HOA Private Government

With an estimated 20% of the population (based on industry data) residing in homeowners associations,  a percentage higher than either that of Black of Hispanic categories, the demographics of HOAs remains a mystery.  Who lives in homeowners associations?

The only hint at HOA demographics comes from the 2007 industry survey on HOA satisfaction, sponsored by the Community Associations Institute (CAI) trade group[i].  This sample of some 709 phone calls revealed a significant difference between the sample and the 2000 US Census data[ii]. 

This difference can be explained by one of two alternatives.  One is that the sample is biased in order to bring about the most highly favorable results for CAI.  The other is that the sample does reflect the norms of  homeowners associations, and reveals that the HOA population represents a distinct class or subset of American society: the senior, educated, white, well-off segment of America. 

The demographics of this survey should be of concern to the policy makers.  If the sample demographics are representative of HOAs, then the claims of HOAs as “affordable housing” should be replaced with the more accurate description, “discriminatory housing.”   Then the public policy that requires only HOA subdivisions for all new housing in an increasing number of towns and cities is discriminatory.  Unless, of course, the above demographics are not representative of homeowner associations.

It would seem that the time has come for “the acceptance of a quiet innovation in housing”[iii] to be exposed to the sunlight, and that a more thorough survey of homeowner association demographics is in order.  Who lives in HOAs?  Are HOAs, aided and abetted by local government mandatory HOAs for new housing,  establishing a class division within America?  

Notes

[ii] See Who lives in an HOA? Public officials take notice  (Jan. 2008).

[iii] Taken from the title of the CAI co-funded book, Community Associations: The Emergence and Acceptance of a Quiet Innovation in Housing. Donald R. Stabile (Greenwood Press 2000).

Audited Consolidated Financial Statements
and Other Financial Information
COMMUNITY ASSOCIATIONS

INSTITUTE & SUBSIDIARY
June 30, 2009

L. ACCUMULATED DEFICIT

 
As indicated in the accompanying statement of financial position, CAI has reported recurring losses which have generated a deficit in undesignated net assets of $611,972 and $395,589 as of June 30, 2009 and 2008, respectively. Continued deficits threaten to undermine CAI’s  ability to continue its current level of operations in the future. The consolidated financial statements do not include any adjustments that might be necessary in the event that CAI is unable to continue its current operations.

Management’s plan to alleviate the deficit includes supporting and advancing manager licensing legislation in more states expanding and creating new international partnerships; developing a new virtual membership category and reducing personnel and overhead costs.

In accordance with the approved three year financial plan, the Board of Directors has approved a budget for the year ending June 30, 2010, which projects net income of approximately $42,000. However, there can be no assurance of the success of these efforts.

Ever wonder if the CAI member HOA attorneys are worth their fees? How good are they? What’s their Win – Loss stats? This data is very difficult to come by from the trial courts, and even from the appellate courts where records are kept. Of course, we wouldn’t want to get these stats from CAI unless their source data is provided for independent inspection, which is a problem based on the recent CAI “satisfaction surveys” lacking in such material disclosures.

Fortunately, detailed records are available from the Arizona Office of Administrative Hearings (OAH) where proceedings are recorded and decisions posted on the internet. For the short period of 28 months (from September 2006 to February 2009), this state agency was permitted to adjudicate HOA disputes, and decided 52 out of 66 petitions.  Although this is a limited sampling not related to civil court cases — where the Rules of Civil Procedure come into play against the Pro Per — these OAH hearings present a leveling of the litigation playing field. An analysis of these cases will provide a good clue to the litigation value of an HOA attorney, and to whether or not engaging a CAI member attorney resulted in improved success.

A colleague gathered the data, which showed the following prevailing party percentages:

HOA                    53.8%
Homeowner   40.4%
Split                      5.8%

This is quite surprising given that in almost all the cases the homeowner was a Pro Per and the HOA was represented by an attorney; and given the fact that the state laws are clearly pro-HOA, and the governing documents amount to an adhesion contract in favor of the HOA. What the percentages seem to be saying is that “black letter” provisions of the statutes or governing documents — it’s right there, in black and white — were violated by the HOA. That an unambiguous provision had been violated and yet the HOA and its attorney failed to “own up” and voluntarily correct these obvious violations. That it took a hearing by the victimized homeowner in order to obtain justice.

The question before us to be answered is: did using a CAI member attorney improve the stats? Roughly 38% of the petitions, 20 out of 52, involved one of four CAI member attorney firms, with

CAI prevailed                            55.0%
Homeowner prevailed           45.0%

Intuitively, and supported by statistical analysis, engaging CAI member attorneys had no impact on the outcome of the hearings. We then ask: What role, if any, do these attorneys play in HOA disputes? And the answer, partly addressed in the highlighted sentence in the earlier paragraph, and from the prolific advisories from one CAI member firm, Carpenter Hazlewood, is: to seek and promote loopholes and technicalities in the law and governing documents that would lead to adversarial litigation.

Arizona CAI is at it again, fighting every little “turf war” to control the powers and authority over the members of the community, regardless of what the common law, real estate law, or constitutional law may hold.

HB2345

We go from controlling parking issues on public streets to restricting access to one’s home. Under the law, every owner has the right to ingress and egress to his home, and the right of visitors and family members to have access to his home.   Under the right to advertise the sale of a home, Scott Carpenter has spied a loop-hole in the new HB 2345 bill signed into law, where is advises his faithful followers that, you know, you can prevent open houses in gated communities. He is cautious to state, “But nothing in HB 2345 requires an association to provide access to potential buyers when the access protocol in place would not permit their entry.”   And he stops there without qualifying things like, signing in, like placing a sticker on the dash, etc., but leaves readers to the false conclusion that they can stop open houses in some way. 

This is an outright failure to recognize the intent of the legislature, and to “stir up the pot”, knowing full well that any such harassment of potential buyers and visitors would be seen as an outright “restraint on alienation” under property law –  a clause that seeks to prohibit the recipient from selling or otherwise transferring his interest in the property.

HB 2768

Here, Carpenter attempts to muddle the waters with respect to transfer fees.  He says to the HOA boards, go forth and amend your CC&Rs (and we will be glad to show you how), at our usual fee) to make the fees for reserve purposes a “legitimate” covenant. “By virtue of the exception, HB2768 will not prohibit the enforcement of “transfer fee covenants” in governing documents if the fee or charge is to be used “exclusively for the purpose authorized in the document”   And Carpenter also points, hey guys, collect these fees for recreational purposes, which the law still allows.  Once again, ignoring the intent of the legislature on behalf of their separatist, secessionist private principalities.
 

These “turf wars” will continue  until the legislature finally takes a strong hand to properly restrain these lawyers and HOA boards, and assert the supremacy of civil government over contractual, private governments that reject the Constitution.

Source:  http://blog.carpenterhazlewood.com/scott/ HB 2345 and HB 2768.

Hear the lament of the California CAI LAC about a pro-homeowner bill.

• AB 2502 would give financial incentives for owners to unfairly manipulate their legal obligation to pay HOA assessments by refusing to pay for approximately one and a half years or up to $3,600 until the association can take appropriate legal action for that owner to pay. This will cause financial havoc for HOA’s. Owners should never be given a right to intentionally stall the payment of debt.
• Owners should not be given the right to unilaterally change the payment plan that was lawfully entered into by and between the owner and HOA. There would be no reason to enter into a plan if an owner could change it at will.
• HOA’s must be able to retain counsel or other professionals to assist them in payment plans. The bill permits HOA’s to retain experts IF the owner grants permission to do so. HOA’s, just like owner’s must always be given an ability to retain professional assistance.
• Creditors, like HOA’s, need to use collection agents periodically. Those agents, like other businesses, require payment. This bill makes it extremely difficult to pay those agents and as a consequence, HOA’s will rarely use them.

This is a desperate attempt to turn homeowners against their  own best interests, and to support the oppressive,  authoritarian HOA de facto government!   Hey CAI guys, what about adhesion contracts; “no need to see” constructive notice to bind one to a contract and to surrender one’s rights, freedoms, privileges and immunities; kangaroo court due process procedures; the right to subsequently alter the contract at purchase time without the buyer’s consent; unfair election procedures; and no enforcement against violation by the HOA government?  What about these gross injustices? 

To claim that homebuyers openly and fervently embraced this  treatment by the HOA is an insult to the good people of California.  It is grossly disrespectful and demeaning. 

Thank you for helping us preserve association solvency!!!  [and our income stream]

Is your legislature, the “sovereign” of the state, a legitimate government?  This is a question that the people, and your government, have avoided asking and answering, but it must be addressed today.  State legislatures have been acting, and the people have unknowingly accepted, the legislature as the “people” rather than as the representatives of the people.  Constitutional scholar Randy Barnett argues, in reference to Congress, but applicable to all states and state legislatures,

Many people no longer conceive of Congress as the servant of  — and checked by — the people.  Instead they picture Congress as We the People itself. Under the prevailing theory of “popular sovereignty”, the legislature is thought of as the people personified, entitled to exercise all the powers of a sovereign people.

Because “the People” can “consent” to alienate any particular liberty or right . . . legislatures . . . can restrict almost any liberty and justify it in the name of “popular consent.”[i]

We, the people, have forgotten and the legislators have ignored, that the basis of our representative system of democracy rests on the consent of the people, not on the divine right of kings, on the right of “We the People” to govern themselves. As Barnett asserts,  “They [the Founding Fathers] made this declaration because they believed that the consent of ‘We the People’ was necessary to establish a legitimate government.”[ii]   We have witnessed decisions by the California Law Review Commission[iii], the NJ Supreme Court[iv], the Texas Supreme Court[v] and the Arizona Legislature[vi], to name a few instances, completely contrary to a just and faithful representation of the people within their respective states.  And it is this failure to represent, in good faith, all the people for their benefit — the general public — and not for the benefit of a “faction” of the people, whose influence is weighted so heavily as a result of the moneyed special interests that gives rise to concerns about the legitimacy of our legislatures.

The legitimacy of our government, as set forth in the Preamble to the Constitution, rests on the consent of the people.  But, in a representative system of government the practical answer to 100% consent, or “actual consent” by each and every person, is “majoritarian” rule, or the rule of the majority.  Understanding that our legal system, not moral system, holds all non-consenting people to be bound by the proper decision of the majority.  In other words, all the people are held to acquiesce and to obey the decisions of the majority, even those to which they did not give their actual consent.  The important question that must be asked is: Does this practical solution to the effective functioning of a representative system create a moral obligation in conscience to obey the law?  Barnett sheds some further light on this question,

Only if it is legitimate can an existing constitutional system issue commands to the citizenry that bind individuals in conscience.  Therefore, though some degree of acquiescence may be necessary to establish a command as positive law, more than acquiescence is needed to create a moral duty to obey such a command.

[Majority] consent legitimates lawmaking only on the assumption that individuals have rights and there are things no person or group can do to them without violating their rights.  For a law is just, and therefore binding in conscience, if its restrictions are (1) necessary to protect the rights of others and (2) proper insofar as they do not violate the preexisting rights of the persons on whom they are imposed.

Without actual consent, liberty must be strictly protected. In the absence of actual consent, a legitimate lawmaking process is one that provides adequate assurances that the laws it validates are just in this respect.  If a lawmaking process provides these assurances, then it is “legitimate” and the commands it issues are . . . . binding in conscience unless shown to be unjust.[vii]

When we examine bills before our legislature, especially those bills protecting homeowner associations or denying the people their rights, freedoms, and liberties; and their privileges and immunities under their state constitutions, we should be conscious of the legislature’s obligations to the people  that they represent.  That they are not a government unto themselves that cannot do any wrong!  That their legitimacy rests on just laws respecting the rights and privileges of the people without violating the rights of others.  That their acquiescence to obey these unjust laws and covenants cannot be misconstrued and interpreted as having  consented in good conscience to have agreed with the laws or with the HOA’s governing documents.  

The pro-HOA supporters led by the national lobbying group, and self-proclaimed educator for HOAs, CAI, simplify the above to a false and erroneous sound bite that the homeowner “agreed to the governing documents.”

The vast majority of these HOA and condo statutes and “acts” do not measure up to qualify as legitimate laws.  The government, realizing that it cannot achieve a voluntary acceptance and willingness by homeowners to obey these laws in conscience,  must resort to repressive and punitive laws as found in any other dictatorship or banana republic, even those with a facade that the people have a right to vote.  These unjust laws mimic the private government “constitutions”, the governing documents of these planned communities, with their authoritarian HOA governments.

America needs to return to fundamental democratic principles, and to the unmistaken intent, goals and objectives of the Founding Fathers, that does not include “maintaining property values”, as summarized in the Preamble to the Constitution:

We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.

References

[ii] Id, Ch. 1.

[iii] George K. Staropoli email letter of April 11, 2006 to Mr. Hebert, Exec. Dir., California Law Review Commission in reference to AB 1921 (major rewrite of the Davis-Stirling Act, absent Chapter 2, Member Bill of Rights (http://pvtgov.org/pvtgov/downloads/AB1921_letter.pdf).

^[iv]  Committee for a Better Twin Rivers v. Twin Rivers, 929 A.2d 1060 (NJ 2007) (HOA constitutional free speech case) (http://pvtgov.org/pvtgov/downloads/TR_SC_decision.pdf).

[v] Inwood v. Harris 736 S.W.2d 632 (Tex. 1987) (homestead; covenants running with the land supersede Texas constitution).

[vi] Failure to pass HB 2034 (2009) and HB2153 (2010) asserting public government, not HOA, control over public streets; default superior court decision in February 2009 declaring an Arizona statute providing for the independent tribunal adjudication of HOA disputes by the Office of Administrative Hearings as unconstitutional.(http://pvtgov.org/pvtgov/downloads/OAH-constitutionality.pdf).

[vii] Supra, n. 2

The following email letter from Mr. Brown to the Arizona legislative leaders reflects his concern about democracy in America.  (For more information on this HOA bill, please see public streets: the battleground for private or public government control).   

hoa constitution

My dear President Burns, Chairman Tibshraeny, Vice-Chairman Harper, Members of the Senate Government Institutions Committee, Senator Bunch, Representative Barto, Co-Sponsors of HB2153 and Representative Barnes:

“From time to time we read in the newspapers, or hear on the radio, about policies and procedures and practices in the Arizona legislature. Most often that which we read or head is critical of how the legislature goes about its business. Words such as “fair” and “open” and “level playing field” are used, as if to imply that the legislature should operate in a significantly different manner that it does.” Senator Randall Gnant, “From Idea…..To Bill…..To Law, The Legislative Process in Arizona,” February 2000

The Guest Opinion, “Who controls public streets,” Arizona Capitol Times, April 1, 2010, is on-point re the proposed HB2153 legislation as well as the global issues respecting associations’ control of property not owned by an association, associations’ control of the conduct and actions of Arizona citizens clearly not subject to the association’s governing documents and associations’ coveted power and dominion over homeowners subject to the association’s governing documents, the sacrosanct “private contract.”

Association stakeholders opposed to HB2153 regularly blur the lines between their long-held belief in “private contracts” not to be interfered with by federal, state, county and/or municipal governments and certainly not the legislature unless and until it suits the stakeholders and their client associations’ interests as evidenced by associations’ growing reliance on “what can government do for” stakeholders and associations today. (See Community Resource, Issue 1 / 2010, “What Your Local Government Can Do For You,” Community Associations Institute / Central Arizona Chapter, attached)

“Getting a hearing on a bill is a crucial first step for individual citizens, lobbyists, special interest groups and state agencies..in the Senate, bills that receive a hearing have a high likelihood of passing the full Senate. So, while failure to secure a hearing is a virtual disaster for a bill, getting a hearing takes a bill on the longest step towards becoming law.” (Gnant)

Please include HB2153 on the Committee On Government Institutions’ agenda, Consideration of Bills, permitting the peoples’ representatives in the Senate to vote on the bill’s passage as your brethren in the House, the people’s other representatives, did so on February 17, 2010 (43/14/03).

Respectfully,

William M. Brown