HOAs want immunity if they are subject to penalties

California’s ECHO, an HOA/CID friendly lobbying group, addressed the California ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT on May 2, 2005 relating to the HOA bill, AB 1098, and the imposition of penalties against boards that violate the laws. For all these years, the only penalties that exist are against the homeowner, and it’s a harsh one that amounts to, in effect, excessive punishment by all interpretations of the US Supreme Court’s holdings in the BMW and State Farm cases.

Yet, ECHO seems to continue this argument of a special status for CIDs and to nullify any penalties with the equivalency of a municipal corporation — a city or town — immunity. This is a response, it seems, to my letter to CLRC regarding the Administrative Procedures Act (found in almost all states) that governs agency procedures. In short, agencies are immune from liability for their acts unless grossy negligent. But, with the failure to provide enforcement provisions against these private organizations, CIDs already have a special status contrary to law and are protected with this approach to government immunity. Furthermore, several court court opinions gave deference to the HOA/CID board views and decisions, because the court felt that the board knows better than the court, which is also another immunity policy with respect to government agencies.

The ECHO statement:

ECHO argues that community associations are more like nonprofit corporations than local governments. According to ECHO, “The average community association has about a hundred members, which is hardly government-like. Community associations cannot fairly and responsibly be commanded to operate like local government when they’ve been granted neither government-like immunities nor legislative privilege and have no elaborate staffs to guide them. Their exposure to liability without immunity or privilege or commensurate guidance has no limit, a consequence we hope was not intended.

If ECHO wants municipal status as a condition that they will accept penalties, then in all fairness and with justice to all, CIDs must be held to the same municipality laws as all other municipal corporations are held: open meeting, freedom of information, filing of complaints according to the Administrative Procedures Act, judicial review, penalities, fines and removal from office, etc. Let’s stop the special status, contrary to law, given to CIDs and uphold the equal application of the laws to everyone.

Arizona Homeowners Legal Information Services

A new service has been added to our web site: Arizona Homeowners Legal Information Services. This service provides internet legal information sources, HOA case references (federal and state), Arizona court information, and info on AZ paralegal and AZ Certified Legal Document Preparer laws.

Just got to AHLIS.

HOA statutes create state actors and actions

[The message of this letter to the Arizona Legislators is valid in regard to the legislation and statutes of many other states. The corporate form of HOA governance needs and relies on its unjust power to deny homeowners their constitutional rights in order to coerce obedience. The special interests, especially CAI, prefer that these valid arguments not be exposed to the public, legislators or the media. This is just what we must do if we are to obtain fair and equitable treatment under the laws].

April 30, 2005

Dear Arizona Senators:

Please do not pass this Homeowner Association bill, HB2154. It will further entangle Homeowner Associations as state actors.

The amendments to ARS 33-1260 & 33-1806 read, in part,

(h) A statement that provides “I hereby acknowledge that the declaration, bylaws and rules of the association constitute a contract between the association and me (the purchaser).

I believe this would be challenged in court as violating other statutes on contract law that require a meeting of the minds and a signature by the homeowner. There is no explicit waiver of constitutional rights. The above wording is suitable for a government agency or some municipal government entity, but not for a private contractual arrangements.

For example, creating or modifying HOA Rules do not require the homeowner’s signature, or even a vote of the members. Adding this paragraph further strengthens the close nexus between the state and the HOA, and further solidifies the status of the HOA as a state actor(1).

The Arizona Constitution, Article II, Section 2, reads (my emphasis):

“All political power is inherent in the people, and governments derive their just powers from the consent of the governed, and are established to protect and maintain individual rights.

The provisions of HB2154, and ARS 33-1256 and 1260; 33-1803, 1806 and 1807; 42-13402 (common area valuation), collectively support the validity of arguments that HOAs are state actors and, thus, subject to the 14th Amendment protections of due process and the equal protections of the laws. Realizing that these statutes will soon be challenged, passing this bill should be carefully reexamined.

A short presentation of supporting constitutional arguments can be found below under Note 2.


George K. Staropoli
Citizens For Constitutional Local Government

1. This appears that this is the only bill out of 22 HOA bills that will be sent to the Governor, Other aspects that interfere with the homeowners rights inlcude: removal of disclosure of loss of homestead exemption (don’t tell the buyer); adds reasonable collection fees to HOA liens (actually, more fees to attorneys since attorney fees are already included); revises board removal procedures; replaces proxy voting with secret ballots without any protections relating to the counting and verification process, and any meeting “new business” leaves homeowner out on the cold.

2. Constitutional arguments, supported by case law, from Nowak & Rotunda, Constitutional Law §§ 12.3, 12.4, (6th Ed., West Group 2000) (my emphasis).

· Cases in which alleged wrongful activity . . . have a connection to state legislation present the widest scope of factual situations.
· When state legislation commands a certain activity, or officially recognizes its legitimacy, there is no question but that state action present whenever someone follows the guidelines of the statute [as demonstrated by the above mentioned statutes].
· Again the reason . . . is that the alleged wrongdoing appears to be connected to activities of the state in such a way that it can be said to be a denial of rights by the state itself.
· When judges command private persons to take specific actions which would violate the Constitution if done by the State, state action will be present in the resulting harm to constitutionally recognized rights [property and liberty rights].

The Land of the HOA

The basis, as I’ve come to understand it, as to why state legislatures and the courts have protected HOAs and ignored our rights, lies in certain theories of economics pertaining to government efficiency in terms of allocating resources, and governmental decisions relating to making a better, happier society. And they are not mainstream American views nor do they reflect the views of our Founding Fathers.

Excerpt from “Land of the HOA” in the April issue of The HOA Citizen–

At one time, many years ago, America lived up to the words of the Star Bangled Banner,

“The Land of the free and the home of the brave”

Today, with the increasing support by state and local governments for private government HOAs that see no evils with making property values more important than our inalienable rights and freedoms, America has come to be,

The Land of the Homeowners Association

Proponents of HOAs believe that it’s their unalienable right to private, corporate, undemocratic governments that promote increasing values, in terms of wealth, to the members of the HOA.

And so this focus on wealth and economics have lured many an unsuspecting homebuyer into not only believing in HOAs, but also into defending them and their undemocratic governance in pursuit of wealth.

This is the carrot that is handed out, but you must also accept the stick as well.

Should the 14th Amendment protections apply to homeowners associations?

These problems and issues with CIDs have existed from their very inception with the publication of the ULI Homes Association Handbook, Technical Bulletin #50, in 1966 and will continue for the next 40 years unless the mental set and attitude toward planned communities undergo a major paradigm shift.

The inescapable conclusion to which the Commission will inevitably be drawn, if our Constitution is to remain meaningful and “that government of the people, by the people and for the people, shall not perish from the earth” and be replaced by the increasing number of private governments, is for CIDs to be subject to the same municipality laws of the state to which all other local government entities are subject. There will again be only one rule of law for everyone.

The following areas must be addressed:

1. Is it proper for the state to create, permit, encourage, support or defend a form of local government of a community of people, whether that form of government is established as a municipal corporation or as a private organization that is not compatible with our American system of government?

2. Is it proper for the state to permit the existence of private quasi-governments with contractual “constitutions” that regulate and control the behavior of citizens
a. without the same due process and equal protection clauses of the Fourteenth Amendment, and that
b. do not conform to the state’s municipal charter or incorporation requirements, or that
c. do not provide for the same compliance with the state’s constitution, statutes or administrative code as required by public local government entities?

Excerpts from March 14, 2005 Citizen letter to California Law Review Commission Memorandum 2005-3 on homeowner bill of rights. The complete letter may be found at Rights.

California CLRC proposal for state assistance to HOAs

Study H-853 March 2, 2005
Memorandum 2005-10
State Assistance to Common Interest Developments
(Staff Draft Recommendation)

See p. 66 for my letter to the Commmission.

My second paragraph reads:

“To state my concerns concisely: Any statute, law, agency rule or regulation not accompanied by an enforcement process or procedure is not a statute, law rule or regulation. It’s an empty statement of policy, relying on the goodwill and citizenship of the people to whom it applies. And when in the course of human events, when a long train of abuses and usurpations, pursuing inevitably the same object, evinces a design to reduce homeowners under an undemocratic, despotic form of corporate government over their homes, their private properties and their lives and the lives of their loved ones, restricting the liberties and freedoms given to and enjoyed by other persons not living in a CID, then it’s for the government to provide the necessary oversight and to exercise its rightful and proper police powers to regulate the abusers, and to restore to homeowners in living in CIDs the same rights and privileges enjoyed by all other persons in the state. It is only fitting for the legislature to enact such proposed legislation.”

Calif. Law Review Commission comments on the state of HOAs

State Assistance to Common Interest Developments
September 2004

Community associations are run by volunteer directors who may have little or no prior experience in managing real property, operating a nonprofit corporation, complying with the law governing common interest developments, and interpreting and enforcing restrictions and rules imposed by a common interest development’s governing documents. Mistakes and misunderstandings are inevitable and may lead to serious, costly, and divisive problems.

The principal remedy for a violation of common interest development law is private litigation. Litigation is not an ideal remedy where the disputants are neighbors who must maintain ongoing relationships. The adversarial nature of litigation can disrupt these relationships, creating animosity that degrades the quality of life within the community and makes future disputes more likely to arise. Litigation imposes costs on a common interest development community as a whole – costs that must be paid by all members through increased assessments. Many homeowners cannot afford to bring a lawsuit and are effectively denied the benefit of laws designed for their protection.

The proposed law would create the Common Interest Development Bureau within the Department of Consumer Affairs. The bureau would educate common interest development homeowners and board members as to their rights and obligations under the law, provide informal assistance in resolving disputes, and as a last resort, enforce the law governing common interest developments.