Tag: justice

Using Bad Debt Accounting in HOA Budgets

My comments in the Northwest Condo & HOA Blog article, “Using Bad Debt Line Items in Association Budgets” is repeated here. 

The choice by HOA boards of the “cruel and unusual punishment” discrminatory foreclosure right, and  unjust transfer fees, coupled with the “free income” gravy money found in a policy to fine, fine, fine is dispicable.  It is a preying upon the weak and disadvantaged. 

My comments.  
 
“You provided very important info on failure to heed CPA advice on bad debts, and choosing to foreclose instead.  HOA boards are derelict in their duties to act prudently.  Foreclousre is unjust and discriminatory against those with high equity.  And foreclosure is a cruel and unusual punishment for the HOA that has not advanced any hardcash like a bank.”
 
In general, see my Commentary links below.
 
 

Understanding the New America of HOA-Land

I assembled several of my publications into this eBook format (5.5 x 8.5 PDF) to present a comprehensive view of the substantive issues relating to the HOA – planned community legal scheme.  The first 3 booklets represent 16 pages, and the “American Political Government” booklet  is a more detailed presentation of some 45 pages.

The cover reads:

“What you need to know about the political and social effects of HOAs on the American way of life.”

“Accepting authoritarian government over democratic government.”

Table of Contents

1. HOAs as an established institution

2. Proposal for muni-zation of HOAs

3. Is there an ideal HOA “constitution”?

4. American political governments

5. George K. Staropoli

Supplemental ebook material (not included):The Foundations of Homeowners Associations and the New  America.

 

Other publications and information can be found at the Citizens for Constitutional Government web site, http://pvtgov.org.

What were the intentions of the “original parties” to the CC&Rs?

I found this HOA case revealing of the misguided attitude, that mindset that HOAs are unquestionably solidly “legit.”  The NC appeals court cited Wise, 357 N.C. 396, 584 S.E.2d 731 (citations omitted, emphasis added) :

“As a general rule, ‘[r]estrictive covenants are valid so long as they do not impair the enjoyment of the estate and are not contrary to the public interest.’ (describing freedom of contract generally). Restrictive covenants are legitimate tools of developers so long as they are clearly and narrowly drawn. The original parties to a restrictive covenant may structure the covenants, and any corresponding enforcement mechanism, in virtually any fashion they see fit. (‘an owner of land in fee has a right to sell his land subject to any restrictions he may see fit to impose’). A court will generally enforce such covenants `to the same extent that it would lend judicial sanction to any other valid contractual relationship.’ As with any contract, when interpreting a restrictive covenant, ‘the fundamental rule is that the intention of the parties governs'”.

Id. at 400-01, Wise, 584 S.E.2d at 735-36.

Therefore, under the common law, developers and lot purchasers were free to create almost any permutation of homeowners association the parties desired. Not only could the restrictive covenants themselves be structured as the parties saw fit, a homeowners association enforcing those covenants could conceivably have a wide variety of enforcement tools at its disposal.

What is missing here is an answer to the question: Who were the “original parties”?  What were their intentions?  Well, it seems quite obvious that the original parties are none other than the declarant and his “stand-in” employees and  not at all any of the subsequent homeowners.  I mean,  what am I missing here?   It gets back to the obvious Contract Law 101 requirement of a meeting of the minds.  How can an oppressive, adhesion contract be viewed by our lofty courts as to the intents of the “original parties”, and then bind the poor homeowner who is not required by law to even read it to be bound under servitudes (covenant) law.

And let’s not get into the judicial scrutiny requirements that all  “contracts” must pass to bind the surrender of one’s rights, privileges, immunities and freedoms under state laws and the Constitution.  I mean, isn’t this still America?

See Bodine v. Harris Village POA, No. COA09-1458, (N.C. App., September 7, 2010). (http://www.leagle.com/unsecure/page.htm?shortname=inncco20100907514).

Do homeowner regulations go too far?

  So his homeowners association levied fine after fine and put a lien on his home though he’d coughed up nearly $50,000 to pay fines and other related costs. Eventually, his home was foreclosed because Darius still owed $24,591.

On Aug. 15 – after losing his one-story home and two days before he would be evicted – Darius’ next door neighbor heard an explosion about 2:20 a.m. Patti McCallister ran outside, saw Darius’ home burning and called 911.

Firefighters found Darius’ badly burned body lying on the floor of his living room in the back of his home.

Do homeowner regulations go too far?     By Matt Tomsic
Matt.Tomsic@StarNewsOnline.com

Sep 3, 2010

 

My Reply:  

HOAs will continue to have serious problems because:

1.  They are based on an  undemocratic authoritarian legal scheme that does NOT place the individual rights and freedoms of the members first, as does our Constitution, but the monetary goal of maintaining property values.

2.   Consequently, this un-American private government  exists outside the Constitution and its protections of the people.  All the legal court battles are attempts to restore those lost rights.

3.   The misleading claims of agreement by homeowners is superficial and would not stand up to judicial scrutiny for the valid surrender of one’s rights.  The mere filing of CC&Rs with the county clerk is sufficient to legally bind lot owners, sight unseen, and is a mockery of both Constitutional and contract law.

4.  Then there is the unspoken alliance of local governments, state legislatures, consumer protection agencies, and public interest firms who shout “individual rights” and “no government interference”, but see no problem with private government interference.  And that also includes CAI.

5.   Community Associations Institute (CAI) was formed back in 1973 to address these problems with the HOA legal scheme, yet these problems continue to exist in spite of all that “education” provided for board members, managers, and legislators.  Would you hire a training firm with that record?  State and local governments seem not have a problem and hire “the failure to get results” CAI.

6.   CAI is on record in its amicus brief to the NJ appellate court in the Twin Rivers case, cautioning the court about the “unwise extension of constitutional protections to homeowners” in HOAs.   The common law synopsis of court decisions regarding covenants takes a decided editorial opinion rather than a neutral summary of the cases when it states, for example, that if there’s a difference between servitudes law (covenants) and constitutional law, servitudes law should apply (§ 3.1, comment h).

6.  The media, even in this article, takes the premise and presumption that the  HOA unquestionably has the right to act, and that its motives are pure and for the benefit of the community.  None of the above substantive issues are ever delved into.

In order to avoid another 40-odd years of continued injustice and discontent, government authorities and legislatures must address the above issue of substance, and stop their participation in the unspoken alliance of “No negatives about HOAs”.

HOAs in the punishment business

I have argued that the HOA is in the punishment and intimidation business, especially with respect to foreclosure “damages”  and fines under failed due process procedures —  the kangaroo courts.  Here’s a recent NJ case that addresses penalties as a punishment.  In this instance, the HOA had a covenant that granted it the right to access a flat 20% charge as liquidated damages rather than attempting to determine just what were the actual damages incurred by the HOA.

Let me clarify.  When seeking damages, the damaged party must submit to the court the actual damages it incurred.  For example, what are the damages to the HOA if your grass height violated the arbitrary rule for well kept lawns?  Or you painted an unapproved house color?  Anybody?  Well, that gets down to simply attorney fees and court costs of which the HOA sees nada.  That’s why there are no actual damages to the HOA itself submitted by the HOA.  So, are these actions by the HOA really a punishment rather than a recovering  of damages inflicted on it by the homeowner?  Hell yes!

The NJ opinion contained,

As we have previously noted, the 20% payment was not “interest.” It constituted a liquidated damages provision established in the By-laws of the Association in lieu of an assessment of counsel fees in instances in which legal action on the Association’s behalf was required.

A clause is a liquidated damages provision if the actual damages from a breach are difficult to measure and the stipulated amount of damages is “a reasonable forecast of the provable injury resulting from [the] breach.  Such clauses are deemed “presumptively reasonable” and therefore enforceable, and “the party challenging [a stipulated damages provision] should bear the burden of proving its unreasonableness.”  Because the harm is necessarily incapable of accurate estimate, “`reasonableness’ emerges as the standard for deciding the validity of stipulated damages clauses.  The amount fixed is unreasonable if it serves not as a pre-estimate of probable actual damages, but rather as “punishment,” grossly disproportionate to the actual harm sustained.

We are certain that if counsel submitted an accounting of the time required to prepare for and conduct the two-day trial held in this matter, the resultant counsel fees would have been substantially higher. However, as the result of the By-laws, the Association has waived the right to that higher award.

Mazdabrook Commons HOA v. Khan, No. A-6106-08T3, (N.J. App.,  Sep. 1, 2010).

That about says it all when a $200,000 home is lost for a $2,000 fine, plus $3,000 in attorney fees.  The homeowner loses everything after building up his equity over 10 -30 years.  This ratio of 40 times the $5,000 is far in excess of the 10 times standard set by the US Supreme Court for punitive damages in product liability cases.  And yet, the HOA had not been damaged as it had not lost a penny of its own! 

It’s called punishment, pure and simple!  How else can an authoritarian regime like an HOA obtain obedience and acceptance of its rules and regulations (“laws”)?

Note that the attorney has no say in the matter, because unlike its erroneous attitude — you owe me $nnn in fees  — in all those dunning letters, it is not a party in the issue, but just a hired hand of the HOA.  So, why are HOAs being so nice to attorneys?  They undoubtedly agree with the attorney that how else can they coerce compliance except through  punishment?  And if lawyers refuse employment because the fees are so low, no coercion.

And, while we are at it,  doesn’t a flat fee of even 20% sound nice?   The above $2,000 foreclosure amount would cost only an extra $400 and not $3,000 to the attorney.  Now that sounds like a leveling of the playing field without HOA attorney fee churning — we need to make a living — obstructing  justice.