CAI files amicus brief in Illinois Supreme Court claiming HOA is like a government

I just read the Illinois CAI chapter’s amicus curiae brief in the IL Supreme Court appeal of the groundbreaking Spanish Court v. Carlson decision. The court held the HOA liable for violating contractual obligations to repair and maintain common areas, and homeowners could withhold assessments.

 Speaking about the need for timely payment of assessment to keep the HOA going, CAI argues,

The very real impact of the Second District’s decision is peculiarly analogous to our government’s need to collect taxes free from objection by individual taxpayers. Surely, if people could refuse to pay taxes and then defend against their collection based upon a claim that the government had been negligent in the maintenance of public spaces and providing services, the government would find itself in dire financial straits and unable to fulfill its obligations.

The other decision in this 2012 case prevented the HOA from using the draconian measure of “forcible entry” – occupy the unit — to get the member to pay right away.  CAI’s argument for the HOA was that forcible entry was a valid tenant-landlord action, but the court had held that not paying rent was also a valid landlord-tenant action.

The major selling argument for CAI’s being “a friend of the court” is its repeated claims to speak not only for the HOA, but for the members, too. CAI offers the same ol’ impression that it is an educational organization and not a business trade group that lobbies for the business interests of its members.  And as such, why is it defending the consumers of its services, the HOA?  We know why?  Does the Illinois Supreme Court know why?

The Institute’s [CAI] mission is to serve as a national voice for those involved in community associations, including homeowners, governing boards, service providers, and vendors. (My emphasis).

The Illinois Chapter’s mission is to provide education and resources to Illinois residential condominium, cooperative, and homeowners associations, as well as represent their interests and the interests of Illinois community association members on issues of legal importance. (My emphasis).

However, the brief is full of arguments supporting the HOA and it right to use the draconian measure of forcible entry, while denying the contractual right to withhold payments when the HOA defaults on its obligations.

See Court decisions: HOA Enlightenment Movement vs. the Dark Ages; CAI amicus brief

When can a homeowner withhold HOA assessments?

In January the Illinois Supreme Court agreed to hear the condominium case, Spanish Court Two Condominium Association v. Lisa Carlson, No. 115342, that breaks with the commonly held legal doctrine that HOA members are not permitted to withhold paying assessments, even when the HOA has failed to make necessary structural repairs to the condominium. Courts have held that HOAs are subject to servitudes law foremost, and that the common good required for the survival of the HOA is paramount.  Therefore, payments must not be withheld in spite of any outstanding controversy.

 In Spanish Court the appellate court held that a HOA condominium owner could withhold paying assessments because the relationship between the owner and HOA was similar to that of a tenant and landlord.  The contract in both situations involved mutual promises of making payments in return for HOA services to maintain and repair the property.  The court held that under contract law the withholding of payments was permitted. This decision broke with precedent, bringing justice to homeowners against special laws for HOAs.

 The courts in other cases and in other states have held that the declaration of Covenants, Conditions and Restrictions (CC&Rs) are a contract to be interpreted as a contract, but then apply servitude law over contract law, and even over constitutional law.  (See the Restatement Servitudes, § 3.1, comment h and§ 6.13, comment a).

 For example, this holding stands in contrast to the January 2013 Illinois Supreme Court ruling in Poris v. Lake Holiday POA (No. 113907) that allowed HOA security personnel to stop and detain drivers who are violating HOA rules, and not municipality ordinances. Here, servitude law prevailed over constitutional law.  And, in 2007 the Twin Rivers HOA (NJ) free speech case (CBTW v. Twin Rivers, 929 A.2d 1060) held that the business judgment rule would protect homeowner rights, and that there may be some instances where constitutional concerns could come into play.

 The Illinois appellate court admitted to the fact that its opinion stood alone in favor of the homeowner and contract law when HOAs are involved.  If the preponderance of the cases is to control, then homeowners can expect an Illinois Supreme Court reversal of the appellate decision as it did in Poris. Homeowners and justice should not be too enthusiastic about the right to withhold assessments in HOAs.

The FEDS must restore law and order in secessionist HOA governments

The following is my comment to a post by Evan McKenzie on his Privatopia Papers blog, Las Vegas HOA corruption probe continues.  In his post, Prof. McKenzie raised the question of federal congressional hearings on HOAs.

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I think it is not only time for federal intervention, but well past the time.  There are a number of reasons.  First, as I wrote on my blog, people living in HOAs are still citizens of the US and of their respective states, not having waived or surrendered their citizenship. State legislatures have ignored not only the US Constitution and Bill of Rights, but their own Declaration of Rights as found in their state constitutions.  They have abdicated their responsibilities to their citizens.

Second, each state has its own set of laws governing HOA private governments creating a confusing and conflicting state of affairs as to what is law and what is not law. It depends on the state you are living in.  Only the federal government — and not a national lobbying organization nor a uniform laws commission that have been devoid of any homeowner representation —  can legitimately set a single, comprehensive set of laws governing the rights, freedoms, privileges and immunities of citizens. 

Third, a decision to settle the issue of  HOAs as state actors or as de facto government entities must be made, and that can only come from a decision by the US Supreme Court upon a complaint filed by the DOJ.  Can HOAs exist as a government entity?  Why not?  If not, then what? 

Understand, and do not be confused by the blurring of definitions, that the homeowners association is the governing body over a subdivision subject to a Declaration of Covenants, Conditions and Restrictions (CC&Rs).  The planned community development is the subdivision’s real estate “package” setting the amenities, housing, landscaping, common elements, and infrastructure that also mandates an HOA form of private governance. 

Fourth, it is an issue affecting some 20% of the US population, a percentage greater than the percentage either for the Hispanic or the Black minorities.

It’s time to bring unity to this country and end subdivision governance by HOAs that create independent principalities.  The planned community development can remain under a democratic form of government subject to the Constitution.  And that must come from Washington.  It can start with hearings to air those constitutional issues that have been avoided by every state and court for far too many years.

Observations on AZ legislative treatment of HOA reform bills

If you listen carefully to the HB 2371 sponsor and committee chair explain her bill you would hear the familiar attitude taken by many legislators. First, you were told that a “meeting of all the stakeholders” to work on combining all the bills into one took place.  Oh yeah?  All the stakeholders, but no homeowners.  

 Second, the objective of the bill was to remove “all the contentious issues” and arrive at a bill satisfactory to all. So, those serious violations of homeowner rights will die each time CAI shouts, “HELL NO, WE WON’T GO”!  And of course, there ain’t nobody present to object.  

 So, that would explain what happened to the wording of SB 1333, the “clean elections” in HOAs bill?  A bill that, if passed, would severely cripple the political machine HOA boards and reduce HOA attorney influence.  A bill that would put an end to HOAs, under attorney guidance, finding ways to deny homeowners a legitimate voice in their governance.  But, there were no homeowners invited to the stakeholder meeting!

 Advocate Pat Haruff corrected the sponsor on this comment about “stakeholders.” No response from the Senator. That means that your pool guy, AC service man, landscaper, etc. are all stakeholders in your private property interests because they make money from you, the homeowner. And the legislators don’t need to hear from you! Welcome to how state legislatures are creating the New America of HOA-Land.

An argument against unlicensed management companies being granted exceptions to the unauthorized practice of law (UPL) laws was raised. While the bill would allow managers to represent HOAs in small claims court, it says nothing about homeowners being allowed to have their own unlicensed person speak for them. No one against the management company amendment portion brought up the AZ UPL decisions and opinions contained in AZ Supreme Court’s Final Order: HOA management firm engaged in unauthorized practice of law. Well, did you really expect CAI or AACM (manager’s association) to do it?  And believe me they know, because the management firm was both a CAI and AACM member.

 The CAI paid lobbyist once again falsely proclaims that CAI represents homeowners, failing to mention that CAI does not, and cannot as a business trade group, represent consumers — and HOAs are consumers of CAI member services. No one corrected him.

 I also got the feeling from the sponsor’s comments that the legislature was sort of tired of all these HOA bills, again and again, so wrap them into one bill and get it done with. I wonder if the annoyance is because they know that they are doing wrong to the people whom they are supposed to represent, and favoring the special interests. What about protecting the private property rights of the individual, a principle uttered so many times in so many arenas except in the HOA arena?

I can’t recall over the past 5 years many HOAs coming before the committees on behalf of HOA bills. No, it’s just the special interest vendors, the “stakeholders”, who live off HOA income who come before the committees. And nobody seems to notice. Yet, the homeowner who comes and/or writes is given short rift.  I’ve told several legislators over the years that we will be coming back year after year until they get it right.

 So, there it is! Homeowners are at the bottom of the food chain, with the legislators ignoring the principle that in a democracy citizens rule.  To paraphrase a statement in an address to the British prisoners of war by the Japanese commandant in the movie, The Bridge on the River Kwai,

 “Be happy in your home”

Can municipal agencies be liable under Monell Claims for policies that support HOAs? YES!

The legal doctrine of Monell claims appears to be suited for those instances where public policy permits violations of constitutional rights under 42 US 1983, “Civil action for deprivation of rights”.[i]    These claims can pertain to police departments and county attorneys, planning boards, and real estate departments and other HOA commissioners or ombudsmen officials if they have adopted such a policy. In other words, if it is the policy of a planning board, or the police department and/or county attorney to ignore or dismiss legitimate complaints against HOAs then this policy allows for the application of civil rights protection under federal law.

 In Nevada, Bob Frank and Tim Stebbins have filed such a federal claim[ii] against Henderson Police Department for false arrest and malicious prosecution relating to their whistle-blowing, which involved IRS rules violations relating to tax refunds to HOAs.  Without probable cause and an independent audit, the police arrested the two homeowners under filing a false claim.  Subsequent to their arrest, the IRS completed its audit that did indeed substantiate the allegations of Frank and Stebbins.

Basically, a Monell Claim involves a claim “against a government unit [with] sufficient facts to show (1) the existence of a government policy or custom and (2) that the unconstitutional act was taken pursuant to that policy or custom.”[iii]  Further clarification of what constitutes “policy” was provided in Pembaur v. City of Cincinnati[iv] decision that held, among other things,

“We hold that municipal liability under § 1983 attaches where — and only where — a deliberate choice to follow a course of action is made from among various alternatives by the official or officials responsible for establishing final policy with respect to the subject matter in question.”

In other words, the policy or custom must come from a high-level official who can be said to speak for the agency, and thus the municipality.  For example, Commissioners and Directors who are permitted to set rules and regulations by law.  Any such rule, especially an explicit policy statement, may lead to a Monell Claim. For example, in Pembaur the Prosecutor was held to be the final authority when he told the police to break into a business without a warrant.  In Frank, it is shown that the Police Chief and Municipal Judge approved the probable cause claim for the criminal arrest warrant.  See this link for current documents in this case.

When the “unspoken alliance of no negatives about HOAs” becomes incorporated into an agency policy, then Monell Claims may arise.

 

Notes

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[i] “Every person who, under color of any statute, ordinance, regulation, custom, or usage . . . subjects, or causes to be subjected to . . . the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable . . .” (emphasis added).

[ii] Frank v. City of Cincinnati, 2:12-cv-01988-GMN-GFW (D. Nev.) (not decided).

[iii] Supra, note i.

[iv] Pembaur v. City of Cincinnati, 106 S.Ct. 1292 (1986).