Tag: Illinois

Ordinances: the state, municipality and HOA pecking order

Another “outside the box” opinion by the Illinois Supreme Court.  In Palm v. 2800 Lake Shore Drive Condo Ass’n (No. 110505) the court held that city ordinances can trump Illinois statutes under certain circumstances.  Earlier this year the Court said that HOA security people could stop and detain drivers on their private streets, Poris v. Lake Holiday POA (No. 113907), and that homeowners could withhold payment of assessments if the HOA failed to make repairs, Spanish Court Two Condominium Association v. Lisa Carlson, (No. 115342).

Palm raised several issues in regard to constitutional law, home rule powers, and whether “condominium law” should triumph both contract and real estate law. The question before the court, and the one of interest for this commentary, was the simple Chicago ordinance that omitted the pro-HOA boiler plate wording when requesting HOA records, “for a proper purpose,” which as we know can be found in many state laws and in the CC&Rs.  I focus on the doctrine of home rule that has been implied in defense of the HOA legal scheme – the local voice of the community.

Home Rule 

The Court explained that “Home rule is based on the assumption that municipalities [my emphasis] should be allowed to address problems with solutions tailored to their local needs.”  The Illinois Constitution has some very broad home rule provisions,

Except as limited by this Section, a home rule unit [meaning a municipality] may exercise any power and perform any function pertaining to its government and affairs including, but not limited to, the power to regulate for the protection of the public health, safety, morals and welfare; to license; to tax; and to incur debt. (Ill. Const. 1970, art. VII, § 6(a)).

Home rule units [municipalities] may exercise and perform concurrently with the State any power or function of a home rule unit to the extent that the General Assembly by law does not specifically limit the concurrent exercise or specifically declare the State’s exercise to be exclusive.” (Ill. Const. 1970, art. VII, § 6(i)).

The Court addressed the constitutionality of the structure of state governments:

If the constitutional design is to be respected, the courts should step in to compensate for legislative inaction or oversight only in the clearest cases of oppression, injustice, or interference by local ordinances with vital state policies (sic).

It should be noted that the home rule doctrine applies to government entities such as incorporated and unincorporated towns and villages, but does not apply to private, contractual HOAs. HOAs have not been delegated any powers by state legislatures in a proper enabling act.  Instead, statutes are merely created that either mandate regulations or, through the liberal use of the word “may,” declare certain acts and actions to be legal if undertaken by the HOA.

The HOA legal scheme ignores the US and state constitutions.  The IL Supreme Court’s advisory opinion that courts should step in to stop “oppression, injustice, or interference” by HOA “ordinances” that interfere with vital state polices does not apply to HOAs.  In other words, HOAs have been given special status and privileges and immunities not granted to municipalities.

Restrictive ordinances are valid, or are they?

The other aspect of this opinion addresses the case when municipal ordinances supersede statutes, which has its parallel with the validity of ordinances with respect to HOA covenants and rules.  The doctrine has been that if the ordinance is more restrictive then it is valid. However, if it is silent on an aspect of the statute in question, the statute prevails. The HOA argued that without “a proper purpose” clause the ordinance was less restrictive than the statute, and that the statute prevails.

 A technical legal argument followed and the Court held that,  “In sum, the constitutional framework places almost exclusive reliance on the General Assembly to determine whether home rule authority should be preempted. The legislature has not specifically denied the City’s exercise of home rule power or required its exercise of that power to be consistent with statutory provisions.”

 Here, somewhat unique to Illinois, the IL Supreme Court said that the home rule Chicago ordinance should prevail and if the General Assembly didn’t like it, it should explicitly restrict the municipality’s powers in new legislation.  What does this opinion say about municipal ordinances and HOA contracts?

First, remember that the HOA is not a government entity, but exists by virtue of a private contract. The opinion and doctrine should have no bearing on HOA contractual agreements. Second, the reality on the other hand, is that the courts have treated the HOA on the equivalent basis as if it were a municipality, and applied the restrictive ordinance doctrine. If the HOA rule or covenant is more restrictive, it controls over the municipality’s ordinance.  In other words, the HOA has been granted the legal status of a subdivision of the municipality, or the status of a government entity. The HOA stands in the same relationship to the municipality as the municipality stands to the state.

 Third, not only have HOAs been viewed as sub-divisions of a municipality in this aspect, their covenants and rules are not seen to interfere with “vital state policies.”  Private contracts that are not subject to the 14th Amendment are allowed to supersede municipal ordinances and even state laws.  In other words, it is state policy — in all states — to support, encourage and cooperate with, and even coerce obedience to, the acts and actions of private governments operating outside the US Constitution.

 A lot of issues and problems will disappear or lessen in impact if only the state legislatures would face up to reality and provide the same protections all other citizens enjoy by declaring HOAs as either state entities or to require all CC&Rs to state,

“The association hereby waivers and surrenders any rights or claims it may have, and herewith unconditionally and irrevocably agrees to be bound by the US and State Constitutions and laws of the State as if it were a local public government entity.”

  

In regard to the Chicago ordinance that is a fair and just protection of condo member rights, the Court upheld the ordinance.

CAI files amicus brief in Illinois Supreme Court claiming HOA is like a government

I just read the Illinois CAI chapter’s amicus curiae brief in the IL Supreme Court appeal of the groundbreaking Spanish Court v. Carlson decision. The court held the HOA liable for violating contractual obligations to repair and maintain common areas, and homeowners could withhold assessments.

 Speaking about the need for timely payment of assessment to keep the HOA going, CAI argues,

The very real impact of the Second District’s decision is peculiarly analogous to our government’s need to collect taxes free from objection by individual taxpayers. Surely, if people could refuse to pay taxes and then defend against their collection based upon a claim that the government had been negligent in the maintenance of public spaces and providing services, the government would find itself in dire financial straits and unable to fulfill its obligations.

The other decision in this 2012 case prevented the HOA from using the draconian measure of “forcible entry” – occupy the unit — to get the member to pay right away.  CAI’s argument for the HOA was that forcible entry was a valid tenant-landlord action, but the court had held that not paying rent was also a valid landlord-tenant action.

The major selling argument for CAI’s being “a friend of the court” is its repeated claims to speak not only for the HOA, but for the members, too. CAI offers the same ol’ impression that it is an educational organization and not a business trade group that lobbies for the business interests of its members.  And as such, why is it defending the consumers of its services, the HOA?  We know why?  Does the Illinois Supreme Court know why?

The Institute’s [CAI] mission is to serve as a national voice for those involved in community associations, including homeowners, governing boards, service providers, and vendors. (My emphasis).

The Illinois Chapter’s mission is to provide education and resources to Illinois residential condominium, cooperative, and homeowners associations, as well as represent their interests and the interests of Illinois community association members on issues of legal importance. (My emphasis).

However, the brief is full of arguments supporting the HOA and it right to use the draconian measure of forcible entry, while denying the contractual right to withhold payments when the HOA defaults on its obligations.

See Court decisions: HOA Enlightenment Movement vs. the Dark Ages; CAI amicus brief

When can a homeowner withhold HOA assessments?

In January the Illinois Supreme Court agreed to hear the condominium case, Spanish Court Two Condominium Association v. Lisa Carlson, No. 115342, that breaks with the commonly held legal doctrine that HOA members are not permitted to withhold paying assessments, even when the HOA has failed to make necessary structural repairs to the condominium. Courts have held that HOAs are subject to servitudes law foremost, and that the common good required for the survival of the HOA is paramount.  Therefore, payments must not be withheld in spite of any outstanding controversy.

 In Spanish Court the appellate court held that a HOA condominium owner could withhold paying assessments because the relationship between the owner and HOA was similar to that of a tenant and landlord.  The contract in both situations involved mutual promises of making payments in return for HOA services to maintain and repair the property.  The court held that under contract law the withholding of payments was permitted. This decision broke with precedent, bringing justice to homeowners against special laws for HOAs.

 The courts in other cases and in other states have held that the declaration of Covenants, Conditions and Restrictions (CC&Rs) are a contract to be interpreted as a contract, but then apply servitude law over contract law, and even over constitutional law.  (See the Restatement Servitudes, § 3.1, comment h and§ 6.13, comment a).

 For example, this holding stands in contrast to the January 2013 Illinois Supreme Court ruling in Poris v. Lake Holiday POA (No. 113907) that allowed HOA security personnel to stop and detain drivers who are violating HOA rules, and not municipality ordinances. Here, servitude law prevailed over constitutional law.  And, in 2007 the Twin Rivers HOA (NJ) free speech case (CBTW v. Twin Rivers, 929 A.2d 1060) held that the business judgment rule would protect homeowner rights, and that there may be some instances where constitutional concerns could come into play.

 The Illinois appellate court admitted to the fact that its opinion stood alone in favor of the homeowner and contract law when HOAs are involved.  If the preponderance of the cases is to control, then homeowners can expect an Illinois Supreme Court reversal of the appellate decision as it did in Poris. Homeowners and justice should not be too enthusiastic about the right to withhold assessments in HOAs.

Corporatism in America: IL Supreme Court grants HOA police powers to arrest and detain

see-no-evilS
See no evil, hear no evil, speak no evil

“We are not final because we are infallible,
but we are infallible because we are final.”[i]

This Commentary excerpts relevant arguments from the court’s opinion in Poris v. Lake Holiday[ii] relating to police powers and false imprisonment.  I find it necessary to use excerpts so you, the reader, can follow the issues and analysis as they actually occurred before the court.  I believe this is the best way to understand public policy and how the laws are interpreted by the HOA attorneys and courts.  Please read through this lengthy commentary, and discuss with others.

 

FIRST, let’s look at the analysis of the appellate court’s finding that the stopping of the member for an HOA rule violation was unlawful. The appellate court held,

“Specifically, plaintiff [homeowner] argued that: the Association was not authorized by law to stop vehicles and detain drivers;

 “[S]ecurity guards occupy the same status as private citizens.

 “[HOA] security officers were attempting to assert police powers that they had neither the right nor the power to assert. [my emphasis].

 “Because [the HOA] restrained plaintiff for violating an Association rule, not a criminal law, plaintiff established the elements necessary for his false imprisonment claim.”

It is important to understand the detailed reasoning as to why the HOA had no powers to arrest was given:  

“The appellate court concluded that security officers are without legal authority to stop and detain drivers for violating Association rules, because those rules are enacted by the Association, not the General Assembly, and therefore do not constitute an ’offense’ . . . .”

NOW, let’s see how the 7 wise men of the Illinois Supreme Court saw the law. 

Police powers.

 “Plaintiff contends that only the Illinois legislature has the authority to create a private or public police department. . . . Plaintiff and the appellate court err in viewing this issue as one involving private citizens improperly attempting to assert police powers. . . . The appellate court failed to consider the Association’s enforcement of its rules and regulations in the context of its authority as a voluntary association to enact and enforce those rules and regulations.

 “[Since] courts generally will not interfere with the internal affairs of a voluntary association absent mistake, fraud, collusion or arbitrariness. . . . plaintiff generally complains that the Association was unlawfully exercising police powers and authority . . . . However, plaintiff does not, and cannot, argue that the Association and its security officer did not act consistently with its bylaws, or its rules and regulations . . . . ¶

”Plaintiff also argues that the Association is exceeding the legislative powers granted to not for profit homeowner’s associations in enacting and enforcing its traffic rules.  . . . each corporation shall “have and exercise all powers necessary or convenient to effect any or all of the purposes for which the corporation is formed.”  [IL statute].  . . . Regulating and enforcing traffic rules is reasonably necessary to maintain the Lake Holiday roadways.

“The Association rules and regulations were enforced only on Association property, and citations for violations of the rules and regulations were only issued to Association members. Consequently, the Association was not unlawfully exercising police powers that it did not possess, but rather was acting within its authority as a voluntary association to adopt and enforce its own rules and regulations.

 “We can discern no logic in allowing a private homeowners association to construct and maintain private roadways, but not allowing the association to implement and enforce traffic laws on those roadways.”

 And finally, false imprisonment.

 “[T]he appellate court erred in analyzing [the HOA’s] stop of plaintiff in terms of a private citizen effecting a citizen’s arrest, rather than analyzing the stop as pursuant to Association rules and regulations. . . . These facts would lead a person . . . to believe or entertain a strong and honest suspicion that plaintiff was guilty of violating Association rules. Consequently, [the HOA] had probable cause to believe that an offense was committed by plaintiff, which is an absolute bar to plaintiff’s claim for false imprisonment. [my emphasis].”

 

My perspective

 In Poris we have another instance of a state supreme court holding private contracts superior to the Constitution (See NJ supreme court opinion in Twin Rivers[iii]).  Apparently, the only thing that the Constitution has to say is an absolute “no contract interference.”  Note how the court adopted a narrow reading of the laws as it parsed and examined the precise wording of the laws, not stepping back in its alleged legal wisdom seeing only the trees and not the ugly forest.

 The court cleverly ignored the question of detaining non-members, and the question of public streets.

Think of the implication that a non-profit, any non-profit, can enforce its rules even by detain and arresting its member.  And think of the impact on the US Supreme Court question, and Arizona laws (SB 1070), dealing with similar issues of detention, probable cause, and reasonable suspicion by police officers to demand “your papers” to uncover illegal immigrants.

 I can summarize the Illinois opinion with the simple statement by William Pitt, part of which appears on the façade of the Arizona Supreme Court building: 

Unlimited power is apt to corrupt the minds of those who possess it: and this I know, my lords, that where law ends, tyranny begins!”[iv]

 For more on corporatism, see In a democracy approaching corporatism, HOAs are iconic 

Endnotes

[i] Justice Robert Jackson, Brown v. Allen, 334 US 443 (1953). (Robert H. Jackson was also US Attorney General and chief US prosecutor at the Nuremberg Trials).

[ii]Poris v. Lake Holiday, 2013 IL 113907 (Jan. 25, 2012). (It should be noted that I cannot find any record of the amicus curiae for the HOA, an Illinois Association of Lake Communities).

[iii]Committee for a Better Twin Rivers v. Twin Rivers, 929 A.2d 1060 (NJ 2007).

[iv] This statement was made by Lord Chatham (William Pitt) to the British House of Lords in January 1770.

Court decisions: HOA Enlightenment Movement vs. the Dark Ages

In this “groundbreaking decision”, as described by Evan McKenzie in  his Privatopia Blog, the Illinois appellate court made a ruling consistent with the HOA Enlightenment Movement.  Neglect by a condo asociation to make repairs affecting a unit is a defense against continued payment of assessment.  This is a major step toward homeowner justice that removes the “pay no matter what, or lose your home” doctrine of the authoritarian HOA governments.

The case, Spanish Court Two Condominium Association v. Lisa Carlson (2012 IL App (2d) 110473), involved a demand for assessments owed plus a possession — forcible entry — of the unit that was alleged to have suffered damages due to the condo association’s neglect.  (Understand that the condo sued under the Forcible Entry Act to repossess the unit). The court held the condo in the same position as a landlord under the landlord-tenant laws, which allow a tenant to withhold rent as a defense against forcible entry.

 We hold, by analogy to the case law on actions brought under the Forcible Entry Act by landlords for possession of leased property due to unpaid rent, that the unit owner may claim neglect as a defense to the board’s suit under the Act.

 And of very important significance for case law precedent is the holding on the mutual obligations of the CC&Rs contract, my emphasis, (p. 13,14),

 “Plaintiff suggests that a board’s right to collect assessments is absolute and that a claim for nonpayment of assessments is not subject to any affirmative defense.”

[The court replied,] “nowhere does the . . .  Condominium Act suggest that the right is absolute.”  The Condominium Act appears to set the rights of unit owners on par with the rights of the board of managers. Moreover, the rights arise from mutually exchanged promises—on the one hand to pay assessments, on the other hand to maintain the common elements—and so the Declaration and the Bylaws are best seen as contracts.

[T]he condominium instrument indicates (as presumably most do) that the unit owner’s promise to pay assessments is in exchange for the board of managers’ promise to use those assessments for the repair and maintenance of the condominium property, the unit owner may claim, as a justification for nonpayment of assessments, that the board of managers breached its duty of repair and maintenance.

 Contrast this decision with the recent California Supreme Court opinion, reflecting a culture still in the Dark Ages sorely in the  need of enlightenment, Pinnacle Museum Tower  v. Pinnacle Market Development( No. S186149, Aug. 16, 2012 ).   Here the court validated the binding arbitration clause with (my emphasis),

 [T]the Davis-Stirling Act ensures that the covenants, conditions, and restrictions of a recorded declaration — which manifest the intent and expectations of the developer and those who take title to property in a community interest development — will be honored and enforced unless proven unreasonable.

 Under its Discussion, B. Contractual Nature of Terms in a Recorded Declaration, the court gives an instructive presentation on the preferential treatment of the declarant/developer, consent to obey, waiver of rights, “for the common good,” and the open-ended amendment process.  Section C explains what constitute an unconscionable contract clause, rejected in this instance.  Very informative of the Dark Ages culture.

 

The HOA Enlightenment Movement is rolling on, and will gather momentum as the truth, justice, and the American way shall once again prevail.