Montelena and Sun City: the failure of government agencies to protect consumers of HOA controlled homes

Once again, the necessity of obtaining an attorney to read and explain the
legalese of those CC&Rs or declaration cannot be overstated! Why? Because
Arizona government agencies do not protect home buying consumers!

With respect to the transfer fee demand by the Montelena HOA on a buyer to
pay a whopping $2,500 fee to the association (see Homebuyer: HOA
‘Unscrupulous’ In Raising Fee), let’s examine what the buyer would be
getting into. First, and highly questionable and undemocratic, the 440
members of Montelena HOA have unwittingly agreed to have the board, by
majority vote, to set forth rules that become and are held to be amendments
to the CC&Rs, without a vote of the membership (see Article 5.3 of the
CC&Rs). Generally, it usually requires a supermajority vote of the members
to amend the CC&Rs.

Furthermore, buried within Article 6 of the CC&Rs, titled “Membership and
Voting”, are sections 6.8 and 6.9 that require a new owner to pay 2 fees,
both equal to 1/6 of the then current annual assessment, as contributions to
the annual assessment and to the Reserves assessment. And, surprisingly,
section 7.15 allows an additional third fee, a transfer fee, designated as
such, imposed by either the board or the management company. How many fees
is that on the third-party buyer (as such, he is not a legal party to the
CC&Rs agreement). Article 8 grants the HOA the right to lien and foreclose
for nonpayment of assessments. On the third-party buyer, too?? (The buyer
must agree under his purchase contract with the seller, not the HOA, to
assume these assessments in order for the assessment to be binding on him.)
Under section 7.2, Annual Assessments, the board cannot increase assessments
above 20% without a 2/3 vote of the members. Section 7.8 says the
assessments must be uniform across all members, raising the issue that a
transfer fee on sellers alone violates the CC&Rs. (Note that transfer fees,
by whatever name, have been outlawed by new law this year, HB2768).

The public should be protected and made aware that there are so many powers
granted to the HOA or denied to the homeowner hidden within these 50 – 120 page legal agreements. Agreements, by law, that do not even have to be seen, read or acknowledged in order to be binding on unsuspecting homeowners. The real estate agent who is required materially disclose all information and to treat all parties fairly under the simple R. E. Commissioner’s Rule, R4-28-1101, is allowed to ignore this rule. Furthermore since the Arizona Constitution allows real estate agents to to real estate transactions, an additional duty to protect the buyer has been placed upon the agent.

Now, it is not unreasonable to argue that a prudent person buying, for many, their largest asset purchase would consider the above representative covenants as material to his decision to purchase in a particular HOA, or in any HOA. And, it is not unreasonable to argue that the real estate agent is duty bound to provide such material information to the prospective buyer, and that the real estate department, in keeping with R4-28-1101, would have promulgated guidelines and procedures in order to make this material disclosure a meaningful and effective rule. The rule has been ignored by ADRE with respect material information about HOAs.

Last month, in regard to another failure to protect a homeowner from HOA abuse (see Who prosecutes for homeowner justice against HOAs?), I wrote to the Arizona R. E. Commissioner, asking:

Who will protect homeowner justice against HOAs?   I ask ADRE why is it not adhering to its mission, as stated in its pamphlet, ‘The Arizona Department of Real Estate (ADRE) protects the Public Interest through Licensure and Regulation of the Real Estate Industry in Arizona’ . . . . Who, then, will protect the public interest if not the licensed real estate agent under ADRE regulation?  I call your attention to Commissioner’s Rules, R4-28-1101, Duties to Client.

A reply by the Assistant Commissioner side-stepped this questions posed above with a “not my job” reply:

We have been given no authority to adjudicate disputes between HOAs and its member-homeowners. The separation of powers doctrine places this adjudication role in the hands of the courts, not in the hands of the
executive government.

I clearly did not ask that ADRE adjudicate disputes, but to enforce R4-28-1101 and to stand behind its mission to protect consumers, all consistent with the existing delegation of powers to ADRE and to the Commissioner.

Qui Pro Domina Justitia Sequitur

(“who prosecutes on behalf of Lady Justice?”, DOJ seal)

Editorial comment. I suspect, like this year’s new law, HB 2774, “Take That George!” bill (my description), that explicitly states that government officials cannot be compelled to defend statutes, another bill, “Take That George, redux,” will be proposed that would explicitly say that ADRE cannot be compelled to provide consumer protection to buyers of HOA controlled property.

In the words of Jim Wallis, preacher and author of Rediscovering Values, “What has been deliberately and carefully made ‘socially acceptable’ was, not too long ago, thought to be irresponsible – both financially and morally.”

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Published in: on May 9, 2010 at 3:17 pm  Comments (1)  

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One CommentLeave a comment

  1. The “do not compell” bills would prevent a writ of mandamus, which is an order for a government official to meet his obligations and responsibilites of his office. It appears that any contest on defending the contitutionality now becomes a personal question. This is one more step down the road to a state not under the rule of law, but under the rule of man.


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