Tag: regulation

Law review article criticizes HOA public policy

In her 44-page OK Univ. Law Review “Note” (2022) the author, Saige Culbertson, concentrates on the questions of agency relationships and duty of care. However, in order to discuss the question of agency relationships, Culbertson addressed many of the issues still causing problems in HOA-Land including the status of HOAs as quasi-governments, the validity of the CC&Rs “contract,” and the reality of maintaining property values.

With respect to agreeing to be bound, the author maintains in regard to the individual homeowner subject to the CC&Rs,  that

  • “HOAs use these contracts as a basis for their decision making because courts often presume the homeowners have a full understanding of their HOA’s obligations, because they have the duty to examine their contract for real property. The typical HOA contract is overly generalized and broad.
  • “When buying a home, a homeowner does not often have the option to not join. Homeowners also have little-to-no choice of which actions the HOA may take on their behalf, or, crucially, any actions taken by the HOA for any purpose.  
  • “However, the lack of mutual assent is constant throughout the relationship with the HOA. At the beginning, the homeowner might not have agreed to a relationship with the HOA, and those who have agreed might not have a full understanding of the rules of the HOA.
  • “[S]ome courts and scholars argue that HOA contracts are a form of adhesion contracts. Adhesion contracts are exclusively pre-determined by a single party and are presented as “take it or leave it,” while the non-drafting party has no room to negotiate.”

With respect maintaining property values, Culbertson is concerned about “The Fictional Purpose of a Homeowners’ Association,”

  • “The Community Association Institute recently reported 71% of individuals believed their community association rules ‘protect and enhance property values.’ While this belief may have been true in 2005,  more recent research indicates otherwise. 
  • “[A] study found that “[p]roperties located in HOAs do not appreciate faster, on average, than properties not located in any type of neighborhood government”

 and cites this study by Robertson,

  • “[A] 2021 study conducted by former Yale Professor Leon S. Robertson found that “[c]urrent sales price[s] [are] related to property characteristics and local market conditions[,]” and that “sales prices do not reflect the efficacy of homeowners associations to protect property values.
  • “Robertson remarked that “[s]tate and local laws that sanction homeowners associations and allow their coercive practices based on the premise of property value preservation are ill founded.”

With respect to quasi or local government, the author favors making “HOAs part of local government, founded in democratic ideals, and with regulation by the state or municipality,”

  • “The nature and purpose of the HOA are so closely linked to that of local government that . . . clearly give rise to a special sense of responsibility . . . . This special responsibility is manifested in the . . . requirements of due process, equal protection, and fair dealing. The severity of the risks associated with the substantial overreach by HOAs is further shown by actions depriving individuals of their basic rights.
  • “[U]pon analysis of the association’s functions, one clearly sees the association as a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government. As a “mini-government,” the association provides to its members . . . . [citing Cohen v. Kite Hill Cmty. Ass’n, 142 Cal. App. 3d 642].
  • “The lack of checks and balances on HOA actions is a national problem and homeowners are often left with no remedy for violations of their rights. The need for regulation of HOA activities, and further federal protections for individuals, is especially apparent . . . .
  • “[H]omeowners should urge their local government to increase regulations on HOAs to protect their fundamental rights as Americans. States should therefore pass legislation to make HOAs part of local government, founded in democratic ideals, and with regulation by the state or municipality.”

Source: OK Univ. Law Review (PDF download).

HOA-Land Nation publication to aid constitutionality

The important question of HOA constitutionality has generally been avoided and given token lip serve by all interested parties: homeowners, homeowner rights advocates, state legislators, real estate departments, attorney generals, nonprofit private entities proclaiming a defense of the Constitution, and the media at large.

Even the renowned Wayne Hyatt’s[1] statement in 1976 went ignored.

“One clearly sees the association as a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government.   All of these functions are financed through assessments or taxes levied upon the members of the community, with powers vested in the board of directors, council of co-owners, board of managers, or other similar body clearly analogous to the governing body of a municipality.”[2]

Clearly challenging the constitutionality of the HOA model of local government and legal scheme is well beyond past due. To correct this horrific and inexcusable oversight I have published, The HOA-Land Nation Within America,[3] a white paper, an exposé of the HOA legal scheme violations of the Constitution. The eBook and paperback editions can be found on Amazon.

This task of constitutional HOA reforms may appear overwhelming and almost impossible to achieve, but constitutional HOA reforms can happen. It will take tremendous effort and perseverance, and a “never give up” mentality. David Cole passionately makes this point[4]

“If Americans now and in the coming years insist that . . . our most fundamental values, including equality, human dignity, fair process, privacy, and the rule of law, and if we organize and advocate in defense of those principles,” we will succeed in bringing about the necessary fundamental and constitutional reforms to the HOA legal scheme in existence since the HOA “bible” was released in 1964. In order to accomplish this important task, “it will take a persistent civil society, a vigilant media, brave insiders, and judges and other government officials who take seriously their responsibility to uphold the Constitution. But first and foremost, it will take an engaged citizenry.”

“The defense of liberty depends . . . on citizens engaging collectively to fight for the values they believe in. . . . The preservation of liberty through a written constitution . . . has survived . . . because ‘we the people’ have consistently taken up the charge to define, defend, and develop liberty in our own image, so that it reflects our deepest commitment , not just those of a privileged elite who do not represent us.”

It falls upon the homeowners in HOAs, as has always, to advance constitutional arguments that are valid and credible.    And that takes knowledge and understanding of the issues.  The HOA-Land Nation, and other of my publications and Commentaries, as well as those of others, provide the “ammunition” that will pass the valid and credible challenges to be expected from CAI and other lawyers, provided the arguments do not get bogged down in irrelevant arguments from the opposition.

CAI cannot handle a broad Bill of Rights challenge. Period!  I have never been challenged  by CAI because they well know that they are defending the defenseless.

Read the book, paperback or eBook, and spread the word.  Use it in those many HOA violations where state statutes support the HOA.  Work to hold seminars and conferences to openly discuss the issues raised in The HOA-Land Nation.  Expose their defense of HOAs, now!

 Notes

[1] Wayne Hyatt was a prominent figure in the promotion of HOA-Land as well as an important person in creating CAI in 1973, serving as its second president.

[2] I have extensively quoted Wayne Hyatt’s 1976 statement on HOAs as mini-governments, as cited in the 1983 California case, Cohen v. Kite Hill.

[3] I have concluded that there exists an HOA-Land Nation within America that is comprised of fragmented and local HOA governments across the country and have designated them collectively as “HOA-Land.”  The commonality of their declarations of CC&Rs, flowing from the 1964 Homes Association Handbook (ULI publication), their shared beliefs, values, traditions, and institutions qualify HOA-Land as a nation.

[4] David Cole, National Legal Director of the ACLU, Engines of Liberty, Basic Books (2016).

NJ bill A469 a step toward regulatory agency oversight of HOAs?

NJ bill, A469 (former A1730), sponsored by NJ Speaker Pro Temp, Jerry Green, attempts to detail certain state protections for owner-members of HOAs.  Detailed protection is needed as a result of the vague and broad language of the statutes and governing documents that cause 1) unknowledgeable owners who complain to be “blown away” by HOA “officials,” including attorneys, and 2) unnecessary law suits just to clarify language that the HOA attorneys know misrepresent legal doctrine.

For example, “attorney-client privilege” is abused to apply to legitimate corporate records that are not attorney work products; and the misleading, contractual “after notice and opportunity to be heard” phrase regarding complaint hearings that short circuits the legitimate due process protections specifying confrontation of witnesses, providing evidence and the questioning of witnesses by an independent tribunal.

Among other things, the bill addresses due process by DCA (Department of Community Affairs) and fair election procedures, another vague and unspecified process in the governing documents.  It further takes the proactive step, as I’ve alluded to in my writings on HOAs as a government entity, with the pronouncement that, “Any governing documents of an association not in compliance with this section . . .  shall be deemed amended to be in compliance” (C.45:22A-43.c); and “Notwithstanding the provisions of any law to the contrary, a homeowners’ association shall be deemed to have amended its governing documents, including its bylaws” (45:22A-46.e.) (my emphasis).

In addition, additional regulatory powers are granted to DCA, “The Commissioner of Community Affairs shall promulgate any rules and regulations that may be necessary to effectuate the provisions of [this bill]” (C.45:22A-48.b).

Relevant excerpts from this bill can be read at Excerpts.

Some call it government interference in a democratic society.  Others, including yours truly, see it as legitimate police powers of the government to protect its citizens. As stated in this bill in its closing “Statement” (“legislative intent” statement), “This bill clarifies the intent of the Legislature that P.L.1993, c.30 (C.45:22A-43 et seq.) be viewed as an enabling act for homeowners’ associations of non-condominium types of planned real estate developments . . . .” (My emphasis).

In fact, the Planned Community Act states,

 “45:22A-22. Public policy

“The Legislature in recognition of the increased popularity of various forms of real estate development in which owners share common facilities . . .  deems it necessary in the interest of the public health, safety, and welfare . . . that dispositions in these developments be regulated by the State pursuant to the provisions of this act.

“45:22A-24. Administration of act. 4.

“This act shall be administered by the Division of Housing and Development in the State Department of Community Affairs, hereinafter referred to as the “agency.”

Does NJ law make HOAs an arm of the state, state actors, or an unconstitutional delegation of legislative powers to a private entity? 

In short NJ law has created a state regulatory agency and is now proposing to grant it further legitimate authority under its police powers in the “interest of the public health, safety, and welfare.”  An “enabling act,” as the statutes are clearly being designated, is required to grant powers and authority to state agencies.  State agencies are “arms of the state” subject to the 14th Amendment.

If deemed not, then do the NJ statutes provide sufficient control and oversight of private entities by the legislature?  I believe a resoundingly not!  A469 attempts to move in this direction, but more is needed.

I argued this issue in regard to HOAs in general in Supreme Court says corporations cannot be used to evade Constitution and Regulatory agency enforcement of HOA violations.

Regulatory agency enforcement of HOA violations

There has always been a secondary mechanism for enforcing civil law violations that homeowners have been told very little about. In fact, the national ‘educational’ business trade organization has fought against this method from time immoral.

The enforcement of civil law can be found in such state (and federal) regulatory agencies as real estate, banking, medical, registers of contractors, bars, hair salons, etc. Except for HOAs.  Why not?

While state legislatures have intentionally avoided explicit delegation of authority to HOAs, their abdication of their constitutional responsibilities by a do nothing, hands-off attitude is an implicit delegation of authority. This failure to protect HOA members has caused much harm and injury to   individual homeowners, and has caused much divisiveness and disharmony within HOA communities. The various state HOA acts are devoid of any effective supervision, control, or oversight and should be declared unconstitutional.  A regulatory HOA agency solves both the constitutional and civil enforcement defects.

Read the complete paper at HOA regulatory enforcement.

See Model AZ regulatory agency bill and AZ Model regulatory HOA agency fact sheet.

Colorado HOA act creates state actors?

I give credit to the Colorado Legislature for stating its intent, its position, on supporting HOAs, which is rarely found in other state statutes.  Section 38-33.3-102 reads (in part):

Legislative declaration

(1) The general assembly hereby finds, determines, and declares, as follows:

(a) That it is in the best interests of the state and its citizens to establish a clear, comprehensive, and uniform framework for the creation and operation of common interest communities;

(b) That the continuation of the economic prosperity of Colorado is dependent upon the strengthening of homeowner associations in common interest communities financially through the setting of budget guidelines, the creation of statutory assessment liens, the granting of six months’ lien priority, the facilitation of borrowing, and more certain powers in the association to sue on behalf of the owners and through enhancing the financial stability of associations by increasing the association’s powers to collect delinquent assessments, late charges, fines, and enforcement costs;

 

Subsections (c) – (e) contain basically the same theme — don’t let the HOA fail by providing the developer with certain financial protections and operating rules on good management.  In a bold, in your face statement the statute contains an annotation, which reads:

There is no support for the proposition that enactment of a legislative scheme governing the operation of homeowners’ association thereby transforms such homeowners’ association into cities or other governmental entities. Woodmoor Improvement Ass’n v. Brenner, 919 P.2d 928 (Colo. App. 1996).

This 1996 authority still holds true today.  State governments regulate people and entities by establishing laws, such as these HOA “acts” under its police powers “to promote the general welfare.”   That has come to mean to protect the health, safety and general welfare of the people.  The issue at hand, which has not been tested in the courts, is: when does and under what circumstances do these HOA acts create HOAs as state actors?[1]

It would seem that just from this Legislative Declaration of purpose there are reasonable grounds to suspect state cooperation (no penalties against HOA violations of state laws or the governing documents), coercion (foreclosure, pay or lose your home, etc.), and support for HOAs, a close nexus with daily operations (closely involved on HOA management) s symbiotic relationship (you help me, I help you), significant encouragement, either overtly or covertly.[2]  But no mention of any protections of due process and the equal protection of the laws as an objective of its involvement in HOA-Land.

Note that subsection 1(a) above speaks not of individual statutes, but of “a clear, comprehensive, and uniform framework” to support HOAs. Therefore, we must look at the overall picture of the HOA act and determine its broad impact on HOAs, and whether the legal scheme or structure establishes state actors.  And in 1(b) above the general assembly makes a case for establishing state actors when it states, “by increasing the association’s powers to collect delinquent assessments, late charges, fines, and enforcement costs.”  The details can be found within the act itself.

Please understand that in the statutes, both in Colorado and in other states, the statutes give the appearance of protecting the homeowner and his rights, but this is an illusion. What does the homeowner do if the board violates the law?  His ultimate recourse is to sue the HOA in civil court, but the statutes and governing documents (and court case history) are protective of the HOA as this Colorado section clearly demonstrates.

Where are the constitutional protections that would remove the HOA member as a second-class citizen?  To bring him back into the American Zone? They are nowhere to be found!  Why?  Because the state believes that the homebuyer has freely and with full knowledge agreed to be bound by the explicit and implied waivers in the governing documents.  But, have they?[3]

It would seem that the Colorado General Assembly has crossed the line and by its HOA statutes created HOAs as state actors.

References

[1] See, in general, HOA Common Sense, No. 9: HOA governments in fact.

[2] See Do state HOA Statutes Establish HOAs as State Actors?

[3] See HOA Common Sense, No. 4: Consent to be governed