Tag: restructuring HOAs

Restructuring HOAs – intents and purposes

Mentoring: Purposes, intents, and mission of HOAs[1]

The larger HOAs, especially those that are planned master HOAs or resort style or active adult HOAs,[2] may contain explicit mission and vision statements as well as a declaration of values. Most other HOAs, also created as nonprofits, generally do not explicitly offer such statements. Here’s are shortened but typical examples of such statements used by an active adult, resort style HOA in Arizona.

Mission Statement:

To provide residents with a high-value community with resort-style amenities,

To maximize our investments.

Vision Statement: To become the premier active, age-restricted community in Arizona.

Values: We believe in a community culture having high standards and principles of conduct and behavior.

These boards of directors (BODs) believe that they are doing the right thing. Addressing nonprofit organizations, eminent management consultant Peter F. Drucker wrote: “The first job of the leader is to think through and define the mission of the institution.”[3] He makes the point that the worthiness of a mission statement lies in leading to “right action.” It has to be operational, otherwise it’s just good intentions. They set the policies that serve to guide the organization’s activities and conduct toward effective performance.

HOA contractual mission

We can ask: How are the HOAs doing with regard to accomplishing their mission? But first we must discover if the BOD is operating under its contractual CC&Rs obligations rather than adopted intentions. In HOA-Land, regardless of any explicitly adopted statements, all HOA nonprofits do contain a contractual statement of purpose and intent. They can be found in the CC&Rs usually in the opening paragraphs or in the articles relating to the duties, powers, etc. of the association.

In my sampling of CC&Rs of both large and small HOAs I found boilerplate wording that focused on “maintaining property values” or “for the overall development, administration, maintenance and preservation of the Properties.” Almost all, but not everyone, contain a statement directed toward the member: “shall inure [take effect] to the benefit of the member” [or “each owner”], and “be mutually beneficial.” I came across this one-sided statement: “intended to benefit the Association.” The most liberal and progressive statement of purpose mimics the Preamble to the Constitution “to promote the health, safety and general welfare of the residents of the Properties” (the general welfare clause). The inclusion of “health and “safety” are redundant in that “general welfare” includes these concerns.

Unlike other nonprofit organizations, the HOA comes with these contractual obligations and is not free to conjure up any mission that does not conform to the CC&Rs. What is quite clear is the absence of a frame of mind that addresses the requirement to benefit the members. The conduct, actions, intents and policies of the HOA must benefit the members just as our public government must serve the people.

Now it can be argued that that’s just what the CC&Rs and bylaws do is to benefit the members because of its enforcement powers, architectural guidelines, use restrictions, the right to fine, and the draconian right to foreclose. As Drucker maintains, the mission statement must lead to “right action,” which can only be such action that conforms to the HOA’s mission and leads to the effective and productive performance.

Best interests of their members?

Do the members really believe that their best interests lie with an authoritarian, contractual private government that denies fundamental and constitutional protections in the broadest applications of a deprivation of “life, liberty, or property without due process of law” and a denial of “the equal protection of the laws.”? I don’t believe so!

Yes, the above powers maybe necessary to maintain an orderly society, but where are the constitutional protections of the rights of a member that are required for legitimate and valid governmental powers?

Find out more about restructuring the HOA model and “inuring to the benefit of the member” in my sequel soon to follow.

 

Further reading:

 

References

[1] This is the first Commentary under the category of Mentoring. Mentorship is a relationship in which a more experienced or more knowledgeable person helps to guide a less experienced or less knowledgeable person. See About StarMan Group for credentials.

[2] I’ve classified HOAs as to resort style, retirement, and pure residential according to their CC&RS and operations and amenities. For a further discussion of types of HOAs, see Are there vibrant, competent, harmonious HOAs?; the CAI perspective, HOA-Land “one size fits all” injustice. The CAI 2005 survey showed 26.8% were resort and 44.3% were residential.

[3] Peter F. Drucker, Managing the Nonprofit Organization: Principles and Practices, HarperCollins (1990).

Restructuring the HOA model

This Commentary is a position paper on the need to restructure the HOA model of government.  It is not light reading and requires serious consideration and understanding  of the underlying issues.

Background

I have stepped outside the box to offer the boards of directors (BOD) a fresh view of the nature and legalities of the HOA legal scheme. StarMan Group HOA Management Consulting believes that the HOA legal model of government must be restructured to

establish the climate and culture of the HOA enabling the restoration of the lost constitutional principles of democratic government — individual rights, justice and fair play — for its members within the confines of a private contractual government,

In my activist 20 years of HOA reforms, irrational fears have been inculcated in the general public and are the primary elements for the failure to resolve 54 years of endemic HOA issues: fear of loss of home, fear of financial and emotional stress, fear of legal actions and lawsuits, fear of social isolation, and fear of property devaluation. These have been advanced by pro-HOA forces.

The current embodiment of a utopian society (HOAs) was formulated in 1964 (The Home Association Handbook) and CAI was created in 1973 to address the growing dissatisfaction with HOAs. In 1993 it dropped being a tax-exempt educational nonprofit to become a business trade group in order to more effectively lobby state legislatures to protect the status quo of the HOA model of governance.

The HOA model of local government is a fourth type of local government in addition to the public domains of commission, council-manager and council-mayor forms. I ask: Is there a legitimate, bona fide reason and justification for the HOA to function outside public government?   No, there is none!

BOD Reorientation to review the HOA mission

The restructuring of HOAs starts with the education and reorientation of the BOD to better achieve its primary, broad purpose which is to provide quality services to its members. The only statements or covenants relating to the intent or purpose of the HOA focus on the interests of and benefits to the members, and neither to investments nor to social welfare services. The BOD must face the question as to how the best interests of the members can be accomplished by a rejection of the US and state constitutions.

“Maintaining property values” cannot be taken as an investment in your home. The CAI model focuses on punishment and enforcement of violators of the governing documents or those who fail to timely pay their assessments. The governing documents (CC&RS and bylaws) contain restrictions and limitations and any rights or privileges that the members possess under the CC&Rs are laughable when compared to the Bill of Rights or state Declaration of Rights.

I firmly believe that the BOD must undertake a serious, in-depth review of the original intent of HOAs and where it is today and where it’s going. For example, surely an HOA is not a social welfare organization but a private membership nonprofit regardless of any misguided ruling by the IRS. This review must be conducted in an open and unbiased manner free from the years of CAI indoctrination by the CAI School of HOA Governance (my appellation), to which far too many BODs have long been a willing and obedient adherent. Being under the spell of the CAI doctrine, the BOD has lost its freedom of mind, has neglected principles of local government, and functions outside constitutional application.

BODs, in general, resort to CAI not for legal advice on how to run the HOA government but as a crutch to allow them to dodge their obligations to govern the people — their residents — living in the territorial subdivision of the planned community or condo. Why would CAI speak of or admit to the Bill of Rights or to state Declaration of Rights and lose control of the industry? Why haven’t they?

In addressing the management of nonprofit organizations, eminent management consultant Peter F. Drucker wrote: “The first job of the leader is to think through and define the mission of the institution.”  He makes the point that the worthiness of a mission statement lies not in its beauty but in leading to “right action.” It has to be operational, otherwise it’s just good intentions. “One of the most common mistakes is to make the statement [a series] of good intentions.”

CC&Rs are a devise to circumvent the Constitution

The recourse to the real estate laws of equitable servitudes giving legitimacy to the declaration of covenants, conditions and restriction has gone afoul with respect to HOA governments. “The policy makers have failed to understand that the HOA CC&Rs have crossed over the line between purely property restrictions to establishing unregulated and authoritarian private governments.” The governing documents reflect the undue influence of the CAI School of HOA Governance, and the failure to accept the reality that the HOA is a de facto form of local government that functions outside the US Constitution.

The Homes Association Handbook model set the tone, the character, and the culture of the HOA “community” from which the boilerplate declarations flowed with the help of CAI lawyers. There are no public disclosures of the loss of individual property rights, or the legislative immunity granted to BODs, or the unjust elections procedures, or the absence of constitutional due process protections, or court rulings of implied waivers and surrenders of individual rights, just to mention a few.

It goes without saying that private HOA governments must be restructured to return to the Union and restore member rights, freedom, privileges and immunities. It can be done and must be done. Plessy v. Ferguson (163 US 537 (1896)) was overturned by the US Supreme Court fifty-eight years later in 1954 by Brown v. Bd of Educ. (347 U.S. 483 (1954)). So can years of unjust HOA Acts and statutes be overturned in the light of today’s knowledge and conditions.

And so, it starts with the review and restructuring of the purpose and intents of the HOA to establish a climate and culture of the HOA conforming to the principles of democratic government as required of all local government by the Constitution.

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Further reading:

 

HOAs are in need of a major restructuring

Whether you like your HOA, or dislike your HOA, is immaterial. It’s all about the Constitution and the HOA legal scheme. What matters is whether the HOA legal structure is a danger to the country, because it will happen again. And none of us can have confidence, based on the historical record, that it will not happen again because . . . every day it is allowed to continue at will.[1]

It is well past the time for a restructuring of the HOA model of local government formulated some 56 years ago by ULI in 1964 — The Homes Association Handbook. In 1973 CAI was formed to deal with the persistent problems facing the HOA model, and in 1992 CAI was forced to change its educational tax-exempt status to that of a business trade group in an attempt to deal with the continued problems with HOA.[2] In 2005 it had to drop HOAs as a member due to conflicts with the purpose of a business trade group — HOAs are consumers of CAI services.

These HOA problems and issues are endemic to the legal model of unconstitutional, private governments as a result of the intents and motivations behind the introduction of HOAs: to make $$$ by means of a mass merchandising effort.[3] Constitutional considerations were ignored and avoided by focusing on the legalities of real estate law and equitable servitudes to justify the legal authority over the HOA members. The policy makers have failed to understand that the HOA CC&Rs have crossed over the line between purely property restrictions to establishing unregulated and authoritarian private governments.

There is no denying that the HOA subdivision managed by competent boards and professionals appeals to the desires and wants of home buyers and bring many benefits. It comes as no surprise that the vast majority of persons living in an HOA approve and love their HOA, finding only minor problems with the board of directors or HOA managers. The annual “satisfaction” surveys produced by the pro-HOA trade group, CAI, reflect this positive attitude.

However, the HOA legal structure and scheme is authoritarian in nature: strong central power, limited political freedoms, no accountability, and under the rule of man, not law.

But the HOA is truly a totalitarian democracy. A totalitarian democratic state is said to maximize its control over the lives of its citizens by using the dual rationale of general will (i.e., “public good”) and majority rule.[4]

Prof. McKenzie wrote in 1994: “HOAs currently engage in many activities that would be prohibited if they were viewed by the courts as the equivalent of local governments.”[5] The authoritarian nature of HOA-Land is masked by a thorough indoctrination that presents a false picture of the real estate subdivision as democratic, inappropriately named a community, simply because the members are allowed to vote, as meaningless as it is.

The HOA danger to the Constitution has been presented in several Commentaries herein, and in the white paper found in the book, The HOA-Land Nation Within America.[6]

There is no denying that the HOA subdivision managed by competent boards and professionals appeals to the desires and wants of home buyers and bring many benefits. However, as this whitepaper addresses, the means to this end are highly suspect and harmful to our democratic system of government.

StarMan Group, HOA Management Consulting, offers a program to resolve many of the substantive defects with HOAs by means of the complete restructuring of the model: a program of organizational development. It also requires the removal of the adverse influences by the CAI School of HOA Governance as I collectively refer to CAI’s policies, best practices, guides, communications, seminars and certifications, and in its Manifesto.[7]

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References

[1] Rep. Schiff’s (Rep. Adam Schiff is the leading Democratic impeachment prosecutor), opening argument Friday, Jan. 24, 2020, appealing to the Senators to uphold the Constitution. “Whether you like the president, or dislike the president, is immaterial. It’s all about the Constitution and his misconduct. What matters is whether he is a danger to the country, because he will do it again. And none of us can have confidence, based on his record, that he will not do it again because he is telling us every day that he will.”

[2] See in general: Evan McKenzie, Privatopia: Homeowners Associations and the Rise of Residential Private Governments, Yale Univ. Press, 1994; Donald R. Stabile, Community Associations: The Emergence and Acceptance of a Quiet Innovation in Housing (funded by CAI and ULI).

[3] See in general, “Analysis of The Homes Association Handbook,” George K. Staropoli (2006).

[4] George K. Staropoli, The HOA-Land Nation Within America, p. 22 (StarMan Press 2019).

5 Supra n. 2, Privatopia.

[6] Supra, n.4, p. 4.

[7] Community Next: 2020 and Beyond (May 5, 2016).  A manifesto is a public declaration of intentions, opinions, objectives, or motives, as one issued by a government, sovereign, or organization. A white paper is an authoritative report or guide that informs readers concisely about a complex issue and presents the issuing body’s philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision.