Court requires constitutional due process in HOA foreclosures

The enlightenment and awareness that the US Constitution and its due process requirement extends to private government HOAs is gaining momentum. ”The writing is on the wall.”

In the recent Colorado appellate decision in Hummel (C&C Investments v. Hummel, 022COA42, April 14, 2022)  concerning proper notice of homeowner foreclosure by the HOA, the court surprisingly acted sua sponte —in the name of justice. The courts have repeatedly failed to invoke, in the pursuit of justice as it claims to be its fundamental purpose, its right to act sua ponte — on its own — raising discussions of issues not raised by either party.  

In Hummel the question arose as to whether or not the homeowner was given notice of impending foreclosure action by the HOA.  The HOA send a processor server who said he posted the notice in the newspaper, which is allowed under certain circumstances. She discovered her plight only when an eviction notice was pinned to her door. The question be determined was, What is proper, legal service?

While court rules require that the HOA serve notice, the court held that it “must also meet the mandates of due process before foreclosing on an individual’s property” and that,

[I]t is not unreasonable to require a homeowners association to make a good faith, rather than a highly technical, effort to effectuate actual notice to a fellow neighbor before foreclosing on their property.”

In support of its opinion, the Court referenced the Colorado appellate court’s court view:

“Although an association is not the government, it serves “quasi-governmental functions” when enforcing covenants and must abide by the due process requirements of the United States and Colorado Constitutions.

“[T]he United States Supreme Court has long held that when foreclosing a lien against an individual’s home, due process requires “notice [that is] reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.”

The appellate court found that the trial court failed to adhere to these principles before ordering a default judgment.

AZ HB 2158 fair elections goes to Governor for signing

The AZ Senate passed HB 2158, the fair elections in HOAs bill sending it on to the Governor for signing. I congratulate all advocates who supported this bill and the Arizona Legislators coming to understand the need to stop board of director’s abuse under authoritarian private agreements.

This is a major step forward to the equal protection of the laws and proper due process as guaranteed to all US citizens. Under this bill, effective and meaningful opportunity for Arizona members to participate fairly and in an equal manner in the governance of an HOA.

It starts with the ability to campaign and discuss governing issues with the members on the same level playing field. All the members seeking change have to do is to get involved knowing they won’t be “fighting city hall” without legislative support.

The positive effect of this bill includes the need for a rewrite of the governing documents in many areas for many HOAs, removing covenants not complying with the new state law in.

See bill summary: AZ GOV committee hears the voice of HOA members

AZ SC in Kalway holds CC&Rs as “special contracts”

Author’s note:  I make extensive use of direct quotes in order to avoid my interpretations “leaking” through.

The Arizona Supreme Court in Kalway[i] threw some light on the controversy that HOA covenants and CC&Rs are valid contracts and are held as such.   The Court held that, my emphasis,

“CC&Rs form a contract between individual landowners and all the landowners bound by the restrictions, as a whole. . . . in special types of contracts, we do not enforce ‘unknown terms which are beyond the range of reasonable expectation . . . . CC&Rs are such contracts.  Because covenants originate in contract, the primary purpose of a court when interpreting a covenant is to give effect to the original intent of the parties’ with any doubts resolved against the validity of a restriction.”

With respect to the requirement for very important but ignored homeowner notice, the Court continued, my emphasis,

The notice requirement relies on a homeowner’s reasonable expectations based on the declaration in effect at the time of purchase—in this case, the original declaration.  Under general contract law principles, a majority could impose any new restrictions on the minority because the original declaration provided for amendments by majority vote. But allowing substantial, unforeseen, and unlimited amendments would alter the nature of the covenants to which the homeowners originally agreed. . . . Thus, “[t]he law will not subject a minority of landowners to unlimited and unexpected restrictions on the use of their land merely because the covenant agreement permitted a majority to make changes to existing covenants.”

One of the most egregious injustices that I’ve come across is the failure of the courts to apply the full body of contract law to HOA covenants in CC&Rs.  Opinions and dicta refer to the CC&Rs simply as a contract, or an agreement interpreted as a contract — yet in spite of the above opinion — fail to protect the homeowner under contract law 101.  The Cornell Legal Information Institute lists the basic criteria for a valid contract:

 ‘The basic elements required for the agreement to be a legally enforceable contract are: mutual assent, expressed by a valid offer and acceptance; adequate consideration; capacity; and legality.”

Added to this general description of a legal contract is the Opinion holding that the CC&Rs are special contracts that do not permit “unreasonable  expectations” and that the notice of reasonable expectations is set forth in the CC&Rs “at the time of purchase,” and the law will protect minority owners from any such expectations.   

As I have argued many times,[ii] the boilerplate  amendment process that binds non-agreeing owners solely on the basis of a majority or some super majority renders the original “contract” a meaningless piece of paper. 

Professor Barnett explains,

“A law may be ‘valid’ because it was produced in accordance with all the procedures required by a particular lawmaking system, [the HOA amendment procedure, for example] but be ‘illegitimate’ because these procedures were inadequate to provide assurances that a law is just.”[iii]

Conclusion

It should be evident to all that this constitutional issue of “signed the agreement” and are thereby bound to obey needs further thought. As it stands, homeowners in HOAs are subject to special laws, the numerous state HOA/Condo Acts, for special entities allowed to function as de facto private governments outside the protections of the US Constitution.

Notes


[i] Kalway v. Calbria Ranch, CV-20-o152-PR, ¶ 13 -16  (Ariz. March 22, 2022).

[ii] See HOA consent to agree vs. “the will of the majority”,  Contracts, the Constitution and consent to be governed and HOA Common Sense, No. 4: Consent to be governed.

[iii] Randy Barnett, Restoring the Lost Constitution, Princeton Univ. Press, (2004).

AZ Supreme Court landmark HOA opinion

For the times they are a-changin’”[1]

The Arizona Supreme Court opinion in Kalway[2] is, in my view,  a landmark opinion supporting and protecting individual property rights of homeowners in HOAs that are subject to a broad, procedural CC&Rs amendment procedure.  The boilerplate CC&Rs in an intentional denial of fundamental property rights strip away eminent domain protections by ignoring the content of CC&Rs amendments —  anything and everything goes!

Referring to AZ statute 33-1817(A) that allows amendments solely based on a majority vote of the members, the Court stated:

“But § 33-1817(A) does not displace the common law, which  prohibits some amendments even if passed by a majority vote. The original declaration must give sufficient notice of the possibility of a future amendment; that is, amendments must be reasonable and foreseeable.”

The Court cited its 2010 opinion in Dreamland,[3]

“We agree that these cases tend to support the homeowners, in that each refuses enforcement of a new covenant that markedly changed the obligations of the implicated lot owners. . . . in those cases where courts disallowed the amendment of covenants, the impact upon the objecting lot owner was generally far more substantial and unforeseeable than the amendment at issue [in the case before it]

I had addressed these concerns  regarding the Dreamland decision in my 2009-2010 Commentaries that provide  details on these substantive issues.[4]

Although not stated were issues of due process, equal protection of the laws, and eminent domain takings — not raised in the initial complaint or appeal, so the courts  did not offer a direct opinion —  this  opinion strikes at HOA eminent domain takings of homeowner property rights.  It also dealt with the question of homeowner notice (due process) and unexpected and unreasonable modifications to the CC&Rs (lack of equal protection under CC&Rs private eminent domain rights).

* * * *

The above represents my perspective as a longtime 22-year homeowner rights advocate and activist.  CAI Arizona has a different perspective favoring HOAs and their decisionmakers, the board of directors.[5]. Its presentation starts with the overall court opinion.

“Based on this recent case law, CC&R amendments must be reasonable and foreseeable in order to be enforceable. In other words, community associations can no longer amend CC&Rs to create new obligations where the original CC&Rs did not provide owners notice that they may be subject to the new obligations.”

But then adds its spin and advertising appeal:

“Please note that these amendments are specific to Calabria Ranch and its CC&Rs. In other words, an amendment that the Arizona Supreme Court found invalid in the Calabria Ranch case may be found valid for a different community association. Again, we strongly recommend consulting with the CHDB team to analyze your community association’s specific CC&Rs and any proposed, or previously adopted, amendments.”

Looking at the tremendous value toward HOA reform, the Court’s opinion would apply to any instance where the broad conditions — no notice and unexpected and unreasonable — apply, above and beyond those specific amendments dealt with in Kalway.  I’ve found the most prevalent are unexpected and unreasonable amendment modifications, and a failure to provide notice to the homeowner that abounds in the CC&Rs. It falls into those discretionary areas where the CC&Rs are silent, which the Court has declared doesn’t give the BOD unlimited rights.

This opinion presents a powerful tool, a powerful argument before the courts and before state legislatures when seeking HOA substantive reforms.

Yes, and how many times can a man turn his head
And pretend that he just doesn’t see?

The answer, my friend, is blowin’ in the wind
The answer is blowin’ in the wind

(Bob Dylan, Blowin’ In the Wind,  1963)

Notes


[1] Bob Dylan,  “For the times they are a-changin’”  (1964).  It’s interesting to note the coincidences of publication years for this song and The Homes Association Handbook.

[2] Kalway v. Calbria Ranch, CV-20-o152-PR (Ariz. March 22, 202).

[3] Dreamland Villa Community Club, Inc. v. Raimey, 224 Ariz. 42, 51 ¶ 38 (App. 2010).

[4] HOA principalities where there’s no ex post facto or eminent domain protections and AZ court ends open-ended “ex post facto” HOA amendments.

[5] “CC&R Amendment Update from the Arizona Supreme Court,” March 29, 2022 By Carpenter Hazlewood I News.

Donie Vanitzian’s murderer  still waiting trial after 4 years

Three days after Xmas on Dec. 28, 2017, L A. columnist and strident homeowner rights activist Donie Vanitzian died at the hands of her husband of 35 years, Tom Foster. She was 67. It was a murder-suicide incident according to the police. Foster was charged with murder and plead “Not Guilty By Reason of Insanity.” The case is still pending with a series of pretrial conferences scheduled for a number of years now, which I believe must be related to his insanity plea.

Please note that criminal court records are accessible by the public either at the courtroom or remotely by means of computers at the courthouse.  This April 22 another pretrial conference is scheduled and I am hoping someone can drop by the courthouse and access the minute/orders and bring us up to date.

The January 2018 British Daily Mail article, describing Foster as “a former British nightclub tycoon,” depicts their relationship.

Many long-time advocates will remember Donie Vanitzian (1950 – 2017) and her strident, outspoken activism displayed in her emails, in her L. A. Times column, Associations, and in her texts: Villa Appalling!: Destroying the Myth of Affordable Community Living, Vanitzian and Glassman (Villa Appalling Publishing 2002); California Common Interest Development — Homeowner’s Guide,  D. Vanitzian (Thomson-West Legal Publishers, Series: The Expert Series (2006).

* * * *

I worked with Donie from 2006 – 2016 on CLRC ‘s rewrite of the Davis-Stirling Act and in defending her, when she called from time to time at wits end,  against attacks by the Evil Empire attempting to remove were LA Times column and to discredit her in general. We fought like hell, along with Elizabeth McMahon (AHRC), to get a member’s bill of rights included in the rewrite but failed. I admired her and had respect for her knowledge and energizer bunny activism.  We chatted in private. She had a JD but kept on failing the Bar exam and I understood why. She did not accept the establishment’s version of justice and the judicial process.  She had those to-the-point views and criticisms of the Evil Empire and its loyal followers.

In 2006 with her help pretending to be doing research as an adjunct professor,  I was able to get a copy of the 400+ page, 8 ½ x 11 The Homes Association Handbook, TB #50 at a cost of $180.  We split the cost. You will not find this document anywhere, not even on Amazon.

You can read the Jan. 7, 2018 L.A. Times tribute to Donie by Andrew Khouri.  Champion of Homeowners’ Rights

In memory of Donie’s dedication to justice, fair play, and to protecting homeowner rights, I would like to list a number of events that I had recorded as a Commentary over the years, and  revealing a number of incidents that I had occasion to record.

·         Realtors: Are they protecting buyers or the HOA? (May 2006)

·         Common Interest Developments – Homeowner’s Guide (Thomson-West) (Oct. 2006)

·         Homes in HOAs are Lifetime Collateral for HOA Survival (Oct. 2006)

·         AB 1921: The CLRC recommended HOA special interest bill (Jan 2009)

·         Why is CAI member firm of Adams Kessler allowing criticism of LA Times HOA column? (Oct. 2011)

·         Is there a CAI game plan to rewrite HOA CC&Rs to restrict member voting powers?  (Feb. 2012)

·         LA Times column: protecting your HOA property (Nov. 2016)