Undemocratic HOA governments: Politburo federalization

I am not surprised by the silence to my Blogcritic article, ” HOAs: Unrecognized De Facto Local Political Governments ”   It takes time to absorb, since there is the shock that this is happening not in a European or third world country, but here in the US of A. 

In an email back in the summer of 2006, when first writing about the broader impact on constitutional principles by these private governments,  I had the analogy of the Communist Politburo in my mind.  I wrote, in regard to writing another article,

 I will allude to CAI as the modern equivalent of Communist Russia’s Politburo that, from its HQ in Alexandria, VA, has sent its faithful and loyal followers to every state legislature to undermine the American system of government. With less that 17,000 members, smaller than the members of the Arizona Assn. of Realtors alone, CAI controls public policy with respect to the homeowner association governance of condominiums and planned communities.  While its membership represents less than 6% of the homeowners associations in the US as estimated by CAI, its lobbyists control legislation with respect to HOAs in almost every state of the union.

 As added documentation as to where the promoters and supporters of the HOA legal scheme,  are taking us — those legal-academic aristocrats as I refer to them —   here is a real example of a “federal,” Politburo government in Arizona.  The governing structure of Anthem in Maricopa County, AZ, a master community contractual government, binding homeowners under the servitude law of constructive notice, is such a Politburo.  It has a federalized form of government, drafted in 1999 by longtime legal-academic aristocrat Wayne Hyatt, setting out a central government, the Anthem Community Council, ACC, (those socialistic terms) that has no members and is governed by a board of directors.  As the owner/declarant of all the properties to be known as Anthem, it unilaterally declared that,

 To pay for the Council Expenses, all Owners, through an Association or directly, shall be obligated to pay assessments, fees, and other charges as set forth in this Community Covenant . . . This Community Covenant shall be binding upon all Persons having any right, title, or interest in any portion of the subjected real property, their heirs, successors, successors-in-title, and assigns.

 The ACC further binds all property owners who are subject to an association governing a phased subdivision, as hereby subject to this ACC.  In other words, ACC is the federal arm, or more accurately, the Politburo, overseeing the resident-citizens of the Anthem territory and all Anthem subdivision “state” governments.

 BTW, have you noticed the socialist terminology?  In the various state laws, HOAs are called “planned communities”, and Anthem has a “community council,” and there’s the “communal living” aspect of HOAs (described as such by NJ Justice in the Twin Rivers case).  Yes, folks, right here in the good ol’ US of A, and nobody cares.  Not even any of the political parties, or public interest organizations, or the media.

HOAs: Unrecognized, De Facto Private Governments

In the beginning, that’s 1964, the FHA went along with real estate interests and funded The Homes Association Handbook, which, as I have written in Part I of The Foundations of Homeowners Associations and the New America, was the bible for the mass merchandising for “the emergence and acceptance of a quiet innovation in housing” (taken from a historical recounting, Community Associations, the printing of which was funded by both CAI and ULI).

The Handbook had something for everyone who would be involved in making this incarnation work as a widely accepted mode of housing: the builder, the local municipality, the mortgage companies, and even the consumer/homebuyer, to whom it promoted “carefree living,” “affordable housing,” and “maintaining property values,” among other benefits. No negatives were given.and no mention, in this 433-page Handbook, of creating a governing body in accordance with public government statutes (see your state’s municipality laws on incorporated towns or even on home rule). No mention either, of the requirement to be a public entity and therefore to be subject to the Constitution, nor that the Fourteenth Amendment applied to the HOA. The only hint at providing for a democratic form of government came from the promoter’s concern for the legal justification for the HOA to have authority over the private property interests of the homeowners and to impose compulsory assessments: allowing the owners to vote.

Read more on BlogCritics:  HOAs: Unrecognized De Facto Local Political Governments 

Sun City HOA: a real independent principality

Sun City, AZ. a renowned retirement community, is an unincorporated town under the governance of the Sun City HOA (SCHOA).  It does not qualify as a planned community or as an HOA under the state’s statutes. SCHOA is a private nonprofit corporation — no mayor & no town council, governs it.  A sort of a throw back to the times when the sovereign, the king, issued charters or grants of authority to private organizations to conduct business or to govern new lands.

In modern times, does the nonprofit corporation charter by the state, the new “sovereign” of a republic, truly grant a nonprofit corporation the right to function as the legitimate government of a sub-division of the state?  This could not possibly the intent of the corporation statutes since the state abounds with municipal corporation statutes — cities, towns, special districts, etc. — and with methods and procedures for incorporating new towns and cities.  The appeal of direct democracy, local government control or “home rule” is understood, and agreeing to be governed by a business form of government under corporate laws could be viewed as a strong desire for independence from unwanted influences and intrusions.

Sun City is indeed such an independent government, not answerable under state municipality laws or the Constitution, as it is not subject to the planned communities statutes. Sun City is just subject to the broader corporation statutes that were in no way written to establish a democratic form of political government.  This sort of independent principality status has more in common with a tribal society where the inhabitants of the village are loyal first and foremost to their tribe and village, and to the leaders of the tribe, than to their state or country.

This tribalism reveals itself as the Sun City HOA does not require mandatory assessments, yet each deed requires that the owner make mandatory payments to another nonprofit, the Recreational Centers of Sun City (RCSC).  And in order for RCSC to qualify for common area real estate tax treatment, all owners “must be obligated to pay mandatory assessments to maintain and manage the common areas.”    Consequently, to accomplish this reduced tax basis without having to be subject to state planned community laws, a separate agreement is required to be signed by the owner agreeing to pay, not the HOA, but RSCS dues.  This is extraordinary, since the deed itself could simply require mandatory payments to a bona fide HOA that would own and manage the common areas, as is the case with a genuine HOA.

The strong desire to independent of state laws, yet to use them as above, required an amendment to the common area valuation statutes, ARS 42-13402 et seq., adding the “must be” clause above in 2000 (Ariz. Sess. L. Ch 196; HB1251).  What could have possibly been the intent of this statute other than to bestow a gift upon Sun City, an unincorporated community, tax benefits amounting to an estimated $113,000 per year, or $1,130,000 over the past 10 years?

Today, the residents of this independent “principality” are coming once again before the legislature, with the SCHOA attorney (a member of the national pro-HOA lobbying group, CAI), to deny the state its legitimate right to regulate and control the public streets within Sun City (HB 2153).  Suddenly, parking has become a safety issue in spite of the fact that, from the very beginning, the county planning board approved these alleged unsafe streets, and legal mechanisms are available to SCHOA to obtain variances on a case-by-case basis.

Don’t buy it!  Sun City is demanding complete freedom from the state with no interference into the “internal affairs” of their principality.  State cooperation, provided it is consistent with the aims and goals of Sun City, however, is acceptable and welcomed.

Can HOAs be democratic without fair elections?

A homeowner rights advocate raised this very “on point” question:  Is buying votes in an HOA election illegal?  I initially answered that I was not aware of any explicit restrictions in the statutes, the governing documents, or in case law.  However, after reflecting on it for a while, I found arguments relating to the justification of the authoritarian HOA regimes and the need for a right to vote by the members.

Restatement Third, Servitudes, Ch 6, Common-interest communities (2000):

6.16.  Representative Government.

(c) Election of governing board. . . . [E]lection procedures must provide a reasonable opportunity for eligible members to become candidates for election and to make their views known to the electorate, and a reasonable opportunity for eligible voters to cast their votes.

6.18. Meeting and elections.  [nothing here addresses the question of fair election procedures and protections of a members’ election to the board].

Comment (a) speaks to a servitude (covenant) on a member’s right to participate in the governance of the board.  It justifies the HOA control over subdivisions with,

One of the primary justifications for permitting . . . servitudes that subject property owners to the often extensive powers of the [HOAs] to affect their property values and quality of life is that the members have the power through the political process to control the actions of the association.

 

What a false and erroneous statement about the political power to effectively control the  board. It reflects  an “ought be” rather than as “is”.  This erroneous statement, relied on by the courts, was made from high above by the legal-academic aristocrats who wrote the Restatement!   There are no fair elections covenants and procedures in the HOA legal scheme to protect the people that come anywhere near the laws governing elections in the public realm.  And, in my view, deliberately ignored along with all other 14th Amendment protections of due process and the equal application of the laws. 

 

The “comment (a)” excerpt was just lip service. How on earth can homeowners be effectively empowered in a corporate form of governance, under an adhesion contract written in favor of the business interests of the developer, and one that protects the interests of the HOA corporation over the individual rights of members?  To plead ignorance of constitutional law 101 and government law 101 is ludicrous!  This treatment  with its lack of concern for constitutional protections can only be viewed as intentional.

Why do I argue that the lack of constitutional protections is deliberate?  There are several self-evident reasons, but let me trace the origins of why the “voting makes the HOA democratic” defense came about, and why it was necessary to make this misleading argument.  In several prior posts over the years I made reference to the Homes Association Handbook, Technical Bulletin #50 (published by the Urban land Institute in 1964), as the “bible” for the modern incarnation of homeowners associations.  In the Handbook we find parallel statements on voting and the need for democracy in HOAs.  Here are excerpts as can be found in The Foundations of Homeowners Associations and the New America, Part I, The Homes Association Handbook, p. 17:

The other [as opposed to a bureaucratic style of leadership] requires more participation in order to give members a feeling of satisfaction with association operations; it may be called the ‘democratic style’.   

The members can always fall back on democratic controls provided in the bylaws [the corporate governance form of bylaws] to exercise their power to correct a situation . . . . But usually members will not involve themselves in active participation.

The right of every homeowner to membership and to vote is, in our opinion, critical to the strength and success of an automatic homes association.

Because the articles and bylaws of a corporation are relatively easy to change, further strength will be lent to this arrangement [that mandatory assessments require mandatory membership] by inserting a provision governing membership and voting rights in the association in the text of the declaration of covenants and restrictions.

The above accurately reflects the lack of treatment of constitutional protections or any concerns for establishing a working form of government equivalent to public government.  This intentional disregard of the protections of individual rights has remained over the years, and its influence on the legislatures and courts can be seen in numerous incidents.

As examples:  the 2007 Twin Rivers free speech case where servitude law was given dominance over constitutional law; and in the 2009 declaration by an Arizona superior court that an independent tribunal, the state’s administrative hearings function, was unconstitutional, but the “kangaroo” HOA courts are not.