Judicial error regarding HOAs as mini-governments and state actors

Two cases directly dealing with HOAs as mini or quasi governments by means of state actions tests have come to my attention: Brock v. Watergate and Westphal v. Lake Lotawana.[1] (The question of an HOA being a state actor is not raised, but that a specific act of the HOA is a state action. The questions are fundamentally different.) The decisions were based on the public functions (company town) test and one of the US Supreme Court criteria, the “close nexus” test.[2]

Here the question of an HOA being a municipality is linked to showing a comparison with company towns (established by corporations to provide housing for their employees) under the public functions test, which was held to be a municipality. The Court then makes the giant leap to hold that since the HOA was not a company town, and therefore not a municipality, none of its actions can be considered a state action. The Court’s illogical conclusion is that no act of a private entity can be considered a state action, because the entity is not a municipality! This attitude makes a mockery of state action/actors laws that protect citizens from quasi-governments. (Think about this after reading the excerpt below.)

The 1987 Florida Brock opinion, just 4 years after the court quoted Wayne Hyatt’s opposing view in Cohen Hill (see note 2), held that:

A homeowner’s association lacks the municipal character of a company town. In the case of an association, the homeowners own their property and hold title to the common areas pro rata. Moreover, the services provided by a homeowners association, unlike those provided in a company town, are merely a supplement to, rather than a replacement for, those provided by local government. As such, it cannot be said that the homeowners association in this case acts in a sufficiently public manner so as to subject its activities to a state action analysis. Moreover, the association’s maintenance, assessment, and collection activities are not sufficiently connected to the State to warrant a finding of state action. The state cannot be implicated in the association’s activities solely because the association is subject to State law. We conclude that the association in this case does not stand in the position.

(The Court did not realize that most HOA common areas and facilities are not owned by the members, but by the HOA corporation. The members are third-party beneficiaries. The second sentence above is not accurate.)

In further shocking dicta (unsupported legal authority for statements) in the above quote (see To Be in note 2), the Court declared that HOA services are merely a supplement to local government and that as a supplement its acts are insufficiently municipal in nature. Say what?

Well, I got news for the Court. Applying the “common meaning of the word doctrine” shows that “to supplement” means “to complete, add to, or extend by a supplement” and a “supplement” means “something added to complete a thing, supply a deficiency, or reinforce or extend a whole.”  With this definition the HOA would be a part of local government to complete it or supply a deficiency.  The HOA is a municipality!

Sadly, the narrow focus on individual and separate acts and actions to determine the involvement of the state in the functions and activities of the HOA is misguided.  Rather, it is the collection of the numerous acts of the HOA that should be used to determine whether or not the HOA is an arm of the state and stands in place of the state.  Consider for example, does local government supplement state government?  Does town local government stand in the place of state government?

However, based on the irrational argument used in Brock, as quoted above, the Court ruled that the HOA “does not stand in the position of a government.”


In the 2003 Missouri Lake Lotawana opinion, the Court reversed the trial court’s ruling, asking for a declaratory judgment, using the irrational opinion in Brock and held that the plaintiff’s allegations “require state action, and that, here, there is no state action because the Association is not a state agent. . . . the trial court is effectively saying that Mr. Westphal can have no claim because the Association is not a state actor.”

On the other issues the plaintiff directly alleged state action, arguing that,

[T]hat the Association’s conduct is state action because the Association is a quasi-governmental entity.  He maintains that the Association ‘operates as a ‘mini-government’ because it raises money through dues, has an elected governing body, enacts rules and regulations, and enforces such rules through the court system. In support of this argument, Mr. Westphal relies on [Chesus and Terre du Lac].[3]

Referring to the two cases, the Court concluded,

While both cases discuss how a homeowner’s association operates as a “quasi-governmental entity,” neither is authority for the concept that an association’s “quasi-governmental” actions are state actions. Mr. Westphal fails to cite any authority to support his argument that the action of a quasi-governmental entity is state action.

First, the Court selectively only used the term “quasi” and ignored “mini” as in stated Chesus. “Mini,” of course, speaks of a small municipality, yet a municipality. Both cases simply, without further ado, quote the same Wayne Hyatt statements as I quoted in To Be (see note 2) that contain both words.

And the Court is technically correct with regard to a lack of a court finding, but taking such a view makes a mockery of the law and is highly illogical. As argued since “quasi” means “like,” then any action of a quasi-government must be, a quasi-state action. The degree of “quasi” must extend to state actions, too. Stop the “word games”!

“Quasi” must be defined, but not in terms of the public functions test or private entity devise. It must be defined in accordance with our constitutional system of government that cannot allow for outlaw governments to stand alongside constitutional local government.

This commentary, somewhat technical at times, demonstrates the failure of the courts to address the fundamental issues that HOAs are mini-governments, and that by the collective functions and actions of HOAs there is clear and convincing evidence to make the case that they are indeed state actors. The whole is greater than the sum of its parts.

(As a reminder, I am not a lawyer and I simply offer my views on HOA-Land.)


[1] Brock v. Watergate, 502 So.2d 1380 (Fla. 4 Dist. App. (1987); Westphal v. Lake Lotawana, 95 S.W.3d 144 (Mo. App. 2003).

[2] See in general, To be or not to be a mini or quasi government? Hyatt said ‘yes’; Do state HOA Statutes Establish HOAs as State Actors?

[3] Chesus v. Watts, 967 S.W.2d 97 (MO. APP. 1998);  Terre du Lac Assn v. Terre du Lac, Inc., 737 S.W.2d 206 (MO. App. 1987)


HOA Justice and Reconciliation Commissions

The overall mission of the HOA Enlightenment Movement is simply to get the word out about the reality of living in an HOA.[i]  The continuing wounds inflicted on homeowners must be accounted for. Wounds that have been inflicted by rogue[ii] HOA boards supported by the indifference or pro-HOA bias of state legislators, by the “not my problem” attitude of the “good” HOAs who stand by and allow evil in their industry, and by the failure of the national educational trade group, CAI,  to help clean up the industry.

In the interest of justice and reconciliation, a vehicle such as a Truth and Reconciliation Commission[iii] is needed to heal the wounds so our communities and society can return to the principles and basic values of America. A simple “let’s start over again” or “let us be friends” kumbaya approach will not work, nor will the continued failure to hold the offenders accountable for their actions.  Homeowners have suffered financially, legally and emotionally, and closure and justice is warranted. 

The Commission would grant amnesty to offenders and violators of the governing documents and laws who caused such harms, if the offenders could show that they were acting under orders.  As occurred in the 2008 Florida HOA hearings held by Julio Robaina,[iv] the homeowner witnesses’ would confront the offenders.  The offenders would include directors, officers, managers, and HOA attorneys. 

This type of commission with powers to file suit against offenders, who cannot show that they were just following orders, can only be established through state legislation. Advocates can enlighten the media, the state legislators, homeowners, and the public in general to demand the rapid creation of such committees within their respective states.



[i] By “HOA” I am referring to that category of subdivision with a purpose to create an “an adult community” (retirement) or a resort community where owners happen to live similarly to a vacation home resort. I am speaking of those subdivisions that would be classified as a home with some or no amenities, or not even any common properties. In the former instance rules are expected and in the latter the rules are intrusive.

[ii] By “rogue” I mean those boards that have been repeatedly and intentionally grossly negligent of or have ignored their duties and obligations under state laws and the governing documents.  They do so with the knowledge that there are no meaningful penalties for such egregious conduct.

[iii]  The HOA version of this commission is based on the “Welcome to the official Truth and Reconciliation Commission Website,” http://www.justice.gov.za/trc/, August 21, 2013.

Published in: on August 21, 2013 at 4:11 pm  Comments (3)  
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The HOA Enlightenment Movement continues to spread: just legislation for homeowners

A review of new legislation being considered in many state legislatures clearly shows a growing trend toward justice and fair play for homeowners.  Substantive HOA reform bills can be found in Arizona, Colorado, Florida, North Carolina and Texas to name those are known to me.


SB 2292 seeks to end mandatory HOAs for new subdivisions.

SB 1278 reasserts local municipality control of public streets in HOAs.

Colorado.  HB 1276 seeks to restrict HOA foreclosures by setting forth strict procedures for HOAs to follow if they seek to foreclose on a homeowner that include restrictions on the sue of collection agencies, the adoption of a formal payment plan, notice to delinquent homeowners stating the exact amounts owed, and the procedures to resolve issue before any action can be taken..


SB580 places restrictions on management firms.

SB 596 creates a powerful, bona fide state agency to regulate HOAs and that can make rules, to investigate complaints and to seek penalties and restitution in civil court.

North Carolina.  HB 175 is another foreclosure reform bill that prohibits assessment foreclosure, but allows HOAs to obtain court judgments for the assessments owed.  It requires a notice of a claim of lien to be served on the homeowner before any action can be taken.

Texas.  HB 3803 seeks state oversight by allowing the attorney general investigation of financial wrong-doing by the HOA, with penalties.

Much, much more legislation dealing with substantive HOA reforms is needed.  This legislation would deal with fair and just due process procedures in HOA disputes, foreclosure reforms, clean elections procedures, meaningful enforcement against HOA violators, and ending the “consent to agree” misrepresentation in the sale of a home in a HOA.


For more information . . .

the age of HOA enlightenment is coming?

And the HOA Enlightenment Movement grows . . .

Court decisions: HOA Enlightenment Movement vs. the Dark Ages

HOA settles Trayvon death — over $1,000,000?

Homeowners association is believed to have paid more than $1 million.

“During an interview in February, Zimmerman’s attorney, Mark O’Mara, said Trayvon’s parents had made a wrongful death claim against the homeowners association. They’d tried to settle through mediation, he said, and the association or its insurer had offered $1 million but Trayvon’s parents had rejected that amount.”

 Gee, where were all those fantastic HOA attorneys to educate HOA boards as to their liabilities not only under HOA laws, but corporate, agency, and tort laws?


HOA liability: respondeat superior and agents as in Trayvon case
Trayvon — Zimmerman reported to be acting for HOA
If Trayvon HOA is sued, who should share the blame?
Published in: on April 5, 2013 at 10:07 am  Leave a Comment  
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Is Florida’s SB 596 a good bill? YES! Part 2

This post takes a closer look at some of the provisions of SB 596 with its intent “that the powers and authority granted to homeowners’ associations . . .  conform to a system of checks and balances in order to prevent abuses by these governing authorities.”  At the request of then Rep. Julio Robaina I testified at the Feb. 23, 2008 all-day legislative HOA hearing in Tampa, FL.  Public domain clips from this hearing, several of which can be found at the HOAGOV YouTube website, clearly show why checks and balances are sorely needed.

Aside from the introduction of effective enforcement provisions, the other changes of substance deal with regulating the conduct of what the HOA “can and can’t do.”  They are the payment of assessments, elections and proxies voting, and transfer of declarant control.

These substantive changes take the first 17 pages of the bill and is followed by non-substantive changes to 720.3024 creating the Ombudsman office and election monitoring, and HOA Study Council (720.3025). The other substantial changes include:  Section 720.3085, the “pay or die” section (my words), Section 720.306 dealing with meetings and substantial revisions to the elections and proxy voting processes, and changes to 720.307 relating to the transfer of power from the declarant that takes us to page 40 and the subsequent technical changes.

First, I will look at what I call the “pay or die” statutes regarding the continued payment of assessments even when payments are being disputed (720.3085(9)).  “Pay or die” meaning that if any homeowner doesn’t pay his assessments in a timely manner the HOA will die mentality.  I find this reprehensible, approaching an indentured servitude condition, and demonstrating a “close nexus” and a “symbiotic relationship” between the HOA and state, a “You do for me and I will do for you” relationship.  This statutory requirement to pay or else is sufficient alone to have the HOA declared a state actor!  Especially when the statutes also permit the HOA to deprive is member-residents of their rights, freedoms, privileges and immunities as citizens under the 14th Amendment.

However, the bill at least moves forward with checks on the unilateral foreclosure powers of the HOA.  It forces the HOA to prove the correctness of its claim, allowing the court to issue equity judgments that the HOA can’t add right, had sent the notices to the wrong address, refused to cash checks and/or held them past the deadline before cashing in order to demand late fees, just to name a few of the abusive practices.

Read the new subsection 720.3085(9) carefully.  A dispute of the amount would only require deposits of assessments during the legal action, and not the disputed amounts. The term “disputed” needs to be clarified to include abuse by the HOA as mentioned above and not limited to just amounts.  Of course, the justification for clauses (d) and (e), the HOA will die clauses, can be debated.

There are some issues with proxy voting (720.306), but the changes in the bill will serve the homeowners well. Subsection (9) deals with board elections and restricts members who are in arrears to the HOA cannot run for office.  That’s fair.  If a member cannot vote if he is in arrears, a member in arrears should not be allowed to hold office. Co-owners cannot both serve on the board, which give that unit excessive power.  I find the requirement to certify knowledge of the governing documents 90 after an election as preposterous and pro-HOA.  Want to be on the board?  Get educated first!

In regard to the transfer of power changes added in the bill serve to benefit the homeowner.  While not completely airtight, the term “in the ordinary course of business” would restrict the declarant from sitting on lots in order to retain control.  What is missing, as just occurred in Arizona, is the declarant’s modification of the governing documents before turning over its power to lock him in place for all practical purposes.  The usual introductory phrase, “notwithstanding anything in the governing documents to the contrary” should be added to the bill.

As for my views, the inclusion of effective enforcement authority overwhelming outweighs any concerns that I have mentioned above.