Can the HOA sue in a voluntary HOA?

Deborah Goonan, in her blog post, Independent American Communities by Deborah Goonan, quoting the article, Do Voluntary Civic Associations Have Authority to Enforce Their Covenants and Restrictions Over Real Property? raises a very important subtle issue of distinction —  powers of voluntary HOAs over nonmembers.

While homeowners with a voluntary HOA well understand that they are not required to pay assessments, they presume that they are not subject to the enforcement of CC&Rs by the HOA. Deborah quotes from the article, my emphasis, Usually when an association is labeled “voluntary” it means the payment of dues and assessments by its members is voluntary, not the obligation of owners to abide by the covenants and restrictions.

The article makes the argument that the voluntary HOA, where given power by the state, can enforce the CC&Rs, not its rule and regulations or fines, or anything else pertaining to its members.  In order to enforce its “rules” on nonmembers, the HOA must first amend the CC&Rs, which requires a vote of all the homeowners. Nonvoluntary HOAs use the term “members” since all lot owners are members, while the amendment procedure for voluntary HOAs usually refers to all “lot owners.”  Big distinction!

SO, if the HOA comes knocking, check these requirements out. If the HOA does not meet these requirements, any legal suit can be denied as having no standing, or legal right, to sue.

Published in: on October 22, 2018 at 10:08 am  Comments (1)  

The impact of the Kavanaugh decision on HOA due process

With the confirmation of Brett Kavanaugh as a Supreme Court Justice, the US joins the list failed democracies, not by revolution or coup d’état, but by the slow decay and corruption of its democratic institutions and norms.  In their book,  How Democracies Die,[i]  the authors wrote,

Democracies may die at the hands . . .  of elected leaders . . . who subvert the very process that brought them to power. . .. More often, though, democracies erode slowly, in barely visible steps.

Elected autocrats [and parties who] subvert democracy – packing and ‘weaponizing’ the courts and other neutral agencies, buying off the media and the private sector (or bullying them into silence), and rewriting the rules of politics to tilt the playing field against opponents.  Democracy’s assassins use the very institutions of democracy — gradually, subtly, and even legally – to kill it.

And this is just what happened with the Kavanaugh vote.  Not being in the majority, the Democrats could do nothing but hope several Republicans broke rank and voted no.  This did not happen.

Would you want Kavanaugh to be the deciding vote on your life-death case that involved controversial political positions?

In my  January 2018 post, HOA-Land: the product of the decline in democratic institutions in America, I argued that HOA-Land was the result of this slow death of democracy.  Deborah Goonan makes a strong case for the trickle down effect of the death of democracy on HOA due process.  Her lengthy and highly informative post, Does an HOA respect your due process rights? Don’t count on it., goes into a detailed analysis of the Hearing and relates it to HOA due process. She writes,

It’s sad to say that America’s association-governed communities operate under the same dysfunctional and divisive politics — with the exception of occurring at the local level rather than the national level.

The common boiler plate in CC&Rs shortens the requirements for due process to simply, “an opportunity to be heard.”  But, Deborah writes,

But due process, as understood in the context of the U.S. Constitution and centuries of law going back to 16th Century England, is intended to offer greater protections for the accused, ensuring a fair hearing of the issues before a disinterested third party, and, preferably, a jury of one’s peers.

She quotes from, constitutional due process means

The right to an unbiased trial
The right to be given notice of the proposed trial and the reason for it

The right of the individual to be aware of evidence against him

The right to cross-examine witnesses for the opposition

The right to present evidence and call witnesses

The right to be represented by counsel

The effect on HOA due process, and on other issues of private rights, is to signal to rogue HOA boards that they can do as they please so long as it supports HOA-Land according to the CAI School of HOA Governance. It says to the HOA boards, the government is behind you and will ignore the Constitutional and Bill of Rights as it pleases.

Who can stop it? No one but a strong turnout by the people, who still believe in America as a democracy, in the upcoming elections.



[i] How Democracies Die, Steven Levitsky & Daniel Ziblatt, Crown Publishing, 2018. Based on their research into democracies, internationally and historically, the authors make the case that the long-term decline in democratic norms and institutions has given rise to demagogic leadership.

Published in: on October 8, 2018 at 9:07 am  Comments (13)  

Judicial system forces HOA member to defend statute constitutionality

In the good ol’ medieval days the Emperor or King could do no wrong, because he was the law unto himself.  Until, say, 1215 in England where the Magna Carter, written by the nobles against King John of the Robin Hood tale,  placed restrictions on his power.

By the time of the American Revolution, the state representatives distrusted federal power and adopted the separation of powers doctrine whereby each branch could serve as a check on the other branches.  While the legislatures (Congress) would write the laws the judiciary could declare them in violation of the Constitution. The best reasoning I came across for  this was that the legislators were not lawyers and that they could get confused time to time and not fully understand the laws.  Never mind that each state legislature has a Rules Committee with lawyers whose duties are to examine the constitutionality of a bill.

Now come the supreme courts to set them straight and rule on constitutionality.    But, and a big BUT, the judiciary adopted a new doctrine, one that says all approved bills have the presumption of constitutionality.  Goodbye Rules Committees that continue to mislead the public that they serve as a valid check on constitutionality.  A challenge could still made by any public person affected by the new law.

In regard to our area of interest, HOA-LAND, that means the average homeowner or HOA can institute, or defend, a constitutionality challenge with the burden that unconstitutionality must be overwhelmingly made in court.  This what Annette Cohen is currently facing in her defense of legally valid OAH decisions that are enforceable.  (See AZ HOA due process by OAH being challenged once again.)  So the game is rigged against the homeowner who, to preserve her OAH decision, must fight the constitutionality challenge, alone.  But, what about agency and legislature support?

In 2009-10 I was heavily criticizing the failure of the agency and Legislature to file a brief in defense of the HOA – OAH bill.   In the next session the Legislature passed  HB2774, Ch. 105 (2010) making it clear that state officials and entities could not be compelled to intervene and defend statute constitutionality.  I proudly named it “The Take That George” bill.

Note that if she loses, it’s a huge loss for all HOA members in Arizona.

One would think that the legislature would defend its passing a bill into law. Apparently not, when it comes to HOA laws.  By law, an agency is the entity to handle HOA complaints that then seeks “professional” legal help by turning the complaint over to OAH (Office of Administrative Hearings) for adjudication.  One would think it,  now ADRE (real estate department), would defend its process of handling HOA complaints.

As of this writing, there is no court filing of a notice of appearance by the ADRE attorney, the AG, or by the Legislature, which would be required before the AG can file its brief.


Published in: on August 26, 2018 at 9:40 am  Comments (3)  

Illinois court spells out HOA BOD fiduciary duties

First, let me point out to many HOA directors that the HOA is not a social club, but is a binding contractual relationship between the BOD and the members.

BOUCHER v. 111 EAST CHESTNUT CONDOMINIUM ASSOCIATION, INC., 2018 IL App (1st) 162233 (Appellate Court) concerning the fining of a member while withholding material facts.

¶ 35 Directors of a condominium association owe fiduciary duties to unit owners similar to the duties corporate directors owe to shareholders, insofar as the unit owners trust the directors to use the owners’ money for maintenance, repair, and improvements to the building. The unit owners and residents also entrust the board to make decisions on behalf of all members of the association concerning the conduct of association members in and around their homes. . . . The high degree of trust the members must accord to the association imposes on the directors very strict fiduciary duties, particularly with respect to decisions concerning the unit owners’ and residents’ conduct in their home.

¶ 36 Thus, each board member here has strict duties to treat the unit owners “with the utmost candor, rectitude, care, loyalty, and good faith—in fact to treat [them] as well as [he] would treat himself.” . . . . When investigating charges of misconduct against a unit owner, the duty of candor imposes on the board members an obligation “of full, fair, complete, and timely disclosure of material facts.”

¶ 38 The Anderson court found that a condominium association did not properly assess fines upon a unit owner because the association failed to provide the unit owner with an opportunity to be heard in a fair manner. The Anderson court held that before imposing fines, the association had a duty to give the accused unit owner “an opportunity to know the facts on which the agency is asked to act, to cross-examine witnesses and to offer rebuttal evidence.”

¶ 48 The business judgment rule permits a trier of fact to presume that a corporate board made its decisions “on an informed basis, in good faith and in an honest belief that the actions taken are in the best interest of the company.”

¶ 52 While the declaration may limit liability for business decisions made in good faith, it cannot limit liability for violations of the duties of honesty, candor, full disclosure, loyalty, and good faith.

Published in: on August 22, 2018 at 12:11 pm  Comments (1)  

AZ HOA due process by OAH being challenged once again

After 7 years in effect, Arizona’s OAH adjudication of HOA disputes is once more under challenge as an unconstitutional statute, violating the separation of powers doctrine.  Carpenter Hazlewood tried 3 times in 2008 – 2011 and eventually had the old statutes declared unconstitutional.  After the decision, the statutes were changed to accommodate the court’s decision.  (SB 1148, Ch. 185 2011).

The case is CBS-136 HOA v. Cohen, LC 2018-00316 in Maricopa Superior Court.  My fear, as with the earlier cases, no one from the Legislature or DFBLS (now ADRE) or the AG will come to the defense of the statutes.  So, we can expect another defeat with another “in your face” to homeowners —  we don’t really care!

However, this time being too big may work in our favor.  It’s my understanding that if a statute is declared unconstitutional means that it was never law.  That would make the OAH petitions over the past 7 years without effect, or not legal, since no law existed at the time.  It would be like a dirty prosecutor whose cases are now subject to appeal and reexamination to see if they survive scrutiny.  What havoc that would create!

Very interesting!

Published in: on August 21, 2018 at 7:53 am  Comments (3)