Tuesday, July 16, 2013

The Volokh Conspiracy » Our Amicus Brief on the Property Rights of Private Planned Communities

The Volokh Conspiracy » Our Amicus Brief on the Property Rights of Private Planned Communities
Thanks to "Right to Own"  for this alert:  The Volokh Conspiracy (a libertarian law professor blog) reports that The Cato Institute, a libertarian think tank, is getting involved in what could be a major USSC decision regarding HOAs. The Army Corps of Engineers destroyed 14 homes in order to conduct major repairs to an area damaged by Hurricane Katrina. They compensated the owners of the homes, but the HOA wanted compensation for the loss of assessment revenues. The Fifth Circuit Court of Appeals said that the loss of assessments revenue isn't the kind of loss that the Fifth Amendment Takings Clause ("nor shall private property be taken for public use without just compensation") requires compensation for.  But the Cato Institute wants the USSC to overturn that decision:

"The Cato Institute recently filed an amicus brief urging the Supreme Court to hear Mariner’s Cove Townhomes Association v. United States , a case addressing an important issue involving the property rights of private planned communities. The brief was filed on behalf of Cato and several property scholars, including Richard Epstein (Chicago and NYU), James W. Ely (Vanderbilt), Donald Kochan (Chapman), my George Mason colleagues Adam Mossoff, and Alex Tabarrok, and myself. Here is the petition for certiorari written by University of Virginia law professor Daniel Ortiz and the UVA Supreme Court Lititgation Clinic"

[Ilya Shapiro of the Cato Institute summarizes the situation like this:]

"Mariner’s Cove Townhomes Association v. United States affects the rights of the more than 60 million Americans currently living in these associations. This case arises from the federal government’s taking 14 of 58 townhouses from one development in the wake of Hurricane Katrina. Mariner’s Cove owned a right to collect dues that was appended to those 14... homes, and sued the government for extinguishing that valuable right without just compensation under the Fifth Amendment’s Takings Clause. In contrast to most lower courts, however, the U.S. Court of Appeals for the Fifth Circuit held that “the right to collect assessments, or real covenants generally” are not subject to Takings Clause analysis. In other words, the government can take those rights without paying anything to the owners. Cato and a group of esteemed professors, including Richard Epstein, James W. Ely Jr., and Ilya Somin, has submitted an amicus brief supporting Mariner’s Cove and arguing that the Supreme Court should take the case to clarify whether community association fees are compensable property under the Fifth Amendment...Such associations often shoulder the burden of providing and maintaining infrastructure, services, and utilities, which allows for more diverse and customizable amenities for homeowners than if those decisions were left with remote municipal governments....
The perverse implications of the Fifth Circuit’s ruling are clear: it would allow.. local governments to require the creation of a community association, benefit from the resulting private delivery of services while collecting taxes from its members, and later take the property without even paying back the very fees that enabled the government’s benefit. "


IC_deLight said...

The problem with the Cato Institute is that it has cast this as affecting the "property rights of private planned communities", yet has been rather equivocal as to its definition of "community". "Community" is an abstract term. Certainly the HOA corporation is not "the community".

Moreover this article is clearly designed to conceal the distinction between the HOA corporation and the members - a distinction that won't be made when the HOA corporation is suing its members. This does not affect any rights at all of 60 million Americans. At best this affects the interest of a far smaller number of HOA corporations - the interests of these two groups is NOT the same.

Municipalities already require creation of HOAs. Shapiro's remarks fall on deaf ears because of the argument that the homeowners acquired those properties with the burdens already in place. I don't happen to agree that it is "okay" to create second or third class citizens and rationalize it with the lame claim that "they knew it when they moved in there". There isn't anything about this decision that would alter what Shapiro is claiming. There is a much more disturbing interpretation, however.

Don't get me wrong, I think this nonsense about restrictive covenants should be eliminated or if they are to be allowed they should be strictly limited in time. The validity of restrictive covenant requiring assessments into perpetuity without obligation on the part of the HOA corporation should be analyzed on other grounds.

However, if elimination of restrictive covenants is not subject to takings clauses then it would not be a taking for a local government to impose a restrictive covenant on your property after-the-fact. But if a local government can impose a restrictive covenant, then it can bypass limitations on its own authority because these become matters of "legal contract" rather than social compact. As a result you can toss the constitution out the window. Unlike any other kind of "contract" you have no right to negotiate, no "offer and acceptance", and no right of refusal. You would simply be obligated.

I still hope the HOA loses in this case because it will also affirm that local governments can eradicate restrictive covenants purporting to prevent homeowners from parking on public streets and other restrictive covenants.

Perhaps this would be a good case to challenge restrictive covenants purporting to require assessments into perpetuity so as to put the whole HOA industry at risk.

IC_deLight said...

After reading the article written by academics via the Cato Institute, all I can say is their article sounds like something a junior reporter would write after being exposed to the CAI Kool-Aid and having no experience with these HOA corporations.

The case does NOT affect the rights of the involuntary members of the HOA corporations. Confusing the members with the corporate entity is a common error that these esteemed lawyers surely did not make accidentally?

Casting the restrictive covenant as being "owned" by the HOA corporation is another mistake. The HOA corporation certainly does not "own" any restrictive covenant. Following this ridiculous logic, the homeowners would owe the HOA corporation money any time they voted to amend restrictive covenants. I wonder if the HOA industry players would take the position that the HOA corporation owes the homeowners money every time a board tries to impose greater restrictions through "resolutions" or "policies".

No doubt they'll put a lot more stuff in there claiming people chose these places and that the HOA is a mini-democracy.