Are HOAs (home owner's associations) unlibertarian?
Consider:
* They are voluntary in the sense that you can choose to move away or not purchase the property in the first place, but a statist can make the exact same argument about taxes and governments in general.
* They have the power to foreclose on your home and give it to a board member for pennies on the dollar, over a small infraction or debt. This seems to be punishment vastly disproportionate to the damages, as per the NAP or as per anyone's idea of common sense.
What do you guys think? Anyone willing to shed more light on these two items?
Thanks!
They are not unlibertarian because they are completely voluntary. To be analagous to the State the HOA would have to annex your property, or have done so to some owner of the property in the past, and then forever lay claim to it even if they make no further agreements with future owners.
Your second point contains very good reasons why I wouldn't advise anyone to join an HOA with broad power over your property or with the ability to change the rules of the HOA without giving you the ability to quit the association. Being unadvisable and being unlibertarian are two entirely different things, however.
Merlin (emphasis added):2) condition after the sale: this is nonsensical. The moment I sign the contact the house is mine and no one can take it away anymore. It’s my property. Whatever conditions the HOA sought to impose cannot be enforced because property has now been transferred to me, and no conditions can apply to the usage of my property.
This (bolded statement) is tautologically true but does not entail that HOA-contracts are illegitimate. In order to get to this conclusion, you must also assume that property boundaries must be (metaphorically) smooth rather than jagged -- i.e., you must assume that certain rights, though logically disconnected, are not legally disconnectable.
For example, the right to eat an orange is logically dependent on the right to break its skin -- you cannot do the first without doing the second. Hence, possession of the first right must come with possession of the second.
On the other hand, the right to go fishing on a certain lake and the right to harvest ice from it are logically unconnected -- you can do one without doing the other, and vice-versa. There is therefore no basis to say that these rights cannot be held by two different people.
shazam:This seems to demonstrate that the HOA is essentially private socialism. While it would not violate the non-agression principle if entered into voluntarily, it is inherently economically inefficient.
Wouldn't this "private socialism critique" apply to every market entity comprised of more than one person, including a company with a single hot dog stand as its asset and ownership shared between three brothers?
Merlin:A single owner HOA, on the other hand (or a shares HOA, for that matter) has both the means to calculate how well its doing, and the incentive to act.
At least on my part, I'm talking about a shares-based HOA (a corporation, co-op, comprised of share ownership in the HOA accompanied with an exclusive property lease contract granted by the HOA to the shareholder). The value (desirability) of such shares on the open market would be directly affected by the quality of the management (bylaws, regulations, etc.) of the HOA. If the rules are bizarre, or over the top as judged by the market no one would want to partake in them, hence the value of the shares would go down as everyone tries to sell, with no buyers in sight.
The "mutual" case is somewhat of a strawman. Even the hot dog stand company has a clear share (equity) delineation among the three brothers.
Z.
There is something compelling about Merlin's argument that you "must be on someone else's property for him to impose his will on you." "Either," according to Maiku, it's "absolute ownership or nothing."
If someone can impose conditions on your own property, then you really don't own the property at all. This could be considered as Caley McKibbin aptly said "the same as the seller still owning the house."
However, a bank that grants a mortgage may place conditions on the mortgager to preserve the value of the collateral. For example, a property owner may not bulldoze his own house.
If the bank has a superior claim to the property, because the bank can "evict" the mortgager upon default, then the bank should be considered the real property owner, and the mortgager considered as having mere possession of the said property.
If the mortgager has provided a deposit of 20%, on a 30 year mortgage, then every year the mortgager "buys" from the bank 1/30th of the claim remaining, on top of the 20% he already "owns."
The contract is completed when the mortgage is paid in full. No more restricted by previous conditions, since all of these have been removed, the property owner comes into absolute ownership and may do as he wishes on his own property.
For a property within a Homeowners' Association (HOA), no matter how many payments are made, the claim by the HOA on the property can never be extinguished, unlike a mortgage.
There is no way for the property owner to "buy" the claim from the HOA, or bring the contract to a completion. [1] [2]
If the HOA has a superior claim on the property, because the HOA can "evict" a property owner, then the HOA should be considered the real property owner, and the property owner should be considered as having mere posession of the said property.
If the HOA is the real property owner, and the claim is perpetual, with conditions that can never be removed, no matter how many payments are made, then this arrangement is functionally equivalent to a lease.
For a lease, the landlord rents to the tenant a property. No matter how many payments a tenant makes, the landlord will never remove his claim on the property, as he has a perpetual claim on the property.
The landlord has a superior claim on the property, since the landlord can evict the tenant upon contract default. The landlord is the real property owner. The tenant merely possesses the property, as long as he abides by the contract.
Now if the HOA should be properly called a landlord, and the "property owner" a tenant, then the HOA can place whatever condition on the property it wants, within the contract, for a perpetual period of time.
This brings about the problem of contract enforcement. If we accept Merlin's view, then mere promises on a contract can never be enforced, but property rights as security can be enforced. [3]
For example, let's say a landlord rents a property to a tenant for a 10 year lease, with monthly payments made in advance. But then when one year elapses, the tenant defaults, and is evicted.
If promises on a lease contract can be enforced, then the tenant still owes 9 years of lease payments to the landlord.
If promises on a lease contract cannot be enforced, then the tenant owes nothing, and the landlord has a vacant property he can lease to someone else.
Let's assume the latter is true. If the landlord wishes to bind the tenant to a 10 year lease, then he may demand from the would be tenant a security deposit in advance, perhaps equivalent to one month for every one year of lease (or 10 months worth).
This security deposit is a pledge by the tenant to the landlord for future performance on the contract. If the tenant breaks the lease, the landlord keeps the security deposit, and the tenant does not owe anything more.
For a property within a HOA, the "buyer" is paying up front in advance the entire lease for an infinite period of time. However, why would anybody sign a lease for a commitment in perpetuity? [4]
If you think about it, signing a lease that lasts beyond your potential lifetime, while paying up front for it in advance, is really a bad deal for a tenant, and a good deal for the landlord. [5]
This is somewhat of a mystery why anybody would do that. Here I suspect this is an attempt to create a quasi-asset, such that lease contracts can be bought and sold on the open market.
If a lease contract is sold, the "buyer" is assuming the lease obligation, and the "seller" is compensated for the remaining value on the lease.
Normally, lease payments are fixed throughout the duration of the lease, since contracts cannot be unilaterally modified. In other words, lease payments cannot be raised, until the lease expires.
For a HOA, the same is true, but since everything is paid up in front, for a perpetual period of time, then there should be no additional charges beyond that. However, the HOA charges fees for maintenance and services.
Not only that, the HOA may periodically raise the HOA fees should costs increase or the reserve fund is too low. Furthermore, the HOA may charge special assessments from time to time for unexpected expenses.
How can these HOA fees and special assessments be consistent with an unmodifiable contract? Remember, the HOA lease is for a perpetual period of time, and thus can never expire. [6]
If the HOA fees were treated like utility charges, then maybe those charges can be passed on from the HOA to the "property owners." The problem with this approach, is that unlike utilities, HOA fees are mandatory and can never be avoided.
For example, if a cable company raises its rates, the tenant can always unsubscribe from the service, but if a HOA raises its fees, and the "property owners" refuses to pay, then it means eviction.
If someone were to be evicted, then it should be for a contract violation on not paying the amount due. But can this be justified if the amount due is not fixed within a lease contract?
Maybe a possible solution would be how a HOA a structured. If a HOA is structured as a mutual, where the landlords and tenants are one and the same, then any expenses incurred by the HOA would, if left unpaid, would ultimately be a liability against the assets. [7]
If tenants cannot be charged the amount, then the landlord is responsible for the expense. But since in a HOA the tenants are also the landlords, the HOA fees are assessed on the "property owner", not as tenants, but as landlords.
In general, the HOA concept should be considered more consistent with a landlord-tenant relationship, than a property transfer rule, and to do otherwise would make it more complicated than it has to be.
MacFall:Libertarian: The HOA recieves a property, and decides on a continual basis whether or not to maintain the restriction. Later occupants have the ability to buy the deed and own the property unencumbered. Unlibertarian: The HOA recieves a property with said restriction. A later occupant wishes to buy the deed unencumbered, but is not able to do so because the encumberments are considered to exist forever, even after the property has changed hands.
Merlin:For a typical contract has no when clause, no time when the house is yours. At any time, if you fail to do something, they take it away. Hence, its not a transfer of property. At any time, you can claim you money back, as they can with the house. Its rent.
Merlin:Now, if I pay you 100 buck to mown my lawn tomorrow, and you cancel in the afternoon, what has happened? Must you mow my lawn? No, its just a promise of your, and hence you can default. But that’s no the end of the story. For you do not own the 100 bucks I gave you. For our agreement was that I’d give you 100 buck to mown my lawn, hence those 100 buck become yours when my lawn is mowed, not now. You do not own them, hence I can easily call those back. Is this an acceptable outcome?
Merlin:Now the HOA could give you single-rent contract: you pay the market value of the house upfront, and what you get is to rent the house. You keep it as long as you comply with the owners (the HOA) regulations.
Caley McKibbin:If there was such as a thing as a value as rent contract and you were mentally retarded such that you would pay the value of a house as rent, the seller could take your money and instantly evict you for any invented reason, rinse and repeat.
Caley McKibbin:A purchase with the stipulation that the seller can arbitrarily change the terms at will is not really a purchase at all. It is simply person A giving person B money for nothing. "You pay me x and I still own the house." That is not a valid contract to begin with.
Merlin:My point is that most HOAs I know ff are mutuals, i.e. socialism incarnate. Otherwise I see no problem at all with their operation.
Is this Rothbard's stance? Could you point me to where he mentioned that contractual obligations could be ignored? Not that I'm validating your appeal to authority... I'm just curious :)
Not at all, since now that I claim, you do not provide. So its clear that you never held any risk, thus you never earned any premium at all.
Prove that I wasn't willing to claim during those days. You cannot do so, since you cannot read my mind or intentions. Without being able to prove me wrong, you have to acknowledge y that I held the risk during those days, and again, not my fault you didn't have anything to claim from days 1 - 89, so nope, no premium for you!
Why is it that in your world, people can cause a significant amount of damage through non-performance of contract and yet not be liable?Because there is no stopping point. Once you agree to allow damages for non-NAP-breaking actions that cause damage, you can easily claim damages for libel, or not showing up at parties, or for your girlfriend breaking up. Why not claim damages from Yahoo! If it shuts down its mail service? Taken to its proper extremes, it would paralyze society. Its a slippery slope with no end in sight.
Why is it that in your world, people can cause a significant amount of damage through non-performance of contract and yet not be liable?
This is a complete strawman. I'm talking about non-performance of specific clauses voluntarily agreed to in contract, in writing. Nothing you wrote here applies to my argument.
Ah, the important question. Well, I certainly don’t know, but I believe that, especially in business, people would come to see that having the possibility to act on your contracts as you see fit is immeasurably advantageous.
I can imagine that those selling the service could see it that way.
Who would agree to a 20 years contact in a world where you cannot get out of contracts? These guys seeking to write long-term contracts would be the very first, I believe, to want arbitration that recognizes the right to leave. You can throw here all pension funds and life insurance, a massive fund! Otherwise no one will agree to the contract in the first place.
Strawman. This wasn't my argument, either. I said that if you do leave the contract, you should still be liable for compensatory damages for what was originally agreed on. It's up to the market to determine the extent of those, but I doubt they would be zero in all cases not involving transfers of your definition of property.
I hope so, but once we accept initially voluntary slavery as enforceable, the road ahead seems very turbulent to me. But let’s hope you are right, and my fear are indeed baseless.
This is a valid point of contention. There is indeed a point where "voluntary" clauses can lead to conditions approximating slavery more than liberty. This is why I posed the question in the first place, because I do see it as possible for an HOA to become quite totalitarian, through "voluntary contracts".
Current society recognizes that contractual clauses can be backed by force, while placing limits on damages (you cannot be forced to be someone else's slave, for example...). This is not a point of argument for me; the market would decide this based on what people demanded. For me the real issue is the monopoly of force and the double standard between government and the rest of society. While you cannot be made a slave of another private person, you can most assuredly be made a slave of society via the force of government (taxation, etc...)
From “The Ethics of Liberty”, p.133 (emphasis mine):
The right of property implies the right to make contracts about that property: to give it away or to exchange titles of ownership for the property of another person. Unfortunately, many libertarians […] hold the contract itself to be an absolute, and therefore maintain that any voluntary contract whatever must be legally enforceable in the free society. Their error is a failure to realize that the right to contract is strictly derivable from the right of private property, and therefore that the only enforceable contracts (i.e., those backed by the sanction of legal coercion) should be those where the failure of one party to abide by the contract implies the theft of property from the other party. […] Let us illustrate this point. Suppose that Smith and Jones make a contract, Smith giving $1000 to Jones at the present moment, in exchange for an IOU of Jones, agreeing to pay Smith $1100 one year from now. This is a typical debt contract. What has happened is that Smith has transferred his title to ownership of $1000 at present in exchange for Jones agreeing now to transfer title to Smith of $1100 one year from now. Suppose that, when the appointed date arrives one year later, Jones refuses to pay. Why should this payment now be enforceable at libertarian law? Existing law […] largely contends that Jones must pay $1100 because he has "promised" to pay, and that this promise set up in Smith's mind the "expectation" that he would receive the money. Our contention here is that mere promises are not a transfer of property title; that while it may well be the moral thing to keep one's promises, that it is not and cannot be the function of law (i.e., legal violence) in a libertarian system to enforce morality (in this case the keeping of promises). Our contention here is that Jones must pay Smith $1100 because he had already agreed to transfer title, and that nonpayment means that Jones is a thief, that he has stolen the property of Smith. In short, Smith's original transfer of the $1000 was not absolute, but conditional, conditional on Jones paying the $1100 in a year, and that, therefore, the failure to pay is an implicit theft of Smith's rightful property. Let us examine, on the other hand, the implications of the now prevalent "promise" or "expectations" theory of contracts. Suppose that A promises to marry B; B proceeds to make wedding plans, incurring costs of preparing for the wedding. At the last minute, A changes his or her mind, thereby violating this alleged "contract." What should be the role of a legal enforcing agency in the libertarian society? Logically, the strict believer in the "promise" theory of contracts would have to reason as follows: A voluntarily promised B that he or she would marry the other, this set up the expectation of marriage in the other's mind; therefore this contract must be enforced. A must be forced to marry B. As far as we know, no one has pushed the promise theory this far. Compulsory marriage is such a clear and evident form of involuntary slavery that no theorist, let alone any libertarian, has pushed the logic to this point. Clearly, liberty and compulsory slavery are totally incompatible, indeed are diametric opposites. But why not, if all promises must be enforceable contracts?
The right of property implies the right to make contracts about that property: to give it away or to exchange titles of ownership for the property of another person. Unfortunately, many libertarians […] hold the contract itself to be an absolute, and therefore maintain that any voluntary contract whatever must be legally enforceable in the free society.
Their error is a failure to realize that the right to contract is strictly derivable from the right of private property, and therefore that the only enforceable contracts (i.e., those backed by the sanction of legal coercion) should be those where the failure of one party to abide by the contract implies the theft of property from the other party.
[…]
Let us illustrate this point. Suppose that Smith and Jones make a contract, Smith giving $1000 to Jones at the present moment, in exchange for an IOU of Jones, agreeing to pay Smith $1100 one year from now. This is a typical debt contract. What has happened is that Smith has transferred
his title to ownership of $1000 at present in exchange for Jones agreeing now to transfer title to Smith of $1100 one year from now. Suppose that, when the appointed date arrives one year later, Jones refuses to pay. Why should this payment now be enforceable at libertarian law?
Existing law […] largely contends that Jones must pay $1100 because he has "promised" to pay, and that this promise set up in Smith's mind the "expectation" that he would receive the money.
Our contention here is that mere promises are not a transfer of property title; that while it may well be the moral thing to keep one's promises, that it is not and cannot be the function of law (i.e., legal violence) in a libertarian system to enforce morality (in this case the keeping of promises).
Our contention here is that Jones must pay Smith $1100 because he had already agreed to transfer title, and that nonpayment means that Jones is a thief, that he has stolen the property of Smith. In short, Smith's original transfer of the $1000 was not absolute, but conditional, conditional on Jones paying the $1100 in a year, and that, therefore, the failure to pay is an implicit theft of Smith's rightful property.
Let us examine, on the other hand, the implications of the now prevalent "promise" or "expectations" theory of contracts. Suppose that A promises to marry B; B proceeds to make wedding plans, incurring costs of preparing for the wedding. At the last minute, A changes his or her mind, thereby violating this alleged "contract." What should be the role of a legal enforcing agency in the libertarian society? Logically, the strict believer in the "promise" theory of contracts would have to reason as follows: A voluntarily promised B that he or she would marry the other, this set up the expectation of marriage in the other's mind; therefore this contract must be enforced. A must be forced to marry B.
As far as we know, no one has pushed the promise theory this far. Compulsory marriage is such a clear and evident form of involuntary slavery that no theorist, let alone any libertarian, has pushed the logic to this point. Clearly, liberty and compulsory slavery are totally incompatible, indeed are diametric opposites. But why not, if all promises must be enforceable contracts?
Indeed the whole chapter is very, very interesting. When I first read it, I too found it ill-thought. But in time, i came to agree strongly.
I do not pay 365 premiums for 365 contracts. I pay one premium, for one coverage. If you fail to provide, you void the contartc, hence none of that money is yours. The burden of proof in on you to show that you would have paid any other day.
I said that if you do leave the contract, you should still be liable for compensatory damages for what was originally agreed on. It's up to the market to determine the extent of those, but I doubt they would be zero in all cases not involving transfers of your definition of property.
Its the same. Who would, in his right mind, enter a 99 year lease contract with you, when condition 5 years form not, let alone 55, are unpredictable? According to strict contracts enforcement, even if rents 20 years form now are 5000% of what we agreed, I still have to carry on. Would you enter into such a contartc without the right to cancel without penalty?
Your one premium was divided into 365 equal parts. 1 part provides coverage for 1 day. Read it in the contract. ;) Even if you're right and I have to return the whole premium (looks like you'll have to use force to get it back from me), I still prefer that over paying the huge payout that I was supposed to. I'm retiring anyways, or perhaps I'm moving to another part of the world where nobody knows me, so who cares? Anyways, we're just butting heads here, so no need to continue on this point.
No, I wouldn't. I might accept a penalty, should it be small enough (perhaps 1 to 3 months rent). For example, I currently lease a car, but to cancel it means I would have to pay some payments as penalty. I accepted that when I leased the car. These are strawman arguments, since the world does not behave this way currently, and even if such a contract existed and was broken, it would be up to the market to decide the appropriate damages. I do accept that judges can strike out or modify certain parts of a contract if they are vastly unproportionate. This doesn't mean that enforcement can't or shouldn't ever happen.
Doesn't this example answer itself, whether or not we enforce damages for non-performance of contracts?
Interesting, I'm going to check it out. I noticed that Rothbard defends the payment of interest, whereas you would say that the extra $100 is simply a promise, right? :)
Anyways, I would like to get this thread back on track. The topic we've been discussing for the past couple of pages deserves a thread all on its own.
This article appears to support HOAs as they currently operate:
http://mises.org/daily/2484
"Now, consider the homeowners association (HOA). ... Now, I'm not saying that some residents will not suffer the occasional annoyance as HOA trustees hold the color pallet against your mailbox to verify the hue of the stain which you applied ... Other than showing excessive exuberance at times, the HOAs are typically indicted in the press when the singular property owner wants to turn his front yard into a memorial for the flag, replete with search lights and a continually repeating sample of Taps. What's worse, the property owner knowingly agreed to such restrictions prior to purchasing the property. The homeowner,attempting to trample on the agreement, is hailed as the last defender of Lady Liberty herself, while the HOA, defending its contract with all homeowners, is perceived as evil incarnate."
Personally, I find it disconcerting, because I'd be happier if there was a decidedly unlibertarian flaw in the HOA model, but so far I don't see one.
I think there are limits to an HOAs power which governments have, but which an HOA could not legitimately have. For example, you could not contract to pay 30% of income tax and have that automatically transfer to your children. The children never entered into that contract, so why should they be liable for it?
There is a way around that limit for the HOA. They could just contract with the property "owner" upon purchase and stipulate that he must pay a tax in proportion with the resident's income. It's up to him on how to collect it (he can simply make it a condition of continuing to live in his adobe). If agreed by the property owner upon time of purchase, then it is voluntary. If agreed by the residents of the home, then it is voluntary (after all, the owner can always change his mind on the terms and conditions of living in his own house!)
I don't think a competitive world would ever get this bad, but it does seem like there is no libertarian defence against abusive HOAs that foreclose against their owners for small debt arrears. (Merlin: There are surely ways for the HOA to make the agreement based on property and stronger than your "promises"). I would love for there to be one, though.
The transfer of ownership theory is interesting; I haven't thought of it in that way before. If there are clauses on the use of the property after the transfer has been made, then the property hasn't truly been transferred as the old party still has a claim on it. Thanks for mentioning that, guys.
My question then, is what if HOAs fully embrace this theory? What if instead of selling property, they simply sell the right to live in the property, subject to their terms and conditions. If you voluntarily accept that then you don't own full rights to the property, but merely the right to live there, then is this still unlibertarian?
How about the common property owned jointly by the HOA members, such as the sidewalks and streets? Let's say that the rules stipulate that you will not be allowed to enter the common property unless you abide by all the rules and regulations. You will essentially be under house arrest. Would you also consider this libertarian or unlibertarian?
If you voluntarily accept that then you don't own full rights to the property, but merely the right to live there, then is this still unlibertarian?
Not at all, they can ask for you to circumcise your every male children, eat you cat, ‘lend’ your wife to your neighbors ever Wednesday for what libertarians are concerned. What the market will take is their only issue.
Fully libertarian. Of course, a guy with a modicum of brains would cancel the contra immediately and tell its kindly neighbors to screw off. And such a HOA would go bankrupt within months. But in theory, sure they can let your starve to death.
"Are HOAs (home owner's associations) unlibertarian?"
In principle no. But often in practice yes. Here is Texas HOA's have the statutory right to pass off their legal costs to any member they sue.
Ultima:My question then, is what if HOAs fully embrace this theory? What if instead of selling property, they simply sell the right to live in the property, subject to their terms and conditions. If you voluntarily accept that then you don't own full rights to the property, but merely the right to live there, then is this still unlibertarian?
How is this distinct from a lease?
This seems to demonstrate that the HOA is essentially private socialism. While it would not violate the non-agression principle if entered into voluntarily, it is inherently economically inefficient.
Why? Socialism entails centralised control over the means of production and the abolition of private ownership (and thus pricing) with respect to them. Merely selling a limited bundle of rights is not 'socialism', it merely means ownership will be joint.
Freedom of markets is positively correlated with the degree of evolution in any society...
I.e. socialism in a limited scale. Yet, unlike the hot dog stand that Z. took as an example, a whole neighborhood would actually find it very difficult to operate. I don't believe that HOAs in their 'mutual' (we all own our neighborhood) would survive the onslaught of 'feudal' (single landlord) HOAs.
Merlin:I.e. socialism in a limited scale. Yet, unlike the hot dog stand that Z. took as an example, a whole neighborhood would actually find it very difficult to operate. I don't believe that HOAs in their 'mutual' (we all own our neighborhood) would survive the onslaught of 'feudal' (single landlord) HOAs.
Maybe you can explain why a whole neighborhood owned "mutually" cannnot operate?