California – Page 4 – HOA Constitutional Government

HOA debt and member consequences

From the April L.A. Times column, ASSOCIATIONS, by Donie Vanitzian — Can titleholders pay their share of loan directly to bank? Here’s a peek.

HOA issue

Even with an annual income of more than $2 million, our association is in a big mess. There’s a several-million-dollar loan inclusive of our reserve account the association is paying off that has a variable interest rate currently at 6.85%. The association can’t touch the reserves because the bank says it’s garnisheed as collateral for the loan.

The board says we have to pay this money back because the bank is holding our reserve account hostage. If it is borrowed and we can’t touch this high-interest money, can the association just give it back?

Response

California homeowner associations cannot declare Chapter 7 bankruptcy and wipe out their debt. California appellate courts have ruled that because the association has an unending source of money — the titleholders — with which to pay its obligations, at most it can file for Chapter 11 reorganization. The court can order an association to make an emergency assessment against all the titleholders to pay off its obligation.

CAI attorney stalwart defends HOA Land private constitutions and so-called bill of rights

The CAI stalwarts once again responding to my challenge to defend the constitutionality and legal status of the HOA legal scheme, including the highly questionable assertion of a “consent to agree” under the constructive notice doctrine. This time, dedicated CAI stalwart Beth Grimm enters the arena with her August 2012 e-newsletter, What’s new in HOA Land . . . The topic is, “Homeowners Bill of Rights.”

From the very start she informs her readers, in a round-about way, that there are no federal or state constitutions applicable to HOA private agreements. I’ve been saying that for years! And she points out that, “Without A Constitution What Is a Bill of Rights Worth?” Grimm continues in what must be taken as a joke, in full agreement with the comment by Bill Davis, with a quote from Thomas Jefferson about the need for a bill of rights after admitting there is no HOA constitution.

It appears that the reader is entering the realm of the attorney “word-game,” where long established concepts and meanings are distorted to suit the attorney’s private agenda. It’s an indoctrination and propaganda tactic. Welcome to Newspeak.

In strict legal terms, the assertion by Grimm that the governing documents are the HOA’s constitution is not correct. But the courts have upheld the CC&RS as if they were just like a political constitution and interpreted them as a de facto constitution. And as I have tried to explain, state laws like the California Davis-Stirling Act, the UCIOA acts, and other state HOA “Acts” serve as a parallel code of public laws applicable at the local government level to the class of nonprofit private governments called HOAs.

The courts have also applied public government attributes, conditions and rights to these private contracts that are not contained in the explicit CC&RS covenants, and have applied overly broad interpretations as to what the members have agreed to without their signature – just by simply taking their deed in hand. In other words, the activist courts are imputing a “consent to agree” that does not exist in the CC&RS. And nobody warns the unsuspecting homeowner of the consequences of reaching out for that deed. Nobody!

A host of reputed rights are then examined by Grimm, but they read more like the documents of the Rights and Responsibilities of members (a document first used to explain what a democracy is all about and how citizens are to act;[i] and a publication of CAI Central). It is in stark contrast to the preamble to the US Bill of Rights, emphasis added,

THE Conventions of a number of the States, having at the time of their adopting the Constitution, expressed a desire, in order to prevent misconstruction or abuse of its powers, that further declaratory and restrictive clauses should be added: And as extending the ground of public confidence in the Government, will best ensure the beneficent ends of its institution.

This long time CAI stalwart attorney does not address the constitutional concerns raised in my The Truth in HOAs Disclosure Agreement, nor does she call for CAI to conduct such a poll. There is no support for my Declaration of US and State Citizenship. Grimm’s presentation misses this important point.

Nor does she mention that back in the 2008 – 2009 the California Law Review Commission’s attempt to rewrite the Davis-Stirling Act contained a proposed Chapter 2, Member Bill of Rights. It was quickly removed and has not been adopted in the new law to become effective in 2014. Nor does she present the homeowner advocates proposed homeowners bill of Rights published in the now defunct AHRC website and the AARP version written by David Kahne in 2006, among others.

It should be noted that in 2008 the Uniform State Laws Commission adopted a bill of right for UCIOA (UCIOBORA), but did not incorporate it was a part of UCIOA. Rather, they created a separate version so that states can choose to adopt its so-called bill of rights or leave them out. To date, no state has adopted this bill of rights. It reads like your CC&Rs and pro-HOA state laws. Nothing at all like the US Bill of Rights or the state Declarations of rights.

If HOA Land is to join the union and lose its independent principality status, thereby providing constitutional protections to the homeowners, then Beth Grimm and all other CAI legal-academic aristocrats should be demanding the amendments to the Declaration and state laws as proposed in my Declaration above,

The association hereby waivers and surrenders any rights or claims it may have under law and herewith unconditionally and irrevocably agrees 1) to be bound by the US and State Constitutions, and laws of the State within which it is located, as if it were a subdivision of the state and a local public government entity, and 2) that constitutional law shall prevail as the supreme law of the land including over conflicting laws and legal doctrines of equitable servitudes.

Why aren’t they? The above state law and mandatory Declaration amendments will put an end to the jokes and word games that attempt to hide the fact that HOAs are de facto but unrecognized governments operating outside the Constitution. And there will be a bona fide Bill of rights!

[i] The Rights of Man, Thomas Paine, 1791; The Declaration of the Rights of Man and of the Citizen, 1793, French revolution origins)

Court decisions: HOA Enlightenment Movement vs. the Dark Ages

In this “groundbreaking decision”, as described by Evan McKenzie in his Privatopia Blog, the Illinois appellate court made a ruling consistent with the HOA Enlightenment Movement. Neglect by a condo asociation to make repairs affecting a unit is a defense against continued payment of assessment. This is a major step toward homeowner justice that removes the “pay no matter what, or lose your home” doctrine of the authoritarian HOA governments.

The case, Spanish Court Two Condominium Association v. Lisa Carlson (2012 IL App (2d) 110473), involved a demand for assessments owed plus a possession — forcible entry — of the unit that was alleged to have suffered damages due to the condo association’s neglect. (Understand that the condo sued under the Forcible Entry Act to repossess the unit). The court held the condo in the same position as a landlord under the landlord-tenant laws, which allow a tenant to withhold rent as a defense against forcible entry.

We hold, by analogy to the case law on actions brought under the Forcible Entry Act by landlords for possession of leased property due to unpaid rent, that the unit owner may claim neglect as a defense to the board’s suit under the Act.

And of very important significance for case law precedent is the holding on the mutual obligations of the CC&Rs contract, my emphasis, (p. 13,14),

“Plaintiff suggests that a board’s right to collect assessments is absolute and that a claim for nonpayment of assessments is not subject to any affirmative defense.”

[The court replied,] “nowhere does the . . . Condominium Act suggest that the right is absolute.” The Condominium Act appears to set the rights of unit owners on par with the rights of the board of managers. Moreover, the rights arise from mutually exchanged promises—on the one hand to pay assessments, on the other hand to maintain the common elements—and so the Declaration and the Bylaws are best seen as contracts.

[T]he condominium instrument indicates (as presumably most do) that the unit owner’s promise to pay assessments is in exchange for the board of managers’ promise to use those assessments for the repair and maintenance of the condominium property, the unit owner may claim, as a justification for nonpayment of assessments, that the board of managers breached its duty of repair and maintenance.

Contrast this decision with the recent California Supreme Court opinion, reflecting a culture still in the Dark Ages sorely in the need of enlightenment, Pinnacle Museum Tower v. Pinnacle Market Development( No. S186149, Aug. 16, 2012 ). Here the court validated the binding arbitration clause with (my emphasis),

[T]the Davis-Stirling Act ensures that the covenants, conditions, and restrictions of a recorded declaration — which manifest the intent and expectations of the developer and those who take title to property in a community interest development — will be honored and enforced unless proven unreasonable.

Under its Discussion, B. Contractual Nature of Terms in a Recorded Declaration, the court gives an instructive presentation on the preferential treatment of the declarant/developer, consent to obey, waiver of rights, “for the common good,” and the open-ended amendment process. Section C explains what constitute an unconscionable contract clause, rejected in this instance. Very informative of the Dark Ages culture.

The HOA Enlightenment Movement is rolling on, and will gather momentum as the truth, justice, and the American way shall once again prevail.

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.

This work by George K. Staropoli is licensed
under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
Attribution must be made to George K. Staropoli as author.

And the HOA Enlightenment Movement grows . . .

A few more enlightenment articles (see the age of HOA enlightenment is coming?) by the legal-academic aristocrats have appeared in the media and on the internet. Among these modern pretenders to Philosopher-Kings, the Adams-Kessler (Calif.) blog warns about HOA managers engaging in the unauthorized practice of law, Managers Practicing Law. Then there’s the past president of CAI “Central,” Ellen Hirsch de Haan, at the infamous Florida lobbyist law firm of Becker & Poliakoff on the need for neighborhood watch group oversight. Guard yourself from lawsuits against your HOA.

And more websites and bloggers are adding to the coverage of the Real Stories of HOA-Land, like with, Think Twice Before Placing Blame on Owners. Congratulations! The media has also been providing increasing attention to the real happenings in HOA-Land rather than just mouthing the pro-HOA “party line.”

And so must all those homeowner rights advocate websites join in the Enlightenment Movement today! At least post these enlightenment articles. Let your followers know that these legal-academics didn’t wake up a few days ago and say, My God! Look what’s going on in HOA-Land! That they have been deceived all these years!