Friday, November 02, 2012

HOA board mentality and unconscionable CC&Rs rewrites

By George K. Staropoli

Homeowners living in HOAs must decide what side of the fence they are sitting on!       Whether on the side of management or on the side of the rank and file homeowner?  There is a major difference as the HOA is not a democratic community government, but a corporate form of government.  And never has a corporate form of government been described as democratic.

The business parallel of “management vs. employees” in HOAs is alive and well. Management represents the HOA entity and not the members, just as management represents the stockholders and not the employees.  Legally this fact is found everywhere.  And the HOA attorney who advises the board and rewrites CC&Rs and amendments represents management and not the interests of the members.  How many times have you seen and heard “for a more productive and effective HOA” and “for the benefit of all members collectively”?   Sounds nice, but the two are not equivalent.  The board does not speak for all the members and that’s why there is member voting.

A most egregious and unconscionable act by the board and its attorney can be found in the broad rewrite of the CC&Rs where liberties are taken in favor of the HOA.  Where the homeowner again unknowingly waives and surrenders his rights and freedoms to the HOA, because the homeowner rank and file does not hire their own attorney to explain the impact of the HOA changes.

An example of how far this unconscionable activity can go involves the rewrite of CC&Rs by an Arizona CAI member attorney firm, and member of CAI’s College of Community Association Lawyers (CCAL).   In the rewrite the attorney deleted “reasonable” with regard to attorney fees and added “all”.  The attorney also did not adopt the “prevailing party” widely accepted standard of fairness, but mandated the homeowner to pay its fees regardless if the homeowner wins.  In other words, even if the homeowner had brought suit against HOA wrongful behavior and wins, he must still pay the HOA attorney fees.  Covenants that are unconscionable and against public policy are held to be invalid.

Additionally, a festering issue at the Arizona Legislature has been the awarding of attorney fees by the Office of Administrative Hearings (OAH).   The attorney uses the term “administrative law judge” as most homeowners would know that OAH does not pay attorney fees.  This blatant “squeeze it by and maybe they won’t notice” tactic is disgraceful.  Yet, in 99% of the cases heard at OAH the HOA has decided to hire the unnecessary attorney.  The HOA should pay for this unnecessary decision.

And yet many homeowners would go along with this “stick it to the homeowner” mentality.   Presumably because they see themselves not as the “homeowner” at issue, and therefore it doesn’t affect them.  But, the rewritten covenants apply to them, all of them.  And it also applies to the directors and officers who believe that this unconscionable conduct is good for the HOA in the long-term, and that it also doesn’t apply to

Homeowners in HOAs must decide where they stand.  For their rights or for unconscionable conduct and acts of bad faith by the HOA board and its attorney who is not your attorney.

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