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Dreamland subdivision homeowners protested amendments requiring them to become mandatory dues paying members of a county club, which was turned into an HOA. This opinion put to rest several conflicting court cases in Arizona and in other states, dealing with the validity of what I have called, “ex post facto” amendments to the CC&Rs. In short, the strict contractual provision that the CC&*Rs could be amended by a majority vote and be binding on all dissenting members has been upheld the courts. Certain cases raised the important issue of the extend and impact of these amendments understanding that many of them were beyond any reasonable expectation of the member at the time of buying into the HOA.

Excerpts:

It is not reasonable to use the amendment provision to direct that one group of lot owners may, in effect, take the property of another group in order to fund activities that do not universally benefit each homeowner’s property or areas owned in common by all.

By contrast, the court determined that “[i]n those cases where courts disallowed the amendment of covenants, the impact upon the objecting lot owner was generally far more substantial and unforeseeable than the amendment at issue [in the case before it].”

We agree that these cases tend to support the homeowners, in that each refuses enforcement of a new covenant that markedly changed
the obligations of the implicated lot owners.

Congratulations to Cheifetz Iannitelli Marcolini, PC attorneys, Steven W. Cheifetz, Stewart F. Gross, and Matthew A. Klopp.

The case: Dreamland Villas CC v. Raimley, CA-CV 08-0388, AZ App. Div. 1, Mar. 16, 2010 at VICTORY!

My commentaries on this substantive issue:

“There are two important factors in this decision to be noted that have a tremendous impact on constitutional protections, and reflect a government not subject to the Constitution. First, implicit in the above decision by the court is the legality of “ex post facto” amendments: amendments to the CC&Rs that alter the homeowner contract and bind the homeowner without his consent to the new contract.  An action that is not permitted under the Constitution for government entities.”   The extent of HOA intrusion into a member’s life.

“Wow!! HOAs escape ex post facto restrictions and eminent domain protections — no compensation was offered homeowner. Welcome to the HOA-land of independent principalities with their own multiplicity of protected private “constitutions.”

“The argument advanced for amending those so-called contracts, and upheld in the courts, is that they contain an amendment procedure, and so long as the procedure was followed they are valid. So argue the “expert” CAI attorneys. But, they want you to ignore the other side of due process — substantive due process where the HOA “law” is itself a violation of our system of government.

“And forget about any question of a buyer’s “reasonable expectation” as a requirement for a valid amendment. Or that there is no explicit waiver of the surrender of any property rights. Or, that under contract law a CC&R amendment easily falls under an “agreement to agree” (“A-to-A”), and is not binding. An A-toA is an enforceable document if the specifics are sufficiently definite, as well as compensation, but some details are to be worked out. In a valid A-to-A, parties cannot bind themselves to negotiate to reach an agreement on some issue or important detail. (See Black’s Law Dictionary). What is an amendment? It is not a negotiation between the HOA and every individual homeowner, especially if not 100% approved! It can be a very important issue (detail) not heretofore contemplated or envisioned by the buyer.

“How then are they valid? Because the courts have treated this CC&R “contract” not strictly in terms of the words contained therein, but quite liberally by ascribing public government attributes to the HOA, far and above any reasonable interpretation or construction of the CC&R “contract”, and beyond any reasonable or “buried” intent to form a de jure government.”

HOA principalities where there’s no ex post facto or eminent domain protections

 

It seems that the AZ CAI chapter is seeking to have  homeowners associations publically represent its members.  To speak out before the legislature on HOA issues as the  HOA representative.  Even worse, it appears that CAI wants to sign-up HOA members to give their consent to have CAI lobbyists represent them politically.  

Here’s what its March 12, 2010 LAC “Legislative Update” mailer said,   The mailer clarifies CAI’s personal agenda: 

 The mailer “encourage[s] our Business Partners and Management Companies to get involved in this important aspect of our industry. Your companies thrive because Community Associations remain strong and vital and you can help keep them that way”. 

Clearly, CAI is not looking after the best interests of the HOA, and especially not the homeowner based on its positions over the years.  CAI is a business trade organization that must operate for the benefit of its members, the attorneys, the management firms, and some vendors, but cannot be any HOA.    CAI then seeks to obtain your consent to speak on public issues, arguing,  

“The community must prove that they speak for the majority of those who live in Community Associations; we need your assistance. At a minimum, please fill out your contact information so we can improve and update our grassroots database and get you involved in our Community Action Programs. . . . we need to be prepared to act when necessary.”  

The form states,  “I would like to be a part of the CAI Arizona Legislative Action Committee’s Community Action Programs”, and asks  for n/a and legislative district.”

 
 Methinks that CAI intends to use these open-ended forms before the legislature on all issues to indicate homeowner support.  Do not allow this to happen!  Your elected legislator is your representative!   

I have criticized CAI for misrepresenting themselves before the Legislature for years.  I have criticized HOA boards for speaking out on public issues on behalf of its members without first taking a vote of the membership. 

This mailer seeks to justify their appearances in public as representatives of the HOA.  Do not allow your Board to speak for you, the members, unless a vote of the membership is taken on every public issue, especially on reform legislation! Do not agree to any specific or broad changes to your C&Rs or bylaws that gives your board these powers to represent you!  

The mailer goes on to say, “A lobbyist helps ensure any new laws regarding associations are good for the associations and their members”, which is not completely true since it presumes that the board speaks for the individual member on political issues.  It also places the HOA above the law when it claims that it fights to avoid a “negative impact on associations and their ability to operate in accordance with the community documents”, irrespective of the laws of the land and the Constitution.  

If you think that the HOA should represent you politically, then urge the Board to incorporate as a government entity to protect your rights and yourself from abuse.  Understand that the purpose of the HOA is basically to maintain property rights, and says nothing about protecting your individual rights and freedoms under the laws of the land.   

Beware of this appeal!!  Warn your friends and neighbors who live in an HOA or condo.  Do it now!  

 The following is a rebuttal of certain assertions and claims found in the CAI online “brochure”, Issues and Perspectives.

  

1.  What to Ask Before You Buy (from CAI’s Issues and Perspectives brochure)

 a.  Issues often arise because of false expectations, misinformation and misunderstanding. You can help ensure a more positive community experience by learning all you can about a community before you buy or rent a home in that neighborhood.

Comment:  This is so disingenuous!  There are no warning notices and advisories to inform homebuyers for “learning all you can about the community”.  For example, that they are entering into a private government where the Bill of Rights does not apply.  Or, that they are providing their homes as collateral for the HOA’s survival, without compensating protections against abuse.  Essentially, the HOA “constitution” is a repudiation of the principles of the American system of democracy.

The CAI propaganda materials, like this brochure and alleged survey, serves CAI’s agenda in defense of the status quo.  The only changes CAI seeks, as evidenced from its repeated appeals, is for the homeowners to get more involved, ignoring the fact that the declaration is an unconscionable adhesion agreement favoring the corporate entity, the HOA, against its members.   And, homebuyers were buying a home, not a political job.

 

b.  Community associations exist because they offer choices, lifestyles, amenities and efficiencies that people value. Yet, with all of their inherent advantages, community associations face complicated issues, none more common than the challenge of balancing the rights of the individual homeowner with those of the community as a whole.

Comment:  How does CAI explain the fact that its lawyers had opposed the “extension of constitutional protections for homeowners . . .”  in its amicus curiae brief to the NJ appellate court (the Twin Rivers free speech case)?  I guess its “balancing” is a bit slanted in favor of HOA governments.

 

c.  While assessments, rules and regulations are important, don’t overlook other fundamental questions: Is it the right kind of community for you and your family?

Comment:  This is a serious question for all homeowners to consider. Homeowners may like the idea of “carefree living”, of the HOA as an enforcer of rules that are alleged designed to maintain property values, or the lifestyle in those specific HOAs that can be considered a resort or retirement community, but not those that are essentially a community of one’s home, of residences.  But, in absence of any information or communications from the authorities — from consumer protection agencies, from the real estate agent, — from the developer, or from the media as a watch dog on reality, how can a buyer make an informed and intelligent decision?  He is not informed of any downside to HOA living, and therefore, he carries a mistaken expectation that he remains under the protection of the democratic jurisdiction of the local government and state.  Not true, as Evan McKenzie mentioned long ago in 1994: the HOA member argues about his rights that he does not have in an HOA. (See Privatopia).

Buyers can buy into an HOA with the above realizations and knowledge, but his choice to proceed is a choice to reject the principles of democratic government in exchange for loose statements about maintaining property values.  There are no defenses that  the buyer does not reject the Constitution.  Is that the “right kind of decision for you and your family”?

 

http://www.caionline.org/about/press/Media%20Statements/statement_buyers.doc

I have argued that most of the court decisions relating to HOA issues have been “bad law”, because the laws being upheld are, indeed, pro-HOA laws, and that the current public policy influencing the judges[i] also reflects this “HOAs are the next best thing to Mom’s apple pie.”  The recent overruling of a precedent in Citizens United by the US Supreme Court explicitly acknowledges that  “[S]tare decisis is a principle of policy and not a mechanical formula of adherence to the latest decision.[ii]“

 

 My purpose here is to understand the ease with which precedent can be rejected, and the rationale provided for overruling precedent. The specifics of the issue at hand are not relevant to this understanding.  The rationale for overruling precedent is given in Citizens United as,

Our precedent is to be respected unless the most convincing of reasons demonstrates that adherence to it puts us on a course that is sure error. “Beyond workability, the relevant factors in deciding whether to adhere to the principle of stare decisis include the antiquity of the precedent, the reliance interests at stake, and of course whether the decision was well reasoned. We have also examined whether “experience has pointed up the precedent’s shortcomings.”

Austin [the precedent in question] is undermined by experience since its announcement.

Some examples of not “well reasoned”, or “bad law”, can be found in Inwood v. Harris[iii] in which the Texas Supreme Court held that equitable servitude laws pertaining to the timing of the filing of CC&Rs superseded the Texas Constitution. The constitution contained explicit protection of homesteads under its homestead exemption provisions.  The NJ Supreme Court, in the Twin Rivers[iv] free speech case, also upheld equitable servitude laws and private contracts as superior to First Amendment rights.[v]  Additionally, at the superior court level, there’s the decision on the unconstitutionality of an Arizona statute that provided for independent tribunal adjudications of HOA disputes.[vi] The judge ignored the deficiencies of the HOA’s “due process” procedures under the HOA’s “after an opportunity to be heard” covenant.

And finally, in general, there is the failure to apply the “antiquity of the precedent” justification to the 1946 Marsh v. Alabama holding of a company town, “public functions” test for state actors.[vii]  The precedent value of this decision is still retained when, after 64 years,  “experience has pointed up the precedent’s shortcomings.”

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[i] See in general, HOAs, justice, and judicial myth and precedent.

[ii] CITIZENS UNITED v. FEDERAL ELECTION COMM’N , 08-205, Jan. 21, 2010 at 47. (“Stare decisis” is the legal doctrine of precedent under which the court must follow earlier judicial decisions, otherwise the whole legitimacy of “rule by law” and not by man — and the moral authority of the courts —  would be undermined. The earlier decided case serves as the “precedent” for later decisions on similar issues.)

[iii] Inwood v. Harris, 736 S.W.2d 632 (Tex. 1987) (homestead; covenants running with the land).

[iv] Comm. for a Better Twin Rivers v. Twin Rivers Homeowners’ Ass’n, 929 A.2d 1060 (N.J. 2007).

[v] See critique of this opinion: The Twin Rivers Case: Of Homeowners Associations, Free Speech Rights and Privatized Mini-Governments, Paula A. Franzese and Steven Siegel, 5 RUTGERS J.L. & PUB. POL’Y 630 (2008).  Part of the issue on Homeowner Associations: Problems and Solutions.

[vi] See  The State of Arizona will not protect buyers of HOA homes! on HOA Private Government website for a detailed account of this disgraceful default decision.

[vii] Marsh V. Alabama, 326 US 501 (1946) (company town and public functions) .