Does the Constitution support the will of the HOA no matter what?

A rogue board is operating at Terravita HOA in Scottsdale, AZ. In short, the HOA attorney saw no problem in adding a restrictive covenant that would allow OAH attorney fees regardless of the law that OAH is not allowed to award attorney fees.[1] It was properly passed by the Terravita members. Since the validity of the covenant was not challenged, the following scenario evolved.

Based on the wording of the covenant, the sole target was a resident, Mr. Brown, the only person who meets this classification in Terravita. Section 17.01, Article XVII, of the Terravita Declaration reads,

[I]n bringing claims against Owners or defending claims brought by Owners in an administrative action or proceeding, including but not limited to, proceedings before an Administrative Law Judge, and any appeal thereof; the Association shall be entitled to recover its attorneys’ fees and costs from the Owner involved in the administrative proceeding if the Association is a prevailing party in such action, and the amount of such attorneys’ fees . . . .

The battle between Brown and the board also involved CAI attorney Ekmark, where there is plenty of history, Brown having filed several suits and won them and publicized the amount of HOA funds spent on minor litigation.

In this instance, Brown was seeking access to board minutes at a meeting alleged to be an executive meeting where the minutes are exempt from disclosure. The problem, according to Brown, was that he was not allowed to present evidence that the meeting was not an executive meeting.  The court simply took Ekmark’s word that it was an executive meeting.

Being the prevailing party, the HOA then claimed attorney fees for the OAH appellate costs, the basis of Brown’s current appeal (CA-CV 14-000455, Division 1). (I avoid the other pertinent legal issues involved in this case and focus on the validity of the covenant.)

The question I raise is that the covenant was invalid, being an unconstitutional deprivation of due process and the equal protection of the law. Once again, like the CC&Rs, can a private organization draft a document or rule that conflicts with state law and yet be held legally binding by the courts? (When does it stop?) And since the covenant was enforced by the courts, there are grounds for filing a deprivation of rights suit under 41 USC 1983[2] (“under color of any statute”) and claiming state action by Terravita.

Understand that, in general, court enforcement of a CC&Rs agreement to abide by the majority decision under a valid amendment procedure alone fails to uphold the principals of our democracy.  The Constitution does not say that the majority is always right.  The 5th and 14th Amendments do not contain exceptions like, “

no person shall be deprived of life, liberty or property, without due process of law (5th & 14th Amendments) . . . nor deny the equal protection of the law (14th Amendment) unless approved by a majority or supermajority vote as contained in the governing documents.

The case before us is another example of judicial populism that holds that the will of the majority shall prevail no matter what.  How far have the courts gone in ignoring the Constitution and allowing unrestricted private individual or group “rewrites” of the Constitution to be binding? 

By such court activism, the America of today not the America of your father or your grandfather.

References

[1] OAH, the Office of Administrative Hearings, is an executive agency obtaining it powers and authorities from the legislature’s enabling act.  The statutes (ARS 41-1092 et seq.; 41-2198 et seq.) and Administrative Code (R2-19-101 et seq.) do not grant the OAH the power to award attorney fees.

[2] 42 USC 1983, Section 1983. Civil action for deprivation of rights

 “Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress, except that in any action brought against a judicial officer for an act or omission taken in such    officer’s judicial capacity, injunctive relief shall not be granted  unless a declaratory decree was violated or declaratory relief was    unavailable.”

PA congressional candidate rejects HOA-Land

Congressional candidate Andy Ostrowski posts on his blog,[1]

During my run for Congress, I have met many people with many unique needs for assistance, and government action. None has been as compelling as those Americans who are involved in property ownership in Homeowners’ Associations (HOAs).

HOAs, and their Boards, serve public purposes traditionally reserved for governments, and elected officials, and this reveals one of the true hearts of the problem – there is no accountability to oaths of office to uphold and defend the constitution. People who try to sue these HOAs are told that they are not government entities, and do not have the same responsibilities and duties as do their governments. They are creatures of corporate law, and planned development acts.

This is a true civil rights issue as it involves legislatures across the country enacting laws that cut off constitutional rights, and access to courts for millions of Americans, and I will fight to give government back to the people by fighting for the rights of these individuals.

Is Andy for real? Here’s what he says on his web page[2],

The justice system is broken. Government is not operating according to the founding principle of the Consent of the Governed. It is running according to the will of the one percent – those who can pay for access.

As a lawyer . . . . My life has been devoted to defending the constitutional rights of hard working American citizens. . . . I believe in the equal treatment and equal protection of all. I believe that corporatism [polite word for fascism], cronyism, Wall Street influence, lawyers, and courts are the root causes of our political ills.

Mr. Ostrowski, after elected, should investigate the independent principalities legal scheme of HOA-Land and how it tears asunder the fundamental fabric of our democratic system of constitutional government. (See HOAs violate local home rule doctrine and are outlaw governments).

Mr. Ostrowski should demand an investigation into a widespread pattern of fraudulent conduct and misrepresentation in the selling process and its impact on the alleged, bona fide homeowner consent to be government.[3]

Mr. Ostrowski should require HUD to only support loans to HOAs and homes in HOAs provided that there are state laws that mandate the following to be included as part of the HOA declaration,

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, the 14th Amendment,  and laws of the State as if it were a local public government entity.[4]

Support Andy Ostrowski whether or not you live in his district (11th).  Tell him about the extent of the problems in HOAs not found in the media. Tell him!

I would like to thank Cynthia Stephens for bringing this important event to my attention.

References

[1] Homeowners’ Associations – A Need for Congressional Action,” Andy Ostrowski for Congress.

[2] “Why I Am Running,” Andy Ostrowski for Congress 2014.

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

[4] Homeowner Association Consent to be Governed Agreement: An Act,” (model statute).

Published in: on October 7, 2014 at 7:09 am  Comments (4)  
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HOA foreclosures and unclean hands

I’ve come across a few cases involving the markedly low HOA auction price as compared to the market value of the home. Previously, I compared this situation to the US Supreme Court’s finding that punitive awards more than 10 times the damages violates the 8th Amendment and constitutes cruel and unusual punishment. (See State Farm v. Campbell, 538 U.S. 408 (2003)). But other decisions pertaining directly to foreclosures, which did not address the 8th Amendment, are also to be considered.

In the 1984 Tennessee Supreme Court non-HOA case, Holt v. Citizens Central Bank (688 S.W.2d 414), the court reversed long standing doctrine regarding foreclosure sales.  The view that “a price of ten percent of the fair market value would probably shock the conscience of any court” and “that inadequacy of consideration so great as to shock the conscience of the court, standing alone, was sufficient to warrant voiding the sale” was thrown out.  In place, the court held, along with decisions in Texas and North Carolina, that

If a foreclosure sale is legally held, conducted and consummated, there must be some evidence of irregularity, misconduct, fraud, or unfairness on the part of the trustee or the mortgagee that caused or contributed to an inadequate price, for a court of equity to set aside the sale.

The question for homeowners in foreclosure is whether or not the HOA comes with unclean hands[i]?  Are there elements of “irregularity, misconduct, fraud, or unfairness” on the part of the HOA?

In the Tennessee 2011 appellate case, Brooks v. Rivertown (No. W2011-00326-COA-R3-CV memorandum decision[ii]), the court upheld the denial of an HOA foreclosure because the HOA could not specify an exact amount owed. It upheld the Holt decision since it found irregularities in the HOA’s bookkeeping; and the HOA also failed to follow its required 30-day notice in non-judicial foreclosure, amounting to unclean hands.

For those in foreclosure, you need to ask for an accounting by the HOA, which must show your legitimate challenges to the HOA’s recordkeeping, like I paid but the HOA ignored me, etc.

Notes

[i] “The principle that a party cannot seek equitable relief or assert an equitable defense if that party has violated an equitable principle, such as good faith.” Black’s Law Dictionary, 7th Ed.

[ii] A memorandum decision means that no new law was made, and that just old law was applied.  Consequentially, there is no reason for binding precedent status.

Published in: on October 4, 2014 at 8:24 am  Comments (2)  
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Are there vibrant, competent, harmonious HOAs?

Community Associations Institute (CAI), is a national trade organization that claims it is dedicated to fostering vibrant, competent, harmonious community associations. I am well aware of HOAs that do not have any signs of abuse or rogue boards, and the members seem not to have any serious complaints.  The ‘happiness’ level is high.  In my view this can occur on a case by case basis where the board can be described as a benevolent dictatorship governing the HOA with reason and common sense.

However, this condition would also require a certain caliber of members who fully understand that they did not buy a residential home, but a home in a resort with the reasonable expectation of resort amenities and rules. As long as the board is benevolent and non-intrusive, the members are quite content with the conduct of their private government.

But, this is a special case where the HOA legal structure is not really needed, yet has been adopted for convenience. For example, time share resorts also have a homeowners association and the resort category of HOAs can be seen as “full year” timeshares. (The other categories are retirement HOAs with their expected rules and regulations — where active adult communities are more of a resort HOA – and residential HOAs with unreasonable expectations of authority).

The criteria for determining whether the HOA is a residential or resort HOA would depend on the eyes of the beholder, the homebuyer.  And that would depend, in part, on the advertising, catalogues, brochures, and statements by the developer, the HOA and the real estate agent as to the nature of the subdivision. Subdivisions are not classified in this manner except for saying they may have amenities.

I am also well aware of the many resort type HOAs that are not benevolent dictatorships.

In my long 14 years as a homeowner rights advocate (please see http://pvtgov.org/pvtgov/bio-hoa.pdf) I do not believe CAI has contributed to solving the 40 years of HOA problems, and thereby helping to create “vibrant, competent, harmonious community associations.

Published in: on September 27, 2014 at 7:08 pm  Comments (4)  
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HOAs violate local home rule doctrine and are outlaw governments

It’s time to approach “the HOA is or is not a government” controversy from a new perspective — home rule. The HOA Establishment’s argument that the HOA government is really a business can equally apply to a government also being a business rather than a government.  The criteria do not distinguish one from the other and is a meaningless decider.  (Did you ever see the word ‘business’ when you bought your HOA home?)

The argument that the HOA is not a government because it was not created as a municipal corporation — but created and formed under the state’s nonprofit corporation laws — is a legal technicality. What that means is simply that the HOA is not recognized as a political subdivision of the state. It says nothing about HOAs being de facto governments! We all are well aware of that HOAs are not municipal corporations, but the real question is: WHY NOT?

Getting down to the issues of state laws relating to local governments, let’s examine the doctrine of home rule. Under the home rule doctrine local communities are permitted a large degree of self-government even to the extent that state legislative action is not necessary. Let’s keep in mind, as you continue to read, the mantras of “no government interference” and that self-governing HOAs are the democratic representation of the voice of the members.

Part 1. Home Rule doctrine.

A detailed discussion of home rule can be found in Nicholas C. Anthony’s presentation to the Nevada Legislature.[1] In summary, there are home rule states and restrictive “Dillon’s Rule” states with respect to legislative delegation of local self-government powers.  There are only 10 pure home rule states, the others being Dillon’s Rule or a modification of Dillon.  Dillon’s Rule states that local governments get their authority, and no other authority, from the legislature enacting general laws and not special laws, much like an executive branch agency.  However, home rule allows for restricted freedoms: “Most states grant a portion of their governing power . . . to establish laws, levy taxes, and administer government on a local level . . . without obtaining legislative approval.[2]

The point here is that even communities that are self-governing, either under Dillon or home rule, are subject to the state’s constitution and legislative grant of authority. They are not the voice of the people in total disregard of the authority of state government as insisted by the HOA Establishment. They are not formed by private business groups writing their own constitution for the community without any debate or discussion amongst the people. (The courts have often referred to the CC&Rs as the HOA’s constitution or charter).

The granting of this authority occurs by means of the state’s municipality corporation laws that deal with the formation and recognition of incorporated/unincorporated cities and towns. (Read your state laws in this area and you will see that all such entities are subject to their state’s respective constitution as a state entity.)

Of particular application to HOA de facto, private governments, Arizona offers an excellent example of the interplay between the power and authority of the legislature vs. the municipality. Arizona, and many other states, permits city/town charters for communities above a certain population.  The opinion of the Arizona Supreme Court in Tucson v. Arizona[3] presents this interplay between local government and state authority (my emphasis).

“Under Arizona’s Constitution, eligible cities may adopt a charter—effectively, a local constitution—for their own government without action by the state legislature. ‘[A] home rule city deriving its powers from the Constitution is independent of the state Legislature as to all subjects of strictly local municipal concern.’

“The purpose of the home rule charter provision of the Constitution was to render the cities adopting such charter provisions as nearly independent of state legislation as was possible.

“Article 13, Section 2 [Arizona Constitution] requires city charters to be “consistent with, and subject to, the Constitution and the laws of the state.” This provision, the Court held, does not subject charter cities to the legislature’s plenary power.

“[T]his court has uniformly held that a city charter, when regularly adopted and approved, becomes the organic law of the city and the provisions of the charter supersede all laws of the state in conflict with such charter provisions insofar as such laws relate to purely municipal affairs.”

The point being made here is the quite liberal degree of authority granted to charter cities in areas of local, community matters without legislative interference, but still subject to the state constitution as a government entity.   The grant of authority comes not from a state grant under corporation law, but from a state grant under municipality law.

Why is the municipality mechanism inadequate for the local governance of subdivision communities known as HOAs? Why must the HOA exist under special laws for special entities?  Is municipal corporation law completely inadequate and there is a compelling and necessary government interest to support and cooperate with HOA “private governments by contract[4] that deny due process and the equal protection of the laws?  Here are some answers from some 20 years ago.

In 1992 Dilger wrote: “For example, most of those who advocate the formation of RCAs [HOAs] assume that RCAs  . . . incorporate all the rights and privileges embodied in the US Constitution, including . . . the rights of due process and equal protection under the law found in the Fourteenth Amendment;” [5]

This leads to Mckenzie’s 1994 conclusion in Privatopia: “CIDs [HOAs/POAs/RCAs] currently engage in many activities that would be prohibited if they were viewed by the courts as the equivalent to local governments” [6]

There is no compelling and necessary justification for HOA special treatment. It’s time to end these outlaw private governments that violate even the most liberal home rule, self-governing provisions of state laws and constitutions.

 

References

[1] Anthony C. Nicholas, “A Discussion of Home Rule in Nevada,” February 18, 2010 (6 MB). The court makes no reference to the Dillon Doctrine.

[2] Id.

[3] City of Tucson v. State of Arizona, Part II A, 273 P.3d 624 (Ariz. 2012).

[4] Roger Jay Dilger, Neighborhood Politics: Residential Community Associations in American Governance, p. 160, New York Univ. Press, 1992.

[5] Id., p. 136.

[6] Evan McKenzie, Privatopia: Homeowners Associations and the Rise of Residential Private Governments, p. 154, Yale Univ. Press, 1994.

Published in: on September 15, 2014 at 2:24 pm  Comments (1)  
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