Business Corruption

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					       Citizens Against Private Government HOAs, Inc
          5419 E. Piping Rock Road, Scottsdale, AZ 85254-2952
                      602-228-2891 / 602-996-3007
                         pvtgov@cs.com http://pvtgov.org

                                  Nov 5, 2002



  The Pervasive Political and Business Corruption Involving
                 Homeowners Associations

               An audio – visual presentation by George K. Staropoli


The term, corruption, as used here refers to the failure to uphold the
principles and intents of the US and state Constitutions. In short and in
common usage, the laws of the land have been corrupted to benefit a select
few including your local government. As an example of local government
corruption, the town of Gilbert, AZ proudly boasts its goal “to be the best
town in Arizona” and in order to achieve this goal the town council
mandates only homeowner associations for new residential developments.
This policy, I believe, was never put to a public vote.


WHY SHOULD YOU CONTINUE VIEWING THIS TAPE?

Well, you should continue to view this important news video, because it
contains information being kept from you. Information that you need to
know to protect yourself, because living in an association will indeed affect
your future well-being and financial status, if it has not already done so.

Have you considered the affect on your financial status if your board began
requiring all sorts of payments for this or for that reason? Have you
considered your recourse if you disagree with the board or a director or a
friend of a director? Or when you begin receiving fines for arbitrary
reasons? Or when your lawn is no worse off than others? Or when the color
of your house is not really noticeable different from other homes? All that it
takes in most HOAs is simply to disagree with the position of the board.



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And if you dare attempt to exercise your rights to assembly and to collect
votes in opposition to the board’s position, woe to you.

Are you prepared for the knock on the door and the process server who
hands you a notice of foreclosure? Or for the court complaint containing a
demand for payment to the association, including 3 – 10 times the HOA debt
in attorney fees?

You live at the sufferance of the board. Today it may be a beneficial board;
tomorrow it may be different. Just one remark or question in opposition can
do it. And, you have very little recourse under current laws and attitudes by
the legislature. Therefore, you will undoubtedly comply with the wishes of
the HOA, just as if the president of the HOA were a King.

You don’t realize how many callers and emailers tell me that “I can’t believe
this is happening to me”, or “It can’t be as bad as you say it is.” Yes it is.
And you get no assistance or sympathy from your government officials or
from the lawmakers. Not from AARP, nor from ACLU.

Will your HOA foreclose on you for a failure to make payments? You bet
they will. That’s their reason for being. Enforce the CC&Rs without
exception. And you have no recourse but to pay, innocent or guilty. HOAs
are able to coerce residents into compliance. Yes, it is coercion when there
are no avenues for a redress of grievances. The judge will simply say that
the CC&Rs give the HOA these broad powers and that the board does not
have to be fair and just. And there is nothing he can do about it.

Now, all homeowners who believe in the goodness of their HOA and in their
board of directors are acquiescing to these practices. They are avoiding
their civic responsibilities to the greater community that has granted them
the right to exist. They are showing no compassion, no charity, and no moral
or ethical judgment. And, yet, they don’t realize that the next caller to me
with an HOA problem could be one of them.


WHAT IS THE NATURE OF THIS CORRUPTION?

First, almost all associations are corporations subject to corporation statutes
and not municipal / state government statutes. There is no bill of rights in
your CC&Rs, nor any separation of powers nor checks and balances

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doctrines. In fact, the CC&Rs were written by the developers to please all
business concerns relating to the sale of HOA properties. There is no
recognition in the CC&Rs that HOAs govern a community just like a town
or city.

Under corporation laws, the board has all powers and the owner members
are given almost no power, even if there are provisions to vote on issues.
There is very little democracy at work in HOAs, just as there is very little
democracy at work in other governments that advertise themselves as “the
people’s republic”, like China, Cuba, etc,

These HOAs are construed by the courts to be private organizations that are
a party to a binding contract with you, the homeowner. It’s an onerous
contract that gives you very little rights, was declared binding even though
you did not sign any such contract nor initialed the pages that you had read
them. This view of the CC&Rs is the reason why state governments say that
they can do nothing – the US Constitution forbids interference into private
contracts. This allows HOAs to deny you your rights as is guaranteed by the
Constitution to everyone; and to operate outside the provisions of the 14th
Amendment that requires due process and the equal protection of the laws
for everyone. The courts have ruled that such contracts, in general, are
unconscionable and contrary to good public policy. Yet our legislators do
nothing!

You were not even told about these important and material facts when you
bought your home, were you?

Were you told that you had surrendered these rights when you bought your
home, and that the state would be unwilling to do anything? In contrast,
criminals pleading not guilty are asked to sign and initial documents that
they surrendered their constitutional rights, but homeowners are told
nothing.

Further corruption of our Constitution comes from state statutes and city
ordinances that favor and encourage the existence and operation of these
HOAs, as we have shown that are really private governments operating
outside the laws of the land. For example, your HOA exists solely because of
the mandatory CC&Rs that contain compulsory payments of assessments.
Without these provisions, most HOAs would cease to exist. The promoters
of homeowners associations, HUD, ULI and CAI discovered that they could

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not mass market these “products” without these “involuntary servitudes”.
Again, as an example, Gilbert, AZ, in Ordinance 1163, mandates the use of
a homeowners association to govern a planned community.

In terms of business corruption, instead of CPA irregularities in conjunction
with corporate board members and officers, as with Enron and WorldCom,
we have attorneys acting in an unethical manner, supported by an unethical
application of the State Bar’s ethics rule.

HOA attorneys create adversity and not good community relations. They
insist that the board strictly enforce the CC&Rs, and that means penalties for
nonpayment of assessments or fines for CC&R violations, and that the board
act to foreclose in the event of failures to make payments. Why? Because
they make big bucks from their fees that are permitted, by law, to be
included in the amounts due upon foreclosure. The ratio of HOA debt to
attorney fees can be as high as 10 – 1, in favor of the attorney. It’s unethical
and unconscionable. Yet, the government does nothing. It is concerned,
however, about telemarketing calls that it has no chance of enforcing with
these slick operations.

Furthermore, disputes with homeowners may involve violations by the
board. Yet, the board can use these attorneys to defend themselves or to sue
the homeowner, while the homeowner is precluded from having access to
the HOA attorney, who is paid from the homeowner’s assessments. This is
highly unethical. Yet, the State Bar, under the rules of the state’s Supreme
Court, sees no problem in permitting this to occur. It does not find fault
when the attorney fails to act under its Rule, ER 1.13, to properly inform
the board of facts showing that the board has violated state laws and the
governing documents.

One other important point is that the hands-off attitude by our government –
the, “you’re on your own” attitude – allows HOAs to act with impunity
when they violate state laws or their contractual obligations under the
governing documents. If you win your suit, you get the records you asked
for. There are no fines or jail terms for board violations, and no motivation
not to violate the law again.




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IN SUMMARY

HOAs OPERATE UNDER THE LEGALESE OF A CORPORATION AND
NOT A GOVERNMENT, ALLOWING THEM TO AVOID
ACCOUNTABILITY FOR THEIR ACTIONS AS ANY MUNICPAL
GOVERNMENT WOULD BE HELD ACCOUNTABLE, AND TO DENY
HOMEOWNERS’ THEIR CIVIL LIBERTIES. They operate outside our
expectations of an American system of government with its cherished
democratic principles.

Your state and municipal governments see no evil in this arrangement,
because the special interests dominate the legislatures and have seen to it
that the laws operate in their favor. Our Constitution has been corrupted and
the HOA corporation is corrupt in that it allows for unethical attorney fees to
be included as a part of the foreclosure lien, and can violate the law with
impunity. Our government has not been completely honest with its citizens.

This state of affairs, this corruption of our laws, is important to all
homeowners who must put a stop to this corruption. Our government
must be truthful with its citizens and apply the law equally to all
persons, regardless as to where they live. Any homeowner could be the
next person to come under the board’s axe. And, when it happens, it
will be too late to change the laws before the foreclosure of your home.




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