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CA court upholds HOA suit against real estate agents

This important 2012 California case deals with, among other issues, a real estate agent’s duties to buyers in HOAs. The court found the realtors, acting in a dual agency capacity for the developer and builder, had violated their fiduciary duties to buyers by failing to disclose material facts: false budget numbers to induce buyers, failing to disclose material, public reports showing soil issues.

The Calif. appellate court held:

The statute gave ‘associations the standing to sue as real parties in interest in all types of actions for damage to common areas, including breach of implied warranty causes of action.’

The Realtors were dual agents in that they also represented the HOA members as buyers’ agents. Re/Max acted as dual agent in the sale of three parcels in Glen Oaks Estates, and Dilbeck acted as dual agent in the sale of one parcel in Glen Oaks Estates.

In sum, [the statute] does not replace dual agents’ fiduciary obligations to their buyer clients. . . . The Realtors breached their fiduciary duties as buyer’s agents by failing to disclose certain transactional documents, concealing facts . . . .

GLEN OAKS ESTATES HOMEOWNERS ASSOCIATION v. RE/MAX PREMIER PROPERTIES, INC.
As an aside:

In general, the normal real estate transaction, where there’s no dual agency, involves a selling agent representing the seller, and a different buyer’s agent representing the buyer. In Arizona, for example, the agent owes a fiduciary duty to his “client,” which is defined as the person who makes the commission payment to the agent. The agent “shall disclose in writing to all other parties any information the licensee possesses that materially or adversely affects [the sale]”, but the agent must “deal fairly with all parties.”

However, in almost 100% of the sales the buyer’s agent gets paid from the selling agent under a “co-broke” arrangement. The buyer’s agent then, according to R4-28-1101 of the Commissioner’s Rules, would have a fiduciary duty to the seller as that’s where he gets paid. Isn’t that a contradiction in the laws that creates a conflict of interest in the buyer’s agent? (Of course, the powers that be don’t see it that way – would confuse the issue). So, who’s really looking after the buyer’s interests? It appears dual agency does.

Furthermore, can a licensed agent who is required to take courses in agency, contract and real estate law hide behind the fact that he knows nothing, and therefore doesn’t have material HOA information in his possession? Would that be a reason for the media and government agencies and officials apparent role in an “unspoken alliance of nothing negative about HOAs”? If so, something is rotten in Denmark!

What would Pareto say about HOAs as “superior” decisions?

Are you familiar with Pareto’s Law, or Pareto Superior transaction? In the higher brainy types people like to talk about economics and wealth distribution, and government efficiency (I think CAI talks about efficient government in its materials).  Here’s what Pareto had to say.

(As these brainy types like  overly broad concepts and formulations, a “point” as used below, designates some measure of the conditions or status of society or government.  A “move” represents some government decision).

(i.) Pareto Superiority = A move from one distribution point to another is said to be superior when at least one party is better off and no one else is worse off. (This includes moves that benefit all parties; the essential concern is that no one is worse off after the move compared to welfare before the move.)

(ii.) Pareto Inferiority = A move from one distribution point to another is said to be inferior when at least one party is worse off (even if all others are better off).

(iii.) Pareto Optimality = There is no superior move possible from the current point of distribution. All possible moves are inferior in nature. Thus, no move can be preferred or defended by policy makers.

For us lowly folk, just focus on who benefits and who gets hurt. (In the world of servitudes, the law talks of the burden and benefited estates).  I can say quite empathetically that most of the HOA legislation cross this country are definitely Pareto Inferior decisions as many people are mandated to give up benefits for the benefits of HOA life, with its unequal application of the laws. Who can argue that no one is worse off by most HOA legislation?

But, what do I know?

HOA bills and the legislative “system”

I thought it a good time to summarize how your state legislature works. I’ve referred to the need for a champion, which implies, if not opposition, but having to deal with the legislative “system.” And there is a System. I will use Arizona as a model, understanding that other states will vary somewhat. For example, the Texas Legislature meets every 2 years. They do not use Committee of the Whole (COW) as the first Floor vote, but “second read.” California has sessions lasting for 2 years. Check your legislative website for your state’s process.

 

The System – the power of the majority party

The majority power rules and control the System. The President of the Senate and Speaker of the House determine the committees, what bills are heard where, who the Chair will be, and who are the members.

The committee chair determine whether or not his committee will hear a bill referred to it. I believe he can be overruled by a vote of the members, but that would be like going over the head of your boss, a No-No. At the request of a bill’s sponsor, he can hold the bill until the next meeting because the sponsor doesn’t have the votes. The sponsor can also “give up the ghost” and kill his bill.

Next step may be a Rules committee, a perfunctory committee supposedly passing on constitutionality, but just another place where the Chair can prevent a bill from proceeding to a floor vote.

(The Caucus vote, if passed out of Rules, is a nonbinding “courtesy” discussion meeting of the separate parties.)

Next we have what is called the Calendar, or Calendars for COW and Third Read. They are “ files” under the President’s or Speaker’s control who decide if and when the bill moves to the COW/second read vote. If passed at this point, these leaders can then decide, again, if the bill will proceed to a third read/ final vote of the House or Senate.

If passed out of the first branch, the process starts all over again in the second house.

Your champion must get support of all these players, or not run into serious opposition from the power players. He/she needs your emails and voice sent to the committee members and even to all the legislators if HOA reform bills are to succeed — especially the controversial bills. Over the years I’ve seen bills die at every one of the above stages. I have seen HOA bills held for weeks by the Speaker or President, who finally succumbed to public outcry and allowed the members to vote the issue, all of which passed with flying colors. The System is political, understanding that the majority party members also voted overwhelming to pass the bill.

At this early stage in Arizona, of the 16 HOA bills, 1 was Held, and 1 is sitting in the COW waiting for a floor vote. It had passed the committee by a 5 – 2 vote, but was objected to for a direct floor vote, which does not allow discussion. It has been sitting on the COW calendar for 3 weeks, waiting at the pleasure of the President of the Senate for a Floor vote. The bill would impose treble damages to HOA boards if the court found the lawsuit to be selective in nature against the homeowner. (Is that any worse that the right to take away one’s home for $50 after 1 year?)  Yes, discussion is important, but it must be allowed to occur if the democratic process is to work.

Yes, Virginia, there is a Legislative System.

Does civil government rule or does it submit to private HOA groups?

Dear Arizona Senators,

I continually am amazed at the opposition to this bill and the mistaken belief that any private contract can supersede legitimate local government. We all know that there is no absolute right to private contracts! HOAs are ignoring their role in a democratic society to obey the rules, as they like to say about homeowners in HOAs. They should follow the rules of this society and go to the planning board for a variance. Like they repeatedly say, “Homeowners can go to the courts, to agencies, to get a fair deal, etc.” but that’s not for the HOA that insists on making their own rules. It is simply a power play as to who rules the municipality.

The legislature has no choice but to uphold public government authority. If problems exist or changes are desired, since the HOA does not own the public roadway, the HOA can do what all citizens are entitled to do, go to their planning board and ask for a variance. The fact that the initial planning board approved these private roadways speaks to the retention of public government authority, otherwise it could have required private streets.

Please bear in mind, since CAI loves constitutional challenges as it fought over the proper delegation of authority to DFBLS, the court ruling in McLoughlin v. Pima that held,

However, it is a well established theory that a legislature may not delegate its authority to private persons over whom the legislature has no supervision or control

and

The legislature cannot abdicate its functions or subject citizens and their interests to any but lawful public agencies, and a delegation of any sovereign power of government to private citizens cannot be sustained nor their assumption of it justified, (Emmett McLoughlin Realty v. Pima County, 58 P.3d 39 (Ariz. App. Div. 2 2002), ¶ 7).

HOAs have usurped and assumed public government functions! And we all know accountability to and proper supervision by state the does not exist with HOAs to meet this constitutional requirement. They cannot have their cake and eat it, too! They cannot demand special consideration not to be held accountable and then do as they please.

Please make it clear to all persons that we are one state, indivisible with liberty and justice for all.  Please pass this important bill.

Note:  This bill, SB 1113 and its House duplicate, HB 2030, simple reassert public government control over public streets within an HOA subdivision.  HOAs have fined homeowners for any car parked in front of their homes.

Is there a CAI game plan to rewrite HOA CC&Rs to restrict member voting powers?

It appears to me that the 2012 CAI game plan is to completely rewrite the CC&Rs. This makes it about 1/2 dozen cases that I’ve heard in the past 6 months, and all seem to restrict the powers of the homeowner by not allowing homeowners to vote on important issues.

As an example, the current LA Times HOA column by Donie Vanitzian, “Homeowner association can’t adopt new bylaws without owners’ OK”,  deals with a question of a rewrite of the CC&Rs with provisions to exclude homeowner voting on certain issues involving IRS overpayments. This excellent article touches upon a serious move by  attorneys to further entrench the board of directors as a dictatorship. BEWARE!

One malicious rewrite is to permit minority voting control for assessments, amendments to the CC&Rs, and taking on outside loans/debt (CAI attorney). Minority control comes in the form of, for example as such a bill mandating minority rule was defeated in Arizona last year, a 2/3 vote of those in attendance with a 50% quorum, which gives 1 /3 vote to approve issues. (CAI attorney sponsored).

Now, they are going directly to the members who are well known to be apathetic and there’s a very good chance that they will sign on without even reading the details. One rewrite includes a 50% reduction in the quorum until a quorum is met, which would allow the political machine to adjourn the meeting and recall it every 5 minutes until they win. A second method, as I just witnessed, is to permit a 2/3 vote of the board to settle matters in the event that a quorum is not attained at the second meeting. (CAI attorneys).

In Arizona, SB 1476 would put a stop to CC&Rs that ignore member voting on CC&Rs amendments, and other restrictions on board acts to quash democracy in HOAs.. Minority rule, especially with the well know abuse by HOAs, is a very dangerous power as it would allow the political machine, the clique in power, to completely alter the CC&Rs o completely ignore any voting by the members, even to allowing future directors to be appointed by a “select” committee of current board members. And all would be legal, according to numerous court decisions, so long as the procedures specified in the CC&Rs are followed. Period!

What we are seeing here is CAI attorneys acting to promote seditious acts that undermine our Constitution and democratic society with its basic principal of majority control.

What we are seeing here is CAI creating and establishing HOA fascist governments where the HOA state objectives are first and foremost — to support the HOA corporation aided and abetted by corporate interests – the attorneys and management firms, the “hired hands.” The second part of the fascist form of government, in order for it to succeed, is the need to suppress individual rights and freedoms as we see with HOAs, and as we heard from CAI, “the unwise extension of constitutional rights to the use of private property by members . . .” (CAI amicus brief to NJ appellate court in Twin Rivers).

WAKE UP HOMEOWNERS! WAKE UP! YOUR PRIVATE PROPERTY HOME IN AN HOA IS A MYTH, AND ALL YOU OWN IN YOUR HOME IS THE RIGHT TO MAKE HOA ASSESSMENT PAYMENTS.