SUPREME COURT OF UTAH CLARIFIES BOARD AUTHORITY!!! Extremely helpful for HOAs

First, there are a few very exciting things happening in the next few months in the HOA world for me and you.  Stay tuned.

Second, we will be sending out notice of our next HOA University shortly and look forward to your attendance.  Topics are always welcomed.

Third, I’ll try to make these comments concise and to the point – but please contact me if any follow up is needed.  I believe this decision is one of the most significant HOA decisions in Utah in the last decade.

On June 22, 2016, the Utah Supreme Court “got rid of” the old mindset that historically has been applied by Utah Court’s when determining a Board’s authority to interpret and enforce the CCRs.

Utah Courts, it seems forever, applied the following standard when interpreting CCRs.  That is, CCRs are NOT FAVORED in the law.  Therefore, you must construe CCRs in favor of the owner’s free use and unrestricted use of their property.  If your CCRs had any ambiguity at all; the land owner would like win the enforcement dispute.

Bottom line:  This meant that the CCRs had to be right on point, without ambiguity, and only then the could the Board feel somewhat comfortable enforcing the CCRs as drafted.

In the Case of Fort Pierce v. Shakespeare, the Shakespeare’s applied to put a cell tower on their commercial lot.  The Board denied their application pursuant to their ARC/ACC review ‘powers.’  Nevertheless, the Shakespeare’s continued to build the cell tower even after a timely denial by the Board.

The HOA sued and this went so far as a bench trial.

The district court held that the Shakespeares did indeed breach the CCRs by constructing the cell tower without Board permission.  HOWEVER, the district court applied the OLD STANDARD that “restrictive covenants are not favored in the law and are strictly construed in favor of the free and unrestricted use of property.”

This is a highly fact intensive case but, even though the court agreed that the CCRs were breached, essentially the court ruled that the Board went too far with its disapproval powers stating that the Board did not have the right to limit the number of cell phone towers in this particular commercial / industrial park.

I realize I’m starting to bore you now, so let me get to the “meat” of what happened next.

The court further ruled that the Board’s denial was “unreasonable and arbitrary” and that THE TOWER IS APPROVED AND COULD REMAIN (the court overturned the Board).

The HOA appealed to the Utah Supreme Court.

The Utah Supreme Court, which has now created IMPORTANT PRECEDENT FOR ALL OF US, held that:  “Restrictive Covenants are a method of effectuating private residential development schemes” and “give property owners in such developments the right to enforce those covenants against other in the development.”  Citing other Utah Supreme Court cases, the court noted and clarified that we now interpret CCRs by a different standard  – not the “strict construction in favor of the free use of land” standard but clarified the new standards as:  WE INTERPRET BOARD ENFORCEMENT DECISIONS UNDER THE SAME PRINCIPLES USED TO INTERPRET CONTRACTS.  THIS IS A NEUTRAL STANDARD – LOOKING AT THE TERMS OF THE CCRS (as a contract) AND WHAT THE PARTIES BARGAINED FOR WHEN THEY PURCHASED THEIR PROPERTY.

To be concise, Boards now have a stronger enforcement position than then did under the “old standard.”

It is going to be more difficult for an owner against whom you are enforcing the CCRS to now argue that the Board is acting arbitrary and in a random manner.  This is extremely significant to Boards; Board decision making authority; and enforcement authority in general; all of which are now, by this ruling, help protect the integrity of a Board decision.

The Supreme Court found that the Board had sufficient authority under a contract interpretation of CCRs (rather than strict interpretation for the free use of land), which also takes into consideration INTENT of the parties, to deny the application and REVERSED the district court’s ruling.

This is significant because it clarifies the standard under which CCRs and Board decisions are made; this decision significantly gives more deference to a Board’s decision than in the past (which still must be consistent with the CCRs) but causes the enforcement analysis to be done on a neutral playing field rather than the deck being stacked in the owners’ favor from the outset.

I look forward to speaking with you as your community needs arise and discussing the implications of this case generally if questions exist.

Best to all – John Richards  (jrichards@balljanik.com).  801-274-6800.

 

6 Must Have HOA Resolutions (Board Rules)

First and foremost, thank you for attending our recent HOA Law Seminar. It was great to see so many familiar faces and meet new Board members.

PLEASE LOOK FORWARD TO OUR UPCOMING HOA UNIVERSITY IN FEBRUARY – TO BE ANNOUNCED

Many Board members do not know the extent of the authority they have for “rule making.”  There are a few rules that govern drafting rules, but for our purposes, I want you to be aware that a Board adopted rule cannot conflict with your Bylaws, CCRs, or State Statutes.  Surprisingly, every Board still enjoys broad rule making authority.  (Recent statutory additions even further strengthen what you can do by Rule.)

A RESOLUTION is merely the formal name of the legal document that contains the RULE.

I wanted to list a few of the “must have” Resolutions and briefly explain the purpose of each.

It is key to remember that whatever rules or policies your HOA adopts, they must be evenly and uniformly implemented against ALL members; precisely as adopted.  No favoritism.

  1.  Collection Resolution – Bottom line:  You must have a policy that explains what the Board does when someone is delinquent, what the manager does and at what point in time a file is turned over to your attorney for collections.  We recommend that an account be turned over between 60 and 90 days delinquency.  A lien should be filed ASAP.  We collect our fees from the debtor with the goal being the HOA collections 100% of what it is owed and the attorney is paid as well.  You should never pay a percentage of the outstanding balance for HOA collections.
  2. Document Retention Resolution -Did you know that some HOA records must be kept forever others can be discarded when you choose?  Why pass box after box from Board to Board when you don’t have to?  Here is the problem, many Boards keep far too many records.  Therefore, if an owner requests to review records, which is their right (and they will if they are unhappy about something) and you’ve kept them, you have to provide them.  Why keep more documents than necessary?  A document retention policy is based on statute and common sense.  For example, you must keep minutes indefinitely per state law.  However, you can keep enforcement letters for as long as you like.  You want to keep enforcement/demand letters, however, for a time so you can prove that you are enforcing generally in the community – but why keep them beyond 1 or 2 years?  This policy gives you a chart, which you largely can control the outcome of, to guide your document retention policy.
  3. Electronic Notice and Voting Resolution – You can now send out notices of meeting via your website, email and even text messages.  Wouldn’t it be great to conduct voting on amendments and other matters electronically (email) as well?  An electronic Notice and Voting Resolution solves this problem and provides a step-by-step process to implement electronic communication into your community.
  4. Enforcement Resolution Believe it or not, the Board does not have to get involved in every single dispute (warning:  this is a general statement and each situation should be evaluated by counsel).  What if an upstairs neighbor in a condominium is making noise that only 1 other member can hear?  How do you, as a Board, know whether this is a serious issue or whether it is just a personality dispute?  Each HOA should have a policy that requires owners to take certain steps amongst themselves before the Board gets involved.  That way, a significant number of issues may get resolved without having to involve the Board.  Exceptions would be life, health and safety complaints but there is a way to “push back the point in time” the Board must get involved.  This can be a welcomed relief for many Boards.
  5. Absentee Owner Resolution – Are you concerned about owners who are away from their home for periods of time?  Are you concerned that, because no one is home, that the furnace may not be set at the right temperature leading to possible pipes breaking in the winter?  An absentee owner resolution implements certain base-line controls to protect the home (usual a condominium or townhome unit connected to another unit) from issues that arise when no one is home to take care of areas (pipes, namely) that could have an impact on others without oversight.
  6. Fining Procedure Resolution – Utah’s laws regarding fines have changed.  There are different rules for REPEAT violations and CONTINUING violations.  The point to know for now is that is in either scenario you are now allowed to give notice just once and thereafter go directly to fines (some details and rules apply) should the behavior continue.  Because these new rules won’t be in your CCRs, you need a resolution that allows you to send notice just once and then get right to fining should the situation come to it.

As mentioned, rule making is broad and quite “powerful.”  Use this authority carefully.  When exercised properly, however, your Association will function more smoothly, your burdens as a Board will be lightened and you will better discharge your duties to your membership.

I look forwarding to speaking with you all soon.  Again, be looking forward to HOA University (“HOA UNI”) shortly.

Best, John Richards

jrichards@balljanik.com

http://www.balljanik.com/utah

 

A Healthy HOA in 2016

FOR STARTERS:  SAVE THE DATE 1/16/16.  Join us for a free educational seminar and Meet and Greet Saturday morning the 16th.  Contact me for more details!  I’d love to see you there.

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Now that a new year is upon us, it is appropriate for every board to take a few minutes at their next board meeting to make sure the following issues are in order. If not, please contact us and we would be happy to take the opportunity to help your association be adequately prepared for any issues that arise in 2016.

The following is a checklist as you review your Association’s “health” for 2016:

  1. Are there defects in any of the areas over which the Association is required to maintain?   If it has been within 6 years of the completion of your community, you may have remedies for any construction defects.
  2. Evaluate your governing documents (CCRs, Bylaws, Rules, etc.). We advise that governing documents be reviewed and/or updated every six years as state laws change almost every year.  Many changes to your “governing documents” can be done by Board resolution rather than an amendment (which requires a vote).  Make sure your governing documents are up-to-date.
  3. Make sure you have a copy of applicable statutes for your association in a binder for each board member. Our office can provide you courtesy copies of these statutes as needed, so that they can be reviewed to the extent that they take priority over your CCRs or Bylaws. You should be familiar with the governing Act and the non-profit corporations Act.  (You need to know whether you are a condominium community or planned unit development.  A townhome is an architectural style.)
  4. Be sure to keep a book of resolutions (Rules and Resolutions) that show when a rule was adopted, the text of the rule, and indicate if a rule has been repealed or not. That book should be passed down from board to board so the association knows which rules have been adopted by the Association.
  5. If your CCRs have architectural standards, make sure your architectural guidelines and design standards are clear, unambiguous, and make sure that the process for submitting plan approval is clearly set forth and not inconsistent with law or other provisions of your governing documents.
  6. The Association should have a collection resolution in place which specifices what the association will do internally (it’s Manager or Board), which also states after how many days delinquent an account must be in order to be turned over to your attorney for collections. NOTE:  Our office was the pioneer for deferred attorney fee collections, known as our “Common Sense Collections Program,” whereby we collect our fees from the homeowner and we do not take a percentage of recovery from the Association.
  7. Make sure your association has an enforcement policy in place. This is a unique type of policy that indicates the point in time the association gets involved with an enforcement matter, especially when only one homeowner is complaining and no one else seems to be bothered by a specific behavior. This type of policy puts burdens on the aggrieved owner to help the Board feel comfortable that the owners are not furthering a personal agenda, but truly addressing a community concern.
  8. The Association’s insurance policies should be reviewed for adequate coverage for those areas over which the association is required to insure including adequate Director and Officer Liability Insurance, in case of a claim made against the Board.
  9. The Association should be trained regarding the respective roles of the Officers of the Association. Remember the Board or the Management Committee is a distinct entity from its officers. Usually the Board and Officers are the same people, but the jobs of the Officers need to be understood by those serving in those capacities and a policy statement (what each Offices does) may be needed if not adequately contained in your Bylaws.
  10. The Association should adopt a document retention policy. Some documents are required to be kept indefinitely. Others may be disposed of at your earliest convenience. There is no reason for documents that do not need to be kept be kept for years and years in a box or file cabinet.  A document retention policy will help you determine how long you keep certain types of documents.
  11. The Board should, through its attorney, undertake brief Fair Housing training to understand how discrimination complaints arise and how reasonable accommodations are to be dealt with regarding such issues as service and companion animals.
  12. Ask yourself if you are aware of recent statutory changes that address electronic means of communications and other issues such as open meeting,  rental restrictions, rule making and reserves.
  13. The Board should fund its reserve fund and speak with their attorney about the adequacy of that fund and how it should be used in comparison to operating expenses.
  14. Does your Board having a Schedule of Fines that differentiates between a continuing violation and a repeat violation? Do you understand what type of notice and how frequent such notice must be given when there is a repeat violation and what due process must follow if an Owner is alleged to have violated a rule before an actual fine can be levied?

THESE ARE JUST A FEW QUESTIONS/ISSUES YOU SHOULD REVIEW FOR 2016 AND BEYOND.  WE WOULD LOVE TO ASSIST WITH ALL YOUR ASSOCIATION’S NEEDS.

BEST WISHES THIS NEW YEAR – JOHN RICHARDS

jrichards@balljanik.com

RADON GAS – OH NO!

Please remember that my opinion below is intended for educational purposes and information only.  Please do not rely on my opinion below until we’ve discussed your specific facts.  With that disclaimer, let’s talk about RADON GAS!

Is the HOA responsible for radon gas found within a unit?  No.  Though I am not a chemist, I know that radon gas is found in virtually all soils due to the breakdown naturally occurring uranium (that is about as much as I know).  Nevertheless, radon gas can be a health hazard and this is an important topic.

As you know, radon gas seeps through foundations and concrete and can enter a unit.  Because there is no perfect building technique to keep these microscopic chemicals from passing through concrete and, ultimately, entering the unit.  Such gas entering a unit is not necessarily the “fault” of the Developer and, consequently, it is not a “defect” in the common areas.

In short, owners are responsible to maintain their interiors.  That logic applies to radon testing and mitigation – it simply falls on the owner.

Of course, the Association would be responsible for any radon gases mitigation found in the common areas (be mindful that crawlspaces, attics, etc., could be common areas and not part of the unit; certainly clubhouses, etc., are common areas).

If the Board knows that a unit tested positive for radon should does it have a duty to disclose it to the community?  No.  For the reason that radon gas found inside the interior of unit is an owner responsibility, there should be no obligation to inform the community that radon was detected in a private unit.  However, this mentality could cause problems.

It may be wise to “get ahead of the story” and remind owners of their responsibility for testing and mitigating radon gas to help minimize scrutiny of the Board for “not acting.”

I hope this brief entry helps.  As always, contact me directly for additional discussion.  Best regards, John Richards, Esq.   jrichards@balljanik.com

MARK THE DATE:  JANUARY 16, 2015 – HOA ESSENTIALS AND BEYOND!  MORE INFORMATION TO COME.  LIVE PRESENTATION!

 

 

 

 

Do I Really Need Reserves (Savings)? Who Says?

The under-funding of your HOA’s reserve account is one of the greatest challenges you will face.  Failure to “start funding” and a failure to “have a reserve funding plan” could lead to claims of malfeasance against your Board.

Q.  Who says we need reserves?

A.  The legislature.  Reserve funding is required under 57-8a-211 if your community is a “non-condo” and 57-8-7.5 controls if you are in a condominium community.  The procedural requirements for both are the same.

Q.  Why can’t we just specially assess when we need money?

A.  First, as mentioned, reserves are required by statute.  Second, it is just not fair for a new(er) owner to come into a community and then have to pay for repairs or replacement of an asset that others enjoyed without saving up for the day it ultimately needs to be fixed or replaced.

Q.  How much do I need to have in reserves?

A.  The Board needs to tuck away each year an amount it deems prudent or the amount required in the CCRs (if any amount is stated in the CCRs).  Remember, reserve funds come from a portion of the regular assessment.  The secret is to have set your dues “high” enough to cover operating expenses and a reserve contribution.

Q.  How do I determine how much the Board should set aside for reserves each year?

A.  The law requires that a RESERVE ANALYSIS be done.  The Board uses the reserve analysis to determine what a prudent reserve contribution is for any given year.

Q.  What does a reserve analysis include?

A.  An itemization of funds needed to cover the cost of repairing, replacing or restoring common areas and facilities that have a useful life of three years or more and a remaining useful life of less than 30 years, if the cost cannot reasonably be funded from the general budget or other funds of the Association.

Q.  How often do I have to update or “re-do” our reserve analysis?

A.  You need a new reserve analysis every 6 years and an update every 3 years.

Q.  How is the reserve contribution for a given year announced?

A.  You must list a LINE ITEM in your annual budget which shows the amount of the reserve contribution for that year.  This implies that you will distribute the budget at least annually.

Q.  What if my HOA does not fund reserves?

A.  You can be sued for damages.  Trust me, you don’t want to be in this situation.  Get on a reserve funding plan.  There are experts that prepare reserve studies and we can refer them to you.

IMPORTANT NOTE:  A BOARD MAY NOT USE MONEY IN A RESERVE FUND FOR DAILY MAINTENANCE EXPENSES UNLESS A MAJORITY OF MEMBERS VOTE TO APPROVE THE USE FOR THAT PURPOSE.  FURTHER, YOU CANNOT USE ANY RESERVE FUNDS FOR A PURPOSE OTHER THAN FOR WHICH THE FUND WAS ESTABLISHED.

Let me know if you have any questions about reserves.  The above is general information only and not intended to be advice for your specific association but I’d sure love to help you out.

Thanks everyone – John Richards

Why is My HOA Losing Money? DELINQUENT ASSESSMENTS

Many Associations are extremely critical of their expenses (which they should be) but fail, until it is too late, to address one of the key reasons why their Association is having financial difficulties.

That reason is allowing delinquent assessments to accrue for far too long before formal collections begin.  This issue often gets overlooked because Board members don’t want to confront their neighbors on this sensitive issue.  Such a mindset must be changed.

This blog entry will provide tips to collect unpaid HOA “fees” or “dues.”  Please read the following seven (7) key points.

First, every Association needs to have a collections policy in place.  This policy sets forth the point in time the Board takes certain action and when a file will be turned over to your Attorney. It further states what the Board will d0 (warning letters, demands, etc.) and what the attorney will do so that everyone is treated the same.

Second, make sure that your Association has all of the collection remedies allowed by law.  Some key remedies are available to you but only if contained in your CCRs, Bylaws or Rules.  Rules can be easily adopted to give you a wide range of collection “tools.”

Examples of collection remedies (collection “tools”) include:

a.  Lien rights;

b.  The power to foreclose your lien;

c.  Late fees and interest on the unpaid balance;

d.  The ability to demand rent from a tenant if the absentee owner is not paying their HOA assessments (That is, the “landlord” is most likely getting paid rent by their tenant living in your HOA.  Upon following certain formalities, the law allows the HOA to receive this rent until the account is current and the “tenant” cannot be held in default under the lease from not paying their landlord.).

e.  The power to deny use of the common area amenities;

f.  The authority to terminate utilities paid for from assessments – water, electricity, cable and internet can all be “turned off” in many situations.  For obvious reasons, we should be consulted before using this remedy;

g.  Denying voting privileges if contained in your governing documents;

h.  Hold the delinquent owner responsible for attorney fees and collection costs;

i.  Make sure you use an HOA Attorney who specializes in HOA collections.

There is no reason why the Association should pay anything for collection services (except for perhaps hard costs) as those legal fees may be recovered from the debtor homeowner.  Please contact me to learn more about Common Sense Collections which basically provides that in most instances the HOA pays no legal fees for specialized collection services.  TIP:  Do not use a collection agency.  No company should take a percentage of what they collect as their fee leaving the HOA short of a full payment.

j.  Make sure that your CCRs make your owners both personally liable for the debt as well vesting your HOA with lien rights mentioned above.  You then have options if needed:  (1) seek a money judgment against the debtor; (2) foreclose your lien against the property.

These are just a few of the important collection remedies.  I would love to discuss all options with your Board.

Third, do not let delinquencies accrue and add up – this greatly diminishes your cash flow and the longer you wait, the harder it becomes to collect against someone.  I suggest that a collection matter be turned over to the HOA’s attorney no later than at 60 days’ delinquency.

Fourth, understand the difference between homes that have been foreclosed on (meaning the lien is wiped away but the owner remains personally obligated – if you can find them) and those owners that have filed for bankruptcy (which means the personal debt is wiped away, but in most cases the lien remains in tact and can be collected against).

Again, we can help you understand this process in more detail.  Don’t give up on these types of cases but realize that collections does become more difficult as you can understand when a bankruptcy or foreclosure occurs.

Fifth, demand that your manager keep detailed accounting ledgers for each owner (most management companies do this in the regular course of business).  However, make sure that if you change management companies, that you have access to past account information so that if a new manager starts a new ledger with a balance forward, you can explain the “balance forward” charges if ever questioned.

Sixth, have your HOA attorney file the lien as soon as possible once an account becomes delinquent.  PLEASE NOTE THAT HOA LIENS MUST CONTAIN SPECIFIC INFORMATION PER STATUTE.  IF YOU FAIL TO INCLUDE THE CORRECT LANGAUGE YOUR LIEN MAY BE VOID.

Seventh, make sure that your HOA is signed up on Utah’s HOA Registry and that it is updated within 90 days of a change in the Board member(s).  If the Registry is out of date, your lien is invalid until it becomes current.

That’s it for now!  I’d love to hear any suggested topics you’d like me to write about.  Call me at 801-274-6800 or email me at:  jrichards@balljanik.com

Until next time – YOUR ONE STOP, FULL SERVICE HOA ATTORNEY – John Richards, Esq.

What Can My HOA Regulate by Rule?

The following are some general guidelines for Boards/Management Committees to consider when adopting use restrictions by RULE (as opposed to what may already be in your CCRs or Bylaws).  The following is for general educational purposes only and is not a comprehensive list or discussion of what may be done by Rule.

THE BASICS.  Remember, that “rules and regulations” are distinct from “CCRs” and “Bylaws.”  If you have adopted a rule that conflicts with your CCRs or Bylaws, then the rule will likely be invalid.

Also note that a “Resolution” is the formal name of the procedure/policy that embodies your “rules and regulations.”

Finally, always keep in mind that an Association’s ability to regulate “use” or “behavior” within or on a private “lot” or “unit” is different from its ability to regulate activities within the “common area.”

Nevertheless, Utah law DOES grant Associations a wide degree of rule making power.  Rules are critical, especially if certain important restrictions and HOA “powers” are not expressly stated in your CCRs or Bylaws.

The key is to make sure that your Board/Committee has expressly adopted specific rules so that your HOA can utilize certain governance and enforcement actions allowed by Utah’s Community Association Act and Utah’s Condominium Act.  Extremely important issues ranging from collection remedies, regulating rentals to providing electronic notice of HOA meetings can be implemented by HOA Rule.

The following is only a sampling of what your Board/Management Committee can (and cannot) adopt by Rule.

ACTIONS BOARDS MAY TAKE BY RULE

(NON-CONDOMINUM COMMUNITIES)

57-8a-106. Fee for providing payoff information needed at closing.

IF specifically authorized by Rule, an Association may charge a fee for providing payoff information. However, per code, the Association cannot require that this fee be paid before closing or exceed $50.

57-8a-208. Fines

Your HOA may assess fines for violations but the behavior that constitutes a violation must first be contained in a written Rule (or CCRs or Bylaw) and the fines associated with such violations must also be contained in a “Schedule of Fines.”

57-8a-209. Rental Restrictions.

Associations may by Rule, create procedures to determine and track the number of rentals and lots in the Association.

57-8a-214. Fair and reasonable notice.

If you want to utilize electronic means for notice of HOA actions, then a Rule needs to be created to outlining the procedure of providing notice via electronic means, including text messages, email or the Association’s website.

57-8a-217. Association rules, including design criteria – Requirements and limitations relating to board’s action on rules and design criteria – Vote of disapproval.

By Rule, Associations may adopt, amend, modify, cancel, limit, create exceptions to, expand, or enforce the rules and design criterial of the Association.

57-8a-218. Equal treatment by rules required – Limits on association rules and design criteria.

A Rule may vary according to level and type of service the association provides to lot owners and differ between residential and nonresidential uses.

A Rule may not treat lot owner differently because lot owner rents BUT a rule may (with exceptions):

  • Limit or prohibit a rental lot owner from using common areas for other than attending meetings and managing their rental lot.
  • Charge a rental lot owner a fee to use the common areas
  • Require tenants to abide by terms of the governing documents and hold tenant and lot owner jointly and severally liable for a violation of governing documents.

A Rule may not limit rights of owner to display religious and holiday signs and decorations inside a dwelling BUT may adopt restrictions regarding displays visible from outside the lot.

A Rule may not regulate content of political signs, BUT a rule may regulate the time, place and manner of posting political signs.

A Rule may not interfere with the freedom of owner to determine the composition of the household, BUT a Rule may require that all occupants be members of a single housekeeping unit or limit the number of occupants permitted in each dwelling based on the dwelling’s size and facilities and fair use of the common areas.

A Rule may not interfere with legal activities within the dwelling, BUT MAY prohibit an activity within the dwelling if:

  • It is not normally associated with residential use
  • Or creates monetary costs for the association or other lot owners; creates a danger, generates excessive noise or traffic; creates unsightly conditions visible from outside the dwelling; creates an unreasonable source of annoyance to others or creates the potential for smoke to enter another’s dwelling or common areas.

A Rule may not alter the allocation of financial burdens among various lots BUT MAY (a) change common areas available to lot owner, (b) deny the use of common areas or deny use priviledges to a lot owner if the lot owners is delinquent in paying  assessments or abuses the common areas or violates the governing documents.

A Rule may require a minimum lease term unless contrary to declaration.

Also, a Rule MAY:

  • Regulate the use of common areas
  • Impose and receive payment of fee for use of common areas (except limited common areas) and a service provided to a lot owner;
  • Impose a charge for a late payment of an assessment;
  • Provide for the indemnification of the officers and Board consistent with nonprofit Act; (this will be the topic of a separate blog entry);

Always remember that a Rule must be reasonable and consistent with the HOA’s governing documents.

57-8a-221. Reincorporation of terminated or dissolved association.

A Rule is needed to  reincorporate a dissolved Association and to readopt the bylaws in existence at the time of termination or dissolution.

57-8a-225. Association’s right to pay delinquent utilities.

The Board may, if permitted in its Rules (or CCRs or Bylaws)  and after reasonable notice to owner: enter and winterize the lot.

57-8a-309. Termination of a delinquent owner’s right – Notice – Informal hearing.

If not contained in the CCRs or Bylaws, a Rule is needed to allow a Board to terminate a delinquent lot owner’s right to receive utility service for which the lot owner pays as a common expense or to access and use of recreational facilities. Boards must give notice before terminating utility service or access to facilities.

It is important to note that before your HOA levies a fine, the Board must conduct an informal hearing if requested.  The procedure for the hearing must be spelled out in your CCRs or RULES.

57-8a-310. Requiring tenant in residential lot to pay rent to association if owner fails to pay assessment.

Rules may require that a tenant under lease with a lot owner pay the association all future lease payments due to the owner if the owner is more than 60 days late.

ACTIONS MANGEMENT COMMITTEES MAY TAKE BY RULE

 (CONDOMINIUM COMMNITIES)

57-8-10.1 Rental Restrictions.

If your Association has rental restrictions, it is required to create by rule, procedures to determine and track the number of rentals in the project and to ensure enforcement of the rental restrictions.

57-8-37 Fines

See the same discussion above – Associations may assess fines against owner for violation of governing documents (with certain conditions) but the behavior that constitutes a violation must be first adopted in the form of a Rule.

57-8-42 Fair and Reasonable Notice

Just as in non-condominium associations, a condominium association can provide notice to unit owners by methods not mentioned in Nonprofit act if, considering all the circumstances, the notice is fair and reasonable and a Rule has been adopted allowing notice by electronic means, including text message, email or website of the association.

57-8-43 Insurance

By Rule, an Association may obtain an additional type of insurance other than required; or a policy with greater coverage than otherwise required.

57-8-52 Termination of delinquent owner’s rights – Notice – Informal Hearing.

Also as discussed above, a management committee of a condominium community may terminate a delinquent owner’s right to: 1) receive a utility service for which unit owner pays as a common expense; or 2) access and use recreational facilities.

Before terminating rights, association shall give notice in a manner provided in declaration, bylaws or RULES that they will terminate rights within a certain time provided by governing documents or rule, amount due, right to request hearing, time provided and estimate cost to reinstate if service is terminated.

57-8-53 Requiring tenant in residential condo unit to pay rent to association of unit owners if owner fails to pay assessments

Management committees may require a tenant under a lease with a unit owner to pay the association all future lease payments do to the unit owner if unit owner fails to pay assessment for more than 60 days.  BUT THERE MUST BE A CCR PROVISION OR A RULE IN PLACE TO UTILIZE THIS REMEDY.

** Remember, the real benefit of a rule is to supplement deficiencies in your CCRs and Bylaws.  Rules are an invaluable tool for effective community governance.  The above reflects only a few statutory examples of rule making power.  Never hesitate to contact us to discuss this issue further.

THANKS FOR READING!  More to come.