Tag: contract

Call for HOA action: “Occupy Wall Street” vs. Occupy the Legislature

“Occupy Wall Street”! What a way to get attention! How about an “Occupy the Legislature” demonstration against unjust and unfair HOA foreclosures with their intimidation, threats, and cruel and unusual punishment? In every state — especially Florida, Nevada, Arizona, Texas and California.

The pro-HOA supporters’ reason for the need for foreclosure rights can be found in the defective HOA legal scheme that is similar to a partnership. In partnerships there are a limited number of financial supporters, the owners, who are jointly and severally responsible for all the HOA debts — those with the money pay for those without the money. A legality. And like a privately held small business, the financial base is relatively small and limited to the homeowners who have very little practical means to escape their obligations by leaving the HOA.

Those who feel that foreclosure is needed need to ask themselves, Does the means justify the end? An “I don’t care” response is unacceptable, and legitimizes the authoritarian HOA government. Foreclosure is a special law for a special group that violates state constitutions — the equal protection of the laws, special laws for private organizations, and “color of law” constitutional violations. No state has declared its intent or purpose for the statutes – they wouldn’t dare – that justifies a legitimate government interest that can withstand judicial review of the statute. And that review is a strict review that looks to a necessary and compelling reason to deprive citizens of their rights.

And remember, there is that huge cloud hanging over the genuine and freely given, after full knowledge of all the material facts, consent to the CC&Rs. CC&Rs, a real estate doctrine based on equitable servitudes and not constitutional law, do not legally require an explicit signature or explicit surrender or waiver of constitutional rights, or for a bona fide consent to be governed by the de facto HOA political government.

Homeowners must let go of their irrational fears that the HOA would be shut down. They must stop their blind adherence to the CAI chant of “no government intervention” that really is a belief that HOA governments, unaccountable to the Constitution and state governments, are far better than public government with its police powers to protect citizens from abuse by other citizens.

An Occupy the Legislature movement is a grass roots, ground level action. It must come from local homeowners organized under local leadership, behind a fixed purpose. And right now, “Stop HOA foreclosures” is a very appropriate mission.

See HOA foreclosures:  will the real CAI stand up

In HOA-Land, Halloween is verboten!

Texas Neighborhood Tells Family to Remove Halloween Sign From Yard.

This is one very serious aspect of how HOAs have redefined the American community, not only its landscaping aesthetics, but America’s social and political customs, traditions, and system of government. And all made possible by cooperative and biased state legislatures and courts that uphold the CC&Rs as if they were a contract, yet fail to apply “Contract Law 101” to these supposedly valid contracts.

The application of contract law, and constitutional law, would immediately invalidate the CC&Rs and the legal HOA scheme based on the seminal Homes Association Handbook of 1964.

Welcome to the New America of HOA-Land.

Legal-academic aristocrat – advocate exchange on HOA bad faith conduct

I am responding to Mr. Berding’s undated blog entry, First Thing We Do, Let’s Ban All the Bloggers! , a no-name identification of the author of the blog, namely yours-truly. Why is Mr. Berding afraid of mentioning my name? After all, I’m not an attorney. He chose to copy my Commentary rather than to provide a link to my blog, with all those other commentaries.

Ok, it does appear that Mr. Berding is quite perturbed about my statements and quotes from a D & O insurance article that uses the phrases “bad faith,” “criminal intent,” and “fraudulent acts.” He’s upset that I emphasized these words in my Commentary (WordPress Blog). Yet, Berding misleads the readers of his own blog by referring to my Commentary as, “suppose this is a blog.”

Yes, the ugly truth does hurt, Mr. Berding, doesn’t it? And I suppose posting on those blogs, like yours, those CAI blogs, and the Adams Kessler blogs does make them right and important, but forget about those advocate written blogs. Spoken as a true legal-academic aristocrat making Philosopher-King (educated elite setting forth what is good government to the rulers) pronouncements.

Mr. Berding then invokes the legalistic argument of allegations and no proof, as if this were the time and place for legal confrontation. His attitude reminds me of the slogan commonly found on court buildings and other judicial buildings, “Equal Justice Under the Law.” This slogan contains a hidden premise, or assumption, that the law is just and fair. Suppose it isn’t, as advocates maintain? Then the slogan is reduced to a meaningless and empty statement. And those with power derived from these unjust laws just love to argue, “It’s the law! It’s the law! We have done nothing wrong!” And that’s were ethical and moral questions of good faith – honesty and integrity, or an honest intent to act without taking an unfair advantage over another person – come into play.

Our public policy permits the law to inflict financial damages, and the possible loss of all one’s equity in his home, for violating the CC&Rs, yet gives only a “ slap on the wrist” to violations by the HOA board. It permits “after an opportunity to be heard” to satisfy the due process requirement for hearings on violations, there being no explicit statement, as found in the public arena: “by an independent tribunal with the right to present evidence, demand proof and to confront witnesses.” It is absent from the CC&R contractual agreement. And where state legislatures maintain a hands-off posture, providing no oversight accountability or effective enforcement against board violations in a “see no evil, hear no evil and speak no evil” banana republic posture. And justifies this pro-HOA support with, “Well, that’s what the homeowner agreed to. Now he’s just trying to get out of a contract.” What kind of society do HOAs create?

I’m sure he would be shocked, as were the editors at KPHO, the Phoenix CBS-TV affiliate, when they conducted a poll on the PTSD HOA Syndrome (click on image), and found out that 68% of the respondents agreed it existed. Or that an overwhelming 91% respondents in a Truth in HOAs Disclosure Poll said NO to signing an agreement to accept, beforehand, the conditions as set forth in the poll — misrepresentation, fraud, no meeting of the minds, etc. No, after all, his philosophy accepts the belief that “the king can do no wrong.”

As to his CAI remark, all he had to do is to attend these seminars and discover for himself the lack of homeowner protection material presented at these seminars. For example, important info for homeowners can be found in my latest Commentary (HOA boards cannot escape wrongful acts by their managers), information regarding the relationship between the HOA and the management firm. It is is an agency relationship that carries with it immense protections for the homeowner against both the management firm and the HOA board. It’s not on the agenda.

As to misleading and out-of-context statements about the D & O article, Mr. Berding misses my point, which is that the board can be sued and here are the grounds for suing. Also not found in an educational CAI, town sponsored seminar. He discredits my work as “emotional,” “lacking objectivity,” and that I “don’t contribute much that is useful to their chosen subject.” So sayeth the Philosopher-King, or is it the “weavers” from The Emperor’s New Clothes?

Come down from the clouds Mr. Berding, and see what is happening around you. I challenge you to answer the following 4 questions that were posed in March 2006 to Mr. Durso, then Editor of CAI’s Common Ground,

I ask the legislators, the public interest organizations and policy makers to consider the following 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. Does “constructive notice”, the “nailing to the wall”, the medieval method of notice, measure up 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?

I await your reply, or a reply from any of the legal-academic aristocrats.

HOA boards cannot escape wrongful acts by their managers

Given the fact that the HOA manager and/or firm acts “in place” or “on behalf of” the board under a contractual relationship that explicitly identifies the manager as an “agent” or “management agent,” the HOA can be held liable for the acts of its manager. (See study of Arizona management contracts).

Under tort law (the common law of wrongful acts) of vicarious liability (the tort doctrine that imposes responsibility upon one person for the failure of another) and respondeat superior, the board cannot ignore, walk away or refuse to take corrective action action against the manager without incurring liabilities.

First, from the HOA’s obligations, under the officers and directors duties to act in good faith and as a prudent man, the board is obligated to act against its manager where state laws and the governing documents have been violated, or when the manager is clearly committing wrongful acts, like making false statements, harassing a homeowner, etc.

Second, let’s look at what the Restatement (3rd) of Agency (2006) has to say about the liabilities of the agent and principal (manager – board). (Of course, one would not expect to see this material covered in any government sponsored seminar, or manager licensing education, like at the Leadership Centre in Phoenix, which is supported by the towns of Chandler, Mesa, Gilbert, Queen Creek, Apache Junction). “Direct liability” refers to suing the party as such. The main points are summarized below:

¶ 7.01 An agent is subject to liability to a third party (homeowner) harmed by the agent’s tortious conduct.

¶ 7.03 (1) A principal is subject to direct liability to a third party harmed by an agent’s conduct when . . .

(a)(ii) the agent’s conduct, if that of the principal, would subject the principal to tort liability; or . . .
(b) the principal is negligent in selecting, supervising, or otherwise controlling the agent;
(2) A principal is subject to vicarious liability to a third party harmed by an agent’s conduct when . . . the agent commits a tort when acting with apparent authority in dealing with a third party on or purportedly on behalf of the principal.

¶ 7.05 (2) When a principal has a special relationship with another person [as the board with a homeowner], the principal owes that person a duty of reasonable care with regard to risks arising out of the relationship, including the risk that agents of the principal will harm the person with whom the principal has such a special relationship.

¶ 7.06 A principal required by contract or otherwise by law to protect another cannot avoid liability by delegating performance of the duty, whether or not the delegate is an agent.

study of Arizona management contracts

I’ve collected 5 actual management contracts from management firms who are members of the AZ Assn of Community Managers, AACM. All are for HOAs in the Phoenix Metro area. As one management agent told me a long time ago, “What are you doing George? We got a good thing going here!”

 

In general, here’s what they have in common

 

Monthly fees:

$2,000 – $4,000 per month — ($12, 000 – $48,000 plus all those transaction fees summarized below).

Per transaction fees:

numerous and detailed, above the basic monthly fee.

Agency relationship:

4 out of the 5 explicitly acknowledge an agency relationship with the HOA – fiduciary, loyalty, best interests.  One contract specified that it was an independent contractor, but this does not remove the agency relationship.

 “acting under orders”:

All contracts are full of wording that the agent acts under the supervision and direction of the HOA board and its policies.  This serves to negate any “independency” and place the liability on the HOA board. The board can be held responsible for the misdeeds of its agent under respondeat superior. (Never heard of it, did you? That’s because CAI wants it a secret.)

 what does the monthly fee cover?

I couldn’t figure this out after looking at all those transaction fees that are extra. I concluded that it must cover such items as

  • waiting for the phone to ring,
  • responding sometime to homeowners, touring the grounds on an inspection tour (except nighttime inspections which are extra),
  • seeking violators and or physical damage,
  • and dealing with the clerical duties pertaining to meetings and attending a few of them.

Transaction fees:

  • Paper, envelopes, stamps, check, faxes, etc charges;
  • letters including dunning letters, billing reports;
  • transfer fees, disclosure fees, computer and bookkeeping fees;
  • education, newsletters, website;
  • senior staff, computer staff, agent staff.

 

POINTS TO REMEMBER

Your management firm has a legal, binding contract with your HOA, in which it admits that it is an agent of the HOA and to acting under the “orders” of the board. An agency relationship is a fiducciary relaionship with the HOA.  The contract, corporation law, and the CC&Rs require to board to oversee the acts and actions of the management firm, and to take action when there’s wrong-doing by the management firm.  The HOA can be sued under respondeat superior for any wrongful acts by the management firm.

The principal may authorize  the agent to perform a variety of tasks or may restrict the agent to specific functions, but regardless of the amount, or scope, of authority given to the agent, the agent represents the principal and is subject to the principal’s  control. More important, the principal is liable for the consequences of acts that the agent has been directed to perform.