Tag: foreclosure

Fines: unconstitutional delegation to HOAs

This question of HOA fines, in 2 cases, was brought to my attention in my early years by Shu Bartholomew. It is a prime example of how constitutional issues can perk down and affect members in HOA-Land.  It is important to understand that they apply to just 2 states, RI and VA. Why not in other states?  Because legal doctrine holds that all bills are deemed constitutional unless challenged in court. If people do not raise these issues in court, like I did in Arizona in 2013, you can see HOAs fining away in violation of the laws of the land.

A 1982 VA supreme court in Gillman (292 S.E. 378)  overturned imposed fines and a lien, holding,

“We find no language in the Condominium Act which authorizes the executive or governing body of a condominium to levy fines, impose penalties, or exact forfeitures.”  

“The imposition of a fine is a governmental power. The sovereign cannot be preempted of this power, and the power cannot be delegated or exercised other than in accordance with the provisions of the Constitutions of the United States and of Virginia. Neither can a fine be imposed disguised as an assessment.”

NOTE: Current VA POA statutes speak only of “charges” and liens for non-compliance, nothing about fines. No violation of fundamental rights.

In Foley (RI, 1999), the question of the constitutionality of HOA fines was answered after 4 decisions. The issue involved whether the Condominium Act of 1982 violated the RI Constitution of “an unconstitutional delegation of power to a private entity.”  The RI Supreme Court remanded to the superior court, outlined below,  to decide the constitutionality question.

The key factor involved the enforcement of fines by means of foreclosure. Only recently have the courts and legislatures looked at the validity and fairness of the HOA foreclosure process. The owner’s equity is wiped out and raises the question of a cruel and unusual punishment in violation of the 8th Amendment. The supreme court and remanded trial court decisions are presented.

Foley v. Osborne, 724 A.2d 436 (R.I. 1999)

2. Improper Delegation Claim

The plaintiff argued on appeal that the actions taken by the committee pursuant to provisions in the 1982 act were illegal because they stemmed from an improper delegation of article 10 judicial power to a private entity. R. I. Const., art. 10. We are of the opinion that plaintiff  properly presented his claim that there was an unconstitutional delegation of power to a private entity.

In his opening statement, plaintiff argued at length — again without objection — that the 1982 act allowed an unconstitutional delegation of police power to the committee, a private entity. . . . . The trial justice, however, subsequently issued a bench decision and judgment that failed to rule on plaintiffs argument that the 1982 act unconstitutionally delegated  judicial power.

Consequently, we remand this case to the Superior Court with our instruction that the trial justice consider and rule on whether in this case the 1982 act represents an unconstitutional delegation of judicial or police power to the condominium association, a private entity.

If the trial justice finds that the delegation is unconstitutional, then within the time permitted for appeals, the defendants may seek appellate review of the trial justice’s ruling; alternatively, as a consequence of the trial justice’s ruling, the defendants may bring “an action to recover sums due for damages or injunctive relief or both” in accordance with the condominium association’s bylaws.

If the delegation is found to be constitutional, the trial justice must then find whether any conflicts between the provisions of the 1982 act significantly modify the relation between an owner and an association where, as here, the bylaws provided for a judicial procedure prior to foreclosure.

If the trial justice finds no conflict and affirms the previous judgment, the plaintiff may seek review of the ruling. If the trial justice finds such a conflict, the defendants may appeal pursuant to the rules  of appellate procedure.

Foley v Osborne, 1999 R.I. Super. LEXIS 50 (Newport Superior Ct  on remand)

[Decision on remand from RI Supreme Court (724 A.2d 436)]

The Superior court held the following.

Although other statutes permit debt collection without court intervention, none authorizes private entities to impose fines.  It is the authority to impose fines and to enforce them that distinguishes the 1982 Act from other legislation. Finally, the act empowers the association with the ability to enforce its orders by depriving a violator of his property by foreclosure. In this capacity, the association acts as a tribunal exercising judicial power.

For the foregoing reasons, the Court finds that the 1982 Act represents an unconstitutional delegation of judicial or police power to the condominium association, a private entity.

The Collected Writings TOC 1

Announcing “HOA Constitutional Government: the continuing battle,” is now available on Amazon as a Kindle eBook. See https://www.amazon.com/dp/B0CSC5LCY8. Paperback to follow.

I have included a table of contents of 56-issues reflecting perspectives, views, opinions, and documentation that point the way to HOA substantive reforms.  Readers may not agree, accept, or like what is stated in these issues that have been essentially avoided over the years; they are of immense educational value  and necessary for a realistic picture of HOA-Land. Part 2 of the TOC to follow.

See: HOA Constitutional Government: collected posts.

I.  On Reform Legislation . . .

d.  Decl. of Indep. from HOA government — 2000 . . .

e.  A united, national front to HOA reform legislation (2023)      . . .

f.   Two distinct levels for HOA legislation (2019)   . . .

g.  Analysis of The Homes Association Handbook (2006) . . .

h.  America’s homeland: HOA law vs. Home rule law (2022)        . . .

i.   Preface to HOA Common Sense (2021)    . . .

j.   HOA Common Sense, No. 1: The New America of HOA-Land (2013) . . .

k.  the NJ Supreme Court opinion in the Twin Rivers HOA case (2008) . . .

l.   CAI firmly supports the New America of HOA-Land (2011)     . . .

m. Authoritarianism in America; authoritarianism in HOA-Land (2022) . . .

l.   AZ bill, SB 1148, seeks to restore OAH adjudication of HOA disputes (2011) . . .

m. Arizona’s new “Take That George!” law: defend HOA statutes (2010)           . . .

n.  AZ Rep. explains failure of HOA reform legislation (2013)      . . .

o.  The Florida (HB 1397): police powers and the loss of fundamental rights (2009)  

p.  Landmark FL HOA law imposes criminal conduct (2023)       . . .

q.  Colorado senator’s guide to effective HOA legislation (2013)  . . .

r.  NC reform bills need your support (2023)          . . .

s.  North Carolina: second battleground for people’s rights in HOAs (2013) .  .

t.  CA bill AB 1410 –  a step backwards for HOA homeowner rights (2022)       .  .

u.  Substantive SC HOA reform bill – end foreclosure (2019)       . . .

v.  Effective HOA reform legislation (2023) . . .

w. HOA member Declaration of US and State citizenship (2015) . . .

NC foreclosure bill SB 312 dies silently

I had sought for a representative example of emails to the legislators  and copies of proposed testimony before the hearing committees that I would review and add constitutionality challenges. Having received none from the advocacy group, I found the following event an excellent case to demonstrate the need to apply constitutional law.

A 2023 NC bill taking strong stand on HOA foreclosure rights. It was a bill containing above and beyond restrictions and actions on filing liens for failures to pay assessment.  It was read and sent to the rules committee in March without being assigned to any hearing committee, as is SOP. As I explained in “Understanding the Legislative structure,” the Rules Committee is controlled by the majority party leaders and can hold a bill from being heard, which it appears has happened.

My review and analysis rests solely on the following. The bill had good intentions but lacked any real support or concern from the bill sponsor.  It simply deleted all references in the NC General Statutes granting the HOA rights to foreclose on” dead beats.” I am not aware of any social media or news media coverage of this important bill.

In general, my recommendations on preparing and supporting favorable legislation are presented in Legislative proposals and legal memoranda, but here I apply those recommendations to this bill.

First, in a highly controversial bill as we have here, the sponsor should have included an Intent section that provides the rationale for the need for the bill to be made law. Even if not passed, the Intent section becomes part of the legislative record otherwise silence reigns.*  A host of legal authority failed to be presented to the NC General Assembly that, among other violations, raised constitutional issues of violations of the 8th Amendment against cruel and unusual punishment.

Of particular authority – persuasive authority in the courts – that carries strong weight is found in the Minnesota decision: Supreme Court finds taking excess foreclosure funds unconstitutional. 

“She brought ‘claims under the Takings Clause of the Fifth Amendment and the Excessive Fines Clause of the Eighth Amendment.’ . . . Because we find that Tyler has plausibly alleged a taking under the Fifth Amendment [eminent domain] . . . we need not decide whether she has also alleged an excessive fine under the Eighth Amendment.”

For a discussion of foreclosure injustice, see HOA Common Sense, No. 8: Draconian punishment and intimidation. Also see the 2019 SC bill analysis, Substantive SC HOA reform bill – end foreclosure.

 “The Eighth Amendment’s Excessive Fines Clause is an incorporated protection applicable to the States under the Fourteenth Amendment’s Due Process Clause. . . .  The Fourteenth Amendment’s Due Process Clause incorporates and renders applicable to the States Bill of Rights protections “fun­damental to our scheme of ordered liberty.”

Now is the time for all good advocates . . .

The NC legislature is still in session and bills are carried over to the following year in NC’s biannual sessions.  With a strong outcry from NC citizens and advocates the Rules Committee can place this bill back into play by assigning a hearing committee and allowing for a vote; if not too late this session then next year. (See Understanding the Legislative structure).  Support by the Sponsor, Senator Kandie Smith, is a strong endorsement.

The ball is in the NC advocate’s court.

HOA home is security against HOA failure

On a FB advocacy group, a member offered advice to another who was in a late payment dispute with their HOA and being sued. She said pay in protest, which is nice but leaves loose ends and can be, and will most likely be, rejected by the HOA.  I replied:

Interesting and I hope it works. Way back an aggravated homeowner in dispute who refused to pay assessments was sued. Rationally, and applying a fair, just and acceptable solution to debt disputes, told the judge that she would place the owed money in escrow until the case was resolved. The judge said, NO! That was way back in 2003 and things are a little bit better now, and there is another judge. Make the plea to the judge and not the HOA.

I’ve come to believe that state legislatures regard HOAs as a state security interest – in contrast to a national security interest– and can impose what amount to martial law that allows the curtailment of your rights and freedoms. In short, it seems that the HOA could not be allowed to fail so pay up or die. At the cost or your home and all your equity in foreclosure. Talk about intimidation!

YOUR HOME HAS BEEN PLEDGED AS SECURITY TO THE HOA, without saying so in your “fully agreed upon’ CC&Rs!

Supreme Court finds taking excess foreclosure funds unconstitutional

The Supreme Court landmark decision in Tyler v. Hennepin County (No. 22-166, May 23, 2023), addressed an appeal by a  non-HOA homeowner in Minnesota who was foreclosed on by the state.  She brought “claims under the Takings Clause of the Fifth Amendment and the Excessive Fines Clause of the Eighth Amendment.” It has an immense impact on the constitutionality of HOA foreclosures. The Takings Clause is applicable to the action of states by means of the 14th Amendment.

(These claims of unconstitutional foreclosures and excess fines as a punished were argued in my 2013 pamphlet, HOA Common Sense: rejecting private government, No. 8, “Draconian punishment and intimidation.”)

In Tyler, the Court maintained that while states have imposed property  taxes,

“Such taxes are not themselves a taking, but are a mandated “contribution from individuals . . . for the support of the government . . . for which they receive compensation in the protection which government affords.”

And it posed, “The question is whether that remaining value is property under the Takings Clause, protected from uncompensated appropriation by the State.”  The Court answered,  “Our precedents have also recognized the principle that a taxpayer is entitled to the surplus in excess of the debt owed.” 

The Court’s reasoning extended the Takings Clause to other arenas beyond taxes,

“Finally, Minnesota law itself recognizes that in other contexts a property owner is entitled to the surplus in excess of her debt. Under state law, a private creditor may enforce a judgment against a debtor by selling her real property, but “[n)o more shall be sold than is sufficient to satisfy” the debt, and the creditor may receive only “so much [of the proceeds) as will satisfy” the debt. . . . Likewise, if a bank forecloses on a home because the homeowner fails to pay the mortgage, the homeowner is entitled to the surplus from the sale.”

The Supreme Cout concluded,

“Because we find that Tyler has plausibly alleged a taking under the Fifth Amendment, and she agrees that relief under “the Takings Clause would fully remedy [her] harm,” we need not decide whether she has also alleged an excessive fine under the Eighth Amendment.”

In a broad, extended view of this decision, one can say that any state law that does not allow excess funds from foreclosure to belong to the debtor, by public or by private foreclosures, would be deemed unconstitutional.  And that goes for HOA foreclosures!  No longer need we address the opposition that HOAs are private contracts and the Constitution and laws of the land do not apply.  This momentous Supreme Court decision has knocked down the doors for homeowners in HIOAs.