By Deborah Goonan, Independent American Communities
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?