I could not believe what SB 1240 was amending. Shades of SB 1454 when in 2013 that bill was declared unconstitutional by the AZ attorney general in a settlement agreement. SB 1240 raises several questions:
- An unconstitutional delegation of legislative authority and power to private entity HOAs to regulate public streets: if the “local government entity has granted that authority [to regulate] to the Association.”
a. SB 1240 does not grant legislative authority to the local governmental entity to defer to the HOA association;
b. does not contain specific wording with regarding the powers and functions delegated to the HOA — “to regulate” is too broad a delegation of power.
c. And does not contain specific wording with regarding the powers and functions delegated to the HOA — “to regulate” is too broad a delegation of power.
- Assuming (A) above is constitutional, the bill would make HOAs state actors, functioning for and in place of the “local governmental entity,” presumably the planning board. As such HOAs would be subject to the state and US constitutions as an arm of the state.
Lengthy presentations of constitutional law, state actors, and the delegation of legislative authority can be found in voluminous legal encyclopedias like American Jurisprudence (cited as Am. Jur. 2d) and Corpus Juris Secundum (CJS). These constitutional questions can also be found in legal treatises (lengthy discussions) like in Constitutional Law (Norwalk and Rotunda, West Group) and in legal journals like Wm & Mary Bill of Rights Journal.
For my concerns here, I will make use of an Arizona case in which the CAI member law firm of Carpenter Hazelwood attempted to have OAH adjudication declared unconstitutional on several occasions. The decision in Waugaman served as the basis for the subsequent “rubber stamp” decision in Phoenix Townhouse and the supreme court decision in Gelb.
In Waugaman the court held,
An administrative agency may resolve disputes between private parties if this authority is auxiliary to and dependent upon the proper exercise of legitimate regulatory power. In the context of disputes between homeowners and homeowners’ associations, there are no defined regulatory duties vested in the Department or any other executive branch agency. Thus, the legislature’s delegation of authority to the Department violates the separation of powers doctrine.
This decision reflects the essential requirement for a constitutional delegation of power to an agency, and logically, to any delegation of regulatory power to any private entity like an HOA. SB 1240 should be withdrawn to avoid another black mark for the Arizona Legislature.
SB 1240 is a prime example of why the federal government must get involved in holding state legislatures to tow the constitutionality line.
 See the history presented in AZ OAH adjudication of HOA disputes held unconstitutional. The decision in Waugaman was ruled not binding by the AZ Supreme Court and it could not binding precedent as to other cases. A few months later, the legislature revised the statutes to comply with the ruling and the constitutionality challenge became mute.