Tag: CAI

CAI maintains HOAs are protected by and do not violate the Constitution — not so!

Much to my surprise and astonishment I stumbled upon CAI’s press release on its website.[1] It informs the reader that all is well with the HOA legal scheme and there are no waivers of constitutional rights or other constitutionality problems. In fact, CAI claims that the Constitution protects the CC&Rs’ contract.

Contrary to conventional wisdom, Americans do not waive their constitutional rights when they move into a community association. In fact, courts have found that community association residents, by enacting reasonable rules for their own communities, are actually exercising their constitutional rights of association, contract, expression and assembly. . . . By purchasing homes in association-governed communities, buyers enter into constitutionally protected agreements with their neighbors.

The U.S. Constitution gives community association residents the right to govern their own communities without the need to get government’s permission to adopt rules. This prerogative is at the core of individual property rights and is a tradition that dates to the very founding of our nation.

I am not surprised at CAI’s failure to mention yours truly by name, the only outspoken advocate on HOA constitutional violations[2] that emphatically objects to and challenges CAI’s simplified arguments that misrepresent the law.

 

First paragraph fallacies:

Apparently agreeing to  free speech restrictions on displaying signs or flying the flag and due process protections are not considered a waiver or surrender of rights by CAI. CAI’s position that the right to associate and to enter into private contracts is protected by the Constitution is a false and naïve argument. Can you and I privately agree to violate the Constitution, and to associate in community where its government is not subject to the same restrictions as public government?

There are conditions for a voluntary waiver and surrender of constitutional rights that the CC&Rs agreement fails to meet, especially when it comes to implied waivers — those not specifically stated. But somehow the courts enforce the CC&Rs as if they met the requirements for constitutional waivers, like the Twin Rivers[3] case that CAI is relying on. CAI doesn’t mention its amicus curiae that argued “In the context of community associations, the unwise extension of constitutional rights to the use of private property by members (as opposed to the public) raises the likelihood that judicial intervention will become the norm . . . .” If no rights were waived, why then is CAI so concerned about restoring them?

I have raised the valid argument of misrepresentation in the selling process and that the buyer was misled and not fully informed as to the consequences of his entering HOA-Land. No one, who firmly believes that HOAs are good for America, has stepped forward and publically signed the Homeowner Association Consent to be Governed Agreement: A Model Act[4] that a sign-off of explicit waivers and surrenders of constitutional rights (in paragraph 3), including a waiver of the equal protection of the laws.

Second paragraph fallacies

I explain in “HOAs violate local home rule doctrine” (see note 2 below) that HOAs are allowed operate far beyond state laws relating to home rule statutes, granting HOAs independent political government powers are denied to legitimate home rule communities. Consequently, HOAs are being treated with special laws for special entities in violation of the Constitution, federal and state.

The question that I have raised, and ignored by CAI in its release and in other communications, is summed up in the following statement: “The policy makers have failed to understand that the HOA CC&Rs have crossed over the line between purely property restrictions to establishing unregulated and authoritarian private governments.” In essence, HOAs have been allowed to operate outside the Constitution as authoritarian independent principalities, violating the fundamental principles and values underlying our American way of life.

While CAI publicizes its claims to be working for productive, healthy and desirable communities, it is apparent that these communities are not part the American system of democratic government. It advertises that it is an educational organization, yet conducts surveys to promote its view of what is good for HOA-Land.

References

[1] https://www.caionline.org/PressReleases/_layouts/15/WopiFrame.aspx? sourcedoc=/PressReleases/Media%20Statements/Homeowners%20and%20Constitutional%20Rights.doc&action=default. October 7, 2015. (I don’t know how long this has been there, but CAI has revised its website recently.)

[2] See in general, CC&Rs are a devise for de facto HOA governments to escape constitutional government; Unconstitutional delegation of power to HOAs; HOAs violate local home rule doctrine and are outlaw governments.

[3] CBTW v. Twin Rivers, 929 A.2d 1060 (2007).

[4] An example: “d). I understand that the association, as a private entity and not an arm of the state, is not subject to the restrictions and prohibitions of the 14th Amendment to the US Constitution that otherwise protects the rights of the people against actions by public government entities; (g) that there are no equivalent clean or fair elections procedures to protect the integrity of the HOA election process as found in public government elections.” http://pvtgov.org/pvtgov/agree-disclose-license.pdf.

HOA vs public government

Ever wonder what would happen if your town/city council did not have enough public minded citizens to run for office?  You know, like what we see in many HOAs?

While I’m not sure, several scenarios are possible.  A small clique would soon dominate the council and the shortage of councilmen ignored.  Or, the state would be asked to get involved either by citizens unhappy with the ruling click, or vendors concerned about the legitimacy of contracts would seek protection.

In HOA-Land who would be able to step in and restore order and a just government?  Not the state since the HOA is not a state subdivision.   Could be the vendors who are mainly the lawyers and managers.  Not likely. After all, it is they who control the HOAS “council.” They like it just this way, because, as we see in the governing documents and state laws, they are a privileged class. Not the board composed of the clique and perhaps “conscripted” directors – those bodies urged to become a director to satisfy the CC&R and who remain silent and acquiesce to the president’s wishes.

I hope readers begin to realize that the dogmatic cry of “no government interference” got just what they asked for – complete independence and on their own. HOA-Land private government requires a higher degree of public involvement than found in the nation as a whole – an insurmountable barrier.

However, some disgruntled member can file a request to the court to appoint a receiver who will manage the HOA – and get paid for it — as it is quite evident that the members are incapable of governing their HOA. Now, he would have his orders from the court and that would not include the irrational lament promoted by the CAI lawyers and managers that it ain’t fair to the “good” members.  Well, it is fair in terms of the fact that it is the failure of the members to participate that makes them guilty of the failure to manage their HOA.  Oh, you thought you were just buying a home and management of the HOA was someone else’s problem.  SURPRISE!

In my opinion, HOAs as a state entity bring more protection than the private and adhesive CC&Rs “contract.”  Understand that turning to the 42 year-old national educational entity, as several states and towns have, that has failed all these years to fix HOA problems is irresponsible and lunacy pure and simple.  As a state entity you have bodies of statutes and common law, and traditions and precedent that serve to protect citizens as opposed to the Johnny come lately, make new law on the fly by courts. New laws that interpret your “contract” in many unexpected ways that do not serve individual rights and interests because the HOA is a private entity.

HOAs are a throwback to medieval feudalism

Preposterous?  A wild thought?    You say that: according to the national HOA business ‘educational’ trade group, HOAs are the best example of local democracy at work [1].  So, make your point, convince me!  OK, I will!

Please see the table,  A comparison between fiefdoms and HOAs.

Note 1. “Associations are the most local form of representative democracy, with leaders elected by their neighbors to govern in the best interests of all residents.”  Community Associations Fundamentals, item 2.

CAI recognizes HOAs DO have problems

In a recent Associations Now article, “Study: Homeowners Associations Hit New Population Peaks, CAI Skiba is quoted as saying: “‘Not all associations operate as well as they should, and we’re never happy when we see a community in the news for the wrong reasons, but at least we know struggling communities are the exception to the rule,’ CAI chief executive Thomas Skiba, CAE, said in a comment on the study.”  I believe CAI is waking up to the fact that it can no longer hide the real lives of HOA members.  I expect a mia culpa (I am guilty) announcement by a repentant CAI. It has no other choice to stave off being completely discredited if it refuses to come into the light.

To assist CAI in its path to enlightenment, I have prepared another critique of CAI’s views about the HOA legal scheme and operations in reality.  CAI has published its “Community Associations Fundamentals” with the stated purpose that “CAI developed the Community Association Fundamentals to foster a better conceptual understanding of how associations function and the roles of residents and association leaders.” I will attempt to “decode” and examine what is really being said or not being said with the understanding that the word “fundamental” has the following generally accepted meanings, “forming a necessary base or core” or “of central importance.”

Please read CAI’s HOA “fundamentals” analyzed and “decoded.” You can help CAI in its hour of need — spread the word.

 

CAI background

In 2006, and followed up in 2012, I published the following analysis of CAI’s membership. In Who controls CAI and its 50 state HOA lobbying committees? I used census and CAI data to show that only 5.9% of HOAs are CAI members, based on all ‘volunteers’ belonging to different HOAs with no duplication. If all CAI members were counted then there would be only 9.8% HOA representation.  Furthermore, a miniscule .6% (.006) of Americans are CAI members. The CAI quoted “63 million Americans” is that number of people, not CAI members, living in HOAs.

On CAI’s 14 member Board of Trustees, HOA ‘volunteers’ (misguided individuals who are mainly HOA board members) hold only 2 positions. Vendor members hold the other positions as HOAs are not allowed to be a member.

In spite of the miniscule minority representation of HOAs and HOA members, CAI Legislative Action Committees (LACs) lobby and dominate HOA legislation in all states.

The continuing saga of Brown vs Terravita HOA. Can CC&Rs amendments violate state law?

Summary

The AZ appellate court is deciding whether or not to permit an attorney fees award resulting from an ALJ decision not involving a contract. The law says no, but Terravita’s HOA attorneys think differently and managed to get a CC&Rs amendment passed that permits just such a violation of state law.  Brown, the homeowner/plaintiff, had filed a complaint against state statutes and not against the CC&Rs. Furthermore, the amendment does not represent a majority or supermajority vote, but a minority vote based on a 2010 “minority control” CC&Rs amendment.  In other words, Terravita has become an oligarchy in fact.  Will this influence the court’s decision?

Case history

Terravita is a1300 resident, more or less, HOA in Scottsdale, AZ, with country club and golf included.  William Brown is a long-time resident who has been active in challenging the Terravita board for some time, winning cases.  In fact, Terravita’s insurance company has specifically set a $75,000 deductible for suits filed by Brown, just for him alone. Can you guess why?[1]

The ongoing case from 2012, filed with the OAH was decided against Brown on a question of failing to hold an evidentiary hearing for Brown’s position (regarding evidence that an executive meeting was not an executive meeting and Brown was entitled to the records). The ALJ felt the hearing was not necessary and granted summary judgment against Brown.

 The Court’s Order upheld the Administrative Law Judge’s grant of summary judgment in favor of Terravita. Thus, Terravita is entitled to its attorneys’ fees and costs as the prevailing party under A.R.S. §§ 12-341.01 and 12-341 as well as under the Amended and Restated Declaration of Covenants, Conditions, and Restrictions for Terravita, as amended . . . .[2]

The HOA filed for attorney fees for the OAH hearing and for appellate costs. Uncertain that, in this ongoing case, Terravita will prevail under 12-341.01 and case history, which supports nonpayment of attorney fees in ALJ cases, Ekmark (The law firm of Ekmark & Ekmark) first argues that Brown is none other than “Bad, bad [Bill] Brown, meanest guy in the whole damned town”[3] (my words).  The application for fees, in my view, character assassinates and libels Brown using Uyleman v. D.S. Rentco to defend its claim for a discretionary fee award. Brown is described as:

This lawsuit was both unfounded and trifling. It was nothing more than an attempt to harass and burden the Terravita community . . . Plaintiff proceeded to waste the resources of the Court and Terravita by appealing this meritless case. . . . The burden of defending these spurious claims should not fall on innocent homeowners. Rather, it should fall on the Plaintiff who filed this action and appeal with no legal basis and with no reason other than to harass Terravita.

Is this a case of the pot calling the kettle black?

In my view, this argument is a weak one designed to attack Brown. The second, but questionable, argument advanced by Terravita relates to the 2013 amended CC&Rs that permit such attorney fees in contradiction to state law.  (It raises questions of, who’s in charge?  The state? The municipality? The HOA? The HOA lawyers? Who??)  But in order to do so, Ekmark must claim that the OAH issue pertained contract and fees are payable under ARS  12-341.01.

Brown filed for a review and a superior court appeal of the decision, and then filed the ongoing appeal in the appellate court against the attorney fee award, CA-CV2014-000455.  He counters with, “The claim for attorneys’ fees under TCA’ s amended and restated declaration, in addition to defying credulity, is a misplaced transparent ex post facto attempt to trump well-settled Arizona law.”[4]

Brown presents his argument that the case is not a contract case but a violation of state law, having filed the OAH petition as a violation of state law, not of the CC&Rs.  (This is the question that should be before the courts, not one advanced after the fact by the attorneys in order to claim fees.) Apparently Brown’s wording was intentional, anticipating the HOA’s recourse to the 2013 amended CC&Rs.

Can CC&Rs covenants violate the Constitution or state law?

Under The Restatement (3rd) Servitudes, section 3.1,[5] the answer to the above question is NO!  As I wrote in 2005,[6]

When did “whatever the people privately contract” dominate the protections of the U.S. Constitution?

At the heart of the matter is the continued replacement of democratic local government, governments subject to the U.S. Constitution and 14th Amendment prohibitions, with contractual, authoritarian private governments that are not subject to the prohibitions of the 14th Amendment.

Can you and I contract to not pay income taxes?  Heavens no! But, can the HOA contract via amendments or rules to lower speed limits on public streets within its community? The courts would probably uphold the HOA’s position under 1) a validly adopted amendment, 2) members agreed to be bound by the governing documents, and 3) if the amendment is more restrictive than state law or ordinance.

What gives? Why the difference?  I’ve seen court decisions based on the business judgment rule,   (the board knows best), the amendment is in the best interests of the entire membership, and it’s the voice of the majority of the members.  But, this is not the case with Terravita and the attorney fees amendment.

Let’s go back to the 2010 Terravita amendment that was approved by the members allowing amendments to be passed by a minority of the membership,[7] contravening prevailing doctrine that supermajority approval was necessary for amending constitutions or charter.

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.[8]

Consequently, as best as can be determined, the Terravita attorney fee amendment of 2013 passed with only 38% of the membership, although the board announced a misleading 90% approval. Based on Terravita’s email that 571 ballots were received, 90% would mean just 514 members approved the amendments or 38% overall membership approval.  Not even a majority!

OMG, the minority can speak for the majority, binding all of them to the amendments. So much for the board speaks for the majority of members. So much for HOAs being democratic.  Members who do not vote cannot be considered as approving the amendments.  Another democratic principal fallen by the wayside.

All brought to you under the advice and supervision of Ekmark, a CAI CCAL attorney.

Fortunately, a year later an Arizona bill, HB 2441, with similar provisions was put forth by another CAI CCAL member, Scott Carpenter, and failed. Carpenter characterized the bill as, “This change would enable community association to change their documents without onerous approval requirements that count a failure to participate as a ‘no’ vote.”[9]  In other words, create an oligarchy like Terravita with control by the few, and guided by attorneys, the HOA philosopher-kings.

In conclusion, how will the Arizona appellate court decide this case against Terravita?  For the survival of the defective  HOA regardless of the harm to the principals of our system of government, or will the court stand up and be counted, saying enough is enough?

References

[1] It would seem that the insurance company was going to pull its E & O insurance, but settled for this arrangement.

[2] Terravita’s application for attorneys’ fees  for (Ekmark & Ekmark)

[3] Jim Croce lyrics from Bad, Bad Leroy Brown:

“And it’s bad, bad Leroy Brown The baddest man in the whole damned town Badder than old King Kong And meaner than a junkyard dog.”

[4] See Brown’s 22 page opening brief, 1 CA-CV2014-000455, 9-16-2015. In addition, the amendment to § 17.08 only grants attorney fees to the HOA if it wins; the homeowner gets nothing.

[5] “A servitude . . . is valid unless it is illegal or unconstitutional or violates public policy [being]  a servitude that is arbitrary, spiteful, or capricious.”

[6] HOA reforms needed to guarantee U.S. Constitutional protections.

[7] Section 17.02 of the 2-10-2010 amended CC&Rs: “This Declaration may be amended by the affirmative vote or written consent, or any combination thereof, of the Owners holding not less than two-thirds (2/3) of the votes cast, provided that the total vote equals or exceeds Quorum.” A quorum being 1/3 of the membership.  Thus 1/3 of 2/3 = 307 affirmative votes out of 1380 members.

[8] See Beware the folly of eliminating supermajority voting for amending the HOA CC&Rs; HOA democracy at work: dysfunctional adoption of amendments by minority vote.

[9] Carpenter Hazlewood Delgado & Wood blog of Jan. 18, 2011, written by Scott Carpenter, “HB2441 – CC&R Amendments.”