Recently, there was an interesting discussion started by Fred Pilot at The Privatopia Papers blog asserting that "people don't see HOA convenants -- a real property contrivance -- as contracts". The blog posts resulted in many comments by readers, and follow up blog posts by Evan McKenzie, Tyler Berding, George Staropoli, and Fred Fischer. The posts, and comments, are a bit on the long side, but worth reading if you're interested in this topic.
Saturday, December 31, 2011HOA convenants not generally regarded as contracts
Posted by Fred Pilot at 9:57 AM
at http://privatopia.blogspot.com/2011/12/hoa-convenants-not-generally-regarded.htmlDo Americans consider CC&Rs Contracts, Revisited
Monday, January 02, 2012
...Tyler responds that they are contracts, period, because that is what courts universally say they are. This is in large part beyond dispute: like it or not, condo associations, HOAs, and housing cooperatives are recognized by federal and state law, and CC&Rs and other CID governing documents are fully enforceable, subject to a few exceptions, in every court in the nation....
...I agree with Tyler, as I must, that CID governing documents and the decisions based on them are legally enforceable under contract and real property law. This has been true for many decades, even centuries, and in my first book on this topic I relate some of the early legal history that laid the foundation for enforcing these documents.
However, I think that Fred raises an important point. Is it true, as he claims, that these documents and decisions have no legitimacy in the eyes of the public, notwithstanding their enforceability? And if this is true, does it imply that there could conceivably be sufficient opposition to CID regimes to bring about dramatic change, such as local government opposition to CID construction, developer decisions to move toward other ways to build, market rejection of CID housing, judicial rulings that undermine CID power, or state legislative action that would reverse the overwhelming trend in favor of CID construction?
Posted by Evan McKenzie at 1:55 PM
at http://privatopia.blogspot.com/2012/01/do-americans-consider-cc-contracts.htmlDo owners believe CC&Rs are contracts, part trois...
Monday, January 02, 2012
Tyler Berding tried to comment my long post in response to the
Pilot/Berding exchange, but Blogger rejected it as too long. I am
posting Tyler's response here:...the real problem which is that community associations are created mostly for the benefit of municipalities and developers, with very little insistence by government on a financial model that can remotely meet the expectations of the eventual homeowners. Community associations are dying financially. Their business model is fundamentally flawed and many will eventually become obsolete and fail...
...Community associations are a financial disaster in normal times, and when hidden or unexpected damage or expenses arise, most associations lack the financial reserves to meet the demand. The water bill case is just one example. The average association does not have half the financial reserves it needs to properly maintain the expected issues—and they have zero funding for the unexpected...
...Better, all of us should be discussing how to help owners save whatever remaining equity they have, and then second, how to convince government to quit mandating for sale housing that will inevitably become obsolete because it has a form of governance that cannot fund its operations--just for the sake of additional property tax revenues....
Posted by Evan McKenzie at 10:24 PM
While Mr. Berding has long warned about the the economic un-sustainability of so-called "community associations" -- it has been called "Tyler Berding's death spiral" to those who are familiar with what H.O.A. corporations really are -- this is still a remarkable admission coming from an industry attorney who represents them.George Staropoli on the "Do owners believe CC&Rs are contracts?" debate
Wednesday, January 04, 2012
From George Staropoli comes this response to the Pilot/Berding discussion:
Posted by Evan McKenzie at 9:48 PM
at http://privatopia.blogspot.com/2012/01/george-staropoli-on-do-owners-believe.htmlFred Fischer on the "Do owners believe CC&Rs are contracts?" debate
Wednesday, January 04, 2012
Fred Fischer weighs in:
...For CID housing to continue to exist into the future and be sustainable will require a major shift away from its present use of adhesion contracts imposed upon property buyers. Therefore a legal shift needs to occur at build-out from the original intent of the developer to manage and sell his properties. To the owner/members so that they can manage and sustain what is then their properties and responsibility....
...Finally at the end of the day no one can say we don’t understand why housing association governance is economically collapsing or so controversial. Because when basic liberty and the use and enjoyment of one’s property becomes absolutely controlled by others, to the point that a door knocker or flower pot can’t be installed without committee approval with the consequence of a fine and foreclosure if disobeyed. We have just created a new form of tyranny masqueraded as a housing association so that others can earn an income or profit over the conflicts and this needs to end NOW. Or CID housing will continue to economically and socially collapse and then tens of millions of property owners will possibly be living on the streets...
Posted by Evan McKenzie at 9:49 PM
In between those blog posts is a story that illustrates my assertion
that "As a corporation, an H.O.A. is a defective product", since the
personal assets of the investors were not protected from the
corporation's debts and liabilities.
Shortly before the exchange about the perceived legitimacy of H.O.A. contracts, Professor McKenzie wrote about the fine print in adhesion contracts at http://privatopia.blogspot.com/2011/12/fine-print-society.html
In 2006, Mark Lemley wrote that