constitution – Page 25 – HOA Constitutional Government

To the Sovereign of Arizona: where are the checks and balances on HOA governments?

I found the following resolution by the Arizona Legislature to re-affirm its sovereignty over Arizona personnel and its right to serve as a check and balance on the Federal government very intriguing. I keep thinking about why the “Sovereign of Arizona” believes checks and balances are not needed with respect to the independent, private governments known as HOAs, to which it has given its active support and cooperation.

Apparently, this concern for government checks and balances has been found not necessary when it comes to HOA governments. Apparently, obedience to the Arizona and US Constitutions with respect to due process protections and the equal protection of the laws for citizens living within these regimes has been found not necessary. It seems that the warnings of James Madison in The Federalist Papers, #51 have been ignored: “If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary”. Somehow average people become angels who can do no wrong when they become an HOA board member.

I would think that the citizens of Arizona do indeed need the long arm of the Federal government to serve as a check and balance since Arizona, and all other state governments, has failed to standby and to uphold the US Constitution. I think it is probably necessary for the Federal government to commandeer and nationalize Arizona personnel who participate in violating the US Constitution.

See The FEDS must restore law and order in secessionist HOA governments

SENATE CONCURRENT RESOLUTION 1016 (2013)

A CONCURRENT RESOLUTION

proposing an amendment to the Constitution of Arizona; amending article II, section 3, Constitution of Arizona; relating to the rejection of unconstitutional federal actions.

Be it resolved by the Senate of the State of Arizona, the House of Representatives concurring:

1. Article II, section 3, Constitution of Arizona, is proposed to be amended as follows if approved by the voters and on proclamation of the Governor:

3. Supreme law of the land; authority to exercise sovereign authority against federal action; use of government personnel and financial resources

Section 3. A. The Constitution of the United States is the supreme law of the land to which all government, state and federal, is subject.

B. To protect the people’s freedom and to preserve the checks and balances of the United States Constitution, this state may exercise its sovereign authority to restrict the actions of its personnel and the use of its financial resources to purposes that are consistent with the constitution by doing any of the following:

1. Passing an initiative or referendum pursuant to Article IV, part 1, section 1.

2. Passing a bill pursuant to Article IV, part 2 and article V, section 7.

3. Pursuing any other available legal remedy.

C. If the people or their representatives exercise their authority pursuant to this section, this state and all political subdivisions of this state are prohibited from using any personnel or financial resources to enforce, administer or cooperate with the designated federal action or program.

2. The Secretary of State shall submit this proposition to the voters at the next general election as provided by article XXI, Constitution of Arizona.

Combatting the CAI happiness in HOAs surveys

It is the CAI sponsored/conducted surveys of overall “happiness in HOAs” (my words) that advocates must come to deal with. The surveys must be challenged and confronted, because the HOA lobbyists will show them, with a smile, to your state legislators. And then they will point out several other similar surveys. The legislators will simply glance at the data, smile, and say, “How can I help you?”

It is accepted doctrine, especially in the courts, that if a statement is not refuted it is taken as true. Same applies here when arguing for HOA reform legislation. The surveys can be challenged on several points, such as, biased surveys even though the reputable Zogby conducts the actual survey under the sponsorship of CAI; the questions asked and not asked; and the conclusions drawn from the data presented if you obtain access to the actual survey questionnaire and unedited responses. (Any reputable organization will provide this information as verification of its conclusions, as is standard operating procedure with any validly conducted research).

Take the latest CAI 2012 survey under “Association Rules” that contained an assertion that 25% — note not 5% — had a “significant” personal issue or disagreement” with their HOA. It also stated that just 42% were satisfied with the outcome. Yet, the survey concluded with the finding that just 8% dissatisfied with their board: “This strongly suggests that the vast majority of residents recognize and appreciate the net benefit of living in their communities—even when there are differences of opinion.” The survey did not go into the nature of the disputes. Were they trivial, or did they involve homeowner rights and the fair and just treatment of homeowners?

The following question was asked under “Pre-purchase Awareness:” Did the fact that your current home is in a community association make you more likely to purchase or rent your home, make you hesitant about purchasing or renting your home or have no impact? An interesting question that indicates an awareness of advocate arguments that if they knew the whole truth about HOAs they wouldn’t buy into an HOA. Of course the survey revealed that 64% indicated “no impact” and 29% indicated “more likely,” for a 93% positive view of HOAs.

However, no one was asked to read my Truth in HOAs Disclosure Agreement and its comments from readers, for example, that provided a lot of material information about HOA life. What do you think the response would have been? But, if nobody tells the legislators about the Truth in HOAs disclosure, or can get the local media to run a survey, then the legislators can pretend ignorance, or at least ignore the babblings of a few malcontents.

It seems that the predominate attitude of the vast majority of state legislators is that the overall benefits of HOA legal scheme far outweigh any concerns for homeowner constitutional protections – due process and the equal protection of the laws.

CAI’s Research Foundation makes the following broad claims in its Statistical Review (my emphasis),

Because of the fiscal challenges faced by many local municipalities, communities are often created with the stipulation that the developer will create an association that will assume many responsibilities that traditionally belonged to local and state government. This privatization allows local jurisdictions to permit the continued development of needed housing without having to pay directly for that infrastructure through property taxes. . . . Community associations not only maintain home values, but also reduce the need for government oversight and expenditures by providing services, assigning payment responsibility to homeowners and being responsive to local concerns.

Read the above carefully! Where are the protections for homeowner rights under the contractual, not public domain, nature of HOA governments? There are no protections as one would expect under our system of democratic government. That is inexcusable! And state legislators do not see any problems with private governments operating outside their state and US Constitutions.

If the above surveys and conclusions by CAI are not challenged, life will remain difficult for meaningful HOA reforms.

Ordinances: the state, municipality and HOA pecking order

Another “outside the box” opinion by the Illinois Supreme Court. In Palm v. 2800 Lake Shore Drive Condo Ass’n (No. 110505) the court held that city ordinances can trump Illinois statutes under certain circumstances. Earlier this year the Court said that HOA security people could stop and detain drivers on their private streets, Poris v. Lake Holiday POA (No. 113907), and that homeowners could withhold payment of assessments if the HOA failed to make repairs, Spanish Court Two Condominium Association v. Lisa Carlson, (No. 115342).

Palm raised several issues in regard to constitutional law, home rule powers, and whether “condominium law” should triumph both contract and real estate law. The question before the court, and the one of interest for this commentary, was the simple Chicago ordinance that omitted the pro-HOA boiler plate wording when requesting HOA records, “for a proper purpose,” which as we know can be found in many state laws and in the CC&Rs. I focus on the doctrine of home rule that has been implied in defense of the HOA legal scheme – the local voice of the community.

Home Rule

The Court explained that “Home rule is based on the assumption that municipalities [my emphasis] should be allowed to address problems with solutions tailored to their local needs.” The Illinois Constitution has some very broad home rule provisions,

Except as limited by this Section, a home rule unit [meaning a municipality] may exercise any power and perform any function pertaining to its government and affairs including, but not limited to, the power to regulate for the protection of the public health, safety, morals and welfare; to license; to tax; and to incur debt. (Ill. Const. 1970, art. VII, § 6(a)).

Home rule units [municipalities] may exercise and perform concurrently with the State any power or function of a home rule unit to the extent that the General Assembly by law does not specifically limit the concurrent exercise or specifically declare the State’s exercise to be exclusive.” (Ill. Const. 1970, art. VII, § 6(i)).

The Court addressed the constitutionality of the structure of state governments:

If the constitutional design is to be respected, the courts should step in to compensate for legislative inaction or oversight only in the clearest cases of oppression, injustice, or interference by local ordinances with vital state policies (sic).

It should be noted that the home rule doctrine applies to government entities such as incorporated and unincorporated towns and villages, but does not apply to private, contractual HOAs. HOAs have not been delegated any powers by state legislatures in a proper enabling act. Instead, statutes are merely created that either mandate regulations or, through the liberal use of the word “may,” declare certain acts and actions to be legal if undertaken by the HOA.

The HOA legal scheme ignores the US and state constitutions. The IL Supreme Court’s advisory opinion that courts should step in to stop “oppression, injustice, or interference” by HOA “ordinances” that interfere with vital state polices does not apply to HOAs. In other words, HOAs have been given special status and privileges and immunities not granted to municipalities.

Restrictive ordinances are valid, or are they?

The other aspect of this opinion addresses the case when municipal ordinances supersede statutes, which has its parallel with the validity of ordinances with respect to HOA covenants and rules. The doctrine has been that if the ordinance is more restrictive then it is valid. However, if it is silent on an aspect of the statute in question, the statute prevails. The HOA argued that without “a proper purpose” clause the ordinance was less restrictive than the statute, and that the statute prevails.

A technical legal argument followed and the Court held that, “In sum, the constitutional framework places almost exclusive reliance on the General Assembly to determine whether home rule authority should be preempted. The legislature has not specifically denied the City’s exercise of home rule power or required its exercise of that power to be consistent with statutory provisions.”

Here, somewhat unique to Illinois, the IL Supreme Court said that the home rule Chicago ordinance should prevail and if the General Assembly didn’t like it, it should explicitly restrict the municipality’s powers in new legislation. What does this opinion say about municipal ordinances and HOA contracts?

First, remember that the HOA is not a government entity, but exists by virtue of a private contract. The opinion and doctrine should have no bearing on HOA contractual agreements. Second, the reality on the other hand, is that the courts have treated the HOA on the equivalent basis as if it were a municipality, and applied the restrictive ordinance doctrine. If the HOA rule or covenant is more restrictive, it controls over the municipality’s ordinance. In other words, the HOA has been granted the legal status of a subdivision of the municipality, or the status of a government entity. The HOA stands in the same relationship to the municipality as the municipality stands to the state.

Third, not only have HOAs been viewed as sub-divisions of a municipality in this aspect, their covenants and rules are not seen to interfere with “vital state policies.” Private contracts that are not subject to the 14^th Amendment are allowed to supersede municipal ordinances and even state laws. In other words, it is state policy — in all states — to support, encourage and cooperate with, and even coerce obedience to, the acts and actions of private governments operating outside the US Constitution.

A lot of issues and problems will disappear or lessen in impact if only the state legislatures would face up to reality and provide the same protections all other citizens enjoy by declaring HOAs as either state entities or to require all CC&Rs to state,

“The association hereby waivers 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.”

In regard to the Chicago ordinance that is a fair and just protection of condo member rights, the Court upheld the ordinance.

What HOA issues are appropriate for federal intervention?

In my comment (see PVTGOV comment) to Evan McKenzie’s post in his Privatopia Papers blog, Las Vegas HOA corruption probe continues, (February 26, 2013) I supported McKenzie’s opinion that congressional hearings on HOAs was in order. In North Carolina and Nevada several homeowner rights advocates felt the same and Norm McCullough contacted Nevada Congressman Joe Heck, who responded on April 22 with,

I can certainly understand and appreciate your frustrations. Since HOAs are governed by local or state law rather than federal, it would be best to contact your state assemblyman or state senator and local county officials with your comments.

Please be assured that I will keep your comments in mind should this issue be brought to the attention of the House of Representatives for legislative action.

A careful reading of the first paragraph above leads to the obvious: “Not my problem. See your legislators” (my words). However, he extends hope for homeowners in the second paragraph above, “If HOA issues get here, I’ll remember what you wrote” (my words). Congratulations to Norm.

Well, just what are federal issues aside from constitutional issues that abound with HOAs? Let’s take a look at some other recognizable federal laws or “acts”. There’s the Americans With Disabilities Act, Fair Debt Collections Practices Act, Truth in Lending, Truth in Advertising, Right to Work, etc. all of which deal with practices within an industry that cross state lines. These are the nationwide practices that need the broad reach of the federal government. And all the above resulted from abuse against the consumer by the respective industry. With HOAs, we have very strong legitimate arguments pertaining to constitutional violations that amount to state actions in all states.

If advocates wish to be effective at the national level, they must rise above HOA operational concerns and address issues of national import. They must be able to understand and deal with these fundamental issues of democratic governance.

And they must accept the fact that since 1973 CAI has been the aggressive protagonist for the HOA legal scheme or structure that is offensive to our principles of democratic government.

North Carolina: second battleground for people’s rights in HOAs

North Carolina is proud that it was the first state to vote for independence from Great Britain (Halifax Resolves, 1775). Today, some 238 years later, another battle for independence from oppressive government has commenced in the NC General Assembly. This time, it is the people subjected to authoritarian, oppressive private HOA governments who seek equal justice with regard to safeguarding their homes against HOA foreclosure. This time, it is the citizens of North Carolina who seek a redress of their grievances against the NC General Assembly that has supported, and continues to support, special laws for special groups.

In every stage of these oppressions we have petitioned for redress in the most humble terms; our repeated petitions have only been answered by repeated injury. (Decl. of Indep.).

Today, the NC assembly has two HOA bills before it, HB 175 and HB 331: one seeks to impose harsher terms for HOA foreclosure rights, HB 331, and the other seeks to remove the unconscionable right of HOAs to foreclose, HB 175. While NC currently allows unconscionable nonjudicial foreclosure, HB 331 would now put the HOA in the same position of a Trustee holding a deed of trust with the “power of sale,” which amounts to an auction sale without having to go to court. This amounts to putting the HOA in the same position not only as the mortgage holder, but as the trustee as well.

The bill further proscribes new foreclosure procedures that supersede the general NC foreclosure statutes, just for HOA foreclosures. There is nothing in the detailed procedures contained in 4 pages of the bill that addresses any procedures for the homeowner to contest the amount of debt being foreclosed by the HOA. What does the simple phrase, as used in the bill, “if not contested” mean?

On the other side of the battle-line, HB 175 does away with special foreclosure rights just for HOAs. And rightfully so! The right to foreclose has been argued on the basis of the need to collect assessments – read HOA “taxes” — so the HOA can survive. Well, this argument could apply to any nonprofit that seeks to foreclose in order to survive. But, there are no such laws protecting these nonprofits from failure, is there? And these nonprofit, charitable, and educational corporations can argue that they provide a public service, while the HOA provides services to a private group of people, only its members.

Other arguments against HOA foreclosure rights include:

The HOA has not advanced any hard funds like a bank, yet it is treated as a public entity with the right to foreclose on the nonpayment of “taxes.” But, the Assembly does not feel the need for checks and balances on the HOA board for this grant of special powers.
The US Supreme Court has held that punitive damages, which the foreclosure essentially amounts to, in excess of 10 times the actual damages, violated the 8^th amendment’s prohibition on the infliction of cruel and unusual punishments. For example: Foreclosing on a $2,000 debt, of which $500 is the actual assessment debt, on a home valued at $140,000 amounts to a whopping 70 times the debt.
Foreclosure discriminates and is essential an intimidation and punitive measure that is effective only on certain members and not others – only those who have paid their mortgage over the years so that the HOA can collect funds in excess of the existing mortgage. Is it fair for the good people who have paid and paid not only their mortgage but their HOA dues over the years to lose their home? I think not! But, on the other hand we hear their self-righteous chant that it’s “unfair for others to pay for deadbeats” who are behind in their assessments. There seems to be a huge disconnect here.

I cannot entirely blame the members for this attitude, because they have been deceived. They have never been told the facts about the possible adverse financial conditions that could lead to holding them legally obligated for the debts of others. HOA membership is like buying into a small, privately held business that has limited ability to exit or to raise additional funds if needed. Also, the HOA is similar to a partnership where each member is jointly and severally obligated for the debts of the HOA.

If some members cannot meet their “fair share,” any deficiency will be made up from those who can afford to pay. These additional funds, like now being needed by many HOAs, can only come from existing members, which can be imposed upon them through the courts.

Also, I cannot reconcile this obsession by members against letting the deadbeats get away with not paying their HOA debts that often amount to less than $2,000, but who say nothing when their HOA spends $5,000 – $100,000 in attorney fees pursuing trivial lawsuits against minor and questionable violations of rules. We see these cases in the media quite frequently. Something is wrong with the attitudes of members in HOAs, definitely wrong! The attitude of the HOA members themselves is discriminatory and unconscionable.

Which direction will the General Assembly take? For the people by ending the unconscionable and discriminatory HOA rights to foreclose, or for the defective HOA legal structure that denies homeowner protections?