SB 1008, Virginia’s ‘HOA Bill of Rights': an illusion of justice

The Virginia Legislation passed SB 1008 that modified the Code of Virginia adding a “Statement of Lot/Unit Owner Rights,” sections 55-79.72:3 and 55-509.3:1.  It sounds like a Bill of Rights, but the 5 items merely repeat existing law without meaningful and effective enforcement.

Consider that Virginia has a constitutional Bill of Rights, Article 1, that contains section 14,

Government should be uniform. That the people have a right to uniform government; and, therefore, that no government separate from, or independent of, the government of Virginia, ought to be erected or established within the limits thereof. 

It seems that HOA private governments violate Virginia’s Constitution.

Furthermore, take the first 2 clauses of Section 11, “That no person shall be deprived of his life, liberty, or property without due process of law; that the General Assembly shall not pass any law impairing the obligation of contracts.”  Compare the “fine print” of SB 1008 that adds, “the right of due process in the conduct of that hearing(my emphasis), referring to the section on enforcement of rules, (Sec. 55-513 or 55-79.80:2).  The enforcement section specifies the hearing in accordance with the [governing] documents, the member shall be given an opportunity to be heard and to be represented by counsel before the board of directors or other tribunal specified in the documents.”  Does that mean that the counsel is restricted to seeing that the homeowner is allowed to be heard, or is there more?

I have not come across a governing document that calls for hearings that allow presentation of documents and witnesses and the questioning of this evidence, or that the tribunal be an independent body. My point is, What does due process meaning in the context of SB 1008?  Is it under the constitutional bill of rights meaning, or constrained by the CC&Rs and bylaws private contracts?  Sounds like same ol’, same ol’.

Legislation without effective enforcement through monetary penalties is merely a recommendation that relies on the good faith of the parties, namely the board and its attorney and manager advisors.  But, we know all about the good faith acts of many of these responsible parties, especially those of rogue boards that ignore the laws and governing documents or knowingly violate them with impunity.

It would have been so much simpler to have these details spelled out in this one page bill if, indeed, justice for homeowners was sought.

Published in: on February 22, 2015 at 9:40 am  Leave a Comment  
Tags: , , , , ,

Unconstitutional delegation of power to HOAs

Article I. Section 1, of the US Constitution states that “All legislative powers herein granted shall be vested in a Congress of the United States” and nowhere in the Constitution is there any mention that Congress can delegate its exclusive law making powers to any other branch of the government or to any other organization.  State constitutions have similar wordings like that of Arizona, “The legislative authority of the state shall be vested in the legislature, consisting of a  . . . .” 

The legislative authority and powers of the state are past down to subdivisions of the state known as cities, towns, counties, taxing districts, etc.  These powers are said to be delegated from above to the subdivision, and it is common sense that if an entity does not have the power then it cannot delegate that power to anyone else.

This delegation of authority is carried out through a state’s municipal corporation and county laws (and to executive agencies by means of enabling acts of authority).  Reading the municipality laws reveals authority for a defined territory, large or small and often referred to as a community, to elect a governing body, establish courts, make laws and ordinances (rules and regulations), enforce laws, have courts, have a police department, establish fines for violations, have a jail, and to assess residents and collect taxes.  All under the approval and oversight of the state legislature.  These subdivisions are also known as state entities, public bodies or arms of the state.

We must first, once again, decide if HOAs are state actors and arms of the state like any other municipality, or are they just private nonprofit corporations. If found to be a state actor, the 14th Amendment applies and no further investigation into the constitutionality the delegation of legislative authority is necessary.

HOAs as state actors

Let’s start anew and compare state constitutions and city/town charters with the duties, powers and functions of the homeowners association governing body widely set forth in its declaration of conditions, covenants and restrictions (CC&Rs). The CC&Rs declares and defines the authority for the HOA to act in certain manners. We can easily see almost identical powers and duties with municipal corporations, far more so than can be found in a business charter, as CAI like to argue, or in a nonprofit charitable organization, or in a professional association, or in a trade association, or in a union charter, or in a for profit property management service business.

Seeking, attaching and using special meanings to common everyday words and concepts to fit a square peg in a round hole, as the pro-HOAs forces have made an art form, flies in the face of reality.  CAI likes to argue that assessments are not like taxes, that fines are not penalties for violations, rules and regs are not ordinances, etc. Dismissing these special definitions, HOA CC&Rs are almost identical to municipal charters of authority, which becomes quite apparent when we strip away these contrived definitions of words and look and the total picture that reveals the entire intent of the CC&Rs.  And that’s to govern the subdivision or community, to regulate and control the people within the subdivision.

In effect, HOAs are de facto political governments.  I choose the description of HOAs as a political entity and not a quasi or mini-government, because it more accurately describes the nature of the governing body – ruling over people in their homes. As I recently wrote,

The policy makers fail to understand that the terms and conditions of the HOA CC&Rs cross over the line between purely property restrictions to establishing unregulated and authoritarian private governments.[1]

The argument has been made that HOA governments are equivalent to municipalities with respect to powers, duties and authority and as such are indeed state actors subject to the 14th Amendment’s restrictions.

 

Unconstitutional delegation of legislative powers to HOAs

We must now address the argument that HOAs are not state actors, but private actors or entities not subject to the 14th Amendment.  We need to determine the legitimacy and constitutionality of these private actors, these private corporations formed under a private agreement. This takes us back to the question raised in the beginning of this paper of the constitutional delegation of legislative authority and powers not to agencies, but to private entities.

(The case where it is believed that there was no delegation to HOAs at all will be addressed below.)

This question of delegating legislative powers, or the non-delegation doctrine, has, like constitutional questions, undergone multiple court opinions resulting in a complex web of: what is the law?  To make things short, my layman’s summary comes down to deference to private entities, because they know better about their business or corporation than does the court.  And if the owners have elected a governing body, then that body speaks for the owners. A prime example of this judicial philosophy that should be familiar to most homeowners is the business judgment rule. The board knows best, unless it can be shown that it has acted unreasonably.

Sadly, the courts have shown less and less concern for constitutional intent and values or in protecting individual rights in favor of a money oriented practicality of efficiency of government — one that favors the privatization of legislative authority.  Yes, I know, confusing and unbelievable, but remember the quote from the Forward in The Restatement,Therefore this Restatement is enabling toward private government.”[2]  Private actors (unlike the executive branch) have virtually no public accountability, and legislatures may be too busy to address their misdeeds by repealing legislation. Checks and balances and government oversight are of little concern as we are quite familiar with their absence in HOA state laws.

I can hear CAI shouting, way over here, that there is no delegation of legislative powers to private HOAs!  Precisely! There are no enabling acts granting HOAs such legislative powers. That makes CC&Rs and HOAs an unconstitutional usurpation of legislative authority.  If municipal corporations, agencies and private entities must have delegated authority to act, no matter how broad or detrimental to individual rights, then how can HOAs not be outside our constitutional system of government?  Even a state’s most liberal adoption of the home rule doctrine requires allegiance to the state and US constitutions. (See HOAs violate local home rule doctrine and are outlaw governments).

Our government cannot look aside and ignore this assault on the foundations of our system of government!  We cannot tolerate everything goes, especially self-anointed political governments.

In defense of this unacceptable attitude by elected officials, it can be argued that even though there may not be explicit delegation there is an implied delegation of legislative powers, based on the nature and intent of the state’s HOA acts and statutes. These state laws permit those functions and powers of a municipal government, as stated in above, that regulate and control the peoples within a subdivision, large or small.

(Some states do have a statement of general government interest to overcome any judicial scrutiny as to constitutionality under the 14th Amendment, which can be challenged. The basis is that the statutes also contain serious harm to others.  In Shelly, “the States have denied petitioners the equal protection of the laws and that, therefore, the action of the state courts cannot stand”[3] and that constitutional rights were denied.)

US Supreme Court to address delegation to private entities

The question of the delegation of legislative powers to private entities is now before the US Supreme Court in DOT v. Association of American Railroads.[4]   Stephen Wermiel writes that “The Solicitor General argues that there is no unconstitutional delegation to a private entity because government officials retained control . . .[5]   We know this is not true with HOA statutes.

Wermiel continues,

The Supreme Court must decide if the delegation of authority to Amtrak is an unconstitutional grant of legislative powers to a private entity. To reach that decision, the Justices must decide if the authority given to Amtrak by federal law is legislative in nature, and whether Amtrak is a private corporation or a public entity.”[6]

Either way, whether HOAs are de facto political governments and state entities, or are an unconstitutional delegation of legislative powers, they can only legally function as an arm of the state under the restrictions of the 14th Amendment.

References and authorities

[1] See CC&Rs are a devise for de facto HOA governments to escape constitutional government.

[2] Restatement Third, Property: Servitudes (American Law Institute 2000).  The full statement reads, from the Forward: “Professor Susan French [Reporter (chief editor/contributor) for this Restatement] begins with the assumption . . . that we are willing to pay for private government because we believe it is more efficient than [public] government  . . . . Therefore this Restatement is enabling toward private government, so long as there is full disclosure . . . .”

[3] Shelly v. Kraemer, 334 U.S. 1 (1948).

[4] DOT v. Association of American Railroads, No. 12-1080 (SCOTUS).

[5] Stephen Wermiel, SCOTUS for Law Students: Non-delegation doctrine returns after long hiatus.  (SCOTUSblog Dec. 4, 2014)

[6] Id.

please sign Change.org petition to regulate HOAs and limit CAI influence

I received this email from Suzanne and signed.  I urge all those fed up with the HOA abuse and injustice to sign it ASAP.  Visit limit CAI

“Enact legislation on a state and federal level regulating condominium and homeowners associations and limiting lobbying power of the Community Association Institute”

Published in: on January 29, 2015 at 1:08 pm  Comments (8)  
Tags: ,

model HOA regulatory agency bill

shockingThe attached was submitted to AZ legislators.  The model bill should be tailored to your state’s laws.  The sections under 41-2000 et seq. are the amendments that should be included as part of any similar effort to create a level playing field for homeowners.

 From: George

Sent: Monday, January 26, 2015 6:11 PM

Subject: department of HOA is desperately needed as DFBLS is doomed

Dear Arizona Legislators,

I quickly put together a solid bill (attached) based on a Florida bill and adapted to Arizona to help relieve continued legislative involvement in what should be handed by a bona fide regulatory agency.   I took pains to write a good bill in conformity with the drafting requirements and I hope it will ease your review.

I well understand the current atmosphere of no government interference, but the gross and shameful treatment of HOA members by the HOA stakeholders demands justice.  It is not a question of misplaced dogma, but of treating all the people equally under just and fair laws.

The proposed bill summary reads:

Summary.   This bill establishes a department of homeowners associations with full direct regulatory authority over Ch.9 and Ch. 16 associations under the direction of a commissioner. It provides for receiving complaints, investigations, filing legal actions, issuing civil penalties, rulemaking, and establishing an Advisory Board to provide recommendations to the commissioner.  Funding is provided by a $4 per unit fee per year.  The processing of HOA disputes by DFBLS is stricken.

My proposal brings a more level playing field in that the proposed Advisory Board will be balanced in favor of the members, and does not consist of any HOA stakeholder vendor lawyers or managers.  It’s the people’s vehicle for justice.

I urge you to stand behind the effort and sponsor the bill, and campaign for its passage.  I will be happy to meet with any legislator to explain the bill and answer any concerns.

Respectfully,

George K. Staropoli

Published in: on January 27, 2015 at 5:56 pm  Comments (8)  
Tags: , , , ,

CC&Rs are a devise for de facto HOA governments to escape constitutional government

This commentary takes a long look at the validity of HOA covenants and the need for judicial enforcement in order to invoke state action with respect to fundamental rights and freedoms.   It informs the reader that such enforcement depends upon the member’s voluntary agreement to be bound by the declaration, and raises issues of the lack of genuine agreement.  The agreement requirement is not analyzed under contract law, but under HOA law that has been designed to protect the HOA and position the declaration as the supreme law of the HOA community.

Long ago in 1994 Professor McKenzie wrote, “HOAs currently engage in many activities that would be prohibited if they were viewed by the courts as the equivalent of local governments.[i]

Two years after Marsh v. Alabama[ii] — the 1946 Supreme Court opinion setting the misguided “public functions” test for a municipality — the Court specifically dealt with the question of the constitutionality of restrictive covenants.  The issue in Shelly v. Kraemer[iii] was “that judicial enforcement of the restrictive agreements in these cases has violated rights guaranteed to petitioners by the Fourteenth Amendment.”

With respect to restrictive covenant enforcement the Shelly court said:  “That the action of state courts and of judicial officers in their official capacities is to be regarded as action of the State [‘state action’] within the meaning of the Fourteenth Amendment, is a proposition which has long been established by decisions of this Court. . . . The federal guaranty of due process extends to state action through its judicial as well as through its legislative, executive, or administrative branch of government.”   The Court held “that in granting judicial enforcement of the restrictive agreements in these cases, the States have denied petitioners the equal protection of the laws and that, therefore, the action of the state courts cannot stand” (my emphasis).

Unfortunately, the Court chose a narrow view of this issue limiting it to that involving racial discrimination.  A more expansive application of the 14th Amendment can easily be applied to any covenant that violates a member’s rights, freedoms or privileges and immunities as a citizen, but that has not been the case.

The 1976 Florida case, Brock v. Watergate Mobile Home,[iv] directly addressed the question of an HOA declaration and its actions under the Declaration.  It used the Marsh “public functions” test and the additional “close nexus” test (HOA action is closely resembles government action). No state action was found.  The HOA was not like a company town and the state’s involvement, as occurred in the limited context of the case, was not a close nexus.

Please understand that CC&RS and covenants are not automatically invalid or unconstitutional.  It requires a court to declare them so, at the expense of a homeowner lawsuit.  

Also, it is important to note that the court question was not about the validity of a restrictive covenant itself, but the court enforcement of that covenant. (This requires a lawsuit in which the court upholds the covenant and a subsequent lawsuit charging a violation of the 14th Amendment.)  The Shelly court’s view was that as the 14th Amendment applied “only to governmental action, as contrasted to action of private individuals, there was no showing that the covenants, which were simply agreements between private property owners, were invalid.”   Furthermore, “[The 14th] Amendment erects no shield against merely private conduct, however discriminatory or wrongful” (my emphasis).  In Arizona, today, the appellate court is to decide whether a CAI attorney amendment to Terravita’s CC&Rs that directly contradicts state law will be held valid.[v]  Behold the power of private contracts!

In view of the above we can ask, what makes a valid agreement?  Fortunately, a condition was attached to this view, which is never ever mentioned by pro-HOA supporters including those renowned CAI attorneys: “So long as the purposes of those agreements are effectuated by voluntary adherence to their terms. Sadly the courts have unquestionably accepted the validity of the CC&Rs as a voluntary agreement and this consent to be bound has become legal doctrine. For example, in Midlake v. Cappuccio the PA appellate court upheld a valid consent to agree by the buyer at time of purchase: “The Cappuccios contractually agreed to abide by the provisions in the Declaration at the time of purchase, thereby relinquishing their freedom of speech concerns regarding placing signs on this property.”[vi]   There have been numerous other cases where the court has upheld a valid consent to agree per se and a waiver/surrender of constitutional rights under said holding.

But, is there a genuine consent to agree?  I have written several commentaries about the lack of a genuine consent to agree as a result of misrepresentation, fraud, half-truths and hidden factors not fully disclosed to homebuyers.[vii]  Certainly not according to contract law 101 with its requirements for full disclosure, a meeting of the minds, and absence of fraud.

Unfortunately, once again, HOA declarations and covenants are seen as a law unto themselves that is based on a cutting and pasting of various laws, including constitutionality law, to provide for the protection and survival of HOAs.  We have pro-HOA statutes in every state and a Restatement of Servitudes[viii] (covenants) that was written to promote and protect HOAs. “Therefore this Restatement is enabling toward private government, so long as there is full disclosure[ix] (my emphasis).

The Restatement advises judges — and is regarded as precedent — that its collection of laws known as HOA law dominates all others.   Section 6.13, comment a, states: “The question whether a servitude unreasonably burdens a fundamental constitutional right is determined as a matter of property law, and not constitutional law”. Section 3.1, comment h, states: “in the event of a conflict between servitudes law and the law applicable to the association form, servitudes law should control.”

And we have CAI, the national HOA lobbying organization, repeatedly making it clear that the HOA is a city-state, an independent principality, and the decisions of the HOA are the supreme law of the community.[x]  It is easily concluded why CAI has vehemently denied and opposed any reference or declaration that HOAs are de facto governments — mini or quasi-governments — and argue that HOAs remain free from constitutional restrictions on government entities.

HOAs have been institutionalized under this state of affairs, this public policy, and unquestionably accepted as this is the way it is.  Nothing will improve the conditions to which HOA residents are subject unless HOA public policy changes. Public policy today rejects constitutional government for HOAs and allows HOAs to operate outside the law of the land.

The policy makers fail to understand that the terms and conditions of the HOA CC&Rs cross over the line between purely property restrictions to establishing unregulated and authoritarian private governments.

 

References

[i] Evan McKenzie, Privatopia: Homeowners Associations and the Rise of Residential Private Governments, Yale Univ. Press, 1994.

[ii] Marsh v. Alabama, 326 U.S. 501 (1946). The holding was that a company town was no different from a municipal town.

[iii] Shelly v. Kraemer, 334 U.S. 1 (1948).

[iv] Brock v. Watergate Mobile Home, 502 So. 2d 1380 (Fla. 4th Dist. App. 1987). This case was a civil rights violations case based on 42 US 1983 as a result of various acts by the HOA.

[v] Brown v. Terravita, 1 CA-CV 14-455. See Will Arizona allow HOA covenants to dominate state laws? and  Does the Constitution support the will of the HOA no matter what?

[vi] Midlake  v. Cappuccio, 673 A.2d 340 (Pa.Super. 1996) (PA appellate court). .

[vii] See “Consent to be governed, No. 4,HOA Common Sense: rejecting private governmentProposed “consent to be governed” statute, the “Truth in HOAs” bill; and court examines consent and surrender of rights in HOA CC&Rs.

[viii] Restatement Third, Property: Servitudes (American Law Institute 2000).

[ix] Id., From the Forward: “Professor Susan French [Reporter (chief editor/contributor) for this Restatement] begins with the assumption . . . that we are willing to pay for private government because we believe it is more efficient than [public] government  . . . . Therefore this Restatement is enabling toward private government, so long as there is full disclosure . . . .”

[x] See CAI: the HOA form of government is independent of the US Constitution;  Misrepresentation: CAI comes with unclean hands and Will the real CAI standup: its contradictory beliefs, pronouncements and goals.

Follow

Get every new post delivered to your Inbox.

Join 302 other followers

%d bloggers like this: