Legal Articles
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Almost all governing documents provide at least two remedies:

1) Filing a lien against the owner's property and foreclosing the lien by selling the property at public auction.

2) Filing a lawsuit against the delinquent owner and obtaining a money judgment

Unfortunately, both these options can be time consuming and expensive. Although the governing documents often allow the association to recover legal costs from the delinquent owner, there is never any guarantee that a court will award these costs.

But there’s another way! Consider that while the association is foreclosing or filing a lawsuit, the delinquent owner continues to use amenities and utilities provided by the association. Suspending amenity privileges, like pool access, applies subtle pressure to the delinquent. Often a portion of each owner's monthly assessment pays for water and other commonly metered utilities. Consider suspending commonly metered utilities to non-paying owners.

To ensure that the association has the authority to shut off a commonly metered utility to a unit, the association can amend the governing documents to provide for the termination of utility services for non-payment of assessments. This procedure should provide for adequate notice to the owner prior to suspending any utility services. Another quicker and cheaper method is by enact a Termination of Utilities Resolution. This resolution needs to comply with the governing documents, federal and state statutes plus provide for a notice and appeal procedure.

Although this procedure sounds radical, it is extremely effective in curing delinquencies. As with any rule, if there is no teeth for enforcement, some will challenge it all the way. If these personalities live in your community, consider "drying up" your delinquencies.  BACK

Car Wars
It’s a war out there...Car ownership and land costs on the rise...street width and parking space on the decline. Where the two meet isn’t pretty and battles erupt: parking committees posting dayglo orange violation stickers on vehicles, roving tow trucks with instructions to hook and tow on sight and neighbors duking it out over parking spaces.

In an effort to resolve the problems, the Board often enacts a reserved parking system. If your board has invoked such a plan, is it in compliance with the governing documents? In condominiums, each owner owns an undivided interest in the common area parking spaces. In a homeowners association, every owner has an easement to use the common area parking. So, all residents have the right to use any parking space, provided the space is vacant. By assigning parking spaces to a particular owner, the Board may be illegally precluding residents from freely using available parking. Read the governing documents carefully. The Board must have specific power to enact reserved parking in the common area.

Assuming that your association's governing documents do provide the Board with the authority to assign parking spaces, before embarking upon a reserved parking scheme for your community, there are a number of issues still to consider:

1. How many parking spaces will be assigned to each unit or lot? After these spaces are assigned, are there enough spaces left to designate as "Visitor Parking"?
2. Are the parking spaces situated so that each owner will have a reserved parking space close to the front door? What happens if there is only one space in front of two units or no spaces in front of a particular unit at all?
3. Do owners have the right to trade or sell reserved space?
4. What type of registration system will be implemented for tracking violators? And who will do the monitoring?
5. What is the policy for handicapped parking spaces?
6. How will the reserved parking system be enforced? Fining? Towing? Make sure your towing policy is in compliance with local ordinances.

Car Wars. This is not a battle easily won. Americans believe parking is among the Bill of Rights. Before getting too radical with a parking policy, consider the practicality of monitoring it and the conflicts that could arise from enforcement. It may be more painful than leaving things as they are.  BACK

Fixing Your Documents
It’s been said, "If you ever truly want to understand something, just try to change it." Making amendments to your governing documents fits this description to a "T". Making changes in one area often has significant ramifications in another area.

First of all, there are several reasons NOT to amend your documents:

Reason #1. To conform to current state statutes. Since the statutes prevail over the documents, there is no need to amend the documents. This would require an amendment every time there is a change in the statute. An this can happen frequently.

Reason #2. To eliminate developer language. After the developer has sold all of the homes in the association, the language becomes obsolete.

Reason #3. To beef up rules and regulations. The Board is empowered to make rules and this can be done apart from amending the CC&Rs. An accepted, easier and cheaper process for expanding the scope of rules can be handled through the "Resolution Process". Resolutions are designed to address issues like collections, pets, parking and architectural control that need a broader definition and enforcement policy.

The criteria for amending documents is normally found in the governing documents. Look for the following:

1. What percentage of the voting interest is required to amend the documents?

2. Is a meeting required to vote or can is a mail ballot sufficient?

3. If an owner does not vote, is it considered in favor of or against the amendment?

When amending the documents, work with a knowledgeable attorney. (They invented the process, right?) The board and attorney should agree on a fee prior to beginning the process. Things that will affect the cost are: Will the attorney only review the board’s proposed amendments and make suggestions? Will the attorney draft and record the amendment?

Owners input should be included in the amendment through a meeting or survey. Involved owners are more likely to support it when they understand the goal.

Whether to consider single or multiple amendments simultaneously depends on the complexity of the issues. Too many complex amendments may be confusing. If the amendments are straight forward, include them all and vote on them individually.

Change can be good IF there is real need. Don’t fix it if it ain’t broke. BACK

Addressing Construction Defects
One of the first orders of business for a new Board is to conduct an evaluation of the physical condition of the premises and determine if there are any structural defects which need to be repaired.

Most purchase agreements for new construction in a community association contain a 12 month express warranty for materials and workmanship. In addition, there is a common law implied warranty of habitability which also exists to cover latent defects for a specified period of time after discovery. Lastly, most states have a statute of limitations on these types of defects running from the date of defect discovery and usually a set period of time from the actual completion of construction.

Determining the Scope & Extent of the Defects. New construction requires a "breaking-in" period involving building settlement, seasoning of lumber, concrete drying, etc. Statute of limitations permitting, it is recommended that an association experience a full cycle of seasons prior to commencing the final inspection process. Serious defects apparent to the untrained eye should obviously be handled on an ongoing basis and owners should be reminded to report defects promptly.

The Spring Walk Through. A committee should be designated to walk the grounds and inspect the premises to make note of obvious physical defects. Chipping paint, cracked masonry, dead shrubbery, etc. should be specifically identified by location. Often a builder will request to participate to create his own "punch list".

How to Assess the Damages. Since a Board generally consists of lay people, they should hire a qualified and licensed architectural/engineering firm that is experienced in dealing with multifamily residential developments. The selected candidate should be given the Board’s inspection report and then compile a comprehensive report containing:

• Scope, extent and locations of defects
• Building code violations (if any)
• Cause of defects
• Recommended procedures for repairing defects
• Itemized costs for any repairs to be made
• Anticipated remaining useful life of all major amenities (roofs, parking lots, siding. etc.)

The purpose of the report is three-fold: (1) to establish a basis for discussions with the developer for possible settlement of developer liability; (2) to establish an initial basis for potential litigation, and, (3) to provide the Board with information to help establish proper reserves for future repairs and replacements.

Commencing Negotiations. Once the engineering report has been completed, the developer should be notified in writing as to the extent and scope of the defects and should be invited to meet informally to discuss the issues. The association should provide a copy of the report to the developer in advance.

If the developer is willing to discuss the issues, an association should be prepared to refute the customary defenses:

• Ordinary wear and tear not covered by warranty
• Lack of preventive maintenance
• Negligence
• Waiver of the implied warranty

A developer should be given a reasonable opportunity to repair construction defects. As a practical matter, most experienced developers budget for after sale repair work. However, the Board should consider if (a) The developer has a track record for living up to his word; (b) This is merely a stalling tactic, or (c) The repair work will be worse than the original construction.

When Negotiation is Unsuccessful. If the developer is uncooperative, the Board needs to determine if the scope of repairs warrants the expense of legal action. The Board should also get a legal opinion as to the legal theories of recovery and the risks and liability involved in pursuing litigation.

Advising the Membership. Due to the potential for enormous costs and lengthy delay, it is important that the Board remember that the owners will underwrite the cost. A special meeting should be called to meet with the Board, attorney and engineer to discuss the ramifications.

Final Resolution. Lawsuits may drag on for years while costs escalate and the buildings deteriorate. The Board’s time, patience and nerves will likely be stretched to the limit. These possibilities must be carefully evaluated. An alternative of negotiation should be seriously considered recognizing that accepting a piece of the pie may be bigger, after a lawsuit is finished, than the whole pie. Get good advice, don’t act rashly and keep the idea of compromise in clear view. Excerpts from Guilt by Association by Jordan I. Shifrin  BACK

The 3 Rs: Rules, Regulations & Resolutions
Every community association has various methods available for establishing acceptable community standards. As a benchmark, community standards must stand the test of federal law: For example, the board cannot enact a rule that flies in the face of the Fair Housing Act.

Sometimes community standards or rules are clearly defined in the governing documents, also called the Declaration and Bylaws or CC&Rs (Covenants, Conditions & Restrictions). More often, however, these documents only provide a framework or starting point, leaving the "fleshing out" process up to the Board. This is done to allow flexibility and customization of policy. The Board may use either rules and regulations or resolutions to accomplish this goal. So what’s the difference?

Rules and Regulations should be limited to addressing rules of conduct in the common or limited common area property. Appropriate topics include:

• Hours of operation
• Restrictions (like pool rules) and,
• Limitation on guest use.

When adopting new or revised rules, it’s wise for the Board to solicit owner input for a greater degree of compliance. And always make sure to follow the dictates of governing documents when adopting, amending or revoking rules and regulations.

Resolutions are the preferred method of establishing procedures for the Association. Resolutions come in two flavors: policy and administrative.

Policy Resolutions define acceptable community standards. An example of a policy resolution: Many governing documents are unclear with regard to maintenance responsibilities. Who repairs a water supply line after it enters an owner’s unit? Who repairs damage from a flood originating in an upper unit? There are many variations on this theme that could be answered in a policy resolution that defines association versus owner maintenance responsibility. Other significant and critical policy resolutions deal with money collection, parking, architectural guidelines and enforcement procedures.

Administrative Resolutions define procedural guidelines, like how to hold more effective board and homeowner meetings.

The mechanics of formulating a resolution: The resolution should first cite the relevant provisions of the governing documents and any applicable state statute, especially those sections which give the Association authority to establish policies. Following the authority section are the details of the resolutions. It is advisable to circulate any proposed resolution to the membership for a minimum 30 day period for comment before the Board votes on it. Once approved, it should be dated and signed by the Board President and the Secretary.

A word about amending the governing documents: As opposed to rules, regulations and resolutions, amendments must be approved by a required percentage of the owners dictated in the governing documents, often 75% or more. Reaching this majority is not easy so amendments should not be undertaken lightly. The process is relatively costly and time consuming. If, however, the documents are unwieldy or in violation of the law in some respect, amending may be prescribed. Consult with an attorney knowledgeable in homeowner association law.

Rules, regulations and resolutions help solve a frequent problem in homeowner associations: inconsistent enforcement that results from frequent board turnover. Inconsistent enforcement may lead to permanent unenforceability of a particular restriction. Rather than reinventing the wheel every time a problem arises, thoughtful rules, regulations and resolutions can be crafted that answer most questions so the Board only need deal with those periodic issues that fall outside the norm. Article includes excerpts by attorney Rich Vial of Portland Oregon. BACK

Hats Off to Lawyers
Dr. Zeuss wrote a book entitled "The 500 Hats of Bartholomew Cubbins" wherein Bartholomew was ordered to remove his hat in the presence of the king. Even though he tried to comply, every time he removed his hat, another would mysteriously appear.

Lawyers wear many hats as well. They are trained in multiple disciplines that can be of great value to homeowner associations. Here are some of the important hats a competent homeowner association attorney should wear well:

Business Hat. The Board is responsible for the biggest asset most people own. A community association should be run like the business that it is. The attorney’s role is to advise the board in business situations to keep the board and association out of trouble. An attorney should review and/or draft construction, employee and management contracts to steer the association clear of avoidable disputes.

Contract Negotiator Hat. Attorneys specialize in the art of negotiation. In any effective negotiation, there are techniques, language, strategies and timing that make or break the deal. An attorney can be invaluable in striking a better bargain.

Collection Hat. Inevitably, some owners refuse or cannot pay assessments they owe. After best efforts to collect the debt internally have been exhausted, the association attorney can often bring speedy resolution to the matter using the association’s legal rights to lien or foreclose owner property. With a properly crafted Collection Policy, the attorney fees can even be recouped from the delinquent owner.

Financial Advisor Hat. Lawyers can assist in evaluating reserve fund requirements, borrowing money and contractor bonding requirements which all have legal consequences.

Management Consultant Hat. Many associations do not have the benefit of an experienced and knowledgeable association manager to guide the Board in its day-to-day operations. The association attorney can in many cases fill this gap.

Construction Hat. An experienced community association attorney should be familiar with common construction problems and assist the Board to sort out association versus owner responsibility, developer warranty issues and contractor compliance issues. An Areas of Responsibility List assists in identifying who is responsible for what.

Mediator Hat. Occasionally, situations that could culminate in a lawsuit can be handled relatively painlessly with a dispute resolution process. Your attorney should be willing to advise such a course of action before jumping directly into court.

Some other traits the attorney should have:

Time for Your Business. While this may seem obvious, some attorneys are stretched to the limit work-wise. It’s good to clarify expectations about attorney availability and work turnaround up front.

Competitive Fees. Attorneys sometimes have dramatically different fee schedules. Moreover, not all association legal work requires a senior attorney to complete. Sometimes the work is clerical and sometimes a legal assistant can perform the task at a substantially reduced hourly rate. This should be clarified in advance and your attorney should be committed to only charging the level of expertise required for the work.

Like Bartholomew, lawyer hats come off only to have another appear. It behooves the Board to associate with only a homeowner association law specialist. If you don’t already have one, go shopping today. Like a hat on a raining day, lawyers do come in handy. Be prepared.   BACK

Facting the Disputes
Neighbors aren’t always as neighborly as they could be and, on occasion, have a difference of opinion about issues that affect them jointly. Governmental regulations often impact homeowner associations where residents own their own lots (unlike condominiums where all owners own an undivided interest in the real estate).

Trees

• Homeowners have a legal right to trim neighbor's trees whose branches overhang on their property to the property line, but may not go on the neighbor's property or destroy the tree. Most states have fining provisions for those who intentionally harm another's tree.
• A tree trunk which stands partly on the land of two or more people is called a boundary tree and belongs to both property owners. All owners must agree before a healthy boundary tree may be removed.
• City government and utility companies whose equipment is threatened may trim or remove the dangerous tree, or require the homeowner to do the same.
• Certain species of trees may be prohibited. Examples: trees that cause allergies, harm other plants, or grow too close to a street, intersection, power line, etc.

Fences

• Most fence ordinances regulate location, height, material used, color and appearance.
• Height restrictions may also apply to natural fences of bushes or trees if they meet the ordinance's general definition of fences. Trees that are planted in a row and grow together to forma barrier usually considered a fence. The city may grant a variance (exception to fence ordinance) to homeowners who want to block noisy or unsightly adjacent commercial properties.
• Fences on a boundary line belong to both owners. Both are responsible for its repair and upkeep.

Noise

• Almost every community adopts a local noise ordinance prohibiting excessive and disturbing noise referred to "Quiet Enjoyment".
• Noise ordinances may forbid operating a noisy home-based business, discharging firearms or firecrackers; mechanical equipment, barking dogs, etc. Some communities designate certain "quiet hours."
• Noise can also be a health hazard. Exposure to sounds of 115 decibels for 15 minutes a day causes hearing loss. A train is 120 decibels; live rock music is 130. Noise also affects the ability to concentrate and learn. Children exposed to excessive noise have problems with reading and memory.
• Many areas also prohibit sustained noise that exceeds a certain decibel level. The decibel limits may be set according to the time of day and the neighborhood zoning. When a neighbor complains, decibel level monitoring equipment can be placed on the property line for a reading.

Views

• Homeowners have no right to light or view unless it has been granted by law or subdivision rule. The exception is: no one may not deliberately block another's view with a structure that has no reasonable use to the owner.
• Some cities have adopted view ordinances. These laws protect a property owner’s view at the time of purchase from being obstructed by construction and growing trees. View ordinances can contain limitations, however, that take most of the teeth out of them. Some examples: Certain species of trees may be exempt, especially if they grew naturally. A neighbor may be allowed to complain only if the tree is within a certain distance from the property. Trees on city property may be exempt.

While homeowner associations often have their own criteria for noise, views, trees and fences, sometimes relief is available from the local government. And sometimes the government itself is the problem. Go figure. That’s the facts and nothing but.  BACK

Contractor or Employee?
One of the traps homeowner associations fall into is hiring "contractors’ that aren’t legally contractors. Oh, they may claim they are, but just wait until they have a tax problem or injury and suddenly, the association has just gained a new employee, possibly with a lifelong disability. The IRS has a common law test to determine whether a worker is technically self employed or not. Most have to do with the customer’s "right of control". The following are conditions that could lead to implied employee status. No one condition necessarily triggers it but if a number of them exist, beware. (See IRS Revenue Rule 87-41 for more information)

1. Is the individual required to follow instructions?
2. Do you provide training to accomplish the work?
3. Is the individual regularly employed at association work?
4. Is the work done personally by the individual?
5. Does the association directly pay the individual’s assistants?
6. Is there a continuing ongoing relationship?
7. Are there a set amount of work hours?
8. Is the individual engaged full time?
9. Does the individual work on the association’s premises?
10. Does the individual work according to a schedule set by the association?
11. Is the individual required to submit regular reports?
12. Is the individual paid by time rather than by project?
13. Is he reimbursed for expenses?
14. Does the association furnish the tools and materials?
15. Does the individual have vested interest for performing the services?
16. Can the individual realize a profit or loss?
17. Does the individual work for more than one customer at a time?
18. Does the individual make his services available to the general public?
19. Does the employer have the right to fire the individual?
20. Does the individual have the right to terminate the relationship?

An important element is the ability of the customer to dictate not only the result, but also the process used. To safeguard the interests of the association, use only properly licensed, bonded and insured contractors unless the board consciously elects to hire an employee.

All contactors should produce a business license, liability insurance and/or a verifiable Construction Contractor Board number (if required by the state) to corroborate their claim. Are they listed in the Business Pages of the phone book? Do they have a business card? All these are signs of a legitimate contractor.

Use this 20 Point list to "filter" all new contractors so you don’t get more than you bargained for.  BACK

Renter Rights
The phrase "absentee landlord" conjures up images of the "tenant from hell" and an owner who could care less what happens. However, both are myths...both want the highest return for their investment. What benefits the association will also benefit them.

The Board can take some steps that will help assure a more successful tenancy. It is reasonable to want tenants and landlords to comply with the rules. Of course, the tenant has to know what they are in order to do that. Remind the landlord that the tenant is bound by the same rules as owners. Include renters with other new residents who receive information summarizing the rules and amenities.

Landlords should provide the Board with:

~ Name of the tenant, emergency number and contact
~ Car information (make, model, plate number)
~ A copy of the rental agreement that lists the association rules as a condition of the agreement

The last item is the most important because it places the burden on the landlord to advise the tenant of rules and requires that the tenant acknowledge receipt of that information.

Landlords also should:

~ Perform background checks on prospective tenants
~ Gather references from previous landlords (not the present one, who may have a vested interest in getting this tenant out)
~ Understand the landlord tenant laws.
~ Make sure to identify all occupants in the lease; and
~ Be clear in the rental agreement about requirements for pets, parking and other association rules.

Tenants are not second-class citizens. Treated like members of the community, they will probably act the part. Integrating them as neighbors, they will take care of the property and respect the neighbors. Treat renters like owners and all win.  BACK

Appearances Count
One of the advantages of a homeowner association is being able to enforce appearance standards (aka Architectural Control). Appearance standards are designed to protect everyone’s property values. If all homes follow the same basic theme, the average home buyer will be willing to pay more.

Most regular subdivisions have appearance standards, but, in truth, only a lawsuit (or a Mafia hit man) can stop someone determined to violate them. Since most neighbors hate confrontation, appearance standards usually go by the wayside opening the door to the things like RVs parked along side the house, tarped "classic" cars, hubcap sculptures and eye wincing paint colors. Thus, the need for appearance standards and the enforcement thereof.

The governing documents usually outline the appearance standards when they are very strict but often say little when they’re not. They may define the standards but not the enforcement method. leaving the Board in an awkward position when confronted with multiple appearance "challenges". This is a great topic for the Resolution Process. Resolutions are board policies that deal with complex issues like collection of money, pets, parking and appearance standards. Resolutions provide a framework to deal with them effectively. By the way, resolutions cannot amend or change the meaning of the governing documents, only expand on the authority. Amending the governing documents requires an appropriate vote of the homeowners.

After your Appearance Standards Resolution is drafted, ask your attorney to review it for compliance with statute and your governing documents. Then, allow the other owners to participate in the outcome. Once drafted, it should be circulated to all the owners for a 30 day review and comment period. The approval process shouldn’t be rushed. Change is difficult for some.

A good way to broach the subject with the membership is to send out a newsletter discussing the reason why: to preserve property values. Consistent appearance standards are in everyone's best interests. Describe how, for example, junk vehicles, unkempt lawns, collapsing fences and weathered or hot pink paint drag property values down (without pointing fingers or naming names). Encourage attendance to a special meeting to discuss the Appearance Standards Resolution.

After the new Appearance Standard Resolution is cussed, discussed, amended and approved, it’s time to start enforcement. Select the closest equivalent you have to Henry Kissinger and a Mafia hit man (that’s a joke folks). If you have none of these, after appropriate written notifications, make good use of your attorney to turn up the heat. Never be guilty of selective enforcement. Treat everyone the same.

Appearances do count and it’s up to the Board to watch dog what happens in the community. Don’t wake up one day and ask "Where am I and why am I in this handbasket?" Protect your assets today!  BACK

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