Tag: CAI

court examines consent and surrender of rights in HOA CC&Rs

 This HOA arbitration clause case discusses those important legal issues ignored by  state legislatures and the courts over the years —  those pertaining to the homeowner’s consent to agree, his surrender of his rights by the  mere acceptance of a deed, and raises the question of misrepresentation by the participants in the Unspoken Alliance.  The Court in Pinnacle[1] reiterated that consent may occur by implication, but does not concern itself with the “full knowledge” and misrepresentation of that implied consent.  While the Court dealt with the matter before it, the arbitration clause, the application of its reasoning can be extended to the broader issues of a valid contract under its application of contract law requirements.

 For example, one aspect is the holding that the buyer has agreed to the CC&Rs if he has opportunity to examine the CC&Rs, at or shortly after closing and accepting the deed, but declines to do so.   This legal doctrine presumes that “all things being equal”, but they are not with regard to misrepresentation by the developer and the real estate agent, and the silence on the part of the consumer protection agencies.  These agencies have failed to put forth warnings to buyer to the effect:  There are surprises and covenants that you may feel are oppressive, which may affect your rights, freedoms, privileges and immunities to which you are entitled under state laws and the Constitution.

 The Court stated the facts of the Pinnacle CC&Rs .

 “In selling the condominiums Pinnacle used a standard purchase and sale agreement that recited on the first page that the buyer agrees to comply with the CC&R’s by accepting a grant deed to the condominium. . . . any dispute in any manner other than as provided in [the CC&R’s]. Buyer and Seller acknowledge that by agreeing to resolve all disputes as provided in [the CC&R’s], they are giving up their respective rights to have such disputes tried before a jury. WE HAVE READ AND UNDERSTOOD THE FOREGOING AND AGREE TO COMPLY . . . “

 In spite of the above, the Court found the clause unconscionable.  Borrowing from Villa Milano[2], the court quoted (emphasis added), “A developer should not be permitted to accomplish through the CC&R’s what it could not accomplish through a purchase contract.”   (Please note that in a broader sense I have argued that HOAs by virtue of a written covenants running with the land — CC&Rs — cannot be allowed to circumvent the US Constitution.)  The court held,

 “We examine this question under general contract formation principles. . . .Essential components of a contract include parties capable of contracting and the consent of the parties to the contract. . . . Although the arbitration provision states that by accepting a deed for any portion of the association property, the Association agreed to give up its right to a jury trial and have any construction dispute decided by arbitration, the Association had no choice but to accept the property that Pinnacle deeded to it.

 “We agree with Villa Milano insofar as it holds that CC&R’s can reasonably be ‘construed as a contract’ and provide a means for analyzing a controversy arising under the CC&R’s when the issue involved is the operation or governance of the association or the relationships between owners and between owners and the association. . . .”

Please read the following very carefully.  “Does not comport” should be read as:  insufficient to pass judicial review for the surrender of such an important Constitutional right.

 “Treating CC&R’s as a contract such that they are sufficient to waive the right to trial by jury does not comport with the importance of the right waived. CC&R’s are notoriously lengthy, are adhesive in nature, are written by developers perhaps years before many owners buy, and often, as here with regard to the waiver of trial by jury, cannot be modified by the association. Further, the document is not signed by the parties. . . . The general principles discussed in Treo[3] regarding the need for free and voluntary consent before a party can be deprived of its constitutional right to a jury trial are equally applicable to arbitration.”

 The Court then addressed the issue of unconscionable adhesion contracts. 

 “Procedural unconscionability focuses on oppression or surprise.  “Oppression arises from an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice,” while “surprise involves the extent to which the supposedly agreed-upon terms are hidden in a prolix printed form drafted by the party seeking to enforce them. . . . In assessing substantive unconscionability, the paramount consideration is mutuality.

 “The provision in the purchase and sale agreements did not mention arbitration, nor did it explain to purchasers the type of disputes for which they have agreed to waive their constitutional right to a jury. To discover this information, purchasers needed to read the CC&R’s. . . . However, for the terms of another document to be incorporated by reference into a contract, the reference must be clear and specific, and the terms of the incorporated document must be known or easily available to the contracting parties.”  [The CC&Rs are incorporated by the statement that the deed is subject to CC&Rs, but most do not contain the explicit legal  statement, “and are incorporated herein”].

And specifically in regard to binding homeowners by means of constructive notice,

 “Assuming the CC&R’s had been recorded before the sale of the first condominium, we cannot conclude that recording a document qualifies as making the document readily or easily obtainable. It is unreasonable to assume that buyers eager to complete their purchase of a condominium will stop the process and travel to the county recorder’s office to locate a copy of the CC&R’s. Thus, there is a high degree of surprise because purchasers have no means of ascertaining . . . . Oppression also exists because the jury waiver provision in the purchase and sale agreements and the arbitration provision in the CC&R’s were part of preprinted materials presented on a take-it-or-leave-it basis to purchasers without any negotiation. . . . Accordingly, the existence of surprise and oppression reveals a high degree of procedural unconscionability.”

One would think that all those CAI lawyer-members of its College of Community Association Lawyer, and all those legal-academic aristocrats who write journals, attend seminars and conferences, and offer their person opinions in the Restatement Third, Property: Servitudes on what the law is would know better.  The Restatement was supposed to summarize the general holdings of the courts, and not the opinions of the legal-academic aristocrats, as to the common law of servitudes (covenants running with the land). 

 For example, § 3.1, comment h, states: “in the event of a conflict between servitudes law and the law applicable to the association form, servitudes law should control”;  and § 6.13, comment a, states: “The question whether a servitude unreasonably burdens a fundamental constitutional right is determined as a matter of property law, and not constitutional law”. These statements reflect an excess of zeal and an abuse of the duties as editors/contributors to the Restatement.  It is not to difficult to conclude that this Restatement serves to advance the interests of the legal-academic aristocrats.

These efforts have permitted HOAs to become institutionalized over the years, which translates into an acceptance without question of the rights and powers of the HOA.  The principles applied in this case on arbitration clauses must be extended to the very nature and legal foundation of the HOA scheme.

 

Notes

 1. Pinnacle Museum Tower HOA v. Pinnacle Market Dev., D055422, Cal. App. Dist. 4 (July 30, 2010).

 2. Villa Milano Homeowners Assn. v. Il Davorge, 84 Cal.App.4th (2000).

 3. Treo @ Kettner Homeowners Ass’n v. Superior Court, 166 Cal.App.4th 1055 (2008).

HOAs vs. local government — which “laws” control?

In the  Aug. 6, 2010 Carpenter Hazlewood (CAI attorneys, AZ) e-newsletter post, “Deed Restrictions versus City and County Ordinances: Which One Controls,”   attorney Nkita Patel wrote,

“In sum, if there is a conflict between the association’s CC&Rs and a city or county ordinance, the more restrictive provision will govern.”  

The underlying rationale is that the homeowner, upon taking possession of his deed, has agreed to every surrender of his rights.  And people can agree to the surrender of their rights.  But, under what circimstances and conditions?  Under servitude law of covenants, the homeowner need not read nor sign his explict consent to the surrender of his rights. But, this justification, by itself, is a violation of not only contract law, but of constitutional law and the owner’s due process rights.  Even The Restatement of Servitudes, §3.1, holds that an unconstitutional covenant is invalid.  What say you, Ms. Patel?  

Furthermore, what say you if the covenant simply says, ineffect, “No parking on the streets or driveway?”   Here, regarding public streets, the ordinance says, “No parking 8:00PM to 6:00AM.”  Which is more restrictive?  Which “political law” controls?   

And, finally, the “usual advice” statements are offered, where only partial answers are provided —  those favoring the HOA and NOT explaining how the law would apply as to circumstances favorable to the homeowner.  Carpenter Hazlewood has never addresed the issue of guest parking and the wrongful holding a member in violation of the CC&Rs in an egregious violation of the law, good faith treatment of members, and a just and fair governance. 

What say you, Ms. Patel, about the HOA’s actions in these circumstances?  Please see Wigwam Creek North HOA v. Fuchs, CC: 2010- 49644, Estrella Justice Court, where such an event and wrongful HOA act took place, apparently with HOA attorney approval.

 

Read more . . .

HOA attorney collusion and regulation of public streets

Ethical obligations of attorneys to HOA members

 

HOA attorney doesn’t recommend Roberts Rules — let the boards do as they please

 In the July 23, 2010  issue of “the word” for HOA boards (CAI Carpenter Hazlewood’s enewsletter), CHDW’s Sahl correctly states the silence of the  AZ statutes on the issue of corporation rules of order.  And, in true pro-HOA support — after all they represent that separate and distinct class of owners, the directors and officers — say the board can do as it pleases.  Absent is any recommendation for  a sound and “good faith” functioning of the HOA by recommeding that, as a very good idea,  the HOA does adopt Roberts Rules of  Order. 

But, why should they when the board has the broad powers granted by the adhesion CC&Rs and state laws?  Why confine and restrict its right to do as it pleases, under these very broad grants of freedom to act, by using  Roberts?   No, no, no!  “Rules” is for the owner-members, those other guys, and not for the hired-hand managers,  directors, or  officers.   Roberts Rules, repeatedly revised, is the 134-year accepted standard for conducting board meetings by corporations, especially nonprofit corporations. 

Please understand that the Board does not function for the benefit of the “people”, the homeowner-members, as does public government, but to enforce the CC&Rs first and foremost.  Such enforcement to maintain property values is for the mutual benefit of the homeowner-members to the exclsuion of all other rights, freedoms, and privileges and immunities still available to those not living in HOAs. 

This surrender by homeowners of their privileges and immunities,  which all Americans are to enjoy, must be fully understood.  It is not diviluged to the public at large under the unspoken alliance of  “no negatives about HOAs.”

 

For more info, see  Does CAI act in good faith for the benefit of the people in HOAs?

                              Confederate Texas and HOA governments: de facto, unlawful governments

HOA attorney collusion and regulation of public streets

During the past Arizona legislative session, HB 2153, dealing with a re-assertion that public streets are regulated not by HOAs but by civil government, was defeated by HOA/CAI opposition and a group of HOA special interests, Sun City HOA.   Part of the argument for the bill were the realistic incidents where the HOA fined a homeowner for a car parked in front of his home, on a public street — without any attempt to verify whether the car was owned by a member of the household.  In other words, in a display of gross injustice and a  stark display of HOA power and intimidation, the HOA simply fined the homeowner. (It is well understood that some 90% of the homeowners pay up rather than go to court to fight for their rights).

 What is further unconscionable and irresponsible, and a violation of an attorney’s code of conduct, HOA attorneys would simply “pick up the paper,” file the charges against the homeowner, and of course tack on its fees, and proceed in a flagrant violation of  Rule of civil procedure, 11(A), which states, in part (emphasis added),

The signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; that to the best of the signer’s knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

and the Arizona Rules of Professional Conduct, R42, Ethical Rule 3.1 (mimics the above Rule), and ER 3.3, Candor to Toward Tribunal, in part,

(a) A lawyer shall not knowingly:  (1) make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer . . .  (3) offer evidence that the lawyer knows to be false.

Is this legalized extortion by the HOA attorney and HOA board, acting together?[i]

While the bill was before the legislature, an on going court case[ii] was taking place, just brought to my attention.  A homeowner was being fined for just such an occurrence.  Both the management firm and HOA attorney are Community Association Institute (CAI) members, a trade group that lobbied against the bill.  CAI advertises as being the leading educator for the HOA industry and HOA law experts.  The Arizona law firm is Maxwell & Morgan where both principles are members of the CAI Community Association College of Lawyers.

Upon being notified of parking violations, the homeowner properly informs the management firm, Rossmar & Graham, that the cited cars are not his, and provides the license plates of his 2 cars (Mar. 28, 2009 email).  Subsequently, the board denies his request to remove the fines.  According to the homeowner, the attorneys continue and file suit, and then remove their claim for the fines.  Undoubtedly, the attorney realized she was in trouble for blindly doing the HOA’s bidding. 

Most egregiously and unethically, the M & M attorney still sought attorney fees from the homeowner.  This is unconscionable and unethical.  The attorney did the board’s bidding, ran up  fees, and then found that she was involved in an unsupportable charge, but still sought her fees from the homeowner.  The homeowner has to pay for the wrongful acts of the board, and the blind acceptance of the suit by the attorney? 

And now we have a former CAI legislative action committee chair, Scott Carpenter (another CAI college of lawyers member), whose firm advises HOAs on possible loopholes in the right of HOAs to regulate parking[iii].   In an inexcusable misstatement of the public parking issue, attorney Patel fails to mention the main issue regarding regulation of public streets by public government, citing only a Missouri case, Maryland Estates v. Puckett, that affirms HOA regulation of its members, but not the public.  His reference to checking vehicle ownership is only made in regard  to the possibility of illegal towing.

The battle for HB 2153 was precisely to prevent such abuse as occurred in the Wigwam Creek lawsuit.  But, Carpenter, in his Arizona Legislative Session blog entry of January 13, 2010, “Authority Over Roadways,” only saw, “If the bill is really about parking, then enforcement of a parking prohibition in a planned community’s governing documents is the enforcement of a contractual provision and does not, in its enforcement, exert any ‘authority’ over the roadway itself.”   Clearly this is a biased advocacy statement regarding pending legislation, and hiding behind the imprimatur of an attorney, not addressing or cautioning his readers about the implications regarding the public who are not members of the HOA.

In my Commentary of April 5, 2010[iv] I stated that the purpose of the prolific advisories/advertisements were “to seek and promote loopholes and technicalities in the law and governing documents that would lead to adversarial litigation.”

Something is rotten in Denmark!  Shame on CAI, Maxwell & Morgan and Carpenter, Hazlewood.   And shame on the Arizona Legislature for seeing no evil in regard to public control of public streets, and for accepting the voice of the CAI attorneys as gospel.

Notes

[i] See, Ethical obligations of attorneys to HOA members.

[ii] Wigwam Creek North HOA v. Fuchs, CC: 2010- 49644,  Estrella Mountain Justice Court, Maricopa County, AZ.

[iii] “Enforceability of Parking Restrictions”, Nikita V. Patel, Esq., July 9, 2010 enewsletter, Carpenter, Hazlewood, Delgado & Wood, PLC.

[iv] “How good are the CAI member HOA attorneys?“,  HOA Private Government, http://pvtgov.wprdpress.com.

HOAs as an institution and its impact on society

The common definition of “institution”, for our purpose, is “ a custom, practice, relationship, or behavioral pattern of importance in the life of a community or society”, or  “an established custom, law, or relationship in a society or community.”   The degree or strength of the acceptance of the established custom or behavior pattern often results in the perception that the institution is a concrete and indestructible reality, and not dependent on one’s belief or acceptance of the  institution.  For example, marriage is an institution that has been losing its acceptance in recent time.  

The definition of an institution well applies to planned communities and homeowners associations.  As a result of the failure over 47 years to mount substantial opposition, homeowners associations have become an American institution, an accepted  way of life.  While there were “spots” of protest and informed communication over the years, it was the accumulated effect of the national lobbying organization, CAI, supported by real estate and land usage legal-academic aristocrats writing in their journals and speaking at conferences, that brought about the institutionalization of HOAs.  Homeowners associations  have become accepted as a way of life in our society and culture, and thoroughy ingrained into our society. 

Consequently, it does not come as a surprise that any substantial opposition, such as my commentaries and citations of authorities, is met with disbelief. This is normal human behavior, which occurs with any idea or facts that are contrary to one’s long term beliefs and values.  This is the effect of institutionalization.  

When confronted with facts and hard evidence to the contrary of these long held beliefs, the normal reaction is a defense of the long held belief.  After all, many aspects of one’s life are tied to one’s beliefs and values, and they cannot be dismissed out of hand.  The common reactions are:  You are crazy! You don’t know what you are talking about!  You’re a weirdo!  A radical!  The reaction is to ignore any evidence to the contrary. 

The stronger the belief, the more reactionary is the response to contradictory information.  Defensive arguments offered to retain the long held belief can rise to highly illogical and absurd defenses.  Even legislators are not immune to this aspect of human nature.  Such is the effect of institutionalization on society.   

HOAs became part of our society with the help of the special interests who did not speak, and continue not to speak, of any negatives about homeowners associations in America.  The unspoken alliance of “no negatives” has been thoroughly ingrained into our elected officials, the media, and the public at large.  Just a natural consequence of the institutionalization process.  But, an institution does not automatically carry the stamp of being ethical, moral or just.  Slavery was once an American institution.  Established practices and behavioral patterns just reflect the mindset and values held by a large majority of the society, and we well know societies can go awry from time to time.   

The only rehabilitation therapy is the continued and repeated exposure to the facts, and I mean facts backed by hard evidence, legal authority, and confronting those seeking to maintain the institution’s continued existence in our society.  Such as, presenting the other side of the issue at hand, which, as we know, was often purely propaganda and not the full truth.  (A good example would be the HOA Academy backed by a number of Arizona towns that does not inform HOA members of their limited rights when a suit is brought by their HOA, or provide information about the statutes and the demanding nature of legal Rules of Procedure). 

In time, either the established institution is now seen in a a different and unfavorable light, or society becomes divisive with the supporters taking dogmatic ideological positions, resorting to, essentially, an “I don’t care” rationale.