Chapter EightIIIChapter Ten

9. The Court System: Blind to Injustice

The moment that deed restrictions began to affect the rights of the individual homeowners in a community they were challenged in court forcing developers to use all means at their disposal to influence the courts to legally validate their development schemes.

how much to make it legal?
In order for developers to maintain control over a subdivision’s zoning, appearance, and day-to-day operation, the CC&Rs had to be enforceable in court. The covenant restrictions had to legally run with the land and the homeowners associations had to have some legal authority to enforce the CC&Rs.

This was thought to be the only way the developer could guarantee that the subdivision would be maintained as they dictated. The justification they presented to the public and to the courts was that deed restrictions enhanced property values.

Big business has always had a powerful influence on the legal system and the CID industry is no exception. Through the usual means of generous campaign contributions, courts rulings began to favor the developers. The justification given by the courts for their acceptance of these residential deed restrictions was simply that deed restrictions were responsible for the overall attractiveness of a community, and therefore, were good for all concerned. The courts refused to recognize the many ways in which deed restrictions could be abused.

seeing is believing - case closed!
Developers have also convinced courts that the uniform appearance of a neighborhood is enough to constitute legal notification of the existence of deed restrictions. Developers and homeowners associations are not legally obligated to make verbal or written disclosure of the existence of deed restrictions. It is up to the homebuyer to determine whether or not deed restrictions apply by the appearance of the development. This is another obvious example where the industry has decided they have nothing to gain by being honest and straightforward.

restrictions make things nice
This theme was carried out to a ridiculous extreme in my neighborhood when a board member suggested that any prospective homebuyer driving through our very un-uniform subdivision would automatically be put on notice that deed restrictions exist because the neighborhood “looked nice.”

a goose that walks, talks, and acts like a duck?
The biggest bang for the buck the industry lobbyists ever got out of the courts was the view that, although the HOA boards functioned like a municipal government, they would be seen by the courts as a private, corporate, business entity. This meant that HOA boards were not subject to the legal limitations and oversights the courts applied to municipal governments. That way, it's always open season on homeowners.

the benevolent litigant?
The court further strengthened the position of the developers and the CID industry by recognizing a corporation as an agent for the rights of the property owners (the fox will guard the henhouse). This recognition gave the corporation the right to sue those property owners. This ruling was called the Neponsit decision and it gave private corporate governments the authority to enforce the will of the developers forever.

who’ll buy my ruling?
Most of these court decisions took place prior to 1950. Since then, the plight of the homeowner has only worsened. Recent scandals involving lobbyists for special interest groups reveal how involved these lobbyists are in the creation of legislation favorable to their own interests, and the CAI, special interest group of property management companies and association lawyers, has been very successful in drafting legislation favorable to their membership.

Since 1992, when the CAI reorganized as a trade organization for the CID industry, they have organized opposition to every legislative recommendation that would have provided property owners in CIDs some protection from their predatory membership.

the winners just show up, but not empty handed
The reason CAI lobbyists are so successful is very simple; they attend every legislative session in the country where a bill comes up before a legislature that threatens their industry, and they come with their pockets full of cash. They are there, and you are not.

The homeowner has no representation; there are no lobbyists protecting the interests of the American homeowner. I know what you’re thinking. We do to have lobbyists; they’re called congressmen and senators. That’s true, but the CAI is contributing to the reelection campaigns your congressmen and senator’s as well as the judges and you are probably not. These campaign contributions have an amazingly positive effect on how laws are written and judges rule.

You get what you pay for.


Chapter EightIIIChapter Ten