Can the Bella Vista Property Owners Association legally shut off a member's water for unpaid POA dues?

Plain-English summary

Representative Kim Hendren asked the Attorney General about a dispute at the Bella Vista Property Owners Association. The POA had a policy of shutting off a member's water if the member fell 90 days behind on monthly POA assessment payments. The POA both ran the water department and collected the dues. Hendren asked whether, if the member's water bill itself was current, the POA could still shut off water service to collect on unpaid dues.

Attorney General Leslie Rutledge declined to opine. She invoked her predecessor's 2011 opinion on the same question (Op. Att'y Gen. 2011-077), reaffirmed that the Bella Vista POA is a private nonprofit corporation, and explained that the legal authority for the POA to terminate a service it provides is purely a matter of contract between the POA and its members. The AG is statutorily barred from engaging in the private practice of law (A.C.A. § 25-16-701), which would be what interpreting a private nonprofit's contracts amounts to. The opinion told the requester to take the question to private counsel.

The opinion attached and re-issued the 2011 opinion in full, which had answered six related questions about Bella Vista POA governance with the same refrain: "the POA's charter documents will control."

Currency note

This opinion was issued in 2019. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and legal framework

The Bella Vista Property Owners Association is a private nonprofit corporation, established in 1965 to manage the affairs of Bella Vista Village, a planned community in northwest Arkansas. Every property owner is a member of the POA, and every property is subject to the POA's Declaration and Protective Covenants.

The POA owns and operates a water and sewer system that serves the community. It also collects monthly assessments (POA dues) from its members under the Declaration. Bella Vista was incorporated as a city of the first class in 2006 (a separate event from the POA's continuing private status), but the POA itself remained a private nonprofit, not a governmental body.

That private status is what drove the AG's analysis. A.C.A. § 25-16-701 prohibits the Attorney General from engaging in the private practice of law. Interpreting a private corporation's contracts with its members, including whether the POA's Declaration permits a service termination for unpaid dues, falls squarely within the private practice of law.

The 2011 opinion (Op. Att'y Gen. 2011-077) had drawn an explicit contrast with municipal water shutoffs. When a city government provides water and considers shutting it off because a customer has not paid for a related service, the municipality’s police power is a relevant consideration, as the 2011 opinion explained. The earlier opinion had pointed to Op. Att'y Gen. 2008-028 as having addressed that municipal scenario in detail. A private POA is not invested with the police power. So even though the practical question (water cut off for unpaid dues) looks similar, the legal framework is entirely different.

Why the AG would not engage on the contract question

The bar against the AG engaging in private legal advice is not a discretionary preference. A.C.A. § 25-16-701 makes it a statutory rule. The 2011 opinion noted that the AG's office had been provided copies of the Bella Vista Declaration and Protective Covenants and Bylaws, but was not authorized to interpret them. The same principle applied in 2018. The dispute, however practically pressing for the constituents involved, is a contract dispute between private parties.

The 2011 opinion did flag one related point that could change the analysis: if the POA were "intertwined" enough with municipal services or were receiving direct public funding, the POA board’s activities might be subject to FOIA disclosure. The Arkansas Court of Appeals in Waterworks v. Kristen Investment Properties had identified "water service" as "a service routinely provided by government." The 2011 opinion said the POA board’s activities might be subject to FOIA disclosure if the POA received direct public funding and its activities were intertwined with public services. It made no factual finding that those conditions existed.

Common questions

Why won't the Attorney General answer this?

Because the Bella Vista POA is a private nonprofit, not a government entity. The AG is statutorily barred from engaging in the private practice of law. Interpreting a private nonprofit's Declaration and Protective Covenants is the kind of work private counsel does for paying clients.

Where should a Bella Vista resident with this question go?

Private counsel. The 2011 opinion also flagged the possibility of consulting the Bella Vista city attorney to the extent any aspect of the water operation was tied to the city through contract, but that is not always available.

Did the 2011 opinion decide whether a city could make the same shutoff?

No. It distinguished the POA’s contract question from a municipality’s use of police power to discontinue one service over nonpayment for another and referred to Op. Att’y Gen. 2008-028 for that separate issue. It did not decide any city’s shutoff authority in the facts posed here.

Could the POA's status change in a way that opened the question to AG opinion?

Possibly. If the POA's water operations became tightly intertwined with municipal services or received direct public funding, the POA board’s activities might be subject to FOIA disclosure. The 2011 opinion did not find those conditions had been met.

Did the AG say the shutoff was illegal?

No. The AG made no judgment on legality at all. The opinion only held that the question lay outside the AG's authority to answer.

Citations

A.C.A. § 25-16-701; prior AG opinions Ops. Att'y Gen. 2011-077, 2008-028, 2007-192, 2007-227; Hutchens v. Bella Vista Village Property Owners' Ass'n, 82 Ark. App. 28, 31, 110 S.W.3d 325 (2003); Morris v. Medin, 43 Ark. App. 29, 30, 858 S.W.2d 142 (1993); Waterworks v. Kristen Investment Properties, 72 Ark. App. 37, 42, 32 S.W.3d 60 (2000); Central Hardware Co. v. N.L.R.B., 407 U.S. 539, 547 (1972).

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

STATE OF ARKAN SAS
ATTORN EY G EN ERAL
LE SLI E RU T LEDGE

Opinion No. 2018-088

January 3, 2019

The Honorable Kim Hendren
State Representative
1501 West Highway 72 Southeast
Gravette, AR 72736-9438

Dear Representative Hendren:

This is in response to your request for an opinion on behalf of your constituents who are members of the Bella Vista Property Owners Association (POA). Your request states that the POA has implemented a policy that states "if a member is ninety days delinquent in his or her monthly assessment payments to the Association, the delinquent member's water is shut off." You also state that the POA owns and operates the water department.

In light of the above-referenced scenario, you ask the following question:

If the member is current in his or her water payments, is it legal for the Association to shut off said member's water?

RESPONSE

With respect, I am unable to provide an answer to your question. I must echo my immediate predecessor- who was presented with substantially the same question in 2011 1-in stating that the PO A's legal ability to terminate a service it provides is purely a matter of contract between the POA and its individual members. I have enclosed a copy of that opinion for your convenience and review.

At the time of the 2011 opinion, the Bella Vista POA was a private non-profit corporation, and not a public body politic or governmental entity. It is my

1
Op. Att'y Gen. 2011-077 at 3.

323 C ENTER STREET. SU ITE 200 · LITT LE RO C K. ARKAN SAS 7220 1 TELEPHONE (50 1) 682-2007 · FAX (50 1) 682-8084 ARKAN SASAG.GOV

The Honorable Kim Hendren
State Representative
Opinion No. 2018-088
Page 2

understanding that there has been no change in the POA's legal status since that time. Additionally, as you state in your request for my opinion, the POA owns and operates the system that provides water service to its members, which was also the case in 2011. As these facts appear to remain unchanged since that earlier opinion, I, like my predecessor, lack the authority to opine on whether private parties have contractually agreed to tie the provision of one service to the payment of a fee for another service or amenity. 2 Any question regarding the propriety of the matter at issue should be addressed to private counsel as a matter of contract law.

Sincerely,

~/A
RUTLE~
LESLIE
Attorney General

Enclosure

2
See Ark. Code An n. § 26-16-701 (Rep I. 2014) (prohibiting the Attorney General from engaging the private practice of law). Accord Op. Att'y Gen. 20 11-077 at 2.

STATE OF ARKANSAS
THE ATTORNEY GENERAL
DusTIN McDANIEL

Opinion No. 2011-077

September 2, 2011

The Honorable Donna Hutchinson
State Representative
24 Rillington Drive
Bella Vista, Arkansas 72714-3204

Dear Representative Hutchinson:

I am writing in response to your request for my op1mon on the following questions:

1. Should a POA water system follow the same rules and regulations concerning a public water system -- especially laws governing shutoff issues?

2. Does the POA have legal standing to shut off water when the resident has paid their water bill but not their monthly POA fee?

3. If an elected member of the POA Board refuses to sign a confidentiality promise, can he still serve on the Board?

4. If a POA executive committee meeting was held in confidence, can the POA Board members vote at a later date to make it public?

5. Can the POA Board change the rules of the Declaration and Protective Covenants with just a vote of the Board members and not a vote of the property owners?

323 CENTER STREET, SU!1'E 200. LITTLE ROCK, .ARKANSAS 72201 TELEPHONE (501) 682-2007 •FAX (501) 682-8084 INTERNET WEBSITE• http://www.ag.state.ar.us/

The Honorable Donna Hutchinson
State Representative
Opinion No. 2011-077
Page 2

6. If a Board member was forced to resign and was told that disclosing the reasons for the forced resignation would result in he or she [sic] being sued, would this violate the former Board member's First Amendment rights?

Your questions relate to the operations of the Bella Vista Property Owners' Association (the "POA").

RESPONSE

With respect to all of your questions, subject to certain statutory restrictions, the POA's charter documents will control. Given that the POA is a private nonprofit corporation and that I am barred from engaging in the private practice of law, I must advise that you refer your questions to private counsel or, possibly, to the Bella Vista city attorney.

Question 1: Should a POA water system follow the same rules and regulations concerning a public water system -- especially laws governing shutoff issues?

I must note initially that I am statutorily barred from engaging in the private practice of law. 1 It is my understanding that the Bella Vista POA is a private nonprofit corporation, 2 whose transactions with its members are thus beyond the

I A.C.A. § 25-16-701.

2
The Arkansas Court of Appeals has offered the following summation of the Bella Vista POA's operations:

Bella Vista Village is a planned residential and commercial community that was formed in 1965. In accordance with the terms of the Bella Vista Declaration, the ... Bella Vista Village Property Owners' Association (POA), was established to manage the affairs of Bella Vista Village. Every Bella Vista property owner is a member of the POA, and their property is subject to the declaration.

Hutchens v. Bella Vista Village Property Owners' Ass 'n, 82 Ark. App. 28, 31, 110 S. W.3d 325 (2003). The court has further offered the following summary:

Bella Vista Village, originally incorporated as the Bella Vista Country Club, is a nonprofit corporation organized under the laws of the State of Arkansas. It is a recreational retirement community developed by Cooper Communities, Inc., formerly known as Cherokee Village Development Company, Inc., consisting of approximately 37,000 lots or living units, approximately 4,000 of which are improved. The POA owns and operates recreational facilities consisting of golf courses, swimming pools, tennis

The Honorable Donna Hutchinson
State Representative
Opinion No. 2011-077
Page 3

scope of my authority to assess. Any questions regarding the propriety of the POA's practices should accordingly be addressed to private counsel.

I can opine, however, that a private POA water system is obliged to follow the rules and regulations set forth in its charter documents. Although I have been provided copies of the Bella Vista Village Declaration and Protective Covenants as well as the Bella Vista Village Bylaws, I am not authorized to interpret their application in the present case. I am unaware of whether the POA has contracted with the City of Bella Vista to provide water services to the city's citizens, and I would be unauthorized to opine on the scope of that contract even if I knew its terms. Again, I must stress that the contractual obligations of a private entity should be discussed with private counsel and, to the extent that the contract involves a municipality, with the city attorney.

Question 2: Does the POA have legal standing to shut off water when the resident has paid their water hill but not their monthly POAfee?

The POA's legal standing to terminate a service is purely a matter of contract. I am unauthorized to address whether a private party has contractually agreed to tie the provision of a service to the payment of a fee for another service.

Your question differs from the obverse question of whether a municipality providing water services might shut off such services because a customer had failed to pay for a related service. I addressed this issue in some detail in the attached Op. Att'y Gen. 2008-028, focusing upon a municipality's police power to discontinue one service because of a citizen's failure to pay for a related service. A private entity such as the POA is not invested with the police power governmental units may exercise. A failure to pay dues to a private organization may justify that organization's refusal to provide water services if a contract so dictates. I am not in a position, however, to determine whether such is the case in this instance.

courts, clubs and restaurants, among other facilities and common properties. The POA also provides water and sewer facilities, fire protection, emergency services, and police protection through the Benton County Sheriff's Office.

Morris v. Medin, 43 Ark. App. 29, 30, 858 S.W.2d 142 (1993). Bella Vista was reportedly incorporated in November 2006 and is currently a city of the first class.

The Honorable Donna Hutchinson
State Representative
Opinion No. 2011-077
Page 4

Question 3: If an elected member of the POA Board refuses to sign a confidentiality promise, can he still serve on the Board?

Given my lack of knowledge of the attendant circumstances, I cannot determine what the term "confidentiality promise" denotes. In light of the private status of the POA, it is conceivable that Board membership might be conditioned upon a Board member's not publicizing the content of certain Board deliberations. 3 The conditions of Board membership are determined by the PO A's charter documents, which the members of the POA presumably approved. Not being a private attorney, I am unauthorized to opine regarding the legal effect of those documents.

Question 4: If a POA executive committee meeting was held in confidence, can the POA Board members vote at a later date to make it public?

Subject to the possible application of the Freedom of Information Act, 4 the authority of the POA Board to publicize its deliberations - or, for that matter, to change its mind regarding whether to publicize its deliberations - is purely a function of what powers the Board has been afforded in the charter documents approved by the POA's members. Determining the scope of those powers is a task to be addressed by a finder of fact, which I am not authorized to do in my capacity as an issuer of formal opinions.

3
I should note, however, that the Board's activities might be subject to disclosure under the Freedom of Information Act if the POA receives direct public funding and its activities are intertwined with public services that the city itself might normally provide. See Op. Att'y Gen. No. 2007-192 (discussing the possible application of the FOIA to a private nonprofit corporation receiving public funds). With respect to the "intertwining" issue, as my predecessor observed in Op. Att'y Gen. No. 2007-227:

Although it is unclear just how "intertwined" a private entity must be with the government before the FOIA will be deemed applicable, it bears noting, given your constituent's statement that the POA is selling water to the City, that the Arkansas Court of Appeals has identified "water service" as "a service routinely provided by government." Waterworks v. Kristen Investment Properties, 72 Ark. App. 37, 42, 32 S.W.3d 60 (2000).

In my opinion, any potential POA Board membership condition of confidentiality would be subject to this qualification. 4 See note 3, supra.

The Honorable Donna Hutchinson
State Representative
Opinion No. 2011-077
Page 5

Question 5: Can the POA Board change the rules of the Declaration and Protective Covenants with just a vote of the Board members and not a vote of the property owners?

Again, the POA's charter documents will control in resolving this question. I am unaware of any provision of state law that would preclude the POA from authorizing the Board to change the provisions of the Declaration and Protective Covenants without an approving vote of the POA membership. Any such change, however, obviously could not compromise contractual rights, such as rights of property ownership or access to common amenities, that have vested in individual members of the POA. For the reasons expressed above, I cannot address the factual question of whether the Board has been charged with such authority.

Question 6: If a Board member was forced to resign and was told that disclosing the reasons for the forced resignation would result in he or she [sic] being sued, would this violate the former Board member's First Amendment rights?

Given that the POA is a private organization, any threat by the Board to file suit if a Board member elected to speak on any topic would not implicate the First Amendment, which involves only governmental regulation of speech. 5 Again, any suppression of speech under the circumstances you have recited would be subject only to the law of contracts. Nothing would preclude a Board member from agreeing to maintain silence on any given issue as a condition of his or her membership, and nothing would preclude the Board, on behalf of the POA, from suing for the violation of this condition, although it is difficult to envision what remedy would lie. Conversely, nothing would preclude an unjustly sued Board member from seeking judicial relief in the form of an action for abuse of process or malicious prosecution.

5
As the Supreme Court noted in Central Hardware Co. v. N.L.R.B., 407 U.S. 539, 547 (1972):

Before an owner of private property can be subjected to the commands of the First and Fourteenth Amendments the privately owned property must assume to some significant degree the functional attributes of public property devoted to public use. The First and Fourteenth Amendments are limitations on state action, not on action by the owner of private property used only for private purposes.

The Honorable Donna Hutchinson
State Representative
Opinion No. 2011-077
Page 6

Assistant Attorney General Jack Druff prepared the foregoing opinion, which I hereby approve.

Sincerely,

~·
DUSTIN McDANIEL
Attorney General

DM/JHD:cyh

Enclosure