Tag: foreclosure

co-opting the HOA “homeowners bill of rights”

 

In 2008 the 1994 UCIOA (Uniform Common Interest Ownership Act) was modified to accommodate the outcry from homeowner rights advocates.  This shortened version is known as the Uniform Common Interest Ownership Bill of Rights Act (UCIOBORA), and is a political maneuver to co-opt the real meaning and intent of a “bill of rights.”  Here’s an explanatory excerpt from UCIOBORA:

 

Further, ULC [Uniform Law Commissioners] acknowledges that it will often not be feasible to enact UCIOA 3.0, in part because of the difficulty drafters in the States may encounter in integrating any new adoption of the existing Uniform Acts with the laws that may already exist in a particular state.  For these reasons, ULC  promulgated a free-standing and relatively short Uniform Act that addresses all of the ‘association versus unit owner’ issues touched on during the drafting of the 2008 UCIOA amendments. The free-standing Act is known as the Uniform Common Interest Owners Bill Of Rights Act or “UCIOBORA”. While not all sections of UCIOBORA are identical to UCIOA 3.0, the concepts underlying each Act are the same, and are adjusted simply to recognize the simplified nature of UCIOBORA.
 
 
In short, UCIOA wasn’t selling.  It seems that UCIOBORA is the sad result of the political motives to get UCIOA selling again. It’s a document that does not at all read like the US Bill of Rights, or any state constitution’s Declaration of Rights (state constitution equivalent of the Bill of Rights), or even the Declaration of the Rights of Man and Citizen (France, 1793).  Far from it.  Rather it reads like your current CC&Rs and UCIOA with a number of concessions to reality.  However, it lacks substantive protections of homeowner rights, such as: a fair and just due process by means of an independent tribunal; fair elections procedures with equal and fair access to membership lists, and equal opportunity appearances in the HOA newsletter/website; restrictions on the right to foreclose, since the HOA is not in the same position as a lender who had advanced hard cash; and enforcement by means of penalties against board violations of the governing documents, otherwise all such laws are just recommendations dependent on the goodwill of the affected persons.
 
A homeowners bill of rights is necessary because the Constitution with its Bill of Rights amendments does not apply to private HOA governments.  HOA governments operate outside the Constitution, which is greatly desired and defended by HOA supporters as they would not be able to act in ways that a civil government cannot act.  A statement in a declaration that says that the HOA is subject to the Constitution is meaningless, since the Constitution does not apply to private entities.  What is necessary is a statement that the HOA acknowledges the Constitution as the supreme law of the land and irrevocably agrees to be subject to it  as if it were indeed a government entity.
 
 
Short History
In 1997, Elizabeth McMahon of AHRC filed a Homeowners Bill of Rights with the California Law Review Commission looking into revising California’s HOA statutes.  In 2000, George K. Staropoli submitted a statement to the Arizona Interim HOA Committee, Homeowner’s Declaration of Independence from the HOA system of government.  In 2006, AARP produced a public policy statement, A Bill of Rights for Homeowners in Associations, written by Houston attorney David Kahne.  In 2006 the legal-academic aristocrats (lawyers for the real estate interests) at a Texas senate hearing proposed a Texas Uniform Planned Community Act (TUPCA).  Responding to Texas homeowner rights advocates, the committee was told that UCIOA (the model act for TUPCA) was being modified to include a bill of rights section.  In 2008, George K. Staropoli informed the California Law Review Commission of a proper Members Bill of Rights section to the Davis-Stirling Act (This section was later  dropped from the revision).
 
 

Who prosecutes on behalf of homeowners in HOAs?

Qui Pro Domina Justitia Sequitur

(‘who prosecutes on behalf of Lady Justice?’)

 

 

Attorney Penny Koepke appeared on the Nov. 19th Arizona KPHO TV segment, “HOA Disputes,” as the demure and soft spoken attorney from the Ekmark & Ekmark law firm, and spoke in favor of the demise of due process protections for homeowners. (See http://www.kpho.com/local-video/index.html and select “HOA Disputes”). The court case discussed in this news segment was Gelb v. DFBLS (in re Sedona Casa Contenta HOA).

 

Please note that the Carpenter Hazlewood law firm, which pursued the constitutionality challenge to the state agency adjudication of HOA disputes in three cases leading up to the Gelb decision, does not appear in the KPHO segment. Partners Carpenter and Hazlewood, as well as Curtis Ekmark, are all members of the national HOA lobbying trade organization (not an educational 501(c)3 organization), Community Associations Institute, CAI. Ms. Koepke does not admit to being a member, but frequently speaks and lectures at seminars and conferences for CAI.

 

In 2004, Ms Koepke also appeared before the Arizona House FMPR committee hearing on the HOA foreclosure reform bill, HB 2402. She addressed the committee and responded to questions by the bill’s sponsor, Rep. Farnsworth, for about 21 minutes. (The audio CD is available from the Clerk’s office archives for a small fee).

 

Following this hearing, I produced a segment on HB2402 from the House audio CD. In her testimony Ms Koepke had stated that she was an ethical person of integrity who foreclosed only as a last resort upon the instructions of her HOA clients. However, she had a problem with making use of alternative methods of collecting debts as are available to all lien holder in other arenas, and saw no moral issue with completely stripping the homeowner of all his equity for a few pieces of silver. Her justification was that they were “scofflaws” who needed to be punished to deter future untimely payments. In the complete audio, you will hear the committee Chair informing Ms Koepke that such actions were “unconscionable.” I added a commentary as an addendum, which presented a few background cases and incidents in which Ms Koepke was involved. This short commentary video can be found at Foreclosures.

 

It should be apparent by now, with respect to foreclosures and due process protections in general, that a homeowner can get a better deal from the IRS than from his HOA backed by attorneys. There is no requirement in the HOA “contract” — the CC&Rs “constitution” — requiring the HOA to be fair, just, compassionate, conciliatory or charitable. Remember: “It’s the contract, stupid,” and you are not protected as one would think under state laws and constitutions.

Mortgage industry – developer cooperation for HOA survival

Does the mortgage industry collusion extend beyond just foreclosure to a broader tit-for-tat, “one hand washes the other” cooperation with HOA developers? Ever wonder why your CC&Rs contain a 20 -30 year “no terminate” clause? Or why your CC&Rs contain archaic and ignored wording that the first lender must approve any CC&R changes? Or why there’s that PUD rider attached to your mortgage?

In order to understand the “why” we must go back in time to the period of the original promoters of the legal scheme for planned developments with homes associations. That was in 1964 with the publication of the HOA mass merchandising document, the Homes Association Handbook, Technical Bulletin #50, by the Urban Land Institute. (For an analysis of this document see Part I of The Foundations of Homeowners Associations and the New America). The document was one that spoke of a utopian scheme for better communities, which would also make tons of money for the developers and promoters. In 1964, HOAs were a new concept that had to be sold to all the “players” in order for the concept to succeed and, as with any new venture or concept, it came with high risks. One question for these mass marketeers was how to get funding from banks and mortgage companies to finance the development of planned communities, and subsequent HOA home mortgages. It was a question of insuring the survival of the HOA and, consequently, its marketing success.

First, the right to foreclose. One way was to come down hard on homeowners who didn’t pay their “fair share” and threatened the survivability of the HOA: create covenants that run with the land granting the HOA automatic liens for assessments and the right to foreclosure for non-payment. And, since there may be instances where there would be insufficient funds, as they recognized the second position status of the HOA, it was necessary to include a grant of right to seek a personal judgment against all of the assets of the non-paying homeowner. All in the name of survivability of the HOA for the future success of the promoters. (See Section 12.3 and 12.31 of the Handbook).

They were not concerned with constitutional and legal issues relating to democratic governance and protecting the rights, freedoms, privileges or immunities of the member-owners. They could not tolerate democratic protections by means of independent tribunals and so gave themselves, as Declarant, dictatorial rights over the community. The developers had to stay in control to protect their investments and profits.

 Second, “sweeteners” for the lenders. With these strong measures to protect the HOA income stream from non-payers, who, by the way, may dislike the way the HOA was operated and want to withhold payments, they could now approach the mortgage companies and banks. They gave the lenders additional protections to get them on board – the HOA cannot be terminated until after the first 20 -30 years of operation, even though the developer no longer had any obligations to the lenders – he was long gone and had paid off the lenders.

So, why this “no terminate” clause? Why the PUD rider on individual home mortgages not owned by the HOA, that holds no title to the individual home? Why should the lenders want additional assurances when they got none of these with traditional, non-HOA homes? Why were they given these “sweeteners?” As an inducement so they would make loans in support of this unproven concept?

It appears that this was all for their mutual benefit, at the expense of the unsuspecting home buyers.

Stop your HOA foreclosure –demand the HOA to prove title

The real issue as I’ve pointed out is:  Does the foreclosing party hold the deed?  That’s what all the “robosigning” and “document irregularities” are all about — saying that they held the title.  The MSNBC Dylan Ratigan show at 1:00 PM MST described the problem quite well.  You can track it down by going to the internet and viewing the segment online. (View http://www.msnbc.msn.com/id/31510813/).

Ratigan asked if the foreclosure fraud was intended to cover-up the larger mortgage “give away” fraud.  Ohio AG said foreclosures  “involved filing fraudulent evidence” in the foreclosure process – “fraudulent affidavits.”  Ratigan said it quite clearly: “the banks to bypass the normal court procedures  to force the mortgage holder to prove they own the property in order to foreclose.”

 HOAs DO NOT HAVE TITLE TO FORECLOSE!   

While the CC&Rs  and state laws allow them to foreclose, most must follow the laws regarding mortgage foreclosures.  Homeowners facing foreclosure should get an attorney to stop any pending HOA foreclosure, ASAP!

And, have you asked yourself, why didn’t the HOA attorneys know about holding title?  Why didn’t the national HOA education and lobbying group’s College of Community Association Lawyers (CAI’s CCAL) know about holding title?  Why not?

See HOA foreclosures illegal under “no title” rulings?

HOA foreclosures illegal under “no title” rulings?

I now address the overall legitimacy of this right by the HOA to foreclose. I have said enough about the HOA draconian foreclosure right, its discriminatory nature, and its cruel and unusual punishment aspect when the homeowner losses more than 10 times the amount owed the HOA. Or the fact that it reflects the mismanagement by the board who refuse to use standard AICPA “provisions for bad debts” to ameliorate any shortfalls.

Most CC&Rs and state laws grant the HOA a lien on the homeowner’s property from the day the assessment is due, and that the perfection of that lien is automatic when the CC&Rs are filed with the county clerk. They go on to say that the foreclosure of the lien is the same as a mortgage foreclosure. And, to get around the protections against deficiency sales, the right to a personal judgment is given the HOA by the unsuspecting homeowner. However, if the underlying right to foreclose is invalid, then the personal judgment is notwithstanding. Also, the claim that the lien is supposedly a valid consensual lien is irrelevant to the argument advanced below.

Recent developments (see in general, “MERS: Is Your Home Foreclosure Proof?”) have surfaced the longstanding rule of law that to foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. Although the court rulings pertain to the electronic deed filing service, MERS, the reasoning can easily be applied to HOAs since they do not hold title, nor can they establish a chain of title for relief. The law requires that the party foreclosing must produce a promissory note or assignment that it is entitled to relief. The recent court cases held that, in regard to MERS, if the foreclosing party is not the title holder of properties held in its name, the chain of title has been broken, and no one may have standing to sue.

 

We all know that the HOA is not the title holder, nor has an assignment of interests in the property. Remember that the laws and CC&Rs explicitly specify that the HOA foreclosure procedure follows a mortgage foreclosure procedure, which renders its right to foreclose invalid under the recent court holdings (California, Florida, Kansas, Nebraska all serve as persuasive precedent). If the laws so favored the protection of a person’s home as to require a proof of a chain of title, there should be no exception for the HOA to have a bona fide right to foreclose.

There cannot be unconstitutional special laws for a private organization without passing judicial scrutiny as to an appropriate level of government interest or purpose. If there is such a compelling necessity, and not just a convenience, then why not protect the homeowner by declaring the HOA a government entity subject to the same constitutional restrictions and prohibitions as all other government entities are subject?

 

These recent developments also raise the issue of an entitlement to relief. What is the entitlement to relief owe to the HOA that warrants cruel and excessive punishment through foreclosure? What are the damages to the HOA that are never stated by the HOA to warrant such a draconian procedure? Damages that favor and benefit the third-party HOA attorney more than the HOA itself? If the lender must produce a chain of title when it has advanced hard cash, why is the HOA, who has not advanced any hard cash, entitled to the same relief?

 

Homeowners facing HOA foreclosures should immediately contact a lawyer to pursue this defense and put a stop to draconian foreclosures that serve to intimidate and punish homeowners who have fallen on hard times.