AZ Senate protects HOA misconduct rejecting HB 2052

The Arizona Senate is still sitting on HB 2052 since a month ago, March 1st,  a bill providing for member participation in HOA governance.  The bill  explicitly states, since the CC&Rs is seen as a contract, what the HOA cannot do and must allow for fair elections and meaningful  participation in HOA governance.

In the past I’ve addressed this constitutional question of fair elections in the HOA model of an authoritarian,  business form of governance.  I’ve provided examples of incidents and court cases reflecting this denial of fair elections, which exist in the public domain, as if the HOA is afraid of the democratic voice of its members.

In this writing I will call to your attention how an upscale, over 1,000 member HOA board — as a representative example of such HOAs — refuses to accept the facts laid before it that provide valid cause to conduct a due diligence examination; and to validate its positions in regard to its fiduciary obligations of good faith conduct and obedience to the governing documents.

Below I’ve copied parts of its application package provided to all candidates for  a director’s position. The package material clearly shows the BOD’s awareness of its fiduciary obligations and its required treatment with respect to the membership.

Obligations  and liabilities of directors

“Directors have a fiduciary duty to the Association and to each member.

“The duty of loyalty requires that:   Directors act in good faith  pursuant to a free, honest exercise of judgment not influenced by considerations other than the best interest of the Association.

“Failure to discharge the fiduciary duty can subject the Association to liability and subject the Director to personal liability. A Director can also be liable for illegal or tortuous acts of the Board of the Association if he/she participates in the decision to authorize the acts or knowingly fails to take steps to avoid the action. “[Emphasis added].

HOA control of the candidate process and campaigning

Getting down to the specific application of HB 2052, the relevant HOA’s candidacy procedures follow, with the opening line stating: “The Campaign and Election Policies have been carefully developed to provide a fair and clean process for candidates and all members.

While the specific policies are not clearly stated as whether prohibited or permitted, the overall tone is definitely of a prohibitive nature. The 14 points are shown as Exhibit 1 below. In sum, they include not using email listings; association facilities or agencies, clubs, etc. websites; no right to hold Q & A sessions independent of HOA;  no right to campaign through social media —  Facebook, Instagram, etc.; all advertising must be HOA approved; distributing flyers outside restaurants, presumably those within the HOA, or on common areas.

The policies of this HOA, and many other large-scale HOA are similar but not so detailed, demonstrate the failure of the board directors to act in good faith and as a fiduciary for the members.  For the HOA to argue that “The ends justify the means and we determine what’s good for the members, but the HOA entity comes first” is unsatisfactory and irrelevant. These policies reflect an authoritarian government that accepts the rejection of fundamental member democratic rights and privileges because they can hide behind the questionable legality of the CC&Rs.

There can be no excuse for HOA directors not being aware of the voluminous materials available for conducting their due diligence with respect to democratic, fair elections and member participation in HOA governance. They have been given plenty of notice, which subjects them to personal liabilities and prevents them from hiding behind “my attorney said it was OK,” or from acts of omission – doing nothing. 

This representative HOA’s policy so informs them of their liability. Yet, nothing is done to correct these violations of good faith. And still the directors, officers, and managers all demand respect! It’s shameless!

What is going on, you may ask?  Well, the board is setting policy for the acceptance of candidates without a vote of the membership. In other words, unless the proposed candidates are accepted by the BOD, the members have lost a candidate of their choosing. They have lost a meaningful participation in the governing of the HOA; they cannot disagree with the establishment!  So, if you thought your HOA was democratic, forget about it! 

Also, the BOD controls how candidates acceptable to them can campaign, placing severe restrictions not found in the fair public elections procedures.  See Exhibit 1 below. Again, members have lost their right to fair and free elections in HOA matters.

AZ Senate’s rejection of HB 2052

It is easily seen that  the AZ Senate supports these undemocratic polices as represented by this HOA’s practices. 

I have maintained that,

“Public policy today rejects constitutional government for HOAs allowing them to operate outside the law of the land. The policy makers have failed to understand that the HOA CC&Rs have crossed over the line between purely property restrictions to establishing unregulated and authoritarian private governments.”

See, CC&Rs are a devise for de facto HOA governments to escape Constitutional government; Reorienting the HOA board – fair elections; HOA Common Sense, No. 6: Fair and just hearings

And furthermore, “CIDS [HOAs] currently engage in many activities that would be prohibited  if they were viewed  by the courts as the equivalent of local federal amd Arizona governments.”  … Privatopia (1994), Evan McKenzie.

It is not too late for the Senators to meet their obligations to uphold the federal and Arizona Constitutions by passing HB 2052 into law.

Exhibit 1. HOA BOD campaign policies.

  1. Using email listings, electronic or websites of Neighborhood Representatives and Alternates, Charter Clubs, Interest Groups, community and specialty groups.
  2. Addressing a formal . . . Group (e.g., Neighborhood Representative, Charter Club, Interest Group, specialty group meetings, sports venues, etc.). However, a person’s right to free speech in casual conversations shall not be restrained.
  3. Participating in formal Q&A sessions and programs other than those sponsored by the . . . Election Team.
  4. Using Association facilities for campaign events for individual candidates.
  5. Removing other candidates’ campaign flyers from approved locations.
  6. Using the official . . . website, Facebook or Instagram social media accounts to promote your campaign or to use your personal social media accounts to defame or incite defamation of candidates, engaging in unkind innuendoes / slander / harassment at any time or in any setting.
  7. Posting campaign flyers on street signs, trees, light poles, motor vehicles, golf cars, lawns, windows, auto windshields, or in commercial buildings.
  8. Defacing approved campaign flyers.
  9. Using balloons, buttons, t-shirts, marked-up election ballot, etc. as campaign tools.
  10. Using advertising of any type (other than approved campaign statement and/or approved personal correspondence).
  11. Using multiple versions of campaign flyers at the same time.
  12. Placing flyers in mailboxes (against the law).
  13. Distributing campaign flyers outside the entrance of or in the restaurants.
  14. Distributing campaign flyers in common areas except as noted.

Limited purpose public HOA board; slander; AZ HB 2052

This writing is not meant to scare homewners from expressing their political free speech rights regarding HOA governance issues, but to observe certain precautions.

I’m disturbed by the appellate court’s rejection of theappeal in Tarter v. Bendt with respect to limited purpose public figure immunity pertaining to complaints against an HOA. The homeowner’s  complaints consisted of verbal statements, written communications, and a newsletter.

If Arizona’s HB 2052 (to be voted on by the full House), as a start,  were law today I believe your outcome would have been favorable. In part, the bill  

Allows a member or group of members to organize to discuss or address planned community business, including the following: a) Board elections or recalls; b) Potential or actual ballot issues; c) Revisions to the community documents; d) Property maintenance e) Safety issues; or f) Any other community business or actions. (Sec. 1, 2)

(See more, Arizona HB 2052 restores homeowner constitutional speech protections).

My nonlawyer view is that the case was a harsh application of the laws in an instance of an entity that functions for all intents and purposes as a local government;  allowed to operate outside constitutional protections. It is not  an “as usual” slander/libel situation but was treated as such in a memorandum decision.

The crux of the opinion was,

The parties stipulated that Mr. Tarter, as the HOA president, was a limited purpose public figure. Thus, the Tarters were required to prove that Mrs. Bendt’s defamatory statements were “made with ‘actual malice’—that is, with knowledge that it was false or with reckless disregard of whether it was false or not.”

In spite of the homeowner’s loss, the case can serve as a hard lesson to other homeowners, warning them of the dangers of rambling against their HOA and board of directors,  as the Court saw it. It serves warning that ALL relevant issues be brought before the court at trial as they may not be allowed in an after-the-fact appeal.

The Court summarized the defamatory statements, as charged by the HOA,  consisting of:

The Tarters introduced evidence that Mrs. Bendt called Mr. Tarter “idiot,” “fool,” “spineless,” “disgusting,” “chicken shit,” “lowlife,” “low-class sneak,” “unethical,” “lazy,” “weak,” and “a complete fake” in front of fellow HOA members. . . . . Mrs. Bendt also disparaged Mr. Tarter’s legal education, insulted his alma matter, referred to him as a habitual liar, and unethical. Mrs. Bendt accused Mr. Tarter of violating his attorney ethical obligations, and wrote that he could be disciplined by the Arizona State Bar and investigated by the Attorney General (“AG”).

As the Court saw it, very important issues of compensatory and punitive damages were raised and found in favor of the HOA.  The court allowed large sums, totalling $1,500,000, for nonmonetary damages as harm to reputation and emotionsl stress, and others, so beware! 

Support HB 2052 to be soon voted in  the House COW; date to be set.

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CAI concerned about growing strength of advocate arguments for HOA reforms?

Please understand that the proactive efforts by advocates across the country, especially the new reform legislation, are making CAI very nervous.  Look what CAI has done to get more $$$ to fight advocate legislation.

Issues Advancement Fund (IAF) 

What is the Issues Advancement Fund? CAI’s Board of Trustees established the Issues Advancement Fund to help support and advance CAI’s legislative, regulatory and legal advocacy efforts and programs. It was established to provide a resource base to enable CAI to respond to challenges, which, if unmet, could undermine community associations, their residents and member professionals. The Issues Advancement Fund works to support efforts at both the state and federal levels.

Who can contribute to the IAF? The Issues Advancement Fund accepts voluntary contributions from individuals, associations and businesses that wish to directly support CAI’s government affairs initiatives.

The very powerful CAI California LAC (CLAC) admits to the need for its top-line – CAI’s view – lawyers in CCAL to defend the HOA legal concept that flies in the face of our constitutional system of government (my emphasis).

How CLAC Benefits from CCAL Attorneys

“CCAL attorneys have played a significant role in CAI-CLAC and provided countless volunteer hours and dedication since the formation of this organization,” says current CLAC Chair Darren Bevan. “These attorneys offer their expertise and real world experiences as this organization works towards smart legislation that preserves community.

CCAL lawyers commit themselves to raising the bar of professional and ethical conduct in representing community associations in such areas as education, advocacy, governance, and career mentorship.

Being recognized as a CCAL Fellow is the pinnacle of the legal profession for the community association lawyer.”

(http://www.caionline.org/govt/advocacy/Pages/IssuesAdvancementFund%28IAF%29.aspx).

Earlier this year in Arizona, 2013 CCAL President Scott Carpenter hit the nail on its head when he cautioned his audience in Top 10 For 2015 (Arizona Carpenter Hazlewood online seminar).

“What we are seeing is that the [homeowner] attorneys are becoming more sophisticated and making more sophisticated arguments, and the litigation is becoming more and more challenging in the sense they are raising arguments that are harder for us to beat back . . . .” (7:31 – 8:10)

CAI can be beat easily with fundamental constitutional arguments and avoiding CAI’s narrow real property approach to community government. CAI still speaks of community associations while arguing HOAs are businesses. Doesn’t make common sense, does it?  Just demand CAI answer this obvious contradiction, reminding them that advocates are not stupid.