Statement of Rights

2006 October 15
Last update:  2009 Jan 22.  See History for brief descriptions of changes and updates. 

    The most important concept in legislation concerning Common Interest Developments (CIDs) and Property Owners Associations (POAs) is the definition of the rights of owners of property in a CID who are also members of the governing POA.  It is the owners who provide all of the money through their purchase of property and ongoing payment of annual and special assessments for the CIDs and the function of the POAs. 

    The term, Statement of Rights, is used rather than Bill of Rights [footnote 1] to give deference to the federal Bill of Rights.  The definition of rights in the state constitutions is typically called a Declaration of Rights.  Much of the literature on this subject refers to Homeowners Bill of Rights. 

    The continuation of this post is a Statement of Rights for owners/members in a CID/POA.  Combined with the notes and comments, this Statement of Rights basically defines the content for CID/POA law for mature CIDs/POAs.  Your suggestions, recommendations and concerns are requested and are welcome.  Just add a comment.  Thanks. 

Don Nordeen
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Footnote 1 — Bill of rights is over-used, apparently to claim increased importance.  Consider a few examples of claimed bills of rights:  Library Bill of Rights, DigitalConsumer.org Bill of Rights, Academic Bill of Rights, Bill of Rights for Scientists and Engineers, Donor Bill of Rights, Patients' Bill of Rights, another Academic Bill of Rights,  Consumer Bill of Rights and Responsibilities in the Health Care Industry, another Consumer's Bill of Rights, Mortgage Consumer Bill of Rights, Cable Consumer Bill of Rights, ... .  There are literally thousands and thousands.  <Use your browser's back button/arrow to return to previous location>

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• History:  Changes are usually identified in the text with the date which facilitates searching by date. Edits are usually noted by add and delete changes. 
  
  • 2009 Jan 23 — Added more information on and references to democratic principles
  • 2009 Jan 17 — Additional information about an office of ombudsman and/or equivalent and use of specific courts for resolution of various issues
  • 2009 Jan 16 — Further editing on prohibiting fines by the POA and use of courts. 
  • 2009 Jan 15 — General editing
  • 2009 Jan 14 — Edited language concerning the meaning of "amend" and included reference to NC Supreme Court opinion in Armstrong v. Ledges which limits the scope of amendments to the CC&Rs in Rights #5, #7 and #9. 
  • 2009 Jan 13 — added new Right #3 on limitations of CC&Rs and associated notes and justification
  • 2009 Jan 12 — added text to Right #1 to allow exceptions to preservations of rights under the federal and state constitutions and to extend rights to federal and state laws
  • 2008 Sep 28 — added note that TUPCA is no longer active
  • 2007 Mar 09 — The explanation for Right #1 edited to include more discussion on the balance that must be struck between strict application of individual rights and common interests.
  • 2006 Oct 21 — Right #10 edited by add and delete language to show right with and without fines that may or may not be constitutional.
  • 2006 Oct 15 — Initial Post
• Links:  Statement of Rights at [http://swagman.typepad.com/poa_governance/2006/10/statement_of_ri.html]
• Key Words:  • Legislation, CID & POA Model & Content; • Legislative Issues & Proposals; • POA Governance; • POA Board of Directors Issues; • POA Members' Rights; • Private Government; access to records; ADR; alternate dispute resolution; alternative dispute resolution; annual meeting; arbitrary; arbitrary and capricious; Armand Arabian; attorney; attorney client privilege; attorney general; attorney obligation; audit; bill of rights; board of directors; board of trustees; board of stewards; CC&R; CC&Rs; closed meeting; closed session; common interest community; common interest development; community association; Covenants Conditions and Restrictions; democracy; democratic; dispute; dispute resolution; executive session; fair election; freedom of information; GAAP; governance; governing documents; Homeowner Bill of Rights; homeowners associations; land development; Legislation, CID & POA Model & Content; legislative issues & proposals; meeting; members' meeting; members' rights; model act; nonprofit corporation; non-profit corporation; obligation; ombudsman; open meetings; planned communities; planned unit development; POA governance; POA members' rights; POA problems; POAs, general; preservation; preservation fund; private government; property owners association; property rights; proxies; proxy; proxy vote; proxy voting; public policy; reference materials & papers; reserve; reserve fund; special meeting; statement of rights; transparency; trustee; vote; voting

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Statement of Rights for Owners in Common Interest Developments and Members in Property Owners Associations (continued)

2006 October 15
Last update:  2009 Jan 22.  See History for brief descriptions of changes and updates.

Table of Contents

• Introduction to the Statement of Rights

• Recommended Statement of Rights

• References Used

Introduction to the Statement of Rights

• Order for Presentation.  Since some of the rights build on others, the rights are arranged in the order of descending hierarchy of logic, which is not necessarily in descending order of importance.

• Explanation of Terms.  This document uses the terms, Common Interest Development (CID) for the real estate development and Property Owners Association (POA) for the organization of owners/members.  These terms are selected as the most general of the various terms used.   See explanation of terms in Definitions/Glossary for CID/POA Terms [URL is <http://swagman.typepad.com/poa_governance/2005/10/definitionsglos.html>.]

• Rights in Common Interest Developments (CIDs) and in Property Owners Associations (POAs).  The rights must be recognized in all law.  The distinction between CIDs and POAs is important and necessary since CIDs are generally covered under property law and POAs under corporation or organizational law.  Generally, "owners" applies to property law, and "members" applies to corporation or organizational law.

• Recommend the Title "Statement of Rights".  The recommended title is "Statement of Rights" rather than "Bill of Rights" to give deference to the Federal Bill of Rights.  For more explanation, please see text in Homeowners Bills of Rights [URL is <http://swagman.typepad.com/poa_governance/2005/09/homeowners_bill.html>.]. 
  
  • Please recognize that the inconsistency in the title of that post is intentional.  I used the Homeowners Bills of Rights in that title because it is a term in wide use and necessary in internet searches, even though I prefer to give deference to the Federal Bill of Rights.


• General and High-Level Language.  Rights should be expressed in general and high-level language.  Consult the Declaration of Rights in your state's constitution for an example of the language used.  Generally, the rights are stated without exceptions or qualifications.

• Exceptions to Rights.  Exceptions or qualifications to rights should be stated only with clear standards.  Exceptions or qualifications may have the effect of reducing the rights, and/or granting rights to those parties named in the exceptions.  See proposed language drafted by Justice Arabian as an example with integral standards for the exceptions.  Added 2009 Jan 12 >>>  The developer should be prohibited from including any exceptions to rights under federal and state constitutions and laws with owners allowed to self-impose exceptions through amendment of the CC&Rs only with unanimous consent (for abridging constitutional rights) or by very high super-majority (for abridging rights under the laws).<<<
  

• Rights in Positive vs. Negative Language.  It may be better to state some of the rights in the negative against other entities.  For example, the first amendment to the U.S. Constitution is stated in the negative, "Congress shall write no law •••".  Most of the rights are positive, or affirmative, statements of rights.  Some might be better stated in the negative.

• Rights of Owners/Members are Only Part of CID/POA Law.  As with all rights, expansion is needed and would normally be included in the subordinate sections of the law.  These subordinate provisions add the necessary implementation and objective standards, but cannot be inconsistent with the Statement of Rights.  Other subordinate provisions may include exceptions, but only if unambiguous standards are provided.  Subordinate requirements should not be omitted from the law unless there is justification to accept that such policies, practices and procedures will typically be defined by the developer in the initial bylaws or other governing documents.

• Notes and Comments.  Notes and comments are included in "bullet" form for most of the rights.  These explain, provide references, and discuss subordinate law that may be required.  You may wish to skip the notes and comments. 
  

<Return to Table of Contents>

Recommended Statement of Rights

    (Edited 2009 Jan 15) >>> The recommended rights consist of a Preamble plus 25 26 separate rights.  The notes and comments provide explanation and definition of much of the required subordinate law, albeit organized by the Statement of Rights. The Statement of Rights are the guarantees by the state to the owners in common interest developments and members in property owners associations (POAs).  Much debate is needed to ensure that the stated rights (1) are superordinate, (2) can be simplified are as simple as possible but no simpler and/or can be combined, and (3) are complete.  In drafting this Statement of Rights, questions regarding content have been resolved in favor of inclusion. <<<

    Combined with the notes and comments, this Statement of Rights provides a "road map" for the content for CID/POA law for mature CIDs/POAs.  Please note that residents of towns and villages are basically guaranteed these rights in their municipalities by state law.  (Added 2009 Jan 23) >>> This statement of rights is also based on democratic principles.<<<  The additional rights included below also pertain to meetings of members (New England Town Meeting) and some of the interactions with the board of stewards.  This Statement of Rights does not address the considerations during which the developer is also involved in a partially completed CID with many unsold property units.   

    For a perspective of the language used, please read Article  I of the Michigan Constitution which is titled Declaration of Rights and describes 25 fundamental rights of each person — not the authority of the government to control people.  To generate the full Article I, click on the printable icon at the top of the page, and then click on the TXT (HTML) icon or the PDF icon.

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Statement of Rights

    Preamble and Fundamental Purpose — (Edited 2009 Jan 22) >>> All political power is inherent in the owners/members, and a property owners association derives its just powers from the consent of the governed, and is established to protect and maintain their individual rights, and instituted for their equal benefit and protection.  <<<

• The above is adapted from the Arizona Constitution, specifically Section 2 of Article 2:  Political power; purpose of government, which states, "All political power is inherent in the people, and governments derive their just powers from the consent of the governed, and are established to protect and maintain individual rights."
• Article I, Section 1, of the Michigan Constitution states, "All political power is inherent in the people. Government is instituted for their equal benefit, security and protection."
• Just as the state constitutions typically begin with a Declaration of Rights, the law governing Common Interest Developments (CIDs) and Property Owners Associations (POAs) should begin with a Statement of Rights. 
• The requirements for mandatory membership in the POA, the payment of assessments, the regulation of the property in the CID regulated by the CC&Rs, and other factors make a POA much like a town or village.  Hence government, albeit private government, is an appropriate description and reference.
• The language in the preamble refers only to the POA which is the governing body.  However, the creation and authority for the POA is typically stated in the CC&Rs which is a mutual contract among the owners. 
  
• This fundamental purpose is shown in a preamble because all of the other rights listed below are derived from this fundamental purpose.

 
1.  Rights under Federal and State Constitutions.  (Edited 2009 Jan 12) >>> The rights of each owner/member under the Federal and State Constitutions and under federal and state laws shall not be abridged. <<<

• Retired California Supreme Court Justice Armand Arabian has written a legislative provision.  Justice Arabian's language is more comprehensive and allows for limited exceptions under specified conditions.  Moreover, standards for the exceptions are inherent in the language describing the exceptions Justice Arabian considers. 
• (Edited 2007 Mar 09)  An absolute right is simply stated as above, which may be too strong and in conflict in striking the correct balance between individual rights and common interests.  Justice Arabian's more complete language addresses this balance.  That language should be included in the subordinate provisions in the law for implementation of the right.
  • (Added 2009 Jan 12)  An alternative is to prohibit the developer from including any language that abridges any right under the federal and state constitutions, but to allow certain rights to be abridged by contract by unanimous consent of the owners.  
  • (added 2009 Jan 12)  In a similar way, the developer should be prohibited from including any language that abridges any right under federal and state law, but to allow certain rights to be abridged by contract by approval of a super-majority (such as 90%) of the owners. However, there is justification for unanimous approval since abridging of rights under the law should not be imposed by actions of other persons. 
    
• (Added 2007 Mar 09)  An example of striking a balance between individual rights and common interests is the use of parliamentary procedure in organizations.  In a post at the Robert's Rules of Order Newly Revised discussion forum, Mr. Robert B. Fish wrote on 2/28/2007 10:44:00 AM:

    Re: "...free speech..." — Deliberative bodies do not allow speech that is as free as guaranteed by the US Bill of Rights.  Members agree through their bylaws (and adoption of a parliamentary authority) to limit their speech to always adhering to decorum, to not debating when another member has been assigned the floor, to introducing motions at their proper time, to not requiring the assembly to decide a question more than one time in a meeting (technically: session), to ceasing debate if the assembly so decided (2/3 vote required), and many other limitations.
    Of course, there is great detail behind these broad limits but you get the idea.

Even though a requirement for the meeting, the agreement to adhere to Robert's Rules of Order is clearly not a violation of free speech, since the rules do not universally apply to all speech by the member.

 
2.  Superior Rights.  (Edited 2009 Jan 15) >>> Each owner in a common interest development and member of a property owners association shall enjoy these rights as superior rights.  Only those laws, and restrictive covenants and other governing documents not inconsistent with these superior rights shall be valid.  <<<

• Owner/member rights must be superior (superordinate and above all others relating to CIDs and POAs) if they are to be rights with the intended purpose, and must be superior to other laws concerning CIDs and POAs. 
• (Edited 2009 Jan 15) >>> The "not inconsistent with" language is typically used to allow for other laws outside the scope of the provisions.  Another form for the language is, "Any law or restrictive covenant inconsistent with these superior rights is invalid."   A stronger requirement is that all laws and restrictive covenants and other governing documents be consistent with these rights.  <<<
  
• The legislative experts need to be consulted on how best to write the language.

 
(New, added 2009 Jan 13) >>>  3.  Limitations on Restrictive Covenants.  Restrictive Covenants, and more generally, Covenants, Conditions and Restrictions (CC&Rs), shall be operative upon use of the land by any owner having notice of it and are not personal to the owner, except for mandatory membership of the owner in the owners association and personal conduct on common properties of the association that trespass on the rights of other owners/members. 

• Typically, the definitions of Restrictive Covenants concern use of the property and run with the land.  See the definition of Restrictive Covenant by thefreedictionary.com [URL is <http://legal-dictionary.thefreedictionary.com/restrictive+covenant>].  Also see definitions of CC&Rs by thefreedictionary.com [URL is <http://legal-dictionary.thefreedictionary.com/Covenants%2c+Conditions+and+Restrictions>] (scroll down for links to related terms) and CC&Rs by findlaw.com [URL is <http://realestate.findlaw.com/covenants-conditions-restrictions/>].  The last link contains links to other aspects of CC&Rs including Types of CC&Rs: Home Business and Personal Conduct [URL is <http://realestate.findlaw.com/covenants-conditions-restrictions/ccr-home-businesses.html>].  The personal conduct applies to all people who use the common property and is therefore a restriction on the use of the common property. 
  
• The meaning of "running with the land" makes the provision not personal.  See for example Trahan's Glossary [URL is <http://www.tahanlaw.com/Glossary/azrealestatetermsntoz.html>.].  Scroll down to "running with the land".  All see Candlewood Lake Assn., Inc. v. Scott, 2001-Ohio-8873 [URL is <http://www.sconet.state.oh.us/rod/docs/pdf/10/2001/2001-ohio-8873.pdf>.], separately search for "not personal" and "with the land", and Tri-State Sand & Gravel, L.L.C. v. Cox, No. 38,217-CA, COURT OF APPEAL OF LOUISIANA, SECOND CIRCUIT, April 7, 2004, Judgment Rendered [URL is <http://www.lacoa2.org/Opinions%20PDF/38217ca.pdf>.], search for "not personal". 
  
• Thus, any requirement that limits the use of the property and runs with the land applies to the property and not the owner.  It is not personal to the owner but can indirectly restrict the conduct of the owner in the use of the land.  The owner cannot act to produce results (use of the property) that are restricted by the CC&Rs.  More specifically, the actions of the owner indirectly restricted are limited to actions made on the property and do not extend to actions and conduct not made on the property.  This is the concept described in the above right.
• The exceptions are limited.  Mandatory membership in the owners association is an action or requirement on the owner and is not an action taken on the use of the property.  With regard to the use of common property, it is the result of the actions of an owner/member that trespass — a word carefully chosen to limit rules and regulations on use of the common property.  See synonyms for trespass [URL is <http://www.merriam-webster.com/dictionary/trespass%5B2%5D>.]. 
• The requirement of not being personal is stated in cases involving easements.  The above language is based on an opinion by the landmark Michigan Supreme Court, which described the process in Sanborn v McLean, 233 Mich  227, 229-230; 206 NW 496 (1925):  [See summary of Sanborn v. McLean [URL is <http://www.audiocasefiles.com/acf_cases/9499-sanborn-v-mclean>.].
  

  "If the owner of two or more lots, so situated as to bear the relation, sells one with restrictions of benefit to the land retained, the servitude becomes mutual, and, during the period of restraint, the owner of the lot or lots retained can do nothing forbidden to the owner of the lot sold.  For want of a better descriptive term this is styled a reciprocal negative easement.  It runs with the land sold by virtue of express fastening and abides with the land retained until loosened by expiration of its period of service or by events working its destruction.  It is not personal to owners but operative upon use of the land by any owner having actual or constructive notice thereof.  It is an easement passing its benefits and carrying its obligations to all purchasers of land subject to its affirmative or negative mandates.  It orginates for mutual benefit and exists with vigor sufficient to work its ends.  It must start with a common owner.  Reciprocal negative easements are never retroactive; the very nature of their origin forbids.  They arise, if at all, out of a benefit accorded land retained, by restrictions upon neighboring land sold by a common owner.  Such a scheme of restrictions must start with a common owner; it cannot arise and fasten upon one lot by reason of other lot owners conforming to a general plan.  If a reciprocal negative easement attached to defendants' lot it was fastened thereto while in the hands of the common owner of it and neighboring lots by way of sale of other lots with restrictions beneficial at that time to it."  [Underline and bold emphasis added]

  A similar conclusion is drawn in Green v. Lupo, 32 Wn. App. 318, 647 P.2d 51 (1982) — The court held that an easement is not personal if there is anything in the grant to suggest that it was intended to be tied to the land retained or conveyed. 
• There are other cases that opine that easements that run with the land, not just reciprocal negative easements, are not personal.  "Being personal" and "running with the land" are mutually exclusive.  It has to be one or the other depending upon the language, but cannot be both. 
  
• The same reasoning applies to any covenant that runs with the land.  "Being personal" and "running with the land" are mutually exclusive.  This Right ensures that the CC&Rs establishing the Common Interest Development will not impinge on the rights of owners/members.  It appears that, for covenants to be personal, such must be expressly stated. 
  
• The concept of constructive notice, such as by recorded documents, really doesn't inform potential buyers for a number of reasons including (1) not being viewed as important by buyers at the time of purchase; (2) difficulty in understanding the meaning and ramifications of the special language and underlying property law; and (3) cost of engaging an attorney to explain who also may not understand the ramifications of the CC&Rs.  Consequently, the subordinate provisions of any CID/POA Act should include disclosure requirements and reference in the deed which would provide actual notice.  See Right #26. 
  
• The limitations in this Right prohibit social contracts from being included in the CC&Rs, since social contracts involve people not just the property and concern actions not taken on the property.  Personal requirements, which can be intrusive and must be avoided, are not needed except as defined in the Right. 
  
• The concepts are also interrelated with those in Right #9.  <<<
  

 
4.  Right of Membership.  Each owner/member who owns property subject to covenants, conditions and restrictions (CC&Rs) shall be a member with full members' rights of any Association to which the member must make mandatory payments or that has the authority to enforce the CC&Rs as defined therein.  Voting rights shall not be abridged.

• (added 2008 Jan 15) >>> Implicit in this Right is that voting rights shall not be denied to any member.  Denial of voting rights if not in good standing would not be permitted.  This Right mirrors the voting rights in government which do not require tax payments to be current, or other conditions, to have the right to vote.  <<<
  

 
5.  Right to a Property Owners Association with Limited Purposes and Devoted to Those Purposes.  (Edited 2009 Jan 15) >>>  The purposes of the Association shall be specific and limited and shall only be (1) to provide stewardship for the common interests as defined in the CC&Rs, (2) to protect the rights of the owners/members, and (3) to provide those functions required by law.  The Association shall be of the members, by the members and for the members.  <<<

• Limited is an important concept to members by providing predictability and stability, and allowing intrusion only as defined in the CC&Rs for the common interest.  Many, if not most, of the abuses by boards are directly related to actions beyond these three limited purposes, often based on expansive and indeterminate statements of purpose.  (Added 2009 Jan 14) >>>  See Armstrong v. Homeowners Asso., 360 NC 547 (640PA05) 08/18/2006 partially quoted in Right #9 for a comprehensive discussion concerning the unreasonableness of such general provisions.  <<<  
• If POAs are a distinct legal entity, then the authorizing provisions can reflect the specific and limited purposes. 
• See the excellent paper by Lois and Samuel Pratt, A Bill or Rights for Homeowners in Residential Community Associations [URL is <http://members.cox.net/concernedhomeowners/PrattBoR.htm>.] for a discussion of the role of the POA, common interests and individual rights. 

 
6.  Right to Democratic Governance.  Each owner/member shall have to right to governance based on democratic principles, as defined in law for towns and villages adapted to the unique aspects of CIDs/POAs. 

• See Democratic Principles for CIDs and POAs [URL is <http://swagman.typepad.com/poa_governance/2006/06/democratic_prin.html>.] which lists 20 democratic principles.  Most of the 20 principles listed exist in the law governing towns and villages. 
• (Added 2009 Jan 23) >>> The most visible part of democratic principles are elections, which are not enough.  This is easily confirmed by searching the internet with the phrase in quotation marks, "elections are not enough".  The result is about 37,000 hits with many concerning evolving democracy in third-world countries.  <<<
• Most people are familiar with the governance of towns and villages. The more governance of POAs is made to have the look and feel of a town or village, the easier it should be for members and its board of stewards.

 
7.  Right to Limited Powers for the Board of Stewards.  (Edited 2009 Jan 15) >>>  Each owner/member has the right that powers of the Board of Stewards will shall be limited to those required for the Board to manage the purposes of the Association and to facilitate administration of matters reserved to the owners/members.  <<<

• The word "steward" is used rather than director to be consistent with the purpose of the POA (to provide stewardship for the common interest).  The word "trustee" is used by some jurisdictions.  Both connote the concept of the obligations of the board with necessary authorities to carry out the obligations.  The word "director" places the emphasis on "boss" which is not the proper concept. 
• Powers of the board to "act for the general welfare of the members" are invitations to abuse.  Such provisions are unnecessary.  Rather, powers should be specifically stated and limited to those stated.  (Added 2009 Jan 14)>>>  See Armstrong v. Homeowners Asso., 360 NC 547 (640PA05) 08/18/2006 partially quoted in Right #9 for a comprehensive discussion concerning the unreasonableness of such general provisions.<<<  
• The specific and limited powers provide members with predictability and stability of governance.  The specifics  also become the basis for resolving disputes concerning claims by members that the board is acting beyond its authority or failing to exercise its obligations.  Some form of ADR that is low cost to members and paid by the Association should provide the first level of dispute resolution.  See Rights 23 and 24. 
• The board has both the obligation and the authority to carry out the purposes to provide stewardship for the common interest as defined in the CC&Rs, to protect the rights of the members, and other duties as defined in law.

 
8.  Right to Fairness and Civility in Governance.  Each owner/member shall have the right to fairness and civility in all governance and interactions between each owner/member and directors, officers, agents, and staff. 

• The members of a POA are a deliberative organization as defined in many papers and books.  A good reference is Robert's Rules of Order Newly Revised.  It is based on the rules originally written for the United States Senate.  Another reference is Stephen L. Carter's book, Civility.
• Fairness, civility and respect to members sets the standard for reciprocal civility towards directors and staff. 

 
9.  Right to Control and Amend the Governing Documents.  (Edited and revised 2009 Jan 14)  Owners/members shall have the right to propose changes, and the exclusive right to create, change, amend, or terminate approve changes, to any or all provisions in the governing documents.   Amendments (improve, correct, modify, alter, adjust, fix, remedy, and refine excluding drastic change, terminate, and/or rescind) to existing provisions shall require approval of a majority or higher percentage of owners and then shall be binding on all owners.   New provisions, drastic changes, terminations, rescissions and/or nonuniform provisions shall require approval of all owners.

• (Edited 2009 Jan 14)  Generally, "amend" is sometimes used as an umbrella for create, change, amend, or terminate.  However, amend has a more limited meaning, as stated in the definition of amend and the synonyms for "correct".  "Amend" is limited to change or modify for the better, improve, to alter especially in phraseology, fix, correct, rectify, remedy, adjust and revise, and does not include drastic change, terminate and/or rescind. 
• (Added 2009 Jan 14)>>>  The above includes some case law with regard to amendments in the statutory law so that these important provisions are highly visible in the statute. 
  • "A deed restriction [or CC&R] which properly allows a majority, or greater percentage, of owners within a particular subdivision to change, modify or alter given restrictions binds the other owners by properly passed and recorded changes in the same manner as those contained in any original grant and restriction."  Ardmore Park Subdivision Ass'n, Inc v Simon, 117 Mich App 57; 323 NW2d 591 (1982). 
       Amendments requiring approval by only a majority of owners shall be limited to improve, correct, modify, alter, adjust, fix, remedy, refine, and improve existing provisions, and shall not introduce new provisions or fundamentally change the character of the CC&Rs.  See Armstrong v. Homeowners Asso. below. 
    
  • "Non-uniform covenant amendments require the unanimous consent of the affected property owners.  Holding otherwise would leave present property owners in an uncertain position whenever their covenants allowed for amendments with less than the unanimous consent of the affected owners.  The fundamental premise that makes people willing to bind themselves to the burdens of restrictive covenants is that the resulting benefits are assured; each property owner relies on the fact that all are bound equally, so that no burden can be imposed on one that all are not willing to assume.  Permitting non-uniform amendments and exemptions by majority or supermajority vote would destroy this crucial aspect of covenants and thus undermine the entire system of private regulation of real property in Michigan."  Maatta v. Dead River Campers, Inc., 689 N.W.2d 491 (Mich. App. 2004).
  • An extensive opinion on limitations of amendments is provided in Armstrong v. Homeowners Asso., 360 NC 547 (640PA05) 08/18/2006.  Two major conclusions are:
    

       (1)  "For these reasons, we determine that the Association's amendment to the Declaration which authorizes broad assessments “for the general purposes of promoting the safety, welfare, recreation, health, common benefit, and enjoyment of the residents of Lots in The Ledges as may be more specifically authorized from time to time by the Board” is unreasonable.  The amendment grants the Association practically unlimited power to assess lot owners and is contrary to the original intent of the contracting parties.  ..."
       (2)  "For the reasons stated above, we conclude that the disputed amendment is invalid and unenforceable.  In so doing, we echo the rationale of the Supreme Court of Nebraska in Boyles v. Hausmann, 246 Neb. 181, 191, 517 N.W.2d 610, 617 (1994): “The law will not subject a minority of landowners to unlimited and unexpected restrictions on the use of their land merely because the covenant agreement permitted a majority to make changes in existing covenants.”  ..."

  • Louisiana has a statutory requirement that any amendment to a restrictive covenant that increases its stringency requires unanimous approval of owners.  This would include all new provisions.
  • The requirement for unanimous approval for any nonuniform provision include "by any means" since it is easy to write language that technically applies to all property units but in fact creates nonuniform requirements for owners of property units. 
• The concepts above should either be integrated into the statement of right or be subordinate provisions derived from an appropriate worded statement of right concerning amendments.  The concepts are also interrelated with those in Right #3.  <<<
• This is a very important right.  The right is to both control and amend the content in the governing documents since the CID/POA should be of the members, by the members and for the members. 
• (Edited 2009 Jan 15) >>> The right should be exclusive to the owners/members with the board having no authority at all except a non-exclusive right of proposal.  Separation of powers is important.  <<<
• Boards have a clear conflict of interest in proposing amendments to governing documents since the governing documents define the obligations and authorities of the board.  Further, the board is obligated to enforce the documents.  As with all resolutions for a vote by the members, boards have an administrative obligation to provide full and accurate information so that members can make informed decisions.

 
10.  Right of Notice and Stability in Rules and Charges.  (Revised 2006 Oct 21 & 2009 Jan 16)  Each owner/member shall have the right of use and enjoyment of the common property of the Association.  Rules and charges for services and benefits enacted by the Association shall be limited to administration and implementation of the provisions in the CC&Rs.  No rule or charge is valid until properly noticed to each owner/member.  No rule may include imposition of a fine except as implementation of a fine authorized with clear standards in the CC&Rs.  Where the Board of Stewards has power to change operating rules and charges, the owners/members shall have notice and an opportunity, by majority vote, to override new and/or revised rules and charges.  No fine or other remedy can be assessed without a validated violation except by the court of jurisdiction. 

• This right was first written on the basis that fines are appropriate and constitutional.  Then by add and delete changes, the right was rewritten without use of fines. 
• Even without the authority to assess fines and other remedies, the associations could still issue findings of violations and warnings to correct. 
• Right #1 makes the U.S. and state constitutions and state and federal laws applicable to POAs.  Inherent in both is the separation of powers:  legislative, executive (includes police), and judicial. 
• Several courts have ruled that the power of an association to impose fines is unconstitutional on the basis that the association would have legislative, police and judicial powers in violation of the separation of powers defined in the federal and state constitutions.  These cases hold that only government has the power to impose fines.  See:
  • Foley v. Osborne Court Condominium, 1999 R.I.Super. LEXIS 50, available at Foley [URL is <http://www.ccfj.net/courtdecfinRI.htm>.].  The summary conclusion of the court states, "the Court finds that the 1982 Act represents an unconstitutional delegation of judicial or police power to the condominium association, a private entity."  Other statements include:
    • "It is interesting to note that the inherent power of the Court to impose fines for civil contempt does not permit the court to compel the contemnor to forfeit his or her property.  “In any case, the contempt power does not comprehend the power to deprive one of his property and convey it to another.”  Britt v. Britt, 119 R.I. 791, 383 A.2d 592 (1978)."
    • "The association is authorized to hear disputes concerning allegations that unit owners have violated the declaration, bylaws, or rules and regulations of the condominium.  The 1982 Act permits the association to determine those controversies and to issue orders directing violators to pay fines.  Finally, the act empowers the association with the ability to enforce its orders by depriving a violator of his property by foreclosure.  In this capacity, the association acts as a tribunal exercising judicial power."
  • Unit Owners Ass'n of Build America-1 v. Gillman, 223 Va. 752,  292 S.E.2d 378 (1982) available at Gilman [URL is <http://www.ccfj.net/courtdecfines.htm>.]   The court stated, "The mischief that could be wrought if it were constitutionally permissible for a condominium association to levy fines on and exact penalties of unit owners is dramatically illustrated by this case."  The court also stated, "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."
    
• (Added 2009 Jan 16)>>> A NJ Appeals Court "noted that neither state law nor the governing documents of the association gave the association the power to impose a fine. It could therefore only sue for damages or injunctive relief."  Walker v. Briarwood Condominium Assn., 274 N.J. Super. 422, 428  (App. Div. 1994) — See YOUR HOME; Fining The Rule Breakers  {URL is <http://query.nytimes.com/gst/fullpage.html?res=9B00E5DD1E38F932A2575AC0A962958260>.].  Two years later, legislation was approved establishing the authority of the association to levy fines. However, the constitutional question has not bee tested.  <<<
• (Added 2009 Jan 16)>>> The above illustrates that statutory definition is needed to provide certainty for POA members.<<<   Perhaps the language can be made more general with the omitted details organized in the subordinate provisions of the law. 
• The above right ensures that all rules will be subordinate to the restrictions in the CC&Rs.  Without this provision, rules might have the same rank as restrictions in the CC&Rs even though the requirements for approval of new or revised rules/restrictions might be much less stringent. 
• If fines are premitted, the requirement for a validated violation before assessment of a fine is the usual practice for violation of municipal ordinances.  The owner has the right to a hearing by an independent and impartial body not selected by the Board of Stewards at which the violation must be proved before a fine or other remedy can be assessed.  These detail requirements should be in the subordinate provisions of the law.  See Rights #23 and #24. 
  
• If fines are not permitted by the Association, then the relief must be granted by a court as injunctive relief , or some other relief, as in any other contract dispute.  An alternative for violations of restrictive covenants is to authorize such violations to be classified as civil misdemeanors or civil infractions, and treat them in municipal court the same way violations of land use and zoning ordinances are handled.  This approach was taken in Madison, Mississippi, but will the infraction treated as a felony which introduced an unnecessary violation of rights.  The approach as a civil misdemeanor should satisfy the enforcement and separation of powers requirements without the abuse that sometimes occurs with Association fines.  
• Issues concerning governance should be referred to circuit courts as contract disputes since CC&Rs, bylaws and other governing documents are treated as contracts under the law. 
• Michigan Nonprofit Corporation Act (MNCA) [URL is <http://www.legislature.mi.gov/(S(mjvenkud01pjiaawjh2a4k55))/documents/mcl/pdf/mcl-Act-162-of-1982.pdf>.] contains no provisions for dispute resolution for a membership (mutual-benefit) nonprofit corporation, but it contains numerous references to and uses of the circuit court.  Specifically, MNCA defines conditions for a members' action against the corporation in §450.2491 Action by shareholder or member in right of corporation to procure judgment; allegations. [URL is <http://legislature.mi.gov/doc.aspx?mcl-450-2491>.].  In a separate chapter on cooperatives, a dispute resolution body is defined in §450.3147 Dispute resolution body. [URL is <http://legislature.mi.gov/doc.aspx?mcl-450-3147>.].  This section requires a neutral body to hear the dispute and prohibits board members and officers from serving on the neutral body.  Therefore a separate dispute resolution body within a POA organized under MNCA as a membership corporation, but not as a cooperative, may be inconsistent with MNCA.  This doesn't bring in the constitutional arguments at all.  However, the disputes might involve violation of the CC&Rs (property law) which may be beyond the scope of a mutual-benefit corporation. 
• Not permitting Associations to levy fines eliminates a major contention in Associations.  Regardless of constitutionality, it is good policy for all remedies to reside with the court of jurisdiction. 
• Some of the concepts in Rights #8 and #9 are expressed in the California Homeowners Bill of Rights as "Homeowner citizens shall have the absolute right to vote on any changes to the terms of the original contract, i.e. changes in rules and amendments to governing documents or fines they are expected to pay.  No fine shall exceed the true costs of the remedy." 

 
11.  Right to Assemble.  Owners/members shall have the right to assemble including the use of the Association's facilities and the Association's communication tools for giving notice and provided related information to other owners/members.

• Perhaps the term "proper purpose" could be a requirement.  However, its use would beg the question as to who determines the proper purpose.  "Proper purpose" is used in law which may provide the necessary standard.  Since, the right to assemble under the constitution contains no such limitation, no such limitation is included in the right as written.
• Members have a right to assemble under the state and federal constitutions.  This right is only an extension to use of the Association's facilities and resources.  Since there typically is no independent press that provides coverage of the CID/POA operations, the POA shall provide those communication tools. 
  
• Virginia POA Act provides for members to communicate with all members at Association expense.  See Virginia POA Act §55-510.2. Distribution of information by members [URL is <http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+55-510.2>.].

 
12.  Right to Vote and to Fair Elections.  Each owner/member shall have the right to self-nominate or nominate another owner/member to serve on the association's governing bodies and to vote by secret ballot in elections with fair voting procedures neither controlled nor administered by the Board of Stewards.

• The is really broader than just election of stewards and should include votes on resolutions, amendments to governing documents, etc.  However, a separate right concerning voting and fair procedures for these other votes also allows definition of matters for which the members reserve the right to approve.  See added item below.
• A secret ballot requires directed proxies, or something equivalent to an absentee ballot. 
• This also includes the right to full and accurate information as described in Right #15. 

 
13.  Right to Vote on Other Matters at Members' Meetings.  Owners/members shall have the right to vote with fair voting procedures neither controlled nor administered by the Board of Stewards at members' meetings on all matters that materially affect their rights, benefits, current and future obligations, loans, bonds and _________ before voting receive information from the Association that is full, accurate, timely and unbiased and also includes the members' dialogue at a deliberative members' meeting. 

• What other matters should be included?  changes in annual assessment?  special assessments?  In towns and villages, citizens vote on millages, other tax assessments and bond issues.  There are pros and cons on giving members control of the "taxes" they pay.
• The members' meeting is intended to be a deliberative meeting for the debate and shaping of issues to be voted on.  It is not to be a "rubber stamp" for what may be proposed by the board. 
• The provisions in the law may require an exception for the board to meet its fiduciary duties to protect the assets in the event that members refuse to approve the necessary funding.  The Virginia POA Act §55-514.1. Reserves for capital components. [URL is <http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+55-514.1>.] provides a similar requirement concerning reserves. 
• The Virginia POA Act §55-514. Authority to levy special assessments. [URL is <http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+55-514>.] gives the board the authority to levy special assessments, but defers to the CC&Rs regarding the authority for annual assessments.  It also relieves the board of its fiduciary duty in the event that members' do not approve sufficient funding.
• Florida Chapter 720 {URL is <http://www.flsenate.gov/statutes/index.cfm?App_mode=Display_Statute&URL=Ch0720/ch0720.htm>.] (search on "assessment") gives the board the authority to levy assessments, but includes a number of other requirements including advance notice to all members concerning the proposed assessment and reasons prior to the board meeting at which the assessment will be considered. 
• The board has a duty to facilitate, not control, a members' meeting and and related administration in a neutral and even-handed manner.  In a town or village, the notice of any meeting (such as a New England style town meeting) and voting are handled by the clerk, who is independent from the town or village council. 
• Other provisions in the law would have to consider the implementation which must address the absentee or proxy issues.  As stated, a deliberative meeting would be required with the members' dialogue provided to all members before voting.  This requires a second notice for a second meeting limited to voting in person or by directed proxy. 
• Abuses of proxies occur with general proxies, which should be prohibited.  Voting by directed proxy is a more general form of voting by absentee ballot, and allows members to provide a directed proxy to be read at the deliberative meeting.  See Meetings, Information, Proxies and Voting  [URL is <http://swagman.typepad.com/poa_governance/2007/01/meetings_inform.html>.]. 
  
• See right to full, accurate, timely and unbiased communication for further discussion in Right #15.  Specifically, the lack of independent press requires the Association to provide the communication.

 
14.  Right to Approve Operating Plans and Budget.  (Edited 2009 Jan 15) >>> Owners/members shall have the right annually to consider, amend and approve the long-range plans including financial implications, annual operating plan, annual budget, and annual assessment.  The Association shall provide the opportunity for owners/members to participate in their development.  <<<

• This could have been included in the above "right to vote on major matters", but a separate item gives emphasis to the plans and budget  The issue is larger than just the budget, and includes long-range planning, annual assessment, and the budget.  For smaller POAs, approval of the operating plan and budget including annual assessment are in the spirit of democratic governance.  They all go together.  In larger organizations, participation by members may be more difficult and may have to be done by valid surveys and/or by petitioning the board.  Perhaps language can be crafted for the Right and the subordinate provisions that would include both if the above is not clear. 
• Indirectly, this Right requires the Association to provide annual long-range plans, annual operating plans and annual budgets. 
• Owners/members' approval of a special assessments and bond obligations are covered in the above.
• Other subordinate provisions should be in the other parts of the law.

 
15.  Right to be Informed and to Communicate with Other Owners/Members.  Owners/members shall have the right to receive full, accurate, timely and unbiased communications and notices from the Association, and the right to communicate with all members in the Association's publications and communication tools at no cost.

• This is an area in which POAs are different from towns and villages because POAs don't have an independent press.  Various notices must be published by towns and villages.  They are restricted from publishing explanations because such can easily become an advocacy for the political party in power.  Citizens donate money and campaign for their issues.  There is no practical way to duplicate this in associations, particularly for those with seasonal or vacation occupancy.  Any publication by the board can easily become an advocacy by the board unless there is a requirement for full and accurate information. 
  
• (Added 2009 Jan 15) >>>  Consequently, the Board of Stewards has the obligation to provide full and accurate information [URL is <http://swagman.typepad.com/poa_governance/2007/02/definition_of_f.html>.] to members on all matters affecting their rights, obligations and actions requiring a vote of the owners/members.  <<<
• The importance of members being able to communicate to other members is recognized in the Virginia POA Act, §55-510.2. Distribution of information by members. [URL is <http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+55-510.2>.].   

 
16.  Right to Open Meetings.  Owners/members shall have the same right to open meetings that citizens have to governmental meetings under the the Open Meetings Act. 

• This establishes a clear standard based on well-established good public policy.
• The Open Meetings Act includes the standards for a closed session including a 2/3 vote (in Michigan). 
• The Open Meetings Act covers notice, special meetings, emergency meetings, action without a meeting, etc. 
• The rights to address the board or committee before a vote is taken and the requirements concerning content of minutes are in a separate right on Board Meetings of the Association.

 
17.  Right of Access to the Board of Stewards and its Proceedings.  Each owner/member shall have the right to a timely response from a petition to the board on any subject, and to speak at a board meeting on any subject under consideration before a vote is taken. The Board of Stewards shall provide a full, accurate, timely and unbiased accounting in writing of all Association actions. 

• Generally, fiduciary duty in a nonprofit organization includes the duties of care, loyalty and obedience.  Since these concepts are not well established in common law for POAs, the specific duties should be defined in the law governing the POAs.
• The right to speak at a board meeting is included in Florida Chapter 720 {URL is <http://www.flsenate.gov/statutes/index.cfm?App_mode=Display_Statute&URL=Ch0720/ch0720.htm>.].  Search the Chapter with "speak" it identify the many applicable sections.  The Virginia POA Act § 55-510.1. Meetings of the board of directors. [URL is <http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+55-510.1>.] requires that the board's briefing packet be available to members at the same time it is sent to the board members. 
• The accounting in writing includes the minutes of the board meetings.  Minutes shall be timely available and shall record the major factors in all decisions and shall document how the fiduciary duty of each board member was  exercised.  Such requirements can be included in the subordinate provisions in the law.  See Fiduciary Responsibility of Association Directors: Practical Application of Legal Theory [URL is <http://www.hoa-law.com/publications/fiduciary-responsibility-of-association-directors.shtml>.].  
• This concept is expressed in the California Homeowner Bill of Rights [URL is <http://swagman.typepad.com/poa_governance/2005/09/homeowners_bill.html#LinkDLCalBofR>.] as "Boards give a full, true and accurate accounting in writing of all association actions."  This broad language includes minutes, reports, analyses, legal opinions, accountant opinions, briefing materials and other advice from experts.
• Many subordinate provisions are required as illustrated in the Florida and Virginia statutes. 
• The documentation not only protects the board members from personal liability, but also protects the members since the members end up paying for the mistakes of the board. 
• The right of access to the books and records is covered under right of access to books and records in Right 19.

 
18.  Right of Annual Members' Meetings.  Owners/Members shall have a right to an annual meeting of the members (1) to elect directors, (2) to be presented a full, accurate, timely and unbiased report by the board of its stewardship, and (3) for the consideration of and voting on other duly-noticed matters.  A written annual report shall be included in the notice of the annual meeting. 

• Taken from corporation law and adapted to POAs, the annual meeting is in the spirit of the New England Town Meeting.
• The annual members' meeting is intended to be a deliberative meeting for the debate and shaping of issues to be voted on.  It is not to be a "rubber stamp" for what may be proposed or reported by the board. 
• The important aspect of this right is the reporting of stewardship by the board, which must be full and accurate as described in Right #15.  This provision should help create the obligation to serve the owners/members.  Too often the annual meeting is just advocacy by the board. 
• Should a written annual report be required as stated above?  If so, this would become part of the disclosure package to prospective buyers in Right #26.
• My view is that the annual report should be required and should be included in the notice of the annual meeting.  The meeting then provides the opportunity for members to consider the report in advance of the meeting and to amend it before approving the filing of the report.  Members may also wish to consider motions to provide further direction to the board. 
  
• The opposing argument will be that it places a burden on a volunteer board, and/or increases the costs that must be paid to the management company. 
• The details of the content for the "stewardship report" should be in the subordinate provisions of the CID/POA law.

 
19.  Right of Special Members' Meetings.  Property owners shall have the right to petition for a special members' meeting to (1) recall a director or dismiss an officer appointed by the directors, (2) propose a resolution that would require the association to implement a specific course of action, or (3) propose a veto or rescission referendum to prevent a measure enacted by the board of stewards from going into effect.

• The above is equivalent to the rights citizens have in towns and villages, except that the voting on referendums occurs without a meeting. 
• The implementation provisions concerning content of the petition, notice, etc. should be in the subordinate provisions of the law. 
• Note that there is no limitation on what resolutions can be proposed and considered at a duly-called Special Members' Meeting. 

 
20.  Right of Access to Association's Books and Records.  Each owner/member shall have the right to inspect and copy all books and records of the Association, with cost not to exceed the cost of copying, except:  (1) records that must be kept confidential by law; and (2) records on matters in progress for which the release can be delayed until completion but only if immediate release would cause material harm to the Association.  The provisions in the Freedom of Information Act shall apply where not inconsistent with the stated Right. 

• As for Open Meetings, this language establishes a clear standard based on well-established public policy. 
  
• The subordinate provisions concerning delaying release should require a 2/3 vote of the board to delay release. 
• Note that this does not recognize any privilege for attorney and accountant communications.  Any such communications can directly affect the rights and benefits of owners/members, and therefore shall be available to them. 
• Any opinion from a professional that affects one owner/member fundamentally affects all members. 
• Good references are the Virginia POA Act §55-510. Access to association records; meetings of the Board of Stewards. [URL is <http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+55-510>.], and Florida Chapter 720 §720.303(5) Inspection and Copying of Records. [URL is <http://www.flsenate.gov/statutes/index.cfm?App_mode=Display_Statute&URL=Ch0720/ch0720.htm>.]. 

 
21.  Right to Certified Financial Reports.pan>  The Board of Stewards of the Association shall certify to the owners/members that the books, records and financial reports are kept and published according to Generally Accepted Accounting Principles (GAAP) certified by a credentialed independent public accountant.

• The 2004 Law in Florida (Chapter 720) defines audit requirements by size.  See Florida Statute §720.303(7)(a) [URL is <http://www.flsenate.gov/statutes/index.cfm?App_mode=Display_Statute&URL=Ch0720/ch0720.htm>.], and search on "accounting principles".
• The annual certification to the owners/members is much more meaningful than just a requirement concerning financial reports because it requires the Board of Stewards to understand the reports. 
• The details, specifically those concerning audits, reviews and compilations, can be included in the subordinate parts of the law as in Florida's statute.

 
22.  Right to Ratify Transfers of Common Property.  Owners/members have the right to consider, amend and approve any proposed sales, leases, donations, easements, rights-of-way, and licenses of association-owned real property.  The Association shall annually certify to the owners/members that all assets are owned by the Association. 

• Typically, owners/members have an undivided interest in the assets and equity in the Association.
• The annual certification to the owners/members requires the board to make the determination as to whether or not all assets are owned by the Association. 

 
23.  Right to Fair Collection Methods and Takings.  No owner/member shall be subject to foreclosure by an Association unless unpaid assessments are two years in arrears, a reasonable payment plan has been offered, and effective notice of pending foreclosure has been provided.  Any foreclosure shall require judicial review.  The Association may not assess attorney fees unless approved by the court.  No private property may be taken without due process and just compensation. 

• Owners have an obligation to pay the assessments.  Penalties are required since some will not pay without them. 
• An appropriate standard is that owners should be afforded the same degree of due process for non-payment of assessments as they have for non-payment of property taxes.  The subordinate provisions can so provide. 
  
• Maybe the protections in the law concerning foreclosure with judicial review provide the necessary due process for owners including a right of redemption.  If not, subordinate provisions should be included in the CID/POA law. 
• Subordinate provisions in the law should further define the requirements for a reasonable payment plan and effective notice of pending foreclosure.
• Above language is intended to exclude unpaid fines, if constitutional and permitted by law, being used as a basis for a foreclosure proceeding.  Fines are excluded in Right #10. 
  
• The subordinate provisions of the law should provide the association with a reasonable and low-cost process for collecting delinquent dues and assessments, and other charges, such as authority to use a small claims court without attorney representation.  (Added 2009 Jan 16) >>> However, this may not be feasible since dues and assessments are on the property unit and run with the land, and therefore are not personal.  <<<
  
• Allowance of attorney fees for collection should use the American standard.  Any requirement for losing party to be assigned attorney fees in collections can easily be abused.  (Added 2009 Jan 16) >>> The other side to the issue is those owners who pay on time end up paying the collection costs.  Maybe language can be crafted that assigns  the collection costs without opening the door to abuse.  <<<

 
24.  Right to Resolve Disputes Without Litigation.  Each owner/member shall have the right to a public dispute resolution process without litigation paid by the Association that provides due process, and is effective and timely.  Such process shall be before an impartial body not selected by the Board of Stewards.  Use of any alternative dispute resolution does not cancel the rights of appeal by the owner/member in the courts. 

• The precedent for "paid by the association" is that the costs for courts are paid by government. 
• The requirements for due process include democratic principles, specifically a clear statement of violation, separation of powers, independent body, access to witnesses and records, etc.  These aspects of due process should be included in the subordinate law as "including but not limited to". 
• The dispute resolution process should also be available to resolve disputes alleging that the board is not adhering to the governing documents or in general not properly exercising its fiduciary duties.  Subordinate provisions should assign the burden of proof of adherence to the governing documents and proper exercise of fiduciary duty to the board. 
• A clear standard for legal opinions is required, which is what a court of appeals would likely affirm.  This is the standard that should be used in any ADR.  Further, this standard should be part of the fiduciary duty of each board member and not to proceed if there is doubt that a court of appeals would affirm.  This is also the standard that would be (should be) used by the attorney general in oversight of CIDs/POAs.  See Right#26 concerning oversight by the AG. 
• This would also provide the standard for legal opinions from the attorneys for POAs.  Since legal opinions on any subject are not unique and typically reflect the interests of the agents (advocate is what attorneys do; they are not champions of fairness and justice), the standard combined with oversight by the AG would quickly bring the necessary discipline to only provide legal opinions that meet the standard which would serve the interests of the owners/members in better self-regulation of the POAs. 
• The consequences of "paid by the association" will be a strong incentive for boards to seek amicable resolutions to avoid the costs, and for the board to adhere to the law and governing documents.   This will help make the Association a self-regulating organization. 
• Concerns that owners/members will abuse such processes are without foundation.  Each owner/member should be required to assemble the facts and arguments for his/her case. 
• For more explanation, see Outline of Dispute Resolution Recommendations [URL is <http://swagman.typepad.com/poa_governance/2006/08/outline_of_disp.html>], which is work in progress. 

 
25.  Right to State Oversight and Fairness in Litigation.  Each owner/member shall have a right to oversight by the state similar to the oversight over towns and villages.  The oversight shall include an Office of Ombudsman which shall be a champion for the rights of owners/members.  There shall be fundamental fairness in funding of litigation between the Association and an individual owner/member.  If the owner/member prevails, the Association shall pay reasonable attorney fees. 

• The language should be adapted to the type of oversight provided such as ombudsman, administrative law judge, etc.  Such requirements can be included in the subordinate provisions.
• The word "champion" is carefully chosen.  The word "advocate" is not the correct meaning.  The definition of "ombudsman" [URL is <http://www.merriam-webster.com/dictionary/ombudsman>.] is the meaning intended. 
• Since the state directly or indirectly authorizes CIDs and POAs, the state has the obligation to provide the necessary oversight.
• (Added 2009 Jan 17) >>>  The neutral governmental body for the Office of Ombudsman is the Office of Attorney General.  The AG has the oversight responsibility for public-benefit nonprofit corporations.  This is a natural extension.  Moreover, the Office of AG has the authority to issue opinions so that what is learned on one case can apply to others.  Nevada established an office of ombudsman in the real estate division.  However, "The ombudsman's office has been told by the attorney general's office that it has no power to intervene in disputes between homeowners and their association boards concerning governing document disputes." See newspaper column "NEVADA VIEWS:  Seeking to protect homeowners"[URL is <http://www.lvrj.com/opinion/35276734.html>.].  
• Maryland qpproved legislation in 2007 extending the authority of the Attorney General to POAs [URL is <http://mlis.state.md.us/2007rs/billfile/HB0183.htm>.].  Click on CHAPTER NUMBER: 593 to read the approved legislation. 
• Arizona has created an administrative law judge to provide the mechanism for the owner/member to address an issue with the association at reduced cost.  However, one court has ruled the ALJ to be unconstitutional under the Arizona because the ALJ is in the executive branch without significant regulatory function and therefore a violation of separation of powers. 
  
• The above three bullets are consistent with governmental separation of powers with the AG authorized to issue opinions and an Administrative Law Judge in the judicial branch authorized to issue opinions and orders.   <<<
• Subordinate provisions should include the information to be collected by the state and reported annually to the legislature and all concerned. 
• The high cost of litigation effectively eliminates the use of circuit court for most owners/members.  The result is acquiescence to abusive actions by a board.  The litigation costs for the Association are paid by all owners/members. The high costs of litigation paid by the individual owner/member effectively denies the court system to the individual owner/member. 
  
• The high cost of litigation to the individual owner/member is a direct result of the law (such as the nonprofit corporation act) designating the circuit court as the process for dispute resolution.
• (Added 2009 Jan 17)>>>  Allegations of violations by an individual owner/member could be handled in municipal court in which an owner/member may be able to represent him/herself. 
• Fairness can be created by assessing the cost of litigation in proportion to the number of property units represented for all appeals from lower courts to circuit courts and governance issues filed in circuit court.  This in effect would assign almost all costs to the association, which is fair since governance issues and rulings on individual violations by the circuit court may affect all owners/members alike.  <<<
• The disparity in the economics of litigation exists to a lesser extent in municipalities because many disputes between a resident and a municipality are resolved in municipal court without attorneys. 
• The overall effect of the oversight should be to make the POAs as self regulating as possible.  Leveling the economics of litigation is a major element.

 
26.  Right of Disclosure Prior to Purchase.  Prospective buyers have the right to a disclosure package that defines owners'/members' rights and obligations, governance of the association, financial condition, and current operating plan and budget.  Buyers shall designate in writing that the governing documents comprise a contract between the Association and the owner/member and among owners/members. 

• Care must be taken in defining the content to ensure that a liability trap is not created for the Association.
• The specific content in the disclosure package would be defined in subordinate provisions with the overall disclosure requirement defined in Right #26 above. 
• (Added 1009 Jan 15) >>> Since constructive notice does not work (See Right #3.), the deed or other recorded document signed by the buyer certifying that the buyer accepts the recorded documents that runs with the property unit being purchased.  <<<
• Disclosure requirements should be confined to "organizational" documents available to the members:  all governing documents, financial reports certified by CPA, long-range operating plan including financial implications, current year operating plan and budget, and the annual report. 
• It should the buyer's responsibility to draw whatever conclusions the buyer considers to be in his/her interests.  Buyer beware, but buyer is given the information to be informed. 
• The Virginia POA Act ¶55-512. Contents of association disclosure packet; other requirements. [URL is <http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+55-512>>.] has an extensive list of documents for the disclosure packet.  Some of the information appears to be a burden on the association without providing useful information to prospective buyers. 
• Florida Chapter 720 [URL is <http://www.flsenate.gov/statutes/index.cfm?App_mode=Display_Statute&URL=Ch0720/ch0720.htm>.] provides extensive disclosure requirements in another format.  Separately search for "disclose" aand "disclosure".  Florida uses a certification format, which might create an unreasonable risk for the POA.
• The Virginia and Florida statutes provide ideas to generalize into a right, and the details in subordinate provisions. 
• Financial statements prepared according to GAAP, which includes the AICPA Audit and Accounting Guide for Common Interest Realty Associations [URL is <http://swagman.typepad.com/poa_governance/2005/08/aicpa_audit_and.html>.] should provide the important financial information regarding standard financial statements, fund balances for restricted funds, extensive disclosure regarding reserves, etc.  The CPA can only disclose inadequacies in the reserve studies and amounts set aside in restricted funds.  The CPA cannot provide missing or correct poorly supported numbers, which may be unfunded liabilities, because other expertise is required.  My recollection is that the CPA is required to include litigation in audits and reviews, but not in compilations.  This should be checked with a CPA. 
• Aspects that are pending or are considered key may or may not occur, and could create an unreasonable risk for the association. 
• The specific items in the disclosure package should be in subordinate provisions in the law, as in the Virginia and Florida laws.

 

Notes on Issues not Reflected in the Rights above

• No double taxation — Local governments sometimes require CIDs with POAs and further require that the POAs provide specified services which then relieves the duty of the local government to provide those services which they provide to other residents in the jurisdiction.  Such can certainly be specified and required by local government but the local government should issue a rebate to each resident in the CID for government services not provided. 

• Public Policy — Provisions in the governing documents and actions should be consistent with public policy which is defined in case law. 

<Return to Table of Contents>

References Used

    This recommended Statement of Rights has been developed based on number of similar statements and papers on the subject.  Principal among the documents considered are the following:

• California Homeowner Bill of Rights — This document includes ten rights written in general language and dealing with well-defined issues concerning the rights of owners in common interest developments and members of property owners associations. The introduction to the document states:

  "On September 25th we will celebrate the 210th anniversary of the ratification of the federal Bill of Rights.  To honor this occasion, we the undersigned have ratified ten resolutions comprising a Common Interest Development Homeowner Bill of Rights.  Modeled on the Preamble and the Amendments to the U.S. Constitution, this document is meant to inspire public confidence in the concept of the CID, to ensure that this local government institution pursues benevolent goals, and to prevent abuses of power.  Any changes to California law governing CIDs must conform to these inviolable principles."

More on Cal Bill of Rights.  Click your browser's back button/arrow to return to this post.

   

• AARP Homeowners Bill of Rights — See David A. Kahne, Basic Principles of Consumer Protection and Sample Model Statute, AARP Public Policy Institute, Washington, DC, July 2006, p 11-12 [URL is <http://assets.aarp.org/rgcenter/consume/2006_15_homeowner.pdf>.].  The introduction to the "bill of rights" states:

  "To ensure amicable and equitable relations between homeowners and their associations, this bill of rights seeks fair resolution of disputes, specifies rights regarding rules and charges, ensures individual autonomy, and promotes oversight and voting. The bill of rights uses reasonability as the touchstone for all actions, and includes a state Office of Ombudsperson for Homeowners to facilitate resolution of disputes in a manner that strengthens communities."

More on AARP Bill of Rights.   Click your browser's back button/arrow to return to this post.

   

• Texas Uniform Planned Community Act — Click on "Bill Analysis", then go to Sub-chapter D "Protection of Owners", Sections 83.151 - 83.175.  This bill analysis was used for the subject areas in the 25 sections, not for the content.  More than half of the content is concerned with exceptions which, in effect, grants rights to others described in the exceptions.  The rights of owners/members are not directly stated.  Consequently, it is difficult to define a clear statement of rights from the proposed legislation. Nonetheless, the recognition of the subject areas by the real estate attorneys is a major step toward definition of the rights of owners/members.  

  (Added 2008 Sep 24)   This proposed act was apparently considered by the Texas legislature and rejected.  The TUPCA website is no longer available.

More on TUPCA.  Click your browser's back button/arrow to return to this post.

   

Other papers were also used as references in drafting the Statement of Rights.

• The paper by Lois and Samuel Pratt, A Bill of rights for Homeowners in Residential Community Associations [URL is <http://members.cox.net/concernedhomeowners/PrattBoR.htm>.] is an excellent resource for understanding the rights of owners/members and the balance that must be struck between individual rights and common interest.  They stress that fundamental rights are not compromised in the "balance" — only that agreements on certain restrictions benefits all which they identify as the common interest. The balance is between individual rights and common interest, not between individual rights and organizational authority, which is a very different and problematic concept.
  • More on this paper.  Click your browser's back button/arrow to return to this post.
• Papers listed in the post, Homeowners Bill of Rights [URL is <http://swagman.typepad.com/poa_governance/2005/09/homeowners_bill.html>.], will be re-read for further editing of the Proposed Statement of Rights.
  • More on these papers.  Click your browser's back button/arrow to return to this post.

<Return to Table of Contents>

____________________________________________________________________________
Copyright 2006 © Donald L. Nordeen.  All Rights Reserved.  See Copying Posts on This Weblog.
••• End of Post •••

Comments

[stuart]

2006 Nov 17

Re: Board's Responsibility for Maintenance

When you belong to a property owners association and the director of the board only takes care of the property up to the end of his property line but the whole associations pays for this like for example landscaping what recourse does the other members have?

=====Reply=====
2006 Nov 22

After checking the governing documents for your association to understand what is and is not supposed to be done, write a letter to the board requesting the action consistent with the governing documents. Check my post,
Thoughts on Problem Solving for CIDs/POAs, for additional ideas to address the problem.

Don Nordeen

[Diana Sewell]

2007 Apr 03

Re: Mis-Use of this Statement of Rights

We have a couple in our Condo. that is using this Bill Of rights to dissolve our Rules and Regulation and to try and revamp our elected board of Nine people from our community, Am I missing something here is this what you are advocating? we have a meeting Sat. to vote on this. Please reply they are using your article as their guide.

Diana

=====Reply=====

2007 Apr 03

Ms. Sewell:

What you describe appears to be an improper use of my post, Statement of Rights. Please read the Welcome and Home page which describes the purpose of the weblog.

The Statement of Rights does include a number of references including court opinions that may or may not be applicable to your situation.

Don Nordeen

[Rita Hellmann]

2008 June 30

Re: Board Withholding Information

How do I find out why a board of directors would withhold information about the annual statement from an owner?? Also why the same directors would not send the annual statement and date of meeting letter to the owner when they sent the directors a letter of same with a self addressed stamped envelope enclosed.
This is rather odd don't you agree?

Thanks,
Rita Hellmann

====Reply====
2008 Jul 07

Dear Ms. Hellmann,

Don't be surprised at such behavior. Information is power, so it is hoarded by people who view the information as threatening and embarrassing. The short answer is they cover it up.

The expert on this behavior is Chris Argyris, a retired Harvard professor who has researched and written extensively on the subject. Do an internet search with the terms in [ ] including the quotation marks: ["chris argyris" "cover up"]. Or access the paper "Organizational Development / Action Science / Chris Argyris"
at < www.actionscience.com/actinq.htm > which provides a good summary. Scroll down to the The Basic Defensive Reasoning Pattern.

The withholding of information is a strong indication of more fundamental problems. The withholding is likely part of a cover up.

I have deleted your phone number to prevent its misuse. My policy is to protect "personally identifiable information".

Don Nordeen

[Gary Ross]

2008 Jul 29

Re: Mandatory Charge from Association for Cable TV

I live in a single family community with 300 homes in Florida. Until April1, 2008, we (the poa) had a cable contract with Adelphia. In October of 2007, a representative from Comcast came to a poa meeting offering a set price if most (about 80%) of the residents were to sign up. This Comcast representative insisted the only deal Comcast offered to poas' was for 5 years.

The residents had the option of opting out if we weren't interested (but at a later date we would not be offered the same deal the other residents were offered) and could arrange for our own cable or satellite service.
The following day I phoned Comcast and was assured they do not insist on 5 year contracts and would accommodate a poa based upon our specific needs for virtually any time frame.

Approximately 20 residents opted out and arranged for our own cable service.

Last week I received a letter from the property management company that although I opted out of the poa deal with Comcast, I was still obligated to pay for the service beginning April 2009.

Since we opted out of a deal we were not in favor of and the arrangement was established by the poa board and the property management company, are we obligated to subscribe to the same service?

Gary Ross

====Reply====
2008 August 09

Dear Mr. Ross,

Obligations for payments are probably in the restrictive covenants for your Common Interest Development. If payment for cable services or other fees not related to the CID is not authorized in the restrictive covenants, then the association likely does not have the authority to collect a fee without agreement from the owner/member.

You should also check the bylaws which may also contain authorizations for fees. Is approval of members required?

At this point a course of action would be to write a letter to the board requesting the authority of the association to collect fees for cable service.

Don Nordeen

====Further Reply====
2008 Aug 20

A newspaper article provides further information, "Homeowners who are forced into cable TV-Internet deals aren't happy", at
http://www.tampabay.com/news/business/realestate/article773732.ece

I am puzzled as to how the Owners Association can obligate the Owners unless the authority is in the CC&Rs.

Don Nordeen

[Rita Hellmann]

2009 Jan 28

Re: Mailing of Information from POA to all Owners/Members

2008.06.30 at 01:50 my last post.

The Board of Directors refrains from mailing my copy of Annual Statement and letter to attend the Annual Home Owners Meeting when I am an owner:

The same board of directors of the area I live here in Indianapolis still refrain from mailing my copy of the Annual Statement and my copy of the letter to attend Annual Home Owners meeting to date.

They say I am not an owner but my name and my mother's name are signed to the mortgage for my property. They need to mind their own business.

How do I get them to continue to send my copy of the Annual Statement that I need to see where MY MONEY is really going and the letter for the Annual Home Owners Meeting to me. I am on Social Security Disability and this is the reason they continue to discriminate me and not acknowledge I am an owner. They knew I was an owner when I moved here in 1990. I was not on Social Security Disability when I moved here as I had jobs up until the time my hips went bad and had to have total hip replacement surgery. Is this not discrimination?

Thank you for your help.

Rita Hellmann

[Jeri Ann Neu]

2009 Sep 24

Re: Reinstate POA

I am looking to get a petition started for a new poa. We are property owners of a small lake community in Ste Genevieve Mo...formerly known as Rocky Ridge Ranch. We lost our poa to the new owners of what is now called Grayhawk. We pay our assessments and find that not only have we lost many anemities but also don't seem to have any voting rights. How can we get back our POA? It seems that the new owners of our community have all the votes but do not pay on each lot separate that they hold.

Jeri Ann Neu

====Reply====
Dear Ms. Neu,

Re: Your Question re Reinstate POA posted on Governance of POA

I am not an attorney, so this is not legal advice. You have not provided enough information for an effective reply, but below are a few observations.

If the Rocky Ridge Ranch development includes recorded restrictive covenants, or CC&Rs, then those remain in force even with new development owners. You infer that any CC&Rs were rescinded by the new owners, which is probably not true. Rescinding the CC&Rs would likely require approval of all the owners of property units within Rocky Ridge Ranch. Further, the CC&Rs likely established the POA which should still be in force, but may require renewal as a nonprofit corporation if annual reports and fees were not filed with the state.

Collect all the governing documents and read them very carefully. You may need to consult with an attorney who may be able to deal effectively with the new owners. It sounds to me that the new owners are taking advantage of the owners of Rocky Ridge Ranch.

Don Nordeen