We don’t want no stinkin’ government protection for HOA members

This California Adams-Davis-Stirling newsletter (“California’s Leader in Community Associations Law”) says it all.  Speaking to a new federal law as of October 2016 (that applies to all states), Code of Fed. Reg. §100.7(a)(1)(iii)),

  1. “The law requires that boards take prompt steps to investigate and end harassment.
  2. This intrusion by the federal government into the affairs of homeowners associations is unprecedented.
  3. The burden the new regulations create will likely outweigh any intended benefits regulators had in mind.
  4. Associations are not cities with paid city council members, police forces, and governmental immunities.
  5. Making boards an arm of the federal government is going to make it harder to recruit and keep volunteers on boards.”

 

Items (1) and (5) make the HOA a state actor due to the mandatory “order” to investigate harassment complaints relating to Fair Housing laws. Item 5 deals with one of the fundamental flaws of the HOA legal scheme — unpaid and untrained volunteers with no local government experience to run HOAs.  What would you expect?  You get what you paid for.  That’s a gold mine for HOA attorneys, who have created these pro-HOA state laws and adhesion contract CC&Rs.

Item (4), while HOA boards have no government immunities they hide behind the business judgment rule that says let the board decide, not the courts, in effect giving immunities.

The author, Adrian Adams, recommends that “Boards should work with legal counsel to adopt anti-harassment rules for their associations.”  “Should” is not “shall” and not mandatory.  It is an “ought to” that requires no compliance and carries no enforcement actions.

The HOA attorneys do not want government interference since it really would interfere with their domination of HOA boards: Seek advice from the people who know best, your HOA attorney.  It is a self-serving recommendation to generate more income for the attorneys, who have repeatedly failed to serve the beneficial interests of the HOA membership.

“We don’t want no stinkin’ government protection for HOA members”!  If not, who then?  You can’t have your cake and eat it!

Since the state legislators have failed to act, it becomes necessary for the Feds to protect the people. See The FEDS must restore law and order in secessionist HOA governments and Getting the Feds involved in HOA reforms.

Published in: on April 18, 2017 at 9:38 am  Comments (19)  

Rogue AZ Senate violates AZ Constitution

In a unanimous 30 – 0 vote the AZ Senate approved HB 2411 even though it contains 2 subjects but only 1 in the title, thus violating the Arizona Constitution (emphasis added):

Article 4, Section 13, Part 2:

  1. Subject and title of bills

Section 13. Every act shall embrace but one subject and matters properly connected therewith, which subject shall be expressed in the title; but if any subject shall be embraced in an act which shall not be expressed in the title, such act shall be void only as to so much thereof as shall not be embraced in the title.

 

The bill violates the constitution, and the Senators well know it.  It is a repeat of the 2013 SB 1454 bill that also violated the constitution in this manner and was found unconstitutional and invalid after a court challenge was filed (Staropoli v. State of Arizona, CV 2013-009991).  They cannot hide behind the “all laws are presumed constitutional” doctrine when the bill is facially unconstitutional and such a violation was supported in the courts with the Attorney General, for the State, so admitting.

Based on the foregoing, the Court determines that the provisions of SB 1454 enumerated above that relate to planned communities/homeowner associations violate Article 4, pt. 2, § 13 of the Arizona Constitution and are void and unenforceable.

This unanimous vote can only be viewed as a concerted and cooperative effort pushed by the leaders of both parties.  I see it as a dangerous example of the tyranny of the legislature (“The tyranny of the legislature is really the danger most to be feared,” Thomas Jefferson letter to James Madison in Federal Papers #51) and a total disregard of the law.

The Senators seemed to have circled the wagons, saying: Try to tell us our job? Hah! We are everything!  You, the people, are nothing!   Take that!  Sue us again!

Will the Arizona House reject the Senate bills?  I think not.  It’s a top-down act by the legislative leaders with the legislators following orders.

 

Published in: on April 13, 2017 at 6:42 pm  Comments (7)  

Good government and healthy communities

Deborah Goonan accurately describes the environment and culture of HOA-Land, that dispersed and fragmented nationwide collection of subdivisions ruled by authoritarian HOA governments.  In her blog, What is the root cause of HOA dysfunction?, she covers issues like a “flawed government model,” and “apathy is a symptom of a ‘sick’ association, not the cause.

She contrasts the good old days of civic and neighborhood associations of neighbors, not mandatory members with forced mandatory membership ruled by a developer created “constitution” handed down to homebuyers.  “But civic involvement in mandatory, developer-created HOAs is very rarely seen.”

Deborah demonstrates her understanding of the legal nature and structure of the HOA concept: “The HOA is not the community itself – neither its physical structure nor its people.”  It’s a form of de facto political government that is unrecognized by state governments and allowed to operate outside the law — outside the Constitution.

The HOA government creates dysfunctional communities, as Deborah points out, where the health, safety and general welfare are focused on property values.  The “first and only legitimate object of good government” is, according to Thomas Jefferson, “The care of human life and happiness and not their destruction.”

Published in: on March 30, 2017 at 6:12 pm  Comments (6)  

Are CC&Rs unenforceable adhesion contracts?

An Arizonan trial case caused me to revisit the fundamental question of: Are the CC&Rs unenforceable adhesion contracts?  As with CC&Rs being unconstitutional, I do not find any evidence that the courts have directly addressed this most serious question in the past.  Most related cases centered on the arbitration clauses in the CC&Rs.

The Arizona case was challenged with the court finding that the clause was unconscionable and beyond the reasonable expectations of the homebuyer.  The Arizona court wrote,

The arbitration clause is in the Declarations of Covenants and Restrictions. Although the terms of the purchase contract may have been negotiable, the terms of the Declarations were not subject to separate negotiation with each Unit purchaser. Therefore, the Declarations which contained the arbitration clause were in the nature of a contract of adhesion (my emphasis).

“Factors showing substantive unconscionability include ‘contract terms so one-sided as to unfairly surprise an innocent party, an overall imbalance in the obligations and rights imposed by the bargain . . . .” (quoting from Maxwell v. Fid. Fin. Servs. Inc., 907 p .2d 51, an Arizona case).

However, as a trial court decision it lacks value as precedent to be cited in other cases.  It must be upheld upon appeal as CAI attorneys attempted to do with their constitutionality challenge to Arizona’s OAH statutes.  Will this decision pass muster on an appeal, if any?

Several cases from the Montana Supreme Court offer a favorable YES. But first I must explain the other criteria for an adhesion contract: the use of a standardized form.  A standardized form is basically one that is,

[D]rafted by one party (usually a business with stronger bargaining power) and signed by the weaker party (usually a consumer in need of goods or services), who must adhere to the contract and therefore does not have the power to negotiate or modify the terms of the contract. Adhesion contracts are commonly used for matters involving insurance, leases, deeds, mortgages, automobile purchases, and other forms of consumer [Legal Information Institute].

Now the Evil Empire and its loyal followers will argue that each Declaration is a unique contract prepared individually for each HOA.  Not really, as one can easily trace boilerplate from one Declaration to another, just like the boilerplate found in state statutes.  The point is, however, that the Declaration agreed to by each homeowner is one and the same Declaration making it a standardized-contract for that HOA!

 In the 2011 Montana Supreme Court Graziano v. Stock Farm HOA decision the homeowner argued that the arbitration clause was beyond his reasonable expectations and that he had received no notice or explanation of its contents.  The Court held that,

An adhesion contract is a standard form contract prepared by one party, to be signed by the party in a weaker position (usually a consumer), who adheres to the contract with little or no choice about its terms. The weaker party can either accept or reject the contract without the opportunity to negotiate its terms.

However, the Court rejected the CC&Rs as an adhesion contract, because the terms were negotiable, they were not beyond the homeowner’s reasonable expectations, and the owner was a sophisticated business person who knew better, so no surprise.

Although holding that the CC&Rs were not an adhesion contract due to the knowledge of the owner, a supporting Judge wrote,

Imposing and enforcing pre-dispute arbitration requirements in such circumstances is nothing more than a means of depriving landowners of their constitutional rights of access to the courts and to a jury trial under Article II, Sections 16 and 26, respectively, of the Montana Constitution.

 “[T]he landowner should not be bound by a pre-dispute arbitration clause imposed by the developer without negotiation on what amounts to be a “take it or leave it”—or, rather, “buy it and you’re stuck with them”—basis.

In the 2009 Woodruff v. Bretz Montana Supreme Court case (non-HOA, motor home case cited in Graziano above), the court found the arbitration clause to be an adhesion contract and unenforceable.   The explanation of “reasonable expectations” is highly informative and is relevant to HOA CC&Rs.

[R]reasonable expectations derive from all of the circumstances surrounding the execution of the contract, such as the consumer’s business experience and sophistication, any routine practice between the parties established through prior dealings, whether the consumer studied the agreement and comprehended its terms, whether the consumer had the advice or representation of counsel, and whether the challenged provision and the consequences of the provision were fully and adequately explained to the consumer. (My emphasis).

 As you can well see, the CC&Rs constitute unreasonable expectations of the homeowner, and we have more support for misrepresentation and fraud in the HOA selling process and in legitimate failure to be bound.

Who would sign the purchase contract if the homebuyer had full and complete knowledge of HOA-Land living conditions, and the legal restrictions contained in the CC&Rs? Expectations so foreign to the reasonable expectations of constitutional protections?    

Who would think that the legislature would not uphold the state constitution and laws that protect the individual property rights of their citizens and reject the standardized CC&Rs contract?  Who? 

It is an insult to the people!

Published in: on March 26, 2017 at 9:47 am  Comments (2)  

Evaluating HOA legislative reform performance

This posting spells out a simple measure of evaluating how well advocates performed at the legislature.  It uses 2 indicators: one places a weight or importance factor to a bill and the other reflects whether or not the bill passed or failed.  Give it a try.

I use the current status of HOA bills in Arizona as an example.  Feel free to adjust the weights as you see fit.

ARIZONA HOA REFORM PERFORMANCE RATING

2017

(as of March 21, 2107)

BILL VALUE STATUS WEIGHTED
       
HB 2146 1 F -1
HB 2321 0 P 0
HB 2411 1 P 1
HB 2419 1 P 1
HB 2496 2 P 2
SB 1060 0 P 0
SB 1113 -1 P -1
SB 1175 2 P 2
SB 1240 -2 F 2
SB 1288 2 F -2
SB 1289 2 F -2
SB 1400 1 F -1
SB 1401 2 F -2
SB 1402 1 F -1
SB 1416 0 P 0
SB 1429 1 F -1
       
TOTAL 13   -3

 

Performance rating:    -0.19 (-3/16)

Rather than a simplistic ‘body count‘ of bills, I prefer an Performance Rating (PR) where weights –  values –  are assigned to a bill.  Values from -2 to 2 are appropriate here, -2 being strongly opposed, 0 being neutral, and 2 strongly in favor.  Example:  take 4 bills.

Bill 1, value of  1

Bill2, value of  2

Bill3, value of  2

Bill4, value of -2

Total value 3. Divide by number of bills, 4, and PR becomes .75.  If bill4 is revalued at -1, then EM becomes 1 (4/4).  Take a lopsided case of -2, -2, 1, 0.  This produces an PR of -.75, a  real bad day at black rock.  Interpretation: a number of opposed bills passed.   Take another case where several bills are given a neutral value:  2,-1 0, 0 yields an PR of .25.  Not good for advocacy efforts.

Weakness lies not in the PR calculation, but in getting a fair assessment of values and not assigning values to make you look good.  Of course, values must be assigned beforehand or at time of an amendment.

An important aspect:  Passed and failed.  The value is result rated (PF) where Pass = 1 and Failed = -1.   A For bill passing gets a PF of 1 and if it failed it gets a PF of -1.  Similarly, an against bill gets 1 for passing and -1 for failing.

Using 2 factors allows you to assess the importance – value – of the bill and its legislative result, pass/fail. It is a much better measure of how well an advocacy campaign reached its goal of 2.

As you can well appreciate, there is a need for integrity in the rating process.  If you overrate the value and the bill fails, you lose big.

Published in: on March 22, 2017 at 2:14 pm  Comments (1)  
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