Tag Archives: goonan

NJ Supreme Court: Upholds Free Speech in HOAs

      No Comments on NJ Supreme Court: Upholds Free Speech in HOAs
guest blog by Deborah Goonan

In the recent landmark victory for HOA residents, Dublirer v. 2000 Linwood Avenue Owners Inc., Amicus Briefs were filed on behalf of both Plaintiff and Defendant. While CAI’s Amicus Brief filed on behalf of the defendant was not considered by the court, due to its late filing date, in this blog, for the sake of comparison, I will briefly summarize the opposing arguments, and offer my analysis.

Note to readers who may not be aware: In legalese, the term Common Interest Community (CIC) is used to encompass what we generically call HOAs: homeowners’ or condominium associations, cooperatives, master planned communities, and the like.

On behalf of Dublirer, Frank Askin, Esq., NJ American Civil Liberties Union (ACLU), argues the Court should uphold appellate court’s ruling in favor of Dublirer because:

· Property rights of a CIC are not absolute, and must yield to “fundamental individual rights.” The CIC is not entitled to dominion over its residents. Askin cites State v. Shack (1971), and this particular passage sums it up quite well:

“Property rights serve human values. They are recognized to that end, and are limited by it. Title to real property cannot include dominion over the destiny of persons the owner permits to come upon the premises. Their well-being must remain the paramount concern of a system of law.”

· Constitutional rights to free speech and expression outweigh private interests of the CIC, particularly with regard to political activity.

· Askin equates a campaign for the Board of a CIC with running for public office, therefore there must be a fair process.

o Each candidate is entitled to equal time and opportunity to campaign, using the same methods.

o Reasonable restrictions with regard time and place are permissible, but blanket prohibitions against a particular type of communication are not.

o Rules cannot restrict “too much speech,” by making it inconvenient, difficult, or unlikely that residents can exercise their rights without breaking a rule.

· Askin also references the Planned Real Estate Development Full Disclosure Act (PREDFDA), a NJ statute that states that CICs must protect the health, safety, and general welfare of its residents. Excessive restrictions to Constitutional rights to free speech and assembly can be legally challenged on the basis of failing to uphold the general welfare of those who dwell within the CIC.

On behalf of 2000 Linwood (Med-South) Owners Association, Michael S. Karpoff, CAI-NJ Chapter, counter-argues that the court should find in favor of the Defendant, because:

· Constitutional rights do not apply to a CIC, considered private property

· Constitutional rights are not necessary, because CIC residents can rely upon statutes, contractual rights (the governing documents), and other protections such as the fiduciary responsibilities of the Board.

· If the court allows dissemination of information and speech within or by way of common areas (such as elevators, meeting rooms, or hallways), CICs will then be forced to allow members of the general public to the same access. CAI fears “that will interfere with a primary purpose of the private community – to preserve the peace, tranquility, and aesthetics of the residences.” Karpoff does not explain how he draws such a conclusion.

The Supreme Court, in a unanimous decision, largely agreed with Askin’s arguments on behalf of Dublirer. The Court made an important distinction between people who reside on the premises of a CIC and third parties who visit, with regard to applicability of Constitutional protections for free speech and assembly. In essence, the Court has concluded that those who reside in the CIC constitute the CIC’s public, and therefore, political speech of its residents cannot be excessively restricted in the common areas. Each resident must have equal access to the political process, and the Board cannot use rules and restrictions to skew the process to its own advantage.

Finally, there is judicial recognition that statutes and governing documents do not necessarily offer adequate protection of fundamental rights, guaranteed by the Constitution, for CIC residents.

I wonder about the Court’s reference to those who “dwell” on CIC property, as that seems to exclude CIC Members that own units, but do not reside on the property. Some clarification may be needed on that point.

But, in general, I think the NJ decision opens the door for similar challenges in other states. The political process in general – not just political speech and free assembly – is often rife with unfair election processes, unequal access to voting rights (based upon share of property ownership), abridgement of voting rights for those who allegedly violate restrictions or fall delinquent on assessments.

And if the political campaign process is to allow free expression, then why not also allow free expression in any process to amend governing documents, which are akin to local Constitutions or Ordinances? CIC residents have complained about this vexing problem for decades – Boards commonly find ways to circumvent input from members.

What of other Constitutional rights to due process, with true division of powers – where hearings are conducted by neutral judicial process in lieu of a Board-appointed committee in what amounts to a Kangaroo Court?

CAI can no longer argue with confidence that the Constitution need not apply, or that contractual agreements trump the rights of residents in CICs.

References: (see also attached)

http://www.caionline.org/govt/news/Political%20HeadsUp%20Public%20Document%20Library/Dublirer%20Amicus.pdf

http://www.njlawjournal.com/id=1202677991358/Dublirer-v-2000-Linwood-Avenue-Owners-Inc?slreturn=20141111144542

http://www.northjersey.com/news/n-j-supreme-court-fort-lee-co-op-board-violated-man-s-free-speech-rights-in-leafletting-case-1.1145408

Builders, Professionals seek to avoid liability for Construction Defects, with support from local and state government

      1 Comment on Builders, Professionals seek to avoid liability for Construction Defects, with support from local and state government
guest blog by Deborah Goonan

Colorado has been making news on HOA websites lately. In direct contradiction to Colorado state law, Lakewood city officials have recently passed an ordinance that prevents condo owners from suing developers for construction defects.

There are two sides to the issue of construction defects. Builders want to avoid litigation in lieu of binding arbitration, with the opportunity to correct defects. They maintain that defects are often minor, or that defects are a result of poor maintenance by the HOA, rather than shoddy construction.

Homeowners, wary of uncooperative Builders that may drag their feet taking corrective action, or may balk at making necessary repairs, are reluctant to give up their legal rights to sue in the courts.

But Builders have an ally in the form of the Colorado Metro Mayor’s Caucus, pushing for statewide legislation that reduces builder liability for construction defects. You see, the Mayors believe that reducing liability for construction defects will reduce building costs, and convince Developers to build new affordable housing in the form of condominiums.

Instead of working in the best interests of constituents, writing legislation with balanced legal protections for condo owners, proposals aim to gut existing statutory rights to file a lawsuit, requiring mandatory arbitration instead. Anyone who has been involved in arbitration knows that the filing costs are substantial, with results usually slanted in favor of Big Business.

Avoidance of liability for construction defects is a hot button issue, so much so that Colorado attorneys are actually encouraging developers and general contractors to include mandatory arbitration clauses in the Condo and HOA governing documents. Attorneys also recommend requiring Developer approval to amend (or remove) that arbitration requirement following turnover to an owner-controlled Board. (See link below)

Critics in Colorado point out that affordability is probably more affected by factors such as student loan debt and stagnant wages, rather than higher building costs involved with obtaining construction insurance.

Meanwhile, on the east coast, there are similar ongoing battles in my home state of Florida.

In Florida, the controversy centers on whether or not developers, general contractors, and design professionals should be liable for construction defects affecting common area infrastructure – roads, storm water drainage systems and structures, street lighting, and other essential elements – that affect the habitability of homes a the subdivision.

In response to Maronda Homes vs. Lakeview Reserve, where Lakeview HOA sought to sue Maronda for defects that resulted in storm water flooding and deterioration of roadways, Developers and construction firms sought to avoid liability for defects to common areas that are “unattached” to the homes, or that do not result in direct damage to individual homes. In 2012, the Florida Legislature passed, and Governor Scott enacted, FL Statute 553.835, preventing HOAs from filing suit to recover damages from construction defects to common area infrastructure. Attorneys and homeowners alike opposed this consumer-unfriendly legislation, but real estate development interests lobbied for its passage, and most state Legislators voted in favor of the amendment. The law basically states that homeowners are stuck with the cost of making repairs to defectively constructed roads, storm water ponds, swales, underground drainage, and the like.

“Too bad – Buyer Beware!”

However, in 2013, the Florida Supreme Court found that 553.835 shall not be applied retroactively in the case of Maronda v. Lakeview. The Court also left the door open for a constitutional challenge in defect suits brought after July 1, 2012, when the law became effective. The statute still stands, awaiting that challenge.

In the meantime, design professionals (architects, engineers, designers, surveyors, etc.) successfully lobbied for passage of their own protective legislation, FL Statute 558.0035, limiting individual liability for professional negligence claims.

Notice that nobody seems to lobby for quality construction, and protection of owners’ health, safety, or financial interests. Instead, Legislative focus is on reducing construction and legal costs for builders and related professionals. While it makes sense to inhibit frivolous defect lawsuits or fraudulent claims, it makes no sense at all to eliminate accountability of Developers and others who designed and created HOA subdivisions for personal profit.

Furthermore, it is outrageous that legislators continue to circumvent the judicial process by passing laws that limit the rights of constituents.

Florida references:

Florida Supreme Court rules that a homebuilder’s implied warranties apply to subdivision improvements that provide “essential services” to homeowners

http://www.lexology.com/library/detail.aspx?g=7c45caa0-800b-4874-b394-b8957310cb50&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+Other+states+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2013-07-24&utm_term=

Florida Condominium Law Protects Condo Owners from Construction Defects

http://www.floridacondohoalawblog.com/2012/05/articles/construction-issues-contractual-disputes/florida-condominium-law-protects-condo-owners-from-construction-defects/

FL Statute 553.835 Implied warranties (effective July 1, 2012)

http://www.flsenate.gov/Laws/Statutes/2012/553.835

Florida Statute 558.0035: Limiting Design Professional Negligence – See more at:

http://www.jimersoncobb.com/blawg/2013/06/florida-statute-558-0035-limiting-design-professional-negligence/#sthash.4j7R4QnE.dpuf (effective July 1, 2013)

Colorado References:

Building lawsuits could be reformed

http://durangoherald.com/article/20141130/NEWS01/141139971/-1/taxonomy/Lawsuits-in-building-defects-may-be-reformed—

How to guarantee the HOA can’t litigate condo construction defect claims

http://www.lexology.com/library/detail.aspx?g=b768d3c2-c021-4701-83eb-59bdc1998b87

HUD’s Push to Privatize Public Housing Parallels Rise of HOA Land

      No Comments on HUD’s Push to Privatize Public Housing Parallels Rise of HOA Land
guest blog by Deborah Goonan

Although not widely reported in the news, Federal and local governments, working with private investors, have created a yet another privatization plan to “save” Affordable Housing in America. The Department of Housing and Urban Development (HUD) has begun a pilot program known as Rental Assistance Demonstration (RAD), which they claim promises to preserve our dwindling, aging stock of Public Housing, much of it constructed in the 1960s and 1970s.

Although affordable housing provides a safety net to over 2 million low-income Americans, it has become politically unpopular in Congress, and Federal funding has dropped significantly over the last 2 decades. Insufficient appropriations to local housing authorities has, in turn, led to deterioration of aging structures, with the loss of over 300,000 HUD units. One recent study estimates an additional $26 million is needed to adequately preserve existing Public Housing infrastructure. Proponents of RAD  (HUD and a group of interested Developers) claim that private capital funding is necessary to preserve the remaining 1.2 million affordable units.

Adopted in 2012, HUD seeks to privatize up to 60,000 existing affordable housing units through 2015. Under RAD, local government housing authorities can now leverage equity in aging multifamily properties to obtain private mortgage funding from investors. You read that right – in an effort to fund expensive repairs and remodeling as a result of years of deferred maintenance from lack of public funding, the government is now willing to allow local governments to take out the equivalent of private home equity loans on Public Housing.

RAD also provides long term rent subsidy contracts to owners to cover the difference between actual operating costs and the amount of subsidized rent paid by low-income tenants. But the local housing authority is not required to maintain public ownership. Certain deals financed through the Low Income Housing Tax Credit (LIHTC) program will transfer ownership from local governments to private, for-profit owners, while also providing tax breaks for private developers.

Note the parallel to HOA-Land: HOAs are supply-side driven by local governments seeking ways to increase property tax revenue through development of private communities. The rise of HOAs is a direct result of underfunded local governments, state-imposed caps on tax increases, and reduction in Federal funding.  Private developer-controlled HOAs, first regarded by local government leaders as saviors, are now seen as indispensable Cash Cows.

Similar Fundamental Flaws

But, in addition to strikingly parallel motivating factors that led to the proliferation of HOAs, the RAD pilot program contains several fundamental flaws.

First, skeptics, myself included, envision that investors will simply cherry-pick the most profitable projects in prime locations. Investors are in business to make a profit, first and foremost. Properties in less desirable locations, or in greater need of renovation, would be least likely to attract private investment.

Second, as currently written, with significant input from Developers and Real Estate Investors, RAD only guarantees Federal subsidy funding of half of all affordable units, unless those units are reserved for elderly or disabled tenants. Critics say that will either lead investors to favor elderly and disabled tenants over families with children, or result in a net loss in affordability of 50% of existing units, as existing tenant agreements expire. The unfunded units are likely to end up with either minimally affordable rates or market-rate rents. Thousands of tenants are likely to be displaced.

Third, because RAD is essentially an equity line of credit for taxpayer subsidized housing, the risk of foreclosure is very real. There are no loan guarantees provided by either FHA or HUD. So if the Federal government shuts down again, as it has in the past, and stops the flow of monthly subsidy checks to the owners, defaults could occur. If the property is not properly managed, and falls into financial distress, it may either be reacquired by HUD – on the taxpayer’s dime  – or acquired by a third-party private bank or owner. That would terminate the subsidy contract and leave the door open for the new investor to convert the property to a market-based or high-end rental property, or possibly even luxury condominiums or commercial property.

Fourth, RAD relies heavily on HUD’s duty to enforce its standards and regulations. But as an executive branch agency, political considerations typically lead to weak enforcement of toothless regulations. HUD has a history of inconsistent enforcement of its own regulations. Additionally, tenant advocates are very concerned about the lack of Constitutional protections that result from private contracts affecting residents.

Sound familiar?

I can say with confidence that the critics are right to be skeptical of privatizing Public Housing.  As we see with the proliferation of HOAs, Developers and real estate investors do cherry pick prime properties, then seek to convert them to higher-profit use, displacing thousands of owners and tenants alike.

Private management of HOAs has resulted in fiscal distress and failure for many communities. The only reason more HOAs have not defaulted is because they are able to assess the owners as needed, and confiscate homes through foreclosure for non-payment of those assessments. Low-income tenants cannot be assessed to make up for a budget shortfall, so poor fiscal management will certainly result in foreclosures in times of economic stress.

CAI has convinced the majority of our Courts that HOAs are private corporations and not state actors subject to Constitutional constraints. States generally fail to adequately enforce HOA regulations, even where regulatory executive-level agencies exist. HOA legislation is scoffed at by corporate interests and merely provides the illusion of consumer protection.

RAD is only an experiment at this point. But so were HOAs before 1973.

References for more information:

Risks vs. Rewards: Inside HUD’s Favorite New Program

http://nextcity.org/daily/entry/public-housing-privatized-hud-rad-section-8

Private Funding, Public Housing: The Devil in the Details

http://www.vjspl.org/wp-content/uploads/2012/06/2.20.14-FINAL-LAYOUT-Private-Funding-Public-Housing_Smetak.pdf

Free Speech Rights Upheld in NJ — Six Year Legal Battle‏

      1 Comment on Free Speech Rights Upheld in NJ — Six Year Legal Battle‏
guest blog by Deborah Goonan

Great news! The Supreme Court of NJ did right by the First Amendment, upholding free speech rights for residents of HOAs, Condos, and Co-ops in the state.

It took six long years, and the determination of resident of Mediterranean South, Robert Dublirer, a semi-retired, former criminal prosecutor from NY.
Dublirer was a critic of the former condo Board, and in 2008, contemplated running for a seat on the Board. However, the Board at the time prohibited him from placing campaign leaflets under the doors of residents, so Dublirer sued the Association for violating his rights to free political speech.

The Supreme Court’s finding sets the records straight: First Amendment free speech residents in HOA, Condo, or Co-op in NJ must be upheld, and cannot be unduly limited by the Board. Constitutional free speech protections trump CC&Rs and Rules barring solicitation of residents, when such speech goes to the heart of democratic process of engaging in political discourse.

Kudos to Frank Askin, Rutgers School of Law professor who filed an amicus brief on behalf of the American Civil Liberties Union of New Jersey.

Thanks to the NJ Supreme Court’s unanimous decision upholding the state’s Constitutional rights in Common Interest Communities, the tide of decades of injustice is finally turning.

(link to story on fighting over leafletting)

ULI Promotes Urbanization, While Developers Prefer Rental Properties To Condos

      1 Comment on ULI Promotes Urbanization, While Developers Prefer Rental Properties To Condos
guest blog by Deborah Goonan

Members of a recent Urban Land Institute (ULI) panel are reporting high demand for urban housing, both within existing city cores and in densely populated “instant cities” (HOAs), created by developers in suburban locations near mass transit.

The attached article highlights how the major players in American housing policy and the real estate industry are not all on the same page.

Housing policy makers still push home ownership as the endgame, while NAR and CAI lobby Congress to pass FHFA proposals to relax mortgage standards. Meanwhile, developers and investors are shying away from less profitable, more risky condominiums, and engaging in new construction and redevelopment for the rental market.

Housing is becoming less affordable, across the board, as cities become more and more gentrified. If left unchecked, the majority of Americans will left with few housing choices: rent for the long-term in an apartment community, or buy or rent a single family home in a private, corporate-governed HOA.

(link to Urban Land Magazine: Changing Face of Residential)

(link to Urban Land Institute – mission and priorities)