Tag: foreclosure

HOA debate: illegitimate government and invalid CC&Rs contract

A very important and lengthy exchange on substantive matters regarding the HOA legal structure and concept can be found on Evan McKenzie’s The Privatopia Papers blog. The topics of discussion are the legitimacy of private HOA government and the validity of CC&Rs as contracts.

Participants, as of this writing, including McKenzie, are Tyler Berding, a California attorney, and homeowner rights advocates Fred Pilot, Fred Fischer and yours truly. The discussion is under the heading, “Do owners believe CC&Rs are contracts?” in the January 2012 postings. The debate was triggered by Pilot’s post of December 31, 2011, commenting on a article wherein he states, “That’s because people don’t see HOA covenants — a real property contrivance — as contracts,” and, “In addition, many property owners don’t see HOAs as legitimate governing authorities.” There are an additional 10 comments on this posting as of this writing. 

Follow the debate at The Privatopia Papers.

Thanks to Evan McKenzie, author of Privatopia (1994) and Beyond Privatopia (2011), for publicizing this important debate.

CAI admits desirableness of HOAs on decline

Now that hard times have come upon us, the weakness and high risk of living in an HOA has become readily apparent, and too late for all those living in HOAs. The coerced acceptance under false pretenses, and the all too eagerness for people to believe, hid the reality that HOAs are like privately held small businesses and partnerships that expose the owners to high financial risks not of their own doing.

As I wrote,

The pro-HOA supporters’ reason for the need for foreclosure rights can be found in the defective HOA legal scheme that is similar to a partnership. In partnerships there are a limited number of financial supporters, the owners, who are jointly and severally responsible for all the HOA debts — those with the money pay for those without the money. A legality. And like a privately held small business, the financial base is relatively small and limited to the homeowners who have very little practical means to escape their obligations by leaving the HOA. (Call for HOA action: “Occupy Wall Street” vs. Occupy the Legislature).

Like those caught in privately held businesses and partnership “gone south,” there is very little that can be done for homeowner-investors in HOAs. HOA foreclosure is unjust and lacks any evidence to salvage an HOA. Those very same laws that gave the image of safe investments and a happy community are at the heart of the problem. You know, like the banks giving away all those almost free mortgages.

Courts finally realizing the gross injustice of HOA foreclosures

The gross injustice of HOA foreclosures is slowly being realized by the courts. In Brooks, the Tennessee appellate court heard an appeal on a non-judicial foreclosure whereby the HOA sold, and bought, a “free and clear” home valued in excess of $321,740 for just $12,828, of which about half, $6,734, were attorney fees.

That’s more than 25 times the “damages” to the HOA, and more than the 10 times limit set by the US Supreme Court for punitive damages. See State Farm v. Campbell, 538 U.S. 408 (2003). And, the Rivertown HOA failed to acknowledge that the homeowner had paid part of this amount before the foreclosure.

The court held, emphasis added,

In addition to finding that the foreclosure sale price shocked the conscience of the court, the trial court determined that various irregularities in Rivertown’s bookkeeping justified setting aside the sale. In its January 27 order, the trial court found that it was “unclear as to what amount would have brought Plaintiff to a zero balance on assessments[.]”

Brooks v. Rivertown on Island, No. W2011-003260COA-R3-CV (Tenn. App., Dec. 6, 2011).

Mr. President: require all HOAs to be subject to the Constitution

By virtue of an unconscionable adhesion private contract favoring the subdivision developer and HOA board of directors, homeowners associations are allowed to deny constitutional protections and the application of the laws of the land. Over 20% of Americans, who are homeowners living in these private governments, live at the “suffrage of the board,” with state laws that do not punish board violations of the laws or of the governing HOA documents.

The alleged “consent to agree” fails all contract law requirements, and does not pass judicial scrutiny for such a waiver or surrender of one’s freedoms, liberties, immunities and privileges as a citizen of his state or as an American citizen. The selling process is ripe with misrepresentation, half-truths, and unspoken material facts about life in an HOA. There are no fair election laws or due process procedures for a fair and just hearing as are provided by public protections.

Foreclosure rights are granted to HOAs as an intimidation and punishment vehicle, and are not found anywhere else where corporations  do not advance hard cash as do banks or mortgage companies.  The HOA does not advance hard cash! A homeowner can lose all his equity for a debt less than 10% of the value of his equity. The foreclosure process is discriminatory against those who have high equity — those who have paid their mortgages and HOA dues for a very long time. It is only from these good people that the HOA can expect to obtain any payment of its debt, provided there is sufficient equity to make a payoff.

Are we united or are there two forms of political government within this great country?  If America is to remain a united people, it is time that the US prohibits the writing of private contracts, Declarations of CC&Rs, subject to common law servitudes in order to subvert the application of the US Constitution.  It is time that these private local governments be made subject to the US Constitution and stop being treated as independent principalities.

Call for HOA action: “Occupy Wall Street” vs. Occupy the Legislature

“Occupy Wall Street”! What a way to get attention! How about an “Occupy the Legislature” demonstration against unjust and unfair HOA foreclosures with their intimidation, threats, and cruel and unusual punishment? In every state — especially Florida, Nevada, Arizona, Texas and California.

The pro-HOA supporters’ reason for the need for foreclosure rights can be found in the defective HOA legal scheme that is similar to a partnership. In partnerships there are a limited number of financial supporters, the owners, who are jointly and severally responsible for all the HOA debts — those with the money pay for those without the money. A legality. And like a privately held small business, the financial base is relatively small and limited to the homeowners who have very little practical means to escape their obligations by leaving the HOA.

Those who feel that foreclosure is needed need to ask themselves, Does the means justify the end? An “I don’t care” response is unacceptable, and legitimizes the authoritarian HOA government. Foreclosure is a special law for a special group that violates state constitutions — the equal protection of the laws, special laws for private organizations, and “color of law” constitutional violations. No state has declared its intent or purpose for the statutes – they wouldn’t dare – that justifies a legitimate government interest that can withstand judicial review of the statute. And that review is a strict review that looks to a necessary and compelling reason to deprive citizens of their rights.

And remember, there is that huge cloud hanging over the genuine and freely given, after full knowledge of all the material facts, consent to the CC&Rs. CC&Rs, a real estate doctrine based on equitable servitudes and not constitutional law, do not legally require an explicit signature or explicit surrender or waiver of constitutional rights, or for a bona fide consent to be governed by the de facto HOA political government.

Homeowners must let go of their irrational fears that the HOA would be shut down. They must stop their blind adherence to the CAI chant of “no government intervention” that really is a belief that HOA governments, unaccountable to the Constitution and state governments, are far better than public government with its police powers to protect citizens from abuse by other citizens.

An Occupy the Legislature movement is a grass roots, ground level action. It must come from local homeowners organized under local leadership, behind a fixed purpose. And right now, “Stop HOA foreclosures” is a very appropriate mission.

See HOA foreclosures:  will the real CAI stand up