Tag: Arizona

Unconstitutional laws and sanctions of invalid HOA powers

 

There are two Arizona bills dealing with substantive, constitutional HOA reforms:  SB 1170, the issue of who controls public streets, and SB 1148, the restoration of due process protections for homeowners by means of an independent tribunal adjudication of HOA disputes. Legislators need to understand the constitutional aspects of these bills and, by the failure of the Legislature to act, the sanctioning of HOA actions that are invalid, unconstitutional, or against public policy. “Sanctioning,” as used in the courts, is the statutory permission to act in a manner that the legislature does not deem illegal. The chief example of this sanctioning is the use of the word “may” in the statutes. While not a compulsory order by the Legislature, it is nevertheless a statement that any such acts are not illegal. A second common example of sanctioning, the error of omission, is the refusal to enact statutes to declare certain acts as illegal.

 

The crux of the opposition to these bills, with their “equal application of the laws” issue, has been the popular cry of protecting individual rights, specifically in regard to “freedom of contract” and “no government interference.”  The more elegant opposition can be stated by a quote from the Dec. of  Indep.:  “governments are instituted among men, deriving their just powers from the consent of the governed.”  The opposition would have legislators believe that this is the end all of the Constitution.  They believe that the HOA constructive notice “contract” is sacrosanct, inviolate, and there is no need for a “Truth in HOAs” law similar to other consumer protection laws, like truth in lending and truth in advertising.  However, the special consideration given to the HOA industry by pro-HOA,  no homeowner protections legislation, and the unconscionable adhesion contract nature of the CC&Rs — with its implicit and non-existent surrender of the homeowner’s rights, freedoms, privileges and immunities — can easily be seen as a violation of The Arizona Constitution :

 

Read the complete commentary at constitutional.

 

Analysis of AZ HB 2441, the HOA minority control bill

 

Opinion

This bill should not be heard in any committee!  

It is contradictory and confusing, and ideal for attorney involvement in the expected challenges to the interpretations of the statutes. Also, it is definitely aimed at destroying any vestige of democratic governance in homeowner and condo associations. This bill denies access to the courts.

Introduction

The Carpenter Hazlewood Delgado & Wood blog of Jan. 18, 2011, written by Scott Carpenter, “HB2441 – CC&R Amendments,” argues: “This change would enable community association to change their documents without onerous approval requirements that count a failure to participate as a ‘no’ vote.” (Emphasis added).  The exercise of the democratic right to vote and to protect one’s private property is considered “onerous” by the CAI Legislative Action Committee co-chair, Scott Carpenter.

Carpenter’s Dec. 17, 2010 letter, titled  “Bad Documents,”  to CAI lobbyist DeMenna proposed a change in the laws.  The letter includes HB 2441, verbatim, under the title “Easier to Amend Bad Documents.”  This bill did not originate with the bill’s sponsors, but from the CAI lobbying organization that supports not you, the homeowner, but that legal corporate person known as the HOA.   The Sponsors are just the vehicle doing CAI’s bidding.

The title of the bill itself simply  reads:  “homeowners’ associations; declaration amendments,”  and the bill extends well beyond just changing the voting requirements to amend the CC&Rs.  Some of these changes are good for homeowner protection, but are offset by the draconian attack on homeowner property rights. CAI argues, in Carpenter’s letter to DeMenna, that the proposed voting procedure is just like public voting laws, but fails to provide the necessary public government protections, and ignores the legal fact of the private contract in operation here, the CC&Rs agreement. HB2441 is another top-down imposition of government interference, which otherwise in instances involving the protection of homeowner rights, is vehemently opposed by CAI.

As you read this bill, remember that the courts take the everyday meaning of the words used, and if not clear, or seemingly contradictory, the court will look to intent.  Courts have held that if word “x” was  not actually stated, then the drafters should have included word “x” if that was their meaning or intent.  Read the bill carefully as written, and think how your opponent could challenge the wording in the courts.

 

Analysis

The full document with its  detailed, 10-point analysis can be found at HB 2441.

What led to the AZ supreme court constitutionality challenge to HOA adjudication?

Ever wonder how and why this statute granting DFBLS the right to submit HOA disputes to an ALJ for adjudication was challenged as unconstitutional?

Chris Gelb filed her petition (08F-H088012-BFS, Apr. 22, 2008) with DFBLS citing violations of her governing documents, and  a violation of the duty of directors under Title 10, 10-3830, as well as a violation of §§ 6.12 and 6.13 of the common law Restatement of Servitudes (2000 ed.). 

In general, Sec 6.12 deals with the authority of the court to overturn board decisions, and 6.13 deals with duties of the board to its members.   Gelb alleged discrimination against her in regard to a landscaping issue –  the type of gravel chosen by the board.   Gelb lost on the legal technicality that  the  “no discrimination” covenant applied only to the CC&Rs and not to the Design Guidelines.  (Raises the question as to why the winners, Carpenter, filed the constitutionality challenge).

She lost the case on the governing documents claim, and the other two were dismissed as being outside  OAH jurisdiction. The broader issues of a rational and equal treatment of members found in both of the dismissed claims would have probably brought about a favorable decision.  

The superior court decision in Phoenix  Townhouse v OAH, DFBLS had just declared the statute before us as unconstitutional, and Jason E. Smith, the Carpenter Hazlewood attorney of record in both cases, jumped at the opportunity to obtain an appellate decision, using Gelb,  that would serve as precedent.  All as a result of the gravel chosen by the HOA board.

 
Justice will still be lacking without the ALJ being able to consider these two important areas of law affecting HOAs. 

co-opting the HOA “homeowners bill of rights”

 

In 2008 the 1994 UCIOA (Uniform Common Interest Ownership Act) was modified to accommodate the outcry from homeowner rights advocates.  This shortened version is known as the Uniform Common Interest Ownership Bill of Rights Act (UCIOBORA), and is a political maneuver to co-opt the real meaning and intent of a “bill of rights.”  Here’s an explanatory excerpt from UCIOBORA:

 

Further, ULC [Uniform Law Commissioners] acknowledges that it will often not be feasible to enact UCIOA 3.0, in part because of the difficulty drafters in the States may encounter in integrating any new adoption of the existing Uniform Acts with the laws that may already exist in a particular state.  For these reasons, ULC  promulgated a free-standing and relatively short Uniform Act that addresses all of the ‘association versus unit owner’ issues touched on during the drafting of the 2008 UCIOA amendments. The free-standing Act is known as the Uniform Common Interest Owners Bill Of Rights Act or “UCIOBORA”. While not all sections of UCIOBORA are identical to UCIOA 3.0, the concepts underlying each Act are the same, and are adjusted simply to recognize the simplified nature of UCIOBORA.
 
 
In short, UCIOA wasn’t selling.  It seems that UCIOBORA is the sad result of the political motives to get UCIOA selling again. It’s a document that does not at all read like the US Bill of Rights, or any state constitution’s Declaration of Rights (state constitution equivalent of the Bill of Rights), or even the Declaration of the Rights of Man and Citizen (France, 1793).  Far from it.  Rather it reads like your current CC&Rs and UCIOA with a number of concessions to reality.  However, it lacks substantive protections of homeowner rights, such as: a fair and just due process by means of an independent tribunal; fair elections procedures with equal and fair access to membership lists, and equal opportunity appearances in the HOA newsletter/website; restrictions on the right to foreclose, since the HOA is not in the same position as a lender who had advanced hard cash; and enforcement by means of penalties against board violations of the governing documents, otherwise all such laws are just recommendations dependent on the goodwill of the affected persons.
 
A homeowners bill of rights is necessary because the Constitution with its Bill of Rights amendments does not apply to private HOA governments.  HOA governments operate outside the Constitution, which is greatly desired and defended by HOA supporters as they would not be able to act in ways that a civil government cannot act.  A statement in a declaration that says that the HOA is subject to the Constitution is meaningless, since the Constitution does not apply to private entities.  What is necessary is a statement that the HOA acknowledges the Constitution as the supreme law of the land and irrevocably agrees to be subject to it  as if it were indeed a government entity.
 
 
Short History
In 1997, Elizabeth McMahon of AHRC filed a Homeowners Bill of Rights with the California Law Review Commission looking into revising California’s HOA statutes.  In 2000, George K. Staropoli submitted a statement to the Arizona Interim HOA Committee, Homeowner’s Declaration of Independence from the HOA system of government.  In 2006, AARP produced a public policy statement, A Bill of Rights for Homeowners in Associations, written by Houston attorney David Kahne.  In 2006 the legal-academic aristocrats (lawyers for the real estate interests) at a Texas senate hearing proposed a Texas Uniform Planned Community Act (TUPCA).  Responding to Texas homeowner rights advocates, the committee was told that UCIOA (the model act for TUPCA) was being modified to include a bill of rights section.  In 2008, George K. Staropoli informed the California Law Review Commission of a proper Members Bill of Rights section to the Davis-Stirling Act (This section was later  dropped from the revision).
 
 

AZ bill, SB 1148, seeks to restore OAH adjudication of HOA disputes

The Arizona bill, SB 1148, seeks to overcome the objections of the appellate court in Gelb, and restore due process protections to homeowners in HOAs by means of OAH adjudication. (See Advocate submits amicus brief in AZ supreme court appeal of HOA due process).  Below is the explicit statement of intent for this legislation, of which one purpose is to  protect the consumer who buys a home in an HOA.

Sec. 4. Legislative findings and intent; department of fire, building and life safety; community disputes

It is the intent of the legislature to find, determine and clarify all of the following after careful consideration of the case Gelb v. Department of Fire, Building and Life Safety, 1 CA CV 09-0744, filed October 28, 2010 (Ct. App. 2010):

1. The department of fire, building and life safety has exercised substantial responsibility for many years in the enforcement and application of state laws and private contracts that regulate the relationships between those who reside in and those who control certain types of common housing, namely, mobile home park residential communities.

2. The legislature has determined that while the direct licensure of mobile home parks and their owners may not have been necessary, the regulation of their private, legal relationships with their tenants has been and continues to be an important consumer protection function of the department of fire, building and life safety and that department has developed considerable expertise in interpreting, enforcing and applying the statutes relating to these mobile home communities and in interpreting, applying and enforcing the terms of the leases, rules and other documents that regulate the relationship between the residents of the mobile home parks and the owners and managers of those parks, and doing so in a cost-effective manner for the residents.

3. The legislature further determines and finds that while direct licensure and regulation of condominiums and planned communities may not be necessary at this time, the legislature has repeatedly found over the years that owners in condominiums and planned communities are frequently subjected to inconsistent, unreasonable and often unlawful enforcement and application of the declarations, rules and bylaws that govern their communities, their managers and their boards of directors, and owners are often unable to afford the cost of formally litigating their disputes in the superior court.

4. The legislature further finds that the continuing use of the existing hearing officer function in the department of fire, building and life safety will provide for an efficient use of already-established common interest community expertise at this agency, will provide an important consumer protection for owners in condominiums and planned communities and will efficiently and effectively provide for resolution of these common interest community disputes without the expense, formality and difficulty of requiring a trial in the superior court in every instance, and will do so without the cost and bureaucratic complexity of creating an entirely new administrative body to perform these important functions, while still maintaining the ability and right to recourse in the superior court, and without threat to the core functions of the judiciary.