If only advocates would stand up to CAI

This month, April 18th and 21st,  I posted comments[1] on the dereliction of duty by state legislatures and the need for the DOJ to investigate state legislatures as well as the undue influence by CAI teachings in its School of HOA Governance[2]  Yesterday, the 23rd, it seems that CAI is trying to soften its misleading statements and failure to disclose the whole truth about HOA-Land.  Previously I had commented upon Kelly G. Richardson’s[3]  2020 article  in The Public Record,[4]

“Richardson seems to be saying that indeed a director has a fiduciary duty to the member but that duty to the HOA comes first.   He further warns directors, who have relevant knowledge and expertise, to remain mum and not speak out least he be sued. If the director chooses to speak out as he should do in the best interests of the HOA, ‘the director is not acting as a director but is an unpaid consultant and could be held liable for their advice.’”[5]

In yesterday’s “ HOA Homefront: What surprises lurk in your CC&Rs?”[6]  Richardson added to his attempt to “tell it like it is” revealing some hidden aspects of CC&Rs. (Emphasis added).

“Here are 11 things about CC&Rs that might surprise you, before you read them. 

“CC&Rs bind all owners, regardless of whether they read it, understood it, or received a full copy of it. As a recorded document, CC&Rs are a “covenant running with the land,” meaning a legal commitment attaching to the land and therefore its owners.

“Normally enforced by courts, even if they seem unreasonable. The California Supreme Court ruled in 1994 that CC&Rs are presumed enforceable, with some narrow exceptions (such as if they contradict a law).

Original developer-supplied CC&Rs often are boilerplate with parts not applicable to the community. This is because the developer’s primary interest is to obtain quick approval from the Department of Real Estate to begin selling the homes.

As limits upon owner autonomy, CC&Rs can seem intrusive at times. These limits help to protect neighbors from unneighborly behavior and against properties detracting from the community.”

I must admit he comes clean to a certain degree admitting to some of those hidden aspects of CC&Rs, which the interested parties including legislators and the media should have been made aware prior to any decision-making, or before buying a home in an HOA. Too late after the fact!  Additionally,  Richardson fails to “call for action” — frequently used by CAI chapters — to correct these silent gotchas by adopting my proposed legislation,[7] which plainly says,

“The association hereby waivers and surrenders any rights or claims it may have under law and herewith unconditionally and irrevocably agrees 1) to be bound by the US and State Constitutions, and laws of the State within which it is located, as if it were a subdivision of the state and a local public government entity, and 2) that constitutional law shall prevail as the supreme law of the land including over conflicting laws and legal doctrines of equitable servitudes. Legislative dereliction of duty

“Furthermore, any governing documents of an association not in compliance with the above shall be deemed amended to be in compliance, and notwithstanding the provisions of any law to the contrary, a homeowners’ association shall be deemed to have amended its governing documents to be in compliance.

Lesson to be learned

For far too many years advocates and homeowners have failed to rally against the heavy influence of CAI on state legislators and the media, thereby allowing CAI to set the tone unchallenged.  This failure demonstrates a severe weakness to achieve HOA reforms of substance.  It is widely known, and proven countless times in other successful arenas, that legislation is accomplished by means of a widespread outcry by the “victims.”  Former Colorado Senator Morgan Carroll strongly advises her readers,

We elect people to represent our interests, but our elected representatives cannot adequately represent you unless they hear from you. . . . If you don’t participate in your government, then the only remaining participants in the system are legislators and lobbyists.” 

It has been a long time failure by homeowner rights advocates to achieve meaningful, constitutional reforms. For whatever reason for this lack of involvement in a nationally united front, the practical reality has been the continued control and dominance by the CAI School of HOA Governance.[8] 

As an aside, CAI’s March “Call For Action”, “Grassroots Advocacy Initiatives Are More Essential Than Ever,” seems to be desperately seeking more active grassroots  involvement by its members, yet advocates remain silent.

“It is more important than ever for CAI advocates to engage in grassroots activism across the country. CAI believes it’s crucial for our members to tell legislators their stories and help them better understand the need for proper public policy decisions when approaching state legislation regulating community associations.”[9]  

Presently, Colorado’s HB 21-1229 is falling by the wayside as well as Arizona’s HB 2052, resurrected from last year’s SB 1412, both excellent reform bills.  California is facing problems with  SB 391 and in Florida  SB 623 (2020) went into defeat.

If only more had come forward and challenged, criticized, and exposed CAI we would have achieved much, much more.  Richardson’s article offers an excellent opportunity to step up to the plate!

References


[1] See Legislative dereliction of duty: supporting HOAs and   State legislatures must be held accountable for dereliction of duty.

[2] The foundation and principles of the School can be traced back to CAI’s Public Policies, The CAI Manifesto (its 2016 “white paper”), its numerous seminars and conferences, its Factbooks and surveys, its amicus briefs to the courts, and its advisories, letters, emails, newsletters, blogs etc. I have designated these foundations and principles collectively as the CAI School of HOA Governance.

[3] Kelly G. Richardson: CAI Board of Trustees 2011-2017; Community Associations Institute (CAI), National, President, 2016; College of Community Association Lawyers (CCAL), 2006; CAI’s California Legislative Action Committee, Chair, 2009, 2010; National Association of Realtors; California State Bar Association, Real Estate & Litigation Sections.

[4] HOA Homefront: Fiduciary Duty – What It Is, And Is NOT,

[5] CAI School faculty advice – managing HOAs.

[6] The Press-Enterprise, News, Housing, Opinion (April 23, 2021).

[7] See for example, Legislative dereliction of duty: supporting HOAs.

[8] Supra n. 2.

[9] See Grassroots Advocacy Initiatives Are More Essential Than Ever .

Are the “powers that be” listening?

Behold the power of the internet! Who says nobody pays attention to my words of wisdom? I quoted Yogi Berra in my November 5th FB post, “It’s not over until it’s over.”

Look what VP Pence had to say today:

“Told @VP Team Today, “it ain’t over til it’s over. . . and this AIN’T over!” Pence tweeted Monday from his Twitter account. “

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.)

Notes

[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.

  

References


[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.

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.

Arizona

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..

Florida.

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