Tag: public policy

For AZ HOAs, public roads means public laws prevail

An interesting federal case came to my attention that involved public access to public roads. In this Puerto Rican case, Watchtower Bible [Jehovah Witnesses] v. Municipality of Santa of Isabel, CIV. NO. 04-1452 (2013), the First Circuit overturned the District Court’s decision and held that the Jehovah Witnesses’ free speech rights were violated.  This case was the remand from the First Circuit in Watchtower Bible v. Sagardia de Jesus, 634 F.3d 3 (2011)).

Shades of Marsh v. Alabama (326 U.S. 501), that 1946 federal case where Jehovah Witnesses attempted to distribute literature in a company town with public access. WOW! (Cited in  Sagardia de Jesus).  Marsh led to the US Supreme Court’s “public functions” test to determine if private organizations were state actors. (Today, there are other tests for HOA state action that nobody seems willing to pursue).

The municipality operated a Public Housing Agency, similar to the “projects” build in the 1950s in Chicago and New York City.  Where there are unmanned gates (“unmanned urbanizations”), entry to the public road is based upon acceptance by a resident who answers a buzzer or gets a call from the visitor. However, Puerto Rico has explicit laws that require all roads to be public roads open to all the people, with the usual police powers exceptions for the health and safety of the residents.  Like criminals don’t get access, etc.

 In dealing with the remand, to tighten the rules in accordance with the laws, the court noted that,

If access to public streets can be denied to them, then access can be denied to anyone. For example . . . the press could also be prevented from entering a gated community to cover the reactions of residents to a court ruling, as that in this case.

The court made the following general statement that has direct application to private government HOA regimes (my emphasis),

 Even today, many nations of the world inadequately protect, or worse, fail to protect, these rights that we often take for granted. This case demonstrates this Nation’s deep history of protecting civil liberties. Any antipathy by individual residents of gated communities towards Jehovah’s Witnesses or members of any other religious faith should yield to common sense and respect for the Rule of Law, product of the United States and Puerto Rico Constitutions.

Ordinances: the state, municipality and HOA pecking order

Another “outside the box” opinion by the Illinois Supreme Court.  In Palm v. 2800 Lake Shore Drive Condo Ass’n (No. 110505) the court held that city ordinances can trump Illinois statutes under certain circumstances.  Earlier this year the Court said that HOA security people could stop and detain drivers on their private streets, Poris v. Lake Holiday POA (No. 113907), and that homeowners could withhold payment of assessments if the HOA failed to make repairs, Spanish Court Two Condominium Association v. Lisa Carlson, (No. 115342).

Palm raised several issues in regard to constitutional law, home rule powers, and whether “condominium law” should triumph both contract and real estate law. The question before the court, and the one of interest for this commentary, was the simple Chicago ordinance that omitted the pro-HOA boiler plate wording when requesting HOA records, “for a proper purpose,” which as we know can be found in many state laws and in the CC&Rs.  I focus on the doctrine of home rule that has been implied in defense of the HOA legal scheme – the local voice of the community.

Home Rule 

The Court explained that “Home rule is based on the assumption that municipalities [my emphasis] should be allowed to address problems with solutions tailored to their local needs.”  The Illinois Constitution has some very broad home rule provisions,

Except as limited by this Section, a home rule unit [meaning a municipality] may exercise any power and perform any function pertaining to its government and affairs including, but not limited to, the power to regulate for the protection of the public health, safety, morals and welfare; to license; to tax; and to incur debt. (Ill. Const. 1970, art. VII, § 6(a)).

Home rule units [municipalities] may exercise and perform concurrently with the State any power or function of a home rule unit to the extent that the General Assembly by law does not specifically limit the concurrent exercise or specifically declare the State’s exercise to be exclusive.” (Ill. Const. 1970, art. VII, § 6(i)).

The Court addressed the constitutionality of the structure of state governments:

If the constitutional design is to be respected, the courts should step in to compensate for legislative inaction or oversight only in the clearest cases of oppression, injustice, or interference by local ordinances with vital state policies (sic).

It should be noted that the home rule doctrine applies to government entities such as incorporated and unincorporated towns and villages, but does not apply to private, contractual HOAs. HOAs have not been delegated any powers by state legislatures in a proper enabling act.  Instead, statutes are merely created that either mandate regulations or, through the liberal use of the word “may,” declare certain acts and actions to be legal if undertaken by the HOA.

The HOA legal scheme ignores the US and state constitutions.  The IL Supreme Court’s advisory opinion that courts should step in to stop “oppression, injustice, or interference” by HOA “ordinances” that interfere with vital state polices does not apply to HOAs.  In other words, HOAs have been given special status and privileges and immunities not granted to municipalities.

Restrictive ordinances are valid, or are they?

The other aspect of this opinion addresses the case when municipal ordinances supersede statutes, which has its parallel with the validity of ordinances with respect to HOA covenants and rules.  The doctrine has been that if the ordinance is more restrictive then it is valid. However, if it is silent on an aspect of the statute in question, the statute prevails. The HOA argued that without “a proper purpose” clause the ordinance was less restrictive than the statute, and that the statute prevails.

 A technical legal argument followed and the Court held that,  “In sum, the constitutional framework places almost exclusive reliance on the General Assembly to determine whether home rule authority should be preempted. The legislature has not specifically denied the City’s exercise of home rule power or required its exercise of that power to be consistent with statutory provisions.”

 Here, somewhat unique to Illinois, the IL Supreme Court said that the home rule Chicago ordinance should prevail and if the General Assembly didn’t like it, it should explicitly restrict the municipality’s powers in new legislation.  What does this opinion say about municipal ordinances and HOA contracts?

First, remember that the HOA is not a government entity, but exists by virtue of a private contract. The opinion and doctrine should have no bearing on HOA contractual agreements. Second, the reality on the other hand, is that the courts have treated the HOA on the equivalent basis as if it were a municipality, and applied the restrictive ordinance doctrine. If the HOA rule or covenant is more restrictive, it controls over the municipality’s ordinance.  In other words, the HOA has been granted the legal status of a subdivision of the municipality, or the status of a government entity. The HOA stands in the same relationship to the municipality as the municipality stands to the state.

 Third, not only have HOAs been viewed as sub-divisions of a municipality in this aspect, their covenants and rules are not seen to interfere with “vital state policies.”  Private contracts that are not subject to the 14th Amendment are allowed to supersede municipal ordinances and even state laws.  In other words, it is state policy — in all states — to support, encourage and cooperate with, and even coerce obedience to, the acts and actions of private governments operating outside the US Constitution.

 A lot of issues and problems will disappear or lessen in impact if only the state legislatures would face up to reality and provide the same protections all other citizens enjoy by declaring HOAs as either state entities or to require all CC&Rs to state,

“The association hereby waivers and surrenders any rights or claims it may have, and herewith unconditionally and irrevocably agrees to be bound by the US and State Constitutions and laws of the State as if it were a local public government entity.”

  

In regard to the Chicago ordinance that is a fair and just protection of condo member rights, the Court upheld the ordinance.

North Carolina: second battleground for people’s rights in HOAs

North Carolina is proud that it was the first state to vote for independence from Great Britain (Halifax Resolves, 1775).  Today, some 238 years later, another battle for independence from oppressive government has commenced in the NC General Assembly.  This time, it is the people subjected to authoritarian, oppressive private HOA governments who seek equal justice with regard to safeguarding their homes against HOA foreclosure.  This time, it is the citizens of North Carolina who seek a redress of their grievances against the NC General Assembly that has supported, and continues to support, special laws for special groups.

In every stage of these oppressions we have petitioned for redress in the most humble terms; our repeated petitions have only been answered by repeated injury. (Decl. of Indep.).

Today, the NC assembly has two HOA bills before it, HB 175 and HB 331:  one seeks to impose harsher terms for HOA foreclosure rights, HB 331, and the other seeks to remove the unconscionable right of HOAs to foreclose, HB 175.  While NC currently allows unconscionable nonjudicial foreclosure, HB 331 would now put the HOA in the same position of a Trustee holding a deed of trust with the “power of sale,” which amounts to an auction sale without having to go to court. This amounts to putting the HOA in the same position not only as the mortgage holder, but as the trustee as well.

The bill further proscribes new foreclosure procedures that supersede the general NC foreclosure statutes, just for HOA foreclosures. There is nothing in the detailed procedures contained in 4 pages of the bill that addresses any procedures for the homeowner to contest the amount of debt being foreclosed by the HOA.   What does the simple phrase, as used in the bill, “if not contested” mean?

On the other side of the battle-line, HB 175 does away with special foreclosure rights just for HOAs. And rightfully so!  The right to foreclose has been argued on the basis of the need to collect assessments – read HOA “taxes” — so the HOA can survive.  Well, this argument could apply to any nonprofit that seeks to foreclose in order to survive.  But, there are no such laws protecting these nonprofits from failure, is there? And these nonprofit, charitable, and educational corporations can argue that they provide a public service, while the HOA provides services to a private group of people, only its members.

Other arguments against HOA foreclosure rights include:

  1. The HOA has not advanced any hard funds like a bank, yet it is treated as a public entity with the right to foreclose on the nonpayment of “taxes.”  But, the Assembly does not feel the need for checks and balances on the HOA board for this grant of special powers.
  2. The US Supreme Court has held that punitive damages, which the foreclosure essentially amounts to, in excess of 10 times the actual damages, violated the 8th amendment’s prohibition on the infliction of cruel and unusual punishments.  For example:  Foreclosing on a $2,000 debt, of which $500 is the actual assessment debt, on a home valued at $140,000 amounts to a whopping 70 times the debt.
  3. Foreclosure discriminates and is essential an intimidation and punitive measure that is effective only on certain members and not others – only those who have paid their mortgage over the years so that the HOA can collect funds in excess of the existing mortgage.  Is it fair for the good people who have paid and paid not only their mortgage but their HOA dues over the years to lose their home?  I think not!  But, on the other hand we hear their self-righteous chant that it’s “unfair for others to pay for deadbeats” who are behind in their assessments.  There seems to be a huge disconnect here.

I cannot entirely blame the members for this attitude, because they have been deceived. They have never been told the facts about the possible adverse financial conditions that could lead to holding them legally obligated for the debts of others.  HOA membership is like buying into a small, privately held business that has limited ability to exit or to raise additional funds if needed.  Also, the HOA is similar to a partnership where each member is jointly and severally obligated for the debts of the HOA. 

If some members cannot meet their “fair share,” any deficiency will be made up from those who can afford to pay.  These additional funds, like now being needed by many HOAs, can only come from existing members, which can be imposed upon them through the courts.

Also, I cannot reconcile this obsession by members against letting the deadbeats get away with not paying their HOA debts that often amount to less than $2,000, but who say nothing when their HOA spends $5,000 – $100,000 in attorney fees  pursuing trivial lawsuits against minor and questionable violations of rules.  We see these cases in the media quite frequently.  Something is wrong with the attitudes of members in HOAs, definitely wrong!  The attitude of the HOA members themselves is discriminatory and unconscionable.

Which direction will the General Assembly take?  For the people by ending the unconscionable and discriminatory HOA rights to foreclose, or for the  defective HOA legal structure that denies homeowner protections?

Arizona bill tells HOAs that they do not control public streets

[Please note that a previous post on this bill, SB 1278, was posted in error, referring to restrictions on mandating HOAs in new subdivisions.  An Arizona bill, SB 2292, that would have made this a law has been stalled in the Legislature and will die there.]

Arizona Session Law Ch. 103 (2013), SB 1278,  reaffirms local municipality control of public streets within an HOA.  It is a groundbreaking bill because it relegates HOA private governments to a rightful secondary status and subject to public government laws.  In a disgraceful rejection of the Constitution, courts see no problem with upholding the common law Restatement of Property (Servitudes) as controlling over Constitutional and contract law.

It’s a simply worded bill:

Be it enacted by the Legislature of the State of Arizona:

Section 1. Title 33, chapter 16, article 1, Arizona Revised Statutes, is amended by adding section 33-1818, to read:

33-1818. Community authority over public roadways: Applicability

A. NOTWITHSTANDING ANY PROVISION IN THE COMMUNITY DOCUMENTS, AFTER THE PERIOD OF DECLARANT CONTROL, AN ASSOCIATION HAS NO AUTHORITY OVER AND SHALL NOT REGULATE ANY ROADWAY FOR WHICH THE OWNERSHIP HAS BEEN DEDICATED TO OR IS OTHERWISE HELD BY A GOVERNMENTAL ENTITY.

B. THIS SECTION APPLIES ONLY TO THOSE PLANNED COMMUNITIES FOR WHICH  THE DECLARATION IS RECORDED AFTER DECEMBER 31, 2014.

While homeowners must wait until 2015, this bill is a giant step forward to curtail the unconsitutional reach of private regimes where homeowners are outside the protections of the US and Arizona Constitutions.  It speaks to putting a clamp on The New America of HOA-Land. The bill took 5 years of dedicated effort by HOA champion and State Senator Nancy Barto before it became law.

HOAs had raised feeble arguments that could and still can  be easily addressed by seeking ordinance variances.  The HOAs and their hired-hand venders have refused to avail themselves of this avenue of redress, which is available to all citizens.  No, this 4 year long battle was a battle for power and control.  Which form of government controls your public streets,  the municipality of the HOA regime?

 

CAI files amicus brief in Illinois Supreme Court claiming HOA is like a government

I just read the Illinois CAI chapter’s amicus curiae brief in the IL Supreme Court appeal of the groundbreaking Spanish Court v. Carlson decision. The court held the HOA liable for violating contractual obligations to repair and maintain common areas, and homeowners could withhold assessments.

 Speaking about the need for timely payment of assessment to keep the HOA going, CAI argues,

The very real impact of the Second District’s decision is peculiarly analogous to our government’s need to collect taxes free from objection by individual taxpayers. Surely, if people could refuse to pay taxes and then defend against their collection based upon a claim that the government had been negligent in the maintenance of public spaces and providing services, the government would find itself in dire financial straits and unable to fulfill its obligations.

The other decision in this 2012 case prevented the HOA from using the draconian measure of “forcible entry” – occupy the unit — to get the member to pay right away.  CAI’s argument for the HOA was that forcible entry was a valid tenant-landlord action, but the court had held that not paying rent was also a valid landlord-tenant action.

The major selling argument for CAI’s being “a friend of the court” is its repeated claims to speak not only for the HOA, but for the members, too. CAI offers the same ol’ impression that it is an educational organization and not a business trade group that lobbies for the business interests of its members.  And as such, why is it defending the consumers of its services, the HOA?  We know why?  Does the Illinois Supreme Court know why?

The Institute’s [CAI] mission is to serve as a national voice for those involved in community associations, including homeowners, governing boards, service providers, and vendors. (My emphasis).

The Illinois Chapter’s mission is to provide education and resources to Illinois residential condominium, cooperative, and homeowners associations, as well as represent their interests and the interests of Illinois community association members on issues of legal importance. (My emphasis).

However, the brief is full of arguments supporting the HOA and it right to use the draconian measure of forcible entry, while denying the contractual right to withhold payments when the HOA defaults on its obligations.

See Court decisions: HOA Enlightenment Movement vs. the Dark Ages; CAI amicus brief