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).


Colorado HB 1200 needs your active support

Colorado’s HB 1200,[i] brought to my attention by journalist Ruthy Wexler, is an outstanding bill that provides for the long ignored, not my job, state oversight of HOA violations. It is a measure that provides the constitutional protections against depriving “a person of property without due process of law” and against denying “the equal protection of the laws.” These protections have been denied by the HOA “constitution,” its CC&Rs. Although a private contract, these protections cannot be waived.

HB 1200 is a much more protective bill of homeowner rights and freedoms as was introduced in Arizona in 2006 and adopted in the face of stringent opposition by CAI. CAI then proceeded in 3 court cases over 4 years to have the statute declared unconstitutional and have the ruling applied to all Arizona HOAs. It almost won but the Arizona Supreme Court denied it precedent value and in 2011 the statute was amended to handle CAI’s claims of unconstitutionality. It is in operation today under Arizona’s real estate department.

I was actively involved in the creation of this Office of Admin. Hearings adjudication of HOA disputes and in the defense of its constitutionality.[ii]

The role of CAI, as presented above, should not be taken lightly. Strong and active homeowner support will be necessary to carry this bill to law. I commented on former Colorado Senate President Morgan Carroll’s book:

Yes, there have been champions of HOA reform, but advocates fail to realize that these legislators must buck the powers that be at the legislature and win over the votes of a majority of other legislators. And this takes outcries by many people, not with gripes of “I wuz wronged!” but with valid arguments as to why HOAs are wrong for the state and the general public well-being.  And how to fix  these wrongs.[iii]

Take heed Coloradans and get behind the sponsors today!

Notes

[i] HB 1200.

[ii] See AZ Supreme Court accepts advocate’s amicus brief in challenge to HOA statute.

[iii] See Why HOA reform advocates fail at legislative reforms (2011).

Toward a democratic HOA subject to the Constitution

The news is good lately as several state legislatures have and are dealing with substantive HOA reform legislation that confronts the HOA legal structure as un-American. California’s SB 323 passed into law last year amid the hostility of CAI; Florida’s HB 623 is in the legislative process of becoming law; and Arizona’s SB 1412 is just starting out in the legislature.

The substantive amendments to state laws are:

SB 323 (CA) — seeks to introduce fair elections procedures for HOAs, addressing one of my 6 substantive defects in the HOA legal scheme.  Deborah Goonan’s excellent discussion of this bill[1] brought to my attention a second defect in the HOA legal scheme, the lack of enforcement of the law.

“A member of an association may bring a civil action for declaratory or equitable relief for a violation of this article by the association. . . . “A member who prevails in a civil action to enforce the member’s rights . . . the court may impose a civil penalty of up to five hundred dollars ($500) for each violation.”

HB 623 (FL) —

“This provision will amend 718 F.S. so any bylaws, or reasonable rules or regulations of the association which diminish or infringe upon any right protected under the Fourteenth Amendment[2] to the United States Constitution or Art. 384 II of the State Constitution and would be void and unenforceable without further action of the association. However, the provision states that the association may record a notice in the public records of the county in which the condominium is located evidencing its intention to not enforce such provision, it would foolhardy for them to do so. This has been overdue in our quest for achieving equal rights.”[3]

Much to my surprise Eric Glazer, of FL HOA & Condo Blog and host of HOA Condo Craze, warns of danger if HB 623 is made law.[4]

To simplify, the 14th Amendment made The Bill of Rights (The first ten amendments to the Constitution) applicable to the states.  So, this law basically says no provision of your governing documents can infringe upon the rights you have under the Bill of Rights.  All of you know several of these rights such as the right to free speech, freedom of assembly, and freedom of religion.

There is plenty of law out there that says when you move into an association, you may give up some of the rights you may ordinarily have in your private home. You do this by agreeing to be bound by the governing documents.

SB 1412 (AZ) — seeks to prohibit HOAs and condos from restricting political free speech. Members are permitted to associate, meet, discuss, show signs regarding political activity.

“NOTWITHSTANDING ANY PROVISION IN THE CONDOMINIUM DOCUMENTS, AN ASSOCIATION MAY NOT PROHIBIT OR UNREASONABLY RESTRICT A UNIT OWNER’S ABILITY TO PEACEFULLY ASSEMBLE AND USE PRIVATE OR COMMON ELEMENTS OF THE CONDOMINIUM IF DONE IN COMPLIANCE WITH REASONABLE RESTRICTIONS FOR THE USE OF THAT PROPERTY ADOPTED BY THE BOARD OF DIRECTORS. AN INDIVIDUAL MEMBER OR GROUP OF MEMBERS MAY ORGANIZE TO DISCUSS OR ADDRESS PLANNED COMMUNITY BUSINESS, INCLUDING BOARD ELECTIONS OR RECALLS, POTENTIAL OR ACTUAL BALLOT ISSUES . . . .”

I cannot emphasize that these bills have a very large umbrella covering many issues found at fault in HOAs. They provide the legal authority supporting many, many complaints, even those where the homeowner is just not happy with the way the HOA is run. In these cases, the HOA hasn’t really violated any law of the governing documents per se. The complaints should their focus on the lack of fair elections to remove wayward boards, or due process and equal protection of the law violations. The 14th Amendment applies!

What is needed is the strong support for the champions of these bills, Sen. Bob Wieckowski in CA, Senator D. Farnsworth in Arizona, and Representative Jason Shoaf in Florida. The California bill made law was achieved, in my opinion, with the help of the strong support of Marjorie Murray of CCHAL.[5] They fought and are fighting the system — state legislatures do not favor HOA reforms.

References

[1]California HOA elections bill update (March 2019)”, Deborah Goonan, Independent American Communities.

[2] The 14th Amendment. Section 1 state prohibitions against laws denying due process of law and the equal protection of the laws, and abridging the privileges and immunities of citizens.

[3] Comment number 6, CCFJ.net, Milena Macias, Esq. (Feb. 4, 2020).

[4] “A PROPOSED AMENDMENT TO THE LAW THAT HAS DANGER WRITTEN ALL OVER IT”, Florida HOA & Condo Blog, Eric Glazer, Esq. (Feb. 3, 2020)

[5] Center for California Homeowner Association Law.

 

 

 

 

Homeowner Advocate Research Research

FYI —-

I have collected, and read over the years, several hundred federal and state opinions on HOAs, state actors, mini-governments, foreclosure, due process, equal protection of the laws, constitutionality, etc.  Must be supreme court or appellate court records. It would be helpful to all if you would forward me a link to any important cases that you’ve come across so I could add them to my database.  Email as attachment to info@pvtgov.org, or fax to private fax at 480-907-2196.

Any questions can be sent by text or, preferably, email. No calls please.

Thanks.

halris_card

state legislature not concerned about the plight of HOA members

Dianna Wray does an excellent, detailed and historical presentation of the unchecked and unregulated power of de facto HOA governments operating outside of constitutional protections – the lack of due process and the unequal equal protection of the law. Without mentioning the above, Wray presents several stories of Texas HOA abusive power that strikes to the heart of homeowner mistreatment and injustice, as the legislature ignores his plight as if Texas were a banana republic. And rightfully so, she extends these unthinkable conditions to occur in all states.

The author warns her readers that,

HOAs are almost completely unregulated and the law is heavily weighted on the side of the homeowners’ associations — they almost always win. In Texas there is no regulatory agency overseeing homeowners’ associations. Most county attorneys and district attorneys won’t get involved with an HOA unless there’s evidence of criminal wrongdoing, and the website of the Texas Attorney General’s Office explicitly states that the office does not investigate homeowners’ associations and advises homeowners to get a private attorney. Most private attorneys conclude that the business just isn’t worth it.

And that goes for all state attorney generals.

She quotes Texas attorney David Kahne (co-author of the AARP bill of rights for homeowners, among other things).

Typically by the end of the lawsuit, it’s been such a hassle, most of the lawyers representing homeowners swear they’ll never do it again. . . . It’s lawsuits over grass growing in the driveway cracks and people who have fallen behind on their dues because of real problems in their lives and then they end up with thousands of dollars of debt, most of it owed to the attorneys.

Wray adds that Evan McKenzie argues,

that HOAs erode homeowner rights because they create a system in which the HOA is never held accountable for its actions. ‘Why do people think you can live in an urbanized area without any form of government except for these privatized entities that are under no legal obligation to uphold your rights?  (My emphasis).

Readers of this commentary must understand, and must understand very well, that the laws on the books in all states are grossly inadequate for the purpose of compliance.  When laws, like HOA laws, fail to provide effective enforcement penalties against perpetrators, like HOA boards, they are merely recommendations and suggestions.  The legislators are relying on the good will of HOA boards, attorneys and managers to voluntarily comply not only with the letter of the law, but with the intent as well.  The record clearly shows that this is not so!

Obviously in disregard of the above criticisms of the HOA-Land legal structure, HOA supporters respond with the same ol’ platitudes. From the HOA attorney,   “Believe me, a lot of people complain about HOAs, but the alternative is chaos . . . It seems like I have a really mean, nasty job, but if somebody doesn’t do it, suburbia would collapse.”  

From the Houston Texas CAI chapter Executive Director,

Without HOAs, common areas wouldn’t be kept up and people could paint their front doors scarlet, park boats on their lawns, put up countless yard signs, keep any number of pets and have six-foot-tall topiary rabbits in their front yards, destroying the look and value of neighborhoods.

They are resorting to fear-mongering!

These supporters, including CAI, are saying that they do not trust their fellow Americans and concerned people must resort to authoritarian contracts and strict enforcement of the rules in order to have a healthy, desirable and joyful community. Can you believe that? Talk about breeding hostility and division among your neighbors. One false move, a report by any “kindly” neighbor, can bring down the wrath of the HOA enforcers.

The author reminds of events in Texas long forgotten or not known to the people, even in Texas, of the battles of Winonah Blevins (2002) and Geneva Kirk Brooks (2004), pioneers in the fight for homeowner rights. Before these cases, won by the homeowners, there was the outrageous Texas Supreme Court decision in Inwood v. Harris (1987) in which the Men in Black ignored the explicit wording of the Texas Constitution regarding foreclosure protections and permitted Inwood to foreclose on Harris. (A few years later, apparently in response to the growing outcry of the court’s shameful special interest decision, the legislature amended the constitution to validate the Harris decision.)

 While the article is lengthy, it is not a manual of how to get along in HOA-Land and remain happy by just following the rules. Or a list of “should-be” or “ought-to-be” statements that are unattainable and beyond the norms of society, like you must accept the surrender of individual liberties for the greater good. It deals with the reality before homeowners and the intentional failure by state legislatures — in all states — over the years to stand by the people and not the special interests.

It is a “telling it like it is,” or that it could easily be that way at any time in your HOA with a changing of the HOA board, or a new attorney, or a new management firm. The homeowner, as presented in Dianna Wray’s well written article, lives at the suffrage of the board; helpless to defend themselves against HOA abuse without a costly battle. Remember that well!

 

Tipping Point: In Huntington Village, the Community Association has All the Power, Dianna Wray, Houston Press ( http://www.houstonpress.com/news/tipping-point-in-huntington-village-the-community-association-has-all-the-power-7998755, Dec. 15, 2015).