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This paper explores the dual forms of political government that currently exist here in the United States. These two forms of governance, which can be found in our history since medieval times, are clearly distinct and incompatible, having come to present times from two paths, one concerned with the control of real property interests by groups or associations of persons, and the other concerned with the democratic governance of a people. The former path has evolved into what is know today as the law of servitudes that govern homeowners associations, and the latter is known as constitutional law that governs all other American government entities.
Private governments, namely the homeowners association (HOA), are the governing body of a subdivision that is subject to CC&Rs under servitudes law. And, as nonprofit corporations, are further subject to corporation laws and any special real property laws referred to as state HOA acts or laws. As a private contractual form of government, they are not subject to state and US constitutions and municipality laws, as are public government entities. It is estimated that there are just under 19% of Americans living in HOAs today, which is more than either the Black or Hispanic minority percentages.
Today, and for the past 44 years, these differing views of governance here in America have come together in conflict. The government of our Founding Fathers, an experiment in democratic representative government, having endured some 220 years is under attack from the real property legal academic aristocrats who, having commented in their establishment of rules for HOAs, the restatement of law - servitudes, advocate: "The question whether a servitude unreasonably burdens a fundamental constitutional right is determined as a matter of property law, and not constitutional law."
What are Restatements? Restatements are secondary sources that seek to "restate" the legal rules that constitute the common law in a particular area into a series of principles or rules. They are prepared by the American Legal Institute (ALI), an organization formed in 1923 consisting of prominent judges, lawyers and teachers. The ALI's purpose is to distill the "black letter law" from cases, to indicate a trend in common law and, occasionally, to recommend what a rule of law should be. Restatements are not primary law. They are, however, considered persuasive authority by many courts, especially as support for legal arguments that have not been addressed by the courts in a particular jurisdiction.
The Forward to the Restatement Third, Property (Servitudes) reflects the property oriented mindset of the Restatement:
"Professor Susan French [Reporter (chief editor/contributor) for this Restatement] begins with the assumption . . . that we are willing to pay for private government because we believe it is more efficient than [public] government . . . . Therefore this Restatement5 is enabling toward private government, so long as there is full disclosure."
And, in the Introduction (emphasis added), "This Restatement presents a comprehensive modern treatment of the law of servitudes . . . ." and then claims that "it preserves the judiciary's traditional role of protecting the public interest in maintaining the social utility of land resources."7
This question of the application of the Constitution and state laws, as all other forms of government are subject, to protect the rights and freedoms of homeowners living in HOAs is a longstanding controversy. The most recent state supreme court challenge to the constitutionality of the HOA regime took place in the NJ Supreme Court (CBTW v. Twin Rivers HOA, 2007 N.J. LEXIS 911, 929 A.2d 1060, NJ 2007), and cites case law (common law precedent) that reflects the influence of the new world order of private governments as promoted by the Restatement.
"The Association argues that . . . it was error [by the appellate court] to impose constitutional obligations on its private property. The Association urges this Court to follow the vast majority of other jurisdictions that have refused to impose constitutional obligations on the internal membership rules of private homeowners‟ associations."
The homeowner plaintiffs argued "that political speech is entitled to heightened protection and that they should have the right to post political signs beyond the Association's restricted sign policy."
In the opinion, the court cited several cases : "Those courts recognize either explicitly or implicitly the principle that the fundamental nature of a constitution is to govern the relationship between the people and their government, not to control the rights of the people vis-a-vis each other." A shocking statement that reflects the court's hands-off approach to any HOA denial of fundamental rights, as if the HOA was sacrosanct.
In rejecting the homeowners' argument of a violation of their constitutional free speech rights, the NJ justices further rejected the role of the Constitution and declared,
"Moreover, common interest residents have other protections. First, the business judgment rule protects common interest community residents from arbitrary decision-making. . . .Pursuant to the business judgment rule, a homeowners' association's rules and regulations will be invalidated (1) if they are not authorized by statute or by the bylaws or master deed, or (2) if the association's actions are fraudulent, self-dealing or unconscionable."
However, in its amicus curiae brief to the NJ appellate court, Community Associations Institute (CAI), a national lobbying trade organization defending HOA regimes) urged,
"In the context of community associations, the unwise extension of constitutional rights to the use of private property by members (as opposed to the public) raises the likelihood that judicial intervention will become the norm, and serve as the preferred mechanism for decision-making, rather than members effectuating change through the democratic process."
What is being said here about constitutional protections? Perhaps, Prof. McKenzie can clarify this, when he wrote as far back as 1994 (Privatopia: Homeowners Associations and the Rise of residential Private Government),
"Residents in CIDs commonly fail to understand the difference between a regime based formally on rights, such as American civil governments, and the CID regime, which is based on restrictions. This often leads to people becoming angry at board meetings and claiming that their "rights" have been violated rights that they wrongly believe they have in the CID. This absence of rights has important consequences because the balance of power between individual and private government is reversed."
A critique of the NJ supreme court's opinion can be found in the Rutgers Law Review article (The Twin Rivers Case: Of Homeowners Associations, Free Speech Rights, and Privatized Mini-Governments, Paula A. Franzese and Steven Siegel), co-authored by an author of the AARP amicus brief supporting the homeowners, that provides a rationale behind the support for HOAs,
"The laissez-fare approach to CIC regulation is reflected in the statutory law, which affords exceedingly few rights and protections to homeowners association residents, and in the common-law principles applied by New Jersey courts when resolving disputes arising over CIC governance."
Now, while the Restatement of servitude law completely ignores constitutional law, it is replete with rules, analysis and points of view reflecting the position that the HOA does not govern the people of a subdivision, but is essentially a nonprofit business having the objective of maintaining property values. However, this legal authority on real property laws and servitudes devotes its entire Chapter 6, some 278 pages or about half of Volume II, to homeowners association governance, admits that the HOA has "substantial power to affect both the quality of life and financial health of their member."
In considering the above, several extremely important questions can be raised:
1. Can a legislature delegate its functions, not government services but functions, to private entities without oversight or compliance with the Constitution, as required of all government entities?
2. Can private parties enter into contractual arrangements using adhesion contracts and a constructive notice consent, which serve to regulate and control the people within a territory (an HOA), within the state, to circumvent the application of the Constitution?
