Tag: law

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. 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).

The influence of HOA special interests on an AZ legislator — SB 1454

First-termer idealism and the awakening

Michelle Ugenti arrived at the Arizona Legislature in 2011 riding in as a Clean Election Candidate, meaning she took no special interest money.  On her web page she quotes from the Arizona Constitution, “All political power is inherent in the people, and governments . . . are established to protect and maintain individual rights.”

It appears from her comments about her first term that she ran right into the reality of how bills become laws:

The following two years [after being elected] have taught me what happens when ideas and principles meet head-on not just with competing beliefs but also with individual self-interest, whipped into a frenzy by forces armed with money and power. 

She’s talking about the special interest money and the influence it has on legislators.  Still, with a positive outlook facing her re-election in 2012 Ugenti writes on her web page, “I hope that my constituents find me faithful to . . .  preserving our rights and freedoms.”

But, something seems to have happened to Ugenti upon her re-election in 2012.  She seems to have found and adopted the way and the means to make a name and to advance herself in politics.  She talks of hard politics, of when to compromise and when to negotiate, and of being successful and effective.

It is precisely this delicate balance of knowing what to give and what to fight for that makes an effective legislator. I believe I am successful because I have the integrity and courage to examine each issue and stand wherever my conscience and conviction demand I stand.

The lure of the special interests

In 2013 we saw Ugenti’s tenacity to fight and stand by her conscience in regard to her HB 2371 HOA bill and incorporating this failed bill into SB 1454. It ran afoul of the Arizona Constitution and House Rules. She showed her conviction before the Senate GE committee hearing on HB 2371 and clearly demonstrated her newly found path to success as a legislator – by advancing the agenda of the HOA “stakeholders,” the special interests who make money from servicing HOAs.  And CAI is one leading “stakeholder.” (Stakeholders are not homeowners who are excluded from such meetings. And the legislators well know it.)

At that hearing Ugenti stated that each year there was “a plethora of personal HOA legislation” and tried “to spare the [committee] members the constant agony of many personal pieces of HOA legislation,” as contrasted to the industry legislation. She also said that she “felt very responsible to the stakeholders.”   That was in March. In July a lawsuit, Staropoli v. State of Arizona,  was filed against the State for an unconstitutional SB 1454. The Attorney General’s office and court agreed, removing Ugenti’s HOA provisions.

Yet, the Arizona Legislature sees no wrong in her conduct leading to the filing an amendment from the floor and refused to discipline her. Ugenti’s integrity and conviction is examined in SB 1454: Machiavelli at work in the AZ legislature – Part 1 and AZ House ‘circles the wagons’ in defense of pro-HOA legislator.

CAI stakeholder support of Ugenti

In October 2013, stakeholder and national HOA lobbyist CAI praised Ugenti for her efforts to advance HOA interests, as CAI sees them.  In an article in the Fall 2013 Community Resource magazine, AZ lobbyist DeMenna wrote, echoing Ugenti’s view that only  stakeholder legislation has any value:

“Under the leadership of Representative Michelle Ugenti . . . a working group was established to address HOA-related issues advanced by legitimate stakeholders. . . . and Representative Ugenti personally led the effort to ensure that only sensible and functional proposals were considered. CAl played a critical role in this process, although some compromises were required. . . . In the end . . . Representative Michelle Ugenti, is to be commended for her leadership in this area.

And in the AZ CAI chapter’s email, Notice to CAI Members **Very Important-Please read!**, Oct. 18, 2013, the AZ chapter wrote, again echoing Ugenti’s views,

Representative Ugenti . . . is instrumental in the development of HOA policymaking. Representative Ugenti’s stakeholder meetings, formed in effort to tackle the growing number of HOA bills introduced every session, are critical in defeating shortsighted proposals.

The email went on to announce a fundraiser for Ugenti:

Fundraising Reception in support of REPRESENTATIVE MICHELLE UGENTI.  Please make checks payable to: MichelleUgenit.com [sic].  If you are unable to attend, you can mail your contribution to CAI’s Arizona Lobbying Team: DeMenna & Associates. . . . Paid for by: www.MichelleUgenti.com.

The decline and fall of a legislator

What happened to Rep. Michelle Ugenti since her first term in 2011?  It appears she has serious issues of integrity and the demands of her conscience to fight for her beliefs. She has fallen away from those ideals and values of “preserving our rights and freedoms”; and that governments “are established to protect and maintain individual rights.” The  authoritarian, private HOA government has no legal obligations “to protect and maintain individual rights” as does our Constitution with its Bill of Rights.

Apparently, she has succumbed to “individual self-interest, whipped into a frenzy by forces armed with money and power.” Her conscience and convictions have led her to advancing special interest agendas and to crossing the line and violating the Arizona Constitution.  

AZ House ‘circles the wagons’ in defense of pro-HOA legislator

I feel that I must respond to the statements made by the Senior Republican Policy Advisor and House Ethics Committee Chair, apparent spoke persons for the House, who whitewash and defend Rep. Ugenti’s actions as just another day at the legislature.  The wagons are being circled.

Constitutionality

Their view is that, Filing an amendment from the floor that turns out to be declared unconstitutional is not a violation; it happens all the time.  Considering the very narrowly tailored definition of unethical acts – only those pertaining to money – it’s no wonder legislators are free to do as they please. Allow me to clarify this misleading view of life at the legislature.

In my 13 years following HOA legislation I’ve come to understand that many controversial bills can be subject to opposing interpretations.  One side may see a bill as not violating the constitution and the other sees it as violating the constitution.  Obviously, the sponsor acting in good faith sees the bill as constitutional and proceeds, hoping that it is not challenged at some point in time and found unconstitutional.  

The court determines constitutionality based on several factors, which include an interpretation of the meaning of the words and sentences in the bill and the applicable law. In this case, Section 13 of the AZ Const., Part 2.  The criterion used begins with the ordinary meaning of the words being definitive and if a word is ambiguous, to rational interpretations of the wording of the bill.  It then looks at other criteria such as the intent of the legislature, if necessary to arrive at an interpretation that reconciles any seemingly contrary views.

Disorderly Conduct

To better understand the nature of the “disorderly act” in question let’s take a look at the relevant constitutional sections and House Rules.  Was a House Rule broken is the key issue?  Section 13 is a simple, direct statement:

“Every act shall embrace but one subject and matters properly connected therewith, which subject shall be expressed in the title; but if any subject shall be embraced in an act which shall not be expressed in the title, such act shall be void only as to so much thereof as shall not be embraced in the title.”  

House Rule 16, referring to Section 13, is a simple direct statement:  “To comply with this requirement, an amendment may not expand the scope of the original bill to give it a new purpose.”  

House Rule 1 is a simple direct statement:

“The House may punish its members for disorderly behavior and may, with the concurrence of two-thirds of the members elected to the House, expel any member (Arizona Constitution, Article IV, Part 2, Section 11). A violation of any of the House Rules shall be deemed disorderly behavior.”

It’s quite clear that House Rule 16 was violated by Ugenti and it is disorderly behavior. What is there to interpret in these applicable legal authorities quoted above?  She is subject to discipline if so decided by the House leadership unless she gets, for political reasons, special dispensation. 

Good faith unconstitutionlity

To put the Ugenti incident, “it happens all the time,” into perspective, let’s look at the recent appellate court opinion in Niehaus v Huppenthal (CV-CA 12-0242 Div. 1) alleging that the Arizona Empowerment Scholarship Accounts (ESA) statutes  violated the Constitution, Article 9, Section 10.[i]  The plaintiffs argued “that the ESA is invalid because it conditions the availability of a public benefit on a waiver of constitutional rights.”  The waiver dealt with a requirement not to attend public schools (a public right) if receiving ESA aid, which the court denied and also denied the complaint. This case was a legitimate question of good faith differing interpretations of the constitution and laws, where one party said Yes and the other said No.  The court gave its binding interpretation.

However, this is definitely not the case with Ugenti and SB 1454.  What is there to interpret and where is the good faith, rational alternative interpretation of the constitution?  Anyone can see the obvious black letter violation. Unlike the bills alluded to by the spoke persons, the inclusion of HOA amendments can only be seen as an intentional and knowledgeable act causing the bill to become unquestionably unconstitutional. It was also a violation of House Rule 16. The everyday meaning of Section 13 and the House Rules are quite clear and there is no room for any rational alternative interpretations.  The Arizona Attorney General’s office, representing the Legislature, agreed that the SB 1454 violated Section 13 of the AZ Constitution and offered to settle. The court declared it so.   

Motivation

What is really at issue is why Ugenti violated the constitution and rules?  Failing to conduct an inquiry amounts to a failure to do justice.  Committing an intentional violation cannot be treated as acceptable conduct for an elected official, a legislator.

So we must ask: What was Ugenti’s motivation for her last woman standing act at the last session? We know she told the GOV committee that she had “a responsibility to the HOA stakeholders,” a group that does not include homeowners nor HOA directors. We know the stakeholders held meetings on SB1454 and HB 2371, its forerunner.

In her defense, Ugenti has blamed some mysterious staff person or House attorney for her action, claiming that she was advised that SB 1454 was not unconstitutional. (I am told that the House Ethics lawyer said he gave no such legal advice).  She took this “advice” with its unreasonable interpretation, but allowing for plausible deniability, that somehow using the word “election” in one of the HOA amendments was OK.  It allowed all other HOA amendments to also be germane to the subject of the title.  This defensive argument is not rational by any means, is without merit, and as attorney Tim Hogan commented, “That’s a far stretch.” 

Removal of ‘HOAS’

And let’s not forget the weak defensive argument that the question is really about the “short title” and not the “title” itself; that the title did list the HOA statutes being amended and no error was committed.  But, the title did not contain the wording “Relating to HOAS,” as required by the bill drafting manual, that would have identified and alerted the public to the additional subject matter.  With over 1,000 bills before the legislature, the first and primary vehicle to identify bills is the index to the bills that only shows the short title.

Furthermore, a disciplinary investigation should also look into the matter as to who changed the title of SB 1454 removing “HOAS,” which can be still found on the Arizona Capitol Times and ADRE (real estate department) websites.  ARS 41-1224 makes the tampering of an introduced bill a class 4 Felony (1 – 3.5 years prison time). But, the wagons are being circled and a cover up is becoming apparent.

The settlement agreement bypassed any exposure or testimony relating to the motivation for her disorderly behavior.

Intent to deceive

If we examine the events surrounding these HOA amendments that had their origin in several bills that were combined into HB 2371, and then added to SB1454, it follows that there was an intent to get a twice failed bill made law. It was an intent to accomplish this by violating the Arizona Constitution in a desperate last ditch attempt in the closing hours of the legislative session.

For these reasons disciplinary action is warranted as set forth in the House Rules.  The people seek transparency and have the right to know just what happened!

Notes

[i]Aid of church, private or sectarian school, or public service corporation

Section 10. No tax shall be laid or appropriation of public money made in aid of any church, or private or sectarian school, or any public service corporation.