AZ Model regulatory HOA agency fact sheet


This proposed bill was adapted from Florida’s SB 1348 (2015) and specifically tailored for Arizona. (It was initially proposed in 2008 by Florida’s Cyber Citizens for Justice,  Its objectives are the creation of a state agency called the Department of Homeowners Associations headed by a Commissioner, and the creation of an HOA advisory board to make recommendations to the Commissioner.  It was modeled along the lines of the AZ Department of Real Estate.

Understand that the bill must specify in detail the powers, authority and procedures to follow in conformance with the law.

The format of the bill follows generally accepted standards for bill drafting.  It uses CAPS for new words and strike-outs for deletes.  These are the important provisions of the bill.  The remainder, in normal formatting, is presented as unchanged wording that must appear as required by bill drafting standards.  Generally, they may be ignored. Each part of the statutes is introduced with “Section n,” not part of the statute, followed by the title of the actual statute being changed, such as “Section 33-1806.” A descriptive, either a “is repealed” or “is added”  in total, or  “is amended” phrase follows. Changes are then presented along with the required unchanged wording of the section.

Adapting to other states. The areas to focus on in order to understand the proposed agency are those, as mentioned above, in CAPS and strike-outs.  They may be incorporated into the statutes of other states as is.  However, no complex bill is without links or references to other statutory sections that relate and bear directly on the validity of the new agency.  These ‘links’ would need to be modified and adjusted, most likely extensively, if the bill is to be introduced outside Arizona.  It requires someone with sufficient understanding of bill formatting and who can work with legislative staff to assist in making these necessary adaptations.

The descriptions given below may contain the advisory, “IGNORE,” which identifies code unique to Arizona and probably needs to be changed if adapting for use in other states.

Understanding the bill, Sec. by Sec.

Note that the bill contains seemingly duplicative changes.  One addresses 33-1200 et seq. (and following) and the other addressing 33-1800 et seq. This is because the 1200 sequence pertains to condos and the 1800 sequence pertains to HOAs (planned units).

Sections 1 and 2 add additional wording to title of existing statutes. IGNORE.

Section 3 adds the Department of Homeowners Associations and establishes the office of an HOA commissioner under Title 41, Chapter 20, 41-2325.  Paragraph (A)(3) defines the duties and powers of the department, including the authority to use the Office of Administrative Hearings (OAH) for dispute resolution. Subsections (B) and (C) present the intent and purpose of the bill.

Section 4 adds the powers of the Commissioner to enforce the condo and HOA statutes, which under subsection (B) includes training and education requirement.  Subsection (C) grants the Commissioner the power to set rules that have the power of law. Many agencies have been granted his power, including the real estate department.

Sections 5 and 6 detail the procedures to follow and powers of the Commissioner to handle complaints and investigate complaints, respectively.

Section 7 specifies the penalties for violating the proposed bill statutes, a requirement absent from HOA governing documents, but required by public criminal law.  It’s a notice requirement.

Section 8 adds the funding requirement of $4/door to support the agency.

Section 9 adds the establishment of the HOA advisory board. Subsections (A) and (B) specify the breakdown of the homeowner dominated board.  Subsection (E) defines the authority to recommend revisions in the best interest of the public.

Sections 10 – 16 specify the procedures regarding HOA disputes and OAH hearings since the existing agency is set to expire in 2019. It just moves current law into a new section of code, Chapter 20.  IGNORE.

Sections 17 and 18 revise linked statutes to the addition of Chapter 20 above.  IGNORE.

Section 19.  Omitted in error.

Section 20 repeals the existing OAH funding.

Published in: on June 14, 2015 at 10:36 am  Comments (2)  
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Supreme Court says corporations cannot be used to evade Constitution

The recent non-HOA decision by the US Supreme Court in DOT v. Assn American Railroads[i] has a direct bearing on the constitutionality of the HOA legal scheme.   This case dealt with the legal status of AMTRAK — is it or is it not a government entity — and was there an unconstitutional delegation of legislative authority.  While I have argued that HOAs are de facto private governments based on their powers, authority and functions, I now make the argument that as a de jure (according to the law) private corporation, HOAs have been unconstitutionally delegated legislative powers. “[R]ecognizing that the power to fashion legally binding rules is legislative.”[ii]

Implicit delegations of legislative powers are described in The Restatement Servitudes[iii] and numerous state statutes carry implicit delegations of legislative powers.[iv]

With respect to violations of the Constitution, the Supreme Court decision in DOT  held 1) that private parties cannot draft agreements to circumvent the Constitution by declaring that an entity, specifically a corporation, is a private organization, 2) that such a determination is made by the courts based on the corporation’s functions, powers and authority, and 3) that in order for a private entity’s delegation of legislative authority to be constitutional, there must be control, supervision and accountability to the state.

I have presented my case that, in the absence of explicit enabling acts, there is implicit unconstitutional delegation of legislative power to private HOAs, particularly in regard to legally binding rules, without accountability.

Read the complete paper at Delegation.

[i] Dept. of Transportation v. Assn American Railroads, 135 S.Ct. 1225 (2015)

[ii] Supra 1, p. 17.

[iii] Restatement Third, Property (Servitudes), Susan F. French, Reporter, p. ix (American Law Institute 2000).

[iv] For a sample of implied rulemaking statutes by state, see:  Arizona: ARS 33-1803(A) and (B) for HOAs; 33-1242(A)(1) for condos. California: Civil Code §§ 4340-4370 (Part 5, Chapter 3, Article 5, Operating Rules). Florida HOAs:  Title XL, § 720 et seq. do not explicitly address rules per se, but speak to enforceable “guidelines” and “standards”; Florida Condos:  Title XL, § 718 et seq. (in particular, § 718.1035, the general statement on “association rules”). Nevada: “NRS 116.31065  Rules.  The rules adopted by an association” (with 5 “musts” imposed on the HOA).

Arizona HOA regulatory bill needs your support.

Last Friday, June 5th,  I emailed a revised AZ model bill to AZ legislators for sponsorship in January 2016.  It was initially drafted this past January, too late for introduction in 2015.  See model HOA regulatory agency bill.

“Summary.   This bill establishes a department of homeowners associations with full direct regulatory authority over Ch.9 and Ch. 16 associations under the direction of a commissioner. It provides for receiving complaints, investigations, filing legal actions, issuing civil penalties, rulemaking, and education as well as establishing an Advisory Board to provide recommendations to the commissioner.   Funding is provided by a $4 per unit fee per year. The processing of HOA disputes by DFBLS is stricken and processing is replaced  by the department of homeowner associations.”

Arizonans, email your legislator and demand sponsorship in 2016!  I will meet with any legislator to clarify and to answer any questions.  This bill affects the general public across the state and attempts to restore law and order to HOA-Land.  It deserves to be made law ASAP!

As you all know, HOAs are private persons and lawmaking is mandated to state legislatures as set forth in their respective constitutions. And you know that the state does not supervise HOAs, but has adopted a ‘hands off’ posture — no penalties for HOA board violations, for instance. “[i]t is a well established theory that a legislature may not delegate its authority to private persons over whom the legislature has no supervision or control.(McLoughlin v. Pima, 58 P.3d 39 (2002).  This bill would provide constitutionally required legislative supervision and control.

Read the proposed regulatory bill:  Regulatory agency

HOAs are a throwback to medieval feudalism

Preposterous?  A wild thought?    You say that: according to the national HOA business ‘educational’ trade group, HOAs are the best example of local democracy at work [1].  So, make your point, convince me!  OK, I will!

Please see the table,  A comparison between fiefdoms and HOAs.

Note 1. “Associations are the most local form of representative democracy, with leaders elected by their neighbors to govern in the best interests of all residents.”  Community Associations Fundamentals, item 2.

Published in: on June 4, 2015 at 7:42 am  Comments (8)  
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CAI recognizes HOAs DO have problems

In a recent Associations Now article, “Study: Homeowners Associations Hit New Population Peaks, CAI Skiba is quoted as saying: “‘Not all associations operate as well as they should, and we’re never happy when we see a community in the news for the wrong reasons, but at least we know struggling communities are the exception to the rule,’ CAI chief executive Thomas Skiba, CAE, said in a comment on the study.”  I believe CAI is waking up to the fact that it can no longer hide the real lives of HOA members.  I expect a mia culpa (I am guilty) announcement by a repentant CAI. It has no other choice to stave off being completely discredited if it refuses to come into the light.

To assist CAI in its path to enlightenment, I have prepared another critique of CAI’s views about the HOA legal scheme and operations in reality.  CAI has published its “Community Associations Fundamentals with the stated purpose that “CAI developed the Community Association Fundamentals to foster a better conceptual understanding of how associations function and the roles of residents and association leaders.” I will attempt to “decode” and examine what is really being said or not being said with the understanding that the word “fundamental” has the following generally accepted meanings, “forming a necessary base or core” or “of central importance.

Please read CAI’s HOA “fundamentals” analyzed and “decoded.” You can help CAI in its hour of need — spread the word.


CAI background

In 2006, and followed up in 2012, I published the following analysis of CAI’s membership. In Who controls CAI and its 50 state HOA lobbying committees? I used census and CAI data to show that only 5.9% of HOAs are CAI members, based on all ‘volunteers’ belonging to different HOAs with no duplication. If all CAI members were counted then there would be only 9.8% HOA representation.  Furthermore, a miniscule .6% (.006) of Americans are CAI members. The CAI quoted “63 million Americans” is that number of people, not CAI members, living in HOAs.

On CAI’s 14 member Board of Trustees, HOA ‘volunteers’ (misguided individuals who are mainly HOA board members) hold only 2 positions. Vendor members hold the other positions as HOAs are not allowed to be a member.

In spite of the miniscule minority representation of HOAs and HOA members, CAI Legislative Action Committees (LACs) lobby and dominate HOA legislation in all states.

Published in: on May 28, 2015 at 5:55 pm  Comments (2)  
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