Did PA congressional candidate get it right with HOA contracts?

Andy Ostrowski, a PA congressional candidate, writes in support of homeowners with HOA issues. He is a constitutional lawyer and believes that certain HOA issues are similar to the constitutional waiver of rights question as stated in the US Supreme Court decision in Overmyer v. Frick.[1]  He wrote:[2]

Principles of freedom of contract must be recognized …  but these homeowners, often focused on raising families and building their lives in peace and comfort, and not focused on legalese and boilerplate contracts, must be sure to have known the rights that they are giving up.

If it is an honest system, and the CAI and HOA organizations truly have the best interest of the homeowners at heart, and are not just trade groups serving the big corporate and banking interests, the simple assurance, through full and complete disclosure, and arms-length negotiation, that people are not giving away their constitutional rights for nothing is something that we should, as a society, expect at a minimum,

This entire system of contracting appears to violate the principles of Overmyer v. Frick. At the very least, then, these contracts would be subject to challenge on those grounds, and this could be done across the country.

Overmyer was not an HOA issue but one involving the doctrine of cognovit, which is the surrender of rights in a contractual agreement.  In reaching its decision the Court took the following as applicable to the surrender of constitutional rights:

This is not a case of unequal bargaining power or overreaching. The Overmyer-Frick agreement, from the start, was not a contract of adhesion.

[W]e assume that the standard for waiver in a corporate-property-right case of this kind is the same standard applicable to waiver in a criminal proceeding, that is, that it be voluntary, knowing, and intelligently made, or “an intentional relinquishment or abandonment of a known right or privilege,” and even if, as the Court has said in the civil area, “[w]e do not presume acquiescence in the loss of fundamental rights . . . .”

Simply stated, cognovit contracts, or the more general waiver of rights by contract, are not necessarily unconstitutional.  However, Evan McKenzie wrote that Ostrowski’s argument was “Interesting theory, but I think it is far-fetched. The problem is that the court ultimately ruled in favor of cognovit.”[3]

In this layman’s view, the argument has merit and is not far-fetched and must be raised in the courts.  It can be argued that the CC&Rs are an adhesion contract heavily weighted in favor of the HOA/developer and is of “unequal bargaining power or overreaching,” Furthermore, valid arguments can be attached in regard to the alleged consent to have agreed.

In my view, this is another challenge that strikes horror into the hearts of the pro-HOa forces, especially CAI.

References

[1] D. H. OVERMYER CO. v. FRICK CO., 405 U.S. 174 (1972)

[2] Homeowner’s Associations – The Perfect Storm of Corporate Cronyism and Legislative and Judicial Abuse of Constitutional Rights

[3] Overmyer v. Frick–new theory for HOA rights?

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Published in: on October 30, 2014 at 8:14 am  Comments (9)  

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  1. Jan and Ralph above are correct; there is no justice in Marion County Florida for the homeowners in associations that are particularly targeted: seniors, elderly and disabled citizens. Numerous criminal complaints to local police agencies and the Florida Attorney General’s Office of State Wide Prosecution are quashed by the local State Attorney (prosecutor), who has been in this elected position for 25 years. Among the crimes ignored by this prosecutor is False and Misleading Advertising, Unlicensed General Contracting, Fraud, Felony Theft, Scheme to Defraud and Racketeering. The unlicensed contracting rendered the contracts unenforceable by the contractor/developer (as ordered in 4 civil suits) and all of the association documents itemized in the contracts unenforceable. Of course there are association managers that are licensed by the Florida Department of Business and Professional Regulation involved in these scams. The DBPR has finally taken back one manager license and is prosecuting 13 more cases with 16 violations. All of these violations are criminal acts in Florida, ignored by the prosecutor. The state statutes that are applicable to the operation of an association are ignored by the managers and their puppet directors as well as by the developers that maintain control of the associations with up to 9 votes/lot or refusal to transition the association to the members as prescribed by law. Homeowners are harassed, threatened and subject to unlawful fees, fines, liens and even foreclosure. George Washington stated in 1789: “The due administration of justice is the firmest pillar of good government”. There is no justice in Florida in 2014.

  2. Just use common sense. How much time and money is spent by HOA Boards and CAMs consulting with or referring to attorneys specializing in community association law? If the governing document, the so-called contract, is so simple to read, fully comprehend, and apply, then why do we need the attorneys to interpret, rewrite, and officially notify owners when violations occur?

    There is no plain language summary or line by line, page by page review with buyers – or tenants, or heirs – because, if there were, who in their right mind would agree to the terms? Not a word of this contract is subject to negotiation. Take it or leave it.

    • You are so right.i would never have agreed to be under the thumb I find myself under. The boards and their attorneys are unscrupulous.

  3. Thank you for drawing an important part of legislation to our atteniton. I had not known about it. You wrote, “Furthermore, valid arguments can be attached in regard to the alleged consent to have agreed.”

    Indeed this is true. The biggest one for me is this: I read all my doucments–CC&Rs and the Bylaws. I decided I oculd live with them. What I did not know was that the boards do not follow their own doucments and they protected in doing so.

    It was a shock to me when our board hired a propety manager without a vote of the membership. The bylaws clearlys stated that nothing could be approved before it was voted on by members. The board contended it was within their power to do so without a vote. They said the documents allowed it, the members said they did not.

    What has happened since, is the board gets their attorney to “spin” his interpretation of the doucments so that it supports what they want to do. EX: our CC&Rs clearly state that an owner is anyone who has title in any manner that a title is allowed by law. But the board doesn’t want a lot of contract buyers to vote (they tend to be independent) so they had the attoreny write an opinion letter that says contract buyers cannot be members becsue they do not have “record fee simple” titles. The doucmetns are clear that an owner is anyone buying with any title allwoed by law–Utah law allows recognition of “equitable title” under contrat buying. The attorney is clearly spinning his interpretation so the board can knock out many votes and refuse to allwo them to serve on committees and on the board!

    The result is that trustees cannot be held accountable under the law becasue they relied on theo pinion of an expert! everyone knows this is a scam so the board can manipulate elections but it costs so much money to fight.

    So agreeing to the doucments when you buy in mean nothing. If a board won’t follow what is written in the documents and your only recourse is to go bankrupt to force them to, it is not a viable contract. And to add injury to insult, they use yourmoney to fight you!

    When you buy into the association, you agree to give up certain rights, but it is never disclose that if they violate the terms of the contract–they use your money to bankrupt you and they are never held accountable.

  4. Once again I don’t completely get legal jargon…can someone explain further what this means?

    • In plain language, the judge in Overmyer v. Frick ruled that both parties were of relatively equal knowledge and sophistication when Overmyer agreed to his “second-chance” contract woth Frick to make good on his debt payments. The contract gave Frick the right to bypass judicial process in the event of another default.

      McKenzie argues that the same applies to homeowners v. their HOAs. Ostrowski and Staropoli disagree, as do I. Home buyers are not on equal footing in regard to the HOA contract (CCRs) because the Developer’s attorneys draft these documents in the Developer’s favor. Buyers/owners have no equal expert representation to either create the original contract, and have no rights to modify the terms prior to purchase. Therefore, some would argue, the contracts are invalid.

      George can correct me if my explanation is inaccurate.

      • Thank you Deborah for a nice layman explanation, it’s much appreciated.

  5. The mythical “benefits” to purchasers in HOA communities–the preservation of property values, competent upkeep of common elements, the assurance that one will peacefully enjoy his/her property (this is a basic property right in the U.S.) have not been delivered in the majority of these communities! The benefits to the other ide of the contracts have been replete–financial wealth and an iron-handed control of property owners. In the case of FL, the statutes written to protect the rights of HOA property owners are scoffed at daily and NOT complied with, with no adverse consequences for these developers and rogue Board members who violate them! Those considering buying in FL in an HOA community need to be aware that the fancy promises implied in FS617, 618, 720 etc. mean nothing–as the Legislature refuses to grant, via legislative reform, the right to criminally prosecute those who defraud homeowners, in some cases over a million or more dollars a year, by way of jacking monthly mandatory fees up at will without a vote, and via embezzlement of these fees to support their opulent lifestyles. The statute requires the turnover of control of the HOA at 90% buildout by the developer; dozens of these communities are living in tin dictatorships run by developers who refuse to relinquish the control of $1M plus annual income of monthly fees, and the homeowners are held hostage by the inability to come up with hundreds of thousands of $$ to pay lawyers to force the turnover! A criminal complaint in Marion County, two actually, resulted in the refusal of the State Attorney to prosecute an abusive developer in spite of probable cause having been established by the Sheriff’s Office investigation. That has been going on 20 years now, with no relief in sight for the homeowners. Newcomers to FL need to know this: if you buy in a homeowners association community–you are on your own baby! There is no county, state official or agency who will enforce all of those glowing protections in FS720 Homeowners Association. It is a fraud against the elderly retirees who flock to FL with visions of a perfect retirement, which more often than not, they find is more of a nightmare retirement. Welcome, to Florida, the land of public corruption the likes of which you have not seen “up north.” The powerful developer lobby literally OWNS the FL Legislature, and they would not so much as sneeze if it hurt their pot of gold!

  6. Excellent, pertinent article for Floridian parcel owners in HOA. In Florida, the CC&Rs are unilaterally developer created contracts entirely weighted in favor of the developer / HOA. Thanks for posting this. Ralph Udick, Lady Lake, FL 32159


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