HOA foreclosures as an excessive penalty violation of due process?

Last year Arizonans finally received some justice with the passage of the watered-down HB2402 modifying ARS 33-1256 and 33-1807, Liens for Assessments. But homeowner injustice remains with the unconstitutional failures of due process protections and the unequal protection of the laws relating to the association's right to penalize and foreclose.

Under these two statutes and ARS 33-1803, Penalties (planned communities), the association is allowed to penalize homeowners who fail to make assessment payments on time with penalties and interest charges on these debts. It gives the false belief that the association had advanced its own funds to the homeowner and is now seeking a timely repayment. Such is not the case, for these associations do not advance funds nor is their primary business a lending or credit business.

Black's Law Dictionary defines a penalty as,

"1. Punishment imposed on wrong-doer, esp. in the form of imprisonment or fine.
2. Excessive liquidated damages that a contract [in our case the CC&R contract] purports to impose on a party that breaches.

'A penalty is a sum which a party ... agrees to pay or forfeit in the event of a breach, but which is fixed, not as a pre-estimate of probable actual damages, but as a punishment, the threat of which is designed to prevent the breach ...'

Excessive punishments, as in excessive punitive damages, has been found by the US Supreme Court to be an unconstitutional violation of the 14th Amendment's due process clause and a deprivation of property. (State Farm v. Campbell, 538 US 408 (2003) see note 1 below). Foreclosing on a $200 HOA debt with over $2,000 in attorney fees causing the homeowner to lose his equity in his home that can have a market value of $120,000 or $200,000 or even $1,000,000, representing a 200x to 5,000x ratio of damages to losses, is extremely excessive. The Court offered a 10 to 1 or less ratio as acceptable ratios for punitive damages.

For these reasons, I ask that new legislation be adopted to remove these punishments, such as the right of the HOA to impose daily fines to the extent they become excessive, and the right to foreclosure as a remedy to collect assessments in arrears, as they are excessive punitive damages under the USSC guidelines of State Farm v. Campbell.


Note 1.
The US Supreme Court case of State Farm v. Campbell, 538 US 408 (2003) in which the Court said:

'"The Due Process Clause of the 14th Amendment' prohibits the imposition grossly excessive and arbitrary punishments a tortfeaser [worng-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".

‘Great Communities’ have fair HOAs

East Valley Tribune, Letter to the Editor, Nov 8, 2004

SCOTTSDALE


The recent Tribune article on Arizona Great Communities still emphasizes property values over what really makes a community: the democratic and free exercise of the liberties and freedoms granted to all Americans.

In its criteria for the award, the Arizona Great Communities organization does have some worthy objectives: keeping reserves, informing members of who the officers and directors are and some "institutional" vendor educational requirements related to other board/founder affiliations.

These organizations focus on the status quo and teach current topics on management that have proven ineffective over the years, when used alone and without any courses in government, people relations, statutory obligations of homeowners associations, or an understanding of contract law for directors of HOAs.

These are sorely and desperately needed educational reforms yet to be seen after years of bringing these major deficiencies of HOA management to public awareness.

And why aren’t these topics covered? Because the special interests don’t want the public to know any serious problems with the loss of homeowners’ rights or the overwhelming powers granted to the board with little protections for the homeowners.

It’s time that these community oriented/HOA organizations deal with the reality before them.



GEORGE K. STAROPOLI

Letter to Pennsylvania State Representatives

TO: PA Representatives
Lynn B. Herman, Chair, Local Government Committee
John Taylor, Chair, Chair, Urban Affairs Committee

HB 2461 Sponsor Schroder:

Bill Sponsors:
SCHRODER, ARMSTRONG, BARRAR, BENNINGHOFF, BOYD, CORRIGAN, CRAHALLA, DENLINGER, MANDERINO, O'NEILL, REICHLE, T. STEVENSON, E. Z. TAYLOR, THOMAS AND TIGUE

I would like to congratulate all the sponsors of this much needed bill to hold HOA boards accountable under the law, and to bring a measure of justice to homeowners. I wish you the best in these efforts and that the bill becomes law.

However, let me mention an important aspect of your bill that is easily recognized by homeowner rights advocates as creating obstacles to effective deterrence to violating the laws and at the same time "motivating" boards to comply with the laws. A 2/3 vote is too high a standard for justice and the amount of fines, $50, is nothing more than "lunch" money to the HOA.

What is needed is a punishment that fits the offense as compared to comparable offenses or punishments. A search of the PA statutes reveals that a higher misdemeanor penalty is appropriate, since they can call for fines of up to $10,000 (medical record keeping) for corporate violators of similar offenses.

PA examples of a misdemeanor:
§233.117 third degree - school official releasing confidential info
§249.54 second degree - false statements or falsifying records
§15.147 second degree, $2,500 fine -- HEW official violation statutes
§317.4 third degree - state official disclosing confidential information§105.4 misdemeanor - violating Art. for by Public Assistance employee

Please keep in mind that violations by directors who owe a fiduciary duty to the homeowners should also be in keeping with the same per diem charges that many HOAs levy against homeowner offenders. I strongly suggest that this is the appropriate fine for HOA board offenders of the law.

What's good for the goose is good for the gander.

George K. Staropoli
Citizens for Constitutional Local Government
Scottsdale, AZ