Tag: contract

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 14th 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.

Case study on how ‘stakeholders’ create dysfunctional HOA communities

Please read this unfolding case study of how the “stakeholders,” those who have put forth HB 2371, dominate the members of an upscale HOA in Scottsdale, AZ. HB 2371 calls for unlicensed HOA managers to represent HOAs in small claims court and creates an exception to state UPL laws.

In the Terravita Community Association, a vote was held this past Tuesday to amend the CC&Rs to permit the HOA to assess attorney fees against losing homeowners in an administrative hearing. (See HOA democracy at work:  dysfunctional adoption of amendments by minority vote). The unusual wording only permits the petitioner who filed the complaint to be awarded attorney fees if the prevailing party. But, the administrative hearings do not award attorney fees by law, and attorneys are not required. Yet Terravita sees the need to use an attorney and use member fees for this unnecessary expense.

Furthermore, as called to the attention of the Terravita board, the wording of the amendment would strip the existing contractual agreement that attorney fees be awarded in civil court, a more expensive procedure and subjecting the HOA to increased litigation costs.

In other words, state law be damned! The members have declared that they have agreed to ignore the law and to charge attorney fees as stated. And for only a few administrative petitions that have been filed. There was no debate, no discussion, no opposing views presented to the members. Just, “Here’s the ballot. Vote YES and return it.” And the members, like Colonel Potter in MASH who signed anything Radar put in front of him, voted in favor.

It should be noted that the CC&Rs amendment was passed by a minority of the members, only 571 members out of 1380 voted, a minority of 41%, and the amendment passed with just 514 votes or 37% of the membership. Minority voting was approved by the members in 2010, making this mockery of democratic principles possible. In 2011, the legislature had voted down a statute, proposed by the “stakeholders”, that would allow all HOAs to implement minority control of the amendment process — an unthinkable procedure allowing minority adoption of amendments to constitutions and charters.

Well, what does that say about that unassailable, inviolate “contract” that the special interests, those “stakeholders,” have been shouting?  It is meaningless when others can amend your agreement with changes that reasonable persons would not anticipate or expect.  And now in Terravita, by a minority vote. Apparently, it’s not an issue with the members of Terravita.

Tearravita Community Association is an upscale “resort” type HOA in Scottsdale, AZ, with a golf course, community center, and a security guard entrance. It has 1380 members, has a CAI/AACM management company, and a CAI attorney.

HOA democracy at work: dysfunctional adoption of amendments by minority vote

 

OPEN LETTER TO  TERRAVITA CA MEMBERS

Understand what a YES vote means for Terravita and your image as a citizen

Summary

The writer provides an example of how HOAs create a dysfunctional, un-American community, using arguments against the adoption of CC&Rs amendments on two occasions by the Terravita CA in Scottsdale, AZ.  In the first instance, amendments that violated Arizona statutes in regard to the content of the ballot were approved in 2010. One non-disclosed amendment made significant reductions in the requirement for adoption of future CC&Rs amendments, from a supermajority vote to a minority vote.  (In 2011, the Legislature defeated a CAI drafted bill that would allow for minority control of HOAs). 

The current amendment reflects an undisguised intent to punish one member for filing Office of Administrative Hearings (OAH) Petitions against Terravita.  Attorneys are not awarded fees at OAH because they are not required, yet the poorly constructed amendment removes attorney fee awards in civil court actions.  As a result of the approval of the non-disclosed “minority control” amendment in 2010, a minority of only 307  out of 1380 votes will be required to adopt this Board approved punitive amendment. 

Without any prior open discussion or debate, the distributed Absentee Ballot is one-sided in favor of the Board without opposing arguments. Adopting these amendments by a minority of members reflects an un-democratic and dysfunctional culture within Terravita.  The objectives of the “corporate state” are primary and individual property rights are secondary. Members are urged to reject the amendments.

Read the full letter here . . .

Corporatism in America: IL Supreme Court grants HOA police powers to arrest and detain

see-no-evilS
See no evil, hear no evil, speak no evil

“We are not final because we are infallible,
but we are infallible because we are final.”[i]

This Commentary excerpts relevant arguments from the court’s opinion in Poris v. Lake Holiday[ii] relating to police powers and false imprisonment.  I find it necessary to use excerpts so you, the reader, can follow the issues and analysis as they actually occurred before the court.  I believe this is the best way to understand public policy and how the laws are interpreted by the HOA attorneys and courts.  Please read through this lengthy commentary, and discuss with others.

 

FIRST, let’s look at the analysis of the appellate court’s finding that the stopping of the member for an HOA rule violation was unlawful. The appellate court held,

“Specifically, plaintiff [homeowner] argued that: the Association was not authorized by law to stop vehicles and detain drivers;

 “[S]ecurity guards occupy the same status as private citizens.

 “[HOA] security officers were attempting to assert police powers that they had neither the right nor the power to assert. [my emphasis].

 “Because [the HOA] restrained plaintiff for violating an Association rule, not a criminal law, plaintiff established the elements necessary for his false imprisonment claim.”

It is important to understand the detailed reasoning as to why the HOA had no powers to arrest was given:  

“The appellate court concluded that security officers are without legal authority to stop and detain drivers for violating Association rules, because those rules are enacted by the Association, not the General Assembly, and therefore do not constitute an ’offense’ . . . .”

NOW, let’s see how the 7 wise men of the Illinois Supreme Court saw the law. 

Police powers.

 “Plaintiff contends that only the Illinois legislature has the authority to create a private or public police department. . . . Plaintiff and the appellate court err in viewing this issue as one involving private citizens improperly attempting to assert police powers. . . . The appellate court failed to consider the Association’s enforcement of its rules and regulations in the context of its authority as a voluntary association to enact and enforce those rules and regulations.

 “[Since] courts generally will not interfere with the internal affairs of a voluntary association absent mistake, fraud, collusion or arbitrariness. . . . plaintiff generally complains that the Association was unlawfully exercising police powers and authority . . . . However, plaintiff does not, and cannot, argue that the Association and its security officer did not act consistently with its bylaws, or its rules and regulations . . . . ¶

”Plaintiff also argues that the Association is exceeding the legislative powers granted to not for profit homeowner’s associations in enacting and enforcing its traffic rules.  . . . each corporation shall “have and exercise all powers necessary or convenient to effect any or all of the purposes for which the corporation is formed.”  [IL statute].  . . . Regulating and enforcing traffic rules is reasonably necessary to maintain the Lake Holiday roadways.

“The Association rules and regulations were enforced only on Association property, and citations for violations of the rules and regulations were only issued to Association members. Consequently, the Association was not unlawfully exercising police powers that it did not possess, but rather was acting within its authority as a voluntary association to adopt and enforce its own rules and regulations.

 “We can discern no logic in allowing a private homeowners association to construct and maintain private roadways, but not allowing the association to implement and enforce traffic laws on those roadways.”

 And finally, false imprisonment.

 “[T]he appellate court erred in analyzing [the HOA’s] stop of plaintiff in terms of a private citizen effecting a citizen’s arrest, rather than analyzing the stop as pursuant to Association rules and regulations. . . . These facts would lead a person . . . to believe or entertain a strong and honest suspicion that plaintiff was guilty of violating Association rules. Consequently, [the HOA] had probable cause to believe that an offense was committed by plaintiff, which is an absolute bar to plaintiff’s claim for false imprisonment. [my emphasis].”

 

My perspective

 In Poris we have another instance of a state supreme court holding private contracts superior to the Constitution (See NJ supreme court opinion in Twin Rivers[iii]).  Apparently, the only thing that the Constitution has to say is an absolute “no contract interference.”  Note how the court adopted a narrow reading of the laws as it parsed and examined the precise wording of the laws, not stepping back in its alleged legal wisdom seeing only the trees and not the ugly forest.

 The court cleverly ignored the question of detaining non-members, and the question of public streets.

Think of the implication that a non-profit, any non-profit, can enforce its rules even by detain and arresting its member.  And think of the impact on the US Supreme Court question, and Arizona laws (SB 1070), dealing with similar issues of detention, probable cause, and reasonable suspicion by police officers to demand “your papers” to uncover illegal immigrants.

 I can summarize the Illinois opinion with the simple statement by William Pitt, part of which appears on the façade of the Arizona Supreme Court building: 

Unlimited power is apt to corrupt the minds of those who possess it: and this I know, my lords, that where law ends, tyranny begins!”[iv]

 For more on corporatism, see In a democracy approaching corporatism, HOAs are iconic 

Endnotes

[i] Justice Robert Jackson, Brown v. Allen, 334 US 443 (1953). (Robert H. Jackson was also US Attorney General and chief US prosecutor at the Nuremberg Trials).

[ii]Poris v. Lake Holiday, 2013 IL 113907 (Jan. 25, 2012). (It should be noted that I cannot find any record of the amicus curiae for the HOA, an Illinois Association of Lake Communities).

[iii]Committee for a Better Twin Rivers v. Twin Rivers, 929 A.2d 1060 (NJ 2007).

[iv] This statement was made by Lord Chatham (William Pitt) to the British House of Lords in January 1770.

legislative support for HOA regimes has created a dysfunctional society

“The times, they are a changin”

When state legislators allow private government HOAs to be unaccountable to state laws as required by all other government entities, then an attitude that anything goes develops. Why? Because there are no penalties to serve as a check and balance on HOA activities.  It creates a lawless attitude of, “Go for it, what do you have to lose?”   It creates a dysfunctional society.

 It is commonly known that state legislators have a blind adherence to the false belief that HOAs do no wrong, and that there is no need for HOA penalties to serve as detriments to intentional and willful violations of the laws.   State legislators continue to believe that homeowners are openly and fully informed when accepting a deed binding them to an unsigned contract; and that the HOA and its special interest attorney national organization are acting in good faith.  

State legislators continue to believe that the HOAs and their hired hands, the management firms and attorneys, will comply with both the letter and intent of state laws, rather than seeking loopholes for income producing court cases. Such dogmatic beliefs have created a dysfunctional society operating outside constitutional government under a second set of laws just for HOA subdivisions.

 And we know where this can and has led to:  financial and emotional stress and even deaths attributed to the enforcement of HOA rules uber alles (German for “above all”). The latest shocking incident, after the Trayvon Martin incident (HOA liability: respondeat superior and agents as in Trayvon case), is the incident reported in the Sun-Sentinel article, “Parking at home shouldn’t bring tow — or death.”

Ask yourself why do towing companies roam the streets towing cars in private communities without obeying the laws, or without getting a complaint from the HOA? BECAUSE they can and because the HOA really doesn’t care — its rules are being enforced by someone else. And there are no penalties against HOA boards violating their own governing documents. The HOA is the sovereign, and it can do no wrong!

 However, there is hope. An indication of a return to sanity comes from the Republican Party’s realization that its obsessive adherence to dogmatic principles of laissez-faire corporatism has been a failure. (HOAs are a prime example of corporatism in operation in America).  Republicans are beginning to think in terms of less dogma but a more principled “protecting private property,”  always a fundamental principle of this country.  It stands in opposition to socialist states operating for the benefit of the corporation and not for the rights of the people.

 State legislators should take heed. They have created a dysfunctional society with their unreasonable and irrational support of authoritarian HOA regimes.  It’s well beyond time for an awakening, enlightenment, in their views of authoritarian HOA private regimes.