Can a Board Start Enforcing the HOA’s Covenants and Rules When a Prior Board Did Not?

Without a doubt, one of the most common legal issues Boards face is trying to get its Association back “on track” when prior Boards have not diligently enforced its CCRs, Bylaws or Rules in the past.

I came to the realization years ago that if a new Board (or new attitudes) comes into office, and if they were forever barred from enforcing certain rules and covenants because a past Board did not, then that Association may might as well dissolve as there would be no possibility of it ever getting back to the intended “aesthetic standard” or “qualify of life” which the owners expected when they purchased.

I could not accept this result (of a Board being prevented to correct the past).  I have advised Boards that they CAN start enforcing their Governing Documents – you just simply have to apply a few key concepts when doing so.

In addition, Utah finally adopted a standard for Board’s enforcement decisions that essentially “codifies” the Business Judgment Rule (“BJR”).  The BJR simply is a principle of law that states if a Board made a reasoned, educated decision intended to be in the best interests of the Association, its “decision” will not be seconded guessed by the courts.  This concept is reflected in the Acts for both condominiums and non-condominiums and I’ve cut and pasted the Community Association Act’s text (for non-condos) below.

However, the law provided in the Code section(s) below is not the focus of this entry but it is related to my following comments and is a very important statute for all Boards to know.  Please contact our office at any time to discuss the “BJR.”

This entry is focused on the defense owners often raise when the Board attempts to enforce its CCRs and Rules against a member.  I am sure many of you have heard one or more of the following defenses: “…you are picking on me;” “…you are not treating everyone the same;” or “…you can’t enforce this against me because no one has enforced it in the past.”

To be concise, the most common defense to enforcement are:

  1.  Arbitrary application of the CCRs or Rules;
  2. Selective enforcement;
  3. Waiver;
  4. Changed conditions;
  5. Estoppel;
  6. Statute of Limitations has passed; and
  7. Abandonment of the covenant.

We are going to  be focusing on the defense of SELECTIVE ENFORCEMENT.

Please think back to how this blog entry started – if a (new) Board could not start enforcing covenants that may have been ignored in the past, then the Association will forever be on a downward spiral and never be able to correct past decisions.  Surely this cannot be ‘the law?’

I should caution you, however, that if prior Boards have been negligent in their duties so much so that the character of the neighborhood has totally changed, and therefore, there is no value at all in enforcing the covenant(s) in the present, covenants can be abandoned.  Nevertheless, THIS IS RARE.  There must be no value to the community if the covenant is enforced to find abandonment.  As an extreme example, if you have 20 homes in your community and the CCRs require a “cedar shake roof” but, because its expensive, the Board has turned a blind eye to those who have installed asphalt shingles and 18 of the 20 homes are not in compliance.  If an ordinary potential buyer comes through the community and has no reason to believe the asphalt shingles are prohibited and, at this late date there no longer a “feel” that certain roof types are required so there would be no benefit in trying to enforce now, it is possible that the roofing covenant MAY be abandoned.  If you are struggling analyzing what you can or cannot enforce, please contact us.

BACK TO THE DEFENSE OF SELECTIVE ENFORCEMENT AND WHEN THAT DEFENSE FAILS!!!

The following is a real life factual situation.  A developer of a condominium community had granted permission to several owners to alter deck railings – is such a manner that they were not consistent with the type of materials/style that was required in the CCRs.

The (new) Board (after the developer had lost administrative control), wanting to bring back a uniform style and aesthetic to the community.  They demanded that any owners that had received such “permission” must return their railings to the original construction.

A lawsuit resulted.  The defense?  SELECTIVE ENFORCEMENT of the Board by the demanding that only a few owners must now follow the CCRs (interestingly, as you have likely noticed, those owners even had ‘permission’).

The Trial Court ruled that the owners who had modified their railings must restore them to the original construction.

The Court of Appeals affirmed the Trial Court’s ruling.

FACT – the alterations made with the developer’s permission, before turnover, were the only alterations that had continued in the community.

IMPORTANT LESSON – An important lesson here is that the Association, ever since the (new) Board “inherited” the responsibility for enforcement within the community, it had consistently stopped any further violations of the CCR provision that stated “no alterations to the railings.”  The court heavily relied on the concept that the (new) Board had CONSISTENTLY performed its duty even though it had done so only PROSPECTIVELY.

The courts ruled that although the developer’s enforcement had been lax in the past, the Association’s Board’s even, non-arbitrary and consistent prospective enforcement WAS NOT SELECTIVE ENFORCEMENT.

This opinion goes to show that a CCR or Rule that is consistently and uniformly applied generally does not constitute selective enforcement as many offended owners are quick to assert, EVEN IF SOME PAST VIOLATIONS WENT UNPUNISHED.

Our job at RICHARDS LAW is to help your Board adopt a uniform policy that will help you clean up past failed enforcement of a prior Board and thereby helping you overcome this defense.

Finally, in other situation, the Board decided to start enforcing its antenna restriction.  This time, the offended owner(s) did not complain about the prior Board(s) not enforcing the antennae restriction, they complained that OTHER COVENANTS IN THE ASSOCIATION where not being enforced so the antennae covenant could not be either.  THIS ARGUMENT FAILED AS WELL.

Please take a moment and read the following Code Sections to see how they ‘dovetail’ with the above court decisions.  A future blog entry will focus on the BJR as described below.  In particular pay special attention the text I highlighted in RED.

As always, the attorneys and team at RICHARDS LAW looks forward to helping your community regardless of the issue.

Sincerely, John Richards, Esq.; fellow CAI CCAL.

57-8a-213. Board action to enforce governing documents — Parameters.
(1)
(a) The board shall use its reasonable judgment to determine whether to exercise the association’s powers to impose sanctions or pursue legal action for a violation of the governing documents, including:
(i) whether to compromise a claim made by or against the board or the association; and
(ii) whether to pursue a claim for an unpaid assessment.
(b) The association may not be required to take enforcement action if the board determines, after fair review and acting in good faith and without conflict of interest, that under the particular circumstances:
(i) the association’s legal position does not justify taking any or further enforcement action;
(ii) the covenant, restriction, or rule in the governing documents is likely to be construed as inconsistent with current law;
(iii)
(A) a technical violation has or may have occurred; and
(B) the violation is not material as to a reasonable person or does not justify expending the association’s resources; or
(iv) it is not in the association’s best interests to pursue an enforcement action, based upon hardship, expense, or other reasonable criteria.
(2) Subject to Subsection (3), if the board decides under Subsection (1)(b) to forego enforcement, the association is not prevented from later taking enforcement action.
(3) The board may not be arbitrary, capricious, or against public policy in taking or not taking enforcement action.
(4) This section does not govern whether the association’s action in enforcing a provision of the governing documents constitutes a waiver or modification of that provision.

IS YOUR BOARD READY FOR 2019?

ISSUES FOR BOARD REVIEW FOR 2019
1. Litigation Trends 2018 – The most common issues we dealt with in 2018 that actually went to court:

  • Architectural Restriction Disputes
  • Submittal of Plans to the ACC and Whether the Interpretation was Correct
  • Rogue Board Members – namely, Board members who do not support the majority Board decision and start to disparage the sitting Board
  • Water Shares
  • Misuse of Associations Funds by the Board
  • Selective Enforcement – the all to common allegation “the association is picking on me and no others
  • HOA Lien Foreclosures (despite a slightly better economy, we actually foreclose more HOA liens in 2018 than in years past.

2. Basic Policies Every Association Should have in Place

– Collection Resolution (critical)
– Document Retention Policy (newer but highly recommended)
– Fining Policing / Schedule of Fines (critical)
– Code of Conduct – for Board and Owners – (more and more common)
– Confidentiality Policy for Board Members (more and more common)
– Covenant / Rule Enforcement Policy (common). At what point does a Board have to get involved with a dispute?
– Hearing Policy (for owner to dispute a fine, etc.)
– Electronic Voting / Communication Policy

3.   13 Things to Check / Do Every Year:

1. Your Nonprofit Corporate Status – updated? Renewed?
2. Your Registered Agent – updated? Why is this important?
3. Your Utah HOA Registry Status – know what the penalty is?
4. Do you know which provisions of your CCRs are TRUMPED by Utah law?
5. Do you have some sort of welcome packet within your community? Why might this be a good idea?
6. Plan your Board meeting calendar for the full year – why is this a bad or good idea?
7. Have you started to keep a Book of Resolutions? (what are Resolutions?)
8. Are you Vendor contracts in 1 central location?
9. Do you file your own liens? Do you know Utah’s requirements for liens?
10. Are you keeping minutes? Detailed (they should not be detailed)? Executive Session – do you know the rules for Executive Session?
11. Is it time to update your Reserve Analysis?
12. Do you have the right insurance? What is your deductible?
13. Do you have the “basic” policies listed above?
4. 2019 Legislation
1. Fixes to Reinvestment Fee Statute (master / sub HOA issue)
2. Fixes to “payoff amounts at closing” in both statutes
3. Records – clarifying what is and is not an “association record”
4. Fines – issues about fining in increments of 10 days for consecutive violations…
5. HOA Registry Fix – “lien may not arise” versus “lien may not be enforced”

 

SAMPLE AGENDAS for BOARD AND ANNUAL MEETINGS

Like you, I attend a lot of Board meetings and annual meetings. I must admit that I am often surprised that there is not a formal agenda on many occasions. There are two key reasons an agenda is necessary: (1) to keep the meeting efficient and orderly; and (2) to primarily focus on present issues at hand – not ones raised for the first time at the meeting itself (this is more true for annual meetings than Board meetings).

The following are sample agendas of a Board meeting and annual meeting. Please take a moment to review and see if your community could benefit from these outlines.

I would like to pay special attention #7. Most of that is standard but we advise the you, the Board, specifically review each delinquent account and know which stage of collections they are in and authorize the next action.

I look forward to speaking with you all soon.   John

————————————————————————————————————

BOARD MEETING AGENDA
Date ______________

1. Call to Order – Establish a quorum

2. Open Forum: Open Forum can be held at the beginning, middle or end of the meeting at the Board’s discretion.

During open forum, each attendee may address the Board for up to three minutes. A director or manager may briefly respond to statements made or questions posed. Speakers must observe rules of decorum and not engage in other disruptive behavior.

If a speaker is in the middle of a sentence when time is called, he/she may finish their thought before sitting down. The time guidelines ensure that others will have an opportunity to speak. Speakers may not allot their time to others. All persons must follow the Meeting Rules listed at the bottom of this agenda.

3. Approval of Minutes

4. Reports
a. Treasurer’s Report (review up-to-date financials)
b. Committee Reports
• Architectural Committee
• Landscape Committee
c. Manager’s Report (if you have a manager)

5. Unfinished Business (from last meeting – the following are examples)
a. Balcony Repairs
b. Installation of new security gates

6. New Business
a. Tree trimming
b. Schedule for painting buildings 3, 4 and 5
c. Approve Liens on delinquent owners
d. Review and approve next year’s budget
e. Possible change in Board officers

7. Adjourn to Executive Session
a. Member disciplinary hearing
b. Personnel issues
c. Roof repair litigation
d. Landscape proposal
e. Foreclosure authorizations

Meeting Rules: No audio or video recording allowed by attendees. However, the Secretary may record the meeting to aid in preparation of minutes. The recording is deleted once the minutes have been prepared.

As provided under Utah’s open meeting law, members may observe the meeting but do not have the right to participate in the Board’s deliberations or votes. Members may address issues during the open forum portion of the meeting. If attendees become disruptive, they may be expelled from the meeting and/or fined (this latter part must be in your rules).
ANNUAL MEETING OF EASYSTREET HOMEOWNERS ASSOCIATION
DATE ________________

1. Registration/Sign In.

2. Call to Order: The inspector of Elections determines when quorum has been achieved. At that point, the meeting is called to order by the President.

3. Approval of Minutes: Unless the minutes were already approved by the Board (if authorized by your Bylaws), a motion is usually made to waive the reading of prior year’s minutes and followed by a voice vote to approve the minutes.

4. Reports: Reports are traditionally given at the annual meeting but because of low turnout, many HOAs forgo them and send written reports to all owners. It reports are given at the meeting, they usually include a summary by the Treasurer of the HOA’s year-end financial condition and a report by the President of the past year’s projects and a look forward.

Irrespective of turnout I always recommend at least 2 items be discussed (1) finances – with appropriate financial statements handed out; and (2) projects to be undertaken this next year.

5. Nominations (if Board positions are open): If authorized by the election rules, nominations are taken from the floor followed by statements of nominees.

6. Close the Polls: Some associations close the polls a day or two before the meeting (see your Bylaws – this is rare but please check). If polls remain open during the meeting which is most likely the case, (i) the President should call for a motion to close the polls so the counting of ballots can begin or (ii) the Inspector of Elections can ask if everyone has voted that wants to vote and simply announce that the poles are closed.

7. Presentation of Awards: Many associations present awards to retiring directors and recognize the work of committees.

8. Open Forum: Members in good standing are free to speak on any matter of interest to the community. Members must observe rules of decorum and disrupt the meeting. Each person will have three minutes to speak. If they are in the middle of a sentence when time is called, they may finish their thought before sitting down. The time guidelines ensure that others will have an opportunity to speak. Speakers may not allot their time to someone else.

TIP: Despite not knowing what members may raise, I have experienced more disputes because the Board did not let members speak at the annual meeting. So, my advice is to definitely allow owners to speak, but control the process. Regulate the duration of time they can speak and never make a decision at that time; only ask questions and take note of the concern. Make sure the owner(s) feel as though their issue has been heard and that you will get back to them. And then, in fact, GET BACK TO THEM.

9. Election Results

10. Adjournment

11. Organizational Meeting: New and continuing Board members will meet after the meeting to elect officers and establish Board meeting dates an

ASSESSMENT AND FINE COLLECTIONS – Important considerations for Attorneys, Boards and Managers

Hi everyone – I hope you have had a nice summer.

I spoke yesterday to a group of attorneys for “continuing education” credit – my topic was HOA collections.  Even though I’ve addressed this in the past, I wanted to get a “summer blog” entry to you and thought I would use my outline from yesterday.

Please see the following and note that our firm has an exciting lineup of topics for the rest of the year – and you will be seeing my entries much more frequently.

Finally, for those of you in Salt Lake, I am holding HOA UNIVERSITY this Saturday at 9 am to 10 am.  Light refreshments served; not cost; but please RSVP if interested by calling 801-274-6800 or emailing Jana at:  jana@richardshoalaw.com

TOPIC:  DO I REALLY HAVE TO FOLLOW MY GOVERNING DOCUMENTS?

COME SEE OUR NEW OFFICES:

4141 So. Highland Drive, Suite 225

SLC, UT 84124

801-274-6800

john@richardshoalaw.com

http://www.richardshoalaw.com

 


LET’S GET TO IT:      FAIR DEBT COLLECTION

The following are some important considerations to avoid a Fair Debt Collection Act claim when dealing with HOA assessments and FINES.  Please give this a quick read – I look forward to talking/seeing most of you in the near future as your needs come up.  For Boards collecting its own debt, the Act may not strictly apply, but PLEASE be cautious of the “triggers of liability” below.

Thanks in advance – John

 

Whom the Fair Debt Collection Practices Act (the “Act” or “FDCPA”) Covers
1. The FDCPA protects debtors from being harassed by creditors.
2. If creditors violate the act, consumers can sue them for damages—even if the consumer actually owes the debt.
3. The act applies only to consumer debt, like credit card debt; it doesn’t cover business debts.
4. The Act restricts the activities only of third parties collecting debt on behalf of another entity.
5. It’s an important consumer protection statute that does apply to the collection of HOA assessments BUT it typically doesn’t apply to homeowners associations attempting to collect a debt themselves.
6. Management companies typically are not subject to the Act, BUT THIS IS NOT CONCLUSIVE.

There are cases out there that conclude that management companies aren’t debt collectors but debt servicers. A debt collector is someone who collects debt when it’s past due. A debt servicer collects debt whether it’s past due or not.
7. BUT – beware to HOA attorneys – the Act applies.

Actions that Trigger Damages
The FDCPA allows consumers to recover damages if they can prove a debt collector has violated the act.

It’s a violation of the FDCPA for a debt collector to:

• Lie or mislead debtors

• Yell, shout, swear, name-call, use racial slurs, or threaten violence against debtors

• Contact debtors’ friends, family, co-workers, or neighbors and tell them the debtors owe a debt or to call debtors at work after they’ve asked the collectors to stop

• Make threats to sue debtors or garnish their wages or claim they can be arrested or jailed for failing to pay

• Directly contact debtors who are represented by a lawyer

• Call debtors over and over and over and over  (do not call before 8 am or after 9 pm)
• And then there’s the catchall, which is to do anything else that could be defined as unfair, undignified, or disrespectful

What HOAs Should Know
Whether the FDCPA applies to your HOA’s collection of overdue assessments, your management company’s collection of delinquent accounts, or your lawyer’s collection of assessments/unpaid fines, your HOA client could step into trouble. If it does, the outlook isn’t favorable for the HOA.
Be very careful about:
1. How you handle liens and foreclosures;
2. If you’re going to discuss OUTSTANDING ACCOUNTS in an open meeting, attach a code to the account so you’re not referring to an address or owner’s name. The biggest thing we tell our clients to be careful of is not to make it public that somebody is delinquent.
3. Utah’s lien filing requirements: (1) Are the CCRs a lien? (2) Is a separate lien needed? (3) What is this Utah Department of Commerce HOA Registration issue? (4) Can you lien up unpaid HOA fines?

PLEASE GET AHOLD OF OUR OFFICE IF YOU DO NOT KNOW WHAT THE UTAH HOA REGISTRY IS?  IF YOU ARE NOT REGISTERED OR IT IS NOT UP-TO-DATE – you may not have lien rights!!!!!!
Board Member Advice:
SIMPLE TIP: Board members need to understand that the Act strongly favors debtors, not associations. So it’s very easy to get yourself in trouble when you have outsourced your collections.
Attorney and Management Company Advice:
Debtors can sometimes turn the table on a law firm, an association, or a management company—or all of the above—because they feel they haven’t been treated in accordance with the FDCPA’s provisions (whether rightly or wrongly – if they perceive unfair treatment, a claim may follow).
Recently Heard Comment from an Attorney Friend:
“I’ve had a couple claims, and they’ve all been shakedowns (for the most part). They’ve all been frivolous, but there’s no reason to fight them because it’s so easy for consumers to win them. It’s just an extremely debtor-friendly law, and there’s really no good reason for an association to test it.”
RICHARDS – My take: I don’t know if I’d go so far to say all the claims are frivolous, but the point is be careful, be sensitive, know the law.  You are not alone in this and surround yourself with a professional team.

WE ARE READY TO HELP WITH ALL OF YOUR HOA NEEDS.  Please feel free to forward any topics you may want to see analyzed.

John

2018 UTAH HOA LAWS

2018 Legislation.

It is that time of year again.  As of May 8, 2018, a few minor, but important HOA laws went into effect. As a member of the Utah Legislative Action Committee, we recognized the need for a few clarifications and “clean ups” in the existing statutes.  There are some new laws (stated below) but the session was relatively quite for HOAs.

We will see what happens next year.  I will be give a very concise summary below.  Any references to the “Code” or “U.C.A” means the Utah Code Annotated.  For HOAs, we are primarily concerned with Title 57 of the Code.  If you own a condominium, then Chapter 8 is applicable to you.  If you live in a NON-CONDO, then Chapter 8a is the chapter to review.  Both are cited below.  If you are not sure which Code section applies to you, please give us a call.

If you are new to looking up the Code, simply “google” … “Utah Code.”  The Code will be the first ‘hit’ that pops up.  Click on the first link.  Then, scroll down to Title 57.  Once there, click on Chapter 8 or 8a, as the case may be for you.  You will then see many Sections of relevant law.

Here we go – this will be very concise and only meant to give you the basic information you need to understand the laws that were passed.  Please give us a call or send us an email at any time for further discussion (801-274-6800); (john@richardshoalaw.com)

Major Topics addressed:  (1) Association Records (just wait – more to come this year); (2) Use of Reserves; (3) Rental Covenants.

1.  U.C.A. 57-8-17 and U.C.A. 57-8a-227.  Perhaps the most drastic addition to our HOA law was the requirement of an HOA to make specific records available on its website IF IT MAINTAINS A WEBSITE.  There is NO requirement to maintain or have a website however.

WEBSITE RECORDS:  (1) Declaration; (2) Bylaws; (3) Most recently approved minutes; and (4) Most recent budget and financial statements – all to be accessible via your website.  THERE ARE PENALTIES FOR NOT COMPLYING.

If an Association does not maintain a website, these same records (and other per prior law already in place) are to be available at the address set forth on the Utah HOA Registry.  IF YOU HAVE ANY QUESTIONS ABOUT THE HOA REGISTRY, PLEASE CONTACT US – you do not have any lien rights if the registry is not up-to-date.  I am working on a change to this law for next session but for now, being ‘outdated’ on the registry is a pretty big deal and could cost you a lot of money- please contact us as needed as this is one matter you want to make sure is current.

2.  U.C.A. 57-8-10.1 and U.C.A 57-8a-209.  We made a very minor, yet very important clarification to the REQUIRED EXEMPTIONS an HOA must give if you impose a limitation or “cap” on the number of rentals.

One of the exemptions in place for the last few years, required you to exempt from your rental cap an owner whose employer had relocated them for “no less than two years…”

This was not our original intent.

Therefore, we corrected this exemption to require the HOA to exempt from its rental ‘cap’ any owner “whose employer has relocated the owner for TWO YEARS OR LESS.”

You can see the difference, the prior version required and exemption for long-term job relocations – this was not our intent.  The intent was to allow an exemption for short-term job relocations and the new language fixed that issue.

3.  U.C.A. 57-8-60 and U.C.A. 57-8a-211.

USE OF RESERVES FUNDS:

In the past, there was an argument that you could only take money out of your reserve fund if it was being taken out for the very purpose (roofs for example) for which the money was put into the account.

But what if you had excess money in a particular account, but needed money for another capital improvement – could you not use that money for another purpose or would you have to increase assessments or levy a special assessment despite having the money earmarked for another purpose.  We clarified this situation.

NOW – an HOA may use money in a reserve fund for a purpose OTHER THAN the purpose for which the reserve fund was established if a majority of association members votes to approve the use of reserves funds for the needed purpose/project.

4.  U.C.A. 57-8-7.5 and U.C.A. 57-8a-230.

CLARIFICATION ON NO CO-MINGLING OF FUNDS:

It has been clarified (and probably is your practice already) that all of the HOA’s funds are to be kept in an account in the name of the HOA and the HOA may not co-mingle the HOA’s funds with the funds of any other person or entity (this is a question to ask your property management company – as to how they handle your funds).

 

CONCLUSION:

The above reflects the substantive changes to the Code.  This was a relatively “light” year but every change is important.  The 2018-2019 session will prove to be much more comprehensive and if you want to be involved with crafting Utah’s HOA laws, please contact this office and we will get you involved.

Thanks for taking a few minutes to read this blog entry.  We appreciate your support of The Richards Law Office  More to come.

Sincerely, John Richards

 

 

 

“Group Homes” – Not in my neighborhood!

If you have not heard of a “group home,” chances are that you will at some time or another.

Simply stated, a “group home” is a living arrangement that serves the disabled by allowing them to live together, undergo therapy and simply provide support for one another (a group of unrelated, disabled, individuals living together in a dwelling).

The concern that frequently arises is that a “group home” is proposed either inside your HOA’s boundaries or right ‘next door.’  Without minimizing the importance and social need for group homes, the question that we hear quite frequently is “can we stop a group home” from coming into our neighborhood?”

CASE STUDY – WE WERE LUCKY:  After advising a HOA client of ours about the legal issues involved, the HOA still wanted to challenge a group home from operating inside the HOA on the basis of it being a “commercial activity” which was prohibited by the CCRs.

The owners of the group home were represented by the Utah Disability Law Center and we took them to court to stop their “commercial” activities.

I knew we were on shaky ground, I had detailed discussions with the Board about my concerns, but the HOA wanted to raise some issues that did have merit and, in the end, we filed suit to stop the group home from operating.

The District Court, did rule that the group home was conducting a commercial activity in violation of the CCRs and required them to stop.  Opposing counsel, when the ruling was announced, literally jumped out of his chair in disbelief and yelled “…but the Fair Housing Act, the Fair Housing Act!”

I too was surprised at the ruling, to be honest.  I’ll explain why below – and I knew that if appealed, the ruling could very likely be overturned.  It was not appealed, the group home was in financial distress (it turned out) and they sold the property and the issue was over.  WE WERE LUCKY.

The Federal Fair Housing Act Amendments (1988) expanded protections to individuals with all types of disabilities which, in effect, made it unlawful to enforce a “prohibition” against group homes in HOAs.  As you likely know from other Fair Housing issues you have dealt with, not every challenge, however, is a “disability” within the meaning of the Act.

If an owner of a proposed group home approaches your HOA, you can request documentation that verifies the existence of a disability related need for the home.  If it is legitimate, your HOA is now subject to the Fair Housing Act (“FHA”) and will MOST LIKLEY be required to grant a reasonable accommodation deviating from your CCRs and allowing the home (please contact us for a detailed analysis if this issue arises).

PLEASE NOTE that note all alleged group homes are protected under the FHA.

The following are NOT considered disabilities under the FHA (pay special attention to the word “current” below):

  1.  Current drug addicts (as opposed to recovering addicts);
  2.  Current substance abusers;
  3.  Current alcoholics;
  4.  Criminals;
  5.  People with bad credit; and
  6.  Sex offenders.

Please remember that standards and laws change, so the above is just a guide to encourage you to contact our office but the above categories of individuals are not deemed disabled under the FHA.

However, you can see that if the program offered by the group is NOT on the above list, then the group home will be exempt from your CCRs (“no commercial activity” restriction for example) and you will most likely be required to grant a REASONABLE ACCOMMODATION.

In my case, the District Court Judge took the plain meaning from the CCRs and said the group home was a commercial activity (for recovering addicts) and opposing counsel could not believe the ruling because the use of the home was not for one of the categories listed above.  THE RULING MOST LIKLEY WOULD HAVE BEEN OVERTURNED IF APPEALED (there were many more facts involved and my point is simply to point out the risks of challenging a group home).

A reasonable accommodation for a group home does not mean that the home is permitted and thus ‘anything goes.’

There still cannot be unreasonable behavior, etc., but the point of this entry is to let you know that a group home in a HOA presents unique issues and implicates federal law – the Fair Housing Act and must be taken very seriously.

Be very careful when a group home is proposed in your community and contact our office immediately for a thorough discussion.

We hope that all of your HOAs have started off 2018 well. I appreciate all of our valuable clients and readers of this blog.  Please contact us at any time with any issue or suggested topics to discuss.  Please check our website for upcoming “HOA University” classes or call to get on our e-mail list.   http://www.richardshoalaw.com

Thanks again to all of you – John Richards, Esq, CCAL    801-274-6800

(john@richardshoalaw.com)

New Year – New HOA?

I’m excited to create this blog first entry for 2018. The title of this entry – New Year, New HOA? – is somewhat misleading. I do not believe that any of you will be dissolving your current HOA and forming a new HOA in 2018. However, just like setting personal goals and resolutions, the new year is the perfect time for an Association to review all its operations to make sure that it is using correct practices and habits, and staying educated in the current law. In the essence, by doing this, the HOA is acting like a “new” HOA in 2018.

I’ll present this entry in the form of a checklist of issues than an HOA should think about as it heads into 2018 in order to be adequately prepared for the many types of issues your community will face. This list is not exhaustive, is for educational purposes only, and I encourage any of you to contact our office for a follow-up.

  1. Recently Turned Over From a Developer:
    • If your Association has recently been turned over from a developer, we advise that you promptly have an expert review the structural components of your buildings, common areas, amenities, roads, roofs, etc., to make sure that you have identified any potential concerns with the construction. There may not be any, but if there are, we need to know and identify them now so that we can begin a remedial course, instead of being surprised five years from now with catastrophic expenses.
    • Also, make sure that you have received adequate records from the developer. This would include contracts, receipts, banking information, governing documents, tax  ID numbers, insurance policies, previous tax filings, reserve studies, etc.
  2. Reserve Analysis:
    • Irrespective of turnover, review your reserve analysis to see if it is time for an update or a new study. The Board will be held to a standard of having a reasonable and prudent amount of money saved up to repair or replace assets via a funded reserve account. You should take every effort to review this study regularly at your Board meetings.  This is a somewhat detailed discussion which should be had in more detail.
  3. Governing Documents:
    • Most communities’ governing documents do not contain the latest statutory provisions and requirements as both the Condominium Ownership Act and the Community Association Act are drastically amended each year. It may be time for your community to update your CC&Rs and Bylaws in their entirety. Please contact our office for a bid of this process – the typical price range is between $3,700 and $4,200 for a full rewrite. Some exceptions apply.
    • If a full re-write is not necessary, there may be provisions in your governing documents that need to be amended to better conform to the desired use restrictions and policies of your community. If any amendments are desired, please contact us with the topics of any potential amendments for a consultation.   
    • Your rules and regulations should be reviewed to make sure that they are compliant with fair housing standards, applicable Utah law, and are not inconsistent with your Covenants and By-laws.
  4. Resolutions:
    • The Association should consider several key policies or resolutions that govern the activities of the Board and owners. For example, every Association should have these documents:
      • Collection Resolution
      • Document Retention Policy
      • Schedule of Fines
      • Fine Enforcement Policy
      • Covenant Enforcement Policy
      • Code of Conduct amongst members and the Board (if necessary). 
  5. Maintenance Responsibilities:
    • Irrespective of the age of the property, the Board should walk the property and note any areas over which the Association has maintenance responsibilities that may be of concern. The objective here is to identify problems as early as possible so that you are not deferring maintenance only to incur greater expenses down the road.
    • If you have any common amenity (tennis court, pool, hot tub, stream bed, clubhouse, etc.) that is not functioning, contact this office about your obligation to make sure those amenities are in working order.
  6. Insurance:
    • Carefully review your insurance policy. Utah law regarding condominium insurance drastically changed in 2014 and to this day, many condominiums are unaware of these changes. The condominium insurance covers the common property, the unit, and improvements within a unit. This can be complicated. Owners are entitled to know the Association’s master policy deductive, and if an owner experiences a loss, irrespective of fault, they are to pay the deductive and thereafter the Association policy takes over. 
    • If your community does not consist of attached roofs, and the Association has no ownership interest in the roofs, different rules apply regarding insurance. If you have any questions whatsoever, contact our office to have your policy reviewed for appropriate coverage, Directors-and-Officer insurance, and compliance with Utah code.
  7. Fining Policy:
    • As mentioned above, every Association should have a fining procedure policy. Fines have recently been addressed more clearly by statute and are divided into two categories: repeat violations and continuous violations.
    • If you have a fine policy in place and adequately give the owner notice, you only need to give notice of a violation one time, and for every violation thereafter you may directly levy a fine without further warning. There are several rules which apply to this process, but it is now much easier to levy a fine consistent with your schedule of fines. It is critical that a Board understands the correct process to levy a fine.
  8. Fair Housing Laws:
    • Every Board should take an opportunity to meet with our office to discuss current trends in fair housing laws, whether it be familial discrimination, national origin discrimination, or disability discrimination, these are topics that all Boards should be familiar with. As you can imagine, this conversation leads into discussions of companion animals, assistance animals, and so forth. Nevertheless, the Board is obligated to have a basic working knowledge of some of these key legal principles.
  9. Professional Team:
    • Surround yourself with a professional team. You are not required to be an expert in Association law. However, Board members are fiduciaries owing a duty to your members to act in the best interests of the community. This can be done by surrounding yourself with a professional team: a lawyer (on-call), an accountant, an insurance agent, and a professional property manager.
  10. Production of Records:
    • Much litigation has ensued about the keeping and production of records when an owner makes a request. You should have a document retention policy so that you know what records you need to keep, what records you need to produce, and when you can withhold certain information from your members (which is a rare occasion).
  11. Existing Violations:
    • The Association should be very conscious of existing violations in the community. Whether its related to too many renters based on a rental cap, too many large pets based on a pet policy, parking violations, or architectural and aesthetic violations. In time, an Association will lose its ability to enforce covenants if they do not consistently and uniformly enforce against others (called abandonment). The line has not been drawn in the sand as to when you will no longer be able to enforce a covenant, but you will not know if you are potentially in jeopardy of losing your ability to enforce a covenant if you are not monitoring violations.
    • As an example, I once had a case where we had to file a lawsuit to have an owner lower his shed, which was too high per the Association’s rules. In their defense, the defendant presented hundreds of pictures of other violations throughout the community – unsightly articles, unkempt conditions on balconies and decks – which were contrary to the covenants. The defendant had an argument stating that the Association was biased – they were enforcing against this specific owner about a shed height, but letting countless other owners be in violation of another covenant. These are issues the Board must be affirmatively aware of.
  12. Collections Policy:
    • The Association needs have collections policy, which will provide the Board with a uniform timeline and procedure to collect against those who are delinquent. This policy must treat every delinquent owner the same way. We suggest that Board members be educated on the collection remedies available to them: HOA lien foreclosures, demanding rent from tenants, terminating common utility services, or filing a complaint for collections.
  13. Non-Profit Status:
    • Make sure the Association’s non-profit status is current, its registered agent is currently living in the community or a professional associated with the Association, and that it is registered at the Department of Commerce on Utah’s HOA registry.
  14. Transfer or Reinvestment Fee:
    • Finally, if your Association is collecting a transfer fee or reinvestment fee, please contact this office for a discussion about what is legally required in order to impose such a fee. Some Associations are presently incorrectly collecting this fee.

The above is just a sampling of the issues a Board should be looking at in 2018. Having these fundamental issues under control puts your community in good standing for this upcoming year. Contact this office to be part of our regular HOA University course for legal updates and training on hot topics that confront all of us. Best wishes for 2018 – I look forward to working with all of you, and I appreciate the relationships we have established over the years.

Best Regards, John Richards