HOA Private Government

Once again, the necessity of obtaining an attorney to read and explain the
legalese of those CC&Rs or declaration cannot be overstated! Why? Because
Arizona government agencies do not protect home buying consumers!

With respect to the transfer fee demand by the Montelena HOA on a buyer to
pay a whopping $2,500 fee to the association (see Homebuyer: HOA
‘Unscrupulous’ In Raising Fee), let’s examine what the buyer would be
getting into. First, and highly questionable and undemocratic, the 440
members of Montelena HOA have unwittingly agreed to have the board, by
majority vote, to set forth rules that become and are held to be amendments
to the CC&Rs, without a vote of the membership (see Article 5.3 of the
CC&Rs). Generally, it usually requires a supermajority vote of the members
to amend the CC&Rs.

Furthermore, buried within Article 6 of the CC&Rs, titled “Membership and
Voting”, are sections 6.8 and 6.9 that require a new owner to pay 2 fees,
both equal to 1/6 of the then current annual assessment, as contributions to
the annual assessment and to the Reserves assessment. And, surprisingly,
section 7.15 allows an additional third fee, a transfer fee, designated as
such, imposed by either the board or the management company. How many fees
is that on the third-party buyer (as such, he is not a legal party to the
CC&Rs agreement). Article 8 grants the HOA the right to lien and foreclose
for nonpayment of assessments. On the third-party buyer, too?? (The buyer
must agree under his purchase contract with the seller, not the HOA, to
assume these assessments in order for the assessment to be binding on him.)
Under section 7.2, Annual Assessments, the board cannot increase assessments
above 20% without a 2/3 vote of the members. Section 7.8 says the
assessments must be uniform across all members, raising the issue that a
transfer fee on sellers alone violates the CC&Rs. (Note that transfer fees,
by whatever name, have been outlawed by new law this year, HB2768).

The public should be protected and made aware that there are so many powers
granted to the HOA or denied to the homeowner hidden within these 50 – 120
page legal agreements. Agreements, by law, that do not even have to be
seen, read or acknowledged in order to be binding on unsuspecting
homeowners. The real estate agent who is required materially disclose all
information and to treat all parties fairly under the simple R. E.
Commissioner’s Rule, R4-28-1101, is allowed to ignore this rule.
Furthermore since the Arizona Constitution allows real estate agents to
function like an attorney in regard to real estate transactions, an
additional duty to protect the buyer has been placed upon the agent.

Now, it is not unreasonable to argue that a prudent person buying, for many,
their largest asset purchase would consider the above representative
covenants as material to his decision to purchase in a particular HOA, or in
any HOA. And, it is not unreasonable to argue that the real estate agent is
duty bound to provide such material information to the prospective buyer,
and that the real estate department, in keeping with R4-28-1101, would have
promulgated guidelines and procedures in order to make this material
disclosure a meaningful and effective rule. The rule has been ignored by
ADRE with respect material information about HOAs.

Last month, in regard to another failure to protect a homeowner from HOA
abuse (see Who prosecutes for homeowner justice against HOAs?), I wrote to
the Arizona R. E. Commissioner, asking:

Who will protect homeowner justice against HOAs?   I ask ADRE why is it not adhering to its mission, as stated in its pamphlet, ‘The Arizona Department of Real Estate (ADRE) protects the Public Interest through Licensure and Regulation of the Real Estate Industry in Arizona’ . . . . Who, then, will protect the public interest if not the licensed real estate agent under ADRE regulation?  I call your attention to Commissioner’s Rules, R4-28-1101, Duties to Client.

A reply by the Assistant Commissioner side-stepped this questions posed
above with a “not my job” reply:

We have been given no authority to adjudicate disputes between HOAs and its
member-homeowners. The separation of powers doctrine places this
adjudication role in the hands of the courts, not in the hands of the
executive government.

I clearly did not ask that ADRE adjudicate disputes, but to enforce
R4-28-1101 and to stand behind its mission to protect consumers, all
consistent with the existing delegation of powers to ADRE and to the
Commissioner.

Qui Pro Domina Justitia Sequitur

(“who prosecutes on behalf of Lady Justice?”, DOJ seal)

Editorial comment. I suspect, like this year’s new law, HB 2774, “Take That
George!” bill (my description), that explicitly states that government
officials cannot be compelled to defend statutes, another bill, “Take That
George, redux,” will be proposed that would explicitly say that ADRE cannot
be compelled to provide consumer protection to buyers of HOA controlled
property.

In the words of Jim Wallis, preacher and author of Rediscovering Values,
“What has been deliberately and carefully made ’socially acceptable’ was,
not too long ago, thought to be irresponsible – both financially and
morally.”