A homeowners’ association (“HOA”) governs a growing number of suburban American communities. Oftentimes, the presence of an HOA as a mechanism of private government is beneficial to community members and is a main incentive for why homeowners choose what property to purchase. Because of their broad decision-making powers and judicial discretion, however, HOAs sometimes make controversial decisions by overreaching what one would define as the “normal” functions of HOAs. In several recent, controversial decisions in property planning, HOAs may have crossed into illegality by violating constitutional norms.
In Naples, Florida, Tom Monaghan, the founder of Domino’s Pizza and a devout Catholic, has attempted to use property planning and HOAs to form the town of Ave Maria, which is considered to be “America’s first gated Catholic community.” Monaghan, focusing on religious philanthropy, has spent millions of dollars in attempting to advance the moral teachings of the Catholic Church while combating the “morally corroded secularism of modern America.” His most recent project, Ave Maria, consists of a 5000-acre plot with plans for 11,000 homes, a commercial district controlled by Monaghan, and a Roman Catholic university. Although the homeowners in Ave Maria will own their property, Monaghan and the town developer, Barron Collier, will retain all control over the commercial property. In 2004, Monaghan announced that
you won’t be able to buy a Playboy or Hustler magazine in Ave Maria Town. We’re going to control the cable television that comes in the area. There is not going to be any pornographic television in Ave Maria Town. If you go to the drug store and you want to buy the pill or the condoms or contraception, you won’t be able to get that in Ave Maria Town.
Indeed, Monaghan has backed down somewhat from his 2004 claims. Nevertheless, the American Civil Liberties Union has threatened lawsuits and others question whether Ave Maria will violate the constitutional norms guaranteed by the First Amendment, including the right to free speech and exercise of religion.
In the same state, the town of Celebration is facing similar First Amendment concerns. Celebration, built by the Disney Corporation, aims to be a modern day “City on a Hill,” based on a foundation of “community” values enforced through the town’s HOA. Undeveloped real estate in Orlando, the desire for a safe and welcoming community, property values, and dissatisfaction with the Florida public school system led many homeowners to choose to move to Celebration. These benefits have come at a price for homeowners: they are subject to HOA rules and regulations. These rules call for the surrender of many rights that one would expect from a municipal government, including the HOA’s inability to “change any rule or restriction in Celebration ‘without prior notice to and the written approval of the Celebration Company.”’ The political minority in Celebration oftentimes finds itself to be “‘powerless against the association and the association . . . powerless against Disney.”’ Many consider Celebration disconcerting, manufactured, and undemocratic.
This Comment examines the development of common-interest communities (“CICs”) and HOAs in American culture, including their prevalence and expansion into American community planning. Part II.B discusses the U.S. Supreme Court decisions that address the state action doctrine as applied to private property owners in the context of how the right to exclude balances with other interests. Additionally, Part II.C addresses the business judgment rule, which is the standard applied by most jurisdictions in analyzing decisions of the HOA directors and officers. Furthermore, Part II.D analyzes federal statutes and their applicability to limiting the intrusion of constitutional norms by HOAs.
Part III of this Comment evaluates the existing law pertaining to HOAs and concludes that such law is inadequate to protect the fundamental rights of property owners from HOAs. More specifically, Part III.A argues that the inapplicability of the state action doctrine to HOAs necessitates a change in what constitutes state action. Next, Part III.B acknowledges that HOAs are not subject to state action analysis and concludes that the right to exclude goes too far in allowing HOAs to enforce discriminatory policies. Part III.C then argues that the business judgment rule is unable to protect homeowners from overreaching associations. Part III.D asserts that states should adopt a fundamental rights inquiry analysis to protect homeowners from overreaching HOAs. Such inquiry would consist of balancing fundamental rights afforded by state constitutions against the reasonableness of the HOA decisions. In conclusion, this Comment determines that the current law on HOAs is not able to protect homeowners’ fundamental rights.