Why should taxpayers pay private entity HOA assessments? It ain’t fair!

Good golly Miss Molly, what are we gonna do?  What are we gonna do?  If state governments refuse to pay assessments on HOA property it owns by foreclosure, how is the HOA to survive?  The “stakeholders”, which does not mean the owners but all those vendors who feed off the HOA income streams, are aghast! How are we gonna make a living?  How are we gonna make a living?  Good golly Miss Molly!

A Tennessee bill is proposing an exception to its laws to exempt the state from having to pay HOA assessments on properties that it took over by foreclosure. “But state lawmakers are considering a bill that hands those foreclosure charges to the rest of the homeowners’ association instead of the municipality. What it does is increase the cost to the homeowner.” (TN bill would pass foreclosure fees to neighborhoods). 

Um, what happened to the battle cry in favor of HOA foreclosure, “It ain’t fair for others to pay for deadbeat homeowners?”  Why should taxpayers not living in the private contractual HOA governed community, with its private amenities, pay for deadbeat HOAs?  It ain’t fair! 

As with any business enterprise, when times are good all defects are masked and hidden from daily concerns.  Policies, procedures, rules and regulations, and the legal structure and purpose of the entity can escape serious concern.  The world is good.  HOWEVER, when things start falling apart, like the financial quagmire facing HOAs, the poorly formed and drafted organizations functioning under faulty premises and legal structure start falling apart.  And this is what is happening to defective HOA legal concept.

I cannot count the number of times state legislators told homeowners that they had agreed to a contract and now that it is working against them they want the legislature change that contract. NO, was the position of the legislator.  Well, the nature of the CC&Rs contract is defective as it imposes a financial liability on the members much like a partnership with its joint and severable liability on all the partners. Also, the member liability is much like buying stock in a small closely-held business with limited ability to raise additional funds except from the members themselves.  It’s all part of the “deal.”  Didn’t the national pro-HOA lobbying organization explain that to you?

Or, were you just told that the HOA was a great way to preserve property values?

And let’s not forget that state legislatures have granted the HOA “special dispensation” in terms of special laws for a special entity – no oversight and very little HOA accountability.  They have played their part in creating the HOA financial quagmire.  Instead of a city or two going bankrupt, the state has set the stage for hundreds of communities governed by HOAs to go bankrupt. 

For the state to pay assessments would be like throwing good money after bad money.

To the Sovereign of Arizona: where are the checks and balances on HOA governments?

I found the following resolution by the Arizona Legislature to re-affirm its sovereignty over Arizona personnel and its right to serve as a check and balance on the Federal government very intriguing.  I keep thinking about why the “Sovereign of Arizona” believes checks and balances are not needed with respect to the independent, private governments known as HOAs, to which it has given its active support and cooperation.

Apparently, this concern for government checks and balances has been found not necessary when it comes to HOA governments.  Apparently, obedience to the Arizona and US Constitutions with respect to due process protections and the equal protection of the laws for citizens living within these regimes has been found not necessary.  It seems that the warnings of James Madison in The Federalist Papers, #51 have been ignored:  “If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary”.  Somehow average people become angels who can do no wrong when they become an HOA board member.

I would think that the citizens of Arizona do indeed need the long arm of the Federal government to serve as a check and balance since Arizona, and all other state governments, has failed to standby and to uphold the US Constitution. I think it is probably necessary for the Federal government to commandeer and nationalize Arizona personnel who participate in violating the US Constitution.

See The FEDS must restore law and order in secessionist HOA governments

  

SENATE CONCURRENT RESOLUTION 1016 (2013)

A CONCURRENT RESOLUTION

proposing an amendment to the Constitution of Arizona; amending article II, section 3, Constitution of Arizona; relating to the rejection of unconstitutional federal actions.

 Be it resolved by the Senate of the State of Arizona, the House of Representatives concurring:

 1. Article II, section 3, Constitution of Arizona, is proposed to be amended as follows if approved by the voters and on proclamation of the Governor:

 3. Supreme law of the land; authority to exercise sovereign authority against federal action; use of government personnel and financial resources

Section 3. A. The Constitution of the United States is the supreme law of the land to which all government, state and federal, is subject.

 B. To protect the people’s freedom and to preserve the checks and balances of the United States Constitution, this state may exercise its sovereign authority to restrict the actions of its personnel and the use of its financial resources to purposes that are consistent with the constitution by doing any of the following:

1. Passing an initiative or referendum pursuant to Article IV, part 1, section 1.

2. Passing a bill pursuant to Article IV, part 2 and article V, section 7.

3. Pursuing any other available legal remedy.

 C. If the people or their representatives exercise their authority pursuant to this section, this state and all political subdivisions of this state are prohibited from using any personnel or financial resources to enforce, administer or cooperate with the designated federal action or program.

 2. The Secretary of State shall submit this proposition to the voters at the next general election as provided by article XXI, Constitution of Arizona.

For AZ HOAs, public roads means public laws prevail

An interesting federal case came to my attention that involved public access to public roads. In this Puerto Rican case, Watchtower Bible [Jehovah Witnesses] v. Municipality of Santa of Isabel, CIV. NO. 04-1452 (2013), the First Circuit overturned the District Court’s decision and held that the Jehovah Witnesses’ free speech rights were violated.  This case was the remand from the First Circuit in Watchtower Bible v. Sagardia de Jesus, 634 F.3d 3 (2011)).

Shades of Marsh v. Alabama (326 U.S. 501), that 1946 federal case where Jehovah Witnesses attempted to distribute literature in a company town with public access. WOW! (Cited in  Sagardia de Jesus).  Marsh led to the US Supreme Court’s “public functions” test to determine if private organizations were state actors. (Today, there are other tests for HOA state action that nobody seems willing to pursue).

The municipality operated a Public Housing Agency, similar to the “projects” build in the 1950s in Chicago and New York City.  Where there are unmanned gates (“unmanned urbanizations”), entry to the public road is based upon acceptance by a resident who answers a buzzer or gets a call from the visitor. However, Puerto Rico has explicit laws that require all roads to be public roads open to all the people, with the usual police powers exceptions for the health and safety of the residents.  Like criminals don’t get access, etc.

 In dealing with the remand, to tighten the rules in accordance with the laws, the court noted that,

If access to public streets can be denied to them, then access can be denied to anyone. For example . . . the press could also be prevented from entering a gated community to cover the reactions of residents to a court ruling, as that in this case.

The court made the following general statement that has direct application to private government HOA regimes (my emphasis),

 Even today, many nations of the world inadequately protect, or worse, fail to protect, these rights that we often take for granted. This case demonstrates this Nation’s deep history of protecting civil liberties. Any antipathy by individual residents of gated communities towards Jehovah’s Witnesses or members of any other religious faith should yield to common sense and respect for the Rule of Law, product of the United States and Puerto Rico Constitutions.

Ordinances: the state, municipality and HOA pecking order

Another “outside the box” opinion by the Illinois Supreme Court.  In Palm v. 2800 Lake Shore Drive Condo Ass’n (No. 110505) the court held that city ordinances can trump Illinois statutes under certain circumstances.  Earlier this year the Court said that HOA security people could stop and detain drivers on their private streets, Poris v. Lake Holiday POA (No. 113907), and that homeowners could withhold payment of assessments if the HOA failed to make repairs, Spanish Court Two Condominium Association v. Lisa Carlson, (No. 115342).

Palm raised several issues in regard to constitutional law, home rule powers, and whether “condominium law” should triumph both contract and real estate law. The question before the court, and the one of interest for this commentary, was the simple Chicago ordinance that omitted the pro-HOA boiler plate wording when requesting HOA records, “for a proper purpose,” which as we know can be found in many state laws and in the CC&Rs.  I focus on the doctrine of home rule that has been implied in defense of the HOA legal scheme – the local voice of the community.

Home Rule 

The Court explained that “Home rule is based on the assumption that municipalities [my emphasis] should be allowed to address problems with solutions tailored to their local needs.”  The Illinois Constitution has some very broad home rule provisions,

Except as limited by this Section, a home rule unit [meaning a municipality] may exercise any power and perform any function pertaining to its government and affairs including, but not limited to, the power to regulate for the protection of the public health, safety, morals and welfare; to license; to tax; and to incur debt. (Ill. Const. 1970, art. VII, § 6(a)).

Home rule units [municipalities] may exercise and perform concurrently with the State any power or function of a home rule unit to the extent that the General Assembly by law does not specifically limit the concurrent exercise or specifically declare the State’s exercise to be exclusive.” (Ill. Const. 1970, art. VII, § 6(i)).

The Court addressed the constitutionality of the structure of state governments:

If the constitutional design is to be respected, the courts should step in to compensate for legislative inaction or oversight only in the clearest cases of oppression, injustice, or interference by local ordinances with vital state policies (sic).

It should be noted that the home rule doctrine applies to government entities such as incorporated and unincorporated towns and villages, but does not apply to private, contractual HOAs. HOAs have not been delegated any powers by state legislatures in a proper enabling act.  Instead, statutes are merely created that either mandate regulations or, through the liberal use of the word “may,” declare certain acts and actions to be legal if undertaken by the HOA.

The HOA legal scheme ignores the US and state constitutions.  The IL Supreme Court’s advisory opinion that courts should step in to stop “oppression, injustice, or interference” by HOA “ordinances” that interfere with vital state polices does not apply to HOAs.  In other words, HOAs have been given special status and privileges and immunities not granted to municipalities.

Restrictive ordinances are valid, or are they?

The other aspect of this opinion addresses the case when municipal ordinances supersede statutes, which has its parallel with the validity of ordinances with respect to HOA covenants and rules.  The doctrine has been that if the ordinance is more restrictive then it is valid. However, if it is silent on an aspect of the statute in question, the statute prevails. The HOA argued that without “a proper purpose” clause the ordinance was less restrictive than the statute, and that the statute prevails.

 A technical legal argument followed and the Court held that,  “In sum, the constitutional framework places almost exclusive reliance on the General Assembly to determine whether home rule authority should be preempted. The legislature has not specifically denied the City’s exercise of home rule power or required its exercise of that power to be consistent with statutory provisions.”

 Here, somewhat unique to Illinois, the IL Supreme Court said that the home rule Chicago ordinance should prevail and if the General Assembly didn’t like it, it should explicitly restrict the municipality’s powers in new legislation.  What does this opinion say about municipal ordinances and HOA contracts?

First, remember that the HOA is not a government entity, but exists by virtue of a private contract. The opinion and doctrine should have no bearing on HOA contractual agreements. Second, the reality on the other hand, is that the courts have treated the HOA on the equivalent basis as if it were a municipality, and applied the restrictive ordinance doctrine. If the HOA rule or covenant is more restrictive, it controls over the municipality’s ordinance.  In other words, the HOA has been granted the legal status of a subdivision of the municipality, or the status of a government entity. The HOA stands in the same relationship to the municipality as the municipality stands to the state.

 Third, not only have HOAs been viewed as sub-divisions of a municipality in this aspect, their covenants and rules are not seen to interfere with “vital state policies.”  Private contracts that are not subject to the 14^th Amendment are allowed to supersede municipal ordinances and even state laws.  In other words, it is state policy — in all states — to support, encourage and cooperate with, and even coerce obedience to, the acts and actions of private governments operating outside the US Constitution.

 A lot of issues and problems will disappear or lessen in impact if only the state legislatures would face up to reality and provide the same protections all other citizens enjoy by declaring HOAs as either state entities or to require all CC&Rs to state,

“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 and laws of the State as if it were a local public government entity.”

  

In regard to the Chicago ordinance that is a fair and just protection of condo member rights, the Court upheld the ordinance.

What HOA issues are appropriate for federal intervention?

In my comment (see PVTGOV comment) to Evan McKenzie’s post in his Privatopia Papers blog, Las Vegas HOA corruption probe continues,  (February 26, 2013) I supported McKenzie’s opinion that congressional hearings on HOAs was in order.  In North Carolina and Nevada several homeowner rights advocates felt the same and Norm McCullough contacted Nevada Congressman Joe Heck, who responded on April 22 with,

 I can certainly understand and appreciate your frustrations. Since HOAs are governed by local or state law rather than federal, it would be best to contact your state assemblyman or state senator and local county officials with your comments.

Please be assured that I will keep your comments in mind should this issue be brought to the attention of the House of Representatives for legislative action.

A careful reading of the first paragraph above leads to the obvious: “Not my problem. See your legislators” (my words).  However, he extends hope for homeowners in the second paragraph above, “If HOA issues get here, I’ll remember what you wrote” (my words).  Congratulations to Norm.

Well, just what are federal issues aside from constitutional issues that abound with HOAs?  Let’s take a look at some other recognizable federal laws or “acts”.  There’s the Americans With Disabilities Act, Fair Debt Collections Practices Act, Truth in Lending, Truth in Advertising, Right to Work, etc. all of which deal with practices within an industry that cross state lines.  These are the nationwide practices that need the broad reach of the federal government.  And all the above resulted from abuse against the consumer by the respective industry.  With HOAs, we have very strong legitimate arguments pertaining to constitutional violations that amount to state actions in all states.

If advocates wish to be effective at the national level, they must rise above HOA operational concerns and address issues of national import.  They must be able to understand and deal with these fundamental issues of democratic governance. 

And they must accept the fact that since 1973 CAI has been the aggressive protagonist for the HOA legal scheme or structure that is offensive to our principles of democratic government.