This requirement is not as detailed as that of Monroe Township, but still centers on subdivisions with common areas and property, which defines an HOA in Arizona.  Again, as long as the governing documents cover maintenance, the planning boards ignore the other covenants that affect the homeowner’s equal application of the laws and due process rights. But the fact remains, as with Monroe Township, ignorance of the declaration does not absolve the planning board of its responsibility for establishing HOAs as state actors.

The Chandler, AZ ordinance[v] states,

40-1. – Policy.

It has become common for developers to satisfy certain of the conditions of approval for subdivisions by use of commonly owned property maintained by a Homeowners’ Association (HOA) composed of the property owners within that subdivision. These [subdivision] facilities and amenities become conditions to and a part of the approved subdivision with which the developer must comply. Without these facilities and amenities, the subdivision would not have been approved by the City and the development would not have proceeded.

It is hereby adopted as a policy of the City of Chandler, Arizona, that when Homeowners’ Associations are given such responsibilities pursuant to the zoning and subdivision approvals which allowed such properties to develop . . . .

 

It is a more wishy-washy statement, but the bottom line is that the developer will indeed form an HOA if he wishes to be approved, and not want to oversee the subdivision in perpetuity as required by the ordinance.  Here, the planning board says, No, not me! Him, the developer! His choice in establishing private governments.  This is about the same choice given to a homeowner if he wants to live in a new home, isn’t it?  And again, the planning board adopts a Not my job when it comes to approving the HOA governing documents.

 

B.                 Are the planning boards exceeding their authority by mandating HOA private governments for sub-divisions?

Part A, above, leads to the serious concern of low level divisions of a town or city demanding and establishing private governments without any oversight or accounting.  While delegating such legislative functions to a private entity is unconstitutional, the planning board itself has not been delegated authority to create such private governments over subdivisions within the state.  It has exceeded its authority!

 

For more information, see HOA Case History: state actors or mini/quasi government;

 

Notes

[i]  Monroe Township Zoning Ordinances, § 175-113. Homeowners’ associations. 

[ii] Id., subsection (A).

[iii] Id., subsection (E).

[iv]Gilbert, AZ  Zoning Regulations, Article 4.9: Common Area Ownership and Maintenance, Section 4.903.

[v]Part VI, Chandler, AZ Code of Ordinances, Chapter 40 – HOMEOWNERS’ ASSOCIATION IMPROVEMENTS.