A question from a Board President: ‘How does an Association proceed when meth is detected within the Community?’

You have raised an important question – which is a bit complicated for the Association.  The concern to the Association is potential contamination in the common-areas – the unit is not our issue per se – but it is very likely that if there was contamination in the “unit” (as defined in your CCRs), then there is possible contamination – to one degree or another – in the common-areas.  That is where we, the Board, MAY have a concern to resolve.

Many Associations CCRs define that the unit ‘ends’ at the paint on the walls – making the sheetrock/drywall behind the paint common area.  It is a contamination of the “common-area sheetrock” or other part of the common-area that make this an association issue, as mentioned.

We need to do a few things: 

1st.  We need to get a hold of the Health Department and inquire as to the status.  The primary responsibility of all this falls on the owner but we do have an HOA concern because these chemicals can get into the walls.  As such, we need to ask if the unit has been decontaminated.  We also need to ask whether the decontamination would include testing the drywall, etc. 

If the decontamination is complete and the Heath Department signs off on the unit and common area walls as being ‘clean,’ then we do advise that you send out a community newsletter or communication with this update.  We do not want to be accused of not disclosing an issue that relates to the common area we oversee.  I am assuming that because the unit has been ‘red tagged,’ that other owners know of the problem and this may be causing commotion. 

However, if the unit is not ‘clean’ yet:

2nd.  We should engage in an independent testing of a few key spots in the common areas – to make sure there is not a problem.  If we test (unfortunately, it would be a common expense) and we find nothing of concern, that is great news and we report that to the members as well.  It is very possible that there is no contamination in the common area walls, but we should confirm to avoid be accused of not investigating this matter.

If there is contamination in the common area walls, then we should get estimates to take care of this issue after identifying the scope.  My experience has been that usually the contamination is minor, if any at all, as it relates to common areas.  If we must pay for testing and even undertake any remedial work, we will seek to recover that from the unit owner who caused all this.  Getting reimbursed however is not guaranteed but we would work diligently to seek damages and repayment fees.   

Avoiding Liability:

3rd.  The bigger concern, as I have eluded to, is that as units sell, and there is some contamination in the common areas, and it was not disclosed (yet we knew of this problem) and then someone gets sick or complains — that could put the Association is a serious liability position and our job is to help you avoid that.  Following-up on clean-up efforts is the Board’s obligation.  I am hopeful however, if experience holds true, that there is not much of a problem in the common areas if at all; we then update the owners; and have just protected the Association.

If there our any questions on this or similar issues do not hesitate to reach out to us.  Our office would be more than willing to contact the Department of Health and go through the issue above with them.   This is one of those situations that an ‘ounce of prevention is worth a pound of cure…” (so to speak).

Upcoming HOA University Events

Please Join us for one of our upcoming HOA University Events where we discuss:

“The Most Commonly Disputed HOA Issues; and what we can learn from 2019. A year in Review.”

Feb 8, 2020 – 9:30am SLC Office (This session is now full. Please join us at one of our other events)
Feb 10, 2020 – 7pm SLC Office
Feb 21, 2020 – 2pm
Courtyard by Marriott St. George
185 S 1470 E, St. George, UT 84790

Attributes of a Good Board Member (in fact,this is your legal standard)

I hope that everyone is well.  Please take a moment to review the 11 items listed below.

I was a co-presenter at a Community Association Institute (“CAI”) program yesterday (with Ryan Bonham of Advanced Community Services) where, with nearly 90 Board members in attendance, we conducted a Board Leadership Development Workshop.  The following “attributes of a good board member” come from that presentation.

I suggest that each reader take this list to their full Board and review it together and I encourage any questions that these issue may generate:

  1.  Respect others by arriving in time to Board meetings;
  2. Come prepared to make decisions, have reviewed the Board packet in advance and gathered any information needed to make a decision;
  3. Follow the agenda; avoid “side conversations” that take the Board discussion off track;
  4. Act professionally at all times, avoid sarcasm and name calling;
  5. Speak only when recognized by the “chair” and address comments to the “chair” rather than to another person;
  6. Refrain from making excessive comments so that others are given an opportunity to express their views;
  7. Have a basic understanding of your governing document (CCRs, Bylaws, Rules);
  8. Make decisions through the use of motions and seconds;
  9. Set aside any personal agenda, prioritizing decisions that are in the best interest of the community as a a whole;
  10. Disclose any conflict of interest (or any perceived conflict of interest) and abstain from voting on such matters;
  11. Respect the authority of the Board by refraining from speaking outside the meeting on issues unless appointed by the Board as its spokesperson on an issue.

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