A review of new legislation being considered in many state legislatures clearly shows a growing trend toward justice and fair play for homeowners. Substantive HOA reform bills can be found in Arizona, Colorado, Florida, North Carolina and Texas to name those are known to me.
Arizona.
SB 2292 seeks to end mandatory HOAs for new subdivisions.
SB 1278 reasserts local municipality control of public streets in HOAs.
Colorado. HB 1276 seeks to restrict HOA foreclosures by setting forth strict procedures for HOAs to follow if they seek to foreclose on a homeowner that include restrictions on the sue of collection agencies, the adoption of a formal payment plan, notice to delinquent homeowners stating the exact amounts owed, and the procedures to resolve issue before any action can be taken..
Florida.
SB580 places restrictions on management firms.
SB 596 creates a powerful, bona fide state agency to regulate HOAs and that can make rules, to investigate complaints and to seek penalties and restitution in civil court.
North Carolina. HB 175 is another foreclosure reform bill that prohibits assessment foreclosure, but allows HOAs to obtain court judgments for the assessments owed. It requires a notice of a claim of lien to be served on the homeowner before any action can be taken.
Texas. HB 3803 seeks state oversight by allowing the attorney general investigation of financial wrong-doing by the HOA, with penalties.
Much, much more legislation dealing with substantive HOA reforms is needed. This legislation would deal with fair and just due process procedures in HOA disputes, foreclosure reforms, clean elections procedures, meaningful enforcement against HOA violators, and ending the “consent to agree” misrepresentation in the sale of a home in a HOA.
I just read the Illinois CAI chapter’s amicus curiae brief in the IL Supreme Court appeal of the groundbreaking Spanish Court v. Carlson decision. The court held the HOA liable for violating contractual obligations to repair and maintain common areas, and homeowners could withhold assessments.
Speaking about the need for timely payment of assessment to keep the HOA going, CAI argues,
The very real impact of the Second District’s decision is peculiarly analogous to our government’s need to collect taxes free from objection by individual taxpayers. Surely, if people could refuse to pay taxes and then defend against their collection based upon a claim that the government had been negligent in the maintenance of public spaces and providing services, the government would find itself in dire financial straits and unable to fulfill its obligations.
The other decision in this 2012 caseprevented the HOA from using the draconian measure of “forcible entry” – occupy the unit — to get the member to pay right away. CAI’s argument for the HOA was that forcible entry was a valid tenant-landlord action, but the court had held that not paying rent was also a valid landlord-tenant action.
The major selling argument for CAI’s being “a friend of the court” is its repeated claims to speak not only for the HOA, but for the members, too. CAI offers the same ol’ impression that it is an educational organization and not a business trade group that lobbies for the business interests of its members. And as such, why is it defending the consumers of its services, the HOA? We know why? Does the Illinois Supreme Court know why?
The Institute’s [CAI] mission is to serve as a national voice for those involved in community associations, including homeowners, governing boards, service providers, and vendors. (My emphasis).
The Illinois Chapter’s mission is to provide education and resources to Illinois residential condominium, cooperative, and homeowners associations, as well as represent their interests and the interests of Illinois community association members on issues of legal importance. (My emphasis).
However, the brief is full of arguments supporting the HOA and it right to use the draconian measure of forcible entry, while denying the contractual right to withhold payments when the HOA defaults on its obligations.
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!
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.
In January the Illinois Supreme Court agreed to hear the condominium case, Spanish Court Two Condominium Association v. Lisa Carlson, No. 115342, that breaks with the commonly held legal doctrine that HOA members are not permitted to withhold paying assessments, even when the HOA has failed to make necessary structural repairs to the condominium. Courts have held that HOAs are subject to servitudes law foremost, and that the common good required for the survival of the HOA is paramount. Therefore, payments must not be withheld in spite of any outstanding controversy.
In Spanish Court the appellate court held that a HOA condominium owner could withhold paying assessments because the relationship between the owner and HOA was similar to that of a tenant and landlord. The contract in both situations involved mutual promises of making payments in return for HOA services to maintain and repair the property. The court held that under contract law the withholding of payments was permitted. This decision broke with precedent, bringing justice to homeowners against special laws for HOAs.
The courts in other cases and in other states have held that the declaration of Covenants, Conditions and Restrictions (CC&Rs) are a contract to be interpreted as a contract, but then apply servitude law over contract law, and even over constitutional law. (See the Restatement Servitudes, § 3.1, comment h and§ 6.13, comment a).
For example, this holding stands in contrast to the January 2013 Illinois Supreme Court ruling in Poris v. Lake Holiday POA (No. 113907) that allowed HOA security personnel to stop and detain drivers who are violating HOA rules, and not municipality ordinances. Here, servitude law prevailed over constitutional law. And, in 2007 the Twin Rivers HOA (NJ) free speech case (CBTW v. Twin Rivers, 929 A.2d 1060) held that the business judgment rule would protect homeowner rights, and that there may be some instances where constitutional concerns could come into play.
The Illinois appellate court admitted to the fact that its opinion stood alone in favor of the homeowner and contract law when HOAs are involved. If the preponderance of the cases is to control, then homeowners can expect an Illinois Supreme Court reversal of the appellate decision as it did in Poris. Homeowners and justice should not be too enthusiastic about the right to withhold assessments in HOAs.
HOA Constitutional Government 