“Private Metropolis” revisited

It is my strong belief that  the HOA legal model of local government played a part  in the demise of democracy in America[i] has been greatly assisted by the recent publication Private Metropolis.[ii]  In my prior post on Private Metropolis,[iii] I was very pleased by the opening Introductory paragraph,

The opening introductory segment encompasses a wide description of special  governmental units. It is loaded with constitutional issues and controversies that says it all quite plainly: “quasi-governments,” “shadow local states,” “the municipality is no longer the privileged seat of governance,” and “special purpose local governments” (including homeowner associations with some 27% of the population — according to CAI — as residents), that “became, in effect, shadow governments.” 

Unfortunately, these highly descriptive political concepts  used in this very broad study of local government failed to appropriately address the form of local government known as HOAs.  Scant attention is given to these associations by the authors. In the 312 pages “homeowner association” is mentioned just once and “CID” twice. But “shadow government” and “quasi-government” and “special districts” are tossed around quite frequently. Readers, having read the very enticing title, will be greatly disappointed by its failure to deal with the most direct affront to the eclipse of local democratic government: the HOA legal model of governance that has been supported by all state legislatures across this country.

HOAs, my generic term for community and homeowners associations, satisfy the fundamental definition of a political government.  Black’s Law Dictionary (7th Ed.) definition separates the men from the boys: “Modern states are territorial; their governments exercise control over persons and things within their frontiers.”  And that is the unique feature of political government that  distinguishes an HOA from  a business, a non-profit charity, a club, a union, etc. I believe that the decision to form HOA governance outside the domain of public government was intentional to avoid constitutional restrictions.[iv]

They are a de facto yet unrecognized form of local government — other forms being mayor-council, council-manager — born and created as private entities, and as such,  have escaped, for the most part, under the common defense prohibiting  any ”law impairing the obligation of contracts.” Although the other forms of public local government are subject and held to the Constitution and the laws of the land. HOAs meet every criteria set forth by the authors as indicated above and epitomize the eclipse of local democratic government. 

The authors appear to admit the failure of the  ivory tower “philosopher kings” (my terms) to actively participate in preventing the fall of local democracy: “Instead, even scholars who study local governments [only recently realized] the degree to which quasi-public institutions are insulated from the democratic process.”  That applies strongly to authoritarian HOA governments. 

Notes


[i] See in general, Whither goest local government? Restrictive HOAs or responsible public government (2009); CAI’s early awareness of HOA constitutionality, public mini-government (2021); HOAs are another form of local government (2021).

[ii] Private Metropolis: the Eclipse of Local Democratic Government,  Dennis R. Judd, Evan McKenzie, Alba Alexander, Global and Community Series, Vol. 32, Univ. of Minneapolis Press (June 22, 2021).

[iii]  Private Metropolis: explaining the demise of local public government.

[iv] CC&Rs are a devise for de facto HOA governments to escape constitutional government.

Business judgment rule not right for sui generis HOAs

This examination of the business judgment rule is a supplement to my amicus curiae brief to the AZ Supreme Court (Taylor v. Bendt, CV-21-0049, awaiting decision to hear case) in which I provided guidance in regard to 1) HOAs are sui generis created by rejecting Constitutional protections and instituting and supporting  separate laws for special organizations, 2) HOA-Land has been under the heavy influence and domination of the national lobbying entity, Community Associations Institute (CAI), and 3) as a result of the above a pro-HOA mindset has crept into our judicial system resulting in bad laws setting  bad precedent.

You can read the complete 30 page treatise (15 pages of argument plus apprendices) here .

Advocate HOA practical education webinar

After viewing Raelene Schifano’s first webinar I was impressed with her detailed knowledge and involvement in HOA issues. Her education series dealing with the nitty-gritty of HOAs is much needed and should be helpful to the average HOA homeowner.  She’s undertaking practical and knowledgeable proactive steps toward HOA reforms. While based in WA state, I strongly believe all concerned homeowners seeking information from an advocate and not from your HOA or its attorney, especially if he’s a CAI member, to listen up.

From her promo:

HOA Fightclub302

“I will offer this educational series every Saturday, August 14th at 11:00am CST. I allow everyone to participate and offer solutions. Hope to see you there.”

CAI’s early awareness of HOA constitutionality, public mini-government

It appears that CAI has adopted a “see no evil, hear no evil, speak no evil” attitude toward HOA constitutionality and public mini-government issues that are still prevalent today.  And it spread to the policy-makers.

Wayne S. Hyatt’s 1975 Emory Law Journal article, Condominium and Home Owners Associations:  Formation and Development, 2 years after the formation of CAI, presents his highly influential view on HOA constitutionality while recognizing that HOAs are mini-governments.

Wayne Hyatt “the most prominent advocate in CAI” serving as a 1975 “homeowners representative” and a former president (1978-79) (Privatopia, p. 219, 138 respectively). Hyatt  devoted his practice to working with developers of condominiums, master planned communities, resorts . . . to create community governance structures and community stewardship organizations.

While actively practicing law, he was also a member of 1) the American Law Institute (that wrote the pro-HOA Restatement of Servitudes, 2) the College of Community Association Lawyers (CAI affiliate) , the Community Associations Institute (CAI, created in 1973 by the National Association of Home Builders [grant of]  $30,000), and  3) ULI – the Urban Land Institute (sponsor of the 1964 “HOA bible,” The Homes Association Handbook) and served as a ULI Trustee.

He also served as an Advisor 1) to the Restatement of the Law (Third) Property: Servitudes, and 2)  to the Special Committees on a Uniform Condominium Act and a Uniform Planned Community Act of the National Conference of Commissioners on Uniform State Laws (Uniform Law Commission, UCIOA and UCA).  Hyatt received several awards from CAI.

Hyatt developed many of the Dell Webb’s master planned and resort/active adult association CC&Rs over the years.

His 1975 Emory Law Journal article gives readers a good idea of constitutionality and local government concerns that seemed to have evaporated over the years as CAI’s influence increased dramatically.  A few important excerpts:

  • “The California Code provides for an association and affords it the powers and duties of the mini-government.” {T]he [Georgia] legislature has in effect provided a large measure of home rule for what is in essence a category of small municipalities, and each has established a system of officers and directors in the nature of a mayor and council to oversee the exercise of this rule.” (At 988). 
  • “‘Has the state permitted, even by inaction, a private party to exercise such power over matters of a high public interest that to render meaningful’ constitutional rights, private action must be public?”(Footnote 33 at 983). [In simple terms, private government HOAs must be subject to local government protections].
  • “The Declaration is not a contract but, as a covenant running with the land, is effectively a constitution establishing a regime to govern property held and enjoyed in common.  It further sets forth procedures to administer, operate, and maintain the property. . . . the declaration and particularly the by-laws create not only a corporate structure but also a governmental authority that requires and deserves competent, experienced persons . . .” (at 990).
  • “The power of ‘levy’ is a distinctive characteristic of the association and removes it from a mere voluntary neighborhood group. . . . The imposition of penalties, whether fines . . . or a denial of use of facilities enforced by injunction, certainly represents quasi-judicial power to affect an individual’s property rights. . . . The possession and exercise of such power has substantial consequences with clear constitutional implications.  The courts have not yet considered a direct constitutional challenge to an association’s action.” (at 983).
  • “[T]he constitutional issue is most acute in rule enforcement; however the association’s established procedures, declaration, and by-laws should insure compliance with at least rudimentary constitutional principles, and there must be a procedure to protect members’ rights.” (at 984).

Nowhere will you find any equivalent discussion of HOA constitutionality, or HOAs as mini-governments or as a form of local public government. Not in its Manifesto, Community Next 2020 and Beyond (2016);  not in its Public Policies: Private Property Protection, Government regulation of Community Associations, and Rights and Responsibilities For Better Communities (July 15, 2021).

And not in any of its anti-constitution amicus briefs: Twin Rivers NJ appellate (2004), Dublirer NJ Supreme Court (2011);  Surowiecki, WA Supreme Court (2021) (business judgment rule overrides judicial review); Turtle Rock AZ appellate (2017); Foreshee WI appellate (2017).

Elitist large-scale HOAs

Understanding private elitist HOAs as social welfare HOAs

Data on HOA member demographics is scare but I’ve been able to uncover  documents, 11 years apart, that lead one to believe that H-O-As are elitist for the most part.  A CAI  survey showed 79% respondents with incomes over $50,000 and 86% with some college of more.  US Census showed 24.4% and 44.9% respectively. A confirming study on a large-scale H-O-A showed 88.1% with some college or more and 76.4% with income over $45,000.

According to CAI’s LSA (large-scale associations) category of 1,000 or more units, a Nevada CAI survey showed a mere 2.0% were LSAs. This emphasis by CAI on LSAs, a small minority of HOAs across the country, impacts all H-O-As of every size in the state as a result of its intense lobbying efforts, its one size fits all policy.

These surveys are not  consistent with the totality of social welfare HOAs as contained in the IRS databases of 36,532 organizations filing under (c)4. Just 10.8% (3,931) of these organizations met the criteria for “homeowner associations” under the IRS subcategories, a far contrast with the surveys. Analyzing the justification by the IRS for one large-scale H-O-A raised concerns about the (c)4 tax-exempt process.

The absence of any discussion by SCG, a large-scale H-O-A, of it’s social welfare status  and related activities is compelling.  Based on my many years exposure to HOA legalities, I would hazard a guess that the board had advisers and assistance in preparing and filing its application.  SCG has close ties to CAI by virtue of its directors being CAI members, its attorney and CAM being CAI members, and its accounting firm, Mansperger Patterson & McMullin, also being a CAI member.

Read the full research study at elitist H-O-As.