HOAs have no constitutional right to foreclose

The proponents for the need to foreclose on a homeowner for failing to make his assessment payments have argued that there is a compelling government interest in preventing the failure of the planned community as a result of the widespread or prolonged failure of homeowners to make their assessment payments. However, there is no constitutional right for a planned community to receive homeowner assessments, just a questionable contractual right supported in many states by statute.

First, the inclusion of this provision in the CC&Rs, or by state law, is only to punish delinquent members, and the punishment is excessive. The US Supreme Court has ruled that excessive punishment with respect to the amount of punitive damages awarded by the courts is a violation of the Due Process clause of the 14th Amendment.

• Second, while the argument that the state has a compelling reason to protect private contractual arrangements, in general, by means of judicial enforcement is valid, the argument that the state may use the “club of foreclosure” as the means to enforce the CC&R contractual agreement to pay assessments lacks merit.

Suppose that a charitable pledge agreement contained a right to foreclose on the contributor’s home if he fails to pay the pledged amount, either in full or by means of a partial payment arrangement. And it was irrevocable for 20 – 30 years. What would be the outcome? Obviously, no one would make any pledges under these circumstances. Yet, because of the contractual arrangement, these charitable organizations could enlist the courts to enforce the agreement on the basis that they provide a sorely needed benefit to the state or community as a whole.

We ask, What damages would be suffered by the charity? What remedy, if any, would the charity be entitled to receive? The $100,000 plus home for a $100 pledge? For a $1,000 pledge? Can the charity argue that this pledge is vitally necessary for it to achieve its charitable objective, for the benefit of the community, as set forth in its budgeted activities? Is the charity entitled to the right to foreclose?

No, this remedy won’t fly. But when it comes to such outrageous CC&R provisions and statutes, they are accepted and viewed as a fundamental right of the HOA. A right that is needed, as implied by these arguments, if the HOA is not to fail. No, this argument is also without merit.

Let’s stop protecting Homeowner Asssociations and start protecting the fundamental rights of homeowners — due process and the equal application and protection of the laws.

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Published in: on February 6, 2005 at 2:24 pm  Leave a Comment  

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