Court requires constitutional due process in HOA foreclosures

The enlightenment and awareness that the US Constitution and its due process requirement extends to private government HOAs is gaining momentum. ”The writing is on the wall.”

In the recent Colorado appellate decision in Hummel (C&C Investments v. Hummel, 022COA42, April 14, 2022)  concerning proper notice of homeowner foreclosure by the HOA, the court surprisingly acted sua sponte —in the name of justice. The courts have repeatedly failed to invoke, in the pursuit of justice as it claims to be its fundamental purpose, its right to act sua ponte — on its own — raising discussions of issues not raised by either party.  

In Hummel the question arose as to whether or not the homeowner was given notice of impending foreclosure action by the HOA.  The HOA send a processor server who said he posted the notice in the newspaper, which is allowed under certain circumstances. She discovered her plight only when an eviction notice was pinned to her door. The question be determined was, What is proper, legal service?

While court rules require that the HOA serve notice, the court held that it “must also meet the mandates of due process before foreclosing on an individual’s property” and that,

[I]t is not unreasonable to require a homeowners association to make a good faith, rather than a highly technical, effort to effectuate actual notice to a fellow neighbor before foreclosing on their property.”

In support of its opinion, the Court referenced the Colorado appellate court’s court view:

“Although an association is not the government, it serves “quasi-governmental functions” when enforcing covenants and must abide by the due process requirements of the United States and Colorado Constitutions.

“[T]he United States Supreme Court has long held that when foreclosing a lien against an individual’s home, due process requires “notice [that is] reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.”

The appellate court found that the trial court failed to adhere to these principles before ordering a default judgment.

AZ HB 2158 fair elections goes to Governor for signing

The AZ Senate passed HB 2158, the fair elections in HOAs bill sending it on to the Governor for signing. I congratulate all advocates who supported this bill and the Arizona Legislators coming to understand the need to stop board of director’s abuse under authoritarian private agreements.

This is a major step forward to the equal protection of the laws and proper due process as guaranteed to all US citizens. Under this bill, effective and meaningful opportunity for Arizona members to participate fairly and in an equal manner in the governance of an HOA.

It starts with the ability to campaign and discuss governing issues with the members on the same level playing field. All the members seeking change have to do is to get involved knowing they won’t be “fighting city hall” without legislative support.

The positive effect of this bill includes the need for a rewrite of the governing documents in many areas for many HOAs, removing covenants not complying with the new state law in.

See bill summary: AZ GOV committee hears the voice of HOA members

AZ SC in Kalway holds CC&Rs as “special contracts”

Author’s note:  I make extensive use of direct quotes in order to avoid my interpretations “leaking” through.

The Arizona Supreme Court in Kalway[i] threw some light on the controversy that HOA covenants and CC&Rs are valid contracts and are held as such.   The Court held that, my emphasis,

“CC&Rs form a contract between individual landowners and all the landowners bound by the restrictions, as a whole. . . . in special types of contracts, we do not enforce ‘unknown terms which are beyond the range of reasonable expectation . . . . CC&Rs are such contracts.  Because covenants originate in contract, the primary purpose of a court when interpreting a covenant is to give effect to the original intent of the parties’ with any doubts resolved against the validity of a restriction.”

With respect to the requirement for very important but ignored homeowner notice, the Court continued, my emphasis,

The notice requirement relies on a homeowner’s reasonable expectations based on the declaration in effect at the time of purchase—in this case, the original declaration.  Under general contract law principles, a majority could impose any new restrictions on the minority because the original declaration provided for amendments by majority vote. But allowing substantial, unforeseen, and unlimited amendments would alter the nature of the covenants to which the homeowners originally agreed. . . . Thus, “[t]he law will not subject a minority of landowners to unlimited and unexpected restrictions on the use of their land merely because the covenant agreement permitted a majority to make changes to existing covenants.”

One of the most egregious injustices that I’ve come across is the failure of the courts to apply the full body of contract law to HOA covenants in CC&Rs.  Opinions and dicta refer to the CC&Rs simply as a contract, or an agreement interpreted as a contract — yet in spite of the above opinion — fail to protect the homeowner under contract law 101.  The Cornell Legal Information Institute lists the basic criteria for a valid contract:

 ‘The basic elements required for the agreement to be a legally enforceable contract are: mutual assent, expressed by a valid offer and acceptance; adequate consideration; capacity; and legality.”

Added to this general description of a legal contract is the Opinion holding that the CC&Rs are special contracts that do not permit “unreasonable  expectations” and that the notice of reasonable expectations is set forth in the CC&Rs “at the time of purchase,” and the law will protect minority owners from any such expectations.   

As I have argued many times,[ii] the boilerplate  amendment process that binds non-agreeing owners solely on the basis of a majority or some super majority renders the original “contract” a meaningless piece of paper. 

Professor Barnett explains,

“A law may be ‘valid’ because it was produced in accordance with all the procedures required by a particular lawmaking system, [the HOA amendment procedure, for example] but be ‘illegitimate’ because these procedures were inadequate to provide assurances that a law is just.”[iii]

Conclusion

It should be evident to all that this constitutional issue of “signed the agreement” and are thereby bound to obey needs further thought. As it stands, homeowners in HOAs are subject to special laws, the numerous state HOA/Condo Acts, for special entities allowed to function as de facto private governments outside the protections of the US Constitution.

Notes


[i] Kalway v. Calbria Ranch, CV-20-o152-PR, ¶ 13 -16  (Ariz. March 22, 2022).

[ii] See HOA consent to agree vs. “the will of the majority”,  Contracts, the Constitution and consent to be governed and HOA Common Sense, No. 4: Consent to be governed.

[iii] Randy Barnett, Restoring the Lost Constitution, Princeton Univ. Press, (2004).

The roles of the Supreme Court vs the Legislature

At today’s Senate confirmation hearings of Judge Jackson, an intriguing dialogue took place between Jackson and Senator Lee (Utah).  The topic raised by Lee focused on the role that the Supreme Court is to say what the law is, and the role of Congress (or state legislature) is to say what the law should be creating public policy. The Court deals with the policies set by Congress.

The role of homeowner rights advocates is to say  to the legislatures what the law should be with respect to HOA-Land.  It is not to say that this happened to me and it’s wrong, or my HOA does so and so, which does not rise to the level of setting policy for all HOAs/condos  — no special laws for special entities.

And that’s another area where reform legislation often fails — too local.  Reforms must be broad as to have general concern for the state; as the courts have held from time to time, “This case Involves legal issues of statewide importance.”   And it must be explicitly stated or  implied.

Public policy today is harmful to the private property rights of HOA owners, and to a denial of due process protections and violations of the equal protection of the laws, treating HOAs as if they were independent principalities.  These policies and attitudes have created unjust, bad laws enforced by the courts, and used as precedent for more bad laws.

The cycle ends by advocates addressing the root cause of pro-HOA laws that treat HOA members as second-class citizens, which they are not!

AZ GOV committee hears the voice of HOA members

The Arizona GOV committee meeting on HB 2158 yesterday heard the voice ot the HOA homeowners  — the HOA citizens — on the need for HOA regulation and control of rogue boards. The members heard the horror stories, and were made awareof lack of free political speech as enjoyed by non-HOA members.

The bill passed 7 – 0 with 131 owners submitting their support for the bill, using the RTS (Request to Speak) procedure, while just 3 RTS submissions were against the bill.  This procedure allows the public to submit a short statement for or against a bill, with the option of speaking at the meeting.  All submissions become part of the public record and are accessible by the public.

Here is a sample of the FOR submissions at both  the earlier House (195 FOR; 31 Against) and Senate hearings, by the owners themselves and not just board members:

  • This bill is necessary to prevent the abuse of fundamental rights or free speech and assembly. Please support it.(WD)
  • Homeowners should be able to use all the facilities of the HOA to express their concerns and ideas abou8t HOA business.  Please support this bill. (PF)
  • Please protect homeowners rights to voice their opinions without fear of retribution (KHW)
  • This bill seeks to protect homeowner’s ability to participate in the governance of their communities and to express their support or opposition for board candidates or community ballot measures in an attempt to influence the outcome. (D Legere)
  • It is criminal how HOA Boards are allowed to infringe upon one’s right to assemble/speak and impose their beliefs. (LN)
  • HB2158 will allow homeowners to engage each other over concerns for the betterment of their communities. (SP)
  • Please vote to protect the homeowners right to show support or opposition to HOA Board candidates.  The suppressive measures that our board takes is board line criminal.   (RW)
  • This bill will help empower homeowners to fight against overbearing board of directors. (KC)
  • We need to pass this legislation to protect the right of assembly and to redress the government for those who live in HOAs.  Vote yes for this bill.  (JR)
  • HOA’s should not be allowed to restrict a home owner’s freedom to assembly or free speech. Regardless of which side of the ballot the home owner votes on. (LS)
  • Homeowners are handicapped from effective political participation in HOA governance and fair elections will make a difference. (yours truly)
  • It prohibits HOAs from infringing on Constitutional rights of owners during HOA elections.  Two thumbs up!  (CS)

Yes, ’n’ how many times can a man turn his head Pretending he just doesn’t see?

The answer, my friend, is blowin’ in the wind The answer is blowin’ in the wind