Would the HOA legal scheme collapse under a democratic form of government?

The HOA legal scheme as a nonprofit form of government chartered under corporation laws cannot be held in the same light as a democratic public government chartered under municipal corporation laws.

We use the term HOA quite loosely as I have in many of my posts.  However, the HOA is 1) the legal governing body of a 2) planned unit development or condominium, which is a real estate ‘package’ of amenities, landscaping, etc.  It is a de facto – it exists and functions – government, but unrecognized by the state as is Cuba.

Can we get rid of the ‘package’?  I don’t think so for reasons that I’ve stated  — too big.  Can we get rid of the oppressive authoritarian governing body known as the ‘association,’ home or property owners associations, etc.? Definitely yes!  Or can we?

Questions for study and thought!  

 1.    Will the ‘package’ collapse if we remove the oppressive authoritarian governing body and substitute a more democratic regime?

2.    Why didn’t the promoters of the current HOA scheme (in their seminal publication, The Homes Association Handbook) present the HOA as a municipal corporation rather than a nonprofit corporation?

In regard to question 2, is it because the promoters knew that the HOA would be subject to the Constitution and restricted by state laws?

A hint is given, even in the Handbook, with the discussion of ‘free riders’ and the need for mandatory membership and compulsory dues.  (A ‘free rider’ is one who benefits from the efforts and money of others as in the case of unions, as would be the case with voluntary HOA memberships.)  The other hint is how does one maintain property values, that huge appeal to the masses, without strict enforcement of many specific rules and regulations? If people were free to do as they please, what is the value of the HOA?

Apparently, local ordinances did not satisfy the promoters of the HOA scheme because they were too broad and didn’t represent the membership, but somehow top-down, take-it–or-leave-it CC&Rs do.  And to be sure, make it an adhesion contract that favors the HOA and prevents the practical and effective voice of the people. Apparently our system of government failed to satisfy the promoters, and their need for a better form of government was sought – one better suited to the goals of the promoters.  A fascist form of government (or if that offends you, a corporate oligarchy where the objective of the state is to satisfy not the people, but the government) did the trick quite well.

The answers will illuminate the fundamental problem with HOA reform and the resistance to substantive reforms.

 

The unclean hands of the HOA

I have spoken of the unclean hands of the HOA in “HOA Common Sense No.4, Consent to be governed” and in “No.8, Draconian punishment and intimidation.”  Unclean hands is a legal doctrine that denies a plaintiff’s (HOA) complaint if the plaintiff has done anything wrongful or unfair relating to the issue at hand. If a defendant (homeowner) can show the plaintiff had “unclean hands,” the plaintiff’s complaint will be dismissed or the plaintiff will be denied judgment.

In his dissenting opinion in Olmstead v US  (1928)[1] Justice Brandeis wrote (my emphasis),

The governing principle has long been settled. It is that a court will not redress a wrong when he who invokes its aid has unclean hands. The maxim of unclean hands comes from courts of equity. But the principle prevails also in courts of law. Its common application is in civil actions between private parties. Where the government is the actor, the reasons for applying it are even more persuasive.

The court’s aid is denied only when he who seeks it has violated the law in connection with the very transaction as to which he seeks legal redress. Then aid is denied despite the defendant’s wrong. It is denied in order to maintain respect for law; in order to promote confidence in the administration of justice; in order to preserve the judicial process from contamination.

This doctrine also applies to the government at all levels.  As Brandeis continued in his dissent,

In a government of laws, existence of the government will be imperiled if it fails to observe the law scrupulously. Our government is the potent, the omnipresent teacher. For good or for ill, it teaches the whole people by its example. Crime is contagious. If the government becomes a lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.

And it also applies to HOA private governments, because it’s an equitable protection.  We all know that HOA boards have, in all too many instances, grossly dirty unclean hands.  We see the anarchy with 50 different state laws and the 324,000, more or less, independent CC&Rs “constitutions.”

 

Note

[1] Olmstead v. U.S., 277 U.S. 438 (1928).  This case involved federal wiretapping, which back in 1928, the SC found no violation of the Constitution.

HOA laws that fail to protect the people from harm

I have written many times about the loss in the protections of individual rights, freedoms, privileges and immunities that continues in our country.  I wrote about the presumption that all laws passed by the legislature are constitutional, because, apparently, the sovereign can do no wrong.  After all, the legislature is the voice of the people, isn’t it?

BUT, this false analogy to the king can do no wrong ignores the fact that the king was not bound by any constitution or charter, and was free to do as he pleased.  But, we have, or are supposed to have, a constitution with restrictions on government.  We also have the doctrine of judicial review of legislation, subjecting the laws to pass judicial scrutiny.

Of the three levels now part of the doctrine of judicial scrutiny, the peoples’ rights fall into one of three categories. The least protective is a legitimate, rational government interest (basically anything the government says is important to the people goes); the strictest is a compelling and necessary interest, reserved for explicit fundamental rights violations.

I have always been bothered about many HOA laws purported to be in the best interest of the people, yet deprive or deny a category of people, those living in HOAs, of their constitutional rights (free speech in many forms, due process protections) and the equal protection of the laws. In Arizona, for example, the horrendous SB 1482 omnibus (read ‘ominous’) bill did just that: granted special rights to HOA managers and left homeowners with unequal legal representation; rejected a private agreement to prevent crimes to allow real estate agents to be able to rent homes in HOAs, a long time frowned upon right.

In the recent Arizona appellate opinion in Vong v. Aune (non-HOA case that explains judicial scrutiny), the court held that, “Courts have found a legitimate purpose lacking where a regulation fails to protect the public from harm.” ¶ 18.  Did I miss something?  Did the Rules Committee that has the duty to check for constitutionality miss something?

Of course the game is still in favor of the government where the burden is put on the homeowner challenger.  He must show that the alleged good for the community is overwhelmingly overridden by the damage to the HOA homeowner public class, and is contrary to public policy. It raises the question of one class of people losing constitutional protections so that others may . . . . may what?

Sadly, public policy as shaped by court and legislative decisions seems to be on the side of the HOA.

When do majority CC&R amendments trample minority rights?

 

The generally accepted legal doctrine upheld by the courts in many states is that any CC&Rs amendment validly passed by the amendment procedures in the CC&Rs is binding on non-consenting homeowners.  This doctrine ignores the content and relevancy of the amendment to the intent and purposes of the drafters, the developer.

The questionable word game involved in this issue deals with the meaning and use of ‘modify’ or ‘change’ as compared to ‘new.’  Does your CC&RS say modify or change, or does it also include the words add or new?  Some courts make no distinction and thereby unconstitutionally modify the CC&Rs contract by depriving non-consenting homeowners of their property rights that they believed they possessed at the time of purchase.

(In general, the dictionaries define ‘modify’ as a change, and ‘change’ to mean ‘to make different,’ but excluding any reference to ‘new.’)

With this presumption in favor of the HOA, these courts fail to determine if this is what the unsuspecting home buyer understands, and that he has been given appropriate notice. Is he aware that ‘change’ also means ‘new’ or ‘add’?  Simply said, we are dealing the ex post facto CC&Rs amendments that deprive a homeowner of his rights without his consent and without any compensation.

In the April 2014, the Washington State Supreme Court opinion in Wilkinson v. Chiwawa,[i] said, wait a minute with respect to rentals.  ‘Change’ or ‘modify’ does not mean ‘add’ or ‘new.’  It held that,

While Chiwawa homeowners knew that existing restrictive covenants could be changed by majority vote so long as the changes were consistent with the general plan, they did not buy into the creation of new restrictions unrelated to existing ones. . . . When the governing covenants authorize a majority of homeowners to create new restrictions unrelated to existing ones, majority rule prevails “provided that such power is exercised in a reasonable manner consistent with the general plan of the development.”

This rule protects the reasonable, settled expectation of landowners by giving them the power to block “`new covenants which have no relation to existing ones’” and deprive them of their property rights.

The Association could not adopt the restriction without unanimous consent. This is the contract into which the parties bought and the expectation that we must uphold.

One of the most notorious examples of this type of amendment occurred in OSCA[ii] where mobile homeowners were forced to pay dues for a country club, owned by the developer and not owned by the HOA, and open to the public on a fee basis.  It helped increase the value of the HOA, was the justification for the amendment.

What does your CC&Rs say?  Watch for those CAI attorney rewrites that sneak these words into your CC&Rs without proper notice, as for example, Arizona requires.

And remember, who writes these state laws?   The  HOA stakeholders that do not include the homeowners!

References

[i] Wilkinson v. Chiwawa, Wn.  No.86870-1, p. 6,7 (April 17, 2014). The issue was an amendment that prohibited short-term rentals when the CC&Rs were silent on duration.  Was it a new covenant or a modification to the one that simple said renting was allowed.

[ii] OSCA Development v. Blehm, No. E320843 (Cal. App. Dist. 4 1999).

On stopping HOA bullies and rediscovering lost values

Excerpts of guest blogs by George Staropoli on Ward Lucas’ blog, Neighbors at War!

 

Rediscovering Values

For a society, a community, to function in an orderly manner there must be not only rules, but a firm belief in the need to enforce just and fair rules and laws. Political philosophy says that where laws are unjust and unfair, then the democratic government is not legitimate, cause the reason for forming a social contract and surrendering freedoms is just that.

On Stopping Bullies

Proposed HOA reforms must include necessary and sufficient detriments to put an end to HOA bullying and abuse. People do not become angels when they become a board member, like our astute, politically savvy legislatures would like you to believe.

 If angels were to govern men, neither external nor internal controls on government would be necessary.  James Madison, The Federalist Papers, # 51.

 

 

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