Tag: ethical conduct

On stopping HOA bullies and rediscovering lost values

Excerpts of guest blogs by George Staropoli on Ward Lucas’ blog, Neighbors at War!

 

Rediscovering Values

For a society, a community, to function in an orderly manner there must be not only rules, but a firm belief in the need to enforce just and fair rules and laws. Political philosophy says that where laws are unjust and unfair, then the democratic government is not legitimate, cause the reason for forming a social contract and surrendering freedoms is just that.

On Stopping Bullies

Proposed HOA reforms must include necessary and sufficient detriments to put an end to HOA bullying and abuse. People do not become angels when they become a board member, like our astute, politically savvy legislatures would like you to believe.

 If angels were to govern men, neither external nor internal controls on government would be necessary.  James Madison, The Federalist Papers, # 51.

 

 

Proposed US Constitution amendments will help HOA reforms

I have cautioned my followers about the ‘games’ that lawyers play with the precise wording and grammar used in bills and, eventually, the resultant laws.  They love to parse the sentences and apply interpretations that have a plausible relationship to a valid legal issue.  When they seek a ‘loophole’ in the law the plausible becomes unreasonable, yet the courts will go through the exercise and entertain a challenge to the law.

What is needed is a tightening up of the laws and bills as a result of an analysis of how their wording can be used to get around the intent of the bill.  With respect to HOAs this is an unlikely task when state legislatures favor the HOA legal scheme currently adopted as public policy. But there is hope stemming from the very top, from retired Supreme Court Justice Stevens who has proposed Six Amendments[i] to the US Constitution.  Below are 2 of the 6 proposed amendments that are particularly important to HOA reform legislation.

 

The “Anti-Commandeering Rule” (Amend the Supremacy Clause of Article VI) — This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges and other public officials in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding.

Sovereign Immunity – Neither the Tenth Amendment, the Eleventh Amendment, nor any other provision of this Constitution, shall be construed to provide any state, state agency, or state officer with an immunity from liability for violating any act of Congress, or any provision of this Constitution. [New amendment].

In the “Anti-Commandeering Rule” Justice Stevens found it necessary to add “and other public officials” to explicitly bind government officials to obey the Constitution and laws of the land.  I am sure that the Founding Fathers did not think such an explicit statement would or should be necessary.  But, it’s obvious that our elected officials have forgotten their duties and obligations to the Union in favor of their political party dogma and their concern for their legacies. Just review recent state supreme court HOA decisions and the numerous pro-HOA state laws to understand the need for this constitutional amendment.

In the “Sovereign Immunity” amendment Justice Stevens found it necessary to hold elected officials on the federal and state levels to their obligation not to violate the Constitution.  The common example can be found in every state’s support of de facto HOA private governments unanswerable to, and circumventing, the US Constitution.   Again, one would not think that this would be necessary to state.

Both of the proposed amendments to the Constitution are the result of how lawyers examine the precise wording of the laws and Constitution, and raise “and, if, or buts” to get around the intent of the laws. Or, even to question the intent of the drafters of the bills.  With respect to HOA legal scheme, must we add such specifics to state constitutions and HOA/condo acts?

Bob Frank, a Nevada Commissioner, raised this very question; “Should HOA/Condo Associations Implement US Constitutional Protections For Residents In CC&Rs?”  in the HOA Common Sense LinkedIn group (must be a LinkedIn member).  It’s a must read!

 

Reference

[i] Six Amendments: How and Why We Should Change the Constitution, Justice (ret.) John Paul Stevens (Little, Brown and Company, April 22, 2014). (Available on April 22th).

A lesson in HOA reforms and power politics in AZ

 

For those who still believe that HOA reform legislation is not political, and in particular not power politics, take heed from the following analysis of events at the Arizona Legislature.  It deals with SB 1454 reborn as SB 1482 this year and substituted for the identical bill, HB 2695.

It begins at the start of the session when no bills were introduced to repeal the statutes found invalid in last year’s SB 1454 by the court.  Calls to the Senate President and Speaker of the House, and Secretary of State, to correct this seemingly oversight went unheeded. That was puzzling to say the least.

First, SB 1482 was introduced by Senator Griffin and amended, and passed unanimously by the Senate. It sat in the House for an unheard of 7 weeks until this week.  It past the deadline for being heard in a committee of the House, per the rules, and was presumed dead.

Second, HB 2695 was introduced by Rep. Ugenti for the fourth incarnation of the “omnibus HOA bill.” It was also amended and made identical to SB1482. It passed the House Committee of the Whole (COW) over 4 weeks ago, but was not put on the final vote agenda giving the illusion that it was dead. It passed the deadline to be heard in the Senate.

Neither bill could be heard in the other branch, according to the usual rules.

Finally, after the budget negotiations were resolved this week, a few bills were attended to that included the presumed dead HB 2695. It was ready for the final vote this week.  Why now?  That wouldn’t help because it could not be sent to the Senate for a vote since that deadline, too, had past.

So, the clever plot unfolded when SB 1482 was substituted HB 2695, in compliance with the legislative rules, because it had already passed out of the Senate and there was no need to go back to be voted on all over again.

All in time to withstand a possible Governor’s veto as the session will not end before any veto. This allows the legislature to override the veto because it has more than a 2/3 approval of both houses.  It was all carefully planned out and timed!  The bill was passed 49-6 with 5 NV.

Why the theatrics is not clear.  Didn’t have the votes and had to wait?  I believe that the timing is too coincidental, and reflects a successful plot that demonstrated the power of the HOA stakeholders over the legislature. You know, let them think they won and we will stick it to them for last year’s law suit.  We will show them who’s boss!  Not unexpected based on Ugenti’s prior behavior and attitude.

AZ legislature fails to remove invalid statutes from its ARS web page

“Because the [right] to rule is rather the appearance of justice rather than justice itself, the appearance of injustice defeats every [right] to rule.”[1]

While the SB 1454/HB 2371 redux bills SB 1482 and HB 2695 appear to be dead this session, there is still no bill to repeal the amended statutes in Sess. L. Ch. 254 (2013);[2] those declared unconstitutional and invalid by the Arizona court, and agreed to in a settlement agreement with the Arizona Legislature.[3] The Legislature is intentionally misleading the public as to the legitimacy of the Arizona Revised Statutes in what appears to be a slap at the separation of powers doctrine – we will ignore the ruling of the court.

The following was sent to the Arizona legislative leaders (March 19, 2014 email).

“Dear Legislators,

 “I cannot understand why the SB 1454 statutes declared invalid, and agreed to in a settlement agreement, are not being repealed?  ARS show them as valid laws, without any annotation, which misrepresents their validity to the public.

 “I cannot understand why the HOA HB 2371 redux bills this year, HB 2695 and SB 1482, provide for their repeal contingent on the passing of these omnibus bills?  There is no ‘standalone’ bill to set the record straight.   These invalid statutes cannot remain on the books for another year!”

 

The following was sent to Secretary of State Bennett.  (March 21, 2014 SOS form).

 “Sess. Laws Ch. 254 (2013) was declared unconstitutional in court and certain statutes were found to be invalid. See Staropoli v. State of AZ, CV2013-009991.  An agreement with the AG representing the Legislature was signed and accepted by the court.

“Yet Ch. 254 shows the invalid statutes and there is no annotation that certain statutes are invalid. THIS MISLEADS THE GENERAL PUBLIC!

 “I believe Session Laws and ARS must be corrected to reflect the true status of the statutes.”

 

In HOA SB 1454 progeny: passing SB 1482/HB 2695 would be an act of tyranny by the AZ Legislature (February 25, 2014), I wrote:

“No choice to repeal statutes found unconstitutional

“These statutes were declared unconstitutional by agreement with the AG, representing the Legislature, and an order by the court accepting the settlement agreement.  However, the Arizona Revised Statutes (ARS) still shows these statutes as if they were valid and enforceable laws, which is deceptive to the public accessing the official Legislature’s website, ALIS. There are no annotations to advise the public otherwise.

“The repeal of these unconstitutional statutes is conditioned upon bill approval. A failure to pass both bills will still leave these statutes on the books. There is no stand-alone bill that repeals these unconstitutional statutes as would be expected by a legitimate legislature acting with integrity as representatives of the people, and not as representatives of the special interests. Apparently the defiant eight-hundred pound gorilla, the special interest HOA stakeholders (CAI, AAR, AACM and AHBA),  has flexed its muscle, and the sponsors have reacted accordingly.”

This is incredulous! It is unthinkable that legislative leaders would succumb to the shadow government of the HOA stakeholder special interests, and openly mislead and misinform the public! Furthermore, after being given sufficient notice, the failure to correct ARS can only be viewed as intentional.

What other rational explanation can there be? Perhaps the participating legislator – special interest organization ALEC (American Legislative Exchange Council) was involved? People for the American Way[4] describes ALEC as,

The American Legislative Exchange Council, is a one-stop shop for corporations looking to identify and cultivate friendly state legislators and then work with them to get special-interest legislation introduced and passed.

The American Legislative Exchange Council, serves as a voice for corporate special interests in state legislatures across the country. Its corporate executives, lawyers and lobbyists, along with member legislators, draft, lobby for, and secure passage of a wide array of bills designed to promote corporate interests.

For more information about ALEC see United States of ALEC. (Bill Moyers 30 minute video in 2012 on ALEC. AZ is right up front.)

References

[1] W. B. Allen, “Machiavelli and Modernity,” The Prince, Niccolo Machiavelli, p. 108.

[2] http://www.azleg.gov//FormatDocument.asp?inDoc=/legtext/51leg/1R/laws/0254.htm&Session_ID=110.

[3] http://pvtgov.org/pvtgov/downloads/order-final.pdf.

[4] http://www.pfaw.org/media-center/publications/alec-arizona-voice-corporate-special-interests-halls-arizonas-legislature.

HOA Common Sense, No. 8: Draconian punishment and intimidation

Draconian punishment and intimidation, No. 8

The Tennessee appellate court in Brooks found “that the foreclosure sale price shocked the conscience of the court.[i] A home valued at over $321,000 was foreclosed for just $12,800 of which $6,734, more than half, went directly into the attorney’s hands.[ii]  That’s more than 25 times the “damages” to the HOA. The Charleston Regional Business Review reported that the average foreclosure debt was about $4,500 and the average home value foreclosed was about $160,000, or 36 times the debt.

An award of more than the 10 times for punitive damages was held by the US Supreme Court in State Farm v. Campbell[iii]  to be a cruel and unusual punishment in violation of the 8th Amendment.  This right to foreclose in unjust and draconian, taking away a person’s home and leaving him with nothing!   It is unconscionable and discriminatory as explained below. Furthermore, HOAs assessments are considered a consensual lien and are exempt from homestead protections. (See paper No.4 above, speaking about your legitimate consent to be bound.)

With respect to HOA foreclosures, we once again discover that HOA assessments are being treated the same as public government taxes and property assessments — must be paid and your property can be foreclosed for non-payment. Both taxes and HOA assessments are not related to hard cash payments for which the lender is entitled to foreclosure to protect his loan, nor are they based on any specific transactions, like payments for garbage collection, for electricity, or for police protection, etc. 

Why should the HOA be given this right when other entities do not have foreclosure rights, and when there are other available collection methods — garnishment, sale of other property, etc. — to collect on bad debts?  Other entities, both public and private, must face the possibility of failure or bankruptcy – there are no guarantees in life.  A standard accounting procedure, and used by CAI Central in its financial statements, is what is called “Bad debts reserve” or “Reserves for bad debts,” which is an annual estimate of uncollected assessments.

Using common sense, we can understand the value to the HOA to “evict” the non-payer and to replace him with a new owner who will make timely assessment payments.  That’s logical. There is very little opportunity to raise additional funds for expenses except by means of increased assessments on other members, the “it’s not fair” argument. While the end of the foreclosure action has a rational value, the means is highly suspect. 

In addition to the arguments of special rights as enjoyed by public entities and an unconscionable punishment, HOA foreclosures are discriminatory.  The following quote is from an Arizona CAI attorney:

Assuming foreclosure eligibility requirements are met, whether foreclosure is a viable option depends largely on what other liens, interests, and encumbrances burden the subject property. . . .If the property is not subject to a mortgage or there is a minimal first mortgage, foreclosure is a viable option as there is likely equity in the property. . . . Even if the property is subject to a recorded first mortgage and there is no equity in the property, foreclosure still may be a viable option. Sometimes the threat of foreclosure alone is enough to get a delinquent owner’s attention. . . . the owner will often pay the association in order to keep his/her home.[iv]

This is an admission of the discriminatory nature of the foreclosure process — works only if the homeowner was an upstanding citizen who had paid his mortgage and assessments for many years, and had created all that equity that the HOA now seeks. It is also an admission of the punitive and intimidation motives of the HOA — “the owner will often pay the association in order to keep his/her home” — without facing the reality that “you can’t get blood from a turnip”! The HOA attorneys promote the view that the non-payers are scofflaws and deadbeats who are seeking to stick it to the good, assessment paying members. “It isn’t fair!” goes the cry.

What the foreclosure process does do, and is not mentioned by the CAI attorney, is that the attorney can claim fees many times in excess of the amounts owed the HOA. So, who really benefits? Certainly not the homeowner who loses everything with this draconian punishment. And there are other methods available to collect bad debts, and if not viable, well, then that’s the cost of doing business.

Is this good public policy to treat homeowners facing hardship not of their doing — take away their home and leave them with nothing?  Legislation must be put into place to protect against intimidation and wrongful foreclosure, and to ensure a strict enforcement of the foreclosure process, especially requiring documentation and an exact specification of the undisputed debt owed.  If the state legislatures truly believe that HOAs are the next best thing to Mom’s apple pie, they should be ready to ante up and financially support HOAs facing financial difficulties.  Perhaps in this way homeowners will get the accountability to the state and the requisite oversight of HOAs.

As to the broader solution, there is a just and compassionate legal solution to this state of affairs that can be put into place quickly and effectively. Allow the homestead exemption for HOA assessments!  If a state has no homestead protection, simply enact one ASAP!  This is a fair, compassionate, and sensible solution.  I anticipate strong opposition to this proposal, but I remind the opponents to be prepared to address the unclean hands of the HOA as summarized in this Common Sense series of papers.

PS.  I apologize for the intrusion by WordPress to have added underlines to certain words.

References