Supreme Court: Government powers delegated to corporations are bound by Constitutional Law

by Deborah Goonan 

A recent Supreme Court ruling involving the legal status of AMTRAK seems to relate directly to the legal status of Association-Governed Communities, commonly known as Homeowners’ Associations (HOAs).

According to George K. Staropoli, a long-time homeowner/Constitutional governance advocate from Arizona:

The recent non-HOA decision by the US Supreme Court in DOT v. Assn American Railroads[i] has a direct bearing on the constitutionality of the HOA legal scheme. This case dealt with the legal status of AMTRAK — is it or is it not a government entity — and was there an unconstitutional delegation of legislative authority. While I have argued that HOAs are de facto private governments based on their powers, authority and functions, I now make the argument that as a de jure (according to the law) private corporation, HOAs have been unconstitutionally delegated legislative powers. “[R]ecognizing that the power to fashion legally binding rules is legislative.”[ii]

With respect to violations of the Constitution, the Supreme Court decision in DOT held 1) that private parties cannot draft agreements to circumvent the Constitution by declaring that an entity, specifically a corporation, is a private organization, 2) that such a determination is made by the courts based on the corporation’s functions, powers and authority, and 3) that in order for a private entity’s delegation of legislative authority to be constitutional, there must be control, supervision and accountability to the state..

Mr. Staropoli makes the argument that HOAs are corporations created by state law, and then improperly delegated certain limited government powers, in the absence of a state charter and any meaningful oversight. And when you compare HOAs to AMTRAK, their relationship to government entities is of a similar nature. I agree.

After all, what is the reason that Associations have been allowed to proliferate – even to the point where they are required for most new developments? The reason is because HOAs have become private, hyperlocal governments that provide various levels of limited-public services. As long as your HOA is maintaining its roads and storm water system, maintaining green spaces, arranging for waste disposal, and enforcing its local “ordinances” and “zoning” requirments written as deed restrictions into Covenants, Conditions, and Restrictions (CC&Rs), YOUR LOCAL GOVERNMENT IS OFF THE HOOK FOR THESE DUTIES.

In other words, your local government has delegated public services to your HOA – a corporation – and then labeled the Association as a “creature of statute” in the case of condominiums, and as a “private organization” or “business entity” in the case of planned communities of single-family residences.

For about 5 decades, the indsutry of Association Governance, led by trade (lobby) group Community Associations Institute (CAI), has insisted that The Constitution and the Bill of Rights Need Not Apply in residential Associations, because, they claim, “Community Associations” are private entities.

Other than your HOA, Condo Association, or Cooperative, what other private corporate or business entity has the power to create and amend rules, and enforce deed restrictions affecting your use and enjoyment of private property? Or to limit your rights to free speech, religious freedom, your right to vote in Association elelctions, and your right to lease your property to a tenant of your choice?

The purpose of deed restrictions, often with co-establishment of private Association-Governance corporations, certainly appears to cirucmvent Costitutional constraints that would limit the power of Associations.

Does this recent Supreme Court ruling signal that CAI’s House of Cards must also fall to a similar legal challenge?

Read the rest of George Staropoli’s insightful blog post, entitled Supreme Court says corporations cannot be used to evade Constitution here

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