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Posts Tagged ‘HOA’

Best Practices for HOA Elections

Posted on: February 13th, 2019

By: Charles McCurdy

In California, as communities with HOAs have proliferated, so has the thicket of statutes, rules and regulations that apply to their operations. For example, just holding an election for an HOA’s Board of Directors implicates California’s Civil Code, its Corporations Code and an HOA’s governing documents, including its bylaws and CC&Rs. Additionally, since 2006, HOAs must have separate documents setting forth their voting rules. As HOA elections frequently morph into contentious affairs, it is often a good idea to provide as much clarity as possible on the standards and procedures to be used in advance of the election. This can help elections run more smoothly and may enable HOAs to avoid disputes and even costly litigation about the results.

To further this goal of more agreeable elections with more definite outcomes, HOAs should update their governing documents, particularly bylaws and voting rules. The Civil Code (§ § 5105 – 5130) relating to HOA elections has changed twice in the somewhat recent past (2006 and 2013), while many HOA’s governing documents date from their founding. In many instances, amended statutes may supersede outdated governing documents. This can sow confusion when members rely on governing documents that no longer control to understand how the election will be run, who are eligible candidates, and other important election-related considerations. Once governing documents comport with current statutes, HOAs should distribute them to their members in the lead up to elections. For example, HOAs can include these documents as part of an election package that may also include ballots, candidate information and other instructions or regulations. HOAs should also remember the law mandates equal access to association media (such as newsletters) and meeting space for campaigning.

While HOA elections may not always bring out the best in their members, a bit of anticipatory drafting and information sharing can go a long way to avoiding litigation over their results.

If you have any questions or would like more information, please contact Charles McCurdy at (415) 352-6416 or [email protected].

California Enacts New Anti-Fraud Laws To Protect HOA Members

Posted on: January 24th, 2019

By: Greg Fayard

In California, an anti-fraud bill designed to protect HOA members sailed unopposed through the legislature becoming law January 1, 2019.

The Community Associations Institute and the California Association of Community Managers sponsored the bill, which makes various changes to California’s Davis-Sterling Common Interest Development Act—the statutory scheme governing HOAs in the state. The purpose of the bill was “to take important steps to protect [HOA members] from fraudulent activity by those entrusted with the management of the association’s finances.”

The bill changed California’s Civil Code related to homeowner association money management to require any transfer of $10,000 or 5% of total association combined reserve and operating deposits (whichever is smaller) have prior written approval from the association’s board. (Civ. Code, §§ 5380(b)(6) and 5502.)

The new law prevents overly active board officers or HOA managers who pay bills or transfer funds without first getting explicit board approval. The intent of the new statute appears to require express permission for each individual transfer over $10,000 or 5% of the association’s deposits. Advance written authorization from a board is required not only for payments and withdrawals but also deposits and transfers between association accounts.

Civil Code section 5500 has required boards to at least quarterly review the HOA’s operating and reserve accounts, the reserve revenues and expenses compared to budget, the latest account statements, and income and expense statements for each HOA bank account. Under the amended Civil Code section 5500, these reviews must now be monthly, not quarterly.

Fortunately, new Civil Code section 5501 allows boards to meet the financial review requirements without meeting. The review, however, must be performed by each director or by a subcommittee consisting of the treasurer and another director, with ratification of this review noted at the next open board meeting.

The last new anti-fraud law change is new Civil Code section 5806. This statute requires all associations have fidelity (dishonesty) insurance in an amount equal to at least the total reserve funds plus three months of assessments. The insurance must include computer fraud and funds transfer fraud and must cover the association’s management company if the HOA is professionally managed.

All these changes have one purpose in mind: prevent financial fraud from being perpetrated on HOA members by their HOA leaders.

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

Florida Updates Its HOA Laws

Posted on: December 10th, 2018

By: Michael Kouskoutis

Earlier this year, Florida has enacted several laws impacting homeowners associations. Among these changes include the following:

As of July 1, 2018, Florida requires homeowners associations to publicly record all amendments to governing documents, where “governing documents” is defined to include “rules and regulations adopted under the authority of the recorded declaration, articles of incorporation, or bylaws and duly adopted amendments thereto.” Prior to this law, an HOA’s rules and regulations did not need public recording to take effect. Therefore, associations should publicly record such rules passed after July 1, 2018, especially prior to any attempt to enforce them.

Also as of July 1, 2018, association board members are not permitted to cast votes through email, and fines levied by the board and approved by the committee must be paid within 5 days after the committee’s approval. Moreover, amendments must be presented to voters with proposed changes either underlined or stricken, unless it would hinder the ability to understand the amendment, whereby a notation must be inserted before the proposal.

While these changes are not monumental, we still encourage homeowners associations to be mindful of them. If you have any questions or would like more information, please contact Michael Kouskoutis at [email protected].

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].