legislature – Page 30 – HOA Constitutional Government

Beware the folly of eliminating supermajority voting for amending the HOA CC&Rs

The latest drive by pro-HOA attorneys and lobbyists has been to seek legislation to do away with supermajority amendments to the CC&Rs. If approved, the very foundation of majority rule in a democracy, and our long standing requirement that fundamental documents must have supermajority voting in order to be amended, would be destroyed. The argument is, Gee, because of the apathy, we can’t make important amendments to the CC&R.

In the 2011 Arizona legislative session, HB 2441 was defeated at the last moment. It would have allowed for minority – as low as 1/3 of the members — to amend the CC&Rs. The CAI lobbyists fought hard for this bill, even telling the committee that although it was governmental intrusion, the legislature always did that.

Think for a moment. If a minority can control the amendment process, it can control the HOA by enacting amendments that further strengthen the powers of the incumbent board. Given the fact that the rogue boards are dominated by their HOA attorneys, minority control solidifies the political machines as the power elite.

Think about it! Under a political machine minority vote regime, the regime can eliminate all and every need for member approval, except, of course, voting for directors. And, all future amendments will have this acceptable ground for the amendment — the apathy of the membership demands minority control. Nobody cares, so what!

However, in spite of this persuasive argument, the infinite wisdom of the California legislature shines brightly when it enacted laws in the Davis-Stirling act permitting just such amendments as valid. Section 1356 addresses minority control of an HOA. This section 1356 is an oxymoron and is an unreasonable and illogical intrusion on the private contract and to our fundamental belief in majority rule in a democracy.

Section 1356 allows for less than supermajorities where the governing documents require more to amend the governing documents. So a 60% voting requirement would allow for minority control. There is no restriction in the law on the lower limit for approval except to appeal to the judge that “this ain’t right.” In other words, like the failed Arizona bill, 1/3 can be acceptable, and even a 20% requirement would be acceptable.

The lunacy of this law is that a majority voted amendment to reduce supermajority voting requirement is valid, if approved by a judge. Go figure! The law has circumvented the CC&Rs private contract putting the cart before the horse! That the members have spoken is the basis for this requirement, in spite of evidence of psychological indoctrination to obey and legal pressures of financial harm for not obeying. (See Why do people harm others in HOAs?)

But if a supermajority was needed, as currently required by the CC&Rs, the amendment to amend before the court would fail. I mean, isn’t that why the HOA is before the court? They can’t get anything done with a supermajority!

How to get a supermajority vote? It’s done every day, everywhere. The content and need for the amendment must be conveyed to the membership in an open forum, an open meeting, and be debated before the membership. And not in some one-on-one private meetings or phone calls.

There is no requirement in the law to hold an open meeting of the membership to debate the amendment before approving the elimination of supermajority voting. A requirement that is found in all legislative and state agency rule-making procedures – public input.

In the recent court opinion (Quail Lakes Owners Assn. v. Kozina (2012) 204 Cal.App.4th 1132), the homeowner does not challenge the validity of this law, but advances procedural arguments under the law. That was a big mistake (he lost), as I’ve repeated argued, of not seeing the ugly forest through the trees. The mandatory requirement under § 1356(c)(5), that “the amendment is reasonable” was never argued as I’ve argued above. In fact, my arguments above were made loudly and clearly in defeating Arizona’s HB2144, and that defeat went to the very last vote.

This decision is another example of bad law becoming a detrimental precedent against homeowners. If you think you have problems now, wait until your HOA blindly obeys the board and allows for a minority controlled HOA.

This work by George K. Staropoli is licensed
under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
Attribution must be made to George K. Staropoli as author.

Media still sees HOAs only in monetary terms

My comments to the investigative reporter from KTHR.TV in Indianapolis, IN.

I congratulate you on your very detailed report on what HOAs are all about (13 Investigates: HOAs). Your article joins the newly emerging HOA Enlightenment Movement that looks beyond the special interest, national lobbying trade entity, CAI, propaganda. For more detailed info on HOAs, beyond my short comments, please visit my links below.

Take maintaining property values covenant, the very basis of the pro HOA argument. Show me where the CC&Rs warrant or guarantee property values? Don’t look too hard as you will not find any. In short, the buyer gives up his rights and freedoms, offers his home as collateral for the survival of the HOA, and agrees to pay the assessments no matter what, even if there’s a dispute with the HOA, for an empty promise. Some deal!

In general

The HOA legal scheme is seriously defective in regard protecting people who are citizens of their state and the US, but who are now under a private regime not accountable to the state. The CC&Rs “contract” is based on equitable servitudes and not constitutional or contract law, making these de facto HOAs independent principalities. But, you only see the money side of HOAs that can be viewed as a con job.

For example, the HOA is very much like a closely held business with restricted exit opportunities, and where the members are jointly and severally liable for the debts of the HOA – if a member can’t pay, his “share” can come from the other members’ pockets. Did you know that? Wasn’t that explained to you?

Did you know that the buyer does not have to even read the CC&RS to be held to the binding agreement? All that is necessary is to file the CC&Rs with the county clerk’s office and the buyer is bound by simply accepting his deed, sight unseen and unsigned. Why isn’t the buyer told before he signs the purchase contract? Isn’t this misrepresentation?

Let’s jump to “Steps to Take Now.”

In general, although Indiana has a very limited HOA statutes, the CC&RS are an adhesion contract — take it or leave it in favor of the HOA – that contain provisions that a municipal government could not impose on its citizens. And don’t forget the misrepresentation mentioned above when you hear arguments that “they agreed to and signed” the contract.

See The Truth in HOAs Disclosure Agreement.

Your discussion of “Homeowner Rights” is woefully deficient!

You speak only of the “laws” of the HOA and its CC&RS “constitution.” Do you really believe that the buyers willingly and openly agreed to waive and surrender explicitly stated and implied rights when they took their deed? In a manner that would pass judicial scrutiny? For example, “fines” and the “notice of a hearing” as commonly found in the top-down CC&Rs mock the Constitution. And, the absence of fair elections protections makes political machines a reality.

See the Declare your US and State Citizenship for the legislature.

I hope you will make a serious effort to read these materials, backed by evidence, court decisions, statutes and the statements made by the pro-HOA special interests. And publish your review and summary.

the age of HOA enlightenment is coming?

I’m beginning to see more and more evidence of enlightenment by pro-HOA supporters. The dogmatic insistence on enforcing the CC&Rs is falling away to a proper concern for the principles of democratic government and the fair and just treatment of homeowners. The strict view of the covenants is weakening. There is a growing awareness that HOA boards are governed by other laws and ethical and moral considerations, if indeed HOA regimes are to meet the CAI propaganda of vibrant and harmonious communities.

The Berding-Weil blog, Condo-issues.com (California), shows recent evidence of this enlightenment as is recent posts introduce a degree of reality of events. Now, Donna DiMaggio Berger in Florida reminds boards of good government practices with,

Lastly, when you poll your community members and they voice an opinion on a proposed course of action, boards who disregard that input do so at their own peril. This is not to suggest that the membership must be polled on every course of action, particularly on routine maintenance which is one of a board’s main functions, but if you ask for input on discretionary spending it’s probably best to heed the message your members delivered.

Avoiding the appearance of self interest as an association director

Wow! What a thought — poll your community! Why didn’t I think of that very democratic tool? As claimed, the HOA board is the representative of the owner-members. Gee, asking for input is a radical suggestion for an undemocratic corporate form of government. Long overdue as HOA regimes are de facto political governments. Congratulations Donna! Excellent message for HOA boards as HOA member servants.

Now, Mr. Berding, why didn’t you address the recognition of the HOA de facto government in your “Reform Community Associations?” post? After all, you do hold a PhD in Government from the prestigious Claremont School. Your message was that HOAs were too big to fail, and we all have to live with the way things are.

Every year the California legislature, and the legislatures of other states tinker with the enabling statutes for homeowner’s associations, but these efforts are usually paternalistic, constituent-favoring amendments that do little or nothing to solve the fundamental problems.

How about the simple amendment that would go a long way to solving problems by restoring the equal application of the laws and due process protections of the 14^th Amendment to homeowners, as it should be, and create a unified country rather than a myriad of independent HOA principalities?

The association hereby waivers 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.

HOA member Declaration of US and State citizenship.

Does mandating HOAs using “shall” establish HOAs as state actors?

A common joke of the 1950s related to communist Russia’s 5-Year economic plans. It was a top-down plan that always failed. The joke went:

In Russia You can buy any shoes you want as long as they are black. Why is that? Because they only make black shoes.

Jump to 2012 America.

In America you can buy any new home you want so long as it’s in an HOA. Why is that? Because they only build new homes with an HOA.

A. Does the use of the word “shall” establish the HOA as a state actor?

1. Monroe Township

I begin by an examination of the hard-core Monroe Township, NJ HOA ordinance[i] which states, in part, my emphasis,

“A homeowners’ association shall be established for a multifamily development or a development consisting of 100 dwellings or more. . . . The homeowners’ association shall be established for the purpose of owning and assuming maintenance responsibilities for the common open space and common property designed for or located within a development.”[ii]

Please understand that many states define an HOA as having common areas and amenities. Note the territorial implication of the HOA government, “located within”.) But, the ordinance doesn’t stop there. It includes, “The organization shall incorporate the following provisions: (1) Membership by all property owners in the project shall be mandatory.” [iii]

Now, the ordinance is very craftily worded to pertain to owning property and “assuming maintenance responsibilities,” and not touching on any aspect or implication of governing. Except, of course, the town must explain just what “assuming responsibilities” means if not managing or governing. It could simply mean a hired hand, a contractor, if the word “responsibilities” were omitted.

The intent of the ordnance is clearly stated in subsection (E)(4), which says in part, “The organization shall clearly describe in its bylaws all the rights and obligations of each tenant and owner, including a copy of the covenant . . . and the fact that every tenant and property owner shall have the right to use all common properties. . . . These shall be set forth as a condition of approval and shall be submitted prior to the granting of final approval

Doesn’t this wording indicate an awareness that the HOA is concerned with more that performing maintenance functions? Why would a planning board be concerned with the terms of a private contractual agreement beyond its sole authority in regard to property ownership and maintenance? There are laws governing property rights and tenancy that surely would not be duplicated in the Declaration.

No, the planning board is fully aware, or else it’s intentionally negligent, of the legal status of HOA through state statutes and commonly used boilerplate declarations. In other words, the planning board cannot escape its responsibility for requiring HOA governance by saying we don’t look at or approve of the governing documents. Regardless of board’s awareness, the mandate for submitting the HOA governing documents and the required approval by the planning board establishes the HOA as a state actor subject to the 14^thAmendment.

2. Arizona mandates

Gilbert, AZ has a mandated HOA requirement that says, emphasis added,

A homeowners or property owners association shall be created to maintain and operate landscaping, open space, recreation facilities, private streets, utilities, and/or other facilities held in common ownership. The documents creating the association shall provide that this obligation continue in perpetuity. Evidence of compliance with this Article shall be submitted with an application for a final subdivision plat or minor subdivision.[iv]

This requirement is not as detailed as that of Monroe Township, but still centers on subdivisions with common areas and property, which defines an HOA in Arizona. Again, as long as the governing documents cover maintenance, the planning boards ignore the other covenants that affect the homeowner’s equal application of the laws and due process rights. But the fact remains, as with Monroe Township, ignorance of the declaration does not absolve the planning board of its responsibility for establishing HOAs as state actors.

The Chandler, AZ ordinance[v] states,

40-1. – Policy.

It has become common for developers to satisfy certain of the conditions of approval for subdivisions by use of commonly owned property maintained by a Homeowners’ Association (HOA) composed of the property owners within that subdivision. These [subdivision] facilities and amenities become conditions to and a part of the approved subdivision with which the developer must comply. Without these facilities and amenities, the subdivision would not have been approved by the City and the development would not have proceeded.

It is hereby adopted as a policy of the City of Chandler, Arizona, that when Homeowners’ Associations are given such responsibilities pursuant to the zoning and subdivision approvals which allowed such properties to develop . . . .

It is a more wishy-washy statement, but the bottom line is that the developer will indeed form an HOA if he wishes to be approved, and not want to oversee the subdivision in perpetuity as required by the ordinance. Here, the planning board says, No, not me! Him, the developer! His choice in establishing private governments. This is about the same choice given to a homeowner if he wants to live in a new home, isn’t it? And again, the planning board adopts a Not my job when it comes to approving the HOA governing documents.

B. Are the planning boards exceeding their authority by mandating HOA private governments for sub-divisions?

Part A, above, leads to the serious concern of low level divisions of a town or city demanding and establishing private governments without any oversight or accounting. While delegating such legislative functions to a private entity is unconstitutional, the planning board itself has not been delegated authority to create such private governments over subdivisions within the state. It has exceeded its authority!

For more information, see HOA Case History: state actors or mini/quasi government;

Notes

[i] Monroe Township Zoning Ordinances, § 175-113. Homeowners’ associations.

[ii] Id., subsection (A).

[iii] Id., subsection (E).

[iv]Gilbert, AZ Zoning Regulations, Article 4.9: Common Area Ownership and Maintenance, Section 4.903.

[v]Part VI, Chandler, AZ Code of Ordinances, Chapter 40 – HOMEOWNERS’ ASSOCIATION IMPROVEMENTS.

HOA foreclosure: an unconstitutional punishment

Writing on the Hindman-Sanchez blog (Colorado) in 2011, attorney Sanchez asks, “Is Foreclosure the Right Option?” She offers 3 options: 1) just lien the property and wait, 2) get a money judgment on the debt owed and garnish money source, and 3) foreclose. Sanchez answers that option 1 is not quick; option 2 will not work if there is no cash available; so that leaves option 3, foreclose on the house.

However, working on behalf of the HOA and its supposed survival concerns, Sanchez fails to address the practical matter of 1) not enough equity in the home to for the HOA to collect its debt after the mortgage is paid off, or assumed, and 2) the moral and ethical question of a discriminatory, unethical, and inequitable option that amounts to a cruel and unusual punishment. It affects only those who have paid their mortgage and assessments obligations over many years.

And remember, the HOA has not advanced any hard cash as a bank or lender to warrant a special foreclosure law, but is functioning as a state entity collecting on the failure to pay taxes. Nor has it performed any services to warrant special treatment under a mechanics lien analogy. Its services have been performed on behalf of the fictional but legal and separate person, the HOA.

From a broader aspect on the nature of the “contract” between the homeowner and the HOA, the homeowner was not told that buying into the HOA corporation is like buying into a closely held business that has limited marketability (ease of selling out, which amounts to selling his home), and whose source of additional funds is very, very limited – increased assessments, special assessments, and obtaining a bank loan if possible. That’s the bargain the homeowner made when he bought his home. That is the hidden downside of HOA corporations kept hidden by the HOA, the developer, the real estate agent and the consumer protection agency, if any.

The use of foreclosure focuses the members’ attention to the other guy and not on the nature of the contract. It is an irrational attempt by an HOA attorney to “get blood from a turnip,” which after all, is just what one would expect when dealing with “deadbeats.” It serves to intimidate and punish homeowners by taking away the homeowner’s home, leaving him nothing.

Sanchez ignores the reality of the present economic situation, which she admits to. She speaks, however, of foreclosure as a “necessary tool” to punish and to intimidate.

While associations have other options available, foreclosure is a powerful and necessary tool in the association’s collection efforts arsenal. People take notice when there [sic] property is being foreclosed. Foreclosure may motivate those who have not been making assessments to bring their account current. More often than not once a delinquent homeowner gets notice of a pending foreclosure on their property, they make some type of payment arrangement or refinance.

If HOA covenants and statutes that allow the HOA to take a member’s home or money based on an HOA fine was held to be an unconstitutional punishment or penalty[i], so must foreclosure statutes be held as an unconstitutional preemption of government power. The argument that foreclosure is just a legal collection method and not a punishment falsely states reality.

(Loura Sanchez and Hindman are Colorado attorney members of CAI and members of its College of Community Associations Lawyers (CCAL)).

[i]In Unit Owners Association v. Gilman, 292 S.E.2d 378 (1982), the Virginia Supreme Court heldthat a fine was “A pecuniary punishment imposed by lawful tribunal upon person convicted of crime or misdemeanor. A pecuniary penalty. It may include a forfeiture . . .” and that “The imposition of a fine is a governmental power. The sovereign cannot be preempted of this power, and the power cannot be delegated or exercised other than in accordance with the provisions of the Constitutions of the United States and of Virginia. Neither can a fine be imposed disguised as an assessment.”