Tag: HOAGOV education

Misrepresentation: CAI comes with unclean hands

I argue that  CAI exhibits a pattern of misleading advertising, at the national and state levels, intended to induce the public to buy HOA controlled homes and to attain favorable support from the media, the legal-academic community, and state legislators.  In other words, it appears that there is misrepresentation in its advertising.  Here are some examples at the national level and a few CAI state chapters. (Note that I include dates with my quotes as web pages change from time to time.)

CAI Central

“CAI provides information and education to community associations and the professionals who support them. Our mission is to inspire professionalism, effective leadership and responsible citizenship.”  (Building Better Communities, http://www.caionline.org/Pages/Default.aspx, Aug. 28, 2014).

“An international organization dedicated to building better communities, CAI provides information, education and resources to all community association stakeholders, including community managers and homeowner leaders.”  (Who Are We,

http://www.caionline.org/about/who/Pages/default.aspx, Aug. 28, 2014).

“Providing respected professional education remains one of CAI’s core missions—and thousands of managers continue to take full advantage of these opportunities.” (Core Mission, http://www.caionline.org/about/who/Documents/Annual_Report.pdf, Aug. 28, 2014).

Nowhere does CAI mention that it is a business trade organization, a 501(c)6 tax-exempt nonprofit, whose purpose is to benefit its members.[1]  Rather, the impression given above is that it is an educational organization to help HOAs and their board members.  However, HOAs are not CAI members and only 60% of CAI’s members are HOA members called individual “volunteers. However, the dominant factions are the attorneys and management firms who are the vendors to HOAs. Only 2 seats on the 14 member CAI Board of Trustees are for these “volunteers.” (Note that the above term “stakeholders” as commonly used with HOA means the vendors and does not include HOAs).

As a business trade organization, isn’t it a conflict, a violation of its trade group status, to speak for, provide education, and guide the consumers of its members’ services, the HOA?  Shouldn’t that be the job of a bona fide HOA association? A true association of HOAs, consistent with other industry or professional associations, would consist of HOA members who are allowed to vote.  It would allow the vendors or stakeholders – CAI, other management firms or associations and attorneys – to be non-voting associate members.

As I see an attempt to get around not having HOAs as members, CAI’s volunteer application offers discounts for multiple board members who join.  Page 2 is titled, “Membership Application for [association name]” if more than 1 director is signing up. (http://www.caionline.org/about/benefits/Documents/cavl_application.pdf). A 2005 complaint was filed with the IRS  charging CAI with violating its trade group status by having consumers, HOAs, as members.  The result was that CAI dropped HOAs as members and apparently got around this restriction by introducing “volunteer” members. As the application shows, CAI offers inducements in order to influence an entire HOA’s board, a consumer of its members’ services.

“While joining CAI on your own is important, having your entire board connected to CAI is the best way to ensure you are making informed decisions—and an excellent way to help your board members achieve the results, respect and recognition they deserve.”  (Benefit for

Homeowner Volunteer Leaders,

http://www.caionline.org/about/benefits/Pages/VolunteerLeader.aspx, Aug. 28, 2014).

Furthermore, it is unconscionable that CAI advertises and speaks before the policy makers and legislative bodies claiming to speak for HOAs and their members.

“LACs prevented the enactment of flawed legislation while working to ensure that other bills reflected the interests of homeowners, associations and the industry professionals who serve them.” (CAI 2013 Annual Report, State and Federal Engagement,

http://www.caionline.org/about/who/Documents/Annual_Report.pdf,  Aug. 28, 2014).

Let’s examine this preposterous claim even if CAI indeed had HOAs as members.  By its own data, CAI states that 60% of its membership is volunteers[2], and if each were in a separate HOA CAI would have representation of, at most, some 19,200 HOAs.  That would make CAI representation equal to a paltry 6% of all HOAs.[3]   What a blatant misstatement of representation!

 

Selected state chapter advertising – no mention of business trade group or 501(C) 6 tax-exempt

Arizona Central –

“The Community Associations Institute national chapter was founded in 1973 as a multi-disciplinary non-profit alliance serving all stakeholders [does not include homeowners] in community associations. It provides education and resources to America’s 315,000 residential condominium, cooperative, and homeowner associations, and to the professionals and suppliers who serve them.” (http://a.mwapp.net/p/mweb_ws.show2?

xpod_id=77805054&xcanvas=&xid=79759889, Aug. 28, 2014).

New Jersey –

“The New Jersey chapter of CAI (CAI-NJ) is dedicated to enhancing the quality of  community association living, through education, legislative advocacy and  professional development. . . . The Community Associations Institute (CAI) is a national, non-profit organization dedicated to providing the education and resources necessary to foster vibrant, responsive, competent, community associations and helping them promote harmony and responsible leadership.” (http://www.cainj.org/about/about-cai-nj/, Aug. 28, 2014).

Florida central chapter –

An education and resource institute dedicated to the 7,500+ HOA & Condominium Associations in Central Florida, their volunteer leaders, and the business partners who support them. (http://www.caicf.org/, Aug. 28, 2014). For more than 30 years, CAI has been the leader in providing education and resources to the volunteer homeowners who govern community associations and the professionals who support them. (http://www.caicf.org/site_page.cfm?pk_association_webpage_menu=446&pk_association_webpage=470, Aug. 28, 2014).

Orange County, CA chapter –

“The Orange County Regional Chapter of Community Associations Institute (CAI-OCRC) provides education, networking, resources and advocacy for community associations and the professional and volunteers who serve them. . . . Members include condominium associations, cooperatives, and homeowner associations . . . .” (http://www.caioc.org/, Aug. 28, 2014).

Conclusion

When CAI goes before the policy makers, government officials or legislative committees, acting as modern day Philosopher Kings,[4] but raising questions of candor to the tribunal, advocates must speak out loudly.  Any such statements must be confronted, challenged and exposed before the audience addressed by CAI.  Speaking to one another is an empty exercise, unless to exhort others to act.  And after repeated confrontation as above and the recipient fails to act, then challenge the policy maker, the government official or the legislative committee – Why are you doing nothing?  Tell them that you have provided documentation that any reasonable person would agree reflects the unethical and illegal conduct of the lobbyists.  Why are they not acting in a responsible manner?

“In every stage of these oppressions we have petitioned for redress in the most humble terms; our repeated petitions have been answered only by repeated injury.”  (Decl. of Indep.)

References

[1] “IRC 501(c)(6) provides for exemption of business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues (whether or not administering a pension fund for football players), which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.” (http://www.irs.gov/pub/irs-tege/eotopick03.pdf). (Contrast CAI with “real estate boards,” more commonly known as the association of realtors, realtor education is focused in its professional members and not on the homebuyer who is a consumer of the services of its members.  Realtors do not lobby for home sellers/buyers, but for its agent members.)

[2] From CAI miniscule minority dominates public policy (2007).

[3] CAI’s Industry Data (http://www.caionline.org/info/research/Pages/default.aspx)

shows 326,000 HOAs and states that it has some 32,000 members (http://www.caionline.org/about/who/Pages/CAI40thAnniversary.aspx). That’s a 32/326.6 ratio of 9.8%.  My best estimate from note 2 above is that volunteers make up just 60% of the members, making HOA representation at about 6% at most.  “At most” means that there is just one volunteer from an HOA, which we know is not true.

[4] “Until philosophers rule as kings, that is, until political power and philosophy entirely coincide…cities will have no rest from evils…there can be no happiness, either public or private, in any other city.” Republic, Plato.  (In other words, “the key to the notion of the ‘philosopher king’ is that the philosopher is the only person who can be trusted to rule well.”

HOA Common Sense, No. 9: HOA governments in fact

HOA Governments in fact, No. 9

I believe all HOAs should be required to have a sign at the main entrances to the subdivision that clearly states: “You are now leaving the American Zone.”[1]

De facto governments.

Is the HOA a mini or quasi government?  Is it a state actor? Or is it just another business with special privileges?  I believe we all can agree that the status of HOAs is that they are de facto – they exist — governments, not recognized by the state under municipality statutes just as Cuba is a de facto government not recognized by the US. 

What is the uniquely defining attribute of a government that distinguishes it from a business or non-profit charity?  Understand that all the functions that the CAI lawyers claim to make the HOA a business can also be used to claim that businesses are governments. Think about it.  Yes, they share the same functions – taxes/assessments, fines/penalties, courts/hearings, ordinance/rules and regs, etc. But the basic criterion is that “modern states are territorial, their governing body exercise control over the persons and things within their frontiers.[2]  This alone singles distinguishes a government from a business or charity.

Black’s Law[3] attempts to clarify what is commonly accepted as a political government: A government is “The principles and rules determining how a state is regulated.”  A nation is “a community of people inhabiting a defined territory and organized under an independent government; a sovereign political state.” And politics is “The science of the organization and administration of the state.” The general understanding uses the terms ‘people,’ ‘territory’, ‘regulation,’ and ‘state/nation’. 

Now, I know the above may be confusing, but the skilled HOA attorneys will do their parsing and word game analysis (depends on what the meaning of ‘is,’ is) of these definitions seeking to create reasonable doubt as to what the people know to mean as “government.”  You know, such as the argumentative asinine statement that, is the owner of a football stadium that regulates the people in the stadium a government?  

I prefer the simpler, down to earth answer given by Justice Stewart regarding what is pornography,

“I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description [hard-core pornography]; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it . . . .”[4]

It is interesting to note that David Wolfe, a founder of CAI back in 1973, had the following to say in 1978 when CAI debated the status of HOAs as a government.

One legal opinion offered in support of construing CAs [HOAs] as a government noted that the Supreme Court had required constitutional procedures in a ‘company town’ and with ‘political parties’; from this view CA actions were ‘public’ in a constitutional sense. . . . Wolfe concluded that a new definition of a CA as a government was needed to bring about Lewis Mumford’s vision of a democracy.[5]

And long ago in 1994 Prof. 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.[6]

The defective legal scheme

Please understand that all substantive (as opposed to changes to laws affecting HOA operating methods and procedures) reform legislation is an attempt to restore your rights, freedoms, privileges and immunities as citizens.  They were taken away by the HOA biased laws that granted the HOA power to deny or did not prohibit the HOA from denying your constitutional rights.  Yet, even the most independent local control over people found in a state’s home rule statutes requires allegiance to the US and state constitutions.[7]  Why do HOAs get special laws?  Why are they exempt from the Constitution?  It doesn’t add up!

You may ask, What for?  The answer is obvious: for the survival and acceptance of a defective legal scheme that seeks to impose authoritarian governments on unsuspecting people. If boards and officers are to be held accountable, who would volunteer?  Well, why not pay them a salary so accountability can be demanded?  WHAT!!!  If they are going to be paid and held accountable, then members have a right to demand qualified board members and not any ole body who would like to be on the board.

Wait!  Wait! I can see readers recoiling in horror.  “The horror . . . the horror . . .” (from the movie Apocalypse Now!).   So, boards are generally not paid and are volunteers, without any special training.  At least the legislature and city councils have tradition and long established rules and procedures with staff to assist the law makers, but HOAs are “on the fly” – on the job,  decide as you go.  No wonder we have all these problems with capable governance.  And the volunteers and the special interests lament, “but we are volunteers helping to make a better community. You can’t hold us responsible and accountable. We need a free reign.”  Yeah!  Right!  Free to create havoc!

All because the mass merchandising of the HOA concept could not be sold under such conditions that demanded prudent accountability.

And, the concept could not fly without mandatory members and compulsory dues.  The founders of the HOA scheme who wrote the HOA “bible” in 1964 well knew this. And in order for the HOA to legally bind subsequent home owners the founders had to resort to servitudes running with the land, or equitable servitudes/covenants.[8]  

But, the equitable servitudes doctrine brought a host of ills detrimental to the US Constitution and the Bill of Rights, which very disappointedly the courts have held superior to the supreme law of the land.[9]  They have allowed for the establishment of the New America of HOA-Land with communities governed by de facto authoritarian, private government regimes known as HOAs.

HOA member Declaration of US and State citizenship

All that is needed to have HOAs rejoin the Union is for state legislatures to pass a bill that states:

Notwithstanding anything to the contrary in the governing documents, or other laws to the contrary,

Wherefore, the members of the association, having not waived or surrendered their rights, freedoms, privileges and immunities as citizens of the United States under Section 1 of the Fourteenth Amendment, and as citizens of the state within which they reside, the CC&Rs or Declaration for any planned community, condominium association or homeowners association shall state, or be amended to comply, that, “The association hereby waives and surrenders any rights or claims it may have under law and herewith unconditionally and irrevocably agrees 1) to be bound by the US and State Constitutions, and laws of the State within which it is located as if it were a subdivision of the state and a local public government entity, and 2) that constitutional law shall prevail as the supreme law of the land including over conflicting laws and legal doctrines of equitable servitudes.

PS.  I apologize for the intrusion by WordPress to have added underlines to certain words.

References

[1] As contained on the On The Commons website, Shu Bartholomew, Producer and Host (http://onthecommons.us).

[2] “State”, Black’s Law Dictionary, 7th Ed.

[3] Id.

[4] Jacobellis v. Ohio, 378 US 184 (1964).

[5] Quoted in Community Associations: The Emergence and Acceptance of a Quiet Innovation in Housing, Donald R. Stabile (Greenwood Press, 2000), pp. 164 -167. Lewis Mumford was a 1920s utopian community promoter.

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

[7] A legislature’s grant of autonomy for local government to act without legislative approval on acceptance of certain terms (Blacks’ Law Dictionary, 7th Ed.); “as long as they obey the state and federal constitutions” (Home Rule, Wikipedia (http://tinyurl.com/nyqpd2a).

[8] The Homes Association Handbook, Urban Land Institute Technical Bulletin #50 (1964); See my analysis at Analysis of The Homes Association Handbook.

[9] Most notable are: Inwood v. Harris, 736 S.W.2d 632 (Tex. 1987) (Texas Constitution overridden by covenants running with the land); Villa de Las Palmas v. Terifaj, 90 P.3d 1223 (CAL. 2004) (amended restrictions are binding on all in violation of ex post facto prohibition doctrine); Committee for a Better Twin Rivers v. Twin Rivers, 929 A.2d 1060 (NJ 2007) (fundamental rights denied and business judgment rule is sufficient protection of homeowner rights).

 

 

 

HOA Common Sense, No. 8: Draconian punishment and intimidation

Draconian punishment and intimidation, No. 8

The Tennessee appellate court in Brooks found “that the foreclosure sale price shocked the conscience of the court.[i] A home valued at over $321,000 was foreclosed for just $12,800 of which $6,734, more than half, went directly into the attorney’s hands.[ii]  That’s more than 25 times the “damages” to the HOA. The Charleston Regional Business Review reported that the average foreclosure debt was about $4,500 and the average home value foreclosed was about $160,000, or 36 times the debt.

An award of more than the 10 times for punitive damages was held by the US Supreme Court in State Farm v. Campbell[iii]  to be a cruel and unusual punishment in violation of the 8th Amendment.  This right to foreclose in unjust and draconian, taking away a person’s home and leaving him with nothing!   It is unconscionable and discriminatory as explained below. Furthermore, HOAs assessments are considered a consensual lien and are exempt from homestead protections. (See paper No.4 above, speaking about your legitimate consent to be bound.)

With respect to HOA foreclosures, we once again discover that HOA assessments are being treated the same as public government taxes and property assessments — must be paid and your property can be foreclosed for non-payment. Both taxes and HOA assessments are not related to hard cash payments for which the lender is entitled to foreclosure to protect his loan, nor are they based on any specific transactions, like payments for garbage collection, for electricity, or for police protection, etc. 

Why should the HOA be given this right when other entities do not have foreclosure rights, and when there are other available collection methods — garnishment, sale of other property, etc. — to collect on bad debts?  Other entities, both public and private, must face the possibility of failure or bankruptcy – there are no guarantees in life.  A standard accounting procedure, and used by CAI Central in its financial statements, is what is called “Bad debts reserve” or “Reserves for bad debts,” which is an annual estimate of uncollected assessments.

Using common sense, we can understand the value to the HOA to “evict” the non-payer and to replace him with a new owner who will make timely assessment payments.  That’s logical. There is very little opportunity to raise additional funds for expenses except by means of increased assessments on other members, the “it’s not fair” argument. While the end of the foreclosure action has a rational value, the means is highly suspect. 

In addition to the arguments of special rights as enjoyed by public entities and an unconscionable punishment, HOA foreclosures are discriminatory.  The following quote is from an Arizona CAI attorney:

Assuming foreclosure eligibility requirements are met, whether foreclosure is a viable option depends largely on what other liens, interests, and encumbrances burden the subject property. . . .If the property is not subject to a mortgage or there is a minimal first mortgage, foreclosure is a viable option as there is likely equity in the property. . . . Even if the property is subject to a recorded first mortgage and there is no equity in the property, foreclosure still may be a viable option. Sometimes the threat of foreclosure alone is enough to get a delinquent owner’s attention. . . . the owner will often pay the association in order to keep his/her home.[iv]

This is an admission of the discriminatory nature of the foreclosure process — works only if the homeowner was an upstanding citizen who had paid his mortgage and assessments for many years, and had created all that equity that the HOA now seeks. It is also an admission of the punitive and intimidation motives of the HOA — “the owner will often pay the association in order to keep his/her home” — without facing the reality that “you can’t get blood from a turnip”! The HOA attorneys promote the view that the non-payers are scofflaws and deadbeats who are seeking to stick it to the good, assessment paying members. “It isn’t fair!” goes the cry.

What the foreclosure process does do, and is not mentioned by the CAI attorney, is that the attorney can claim fees many times in excess of the amounts owed the HOA. So, who really benefits? Certainly not the homeowner who loses everything with this draconian punishment. And there are other methods available to collect bad debts, and if not viable, well, then that’s the cost of doing business.

Is this good public policy to treat homeowners facing hardship not of their doing — take away their home and leave them with nothing?  Legislation must be put into place to protect against intimidation and wrongful foreclosure, and to ensure a strict enforcement of the foreclosure process, especially requiring documentation and an exact specification of the undisputed debt owed.  If the state legislatures truly believe that HOAs are the next best thing to Mom’s apple pie, they should be ready to ante up and financially support HOAs facing financial difficulties.  Perhaps in this way homeowners will get the accountability to the state and the requisite oversight of HOAs.

As to the broader solution, there is a just and compassionate legal solution to this state of affairs that can be put into place quickly and effectively. Allow the homestead exemption for HOA assessments!  If a state has no homestead protection, simply enact one ASAP!  This is a fair, compassionate, and sensible solution.  I anticipate strong opposition to this proposal, but I remind the opponents to be prepared to address the unclean hands of the HOA as summarized in this Common Sense series of papers.

PS.  I apologize for the intrusion by WordPress to have added underlines to certain words.

References

HOA Common Sense, No. 7: boards can do no wrong

HOA Boards can do no wrong, No. 7

In shocking contrast to our common sense and all that has been said about the need to protect the people from government, state legislators see no need for effective and meaningful enforcement that average people are transformed into angels when they become board members.  James Madison must be in a rage, wherever he may be, at this slap at his advice that, “If men were angels there would be no need for government.”

State legislators have said that the complaining HOA member signed a contract and is now trying to get out of it because he now thinks it’s a bad contract, and that he will not support any such legislation. Furthermore, anyone who didn’t read the contract or get a lawyer is not too smart and that he, the legislator, would have never done that.  What do you think of that attitude in light of the above papers 3 – 6?  And don’t forget that you are being held to have agreed to be treated in such a demeaning way by your elected officials.

Where are the fair and just laws argued for in paper No. 4?  They are not there!  Instead, we have special laws for special entities, the HOA, without a necessary and compelling government interest to deprive citizens of the rights and freedoms.[i]  What a travesty of our American way of life! 

You may ask, What for?  The answer is obvious: for the survival and acceptance of a defective legal scheme that seeks to impose authoritarian governments on unsuspecting people. If boards and offers are to be held accountable, who would volunteer?  Well, why not pay them a salary so accountability can be demanded?  WHAT!!!  If they are going to be held be paid and held accountable, then members have a right to demand qualified board members and not any ole body who would like to be on the board.

Wait!  Wait! I can see readers recoiling in horror.  The horror . . . the horror . . . (from the movie Apocalypse Now!).  Consequently we are told that we must accept the lunacy that all volunteers can do no wrong and if they do, well, that’s your fault for electing them!  And let’s not forget that the board has hired hands to protect them – the attorney and manager.  At your expense.  The homeowners pay for the board’s wrongful acts.  

So, why aren’t the members more involved in watching over the acts of the board?  Well, maybe it would help if the laws backed the members up with effective and practical means to enforce HOA wrongful acts; otherwise it’s just an exercise in futility.  The game is rigged in favor of these independent principalities!

But those living in HOAs must share the blame for this state of affairs. They have repeatedly failed to unite in an organized common cause to produce intelligent legislation that addresses these fundamental HOA defects.[ii]  CAI in Arizona made that clear when it told the legislature that only the stakeholders produce meaningful bills; the homeowners just raise a multitude of personal issue bills.[iii]

And so, in all practicality considering this state of affairs, the board can do no wrong.  Get used to it!

“If there is no penalty [for] disobedience, the resolutions or commands which pretend to be laws will, in fact, amount to nothing more than advice or recommendation.” (Alexander Hamilton, Federalist #15)

HOA Common Sense, No. 6: Fair and just hearings

Fair and just hearings, No. 6

What is meant by “fair and just hearings”?  The HOA attorneys tell you it’s “after notice and an opportunity to be heard” as found in almost all CC&Rs and in the vast majority of state HOA laws. This simple statement is a contractual provision and law as applied to HOAs, but it is not what the US Supreme Court holds as procedures meeting the Constitution’s and the 14th Amendment’s due process requirements.  HOA members have been shortchanged!

As a private entity, HOAs are not subject to the Constitution and are not required to establish justice, which is a goal not found in any CC&Rs ‘constitution,’ but found in the Preamble to the US Constitution. Was this important fact explained to you when you bought into an HOA with its dream home?  Why not?

US Appeals Court Judge Henry Friendly in his well-regarded article, “Some Kind of Hearing,” generated a list that remains highly influential, as to both content and relative priority:[i]

1. unbiased tribunal [independent ‘judges’]

2. notice of proposed action and grounds asserted for it [document showing all the rules]

3. opportunity to present reasons why should not occur [defense of allegations]

4. right to call witnesses

5. right to know opposing evidence

6. right to have decision based exclusively on evidence presented

7. right to counsel [especially if HOA attorney is present]

8. making of record

9. availability of statement of reasons [public awareness of defense]

10. public attendance [transparency]

11. judicial review [appeal to civil court]

 

I’ve inserted annotations as applicable to the HOA version of justice.  As you can see, members are being shortchanged by HOA attorney/lobbyists who influence and dominate state legislatures, and who write and rewrite the CC&Rs and bylaws.  HOA kangaroo courts make homeowners second class citizens, and their foolish appeals to their HOA attorney go nowhere, because no one told you that he represents the board, not the members.  You know, like management vs. employees.

And since there is no legal obligation of the HOA to establish justice, providing for some form of public defender equivalent falls on deaf ears.  The HOA wins in this lopsided “playing field” since it has the money to hire attorneys to legally maneuver the system to make it costly for the homeowner to complain.  And don’t forget the public ostracizing of members who complain: they are costing you money; they are not good neighbors. Don’t forget that there’s no opportunity for the homeowner to answer in the same media as used by the HOA – the newsletter, board meetings and website.

Yet, government interference to protect your rights as citizens is violently frowned upon by HOA members.  Why?  It doesn’t make sense, doing nothing about your loss of protections.  For what?

[i] Henry J. Friendly, “Some Kind of Hearing,” 123 U. PA. L. REV. 1267 (1975).