Publications on HOA constitutionality and legal structure

Peter F. Drucker was an internationally renowned management consultant in the 50s and author of the management “bible,” The Practice of Management. “A classic since its publication in 1954, The Practice of Management was the first book to look at management as a whole and being a manager as a separate responsibility.” Bob Woodward you should know. 

View publications here: Amazon.com: George K Staropoli: Books, Biography, Blog, Audiobooks, Kindle

Is CAI a coercive HOA monopoly?

Community Associations Institute (CAI) dominates themarket for HOA educational services and controls the market around it by means of its extensive lobbying of state legislatures and by holding seminars, conferences and publications extolling its self-serving agenda that promotes the HOA legal structure and scheme; by the support  of state agencies that sponsor CAI seminars and classes, and by private entities trained under the CAI education program – ECHO in California and CALL in Florida, as examples. It has become successful in lessening competition as a result of its “improper conduct.”

A quick review of the internet postings shows (emphasis added),

“[The]  courts ask if that leading position was gained or maintained through improper conduct—that is, something other than merely having a better product, superior management or historic accident. In the end, courts will decide whether the monopolist’s success is due to ‘the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.’”

“Coercive monopoly” is defined as:

A monopoly that is created using extraordinary power such as a government or international agency. For example, a government that grants legal protections to firms that create barriers to entry to prevent competition. Firms commonly lobby governments for rules that protect them from competition.”

With respect to CAI, a tax-exempt nonprofit, can it be charged as a monopoly? It is a well-established fact that no state has granted  CAI a protective government monopoly exclusion —  the right to lessen competition. And that includes local governments in several states that openly support and encourage the CAI HOA program; some states have actually employed CAI as its authority to educate the public regarding HOAs.

The  answer is YES according to the following Supreme Court case. The case addresses the instance where  the state assigns a “governmental monopoly” (making it a state-actor) to an entity (which HOAs are not), but must explicitly state that the entity has the right to lessen competition,

“Under this Court’s state-action immunity doctrine, when a local governmental entity acts pursuant to a clearly articulated and affirmatively expressed state policy to displace competition, it is exempt from scrutiny under the federal antitrust laws. In this case, we must decide whether a Georgia law that creates special-purpose public entities called hospital authorities and gives those entities general corporate powers, including the power to acquire hospitals, clearly articulates and affirmatively expresses a state policy to permit acquisitions that substantially lessen competition. Because Georgia’s grant of general corporate powers to hospital authorities does not include permission to use those powers anticompetitively, we hold that the clear-articulation test is not satisfied, and state-action immunity does not apply.”

 (F.T.C. v. Phoebe Putney Health System (133 S.Ct. 1003 (2013)).

CALL TO ACTION

I believe the case can be made for a CAI monopoly and for the Feds to  investigate (Citizens Complaint Center, Antitrust Division, DOJ),  and to file an appropriate antitrust lawsuit ASAP.

Authoritarian HOAs and AZ SOS Fontes on American authoritarianism

In January 2022 I summarized my earlier works on authoritarianism in HOAs as a natural consequence of authoritarianism in America.[1]

I came to the conclusion in 2019 that there was a rise in authoritarianism throughout the world including America. And with HOA-land[2] constituting of some 23% plus of Americans, authoritarianism was also well rooted in the HOA form of governance. 

“The HOA legal structure and scheme is basically authoritarian in nature: strong central power, limited political freedoms, no accountability, and under the rule of man, not law. ‘There are a lot of Americans who do not care for democracy. They do not mind [failing] to follow the Constitution, or that [it] poses a danger to democracy.’ (Authoritarianism in the HOA-Land Nation (2019)).

There is a mass psychology present in HOA-Land. Mass psychology is a study of how your behavior is influenced by large groups of people — “birds of the same feather flock together.” It is the result of the longtime conditioning and indoctrination into identifying with the principles and beliefs promoted by the CAI School of HOA Governance. Mass Psychology and Cult Behavior Within HOA-Land (2020)).

Arizona Secretary of State-Elect, Adrian Fontes

In MSNBC interview on Nov.17, 2022, the Arizona Secretary of State-Elect had the following to say about Americans .[3]

Election deniers . . . we need to call them authoritarians because they don’t believe in the democratic process.  They don’t believe in the consent of the governed. This is  so soundly an authoritarian movement when you look at the people who care about democracy, who care about the function of our government.”

“The people have spoken. There is an authoritarian movement in America, it may be loud . . . but it is dangerous, and we must continue to push back against it with vigor. . . . We have to become better citizens across the nation . . . we have to understand the fundamental structure [of government] better.”

Asked by the interviewer what can you do as secretary of state,  

“I have begun to work with . . . members of the Arizona Legislature . . . we got to be bigger than the problem, we got to be working together, to help people understand that we are all in this together.  You have to set your partisanship aside and work together toward common ends.”

“That’s the kind of leadership that folks like me have to set.   We got to reach out and show the American public that . . . cooperation will open up more avenues of conversation and that’s how we as leaders can set the example.”

Restructure the HOA model of governance

I have stepped outside the box to offer the boards of directors (BOD) a fresh view of the nature and legalities of the HOA legal scheme. StarMan Group HOA Management Consulting believes that the HOA legal model of government must be restructured to establish the climate and culture of the HOA enabling the restoration of the lost constitutional principles of democratic government — individual rights, justice, and fair play — for its members within the confines of a private contractual government.

The HOA model of local government is a fourth type of local government in addition to the public domains of commission, council-manager, and council-mayor forms. I ask: Is there a legitimate, bona fide reason and justification for the HOA to function outside public government?   No, there is none!

It goes without saying that private HOA governments must be restructured to return to the Union and restore member rights, freedom, privileges, and immunities.[4]

The task before the new Arizona administration

In 2006, HB 2824 (Ch.324), sponsored by Rep. Eddie Farnsworth, established OAH hearings of HOA disputes, followed in 2011 by SB 1148 (Ch. 185), sponsored by Senator Andy Biggs to revise HB 2824 to deal with constitutionality challenges by the trade group, CAI, and 11 years later Arizona now has HB 2158 (Ch. 125), sponsored by Rep. John Kavanagh, allowing for a more meaningful, democratic voice of the members in HOA government.

Hopefully, Fontes will apply his concerns about authoritarian America to that 23% of the population directly subject to authoritarian, contractual, private local government known as HOAs. Hopefully, the to-be-elected Attorney General will identify with Fontes, and they will exert strong influence on the new administration to correct the past legislative ills of supporting, co-operating, encouraging, and protecting the HOA legal structure.

Hopefully, the newly constituted Arizona Legislature will  restore fundamental and constitutional protections, especially due process and the equal protection of the law, to citizens living in homeowner associations.

Notes


[1] Authoritarianism in America; authoritarianism in HOA-Land (2022).

[2] Some 23% of Americans live in HOA-Land, that collection of fragmented independent principalities known, in general, as HOAs. HOAs are separate, local private governments not subject to the constitution, and collectively constitute a nation within a defined geographical region known as the United States.   “A nation consists of a distinct population of people that are bound together by a common culture, history, and tradition who are typically concentrated within a specific geographic region.”

[3] We Must Push Back Against Authoritarians, Says Arizona’s Secretary Of State-Elect – Bing video.

[4] Restructuring the HOA model, George K. Staropoli, StarMan Publishing  (2020).

Important AZ case on CC&Rs interpretation

While this case deals specifically with Arizona statutes, the legal doctrine applies across all states.  The issue involved amending the CC&Rs by means of consent forms. Learn how the courts look at HOA complaints on interpretating CC&Rs — not what you probably think. So learn! 

Your declaration probably has the misleading statement that the board has the right to interpret the governing document. Not so! The courts have that sole right.

Please note that on important cases affecting HOA board authority and  powers, you may well find CAI filing an amicus brief as in Mountz.[1] For those with some legal understanding, the following will make sense. If you don’t understand, post questions here.

 The case

A number of owners sued seeking a declaratory decision that the amendment was unenforceable, and the lower court agreed. The HOA had sent a letter indicating “that owners could approve the Amendment by signing and returning an attached consent form.” The result was announced at the subsequent annual meeting, and the VP  “certified that the Amendment was adopted by at least 50% of the lot owners.”

Now pay attention to my warnings of word games and expansionist interpretations. The lower court held “the Amendment invalid because it was not executed by at least half of the owners,”  because

“the CC&Rs authorize an amendment “by Instrument executed by the [o]wners of at least fifty percent (50%) of the Lots . . . and such amendment shall not be effective until the recording of such Instrument.” (Emphasis added.)  The Court said that “Because it was  not done in this manner, the Amendment is invalid.

Mountain Gate argued “when the approving owners signed and returned their consent forms, they gave the Board actual authority to execute the Amendment on their behalf.”  The key issue came down to, what is the meaning of “execute.”

CC&Rs contract Court interpretation principles

My annotations are in square brackets [].

  • A restrictive covenant is a contract [The courts have not clarified that by “contract” they meant under Contract Law, which the CC&Rs would fail to meet.  Instead, one court held that the CC&Rs are interpretated as a contract, again missing application of Contract Law.]
  • When we interpret them, as with any contract, we strive to give words their ordinary, common-sense meaning to carry out the parties’ intent. [As with the argument over the meaning and use of the word “execute”].
  • Restrictive covenants “should be interpreted to give effect to the
  • intention of the parties. . . . We look to the “language used in the instrument, . . . the circumstances surrounding the creation of the [instrument], and . . . the purpose for which it was created.”
  • Enforcing the intent of the parties is the “cardinal principle” for interpretating restrictive covenants. . . . We will not read a covenant in a way that defeats the plain and obvious meaning of the restriction.  [the Amendment, and it was executed by only one lot owner, a Board member.] The plain language of Section 11(E) does not authorize one individual to amend the CC&Rs by “written consent”
  • we will not add provisions that were not originally included because doing so would defeat the intent of the amendment provision. . . . [the HOA]  broadly reads those definitions to allow the execution of a document through an agent. But the Association cites no authority supporting its argument that agency principles may trump the plain language of a restrictive covenant. [The HOA argued the interpretation of the word “execute” but the Court rejected this expansive meaning of the word within the intent of the CC&Rs. Also understand the need for supporting evidence to back any argument you make.]
  • Contracts are read to incorporate applicable statutes,  but a statute governs only when the contract is incompatible with the statute. [This is a strong statement of no interference with contracts].

Notes


[1] Mountz v. Mountain Gate, No. CA-CV 21-0656 (App. Div. 1, from Navajo County,11-10-2022).

HomeAdvisor study critical of CAI surveys

For years (since 2005) the public in general, the media, and state legislators have been targets of CAI’s “satisfaction” surveys sponsored by its affiliate, The Foundation for Community Associations Research. This year a study was conducted by HomeAdvisor this past September in an effort to uncover  the attitudes of US HOA members across the country regarding life in an HOA.

The HomeAdvisor study confirms the 2015 online polls by two homeowner rights advocates, Sara Benson (Chicago) and Jill Schweitzer (Phoenix), on homeowner satisfaction with HOAs.  In stark contrast, not surprisingly, the Combined Advocate Surveys, as I refer to them, revealed opinions and views refuting the results of the CAI “happiness” surveys. It appears that the CAI studies were happiness studies of happy HOA members.


Read my full analysis, “HomeAdvisor study confirms advocate study critical of CAI surveys,” and its statistical findings.

 

 

CAI: your friend or your foe?

Author’s note:  I’d like to thank the ever-alert Deborah Goonan of IAC for this important tip.

Unbelievably, the CAI Washington chapter spills the beans  on CAI’s mission and objectives.  As a tax-exempt 501(c)6 business trade nonprofit the oxymoron statements below admit to working for business entities and at the same time, serving the consumers of these services, the HOAs.  “to advocate on behalf of community associations.” 

CAI is not permitted to have HOAs as members, so it recruits the boards of directors as individual volunteers creating conflict of interest conditions. I offer this statement by the chapter to set the tone for my criticism of the following article.[1] Note it skips over serving its members, the attorneys and managers who are vendors to HOAs.

“Our Vision: “To be recognized as the leading resource for Community Associations and Business Partners.

“Our Mission: “Optimize the operations of Community Associations and foster value for our Business Partners.

What We Do: 1. Advocacy – establish and enhance/maintain relationships with legislators and government officials and to advocate on behalf of community associations; 2. Member Development – boost membership and participation through enhanced outreach; 3. Education – provide a World-Class Education Curriculum for Stakeholders; 4. Member Services – maximize value provided to our current members, including Business Partners (events, conferences, materials, etc.).

Who We Serve: “Community Association Leaders, Business Partners, CAI National, Community Association Members, Developers/Builders, Financial Institutions, Government Agencies, Insurers, Legislators, Managers, Media, Realtors, Sister Associations.

* * * *

Quorum Magazine article Based on the above stated mission and purpose of CAI, the Washington chapter’s magazine recounts a superficial, misleading whitewash portrayal of the history of HOAs in America[2]; it serves as good CAI propaganda and portrays an unprofessional social media illusion that  all’s well in HOA-Land. It is all real estate development oriented sold as a desired and well accepted housing alternative by uninformed individuals.

The article is devoid of constitutional and democratic concerns and validity centering on the HOA as another form of local government —  a contractual, private government.  These issues affecting the rights and freedoms of HOA members can be found in detail in the listed texts and selected quotes. Note the title of the texts, which says a lot.

  • Prof. Dilger wrote in Neighborhood Politics (1992)[3],

“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.”

  • Prof. McKenzie wrote in his landmark Privatopia (1994)[4],

“T]he property rights of the developer, and later the board of directors, swallow up the rights of the people, and public government is left as a bystander. . . . [Consequently,] this often leads to people becoming angry at board meetings claiming that their ‘rights’ have been violated – rights that they wrongly believe they have in a [HOA]. 

“CIDS [HOAs] currently engage in many activities that would be prohibited  if they were viewed  by the courts as the equivalent of local governments.” 

  • Steven Seigel wrote in his WM & Mary journal (1998)[5],

“Because of the traditional view, RCAs [HOAs] rarely have been deemed state actors subject to the requirements of the Constitution. As private entities, RCAs regulate behavior in a way that is anathema to traditional constitutional strictures;”

  • CAI-ULI funded publication Community Associations (2005)[6].

“[HOAs are] a consumer product sold by profit-seeking firm, a legal device, a corporation reliant on both coercive powers and voluntary cooperation, a democracy, and a lifestyle.  With this plan, TB50 [The Holmes Association Handbook] set out the plan that would be taken in forming the CAI.”

  • Franzese and Seigel argued in their Rutgers journal article (2008)[7]

“The laissez-fare approach to CIC [common interest communities]  regulation is reflected in the statutory law, which affords exceedingly few rights and protections to homeowners association residents.”

It can be safely concluded that CAI is not your friend, and any HOA in bed with CAI is representing its interests and not yours.

Notes


[1] Washington Metropolitan Chapter, CAI (Oct.18, 2022).

[2]Community Associations – A Historical Perspective,” Quorum Magazine, CAI (August 2016, reprinted Oct. 2022).  

[3]  Roger Jay Dilger, Neighborhood Politics: Residential Community Associations in American Governance, p. 160, New York Univ. Press (1992). Formerly WVU Prof. Political Science and Director of Political Affairs.

[4] Evan McKenzie, Privatopia: Homeowner Associations and the Rise of Residential Private Government,  Yale Univ. Press (1994).

[5] Steven Siegel, “The Constitution and Private Government: Toward the Recognition of Constitutional Rights in Private Residential Communities Fifty years After Marsh v. Alabama,” Wm & Mary Bill of Rights J., Vol. 6, Issue 2 (1998).

[6] Donald R. Stabile, Community Associations: The Emergence and Acceptance of a Quiet Innovation in Housing, p. 144 (2000). Funded by CAI and ULI.

[7] Paula A. Franzese and Steven Siegel, “The Twin Rivers Case: Of Homeowners Associations, Free Speech Rights And Privatized Mini-Governments,” 5 RUTGERS J.L. & PUB. POL’Y 630 (2008).