guest blog by Deborah Goonan
When I read Evan Bernick’s (Assistant Director at the Institute for Justice) summary of the latest Supreme Court decision involving property rights of raisin farmers, I was taken aback by the parallels to a decades-long battle to protect property rights of homeowners in private, mandatory Homeowners Associations.
In HORNE ET AL. v. DEPARTMENT OF AGRICULTURE, family farmers Marvin and Laura Horne of California were ordered to surrender 30% of their raisin crop to the federal government. Based upon a New Deal Era law, as part of an effort to control raisin prices, the Raisin Administrative Committee would take a portion of the growers’ crops, without immediate compensation. Once the raisin reserve was sold many months later, on terms negotiated by the Committee, any remaining proceeds would be distributed back to the farmers. Seems unfair, right?
When the Hornes refused to turn over their raisins, the government fined them $480,000, the claimed value of the raisins, plus a $200,000 “disobedience” penalty. The matter ended up in court. The Ninth Circuit Court of Appeals found in favor of the federal government. As Bernick explains:
“It reasoned that the Takings Clause affords more protection to real property (land) than it does to personal property (in this case, raisins). In addition, it characterized the reserve requirement as a “condition” imposed in exchange for a government benefit (that is, the privilege of engaging in commercial activity), rather than a taking, adding that the Hornes could always avoid the requirement by “planting different crops.”
Let me pause for moment and point out the parallels faced by HOA property owners.
With regard to HOA issues, courts thus far have reasoned that the Takings Clause affords more protection to real propertyoutside of a mandatory association than it does to real property inside an HOA, where mandatory association membership is required. In addition, payment of assessments, imposition of Covenants, Conditions and Restrictions (CC&Rs) – no matter how unnecessary, unconscionable, or unreasonable – and resulting fines or other penalties imposed for violations of those CC&Rs, are conditions imposed in exchange for the special “privilege” and “benefit” of owning a home in a Developer-designed architectural utopia. And, as we hear over and over again, homeowners unhappy with that arrangement are free to avoid CC&Rs by buying a home that is not burdened by a mandatory HOA.
But in many major real estate markets in the US these days, buyers with price and location constraints have few non-HOA alternatives. The choice is to purchase a home in a mandatory HOA, or give up the American Dream of homeownership.
OK, now read on for the good news.
The Supreme Court reversed the Ninth Circuit’s decision, recognizing that the conditions imposed by the federal government were an unconstitutional Taking without just compensation.
To quote Evan Bernick, the court’s decision rested on three principles:
“The Supreme Court began by roundly (and rightly) rejecting the Ninth Circuit’s distinction between personal and real property. The language of the Takings Clause is broad and categorical and reflects the Framers’ appreciation of the centrality of all private property to a free and thriving civil society. It requires “just compensation” whenever the government appropriates “private property” for a “public use…”
“The Court … found that the Raisin Committee’s deprivation of the growers’ rights in their property was total–they lost the rights to possess, use, and dispose of their raisins … Once there is a taking, the Court held, there is a duty to pay just compensation that the government may not evade.”
“Finally, in response to the argument that the Hornes could always avoid the reserve requirement by planting other crops, the Court affirmed an essential principle: engaging in commerce is not a “special governmental benefit that the Government may hold hostage, to be ransomed by the waiver of constitutional protection.”
For 5 decades, local governments have strongly encouraged or mandated the establishment of over 333,000 HOAs across the US. Mandatory homeowners’ associations are regarded as “mini-governments” by many state and local politicians. Indeed, they serve the public purpose of maintaining infrastructure and governing use of private property, thereby relieving local governments of those duties. Government has created homeowners associations by virtue of statute, mainly for its own benefit.
In Florida alone, many owners continue to endure takings of their homes without just compensation. For several years, we have witnessed hostile HOA Board takeovers, often resulting in termination of condominium associations for the purpose of redevelopment or de-conversion to rental apartments. The terminations have resulted in the forced sale of tens of thousands of units at artificially low appraised values – unjust compensation following inadequate due process for owners to contest the terms of the sale.
Why have homeowners have been forced to accept this injustice? Because the courts have failed to recognize link to Florida Statute 718.117 as a state-sanctioned taking by private investors for the supposed public purpose of “rescuing” distressed condo associations, thereby preserving the property tax base for local governments. By allowing private developers to exploit condo owners, local governments are also relieved of their duty to intervene when HOAs fail miserably. These are the very same HOAs that were approved by local land use planning agencies.
And, in a more broad sense, what about other rights to use property that have been taken by HOAs? For instance, HOAs commonly restrict the right to rent to tenants, or operate a home-based business. Where is the just compensation to homeowners? How is it that HOAs, essentially state-endorsed substitute mini-governments, are not obligated to honor the Constitutional rights of Americans to full use and enjoyment of their property?
Owning a home is not a “special government benefit” that the Government – or its agent HOA – can “hold hostage,” at the cost of giving up one’s Constitutional rights.
Are we yet another step closer to obtaining equal protection for all Americans, whether they live inside or outside the boundaries of an HOA?