Tag: HOAGOV education

CC&Rs are a devise for de facto HOA governments to escape constitutional government

This commentary takes a long look at the validity of HOA covenants and the need for judicial enforcement in order to invoke state action with respect to fundamental rights and freedoms.   It informs the reader that such enforcement depends upon the member’s voluntary agreement to be bound by the declaration, and raises issues of the lack of genuine agreement.  The agreement requirement is not analyzed under contract law, but under HOA law that has been designed to protect the HOA and position the declaration as the supreme law of the HOA community.

Long ago in 1994 Professor McKenzie wrote, “HOAs currently engage in many activities that would be prohibited if they were viewed by the courts as the equivalent of local governments.[i]

Two years after Marsh v. Alabama[ii] — the 1946 Supreme Court opinion setting the misguided “public functions” test for a municipality — the Court specifically dealt with the question of the constitutionality of restrictive covenants.  The issue in Shelly v. Kraemer[iii] was “that judicial enforcement of the restrictive agreements in these cases has violated rights guaranteed to petitioners by the Fourteenth Amendment.”

With respect to restrictive covenant enforcement the Shelly court said:  “That the action of state courts and of judicial officers in their official capacities is to be regarded as action of the State [‘state action’] within the meaning of the Fourteenth Amendment, is a proposition which has long been established by decisions of this Court. . . . The federal guaranty of due process extends to state action through its judicial as well as through its legislative, executive, or administrative branch of government.”   The Court held “that in granting judicial enforcement of the restrictive agreements in these cases, the States have denied petitioners the equal protection of the laws and that, therefore, the action of the state courts cannot stand” (my emphasis).

Unfortunately, the Court chose a narrow view of this issue limiting it to that involving racial discrimination.  A more expansive application of the 14th Amendment can easily be applied to any covenant that violates a member’s rights, freedoms or privileges and immunities as a citizen, but that has not been the case.

The 1976 Florida case, Brock v. Watergate Mobile Home,[iv] directly addressed the question of an HOA declaration and its actions under the Declaration.  It used the Marsh “public functions” test and the additional “close nexus” test (HOA action is closely resembles government action). No state action was found.  The HOA was not like a company town and the state’s involvement, as occurred in the limited context of the case, was not a close nexus.

Please understand that CC&RS and covenants are not automatically invalid or unconstitutional.  It requires a court to declare them so, at the expense of a homeowner lawsuit.  

Also, it is important to note that the court question was not about the validity of a restrictive covenant itself, but the court enforcement of that covenant. (This requires a lawsuit in which the court upholds the covenant and a subsequent lawsuit charging a violation of the 14th Amendment.)  The Shelly court’s view was that as the 14th Amendment applied “only to governmental action, as contrasted to action of private individuals, there was no showing that the covenants, which were simply agreements between private property owners, were invalid.”   Furthermore, “[The 14th] Amendment erects no shield against merely private conduct, however discriminatory or wrongful” (my emphasis).  In Arizona, today, the appellate court is to decide whether a CAI attorney amendment to Terravita’s CC&Rs that directly contradicts state law will be held valid.[v]  Behold the power of private contracts!

In view of the above we can ask, what makes a valid agreement?  Fortunately, a condition was attached to this view, which is never ever mentioned by pro-HOA supporters including those renowned CAI attorneys: “So long as the purposes of those agreements are effectuated by voluntary adherence to their terms.”  Sadly the courts have unquestionably accepted the validity of the CC&Rs as a voluntary agreement and this consent to be bound has become legal doctrine. For example, in Midlake v. Cappuccio the PA appellate court upheld a valid consent to agree by the buyer at time of purchase: “The Cappuccios contractually agreed to abide by the provisions in the Declaration at the time of purchase, thereby relinquishing their freedom of speech concerns regarding placing signs on this property.”[vi]   There have been numerous other cases where the court has upheld a valid consent to agree per se and a waiver/surrender of constitutional rights under said holding.

But, is there a genuine consent to agree?  I have written several commentaries about the lack of a genuine consent to agree as a result of misrepresentation, fraud, half-truths and hidden factors not fully disclosed to homebuyers.[vii]  Certainly not according to contract law 101 with its requirements for full disclosure, a meeting of the minds, and absence of fraud.

Unfortunately, once again, HOA declarations and covenants are seen as a law unto themselves that is based on a cutting and pasting of various laws, including constitutionality law, to provide for the protection and survival of HOAs.  We have pro-HOA statutes in every state and a Restatement of Servitudes[viii] (covenants) that was written to promote and protect HOAs. “Therefore this Restatement is enabling toward private government, so long as there is full disclosure”[ix] (my emphasis).

The Restatement advises judges — and is regarded as precedent — that its collection of laws known as HOA law dominates all others.   Section 6.13, comment a, states: “The question whether a servitude unreasonably burdens a fundamental constitutional right is determined as a matter of property law, and not constitutional law”. Section 3.1, comment h, states: “in the event of a conflict between servitudes law and the law applicable to the association form, servitudes law should control.”

And we have CAI, the national HOA lobbying organization, repeatedly making it clear that the HOA is a city-state, an independent principality, and the decisions of the HOA are the supreme law of the community.[x]  It is easily concluded why CAI has vehemently denied and opposed any reference or declaration that HOAs are de facto governments — mini or quasi-governments — and argue that HOAs remain free from constitutional restrictions on government entities.

HOAs have been institutionalized under this state of affairs, this public policy, and unquestionably accepted as this is the way it is.  Nothing will improve the conditions to which HOA residents are subject unless HOA public policy changes. Public policy today rejects constitutional government for HOAs and allows HOAs to operate outside the law of the land.

The policy makers fail to understand that the terms and conditions of the HOA CC&Rs cross over the line between purely property restrictions to establishing unregulated and authoritarian private governments.

 

References

[i] Evan McKenzie, Privatopia: Homeowners Associations and the Rise of Residential Private Governments, Yale Univ. Press, 1994.

[ii] Marsh v. Alabama, 326 U.S. 501 (1946). The holding was that a company town was no different from a municipal town.

[iii] Shelly v. Kraemer, 334 U.S. 1 (1948).

[iv] Brock v. Watergate Mobile Home, 502 So. 2d 1380 (Fla. 4th Dist. App. 1987). This case was a civil rights violations case based on 42 US 1983 as a result of various acts by the HOA.

[v] Brown v. Terravita, 1 CA-CV 14-455. See Will Arizona allow HOA covenants to dominate state laws? and  Does the Constitution support the will of the HOA no matter what?

[vi] Midlake  v. Cappuccio, 673 A.2d 340 (Pa.Super. 1996) (PA appellate court). .

[vii] See “Consent to be governed, No. 4,” HOA Common Sense: rejecting private government;  Proposed “consent to be governed” statute, the “Truth in HOAs” bill; and court examines consent and surrender of rights in HOA CC&Rs.

[viii] Restatement Third, Property: Servitudes (American Law Institute 2000).

[ix] Id., From the Forward: “Professor Susan French [Reporter (chief editor/contributor) for this Restatement] begins with the assumption . . . that we are willing to pay for private government because we believe it is more efficient than [public] government  . . . . Therefore this Restatement is enabling toward private government, so long as there is full disclosure . . . .”

[x] See CAI: the HOA form of government is independent of the US Constitution;  Misrepresentation: CAI comes with unclean hands and Will the real CAI standup: its contradictory beliefs, pronouncements and goals.

HOA constitutionality will cause the collapse of CAI

Ever wonder why CAI so vehemently fights the view that HOAs are indeed mini-governments, or quasi-governments?  Its amicus curiae brief in Dublirer v. 200 Linwood Avenue[1]  is a meritless, desperate attempt to prevent the NJ Supreme Court from coming to the conclusion that as a government, the HOA election process must be constitutionally protected.  It failed. The Court upheld constitutional rights to a member’s free speech especially in regard to HOA campaigning.

CAI argued that HOAs are businesses and that business owners don’t have constitutional protections.  It practically begged the Court not to allow open public discussions of political issues, because the HOA would lose its privacy rights. Isolationist mentality!  It argued that constitutional protections are not needed because other mechanisms, like the business judgment rule, would handle disputes.  And, that election rights are not protected by the state constitution, but by the pro-HOA statutes and adhesion CC&R contracts.  To paraphrase a line from the movie, The Treasure of the Sierra Madre, “We don’t need no stinkin’ constitutional protections!”

Such statements made in court filings are astonishing!  It is a complete refutation and about face to CAI’s propaganda material made for public consumption.[2]  It repudiates our democratic system of government and the US Constitution!

What would cause CAI to argue such statements without merit before a state supreme court?  Maybe because CAI knows that if HOA constitutionality is accepted and HOAs are seen as state actors or made to become state entities, it would no longer control and dominate the industry.  All would be lost!

HOAs would not be lost as CAI has argued from time to time.  CAI would be lost!  It would have to rethink its public policies, its Best Practices, it training seminars, etc.  It would need to include such courses, which are not and never have been in the CAI vocabulary, understanding the Constitution and Bill of Rights, good local government, best city management practices, etc.

The path to substantive HOA reform legislation has always been on the basis fundamental principles, democratic principles of government, and the US Constitution.  The courts are beginning to see the error of their way.  And CAI cannot prevent the inevitable from happening — it’s just a matter of how soon!

References

1.    See CAI: the HOA form of government is independent of the US Constitution.

2.    See Misrepresentation: CAI comes with unclean hands and Will the real CAI standup: its contradictory beliefs, pronouncements and goals.

CAI: the HOA form of government is independent of the US Constitution

In its amicus brief in the NJ Supreme Court Dublirer case [1] involving free speech in an HOA election campaign, CAI clearly makes the point that HOAs are not subject to constitutional protections and elections processes are covered solely by the HOA governing documents.

These rights of members do not arise from the State Constitution but rather from statutes, contract, the association’s and governing board’s fiduciary duties, public policy and fundamental fairness.

In light of these statutory, contractual and common law standards protecting the interests of community association members, they need not claim constitutional protection from the conduct of governing boards to exercise their rights with respect to the associations.

What CAI is saying is that the pro-HOA statutes that it helped write and the adhesion contracts executed under misrepresentation [2] supersede the protections of constitutional law.

Furthermore, CAI attempts a strenuous argument of “the sky is falling” if free speech was allowed in private HOA communities, which would doom the essential private nature of HOAs.

CAI-NJ’s concern is the attempt to convert private communities into constitutional actors and to open such communities to access not only to speakers from within the community but also to the public, while ignoring contractual agreements and non-constitutional protections.

This case did not deal with outside speakers, but a member running for office and seeking equal access to the membership. CAI then raises another of its favorite “cause celebres” — HOAs are businesses.  Read this fantastic argument:

The relationship between the plaintiff and the defendants here is that of a business corporation and so is similar to that involved in any other business corporation. A shareholder who wishes to run for a position on a corporate board has no right to post campaign signs on the corporation’s property. Moreover, if such a shareholder wishes to distribute campaign literature to the other shareholders before the issuance of the corporation’s annual meeting announcement and proxy, such shareholder must do so at his own expense. Dublirer’s position vis a vis the cooperative here is no different. He has no constitutional right to distribute his campaign materials within the cooperative’s property simply because mailing them to the other tenant/shareholders may cost him money”.

This in the trenches argument stands in stark contrast to CAI’s propaganda statements made for public consumption that HOAs are democratic and represent the best town hall democracy in America.  If HOAs are businesses, why is the term ‘community” used rather than “cooperative”? For example, like “building vibrant, harmonious, competent cooperatives.”

And finally, CAI makes its last ditch appeal that there are other non-constitutional protections for HOA members so the court need not introduce the Constitution into HOA-Land.  Let them remain independent principalities where hired-hand stakeholders like CAI can control and dominate.

This is CAI’s most fearful event of all, that the courts will hold HOAs as constitutional actors or state entities and subject HOAs to the 14th Amendment protections.  This state of affairs would be the death knell not of HOAs, but of the need for CAI itself.  And CAI well knows and fears this eventual outcome.

These views by CAI before the courts and not propaganda for public consumption must be made known to the media and to all state legislatures and legislators.  Then the legislators must be asked where they stand? Behind the Constitution or behind CAI?

Notes

  1. “BRIEF OF PUTATIVE AMICUS CURIAE COMMUNITY ASSOCIATIONS INSTITUTE – NEW JERSEY CHAPTER,” Michael S. Karpoff, Jan. 3, 2013 (Dublirer v. 2000 Linwood Avenue Owners Assn, N.J. Docket 069154 (2014)).
  2. Misrepresentation: CAI comes with unclean hands.

HOAs violate local home rule doctrine and are outlaw governments

It’s time to approach “the HOA is or is not a government” controversy from a new perspective — home rule. The HOA Establishment’s argument that the HOA government is really a business can equally apply to a government also being a business rather than a government.  The criteria do not distinguish one from the other and is a meaningless decider.  (Did you ever see the word ‘business’ when you bought your HOA home?)

The argument that the HOA is not a government because it was not created as a municipal corporation — but created and formed under the state’s nonprofit corporation laws — is a legal technicality. What that means is simply that the HOA is not recognized as a political subdivision of the state. It says nothing about HOAs being de facto governments! We all are well aware of that HOAs are not municipal corporations, but the real question is: WHY NOT?

Getting down to the issues of state laws relating to local governments, let’s examine the doctrine of home rule. Under the home rule doctrine local communities are permitted a large degree of self-government even to the extent that state legislative action is not necessary. Let’s keep in mind, as you continue to read, the mantras of “no government interference” and that self-governing HOAs are the democratic representation of the voice of the members.

Part 1. Home Rule doctrine.

A detailed discussion of home rule can be found in Nicholas C. Anthony’s presentation to the Nevada Legislature.[1] In summary, there are home rule states and restrictive “Dillon’s Rule” states with respect to legislative delegation of local self-government powers.  There are only 10 pure home rule states, the others being Dillon’s Rule or a modification of Dillon.  Dillon’s Rule states that local governments get their authority, and no other authority, from the legislature enacting general laws and not special laws, much like an executive branch agency.  However, home rule allows for restricted freedoms: “Most states grant a portion of their governing power . . . to establish laws, levy taxes, and administer government on a local level . . . without obtaining legislative approval.”[2]

The point here is that even communities that are self-governing, either under Dillon or home rule, are subject to the state’s constitution and legislative grant of authority. They are not the voice of the people in total disregard of the authority of state government as insisted by the HOA Establishment. They are not formed by private business groups writing their own constitution for the community without any debate or discussion amongst the people. (The courts have often referred to the CC&Rs as the HOA’s constitution or charter).

The granting of this authority occurs by means of the state’s municipality corporation laws that deal with the formation and recognition of incorporated/unincorporated cities and towns. (Read your state laws in this area and you will see that all such entities are subject to their state’s respective constitution as a state entity.)

Of particular application to HOA de facto, private governments, Arizona offers an excellent example of the interplay between the power and authority of the legislature vs. the municipality. Arizona, and many other states, permits city/town charters for communities above a certain population.  The opinion of the Arizona Supreme Court in Tucson v. Arizona[3] presents this interplay between local government and state authority (my emphasis).

“Under Arizona’s Constitution, eligible cities may adopt a charter—effectively, a local constitution—for their own government without action by the state legislature. ‘[A] home rule city deriving its powers from the Constitution is independent of the state Legislature as to all subjects of strictly local municipal concern.’

“The purpose of the home rule charter provision of the Constitution was to render the cities adopting such charter provisions as nearly independent of state legislation as was possible.

“Article 13, Section 2 [Arizona Constitution] requires city charters to be “consistent with, and subject to, the Constitution and the laws of the state.” This provision, the Court held, does not subject charter cities to the legislature’s plenary power.

“[T]his court has uniformly held that a city charter, when regularly adopted and approved, becomes the organic law of the city and the provisions of the charter supersede all laws of the state in conflict with such charter provisions insofar as such laws relate to purely municipal affairs.”

The point being made here is the quite liberal degree of authority granted to charter cities in areas of local, community matters without legislative interference, but still subject to the state constitution as a government entity.   The grant of authority comes not from a state grant under corporation law, but from a state grant under municipality law.

Why is the municipality mechanism inadequate for the local governance of subdivision communities known as HOAs? Why must the HOA exist under special laws for special entities?  Is municipal corporation law completely inadequate and there is a compelling and necessary government interest to support and cooperate with HOA “private governments by contract”[4] that deny due process and the equal protection of the laws?  Here are some answers from some 20 years ago.

In 1992 Dilger wrote: “For example, most of those who advocate the formation of RCAs [HOAs] assume that RCAs  . . . incorporate all the rights and privileges embodied in the US Constitution, including . . . the rights of due process and equal protection under the law found in the Fourteenth Amendment;” [5]

This leads to Mckenzie’s 1994 conclusion in Privatopia: “CIDs [HOAs/POAs/RCAs] currently engage in many activities that would be prohibited if they were viewed by the courts as the equivalent to local governments” [6]

There is no compelling and necessary justification for HOA special treatment. It’s time to end these outlaw private governments that violate even the most liberal home rule, self-governing provisions of state laws and constitutions.

 

References

[1] Anthony C. Nicholas, “A Discussion of Home Rule in Nevada,” February 18, 2010 (6 MB). The court makes no reference to the Dillon Doctrine.

[2] Id.

[3] City of Tucson v. State of Arizona, Part II A, 273 P.3d 624 (Ariz. 2012).

[4] Roger Jay Dilger, Neighborhood Politics: Residential Community Associations in American Governance, p. 160, New York Univ. Press, 1992.

[5] Id., p. 136.

[6] Evan McKenzie, Privatopia: Homeowners Associations and the Rise of Residential Private Governments, p. 154, Yale Univ. Press, 1994.

Will the real CAI standup: its contradictory beliefs, pronouncements and goals

With respect to my Commentary, Misrepresentation: CAI comes with unclean hands, this paper contains quotes by CAI leaders, state chapter leaders and CAI attorneys – in 20% of the states – made to the public in general in its advertising and communications, to state legislatures, and to the courts in its amicus briefs. All in support of my arguments of misrepresentation.

They are often contradictory as suited to the purpose at hand; or rejecting principles of democratic government and the US Constitution; or declaring, like fascist principles, that the objectives of the HOA (state) come first and individual freedoms are subservient to the HOA.  And, as is true of fascism, the HOA serves the trade group ‘stakeholder’ entities (corporations) while giving the illusion of democracy because the members can vote.

 *****

Looking at the history of CAI we discover that CAI was formed in 1973 by ULI and FHA to deal with the HOA legal scheme as found in the HOA “bible,” The Homes Association Handbook (1964). Its mission, then, was to educate HOA managers and directors. Some 20 years later in 1992 CAI became a business trade group to deal with criticisms of HOAs by political scientists in various research journals and books.

We can conclude that, over the 40 some years of CAI’s existence and the continuing legal issues with HOAs, that 1) the HOA legal scheme is fundamentally flawed and beyond repair like the Articles of Confederation, and/or 2) a concern that CAI’s educational materials and instruction are also flawed and are contributing factors in the continuing existence of 40 years of HOA problems.

Furthermore, CAI is a business trade organization, a tax exempt 501(c)6 nonprofit serving its members to better serve the public, not an educational 501(c)3 nonprofit.  CAI does not inform subscribers or viewers of this fact.  A business trade group does not educate the consumers of its members’ services, which would constitute a conflict of interest and a violation of its tax exempt status.

Read the entire Commentary with a list of evidence that includes incidents/events from 20% of the states here . . .