Eminent domain and HOA common areas

Is a homeowner entitled to compensation for the eminent domain taking of the HOA’s common area? The Constitution states a taking requires compensation, but since the common areas are owned by the HOA, it gets the compensation. What about the homeowner whose property value – market value – drops because of the new common area use by the state? Now, no longer so desirable.

The ruling by the Kansas Supreme Court in Creegan[1] held that the homeowner not only has CC&Rs contractual rights, but property rights also, and can claim inverse condemnation as it’s called[2]. While the defendant was referred to as a subdivision, it had all the criteria that applies to all HOAs — common areas and covenants that run with the land under equitable servitudes real estate law.

So, if an agency takes common area property for a ditch, for a wall or for road expansion and property values drop, the homeowner may have claims for compensation.

Equally important, but not addressed in Creegan, what about a “taking” by the HOA itself, either of common properties or of the homeowner’s private property? Most common would be a change in the use or purpose of the common property, like removing a park or a tennis court, etc. The more unjust taking involves the HOA itself putting up a wall, or ditch, or the expansion of an administrative building. Or the removal of trees or a fence on your property, which are all permitted by the CC&Rs? This does happen. But the homeowner is not compensated for this “taking.”

The HOA and the courts treat this as a private matter all agreed to by the homeowner who unwittingly gave the HOA broad powers when they “signed up.” They hide behind the fact that they are obeying the law. But the law can be unjust, as it is, favoring the HOA in what amounts to an adhesion contract. My response to this view is well stated by a line in the TV series, Madam Secretary, “You can technically obey the law and still be at fault. That’s ethics.”

HOA “eminent domain” is an example of a loss in constitutional protections due to the private CC&Rs contractual nature. It’s another example of special laws to protect the HOA entity, violating the 14th Amendment against the unequal protection of the law and state constitutions.[3]

HOA eminent domain has not been challenged in the courts as far as I know. It should be!

References

[1] Creegan v. State of Kansas, 391 P.3d 36  (Kan. 2017).

[2] “inverse condemnation – n. the taking of property by a government agency which so greatly damages the use of a parcel of real property that it is the equivalent of condemnation of the entire property. Thus, the owner claims he/she is entitled to payment for the loss of the property (in whole or in part) under the constitutional right to compensation for condemnation of property under the government’s eminent domain right.” Law.com.

[3] For example, Arizona Constitution, Article 2, Section 13. “Equal privileges and immunities. Section 13. No law shall be enacted granting to any citizen, class of citizens, or corporation other than municipal, privileges or immunities which, upon the same terms, shall not equally belong to all citizens or corporations.”

 

Published in: on February 12, 2019 at 11:41 am  Leave a Comment  

Was the 1994 AZ HOA enabling act just for the Sun Cities?

I thought Arizona HB 2374 would pass the House GOV committee. The sponsor, Keven Payne, is also the Vice-Chair of the committee. However, I am surprised at the close vote, which from my experience, indicates rebellious legislators. Yes, House COW and the Senate are next challenges.

We must educate the legislators as to the true nature of the bill. It is more than what the sponsor claims in the bill. Payne will not address the constitutional violations raised by this bill. That’s our strong point, if advocates are not afraid to stand up.

It is interesting to note that the sponsor is well aware of a possible constitutionality challenge to HB 2374 when he included Sec. 3, Legislative intent. He argues that the purpose of the bill would be “clarifying changes that are consistent with the legislature’s intent in 1994 in first enacting section 33-1802.” The original, HOA enabling act of 1994 is silent on legislative intent. It seems that there’s some tea reading and divination going on.

This defense by Payne above seems to imply that the intent of the Planned Communities Act in 1994 was just for these two Sun City developments by Del Webb.  It makes sense, doesn’t it?

However, the purpose of the bill is quite clear and obvious — overturn the court’s ruling in Anderson v. RCSC (see More government interference – AZ HB 2374) and protect the HOA scheme against homeowner property rights.

Again, we return to constitutional matters and the court’s doctrine on interpreting wording of laws. What does the statute contract interpretation say? The recent AZ appellate discussion in Meyer v. State of Arizona (No. 1 CA-CV 18-0031, 2/5/2019; voter rights) explains the judicial doctrine on contract and statute interpretation.

Here, we get entangled with everyday meanings of terms and words, and what does the law explicitly state. As raised by RCSC, it cannot be an HOA because the definition requires that an HOA must be established by a declaration.

“RCSC argues that the ‘declarations’ do not establish RCSC or its ability to assess mandatory assessments. The Court believes RCSC’s argument elevates form over substance. ‘Declaration’ is broadly defined to mean “any instruments, however denominated, that establish a planned community and any amendment to those instruments. A.R.S. § 33-1801(3).”

However, the court pointed out that RSCS has the authority, accepted by the homeowner in a signed agreement specified in the CC&Rs, to act in place of the HOA. The court didn’t buy the RCSC subterfuge. “If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck…” The court granted a summary judgment — no material differences on the issues. The ruling has not been challenged.

What to do if you don’t get your way?  Go to the legislature and change the law, that’s what!

Published in: on February 7, 2019 at 5:20 pm  Comments (2)  

More government interference – AZ HB 2374

The following was sent as a Request to Speak to the Arizona House GOV committee this morning (restricted to 250 characters). HB 2374 seeks to overcome an adverse court ruling holding Sun City recreational center an HOA.  It is an intentional government interference into private contracts to  benefit the HOA.

Dear House Government Committee Members:

I strongly oppose HB 2374 as government intrusion into a private entity under a contractual arrangement.

Granting RCSC, and all such arrangements designed to favor the HOA scheme, not subject to the Planned Communities Act is unconstitutional. It violates the Arizona Constitution, Art. 2, Section 13. “No law shall be enacted granting to any citizen, class of citizens, or corporation other than municipal, privileges or immunities which, upon the same terms, shall not equally belong to all citizens or corporations.

The bill intentionally negates the recent Sept. 4, 2019 Maricopa Superior Court’s summary judgment ruling in Anderson et al v. RCSC, and not appealed, that RCSC is subject to the Act.

“In conclusion, all Sun City residential property owners are obligated to pay assessments that RCSC uses to defray the costs and expenses it incurs owning and operating recreational facilities in Sun City and, as such . . . . RCSC is subject to the Act for the purposes of plaintiffs’ instant lawsuit.”

Aside from city/state “recreation centers” I can only find Sun City and Sun City West using this arrangement of recreation centers, both are Del Webb developments. This is a miniscule class of entities in view of the thousands of HOAs in Arizona. The bill cleverly redefines “association” to exclude entities whose “SOLE PURPOSE OF SUPPORTING RECREATIONAL ACTIVITIES IN A REAL ESTATE DEVELOPMENT.” That applies to only the RCSCs of Sun City and Sun City West.

The bill flies in the face of political claims to support the people. It favors de facto private government HOAs and is unquestionably unconstitutional. We are a democracy and the people are to be protected, not corporations that deny constitutional rights of equal protection of the law (14th Amendment). Do not pass this bill.

Respectfully,

George K. Staropoli

Published in: on February 7, 2019 at 9:13 am  Comments (3)  

AG in AZ defends HOA dispute constitutionality challenge

In 2006 in Arizona the Legislature passed a bill[1] providing for the Office of Administrative Hearings, through the DFBLS agency, to resolve HOA disputes. Over the years from 2007 – 2011 its constitutionality was challenged several times by CAI Arizona, resulting in declarations of unconstitutionality. However, in the final case, Gelb, the AZ Supreme Court de-published the ruling as applied to ALL HOAs, making it non-binding precedent. In 2011 the statute was amended, addressing Gelb.[2]

The Arizona Attorney General, nor the Legislature, intervened in support of constitutionality. Not any longer. In its Answering Brief[3] to the challenge by the HOA in CBS-136 HOA[4], the Assistant AG provides a history of these decisions; and supports the constitutionality of OAH disputes of HOA issues by ADRE. It is a slap in the face of CAI’s attempts from 2007 – 2011 to kill OAH. The AG responded for once in this delicate statute in favor of OAH resolution.

The brief also contains a summary of the Gelb[5] case where the AZ Supreme Court ordered the appellate court ruling in favor of unconstitutionality to be de-published – not binding precedent.  “But in May 2011, the Arizona Supreme Court denied review and ordered the Court of Appeals’ decision de-published without explanation.”[6] I played a role in that decision when I submitted, pro se, an amicus brief to the Court, which was accepted.[7]

This is a major change in the attitude of the AG’s office, long overdue. ADRE may not be perfect, but it’s a step in the right direction. What is needed is legislation to close the loopholes that CAI has been using to defeat its purpose.

References

[1] Ariz. Sess. Laws, ch. 324 (2006).

[2] Ariz. Sess. Laws, ch. 185 (2011).

[3] See  state of AZ brief.

[4] CBS-136 HOA v. Cohen, No. LC2018-000316, Maricopa Superior Court 2018.

[5] Gelb v. Dep’t of Fire, Bldg. & Life Safety, 225 Ariz. 515 (App. 2010).

[6] CV 10-0371, 2011 (Ariz. May 24, 2011 ).

[7] See “AZ Supreme Court accepts advocate’s amicus brief in challenge to HOA statute

Published in: on February 3, 2019 at 12:39 pm  Comments (2)  

HOA Arbitration is not free: it has its costs, too

I’ve often wondered why so many are turning to arbitration as a means of settling HOA disputes, and to avoid court costs. The persons in the know say arbitration is generally cheaper, but an arbitrator can cost $1,000 -$4,000 per day, plus an initial filing fee around $750 with additional administrative costs.

Arbitration relies on one very important factor as applied to rogue HOA boards: both parties must be open to working together for a resolution to the problem. That’s a contradiction from the start: “rogue” and “working together.”

If minimal costs are acceptable and you have a truly workable Board, then this is a possibility. However, understand that there are conditions that can leave you without recourse to an appeal, not only to the decision but to the costs being charged.

As for those outlandish court costs in the tens of thousands or more, it goes without saying you are dealing with a hostile Board and arbitration will get you nowhere.  In the arbitration process, your HOA can still hire attorneys to represent them, and guess who pays for them? Not according to the arbitration process, but because of your CC&Rs make it clear that your HOA costs are paid by homeowner.

Find out more about how to make arbitration work for you. Read articles in the Notes 1 and 2 below.

Notes

[1] “Arbitration Pros and Cons”, Nolo.com.

[1] How much does arbitration cost, and who pays?, Legal Nature.

Published in: on January 30, 2019 at 12:10 pm  Comments (4)