FREQUENTLY USED TERMS WITHIN AN HOA

Thanks for your support over the years.  Let’s get back to some basics!  This is truly a fundamental review of terms that you need to know. 

We wanted to share this information with you all to provide you a greater understanding of common phrases and definitions that are commonplace within Homeowners Association.  Please take a few moments to familiarize yourself with this information, and as always, do not hesitate to reach out with any questions.

ADMINISTRATIVE FEES

Administrative Fees are charged to the HOA by its management company, or third-party vendors for professional services rendered outside the parameters of the assigned task. The administrative fee typically pays for costs of paperwork, phone bills, administrative staff’s time, or other costs that an office might incur.   IT IS A BEST PRACTICE FOR YOUR ASSOCIATION TO UNDERSTAND THE FEES CHARGED BY THE HOA OR ITS MANAGER BECAUSE, ULTIMATLEY, THIS IS WHAT YOUR MEMBERS PAY AND USUALLY IT IS IN ADDITION TO COLLECTION COSTS.  PLEASE MAKE SURE YOU UNDERSTAND THIS NUMBER AND DISCUSS IT.  THE STATUTE DOES LIMIT THIS FEE TO $50 FOR CERTAIN SERVICE.

The HOA or its management company may charge you an ADDITIONAL administrative fee for the processing and handling of:

  • Violation Notices
  • Architectural Reviews
  • Late Assessment Notices
  • Legal Fees
  • Lien Processing Fees
  • Paper/Postage/Copies, etc.

ALTERATIONS OR IMPROVEMENTS

HOAs regulate exterior alterations and improvements in accordance with the HOA’s architectural standards. Therefore, an owner must obtain prior approval to make physical improvements or modifications to the owner’s exterior of the property. Examples of some exterior alterations or improvements include:

  • Structure design
  • Solar Panels
  • Satellite dishes
  • Paint colors
  • Fencing
  • Landscaping
  • Window tinting and coverings.
  • Balcony surfaces, flooring

However, in Utah, you cannot charge your owners fees related to architectural review unless incurred by a third-party.  Please contact our office on this point.

ARCHITECTURAL COMMITTEE (ACC or ARC)

HOAs typically have a committee to control the architectural standards of the community and manage the architectural alteration application and approval process.  We realize, however, that oftentimes the Board serves as the ARC.  Nevertheless, the “ARC” wears a different hat from the Board, and you must understand its roles accordingly (and have the right type of insurance for committees).

ARTICLES OF INCORPORATION

In general, the Articles of Incorporation (the “Articles”) are filed with the Secretary of State identifying the Association as a nonprofit corporation. The Articles typically contain the Association’s:

  • Registered agent and office
  • Purpose and powers
  • Membership
  • Voting Rights
  • Liability of Directors
  • Dissolution

ASSESSMENTS

Assessments are mandatory HOA fees that all members in a common-interest development must pay. Assessments may be designated as Regular Assessments, Maintenance Assessments Extraordinary Assessments, or Special Assessments used to cover the costs for the management and maintenance of the Association’s common areas.   Often referred to as “dues.”

BEST PRACTICES

Professional procedures that are accepted or prescribed as being correct or most effective within the industry of community association management.  If your management company or attorney (or other professional) is not advising you of best practices, they are not in the know.

BOARD LIAISON

A member of the Board of Directors, typically the president, who works as the primary point of contact between the manager and the Board of Directors.

BOARD MEMBER

An elected or appointed member of a Board of Directors that acts as the governing body of the community association. 

BOARD OF DIRECTORS

The Association’s Board of Directors (the “Board”) is elected by the membership to manage all aspects of the Association’s business affairs. Under the Declaration and the law, it is the Board’s duty to promote the health, safety, and welfare of the Homeowners and the fiduciary duty to act in the best interest of the Association and its members. The duties and powers of the Board are outlined in the State’s Corporations Code and the Association’s governing documents.  In Utah, a Management Committee is the same entity as the Board.  Knowing and understanding your duties cannot be understated. 

Remember, the Management Committee is the same as the Board in Utah BUT each group may have its own COMMITTEES – that is a different situation.  Please contact us for use of Committee and protecting them from liability.

BYLAWS

An official document containing a series of rules, formally made by a community association to govern the operation of the community association, required to be established in compliance with the Declaration of Covenants, Conditions, and Restrictions.  Bylaws should be PRIMARILY procedural in nature.  If you find that your Bylaws contain a lot of “USE RETRICTIONS” please contact this office.  Further, Bylaws now need to be recorded with the County Recorder’s office but we find that many Bylaws remain unrecorded. Please check your document.

The Association’s Bylaws contain guidelines for the operation and management of the Association. In the Bylaws, you find provisions related to the Associations’:

  • Membership
  • Purpose of the Board
  • Indemnification of the Board
  • Officer designation
  • Term of office
  • Powers and duties
  • Meeting rules and schedules
  • Quorum for action by Officers
  • Nomination and Election of Officers
  • Removal of members
  • Finance Management
  • Liability and Indemnification of Officers
  • Insurance

CAPITAL IMPROVEMENTS

Capital Improvements are usually significant improvements or structural additions to the community.  This term should be defined within the CCR’s.  Your CCRs may require an owner vote to incur costs for Capital Improvement beyond a certain dollar amount.  The idea is that the Board is authorized to maintain the Common Areas and other items called out in the CCRs but if you are adding a ‘new’ feature or element, owners should approve that expenditure.

CASE LAW

A law that is established after a court makes a ruling forming a legal precedent.  As you can understand, cases from Utah courts have more influence on a court than cases from other states – BUT IT IS ALL IMPORTANT.  Please attend our HOA University for case law updates.

CERTIFICATE OF ACCOUNT STANDING

Also referred to as a Payoff Statement, describes the financial condition of a property within a community association to include account balance, frequency of assessments, and certain other information that varies by jurisdictions which may have specific items or issues that must be addressed.  Please talk with us as there are financial caps on what can be charged at time of closing for a certificate of account standing. 

CODE OF CONDUCT

An internal policy, adopted by the board, setting forth both expectations and obligations regarding conduct within the community by members and the board of directors.  Also known as Civility Guidelines. 

COMMON AREA

Common Areas will be defined in the CCRs and in some cases applicable statutes.  Typically, the common area of a common interest development constitutes everything that is located within the community development except the units, or lots (or other property such as a park space) owned by the association’s individual homeowners, also known as, “separate interest.” Examples of typical common areas are:

  • Everything outside the owner’s lots or parcels.
  • Sidewalks
  • Non-public streets
  • Community amenities
  • Development walls
  • Entrance/Exit gates
  • Condominium exteriors and roofs
  • Everything located on the outside of the Unit’s interior perimeter walls, floors, and ceilings.
  • Hallways
  • Elevators
  • Roofs/Windows/Stairways
  • Community Amenities – Club House, Pools, Tennis Courts, etc.
  • Park Areas / Playground Equipment

As mentioned, to get a clear understanding of what constitutes a common area in your development, review your Association’s governing documents or your state’s real property codes.  More specifically, you should contact our office for any interpretations of where common area ends and a unit or lot begins. This is the source

COMMON INTEREST DEVELOPMENTS (CID)

Homeowner Associations have another, more formal name which is a “Common Interest Development” (CID).  CID’s are a type of home ownership in self-governed private communities. CIDs are developed in many different types and styles, such as single-family homes, condominiums, townhouses and apartment-like multi-story high rises known as cooperatives.

COMMUNITY ASSOCIATION

Is the organization that gives “life” to a “CID” or HOA.  Usually a non-profit corporation or other legally formed entity, to oversee the use and administration of a development for either commercial or residential use (or both but for our purposes most residential) that is governed by a Board of Directors.  Typically, but not always, comprised of those with an ownership interest in the community association.  The term is broadly applied to condominium associations, homeowners’ associations, and maintenance corporations.

CONDOMINIUM

A form of legal ownership in which ownership is divided into individual units and sold. Ownership usually includes a nonexclusive interest in certain “common properties” controlled by the condominium community association.  Owners share an undivided interest in the ‘Common Areas” and own their Units outright.

CONDOMINIUM ASSOCIATION (also see Homeowners Association)

A Condominium Association is a type of common-interest development governed by the elected Board of Directors in accordance with the Association’s governing documents and applicable laws. Condominium owners own their unit and a portion of Association’s common area which is owned jointly by all owners in the Association.

CONTROLLING DOCUMENTS

Also known as Governing Documents, the documents forming and regulation how the community association is operated which usually include the Bylaws, Declaration of Covenants, Rules and Regulations, and Articles of Incorporation.  State laws regulate the recording of these documents in land record offices and the distribution to prospective home buyers.

COOPERATIVE HOUSING

The cooperative housing also known as a co-op, is a type of real estate ownership of a group of dwellings or apartment buildings owned by a corporation. The co-op is governed by the elected Board of Directors in accordance with the co-op’s governing documents. The members of the co-op are stockholders who have the right to occupy a unit for as long as he/she owns the stock. The Corporation owns the title of the real state.  Co-ops are seen more in Southern Utah than anywhere else in the State.  Usually, the Owner owns the RIGHT TO USE the “dirt” or “pad” upon which a semi-permanent mobile home is situated. 

DECLARATION OF COVENANTS, CONDITIONS & RESTRICTIONS

The Declaration of Covenants, Conditions & Restrictions (“CC&Rs” or “Declaration”) contain the contractual obligations of the Association and its members. The CC&Rs sets forth the guidelines and internal “law” on how the Association through its Board of Directors may operate and govern to protect the interest of the Association and its members. It also contains the members’ obligation to maintain and pay assessments and describes the owner’s use of limited common areas and general common areas. Repair and maintenance obligations are contained in the CCRs.  The Declaration usually includes rule making authority to help the Board clarify any provisions of the CCRs. 

DEED

The legal document recording the person(s) who have a legal right to property.  Please pay attention to your CCRs or Bylaws – often times only named on the deed have rights to vote, run for the Board, etc.  This is referred to the rights of the “owner of record.”  Contact us if you have concerns about who is being elected and whether they qualify to run, etc.

GOVERNING DOCUMENTS

The following list of documents are known as the “governing documents” that govern the common interest developments and homeowners.  See the definition of “Hierarchy of Governing Documents” so you know which document controls in case of a conflict.

  • Declaration of Covenants, Conditions & Restrictions (CC&Rs)
  • Bylaws
  • Articles of Incorporation
  • Plats of Survey and Easement Agreements
  • Rules and Regulations
  • Policies

HIERARCHY OF GOVERNING DOCUMENTS

Utah Code states if there is an internal conflict between two separate documents or code, the higher document on this list take priority and determines the outcome.  The following list is the hierarchy of documents per Utah Code. 

  • Community Association Act or Condominium Act (depending on which applies to your association)
  • Utah Revised Non-Profit Corporation Act
  • The Plat & The Declaration (these two separate documents have equal control)
  • Organizational Document (Articles of Incorporation)
  • Bylaws
  • Rules or Policies

HOA

The “HOA” acronym stems from Homeowners Association. HOA is typically used to reference the following types of common-interest development communities:

  • Condominiums
  • Planned Unit Development (PUD)
  • Townhome Style Single-family homes
  • Co-Ops (in Utah)

HOMEOWNERS ASSOCIATION

A Homeowners Association (“HOA”) is a private incorporated, or unincorporated (we always recommend nonprofit incorporation) planned development managed by its elected Board of Directors according to the HOA’s governing documents. The HOA’s membership is comprised of owners of properties who have the obligation to maintain and pay HOA dues.  Likewise, the HOA has the obligation to maintain the common areas, and the right to enforce covenants agreed to by its members.

LIMITED COMMON AREAS

Part of a unit or dwelling on a lot that is typically maintained by a deeded owner but that is the property of the community association (as a form of Common Area), typically in a condominium, items such as balconies, decks, doors, windows, etc., are generally deemed Limited Common Area. In townhome communities and single family home communities, often times driveway, patios and decks will be Limited Common Area.  PLEASE NOTE that the Governing Documents (and statute) of the Association govern the definition of Limited Common Areas and assign maintenance, repair, and replacement obligations.

MAINTENANCE CORPORATION

A community association set-up specifically to maintain certain common elements of a group of homes, homeowner’s association, condominium association, or a combination of smaller associations.  These are rare in Utah.  In some instances, there is not a “full blown HOA” but a limited purpose entity formed for something as simple as say, nothing more, than managing private street lights.

MANAGEMENT COMPANY

The company retained by the community association’s Board of Directors to manage certain aspects of the association as outlined in a management agreement.

MANAGER

The person(s) appointed by the Management Company to act as the liaison between the Board of Directors, Homeowners, service providers, and others and complete certain tasks as the Agent for the community association.

MASTER ASSOCIATION

A community association that oversees a group of subordinate associations.  If you live in a community that has a Master Association, you will be subject to over-arching Mater HOA CCRs, then your neighborhood specific CCRs.  It is important to know that you may have 2 or even 3 levels of assessments and Governing Documents to be aware of.  Usually, this arrangement are for large scale communities.

MEMBERSHIP

Membership is automatic when a person acquires ownership of a property in a common interest development.  Usually, the “member” if the owner of record on the deed (and their family) but confusion often arises as to ‘who the members are…’ and you if you find your HOA in this situation, please let contact us.

OFFICERS

Usually, but not always, a member of the Board of Directors who acts in an official capacity as directed by the Board of Directors but in compliance with the controlling documents of the community association; examples include a President, Vice-President, Secretary, and Treasurer.

PLANNED UNIT DEVELOPMENT

Also referred to as a PUD, a planned development mapping out a planned layout or use for a community.  The term is more often applied to single-family homes forming a community association but can refer to other types of home and business forming a development.  A PUD is also a regulatory process for developing a planned community with some definitions and processes varying by federal, state, county, and local laws, and regulations.

PLAT

A map of a lot within a Planned Unit Development (PUD) or a Condominium community showing where the home is situated on that lot or the dimensions of the unit and identifying the common and limited common areas.  A Plat is typically maintained with a County Recorder’s Office.  in Utah, a Plat has the same priority (as plat maps contain terms and requirements of owners and the HOA from time to time) as the CCRs.

PRESIDENT

There is a lot of confusion as to the role of the President.  Typically the President is a member of the Board of Directors and who is elected by the Board of Directors to serve as a leader of the Board of Directors and principal officer of the community association.  Duties and powers are delineated in the communities controlling documents.

QUORUM

Quorum is the presence of a required number of members in a meeting for the proceedings to be valid.  It is critical you know your quorum requirement for both owner meetings and Board meetings.  It is also vital that you know whether you base a quorum off the total membership or those who show up.   This distinction is critical. Proxies typically count towards a quorum so do written ballots.  One of the most common errors of a Board and/or annual meeting is that a quorum was not properly established.  We have ideas for your Bylaws to help your reach your quorum.  Please contact us as needed.

RESALE PACKAGE (aka Closing Packet)

A resale package is a packet of vital information provided to those purchasing a condominium or a home in an association usually purchased/provided by the seller. This is often provided by the property manager or the closing agent.  The package includes a complete set of recorded documents that govern your association. The Resale Package will vary from state to state but each state and some jurisdictions have specific items or issues that must be addressed in each transaction when real estate is sold.  The resale package usually includes a Certificate of Account Standing (Payoff Statement), Articles, Declaration(s), Bylaws, Easement(s), Agreement(s), Resolution(s), Annual Budget, Insurance Accord(s), Rules and Regulations, HPS Management Forms, Inspection Certificate, and Association Disclosures.  Your Association should record a Notice of Existence of Association that alerts purchasers and title companies of what documents you (as the HOA) expect Buyers to have and be aware of BEFORE they close.

RULES AND REGULATIONS

A series of rules or regulations usually adopted by the Board of Directors for a community association governing certain aspects of the community association usually allowed to be established in accordance with the Bylaws.  The rule making process for non-condominium communities is stricter than for condominium communities.  Please contact us as needed.  A Rule cannot conflict with a CCR or Bylaw provision or it will be unenforceable.  Further, Rules should be accompanied by a Schedule of Fines for noncompliance (of both the Rules and the CCRs).  This Fining Policy / Schedule of Fines is a separate Rule or policy adopted by the Association and largely dictated by statute.  Everyone should have this free-standing policy in place.

SECRETARY

The officer of the community association appointed by the Board of Directors whose duties are delineated in the communities controlling documents but who is usually responsible for supervising and handling the documents of the community association such as minutes, resolutions, correspondence, contracts, rosters, etc.

SPECIAL ASSESSMENT

An assessment that is in addition to a regular budget assessment, typically assessed by a board of directors, to pay for an expense or expenses of the community association that was not originally budget for in the annual approved budget.

STATUTE

Also known as Statutory Law, a law that is passed by an elected group of legislators.

SUB(ORDINATE) ASSOCIATION

A community association that is subject to a Master Association.  Remember, you will be bound by the sub-HOA’s CCRs, Bylaws AND the master’s Governing Documents.

SURVEY

A professional determination of the physical boundaries forming a lot.

TREASURER

The officer of the community association appointed by the Board of Directors whose duties are delineated in the communities controlling documents but who is usually responsible for supervising and handling the finances of the community association.

VICE PRESIDENT

Typically, a member of the Board of Directors and who is elected by the Board of Directors to serve as a leader of the Board of Directors and principal officer of the community association in the absence of the President.  Duties and powers are delineated in the communities controlling documents.

2020-2021 Utah Legislative Update – HOA LEGISLATION YOU NEED TO KNOW!!!

Hi Everyone. Thank you for your continued support of our law firm. I wanted to give you an update on the bills that passed this latest legislative session related to “HOAs.” Some bills only affect single family homes, some affect condominium and non-condominiums. Please take a moment to review and, as always, do not hesitate to reach out to us with any questions.

We appreciate working with you. HB – means “House Bill” and SB means “Senate Bill” with the bill number below.

John Richards

HB 82: Internal Accessory Dwelling Units

HB 82 only affects non-condominium projects with detached and separated homes. HB 82 does not affect condominiums or townhouses.

Of all the new laws, HB 82 is the most controversial and is passed in response to the affordable housing crisis. HB 82 restricts a city or an Association from prohibiting the owner of a detached home from renting out part of their home. The bill refers to this part of the home as an “internal accessory dwelling unit.” Typically, this is a basement apartment, but could also include a remodeled garage.

For an owner to lawfully lease under HB 82, they must comply with the following regulations:

  1. The rented dwelling must be a detached home;
  2. The rented space must be within the aforementioned detached home;
  3. The owner must occupy and use the home as their primary residence;
  4. The rental must be for a term of at least 30 days or more; and
  5. The rental must not violate any municipal ordinances, building codes, and health and fire codes. 

While HB 82 does prevent cities from outright banning rentals, it does authorize municipalities to impose conditions on such rentals. Such conditions can include requiring the homeowner obtain a leasing permit or prohibiting rentals on a home under a certain square footage.  However, HOAs are not allowed to impose such restrictions or regulations.

If your Association forecasts issues resulting from this bill, there are some courses of action: First, you may reach out to your local zoning boards and municipal councils and propose restrictions. Secondly, enforcement of parking restrictions, assessing larger common area maintenance fees due to increased use, and other restrictions that do not outright prohibit renting out the space may prevent an owner from realizing a return on investment, making the lease financially impractical. Finally, enforcement of restrictions on new constructions or attachments to the dwelling within the CC&Rs may limit the construction of an attached “mother-in-law” style apartments. If your HOA has further questions, please give us a call.

SB 31: Security Cameras

SB 31 is applicable to both condominiums and non-condominium projects.

SB 31 prevents associations from adopting rules which restrict an owner’s installation of a security camera that is immediately adjacent to an entryway, window, or other outside entry point of the owner’s residence. The new law does prohibit owners from installing such a camera in the common area that is not physically connected to the owner’s unit.

SB 31 only applies to the rules created by HOAs. Thus, it is still possible to prohibit such security cameras if the prohibition was a restrictive covenant in the CC&Rs. There is some concern that the installation of such cameras by owners may affect the weatherproofing or water-retention issues of the building. If your HOA is confronted with such an issue, you should consult your HOA’s legal counsel on how to enforce other regulations on the owner without violating the new law.  

SB 75: Emergency Use of Reserve Funds

SB 75 affects both condominiums and non-condominium projects.

SB 75 – passed in response to the COVID-19 pandemic as we saw a need for use of reserve funds in emergencies – this legislation allows the Association to utilize reserve funds for budget shortfalls when a state of emergency has been declared. Prior to the passage of the bill, both the Condo Act and the PUD Act prohibited the use of reserve funds for any purpose other than the maintenance, repair, and replacement of the common areas unless approved by more than 50% of the owners.

Now, under SB 75, the Association can use reserve funds for shortfalls in the general budgets when: (1) a “state of emergency” that “extends to the entire state” of Utah has been declared; AND (2) more than 10% of the Association’s non-board members are delinquent in the payment of assessments because of events directly resulting from the state of emergency.

HB 374: Amendments to Discriminatory CC&Rs 

HB 374 applies to both condominiums and non-condominium projects.

Believe it or not, many of your documents (CC&Rs and Bylaws) currently contain language that is unlawful such as “no children in the pool.” How do you get rid of such language if an amendment/vote is required?

Current state and federal laws prohibit the discrimination or preferential treatment to individuals that is based on a protected class: race, color, religion, sex, national origin, familial status, source of income, disability, sexual orientation, gender identity, and age (with special exceptions for legally recognized senior communities). However, older CC&Rs contain provisions that blatantly discriminate against protected classes, even if they are rendered invalid by the state and federal laws.

HB 374 allows an owner to submit a complaint to the HOA regarding discriminatory language within the CC&Rs. After a 90-day investigation, if the HOA’s Board determines the provision is discriminatory against a protected class, the Board may (without the vote of the owners) by majority vote record an amendment to strike the discriminatory language from the CC&Rs.

If your development has such a provision within the CC&Rs, HB 374 allows for greater flexibility to remove such language.

New Towing Regulations:

Effective January 2021, the state’s new towing regulations requires HOAs trying to enforce parking to use specialized towing signs – with specific sizes and colors – placed in certain locations. See Utah Code Ann. §72-9-603 and 604. The specific type of sign your HOA is required to use depends on the towing policy and the agreement with the HOA’s towing company. Many towing companies have already worked with their clients to implement the new regulations by providing the new signs.

If the HOA is not compliant with the new signage regulations, the HOA may still tow the vehicle if it gives written notice by attaching a notice of violation to the vehicle and the vehicle remains for 24 hours. 

NEXT SESSION – I am very interested in proposing a bill this next session that defines and clarifies what “RECORDS” an Association must maintain and produce for inspection. The current status of the law allows owners to go on “fishing expeditions” with tremendously burdensome and irrelevant document requests – if you do not produce there are statutory penalties. If you are interested in being part of such legislation, give us a call.

We will post another entry soon. Until then…

Is it time to redo our governing documents?

There is no question that Governing Documents (namely, CCRs and Bylaws) need to be updated from time to time.  This is primarily due to two issues (1) changing statutes; and (2) best practices.  Consequently, a common question we receive from both new and old homeowner association clients is “how do we know if it’s time to amend or rewrite our governing documents?”  We hope that we can answer this question, provide relevant information, and help homeowner associations understand what needs to be done to navigate this process.  This can be a long process and with lots of questions as “new documents” look and read quite differently from the set your members will be familiar with.  In addition, obtaining the necessary votes can be challenge as well.  In this entry, we will try explaining, the need, the why, the how and the process for updating your Governing Documents. 

Association Review

What documents should be amended?

The basic HOA legal documents that may need amending are:

  • Bylaws
  • Declaration of Covenants, Conditions, and Restrictions (CC&Rs)
  • Articles of Incorporation may need to be updated but generally speaking staying current with the Corporate Division of the State of Utah and having updated Bylaws reduce the need to amend and update your Articles – but it should be looked at.

Amending vs. Rewrites

  • If the legal documents are reasonably up-to-date and in fairly good shape, only one or two sections may need to be amended; in such cases it is preferable to attach some simple amendments rather than to create a whole new document. We typically see documents, however, that have been amended many times and it becomes confusing to the reader as to which provisions control, what has been amended, and whether they even have the correct documents. 
  • As such if the documents need multiple amendments, or are extremely outdated (for example, over 10 years old), we recommend a complete rewrite thus giving your Association a brand-new up-to-date set of documents. Doing this is more efficient, you get better updated terms and provisions (as opposed to just piecemeal amendments).  Every now and again, the Board is insistent that it “likes” its current format and most of the document and all they want is statutory updates and some improved language.  Candidly, this presents a drafting challenge because the Board will usually not have an editable version of its Governing Documents but you should have the discussion with you attorney about a completely new set of documents versus retyping your current documents and adding in desired updates.

The Need

There are no statutory or state requirements to update governing documents but as the saying goes: “a stitch in time saves nine”.

  • Directors can be misled as to their duties and responsibilities by relying on outdated provisions and it is not uncommon for a well-intended Board to be following provisions (for holding and conducting Board meetings as an example) that are not consistent with Open Meeting Laws or perhaps notice of meeting are not being done according to Code.  These are all serious issues.
  • Members may be unintentionally misled into believing the documents accurately’ describe members’ rights, legal procedures, etc., when, in fact, the statute provides more due process in their favor or grants the Board rights not stated in the CCRs or Bylaws.  Disputes can be avoided by having your documents updated.
  • Documents may fail to take advantage of “best practices” which now include the use of website, email, text messages, for notice and voting purposes.

Examples.

  • To eliminate obsolete provisions such as annexation language or Declarant language that is no longer applicable.
  • To eliminate provisions no longer observed or enforced.  If you have long abandoned a requirement such as a certain roofing material, your document should eliminate provisions you can no longer enforce (also think of pets, parking, and similar examples)
  • To eliminate provisions that conflict with current laws.
  • To improve poorly drafted documents by clarifying ambiguous provisions.  Incredibly, some CCRs refer to swimming pools when there is no swimming pool.  This is a drafting error from the outset and needs to be remedied.  Further, often time it is not clear who maintains “X” such as a fence or certain parts of landscaping, or certain parts of the structure – all such issues should be clarified in updated documents.
  • To provide for changes in technology (satellite dishes, home office use, etc.).

FAQ’s

How long should it take to amend HOA documents?

Should the HOA hire an Attorney?

  • The analysis of HOA documents to determine whether or not amendments are desirable, and, if so, how the documents should be amended, requires a degree of expertise which can only be provided by a legal specialist, that is, an attorney who specializes in the drafting of HOA documents. Unless an association has such an attorney as a member, and that attorney is willing to contribute his or her time to amend the documents, the association should retain legal counsel for that purpose.
  • If an association wants to be helpful in providing its attorney with some suggestions or amendments, it should provide a list of points to cover, such as the number of directors, the length of the term of office, the number of pets, the number of vehicles, etc. In other words, give the attorney the basic facts, or the basic principles, but do not try to draft the actual language. That is what you are paying the lawyer to do.

What should it cost to amend association documents?

  • The cost to amend can vary widely, depending upon the type of revisions, the scope and age of documents.  Fees can be as low as $500 for a simple amendment of one or two provisions, and anywhere from $5000 or higher for a complete updated set of the three basic legal documents.

What can be done to obtain member support for amended documents?

  • Boards need to get owner “buy in” to the changes.  When that occurs, they feel ownership of the document and have an interest in its outcome.  This is best achieved by membership involvement after the first draft is prepared, and then solicit input from them.   We understand that this process must be controlled carefully to not let a ‘mob mentality’ take over the project.  Nevertheless, soliciting input or requests for “things to improve in the community” early in the process, help obtain the vote.

What comes next?

How often should association documents be amended?

  • Association documents should be reviewed and possibly updated approximately every 5 to 10 years to incorporate all the changes in statutory and case law.  However, there are changes each year to Utah Law and your attorney should update you on these changes annually.  You can then decide if you need to amend or just educate your Board and members.

How Do We Get Started?

  • Contact your attorney for a document review.  The ‘review’ will give you information as to whether your documents need to be revised. 
  • If it is determined that a rewrite is necessary, we will send you a checklist of questions/issues that will go into our first draft.  This will be the foundation for the final document as we work with you to incorporate statutory changes and best practices.
  • A quote and terms of engage will then be prepared.  Feel free to ask us for samples of CCRs and Bylaws so you as Board members know what the updated documents will look like.  We will also work with you to create a plan to get owners involved and start planning a timeline for drafts and voting.

HOA UNIVERSITY

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HOA Management during hectic times”

2020 has been a tumultuous year and the struggles and challenges will likely go beyond 2020.  HOA’s have been forced to alter governance & management of their communities during the Covid-19 pandemic in an increasingly virtual world.

Please join us for a virtual HOA University where we discuss ideas for conducting association business, holding electronic meetings, and voting, as well as interpreting, updating and utilizing governing documents.  We will be discussing how current events are affecting homeowner associations and some ideas on how to approach these new challenges.

A must-attend course

Location:            Virtual Microsoft Teams Meeting

                              Please Contact us for login information.

Time:                   7:00pm

Date:                    August 10, 2020

Please let us know if you plan on attending.

2020 Updates to the Condo and Community Association Acts

This blog entry outlines recent ‘HOA’ legislation in Utah.

At the most recent legislative session two separate bills passed effecting the  Utah Ownership Act and the Community Association Act.  The two amendments to the Condominium and Community Association Act have now gone into effect.  Below is some information regarding these updates to Utah Code and how they effect Association living.    

House Bill 155 (2020) Senate Bill 183 (2020)
FOR CONDOMINIUMS:  see Utah Code 57-8-6.1; 57-8-13.1 FOR NON-CONDOMINIUMS:  see Utah Code 57-8a-105.1; 57-8a-105FOR CONDOMINIUMS:  see Utah Code 57-8-3; 57-8-37; 57-8-46 FOR NON-CONDOMINIUMS:  see Utah Code 57-8a-303; 57-8a-208
Requires the seller of a unit or property to make certain disclosures before the closing of a sale in relation to the property.  Changes nonjudicial foreclosure process as they pertain to the Condo & Community Association Act.  
Disclosure requirements include:
* A copy of the Association’s Governing Documents.* “Nonjudicial Foreclosure Amendments,” this legislation changes provisions related to nonjudicial foreclosure of a lien on a unit or lot by an association, including establishing limitations on nonjudicial foreclosure (fines cannot be a basis for foreclosure).  A nonjudicial foreclosure is a foreclosure without a lawsuit done by the Association’s attorney – without court supervision.
* Disclosure of either the members of the Board or property manager.* Includes definitions for judicial and nonjudicial foreclosure information and mirrors in the community association act.
* A link to the department of commerce education materials concerning Community Associations.* Amends the notice that must be sent to owner before an HOA begins nonjudicial foreclosure process.
* This applies to all associations regardless of the when the association was formed.* Association fines do not constitute reason for nonjudicial foreclosure.  That is, fines cannot be a basis for HOA Lien foreclosure.

As a point of reference see below the definition of a judicial foreclosure. In a judicial foreclosure, the creditor files a lawsuit and the entire process is overseen by a Judge who, if you prevail, issues and order of foreclosure.

We are happy to answer any questions you may have concerning this or any other topics.  Richards Law is your one-stop shop for all association needs. 

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).

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