If HB 2441 were to become law it would be challenged as an unconstitutional taking of private property rights by means of a contractual interference without a necessary and compelling government interest; and as creating HOAs as state actors under the US Supreme Court holdings of state actors: cooperation with, the coercion of homeowners, and the entwinement with the HOAs daily operations of HOAs among others.
The bill is lengthy, vague at times, and contradictory at other times. It must be read carefully with close attention as to what is not said and the meaning of the words.
1. Majority rule — HB 2441 strikes to the heart of majority rule and rule by the will of the people. It imposes by fiat, by statute, a minority control of changes the CC&RS, which are seen as the community’s constitution or charter. The modification of this type of document is never made for light and transient reasons, but by super majority vote. CAI lobbyist misrepresented the impact of the heart of this bill (subsection B) with his emphasis on two-thirds and 50% numbers, carefully not stating that it is 2/3 of those voting and not the entire membership. With the 50% quorum (buried within subsection (C)(3) and not part of subsection B, where it ought to be) allows half of the 2/3s, or one-third, of the members to alter the “contract” agreed to by a homeowner at purchase, without his consent, or the consent of the majority.
2. Access to the courts – The original version of this bill (subsections J of 33-1227 and I of 12-1817) had an explicit unconstitutional provision that denied court challenges to any CC&Rs amendment, the very same issue now before the AZ Supreme Court – constitutional due process by the Office of Administrative Hearings that permits appeals to the civil courts. In the amended version, this stark unconstitutional denial has been replaced with a much softer wording that still favors the HOA over any homeowner challenge. It makes the simple, but immensely expansive legal doctrine, that any CC&R amendment has the presumption of validity. It copies the “presumption of constitutionality” doctrine regarding statutes, but is even broader in scope as it would preclude two other factors delineated by the Restatement of Servitudes: unreasonableness and contrary to public policy. (See § 3.1, Validity of Covenants in the Restatement).
The second sentence of this subsection gives the illusion to not prevent any challenges to any amendment. It speaks of “does not limit the right”, which contradicts the first sentence that the amendment is presumed valid. Under this wording, the burden, as if the HOA were a state legislature, falls to the homeowner challenger to prove the invalidity of the amendment without stating the appropriate grounds as contained in the Restatement. A fair and just bill would be silent on this issue, as the Restatement should suffice, and not invoke public entity attributes. If CAI wishes to ascribe public entity attributes to the HOA, then the legislators must insist on the full panoply of protections of the 14th Amendment be applicable to the HOA. The bill is silent on these protections of homeowner rights.
3. Illusion of court protection – Subsections I of 33-1227 and H of 33-1817 claim that the court can still decide validity and enforceability issues, giving the illusion of constitutional protections. However, these subsections refer back to the subsections listing the 13 exceptions to the application of the voting procedure and not at all to the content of any amendment — “Subsection G of this section shall not be construed to affect the court’s ability . . . .” These are empty, meaningless subsections provided to mislead the reader.
4. Stakeholders — Speaker Pro Tem Montenegro spoke of meeting with all the stakeholders who are in agreement with his floor amendment. The word “stakeholder” is CAI newspeak, a redefinition of its common meaning, and accepted by the sponsor. “Stakeholder” includes the homeowner, and all stakeholders are not equal. Surely, the homeowner and his private property rights comes first and foremost above and beyond those who make a living from his membership in an HOA. But, apparently no one speaking for the homeowners were present at the sponsor’s meeting of allegedly all the stakeholders.
5. CAI lobbyists misleads legislators – Among the numerous misstatements, misrepresentations and spin in reference to this bill, and to the HOA environment, made before the House GOV committee on HB 2441, I’d simple like to draw to your attention the following, as they are continually being made before legislative committees. Mr. DeMenna, the CAI lobbyist, opened his remarks with: “This [CAI] is the organization that represents homeowners associations throughout Arizona. We are the association’s and board’s duly elected . . . [trailing off, intentionally not saying elected as what] and what have you.” CAI is not permitted, at risk of losing its tax-exempt status, to have HOAs as members as it is a business trade group, not an educational group, and cannot claim any such representation. or for homeowners either.
Neither have I ever heard of any board acting to give any attorney the right to speak for it before public bodies, nor have I ever heard of any vote of the members granting authority to the CAI lobbyist to speak on any of the issues before legislative committees. But, Mr. DeMenna persists in making this falsehood. CAI is simply a third-party interloper interfering with the private contract between the HOA and the homeowner.
Furthermore, the lobbyist once again makes an erroneous statement that the homeowner signed his CC&RS. No such thing occurs in Arizona! Even if he is required to sign the CC&RS, it would not matter as the common law of servitudes binds the homeowner as soon as he takes possession of his deed, sight unseen. It’s called constructive notice. Contract law and constitutional law have been replaced by the pro-HOA servitudes laws. See Calif. opinion: CC&Rs and surrender of constitutional rights.
See HOAGOV YouTube Channel for 9 min excerpt of the CAI lobbyist’s arguments for minority control.
6. Please note that this bill was written by Scott Carpenter, a CAI member attorney, principal in Carpenter Hazlewood Delgado & Wood who brought the challenge to OAH adjudication of HOA disputes, now awaiting a decision by the AZ Supreme Court whether or not to hear the case. Mr. Carpenter is also on record for his assertion that he will defend local control of the community. This bill contradicts this public display of “for the people” as it imposes state law without the vote or consent of the local community, which Carpenter claims to be defending.
HB 2441 must be emphatically rejected! It would be a blot on this Legislature to enact such an abominable statute.
“The founders understood that the principal mission of government was to secure people in their natural rights — to protect them against the lawless private thugs as well as of ill-intentioned legislators.”
Machiavelli and America, Hadley Arkes, p. 145, The Prince (Yale University Press, 1999).