The foundations of homeownders Associations and The New America - Essay - American History - George K. Staropoli, Essays (high school) of United States History

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THE FOUNDATIONS of HOMEOWNERS ASSOCIATIONS and THE NEW AMERICA George K. Staropoli

Introduction

The material of this book first appeared as two separate papers in 2006, which became Parts I and II. Part I is my review of The Homes Association Handbook , Technical Bulletin #50, published in 1964 by the Urban Land Institute. It is referred to as "the bible" for planned community and homeowners association development, the blueprint for the mass merchandising of homeowners associations. It can still be obtained from the ULI Research Division. Part II is my review of the self-congratulatory book by Donald Stabile, Community Associations: The Emergence and Quiet Acceptance of an Innovation in Housing. Since 1992 it has become a national lobbying business trade organization for its members, primarily attorneys and management firms. It has no HOA membership category. The book provides "an insider" account of the promotion and acceptance of homeowners associations. This quiet acceptance of and continued growth of HOAs to where some 20% of Americans now live under these authoritarian private government regimes has established a New America.. A New America contrary to that of The Founding Fathers, and one that has not only changed the physical landscape across America, but the cultural, social and political landscapes as well. Part III explores the dual forms of political government that currently exist here in the United States. Is the restatement of law for servitudes establishing a parallel form of local private government, not subject to constitutional restraints and the protections of individual rights and freedoms? For further information on New America, see Establishing the New America of independent HOA principalities , George K. Staropoli, on Amazon.

1/24/2010 Constitutional Local Government i

Part I

THE MASS MERCHANDISING OF PLANNED COMMUNITIES:

HOW AMERICANS LOST THEIR CONSTITUTIONAL &

PROPERTY RIGHTS

Source: THE HOMES ASSOCIATION HANDBOOK, Urban Land Institute Technical Bulletin #50, 1964 1 August 31, 2006

Part II

NATIONAL LOBBYIST FOR HOA PRINCIPALITIES

April 20, 2006

Part III

American political governments:

private under servitudes law and public under

constitutional law

July 4, 2009 (^1) Study Staff: Byron R. Hanke, Jan Krasnowiecki, William C. Loring, Gene C. Tweraser, Mary J Cornish. This publication can be obtained from the Research Department of ULI for a cost of about $180.

Is the restatement of law for servitudes establishing a parallel form of

• Part I The Mass Merchanding of HOAs Table of Contents
  • PREFACE.............................................................................................
  • OVERVIEW
  • THE MASS MERCHANDISING OF PLANNED COMMUNITIES
    • The Framework.................................................................................
    • The Con.............................................................................................
  • COMMUNITIES THE ULI BLUEPRINT FOR SELLING PLANNED
    • The Necessity for Covenants Running with the Land
    • liens................................................................................................... Superiority of Liens: Homestead Exemption loophole and mortgage
    • The Necessity of Foreclosure
    • The Exercise of State Police Powers to Fine and Penalize.............
    • Developer’s Plan............................................................................. The 30 Year Restriction on HOA termination – Preserving the
    • Amending the Declaration with less Than 100% of the Owners....
    • Weighted Voting in Favor of Developer
  • DEMOCRACY and PLANNED COMMUNITIES
    • Reasons for the Inclusion of Voting privileges
    • Promoting Planned Communities
  • CONTEMPORANEOUS CRITIQUE OF TB#50..............................
  • SUMMARY........................................................................................
  • APPENDICES
    • Appendix 1. TB#50 Table of Contents.
    • Appendix 2. Promotional Brochure.
    • Appendix 3. A Poetic History........................................................
• PRINCIPALITIES Part II NATIONAL LOBBYIST FOR HOA
  • Overview.............................................................................................
  • A National Lobbying Organization
  • Public Policy Contradictions
    • Bankruptcy law changes elevating Assessments to a tax status
    • Government Regulation of HOAs (emphasis added)
    • Uniform Common Interest Ownership Act, UCIOA......................
    • Homeowner Bill of Rights.............................................................. 1/24/2010 Constitutional Local Government iii
  • The Myth of Vibrant Communities
    • Homeowners vs. HOAs
    • Planned communities and Social Capital........................................
  • CC&Rs: The Non-legitimate Social Contract
    • Application of the Social Contract..................................................
    • Legitimacy of board actions
  • Conclusions.........................................................................................
  • APPENDIX.........................................................................................
  • APPENDIX.........................................................................................
    • Appendix A....................................................................................
    • Appendix B
    • Appendix C.
      • Appendix C cont’d
    • Appendix D....................................................................................
    • Appendix E.
    • Appendix F.
• Part III American Political Governments...............................
  • the protections of individual rights and freedoms?............................. local private government, not subject to constitutional restraints and
  • government Clouding the concepts of a business, a private government and public
  • But then, what is government?
  • new social contract............................................................................ Government is defined by a "social contract", and CC&Rs define the
  • Conclusions.......................................................................................
  • George K. Staropoli

Part I The Mass Merchanding of HOAs

PREFACE

Civil law, like criminal law, aims to shape people’s conduct along lines which are beneficial to society – by preventing them from doing what is bad for society... or by compelling them to do what is good for society.... Civil law, like criminal law, is effective mainly because of the sanctions which the law imposes, through the courts, upon those who commit violations.^2 Statutes are expressions of public policy. And common law is, after all, merely the courts’ notion of what best promotes public policy. 3 Law reflects the values and morals of society, but it can argued that too often the society reflected by the law is that of the rich and the powerful, including special interest groups. As the theory goes, the powerful enact laws to help them make and protect wealth, and then use the criminal laws to coerce others into helping them in the process. 4

OVERVIEW

The reader of this publication cannot but come away with the distinct realization that the authors promoted certain aspects of planned communities while deliberately avoiding a solid presentation of a number of serious concerns. It is a comprehensive manual, except for any discussion of the form of democratic governance of the community, for the mass merchandising of a profit-making business enterprise. Not only does this 422 page publication promote the selling of planned (^2) Wayne R. LaFave, Criminal Law , p. 12 (West Group 2000). (^3) Id, p.15. (^4) James W. H. & Sandra L. McCord, Criminal Law and Procedure for the Paralegal, p. 12 (West Legal Studies 2001).

the developer and the mortgagor, and to insure the continued existence of the corporate entity proposed to manage the planned community, the “automatic homes association” 8

. While this Handbook recognizes the problem with the timing of when the covenants running with the land become binding, at the time the developer sells the first lot, it advises that the states will protect the HOA from any homestead exemption because of this priority of liens 9 , but urges the need to insert wording to grant the mortgagor a priority lien before this “developer” lien. 10 The home-buying public protections, as was the intention of the various state legislatures when creating the homestead protection, was intentional disregarded by the advertising of this technical oversight. Over the 42 years since the publication of The Homes Association Handbook, it has become the “bible” for the mass merchandising of planned communities with the accompanying affect on American society, its values and the loss of individual property rights, and the loss of fundamental rights and freedoms upon which this country was founded. The Handbook was supported by several federal agencies and real estate interests^11 , and continues to be supported by these same entities along with state legislatures and local municipalities, with the same apparent disdain for the protection of American liberties and freedoms. The mantra of “less government intervention”, this call for a laissez- faire policy by reputable libertarian public interest firms, masks the prevalent protectionism of planned communities by the states and their (^8) Term used for today’s mandatory membership association. (^9) “We believe that the lien of assessments will, in all states, be recognized as superior to and unaffected by the homestead exemption”. P. 322. (^10) “In absence of an express provision altering priorities, the court held that the lien of the assessments was superior to the lien of the mortgagor... a suggested provision dealing with priorities may be found in Appendix F.” p. 321. (^11) From the cover page: the Federal Housing Administration, US Public Health Service, Office of Civil Defense, Urban Renewal Administration, Veterans Administration, and the National Association of Home Builders. The Urban Land Institute was formed in 1936 as a research division of the National Association of Real Estate Boards (now the National Association of Realtors) under the name of the National Real Estate Foundation (see generally, Community Associations: The Emergence and Acceptance of a Quiet Innovation in Housing , Donald R. Stabile (Greenwood Press 2000).

failure to protect a segment of society from the predator marketing tactics of the real estate industry.

THE MASS MERCHANDISING OF PLANNED

COMMUNITIES

What is remarkable, and disgraceful, is the failure of state governments across the country to impose sanctions for board member violators of planned community, homeowners and condo owners associations. Homeowner violators are subject to fines, penalties, interest with accompanying liens on their homes, and even the HOA’s right to foreclose on the their homes. It seems as though state governments have set a laissez-faire approach as good public policy when it comes to holding planned community governments accountable to the state. Such an attitude can only be interpreted, as cited above, as “this is beneficial and good for society.” One-sided enforcement of the laws against homeowners has become the standard of what is beneficial for the American people. These HOAs have risen to a level that surpasses the accountability of governmental entities under the law, while granting these authoritarian private governments almost equal status and powers as if they were indeed governmental entities. HOA assessments have been given the same status as federal tax payments under the recent changes in the federal bankruptcy laws, and while a person has help and can negotiate a workout plan under federal guidelines for the payment of his taxes owed, there are no similar laws that requires a workout for the payment of HOA assessments owed the private organization, the HOA. The origins of how this came to be here in America, the bastion of democracy, can be traced back to the ULI’s Technical Bulletin #50, that was prepared and supported by the real estate special interests, and aided by federal agencies (See Appendix 1, TB#50 Table of Contents). The effects of this 1964 guide to the selling of planned communities to the public, the media, and the legislatures can still be seen today with several states having adopted a UCIOA (Uniform Common Interest Ownership Act) law, or are considering the adoption of such a law, as, for example, are Texas and California. UCIOA can be seen as the extension of the

(CAI)^13 , carries the subtitle: The Emergence and Acceptance of a Quiet Innovation in Housing_._ However, the reader of TB#50, this bible on how to make the planned community concept work, comes away with a far more sinister picture of corporate collusion and conspiracy, and government willingness to look the other way and hear no evil, see no evil and speak no evil. This quiet acceptance was accomplished by the mass merchandising of the planned community model by entities with a strong business profit-making motive, who published and distributed TB#50 as the tool to overcome any objections by the public, the real estate agents, the mortgage companies, the state legislatures and the local planning boards. TB#50 had something to say on how to sell the concept of HOAs to everybody. And it accomplished this task in a typical business marketing and promotional plan that had answers to the legal concerns, the operation of the HOAs, the physical infrastructure and amenities of the planned communities, down to how to select the right people from the homeowners in order to properly run the homeowners association. All in such a way as not to disturb the profit picture for the developer or mortgage company, and in a way that mandated the loss of homeowner fundamental rights and freedoms by means of an unconscionable adhesion contract, the Declaration. The need for state legislation in order to make the planned community model viable was stressed in TB#50. A common theme that the reader encounters through out TB#50 is the requirement to perpetuate the business-developer’s plan for the community, unchallenged by any government agency and made extremely difficult to amend by the association members (just recall the difficulty in amending the US Constitution). This guideline strongly (^13) CAI was created by in 1973, some nine years after the publication of TB#50, to stop the problems that were occurring with planned communities. It was to provide educational services to HOAs, the government, and the public. Its organization paralleled that of a typical state agency with a board or commission consisting of representative organizations affected by the agency. In 1992, with continued HOA problems and severe criticism by political scientists, such as, Robert Jay Dilger, Evan McKenzie, Stephen E. Barton, Carol J. Silverman, and Gregory S. Alexander, CAI reorganized as a trade group in order to concentrate on lobbying state legislatures to support planned communities and HOAs. See generally, Supra note 4; Privatopia: Homeowner Associations and the Rise of Residentia l Private Government, Evan McKenzie (Yale Univ. Press 1994).

emphasizes that the HOA association and planned community must endure as a monument to the developer, or was it to reassure the mortgage company about property values, and to mollify local government that it will not be required to become involved in what amounts to independent principalities.

THE ULI BLUEPRINT FOR SELLING PLANNED

COMMUNITIES

Some of the more serious and sensitive issues of the past, 42 years ago, and still continuing today are presented below. The Necessity for Covenants Running with the Land TB#50 makes it very clear in Chapter 1 that the homes association, by definition, is tied to covenants running with the land: [W]e have taken the position that no organization is a homes association unless provided for, in some manner, in the covenants, deeds, or other recorded legal documents which affect title to the land within the development.”^14 [T]he right to membership in such an association is automatic [mandatory in today’s jargon] for every home owner because it cannot be withheld from an owner whose land is charged with the obligation to pay its assessments.”^15 This bible for creating planned communities impresses upon its readers that the community’s source of income is from maintenance funds, the assessments, that are legally levied against the land by recorded covenants, which bind each and every owner as a lien against (^14) Chapter 1, “Is it a Homes Association or Isn’t it?”, p.5, (^15) Id, p. 6.

Superiority of Liens: Homestead Exemption loophole and mortgage liens TB#50 advises that the states will protect the HOA from any homestead exemption because of this priority of liens, but urges the need to insert wording to grant the mortgagor a priority lien before this “developer” lien. The home-buying public protections, as was the intention of the various state legislatures when creating the homestead protection, was intentional disregarded by the advertising of this technical oversight. We believe that the lien of assessments will, in all states, be recognized as superior to and unaffected by the homestead exemption. 18 In absence of an express provision altering priorities, the court held that the lien of the assessments was superior to the lien of the mortgagor... a suggested provision dealing with priorities may be found in Appendix F.^19 Section 10 of Appendix F contains the simple wording almost identical to that found in most declarations and state laws: “The lien of the assessments provided herein shall be subordinate to the lien of any mortgage.. .”^20 The reason for this limitation upon the homeowner is obvious -- to insure the acceptance of favorable loans to the developer, and to insure the viability of the planned community. (See the 30 year restriction below). It is a plus in favor of the mortgagor who obviously will accept higher property values given the private HOA maintenance of the community, meaning higher sales prices for the developer. “Inadequate maintenance of the common properties will impair the value of the homes and so of the mortgage lender’s security”. 21 (^18) Supra n. 16, p. 322. (^19) Supra n. 16, p. 321. (^20) Appendix F, Covenants, p.391. (^21) Supra n. 17, p. 210.

So, from the initial concept and model of the planned community, the individual homebuyer has entangled himself in the financing of the developer by allowing the mortgagor to have a first lien for payments in arrears not directly affecting the owner’s private property, but for payments on common property that is owned by the HOA. Please understand what is happening here. The mortgage company does not want to collect the assessments as part of the mortgage payment along with the insurance and taxes. Why not? Is it because the mortgage companies recognize the frailty of HOA boards and the legalities of its operation? Perhaps they do not want to become involved in HOA- homeowner squabbles relating to questions of legitimacy and validity of HOA actions. The homebuyer has granted the mortgagor a favored position not related to the condition of his private home, but to the possible devaluation of the common areas that the homeowner does not directly own or control. Why must the mortgagor be granted this additional protection and assurances, if not but to assist and aid in the viability of the HOA that is only, at most, a third-party beneficiary of the homeowner’s mortgage loan? The lien of assessments unpaid for by the home owner... would, if permitted to come ahead of the mortgage, eat into the mortgage security. For this reason, the mortgage lender is justified in asking that the lien be postponed to his mortgage.” 22 What about the justification of the homeowner for his equity in his home in regard to the loss of his homestead exemption or foreclosure as excessive punishment that leaves him, in reality, with nothing? The Necessity of Foreclosure Why is it necessary for the HOA to foreclose on a home for failure to pay assessments? Granted that the HOA’s survival, like any other governmental entity of non-profit organization, depends on a revenue (^22) Supra n. 17, p. 211.

14th Amendment's due process clause and a deprivation of property.^24. The Court offered a 10 to 1 or less ratio as acceptable ratios for punitive damages. Disregarding the above concerns, in 1964, with the highly motivated special interests seeking to make the planned community model with its mandatory authoritarian homes association acceptable and successful, TB#50 strongly argued for the right to foreclose as an effective legal means to “guarantee” HOA revenues. the primary purpose of TB# was to demonstrating how the promoters had taken steps to protect the interests of the industry participants, steps that were necessary for the acceptance and survival of this new approach to home ownership. The right to foreclose was a paramount selling point, and is directly connected to properly word covenants granting the HOA the right to collect assessments and to lien the homeowner for the non-payment of assessments (see “The Necessity for Covenants Running with the Land”, above). The covenant for maintenance assessments, unlike protective covenants, looks to legal enforcement which will result in a collection of a sum of money. Such enforcement can be made through a proceeding to foreclose a lien on a house.”^25 Such enforcement can be made through a proceeding to foreclose on the home... It [the lien] is enforced by foreclosure proceedings... Moreover, foreclosure of a lien is the best remedy available.... Foreclosure proceedings... do not require personal service of process 26 24 State Farm v. Campbell , 538 US 408 (2003). This action involved the amount of an insurance claim award. (“The Due Process Clause of the 14th Amendment' prohibits the imposition grossly excessive and arbitrary punishments a tortfeaser [wrong-doer]; [The $145 million award was] neither reasonable nor proportionate to the wrong committed, and it was an irrational and arbitrary deprivation of the property of the defendant"). (^25) Supra n. 16, p. 314. (^26) Supra n. 17, p. 202.

The Exercise of State Police Powers to Fine and Penalize While the authors spend much time concerned with the legalities of assessments and enforcement by means of liens and foreclosure, very little is said about violations of the CC&Rs and rules of the HOA. They do advise that the rules be publicized with information about penalties, and that they be few and be simple. 27 As to penalties for violations of the rules, TB#50 is careful to not to specific monetary penalties and liens, but does advise that, “Penalties for abuse of the rules should be appropriate to the facility, the abuse, and the offender.”^28 It is clear that the penalties refer to acts committed at some common area facility, and not for any violations outside the common areas. However, the authors recognize the need for effective enforcement against rule-breakers, but seem to have developed a blind eye to the enforcement of violations by uninformed and incompetent boards. The authors advise getting local authorities involved to help with enforcement of the private organization rules, Since empty threats will only tempt the rule-breaker [board members appear to be excluded from this advice] the association must be strong enough to enforce its rules and must have the cooperation of local authorities, when necessary, as an aid to enforcement.^29 The reader of TB#50 is strongly warned that, The right to enforce a covenant against a particular violation can be lost if action is not taken promptly; by proceeding in court if necessary... Thus, the failure to enforce covenants may have a snowballing effect leading to a destruction of the neighborhood plan. 30 (^27) Chapter 18, “Using the Common Property”, p. 283-4. (^28) Id, p. 285. (^29) Id, p. 283. (^30) Chapter 20, “Conserving the Neighborhood”, p. 297-8.