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.


[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.



[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)  

Will the real CAI standup: its contradictory beliefs, pronouncements and goals

With respect to my Commentary, Misrepresentation: CAI comes with unclean hands, this paper contains quotes by CAI leaders, state chapter leaders and CAI attorneys – in 20% of the states – made to the public in general in its advertising and communications, to state legislatures, and to the courts in its amicus briefs. All in support of my arguments of misrepresentation.

They are often contradictory as suited to the purpose at hand; or rejecting principles of democratic government and the US Constitution; or declaring, like fascist principles, that the objectives of the HOA (state) come first and individual freedoms are subservient to the HOA.  And, as is true of fascism, the HOA serves the trade group ‘stakeholder’ entities (corporations) while giving the illusion of democracy because the members can vote.


Looking at the history of CAI we discover that CAI was formed in 1973 by ULI and FHA to deal with the HOA legal scheme as found in the HOA “bible,” The Homes Association Handbook (1964). Its mission, then, was to educate HOA managers and directors. Some 20 years later in 1992 CAI became a business trade group to deal with criticisms of HOAs by political scientists in various research journals and books. 

We can conclude that, over the 40 some years of CAI’s existence and the continuing legal issues with HOAs, that 1) the HOA legal scheme is fundamentally flawed and beyond repair like the Articles of Confederation, and/or 2) a concern that CAI’s educational materials and instruction are also flawed and are contributing factors in the continuing existence of 40 years of HOA problems.

Furthermore, CAI is a business trade organization, a tax exempt 501(c)6 nonprofit serving its members to better serve the public, not an educational 501(c)3 nonprofit.  CAI does not inform subscribers or viewers of this fact.  A business trade group does not educate the consumers of its members’ services, which would constitute a conflict of interest and a violation of its tax exempt status.


Read the entire Commentary with a list of evidence that includes incidents/events from 20% of the states here . . .

Published in: on September 7, 2014 at 9:48 am  Comments (3)  

Misrepresentation: CAI comes with unclean hands


I argue that  CAI exhibits a pattern of misleading advertising, at the national and state levels, intended to induce the public to buy HOA controlled homes and to attain favorable support from the media, the legal-academic community, and state legislators.  In other words, it appears that there is misrepresentation in its advertising.  Here are some examples at the national level and a few CAI state chapters. (Note that I include dates with my quotes as web pages change from time to time.)

CAI Central

“CAI provides information and education to community associations and the professionals who support them. Our mission is to inspire professionalism, effective leadership and responsible citizenship.”  (Building Better Communities, http://www.caionline.org/Pages/Default.aspx, Aug. 28, 2014).


“An international organization dedicated to building better communities, CAI provides information, education and resources to all community association stakeholders, including community managers and homeowner leaders.”  (Who Are We,

http://www.caionline.org/about/who/Pages/default.aspx, Aug. 28, 2014).


“Providing respected professional education remains one of CAI’s core missions—and thousands of managers continue to take full advantage of these opportunities.” (Core Mission, http://www.caionline.org/about/who/Documents/Annual_Report.pdf, Aug. 28, 2014).

Nowhere does CAI mention that it is a business trade organization, a 501(c)6 tax-exempt nonprofit, whose purpose is to benefit its members.[1]  Rather, the impression given above is that it is an educational organization to help HOAs and their board members.  However, HOAs are not CAI members and only 60% of CAI’s members are HOA members called individual “volunteers. However, the dominant factions are the attorneys and management firms who are the vendors to HOAs. Only 2 seats on the 14 member CAI Board of Trustees are for these “volunteers.” (Note that the above term “stakeholders” as commonly used with HOA means the vendors and does not include HOAs).

As a business trade organization, isn’t it a conflict, a violation of its trade group status, to speak for, provide education, and guide the consumers of its members’ services, the HOA?  Shouldn’t that be the job of a bona fide HOA association? A true association of HOAs, consistent with other industry or professional associations, would consist of HOA members who are allowed to vote.  It would allow the vendors or stakeholders – CAI, other management firms or associations and attorneys – to be non-voting associate members. 

As I see an attempt to get around not having HOAs as members, CAI’s volunteer application offers discounts for multiple board members who join.  Page 2 is titled, “Membership Application for [association name]” if more than 1 director is signing up. (http://www.caionline.org/about/benefits/Documents/cavl_application.pdf). A 2005 complaint was filed with the IRS  charging CAI with violating its trade group status by having consumers, HOAs, as members.  The result was that CAI dropped HOAs as members and apparently got around this restriction by introducing “volunteer” members. As the application shows, CAI offers inducements in order to influence an entire HOA’s board, a consumer of its members’ services.

“While joining CAI on your own is important, having your entire board connected to CAI is the best way to ensure you are making informed decisions—and an excellent way to help your board members achieve the results, respect and recognition they deserve.”  (Benefit for

Homeowner Volunteer Leaders,

http://www.caionline.org/about/benefits/Pages/VolunteerLeader.aspx, Aug. 28, 2014).

Furthermore, it is unconscionable that CAI advertises and speaks before the policy makers and legislative bodies claiming to speak for HOAs and their members.

“LACs prevented the enactment of flawed legislation while working to ensure that other bills reflected the interests of homeowners, associations and the industry professionals who serve them.” (CAI 2013 Annual Report, State and Federal Engagement,

http://www.caionline.org/about/who/Documents/Annual_Report.pdf,  Aug. 28, 2014).

Let’s examine this preposterous claim even if CAI indeed had HOAs as members.  By its own data, CAI states that 60% of its membership is volunteers[2], and if each were in a separate HOA CAI would have representation of, at most, some 19,200 HOAs.  That would make CAI representation equal to a paltry 6% of all HOAs.[3]   What a blatant misstatement of representation!


Selected state chapter advertising – no mention of business trade group or 501(C) 6 tax-exempt

Arizona Central -

“The Community Associations Institute national chapter was founded in 1973 as a multi-disciplinary non-profit alliance serving all stakeholders [does not include homeowners] in community associations. It provides education and resources to America’s 315,000 residential condominium, cooperative, and homeowner associations, and to the professionals and suppliers who serve them.” (http://a.mwapp.net/p/mweb_ws.show2?

xpod_id=77805054&xcanvas=&xid=79759889, Aug. 28, 2014).

New Jersey –

“The New Jersey chapter of CAI (CAI-NJ) is dedicated to enhancing the quality of  community association living, through education, legislative advocacy and  professional development. . . . The Community Associations Institute (CAI) is a national, non-profit organization dedicated to providing the education and resources necessary to foster vibrant, responsive, competent, community associations and helping them promote harmony and responsible leadership.” (http://www.cainj.org/about/about-cai-nj/, Aug. 28, 2014).

Florida central chapter –

An education and resource institute dedicated to the 7,500+ HOA & Condominium Associations in Central Florida, their volunteer leaders, and the business partners who support them. (http://www.caicf.org/, Aug. 28, 2014). For more than 30 years, CAI has been the leader in providing education and resources to the volunteer homeowners who govern community associations and the professionals who support them. (http://www.caicf.org/site_page.cfm?pk_association_webpage_menu=446&pk_association_webpage=470, Aug. 28, 2014).

Orange County, CA chapter –

“The Orange County Regional Chapter of Community Associations Institute (CAI-OCRC) provides education, networking, resources and advocacy for community associations and the professional and volunteers who serve them. . . . Members include condominium associations, cooperatives, and homeowner associations . . . .” (http://www.caioc.org/, Aug. 28, 2014).


When CAI goes before the policy makers, government officials or legislative committees, acting as modern day Philosopher Kings,[4] but raising questions of candor to the tribunal, advocates must speak out loudly.  Any such statements must be confronted, challenged and exposed before the audience addressed by CAI.  Speaking to one another is an empty exercise, unless to exhort others to act.  And after repeated confrontation as above and the recipient fails to act, then challenge the policy maker, the government official or the legislative committee – Why are you doing nothing?  Tell them that you have provided documentation that any reasonable person would agree reflects the unethical and illegal conduct of the lobbyists.  Why are they not acting in a responsible manner?

“In every stage of these oppressions we have petitioned for redress in the most humble terms; our repeated petitions have been answered only by repeated injury.”  (Decl. of Indep.)



[1] “IRC 501(c)(6) provides for exemption of business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues (whether or not administering a pension fund for football players), which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.” (http://www.irs.gov/pub/irs-tege/eotopick03.pdf). (Contrast CAI with “real estate boards,” more commonly known as the association of realtors, realtor education is focused in its professional members and not on the homebuyer who is a consumer of the services of its members.  Realtors do not lobby for home sellers/buyers, but for its agent members.)

[2] From CAI miniscule minority dominates public policy (2007).

[3] CAI’s Industry Data (http://www.caionline.org/info/research/Pages/default.aspx) shows 326,000 HOAs and states that it has some 32,000 members (http://www.caionline.org/about/who/Pages/CAI40thAnniversary.aspx). That’s a 32/326.6 ratio of 9.8%.  My best estimate from note 2 above is that volunteers make up just 60% of the members, making HOA representation at about 6% at most.  “At most” means that there is just one volunteer from an HOA, which we know is not true. 

[4]Until philosophers rule as kings, that is, until political power and philosophy entirely coincide…cities will have no rest from evils…there can be no happiness, either public or private, in any other city.” Republic, Plato.  (In other words, “the key to the notion of the ‘philosopher king’ is that the philosopher is the only person who can be trusted to rule well.”

Published in: on August 28, 2014 at 11:01 am  Comments (16)  

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