Thursday, November 11, 2010

What part of PRIVATE in private local government don't you understand?

A law giving a state agency purview to resolve disputes between property owners and their homeowners associations is illegal, the Arizona Court of Appeals has ruled.

The judges said the Legislature never gave the Department of Fire, Building and Life Safety regulatory authority over homeowners associations. In fact, the judges said, lawmakers provided no such oversight by any state agency.

That, they said, makes unconstitutional a 2006 decision by legislators establishing a hearing process to deal with conflicts between homeowners associations and the governing boards of their planned communities.

Unless overturned by the Arizona Supreme Court, or unless the problem is fixed by the Legislature, the ruling leaves no administrative-review process for such disputes. That makes filing a lawsuit - a far more expensive process - as the only remaining option.

The implicit public policy statement being made here by the Arizona Court of Appeals is "What part of PRIVATE in private local HOA government don't you understand?" The court is saying that private local government means just that: no public oversight or regulation from the executive branch. HOA exceeding its authority? Lawyer up and tell it to the judge.

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Anonymous said...

I find it amusing that a CAI member law firm behind the repeated efforts to shut down OAH will be responsible for the impostition of increased regulation of HOAs. Its defense was based on the absence of sufficient regulatory powers, and as made clear by the court, the agency needed more regulatory authority in order to provide HOA adjudication for a fair and just due process of law, rather than the corrupt HOA process where the accusers judge the accused.

Fred Fischer said...

This case clearly substantiates why the courts really don't understand housing associations by their own contradictory rulings.

What the courts and State legislators don't understand or will admit to, is first that housing associations were "imposed upon members" as the recent,Treo @ Kettner Homeowners Assn. v. Superior Court, 166 Cal. App. 4th 1055 (2008) ("Treo") case stated. Although this case was about CC&Rs it also applies to the entire HOA declaration because it comes as a package, the courts can't say one part was imposed and not another. Second is the fact that citizens can't sign away ones inalienable constitutional rights which includes property and privacy rights through an adhesion contract. Third and may be most important the courts haven't figured out that housing associations in most cases exist because of mandated public policy (possibly state actors) and not through either the developers or buyers voluntary creating them.

Therefore to claim that the associations have nothing to do with "the public" and therefore are private and not subject to administrative oversight is both false and misleading. Along with the courts false belief that just because the members take control of the Board means that the members best interests will be equitably or fully represented. Another myth since the association was created to primarily represent the best interests of the developer, municipality and others, everyone except the members.

Simply housing associations most often exist, not voluntarily but through mandated public policy created privately without public participation and this needs to change. Consequently housing association governance isn't working for it's tens of millions of members, since privatized governance historical creates an endless stream of Pandora's box issues. Remember housing associations are being imposed upon property buyers by cities, towns and counties to earn free income and expand their tax base without incurring additional expense. Not because buyers and even some developers want them or because they are the best or only way to manage a common interest development but because public policy requires them. Therefore the courts need to quit supporting what is clearly unjust.

Fred Fischer said...

The AZ legislature wisely tryed to even the playing field for members. By attempting to stop many of the unnecessary issues that come from civil litigation by offering an affordable and fair alternative to resolve issues for it's members.

The courts need to understand the following and especially that HOAs are not exclusively private entities as they mistakenly believe them to be.


Some involved with CIDs claim that CIDs need a government entity to provide oversight.

One argument against creating a state CID entity is that CIDs are private property,

governed by private contracts, and the state has no role in this relationship.183.......The other side of the argument is that CID problems cannot be dismissed entirely by

government as private issues because CIDs are often created at the request of local


As one manager pointed out, there are few checks and balances in CIDs, without which

people will act in there own self-interest.185 This includes boards, homeowners,

developers, managers, and the other professionals involved with CIDs. One way to deal

with CID complaints is for a neutral third party to negotiate the controversies that arise in

CIDs. In the past, the courts have often played this role. There are a few problems with

the courts as arbitrators for CIDs issues. Litigation is expensive for associations and

often too expensive for individual homeowners. The courts have recently made it clear

that they do not want this role. In 1999, the California Supreme Court decided that it is

not the Court’s place to second-guess homeowner associations.186...
From CRB 02-012 pg 49

Why civil litigation is not good for HOAs and members:

...The authors of DRE’s 1991 study write that many lawsuits consist of disagreements over

CC&R enforcement that did not “seem particularly worthy of an expensive and timeconsuming

legal proceeding.” Inflexible CC&Rs, homeowners’ unrealistic expectations

of worry-free living, and unskilled board members result in litigation being used as the

first resort rather than the last.83

The study cited real estate professionals as saying that litigation is the number one threat

to the future viability and market competitiveness of CIDs.84 Lawsuits have a negative

impact on homebuyers and put a financial strain on CIDs, potentially causing assessment

increases, special assessments or borrowing from the reserve funds to cover legal fees.

Board members in CIDs with construction defects and those in the process of suing

developers were more likely to be harassed by homeowners.85 Some experts claim that

construction defect litigation may be a way for board members to transfer homeowner

anger from themselves to the developer.86*

Lawsuits may not even be effective. The courts usually do not mandate that homeowners

and board members cooperate. They only designate winners and losers. Lawsuits may

serve to only increase the tension between members87 and put a strain on a CID’s

resources.88 This further undermines the ability of the CID to function well....
From CRB- 02-012 Pg.