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What makes a good HOA lawyer?

A good lawyer is highly skilled in creating doubt and confusion through the use of semantic deconstruction.  By “deconstruction” I mean analyzing, dissecting and fragmenting the sentence grammatically to isolate individual words or phrases and to explore alternative definitions.  The poster child example was demonstrated by Pres. Clinton: “It depends on what the meaning of is, is.”

Other specific, well known examples are from the judiciary itself, where in the Kelo decision the court redefined “public use,” as found in the 5th Amendment, to mean “public purpose”; and in the Citizens United decision equating a corporation to a real person with rights to contribute to election campaigns.

A good way to understand this tactic is the forest and trees analogy.  The HOA attorneys ignore the description of the forest (the common meaning of the sentence statement) and attempt to redefine the individual trees that make up the forest (the words and phrases used in the sentence).  By redefining the descriptions of the trees, the attorneys create doubt and an alternative interpretation in their favor. And by doing so, they have redefined the forest to mean something else other than what was obviously intended. The statement, as commonly accepted, now has several alternative meanings.

My favorite example is CAI’s insistence that HOAs are not governments but businesses.  CAI makes use of the archaic Marsh v. Alabama public functions test that reduces the long held legal doctrine of a government (the sentence) to a test of a few factors (the trees). Does the HOA possess the functions of a government?  Well, the question can be reversed to ask: Does a government possess the functions of a business?  This approach gets us nowhere.  The “trees” have become the focus, the substitute legal meaning, of deciding the definition of what a government is, and the traditional legal doctrine is summarily dismissed as irrelevant.  It is a defect in our system of jurisprudence.

If you attempt to find the meaning of a vague concept in the dictionary by pursuing the words used to define it, say the word “government,” you quickly find yourself in a circular rut.  Justice Potter encountered this difficulty in Jacobellis v. Ohio (1964) when he wrote that the Supreme Court “was faced with the task of trying to define what may be indefinable,” referring to the difficulty of defining the broad concept of what is pornography.  He admits to not being able to intelligently define pornography, “But I know it when I see it.” 

This sums up the reality of attempting to define concepts that are well understood in our society, but escape a unique and distinguishing definition. Only by specifying examples that distinguish between what is and what is not can a society clearly arrive at an acceptable definition.

These “word games,” as I call them, this one shot redefinition of long held concepts (the court seeks some means to decide an issue and picks one, almost arbitrarily), is very dangerous and undermines a stable society.  It, along with “political correctness,” is Newspeak (from Orwell’s 1984) where a person can no longer make meaningful distinctions about reality, and where black can mean white.

Good lawyer play these word games very skillfully, and the judges follow along with redefinitions to suit the particular issue before them, rather than re-examining the whole concept that is in question.  Opposing lawyers for homeowner rights advocates must not lose sight of the broader picture, the forest.

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 14thAmendment.

 

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.”  

As word of manager UPL conduct spreads, where were the HOA attorneys?

Adrian Adams, a California CAI member attorney has spread the word about HOA manager  UPL activities.  And the word will continue to be spread to all states since they all has UPL rules. This blog entry follows just a week after my Commentary, Final Order: HOA management firm engaged in unauthorized practice of law, was published.

In the June 24, 2012 of the Davis-Stirling.com eNewsletter, “Managers Practicing Law.”  Adams offers the following advice to HOA boards,

Directors will have difficulty convincing a jury that seeking legal advice from a manager was prudent. . . . When asked for legal advice, a manager should always recommend that the board seek legal counsel. Doing so protects both the manager and the board.

Let’s step outside the box!    UPL supreme court rules have been around for many, many years in all states.  During all this time, where were and what were the CAI self-proclaimed HOA legal experts doing?   Did these experts not know about state supreme court rules on UPL?  Well, that’s no excuse, if true. 

If homeowners can be held accountable under CC&Rs that need only be recorded at the county clerk’s office, sight unseen and without an explicit buyer signature, why should these attorneys escape accountability for negligence to their HOA clients? 

CAI is the national lobbying entity, whose members have repeatedly gone before state legislatures to propose statutes governing HOAs on behalf of all the HOAs and homeowners. (CAI has a miniscule number of homeowners as members, at most 30,000 of some 25,000,000 HOA families).  And CAI attorneys often take the word of the HOA manager with respect to the validity of legal action, without the independent review required by civil court rules that the action is based on facts and the law (Rule 11(a), Signing of Pleadings).

The CAI attorney silence is disgraceful and violates the rules of civil procedure and professional code of conduct. Ethical rule 3.1, Organization as Client, of the code of professional conduct, specifically relates to the attorney’s awareness of illegal conduct by the client or “other person associated with the organization,” and 2.1, Advisor, whereby candid advice on moral and ethical issues may be rendered to the client.

I wonder what the reaction is from those 9 states that use CAI to license managers: Alaska, California, Connecticut, District of Columbia, Florida, Georgia, Illinois, Nevada, and Virginia.  Or from those towns, like in Arizona, who sponsor CAI seminars on good governance.

This egregious conduct is another solid example of the true nature of CAI’s involvement in the HOA governance industry.  It is unquestionably in the self-interest of its members, both its attorney and its management firm members. 

Local government copies HOA government

In the June 23, 2012 NY Times article by David Segal, “A Georgia Town Takes the People’s Business Private,”  Segal asks and answers, “What is local government for? For years, one answer, at least implicitly, was ‘to provide steady jobs with good wages.’”   It reduces public government to just providing for the maintenance of the community, following the lead of the other form of local government, the private HOA regime whose purpose is to just “maintain property values.”

While the answer is in keeping with the theme of the article regarding the privatization of government services, it ignores the unique functions that distinguish a public government entity from a business, or more importantly, a membership nonprofit business.  Just what are those unique functions?

Are governments just a business?  Are businesses just a government?  Are HOAs just a business?  Are HOAs just a local government?  In his April 2, 2008 CAI Ungated blog entry, CEO Skiba writes: “Community associations are not governments . . . .  Yet they are clearly democratic in their operations.”  Skiba continues further with, “The solution to that problem is not to replace democracy with tyranny, royalty, or some other form of government, but to work to make the democratic process better and to hold those elected accountable. . . .”  He seems to be pleading that whatever aspect of democracy there is in HOAs, we must make serious improvements. Note his use of “some other form government” is an admission that HOAs are political governments.

I find it hard to accept the above assertion by Skiba that CAI supports making HOAs more democratic. Rather, CAI supports the top-down imposition of UCIOA laws that blatantly contradict its other pronouncements that HOAs are the town hall ideal of democratic governance.  And it contradicts CAI’s documented positions before the courts and state legislatures opposing constitutional protections for homeowners in HOAs.

Political scientists (among them Wayne Hyatt, Evan McKenzie, and Steven Siegel) have accepted a compromise position that HOAs are a sui generis entity, a unique combination of business and public government functions that require a new set of laws to establish a just and fair governance of people living in an HOA controlled community.  Yet, since Siegel’s seminal paper of 1998 (Wm & Mary Bill of Rights Jnl), the laws remain pro-HOA without HOA accountability to the state, and without the equal protection of laws that apply to all other citizens except those living under HOA regimes.

A detailed discussion of the de facto status of HOAs as state actor governments can be found in The Foundations of Homeowners Associations and the New America, “Part III, American Political Governments.”