Tag: foreclosure

Alleged waiver of rights in HOAs are invalid

I congratulate California Senate Majority Leader Ellen M. Corbett for sponsoring SB 561. This bill asserts California’s rightful authority to impose and restore law and order over this second form of political local governments known as HOAs. This is still America, a land under the rule of law. The disintegration and fragmentation of government and society must be stopped before anarchy reigns, right here in America.

 

The law firm of Swedelson & Gottlieb (S & G) argues on its Blog that they know of no one losing their home just because they waiver their rights to have their payments applied first to assessment reduction rather than to collection costs. There are good, equitable and just reasons for paying down the debt first: paying the costs first prolongs the collection agency income stream, not the HOA’s, as the amount of debt goes on forever and may never decrease. Under these circumstances, like “being under water” in today’s housing market, why pay at all?

 

HOAs are required to apply payments to debt reduction, just like your credit card companies. With a straight face S & G states, “We are aware of no homeowners who have ever lost their homes in an association’s foreclosure simply because of unpaid fees and costs of collection.” So, I guess all is well and right with this use of the payment waiver.

 

This attitude, used by other proponents favoring the survival of the HOA and their incomes streams, portrays all members of an HOA as being so enamored with their HOA that they place their well being and financial conditions in the hands of the HOA board. They are portrayed as being true believers seeing no wrong with the HOA, much as one sees with many religious cults. They are portrayed as openly and eagerly waiving their rights in favor of the HOA no matter how disastrous to them. How insulting to all Americans: your obligation to the “state”, the HOA, is to make timely payments, and any rights, freedoms, privileges or immunities are notwithstanding.

 

In its argument for payment plans, created by the HOA’s agent, but “the board dictates the terms of the agreement,” S & G seems to contradict its argument that the “pay costs first” is for the benefit of the HOA, not the collection agency (emphasis added).

 

There is good reason for this– boards know from experience that many homeowners pay the assessment portion of the payment plan agreement but do not pay the costs of collection, knowing full well that the association cannot foreclose for costs of collection only.

 

Say what? The debtors will pay their assessments to the HOA, making the effort for the benefit of the HOA, not the collection agency? Why would a board give up its first claim to $$$ for the benefit of the collection agency? That doesn’t make sense at all, does it? Why are HOA boards allowing their right to first $$$ go to a “hired-hand” vendor, in violation of their duties to the HOA? Why?

 

It makes sense if the whole purpose of S & G’s position is not to benefit the HOA but its own pocketbook. Furthermore, S& G continues to whine about the debt owed to them that the HOA cannot pay since all the money is going to the HOA first. Boo hoo! I guess they know all about “You can’t get blood from a turnip.”

 

Isn’t that a business decision all businesses face? The loss against the cost of collecting? What about contingency collection agency arrangements? Don’t let S & G slip past this point! If they are so good, the HOA should insist on this type of an arrangement rather than the punitive arrangement now commonly used.

 

And when all else fails, we hear the familiar mantra, “But really, is it fair for the paying/current homeowners to have to subsidize delinquent homeowners?” Well, you see, that “contract S & G says binds all homeowners may not be fair to some homeowners, but that’s what the legal structure of an HOA imposes on members. Is it fair not to tell home buyers about this, and about some other waivers and surrenders of rights unbeknownst to them? Take a look at “The Truth in HOAs Disclosure Agreement” for some eye-openers.

 

Cleverly, S & G avoids the question of a violation of public policy, which as stated in the Restatement (3rd) of Property:Servitudes, Sec. 3.1, makes any covenant invalid. The argument against SB 561 is simply: How dare the California Legislature prohibit a homeowner, exercising his write to contract, without any duress, from surrendering his right to the ethical and fair procedure of debt reduction before costs. How dare the legislature!

HOA foreclosure rights — in-depth discussion with CAI’s CEO and Berding

An excellent news feature from CNBC on HOA foreclosures including CAI’s Tom Skiba and attorney Bill Davis, who is the fellow being sued by John Carona’s corporate entities has been posted on Evan McKenizie’s The Privatopia Papers blog.  See The next foreclosure fight, redux…

An amazing 32 comments in two linked threads have been posted by interested persons including, among “anonymouses,” Evan McKenzie, Tom Skiba (CAI CEO), HOA defender Tyler Berding, Fred Pilot, Fred Fischer,  and yours truly, G K. Staropoli (PVTGOV).  Where are you other guys?

The issue of HOA foreclosure rights is covered quite extensively from several points of view.  If you want to be in the “know”, you must read these comments to better understand the lunacy of “they signed an agreement to pay assessments” and “it ain’t fair for good owners to pay for  these people.”

Get your voice heard.  Send this Privatopia link to your state repesentatives today!

 

The acceptance of Privatopia and the New America of HOA-Land

In his recent interview on OnTheCommons, Evan McKenzie suggested that his new book, Beyond Privatopia, is a collection of his past papers. If so, I believe the following gives a glimpse into what the reader can expect.

In 2004, Arizona advocates had a tough fight to get HB 2402 passed into law. It was to eliminate HOA foreclosures, but we had to settle for no foreclosures for fines, retaining foreclosure for assessments.

McKenzie gave his views on HOA foreclosure and the need for HOAs to survive during this hard fought battle in his Privatopia Papers Blog of March 12 and 13, 2004. (Scroll down and read the March 12th entry, “The plain truth about HOA foreclosures…”, then read his defensive entry of the 13th, “More on foreclosure.” I, too, took offense to his views.

McKenzie’s comments were not at all helpful to the people suffering this gross injustice of this law. His statements reflected the views of the legal-academic aristocracy that the state must survive, that the state comes first. And by “state” I mean the HOA. That the New America of HOA-Land is a legitimate government of the people.

An excerpt from this lengthy entry sums it up,

A third [objection] is the lack of any alternative [by advocates] that would allow HOAs to continue functioning, and advocating instead for positions that would almost certainly destroy common interest housing and leave millions of people in major financial trouble. . . . HOAs would end up competing with all the other creditors–credit card companies, tax collectors, etc.–for the money they need to fix the roof this month. Net result: the existing owners bear the burden for the non-payers. . . . That is a completely unsustainable situation.

I’ve always been against associations having dictatorial power. I’m also against going to the opposite extreme and leaving them powerless. If we go from banana republics to failed states, most people won’t like the latter any better than the former, and somebody will have to pick up the pieces of failed CIDs. Who will that be?

McKenzie presumes that the status quo preserves the HOA, and that susbstantive reforms will only leave the HOA powerless and lead to its inevitable failure. As a political scientist, he does not address the questions that maybe, just maybe, with their current defective legal scheme that HOAs should be allowed to fail. He avoids “muni-zation”, creating special HOA “taxing districts” as public entities, as an alternative. He does not address the question as to why HOAs deserve government protections to foreclose for failures to pay “taxes” as if it were a public entity. The HOA has no hard cash outlays to recoup as a lender does.

Perhaps he fears that real democracy will destroy the HOA that needs strict enforcement of “laws” and an unquestionable obedience to its often arbitrary and capricious objectives in order for it to survive. That public government intrusion is worse than today’s unaccountable private HOA government intrusion. He no longer speaks in the same terms of the constitutional arguments as he did in the 1994 Privatopia.

History shows that successful social and political change involved both an intellectual group to guide and show the way, and an operational group to make their thoughts a reality — working together. You just need to look at the American Revolution, the Irish and Indian independence movements, and the rise of communism in Russia, China and Cuba. There are no intellectual leaders for HOA reforms, and that is a prime reason why the “pink flamingo groups” are not united.

In Gandhi’s dealings with the British Raj for independence, the Brits reminded him that India was a British Colony. He replied, “India belongs to the Indians.” 

In America today, America belongs to the people, not to the HOA regime.

HOA attorney failure to inquire into merits of a complaint — R Civ P. 11(a)

  

I’ve mentioned several times that there are many instances where the HOA attorney could easily be seen as a co-conspirator against the homeowner.  I cited civil court rule R 11(a) – found in all states – that says,

 

“that to the best of the signer‟s knowledge, information, and belief formed after reasonable inquiry [the document] is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose.”

 

In other words, the filing a suit to collect attorney fees, win or lose.  Problem is that the HOA winds up paying when the homeowner does standup in court and demands evidence and facts.  But, in any case, the attorney gets the $$$.

 

While this case does not involve unsubstantiated violations by the HOA, or unreasonable interpretations of the governing documents or statutes, it well illustrates a very important defense argument.  In this Arizona case, CAI HOA attorney Maxwell contested HOA’s second position to the first mortgage lender’s lien, arguing that the statute applied  to first mortgages in time only.  Of course, there was the usual demand for attorney fees  since the HOA lost.  I guess that includes fees for the appeal, too.  

The court found as to the good faith of the filing attorney that,

 

“The good faith component of Rule 11 is not based on whether an attorney subjectively pursues claims in good faith, but instead is judged on an objective standard of what a professional, competent attorney would do in similar circumstances . . . . The trial court determined sanctions were appropriate because there was “no statutory basis or any extension of statute that would lead counsel to presume that Plaintiff had priority over a first deed of trust filed by the Bank[s].”

 

The appellate court said it quite pointedly: “As discussed above, the language in § 33-1807 is clear and unambiguous. Yet, both here and below, VJA bases its arguments on an interpretation of the statute that is contrary to its plain language.”

 

Don’t be afraid to remind your attorney about this Rule 11(a)  — they are usually hesitant to attack their fellow attorneys as they may be next so charged. 

Villa de Jardins Assn v. Flagstar Bank, CA-CV 2010-0177, (Ariz. App. Div. 2, Apr. 22, 2011).

CAI asks why the government won’t let HOAs do as they please

 Under the slow awakening of state legislators across the country, Community Associations Institute (CAI) finds it necessary to remind the faithful followers and public policy makers of the grand and immense contributions that HOAs make toward our society and system of government[1]. So it claims in its “Why HOAs?” article.

 

In article’s second paragraph the writer recites the history of the “master” land owner who sets forth the use and control over the land forever in what we know as covenants running with the land, or CC&Rs.  He then speaks of the value of such CC&Rs, in his next paragraph, bypassing any mention of duly elected government of the homeowners and democratic functions of the HOA. No, you get the HOA constitution from the profit-seeking developer and his attorney written, almost boiler-plate, CC&Rs. So much for a democratic government.

 

Holmgren, the writer, continues to properly inform the reader that local governments like this – a privatization of government services onto you, the homeowner. But, there is one major problem not mentioned. He does not mention that  the protections of your rights and freedoms under the Constitution does not apply to these private contractual HOAs. No, it’s definitely not mentioned, not even hinted.

 

In an abrupt about face, Holmgren then speaks of “why government is so rarely a friend to homeowners associations,” and “they [government] believe homeowners associations are an untoward restriction on individual freedom.”   The issue is one of power – the writer, following CAI policy, firmly believes that HOAs are indeed independent principalities not to be regulated as any other entity, especially as a private government.  He plays to the simplistic dogma that the people can do anything they like, and regulation to protect one faction against the evils of another doesn’t apply to these principalities.

 

The writer then directly attacks the legislatures across the country that have over the years enacted pro-HOA laws. Holmgren blames the government as being opposed to HOAs. Did he fall off a turnip truck and hit his head? In Arizona where he performs, and as reflected in the pro-HOAs laws enacted in other states, my data over the past 8 years show only three substantive bills (foreclosure, due process, control of public streets, etc) out of thirteen that were put into law, and one was declared unconstitutional in a suit brought by the Carpenter Hazlewood law firm.

 

While CAI argues before the legislatures about freedom of local control and the rule of the majority, it seeks top-down imposition of laws upon the HOA homeowners, without their consent and to their detriment. It has now admitted that HOAs are mini-governments, so now it’s OK to interfere with a government contract. And that the right of a minority to change the HOA “constitution”, the CC&Rs, is consistent with democratic government.[2] It appears to be an effort to control the HOA board cliques with their “expert” advice.

 

In spite of its alleged argument with the legislature (carefully called “government”), CAI figures that these draconian undemocratic propositions will be accepted by the legislators in view of their alleged necessity and compelling justification to protect HOAs.  Propositions denying homeowners the equal protection of the laws and due process protections.  I guess CAI, a third-party interloper that seeks to alter the private contract between the HOA and the homeowner, are feeling the threat of a loss of their ability to show a value to HOAs.  And to protect their income stream.

 

This is a sad case of “the tail wagging the dog.” It is sad because there exists an alternative legal scheme for those individuals who seek the benefits of planned communities and condos, who with full knowledge of all the factors relating to HOA lifestyles and without duress, so freely choose. This alternative, existing in all states today[3], can provide these benefits along with the protections of their rights, freedoms, privileges and immunities under the 14th Amendment and every state’s Declaration of Rights, which do not exist under the HOA authoritarian regime.

 

References

  1. CAI Carpenter Hazlewood Delgado & Wood enewsletter of 3/11/11, Why HOAS?, Mark Holmgren.
  2. See video of CAI lobbyist’s statement before the Arizona House Government Committee meeting of 2/15/11 on HB 2441. (http://azleg.granicus.com/ViewPublisher.php?view_id=13, scroll down to entry link).
  3. See A proposal for the “Muni-zation” of HOAs; Stop developers from granting private government charters.