Tag: supreme court

HOA Common Sense, No. 9: HOA governments in fact

HOA Governments in fact, No. 9

I believe all HOAs should be required to have a sign at the main entrances to the subdivision that clearly states: “You are now leaving the American Zone.”[1]

De facto governments.

Is the HOA a mini or quasi government?  Is it a state actor? Or is it just another business with special privileges?  I believe we all can agree that the status of HOAs is that they are de facto – they exist — governments, not recognized by the state under municipality statutes just as Cuba is a de facto government not recognized by the US. 

What is the uniquely defining attribute of a government that distinguishes it from a business or non-profit charity?  Understand that all the functions that the CAI lawyers claim to make the HOA a business can also be used to claim that businesses are governments. Think about it.  Yes, they share the same functions – taxes/assessments, fines/penalties, courts/hearings, ordinance/rules and regs, etc. But the basic criterion is that “modern states are territorial, their governing body exercise control over the persons and things within their frontiers.[2]  This alone singles distinguishes a government from a business or charity.

Black’s Law[3] attempts to clarify what is commonly accepted as a political government: A government is “The principles and rules determining how a state is regulated.”  A nation is “a community of people inhabiting a defined territory and organized under an independent government; a sovereign political state.” And politics is “The science of the organization and administration of the state.” The general understanding uses the terms ‘people,’ ‘territory’, ‘regulation,’ and ‘state/nation’. 

Now, I know the above may be confusing, but the skilled HOA attorneys will do their parsing and word game analysis (depends on what the meaning of ‘is,’ is) of these definitions seeking to create reasonable doubt as to what the people know to mean as “government.”  You know, such as the argumentative asinine statement that, is the owner of a football stadium that regulates the people in the stadium a government?  

I prefer the simpler, down to earth answer given by Justice Stewart regarding what is pornography,

“I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description [hard-core pornography]; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it . . . .”[4]

It is interesting to note that David Wolfe, a founder of CAI back in 1973, had the following to say in 1978 when CAI debated the status of HOAs as a government.

One legal opinion offered in support of construing CAs [HOAs] as a government noted that the Supreme Court had required constitutional procedures in a ‘company town’ and with ‘political parties’; from this view CA actions were ‘public’ in a constitutional sense. . . . Wolfe concluded that a new definition of a CA as a government was needed to bring about Lewis Mumford’s vision of a democracy.[5]

And long ago in 1994 Prof. McKenzie wrote, “HOAs currently engage in many activities that would be prohibited if they were viewed by the courts as the equivalent of local governments.[6]

The defective legal scheme

Please understand that all substantive (as opposed to changes to laws affecting HOA operating methods and procedures) reform legislation is an attempt to restore your rights, freedoms, privileges and immunities as citizens.  They were taken away by the HOA biased laws that granted the HOA power to deny or did not prohibit the HOA from denying your constitutional rights.  Yet, even the most independent local control over people found in a state’s home rule statutes requires allegiance to the US and state constitutions.[7]  Why do HOAs get special laws?  Why are they exempt from the Constitution?  It doesn’t add up!

You may ask, What for?  The answer is obvious: for the survival and acceptance of a defective legal scheme that seeks to impose authoritarian governments on unsuspecting people. If boards and officers are to be held accountable, who would volunteer?  Well, why not pay them a salary so accountability can be demanded?  WHAT!!!  If they are going to be paid and held accountable, then members have a right to demand qualified board members and not any ole body who would like to be on the board.

Wait!  Wait! I can see readers recoiling in horror.  “The horror . . . the horror . . .” (from the movie Apocalypse Now!).   So, boards are generally not paid and are volunteers, without any special training.  At least the legislature and city councils have tradition and long established rules and procedures with staff to assist the law makers, but HOAs are “on the fly” – on the job,  decide as you go.  No wonder we have all these problems with capable governance.  And the volunteers and the special interests lament, “but we are volunteers helping to make a better community. You can’t hold us responsible and accountable. We need a free reign.”  Yeah!  Right!  Free to create havoc!

All because the mass merchandising of the HOA concept could not be sold under such conditions that demanded prudent accountability.

And, the concept could not fly without mandatory members and compulsory dues.  The founders of the HOA scheme who wrote the HOA “bible” in 1964 well knew this. And in order for the HOA to legally bind subsequent home owners the founders had to resort to servitudes running with the land, or equitable servitudes/covenants.[8]  

But, the equitable servitudes doctrine brought a host of ills detrimental to the US Constitution and the Bill of Rights, which very disappointedly the courts have held superior to the supreme law of the land.[9]  They have allowed for the establishment of the New America of HOA-Land with communities governed by de facto authoritarian, private government regimes known as HOAs.

HOA member Declaration of US and State citizenship

All that is needed to have HOAs rejoin the Union is for state legislatures to pass a bill that states:

Notwithstanding anything to the contrary in the governing documents, or other laws to the contrary,

Wherefore, the members of the association, having not waived or surrendered their rights, freedoms, privileges and immunities as citizens of the United States under Section 1 of the Fourteenth Amendment, and as citizens of the state within which they reside, the CC&Rs or Declaration for any planned community, condominium association or homeowners association shall state, or be amended to comply, that, “The association hereby waives and surrenders any rights or claims it may have under law and herewith unconditionally and irrevocably agrees 1) to be bound by the US and State Constitutions, and laws of the State within which it is located as if it were a subdivision of the state and a local public government entity, and 2) that constitutional law shall prevail as the supreme law of the land including over conflicting laws and legal doctrines of equitable servitudes.

PS.  I apologize for the intrusion by WordPress to have added underlines to certain words.

References

[1] As contained on the On The Commons website, Shu Bartholomew, Producer and Host (http://onthecommons.us).

[2] “State”, Black’s Law Dictionary, 7th Ed.

[3] Id.

[4] Jacobellis v. Ohio, 378 US 184 (1964).

[5] Quoted in Community Associations: The Emergence and Acceptance of a Quiet Innovation in Housing, Donald R. Stabile (Greenwood Press, 2000), pp. 164 -167. Lewis Mumford was a 1920s utopian community promoter.

[6] Evan McKenzie, Privatopia: Homeowners Associations and the Rise of Residential Private Governments, Yale Univ. Press, 1994.

[7] A legislature’s grant of autonomy for local government to act without legislative approval on acceptance of certain terms (Blacks’ Law Dictionary, 7th Ed.); “as long as they obey the state and federal constitutions” (Home Rule, Wikipedia (http://tinyurl.com/nyqpd2a).

[8] The Homes Association Handbook, Urban Land Institute Technical Bulletin #50 (1964); See my analysis at Analysis of The Homes Association Handbook.

[9] Most notable are: Inwood v. Harris, 736 S.W.2d 632 (Tex. 1987) (Texas Constitution overridden by covenants running with the land); Villa de Las Palmas v. Terifaj, 90 P.3d 1223 (CAL. 2004) (amended restrictions are binding on all in violation of ex post facto prohibition doctrine); Committee for a Better Twin Rivers v. Twin Rivers, 929 A.2d 1060 (NJ 2007) (fundamental rights denied and business judgment rule is sufficient protection of homeowner rights).

 

 

 

HOA Common Sense, No. 8: Draconian punishment and intimidation

Draconian punishment and intimidation, No. 8

The Tennessee appellate court in Brooks found “that the foreclosure sale price shocked the conscience of the court.[i] A home valued at over $321,000 was foreclosed for just $12,800 of which $6,734, more than half, went directly into the attorney’s hands.[ii]  That’s more than 25 times the “damages” to the HOA. The Charleston Regional Business Review reported that the average foreclosure debt was about $4,500 and the average home value foreclosed was about $160,000, or 36 times the debt.

An award of more than the 10 times for punitive damages was held by the US Supreme Court in State Farm v. Campbell[iii]  to be a cruel and unusual punishment in violation of the 8th Amendment.  This right to foreclose in unjust and draconian, taking away a person’s home and leaving him with nothing!   It is unconscionable and discriminatory as explained below. Furthermore, HOAs assessments are considered a consensual lien and are exempt from homestead protections. (See paper No.4 above, speaking about your legitimate consent to be bound.)

With respect to HOA foreclosures, we once again discover that HOA assessments are being treated the same as public government taxes and property assessments — must be paid and your property can be foreclosed for non-payment. Both taxes and HOA assessments are not related to hard cash payments for which the lender is entitled to foreclosure to protect his loan, nor are they based on any specific transactions, like payments for garbage collection, for electricity, or for police protection, etc. 

Why should the HOA be given this right when other entities do not have foreclosure rights, and when there are other available collection methods — garnishment, sale of other property, etc. — to collect on bad debts?  Other entities, both public and private, must face the possibility of failure or bankruptcy – there are no guarantees in life.  A standard accounting procedure, and used by CAI Central in its financial statements, is what is called “Bad debts reserve” or “Reserves for bad debts,” which is an annual estimate of uncollected assessments.

Using common sense, we can understand the value to the HOA to “evict” the non-payer and to replace him with a new owner who will make timely assessment payments.  That’s logical. There is very little opportunity to raise additional funds for expenses except by means of increased assessments on other members, the “it’s not fair” argument. While the end of the foreclosure action has a rational value, the means is highly suspect. 

In addition to the arguments of special rights as enjoyed by public entities and an unconscionable punishment, HOA foreclosures are discriminatory.  The following quote is from an Arizona CAI attorney:

Assuming foreclosure eligibility requirements are met, whether foreclosure is a viable option depends largely on what other liens, interests, and encumbrances burden the subject property. . . .If the property is not subject to a mortgage or there is a minimal first mortgage, foreclosure is a viable option as there is likely equity in the property. . . . Even if the property is subject to a recorded first mortgage and there is no equity in the property, foreclosure still may be a viable option. Sometimes the threat of foreclosure alone is enough to get a delinquent owner’s attention. . . . the owner will often pay the association in order to keep his/her home.[iv]

This is an admission of the discriminatory nature of the foreclosure process — works only if the homeowner was an upstanding citizen who had paid his mortgage and assessments for many years, and had created all that equity that the HOA now seeks. It is also an admission of the punitive and intimidation motives of the HOA — “the owner will often pay the association in order to keep his/her home” — without facing the reality that “you can’t get blood from a turnip”! The HOA attorneys promote the view that the non-payers are scofflaws and deadbeats who are seeking to stick it to the good, assessment paying members. “It isn’t fair!” goes the cry.

What the foreclosure process does do, and is not mentioned by the CAI attorney, is that the attorney can claim fees many times in excess of the amounts owed the HOA. So, who really benefits? Certainly not the homeowner who loses everything with this draconian punishment. And there are other methods available to collect bad debts, and if not viable, well, then that’s the cost of doing business.

Is this good public policy to treat homeowners facing hardship not of their doing — take away their home and leave them with nothing?  Legislation must be put into place to protect against intimidation and wrongful foreclosure, and to ensure a strict enforcement of the foreclosure process, especially requiring documentation and an exact specification of the undisputed debt owed.  If the state legislatures truly believe that HOAs are the next best thing to Mom’s apple pie, they should be ready to ante up and financially support HOAs facing financial difficulties.  Perhaps in this way homeowners will get the accountability to the state and the requisite oversight of HOAs.

As to the broader solution, there is a just and compassionate legal solution to this state of affairs that can be put into place quickly and effectively. Allow the homestead exemption for HOA assessments!  If a state has no homestead protection, simply enact one ASAP!  This is a fair, compassionate, and sensible solution.  I anticipate strong opposition to this proposal, but I remind the opponents to be prepared to address the unclean hands of the HOA as summarized in this Common Sense series of papers.

PS.  I apologize for the intrusion by WordPress to have added underlines to certain words.

References

HOA Common Sense, No. 6: Fair and just hearings

Fair and just hearings, No. 6

What is meant by “fair and just hearings”?  The HOA attorneys tell you it’s “after notice and an opportunity to be heard” as found in almost all CC&Rs and in the vast majority of state HOA laws. This simple statement is a contractual provision and law as applied to HOAs, but it is not what the US Supreme Court holds as procedures meeting the Constitution’s and the 14th Amendment’s due process requirements.  HOA members have been shortchanged!

As a private entity, HOAs are not subject to the Constitution and are not required to establish justice, which is a goal not found in any CC&Rs ‘constitution,’ but found in the Preamble to the US Constitution. Was this important fact explained to you when you bought into an HOA with its dream home?  Why not?

US Appeals Court Judge Henry Friendly in his well-regarded article, “Some Kind of Hearing,” generated a list that remains highly influential, as to both content and relative priority:[i]

1. unbiased tribunal [independent ‘judges’]

2. notice of proposed action and grounds asserted for it [document showing all the rules]

3. opportunity to present reasons why should not occur [defense of allegations]

4. right to call witnesses

5. right to know opposing evidence

6. right to have decision based exclusively on evidence presented

7. right to counsel [especially if HOA attorney is present]

8. making of record

9. availability of statement of reasons [public awareness of defense]

10. public attendance [transparency]

11. judicial review [appeal to civil court]

 

I’ve inserted annotations as applicable to the HOA version of justice.  As you can see, members are being shortchanged by HOA attorney/lobbyists who influence and dominate state legislatures, and who write and rewrite the CC&Rs and bylaws.  HOA kangaroo courts make homeowners second class citizens, and their foolish appeals to their HOA attorney go nowhere, because no one told you that he represents the board, not the members.  You know, like management vs. employees.

And since there is no legal obligation of the HOA to establish justice, providing for some form of public defender equivalent falls on deaf ears.  The HOA wins in this lopsided “playing field” since it has the money to hire attorneys to legally maneuver the system to make it costly for the homeowner to complain.  And don’t forget the public ostracizing of members who complain: they are costing you money; they are not good neighbors. Don’t forget that there’s no opportunity for the homeowner to answer in the same media as used by the HOA – the newsletter, board meetings and website.

Yet, government interference to protect your rights as citizens is violently frowned upon by HOA members.  Why?  It doesn’t make sense, doing nothing about your loss of protections.  For what?

[i] Henry J. Friendly, “Some Kind of Hearing,” 123 U. PA. L. REV. 1267 (1975).

HOA Common Sense, No. 5: Democratic elections

Democratic elections, No. 5

HOA members have been repeatedly told that they can change things in their HOA by voting for board members and even by changing the governing documents; that HOAs are democratic because members can vote to make these changes happen.  Well, does that make real sense when we know that countries like China and Cuba allow their people to vote? Yes, the people are allowed to vote, but no one would think to call these countries democratic.  Use your common sense!  You are being conned!

HOA members should read my discussion of the California case holding the HOA to have violated the law on fair elections procedures in Wittenberg v. Beachwalk HOA.[i] Such activities as only containing the board’s view of candidates, continuing holding elections until the board wins, and not allowing equal access for ‘town hall’ meetings by members.

Why is it that this country would participate in seeing that fair elections take place in other countries, but do nothing for the 23% of the American population living in HOAs?  While a few states like California have detailed statutes dealing with HOA elections, most do not have an oversight entity watching the elections as undertaken with these foreign country’s elections.  Worst of all, generally it is the HOA attorney or HOA manager who tally and report on the voting, but both cannot be seen as independent observers or neutral parties.  They are both agents of the HOA and not the membership.  That is like having a business’ attorney overseeing union elections.

Furthermore, the defenses of voting the bums out and changing the governing documents are without merit. These defenses reflect the erroneous implicit attitude  that HOAs are the same as public entities.  They are not!  The HOA’s “constitution and laws” are contained in an agreement between a single member and the HOA.  To say that “you”, a single member, can change governing documents or vote the bums out misstates the law and the single member’s ability or right to accomplish this goal.  The member needs the assistance, the cooperation and votes of other members in order to accomplish these changes. 

Without fair elections procedures that contain enforcement against HOA board wrongful acts, including retaliatory acts and intimidation by the board, voting in an HOA is a mockery of democracy.  Is this HOA government better than public government?  Common sense tells us no!

AZ ethics chair finds no violation by Ugenti in SB 1454

See-hear-speak no evil
See-hear-speak no evil

In response to my petition[1] to the AZ Speaker of the House and House Ethics Committee to bring disciplinary action against Rep. Ugenti, I received a short, late evening response from the Ethics Committee Chair, Rep. Lovas.  The terse response amounted to “the act of offering an amendment on the floor does not rise to the level of disorderly behavior for purposes of Ethics Committee jurisdiction. . . . The Ethics Committee will not be taking the matter up further.”  This was a strict interpretation of the meaning of ethics, which under the House Rules deals only with financial issues. It says that a violation of the Arizona Constitution by an elected official is not an ethical concern.

Where ethical restraint is lacking, there can be no hope of overcoming problems. (The Dalai Lama).

 

Very much disappointed in Rep. Lovas’ response, I replied in a little more detail.

 

Rep. Lovas,

I appreciate your late evening response to my emails seeking disciplinary action against Rep. Ugenti for her conduct in submitting her waning hours amendment to SB 1454. The strict interpretation of the committee’s jurisdiction holding that Ugenti’s conduct was not “disorderly behavior for purposes of Ethics Committee jurisdiction” is disturbing. How can a violation of the law by an elected representative, a legislator, not be viewed as unethical? The bill with Ugenti’s amendment was stipulated by the Legislature (per paragraph 22 of the Stipulation) to have violated the Arizona Constitution’s prohibition against bills with more than one subject. And the court so invalidated her additions.

I am disappointed in your response. You treat this incident as “just another day at the office” and this is the way the Legislature works. That if a legislator can violate Section 13 of the Arizona Constitution, so be it. And if caught in doing so and a court invalidates the effects of the legislator’s actions, the attitude of the Ethics Committee seems to be, Oh well. The legislation is invalid. Let’s move on to next year. It smells of, if you can get away with it, good. If not, don’t worry since we will take no action.

 (I am well aware of Randall Gnant’s comments in his guide for the public, From Idea . . . To Bill . . . To Law, p. 51-52, on the not infrequent disregard of constitutionality of legislation by the Legislature).

I do not understand how Ugenti’s actions do not constitute grossly unethical conduct. It sends the message that, yes, this is the way it is. That the Legislature, as sovereign of the State of Arizona, can do no wrong. Sorry, I cannot accept that “this is the way it is.” The people have a “social contract” with the State of Arizona government that binds both parties, which, by your decision, shows that the Committee has chosen to ignore its duties and responsibilities under that contract, the Arizona Constitution.

I understand that much of what I had described in my case for disciplinary action is considered as that’s the way legislation is accomplished, that’s the way the legislature works.[2] Nothing wrong. However, in your response you categorize and restrict Ugenti’s action as a simple filing of an amendment. You mention nothing about the bill was her third and last ditch attempt to get it passed into law. Or that it was in violation of the Constitution and House Rule 16(D), which prohibits any such bill. House Rule 1 says that a violation of these rules can result in disciplinary action and even the expulsion of a legislator. You trivialized the entire incident.

Let us understand the gravity of Ugenti’s knowing and planned violation of the constitution. In the late 1930s President Roosevelt attempted to get legislation passed to pack the US Supreme Court in order to accomplish goals that he believed were for the good of the people — not the party, not the special interests. He was opposed by the US Senate that believed that the President was tampering with the balance of the separation of powers, which was not good for the country. In this incident, no laws were broken and no rules were violated in spite of the overwhelming controversy and seriousness of the legislation.

 More recently, the US Supreme Court in its Kelo decision found justification for interpreting “public purpose” the same as having the eminent domain meaning as “public use.” No laws and no procedures or rules were broken. All was legit and was viewed as in the best interest of the country. But, sadly, not with SB 1454. Not only was a Rule broken, but the Arizona Constitution as well. And the evidence I put forth shows the heavy hand of special interests, the HOA “stakeholder” cabal. (There is more that I have not yet released). Yet, no evil is seen by the Ethics Committee and that no investigation into the affair is warranted. What message does this send to the people of Arizona? What does it say about the State of Arizona?

 I cannot stress the need for action by the Ethics Committee to restore the faith and confidence in the Arizona Legislature. I ask that the committee take whatever action is appropriate and necessary for the House to commence disciplinary charges per House Rule 1. Ugenti must not be given a clean bill of health, a pass, a walk to try again another time. Disciplinary action will also serve as a deterrent to other so inclined legislators.

Please urge the Speaker to undertake disciplinary action on behalf the people, for the good of Arizona.

 

George K. Staropoli