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Archive for the ‘HOA’ Category

Enforcing an HOA Covenant

Posted on: February 12th, 2018

By: Jan S. Sigman

Many homes built in the metro Atlanta area in the past 20 years are located in subdivisions that have a homeowner’s association (HOA). In 1994, Georgia adopted the Property Owner’s Association Act.  If an HOA elects to become subject to the Act, then the covenants passed by the HOA are enforceable against all the current property owners in the association, as well as subsequent purchasers into the community. Covenants may include restrictions on the development and use of the property.

In Great Water Lanier v. Summer Crest at Four Seasons on Lanier Homeowners Ass’n, Case No. A17A1810 (January 2, 2018), the Georgia Court of Appeals enforced various HOA covenants on a subdivision plat where Great Water accepted but did not sign the warranty deed. On cross motions for summary judgment, the trial court held the parcel was subject to the HOA covenants.  Great Water appealed, but the Court of Appeals affirmed the trial court’s ruling.  By accepting the deed, the Court of Appeals held, Great Water voluntarily consented to be bound by the HOA covenants. This case illustrates the need for buyers to conduct due diligence into HOA covenants that could encumber the property.

Jan Seanor Sigman is licensed to practice in Georgia and represents contractors and design professionals in all construction matters including contract negotiations, payment disputes and delays, contract terminations, and defective work. If you have any questions or would like more information, please contact Jan Seanor Sigman at [email protected].

Show Me the Money! Georgia Court of Appeals Affirms HOA’s Right to Recover Attorneys Fees

Posted on: January 31st, 2018

By: Cheryl H. Shaw

Community associations are funded through assessments paid by property owners. When owners fail to pay, the association’s ability to meet financial obligations and provide for upkeep of the community is diminished.  Common area repairs and replacements don’t go away just because the association’s bank account is lean, and maintenance projects get more expensive when delayed. Owners who pay their assessments end up subsidizing those who do not, while delinquent owners continue to enjoy the benefits of the association.  Pursuing delinquent property owners in court can be a long, arduous, and expensive process. However, the Georgia Court of Appeals recently affirmed an association’s right to recover attorney fees incurred in that effort, making the process a little less painful.

In Summit at Scarborough Homeowners Ass’n v. Williams, 343 Ga. App. 343 (2017), an HOA sought to recover its court costs and attorney fees after obtaining judgment against a property owner for unpaid annual assessments. The trial court denied the motion and the HOA appealed, asserting it was entitled to the fees under a provision of the recorded Declaration of Covenants, Conditions, Restrictions and Easements which stated:

The annual and special assessments [imposed by the Declaration], together with late charges, simple interest at the rate of twelve percent (12%) per annum, court costs, and attorneys’ fees incurred to enforce or collect such assessments, shall be an equitable charge and a continuing lien upon the property against which each such assessment is made and shall also be the personal obligation of the person who is the record owner of the property at the time the assessment fell due.

Siding with the HOA and reversing the trial court’s order, the Court of Appeals reiterated that under Georgia law, the Declaration of a homeowners’ association is considered a binding contract: “Where parties contract for the recovery of attorney fees, a trial court does not have the authority to alter that arrangement unless it is prohibited by statute.”  Finding no statute that prohibited recovery of fees in this context, the Court held the Declaration obligated the property owner to pay the HOA the reasonable attorney fees incurred in its collection efforts.  The Court reversed the trial court’s order and remanded the case with instructions to enter an award of costs and fees consistent with the Declaration. Id.

The Williams case confirms Georgia courts will enforce an HOA’s right to recover attorney fees if clearly set forth in the recorded declaration. Making sure your association has the right language in its governing documents is critical.  Cheryl H. Shaw is licensed in Georgia and has successfully represented community associations and property management companies in all manner of claims, including consultation concerning governing documents and daily business operations.  If you have questions or would like more information, please contact Ms. Shaw at [email protected].

Are E-mails HOA Property?

Posted on: December 21st, 2017

By: Michael Kouskoutis

Despite the ubiquitous use of e-mail, Florida law provides no clear answer on the extent to which HOA members can access e-mail communications of the association’s board members.  While Florida Statutes permit broad access to “official records of the association,” including “all written records . . . which are related to the operation of the association,” an arbitrator in Humphrey v. Carriage Park Condominium Association, Inc., Case No. 2008-04-0230, ruled that electronic communications existing on the personal computers of individual directors are not official records of the association, even if they relate to the operation of the association.

In its rationale, the arbitrator emphasized that the property of a director does not become association property merely because of his or her office on the board.  Notably, the arbitrator stated that it may have reached a different conclusion “if the association owns a computer on which management conducts business, including e-mails.”

If ownership is central to the classification of “official records,” then how will courts approach the more frequent occurrence where e-mails are exchanged on personal computers using association-owned e-mail domains?

An arbitrator’s opinion is not binding authority, but it should be viewed by a court as persuasive when this issue inevitably finds its way into a courtroom.  On the other hand, a court may decide to depart from Humphrey entirely.  However and until then, HOAs who wish to clearly draw the line between official and non-official association records should designate computers for association business or adopt policies to transfer association related communications to the association.

If you have any questions or would like more information, please contact Michael Kouskoutis at [email protected].

 

Enforcing the Rules: Are HOA Fines Too Heavy, Too Light or Just Right

Posted on: December 21st, 2017

By: David G. Molinari

Nearly one quarter of Californians live in a community governed by an HOA.  Associations use fines to curb violations of governing documents.  Some associations use fines excessively, while others only rarely.  How should fines be used as an enforcement tool in the management of the HOA’s affairs.

Monetary penalties serve two purposes: enforcement and deterrence.  Without a system of penalties, a Board is handicapped carrying out its duty to enforce the governing documents.  Board members are under a fiduciary duty to enforce the governing documents.  How may the Board reconcile these two purposes?  The imposition of a fine on an owner who violated the CC&R’s fulfills the Board’s enforcement duty; and the severity and extent of the fine should discourage future violations.

The authority for an HOA to impose fines is found in the association’s governing documents.  CC&Rs or bylaws give the Board authority either directly or through the power to adopt rules relating to management of the development to impose penalties on members.  The authority must be exercised through a schedule of monetary penalties adopted and distributed to members. California Civil Code Section 5855, part of the Davis-Sterling Common Interest Development Act requires a schedule of penalties and fines be distributed to the homeowners before fines may be imposed.  This schedule is considered an operating rule which requires minimal due process requirements such as distribution to members for comments at least 30 days before adoption.  The procedure for imposing a fine requires: 1) A hearing before the Board or Enforcement Committee; and 2) at least 10-day notice to the owner of the date and time of the hearing along with an explanation of the nature of the violation.

Some Associations find a step-up type process helpful before handing down fines.  Use of courtesy warning letters for first violations followed by the imposition of monetary penalties provides members with a sense of “fairness and consistency” that avoids a claim that any individual member was being singled out or disciplinary measures were carried out in a discriminatory fashion.

What amount of fine is necessary to enforce compliance?  Fines must be reasonable.  A fine cannot be arbitrary or discriminatory and must be imposed in good faith and geared toward the best interests of the association.  Two common factors in setting amount are the economic status of the community and the seriousness of the violation.  In some associations, a minimal fine of under $100.00 is sufficient to ensure compliance where in a community of multimillion dollar homes, the same fine to enforce landscaping requirements may be meaningless.  Actions that create a safety hazard or that threaten common areas may justify a higher fine than actions that have only an esthetic impact.  The bottom line: the fine must be reasonable, get the owner’s attention and be enforceable.

A related hurdle is the collection of fines. As of 2012 enforcement fines cannot be turned into a lien against the property. California Civil Code Section 7525(b) states that a monetary penalty imposed by an association as a disciplinary measure may not be characterized or treated as an assessment that becomes a lien against the member’s interests enforceable by sale.  That leaves the HOA with a choice of a small claims action as a fast and inexpensive avenue of resolution that avoids additional cost and difficulty of involving attorneys.  Alternatively, depending on the nature and amount of the violation, a Superior Court action may be brought.  Most governing documents have an attorney’s fees provision allowing for the recovery of counsel fees and enforcement costs.  However, in California such provisions are deemed reciprocal.  An unsuccessful case could result in the member avoiding the penalty and having the HOA pay their attorney’s fees.

The HOA must use a rule of reason. Violations must be treated in the same manner.  Reasonable and consistent enforcement will result in the HOA achieving the “just right” balance.

If you have any questions or would like more information, please contact David Molinari at [email protected].

California Homeowners’ Associations Must Allow Politicking: SB 407 is Now Law

Posted on: November 22nd, 2017

By: Jeffrey R. Cluett

On September 11, 2017, California Governor Edmund G. (“Jerry”) Brown, Jr. signed into law Senate Bill No. 407, which passed the California Senate and the California Assembly unanimously. SB 407 has been codified as California Civil Code Section 4515.

Prior Protections

California Civil Code Section 5105(a)(2) requires an association to ensure access to common area meeting space, during a campaign, at no cost, to candidates and members advocating a point of view, including views not endorsed by the board.

Similarly, Section 5105(a)(1) requires that if any candidate or member is provided access to association media, newsletters, or websites during a campaign, for purposes related to an election, the association shall provide equal access to candidates and members advocating a point of view, including those that are not endorsed by the board.

Section 4515’s Added Protections

Section 4515 adds to Section 5105’s protections. It bars associations’ governing documents from prohibiting members or residents from assembling or meeting in common areas or a member’s separate interest, during reasonable hours, for purposes related to common interest development living, association elections, legislation, election to public office, or the initiative, referendum, or recall processes, or for social and educational purposes.  This includes inviting public officials and candidates for office to meet with members, residents, and their invitees, canvassing and petitioning members, and distributing, without prior permission, information about common interest living, association elections, legislation, election to public office, or the initiative, referendum, and recall processes.

It also prohibits a member or resident from being required to pay a fee, make a deposit, obtain liability insurance, or pay the premium or deductible on the association’s insurance policy(ies) to use the common area for these activities.

It also authorizes one prevented by an association or its agent from engaging in these activities to bring a civil or small claims action to enjoin the enforcement of a governing document that violates Section 4015. It also authorizes the court to assess a civil penalty of not more than $500.

This law gives community interest associations attributes of public spaces for members, residents, and invitees. Indeed, the Senate Judiciary Committee analogized common areas to public spaces: “Just as with municipalities, CIDs are marked by common areas, be they streets, sidewalks, park, open courtyards, clubhouses, or common rooms.”  According to its author, “SB 407 would protect the political free speech rights of the 25% of Californians that live in common interest developments by prohibiting HOAs from creating community rules that disallow owners or residents from contacting others for the purpose of informing them about any issue that is the subject of public or association legislation of rule-making.”

Unintended Consequences?

While Section 4515 broadens members’ rights to expression, it may open homeowner associations to disruptive or offensive activities. Under Section 4515, a member or resident could hold demonstrations or marches.  Section 4515 appears to say that common interest associations could not prevent them.  While residents may applaud the increased speech and assembly protections, we foresee disputes arising from activity that association members find troubling or even offensive, but which Section 4515 appears to protect.

Beware of Potential Liability

Common interest development associations should ensure that their governing documents comply with Section 4515. If they do not, they should not enforce those provisions that do not comply with Section 4515.

If you have any questions or would like more information, please contact Jeff Cluett at [email protected].