Desert Mountain opinion (AZ) constitutionality part 1

The Arizona appellate court ruling in Nicdon v. Desert Mountain[1] needs to be appealed to the AZ supreme court on color of law denial of fundamental rights to property; on violations of the equal protection of the laws.  While the issue at hand was an amendment to restrict short-term rentals to just 30 days, it raised several constitutional concerns.

It is unfortunate that the Court relied on earlier HOA case law as precedent.  When these older decisions are quoted and cited, they must be reviewed and rebutted along constitutional concerns. 

Disclaimer: Understanding that in spite of my 20+ years reading hundreds of federal and state supreme court and appellate court opinions, I am not a lawyer nor am I employed by a lawyer; I only offer my views.

. . . .

With respect to Desert Mountain, the following are quotes from the opinion  that I find contentious and worthy of constitutional challenges.

1.  “By accepting a deed in the Desert Mountain planned community, Nicdon became bound by the Declaration, including properly adopted amendments. . . . when [a] homeowner takes [a] deed containing restriction allowing amendment by majority vote, homeowner implicitly consents to any subsequent majority vote to modify or extinguish deed restrictions”.

Surprise! Surprise! “Implicit consents”  means not clearly stated. This is a reality hidden from and not made known to the buyer at closing by the builder, the HOA, or the real estate agent, thus raising full disclosure of material facts violations. Meanwhile the courts, and CAI, have repeatedly upheld the validity of the CC&Rs as a bona fide contract against homeowners.

2.  “In addition, in interpreting contracts, “we attempt to reconcile and give effect to all terms . . . to avoid any term being rendered superfluous.”  The Court accepts CC&Rs as a valid contract.  Based on (1) above, this is an unequal protection of the laws and a due process violation resulting from misrepresentation of material facts.

3.  “In adopting the Amendment, Desert Mountain properly followed the procedures laid out in its governing documents.”  Under contract law this can be seen as an invalid “agreement to agree.”   The homeowner raised the issue of an unreasonable addition to the CC&Rs, but the Court saw it differently.  The real argument, in my mind, was the invalid agreement to agree and therefore,  a taking of personal property without compensation not permitted under the federal and Arizona constitutions.

Although no such restrictions explicitly appeared in the Declaration when Nicdon’s principals purchased their home, they could have reasonably anticipated further restriction or expansion on matters within the scope of the Declaration’s regulation.”

There are no grounds for holding that a member “could have reasonably anticipated further restriction or expansion on matters. . . .”  It’s dictum.  The governing documents are not set up for handling agreements to agree on broad and unreasonable amendments that are NOT negotiated with the members. Voting for the amendment is not negotiating. Many members speaking out on contract matters is not negotiating one-to-one. But, in order to make the HOA work, the amendment process, following public processes, rejects contract validity.  We have unequal protection of the law.

Also, is this an open-ended procedure  making the covenant invalid? “Some courts have concluded that an agreement to negotiate at a later date is an unenforceable agreement to agree. . . . But other courts have distinguished unenforceable agreements to agree from valid agreements to negotiate in good faith.”[2]

4.  “Given these provisions, as well as the comprehensive nature of the Declaration and its amendment procedures, a prospective purchaser of a lot in the community would reasonably be on notice their property would be regulated by extensive use restrictions, including limitations on renting of homes, subject to amendment in accordance with the Section 5.20 process.”

I would argue that a buyer would “reasonably be on notice their property would be regulated by extensive use restrictions” is  an abuse of discretion in that reasonableness is with regard to the content of the amendment and not the notice of an amendment.  It is obvious that there is no provision for negotiations with the homeowner.  The governing documents amendment provisions are set up as if it were a local government and not a one-to-one contract. It needs further explanation.

5.  “A restrictive covenant is generally valid unless it is illegal or unconstitutional or violates public policy” was quoted from the Restatement (Third) of Property (Servitudes) § 3.1(1). 

The Court added §3.1(1)),

 “this concept “applies the modern principle of freedom to contract,” which generally means that courts will enforce parties’ agreements “without passing on their substance.”. . . .  A restriction may violate public policy for several reasons, including if the restriction is “arbitrary, spiteful, or capricious.

I will forego a discussion of freedom to contract[3] and the reliance on the Restatement of Servitudes,[4] which I find biased in its support of HOA and not an independent reporter on common law and court decisions.  Part 2 will go into these complex but highly relevant constitutional issues relating to the HOA legal scheme.

. . . .

What has been lacking in HOA litigation over the years, with all due respect to homeowner champion lawyers, is constitutional law expertise.  I’ve read too many cases that touched upon constitutional arguments like free speech, due process, and equal protection of the laws but failed to delve deeply into these defects in the HOA legal scheme.

  The broad approach successfully used by Justice Ruth Bader Ginsburg in her women’s rights litigation needs to be adopted here. And, as usual, CAI was there representing the HOA or by filing amicus curiae briefs.

References


[1]   Nicdon v. Desert Mountain, No. 1 CA-CV 20-0129 (April 29, 2021).

[2] The Lawletter Blog, The National Legal Research Group, (April 30, 2021).

[3] The question of  “freedom to contract” is explored by Randy Barnett where he argues that there are limitations. Restoring the Lost Constitution: The Presumption of Liberty, Randy E. Barnett, Princeton University Press, (2004).

[4] Restatement (3rd) Property: Servitudes (American Law Institute 2000).


HOA constitutionality Plan supplement – BOD education

The Plan Toward Restoring the HOA Model of Governance[1] called for both a systemic restructuring of the HOA legal scheme and the need to reorient the BODs and legislators. The long ignored and inexcusable questions of constitutionality that continue to harm members and the greater communities across this country must be exposed, understood and accepted.

hoa-const.jpg

The above picture reflects the rewrite of the Preamble to the Constitution as applied to the HOA-Land nation. It reads,

“We the people of a private HOA, in order to protect property values, insure domestic tranquility, promote the general welfare, and secure the blessings of increased property values to ourselves and our posterity, do ordain and establish this Declaration for the United HOAs of America.”

Why is there a need for board of directors education on HOA constitutionality? Why? Because:

  • HOAs are a form of local government not subject to the Constitution, and have created divisiveness and a separation from the greater public community resulting in member confusion regarding the law and their constitutional rights and protections;
  • the national lobbying entity, CAI, has indoctrinated the legislators, the courts, and the public with its CAI School of HOA Governance program that contains just lip service to constitutional questions, for example,

“A global nonprofit 501(c)(6) organization, CAI is the foremost authority in community association management, governance, education, and advocacy. Our mission is to inspire professionalism, effective leadership, and responsible citizenship—ideals reflected in community associations that are preferred places to call home.”[2]

while opposing the application of the Constitution in its numerous amicus curiae briefs to the courts, for example,

“In light of these statutory, contractual and common law standards protecting the interests of community association members, they need not claim constitutional protection from the conduct of governing boards to exercise their rights with respect to the associations.”[3]

  • The Findings, Section II, Education for Homeowners Associations and Board Members, of the North Carolina HOA study report to the NC General Assembly recommended,

“In order to provide accurate and readily available resources to educate homeowners, board members, and interested persons about the duties and responsibilities of property ownership in an HOA community, the General Assembly . . . to seek reliable and unbiased information available from private entities . . . and provide for published and online documents and programs offering HOA education . . . .”[4]

  • Privatopia: Homeowner Associations and the Rise of Residential Private Government, the 1994 landmark book based on the research of UIC Prof. McKenzie, and highly appropriate today, called the reader’s attention to,

“CIDS [HOAs] currently engage in many activities that would be prohibited  if they were viewed  by the courts as the equivalent of local governments.

“In a variety of ways, these private governments are illiberal and undemocratic. Most significantly boards of directors operate outside constitutional restrictions because the law views them as business entities rather than governments. . . . [They] are inconsistent not only with political theories of legitimacy but with the normal process by which governments are created. . . . Thus these ‘private governments’ may violate the equal protection clause of the Fourteenth Amendment.” (Chapter 6).

  • A Table of Authorities,[5] not all inclusive, supporting the Restoring the Lost Constitution.
  • Unanswered questions on HOA constitutionality:

CAI Common Ground Editor Durso mentioned my 2006 “‘open e-mail questionnaire to CAI’ containing four questions.”  Below is a copy of those questions initially addressed to the AZ Legislature a year earlier.  I never had any answer, either from the Legislature or CAI, nor any debate on the issues.

In a 2011 email to the North Carolina Legislature House HOA Committee I asked, “the legislators, the public interest organizations and policy makers to consider the following questions.” And I concluded with, “I await your reply, or a reply from any of the legal-academic aristocrats.”[6] Still no answer.

    • Can a legislature delegate its functions, not government services but functions, to private entities without oversight or compliance with the Constitution, as required of all government entities?
    • Can private parties enter into contractual arrangements using adhesion contracts and a constructive notice consent that serve to regulate and control the people within a territory (an HOA), to circumvent the application of the Constitution?

 A webinar is in the plans that summarizes and follows the materials – the text — comprising the HOA educational series to reorient HOA boards and the public in general. The text is available online under the collection, “Restoring the Lost Constitution to HOA-Land.” Will be coming soon.

Notes

[1] See https://tinyurl.com/sr27yq3.

[2] About Community Associations Institute, April 4, 2020). https://finance.yahoo.com/news/community-associations-institute-cai-provides-181931116.html. April 4, 2020).

[3] CAI amicus brief, Jan. 3, 2013, Dublirer v. 2000 Linwood Avenue Owners Assn, N.J. Docket 069154 (2014).

[4] “Study On Homeowners Associations”, Luke A. Rankin, Chair, South Carolina General Assembly (December 18, 2015). (http://www.scstatehouse.gov/CommitteeInfo/HomeownersAssociationStudyCommittee/HOAStudyCommitteeFinalReport12182015.pdf). April 27, 2020).

[5] http://starman.com/m…/restructureHOA/restructure-reading.pdf.

[6] See Too hot for NC HOA committee – withdraws legal-academic “experts, George K. Staropoli, HOA Constitutional Government (Nov. 17, 2011). https://pvtgov.wordpress.com/2011/11/17/too-hot-for-nc-hoa-committee-withdraws-legal-academic-experts/

“Rules of Engagement” apply to CAI

Many may feel from all my criticism that I unjustifiably have it in for CAI.  Well folks, you decide whether the CAI propaganda statements and publications that are PR releases is in conflict with its numerous acts before state legislators and the courts.  These contradictory stances are revealed in CAI’s amicus briefswhat I say I don’t do [1].

Advocates have failed to apply the Rules of Engagement to such Doubletalk[2] from CAI allowing the legislators, the media and the BODs to see no evil, hear no evil speak no evil.  These Rules are a very important weapon to discredit CAI and stop the policymakers from trusting their misleading statements; to start believing in the validity of the positions and arguments for HOA reforms coming from homeowners and homeowner advocates.

As a prime example, and there are many others found in the numerous CAI briefs dealing with constitutional HOA issues, is the NJ Supreme Court case in Dublirer.[3] It involved the free speech rights of a homeowner to equal access the HOA facilities in order to distribute BOD election materials to his neighbors – an exercise of his rights in a democracy. Allow me to repeat my quotes[4] from CAI’s NJ Supreme Court amicus brief in Dublirer.[5]

CAI-NJ’s concern is the attempt to convert private communities into constitutional actors and to open such communities to access not only to speakers from within the community but also to the public, while ignoring contractual agreements and non-constitutional protections.

The relationship between the plaintiff and the defendants here is that of a business corporation and so is similar to that involved in any other business corporation. A shareholder who wishes to run for a position on a corporate board has no right to post campaign signs on the corporation’s property. . . . He has no constitutional right to distribute his campaign materials within the cooperative’s property simply because mailing them to the other tenant/shareholders may cost him money”.

In plain English, this is secessionist and a rejection of the Constitution. CAI’s position says the people in an HOA will decide what laws to follow or not to follow. It is an incredulous statement from the organization that claims to be the one and only voice on HOAs, but apparently does not understand or simply ignores constitutional law. The CAI position is in opposition to the  long-standing legal doctrine on the delegation of legislative (lawmaking) powers to private persons.

In order to win, advocates must muzzle CAI’s lack of “candor to the tribunal.”[6]  Judicial and legislative  doctrines hold that an allegation or argument that goes unanswered is held to be true.  That’s why, it seems, advocates are viewed as unbelievable,  because of their repeated silence resulting from a lack of knowledge on how to respond.  This must change!

 

References

[1] See in general, Will the real CAI standup: its contradictory beliefs, pronouncements and goals.

[2] From George Orwell’s novel, 1984, where a person holds two contradictory statements at the same time.

[3] Dublirer v. 2000 Linwood Avenue,  103 A.3d 249 (NJ 2014).

[4] See my Commentary for additional quotes: CAI: the HOA form of government is independent of the US Constitution.

[5] Dublirer CAI Amicus.pdf.

[6] Attorney Rules of Professional Conduct, Rule 42, E.R. 3.3

CAI continues to ignore the Constitution for the HOA constitution

CAI continues its stand against HOAs being held to the US and state constitutions.  This is a second case, the first being CBTR v. Twin Rivers, 929 A.2d 1060 (2007). Sort of an argument for secession to an independent principality status where all residents would be regarded as “expats” (expatriates).

In the Twin Rivers case, the CAI amicus brief to the NJ appellate court warned about “the unwise extension of constitutional rights to the use of private property by members [in HOAs].”

Here’s what CAI had to say in this more recent NJ case, 4 years later. Note that it’s a “putative” brief. Aside for being paid by a party, not indicated here, a putative amicus brief can bring up arguments not raised by the parties for the “edification” of the court. This appears to be CAI – NJ’s position.

Excerpts from the “Putative Amicus Curiae Brief” by CAI – NJ to NJ Supreme Court, July 27, 2011

Whatever rights common interest association members have to express themselves regarding association issues arise not from the State Constitution but rather from statute, from contractual provisions of the association’s governing documents, from the fiduciary duty owed by the association trustees, and from concepts of fundamental fairness.

The ability of members to communicate with each other thus may be said to be an implied covenant in the By-Laws, a fiduciary obligation of the organization, and/or due to fundamental fairness to enable members to participate in community affairs and governance.

A governing board’s regulations are enforceable only if they satisfy the business judgment rule, that is, they are authorized by statute or the governing documents and the board’s action is not fraudulent, self-dealing or unconscionable. [citing Twin Rivers].

Because the unit owners have other statutory, contractual and legal remedies to protect them from overreaching by the Association, there is no need to apply the constitutional free speech clause. For that reason as well, the appellate majority opinion should be reversed.

Mazdabrook Commons v. Kahn, No. 67,094, (NJ 2011) (Not yet decided).

In other words, who needs the Constitution? We have our top-down, business profiteer’s CC&Rs private contract, and laws that mimic and are almost identical to the CC&Rs. Who needs the NJ Constitution, too.

See Twin Rivers and NJ HOA free speech rights, redux.

The HOA Principality

A few years ago I made the comparison that HOAs were a modern version of the independent city-states of ancient Greece and medieval times. I was wrong. I was wrong because these city-states had no higher-level government, no king or emperor, to whom they were answerable. That’s why they were independent city-states.

The more accurate comparison would be to principalities that exist in small numbers today in Europe; such as, the Principality of Monaco. They exist within the boundaries of a larger political body, the country or nation, and are essentially self-governing with their own laws. They are governed by an almost absolute ruler, the Prince. They are protected, a “protectorate” you might say, by their surrounding nations and exist by this “higher” government choosing to honor the principality in accordance with its laws.

Today, in the United States of America, the federal and state political bodies have issued “charters” to private individuals, granting them the status equivalent to a principality, much as the kings and emperors of the 16th – 18th centuries handed out charters to loyal followers. These modern charters are known as homeowners associations and are issued without requiring a republican form of government or subjecting all of its citizen-members to the privileges and immunities that apply to all citizens of the US.

If you follow the arguments of the longtime promoter of HOAs, the Community Associations Institute, CAI, you will find that its justification for this state of affairs and private government does not address the US or state constitutions, but the lesser laws of the land, the real estate common laws of servitudes. These opposing views is quite apparent when you follow the arguments by the Frank Askin of the Rutgers Constitutional Law Clinic and CAI in the Twin Rivers New Jersey case on HOA constitutionality questions.

I am not arguing against the right for communities to set their own special ordinances and special taxes for community amenities, but for the guarantees of life, liberty and the pursuit of happiness to all people. If we are to remain true to that contract between the federal and state governments, embodied in their respective constitutions, then the era of the HOA principality must come to a swift and decisive end.

See CAI’s Amicus Brief