Legal Articles
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Rather than trying to plug all the holes, consider developing "harmonizing" principles for your community. Harmonization principles promote reason and encourage participation. For example, instead of dictating "No pets over 20 lbs. are allowed", consider an alternative: "The goal of our community is to provide a harmonious and wholesome atmosphere for all residents. To that end, small, leashed, non-aggressive, clean and quiet pets are acceptable." This pet guideline explains why certain pets are desirable in community terms, not in arbitrary "20 lbs. good, 21 lbs. bad" terms. Will harmonizing principles eliminate periodic challenges? Of course not. But they will encourage residents to do the right thing and eliminate barriers in the community.

The more detailed your rulemaking gets, the less effective it is. "The more the words, the less the meaning". Keep your rules to a minimum, include harmonizing language and your community will enjoy fewer violations and greater unity.  BACK

Evaluating Construction Defect Litigation
Evaluating a construction defect lawsuit requires a careful analysis to determine the strength of the claim. Anticipated litigation costs must be weighed against the potential dollar amount of any award. Damage award collectability is critical as well. Finally, alternate avenues of recovery must be pursued.

Is Claim a Winner? A construction defect claim is considered only after a problem, usually a major one, arises. Emotion must be put aside and a review of the factual basis for the claim must be made. An expert will be needed almost immediately to investigate the defect and give an opinion as to the cause and extent of the defect. Potentially responsible parties (i.e. engineers, contractors, subcontractors) must be identified. Technical legal issues such as statute of limitations, statute of frauds and potential defenses must be examined. Finally, a full, factual and chronological review of events leading up to the discovery of the defect must be made.

After all preliminary information has been gathered and reviewed, the likelihood of success must be evaluated by counsel. If the claim cannot be successfully pursued (such as if the actual cause of damage was an "act of God" as opposed to a defect) it should be dropped immediately before additional expense is incurred. If the claim is a strong one, the analysis of the claim should continue.

Is Claim Worth Pursuing? If the claim can be brought and successfully prosecuted, a simple but important cost-benefit analysis must be made. The estimated cost of litigation (including filing fees, attorneys' fees and experts' fees) must be weighed against the potential recovery. Even where liability is clear, if the cost of litigation exceeds the cost of repairing a defect, the proper business decision is usually to forego litigation and simply repair the defect.

Is an Award Collectable? If you cannot turn your award into dollars to fix the defect, the litigation should not be pursued. If the responsible contractor is out of business and bankrupt, a $10 million jury award will not be worth the paper it is written on. It is incumbent upon the attorney to evaluate, and fully discuss with the client, the likelihood of collecting an award.

Alternative Means of Recovery. In the unhappy event that the analysis indicates that litigation should not be pursued because the claim is not strong, the costs outweigh the potential recovery or the offending party is "judgment proof", the analysis should not stop there. For instance, there may be an architect or engineer whose faulty design actually caused the problem and who may have professional liability insurance to compensate victims for mistakes. A unit or common area insurance policy might provide full or partial compensation to repair a defect. State funds may be available to compensate victims of shady contractors who are not around to correct or pay for their mistakes. These and other avenues of potential recovery should be explored before the book is closed on a construction defect claim.

Pursuing Litigation. In the more happy event that investigation warrants that the claim is worthy, a carefully laid plan must be aggressively pursued. The key to a successful attorney-client relationship is communication. The attorney must always keep the client up to date on the progress of the litigation. The client must keep the attorney informed of changes in circumstances and of any questions or concerns. The attorney must work closely with the client to develop and institute the litigation plan to bring the case to a quick and favorable conclusion.

A construction defect can be financially devastating. If your association is faced with such a dilemma, professionals should be consulted immediately to fully evaluate the claim and suggest a strategy that will give you the best chance of a quick and full recovery. Article by Kevin J. O'Malley, Esq. of Wynn and Wynn in Raynham, MA.   BACK

Making Amends
An association’s governing documents are the backbone of the community. Like any backbone, from time to time, an "adjustment" may be called for. Amending an association's documents impacts both legal and practical considerations. An association should consider amending its Declaration, Bylaws and Articles of Incorporation to accomplish the following:

1. To delete or add use restrictions
2. To conform with changes in state law since the documents were recorded
3. To correct clerical errors, or
4. To fulfill a specific legal requirement, such as eliminating a restriction in violation of the Fair Housing Act.

There are two ways to amend documents. The first is to amend individual provisions by editing, deletion or addition. The other way is to "amend and restate" the entire set of documents. Legally, "amended and restated" documents, are simply an amendment to the existing documents. Practically speaking, they produce a new, organized and easier-to-read set of documents.

A restatement is a much more extensive, time-consuming and expensive project than a partial amendment. While not appropriate for every situation, an amendment and restatement should be considered if current documents have either been amended many times or that they are cumbersome or confusing. It’s also appropriate if the association is contemplating a substantial number of changes at one time.

Before beginning any amendment project, first determine what is required to pass the amendment. Requirements are usually found in the document itself or may be governed by statute. If the amendment requires a high percentage of owner approval, it may be prudent to forego the amendment since the chances of passage are remote.

Here are some general recommendations:
1. Amend the Amendment Procedure. If your documents have difficult amendment procedures, consider "amending the amendment procedure" to ease future changes. Provisions that require 75 percent or more of membership approval or require members to sign a single document are difficult. Consider a procedure that allows an amendment by a majority vote at a valid membership meeting.

2. Withhold Controversial Changes. If you are trying to pass several amendments simu-ltaneously, withhold controversial amendments that may serve to defeat otherwise approvable changes. Present controversial changes individually at a later date so that you have the opportunity to adequately focus on the issues surrounding that amendment.

3. Remember Retroactivity. Amendments cannot be retroactive, such as banning existing pets, and should provide for a "grandfather" provision.

4. Developer Language. Resist the temptation to amend simply to delete references to the original developer. These amendments serve little purpose.

5. Community Forum. Consider holding a community meeting to answer questions and address concerns regarding any proposed amendments before they come up for vote. Educating the membership can go a long way in helping to get amendments adopted.

There are differences in amending condominium association and homeowners association documents. Always consult with an attorney knowledgeable in community association law before implementing any document changes. Carefully weigh the cost versus benefit of document amendments. Don’t overlook that a board approved rule or resolution may be enough to accomplish your objective. The rule must be reasonable and not conflict with the governing documents or the law.

User friendly documents are more likely to be read and understood. Performing a therapeutic "adjustment" can streamline procedures and raise the level of compliance. Thoughtful amendments make for a kinder, gentler community.  BACK

Solomonizing Violations
King Solomon of The Bible was said to be the wisest man of his day. The Board of a community association is called on to act wisely when resolving rules violations. There is an accepted procedure for dealing with them that minimizes the cost and discomfort of all parties concerned. If carefully followed, a generally satisfactory outcome will result. The goal should be to avoid lawsuits.

Most governing documents have provisions for rules enforcement. Typically, a notice of violation is mailed with a deadline followed by a "last chance" notice with another deadline. The idea is to give the violator ample opportunity to cease and desist with progressively severe penalties for noncompliance. If compliance isn’t forthcoming, a lawsuit will need to be filed to force compliance.

Litigation should be considered as a last resort since it is time-consuming, expensive, disruptive, and difficult to obtain quick relief. It also tends to create disharmony within the community. The end result of litigation is often an order of court which neither party considers acceptable. Although the Declaration often provides for the recovery of attorneys' fees, it is rare for a victorious association to receive an award of all of its legal costs so should never be relied upon.

It is far preferable to settle with the unit owner and have a quick, effective and inexpensive resolution if possible. The settlement process should be rational and objective. This is no place for anger, desire for punishment or revenge. When the Board litigates out of anger or resentment, the Association will not profit.

If a settlement is reached, it must resolve and cure the violation satisfactorily. A written record of the violation and resolution should be kept to prove the Board's uniform enforcement policies and practices. The Board should be flexible and creative in negotiating settlements.

Sometimes, there is no choice other than to file suit. Lawsuits seek a judge’s determination that a unit owner has violated the governing documents and a court order requiring the unit owner to stop the violation. It is often aggressive court action that brings a reluctant violator to settlement. The Board has a duty not to permit a flagrant violation of the Declaration. The Board must take care that its enforcement policies are uniformly and systematically applied. A failure to do so can result in a "waiver": The Association may be prevented from enforcing a provision against both a current violator and future violators as well. Further, the failure to enforce the covenants could result in claims against the Board by the other unit owners.

Since litigation is complex and expensive, it is necessary to have a legal budget for the case and to evaluate it on a periodically to remain in control of costs. A precise estimate is difficult because it is impossible to predict what will happen. The complexity and difficulty of the case depends in large part on whether the violator will vigorously defend the case.

The following is a common procedure for handling rules violations:

1. Initial Notice of Violation. The violation should be clearly stated including references to the governing documents or rules that apply and the penalty for noncompliance. A deadline for compliance should be stated. If the Association's governing documents require it, the Board may need to hold a hearing before proceeding further.

2. 10 Day Deadline Notice. This notice, sent by the Association, should restate the content of the Initial Notice of Violation with the additional statement that if compliance doesn’t happen, the matter will be turned over to the Association’s attorney for further disposition and legal costs will be chargeable to the violator (if allowed by the governing documents-if not, consider amending them).

3. 30 Day Notice. If the 10 Day Deadline Notice doesn’t work, the matter should be immediately turned over to the Association’s attorney who will issue a formal 30 Day Notice. This notice gives the violator 30 days to comply before a lawsuit is filed. It is a good idea to include an offer to negotiate a settlement. This would be one more attempt to resolve the case quickly and inexpensively for both sides. If the violator responds positively to a settlement, set up a meeting with a knowledgeable arbitrator. Settlement usually involves compromise on both sides.

4. Litigation If a lawsuit becomes necessary, adopt a flexible budget and, at every point in litigation, the goal should be to settle the case. Aggressive litigation will often expedite settlement. The first stage involves fact and witness investigation, drafting and filing the complaint, serving the papers on the unit owner, recording a notice against the unit, and gathering evidence and documents. If the defendant contests the case, the next step would be pre-trial motions and discovery, involving development of witness testimony and evidence. Finally the case would go to trial for a court determination and order.

It is rare for a case to go that far because both parties are usually motivated to settle in order to minimize the expense. The Association usually has a superior bargaining position because it usually is in a better financial position than a unit owner. However, this advantage should not be taken for granted. It is better to be reasonable instead of taking an overly-aggressive and abusive bargaining position. In addition, if it should ever come to the point that the Association is seeking an award of attorneys' fees from the court, the amount of the award will depend upon how ready the Association was to accommodate the legitimate needs of the unit owner. If the Association takes a hostile negotiating posture, the court may refuse to award fees and costs.

In an emergency situation involving damage or danger to property or persons, it is sometimes possible to obtain an emergency court order. In situations to avoid harm or injury, the Association must not hesitate to aggressively pursue its rights in court.

When proceeding with legal action to enforce the Association's governing documents, it is prudent to hire an attorney who is knowledgeable and both willing to aggressively pursue the Association's remedies and also willing to avoid unnecessary cost and disruption. Remember Solomon and the two women who were both claiming ownership of a baby. His solution was to part the child with a sword. His decree happily did not come about but his knowledge of human character was apparent. The Board. as well, should act with the wisdom of Solomon in resolving violations and maintaining harmony in the community.  BACK

Nuts & Bolts of Homeowners Associations
What is a homeowners association and why do they exist?
Condominiums, cooperatives, planned communities and other forms of homeowners associations ("HOA") are allow the owners to administrate and manage their community. One of the main purposes of the HOA is to enforce a set of covenants (promises) which bind all owners. The covenants are usually contained in a document called a Declaration of Covenants, Conditions and Restrictions ("CC&Rs"). Many HOAs include common property, such as pools, greenways and private roads and in the case of condominiums, usually building structure, walls, roofs, plumbing, wiring and other aspects of the building. Individual property owners are required to pay assessments (usually monthly) to enable the HOA to operate the association and maintain the common property.

Who serves on homeowners associations, what do they oversee and how are such associations governed?
HOAs are usually governed by a board of volunteer owners elected by the remaining owners. The board holds regular meetings to enforce the CC&Rs, to establish a budget, authorize expenditures, collect assessments, problem solve, and oversee maintenance of the common property. The board acts in much the same way as a corporate board of directors. Many HOAs also utilize committees to help administer the association. For example, Architectural Control Committees are commonly used to maintain architectural consistency in the neighborhood.

What kind of legal power do such associations have to enforce their rules?
The main source of legal authority allowing an HOA to enforce its rules comes from the recorded CC&Rs and Bylaws. Because the documents are recorded on the county real estate records, home buyers become legally bound by the valid provisions of these documents when they purchase their homes. Condominium and Planned Community HOAs also have the additional backing of state law, which clarifies legal authority in many ways. HOA laws may also provide additional legal authority not contained in the HOA's documents. All condominium HOAs and many subdivision HOAs are governed by specific state law. HOA actions are usually upheld in court if the authority is provided in the documents or by statute and the board acts reasonably in carrying out the authority.

If I buy property in an area governed by a homeowners association, how will I know the rules? What is my recourse if I disagree with a rule?
The CC&Rs and Bylaws are recorded documents and potential buyers should obtain a current copy of the documents and read them to be sure they want to be subject to their provisions. The documents may permit the HOA to enact additional rules and regulations governing the conduct of the members and the use of the common property. Potential buyers thus have notice that there may be additional rules to which they will be subject. The HOA should have copies of all its current documents available for review, or you can get a copy from a title insurance company.

The homeowners' best approach to take if they do not agree with a rule is to address their concerns with the board. Rules can be amended or revoked if they are unreasonable, unnecessary or simply unwanted by most owners. The amendment or revocation will likely require a member vote. Voting requirements are usually found in the documents. If owners disagree with a rule and are unsuccessful in getting it amended or revoked after following the proper procedures within the HOA, the owners can always bring a legal action to declare the rule unenforceable. However, this could become very expensive, especially if you lose. Most HOA documents require the owner to pay the HOA's attorney fees if the owner loses.

What are some of the common problems faced by HOA boards? Do you have any suggestions for how such associations might be run more smoothly?
Rule creation and enforcement can be an area of concern. The board needs to take special care to ensure owners are given adequate notice of any alleged rule violation, including an opportunity to be heard before any fines are imposed. Sometimes owners fail to pay their assessments, and board members struggle on how best to get their neighbors to pay their share of the common expenses. Because not all situations can be anticipated and included in the HOA's governing documents, I recommend HOA boards adopt a set of rules of procedure or adhere to a standard guide such as Roberts Rules of Order. This will allow maximum participation of HOA members and assist the board to reach decisions on important issues.

It is not uncommon for volunteer board members to have little or no experience in acting on a board of directors or running such an organization. Board members should try to become familiar with the HOA documents. The documents should outline the steps necessary for proper action. However, some situations may require some guidance from someone with more experience. Many HOAs hire management companies to assist with administrative duties. Many of the professional managers are very experienced in assisting an HOA to run smoothly. Experienced attorneys can also provided needed assistance in interpreting HOA documents, assuring proper legal steps are taken when amending the documents, assessment collection, internal dispute resolution, etc. Often a quick phone call can get the HOA headed in the right direction.

Finally, and perhaps most importantly, many problems can be avoided or resolved by encouraging open communication and cooperation among owners and with the board.  BACK

Limiting Rentals
What are the options available as far as limiting rental units?"
We asked several attorneys about this matter and their responses differed. A lot depends on the reason for the limitation. If the reason is, say, that renters are not as desirable as homeowners because they don’t care for the property or follow rules then the battle is more difficult. Renting one’s property is considered one of the basic rights of home ownership. To limit that right or to allow only a small percentage of owners to have the right would surely be challenged by many owners or even by one who is willing to duke it out in court (and probably win).

If, however, the reason to limit is that more than 30% of the units occupied by renters makes financing options more limited thus affecting salability and property values, then the purpose seems more reasonable. In either case, the biggest hurtle is to get 75% approval by owners (typically, but check the governing documents) to amend the Declaration. Expect to pay around $750-$1000 to have the attorney review the documents, prepare the amendment, ballot, ballot explanation and file the approved document.

Once approved, how is it enforced? Enforcement gets administratively complex. Here is how one association handled it:

1. Rentals units could not exceed 20% of total number of units.
2. Rental terms had to be at least 12 months.
3. Existing rentals were "grand fathered".
4. Rentals that became owner occupied for more than 30 days fell out of the rental pool.
5. If 20% of units are rented, other owners desiring to rent are placed on a waiting list. If a slot in the rental pool becomes available, the next on the waiting list has 6 months to rent the unit. If the unit isn’t rented, the owner goes to the bottom of the list and the next is chosen and so on.
6. Each owner renting a unit will provide a copy of the lease to the Board.

Considering the difficulties in monitoring policies like this one and the likelihood that it will legally contested or ignored by certain owners, it seems that a 100% ban on rentals would be a better alternative. To achieve this, the owner of each rental could be given, say, up to a year to terminate the tenancy. After a year, all units would be on equal footing and owner occupied. This issue remains, however, a "sticky wicket". Tread carefully and seek competent legal counsel. BACK

Resolutions: Board Policies That Work
One of the greatest frustrations a board often has is working with the existing governing documents to design rules, regulations and policies that work. The documents are often limited in their scope and application or simply too difficult for the common person to understand. In real life, there are some critical community things like money collection, parking, pets, insurance claims, rules and rules enforcement that often need better definition. Amending the documents is possible but the process is relatively lengthy, expensive and all members must be included in the approval process. But, there is another tool available called the Resolution Process. Here’s how it works:

The governing documents grant the general power to conduct the business and affairs of the association to the Board of Directors. Resolutions provide a systematic procedure to reach, record, promulgate, maintain, and administer far-reaching, precedent-setting actions and decisions. Each resolution deals with a specific topic to define the issue and a procedure on how it will be dealt with. Once enacted, it carries the weight of law in the community binding the Board to following its provisions.

There are two kinds of Resolutions:
Policy Resolutions specifically relate to the long-term management of the Association, including but not limited to, actions affecting members' rights of enjoyment and their obligations, and the protection of the assets of the Association and its members

Administrative Resolutions deal with the internal structure and operation of the Association, including but not limited to, responsibilities of committees, financial procedures, and administration of policies and rules.

The procedure for putting a Resolution in place involves the Board creating and circulating a proposed Resolution to association members for at least 30 days for review and written comment. If the subject matter is "Pets" then the Resolution should refer to any sections in the governing documents that deal with the matter, the Board’s authority to make policy, the reason for the resolution and then the specific guidelines for keeping and caring for pets including penalties, if any. The proposal should be as complete and fair as possible, taking into consideration challenges that could be expected. If the Resolution is fair, well thought out and doesn’t challenge the governing documents, circulating it to the members is usually a painless process, sometimes prompting no feedback whatsoever.

After the review period is over, the Board should consider any and all input received. If warranted, the Resolution should be revised and recirculated to the members for another comment period. If, however, the members are supportive, the Board votes at a formal board meeting either to approve or disapprove the resolution. Resolutions can be amended when necessary by following the same procedure.

Once approved, the Resolution is referenced in the meeting minutes and will be "enforceable" by the Board. The adopted Resolution should then be filed in a Book of Resolutions that is maintained by the Secretary and copies distributed to all current and future Association members.

The Resolution Policy is a great way to deal with those thorny issues that need more depth and development than granted by the governing documents. The member review period allows input that integrates the whole community into the policy process. The point that all members have a voice makes Resolutions an effective policy making tool by helping break down that "us versus them" mentality. Take a look at ways you can put them to work at your community.   BACK

Contract Basics 101
Community associations deal with contracts on a regular basis for hiring personnel, maintenance contractors, arranging for general and service contractors, and for purchasing products. Contracts come in many forms: An invoice, a proposal or a discussion can constitute an enforceable contract. Many community associations do not fully understand the importance of clearly written contracts and contract clauses until after getting burned. The following will help in negotiating and executing contracts that accomplish the intended purpose and basic legal protections.

Have you ever accepted a proposal from a contractor without requiring more? Have you ever signed a contract without reading it? Have you purchased insurance without asking any questions? When presented with a written contract, the board has a fiduciary duty to review it carefully and "negotiate" more favorable terms. Don’t be intimidated by contracts. All contracts can include addendums and counter offers just like in real estate deals.

There are four components that make a legally binding contract: Parties, Subject Matter, Time and Price (Consideration) With them, there is a legally enforceable contract unless one of the parties is drunk, on drugs, a minor, or otherwise lacks the "legal competence" to contract.

Parties. All parties should use their official legal names. Some associations in everyday practice may use a variation of the official name. Check your documents [CC&Rs] for the "official" association name. Look at the Articles of Incorporation for incorporated associations. If it becomes necessary to sue and there is an incorrectly named party, you may jeopardize your ability to collect. Directors or managers should not contract individually for association needs. Make sure the NAMED PARTY is the association. Most CC&Rs provide authority for the board president or some other officer to make contracts on behalf of the association. Authority to sign is sometimes granted to the management company, but this delegation does not change the premise that the association should be identified as the contracting party.

Subject Matter. This might include a description of products, a specific construction project, specific services such as management, legal, financial or laundry facility services. It is very important that it be spelled out clearly in such a way that the association knows exactly what is to be expected. For example, if you fail to specify that both sides of the fence are to be painted, the contractor may paint only the "front" and then leave. If the contract doesn't say what kind of paint or stain is to be used - the contractor may choose an inferior product than you would choose. Further, when soliciting bids, unclear subject matter in the job specifications will result in apples to oranges bids. How can the board choose wisely?

Time. Time for performance is another very important element in a contract. Without it, associations will find it hard to enforce, and be at the mercy of the contractor. What is "reasonable" to the contractor may differ drastically from what the association considers reasonable. "Time is of the essence" should always be specifically stated in the contract, even apart from specific timelines. This tells all parties that time is an important factor and deviations should be avoided.

There should be some deadline which triggers a penalty, unless there is some agreed extension for circumstances beyond the control of the parties. Fencing, painting and roofing contracts are good examples. A penalty clause will protect against a contractor that takes on too many jobs and moves from job to job with empty promises of finishing "soon". Penalties should big enough to get the contractor’s attention and grow daily to prompt action.

Another provision to consider is an automatic renewal clause. It generally requires special action from the association to terminate the contract. For example, some long term contracts like management, laundry facilities and landscaping often have clauses that the contract automatically renews if no notice is given by the association 60-90 days before the anniversary date. If all long term contracts expire at a specific time, then both parties are required to reaffirm the contract, not just the association.

Price (Consideration). There are times where a set price is left out of the contract because of unforeseen circumstances. For example, a roofer that agrees to reroof a building finds that special platforms for the air conditioning units need to be constructed to comply with current code ordinances. The roofer would typically want a "cost plus time and material" contract to cover those unforeseen repairs. The same is common in structural dryrot repairs since much of the damage is hidden. It is still important that all that is seen or known be quantified by a set price. Extras should only be authorized by a written "change order" that details the work to be done and the price.

Common Clauses
Recitals. Recitals appear at the beginning of a contract and discuss the intent and purpose of the contract. There are times when the parties’ intents differ and specific recitals will clarify the original intent. The scope of the contract itself could be stated here.

Extraordinary Circumstances - Acts of God. Sometimes there are special provisions for renegotiating the contract because of extraordinary circumstances that prevent timely completion. A construction contract often contains protection for the contractor if there is an Act of God or disaster that interferes like windstorm, flood or earthquake.

Termination. Both sides generally want the protection of a binding contract so that expectations are fulfilled. However, all contracts should have some means to terminate the contract if it does not work well for the parties. For example, in a construction or painting contract, an association may want the right to terminate if the project is not completed by a date certain, but the contractor may require that all costs expended (such as for building supplies or paint) be reimbursed before termination can be effected.

ADR - Alternative Dispute Resolution. To encourage settlement of disputes outside the court, a good provision to include is for ADR like mediation or arbitration. Mediation is often a desired first step toward resolution. "Mediation" is defined as "intercession of one power between other powers on their invitation to arrange amicably differences between them". "Arbitration" is defined as "the hearing and determination of a controversy by a person either chosen by the parties involved or appointed whose decision is called an award". An arbitration provision may bind the arbitrators to specific rules such as those in effect of the American Arbitration Association.

Limitation on Liability. These provisions are often called indemnification or hold harmless clauses. These limitations should not be unreasonable. The question is "how far do they extend". A property manager generally seeks indemnification from the association if the manager fails in some duty. This means the association may be required to defend the manager if he or she is sued for some failure to act, and pay the damages if the manager is found guilty. Some indemnification clauses protect for simple negligence, others protect for gross negligence. Few protect for intentional, willful or malicious acts. Covenants, Conditions & Restrictions [CC&Rs] often indemnify board members for negligent acts that occur when they are serving the association.

Binding on Heirs and Successors. Without this provision, the contract ends when one of the parties dies, transfers its ownership, dissolves, becomes incompetent, or otherwise incapacitated. Sometimes this is not a problem. For example, if an association hires a contractor to build a fence, perhaps the association would not want the contractors heirs or successors to be responsible for finishing the project if something happened to the contractor. On the other hand, if an association had a contract to lease a property from the developer and that company went broke, the association would want to retain its rights to lease the property with the succeeding entity.

Attorney's Fees Provisions. This provision usually says that if either party is forced to bring a court action under the contract, the prevailing party will be entitled to attorney's fees. This provision serves as a deterrent to default. As long as the association does not breach the contract, an attorney's fees provision would be beneficial.

Construction Contracts Provisions. These kind of contracts are hotbeds for dispute and litigation, so extra care should be taken at the negotiation and drafting stages.

How does one protect against poor construction? Most importantly, provide both detailed bid specifications and standards to the contractor which are referenced in the construction contract. If cleanup is part of the bargain, then state it in the contract. Require performance bonds in substantial construction projects, keeping in mind that the cost of the bond will be figured into the bid. Provide for withholding payment for substandard work. Provide for termination if substandard work is detected at any time. If there are standards stated, it will be much easier for the association to demand that the standards be met. If they are not met, it will be easier to terminate the contract.

How should the payment schedule be determined under a construction contract? The schedule of payments to the contractor should be tied to work completed. DO NOT advance money for materials or prepay. This is a red flag of problems to come. Any contractor you hire should be solvent enough cover reasonable up-front costs. For larger projects, a certain percentage of the contract price could be held back to ensure that all subcontractors or suppliers are paid. Require that the contractor provide lien waivers from all these parties before releasing the "hold back" money.

What does an association do if a mechanics’ lien is recorded against its property? Consult an attorney well versed in contracts and community association law.

In conclusion, it is the board’s fiduciary duty to read and understand and properly prepared contracts that affect the community association. A wise attorney advises to pay as much attention to the "getting out" provisions as the "getting in" provisions. Remember, the well being of the entire association is hanging in the balance. BACK

Deciphering the Bylaws
Question: I was cautioned recently not to interpret the meaning of bylaws or state and local laws covering our homeowner association. I felt like I need a magic decoder ring. Am I getting good advice?

Answer: The board has the duty to enforce the bylaws and is not expected to be an expert in the law according to the Business Judgment Rule. The Business Judgment Rule protects the board as long as they make decisions based on reasonable research, the advice of experts and steer clear of conflicts of interest. From time to time, however, it may be wise to consult with a knowledgeable attorney, especially when there is potential of litigation.

Some older documents may contain provisions that violate current law, like restrictions against children. If your documents are hard to understand, it may be time to redraft them to make them more user friendly. Before investing in the cost of a re-write by an attorney knowledgeable in these matters, request to see a sample of their work. The last thing you would want is yet another set of undecipherable documents. BACK

Pool & Playground Review
With summer here it’s time to make sure that pools and playgrounds are ready for action. Most homeowner associations do not perform legal checkups however, there are sound reasons for doing so:

Review Pool/Playground Rules & Regulations. Eliminate all rules that discriminate against children or single them out for special treatment. Make sure the rules designate hours open. Make sure the rules are distributed to all owners and residents.

Review Signage. It does little good to establish pool or playground rules if those rules are not written and posted in plain sight.

Physically Inspect Gates, Locks and Fences. This should be done with your maintenance personnel to ensure they are in proper working order.

Conduct an Insurance Inspection. Physically inspect the pool area and playground areas with a representative from the HOA’s insurance company. This person may be able to advise you of ways to reduce the exposure to liability.

Review Liability Insurance. It is difficult to determine how much liability is sufficient to protect HOA against pool-related incidents such as slip and falls and drownings, but input from the HOA’s insurance agent should be obtained, and boards should consider whether to raise the limits of liability giving higher awards by juries these days.

Review Local Ordinances & Regulations. Most municipalities and counties regulate fences and gates surrounding pools; however, the type of fence (height, material, spacing, etc.) that is required varies widely from jurisdiction to jurisdiction. County health departments also impose a variety of regulations concerning chemicals and water purification.

Review Safety Procedures & Equipment. If your HOA employs lifeguards, review and verify their training. Be certain they are familiar with the pool, equipment, rules, and safety procedures.

Review Authority of Pool Monitors. If you use "pool monitors", be certain they receive training that covers pool rules, what authority they have to enforce those rules and safety procedures, including summoning emergency assistance. Don’t use the title "lifeguard" unless your pool monitors are trained and certified as lifeguards.

Review Pool Maintenance Contract. In addition to the standard "boilerplate" language that should be included to protect the HOA, the contract should also require the contractor to indemnify and hold harmless the HOA in the event of injury or damage resulting from the negligence of the contractor.

Review Labor Laws. This should include workers compensation coverage, minimum wage laws, required breaks, overtime, and other employment-related issues if you have pool employees or independent contractors.

Review ADA Requirements. Review the requirements of the Americans with Disabilities Act (ADA). If you make your pool or playground available to the public , as this may make these areas places subject to ADA requirements.

Virginia Graeme Baker Pool and Spa Safety Act. This Act was effective on December 20, 2007. The Act applies to pools and spas and requires certain types of safety drain covers and suction entrapment prevention devices. Consult with your pool maintenance company to ensure your pool/spa complies.

Suspension of Privileges. Some Collection Policies allow the HOA to suspend the privileges of a delinquent homeowner. When privileges like access to the pool are no longer available, delinquent homeowners tend to adjust their priority list.

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