Tag: CC&Rs

HOAs operate under a cloak of secrecy

My excerpts from the Abstract of an excellent Memphis Law Review article.

Homeowner associations (“HOAs”) operate under a cloak of secrecy where innocent and unwitting owners have money extracted from their wallets, and then are subjugated to the dominion of potentially wasteful and extravagant expenditures authorized by condescending HOA board members.

In the modern era, HOAs are marketed as establishing desirable communities through the imposition of covenants, conditions, and restrictions (“CC&Rs”) and rules in a neighborhood, with the purported outcome of enhancing quality of life and property values. To help accomplish this unsubstantiated and unproven utopian vision, buildings or neighborhoods controlled by HOAs are subject to the imposition of HOA dominion via CC&Rs upon the underlying property as well as ad hoc rules and regulations.

This exercise of dominion and control, administered by a Board of Directors or Executive Board (“Board of Directors”) is purportedly undertaken in the interest of fulfilling the goals of the HOA. With the powers vested in the HOA Board of Directors to regulate behavior, impose sanctions, and assess fees, the HOA is tantamount to an omniscient, omnipresent, and omnipotent deity.

Source: “The Homeowner Association: A Descent Into Dante’s Inferno Palliated By A Summons To Improve The Hate-Hate Relationship Through Transparent Disclosures,” The University of Memphis Law Review Vol. 54, p.43, Bradford P. Anderson.

Law review article criticizes HOA public policy

In her 44-page OK Univ. Law Review “Note” (2022) the author, Saige Culbertson, concentrates on the questions of agency relationships and duty of care. However, in order to discuss the question of agency relationships, Culbertson addressed many of the issues still causing problems in HOA-Land including the status of HOAs as quasi-governments, the validity of the CC&Rs “contract,” and the reality of maintaining property values.

With respect to agreeing to be bound, the author maintains in regard to the individual homeowner subject to the CC&Rs,  that

  • “HOAs use these contracts as a basis for their decision making because courts often presume the homeowners have a full understanding of their HOA’s obligations, because they have the duty to examine their contract for real property. The typical HOA contract is overly generalized and broad.
  • “When buying a home, a homeowner does not often have the option to not join. Homeowners also have little-to-no choice of which actions the HOA may take on their behalf, or, crucially, any actions taken by the HOA for any purpose.  
  • “However, the lack of mutual assent is constant throughout the relationship with the HOA. At the beginning, the homeowner might not have agreed to a relationship with the HOA, and those who have agreed might not have a full understanding of the rules of the HOA.
  • “[S]ome courts and scholars argue that HOA contracts are a form of adhesion contracts. Adhesion contracts are exclusively pre-determined by a single party and are presented as “take it or leave it,” while the non-drafting party has no room to negotiate.”

With respect maintaining property values, Culbertson is concerned about “The Fictional Purpose of a Homeowners’ Association,”

  • “The Community Association Institute recently reported 71% of individuals believed their community association rules ‘protect and enhance property values.’ While this belief may have been true in 2005,  more recent research indicates otherwise. 
  • “[A] study found that “[p]roperties located in HOAs do not appreciate faster, on average, than properties not located in any type of neighborhood government”

 and cites this study by Robertson,

  • “[A] 2021 study conducted by former Yale Professor Leon S. Robertson found that “[c]urrent sales price[s] [are] related to property characteristics and local market conditions[,]” and that “sales prices do not reflect the efficacy of homeowners associations to protect property values.
  • “Robertson remarked that “[s]tate and local laws that sanction homeowners associations and allow their coercive practices based on the premise of property value preservation are ill founded.”

With respect to quasi or local government, the author favors making “HOAs part of local government, founded in democratic ideals, and with regulation by the state or municipality,”

  • “The nature and purpose of the HOA are so closely linked to that of local government that . . . clearly give rise to a special sense of responsibility . . . . This special responsibility is manifested in the . . . requirements of due process, equal protection, and fair dealing. The severity of the risks associated with the substantial overreach by HOAs is further shown by actions depriving individuals of their basic rights.
  • “[U]pon analysis of the association’s functions, one clearly sees the association as a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government. As a “mini-government,” the association provides to its members . . . . [citing Cohen v. Kite Hill Cmty. Ass’n, 142 Cal. App. 3d 642].
  • “The lack of checks and balances on HOA actions is a national problem and homeowners are often left with no remedy for violations of their rights. The need for regulation of HOA activities, and further federal protections for individuals, is especially apparent . . . .
  • “[H]omeowners should urge their local government to increase regulations on HOAs to protect their fundamental rights as Americans. States should therefore pass legislation to make HOAs part of local government, founded in democratic ideals, and with regulation by the state or municipality.”

Source: OK Univ. Law Review (PDF download).

Effective HOA reform legislation

If advocates want truly effective legislative reforms, they must actively support their legislative champions sponsoring these reforms. There have been important successes as a result of the increased call for and proposed reform legislation in several FB social media groups.

However, these reforms MUST address the very broad and larger constitutional issues that deny homeowners rights — rights that people not living in HOAs enjoy. Simply stated, HOAs must be made part of the Union!  The trickle-down effect would be enormous. All homeowners would be protected and treated fairly when their rights and privileges fall under the well understood laws of the land.

Here’s a simple, straight-forward bill first proposed in March 2011 found in Proposed “consent to be governed” statute, the “Truth in HOAs” bill.

“The CC&Rs or Declaration for any planned community, condominium association or homeowners association shall state that, ‘The association hereby waives and surrenders any rights or claims it may have, and herewith unconditionally and irrevocably agrees to be bound by the US and State Constitutions and laws of the State as if it were a local public government entity.'”

Item 4 of the Truth in HOAs Statute (Bill).

Do we need a private, parallel government? Why?

The answer to the title question is a resounding, NO!  Here are the reasons why not. In essence, all those state HOA/Condo Acts and statutes establish and permit a parallel system of local government— that regulates and controls the residents within its borders —  to function outside the Constitution.

First, it’s time for state legislatures and the judicial system to acknowledge their   willful blindness[1] that the HOA legal scheme, with its insistence and reliance on  equitable servitudes, that “the HOA CC&Rs have crossed over the line between purely property restrictions to establishing unregulated and authoritarian private governments.”  

Professor Evan McKenzie said it quite clearly some 29 years ago in his 1994 book, Privatopia, “”CIDS [HOAs] currently engage in many activities that would be prohibited  if they were viewed  by the courts as the equivalent of local governments.”[2] It remains true today!

Second, Why are there private HOA governments when there is home rule, charter governments?[3] All the states have a version of home rule that varies in the degree of independence granted to a local governments and under what terms. Under the Home Rule doctrine local communities are permitted a large degree of independence even to the extent that state legislative action is not necessary. What is Home Rule? In simple terms, it is a grant of authority and power — of independence — from the legislature to local communities.

There are no legitimate reasons why HOA governed communities cannot exercise effective and productive self-government while  being subject to constitutional law under home rule statutes.

Third, Just what are the valid reasons for sporting and encouraging private government by the state?  Answer: there’s no legitimate and valid reason for private, local government to exist outside the constitutional framework.  Home rule doctrine existed long before the advent of the HOA legal structure in 1964. That is not to say that it would have solved all problems and be a perfect government, but it would be a government under the Constitution, part of the Union,  like all other forms of local government.  

The constitutionality of statutes is subject to the doctrine of judicial review and scrutiny.[4] I have yet to see any valid government justification in support of the HOA legal scheme that deprives citizens of their constitutional and fundamental rights, which requires meeting the strict scrutiny test. Under strict scrutiny, “the government must prove that the challenged law is both narrowly tailored and the least-restrictive means available to further a compelling governmental interest.”

To argue, as have the states and pro-HOA supporters, that state and local government have an interest in reduced expenditures and the establishment of desirable community living does not carry weight. There are valid arguments that the HOA legal scheme denies fundamental and constitutional rights under the 14th Amendment,[5] which requires the application of strict scrutiny.  It has not been tested!

It is no wonder that state legislatures, CAI, and pro-HOA supporters avoid the issues of HOAs as de facto governments, and questions of judicial review.

The 64-dollar question is: Why do HOAs continue to exist and grow? Could it be, like drugs, there is widespread demand? Or is it because of the collaboration — as a group functioning as a monopoly[6] —   of CAI, the builders/developers, real estate agents, etc. to restrict housing solely subject to private governments? Is housing in HOA-Land equal to public, free-market housing?

Adopting the US Supreme Court’s decision in Brown,[7] “’separate but equal’ has no place. Separate educational facilities are inherently unequal.” Separate HOA/condo housing under private governments is inherently unequal and a violation of the 14th Amendment’s Equal Protection Clause.

The answer will be more discussed in more detail in a subsequent commentary.

NOTES

[1] Willful blindness is a legal concept that describes the state of deliberately ignoring or avoiding facts that would make them liable for a wrongful act. 

[2] Evan McKenzie. Privatopia: Homeowners Associations and the Rise of Private Residential Government, Yale Univ. Press, 1994.

[3] See America’s homeland: HOA law vs. Home rule law.

[4] See Judicial Scrutiny standards judge claims of constitutionality

[5] In general, see Desert Mountain opinion (AZ) constitutionality – part 2,  and Law review on CC&Rs constitutionality – part 1.

[6] A monopoly can be “a company or group having exclusive control over a commodity or service: ‘areas where cable companies operate as monopolies.’”

[7] Brown v. Bd of Education,  347 U.S. 483 (1954).

The HOA legal scheme is ab initio unconstitutional

TO:     Legislative leaders in every state

The HOA legal scheme based on the Homes association Handbook is ab initio unconstitutional

In March 2006 I wrote Christopher Durso, editor of the Community Associations Institute’s (CAI) monthly house organ, Common Ground, asking four questions in regard to the constitutionality of HOA’s  (CID, POA, planned unit development, etc.) legal scheme.  My concern was that CC&Rs are a devise for de facto HOA governments to escape constitutional government as presented in  the 1964 “bible” that brought forth the legal scheme, The Homes Association Handbook. 

Replacing democratic local governments with authoritarian private governments:  Is this good public policy? 

“Public policy today rejects constitutional government for HOAs allowing them to operate outside the law of the land. 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.”

Here are the four questions:

 1. Is it proper for the state to create, permit, encourage, support or defend a form of local government of a community of people, whether that form of government is established as a municipal corporation or as a private organization that is not compatible with our American system of government?

2. Is it proper for the state to permit the existence of private quasi-governments with contractual “constitutions” that regulate and control the behavior of citizens without the same due process and equal protection clauses of the 14th Amendment; that do not conform to the state’s municipal charter or incorporation requirements; or do not provide for the same compliance with the state’s Constitution, statutes or administrative code as required by public local government entities?

3. When did “whatever the people privately contract” dominate the protections of the US Constitution? The New Jersey Appeals Court didn’t think so (CBTR v. Twin Rivers, 2006). Does “constructive notice,” the “nailing to the wall,” the medieval method of notice, measure to the requisite level of notice and informed consent to permit the loss of Constitutional protections?

4. Please state what, if any, are the government’s interests in supporting HOAs that deny the people their constitutional rights?

Please respond  to these fundamental questions of HOA constitutionality.