What can be done about unconstitutional clauses in HOA CC&Rs?

By Deborah Goonan, Independent American Communities

US Constitution (pixabay.com)

Last week, George Staropoli addressed the important issue of Covenants, Conditions, and Restrictions (CC&Rs) as adhesion contracts.

In his blog entitled Are CC&Rs unenforceable adhesion contracts?, George references case law with regard to CC&R contracts commonly used in homeowners associations. As examples, he provides excerpts of the written opinions of Judges in Arizona and Montana that pre-arbitration requirements in CC&Rs, while unconscionable and unenforceable, do not deem the CC&Rs themselves as contracts of adhesion.

Both courts found that CC&Rs are negotiable contracts, because, under certain circumstances, they can be amended by members of the Association.

In my opinion, the courts have failed to recognize that, as a home buyer, the consumer has no opportunity to negotiate the terms within CC&Rs prior to close of sale; the fact that the Declarant (developer) retains full control over the content of the CC&Rs during construction phases – a process than can last years or even decades; and the fact that, at best, CC&Rs can only be amended by a super majority of members, often without an opportunity for members holding minority voting interests to negotiate a mutually agreeable compromise.

However, despite these facts of HOA living, the courts thus far seem unwilling to entirely invalidate CC&R contracts. At some point, such decisions may be overturned, but until then, homeowner consumers are stuck with these semmingly irrational decisions.

 

But…

the courts have demostrated a willingness to invalidate certain clauses and provisions within the CC&Rs.

Does this provide homeowner consumers with a viable opportunity to challenge specific restrictive covenants as unreasonable, unconscionable, or unconstitutional?

Let’s review Civil Rights amendments to the U.S. Constitution.

Obviously,  following the passage of the Fair Housing act of 1968, and Fair Housing Amendments of 1988, a homeowner cannot agree – by private contract such as CC&Rs – to restrict sale or lease of a home to a person of a certain race, religious, or ethnic background. Nor can a home buyer or homeowner agree to any provision in the CC&Rs that would prohibit persons with disabilities, single parents, or families with children (except in officially designated housing for older persons).

So why can’t other covenants, restrictions, and powers of HOAs be challenged as unconstitutional?

And, furthermore, why can’t consumers and housing advocates challenge the absurd legal theory that two or more parties can willingly agree, by private contract, to waive or invalidate Constitutional rights?

A few possible areas for challenge of CC&Rs in association-governed housing:

Granting the Association the unilateral power to impose monetary fines, in the absence of official judicial due process, (i.e.- in a court, with a neutral third party considering both sides of the dispute, as opposed to an internal hearing in what amounts to HOA kangaroo court)

Granting the Association the unilateral power to collect rent from a unit owner’s tenant, in the absence of official judicial due process, and perhaps in violation of the lease agreement ( a contract between owner and tenant),

Granting the Association the unilateral power to foreclose a lien on private property, for unconscionably small or unsubstantiated debts, and even though the association lacks a collateral interest in the private property, often in the absence of official judicial due process, and without any guarantee that the association will sell the property at a commercially reasonable price,

Granting the Association the unilateral power to suspend voting rights of its members in the event of non-payment of a financial obligation to the association, even though those voting rights are necessary to protect the private property rights of member owners,

Granting special rights and privileges to the Declarant – Developer, (weighted voting interests, control of the association board, the unilateral right to amend governing documents, the right to waive payment of assessments to reserve accounts, etc.) creating a grave inequity of property rights,

Attaching voting rights to property rather than to the persons who reside in a residential community, especially when equal voting rights are denied in matters involving private property rights,

Granting the power of a super majority of voting interests to force the termination of the association and sale of units, and taking property without just compensation to the minority unit owners,

Granting the Association the unilateral power to enforce restrictive covenants upon use of private property (such as change in rental restrictions or the right to conduct business from home), or unreasonable restrictions upon personal conduct upon private property,

Granting the Association the unilateral power to impose additional rules and regulations, with no opportunity for  members or non-member residents to consider and mutually agree to new terms of the contract,

Granting the Association the right to unilaterally restrict First Amendment rights, including limiting resident rights to free speech and expression with regard to HOA or other political issues, restricting religious liberties that do not infringe upon the rights of others, and prohibiting equal access to common property to entertain viewpoints that oppose those of the HOA board,

Granting the Association the unilateral power to Preserve or renew CC&Rs without a vote of full membership, and in the absence of official judicial review, OR

Granting any group of individual property owners or any third party the right to impose a mandatory property owners’ association upon properties that are not currently burdened by such restrictions.

 

Can you think of any others?

 

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10 Replies to “What can be done about unconstitutional clauses in HOA CC&Rs?”

  1. You asked “Can you think of any others?” H__l yes. How about making illegal changes to to quantities and prices in RESERVE STUDIES? How about forcing owners to paint WHEN no inspections are done to indicate the homes actually need painting (Contractors really love that).

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    1. Yes, Norrm. Good real life examples. I think those instances would fall under the HOA’s unilateral right to amend the “contract” without input or consent of owners (Under the developer) and the HOA’s right to cite a violation without judicial due process. Cooking the books, if it can be proven, would be a criminal offense – fraud.

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  2. -Charging a large amount of interest on late association dues.
    -Our Maui Condo Association has only 5% of the owners living on Maui and so the annual owners meetings are sparsely attended. We have 2 Board Members that prey on new owners as the informal Board Welcoming Committee and collect contact information and then ask for an individual Proxy for voting during elections at the owners meeting. The proxy rules state that it can be given to the board as a whole or an individual, but has no limit for how many proxies one person can hold. This has created a situation where 2 out of 55 owners control every board election. They groom new owners that they think would agree with them on board decisions and then vote them into position.

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    1. The proxy vote is a creation of corporate law. As you can see by reviewing historical US law, proxy voting is unconstitutional. Your condo association is a perfect example of how the proxy can be abused. No doubt that most owners view their condo mainly as an investment, since they do not live in the condo full time. But why not consider using an absentee ballot instead of a proxy?

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  3. I can think of a few more examples just off the top of my head of possible areas for Constitutional challenge of CC&Rs in association-governed housing.

    In addition to “Granting the Association the unilateral power to suspend voting rights of its members in the event of non-payment of a financial obligation to the association, even though those voting rights are necessary to protect the private property rights of member owners,” here is another related area for challenge of CC&Rs in association-governed housing: Granting the Association the unilateral power to suspend a member’s voting rights due to the member’s existing alleged violation of the CC&Rs. In the state of Nevada, even if the member is paying the fines imposed by the Association (without prejudice), that member’s right to vote is/can be denied, and the member’s ability to run for an open Board seat is tainted (at best). The Association’s absolute power to shut down a member’s participation in the so-called democracy because of that member’s alleged non-compliance with the governing documents is another of the totalitarian tactics that Associations can employ in order to preserve their status quo.

    Regarding “Granting the Association the unilateral power to foreclose a lien on private property, for unconscionably small or unsubstantiated debts, and even though the association lacks a collateral interest in the private property, often in the absence of official judicial due process, and without any guarantee that the association will sell the property at a commercially reasonable price,” I submit that such actions can be reasonably argued to be the infliction of “cruel and unusual punishment” on the unit-owner – among other Constitutional infringements, including, of course, no due process.

    There is also the matter of Associations purporting to regulate the speech and behavior of members/residents under the threat of imposing a violation on a resident and/or having the resident arrested. We have seen this at Tiber Island Cooperative Homes in Washington, D.C. in 2015, Mesa Terrace Condominiums/Apartments in Arizona in 2016, and in Nevada’s “bullying law” for common-interest communities that was passed in 2013 – and which many Associations have adopted as a resolution/rule into their governing documents. An Association can assert that a resident has uttered speech that it deems “creates a hostile environment,” and the Association can then impose a violation or attempt to have the resident arrested for that speech (or conduct) and charged with a misdemeanor. If I were to go to a Board meeting and tell a Board member that I think she is a moron and a crook, she and her Gulag could impose a violation on me and/or try to have me arrested. Or the Association could simply fabricate a claim against me since there is nothing practical in law to stop them from doing so; quite the contrary, in fact. How could such rules and laws possibly stand against a First Amendment challenge? (This of course also raises nearly infinite questions regarding defamation in HOA Land.)

    I’d could go on…. I’ll close by saying that it certainly would have been interesting if someone had raised questions about the un-Constitutionality of association-governed housing during the useless hearings for Neil Gorsuch to become a Supreme Court justice. How would he have explained that ours is a Constitutional Republic with liberty and justice for all – except for unit-owners and residents in association-governed housing? How is it that dubious contracts of adhesion are allowed to obliterate – 99% of the time – our supposed Constitutional protections?

    My eternal thanks to you, Deborah, for your great work.

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  4. Deborah- your recent blog article leaves out an entire category of unconstitutional acts (Contract Clause violations) that occur when state legislatures act, often supporting special interest legislation, to amend HOA statues, retroactively changing the terms of the CC&Rs (those “private contracts” you reference)- as with Nevada’s AB 192 (2015) inexplicably and unanimously passed, retroactively changing developer control from 75% to 90%.

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    1. Absolutely! The HOA industry cries crocodile tears when consumer advocates lobby for legislation that would protect the rights and financial well-being of owners and residents, declaring “You must not impair the (CC&Rs) contract!” But, as you point out, when the industry wants to pass legislation that increases their power or privilege over individuals, then they are more than happy to overlook that little contract impairment issue. Double standards!

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  5. Deborah and commentators just touch the surface of the immense con job by the Evil Empire.

    Pursuing any constitutionality challenge will lead to the defense that “you agreed to be bound.” Show this to be invalid and we win! ANd it can easily be done!

    The second line of defense, a more legalistic defense, is the fact that CC&Rs “run with the land” and are part of the real estate doctrine of equitable servitudes. Equitable servitudes, modified and adopted by the Restatement of Property in 2000 giving favorable treatment to the HOA form of governance, are the modern incarnation of the medieval doctrine that the sovereign controls his land and passes down restrictions and uses to owners forever after. CC&Rs, like this doctrine, is autocratic and not democratic, and is promoted to supersede constitutional law (See Restatement section 3.1, comment h).

    Think about this very important and controversial Supreme Court case, as applicable to HOA-Land, that overturned a 121year-old Supreme Court precedent: Brown v. Board of Education. The SC held that “separate educational facilities are inherently unequal”, overturning the decision by the Plessy court in 1896. How about the idea that SEPARATE AND EQUAL HOA HOUSING IS INHERENTLY UNEQUAL”?

    Is HOA housing equal? Are people living in HOAs treated equally under the law as their counterparts not living in HOA-Land? And remember, the consent to agreed defense is laughable in that, it itself, is an unequal protection of the law violation.

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    1. George said:
      “Think about this very important and controversial Supreme Court case, as applicable to HOA-Land, that overturned a 121year-old Supreme Court precedent: Brown v. Board of Education. The SC held that “separate educational facilities are inherently unequal”, overturning the decision by the court in 1896. How about the idea that SEPARATE AND EQUAL HOA HOUSING IS INHERENTLY UNEQUAL”?

      Is HOA housing equal? Are people living in HOAs treated equally under the law as their counterparts not living in HOA-Land? And remember, the consent to agreed defense is laughable in that, it itself, is an unequal protection of the law violation.”

      Exaclty, George. There is a great deal of inequality, because, within their homes and neighborhoods, HOA residents and owners live under an alternate set of laws. That is the point of comparing and contrasting typical CC&Rs to local, state, and federal laws.

      A stark exercise in compare and contrast helps people to “get it.”

      My point is, since it is illegal for people to “agree” to violate the civil rights of another with regard to the Fair Housing Act, why is it not similarly illegal for people to “agree” to violate private property rights of the weaker party in the HOA? Because, after all, most CC&Rs have the effect of cirumventing the Fair Houising Act and Amendments.

      HOAs regularly engage in discrimination by CC&R. Target the unpopular neighbor or the whistleblowing troublemaker with covenant violations or unsubstatiated assessment delinquencies. Blame the homeowner for being a selfish deadbeat. Hold up the HOA board as upstanding volunteers doing a thankless job. The current system lends itself so well to scapegoating.

      And it’s all perfectly legal…or is it?

      What we are discussing is strengthening and extending Civil Rights to encompass private property rights, to reject large portions of CC&Rs – or perhaps the entire concept of restrictive covenants – as what they are: discriminatory, controlling, opportunistic, even dictatorial legal “contracts” meant to serve original landowners and and whatever elite group of opportunistic successors that follows.

      Put simply: Americans are entitled to equal treatment with regard to their private property rights and housing arrangements, no matter where they choose to live.

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  6. I hate the fact the HOA board decides what is “neat and tidy” and decides only weather resistance outdoor furniture and flower planters may be on your private, fenced patio.

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