Should the Feds bailout homeowners associations?

New America HOA-land constitution

New America HOA-land constitution

I came across this letter to President Obama by Community Associations Institute (CAI) member and Florida HOA attorney Gary Poliakoff of Becker & Poliakoff who asks for a bailout for homeowners associations. Mr. Poliakoff asks,

as a condition of their receiving Federal Funds (the banks) and lower interest rates (the homeowners) [they] should be obligated to bring their obligations to their Community Associations current.

Now, I understand this public-private partnership to achieve goals in the best interest of the public where there’s a legitimate government interest, but this request goes well beyond a such an innocently portrayed goal. The argument advanced is that “to a large degree the [HOA] assessments paid by unit owners are going to maintain the collateral of banks” seems to be a stretch of the imagination. Poliakoff argues that the banks are creditors to the HOAs and that an estimated $41 billion in HOA revenues goes to this end of maintaining some $4 trillion in homes. Please understand, in Mr. Proliakoff’s own biography included as part of his news release of March 10, 2009, it states that he “has devoted a significant part of his career to the practice of Community Association law and is considered one of the foremost authorities on the subject.”

What the President is not being told is that these authoritarian, private regimes governing some 20% of Americans who live in HOAs are not subject to US Constitution. As another HOA expert and former CAI national president Wayne S. Hyatt wrote in regard to HOA violations of constitutional rights, “This is particularly true when the conduct prohibited would be constitutionally protected if the regulation were imposed by a government.” What is the necessary and compelling government interest to deny constitutional protections to homeowners, while upholding protections for the HOAs, as private parties who contract to avoid the Constitution? And the contract is an adhesion contract prepared by profit-seeking developers that are binding not as a result of the homebuyer’s explicit consent, but by simply “posting” to the county clerks office under the laws of equitable servitudes.

This cry for a bailout follows CAI “central’s” concern for Federal aid to homeowners in its March 2, 2009 Ungated Blog, “Helping Homeowners, Hurting Associations?” —

[T]he Cram Down legislation could allow bankruptcy courts to discharge past due assessments regardless of any lien or priority lien levied by the association. This would result in irresponsible homeowners getting a free pass on their past due assessments, raising the burden for everyone else or resulting in cuts to community maintenance and reserves.

CAI President Skiba goes on to express concern for the impact on “responsible” homeowners to ante up, thereby increasing the likelihood that they, too, would succumb to foreclosure. The CAI request is not to allow the bankruptcy courts to touch or reduce HOA assessment payments as part of the relief granted to homeowners. The HOA must survive!

It’s unequivocal that CAI’s interest is for the survival of the HOA, and not that of the homeowner who has come under hard times, in spite of public statements and testimony before state legislatures to the contrary. The homeowners are referred to in negative terms as “irresponsible” and, thereby are totally at fault for their dilemma. CAI and Poliakoff, failing in their duty and responsibilities as a good corporate citizens, want everyone to share in reestablishing our economy, but the HOA — it is untouchable. CAI is asking for the right for homeowners to avoid their communal obligations under the CC&Rs to fund the HOA. Yet at the same time, CAI argues that when the HOA files a foreclosure against a homeowner, the homeowner is a deadbeat and has failed to honor his obligations under the same CC&Rs. This is hypocrisy!

CAI cannot have it all their way. The contract works both ways. HOA authority and governance exist under legally binding CC&R “contracts” that, for the homeowner-member, are communal in nature just like binding community property laws, just like binding partnership agreements. Wasn’t this explained to homebuyers when they bought their HOA controlled home?

In the interest of the public in general, and in restoring a sound public policy for HOAs, neither the CAI nor Poliakoff arguments for a Federal bailout of HOAs can be granted. The CC&R contract must be enforced in a neutral manner without favoritism toward the HOA. There is no compelling and necessary government interest to support HOA private regimes that operate outside the Constitution, under which all public government is obligated. Not, at least, without a quid pro quo.

A federal bailout of homeowners associations must restore the Constitution as the supreme law of the land, and that all planned community or condominium declarations that create a homeowners association must contain mandatory wording that the HOA, although a private entity, agrees to be subject to the laws of the land, the US and state constitutions, and affirm that the Constitution is the supreme law of the land as if it were a public entity chartered and authorized as such under state laws. “As if it were a public entity” is essential to creating this obligation.

It is unthinkable that the Federal government would grant such a bailout request without such a pledge of allegiance to the United States of America, one nation, indivisible, with liberty and justice for all, and not a divided nation of independent HOA principalities.

Published in: on March 11, 2009 at 5:44 pm  Leave a Comment  

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