Presentation on theme: "Washington State Chapter COMMUNITY ASSOCIATIONS INSTITUTE The professional organization providing education, resources, and advocacy for community association."— Presentation transcript:
Washington State Chapter COMMUNITY ASSOCIATIONS INSTITUTE The professional organization providing education, resources, and advocacy for community association living.
10 Most Common Association Problems… And How To Fix Them Law Day – May 2013 Presented by: Bob Goff Danny DeWalt Goff & DeWalt, LLP
Overview The GOALS of today’s presentation are to: 1.Identify the most common problems leaders in community association’s face; and 2.Provide practical tools to address and resolve these problems when they arise.
Over-Arching Principles 1.Be Reasonable “The decisions of homeowner’s association's must be reasonable.” (Riss v. Angel) 2.Be Consistent, Not Arbitrary 3.Seek Professional Help 1.A director shall be entitled to rely on information, opinions, reports or statements…prepared or presented … by counsel, public accountants, or other persons as to matters which the director believes to be within such person’s professional or expert competence. (RCW 24.03.127) 4.Maintain transparency with members
Problem #1: Building a Community Within the Association Know the demographics of your members Families? Busy professionals? Retirement? Facilitate opportunities for community BBQ’s, potlucks, work parties, holiday parties, guest speakers Establish Traditions Be Transparent and Open Community Takes Commitment!
Problem #2: Maintenance & Repair CONDO ACT (RCW 64.34.328(1)): … the association is responsible for maintenance, repair, and replacement of the common elements, including the limited common elements… HOA ACT (RCW 64.38.020): Unless otherwise provided in the governing documents, an association may: (6) Regulate the use, maintenance, repair, replacement, and modification of common areas;
Maintenance & Repair Do the governing documents clearly allocate responsibility? Act quickly to avoid further damage! Repairs or Capital Improvements? If capital improvement, check Declaration for owner approval requirements (usually for any expenditure on “addition or capital improvement” over $5 - $10k.)
Maintenance & Repair: Have A Plan! Business Judgment Rule: Obtain and rely on experts for investigation, repair and recovery process. Conduct timely Building Envelope investigations prior to expiration statutory rights. Implied Warranties under the Condo Act –RCW 64.34.445: Four Year Statute of Limitations
Have A Plan! Follow a Maintenance Schedule Document, document, document! Reserve Studies (Apply to both HOA’s and Condominiums) –HOA: RCW 64.38; Condo: RCW 64.34 Comply with RCW 64.55 when applicable.
Problem #3: Enforcing Governing Documents Purpose: To promote and protect property values for all association members Problems arise when: Governing documents are enforced inconsistently or not enforced at all Board members emphasize “rules” over “relationship” with members Board is perceived as a dictatorship
Enforcing Governing Documents To properly ENFORCE the governing documents Board members must KNOW their contents and UNDERSTAND how they work together. Declaration/CC&R’s Bylaws Rules & Regulations Articles of Incorporation Highlight every provision in the governing documents that includes “shall,” “must,” or “may.”
Consider This… Does the Board have the authority to act? Is the rule reasonable? In enforcing this rule is the Board acting reasonably or selectively? Did the member have notice of the rule? Is there an action we can take to resolve this in a relational manner?
Example: Are Pet Weight Restrictions Reasonable?
This Dog Would Meet Virtually Every Weight Restriction
Attorneys Fees Recoverable? The governing documents should provide for the recovery of reasonable attorneys fees and costs for the prevailing party where the enforcement of the governing documents is necessary. “In any action to enforce the governing documents, the prevailing party will be entitled to recover any costs and reasonable attorneys' fees incurred in connection with the action.”
Problem #4: Vendor Contracts Associations often unknowingly enter contracts with vendors that include provisions that can expose the Association to liability and/or significant unnecessary costs Vendor contracts are often lacking detailed specifications outlining the extent (and limitations) of the vendor’s duties.
Key Elements of a Contract Parties to the contract Scope of work to be performed Total cost of work performed Deadline for completion Penalties for delay/nonperformance Payment timeline and methods Insurance requirements Responsibility for obtaining licenses, permits and warranties Who conducts progress inspections Notification procedure for cost overruns Notice required to terminate contract
Contract Clauses to Look Out For Indemnification and Hold Harmless Agreement Attorneys Fees Insurance Limitation of Liability Dispute Resolution
Helpful Tips It’s more than the bid! Utilize vendors that you are confident will do a good job for the Association – WSCAI Members WSCAI approved vendors will likely appreciate the nuances of working with Associations Legal Hire an attorney to review your contract before signing OR have the attorney draft a form vendor contract
Problem #5: Smoking Issue: Can a condominium association ban a member from smoking inside their own unit? In RCW 70.160.011, the legislature passed a bill stating “the people of the State of Washington recognize that exposure to secondhand smoke is known to cause cancer in humans” and, as a result, the statute bans smoking in “public places.”
Condominium a “Public Place?” RCW 70.160.030: “No person may smoke in a public place or in any place of employment.” However, as defined by the statute, “public place” does not include a private residence unless the private residence is used to provide licensed childcare, foster care, adult care, or other similar social service on the premises.
Smoking in Condominiums Possible Legal Theories: Trespass? Nuisance? Violation of “noxious and offensive activities” clause in Declaration? While association’s have the right to ban smoking in common and limited common areas, Washington courts have been unwilling to ban smoking inside units. Units can be made smoke free if the Declaration is amended by vote of the owners. However, because this is a “change in use,” passage of the amendment requires approval of 90% of all owners, plus 100% approval of owners that are “particularly affected” by the change (i.e. owners that smoke).
Problem #6: Communication Effective communication with members of the association is more important than any other act the Board will take. Reasons for Communication Breakdowns: Owner’s Lack of Trust in the Board Past Failures Buyer’s remorse
Effective Communication Frequent Utilizes as many methods as possible –Correspondence, Newsletters, Websites/Email, Blog, Meetings, Twitter Positive, open and direct Regular, consistent Association meetings Listen
Problem #7: Reserve Studies & Reserve Accounts What is it? A reserve study is a planning tool and disclosure document for owners, buyers and others, addressing the most significant maintenance, repair & replacement expenses an Association is likely to face over time
What is Required by Law in WA? Condos (RCW 64.34) & HOA’s (RCW 64.38) Association is encouraged to establish a Reserve Account. Unless doing so would impose an “unreasonable hardship” an association with “significant assets” shall prepare and update a Reserve Study. Unreasonable Hardship: cost of preparing study exceeds 5% for HOA’s) or 10% (for condominiums) of the association’s annual budget. Significant Assets: Current total cost of major maintenance, repair and replacement of reserve components is ≥50% (Condo) or ≥75% (HOA) of the gross budget of the association, excluding reserve acct funds. At least every three years, the study must be prepared and based upon a visual site inspection by a Reserve Study Professional. Must estimate anticipated major maintenance, repair and replacement costs, whose infrequent and significant nature make them impractical to be included in an annual budget.
Reserve Study - Exemptions HOA’s (RCW 64.38.090) Cost of reserve study exceeds 5% of the association’s annual budget; or Association does not have “significant assets”; or 10 or fewer homes in the association Condo’s (RCW 64.34.392) 10 or fewer units; AND 2/3 of the owners agree to exempt the association from the requirements. NOTE: Unit owners must agree to maintain an exemption by a 2/3 vote every three years and the association must disclose it does not have a reserve study in its resale certificates
The Right Approach 1.Know and understand legal requirements. 2.Raise assessments to keep up with inflation. 3.Choose funding levels based on a financial plan that is based on the long-term health of the association rather than on emotion or current circumstances. 4.Seek and follow the advice of professionals.
Problem #8: Dealing with Difficult Owners How satisfied are you with your HOA? Satisfied 72%...Neutral 19%...Dissatisfied 9% 74% of homeowners believe their HOA protects their property values. Only 3% believe the HOA is harmful. Ultimately, the vast majority of the difficulties and concerns come from a very limited minority of the HOA members. Source: Community Associations Institute http://www.yourhoamanager.com/blog/
Practical Solutions If you can’t beat ‘em, have them join you! Try to turn the disgruntled owner into a contributor to the association. Give the owner a proper forum to voice his/her concerns and viewpoints Place the owner on a committee Build member consensus on Board decisions. Minimize the costs of dealing with the owner; both monetarily and in terms of the interference with association operations. Follow the procedures of your governing documents closely. DO NOT make decisions which favor others over the owner. Don’t go to court unless you’re certain the association can win.
Legal Options (If Necessary) Fines/Liens/Collections Injunctions/Temporary Restraining Orders Specific Performance Civil Action for Damages Criminal Action Police should always be contacted if there is a concern for safety because of actions by a member of the association.
Problem #9: Failing to Protect the Association’s Rights Important Statutes of Limitations 3 Years: Oral contracts; Survival Statute 4 Years: Condo Act Warranties 6 Years: Written Contracts
Problem #10: Social Media More and more community associations are using social media to convey information, encourage owner involvement and build community. Methods include: Facebook Twitter Linked In YouTube
Social Media: Risk vs. Reward Benefits of Social Media Communicate a message to a large audience Little, if any, cost Access to younger demographic of members Create a forum for owner involvement Risks Posed by Social Media Use Increased liability Libel Copyright infringement Invasion of privacy Exposure of confidential and/or personal information Increased potential for miscommunication Lack of accountability
Protections Against Liability Strictly control access and use of the medium to members only. Where open comment is permitted, post a disclaimer stating the goal is to encourage the open exchange of ideas, but views expressed do not reflect the position of the association. Establish, publish and maintain standards for usage of the medium. Ensure the Association’s insurance covers claims that may be brought related to social media usage.
Protections Against Liability Prohibit publication of any confidential or embarrassing information that may violate a member’s privacy rights. Establish procedures for screening content before it is posted and for removing content deemed offensive, potentially libelous, or otherwise inconsistent with pre-established standards.