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The Contractual Community

Why Community Associations Are Not “Governments”

By Tyler P. Berding, Esq.
Updated: May 2023

Articles and blogs that analyze and criticize community associations often discuss them as if they were just another local government subdivision. It is a common misconception because so much discussion about this unique housing type is devoted to governance issues. We have boards of directors, which are like city councils. Community managers carry out many of the same functions as city staff. The property has many physical features as a town or city—streets, utilities, parking, recreation facilities, etc.

Association governing documents could be analogous to municipal ordinances, restricting individual property rights to meet the city's or county's needs. But while these two regulatory systems appear similar, their respective legal bases are quite different. Understanding this difference may help to know why characterizing homeowner associations as "mini-governments" or "quasi-government entities" is inapt and can lead to false assumptions about them.

City and county governments are subject to limitations on their authority by various constitutional provisions, but their continued existence and sovereignty, short of war or violent revolution, is assured. On the other hand, a community association is not a sovereign entity. Its continued existence depends wholly upon the contract among the property owners--it has no assurance of perpetual life.

The authority of a community association is derived from covenants recorded against each owner's property. The California Supreme Court has routinely and recently characterized the relationship between a community and its owners as contractual.1 The CC&Rs and Bylaws represent the agreement of the owners and others who share an ownership interest, such as mortgage lenders, to keep the community in existence. At any time, those owners, by whatever voting percentage is required, could terminate the community association by amending the governing documents to eliminate it. Of course, the voting percentage may sometimes be as high as 100% of the owners. Still, at least in theory, it can be done.

The same is not true for cities and counties, which, as subdivisions of state government, derive their right to exist from the authority of the "sovereign" to use an old but still valid concept, limited only by rights granted to individuals by the Constitution of the United States and state constitutions. Even if 100% of the citizens of the United States voted to do it, they could not terminate this country's existence—only Congress, supported by a significant number of state legislatures, has the power to amend the Constitution. From this sovereign authority, the police power is derived with which all government entities enforce their mandate to govern.

There are no better examples than the right of the government to tax its citizens and the right of eminent domain. The government is superior to any citizen in its authority to tax individuals. Similarly, where the public's need for property exists, the government may acquire it (with adequate compensation to the owner) for such public benefits as rights of way or redevelopment. Now each government's power is limited by certain constitutional guarantees such as equal protection and due process, but when those requirements are satisfied, the government may act without further restraint. Regarding the government in this democracy, little doubt exists of the supremacy of the public interest.

We may think similar assumptions apply to the common interest in a community association, but clearly, they do not. The legal underpinning of a community association is a mere contract or covenant that depends upon the reciprocal obligations of the owners. For example, the power of an association to assess its members is not analogous to the power of the government to tax. The power to tax is limited only by the vote of the legislature or Congress, and except for a few constitutional limitations, there is virtually no limit on that power other than that imposed by politics. The contract and statutes limit the power of a community association to assess. That limitation cannot be set aside by the board of directors acting alone but must come from the approval of the individual owners, as the contract provides.

The right of individual property ownership is paramount to that of the community association. There is no mechanism, absent severe damage or destruction,2 whereby a community association could take possession of an individual's separate interest no matter how pressing the need unless it resulted from the foreclosure of a lien for non-payment of assessments—a remedy provided under the contract upon which the community is created and funded. Therefore, there is no community association power equivalent to eminent domain.

So, while we sometimes describe them as "mini-governments" or "quasi-governmental entities," community associations are anything but. They are business organizations. They have no power outside of that conferred upon them by the contract--the covenants recorded against the individual properties. They have no "sovereign" or “constitutional” right to exist independent of that contract and only until the parties agree to amend the covenants. Community associations are not "governments” but merely a management and organizational scheme imposed upon real property. They cannot print money. Their continuing existence relies upon the owners adhering to the contract and supplying the necessary operating capital. They can also become obsolete. When they do, there will be no constitutional precedent to save them; only the laws of economics will ultimately govern their fate.

  1. Pinnacle Museum Tower Association v. Pinnacle Market Development, LLC, 55 Cal.4th 223
  2. California Civil Code Section 4610 allows a majority of owners to cause the sale of the entire property (but not an individual separate interest) under certain prescribed conditions relating to obsolescence, damage, or destruction.
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