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

 

One thought on “New Year – New HOA?

  1. Thank you John, all the Best in this New Year

    Harold Cell # 801.372.5718 Land line # 801-756-2129 Challenge. Innovate. Deliver.

    On Fri, Jan 5, 2018 at 5:00 PM, HOA Living – What I Need to Know wrote:

    > John Richards posted: “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 per” >

    Like

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