Astute Analysis Of The Virginia HOA Debacle
guest blog by George Staropoli
I thank Ward for covering the developments at the Virginia Legislature regarding:
1) the right of HOA to fine members even though the sacrosanct CC&Rs contract does not permit them,
2) making fines the same as assessments thereby allowing for foreclosure for the nonpayment of fines, and
3) overriding the Virginia Supreme Court’s holding in Unit Owners v. Gillman (1982) that fines are a government power that cannot be delegated.
Virginia’s HB 791, the bill in question, makes use of the statutory mandate word, shall, which can lead to claims of HOAs as state actors because they are obligated to do the bidding of the state. “The board of directors shall also have the power . . . to (ii) assess charges against any member for any violation of the declaration or rules and regulations,” except if explicitly forbidden in the declaration. (Sections 55-513(B) and 55-79.80:2(A)).
Yet in Gillman the Virginia Supreme Court held,
We do not agree that it was ever the intent of the General Assembly of Virginia that the owners of units in a condominium be a completely autonomous body, or that such would be
permitted under the federal and state constitutions. Admittedly, the Act is designed to and does permit the exercise of wide powers by an association of unit owners. However, these powers are limited by general law and by the Condominium Act itself.
What HB 791 does is to make HOA fines legal under Virginia’s statutes. Ha! Take that! By fiat, by statute, HOAs are permitted to impose a draconian monetary penalty against homeowners – the right to make them homeless through foreclosure.
The Court in Gillman went on further to say,
“The imposition of a fine is a governmental power. The sovereign cannot be preempted of this power, and the power cannot be delegated or exercised other than in accordance with the provisions of the Constitutions of the United States and of Virginia. Neither can a fine be imposed disguised as an assessment. . . . We think it clear that the Gillmans were being punished, not assessed, and hold the action of the Association to have been impermissible.
And very importantly from a constitutional point of view (my emphasis), “A condominium restriction or limitation, reasonably related to a legitimate purpose, does not inherently violate a fundamental right and may be enforced if it serves a legitimate purpose and is reasonably applied.”
What is the genuine government interest to impose draconian monetary penalties for the failure to pay a private organization’s penalty?
If it is argued, but has not yet been so argued, that HOAs are vital to the welfare of the community in general and to somehow provide for the greater community’s happiness, then what we have is the HOA acting as an arm of the state. The HOA is then subject to the Constitution as if it were a state government entity.
(UPDATE FROM WEBMASTER: even though the State of Virginia may have modified its proposed legislation, George’s point should be kept in mind because other states may begin going down the same unconstitutional path as Virginia was headed.)
