[Please note that a previous post on this bill, SB 1278, was posted in error, referring to restrictions on mandating HOAs in new subdivisions. An Arizona bill, SB 2292, that would have made this a law has been stalled in the Legislature and will die there.]
Arizona Session Law Ch. 103 (2013), SB 1278, reaffirms local municipality control of public streets within an HOA. It is a groundbreaking bill because it relegates HOA private governments to a rightful secondary status and subject to public government laws. In a disgraceful rejection of the Constitution, courts see no problem with upholding the common law Restatement of Property (Servitudes) as controlling over Constitutional and contract law.
It’s a simply worded bill:
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 33, chapter 16, article 1, Arizona Revised Statutes, is amended by adding section 33-1818, to read:
33-1818. Community authority over public roadways: Applicability
A. NOTWITHSTANDING ANY PROVISION IN THE COMMUNITY DOCUMENTS, AFTER THE PERIOD OF DECLARANT CONTROL, AN ASSOCIATION HAS NO AUTHORITY OVER AND SHALL NOT REGULATE ANY ROADWAY FOR WHICH THE OWNERSHIP HAS BEEN DEDICATED TO OR IS OTHERWISE HELD BY A GOVERNMENTAL ENTITY.
B. THIS SECTION APPLIES ONLY TO THOSE PLANNED COMMUNITIES FOR WHICH THE DECLARATION IS RECORDED AFTER DECEMBER 31, 2014.
While homeowners must wait until 2015, this bill is a giant step forward to curtail the unconsitutional reach of private regimes where homeowners are outside the protections of the US and Arizona Constitutions. It speaks to putting a clamp on The New America of HOA-Land. The bill took 5 years of dedicated effort by HOA champion and State Senator Nancy Barto before it became law.
HOAs had raised feeble arguments that could and still can be easily addressed by seeking ordinance variances. The HOAs and their hired-hand venders have refused to avail themselves of this avenue of redress, which is available to all citizens. No, this 4 year long battle was a battle for power and control. Which form of government controls your public streets, the municipality of the HOA regime?
This video covers the Arizona Senate GE committee hearing on a bill that would allow unlicensed HOA managers to represent HOAs. It shows the AZ legislature abdicating and supporting HOA-Land rule over democratic rule, and over the Constitution. It shows a banana republic, “I see no problems,” mentality.
Here are my comments at several points in the video.
My opening statement
Hi, I’m George Staropoli, also known on the internet as HOAGOV. I am once again, reluctantly, before the camera with another HOA legislative documentary. My material comes from events at the Arizona Legislature, and from the legislators themselves.
Viewers will be alerted to the following comments at appropriate points in the video. They are provided to assist you in understanding of what’s really going on. With this in mind, I strongly recommend that you take time to read my HB 2371 Commentary (on this date) on my website before continuing — the link is now being shown.
This video will also be posted to my HOA Constitutional Government website along with my detailed comments — the link is on the screen.
Let’s view the hearing . . .
Opening comments by Ugenti:
You just witnessed the sponsor’s “opening statement.” Note her motive for the bill: Let me quote her, “Every year there is a plethora (many, many) of personal HOA legislation . . . as well as industry HOA legislation.” She stated that she combined all those bills “working through a stakeholder process and allowing the stakeholder process to filter the proposed legislation . . . representing a consensus from the AZ realtors, and AACM (AZ Association of Community Managers, the beneficiary of this bill).” She further added “to spare the members from the agony of voting up or down on personal pieces of legislation.”
Now, what was she saying? First the “personal” bills come from homeowners while the other legislation is “HOA industry legislation.” She put the bills through a stakeholder process and used the process to filter the bills. She failed to say, however, that no homeowner advocates participated in this stakeholder filtering process, which was brought to light in her House GOV testimony, and not denied.
Ugenti said nothing about fixing HOA problems and making HOAs better for everyone, especially the real stakeholders — the homeowners. Not even entertaining an amendment to address issues of substance relating to constitutionality, fair and just laws, and of other homeowner concerns as emailed to her.
Now let me explain that in her earlier statement to the House GOV committee, she also said that she wanted to avoid any controversial bills. But, think about it. If there is serious opposition, based on authoritative sources, wouldn’t that that create a controversy? So, her choice was to deny any opposing views, and only pick the special interest agenda – the stakeholder agenda. Isn’t Ugenti failing to understand that these problems are not singular or personal to just one homeowner? I mean, after hearing more of the same from others and the media, you would think she could take a hint! Apparently not!
Homeowners appear to have been given short rift, and have been placed “at the bottom of the food chain,” defenseless and being gobbled up by everyone else. And here I thought our representatives are supposed to represent the people, not the moneyed special interests.
Art. II, Sect. 2, of the AZ Constitution states, “Governments . . . are established to protect and maintain individual rights.” Did I miss something?
Furthermore, in an outright act of favoritism toward the special interests, as shown in the video, Ugenti asked for questions that she or the stakeholders can answer.
Let’s return to the video . . . .
Homeowner email:
Please understand what has happened in this staged scenario with this constituent email, which the legislators viewed as having a “personal issue” with her association — homeowner owners only bring personal problems while the special interests deal with non-personal agendas.
With the several email dealing with issues and problems of substance, why was the single email chosen for airing before the committee? Why? Because it serves to reinforce the sponsor’s false argument that homeowners only deal in personal issues, which justifies her leaving out the homeowners from serious, authoritative HOA industry specialists! There was no mention of the non-personal, substantive constitutional issues brought to the attention of the legislators in my emails and commentary, or in two other homeowner advocate emails that I have personal knowledge. Nothing! Silence! Not a word!
The legislators “hear no evil, see no evil, and speak no evil.”
Let’s return to the video . . .
Conclusion
You have now witnessed another episode of “the unspoken alliance of no negatives about HOAs.” Did you hear any of the objections that were emailed to the committee? NO! You did not hear that the bill would allow unlicensed HOA property managers to represent HOAs in small claims court, or before an administrative law judge at the Office of Administrative Hearings? Did you know that even licensed paralegals are not allowed to represent others? Did you know that the current law applies to all hearings from all agencies before OAH?
Don’t tell me that the legislators, AACM, CAI, or the sponsor of HB 2371 don’t know about the 2012 AZ Supreme Court opinion on HOA managers engaged in the unauthorized practice of law, and the decision against for numerous UPL violations against one CAI/AACM member? C’mon! The legislators were sent copies of these decisions. The viewers of the hearing video would not think any such events against unlicensed mangers had occurred. In court, hiding exculpatory evidence (evidence in favor of the defendant) is a crime! But, apparently it’s OK in the legislature.
And rather than do what is just, fair and reasonable, and that is to require proper licensing for managers if they are being allowed to represent HOAs, HB2371 is silent on education!
What we have here is a special law for special private entities, without even a whisper of any legitimate justification. The bill is an unconstitutional special law violating the AZ Constitution, ART II, section 13, which states, “No law shall be enacted granting to any citizen, class of citizens, or corporation other than municipal, privileges or immunities which, upon the same terms, shall not equally belong to all citizens or corporations.” In other words, no special laws for special people are permitted.
Section 32 states, “The provisions of this Constitution are mandatory, unless by express words they are declared to be otherwise.” Where are the “express words” in this bill to override the Constitution?
What you have witnessed is the homeowner, the real stakeholder, has been cut out from the legislative process. What we have here is legislative support, cooperation, entwinement, and a symbiotic relationship between the state and the HOA, thereby making good cause for HOAs to be declared arms of the state, or state actors, subject to the 14TH Amendment protections.
It must still pass the Rules committee and the final vote of the entire Senate before becoming law. Passing this bill into law would be unconscionable!
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.
This post takes a closer look at some of the provisions of SB 596 with its intent “that the powers and authority granted to homeowners’ associations . . . conform to a system of checks and balances in order to prevent abuses by these governing authorities.” At the request of then Rep. Julio Robaina I testified at the Feb. 23, 2008 all-day legislative HOA hearing in Tampa, FL. Public domain clips from this hearing, several of which can be found at the HOAGOV YouTube website, clearly show why checks and balances are sorely needed.
Aside from the introduction of effective enforcement provisions, the other changes of substance deal with regulating the conduct of what the HOA “can and can’t do.” They are the payment of assessments, elections and proxies voting, and transfer of declarant control.
These substantive changes take the first 17 pages of the bill and is followed by non-substantive changes to 720.3024 creating the Ombudsman office and election monitoring, and HOA Study Council (720.3025). The other substantial changes include: Section 720.3085, the “pay or die” section (my words), Section 720.306 dealing with meetings and substantial revisions to the elections and proxy voting processes, and changes to 720.307 relating to the transfer of power from the declarant that takes us to page 40 and the subsequent technical changes.
First, I will look at what I call the “pay or die” statutes regarding the continued payment of assessments even when payments are being disputed (720.3085(9)). “Pay or die” meaning that if any homeowner doesn’t pay his assessments in a timely manner the HOA will die mentality. I find this reprehensible, approaching an indentured servitude condition, and demonstrating a “close nexus” and a “symbiotic relationship” between the HOA and state, a “You do for me and I will do for you” relationship. This statutory requirement to pay or else is sufficient alone to have the HOA declared a state actor! Especially when the statutes also permit the HOA to deprive is member-residents of their rights, freedoms, privileges and immunities as citizens under the 14th Amendment.
However, the bill at least moves forward with checks on the unilateral foreclosure powers of the HOA. It forces the HOA to prove the correctness of its claim, allowing the court to issue equity judgments that the HOA can’t add right, had sent the notices to the wrong address, refused to cash checks and/or held them past the deadline before cashing in order to demand late fees, just to name a few of the abusive practices.
Read the new subsection 720.3085(9) carefully. A dispute of the amount would only require deposits of assessments during the legal action, and not the disputed amounts. The term “disputed” needs to be clarified to include abuse by the HOA as mentioned above and not limited to just amounts. Of course, the justification for clauses (d) and (e), the HOA will die clauses, can be debated.
There are some issues with proxy voting (720.306), but the changes in the bill will serve the homeowners well. Subsection (9) deals with board elections and restricts members who are in arrears to the HOA cannot run for office. That’s fair. If a member cannot vote if he is in arrears, a member in arrears should not be allowed to hold office. Co-owners cannot both serve on the board, which give that unit excessive power. I find the requirement to certify knowledge of the governing documents 90 after an election as preposterous and pro-HOA. Want to be on the board? Get educated first!
In regard to the transfer of power changes added in the bill serve to benefit the homeowner. While not completely airtight, the term “in the ordinary course of business” would restrict the declarant from sitting on lots in order to retain control. What is missing, as just occurred in Arizona, is the declarant’s modification of the governing documents before turning over its power to lock him in place for all practical purposes. The usual introductory phrase, “notwithstanding anything in the governing documents to the contrary” should be added to the bill.
As for my views, the inclusion of effective enforcement authority overwhelming outweighs any concerns that I have mentioned above.
As an alternate to making HOA governments a state entity, the creation and establishment of a bona fide, legitimate state agency established by an effective and meaningful enabling act will accomplish HOA reforms. Couple the clear and precise intent to provide for checks and balances – meaning state oversight – with a dedicated head of the agency to carry out the agency’s mission, the independent HOA principalities will now be accountable to the state as they should be.
Florida’s SB 596, sponsored by Senator Hays, proposes such a state agency over HOAs. It proposes the following addition, among other things, to FS 720.302(2):
Having provided certain powers and authority to homeowners’ associations and in deed restrictions created by developers of mandated properties in residential communities, the Legislature recognizes that it is necessary to provide regulatory oversight of such associations in order to ensure compliance with federal and state laws and local ordinances. It is the intent of the Legislature to protect the rights of parcel owners by ensuring that the powers and authority granted to homeowners’ associations and in deed restrictions created by developers of mandated properties in residential communities conform to a system of checks and balances in order to prevent abuses by these governing authorities. (emphasis added).
From first glance, this bill creates a typical regulatory agency to make laws, set rules, investigate, handle complaints and enforce the law in courts. Among the provisions in this lengthy 124 page bill are penalties, fines, HOA cease and desist orders, and restitution enforceable in the courts by the agency, FBPR, and not having to be brought by the individual homeowner. The proposed agency is not a “let’s study the problem” typical political tactic to do nothing by creating just an investigatory agency, which insults homeowners with its “we don’t believe you” attitude. SB 596 is a very good step short of making HOAs state agencies.
It should be obvious to all that what will be argued as government involvement has been brought about precisely because of the abuse within the industry. It is the failure of those “stakeholder,” specil interest moneyed vendors to police the industry. It is the failure of the homeowners themselves to police their boards. And consequently, it falls to state governments to promote the general welfare and protect its citizens against abuse by a stronger faction within the community.
Furthermore, making this bill law will help keep the legislature from hearing HOA reform bills year after year.
In order to establish justice and fair play for all homeowners, it remains to insure that the laws are themselves fair and just. The pro-HOA laws must be amended or revoked. The misguided doctrine that permits CC&Rs and servitude law to supersede constitutional law and contract law must stop.
HOA Constitutional Government 