So. Carolina HOA study committee misses the point

As a follow up to my “State legislature not concerned” commentary, the SC HOA Study Committee released its recommendations on HOA legislation.[1]   On the issue of, “Education for Homeowners and Board Members,” a committee member recommended CAI as a source for HOA education in general. Apparently, with all due respect, he is not fully aware of CAI’s history and its views on maintaining authoritarian private governments.

This property member representative offered, “Education is already available. According to one source, “CAI (Community Associations Institute) webinars offer specialized, professional training without leaving your home or office. . . . Homeowners should have reasonable access to an organization such as Community Associations Institute (CAI) or a knowledgeable State agency to obtain unbiased, accurate information.

Fortunately, the recommendation was not to have a private entity, including CAI, provide HOA education.

While the Community Association Institute (CAI) and other private entities offer educational resources to homeowners and managers, state government cannot place the sole responsibility of educating homeowners and board members on a private entity.”

The committee recommended that several state agencies “to seek reliable and unbiased information available from private entities and to publish and make such programs by private parties available online. So, the door is still open for CAI biased influence given the current climate that CAI is the only source and has no self-interest.

There is an abundant supply of information to inform the legislators of the true nature of CAI, its 42 year history of failure, and its policy to keep HOAs as authoritarian private governments.[2] But the problem is is to first educate the legislators in line with HOA Common Sense: rejecting private government. This requires a source to provide alternate perspectives on HOA governance: civil government, local government, constitutional law, and city managers.

A simple HOA bill would just have to say,

The association hereby waives 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.

There is much to be accomplished in order for meaningful HOA reforms to occur. If advocates continue to fail to speak out and ignore, as I have urged, the principles of constitutional government as applied to HOAs, the outcomes over the years will also continue.

 “We must continue to provoke until they respond and change the laws.” Gandhi.

 

References

[1] STUDY COMMITTEE ON HOMEOWNERS ASSOCIATIONS, Dec.18, 2015 (http://www.scstatehouse.gov/CommitteeInfo/HomeownersAssociationStudyCommittee/HOAStudyCommitteeFinalReport12182015.pdf).

[2] See Will the real CAI standup: its contradictory beliefs, pronouncements and goals and CC&Rs are a devise for de facto HOA governments to escape constitutional government. In general see, Unconstitutional delegation of power to HOAs, HOAs violate local home rule doctrine and are outlaw governments; and Privatopia: Homeowners Associations and the Rise of Residential Private Governments, Evan McKenzie, Yale Univ. Press, 1994; Community Associations: The Emergence and Acceptance of a Quiet Innovation in Housing, Donald R. Stabile (Greenwood Press, 2000).

 

Can the HOA legal scheme survive constitutional due process?

Bob Frank, a Commissioner on the Nevada Commission for Common Interest Communities and Condominium Hotels, asked in the LinkedIn group, Condo Association (and HOA) Network, Should States Pass “Due Process Regulations” Along The lines of The Following Draft?

My comment follows:

Bob, an excellent in depth presentation of HOA due process procedures. Allow me to provide the authority for your proposal. Judge Henry Friendly in his well-regarded article, “Some Kind of Hearing,”[1] generated a list that remains highly influential, as to both content and relative priority (my emphasis):

  • An unbiased tribunal;
  • Notice and grounds for the proposed action;
  • An opportunity to show why the proposed action should not be taken;
  • The right to call witnesses;
  • The right to know opposing evidence;
  • The right to have the decision based only on the evidence presented;
  • The opportunity to be represented by counsel;
  • A record of the proceeding;
  • A statement of reasons;
  • Public attendance; and
  • Availability of judicial review.

 

As you will note, the first listed item above requires “an unbiased tribunal.” What would you add to your proposal to further protect the integrity of your HOA due process procedures? Obviously some sort of code of conduct for those sitting on the “hearing tribunal” is in order. Following are the four Canons taken from the American Bar Association’s Model Code of Judicial Conduct[2].

CANON 1

A judge shall uphold and promote the, independence, integrity, and impartiality of the judiciary, and shall avoid impropriety and the appearance of impropriety.

CANON 2

A judge shall perform the duties of judicial office impartially, competently, and diligently.

CANON 3

A judge shall conduct the judge’s personal and extrajudicial activities to minimize the risk of conflict with the obligations of judicial office.

CANON 4

A judge or candidate for judicial office shall not engage in political or campaign activity that is inconsistent with the integrity, or impartiality of the judiciary.

I would think that third-parties with some legal background would be the way to go, but this would run into the dogmatic “the HOA members shall judge their ‘peers.’” But, then again, is that possible?

You have touched upon one of my 5 HOA substantive reforms arguments, “Fair and Just Hearings,[3] the absence of which is a clear indication of the oppressive and authoritarian nature of the HOA legal scheme.  If it is possible to obtain fair and just hearings, would this move toward democratic reforms cause the HOA legal scheme as it exists today to collapse, or can the real estate package governed by an HOA government survive governed by a true democracy?[4]

References

[1] Judge Henry Friendly, “Friendly, Some Kind of Hearing,” 123 U. PA. L. Rev. 1267, 1279-1295 (1975).

[2] American Bar Association’s Model Code of Judicial Conduct (http://www.americanbar.org/groups/ professional_responsibility/publications/model_code_of_judicial_conduct.html).

[3] See “HOA Common Sense, No. 6, Fair and Just Hearings”.

[4] See “Would the HOA legal scheme collapse under a democratic form of government?

 

Colorado HOA act creates state actors?

I give credit to the Colorado Legislature for stating its intent, its position, on supporting HOAs, which is rarely found in other state statutes.  Section 38-33.3-102 reads (in part):

Legislative declaration

(1) The general assembly hereby finds, determines, and declares, as follows:

(a) That it is in the best interests of the state and its citizens to establish a clear, comprehensive, and uniform framework for the creation and operation of common interest communities;

(b) That the continuation of the economic prosperity of Colorado is dependent upon the strengthening of homeowner associations in common interest communities financially through the setting of budget guidelines, the creation of statutory assessment liens, the granting of six months’ lien priority, the facilitation of borrowing, and more certain powers in the association to sue on behalf of the owners and through enhancing the financial stability of associations by increasing the association’s powers to collect delinquent assessments, late charges, fines, and enforcement costs;

 

Subsections (c) – (e) contain basically the same theme — don’t let the HOA fail by providing the developer with certain financial protections and operating rules on good management.  In a bold, in your face statement the statute contains an annotation, which reads:

There is no support for the proposition that enactment of a legislative scheme governing the operation of homeowners’ association thereby transforms such homeowners’ association into cities or other governmental entities. Woodmoor Improvement Ass’n v. Brenner, 919 P.2d 928 (Colo. App. 1996).

This 1996 authority still holds true today.  State governments regulate people and entities by establishing laws, such as these HOA “acts” under its police powers “to promote the general welfare.”   That has come to mean to protect the health, safety and general welfare of the people.  The issue at hand, which has not been tested in the courts, is: when does and under what circumstances do these HOA acts create HOAs as state actors?[1]

It would seem that just from this Legislative Declaration of purpose there are reasonable grounds to suspect state cooperation (no penalties against HOA violations of state laws or the governing documents), coercion (foreclosure, pay or lose your home, etc.), and support for HOAs, a close nexus with daily operations (closely involved on HOA management) s symbiotic relationship (you help me, I help you), significant encouragement, either overtly or covertly.[2]  But no mention of any protections of due process and the equal protection of the laws as an objective of its involvement in HOA-Land.

Note that subsection 1(a) above speaks not of individual statutes, but of “a clear, comprehensive, and uniform framework” to support HOAs. Therefore, we must look at the overall picture of the HOA act and determine its broad impact on HOAs, and whether the legal scheme or structure establishes state actors.  And in 1(b) above the general assembly makes a case for establishing state actors when it states, “by increasing the association’s powers to collect delinquent assessments, late charges, fines, and enforcement costs.”  The details can be found within the act itself.

Please understand that in the statutes, both in Colorado and in other states, the statutes give the appearance of protecting the homeowner and his rights, but this is an illusion. What does the homeowner do if the board violates the law?  His ultimate recourse is to sue the HOA in civil court, but the statutes and governing documents (and court case history) are protective of the HOA as this Colorado section clearly demonstrates.

Where are the constitutional protections that would remove the HOA member as a second-class citizen?  To bring him back into the American Zone? They are nowhere to be found!  Why?  Because the state believes that the homebuyer has freely and with full knowledge agreed to be bound by the explicit and implied waivers in the governing documents.  But, have they?[3]

It would seem that the Colorado General Assembly has crossed the line and by its HOA statutes created HOAs as state actors.

References

[1] See, in general, HOA Common Sense, No. 9: HOA governments in fact.

[2] See Do state HOA Statutes Establish HOAs as State Actors?

[3] See HOA Common Sense, No. 4: Consent to be governed

The unclean hands of the HOA

I have spoken of the unclean hands of the HOA in “HOA Common Sense No.4, Consent to be governed” and in “No.8, Draconian punishment and intimidation.”  Unclean hands is a legal doctrine that denies a plaintiff’s (HOA) complaint if the plaintiff has done anything wrongful or unfair relating to the issue at hand. If a defendant (homeowner) can show the plaintiff had “unclean hands,” the plaintiff’s complaint will be dismissed or the plaintiff will be denied judgment.

In his dissenting opinion in Olmstead v US  (1928)[1] Justice Brandeis wrote (my emphasis),

The governing principle has long been settled. It is that a court will not redress a wrong when he who invokes its aid has unclean hands. The maxim of unclean hands comes from courts of equity. But the principle prevails also in courts of law. Its common application is in civil actions between private parties. Where the government is the actor, the reasons for applying it are even more persuasive.

The court’s aid is denied only when he who seeks it has violated the law in connection with the very transaction as to which he seeks legal redress. Then aid is denied despite the defendant’s wrong. It is denied in order to maintain respect for law; in order to promote confidence in the administration of justice; in order to preserve the judicial process from contamination.

This doctrine also applies to the government at all levels.  As Brandeis continued in his dissent,

In a government of laws, existence of the government will be imperiled if it fails to observe the law scrupulously. Our government is the potent, the omnipresent teacher. For good or for ill, it teaches the whole people by its example. Crime is contagious. If the government becomes a lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.

And it also applies to HOA private governments, because it’s an equitable protection.  We all know that HOA boards have, in all too many instances, grossly dirty unclean hands.  We see the anarchy with 50 different state laws and the 324,000, more or less, independent CC&Rs “constitutions.”

 

Note

[1] Olmstead v. U.S., 277 U.S. 438 (1928).  This case involved federal wiretapping, which back in 1928, the SC found no violation of the Constitution.

Proposed US Constitution amendments will help HOA reforms

I have cautioned my followers about the ‘games’ that lawyers play with the precise wording and grammar used in bills and, eventually, the resultant laws.  They love to parse the sentences and apply interpretations that have a plausible relationship to a valid legal issue.  When they seek a ‘loophole’ in the law the plausible becomes unreasonable, yet the courts will go through the exercise and entertain a challenge to the law.

What is needed is a tightening up of the laws and bills as a result of an analysis of how their wording can be used to get around the intent of the bill.  With respect to HOAs this is an unlikely task when state legislatures favor the HOA legal scheme currently adopted as public policy. But there is hope stemming from the very top, from retired Supreme Court Justice Stevens who has proposed Six Amendments[i] to the US Constitution.  Below are 2 of the 6 proposed amendments that are particularly important to HOA reform legislation.

 

The “Anti-Commandeering Rule” (Amend the Supremacy Clause of Article VI) — This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges and other public officials in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding.

Sovereign Immunity – Neither the Tenth Amendment, the Eleventh Amendment, nor any other provision of this Constitution, shall be construed to provide any state, state agency, or state officer with an immunity from liability for violating any act of Congress, or any provision of this Constitution. [New amendment].

In the “Anti-Commandeering Rule” Justice Stevens found it necessary to add “and other public officials” to explicitly bind government officials to obey the Constitution and laws of the land.  I am sure that the Founding Fathers did not think such an explicit statement would or should be necessary.  But, it’s obvious that our elected officials have forgotten their duties and obligations to the Union in favor of their political party dogma and their concern for their legacies. Just review recent state supreme court HOA decisions and the numerous pro-HOA state laws to understand the need for this constitutional amendment.

In the “Sovereign Immunity” amendment Justice Stevens found it necessary to hold elected officials on the federal and state levels to their obligation not to violate the Constitution.  The common example can be found in every state’s support of de facto HOA private governments unanswerable to, and circumventing, the US Constitution.   Again, one would not think that this would be necessary to state.

Both of the proposed amendments to the Constitution are the result of how lawyers examine the precise wording of the laws and Constitution, and raise “and, if, or buts” to get around the intent of the laws. Or, even to question the intent of the drafters of the bills.  With respect to HOA legal scheme, must we add such specifics to state constitutions and HOA/condo acts?

Bob Frank, a Nevada Commissioner, raised this very question; “Should HOA/Condo Associations Implement US Constitutional Protections For Residents In CC&Rs?  in the HOA Common Sense LinkedIn group (must be a LinkedIn member).  It’s a must read!

 

Reference

[i] Six Amendments: How and Why We Should Change the Constitution, Justice (ret.) John Paul Stevens (Little, Brown and Company, April 22, 2014). (Available on April 22th).