2015 Case Law Review

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

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

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

Acorn Ponds Homeowners Association vs. DeBenedittis - New York

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

Neufairfield Homeowners Association v. Wagner - Illinois

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

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

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

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

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

Arbors at Sugar Creek HOA vs. Jefferson Bank - Missouri

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

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

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

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

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

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

Belleville vs. Malvern Hunt Homeowners Association - Pennsylvania

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

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

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

Gonon v. Community Management Services, Inc. - Indiana

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

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

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

What Our Clients Say About Us

Last week Community Association Law Group sent an online survey to its clients. Here are some of the things our clients had to say about why they hired us, working with us, and why they stay with us.

• Kevin is very accessible, knowledgeable and works very hard for those he represents!

• [The] flat fee pricing got our attention and opened the door, but it was Kevin's personal style, keen knowledge of HOA law and experience with numerous HOAs that sealed the deal

• The main reason was Kevin's accessibility

• Flat-Fee pricing, approachability

• Love the newsletters and being able to search on a topic at the website

• Great information to send out to our Board members on specific topics as well as keep in a "topics" file in our office.

• Thought provoking articles

• Everything went smoothly and all documents were received timely.

• I am a former board member and currently do the newsletter for our association. I often cite you as a source of information and sometimes use parts of articles or ideas from your newsletter to inform residents on how associations work and what laws/rules regulate us. The articles are useful for educating residents who frequently don't understand how a large association works.

• I found great information on issues that I hadn't thought about; i.e. how new laws might impact communities

• You have an epic logo!

• We were attracted to the Community Association Law Group through the governing document review special offered in Nov, Dec, 2015. 

2015 Statistics

Education Seminars: 23 Speaking Engagements: 12

New Clients: 180

Delinquent Assessments Collected: $185,000

New Employees: 3

Website Visitors: 51,235

Electronic Newsletters Sent: 53

Board Members and Proxies

Occasionally board members of homeowner or condominium associations may not be able to attend board meetings. In most cases it is appropriate for absent board members to participate by telephone. However, sometimes board members ask if they may grant a proxy to another board member in their absence. Can a director give a proxy to another director for a board meeting? The short answer is: NO.

Oregon law specifically prohibits directors from granting proxies for board meetings:

94.641 Assent of director to board action. (1) A director of a homeowners association who is present at a meeting of the board of directors at which action is taken on any association matter is presumed to have assented to the action unless the director votes against the action or abstains from voting on the action because the director claims a conflict of interest.

      (2) When action is taken on any matter at a meeting of the board of directors, the vote or abstention of each director present must be recorded in the minutes of the meeting.

      (3) Directors may not vote by proxy or by secret ballot at meetings of the board of directors.

A proxy allows another individual to act on your behalf.  But directors have been elected by the membership because they trust the director’s judgment. In other words, they elected the director to act on their behalf, exercise discretion, and make decisions that affect the entire membership. Granting a proxy to another director means you are not exercising the fiduciary duties which you were elected to fulfill.

In short, while the board may certainly delegate authority or tasks to managers or committees, directors may not delegate decision making to other directors through the use of a proxy.

Online Voting for Community Associations

We recently concluded a membership vote to adopt an entirely new set of CC&Rs and Bylaws.  The CC&Rs require 75% of all owners to approve, and the Bylaws require 51%. With nearly 300 lots in the community, it was a high number of "yes" votes to receive.  Surprisingly, within a matter of weeks the necessary votes were received and the documents approved. The Association appointed a committee to oversee and coordinate the "governing document project." After an initial meeting to review the challenges with the original governing documents, CALAW created a first draft of the CC&Rs and Bylaws.  Those drafts were reviewed, comments were solicited, and revisions were made.  After one more round of meetings and revisions, we were ready to present the proposed documents to the owners.

First, we posted drafts of the proposed documents on the internet for owners to review and download. Shortly after the documents were provided to the owners, the first of two townhall-style meetings were held.  At the first meeting, attorney Kevin Harker reviewed each section of the CC&Rs and Bylaws, explaining the meaning of each provision and reasons for inclusion.

For the next several days after the meeting, we collected feedback from the owners. Once the owners' concerns and comments were incorporated into a new draft, a second townhall meeting was held to ensure that owners understood the importance and significance of adopting new CC&Rs and Bylaws.

Then came the voting. Owners voted through an online ballot:

As soon as owners clicked "submit", the vote was recorded in an online spreadsheet:

The spreadsheet contained a separate area which kept a live tally of the votes:

With the required number of votes received, the next step was to sign and record.  Community Association Law Group uses Simplifile to upload and record documents to the county recorder's office:

Thirty minutes later the documents were recorded with the county recorder's office:

Once recorded, the documents were official!

FHA Certified Condominiums

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

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

1. Property Use and Type

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

2. Financial Stability

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

3. Operational Stability

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

4. Insurance Requirements

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

A. Property/Hazard Insurance

B. Liability Insurance

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

D. Flood Insurance (if required)

5. Legal Requirements

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

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

Components of an Effective Board Meeting

Board meetings can easily turn into chaos. State law (in Oregon and Washington) and governing documents often provide guidance on running board meetings.  Parliamentary procedure, most importantly, should be used to keep order and allow the meeting to proceed efficiently. The following is a brief overview of the components which are necessary for an effective board meeting. 1. Starting the Meeting

Once quorum is present, the Chair should state “The meeting will come to order.”

2.  Parliamentary Procedures

The Board of Directors should use Robert’s Rules of Order to conduct its meetings.

3.  Order of Business

Sometimes called the "agenda", Robert's Rules uses the term "Order of Business."  Some association bylaws may dictate the agenda for board meetings.  Otherwise, use the following order of business:

A. Reading and Approval of Minutes (Following any corrections, the minutes should be approved, typically by unanimous consent)

B.  Reports of Officers, Boards and Standing Committees

C.  Unfinished Business

Sometimes incorrectly referred to as “Old Business”, this refers to questions that have been carried over from the previous meeting as a result of that meeting having been adjourned without completing its order of business.

D.  New Business

Following any unfinished business, the chair will ask “Is there any new business?”  Board members may introduce new items of business at this time.

4.  Quorum

Quorum is the number of individuals who must be present in order to conduct business.  Most bylaws require a majority of directors to be present in order to achieve quorum.  In the event there is not a quorum, the meeting cannot continue.

5.  Open Meetings Requirement

Washington and Oregon require homeowner association board meetings to be open to the membership. (ORS 94.640 / RCW 64.38.035)  All meetings of the board must be open to owners and properly noticed, except for emergency meetings.

6.  Motions

In formal settings, there should be no discussion without a motion. A motion is a formal proposal for the board to discuss and vote on a particular issue. Meetings should follow the same structure each time: motion, second, debate, vote. Here’s how it works:

A. Member makes the motion

B. Another member seconds the motion

C.  The presiding officer repeats the motion to ensure that everyone is discussing and voting on the same issue

D.  Member then debate or discuss the motion

E. The presiding officer “puts” the motion to a vote

F. The outcome of the vote is announced.

7. Executive Session

Executive session may be used to discuss sensitive or confidential topics.  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.

A. Topics Allowed - Washington

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.

B. Topics Allowed - Oregon

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.

8. Meeting Minutes

The meeting minutes should include the following:

1. Type of Meeting (Special, Regular, Adjourned)
2. Name of the Association
3. Date and Time of the Meeting
4. Place of Meeting
5. Whether previous meeting minutes were approved
6. Separate paragraphs with name of person who makes motions and:
   1. All main motions and any amendments
   2. Whether the motion passed
   3. Names of those who voted in favor of the motion and the names of those who voted against the motion
7. Do NOT include:
   1. Name of person who seconded motion
   2. Remarks of guest speakers
   3. Motions which are withdrawn
   4. Personal opinions
8. Hour of adjournment

As always, talk to a qualified HOA or condominium lawyer for legal advice.

Announcing a Special Assessment

It’s always difficult when a condominium or homeowners association must levy a special assessment against the owners. Sometimes there’s no choice.  If the association failed to reserve money for major repairs or an unexpected cost arises, a special assessment may be the only option. No owner wants to pay a special assessment.  This is why it’s important to explain to the owners why the special assessment is necessary and how it will help in the long run. Here are some tips when announcing a special assessment:

1. Send a letter to the owners explaining that the board has approved a special assessment.  (Some association governing documents may require a vote of the owners). Describe the reasons for the special assessment and be upfront about why the association doesn’t have the funds on hand.  Also cite to the authority of the board to adopt and levy the assessment.

2. Discuss the alternatives that the board considered.  Alternatives include taking out a loan from a bank, postponing repairs, or selling common assets.

3. If possible, explain that owners may have options in paying the special assessment.  The association may have an arrangement with its bank to offer financing to owners.  In some cases owners may have insurance coverage for special assessments.

4. Be sympathetic and if necessary, express regret.  Board members are also owners—it makes sense that board members may not be enthusiastic about the assessment, yet recognize it is in the best interests of the entire membership and association.

5. Give as many details on the total assessment amount, as well as each owner’s share of the assessment.  Be clear with deadlines for payment and payment options which may be available to the owners.

6. Ideally, divide the special assessment into 12 equal payments for owners, each with monthly due dates.  In the case of a foreclosure or bankruptcy, it may be possible to recover unpaid special assessments.

As always, seek qualified legal counsel before levying or collecting a special assessment.

Security Cameras in Community Associations

Much of the case law involving an association’s duty to provide security relies on long standing landlord-tenant laws and cases.  In general, an association has a duty to provide safety and security against foreseeable risks.  There are many cases involving security cameras and community associations.  In one case the court held that an association had a duty to install cameras because of frequent and repeated car break-ins and other criminal behavior in the common area parking lot. Keep in mind that placing security cameras on common property may very well impose or create a duty on the association that may not otherwise exist.  Of course, cameras don’t prevent crimes, they merely record crimes.  But the understanding of the average person assumes that cameras provide some form of actual security.

If the association is aware of repeated criminal acts on common property, it may make sense for the board to install security cameras.  But, there should be actual knowledge—and thus foreseeability—of future acts which a security camera may curtail.

What about signs that say there is surveillance, but there are no actual cameras? The major concern is that owners or guests at the community will see those signs and have a false expectation of safety or security.  In the event a crime occurs on the property, the Association may be exposed to liability if the victim asserts: “I thought there were cameras and video footage may have prevented the incident or allowed the assailant to be identified.”  Generally, it is not prudent to use signage suggesting there are cameras when there are not.

Before making a decision to install security cameras or other security measures, talk with a qualified attorney.

Common Legal Terms in Governing Documents

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

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

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

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

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

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

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

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

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

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

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

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

Enjoin - To require someone to do something.

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

Enumeration - To list or describe.

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

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

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

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

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

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

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

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

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

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

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

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

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

Mortgagee - Person who takes or receives a mortgage.

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

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

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

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

Severability - Capable of being divided.

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

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

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

Reading and Understanding Title Reports

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

Title Companies

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

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

Preliminary Title Report vs. Title Commitment 

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

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

Insurable Title

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

Scope of Insurance

Title Vested

Any defect in or lien or encumbrance

Unmarketable Title

No Right of Access

Endorsements

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

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

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

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

Marketable Title

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

Abstract or Chain of Title

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

Contents of a Title Report

Estate of Interest Covered

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

Current Owner of Estate or Interest

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

Parcel of Land Involved/Legal Description

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

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

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

Liens

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

Covenants, Conditions and Restrictions

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

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

Easements

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

Taxes

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

Other Types of Title Insurance

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

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

Tips for Collections Policies

The authority to levy and collect assessments is found in the Declaration/CC&Rs of community associations.  However, there aren’t typically specific procedures to follow if an owner is delinquent in the payment of assessments.  Most condominium and homeowner associations adopt a separate resolution or policy which governs how the association will handle collecting from delinquent owners.  Here are a few things to consider when adopting a collections policy:

1. State the authority for collecting assessments

The policy should begin by citing to the appropriate authority to file liens, charge late fees and interest, and turn the account over to an attorney for collections.  The governing documents will contain the obligation for all owners to pay regular assessments.  The authority to charge late fees or interest (sometimes the amount is left open for the board to decide) will also be in the association’s governing documents.  In addition, cite to the appropriate state law which grants community associations the power to collect assessments, fines, late fees or interest.

2. Define the process

Most collections policies include the following steps:

a. Initial letter indicating delinquency and the amount of any late fees or interest

After 30 days from the due date, the Association will provide notice to the delinquent owner stating that a late fee and interest have accrued. The notice shall state that if the balance is not paid, the account will be turned over to a law firm for collections.

Any assessment which becomes delinquent will be charged a late fee in an amount equal to 5% of the unpaid assessment. In addition, the assessment will accrue interest at the rate of 9%.

b. Lien filed on lot or unit

c. Second demand letter stating that the file will be turned over for collections

Any assessment including late fees unpaid and past due for more than 60 days will be referred by the Board of Directors to its law firm  for collection.

d. Provisions to comply with the Federal Fair Debt Collections Practices Act

e. The type of garnishment tools which will be used once a judgment is entered against the owner.

After CALAW obtains a judgment, it will begin collection of the judgment by:

garnishing the owner's bank account; or

garnishing the owner's wages; or

executing a writ against the owner's real or personal property; or

any additional methods authorized by law.

3. Publicize the policy

The association will have a difficult time enforcing its policies if those policies aren’t publicized and distributed to owners. This puts owners on notice of the steps that will be followed for the collection of delinquent assessments.  Keep in mind that when new owners move to the community, copies of all resolutions, policies or other unrecorded documents need to be provided.

4. Enforce the policy consistently

Once the board of director adopts a collections policy it must follow the steps outlined in each and every circumstances.  Special arrangements or exceptions are not appropriate. The exact same procedures must be followed in each case.  If not, owners may challenge the application and enforcement as selective or unfair.

Marijuana in Community Associations

For some condominium and homeowner associations, marijuana (smoking and growing) is becoming a concern. There are a handful of tools the board of directors may consider to handle these issues.

1. Nuisance

A nuisance claim is most frequently used in banning smoking in multi-family residential units.  A “nuisance” is defined as conduct that causes a substantial and unreasonable interference with the use and enjoyment of the premises. 

In Christiansen v. Heritage Hills 1 Condominium Owners Association, a Colorado District Court held that second-hand cigarette smoke qualifies as a nuisance.  The Court also noted that smoking is not a right protected by the Constitution.

Although the courts in Oregon and Washington are not required to follow the holding in this case, the courts do still have discretion to follow the holding.  Both the smoking of cigarettes and the smoking of marijuana emit harmful chemicals that can cause serious health complications.  In fact, marijuana smoke has joined tobacco smoke on a list of substances that, in California, regulators say cause cancer. It is harmful to anyone’s use and enjoyment of their property to be involuntarily exposed to dangerous chemicals that can seriously damage their health.  The Board can point to the fact that marijuana can be ingested instead of smoked, which eliminates the dangerous exposure to other people. 

In banning the growing and cultivation of marijuana the Board may rely on a nuisance claim.  The growing of marijuana often emits a noxious odor that can travel from unit to unit.  Additionally, the use of chemicals and lighting for growing could be a fire hazard. The water and lighting required for growing could also constitute extra use of “common utilities.”  That kind of use could be costly and unfair to the other residents.  A community would likely be within its rights to ban growing and cultivation of marijuana.

2. Insurance Issues

In addition to the issues presented above, there is the issue of insurance liabilities.  Fires caused by smoking marijuana or growing it may not be covered by the insurance company.

3. Amendments and Rules

There are a couple different options a Board can use to control smoking and growing.  The first is to amend the CC&Rs.  The other option is to implement a new Rule and Regulation.

The advantage of amending the CC&Rs is that this method provides constructive or record notice to prospective purchasers—i.e. because the amendment is recorded in the county records, owners and perspective buyers are presumed to have notice. 

Additionally, CC&R amendments generally have stronger enforceability.  However, the disadvantage is that it requires membership vote which means it could take longer and it is more expensive.  Some state courts have actually held that the only way a board can implement a no smoking ban is to amend the CC&Rs.  Although there are disadvantages, this is the most reliable method of implementing the ban.

In the alternative, the Board may add a new Rule and Regulation.  The advantage is that these are easier to adopt because they require only board approval and not membership vote.  This also means it is less expensive.  However, prospective purchasers will not have constructive notice of the ban and the enforceability will not be as strong as an amendment to the CC&Rs.

Bend Seminar Recap

Last night's board member seminar was a full house.  The topic was "How to Read and Understand Your Governing Documents."  To view and RSVP for future education events, visit www.calaw.attorney/events Slideshow may be downloaded here: Reading and Understanding Governing Documents Keynote OR 9-23-2015

Collecting on Judgments

Sometimes owners in a community don’t pay their assessments. Often, the Board of Directors must file a lawsuit to collect the delinquent assessments. The lawsuit is filed in small claims court or the civil court in the county where the property is located. Typically, owners do not respond to the lawsuit and the Association receives a “default judgment.” But a judgment is only as good as the Association’s ability to collect the judgment.  For a more detailed overview of collections, click here. Once a judgment is secured, there are several avenues the Association may pursue. Here are some of those options:

1. Garnish Wages or Bank Accounts

At anytime after the judgment is entered in the court records, the Association’s attorney may issue garnishments. Items that are subject to garnishment include: bank accounts, wages, certain personal property, rental income or income tax returns.

The “writ of garnishment” is sent to the individual or entity that holds an interest in the owner’s assets or property.  For example, writs are sent to banks where the owner has an account or to the owner’s employer.

There are some assets or income that are exempt from garnishment, such as social security or disability income.  In those cases, the owner may challenge the garnishment and a judge will then determine what is exempt and what is subject to the garnishment.

2. Debtor Examinations

Once the judgment has been entered in the court records, the Association may obtain an order requiring the owner to appear at the court house.  On the stated day and time, the Association’s attorney may ask questions of the owner related to their finances, bank accounts, assets, or any other information relevant to collecting the judgment.  The information gathered from the debtor exam is then used to issue garnishments or take other collection action to pay off the judgment.

3. Execution on Vehicles

In some cases, a delinquent owner may own cars, boats or other vehicles that are owned free and clear.  In those circumstances, the property may be taken by the sheriff, sold at auction, and the amount received is credited toward the Association’s judgment amount. The Association’s attorney can determine if such assets are available.

4. Settlement

The threat of garnishment may be enough to cause the owner to voluntarily pay the amount of the judgment or make regular payments until the judgment is satisfied.  In those cases, the Association may want to enter into a formal settlement agreement which includes all of the costs and fees that were incurred after the judgment was entered.  This avoids having to file a “supplemental” judgment to collect those fees and costs.

Association Record Inspection

Community associations often have voluminous records.  Owners, who are members of the association, have a right to inspect and review those records. Financial records, meeting minutes, and governing documents are some of the items which constitute official “association records.”  For a more detailed list of association records, visit here. There are some records, however, which owners are not entitled to review or inspect.  Some of those records include:

1. Contracts, leases or business transactions currently under negotiation;

2. Documents or correspondence protected by attorney-client privilege;

3. Records created for consideration in executive session; and

4. Documents or records subject to confidentiality agreements.

Most other records, however, must be available for owner review and inspection.  Under state statute the association is authorized to charge reasonable copy costs or administrative costs.  For Washington homeowner associations, the law provides:

All records of the association, including the names and addresses of owners and other occupants of the lots, shall be available for examination by all owners, holders of mortgages on the lots, and their respective authorized agents on reasonable advance notice during normal working hours at the offices of the association or its managing agent. The association shall not release the unlisted telephone number of any owner. The association may impose and collect a reasonable charge for copies and any reasonable costs incurred by the association in providing access to records. (64.38.045)

Oregon homeowner associations are governed by a similar statute, which also imposes a 10 day timeline:

(11) The association, within 10 business days after receipt of a written request by an owner, shall furnish the requested information required to be maintained under subsection (10) of this section.

(12) The board of directors, by resolution, may adopt reasonable rules governing the frequency, time, location, notice and manner of examination and duplication of association records and the imposition of a reasonable fee for furnishing copies of any documents, information or records described in this section. The fee may include reasonable personnel costs for furnishing the documents, information or records. (ORS 94.670)

Associations should timely respond to all reasonable records requests from owners (and in some cases mortgagees).  The board should adopt a record inspection policy or resolution explaining when and how records may be requested, a list of any records which are not subject to inspection, and a schedule of costs or fees for inspection or duplication of records.  Here is a sample records inspection form that may be used and tailored for your association: Sample Records Request Form

September Board Training: How to Read and Understand Your Governing Documents

Portland - September 15, 7pm Vancouver, September 17, 7pm

Bend, September 23, 7pm

Visit www.calaw.attorney/events for more info and to RSVP.

Deschutes County Subdivision Map

Robert's Rules & Small Boards

Robert’s Rules of Order is designed to keep control of large groups or assemblies.  Members must stand and be recognized by the chair, motions must be seconded,  and members may not speak out of turn.  However, sometimes that level of formality isn’t needed, especially when the assembly is a small number of board members. RRO contains special procedures that small boards may utilize. (Robert’s Rules of Order, Newly Revised, 11th Edition, Section 49)  A “small” board is 12 or fewer members.  Here are some of the informal procedures for small boards:

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

-Motions need not be seconded;

-A board member may speak any number of times on a question (not just two) and motions to close or limit debate are generally not permitted;

-A motion does not have to be pending in order to discuss a subject informally;

-Votes can be taken by a show of hands;

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

-In putting a question to a vote, the chairman need not stand.

An additional exception to the formal rules is that “the chairman can participate and vote.”  However, in most community associations, the chairperson (an officer position) is also a member of the board of directors.  When a vote is taken all board members in a community association should vote—in fact, there is a fiduciary obligation to vote.  Thus, when the chairperson votes on an issue, he or she is voting in their capacity as a board member, not as an officer.

If your board desires to use the procedures for small boards, adopt a policy stating that board meetings will be conducted in accordance with Robert's Rules for small boards.

Deschutes County Woman Sues Neighbors Over Felled Trees

Interesting case with creative legal theories.  Click here to read: http://www.bendbulletin.com/localstate/3449691-151/woman-sues-neighbors-for-damages-over-felled-juniper?referrer=bullet2#