Effective HOA board governance

This commentary follows up on my plan to restructure HOA governance[1] that first requires addressing the attitudes and views of BODs, the members, and the public in general.  The conditioning and indoctrination by the biased views of the national pro-HOA special interest entity must be de-conditioned by a program of reorientation.

  Once again I provide valuable information on the proper functioning of HOA boards in serving their “constituents,” their members.

The management[2] of a country, a state, or a local government, including the private HOA association, is commonly known as politics.  Politics is:[3]

“the practice and theory of influencing other people on a civic or individual level. More narrowly, it refers to achieving and exercising positions of governance — organized control over a human community, particularly a state.

“exercised on a wide range of social levels, from clans and tribes of traditional societies, through modern local governments, companies and institutions up to sovereign states.

“A political system is a framework which defines acceptable political methods within a given society.”

Managing a government disguised as a nonprofit association has its unique requirements and demands that, for the most part, have been ignored.  The commonly found guidelines from the national pro-HOA lobbying entity speak to an authoritarian government with member interests and concerns being secondary to the survival of the association. It’s an unacceptable deviation from the intents and purposes of our constitutional government.[4]

First, let me address the requirements for the sound management of a nonprofit association. Drucker[5] focuses on the overall, broad purposes and responsibilities of the board of directors (BOD) or board of trustees. 

The general term “nonprofit” does not apply to HOAs because it is not a business nor a public government, but “government controls.” The reality of the HOA association is that it controls as does a public government.

Drucker asks, what is the mission of the nonprofit?  A mission statement has to focus on “what the nonprofit really tries to do.”  It cannot be “a kind of hero sandwich of good intentions.” Strategies “convert intentions into action.”

Most HOAs, especially the smaller HOAs, do not have a sound strategy that addresses their mission, goals, and values. But the HOA has an explicit mission and purpose as set forth in the CC&Rs[6] and need to be revisited and made consisted with Drucker and Batts (see below).

Second, in an excellent book on the need for director orientation,[7] the author feels board orientation is lacking and instituting a guideline will improve the nonprofit’s mission and goals. In his succinct book, as applied to HOAs, Batt’s makes the following important points:

Key areas of board action are “strategy, oversight, and policy.”  In keeping with Drucker, “boards and board members should not micromanage the affairs” of the HOA. 

The BOD has “full and final authority” over the HOA association; they are “not merely advisors” to the manager, other wisely known as the CAM. It’s regrettable that all too often the BOD abdicates to the manager and/or attorney who often are members of the same business trade group advancing their own self-agendas.

There is “no individual authority” of a board member to act and the president can only act based upon the authority set forth in the governing documents. Most presidents act, especially in the small HOAs,  without board approval.

There is  a “duty of obedience” to the laws and governing documents that all too often is ignored by not only rogue BODs, but by BODs who falsely believe to do so is in the best interests of the HOA.

Notes

[1] George K. Staropoli, A Plan Toward Restructuring the HOA Model of Governance, StarMan Press, 2020.

[2] Peter F. Drucker, “Management  is the application of a set of principles relating to the functions of planning, organizing, directing and controlling an organization to effectively achieve organizational goals,” The Practice of Management, Harper Row, 1954.

[3]Politics,” Wikipedia.

[4] See Roger L. Kemp, “Forms of Governance,” Managing America’s Cities: A Handbook for Local Government Productivity, McFarland & Co., (2007).

[5] Supra, n. 1.

[6] See  “Restructuring HOAs – intents and purposes,”  supra n.1.

[7] Michael E. Batts, Board Member Orientation, Accountability Press, 2011. It’s a short, to the point, and  easy to read paperback.  Batts has over 25 years on nonprofit boards and has served on several Washington panels.

Are HOA state actors created by statutory use of shall/may?

The use of the words “shall” and “may” have generally accepted meanings in state laws and statutes.[1]  Their use in bills and laws relating to HOA-Land raises the highly controversial question of: Are HOAs state actors?  Wayne Hyatt — former CAI president – wrote in 1976 that HOAs were mini-governments.[2]  In general, a state actor is an entity that is functioning as “an arm of the state” or “in place of the state.”[3]  Does the use of “shall” that is defined as “mandatory” make the HOA an arm of the state?

In sum, the US Supreme Court criteria for classification of a state actor can be found in Brentwood:[4]

  1.  From the State’s exercise of “coercive power,”
  2. when the State provides “significant encouragement, either overt or covert,”
  3. when a private actor operates as a “willful participant in joint activity with the State or its agents
  4. when it is controlled by an “agency of the State,”
  5. when it has been delegated a public function by the State
  6. when it is “entwined with governmental policies,” or
  7. when government is “entwined in [its] management or control.”

In regard to the institutionalization of HOAs, or as I refer to it, HOA-Land, the above tests 1 – 3, and 5 -6 would provide clear and convincing evidence that the policies of state legislatures, as demonstrated by the enacted pro-HOA laws, have created HOAs as state actors who willingly undertake state actions.  Review your state laws for the use of “shall” and the consequences of that mandate on your individual property rights.

***

The pro-HOA laws enacted by state legislators, aside from other constitutional concerns with respect to the 14th Amendment protections of the equal protection of the law and valid due process, use “may” and “shall” that are permissive and mandatory obligations upon HOAs (and condos).  “May” is commonly found as “the board may set the time of the annual meeting,” or “may charge . . .”  The overlooked impact and consequence of this word is to legalize activities and actions that were all-to-fore not legal rights granted to the HOA.

They are now made a legal activity, if your BOD so chooses.   Prior to a statute using “may” the action or activity had to be granted by the governing documents.  If so, by including it in a statute lends “officialness” to the action, and a very difficult process to declare the statute invalid.  It protects the governing documents if so permitted.

The right granted by the use of “may” to HOA boards (BOD) to fine or monetarily penalize members and filing a lien with the right to foreclose, for example, makes it a legal action not granted to other nonprofit organizations.  Can you imagine PBS or United Fund placing a lien on your failure to not pay your pledge to support their existence? No way!  Why allow HOAs this legal right?  Which of the above criteria does it violate?

***

Now the heart of the matter focuses on the use of “shall” that is a mandatory order to the HOA to act on behalf of the state —  fine those members and collect costs including attorney fees, etc. Not only is it a legal requirement for the HOA to act as ordered, the BOD has no choice, no discretion to do otherwise, nor can the members reject a potential amendment or rule change. So much for democracy at work in HOA-Land!  Which of the above SC criteria does it violate?

It is well beyond the time for those public interest nonprofits touting their support for the Constitution and democratic values to get involved and stop this disgraceful and unconscionable legislation.  Stop the legislation that coerces, encourages, and supports private government, authoritarian HOAs.  Legislation that advances the view that the HOA “constitution” is a better deal than the 232-year-old US Constitution.  Shameful!

***

The American experiment in democracy, as the youthful America was described by Alexis de Tocqueville[5], is being subverted by the HOA legal scheme supported by elected officials and academics parading as the nouveau Philosopher-Kings preaching to the elected government leadership.  In 2009 I commented:

“I explore this failure of the American Experiment and the rise of independent HOA principalities in Establishing the New America of independent HOA principalities (see New America).”

Notes

[1] See “Legislative shall,” paper with quotes from Yale Law Journal and the Arizona bill drafting manual as a specific example.

[2] Read his 1976 statement in To be or not to be a mini or quasi government? Hyatt said ‘yes’. (2015). Wayne Hyatt was a prominent figure in the promotion of HOA-Land as well as an important person in creating CAI in 1973, serving as its second president. I believe he had strong influence in drafting the Del Webb Declarations still in use today.

[3] In general. see arguments for state actors: HOA Case History: state actors or mini/quasi government (2011); Do state HOA Statutes Establish HOAs as State Actors? (2012); Judicial error regarding HOAs as mini-governments and state actors (2015), “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.”

[4] Brentwood Academy v. Tennessee Secondary School Athletic Ass’n, 531 U.S. 288 (2001).

[5] Democracy in America, Alexis de Tocqueville (Vol. 1, 1832; Vol. 2 1840). Printed by Alfred A. Knopf (1972).

HOAGOV EDUCATION SERIES: understanding the real lives of HOA members

My purpose for the Education Series, taken from a collection of my Commentaries (WordPress blog), is to present the other side of the HOA legal concept that has been intentional kept hidden from the public, the media, and the legislators.  Homeowners associations (HOAs) — generic for POAs, CIDs, planned communities, and condominiums — have become an institution and are unquestionably accepted as “that’s the way it is.”

Over the years, the general public has heard only the benefits of HOA regimes, but has heard nothing about the means to achieve these benefits. The rationale, I suppose, is that the end justifies the means. This quiet acceptance of the HOA private government regime came to be as a result of aggressive lobbying by the HOA special interests, also known as HOA stakeholders (homeowners not included). The media, that was granted 1st Amendment freedom of speech rights in order to ensure a properly informed electorate, failed its obligations by remaining silent.  Nothing bad, seriously bad, about HOAs is publicized by the media. As you can read in my post on George Orwell’s 1984, the Ministry of Truth (a 1984 agency) parallels Goebbels’ Ministry of Public Enlightenment and Propaganda:

The Ministry of Truth uses control over the education system and the communications media to keep the masses in a state of ignorance and incapable of perceiving the facts of their manipulation. By controlling all sources of information, and playing one ignorant group off against the other, they ensure that effective opposition does not arise. While the masses attempt to make sense of the false reality fed to them in the schools and on the telescreens, the elite manipulators that write the scripts laugh at their confusion.  (Freedom is Slavery, The Modern History Project, April 24, 2015).

The Commentaries listed below present a broad picture of the current conditions, culture and environment relating to living in an HOA controlled home.  Violations of the Constitution’s equal protection of the laws and inadequate due process protections, pro-HOA state laws, legislative support for HOAs, the national business lobbying organization misleading the public that it is an unbiased educational organization, and the HOA attorneys and managers are all presented and discussed in these posts.

For readers who are interested in the history of how HOAs came to be can read my 121 page analysis, with references and legal authorities: The Foundations of Homeowners Associations and the New America.

Become informed.   Please read on.

 READING MATERIALS (click on links to access posts)

 A.    Constitutional issues

  1. HOA Member Declaration of US and State Citizenship
  2. HOA Common Sense: rejecting private government (complete series as PDF)
  3. CC&Rs are a devise for de facto HOA governments to escape constitutional government
  4. HOAs violate local home rule doctrine and are outlaw governments
  5. The unconstitutional delegation of implied rulemaking powers to HOAs
  6. Unconstitutional delegation of power to HOAs
  7. HOA reforms needed to guarantee U.S. Constitutional protections
  8. model HOA regulatory agency bill

  B.   HOA oppression

  1. Why do people harm others in HOAs?
  2. George Orwell’s 1984 is alive and well in HOA-Land

  C.   Community Associations Institute (CAI)

  1. Misrepresentation:  CAI comes with unclean hands
  2. Will the real CAI standup: its contradictory beliefs, pronouncements and goals
  3. CAI: the HOA form of government is independent of the US Constitution
  4. HOA constitutionality will cause the collapse of CAI

George Orwell’s 1984 is alive and well in HOA-Land

thought-policeIn 1949 George Orwell published 1984 where the fictional Oceania (formerly known as England) is a totalitarian state that has instituted a new society designed for the survival of the country.  Oceania had introduced methods and techniques designed to protect the government at all costs:  Big Brother is Watching You; Thought Police (don’t speak out or question, or else); Doublethink, creating the ability of the people to hold and accept two contradictory thoughts at the same time; Newspeak, the official language, replacing English, that redefines words and concepts; Ministry of Truth, the agency of propaganda and historic revisionism; and the Ministry of Love, the agency of regulations and enforcement.

Many can see the parallels and extensions of Orwell’s 1984 in the real 1984, and current world, of homeowner associations (HOAs) — authoritarian private governments.  Let’s take a look.

The principles of 1984 can be identified within the HOA regime: Ministries of Love, the boards and HOA managers, coerce compliance with outrageous fines and claims of violations.  The Thought Police, through1984_big brother the HOA vender organizations and lobbyists, use Doublethink and Newspeak to redefine everyday usage and meanings of words. Newspeak, or simply propaganda — lies and half-truths — to advance one’s interests, is extensively employed to defend the HOA regime. And, of course, there is the ever present all seeing eyes of the HOA — Big Brother is Watching You.

Of course, there are benefits to the state, the community and the residents, including the alleviation of irrational fears of the loss of property values.  But at what price?  At what cost?  At the cost of leaving the American Zone (as expressed by Shu Bartholomew in On the commons.com) and the loss of member rights, freedoms, privileges and immunities protected by the US Constitution and Bill of Rights.

The influence and acceptance of Doublethink has people believing that HOAs are democratic and not authoritarian regimes, because residents can vote – like in Cuba and China. That de facto HOA governments are businesses and not quasi-governments, because it is so declared.  That it’s the members’ fault for not making desired reforms to the HOA legal structure, which contains a very high bar to effective member participation in HOA governance. That the members’ are expressing their individual rights and freedoms by surrendering them and accepting that the authoritarian board speaks for them. However, the board is legally responsible to speak for the HOA corporation in accordance with the CC&Rs that do not recognize the rights of individuals as set forth in the Preamble to the US Constitution.

 Welcome to the New America of HOA-Land

I want you

I want YOU to

Join the HOA-Land Nation, today!

Read the complete paper at 1984

The unconstitutional delegation of implied rulemaking powers to HOAs

Here I present evidence of the explicit and implicit delegation of rulemaking powers to HOAs, which, if not unconstitutional, would alone establish HOAs as state actors.

In an earlier Commentary[1] I discussed the implied delegation of legislative functions to HOA private governments. Putting the issue in simple terms, I quoted Stephen Wermiel’s comments on a constitutional delegation case before the US Supreme Court,

The dispute before the [Supreme] Court . . . [involves] the even less well-known principle that Congress may not delegate legislative authority to private entities. . . . [T]he Justices must decide if the authority given to Amtrak by federal law is legislative in nature, and whether Amtrak is a private corporation or a public entity.[2]

“Rulemaking” is a term that deals with the grant of legislative powers to state agencies and, in a more restrictive mode, to private entities. It is the authority to adopt rules that have the effect of law, which can be found in the federal and state Administrative Procedures Acts (APA)[3]. The point is that the term “rulemaking” is a state agency process and is not found in the nonprofit corporation law even though these nonprofits have rules.

However, it has been applied to the supposedly nongovernmental, private nonprofit HOA corporation. In Tierra Rancho [4]  the court quoted The Restatement (3rd) Servitudes (the common law legal authority in the absence of statutory law) § 6.13(1)(b) and (c) in paragraph 25, “[the HOA has] the duty to ‘act reasonably in the exercise of its discretionary powers including rulemaking, enforcement, and design-control powers.’”  The HOA rulemaking powers are set forth in detail in § 6.7.

Ҥ 6.7 Power to Adopt Rules Governing Use of Property [my emphasis],

(1)        Except as limited by statute or the governing documents, a common-interest community has an implied power to adopt reasonable rules to

(b)        govern the use of individually owned property to protect the common property.”

Comment “b” to 6.7 (p. 141, second paragraph) goes even further,

Even in the absence of an express grant of authority, an association enjoys an implied power to make rules in furtherance of its power over the common property.  The association has no inherent power to regulate use of individually owned properties, however, except as implied by its responsibility for management of the common property.

And finally, examples of implied delegation of rulemaking powers can be found in state statutes.[5]

It is quite evident that the public policy of every state contains an implied delegation of legislative rulemaking powers to private HOA corporations.

Stephen Wermiel explained the non-delegation doctrine in Amtrak (my emphasis),

“[I]n theory delegation to the private sector can never be constitutional. . . . The Solicitor General argues that there is no unconstitutional delegation to a private entity because government officials retained control . . . . The Association of American Railroads (AAR) argues that the delegation to Amtrak is for actual rule-making authority and that Amtrak is . . . a private entity for purposes of the nondelegation doctrine.[6]

In regard to the Solicitor General’s argument, we know this is not true with HOA statutes.  As there is no oversight, no enforcement, and no effective penalties against HOAs that violate the law, there is no government control.[7]  Having the homeowner enforce the HOA laws does not constitute government control or oversight.  In regard to AAR’s argument, the above evidence supports an unconstitutional delegation of legislative rulemaking powers to private HOA entities.

No matter how you view the private entity non-delegation doctrine, HOA rulemaking is unconstitutional and the covenants are thereby invalid. (The Restatement, § 3.1, Validity of Servitudes, General Comments.)

 

References

[1] Unconstitutional delegation of power to HOAs.

[2] Stephen Wermiel, SCOTUS for Law Students: Non-delegation doctrine returns after long hiatus.  (SCOTUSblog Dec. 4, 2014)

[3]See federal Administrative Procedure Act (5 U.S.C. Subchapter II, § 551(4) and § 553).

[4] Tierra Ranchos HOA v. Kitchukov, 165 P.3d 173 (Ariz. App. Div. 1 2007).

[5] A sample of implied rulemaking statutes by state.  Arizona: ARS 33-1803(A) and (B) for HOAs; 33-1242(A)(1) for condos. California: Civil Code §§ 4340-4370 (Part 5, Chapter 3, Article 5, Operating Rules). Florida HOAs:  Title XL, § 720 et seq. do not explicitly address rules per se, but speak to enforceable “guidelines” and “standards”; Florida Condos:  Title XL, § 718 et seq. (in particular, § 718.1035, the general statement on “association rules”). Nevada: “NRS 116.31065  Rules.  The rules adopted by an association” (with 5 “musts” imposed on the HOA).

[6] Supra, note 2.

[7] In regard to the delegation of legislative powers to private entities, a review of the fuzzy case history of the Non-delegation doctrine indicates a constitutional requirement for governmental control or oversight of the private entity’s decisions and rules.  See “ A New Private Delegation Doctrine?”.