Tag: contract

HOA homebuyers MUST have a competent lawyer before they buy

 

Not only must prospective buyers of homeowner association controlled homes retain a competent lawyer, if one can be found who will represent the buyer, but must also understand the fact that covenants are being constantly interpreted by the courts.  That means whatever you or your attorney think you’ve agreed to, assuming unlike today the buyer doesn’t even have to see the CC&Rs in order to be bound by them, the court may give any entirely different spin on the meaning of the covenant. 

That’s called making new law.  And that’s on top of existing legal precedent heavily in support of HOA governments, and against the privileges and immunities to which we all are supposed to be entitled.  To a very good extent, buyers of HOA homes are getting “a pig in the poke.”

When further considering the argument, like CAI and HOA promoters like to argue, that buying a home is buying an investment, this HOA investment is a very bad deal for an investor.  Recall that even the common law authority on servitudes (covenants)[i] recommends that in the event of a conflict between servitude law and constitutional law, servitude law should prevail.  There goes any vestige of any rights still retained by a homeowner.

In a recent example of “surprise” by the Wyoming Supreme Court[ii], owners who sued their HOA for imposing unreasonable requirements on modifications to their home, and won on that issue, were still denied their breach of contract claim.  Now follow carefully.  The trial court accepted the claim of unreasonableness and stopped there, not addressing the other claim of breach of contract and payment of attorney fees.  The supreme court took the position,

 While we have often explained that restrictive covenants are contractual in nature . . . that does not necessarily mean that a homeowner is entitled to recover contract damages against a homeowners association. Ms. Dwan has not identified any provision of her CCRs that would allow her to claim damages against the Association. She has not provided any legal authority, from Wyoming or any other jurisdiction, supporting her claim for damages.[iii]

The court distinguished between equitable relief  — this ain’t right — from a contract with its explicit wording and absence of wording, which doesn’t have to be equitable.  The board can act unreasonably, but they are not punished for doing so.  (Contrast this with the right to punish the homeowner with fines, which is granted to the HOA under both the CC&Rs and almost every state HOA statutory Act).  Once again, the developer’s  “take it or leave it” contract does not protect against board actions by providing a penalty as a detriment against any such further actions. Once again, where wrong-doing was found against the HOA, the CC&Rs adhesion contract favors the HOA with its silence on damages in the event the homeowner does win a lawsuit.  

   Notes

[i] Restatement Third, Property: Servitudes, § 3.1, comment h.

[ii] Dwan v. Indian Springs Ranch HOA, No. S-09-0064, (WY June 3, 2010).

[iii] Id.

Case study: Just how are HOAs independent principalities?

The Arizona Senate Government Institutions Committee failed to pass, for the second consecutive year, a bill reaffirming the civil government’s power and authority over public roadways.  Bowing to pressures from an unincorporated town, Sun City, the legislators accepted the right of a group of private people, who are governed by CC&Rs, to infringe, usurp, and trespass upon local government ordinances.

Why is the Senate committee deferring to private agreements, which ignore constitutional law and its protections of our rights and freedoms?  Why is the legislature agreeing to HOA political government supremacy over public laws, while not recognizing the HOA as a de facto government and holding it accountable as such?  This deference gives the HOA pretty much of a free ride. 

We need to ask on what basis does the Restatement of Servitudes, which offers recommendations to the judicial system by pro-HOA “legal-academic aristocrats”, proclaim: “Although zoning regulations and servitudes are usually compatible in the sense that the more restrictive prevails . . . .”[i]   What does “usually compatible in the sense that the more restrictive prevails” mean?  And, we also need to ask is the current legal doctrine of CC&R supremacy legitimate and constitutionally valid? 

The Arizona Attorney General, in a 2006 Opinion[ii] on this issue, with respect to county fire code authority, cites case law and provides the following conflicting opinions:

  1. In general, when a contract is incompatible with a statute, the statute will control. . . . The exercise of police power to protect the public welfare, such as the enactment of fire codes, may supersede provisions in private contracts like CC&Rs if the government’s actions are reasonable and appropriate to the public purpose.
  2. restrictive covenants cannot avoid obligations imposed by parking ordinance;
  3. municipal ordinance imposing fence requirements supersedes restrictive covenant;
  4. The provisions of these and other fire codes supersede conflicting provisions in CC&Rs.

 

  1.  State or county fire codes supersede CC&Rs when fire code provisions directly conflict with CC&R provisions.
  2. When a fire code provision and a CC&R provision are not in direct conflict, but rather, are both restrictive, the provision that contains the more stringent restriction will control and will establish the permitted use.

 

The first 4 items from the AG’s Opinion are consistent and reflect an unequivocal doctrine that statutes and ordinances supersede CC&Rs.  While item (4) above introduces the issue of “conflict”, it still holds that the ordinance controls even when there is conflict.  Items (5) and (6) above, which are found in the summary section of this short 5-page opinion, are contradictory, and conflict with the first four items taken from the “Analysis” section of this Opinion.. 

We are now faced with the question: what is meant by “direct conflict” as opposed to just “conflict”?   The AG offers no clarification of these terms. This hair-splitting distinction reverses the cited case law and serves to support CC&Rs as controlling over ordinances when the covenant is “more  restrictive.”  

Perhaps, to better understand these words, we can ask: What meaning can be attached to “indirect conflict”? If, for example, a parking ordinance restricts parking from 10:00PM to 6:00AM, is  a covenant restricting parking at any time “more restrictive” or in “direct conflict”?  The pro-HOA quick answer is: obviously it’s more restrictive.  The criterion of  “more restrictive” to grant HOA agreements as controlling is without any rational legal basis to serve as criteria for the denial of legitimate government authority as set forth in the statutes and ordinances.   The only rational basis for a government interest for the surrender of civil authority to a private entity is that “that’s what this private group wants.”  

But the denial of our rights and privileges rises to a constitutional issue, which must requires a more stringent test of “a compelling and necessary government interest”. Those raising the “safe parking” issue in opposition to the have over remedies in law to effectively address their concerns without a wholesale grant of authority to the HOA. . “More restrictive” denies rights belonging to the people by a private organization —  the right, in our example, that the people enjoyed from freedom to park at all other unrestrictive times.  “More restrictive” directly conflicts with the rights belonging to the people.

It should be understood that any such enforcement by the courts could be challenged under the state constitution’s “privileges and immunities” clause, or under the color of law doctrine of 42 U.S.C 1983.

Every person who, under color of any statute, ordinance, regulation . . . subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress . . .

 

Covenants that are unconstitutional, contrary to public policy, unreasonable, or arbitrary and capricious are invalid and unenforceable.  Pro-HOA devotees offer the desperate and misleading argument that “members agreed to be bound by the CC&Rs, raising the issue of “contract interference.” Which leads to a multitude of questions concerning the validity of the consent to have agreed under the requirements for a bona fide contract.  Which leads to the argument that servitudes law with its constructive notice doctrine — homeowners are bound, sight unseen to the CC&Rs — controlling issues of constitutional law.[iii]  Which “turns the Constitution on its head” and leads to questions of a constitutionally valid surrender of one’s rights, freedoms, privileges and immunities. Which, coming full circle, leads to covenants that are unconstitutional, contrary to public opinion, unreasonable, or arbitrary and capricious are invalid and unenforceable.

Notes

[i] Restatement (Third) of Property: Servitudes, § 3.1 cmt. c (2000).

[ii] ATTORNEY GENERAL OPINION, Terry Goddard, No. I06-005, (R06-009), November 15, 2006.

[iii] Supra, n. 1, § 3.1, cmt. h. (“The question whether a servitude unreasonably burdens a fundamental constitutional right is determined as a matter of property law, and not constitutional law“).

Government of the people, by the people, for the HOA

 

The following email letter from Mr. Brown to the Arizona legislative leaders reflects his concern about democracy in America.  (For more information on this HOA bill, please see public streets: the battleground for private or public government control).   

hoa constitution
hoa constitution

My dear President Burns, Chairman Tibshraeny, Vice-Chairman Harper, Members of the Senate Government Institutions Committee, Senator Bunch, Representative Barto, Co-Sponsors of HB2153 and Representative Barnes:

“From time to time we read in the newspapers, or hear on the radio, about policies and procedures and practices in the Arizona legislature. Most often that which we read or head is critical of how the legislature goes about its business. Words such as “fair” and “open” and “level playing field” are used, as if to imply that the legislature should operate in a significantly different manner that it does.” Senator Randall Gnant, “From Idea…..To Bill…..To Law, The Legislative Process in Arizona,” February 2000

The Guest Opinion, “Who controls public streets,” Arizona Capitol Times, April 1, 2010, is on-point re the proposed HB2153 legislation as well as the global issues respecting associations’ control of property not owned by an association, associations’ control of the conduct and actions of Arizona citizens clearly not subject to the association’s governing documents and associations’ coveted power and dominion over homeowners subject to the association’s governing documents, the sacrosanct “private contract.”

Association stakeholders opposed to HB2153 regularly blur the lines between their long-held belief in “private contracts” not to be interfered with by federal, state, county and/or municipal governments and certainly not the legislature unless and until it suits the stakeholders and their client associations’ interests as evidenced by associations’ growing reliance on “what can government do for” stakeholders and associations today. (See Community Resource, Issue 1 / 2010, “What Your Local Government Can Do For You,” Community Associations Institute / Central Arizona Chapter, attached)

“Getting a hearing on a bill is a crucial first step for individual citizens, lobbyists, special interest groups and state agencies..in the Senate, bills that receive a hearing have a high likelihood of passing the full Senate. So, while failure to secure a hearing is a virtual disaster for a bill, getting a hearing takes a bill on the longest step towards becoming law.” (Gnant)

Please include HB2153 on the Committee On Government Institutions’ agenda, Consideration of Bills, permitting the peoples’ representatives in the Senate to vote on the bill’s passage as your brethren in the House, the people’s other representatives, did so on February 17, 2010 (43/14/03).

Respectfully,

William M. Brown

Fundamental government functions: public or private HOA

Last month I commented on The Goldwater Institute’s Local Liberty Charter by Nick Dranias, its Director of the Center for Constitutional Government. The title asked the following question: Whither goest local government? Restrictive HOAs or responsible public government? A “follow-up” question that was not raised is:

Disregarding the knee-jerk reaction by those opposed to government involvement, “private enterprise can do the job better than government”, why, in the face of the serious problems surrounding the restrictive covenant, private government HOAs, does The Institute believe that restrictive covenants will provide for a better government?

It must be understood that we are not talking about providing services, such as trash, utilities, etc., but the basic functions of a government itself. What then becomes of public local government? In essence, the very concept of public government becomes an anachronism, replaced by myriads of independent local “principalities” since our now antiquated concept of government does not permit it to interfere with these private arrangements. What becomes of that initial contract between the people and its government, commonly known and referred to as the US Constitution? What becomes of the protections of individual freedoms and liberties protected by the Constitution?

Are these the concerns of the homeowners living in HOAs — those people whom we are told actually prefer and “love” HOAs? Definitely yes! Just look at the HOA reform legislation of substance, other than those dealing with the day-to-day operations. You will see legislation that attempts to restore fundamental rights and freedoms and “equal justice under the law” to homeowners living in HOAs, that were taken away by special interest influenced legislation.

I congratulate Mr. Dranias, and Shu Bartholomew, for keeping HOA issues before the general public: the basic issue is private or public local government. However, I was disappointed that Mr. Dranias’ appearance on the On The Commons internet talk radio show this past Saturday did not address these important HOA constitutional concerns.

There was, though, a brief mention of a loss of constitutional protections in HOAs. In response to Shu’s concern for private security use of radar guns and the absence of constitutional protections found in the public domain (32 – 35 minute mark), Mr. Dranias gave a response that might have been missed by most listeners. He referred to the city “spinning out or spitting out” a private entity to handle functions that it wanted to unload that such an entity was an agent of the city and was “bound by the same responsibilities of the city.” He added that, “the city cannot avoid its constitutional restrictions by contracting.” He spoke of “if this is an inherent function of government and they chose to contract it out . . . that person would be subject to constitutional law.”

The key point here is that the state did not establish the HOA (court rulings so hold) and, therefore, these private governments are not subject to constitutional protections. Again, this is the reason why there is a strong visceral reaction by CAI to any mention that HOAs are de facto governments.

In response to my email to Mr. Dranias, I was told that he will be addressing the issue in a future report. I eagerly await this report, and I await his return to On The Commons to speak of these concerns.