North Carolina attempts AG protection of HOA members – HB 311

CORRECTION. This post was mistitled referring to new Hampshire but it is a North Carolina bill, HB 311.

NC State Representative Iler introduced HB 311 granting the AG with powers and authority to investigate HOA violations and to commence legal actions against the HOA if warranted.  It seeks direct state involvement in protecting a class of citizens being denied the equal protection of the laws by amending §§ 47C-3-123 and  47F-3-123.

It may come to a surprise to many who find no ills living in an HOA, but it’s well known that state Attorney General’s offices have shied away from investigating and bringing legal actions against HOA board violations of state laws and their contractual obligations. The general response from a number of AGs has been “no authority to act,” although they have general powers to investigate white collar crimes; “the law needs to be changed, go to the Legislature to change the law.”

Representative Iler can be your champion!  He needs your active support  against a legislature – as are all state legislatures —  that is hostile to HOA owner private property interests. NC citizen involvement is necessary for success!

The need to regulate CAI monopoly

To answer to the question I raised, “Is CAI a coercive HOA monopoly?,” required further research and analysis, which resulted in  finding extensive and strong evidence, gathered from over the years, that CAI is definitely acting in violation of the anti-trust statutes; steps need to be taken to break up the monopoly.  Below are my recommendations to regulate CAI’s activities to allow for the voice of others to be heard, especially from owners of HOA homes who suffer under the monopoly.

A.       Regulations on CAI monopolistic activities

1.       CAI to cease all references and implications that it represents HOAs before the legislature, all government bodies, before the courts and including amicus curiae briefs without express consent to do so;

2.      Require CAI to state that it is a business trade nonprofit, explicitly a 501(c)6 and not an educational entity;

3.      Inform readers that it cannot have HOAs as members since HOAs are consumers of the services provided by the trade group members;

4.      It is actively engaged in lobbying state legislatures on bills favorable to the HOA  and not necessarily to the membership;

5.      Inform owners and the public in general that its attorney members represent the HOA personified by the Board of Directors and not the member.

B.    Regulations on HOA activities in support of CAI monopoly

1.       Similar to representing employees in bargaining with management, propose federal laws that permit and protect HOA members to organize its membership to bargain in good faith for amendments to the governing documents and Rules changes;

2.      Propose legislation that allows for the creation and protection of a national HOA Homeowners Coalition, similar in intent as the National Labor Relations Board (NLRB);

3.      To restrict the HOA from interference with the newly established  organized national and state  member entities;

4.      Quarterly inform the membership of the number of directors, officers, managers, and attorneys who are members of CAI;

5.      Publish the total annual amount of spending for CAI dues paid for any HOA members, donations, other fees, and expenditures paid for by the HOA;

6.      Inform the membership that all communications with their attorney are not exempt from disclosure by state law,

7.      and all communications with the HOA attorney constitutes corporate documents that are accessible to the members, unless explicitly exempted under  “Pending or contemplated litigation” apply;

8.     The CC&Rs or Declaration for any planned community, condominium association or homeowners association shall state that, “The association hereby waivers and surrenders any rights or claims it may have, and herewith unconditionally and irrevocably agrees to be bound by the US and State Constitutions and laws of the State as if it were a local public government entity.”

CAI: your friend or your foe?

Author’s note:  I’d like to thank the ever-alert Deborah Goonan of IAC for this important tip.

Unbelievably, the CAI Washington chapter spills the beans  on CAI’s mission and objectives.  As a tax-exempt 501(c)6 business trade nonprofit the oxymoron statements below admit to working for business entities and at the same time, serving the consumers of these services, the HOAs.  “to advocate on behalf of community associations.” 

CAI is not permitted to have HOAs as members, so it recruits the boards of directors as individual volunteers creating conflict of interest conditions. I offer this statement by the chapter to set the tone for my criticism of the following article.[1] Note it skips over serving its members, the attorneys and managers who are vendors to HOAs.

“Our Vision: “To be recognized as the leading resource for Community Associations and Business Partners.

“Our Mission: “Optimize the operations of Community Associations and foster value for our Business Partners.

“What We Do: 1. Advocacy – establish and enhance/maintain relationships with legislators and government officials and to advocate on behalf of community associations; 2. Member Development – boost membership and participation through enhanced outreach; 3. Education – provide a World-Class Education Curriculum for Stakeholders; 4. Member Services – maximize value provided to our current members, including Business Partners (events, conferences, materials, etc.).

“Who We Serve: “Community Association Leaders, Business Partners, CAI National, Community Association Members, Developers/Builders, Financial Institutions, Government Agencies, Insurers, Legislators, Managers, Media, Realtors, Sister Associations.

* * * *

Quorum Magazine article Based on the above stated mission and purpose of CAI, the Washington chapter’s magazine recounts a superficial, misleading whitewash portrayal of the history of HOAs in America[2]; it serves as good CAI propaganda and portrays an unprofessional social media illusion that  all’s well in HOA-Land. It is all real estate development oriented sold as a desired and well accepted housing alternative by uninformed individuals.

The article is devoid of constitutional and democratic concerns and validity centering on the HOA as another form of local government —  a contractual, private government.  These issues affecting the rights and freedoms of HOA members can be found in detail in the listed texts and selected quotes. Note the title of the texts, which says a lot.

• Prof. Dilger wrote in Neighborhood Politics (1992)[3],

“For example, most of those who advocate the formation of RCAs [HOAs] assume that RCAs  . . . incorporate all the rights and privileges embodied in the US Constitution, including . . . the rights of due process and equal protection under the law found in the Fourteenth Amendment.”

• Prof. McKenzie wrote in his landmark Privatopia (1994)[4],

“T]he property rights of the developer, and later the board of directors, swallow up the rights of the people, and public government is left as a bystander. . . . [Consequently,] this often leads to people becoming angry at board meetings claiming that their ‘rights’ have been violated – rights that they wrongly believe they have in a [HOA]. 

“CIDS [HOAs] currently engage in many activities that would be prohibited  if they were viewed  by the courts as the equivalent of local governments.” 

• Steven Seigel wrote in his WM & Mary journal (1998)^[5],

“Because of the traditional view, RCAs [HOAs] rarely have been deemed state actors subject to the requirements of the Constitution. As private entities, RCAs regulate behavior in a way that is anathema to traditional constitutional strictures;”

• CAI-ULI funded publication Community Associations (2005)[6].

“[HOAs are] a consumer product sold by profit-seeking firm, a legal device, a corporation reliant on both coercive powers and voluntary cooperation, a democracy, and a lifestyle.  With this plan, TB50 [The Holmes Association Handbook] set out the plan that would be taken in forming the CAI.”

• Franzese and Seigel argued in their Rutgers journal article (2008)^[7]

“The laissez-fare approach to CIC [common interest communities]  regulation is reflected in the statutory law, which affords exceedingly few rights and protections to homeowners association residents.”

It can be safely concluded that CAI is not your friend, and any HOA in bed with CAI is representing its interests and not yours.

Notes

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[1] Washington Metropolitan Chapter, CAI (Oct.18, 2022).

[2] “Community Associations – A Historical Perspective,” Quorum Magazine, CAI (August 2016, reprinted Oct. 2022).  

[3]  Roger Jay Dilger, Neighborhood Politics: Residential Community Associations in American Governance, p. 160, New York Univ. Press (1992). Formerly WVU Prof. Political Science and Director of Political Affairs.

[4] Evan McKenzie, Privatopia: Homeowner Associations and the Rise of Residential Private Government,  Yale Univ. Press (1994).

[5] Steven Siegel, “The Constitution and Private Government: Toward the Recognition of Constitutional Rights in Private Residential Communities Fifty years After Marsh v. Alabama,” Wm & Mary Bill of Rights J., Vol. 6, Issue 2 (1998).

[6] Donald R. Stabile, Community Associations: The Emergence and Acceptance of a Quiet Innovation in Housing, p. 144 (2000). Funded by CAI and ULI.

[7] Paula A. Franzese and Steven Siegel, “The Twin Rivers Case: Of Homeowners Associations, Free Speech Rights And Privatized Mini-Governments,” 5 RUTGERS J.L. & PUB. POL’Y 630 (2008).

Arizona’s landmark fair elections, free speech law on HOA governance

On Sept. 25, 2022, Arizona’s new HOA reform law (Session Law Ch, 125; HB2158),  bringing substantive free public speech on HOA governing issues and establishing a fair elections procedure, will become effective.

This is a major step forward to the application of Constitutional 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 “tools” are there for members to stand up and fight for their rights. No one else will do it for you! Especially your board of directors.

As James Madison wrote in The Federalist Papers #51: “If angels were to govern men, neither external nor internal controls on government would be necessary.” HOA boards for the most part have demonstrated that they are indeed not angels.

I congratulate the bill sponsor, Rep. John Kavanagh, and 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.

The intent and purpose of this law are highlighted below :

“‘association-specific political sign’ means a sign that supports or opposes a candidate for the board of directors or the recall of a board member or a condominium ballot measure that requires a vote of the association unit owners.“

The details specify the rights of members and prohibitions on the BOD regarding these signs. Furthermore,

“association may not prohibit or unreasonably restrict a unit owner’s ability to peacefully assemble and use common elements of the condominium [or HOA];

“group of unit owners may assemble to discuss matters related to the condominium [or HOA], including board of director elections or recalls, potential or actual ballot issues or revisions to the condominium documents, property maintenance or safety issues or any other condominium matters . . . .”

Relevant sections of HB 2158

The relevant sections of the new law can be read here: HB 2158;  Ariz. Sess. Law Ch 125 (2022). An audio version on Spotify can be heard here: https://spotifyanchor-web.app.link/e/mqz2Fe4Dytb

Management Case Study #2 – court HOA receivership; attorney sued; case sealed

“The events of 2008 – 2012 presented here span wrongful acts by an Arizona HOA and its attorney resulting in a court appointed receivership, and leading to the attorney being sued for aidding and abetting, among other things.  The case then disappears from county court public records and the outcome remains unknown.

“‘Defendants have conspired to take over their homeowners association . . . for improper purposes. Defendants have utilized the Association to gain control of as much property in the community as possible, through improper means .’

“[The HOA atorney] was personally sued for: ‘Breach of Ethical Duties: Disgorgement; Aiding and Abetting; Professional Negligence; Breach of Contract; Breach of Fiduciary of  Duty.’ 

“I do not have any additional court filings, either updates or final disposition.  In May 2012, after 1 ½ years of silence,  I looked into the court records only to discover that the case disappeared from public view.”

Read the full 5-page case study here.