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

Enforcing Parking Restrictions on Public Streets

Many association CC&Rs prohibit owners from parking on the streets within the community. But what if those streets are public streets? Can the association still regulate parking? The short answer is “yes.” When owners purchase property in a community association, they do so subject to the restrictions in the governing documents. In a sense, it’s a contractual relationship between the owner and the association. The owner is agreeing to do (or not do) certain things on their property or within the community. With that in mind, ownership of the streets (whether public or private) doesn’t matter. The owner agreed, via the CC&Rs, not to park in a certain place.

Keep in mind that state law may control an association’s authority to tow a vehicle from public streets. Nevertheless, in most communities the association may still levy fines against an owner for parking violations occurring on public streets.

Several court cases address this issue. Let’s take a look at a few of them.

1. Verna v. Links at Valleybrook, 852 A.2d 202 (NJ Super 2004)

The owner in the association owned a small business. Occasionally, he would park his work vehicle on the street in front of his townhome. The association’s CC&Rs contained the following language:

No trailers or commercial vehicles shall be permitted to remain on any Lot or street in The Links without the written consent of the Board....

The owner claimed that because the streets were public, the association had no authority to regulate parking on those streets. The court rejected the owner's position, stating that the regulation of parking through the CC&Rs is “a matter of contract” which may impose greater limits on an owner’s use of property than governmental restrictions.

2. Maryland Estates Homeowners’ Association v. Puckett, 936 SW2d 218 (Mo. App. E.D. 1996)

In this case an owner within the community conceded that the CC&Rs prohibited him from parking his vehicle in the driveway on his lot. However, he argued, the association could not prevent him from parking on the public street adjacent to his lot. The court held that the CC&Rs are “a contract to which each homeowner becomes a party when acquiring property in the subdivision.” The court ruled in favor of the association and granted an injunction prohibiting the owner from parking on the public streets within the community.

3. Sui v. Price (Cal. App. 2011)

While not directly dealing with parking on public streets, this California case answered the question of whether an association may tow a vehicle which is in violation of the CC&Rs. The owner in this case stored a disabled vehicle on his lot. The CC&Rs prohibited the parking or storing of disabled vehicles anywhere in the community. Further, the association had the authority to enforce rules “by appropriate means.” The owner argued that towing his vehicle was outside the scope of the association’s authority. The court responded by stating “One wonders — how else would the prohibition on parking disabled vehicles be enforced against a recalcitrant homeowner?” Ultimately, the association prevailed in the lawsuit.

5 Ways to Invite Lawsuits Against Board Members and Associations

1.  Violating Open Meeting Requirements Board meetings in Oregon (by statute) must be open to the membership. The same is true for Washington condominiums or any community association with open meetings requirements in the governing documents. The purpose of open meeting requirements is to allow the membership to witness the deliberation, discussion, and decision making of the board of directors.

There are exceptions to the open meetings requirements--namely, emergency meetings and executive session. But unless an exception applies, any time a majority of the board convenes and discusses association business, it's likely a "meeting". And if it's a meeting, it requires notice and observation by the membership.

Violating open meeting requirements casts a shadow on board transparency, causes suspicion among the owners, and increasingly, may cause a lawsuit against the association or board of directors.

2.  Failing to Renew Incorporation

Most associations are incorporated as nonprofit corporations. In some cases, it's legally required that the association be incorporated. Incorporation may provide a shield against liability for board members and owners.

In a 2010 Alabama case, a homeowners association attempted to enforce its architectural restrictions against an owner who constructed improvements without approval. The Alabama Court of Appeals held that the association could only enforce the governing documents if the association was incorporated.

Georgia dealt with a similar case in 2007, when an association filed suit against an owner for delinquent assessments. The owner claimed that because the association had become administratively dissolved when it filed the suit, the association was prohibited from collecting assessments. During the course of the lawsuit the association filed the appropriate renewal paperwork and was reinstated with the secretary of state. As a result, the court allowed the association to pursue collections.

For Oregon associations, visit www.filinginoregon.com to check on the association's incorporation status.

Washington associations can search here: https://www.sos.wa.gov/corps/search_advanced.aspx

3. Failing to Enforce Governing Documents

Board members have an obligation to enforce the provisions of the association's CC&Rs and Bylaws. If a board fails to enforce provisions of the governing documents for an extended period of time, many courts will find that the association has "waived" its right to enforce the same or other provisions.

In an Ohio case, an owner built an addition on his property. The association sued the owner, arguing that the additional building violated the CC&Rs. The court said that because the association had allowed other owners to build unapproved additions, the association couldn't require the defendant in this case to remove the building.

Similarly, some governing documents require the association to make architectural decisions within a certain number of days. The association may waive its right to enforce those covenants if it misses the deadline to respond. In a different Ohio case, the association's documents required the board to respond to architectural applications within 30 days. When the owner didn't receive a response, he proceeded with construction. When the association told the owner he could not proceed, the owner sued and prevailed because the association didn't make a decision within the 30 day window.

4. Violating the Fair Housing Act

There are literally hundreds of court cases involving lawsuits against associations for violations of the Federal Fair Housing Act. Here are some examples:

Auburn Woods I Homeowners Association v. Fair Employment and Housing Comm., 121 Cal App 4th 1578 (2004). A married couple suffered from depression and other disorders. The association's governing documents prohibited all animals. The couple bought a small companion dog to accommodate their mental condition and a lawsuit ensued. The association was found liable of discrimination.

Jacobs v. Concord Village Condominium X Association, Inc., 2004 U.S. Dist. LEXIS 4876 (S.D. Fla., 2004). The court found that the defendant condominium association had violated the Fair Housing Act by refusing to allow a physically handicapped resident to install a ramp so that the plaintiff could freely store, access and charge her motorized tricycle in a storage closet in the condominium building.

Sabal Palm Condominiums of Pine Island Ridge Association, Inc. v. Fischer, No. 12-60691-Civ-SCOLA (S.D. Fla. March 19, 2014). A Florida district court ruled that a condominium association violated the Fair Housing Act by its unreasonable delay in granting a request by a physically disabled resident to keep a service dog.

Hollis v. Chestnut Bend Homeowners Association, No. 13-6434 (6th Cir. July 29, 2014). A Tennessee homeowners association may have violated the Act when it denied owners from constructing an exterior sun room which was designed to accommodate two children with Downs Syndrome.

Board of Directors of Cameron Grove Condominium, II v. State of Maryland Commission on Human Relations, No. 47 (Md. Mar. 28, 2013). A Maryland appeals court ordered a condominium board to pay damages to unit owners who were denied reasonable accommodation of their disabilities. Bhogaita v. Altamonte Heights Condominium Association, Inc., No. 6:11-cv-1637-Orl-31DAB (M.D. Fla. Dec. 17, 2012). A Florida court found that a condominium association's intrusive search for more information regarding a unit owner's medical condition constituted a denial of his requested accommodation under the Fair Housing Act.

5. Filing Incorrect Liens / Collecting Inconsistent Assessments

May lawsuits involve associations levying assessments which are inconsistent with the governing documents. In a 2004 Texas case, an association's governing documents capped assessments at $50 per month. Nevertheless, the board unilaterally raised assessments to $75 per month. An owner sued the association and the court ordered the association to reimburse the owner for the overpaid assessments, plus pay the owner's attorney fees.

In another case, the owner of a commercial condominium unit in Georgia filed a lawsuit when the association levied assessments against the commercial unit to pay for expenses related exclusively to the residential units. The court's review of the governing documents concluded that the association was prohibited from assessing the commercial unit owners for residential unit expenses.

Make sure you read the assessment provisions of your governing documents carefully, and that all assessments are properly apportioned among the owners!

Free Board Member Consultations During April

During the month of April Community Association Law Group is providing free, customized board consultation sessions. During the 1 hour session we'll: 1. Review your governing documents and identify any outdated, unclear, or ambiguous provisions;

2. Review your association's compliance with state law;

3. Discuss collection of delinquent assessments in your association; and

4. Answer any legal questions relating to your association and board.

Book now by clicking here.

Robert's Rules for Small Boards

Robert’s Rules of Order is the most effective tool to ensure efficient, civil, and effective meetings. However, sometimes the formality of Robert’s Rules isn’t necessary. For small board meetings it may not make sense to follow (the sometimes tedious) formal parliamentary procedure. Under Robert’s Rules a “small” board is 12 individuals or less. Robert’s Rules recognizes that small boards may want to operate in a more relaxed and informal setting. Small boards may opt to use the “Informal Procedure for Small Boards” described in Robert’s Rules, 10th Ed., p. 469-71. Here are the key differences between the formal and informal procedures:

1. Board members do not have to stand or be recognized by the chair in order to speak or make motions.

2. Motions need not be seconded.

3. A board member may speak any number of times on a question, and motions to close or limit debate are generally not permitted.

4. A motion does not have to be pending in order to discuss a subject informally.

5. Votes can be taken initially by a show of hands.

6. If a proposal is perfectly clear to everyone it may be voted on even though no formal motion has been made.

7. In putting questions to a vote, the chairman need not stand.

8. The chairman can participate in debate just as any other board member.

So, for small and informal board meetings it may make sense to use the informal procedures. If a majority of the board agrees to “opt-in” to the small board procedures, reflect that in the minutes and proceed under the informal procedures.

Different Meanings of Majority

Condominium and homeowners association governing documents require certain association issues to be voted on. Depending on the specific issue, there may be a different voting threshold, or number of votes required for approval. Let's start with some basics. Robert's Rules of Order defines a "majority vote" as more than half of the votes cast, excluding blanks and abstentions. [RONR, 10th ed., 387)

A "super" majority is anything greater than half. However, avoid using the term "super majority," because that term may have different meanings. An amendment to your governing documents may require 75% approval by the owners. An increase in assessments may require 2/3rds of the owners to approve. Both are technically "super majorities", yet very different numbers.

You must look carefully at the language in your governing documents to understand how many votes are necessary. Here's a hypothetical:

There are 200 lots in the association. At the annual meeting 100 owners are in attendance in person or by proxy. 97 owners cast votes related to the approval of a special assessment, 3 owners abstain.

Depending on the language in your governing documents, the required votes could be very different. Here are some common voting requirements along with the votes necessary under our hypothetical:

1) "A majority of owners present in person or proxy at a meeting" = 51 2) "A majority of votes cast by owners present in person or proxy at a meeting" = 49 (remember, only 97 votes were "cast") 3) "A majority of all lot owners" = 101

Very small differences in the language results in very different outcomes. So, pay close attention to the language used in your governing documents, and make sure you know with certainty the voting thresholds before you take a vote!

March 12 Vancouver Board Training Recap

More than 30 board members and managers attended the education seminar in Vancouver, WA, on March 12, 2015.  Community Association Law Group attorney Kevin Harker presented "EFFECTIVE BOARDS: EFFICIENT MEETINGS, UNDERSTANDING GOVERNING DOCUMENTS, AND OWNER COMMUNICATION."  A copy of the slide show can be downloaded here: EFFECTIVE BOARDS. For information about future seminars, visit www.calaw.attorney/events

Effective Collections Policies

At some point every condominium or homeowners association experiences delinquencies. Assessments are critical for the association to pay insurance, maintain common property, or hire professional management. When an owner is delinquent, the association has two options. It can foreclose on the association’s lien against the lot or unit, or file a personal lawsuit against the owner.

Every association should have a collections policy which outlines the steps that will be taken when an owner is delinquent. It’s critical that the policy is followed each time an owner is delinquent, and that the same steps are used with each owner.

The policy should include the following:

1. Citations to the authority to levy and collect assessments (usually the governing documents and state statutes)

2. The amount of the late fee and when the late fee will be charged.

3. Interest rate.

4. A statement that the association may file a foreclosure action.

5. When the first demand letter will be sent.

6. When the file will be turned over to an attorney or collection agency.

7. When a lien will be filed against the property.

8. If a judgment is obtained, how the association will collect on the judgment (garnishment, writ of execution against personal property)

Click here for a sample collections policy: CALAW COLLECTIONS RESOLUTION

For more information about Community Association Law Group's collections program, click here.

The Difference Between Board Members and Officers

There is often confusion about the difference between directors and officers in condominium and homeowner associations.  Much of the confusion stems from the business world, where typically the board members of a corporation are different individuals than the officers.  For example, IBM has 13 individuals on its board of directors, and nearly 20 officers--all different individuals. In community associations, however, the individual board members are usually the same individuals who serve as officers.  There are distinctions between the roles.

First, board members are almost always elected by a vote of the association's owners.  And (usually) may only be removed or recalled by a vote of the owners.  Officers, on the other hand, are typically elected or appointed by the board members, without a vote and without the input of the ownership.  Most governing documents provide that officers can be removed by a majority vote of the board members--without a vote of the ownership.

You may have heard that the chair of the association only votes in the event of a tie.  This is true--especially in the corporate world.  However, at an association board meeting, the board members are voting in their capacity as board members, not in their capacity as officers.  Assuming the chair of the association is also a board member, the chair has a duty to vote!

Lastly, many governing documents outline specific duties of board members and officers.  Review those provisions carefully and look for differences between the roles.

[As always, your association's governing documents may have provisions which are different than the general information provided above.  Consult legal counsel if questions arise.]

Avoiding Fraud in Condominium and Homeowners Associations

Last week an Indiana newspaper published an article titled "Homeowners association supervisor faces 21 counts of forgery." (Click here to read article) The article states:

A McCordsville woman is charged with 20 counts of forgery and one count of theft of at least $100,000 in Marion County.

Marcy M. Smitley, 39, the owner of MCS Management Group Inc., was hired to supervise the Winslow Crossing apartment and condo complex on the southeast side of Indianapolis.

Court documents state Smitley repeatedly wrote and cashed checks without the permission or knowledge of Winslow Crossing Homeowners Association, pocketing more than $120,000 during the course of four years.

Fraud and embezzlement can occur in any condominium or homeowners association.  Here are some steps to help minimize your risk:

1. Purchase fidelity insurance to protect your association from theft of funds.  Your fidelity policy limits should match the amount of funds in your accounts.

2. Require two signers for all checks.

3. Have an independent CPA perform an annual financial review or audit.

4. Require monthly bank account reconciliation.

5. Keep blank checks in a secure location.

6. Consider background checks for any employee or contractor who may have access to association funds.

Solar Panels in Homeowners Associations

Solar panels are becoming increasingly popular, even in the cloudy Northwest. Oregon and Washington both have statutory provisions which apply to homeowners associations. In most cases, these statutes will override prohibitions in the CC&Rs related to solar panels. The best approach is to work with owners and develop reasonable guidelines for the installation of solar panels. Washington - RCW 64.38.055

Washington’s statute governing homeowner associations and solar panels states:

The governing documents may not prohibit the installation of a solar energy panel by an owner or resident on the owner's or resident's property as long as the solar energy panel:

(a) Meets applicable health and safety standards and requirements imposed by state and local permitting authorities;

(b) If used to heat water, is certified by the solar rating certification corporation or another nationally recognized certification agency.

However, there are some restrictions that an association may place on the installation of solar panels. For example, the governing documents of the association may prohibit visibility of a roof-mounted panel above the roof line or require the materials and installation hardware to be color coordinated.

Oregon - ORS 105.880

Oregon’s law governing solar panels is not as broad as Washington’s. ORS 105.880 reads:

Conveyance prohibiting use of solar energy systems void. No person conveying or contracting to convey fee title to real property shall include in an instrument for such purpose a provision prohibiting the use of solar energy systems by any person on that property.

Any provision executed in violation of subsection (1) of this section after October 3, 1979, is void and unenforceable. For the purposes of this section, “solar energy system” means any device, structure, mechanism or series of mechanisms which uses solar radiation as a source for heating, cooling or electrical energy. [1979 c.671 §5]

Forest Heights Homeowners Association in Oregon has adopted and published a great set of guidelines for solar installations within the association. Click here to view.

Open Meetings and Executive Session

Open Meetings Requirement Washington and Oregon require homeowner association board meetings to be open to the membership. (ORS 94.640 / RCW 64.38.035)

First, it is important to understand what constitutes a “board meeting.” Oregon law defines a board meeting as “a convening of a quorum of members of the board of directors at which association business is discussed, except a convening of a quorum of members of the board of directors for the purpose of participating in litigation, mediation or arbitration proceedings”

If a quorum of the board is discussing association business, whether in person or by electronic means, the board communication is considered a “meeting" which must comply with the open meetings requirements as set forth by statute.

In general, all meetings of the board must be open to owners and properly noticed, except for emergency meetings. There is no specific definition of an “emergency,” but it would likely include addressing items such as threats to the immediate health, life or safety of residents or preventing significant or irreparable damage to the common property of the Association.

Board members often ask if it’s okay to communicate with other board members via email. Oregon law addresses this issue: “the meeting and notice requirements in this section may not be circumvented by chance or social meetings or by any other means”.

In other words, alternate forms of communication, such as email, cannot and should not be used for the purpose of circumventing the open meetings requirements. It is crucial to understand the risk that any decisions that the Board makes at, or as a result of, improper meetings could potentially be invalidated.

Executive Session

Oregon and Washington provide an exception to the open meetings requirement. Boards may meet in executive session, outside the presence of the owners, to discuss certain topics.

In Washington, those topics include:

1. Consideration of personnel matters; 2. Consultation with legal counsel or to consider communications with legal counsel, and discuss likely or pending litigation, 3. Matters involving possible violations of the governing documents of the association; and 4. Matters involving the possible liability of an owner to the association.

In Oregon, executive session topics include:

1. Consultation with legal counsel; 2. Personnel matters, including salary negotiations and employee discipline; 3. Negotiation of contracts with third parties; and 4. Collection of unpaid assessments.

Here’s how executive session works: During a normal, open board meeting, any board member may make a motion to convene in executive session. The minutes of the meeting should reflect the motion to convene in executive session. The board members then discuss the relevant issues in executive session.  Once the discussion is complete, the board reconvenes to the open meeting. If any motions or decisions need to be made, they are done so once the board has returned to the open meeting. There are no motions, and no voting, during the executive session.

Remember, the purpose of the open meetings laws is to ensure that owners are able to observe the deliberations, debates and decision making of the board of directors. Open meetings and transparency are critical to a well-run association.

Renters and Rental Amendments

There are usually three types of occupants in condominium or homeowner associations:

1. Owners - motivated to maintain value and foster relationships

2. Investors - motivated by profit; usually less interested in quality of community

3. Renters - often view community association living as apartment living

The term “renters” often carries a stigma in condominium and homeowner associations. Not all renters are bad (and not all owners are good). If renters are a problem in your community, your best bet is to deal with the behavior rather than attempting to ban or limit rentals. If renters are causing parking issues, adopt a parking resolution. If renters are causing noise, enforce the noise or nuisance provisions in your governing documents.

In some cases, adopting a rental amendment makes sense. For example, prospective buyers in community associations may find it difficult to secure financing if the number of rentals is too high.

Adopting a rental amendment is no easy task. In most cases, at least 75% of the ownership must vote “yes” on the amendment. Grandfathering existing rentals will often increase the amount of yes votes. In addition, a good explanation to the ownership about why the board is proposing the amendment and the benefits to the community will go a long way in receiving support for the amendment. Have a lawyer draft or review any proposed amendment to your governing documents.

Here are some things to consider when contemplating a rental amendment:

1. Minimum lease periods - typically a 30 day minimum.

2. Grandfathering existing rentals - any owner renting their unit or lot when the amendment becomes effective is exempt from the rental cap unless that owner sells or transfers their interest in the property.

3. Tenants must receive governing documents - consider requiring owners to put a provision in the lease agreement mandating that tenants receive copies of the association’s governing documents.

4. Contact information - owners should be obligated to provide contact information of each tenant to the association or management company.

5. Hardship provision - think about including a hardship provision allowing an owner to rent their property in excess of the rental cap if circumstances require. A good example of a hardship is military service.

Electronic Voting

By statute, Oregon condominiums and homeowners associations may use electronic voting for association matters. ORS 100.428 governs electronic voting for condominiums in Oregon, and ORS 94.661 applies to Oregon planned communities. (Washington community association may also use electronic voting if the governing documents allow.) In communities where many owners live off-site, this is an effective way to increase participation and voter turnout. Here are a few things to keep in mind:

1) Notice of the electronic vote should be sent via postal mail. The notice should explain what will be voted on and the website address to access the online ballot.

2) The vote is effective as soon as it's electronically transmitted.

3) A vote by electronic ballot may not be revoked.

4) The board must adopt policies or procedures to ensure compliance with the statutory written ballot requirements. Those requirements include specific notice provisions to owners and the right of owners to request secret ballots.

Take a look at a sample electronic ballot here: Sample Online Ballot

Mapping Community Associations and Crime

How should condominium and homeowners associations handle crime in or around association property?  Proactively and carefully.  Certain steps can be taken by the board, such as improved lighting, upgraded locks, or in some cases, onsite security. Some associations have organized community crime-watch programs.  Be careful though--activities by such groups may not be covered by the association's insurance policy.  Many local law enforcement agencies will help associations and the members learn how to prevent crime, how to report suspicious activities, and steps that can be taken to make your community more safe.

The map below is a small section of Portland, Oregon, showing community associations (building icons) with reported crimes during 2013.

Fair Housing Act and Community Associations

In 1988, Congress expanded the scope of the Federal Fair Housing Act ("Act") by adopting the Federal Fair Housing Amendments Act of 1988. These amendments, in part, created a new protected class of disability. Other protected classes include:

1. Race or color

2. Religon

3. Sex

4. National origin

5. Familial status

Requests for reasonable accommodations are as varied as the type of disabilities and the type of rules and regulations. In evaluating requests for accommodations, community associations must normally evaluate whether: (1) the individual is disabled; (2) the requested accommodation is reasonable; and (3) the requested accommodation is necessary for the individual to use or enjoy a dwelling.

The term "disability" means any impairment of a major life activity--things like seeing, hearing, walking, or breathing.  Disabilities include blindness, hearing impairment, mobility impairment, HIV infection, alcoholism, drug addiction, chronic fatigue, learning disability, head injury, and mental illness.

Condominium and homeowners associations are subject to the Act. Here are some recent cases involving the Act and community associations:

Jacobs v. Concord Village Condominium X Association, Inc., 2004 U.S. Dist. LEXIS 4876 (S.D. Fla., 2004). The court found that the defendant condominium association had violated the Fair Housing Act by refusing to allow a physically handicapped resident to install a ramp so that the plaintiff could freely store, access and charge her motorized tricycle in a storage closet in the condominium building.

Sabal Palm Condominiums of Pine Island Ridge Association, Inc. v. Fischer, No. 12-60691-Civ-SCOLA (S.D. Fla. March 19, 2014). A Florida district court ruled that a condominium association violated the Fair Housing Act by its unreasonable delay in granting a request by a physically disabled resident to keep a service dog.

Hollis v. Chestnut Bend Homeowners Association, No. 13-6434 (6th Cir. July 29, 2014). A Tennessee homeowners association may have violated the Act when it denied owners from constructing an exterior sun room which was designed to accommodate two children with Downs Syndrome.

Board of Directors of Cameron Grove Condominium, II v. State of Maryland Commission on Human Relations, No. 47 (Md. Mar. 28, 2013). A Maryland appeals court ordered a condominium board to pay damages to unit owners who were denied reasonable accommodation of their disabilities.

Bhogaita v. Altamonte Heights Condominium Association, Inc., No. 6:11-cv-1637-Orl-31DAB (M.D. Fla. Dec. 17, 2012). A Florida court found that a condominium association’s intrusive search for more information regarding a unit owner’s medical condition constituted a denial of his requested accommodation under the Fair Housing Act.

Warren v. Delvista Towers Condominium Association, Inc., No. 13-23074-CIV-MARTINEZ-GOODMAN (S.D. Fla. July 29, 2014). A Florida U.S. District Court held that a county ordinance banning pit bull dogs was preempted by the Federal Fair Housing Act with regard to service animals. Under HUD regulations, a request for an assistance animal can be denied if the animal’s behavior poses a direct threat and if its owner takes no effective action to control the animal’s behavior to mitigate or eliminate the threat. However, FHA requires that a significant risk—not a remote or speculative risk—exist to deny the reasonable accommodation. Particularly, HUD adopted a notice stating that a request to accommodate an assistance animal can be denied if “(1) the specific assistance animal poses a direct threat to the health and safety of others that cannot be reduced or eliminated by another reasonable accommodation; or (2) the specific assistance animal would cause substantial physical damage to the property of others that cannot be reduced or eliminated by another reasonable accommodation.”

If you are faced with a Fair Housing accommodation or modification request, speak with a qualified lawyer immediately. Violations of the Fair Housing Act may expose the association and board to legal liability.

For more information:

http://www.justice.gov/crt/about/hce/housing_coverage.php

WA State Supreme Court Case on Implications of Plat Dedications

On February 12, 2015, the Washington State Supreme Court issued a ruling on the implications for municipalities which accept plat dedications. In this case, the recorded plat dedicated certain ground water and storm water systems to the county. The county then accepted those dedications by signature on the plat. The homeowners association (and its members) filed suit after issues arose with a drainage pipe. The lawsuit sought to compel the municipality to take action to fix the drainage pipe. Read the case here: http://www.courts.wa.gov/opinions/pdf/895333.pdf

Judicial Foreclosure in Oregon

Overview

Oregon is a “lien theory” state, meaning that a mortgage of real estate only creates a lien or encumbrance and does not transfer title. Foreclosure of a mortgage lien is done through a statutory foreclosure lawsuit, i.e. judicial foreclosure.

This is a different process than the foreclosure of a deed of trust through advertisement and sale, which may be done non-judicially.

ORS Chapter 88 governs the foreclosure of mortgages:

Except as otherwise provided by law, a lien upon real or personal property, other than that of a judgment, whether created by mortgage or otherwise, must be foreclosed, and the property adjudged to be sold to satisfy the debt the lien secures, by bringing suit. Except as provided in ORS 88.103 (Sale of real property after mortgage foreclosure), in addition to the judgment of foreclosure and sale, if the lien debtor or another person, as principal or otherwise, has given a promissory note or other personal obligation for the payment of the debt, the court also shall enter a judgment for the amount of the debt against the lien debtor or other person. The provisions of this chapter as to liens upon personal property do not exclude a person that has a lien from any other remedy or right that the person otherwise has with respect to the property. (ORS 88.010(1))

1. Right to Foreclose

In order for the mortgage holder to foreclose, the mortgagee must default or breach the terms of the mortgage. Typically, this occurs when the homeowner stops or fails to pay the monthly mortgage payment.

2. The Foreclosure Lawsuit

A.  Procedure

The lawsuit to foreclose is filed in the circuit court in the county where the property is located. Like any other lawsuit, the foreclosure suit must be filed with the court, and then personally served upon the defaulting mortgagee.

The mortgagee has 30 days to file an “answer” or response to the suit. If the mortgagee fails to file a response, the mortgage holder is entitled to a “default judgment”. If a response is filed by the mortgagee, a trial date will be set and the case proceeds like any other circuit court case.

B.  Parties

ORS 88.030 describes other lien holders and debtors as defendants:

Any person having a lien subsequent to the plaintiff upon the same property or any part thereof, or who has given a promissory note or other personal obligation for the payment of the debt, or any part thereof, secured by the mortgage or other lien which is the subject of the suit, shall be made a defendant in the suit, and any person having a prior lien may be made defendant at the option of the plaintiff, or by the order of the court when deemed necessary. The failure of any junior lien or interest holder who is omitted as a party defendant in the suit to redeem within five years of the date of a sheriffs sale under ORS 88.106 (Sale and redemption) shall bar such junior lien or interest holder from any other action or proceeding against the property by the person on account of such persons lien or interest. (ORS 88.030)

The foreclosure lawsuit will usually name the following as necessary parties to the litigation:

1.  Owner of the mortgaged property;

2. If the owner is deceased, the personal representative of the estate and the heirs;

3. Junior lien holders, such as second mortgagees and judgment creditors.

4. Any individuals residing at the property

 C. Defenses The mortgagee may raise several defenses to the foreclosure action. Defenses include:

1.  Fraud

2.  Failure to credit payments

3.  Statute of Limitations

4. Laches

5. Unclean Hands

3. What Gets Foreclosed?

If it’s the first mortgage on the property, nearly all interests or liens on the property recorded after the first mortgage are wiped-out through the foreclosure lawsuit. For example, suppose an owner purchases the property through a mortgage in 1999. In 2001, the owner takes out a line of credit secured by the property. If the owner defaults on the 1999 mortgage and a foreclosure suit is filed, that suit will wipe out the 2001 line of credit lien.

A. Priority of Liens

1. Tax Liens

2. Condominium Liens

Whenever an association of unit owners levies any assessment against a unit, the association of unit owners shall have a lien upon the individual unit and the undivided interest in the common elements appertaining to such unit for any unpaid assessments. The lien includes interest, late charges, attorney fees, costs or other amounts levied under the declaration or bylaws. The lien is prior to a homestead exemption and all other liens or encumbrances upon the unit except:

     (a) Tax and assessment liens; and

     (b) A first mortgage or trust deed of record[.]

    (ORS  100.450(1))

A condominium lien can become superior to a first mortgage or deed of trust if proper notice is given. See ORS 100.450(7).

4. The Sale

Before the sheriff conducts the sale of the foreclosed property, they must publish notice of the time and place of the sale once a week for four successive weeks. The notice must describe the property. The mortgagor may then file a motion for the Court to confirm the sale after 10 days from the date of the sheriff’s sale. Typically, the Court will confirm unless there is evidence of fraud, abuse, or inadequacy of price.

5. Sheriff’s Deed 

After the statutory redemption period has expired, the purchaser or last redemptioner is entitled to receive a deed of conveyance from the sheriff.

6. Redemption

Up until the time of the actual foreclosure sale, the mortgagee may pay the amount of the debt and “redeem” his or her right in the property. This dismisses the foreclosure suit. Even after the sale, the debtor has another chance at redemption by paying the purchase price (plus taxes and other fees) within 180 days after the date of the sale.

If the rights of all persons entitled to redeem are acquired by the purchaser or a redemptioner before the statutory redemption period expires, then the court may direct the sheriff to make an immediate conveyance to that person, without requiring him or her to wait for the redemption period to expire.

Click here for a judicial foreclosure timeline chart: Oregon - Judicial Foreclosure

Turnover in Condominiums and HOAs - Oregon

Organization of Association The Oregon Planned Community Act (PCA) and the Oregon Condominium Act (OCA) require that an association of owners be formed for the purpose of administrating, managing, and operating the development. The PCA specifically requires the declarant to organize the association as a nonprofit corporation under the Oregon Nonprofit Corporation Act (See ORS chapter 65) and adopt and record the initial bylaws not later than the date on which the first lot is conveyed.   With respect to a condominium, upon the recording of the declaration and bylaws, an unincorporated association is created by operation of law. Typically, the governing documents require the declarant to incorporate the association as a nonprofit corporation under ORS Chapter 65 prior to the conveyance of the first unit or by the turnover meeting discussed below.

Declarant Rights Relating to Control of Association.  

Subject to certain statutory limitations, a declaration may provide for a period of declarant control of the association. A declarant’s control of an association may include the authority to appoint and remove officers and members of the board of directors of the association, to exercise powers and responsibilities otherwise assigned by the declaration and bylaws to the association, to approve amendments to the declaration or bylaws and, to allocate a greater number of votes to lots or units owned by the declarant. However, even though a declarant may initially control an association, the association itself is a separate entity.

Transition from Developer Control to Control by Owners

Transition is frequently characterized as a process and not an event. This concept is reflected in the PCA and OCA, both of which require the formation of a transitional advisory committee. This committee provides for the transition from administrative control by the declarant to administrative control by the association and its board and is generally referred to as a “turnover.” The timetable and procedure for turnover is established by the PCA or OCA and the declaration. A smooth transition, one that is well organized and amicable, will minimize conflicts and be in the best interests of all involved parties. A successful transition significantly contributes to the success of a development.

Transitional Advisory Committee

As mentioned, the PCA and the OCA provide for the formation of a transitional advisory committee to facilitate the transition from the administrative control by the declarant to control by the association. For condominiums, the formation of a transitional advisory committee is only required if the condominium consists of at least 20 units or, if it is a staged or flexible condominium, the number of units that may annexed or created totals 20. For a planned community created on and after January 1, 2002, a transitional advisory committee is only required for Class I Planned Communities. A transitional advisory committee is advisory only. However, it can request access to the information, documents and records that the declarant must deliver to the owners at the turnover meeting. Serving on the committee provides owners an opportunity to become familiar with the governing documents, budgets, architectural and other restrictions, rules and other critical aspects of association operation and management. Members of the advisory committee are often those owners who ultimately run for, and are elected to, board positions at the turnover meeting.

Turnover Process

Turnover marks the time when legal control of an association is transferred from the declarant to the owners. However, a developer who retains a majority of the units may still practically control the association.

Calling of the Turnover Meeting

The PCA and OCA require the declarant to call the turnover meeting within 90 days of the expiration of any declarant control specified in the declaration. If no such control has been reserved in the declaration, the PCA and OCA specify a time by which such meeting must be called. The declarant must give notice of the turnover meeting in accordance with the bylaws and PCA or OCA. If the turnover meeting is not called by the declarant within the time specified, for a condominium, the meeting may be called and notice given by an owner. In the case of a planned community, the meeting may be called and notice given by an owner or the transitional advisory committee.

Turnover Meeting

At the turnover meeting, owners elect a board of directors and the declarant has the obligation to deliver all property of the owners and association held or controlled by the declarant, as well as all items specified in the PCA and OCA. This includes the association’s governing documents and financial records. Turnover is a critical time in the life of an association. It is therefore important that the association consider retaining the assistance of an attorney experienced in HOA law to ensure a smooth transition and enable the new board to function in a manner that is consistent with all applicable laws and meets the needs of the development.

Three-Month Period After Turnover Meeting.

To facilitate an orderly transition, during the three-month period following the turnover meeting, the declarant, or an informed representative, is required to be available to meet with the board of directors on at least three mutually acceptable dates to review the documents delivered at the turnover meeting.

Review of Financial Statement

For communities with annual total assessments of more than $75,000, the PCA and OCA require the financial statement of to be reviewed in accordance with statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants.

Audit of Association Affairs

After the turnover meeting, the owner-elected board of directors should conduct an audit of the affairs of the association. The board will ultimately need to decide the breadth and scope of the audit. However, consideration should, at a minimum, include a review of the following:

(1) Property Inspection. An inspection of the physical components of the association’s property is critical. In conjunction with such inspection, the following are recommended:

(a) An inspection of and written report regarding the physical condition of the development by someone with experience to recognize faulty workmanship, shoddy maintenance and construction defects.

(b) A written report by an engineer or other qualified person to determine if plans and specifications were followed in construction of the development.

(c) Determination of the status of any unfinished construction repairs.

(2) Association Status. The declaration and bylaws govern matters relating to the operation of the association, including whether it must be incorporated. Unless the declarant provided a copy of the articles of incorporation at the turnover meeting, the board of directors must review the governing documents and determine whether the association is required to be incorporated. If so, after confirming with the Corporation Division in the office of the Oregon Secretary of State, the board should cause the articles of incorporation to be drafted and filed in accordance with Oregon law.

(3) Association Records. As noted above, the PCA and the OCA require that the declarant deliver to the association at the turnover meeting specific documents and items. If not provided by the declarant, the board should specifically request:

-An original or photocopy of the recorded declaration and copies of the bylaws and articles of incorporation;

-A deed to the common property, unless contained within the declaration;

-The recorded minutes of the association and board of directors;

-All rules and regulations adopted by the declarant;

-Financial statements;

-Any and all records of association funds and accounts;

-Any and all tangible personal property of the association and an inventory of such property;

-Records of all property tax payments to be administered by the association;

-Copies of all income tax returns filed by declarant in the name of the association;

-Any and all bank signature cards;

-Reserve account and reserve study information;

(4) Assessment Collections Audit. There should be a complete analysis and evaluation of the collection process and the adequacy of the reserves fund. If there are a significant number of past due assessments, immediate action should be considered. Even if there are only a few assessments that are past due, it is recommended that if there is a transition committee, that it have a collection resolution drafted and ready for adoption by the owner-elected board of directors to facilitate the collection process. A professional reserve study may be needed to help properly fund this account.

Model Code of Ethics - Condominium and HOA Board Members

 Model Code of Ethics for Community

Association Board Members

Board members should:

Strive at all times to serve the best interests of the association as a whole regardless of their personal interests.

Use sound judgment to make the best possible business decisions for the association, taking into consideration all available information, circumstances and resources.

Act within the boundaries of their authority as defined by law and the governing documents of the association.

Provide opportunities for residents to comment on decisions facing the association.

Perform their duties without bias for or against any individual or group of owners or non-owner residents.

Disclose personal or professional relationships with any company or individual who has or is seeking to have a business relationship with the association.

Conduct open, fair and well-publicized elections.

Always speak with one voice, supporting all duly-adopted board decisions even if the board member was in the minority regarding actions that may not have obtained unanimous consent.

Board members should not:

Reveal confidential information provided by contractors or share information with those bidding for association contracts unless specifically authorized by the board.

Make unauthorized promises to a contractor or bidder.

Advocate or support any action or activity that violates a law or regulatory requirement.

Use their positions or decision-making authority for personal gain or to seek advantage over another owner or non-owner resident.

Spend unauthorized association funds for their own personal use or benefit.

Accept any gifts—directly or indirectly—from owners, residents, contractors or suppliers.

Misrepresent known facts in any issue involving association business.

Divulge personal information about any association owner, resident or employee that was obtained in the performance of board duties.

Make personal attacks on colleagues, staff or residents.

Harass, threaten or attempt through any means to control or instill fear in any board member, owner, resident, employee or contractor.

Reveal to any owner, resident or other third party the discussions, decisions and comments made at any meeting of the board properly closed or held in executive session.