Tag: eminent domain

Advocate files AZ supreme court amicus brief fighting unjust laws

We must make the injustice visible.

We must provoke until they respond and change the laws.

(Mahatma Gandhi)

An AZ supreme court amicus brief was filed by Jonathan Dessaules on behalf of the Arizona Homeowners Coalition in CAO v. Dorsey (CA-CV 21-0275) (Waiting for the Court’s decision).  Dessaules argues that the statute in question, ARS 33-1228, conflicts with the Arizona Constitution, Article 2, Section 17, and “a statute cannot circumvent or modify constitutional requirements”.

The intricate legality and constitutionality of private entities—the HOA — taking of another party’s property rights – a homeowners — is discussed in detail.  I frequently quote the brief to ensure accuracy in my review.

ARS 33-1228 “allows condominium associations to force the sale of a nonconsenting owner’s property for someone else’s private use” and is the justification for investors to shut down the HOA. However, “When a state statute conflicts with Arizona’s Constitution, the constitution must prevail.” Furthermore, it is argued that “The legislature may not enact a statute which is in conflict with a provision of the Arizona Constitution.” Consequently, the Legislature lacked the authority to enact 33-1228.

(Stay with it!) The brief goes on to say that ARS 12-1131 provides that “eminent domain may be exercised only if the use of eminent domain is authorized by this state, whether by statute or otherwise, and for a public use as defined in this article.” Public use does not allow for “forcing the sale of a holdout owner’s property to be used by the investor who owners a majority of the other units within the condominium.”

The HOA, Dorsey, counterclaimed that it wasn’t a sovereign and § 1231 doesn’t apply to private organizations, ignoring § 12-1111 that permits individuals the right of eminent domain takings. Consequently, again, it is argued that 12-1228 is invalid.

An additional powerful argument is raised that the Declaration is an adhesion contract. “A declaration is generally a ‘standardized form offered to consumers on essentially a take it or leave it basis.’” And to my long awaited legality, the brief states that “Without the contract even being presented to the purchaser for their signature,” the contract is imposed on the buyer.

Again, we see the  doctrine of “reasonable expectations” as applied to adhesion contracts. “Contracts of adhesion will not be enforced unless they are conscionable and within the reasonable expectations of the parties.” Dessaules maintains that including unconstitutional  statutes in the Condo Act is “substantively unconscionable.” Furthermore, as I have argued many times, “a waiver of a constitutional right is not within reasonable expectations of the parties.”

This is a solid amicus brief by an advocate fighting for HOA reforms to protect members’ rights and privileges.  It does not pretend to accept unjust laws.

* * * *

I would like to thank Dennis Legere, Arizona Homeowners Coalition,  for hiring attorney Jonathan Dessaules to file this important, to the point, excellent amicus brief.

HOA constitutional “takings” and reasonable amendments

Awaiting an Arizona Supreme Court decision is a case involving a fairly common event in which investors buy up a majority of the condo units and vote to dissolve the condo. The owners are then subject to a forced sale against their will. In Cao v. Dorsey[1] investors owned 90 of 96 units but a homeowner challenged this forced sale under constitutional grounds.[2]  I address one constitutional issue here.

With respect to the governing AZ statute on these “takeovers,” the Court  held,

[We] hold that the statute [ARS 33-1228] is constitutional when applied to condominium owners who bought a condominium unit subject to terms that incorporate the statute. We also hold, however, that if there have been substantive post-purchase changes to the statute, the version of the statute in place at the time of purchase controls.

The statute allows for amendments to the CC&Rs, as commonly stated in the CC&Rs, based simply on the vote of the required approval percentage of owner votes, which the investor controls. The plaintiff argued that  the statute “is an unconstitutional taking of private property.” The Court clarified the law,

“Generally, ‘[t]aking one person’s property for another person’s private use is plainly Prohibited’. . . . Without an exception to the general rule, A.R.S. § 33-1228 is unconstitutional on its face.”

The meaning of “takings” refers to the constitutional prohibition of eminent domain takings of property interests when the property owner contests to the taking by the government. My argument criticizing the HOA’s right to take personal property with no compensation to the objecting owner can be found in HOA principalities where there’s no ex post facto or eminent domain protections (2009) and  Homeowners do not have HOA ‘eminent domain’ protection (2022).

A discussion followed as to what version of the law applied as it was amended after the plaintiff’s purchase.  Getting to the heart of the matter, the Court stated,

“[W]e will not ‘allow substantial, unforeseen, and unlimited amendments’ to the Declaration, as that ‘would alter the nature of the covenants to which the homeowners originally agreed.’ . . . We ‘will not subject a minority of landowners to unlimited and unexpected restrictions on the use of their land merely because the covenant agreement permitted a majority to make changes to existing covenants.’”

In short, no surprises and no adding new elements to the Declaration – CC&Rs without member approval. Future amendments, however, “cannot be ‘entirely new and different in character, otherwise they would exceed the reasonable expectations of the owners.’”  Furthermore, statutory amendments do not apply when, 

“the statutory amendments did not merely refine the statutes, correct errors, or fill in gaps, but substantively altered owners’ property rights beyond the “owners’ expectations of the scope of the covenants. . . . And substantive amendments to the Condominium Act cannot later be incorporated into the agreement without renewed consent.”

The Court vacated the trial court decision in favor of the HOA and sent the case back to the superior court based on its holdings. The decision has been appealed to the Supreme Court and we are waiting for its opinion.

What does this case mean?  What is all the hullabaloo about?  How important is a favorable supreme court decision? TEMENDOUSLY IMPORTANT! That’s why CAI is not only the HOA’s attorney but has also filed an amicus brief.  The holding of homeowner reasonable expectations regarding amendments opens the door to further challenges as to just what is reasonable in today’s HOA land agreements.  The opposition can say, “well, it is common that a development can be expected to be bought out, and therefore the holding is mute, not applicable anymore.”

The broader issue for advocates is to apply reasonable expectations to misrepresentations in the selling process that is intentionally designed to hide not only takings by the HOA but violations of the equal protection of the law. In the case of CAI, has its conduct over the years amounted to a coercive monopoly to keep control over the HOA-Land? How about the real estate agents and department looking the other way and concealing the facts?

It’s up to the homeowners and advocates to pursue these challenges that will open the doors to HOA reforms of substance.

Notes

[1]  CAO v. Dorsey, CA-CV 21-0275 (Ariz. App. Div.1, 2022). I would like to thank Dennis Legere, Arizona Homeowners Coalition,  for bringing this case to my attention and for providing me with the court filings. He has filed an AZ supreme court amicus brief  with attorney Jonathan Dessaules.

[2] This is the first of several planned reviews and case memoranda addressing the appellate court decision. To follow will be  reviews of the amicus briefs by AZ Homeowners Coalition,  The Goldwater Institute for the homeowner), and CAI (for the HOA), and the eventual supreme court decision.

Homeowners do not have HOA ‘eminent domain’ protection

You all know about public domain eminent domain protection: the government cannot take your property for public use – public benefit — without fair market compensation, which you can negotiate and take to court if necessary. Acquiring your property is a “taking.” 

According to the courts,  it is not well known that the government’s denial of a natural use of your property is considered an informal taking, and compensation must be paid. I am surprised to learn that almost any personal property owned by the homeowner can be subject to a taking by the government. (Investopedia).

As an HOA member you do not have an equivalent HOA government taking protection whereby you are compensated for any takings or modifications demanded by the HOA. While HOA government takings per se are rare except for foreclosure rights, the HOA does demand that the homeowner replace or remove approved  landscaping trees or shrubbery, additions like sheds, playsets,  repaint the exterior, etc. At the homeowner’s expense!

I’ve found many times that corrective action is delayed until after completion of the approved homeowner improvements, and the HOA demands that it be torn down by the homeowner. Grossly unjust and unfair: it’s the incompetence of the HOA failing to act within a reasonable time while construction begins.

However, it’s understandable and acceptable if the governing documents specify, for example, that exteriors just be repainted every 15 years, or roofs inspected for necessary repairs every 20 years or so, etc.

The argument used by the HOA generally falls into keeping with the image  of the properties and maintain property values, for the benefit of the members, the HOA ‘public.’  As it stands, the owner/ member has no right to demand compensation and is another instance of constitutional protections lost in HOA-Land.

AZ court holds HOA in a representative role on behalf of the members

If your HOA was involved in a legal action and won  a substantial award, who would get the money? Who should get the money? The HOA is a legal person; its members do not have title or stock; they just have a beneficial interest. (With Condos members own a specified interest and ownership in the condominium assets, as stated in their deed,  in addition to their own unit).

Foothills Reserve[1], an HOA,  is a “first impression” for me as judges would say, having not come across the issues presented in the case before. There are two aspects in this case that warrant discussion that have not been presented in the media. It involves an eminent domain taking of property that the HOA claimed diminished the value of the HOA properties, and the court’s reasoning as to who gets to keep the award money.

Eminent Domain and property values

The State of Arizona acquired Foothills property for a major highway interchange and Foothills received $6.5 million compensation as required under the law. But the HOA

“claimed damages [of] alleged diminished value of their homes as a result of factors such as noise, pollution, loss of view, and unsightliness as a result of the South Mountain Freeway., i.e., proximity damages.”

The Court added to the eminent domain’s paid  compensation an additional $12 million depending upon the outcome of the State’s appeal with respect to the “proximity damages” claim. (The brief was filed but at this time I have not been able to obtain a copy). The claim is based on ARS 12-1134(A)

“If the existing rights to use, divide, sell or possess private real property are reduced by the enactment or applicability of any land use law . . . and such action reduces the fair market value of the property the owner is entitled to just compensation from this state or the political subdivision of this state that enacted the land use law.”

Court awarded damages

With respect to the treatment and handling of the award monies, the Court gave very specific orders to the HOA and to the HOA’s attorney who was to be the escrow company for the distribution of the $6.5, and if successful the additional $12.5. It held that “the HOA represented [the owners] solely in a representative capacity,” and was ordered to send the award money to its attorney’s “State Bar Trust Account.”  Furthermore,

“Because many of the homes within the Foothills Reserve subdivision have been sold and may be sold pending appeal, this Judgment does not prevent the Court from taking action to” (i) approve a plan for reasonable notice to the 589 Owners (as some of their whereabouts may not be known). Plaintiff [Arizona] will not participate in these actions”

In short, the Court said that the HOA, “pursuant to the provisions of the Covenants, Conditions, Restrictions and Easements governing the Foothills Reserve subdivision,” was required to act in accordance with the CC&Rs — and as I interpret the statement — in the best interest of the members who have beneficial interests in the HOA corporation.

The Court reaffirms, in my view,  that the HOA exists for the benefit of its members and not for the board of directors to do as they please.

Note [1]. Arizona v. Foothills Reserve, CV-2017-010359, Maricopa Superior Court (March 4, 2022).