Applying the Oregon Planned Community Act

The Oregon Planned Community Act (ORS Chapter 94) was adopted in the early 1980s. The Act applies to any subdivision where the owners have collective obligations. Collective obligations include maintaining common property or paying assessments that are used for association operations. A community may be subject to ORS Chapter 94 even if created prior to the adoption of the Act and even if the governing documents make no mention of the statute.

The applicability of the Act depends on the year the community was created, the number of lots, and the total amount of annual assessments. The number of lots and the total amount of annual assessments determine the "class" of the planned community. Class 1 planned communities contain at least 13 lots with at least $10,000 in total annual assessments. Communities with 5-12 lots and at least $1,000 in total annual assessments are Class 2 planned communities. All other subdivisions with collective obligations are considered Class 3 planned communities.

For Class 1 and Class 2 planned communities created prior to 2002, certain provisions of the Act apply to the extend the statute is consistent with the governing documents. Here is a quick way to determine which portions of ORS Chapter 94 apply to your community (if created before 2002): https://calaw.attorney/ors94applicability

The Meaning of Quorum

Most community association bylaws state a specific quorum requirement for owner or membership meetings.  The purpose of a quorum is to avoid binding owners to decisions made by an unrepresentatively small number of individuals.  Simply put, quorum is the minimum number of members or owners required to conduct business at a meeting. That minimum number may be a percentage of owners or a specific, fixed number of owners. If at the start of an owner meeting it appears the quorum requirement has not been met, the meeting cannot continue.  The only action that may be taken is to set the time and place for another meeting.  Any substantive action taken in the absence of a quorum is deemed invalid.

Some governing documents may not provide for a quorum requirement.  In that case, there are statutory defaults.  In Oregon, if the governing documents are silent then the quorum requirement is 20% of the owners (ORS 94.655).  Washington has a slightly larger default quorum requirement:

Unless the governing documents specify a different percentage, a quorum is present throughout any meeting of the association if the owners to which thirty-four percent of the votes of the association are allocated are present in person or by proxy at the beginning of the meeting.(RCW 64.38.040)

Keep in mind that quorum can be achieved by owners attending a meeting in person or by proxy.  It’s conceivable that quorum could be achieved by only a few owners attending a meeting in person, but each of those owners having multiple proxies from other owners.

If your homeowner or condominium association has difficulty meeting its quorum requirement, here are a few ideas to consider to increase membership attendance:

- Consider changing the location to a more convenient or comfortable place;

- Plan ahead and choose a meeting date that doesn’t conflict with vacation periods or holidays;

- Send notice of the meeting via mail, email, and any other means which owners are likely to receive;

- Consider serving food or refreshments;

- Give away door prizes.

Amending Governing Documents

Amending your condominium or homeowners association governing documents is no easy chore. It can be a long and costly process, and even then, you may not receive enough votes to approve the amendments. The process of amending goes like this:

1. Identify the reasons for amendments 2. Determine any statutory requirements 3. Determine voting requirements 4. Decide on the method of voting 5. Solicit owner feedback on proposed amendments 6. Conduct the vote 7. Prepare the amendments for recording 8. Sign and notarize 9. Secure any governmental approvals 10. Record the amendments with the county recorder

Here are some things to consider before embarking on an amendment project:

Identify the Reasons for the Amendments

There are many reasons to amend governing documents. Common reasons include:

1. Legislative changes 2. Ambiguous provisions 3. Outdated provisions 4. Community demographic has changed 5. Removal of “declarant” language 6. Adding or removing restrictions

It’s critical that the reasons for each amendment are conveyed to the owners. After all, most amendments require owner approval. Making a convincing case to the ownership will result in higher voter turnout and more “yes” votes.

Find out What’s Required

Most CC&R amendments require a vote of between 65%-75% of the entire ownership. Bylaw amendments typically require a majority vote of the owners. However, sometimes state law will require different approval requirements. For example, in Oregon condominiums the approval of 75% of all owners is required for any amendment related to pet restrictions or the rental or leasing of units. (ORS 100.410(4)). In Washington, a homeowners association may amend its governing documents to remove discriminatory provisions by a majority vote of just the board of directors (RCW 64.38.028)

Method of Voting

Most associations will find it impossible to approve a governing document amendment at a physical meeting of the owners. For a CC&R amendment requiring 75% approval, the chances of that many owners attending a physical meeting in person or proxy is slim. The most common method is to conduct the vote by written ballot. Better yet, some communities may conduct the vote via online ballot. This often generates the most voter turn out. For an example of an online ballot, click here.

Finalize and Record

Once the required number of votes have been received, the amendment must be prepared for signature and recording. In some cases, approval by the state or a governmental authority must be received and reflected on the amendment. The amendment should contain references to the original documents which are subject to the amendments, and must be signed and notarized. The amendments do not become effective until recorded with the county recorders office.

To learn more, check out our document amendment timeline.

Understanding Governing Document Restatements

The process of amending governing documents is no easy task. Changes to the CC&Rs typically require between 66%-75% of the owners to approve.  Bylaw amendments, on the other hand, are a little easier to modify, usually requiring a majority vote of the owners.

But suppose over the years your governing documents have been amended several times. Numerous amendments can make things complicated. When reading the CC&Rs or Bylaws, the reader must frequently refer to the amendments to confirm which sections have been modified.

“Restating” a governing document means combining the original document with all subsequent amendments. The association prepares a document incorporating all amendments and records a single “restated” version. Now, members can use and refer to a single document instead of an original and multiple separate amendments.   

For example, let’s suppose your original Bylaws were adopted in 1995. In 1998 the association (via an amendment) increased the number of directors. Then, in 2000, the members voted to change the date of the annual meeting. Two years later, another amendment was adopted increasing the quorum requirement. Lastly, a recent amendment mandated that the board of directors carry liability insurance. Reading the Bylaws now requires the reader to review each of the amendments to ensure whichever section they are reading hasn’t been modified.

Oregon and Washington both provide procedures for restating. Washington, however, only addresses the process to restate the articles of incorporation. (RCW 24.03.183).

The procedure for Oregon planned communities and condominiums is the same. The board of directors adopts a resolution to prepare, codify, and record individual amendments. This does not require a vote of the owners. At the beginning of the restated document, the board must:

1. Include a statement that the board has adopted a resolution authorizing a restatement;

2. Not include any other changes which have not been properly adopted by the membership (except for scriveners’ error or to conform with format or style);

3. Include a certification by the president and secretary that the restated document includes all previously adopted amendments;

4. Cite to the document recording numbers of the previous amendments; and

5. Record the restatement in the county records where the community is located.

If your association has adopted multiple amendments over the years, talk with a qualified attorney and consider codifying and restating your documents.

Governing Document Review

If your governing documents are old, drafted by the developer, or merely unintelligible, one of our lawyers will perform a thorough review of the association's Declaration/CC&Rs and Bylaws. The review lists each of the substantive provisions in your Declaration and Bylaws, as well as provisions which should be in the governing documents. Next to the provision is a recommendation or comment addressing whether the provision is out-dated, should be amended, or should be left as-is. Example:

For associations considering amending the governing documents, this is a great starting point to determine which sections need to be addressed.

Fill out the form below to get started:

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Dealing with Short-Term Rentals

The rise of short-term lease websites (AirBnB, VRBO) has caused significant concern among condominium and homeowner associations. Repeated, short-term rentals may cause parking issues, noise, and other nuisances which disturb community residents.  What can an association do to restrict these types of rental arrangements?

In most cases, an amendment to the governing documents is required to address or restrict short-term rentals. Some associations have attempted to restrict short-term rentals under existing provisions of the governing documents. In most cases, those attempts were unsuccessful.

In a New Mexico case, the association’s governing documents required all lots to be used for “residential purposes” and homes must be “single family” dwellings.[footnote]Estates at Desert Ridge Trails Homeowners' Ass'n v. Vazques, 300 P.3d 736 (2013).[/footnote]  There was no dispute that, in general, owners are entitled to rent their home. But it was the repeated, short-term rentals that caused an issue. An owner in the association began advertising his home on the internet for minimum stays of three nights. 

The association requested a court order stating that the owner was in violation of the “residential purposes” and “single family” dwelling provisions of its CC&Rs, arguing that short-term rentals are inconsistent with those restrictions. The court stated that “residential use” and “residential purposes” is typically interpreted to mean use of property for living purposes, or a dwelling, or a place of abode. The court rejected the association’s argument that repeated short-term rentals constitutes an economic or commercial endeavor, and is thereby inconsistent with “residential use”:

We therefore conclude…that an economic benefit flowing to Defendant from the rental of his home, whether long- or short-term, does not by itself constitute an impermissible business or commercial activity under the “residential purposes” restrictive covenant.

The Oregon Supreme Court decided a similar case.[footnote]Yogman v. Parrot, 325 Or. 358 (1997).[/footnote] An owner in a beachfront subdivision rented his home on a repeated short-term basis. The association’s governing documents stated that all lots be “used exclusively for residential purposes and no commercial enterprise shall be constructed or permitted on any of said property.”

The Court took the position that the short-term renters are “residents”—they eat, sleep, bathe and watch television within the dwelling.  Thus, the use of the home complied with the “residential purposes” language in the CC&Rs. As for the commercial enterprise language, the Court held that the language was ambiguous:

if a “commercial enterprise” requires a business organization that has profit as its primary aim, then the covenant does not cover defendants' use, because the facts shown do not demonstrate that defendants are a business organization or that they have profit as their primary aim (as would be true, for example, of a bed-and-breakfast business).

Ultimately, the Court concluded that the owner’s repeated short-term rental of his home did not violate the CC&Rs.

Many governing documents prohibit rentals of less than 30 days. If that’s the case, the association may prohibit AirBnB type arrangements which are less than 30 days. In addition, if the association’s governing documents provide for a rental cap (only a certain number of lots or units may be rented at a given time), then any type of rental exceeding the rental cap are prohibited. 

If your governing documents do not address short-term rentals, first look to see if city or county ordinances provide guidance. For example, the city of Bend, Oregon, has a local ordinance restricting short-term rentals and requiring permits for such a use. Click here to review the ordinance. 

Absent a city or county ordinance addressing short-term rentals, the association will likely need to consider an amendment to the governing documents. An amendment restricting short-term rentals requires the vote of the membership. If there are already units or lots used as short-term rentals, consider exempting those owners from the restriction so long as they own the property. As always, amendments to the governing documents should be drafted with the help of legal counsel.

Enforcement of CC&Rs

Condominium and homeowner association CC&Rs are, in many ways, similar to contracts. If one party breaches the terms of the contract, the other party may seek the help of the legal system for damages or to require the breaching party to fulfill their obligations. Most CC&Rs allow the community association to enforce the covenants and promises found in the governing documents. The association does this through its elected board of directors.  But does the association have an obligation to enforce the CC&Rs? In most cases, the answer is yes.

A careful look at the CC&Rs will determine who has enforcement authority and whether enforcement is an obligation or a right. Some governing documents require a vote of the owners prior to taking certain enforcement actions.  Other CC&Rs (where there may not be an association) require individual owners to enforce all of the provisions of the governing documents.

The question of whether or not an association may use legal proceedings to enforce its CC&Rs depends on “standing.”  Standing, in a legal sense, means that the party to the litigation has a stake or interest in the dispute, as well as the capacity to sue.  In Oregon and Washington, state law grants community associations standing and authority to enforce covenants through legal action.

Oregon law specifically authorizes community associations to initiate or intervene in matters relating to the enforcement of governing documents:

[A] homeowners association may…initiate or intervene in litigation or administrative proceedings in its own name and without joining the individual owners in the following:

      (A) Matters relating to the collection of assessments and the enforcement of governing documents[.] (ORS 94.630(e)(A))

In Washington, homeowners associations have similar authority. Unless prohibited by the governing documents, an association may:

Institute, defend, or intervene in litigation or administrative proceedings in its own name on behalf of itself or two or more owners on matters affecting the homeowners' association, but not on behalf of owners involved in disputes that are not the responsibility of the association[.] (RCW 64.38.020)

Before an association takes legal action to enforce its governing documents, ask these questions:

1. Would levying fines against a violating owner be more effective?

2. Does the cost of litigation outweigh enforcement through a lawsuit?

3. Does the association have an affirmative duty to enforce the covenant?

4. Is enforcement of the issue more appropriately handled between individual owners?

5. Is alternative dispute resolution an option to resolve the violation?

Special Owner Meetings

Community associations typically have three types of meetings: board meetings, annual owner meetings, and special owner meetings. The notice requirements, quorum provisions, and subject matter are very different for each type of meeting. The most common reason for a special owner meeting is for the removal of directors. Other reasons include approval of special assessments and amending the governing documents. Because the meetings are "owner" meetings, all owners have the right to participate, make motions, and vote.

The notice requirements for special owner meetings are typically found in the association's bylaws. Notice is commonly required no less than 10 days and no more than 50 days prior to the meeting. The notice of a special owner meeting must contain a description of the business to be conducted. For example, if the meeting is to remove a director, the notice must specifically state: "The purpose of this meeting is to consider and vote upon the removal of director John Doe."  The special meeting is strictly limited to the business contained in the notice.

Owners may call a special meeting by submitting a petition signed by enough owners required to call the meeting. Once the petition is submitted, the board should verify the names and ownership of each person who signed the petition. Assuming the petition contains the required number of signatures, the board has a duty to call and hold the special meeting.

Here is a chart showing who may call special owner meetings:

Oregon Condo & HOAs	Washington HOAS	Washington Condos
1. President of the association; 2. Majority of the board of directors; or 3. 30% of the owners (unless different req. is in documents)	1. President of the association; 2. A majority of the board of directors; or 3. 10% of the owners	1. President of the Association; 2. A majority of the board of directors; or 3. 20% of the owners (or lesser percentage if specified in the governing documents)
ORS 94.650	RCW 64.38.035	RCW 64.34.332

Drones in Community Associations

Drones are no longer exclusive to the military.  The prices continue to plummet and the technology has improved to allow even the not-so-tech-savvy consumer to easily pilot the flying devices.  But when drones land on the White House lawn or interfere with firefighting operations, public concern grows.

There are many practical uses for drones. Arial video and imagery are used by construction professionals, farmers, conservationists, and film makers. Most exciting: Amazon has announced that products will be delivered by drone in the near future.

But for many individuals, drones raise safety and privacy concerns. Federal laws impose some expectations and regulations on drone pilots.  For example, the FAA encourages recreational or hobby users to follow certain guidelines:

• Fly below 400 feet and remain clear of surrounding obstacles
• Keep the aircraft within visual line of sight at all times
• Remain well clear of and do not interfere with manned aircraft operations
• Don't fly within 5 miles of an airport unless you contact the airport and control tower before flying
• Don't fly near people or stadiums
• Don't fly an aircraft that weighs more than 55 lbs
• Don't be careless or reckless with your unmanned aircraft – you could be fined for endangering people or other aircraft

Oregon has adopted legislation governing the use of drones which may be used to regulate the flying of drones. ORS 837.380 allows property owners to sue a drone operator if (1) a drone has flown less than 400 feet above the owner’s property at least once; (2) the property owner has told the drone operator that they do not consent to the drone flying over their property, and; (3) the operator then flies the drone less than 400 feet above the property again. If these three conditions are met, the property owner can seek injunctive relief, “treble damages for any injury to the person or the property,” and attorney fees if the amount of damages is under $10,000.

What can community associations do to limit or regulate drones? The answer is: not much.  Some associations would like an all out ban.  Other associations have taken a more moderate approach, and amended the governing documents to allow the board to adopt rules and regulations which govern the flying of drones within the community.  This allows flexibility as technology changes and unanticipated uses arise. If the use of drones in your community creates a nuisance or violates other owner’s privacy, there may already be tools in your governing documents to handle those types of violations.

Stay tuned for a sample set of rules and regulations governing the use of drones in community associations.

2015 Case Law Review

Lawyers depend on case law to provide advice to homeowner and condominium associations.  While cases in other states are not binding, they often provide guidance to lawyers and board members. The following is a short summary of cases from around the United States involving community associations.

Filmore LLLP v. Unit Owners Association of Centre Pointe Condominium - Washington

The association attempted to adopt a cap on the number of rentals in the community. While the governing documents stated that only a majority of owners were required to vote in favor of the amendment, the Court imposed a higher approval threshold of a supermajority of all owners.

Acorn Ponds Homeowners Association vs. DeBenedittis - New York

Pedestrian filed action against homeowners association and association's snow removal contractor to recover damages for personal injuries pedestrian allegedly sustained when he slipped and fell on a patch of ice on property owned by association. The court found that the snow removal contractor did not substantially contribute to the injuries.

Neufairfield Homeowners Association v. Wagner - Illinois

The court in this case determined that two daycare businesses did not create sufficient traffic to violate a use restriction prohibiting frequent commercial traffic in the subdivision.

100 Harborview Drive Condominium Council of Unit Owners v. Clark - Maryland

An owner sued the association after the board refused to provide copies of it’s legal invoices. Under the law, communications between an association and it’s legal counsel are considered privileged. The court denied the owner’s request for copies of those documents.

Bluff Point Townhouse Owners Ass'n, Inc. v. Kapsokefalos - New York

An owner within the community claimed that the association did not have the authority to levy assessments. The Court found that the governing documents provided the authority to levy assessments and that the board had followed the proper procedures to levy and collect monthly assessments.

Arbors at Sugar Creek HOA vs. Jefferson Bank - Missouri

Owners of five lots in 18-lot subdivision brought action against lender that acquired from developer, through foreclosure, the 13 unsold lots and against contractor that agreed to build on the unsold lots seeking, among other things, declaratory and injunctive relief relating to management of the subdivision. The court made the following rulings:

1 lender could establish a successor homeowners association for the subdivision;

2 lender did not violate its duty of good faith and fair dealing by amending subdivision's declaration of covenants so as to remove residency requirement for members of association's board;

3 sufficient evidence supported trial court's finding that board acted reasonably and in good faith in approving building plans for one of the unsold lots;

4 lender was not entitled to recover from the lot owners the expenses it incurred to maintain the subdivision; and

5 lot owners could not be held liable to lender for abuse of process or slander of title.

Belleville vs. Malvern Hunt Homeowners Association - Pennsylvania

The developer of the community recorded CC&Rs before starting construction of the homes. During construction, the developer decided that a portion of the community would receive certain services (snow removal, landscaping) and that other portions would not receive those services.  Shortly after that decision, an owner purchased a lot. The developer gave the owner an unrecorded and unsigned amendment to the CC&Rs. The Court held that without recording the amendment, it was not valid or binding on the owner.

Houston v. Wilson Mesa Ranch Homeowners Association, Inc - Colorado

An owner in the community began leasing his home using VRBO (a short-term vacation rental website). The association took the position that frequent short-term rentals violated the commercial use provision in the CC&Rs.  The Court found that even though the owner was making a profit, the rentals merely provided a place for others to eat and sleep—therefore the use was “residential” and not commercial.

Gonon v. Community Management Services, Inc. - Indiana

Law firms or agencies which handle the collection of assessments are subject to the Federal Fair Debt Collections Practices Act. In this case, an owner sued the association’s management company for violations of the Act. The Court found that because the owner was not delinquent at the time the association hired the management company, the management company was not subject to the Act.

Walker I Investments, LLC v. Sunpeak Association, Inc. - Utah

In this case the Court found under the state’s nonprofit corporation law, the homeowners association was not obligated to provide an owner with the email addresses or phone numbers of the other owners in the community.

FHA Certified Condominiums

Many condominiums throughout the United States are Federal Housing Administration (“FHA”) certified.  This allows prospective buyers to receive FHA-insurance loans and mortgages. If a condominium is FHA certified, that means that the condominium meets all of the FHA legal, financial, operational, and property requirements.

FHA certified condominiums allow for a larger demographic of potential buyers.  This, in turn, makes the condominium more valuable and marketable.There are certain requirements which must be met.  The requirements include:

1. Property Use and Type

Under federal law, FHA mortgages may be used only to purchase a primary residence.  You may not secure an FHA loan for the purchase of a timeshare, condo-hotel, or resort property.  There are other types of properties which FHA loans may not be used: condominiums where more than 25% is designated for commercial use or condominiums located in coastal barrier zones.

2. Financial Stability

To become FHA certified, the association must prepare and fully fund an annual budget.  At least 10% of the budget must be allocated to reserves. The reserve fund is used to maintain, repair and replace common elements of the condominium, such as the siding and roofs.  Lastly, no more than 15% of the condominium units may be more than 60 days delinquent on the payment of regular assessments.

3. Operational Stability

The condominium association must show that at least 50% of the units are owner-occupied. This means that if your association has a high number of rentals, FHA approval may not be an option.  In addition, FHA certification requires that all of the condominium buildings and common element are in good repair.

4. Insurance Requirements

Every association should have certain insurance policies.  Click here for more on insurance. FHA approval requires that the association maintain the following policies:

A. Property/Hazard Insurance

B. Liability Insurance

C. Fidelity Insurance (if there are more than 20 units)

D. Flood Insurance (if required)

5. Legal Requirements

There are a handful of legal requirements to become FHA certified.  First, any rental restriction in the governing documents must comply with the FHA’s governing statutes.  Second, litigation (other than routine litigation for delinquent assessments) must be disclosed and explained.  Lastly, the association must certify that it is in full compliance with any applicable state or federal law.

To see if your condominium has been FHA approved, visit: https://entp.hud.gov/idapp/html/condlook.cfm

Common Legal Terms in Governing Documents

Community association CC&Rs and Bylaws contain numerous legal terms.  Some of those terms have common meanings, others have very specific and legal meaning.  Here is a list of common legal terms, along with plain English definitions: Abate - To stop or diminish.

Alienation - To transfer ownership or possession of land from one person to another.  Governing documents may have a provision against “any restraints on alienation.” This can mean that the Association may not impose rental restrictions or impose criteria for buyers of lots or units.

Declarant - The individual or entity who creates a condominium or planned community.

Casualty - A disastrous occurrence due to a sudden, unexpected, or unusual cause. A “casualty” event is what triggers many insurance policies.

Condemnation - The process of taking private property for public use by a governmental body.

Common Property - Property owned or leased by the association. Usually designated on the plat and described in the Declaration.

Contribution - The right of one person who has discharged a liability to recover from another who was also liable.

Common Elements - The portions of a condominium which are jointly owned.

Cumulative Voting - The ability to cast multiple votes for the same director. Typically prohibited.

Easement - The right of use upon the property of another.

Encroachment - When land is conveyed and it is then discovered that improvements on the property are partially located on an adjacent owner’s property.

Encumbrance - Any right or interest in land, like a mortgage or lien.

Enjoin - To require someone to do something.

Enjoyment - The exercise of the right to use your property. Owners have the right to “quiet enjoyment” of their property.

Enumeration - To list or describe.

E&O - Errors and Omissions insurance. Typically called D&O—Directors and Officers.

Estoppel - When someone is prevented, by their own actions, from claiming a right to the determent of another who was entitled to rely on such conduct.  For example, if the association is aware of a violation and does not act to enforce for a significant amount of time, the association may be “estopped” from enforcement.

Fidelity Bond - An insurance policy for the theft of association funds or money.

Fiduciary - Derived from Roman law, meaning a person of trust and confidence.  Board members are fiduciaries. This means all decisions must be made in the best interests of Association and members.

Foreclosure - The process used by a mortgagor or holder of a lien to deprive an owner of property from their interests in the property.

Improvement - An addition made to property, including sheds, walkways, and utilities.

Indemnification - To restore the victim of a loss, in whole or part, by payment, repair or replacement. If a director is sued for acting in their capacity as a director, the Association typically must “indemnify” the director.  This means the association pays legal fees and the judgment.

Invitee - A person is an invitee on the land of another if they are there by invitation or authorization.

Joint and Several - The liability of two or more people who make the same promise. If a husband and wife purchase a lot in an association, both are liable for the full amount of any delinquent assessments.

Legal Description - A unique description of property that allows the property to be found and identified.

Lien - A claim on property for the payment of debt.

Metes and Bounds - The boundary lines of a piece of property, including the starting and end point.

Mortgage - An interest in property created by a written document providing security in the land in exchange for the payment of debt.

Mortgagee - Person who takes or receives a mortgage.

Nuisance - Any activity on land which is unreasonable, unwarranted or unlawful and is an annoyance or inconvenience to others.

Offset - A deduction. State law prohibits owners from claiming any offset relating to payment of assessments.

Quorum - The percentage or number of members who must be present in person or by proxy in order to hold a valid meeting and conduct business.

Right of Entry - The association’s right to enter an owner’s lot or home to remedy a violation.

Severability - Capable of being divided.

Subrogation - To substitute one person in the place of another.

Successor Unincorporated Association - If an association fails to renew its corporate status, an unincorporated association automatically exists.

Turnover - The process of transferring control of the association from the developer to the owners.

Reading and Understanding Title Reports

What is “Title”? The term “title” has been defined as that which is the foundation of ownership, of either real or personal property, and that which constitutes a just cause of exclusive possession. It has also been defined as ownership, equitable or legal.

Title Companies

Before a title insurer or its agent can insure a transaction, it must operate a title plant in the county where the real property is located or purchase title insurance from a company that does. ORS 731.438(1). All title services by a title insurer must be provided within Oregon, and the information used to produce the services “must be maintained and must be capable of reproduction within the state at all times.” ORS 731.438(2).

A title plant can be jointly owned and maintained in “any county with a population of 500,000 or more, or any county with a population of 200,000 or more that is contiguous to a county with a population of 500,000 or more.” ORS 731.438(4).

Preliminary Title Report vs. Title Commitment 

A PTR does not constitute title insurance. A PTR is also not a promise with respect to the state of the title of real property. It is simply an offer to issue title insurance in a particular form.

A title commitment is an agreement to issue a specified policy to a specified insured upon acquisition of the insurable interest, if accomplished within a limited time, and upon payment of the premium and charges.

Insurable Title

There is a difference between insurable title and marketable title. Title is insurable if the title company determines that, based on its examination of the public record, the company will deliver to the party to be insured a title insurance policy (i.e., a contract of indemnity) subject to the company’s usual printed exceptions and exclusions from coverage as well as subject to certain matters shown in the title report (e.g., a recorded easement).

Scope of Insurance

Title Vested

Any defect in or lien or encumbrance

Unmarketable Title

No Right of Access

Endorsements

Zoning - It provides assurance that the insured property is in a particular zoning designation and that certain specified uses are allowed in that designation. The endorsement does not insure, however, that any of the existing uses on the property are in compliance.

Access - The access endorsements provide additional assurances to the insured regarding access to the insured property, and can be used with owners’ and lenders’ policies. The endorsements specifically identify the physically opened street to which the insured property has access.

Environmental - The endorsements cover only loss sustained by reason of lack of priority of the lien of the insured mortgage over any environmental-protection lien recorded in the public records. The endorsements provide absolutely no protection to lenders regarding the numerous off-record issues raised by federal and state environmental laws.

Location of Improvements - the location-of-improvements endorsement assures that improvements having a specified street address or route or box number are located on the insured property.

Marketable Title

Marketable title is “title such as a prudent man, well advised as to the facts and their legal bearings, would be willing to accept.”

Abstract or Chain of Title

An abstract of title is also different from title insurance. An abstract is a summary of the chain of title to a particular parcel of property that shows how each owner acquired and disposed of the owner’s interest in the property. An abstract also discloses the nature and source of liens, encumbrances, and other matters appearing of public record in the chain of title.

Contents of a Title Report

Estate of Interest Covered

Fee Simple - The fee simple estate (also called “absolute estate” or “fee simple absolute”) is described as “full ownership.” A fee simple absolute is the most common estate in modern times; most people own their property in fee simple. The presumption is that a person conveys the fee estate unless the conveyance expressly states otherwise.  The fee simple absolute is considered the greatest estate because it is of unlimited duration. The estate ends only by the sale of the property or the death of the holder without heirs. It is freely alienable, devisable, and inheritable.

Current Owner of Estate or Interest

Shows the current owner of record and how title is vested, i.e. single man, window, husband and wife.

Parcel of Land Involved/Legal Description

Rectangular or Governmental System - Under the Rectangular System of survey, the surveyors first established a reference point from which a line ran due north and south. This north-south line was designated the principal meridian. The principal meridian for Oregon is the “Willamette Meridian.” After establishing the principal meridian, the surveyors located a point on the principal meridian from which they ran a line due east and west. This east-west line was designated the baseline. In Multnomah County, the baseline for Oregon runs east-west along Stark Street east of the Willamette River and Burnside Street west of the Willamette River.

Subdivision Plats - Subdivisions (but not partitions) are named on the plat. In either case, the locations and descriptions of all monuments found or set must be recorded on the plat, and the courses and distances of all boundary lines must be shown. ORS 92.050(5). Each lot or parcel must be numbered consecutively, and the lengths and courses of all boundaries of each lot or parcel must be shown. ORS 92.050(4). When the subdivision or partition plat is completed and approved, and all required fees are paid, the plat may be recorded in the county records of the county where the described land is situated. ORS 92.050(1).

Metes & Bounds - A metes and bounds description typically contains an introduction defining the general location of the property by reference to the governmental survey, the place of beginning, and the body that describes the various courses of the property boundary by distance and bearing.

Liens

A lien is a claim or charge on property as security for payment of a debt or the fulfillment of an obligation.

Covenants, Conditions and Restrictions

Covenants running with the land take different forms. When a single owner wishes to divide a parcel of land and create a scheme of contractual obligations binding on all future owners of the resulting parcels, the term declaration is an accurate description of what the owner does by recording a written statement of the covenants; hence the term declaration of covenants, conditions, and restrictions or CC&R declara­tion. Often, covenants are also included as a part of and literally on a recorded subdivision or partition plat.

Covenants and servitudes are important tools in private land use planning and regulation. Declarations of covenants, conditions, and restrictions (“CC&R declarations” or simply “CC&Rs”) for subdivisions often parallel public land use regulatory schemes and function as an overlay containing more restrictive requirements. In many instances, the CC&R declaration is coupled with an association, which is a quasi-municipal government for the project, providing services over and above the services provided by the local government.

Easements

An easement is a nonpossessory interest in the land of another that entitles the owner of the interest to a limited use or enjoyment of the other’s land and to protection from interference with this use. The inter­est, once created, may be irrevocable and generally is not subject to the will of the land owner.

Taxes

The first exception shown is a statement regarding the amount and status of the current year’s taxes (e.g., taxes now a lien, now due, or respective installment paid or unpaid).

Other Types of Title Insurance

Litigation Guarantee - The litigation guarantee is used by attorneys who are contemplating filing an action concerning the affected property, such as a quiet-title action, a partition action, or a suit to enforce an easement.

Foreclosure Guarantee - Judicial-foreclosure guarantees are issued to attorneys to indicate the status of the title and the parties to be named as defendants in a mortgage, trust deed, contract, or lien foreclosure suit. In addition to showing the status of title and the necessary defendants, a foreclosure guarantee shows all title exceptions that may or may not be pertinent to the contemplated foreclosure.

Legalese in Governing Documents

Consider the following disclaimer on a law firm’s website:

Material contained herein is not offered as legal or any other advice on any particular matter. Material included here is for informational purposes only and is not necessarily an indication of future results. Transmission of this information is not intended to create, and receipt does not constitute, an attorney-client relationship between a lawyer and the user or browser. No client or other reader should act, or refrain from acting, on the basis of any matter contain in the Law Firm Home Page without seeking the appropriate legal or other professional advice on the particular facts at circumstances at issue.

Huh? It’s difficult to read and understand.  The following disclaimer, in plain English, accomplishes the same result:

Our website is for information only. We can’t give you legal advice through our website, and we can’t guarantee you a certain result. So don’t rely on anything on this website as legal advice.

Visiting our website does not make you our client. If you have a legal problem, see a lawyer and get legal advice for your specific problem.

Lawyers are known for being verbose, using legalese, and not explaining legal concepts in a way that most clients can understand.  There are many reasons for this. One reason is tradition.  Lawyers read legalese throughout law school and believe they are obligated to follow the same style. Another reason is that some lawyers believe that if they use lots of complicated words, they will sound smart. But at the end of the day, using complicated jargon doesn’t help the reader.

Governing documents in community associations are laced with legalese. Many resolutions start with “Whereas”. What does “Whereas” mean? How does it help? And why is it necessary?  The short answer is that “Whereas” is an archaic term that many drafters believe gives a sense of authority.  It doesn’t. The use of that term is unnecessary and mucks up the document.

Here’s a paragraph taken from a community association’s enforcement resolution:

BE IT FURTHER RESOLVED, if proof of insurance is not provided within thirty (30) days as required above, the Association shall notify the Unit Owners they are in violation of this Resolution and, after a, hearing and an opportunity to be heard, will be subject to a fine in the amount of Fifty Dollars ($50.00) per month which will increase to $75.00 for sixty (60) days and $100.00 for ninety (90) days and continuing to increase an additional $25.00 thereafter for each additional thirty (30) days proof of insurance has not been provided to the Association pursuant to Article 8(f) of the Code of Regulations and Section 3302(a)(l 1) of the Act[.]

There are several problems with this section.  First, why is “BE IT FURTHER RESOLVED” necessary?  It’s not.  Second, how many times do you have to read the language relating to fines to actually understand the amount of the fines? Lastly, the authority cited in the final portion of the paragraph is cited twice in the resolution prior to this paragraph.  Is it necessary to cite the association’s authority to do something three separate times?

Here’s the same paragraph re-written in plain English:

1. Owners must provide proof of insurance within 30 days.  After notice of the violation and an opportunity for a hearing, the Association may fine Owners who do not provide proof of insurance. The initial fine is $50. After every 30 day period the fine will increase by $25 until proof of insurance is provided.

Much easier to read, isn’t it?

Granted, there are some legal concepts or words that have no plain English equivalent.  However, when drafting rules, regulations, and policies, consider the reader’s ability to easily comprehend and understand what you are attempting to convey.  And as always, have a qualified attorney review any governing documents prior to adoption.

Enforcement Problems

All owners within homeowner and condominium associations must comply with the governing documents.  The governing documents include the Declaration (CC&Rs), Bylaws, Articles of Incorporation, and Rules and Regulations.  It’s the obligation of the community association to enforce the governing documents when violations occur. However, there are instances when an association may lose the right to enforce provisions of the governing documents.  Court cases and statutes have evolved over the years to identify circumstances in which an association is prevented from enforcement.  Here are a few ways which  may create enforcement problems:

1. Arbitrary or Selective Enforcement

The association has an obligation to enforce all of the provisions in the governing documents equally, fairly, and consistently.  A restriction in the governing documents is arbitrarily enforced if it does not apply to all members of the association.  For example, an association in New Jersey adopted a policy of charging owners who rented their units a $225 security deposit.  The court held that such a policy was arbitrary because it created a separate class of owners who were subject to a fee above and beyond the normal monthly assessments.  Coventry Square Condo vs. Halpern.

Selective enforcement occurs when an association enforces a restriction against one owner, but not others.  Doing so may cause the association to lose its enforcement rights with respect to a particular restriction.  Each violation must be treated the same, and each owner must be subject to the same enforcement policies and procedures.

2. Waiver & Estoppel

Most states recognize the legal doctrines of waiver, estoppel and laches.  These doctrines are essentially the same, and are defenses to the enforcement of governing documents.  If an owner constructs or does something in violation of the CC&Rs, and the association fails to take enforcement action over a lengthy amount of time, the association “waives” the right to enforce and is “estopped” from taking any enforcement action.

An owner asserting any of these doctrines must show: (1) the association delayed asserting enforcement for an unreasonable length of time; (2) the association had full knowledge of all of the relevant facts; and (3) that the delay resulted in such substantial prejudice to the violating owner that it would be inequitable to allow the association to enforce.

Some guidance as to the length of time is found in a South Carolina case where a condominium association failed to enforce landscape restrictions for a period of 4 years. The court found that the Association was estopped from enforcement of the applicable provisions of the CC&Rs. Janasik v. Fairway Oaks Villas.

3. Changed Conditions or Abandonment

Over the course of decades, the aesthetics or architectural styles of the community may change.  An association in Utah (created in 1978) required all homes to be built with wood shingles.  During the next decade some owners installed roofs using materials other than wood shingles.  When the association attempted to enforce the wood shingle provision against an owner, the court found that 23 of the 81 homes in the community were not using wood shingles. As a result, that requirement had been “abandoned” and was no longer enforceable.  Fink v. Miller.

4. Statute of Limitations

Statutes of limitations are laws which prevent legal claims after a certain period of time.  There are multiple statutes of limitation for different legal claims that may arise in a community association.  Seek competent legal advice to ensure you do not lose an enforcement claim as a result of waiting too long.

Ventana Partners, LLC v. Lanoue Dev., LLC (Or. App., 2014)

For some interesting reading on a planned community association's authority or ability to convey common property, take a look at Ventana Partners, LLC v. Lanoue Dev., LLC (Or. App., 2014). Especially interesting is the section of the case which reads:

"Common property" includes property "designated in the declaration for transfer to the association." ORS 94.550(7) (2005). Accordingly, ORS 94.665(1) allowed the MOA to transfer common property, even if it had not yet been transferred from the declarant to the association.

Finally, plaintiffs contend that the amendment to the declaration was ineffective to convey title to Lot 1 to LaNoue because "the recorded [amendment to the declaration] was not fully executed" because the signature line for the City of Portland was not filled in. However, a signature from the city is not required on an instrument conveying title to common property under ORS 94.665(1). See ORS 94.665(6) (formal requirements for an instrument conveying common property do not include signature from the city). And, as noted above, the city gave the approval required by the declaration.

Thus, the trial court correctly construed ORS 94.665(1) in accordance with the plain meaning of its text. That provision allowed the MOA to convey the townhouse owners' interests in the common areas in Lot 1 to LaNoue after receiving consent from 80 percent of the townhouse owners.

Click here to read the full case: Ventana Partners, LLC v. Lanoue

Exercising an Association's Right of Entry

Suppose you’re on the board of directors of a condominium.  In the middle of the night you receive a call that Unit 201 has a broken gas line.  The gas line poses significant health, life and safety issues for the other owners.  Can the manager or a board member enter the unit to turn off the gas or fix the line? It’s not always a clear-cut answer. Owners have an expectation of privacy on their lots, in their units, and in their homes.  However, many governing documents contain a right of entry provision.  This provision allows agents of the association or board members to enter property or condominium units to prevent damage to other areas of the property or to ensure compliance with the governing documents. For example,  planned community associations (if authorized by the governing documents) often exercise the right of entry to remedy landscaping violations. Typically, the association’s governing documents allow all related expenses to be charged to the owner.

Here is an example of a right of entry provision in a planned community Declaration of Covenants, Conditions and Restrictions, which allows the association to:

Enter the Lot or Living Unit in which or as to which such violation exists and to summarily abate and remove, at the expense of the Owner, any thing or condition that may exist therein contrary to the intent and meaning of said provisions, and the Board shall not thereby be deemed in any manner of trespass[.]

In the condominium context, issues which require immediate attention to prevent damage to property or injury to other owners may give rise to an easement of necessity. This is similar to the legal right granted by a right of entry provision in the governing documents. However, the circumstances must be severe and immediate.  In an Ohio Court of Appeals case involving an association’s right of entry, the court stated:

In reviewing a decision by a board of managers to enter a residential unit in a condominium to spray insecticides, the trial court…applies the test of reasonableness, that is, whether under all the facts and circumstances in evidence, the decision to enter was reasonable. This test subsumes three major questions: (1) whether the decision was arbitrary or capricious; (2) whether it was nondiscriminatory and even-handed; and (3) whether it was made in good faith for the common welfare of the owners and occupants of the condominium. River Terrace Condo Ass’n v. Lewis, 514 NE 2d 732 (1986).

In deciding whether to exercise the association’s right of entry, ALWAYS, ALWAYS, consult with legal counsel. Significant liability could result if the circumstances do not warrant using the right of entry or if the process is not followed correctly.

Fines in Community Associations

An association’s authority to fine owners for violations is perhaps the biggest tool in the enforcement toolbox.  Fines are treated like assessments if not paid. The association may file a lawsuit to collect the fines or foreclose on the lien created by the fines. Let’s look at the statutory authority to levy and collect fines.  In Oregon, the law states that the board of directors of a community association may:

(n) Impose charges for late payment of assessments and attorney fees related to the collection of assessments and, after giving written notice and an opportunity to be heard, levy reasonable fines for violations of the declaration, bylaws, rules and regulations of the association, provided that the charge imposed or the fine levied by the association is based:

(A) On a schedule contained in the declaration or bylaws, or an amendment to either that is delivered to each lot, mailed to the mailing address of each lot or mailed to the mailing addresses designated in writing by the owners; or

(B) On a resolution of the association or its board of directors that is delivered to each lot, mailed to the mailing address of each lot or mailed to the mailing addresses designated in writing by the owners[.]

See ORS 94.630 / ORS 100.405

Washington law is very similar, and states that a board of directors may:

(11) Impose and collect charges for late payments of assessments and, after notice and an opportunity to be heard by the board of directors or by the representative designated by the board of directors and in accordance with the procedures as provided in the bylaws or rules and regulations adopted by the board of directors, levy reasonable fines in accordance with a previously established schedule adopted by the board of directors and furnished to the owners for violation of the bylaws, rules, and regulations of the association;

See RCW 64.38.020 / RCW 64.34.304(k)

You may have noticed a critical word in both statutes: “reasonable”.  What’s reasonable in one community may not be reasonable in another. Much of the reasonableness depends on the nature of the violation and whether the amount of the fine is too punitive.  If the violation poses a health, life or safety issue, a large fine is likely warranted.

A Georgia Court of Appeals case provides some guidance on whether a fine is reasonable.  In that case an owner leased her unit in violation of the association’s rental cap.  The association levied a fine of $25 dollars per day.  The Court found that the fine was reasonable for three reasons: 1) the owner’s actions were a clear violation of the associations governing documents; 2) the association provided an opportunity for the owner to cure the violation before levying fines; and 3) the same amount of fines had been applied to other owners who violated the same rental restriction.

Assuming the amount of the fine is reasonable, the association may not actually levy or impose the fine until after notice and an opportunity for a hearing with the board of directors.  When notice of the violation is sent to the owner the association must include a statement that the owner has the right to request a hearing before the fine is imposed.  If the owner fails to request the hearing after the stated deadline, the board may then impose the fine.

If the owner does request a hearing, then the board should allow the owner to present evidence or testimony concerning the violation.  If after the presentation of evidence or testimony the board still determines that a violation exists, fines may be levied at that point.

Lastly, the amount of the fine must be contained in a  "schedule of fines" provided to all owners.  The schedule of fines should list the various types of violations with a corresponding fine.  It's wise to add language to the schedule of fines stating that the fine may be levied daily, weekly, month, or per occurrence.

Preparing For Annual Meetings

Every homeowner and condominium association is required to have an annual meeting of the members. The primary purposes of the annual meeting are:

-Present annual budget to members -Elect Directors -Deliver Committee Reports -Strengthen the Community

1. Determine Notice Requirements

There are three types of meetings in community associations: annual, special, and board. Each type of meeting will have different notice requirements. Make sure you comply with the annual meeting notice requirements contained in your Bylaws.

For Oregon associations, notice of the annual meeting must be sent no less than 10 days and no more than 50 days prior to the meeting date. (ORS 100.407 / 94.650) Washington homeowners associations must send notice not less than 14 days and not more than 60 days. (RCW 64.38.035)  Annual meeting notices must be sent to all members at the last address provided to the association.

2. (Oregon) Include Reduced Quorum Language

Oregon has a unique statute which allows for a reduced quorum for ownership meetings. For condominiums, the statute is ORS 100.408, for planned communities, the statue is ORS 94.655.

If the membership meeting cannot proceed because of a lack of quorum, you may adjourn the meeting. The meeting may then immediately re-start with a reduced quorum. The reduced quorum is 1/2 of the quorum requirement or 20%, whichever is greater.

So, if your quorum requirement is 50%, the reduced quorum would be 25%. If your quorum requirement is 30%, the reduced quorum is 20% (remember, 1/2 or 20%, whichever is greater). If your quorum requirement is 20%, it stays at 20%. Keep in mind that the notice of the meeting must contain a statement that the quorum will be reduced and what the percentage will be if reduced. The language should also state that the meeting will be immediately recalled with the reduced quorum percentage (otherwise, you must wait 48 hours).

To take advantage of this statute, place a statement in the notice indicating that if quorum is not met, the meeting will be adjourned and immediately restarted with the reduced quorum. Indicate the percentage of the reduced quorum.

3. Prepare Proxies

A proxy should contain the following information:

1. Name of association 2. Name of proxy giver 3. Proxy giver’s unit, lot or address 4. Name of proxy holder 5. Date when proxy giver signs 6. Expiration date 7. Signature

Click here for a sample proxy: https://calaw.attorney/wp-content/uploads/2015/01/Sample-Proxy.doc

4. Use A Nominating Committee

Some association documents require the use of nominating committees prior to the annual meeting. In most cases, nominating committees make nominations and the election a much more efficient process. A good nominating committee will solicit names, determine if those individuals are willing to serve, gather biographies of the candidates, and present the information to the board and owners prior to the meeting. Keep in mind, unless prohibited by your governing documents, members can always nominate individuals from the floor at the actual meeting.

5. Prepare Agenda

Oregon and Washington law require annual meeting notices to state the time and place of the meetings, items on the agenda, including the general nature of any proposed amendment to the governing documents, any budget changes, or any proposals to remove directors.

Based on the recommendations in Robert’s Rules of Order, community association annual meeting agendas should include the following:

Announcement of Quorum Reading and Approval of Minutes Reports of Officers, Boards and Committees Election of Directors Unfinished Business and General Orders Announcement of Election Results New Business Adjournment

6. Know Voting Requirements

If certain items on the agenda require a vote of the owners, make sure you know beforehand the required voting threshold. For example, if the agenda includes a vote on levying a special assessment, look at your governing documents to see how many owners must vote in the affirmative. Some votes require a majority, some require a “super-majority”, and others may only require a plurality.

If your governing documents allocate votes by square footage or allow for cumulative voting, have an electronic spreadsheet ready with pre-set formulas to quickly tally votes. Also, if your Declaration or Bylaws prohibit delinquent owners from voting, make sure the names or units of those owners are excluded from voting.

Community Association Record Retention

Condominium and homeowner association accumulate large amounts of records over the years.  Community associations should consider adopting a record retention resolution which indicates the types of records and the amount of time those records will be kept.  Here is a list of common association records, along with recommendations for how long you should keep the records.

Permanent Records.

1.  As-built architectural, structural, engineering, mechanical, electrical, and plumbing plans.

2.  Original specifications indicating thereon all material changes.

3.  Plans for underground site service, site grading, drainage and landscaping together with cable television drawings.

4.  All other plans and information relevant to future repair or maintenance of the property.

5.  A list of the general contractor and the electrical, heating and plumbing subcontractors responsible for construction or installation of common property.

6.  Ownership meeting minutes.

7.  Board meeting minutes

8.  Corporate action taken by members or directors without a meeting.

9.  Records of all actions taken by committees of the board of directors in place of the board on behalf of the association.

10.  Resolutions adopted by the board relating to characteristics, qualifications, rights, limitations and obligations of members.

Records to Keep for 3 Years

1.  All written communications made to members in prior three years.

Records to Keep for 1 year

1.  Proxies and Ballots (one year from date of meeting).

Records to Keep Current Copies Of:

1.  Articles of Incorporation and amendments currently in effect.

2.  Bylaws and amendments currently in effect.

3.  List of names and business or home addresses of the current directors and officers.

4.  Most recent annual report delivered to the Secretary of State.

Recommended Non-Statutory Retention Periods.

1.  Contracts - 10 years from date of completion of contract.

2.  Insurance Policies - 10 years.

3.  Insurance Claims- 10 years.

4. Legal files-pleadings, judgments, other documentation - 10 years.

5. Tapes of board and association meetings - 1 year