Board Member Conflicts of Interest

Suppose the board of directors is considering hiring a new landscape company.  The owner of the landscape company happens to be the cousin of one of the board members. May the board consider hiring the landscape company? And does the board member who is related have to abstain from voting on the matter? Conflicts of interest often arise in community associations.  In general, a conflict of interest arises when a board member has a self-interest (or will receive a financial benefit) from the outcome of the decision.  Another way to describe a conflict of interest is: putting your own interests ahead of the best interests of the association and members.

There are two types of conflicts of interest—actual and potential.  A potential conflict is one in which a board member has duties or interests that conceivably could be at odds at some point in the future. For example, a potential conflict exists every time the board establishes the association's budget. Board members generally have an obligation to propose and establish budgets that meet the financial needs for operating the community. However, the personal interest of most homeowners--including board members--is to pay less, rather than more. While this potential conflict exists, it rises to the level of an actual conflict of interest only when board members choose to disregard the actual needs of their community to minimize their personal expenses.

In contrast, an actual conflict of interest would occur if the board votes to hire a maintenance company which is owned by a member of the board.  By hiring the maintenance company, the board member/owner is receiving a direct financial benefit from the hiring of the maintenance company.

In most cases a board may approve decisions, even if there is a conflict of interest with a board member, if:

 - the board member discloses their interest or the benefit which will be received; and

 - the board member with the conflict of interest abstains from the vote.

In some cases, the best company or vendor in town may have a relationship with a board member.  That doesn’t mean the board must dismiss consideration of hiring the company or vendor.  Here are some steps to follow when conflicts of interest may be present:

1) Disclose - Always disclose to the other board members and the owners any conflicts of interest.  Explain exactly what the relationships are and whether a direct or indirect benefit will be received by a board member.

2) Document - Hiring any contractor or vendor should be documented in the board meeting minutes.  Include the factors which the board relied upon in making its decision.

3) Bid - It’s always the best practice to solicit bids anytime a board begins the process of hiring or engaging professional services.  The bids should be in response to a well-drafted request for bids so that the board may compare costs, services, and terms.

4) Vote - Once all the information has been considered, each board member should exercise their business judgment and vote in a manner which is in the best interests of the association.  A board member with a direct or indirect interest in the outcome should abstain. The vote and abstention should be noted in the meeting minutes.

The board of directors should be sensitive to the potential for conflicts of interest to develop, the duty owed to the membership, and the steps required when a conflict arises. Liability is created not by facing a conflict of interest, but by failing to handle one properly.

Telephones and Board Meetings

[Oregon] There is often confusion about the use of telephones in board meetings.  Let’s start with some preliminary issues.  First, board meetings must be open to the owners for observation.  While there is no right for owners to participate or vote in a board meeting, many boards have an open forum or Q&A session for owners at the end of each board meeting.

The only exception to the open meeting requirement is executive session.  The board may convene in executive session (and exclude owners) to: 1) consult with legal counsel; 2) discuss personnel matters; 3) discuss unpaid assessments; and 4) negotiate 3rd party contracts.

Second, notice of board meetings must be provided to the owners at least 3 days in advance.  Notice must be through a means “reasonably calculated” to inform the owners of board meetings.

Now let’s look at the use of telephones in board meetings.  Oregon law addresses the use of telephones in two different scenarios:

Scenario 1:  There is no physical meeting and all of the directors are using a telephone to communicate and hold a board meeting; and

Scenario 2:  There is a physical board meeting which owners have notice of and may observe, and a single board member calls in to the meeting to participate by phone.

Under Scenario 1, this type of meeting may only occur in cases of emergency.  For example, a pipe bursts on common property and it’s impossible to provide advance notice of the meeting or to convene in person. In such an emergency, the entire board may hold a conference call to make decisions regarding the emergency.

The statute addressing Scenario 1 states:

Only emergency meetings of the board of directors may be conducted by telephonic communication or by the use of a means of communication that allows all members of the board of directors participating to hear each other simultaneously or otherwise to be able to communicate during the meeting. A member of the board of directors participating in a meeting by this means is deemed to be present in person at the meeting. (ORS 94.640(10)(c))

The statute above does not address or prohibit a single board member from participating by phone at a normal board meeting, as described in Scenario 2. In fact, the Oregon Nonprofit Corporation Act provides:

Unless the articles or bylaws provide otherwise, the board of directors may permit any or all directors to participate in a regular or special meeting by, or conduct the meeting through, use of any means of communication[.] (ORS 65.337(3))

It is possible (but not likely) that an association’s governing documents prohibit board member participation via telephone. If that’s the case, follow the provisions of your governing documents.  If there is no such prohibition, there is nothing improper with a board member phoning in to a regularly noticed and open board meeting.  The board member may participate and vote as if they were present in person.

[Washington]

Washington associations, unless prohibited by the governing documents, may also allow board member participation in board meetings by telephone.  The Washington Nonprofit Corporation Act states:

Except as may be otherwise restricted by the articles of incorporation or bylaws, members of the board of directors or any committee designated by the board of directors may participate in a meeting of such board or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time and participation by such means shall constitute presence in person at a meeting. (RCW 24.03.120)

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.

Most Common First Names

This is a graph of the most common first names for presidents of homeowner and condominium associations in Oregon.

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.

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Proposed Radio Antenna Legislation

A few months ago federal legislation was proposed relating to the installation and use of HAM radio antennas.  HR 1301 ("Amateur Radio Parity Act of 2015") would override homeowner association CC&R provisions which prohibit the installation of HAM radio antennas or related equipment. The full text of the legislation is here.

Click here for Community Association Institute's position on the proposed legislation.

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

How Covenants Are Created

Covenants are promises made by the purchaser of property to do (or not do) something upon the land. The most common form of covenants are CC&Rs: covenants, conditions and restrictions.  Almost always in writing, covenants may attach to the property in several different ways: 1. Deed

When the purchaser of property takes title, it is usually done so through a written and recorded deed.  The deed itself may contain covenants preventing the purchaser from certain activities, like mining for minerals or creating a nuisance affecting adjacent land owners.

2. Declaration

A declaration refers to a "declaration of covenants, conditions and restrictions"--the full title of CC&Rs. The declaration subjects multiple lots or parcels in a subdivision or community to the same set of covenants prior to the developer or "declarant" conveying the first lot in the community.  Often, the declaration is incorporated or referenced in the deeds to individual purchasers.  In most states, the recording of the declaration is sufficient without having to incorporate or reference the declaration in each individual deed.

3. Plat

Similar to a declaration, a developer may place covenants on the recorded plat of the community. The plat is a graphical depiction of the lot lines, roads, and common property.  For condominiums, the plat will also show the elevation profile of the units and common elements.  Covenants contained in plats are typically noted in the narrative portion of the plat or referenced on the affected parcels.

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.

Understanding Proxies

Oregon and Washington law authorize the use of proxies unless prohibited by the governing documents. (RCW 24.03.085, ORS 65.231) Many condominium and homeowner associations find it impossible to achieve quorum at annual meetings without the use of proxies.

A proxy is a power of attorney between the “proxy giver” and the “proxy holder”. The proxy holder attends the ownership meeting and can act on behalf of the proxy giver, including making motions, voting, and engaging in debate.

When to Use Proxies

Proxies are typically exclusive to membership meetings, and in most cases should not be used for board meetings. Board members are elected specifically because owners trust the board member’s judgment, expertise, or knowledge.  If a board member cedes their responsibilities to another individual, then they are not fulfilling their fiduciary duties. Oregon explicitly prohibits the use of proxies in board meetings. (ORS 100.419 & 94.641)

Types of Proxies

There are many types of proxies:

1. General proxies;

2. Directed proxies;

3. Proxies for the purpose of establishing quorum; and

4. Combinations of general and directed proxies.

General proxies are ideal unless circumstances require otherwise.

The Proxy Holder

Unless prohibited by the governing documents, the proxy holder may be any individual, including individuals who may not even live in the same community. For example, I could give my proxy to my grandmother who lives in another town. What’s important is that I give my proxy to someone I trust, and who will exercise good judgment.

Proxies and Voting

Keep in mind that giving a proxy to the proxy holder does not cast a vote. It merely authorizes the proxy holder to attend the meeting and then cast votes on behalf of the proxy giver. Proxies are not absentee ballots, and there is no such thing as a “proxy ballot”.

If the proxy giver wants the proxy holder to vote a certain way, then a “directed” proxy may be used. But there are downsides to directed proxies. Suppose I give my neighbor a directed proxy which instructs my neighbor to vote for Jill for the board. However, as the meeting begins Jill decides not to run for the board, and Jane steps into Jill’s place. Now, my directed proxy is useless (not quite useless, it still counts toward the quorum requirement).

Proxy Requirements

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: Sample Proxy

10 Tips for Using Committees

Effective boards utilize committees to help shoulder the burden of association operations.  Oregon law allows the board of directors to create committees for any proper purpose:

(1) Unless the articles or bylaws provide otherwise, a board of directors may create one or more committees of the board of directors which exercise the authority of the board of directors and appoint members of the board to serve on them or designate the method of selecting committee members. (ORS 65.354)

Washington law contains a similar statute authorizing the use of committees. (RCW 24.03.115)

Here are 10 tips for putting committees to use:

1. Write and adopt a policy or resolution describing the purpose and duties of the committee.

2. State the committee’s objectives in clear, measurable terms.

3. Remember that committees make recommendations.  The board of directors makes decisions based on the recommendations.

4. Communicate!  Typically, the head of the committee offers a report at regularly scheduled board meetings.  Between meetings, check in on progress.

5. If board members serve on the same committee, makes sure it’s not a majority of the board.  Otherwise, you may violate open meeting requirements.

6. If there are no board members on the committee, consider appointing a board liaison.

7. If members of the association have particular skills, seek them out.  If a member has expertise in newsletters or marketing, appoint that member to a communications committee.  If a member has experience with landscaping, put the member on the landscape committee.

8. Always be grateful toward committee members and make sure they feel appreciated.

9. Be certain committee members are aware of governing document provisions or other association policies which may impact the committee’s work and objectives.

10. Provide resources to committees when needed.  This includes records, previous committee reports, space to hold meetings, and access to 3rd party professionals.

Board Member Fiduciary Duties

When owners are elected or appointed to the board of directors, it’s critical to understand the importance of fiduciary duties.  A fiduciary is a person “to whom property or power is entrusted for the benefit of another.”  In homeowner and condominium associations, directors are fiduciaries who must act in the best interests of the association and the membership as a whole. Washington law states:

A director shall perform the duties of a director, including the duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner such director believes to be in the best interests of the corporation, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. (RCW 24.03)

Oregon’s standard of conduct for directors is similar:

General standards for directors. (1) A director shall discharge the duties of a director, including the director’s duties as a member of a committee:

      (a) In good faith;

      (b) With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and

      (c) In a manner the director reasonably believes to be in the best interests of the corporation. (ORS 65.357)

There are four key elements to fiduciary duties:

1.  Act in the best interests of the association

Board members must act in the best interests of the entire membership. In other words, directors may not favor particular members because of personal interests, friendships, or financial gain.  This also implies that directors must put their own interests below the interests of the community, even if those interests conflict.

2. Act with care and seek advice

Courts generally review actions of board members and compare those actions with what a reasonably prudent person would have done in the same circumstances.  If directors must make decisions with legal implications, then an attorney should be consulted.  If issues arise involving tax or financial issues, the board should speak with an accountant.  Get expert advice when necessary in order to make informed decisions. Acting with care also requires acting within the scope of the board’s authority.  There must be authority for every action and decision of the board, whether it’s from state law, the CC&Rs, bylaws, or rules and regulations.

3. Act in good faith

Board members are generally protected from personal liability if they exercise sound judgment and fulfill their fiduciary duties.  However, if board members make decisions based on fraud, malice, or discrimination, personal liability may arise because of the failure to act in good faith.

4. Avoid conflicts of interest

Oregon law defines a conflict of interest as: 65.361 Director conflict of interest. (1) A conflict of interest transaction is a transaction with the corporation in which a director of the corporation has a direct or indirect interest.

Conflicts of interest arise when board members make decisions in which they have a personal or financial interest.  If those situations arise, board members must disclose the conflict and (in most cases) recuse themselves from voting.

Recording Board Meetings

Audio or video recording of board meetings typically happens under two circumstances: 1) the secretary of the association records the meeting to assist with creating meeting minutes; and 2) an owner in the audience (without permission) records the meeting. Carefully consider any policy which allows the recording of board meetings. Directors are often less inclined to speak freely if the meeting is recorded. Recording for Meeting Minute Preparation

If the board records meetings for the purpose of creating meeting minutes, adopt a policy stating how long the recordings will be kept. At the expiration of that time period, destroy the recordings.

In most cases, however, there is no need to record board meetings for the purpose of creating minutes. Meeting minutes should contain the motions made, who seconded the motion, and whether the motion passed. Oregon law also requires to list which board members voted yes and which members voted no. Attempting to summarize the discussion or debate of the motion is not required, and generally not advised.

Owner Recording of Board Meetings

Oregon condominium and homeowner associations (and Washington homeowner associations) are required to allow owners to attend board meetings. Although many boards have an open forum for owners at the start or end of the board meeting, owners are not allowed to otherwise participate or vote at board meetings.

Under Robert’s Rules of Order, the board of directors is entitled to adopt rules of order or standing rules governing its meetings. If the board’s decision is to prohibit the recording of board meetings, simply adopt a policy stating that no audio or video recording is allowed.

In addition, ORS 165.540 prohibits the recording of any conversation unless all parties to the conversation are specifically informed. This statute can be used to prevent the secret or unauthorized recording of board meetings. If an owner continues to record a board meeting, the owner can be asked to leave the meeting once the board has adopted a policy.

Most Common HOA President Names - Oregon

Community Association Websites

Many condominium and homeowners associations use websites to distribute governing documents, announce meetings, and allow owners to interact with each other. Ideally, the association’s website should have a password-protected area for owners to access financial data or other information that you may not want available to the general public. Never post sensitive data such as the names of delinquent owners or correspondence from your attorney which contains attorney-client privilege information. Here are a few options to consider:

1. GoGladly

https://products.gogladly.com/free-hoa-website

GoGladly provides well-designed, easy to navigate websites for community associations. A basic website is free. You can add components to the website, like bulletin boards ($5/month), surveys (10 cents per door/per month), calendars and document management.

2. Weebly

http://www.weebly.com

With a drag-and-drop website builder, Weebly makes it easy to have an association website up and running in minutes. A basic website is free. For $8/month, you can create a “members only” section to post content or documents accessible only to owners.

3. Association Voice

http://www.associationvoice.com

Association Voice is tailored specifically for condominium and homeowners associations. There are association management tools and you can integrate the site with accounting software. Packages range from $20/month up at to $300/month.

4. Mosaik Web

http://mosaikweb.com

For a truly custom website, local web design firm Mosaik Web builds beautiful and easy to navigate websites. Contact Mosaik for individual price quotes.

Overview of Collections and Foreclosures

Every homeowners and condominium association relies on assessments in order to operate. Assessments pay for insurance, maintenance, management, and other services necessary for an association to run properly. When owners don’t pay their assessments, the board has a duty to pursue collection efforts. There are two separate avenues for collecting delinquent assessments: 1) foreclosure of the association’s lien; and 2) a personal judgment against the owner for the amount of the assessments.

Liens

Most governing documents provide for an automatic (by operation of law) lien placed on the owner’s property the moment the assessment is delinquent.  State law in some jurisdictions may also provide for an automatic lien.  For planned communities in Oregon the statute reads:

(1) Whenever a homeowners association levies any assessment against a lot, the association shall have a lien upon the individual lot for any unpaid assessments. The lien includes interest, late charges, attorney fees, costs or other amounts imposed under the declaration or bylaws or other recorded governing document. (ORS 94.709)

Oregon condominiums have a similar statute:

(1) 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. (ORS 100.450)

And lastly, Washington’s automatic lien statute for condominiums states:

(1) The association has a lien on a unit for any unpaid assessments levied against a unit from the time the assessment is due. (RCW 64.34.364)

However, it’s a good policy to always record a formal paper lien. The lien is always filed in the recorder’s office of the county where the property is located.

Typically, association liens are superior to all other liens except for first mortgages and deeds of trust, and tax liens. This means that if the association decides to foreclose its assessment lien, it does so subject to any first mortgages or tax liens.  If there is little equity in the owner’s property, then foreclosing the association’s lien may not be the best choice.

Personal Judgments

Aside from the association’s lien rights, the delinquent owner remains personally liable for the assessments.  (ORS 100.475, 64.34.364( 8)) Even if the owner sells the property in your community and moves elsewhere, their personal obligation to pay the balance remains.  This is true even if the property was foreclosed.

To secure a personal judgment, a lawsuit must be filed.  The lawsuit must be personally served on the owner, and the owner has an opportunity to file a written response.  The written response is called an “Answer.”  For a timeline of the collections process, click here.

If the owner fails to file an Answer, the association can ask the court for a default judgment.  Once the judgment is received the association may begin collecting on the judgment through garnishment of wages or bank accounts, filing a writ for the owner’s personal property to be sold at a sheriff's auction, or other legal procedures until the judgment is paid in full.

Dealing with Renters in Community Associations

Most individuals in community associations fall into one of three categories:

- Owner/Occupants: motivated to maintain value and foster relationships

- Investor Owners: motivated by financial benefit; less regard for the quality of the community

- Renters: Often view community associations as apartment living

In many homeowner and condominium associations, there exists a stigma against renters.  Often this stigma is unwarranted.  If rental issues arise in your community, ask a few preliminary questions:

1. Do tenants receive governing documents?

2. What communications (if any) do tenants receive from the association?

3. What steps are taken to involve tenants?

4. Is there a record to support the idea that tenants cause more problems in the community?

Communicating and involving renters in the community may resolve rental issues facing the association and the membership.

What Constitutes a “Rental”

Under Oregon law, “rent” means “any payment to be made to the landlord under the rental agreement, periodic or otherwise, in exchange for the right of a tenant and any permitted pet to occupy a dwelling unit to the exclusion of others and to use the premises.”

If the association has a rental restriction and there is a question of whether an owner is in violation, it may be difficult to determine if an owner is actually “renting.” For example, if the owner’s child lives in the home and is not paying any rent, then that arrangement does not likely constitute a “rental.”

But what if someone other than the owner is residing in the property and it is difficult to determine whether the arrangement is a rental? One thing an association can do is have the owner sign a rental affidavit.  The affidavit is a signed and notarized document stating that the owner is not renting their unit.  This satisfies the board’s obligation to inquire whether the property is in violation of any rental restriction. Click here for: Sample Rental Affidavit

Adopting a Rental Restriction

Restricting an owner’s right to rent or lease their lot or unit requires an amendment to the governing documents. There are several things to consider before embarking on a rental amendment.  First, will the association get enough owners to vote “yes” to approve the amendment? Should the rental amendment be retroactive, or should existing owners currently renting be exempt?  Lastly, consider adding a “hardship” clause which gives the board discretion to allow a rental which exceeds the rental cap in the case of extenuating circumstances (military service, overseas job transfer, etc.)

Other Options

There are other options in addition to a blanket rental restriction.  First, the association could adopt an amendment regulating leases or rentals. Requiring, for example, all rentals must be at least 30 or 60 days, all lease agreements must include a provision that the tenants will receive and follow the governing documents (including rules and regulations), and owners who rent their property must provide the association with the tenant’s contact information.

In most cases, the association is better off focusing on the fair and equitable enforcement of the association’s governing documents.  If renters are causing parking issues, enforce the parking restrictions.  If tenants are creating noise complaints, enforce the nuisance or noise provisions.  In other words, deal with the effects of renters rather than attempting to restrict or limit rentals.

Conflict Resolution In Community Associations

At some point, board members and owners within condominium or homeowner associations will face conflict. Knowing how to effectively resolve conflict will maintain civility and harmony in the community. Generally, there are four steps to resolving conflict: 1) negotiation, 2) mediation, 3) arbitration and 4) litigation. 1. Negotiation

Prior to more formal alternative dispute resolution, the parties engage in negotiation. Each party attempts to educate the other about the position they are taking, their needs and their interests. The most important part of negotiation is the ability to listen to the other side and attempt to come to a mutual understanding.

2. Mediation

Mediation involves the parties in dispute and a neutral, third-party mediator. Mediation does not require the parties to come to any formal agreement, but that’s the end goal. There are many community mediation services with trained mediators. However, if the dispute involves complicated legal issues, a mediator with a legal background is often preferable.

During mediation the parties get to explain their positions and tell their side of the story. The mediator’s job is to find common ground and see what (if anything) the parties can agree to.

Besides potentially resolving the conflict, mediation can expose your side’s weaknesses, which may influence your decision to arbitrate or litigate the dispute in the future. Keep in mind, Oregon law requires (in most circumstances) that the party initiating the claim offer mediation prior to filing an arbitration or litigation claim. (See ORS 100.405 and ORS 94.630)

3. Arbitration

Arbitration is much more formal than mediation. Some governing documents require the parties (association vs. owner or association vs. developer) to submit all disputes to binding arbitration. The arbitrator, or panel of arbitrators, conduct the arbitration similar to a court trial. If the arbitration is binding, the ruling of the arbitrator is the final ruling on the issue and the parties are bound to the decision.

Some state courts require arbitration of all cases less than a certain dollar amount. In court mandated arbitration, the losing party may appeal the decision of the arbitrator and continue to a judicial or jury trial.

4. Litigation

When all else fails, sometimes litigation is the only avenue to pursue. Litigation means filing a lawsuit in court and a trial in front of a judge or jury. Attorney fees for litigating an issue through trial can be very expensive. However, depending on the claim, an association may recover its attorneys fees if it’s the prevailing party.