Tag: linkedin

AZ R.E. dept ignores HOA laws in its policy of “No Negatives About HOAs”

Today, Arizona has a new crop of laws becoming effective, aside from SB 1070, two of which affect HOAs and property sales.  One would think that the AZ Dept of RE (ADRE) would mention these new laws. Although pertaining to HOAs, which ADRE does not regulate, they affect the sale of real property.  Real estate agents are required to know real estate law, contract law, agency law, and the Commissioner’s Rules, which are part of the licensing test and are included in its biannual continuing education classes.

Playing its part in the unspoken alliance of “No Negatives About HOAs“, ADRE released the following document:  Law Book Addendum 2010 Statute Changes –  Click here.   It makes no mention of the only two HOA bills with changes to ARS 33-442, which pertains to real property sales and transfer “fees” imposed by HOAs.  HOA attorneys have suggested that the HOA get the seller to include payment by the buyer it the sales contract.  But, according to ADRE, no need to be concerned here.

The Addendum also does not mention the changes to ARS 33-1808 and 33-1261 pertaining to “for sale sales” signs.  Not a concern of agents either, it appears. (It’s not like ADRE is not aware of the bills, having supported them.).

Under the Commissioners Rules (AZ Administrative Code, Title 4, Chapter 28 (ADRE), Article 11, Professional Conduct, excerpted here (emphasis added),

R4-28-1101. Duties to Client (legally, the guy who pays; the other party is the “customer”)

A. A licensee owes a fiduciary duty to the client and shall protect and promote the client’s interests. The licensee shall also deal fairly with all other parties to a transaction.

B. A licensee participating in a real estate transaction shall disclose in writing to all other parties any information the licensee possesses that materially or adversely affects the consideration to be paid by any party to the transaction, including:

3. Any material defect existing in the property being transferred;

H. The services that a salesperson or broker provides to a client or a customer shall conform to the standards of practice and competence recognized in the professional community for the specific real estate discipline in which the salesperson or broker engages . . . .

I. A salesperson or broker shall exercise reasonable care in ensuring that the salesperson or broker obtains information material to a client’s interests and relevant to the contemplated transaction and accurately communicates the information to the client. A salesperson or broker is not required to have expertise in subject areas other than those required to obtain the salesperson’s or broker’s license. A salesperson or broker shall take reasonable steps to assist a client in confirming the accuracy of information relevant to the transaction.

A strict reading of the above evokes a “caveat emptor” policy by ADRE, and “material” only pertains to the physical, and not to all of the real property interests affected by the sale of the real property.  Yet, in its PR statement to consumers, “Information for Consumers” page, ADRE assures the consumer in its (emphasis added),

 We want to protect consumers from being harmed in real estate transactions.  You will find a wealth of information on this website that will help you be a smarter real estate consumer.  You will also find information about what to do if something goes wrong in your transaction.  Remember, we are always willing to help.

 If you need to speak with an ADRE staff person, phone the ADRE Consumer Assistance Team at 602.771.7730

PS.  Earlier this year, the last time that I wrote ADRE about this, and to the new Commissioner, I was told that ADRE doesn’t regulate HOAs.  No mention of its failure under the above Rule.  I guess HOA laws affecting sales does not concern ADRE, and has adopted the “see no evil hear no evil, speak no evil” stance.

awarding HOA attorney fees and public policy

This Maryland Court of Appeals (equivalent to other states’ supreme court) case[i] discuses the topic of awarding reasonable HOA attorney fees,  public policy, and when exorbitant fees may be awarded.  “In each case, the Associations won affidavit judgments against the Residents in ‘largely uncontested’ proceedings. The Associations also sought attorneys’ fees from the Residents in those courts, calculated according to the ‘lodestar method.'” (Emphasis added).  Note the HOA’s arguments to justify their attorney’s fees.  

First, the generally accepted method to determine attorney fees is known as the Lodestar Method as set forth by the US Supreme Court:

(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the “undesirability” of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases.

 

Second, there is the underlying premise, presumption, of “fee-shifting” that holds, as stated by the Court (emphasis added),

[T]hat the lodestar method of calculating attorneys’ fees was generally appropriate in the context of fee-shifting statutes. This holding is justified by the public policy underlying most statutes that allow for fee-shifting. Fee-shifting provisions frequently apply in “complex civil rights litigation involving numerous challenges to institutional practices or conditions.”

A court’s application of the lodestar method in these cases “is designed to reward counsel for undertaking socially beneficial litigation in cases where the expected relief has a small enough monetary value that [other methods] would provide inadequate compensation.

 

However, the Court saw it as inappropriate, stating (emphasis added),

The policy considerations mentioned above do not apply here because these cases do not involve a fee-shifting statute . . . . It is by contract, not because of public policy, that the Residents are obligated to pay attorneys’ fees to the Associations.

 

But, the HOA responded with (emphasis added),

[These cases] are sufficiently related to advancing the public interest to justify use of the lodestar method in determining reasonable attorneys’ fees.  [And] that “[h]olding delinquent owners accountable for paying their share of association assessments supports social benefits that extend far beyond the association itself.” . . . [H]omeowners associations provide public services such as street maintenance and security, thus relieving local governments of those obligations.

 

The Court’s rebuttal said,

We are unpersuaded [sic] that any tangential benefit the Associations may provide to local government or to the public is sufficient to justify use of the lodestar method in awarding the fees for their attorneys. . . . The fact remains that this litigation arises from disputes between private parties over breaches of contract.

Our rejection of the lodestar approach does not mean that the time spent by the lawyers and a reasonable hourly rate should not be an important component of a court’s analysis.

Courts should use the factors set forth in Rule 1.5 [MD Rules of Professional Conduct on reasonable attorney fees] as the foundation for analysis of what constitutes a reasonable fee when the court awards fees based on a contract entered by the parties authorizing an award of fees

Rule 1.5 does not carry with it the notion that the importance of the right vindicated will justify an expenditure of attorney time that is hugely disproportionate to the dollar amount at issue in the case.

Trial courts are not bound by the monetary amounts in such contracts [that state an amount for the attorney fee] , however, and need not cleave to the contracts at all if they improperly influence the fee award.

[i] Monmouth Meadows HOA v.  Hamilton, Nos. 43, (Md, July 27, 2010). (Three consolidated  cases decided in this decision.)  See Leagle.com  http://www.leagle.com/unsecure/page.htm?shortname=inmdco20100727254.

HOA attorney doesn’t recommend Roberts Rules — let the boards do as they please

 In the July 23, 2010  issue of “the word” for HOA boards (CAI Carpenter Hazlewood’s enewsletter), CHDW’s Sahl correctly states the silence of the  AZ statutes on the issue of corporation rules of order.  And, in true pro-HOA support — after all they represent that separate and distinct class of owners, the directors and officers — say the board can do as it pleases.  Absent is any recommendation for  a sound and “good faith” functioning of the HOA by recommeding that, as a very good idea,  the HOA does adopt Roberts Rules of  Order. 

But, why should they when the board has the broad powers granted by the adhesion CC&Rs and state laws?  Why confine and restrict its right to do as it pleases, under these very broad grants of freedom to act, by using  Roberts?   No, no, no!  “Rules” is for the owner-members, those other guys, and not for the hired-hand managers,  directors, or  officers.   Roberts Rules, repeatedly revised, is the 134-year accepted standard for conducting board meetings by corporations, especially nonprofit corporations. 

Please understand that the Board does not function for the benefit of the “people”, the homeowner-members, as does public government, but to enforce the CC&Rs first and foremost.  Such enforcement to maintain property values is for the mutual benefit of the homeowner-members to the exclsuion of all other rights, freedoms, and privileges and immunities still available to those not living in HOAs. 

This surrender by homeowners of their privileges and immunities,  which all Americans are to enjoy, must be fully understood.  It is not diviluged to the public at large under the unspoken alliance of  “no negatives about HOAs.”

 

For more info, see  Does CAI act in good faith for the benefit of the people in HOAs?

                              Confederate Texas and HOA governments: de facto, unlawful governments

Texas & Arizona: the different meanings of ‘standing to sue’ an HOA

The question on appeal was a question of a legal standing to bring this suit against the defendants.  In general, the Texas appellate court in Webb clarified the legal status of “standing” (emphasis added),

 Standing deals with whether a litigant is the proper person to bring a lawsuit. . . . To establish standing, one must show a justiciable interest by alleging an actual or imminent threat of injury peculiar to one’s circumstances and not suffered by the public generally. . . . As stated by the United States Supreme Court, the question of standing is whether the party invoking jurisdiction has “a personal stake” in the outcome of the controversy.

 

Traditionally, courts have held that this “personal stake” must exist at the commencement of the litigation and continue throughout the lawsuit’s existence.

 

With respect to the Webb decision, the Court noted (emphasis added),  “Accordingly, unless Webb is an owner of a lot within Glenbrook Estates, she does not have standing to seek a declaration whether the Association waived enforcement of certain Covenants.”  Webb was not the recorded owner of the lot, only her husband’s name appeared on the deed, and Webb could not establish any fiduciary relationship or other representation for her husband.  Webb’s  case was dismissed due to a lack of standing to sue.

 See  Webb v. Voga, No. 05-09-00074-CV, Tex. App. Dist. 5, July 15, 2010.  (Glenbrook Owners Assn was a defendant).

NOW, TURNING OUR ATTENTION TO ARIZONA’S MOCKERY OF JUSTICE,  where the Office of Administrative Hearings adjudication of HOA disputes was declared unconstitutional  by the Maricopa County Superior Court (Meritt v. Phoenix Townhouse HOA, LC2008-000740, January 29, 2009), we find an unaddressed issue of standing to sue.  In short, after the decision and after a denial of this writer’s right to file a Motion to Intervene by Judge Murdock, an attempt was  made to bring the issue of a lack of standing to the attention of the court. The fact that the homeowner, who initiated the case, was no longer a member of the Phoenix Townhosue Assn.  On Feburary 23, 2009 I wrote Judge McMurdie, providing the evidence and saying,

 

Petitioner and real party in interest, Ron Merrit (sic), had quitclaimed his deed to his co-owned property in the Phoenix Townhouse subdivision on October 10, 2008, prior to the superior court special appeal of October 23. (Exhibit 1).  I believe this issue became moot at that point.

 I reminded the judge,

 If I had been permitted to intervene, these facts, discovered subsequent to filing the Motion to Intervene, would have been presented appropriately. Rule 60(c)(6) “does not limit the power of a court to entertain an independent action to relieve a party from judgment, order . . . or to set aside a judgment for fraud upon the court.” 

 On March 2, 2009 Judge McMurdie responded with the following Minute Entry (emphasis added),

 The Court has received Intervener’s, George Staropoli, miscellaneous filings.

IT IS ORDERED striking these filings.

IT IS FURTHER ORDERED that the Clerk of Court shall not accept any filings from George Staropoli in this case.

  Apparently, the Arizona courts have a different take on this doctrine of standing to sue when it comes to HOAs.  The decision and harsh attitude of the Judge, and the absence of any government agency or official to defend the statute, allows a paraphrasing of Carl von Clausewitz’s, “War is the continuation of policy by other means” (On War):

  “The judicial system is the continuation of policy by another means!”

  Read the complete story of OAH constitutionality at

The State of Arizona will not protect buyers of HOA homes!

HOA attorney collusion and regulation of public streets

During the past Arizona legislative session, HB 2153, dealing with a re-assertion that public streets are regulated not by HOAs but by civil government, was defeated by HOA/CAI opposition and a group of HOA special interests, Sun City HOA.   Part of the argument for the bill were the realistic incidents where the HOA fined a homeowner for a car parked in front of his home, on a public street — without any attempt to verify whether the car was owned by a member of the household.  In other words, in a display of gross injustice and a  stark display of HOA power and intimidation, the HOA simply fined the homeowner. (It is well understood that some 90% of the homeowners pay up rather than go to court to fight for their rights).

 What is further unconscionable and irresponsible, and a violation of an attorney’s code of conduct, HOA attorneys would simply “pick up the paper,” file the charges against the homeowner, and of course tack on its fees, and proceed in a flagrant violation of  Rule of civil procedure, 11(A), which states, in part (emphasis added),

The signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; that to the best of the signer’s knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

and the Arizona Rules of Professional Conduct, R42, Ethical Rule 3.1 (mimics the above Rule), and ER 3.3, Candor to Toward Tribunal, in part,

(a) A lawyer shall not knowingly:  (1) make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer . . .  (3) offer evidence that the lawyer knows to be false.

Is this legalized extortion by the HOA attorney and HOA board, acting together?[i]

While the bill was before the legislature, an on going court case[ii] was taking place, just brought to my attention.  A homeowner was being fined for just such an occurrence.  Both the management firm and HOA attorney are Community Association Institute (CAI) members, a trade group that lobbied against the bill.  CAI advertises as being the leading educator for the HOA industry and HOA law experts.  The Arizona law firm is Maxwell & Morgan where both principles are members of the CAI Community Association College of Lawyers.

Upon being notified of parking violations, the homeowner properly informs the management firm, Rossmar & Graham, that the cited cars are not his, and provides the license plates of his 2 cars (Mar. 28, 2009 email).  Subsequently, the board denies his request to remove the fines.  According to the homeowner, the attorneys continue and file suit, and then remove their claim for the fines.  Undoubtedly, the attorney realized she was in trouble for blindly doing the HOA’s bidding. 

Most egregiously and unethically, the M & M attorney still sought attorney fees from the homeowner.  This is unconscionable and unethical.  The attorney did the board’s bidding, ran up  fees, and then found that she was involved in an unsupportable charge, but still sought her fees from the homeowner.  The homeowner has to pay for the wrongful acts of the board, and the blind acceptance of the suit by the attorney? 

And now we have a former CAI legislative action committee chair, Scott Carpenter (another CAI college of lawyers member), whose firm advises HOAs on possible loopholes in the right of HOAs to regulate parking[iii].   In an inexcusable misstatement of the public parking issue, attorney Patel fails to mention the main issue regarding regulation of public streets by public government, citing only a Missouri case, Maryland Estates v. Puckett, that affirms HOA regulation of its members, but not the public.  His reference to checking vehicle ownership is only made in regard  to the possibility of illegal towing.

The battle for HB 2153 was precisely to prevent such abuse as occurred in the Wigwam Creek lawsuit.  But, Carpenter, in his Arizona Legislative Session blog entry of January 13, 2010, “Authority Over Roadways,” only saw, “If the bill is really about parking, then enforcement of a parking prohibition in a planned community’s governing documents is the enforcement of a contractual provision and does not, in its enforcement, exert any ‘authority’ over the roadway itself.”   Clearly this is a biased advocacy statement regarding pending legislation, and hiding behind the imprimatur of an attorney, not addressing or cautioning his readers about the implications regarding the public who are not members of the HOA.

In my Commentary of April 5, 2010[iv] I stated that the purpose of the prolific advisories/advertisements were “to seek and promote loopholes and technicalities in the law and governing documents that would lead to adversarial litigation.”

Something is rotten in Denmark!  Shame on CAI, Maxwell & Morgan and Carpenter, Hazlewood.   And shame on the Arizona Legislature for seeing no evil in regard to public control of public streets, and for accepting the voice of the CAI attorneys as gospel.

Notes

[i] See, Ethical obligations of attorneys to HOA members.

[ii] Wigwam Creek North HOA v. Fuchs, CC: 2010- 49644,  Estrella Mountain Justice Court, Maricopa County, AZ.

[iii] “Enforceability of Parking Restrictions”, Nikita V. Patel, Esq., July 9, 2010 enewsletter, Carpenter, Hazlewood, Delgado & Wood, PLC.

[iv] “How good are the CAI member HOA attorneys?“,  HOA Private Government, http://pvtgov.wprdpress.com.