Questions to ask licensed Realtors about HOAs

The courts hold you to the governing documents as a binding contract. Arizona statutes, A.R.S. 33-1806 and 33-1256, ask you to sign a statement that you agree that the C&RS, bylaws and Rules &Regulations are all indeed binding contracts.

DO NOT SIGN THIS AGREEMENT. Know what you are buying into, because you may face the loss of your equity or need to move to some other location.YOU MAY BE SURRENDERING YOUR CIVIL AND CONSTITUTIONAL RIGHTS. SEEK ADVICE FROM A COMPETENT ATTORNEY. Have your attorney explain your rights to you. The Arizona Assn of Realtors preprinted form will now be 11 – 18 pages!

Arizona home buyers, protect your rights by asking your licensed Realtor about:

1. Are you protected from HOA lien foreclosure by the $150,000 homestead exemption? This would protect the first $150K of your home equity.

2. Since your assessments pay for the HOA attorney, will the attorney respond to your complaints about the actions of the board? What remedies are available to you if you contest an action or decision of the board?

3. To what government agency you can file a complaint about your HOA board, as you can with doctors, lawyers, contractors, etc.?

4. If you contest a fine for an alleged violation of the CC&Rs, will you be given a notice and an opportunity to be heard by an independent tribunal and allowed to confront the accusers, demanding the evidence in support of their claims? Will this procedure be similar to the state Office of Administrative Hearings procedures for state agencies?

5. Are the HOA elections held in accordance with the same oversight procedures as are the general elections? Does the HOA follow its governing documents, or are they largely ignored?

6. Why did the Arizona Association of Realtors supported a bill that removed buyer notification of his loss of homestead protection, saying that it did not want agents explaining homestead exemption? (Licensed agents are required to pass an exam covering agency, contract and real estate law, and are required to take continuing education courses in these topics every two years).

7. Can the association foreclose on my $200,000 – $700,000 house for as little as a $200 or $500 late assessment payment? Will you get a “work-out” plan as the dreaded IRS offers those who have not paid their taxes?

If the Realtor cannot or refuses to answer these questions, ask them of the Arizona Department of Real Estate’s Consumer Affairs. Call 602-468-1414 x-225.

If the ADRE will not or cannot answer them, call the Arizona Attorney General’s Office’s Consumer Protection and ask them. Call 602-542-5025.

Constitutional laws: Tennessee and Arizona views

Excerpt from the TennesseanCom article by MATT GOURAS, Associated Press

Attorney General Paul Summers says the bill is probably unconstitutional on three fronts.

• First, he said, it tampers with existing contracts between homeowners and neighborhood associations.
• Second, it probably violates the right to free speech by choosing the American flag over other flags or messages people might want to display.
• Also, Summers said, it may be construed as a move by the state to interfere with private property rights without compensation.

The Tennesse AG calls it according to the law. Unfortunately, some legislatures follow the law and others, like Arizona, feel that they can do no wrong and ignore the laws of the land.

Here, we now see the AG resorting to contract interference by such a statute, prohibited by the Constitution. The only HOA bill signed by the Arizona Governor has mandatory wording that compells HOAs to remove proxies, even if they are allowed in the governng contracts of the HOA. (NOTWITHSTANDING ANY PROVISION IN THE COMMUNITY DOCUMENTS, . . . VOTES ALLOCATED TO A UNIT MAY NOT BE CAST PURSUANT TO A PROXY. THE ASSOCIATION SHALL PROVIDE FOR VOTES TO BE CAST IN PERSON AND BY ABSENTEE BALLOT . . . .)

Second, the Tennessee AG resorts to a strict interpretation of the free speech court opinions when he says that the bill only refers to flying the American flag, and not to any other flags — free speech laws must be content free if they are to be upheld. Another decision that could have easily gone the other way if any reasonable justification for allowing for the American flag was given in the bill.

Third, he resorts to the due process “takings” prohibition of a removal of property rights by the restriction on flying only the American flag(?). This ruling can be easily applied to the Arizona so-called omnibus bill, HB2154, when it removed the use of proxies without giving any reason as to why the state has decided to interfere with private contractual rights.

Laws must reflect not only our values and beliefs, but be based on achieving some goal, some ideal, that serves to improve the long-term quality and standing of society. They should not be a “gut” reaction to some perceived problem.

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].