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Posts Tagged ‘HOA’

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].

Georgia Court of Appeals Upholds Statute of Limitations Defense in Exterior Siding Case

Posted on: January 9th, 2018

By: Jan S. Sigman

In Georgia, a negligent construction action must be brought within four years from when the right of action accrues. The right of action accrues when the plaintiff first could have maintained the action to a successful result, which means substantial completion of the project in original construction cases or the sale of the property in improvement cases.

O.C.G.A. § 9-3-30(b)(1) carves out a specific exception to this general rule. If the damage is due to the manufacture, design or installation of synthetic exterior siding, then the right of action accrues “when the damage to the dwelling is discovered or, in the exercise of reasonable diligence, should have been discovered, whichever first occurs.” The Georgia Supreme Court has interpreted this exception to require the plaintiff to bring an action within four years of learning of potential problems with exterior siding. Scully v. First Magnolia Homes, 279 Ga. 336 (2005).

Recently, the Court of Appeals reaffirmed the Scully rule. In Demere Marsh Assocs., LLC v. Boatright Roofing & Gen. Contr., Inc., 343 Ga. App. 235 (2017), a homeowner’s association sued a contractor and a subcontractor for negligent design and installation of vinyl siding following water damage in multiple residential buildings. The contractor and subcontractor moved for summary judgment, arguing certain claims were time barred. The trial court disagreed, holding there was a factual dispute as to whether the homeowner’s association knew or should have known of siding problems between 2008 and 2012, when the lawsuit was filed.

The Court of Appeals reversed the trial court’s denial of summary judgment and, citing Scully, held the statute of limitations began to run when the homeowner’s association, “through the exercise of reasonable diligence, should have discovered that their [buildings were] being damaged due to defective synthetic … siding.” The Court of Appeals pointed to maintenance records showing water intrusion complaints dating back to 2004 and a report from a hired consultant in 2007, which identified improperly installed vinyl siding. The Court of Appeals concluded the statute of limitations began to run in 2007 and expired in 2011, well before the 2012 suit was file.

The Boatright case confirms Georgia courts will uphold statute of limitations defenses in construction cases, even those involving the exterior siding exception. 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].

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].