“We Have Always Done It That Way”

Courtesy of Barker Martin, Attorneys: http://www.barkermartin.com

“We Have Always Done It That Way”  Is Not A Valid Answer. 

As a board member or a manager are you prepared to answer the question, “What entitles the association to do that?”  The variety of answers we have heard over the years is surprising and often wrong.  The most common wrong answer we hear is, “We have always done it this way.” As association attorneys, that type of answer makes us cringe.  Why?  Because that answer implies that the association did not consult their governing documents ahead of time to see if the action was allowed - and there is the very real possibility that the association has been acting improperly for a long time.

When it comes to the association’s authority to take action, ignorance is not bliss.  Board members and managers must be aware of what the association can and cannot do.  Board members are not expected to know all the state, federal, and local laws th“We Have Always Done It That Way”  Is Not A Valid Answer.

As a board member or a manager are you prepared to answer the question, “What entitles the association to do that?”  The variety of answers we have heard over the years is surprising and often wrong.  The most common wrong answer we hear is, “We have always done it this way.” As association attorneys, that type of answer makes us cringe.  Why?  Because that answer implies that the association did not consult their governing documents ahead of time to see if the action was allowed - and there is the very real possibility that the association has been acting improperly for a long time.

When it comes to the association’s authority to take action, ignorance is not bliss.  Board members and managers must be aware of what the association can and cannot do.  Board members are not expected to know all the state, federal, and local laws that may apply to their association, but they should understand the association’s governing documents.  Why?  Because you can bet that the owner who disputes the action taken by the association will go through the governing documents with a fine-tooth comb looking for ways to challenge the board’s action.  Understanding what authority your association has under its governing documents can help avoid unnecessary disputes and attorneys’ fees.

A cursory review of the governing documents is not that helpful.  We encourage managers and board members to review the documents with a purpose and highlight everywhere the words “shall” and “may” appear so that it is clear what the board and the association must do and what it has discretion to do.
Once the board understands the association’s authority it should cite to that authority (governing documents, statutes, or rules) whenever it takes formal action.  Doing so not only confirms the board’s authority before it acts, it documents that authority for owners who might otherwise have been tempted to challenge the board’s action.

Certainly, there are provisions in your governing documents that are subject to interpretation - and reasonable minds can indeed differ.  However, a solid understanding of the authority granted and restrictions imposed by your governing documents can avoid a multitude of problems.  Ultimately, the only time, “We have always done it this way” is a permissible answer is when if someone asks, “Why do board resolutions always list the basis for the board’s authority?”
at may apply to their association, but they should understand the association’s governing documents.  Why?  Because you can bet that the owner who disputes the action taken by the association will go through the governing documents with a fine-tooth comb looking for ways to challenge the board’s action.  Understanding what authority your association has under its governing documents can help avoid unnecessary disputes and attorneys’ fees. 

A cursory review of the governing documents is not that helpful.  We encourage managers and board members to review the documents with a purpose and highlight everywhere the words “shall” and “may” appear so that it is clear what the board and the association must do and what it has discretion to do. 

Once the board understands the association’s authority it should cite to that authority (governing documents, statutes, or rules) whenever it takes formal action.  Doing so not only confirms the board’s authority before it acts, it documents that authority for owners who might otherwise have been tempted to challenge the board’s action.

Certainly, there are provisions in your governing documents that are subject to interpretation - and reasonable minds can indeed differ.  However, a solid understanding of the authority granted and restrictions imposed by your governing documents can avoid a multitude of problems.  Ultimately, the only time, “We have always done it this way” is a permissible answer is when if someone asks, “Why do board resolutions always list the basis for the board’s authority?”

Process and Procedure Matters

Courtesy of Barker Martin, Attorneys: http://www.barkermartin.com

Associations need to take note:  Process and Procedure Matter.  A Florida homeowner association was recently reminded of this fact when it was ordered to pay an owner $85,000 in damages. The owner is seeking an additional $220,000 in attorney fees.  The dispute stemmed from a $2,212 landscaping bill for replacement of the owner’s lawn.  See the related news article at: http://www.tampabay.com/news/publicsafety/crime/new-tampa-homeowner-wins-judgement-against-homeowners-association/1253895.

In ruling against the Association, the Court made the following findings:

• The Association replaced the owners' lawn when it was not the only yard affected by the drought.
• Three Deed Restriction Committee members never inspected the property before the board authorized the work as required by governing documents.
• The person who installed the sod was an officer and board member of the Association. Governing documents prohibit board members from receiving remuneration without a unanimously adopted resolution, which did not happen.
• The fraudulent lien prohibited the Owners from selling their home, which they had purchased as investment property and rented out. At one point, when the home was valued at $215,000, they had an interested buyer. The property is now worth $100,000, according to the court order.

Keep in mind a couple of things that the Court did not find:

• The Court did not find that the Association acted unreasonably in determining the lawn should be replaced.  To the contrary, the Court found it was not the only yard affected by the drought.
• The Court did not find that the Association lacked authority to replace the lawn. To the contrary, it appears the Association did have authority replace the lawn and had specific procedures for making such a decision that included an inspection of the property by three committee members.
• The Court did not find that the officer/board member could not perform the sod replacement.  The Court ruled that the Association’s governing documents require a unanimously adopted resolution and the process was not followed.

Boards sometimes get into the mindset that so long as they have the authority to make something happen, the process and procedure of getting to that end is largely irrelevant.  The Florida association in this case almost certainly argued that any procedural failure does not change the fact that the lawn needed to be replaced and the Association had the authority to replace it. Based on the Judge’s findings, it seems like the Association had a decent “no harm – no foul” argument.  The importance of following your governing documents cannot be overstated.

THE BOTTOM LINE: Associations lose lawsuits when they don’t follow the proper process and procedures. Obtaining sound legal advice to keep you OUT of court is far more cost effective than the alternative.

Board Training Seminar: Mock Board Meeting

by Maria Garcia, Maintenance Coordinator

Our first Board Training Seminar of the year was a great success!! The topic of our training seminar was “Conducting a Successful Board Meeting”.  We had David Batchelder, owner of David’s Roof Service, sponsor our meeting. He graciously provided sandwich fixings, potato salad, macaroni salad and beverages.  Also in attendance was Gil Price, Executive Director, and Jennifer Hill, Attorney, from Condo Law Group.  During our meeting we explained the roles and duties of a president, vice-president, treasurer and secretary, as well as how to conduct a meeting. With our presentation we conducted a mock board meeting about how to avoid letting a meeting get out of control. Jennifer Hill answered many legal questions for board members on disclosure, executive sessions and financials.  At the end of our presentation we gave away door prizes: two attendees walked away with a copy of the Vickie Gaskill’s book “Community Associations, A Guide to Successful Management” and one lucky winner got away with a $50 gift card to Home Depot.

Thank you to all our board members that attended and we hope to see you at the next one!  We also owe a big thank you to Jennifer Hill, Gil Price and David Batchelder for your participation and contribution!

View more pictures of the event at https://www.facebook.com/media/set/?set=a.10150641194573462.400340.92113323461&type=1&__adt=2
 

Free Webinar for Community Associations

Collecting Judgments from Seriously Delinquent Owners in Small Claims Court - August 31, 2011 at 10am
Presented by Condominium Law Group, PLLC

Taking a delinquent homeowner to Small Claims Court can be daunting for those who have never experienced it. Join an association board president and an attorney as they walk you through the process of taking a delinquent homeowner to Small Claims Court. Presented by Theresa Torgesen, Condominium Law Group PLLC and Tom Files, Association Board President

Go to https://condolaw.webex.com/condolaw/k2/j.php?ED=156298682&UID=1196860987&HMAC=c544e18391a42fb308e9dcfded4cdb0c16a5f089&RT=MiM0&FM=1 and register.

Once you register for the webinars, you will receive another email confirming your registration. Be sure and keep that email as you will need it to sign into the webinar. If you have questions about registering for this webinar or joining the webinar session on the day of the event, please contact WebEx Technical Support at 866-229-3239.

Your colleagues, boards and homeowners are welcome to participate in our Wednesday webinars. If you can’t participate in our webinars, we always record them for playback later. Just go to www.condolaw.net and click on the Webinar page to view and listen to all of our recorded webinars.

Foreclosure Process in Washington

By: Rebekah Near, ORCA Information, Inc.
www.orcainformation.com

This report is to provide you with the information on how the foreclosure process works in Washington State and how long it takes for a bank for a bank or mortgage company to foreclose on your property under Washington’s deed of trust act (RCW Chapter 61.24).

The foreclosure process set out in the legal statue is known as a nonjudicial foreclosure, meaning it is a foreclosure conducted without having to go to court and have a judge order a sheriff’s sale of your property. Instead of a judge, the foreclosure is handled by a trustee who is appointed by the lender. The entire process is basically a series of notices given by a trustee to the borrower and anyone else who has an interest in the property, followed by a public auction (also known as a trustee’s sale). The highest bidder at the trustee’s sale is entitled to a trustee’s deed to the property and to possession of the property 20 days after the sale.

The first step in the process is usually to name a new trustee, since most of the deed of trust forms name a title insurance company as trustee and the title companies in this state do not do the foreclosures. The trustee named can be an attorney or a corporation, but cannot be the same person or company as the beneficiary under the deed of trust (the beneficiary is the lender).

The trustee must follow exactly the procedures set out in the deed of trust act. The basic steps are listed below. There are specific requirements in the law covering what must be included in each notice sent to the property owner.

STEP ONE
Notice of Default
The Notice of Default must be mailed by first class and certified mail to the borrower and must also be personally served on the borrower or posted at the property. The Notice of Default must tell the borrower what the default is (usually failure to make payments), how much is owed for the delinquent payments, trustee/attorney’s fees and other costs that would have to be paid to bring the loan current. It must also advise the borrower that if the default is not cured in 30 days, the property will be scheduled for sale at an auction by the trustee.

The Notice of Default must be mailed/served on the borrower at least 30 days before the Notice of Trustee’s Sale.

STEP TWO
Notice of Trustee’s Sale
If the default is not cured, the trustee schedules the property for a sale at a public auction. The Notice must be given at least 90 days before the sale. The notice must be mailed first class and certified and served on the borrower, the occupant of the property and on anyone else who holds a recorded interest in the property. The trustee must order a title report (Trustee’s Sale Guarantee) from a title insurance company to find out who holds a recorded interest so the trustee can give notice to all parties entitled to receive a notice. The notice must also be published twice in the newspaper (a month before and a week before the scheduled sale). The Notice advises the borrower and anyone else that the loan is in default and if the default is not cured the property will be sold to the highest bidder at the time and place set out in the Notice. In Skagit County, the sale must be held on a Friday at the court house.

STEP THREE
Notice of Foreclosure
This step occurs simultaneously with Step Two since the Notice of Foreclosure is sent to the borrower along with the Notice of Trustee’s Sale. This Notice gives the borrower the amount necessary to reinstate the loan and also an estimate of how much will be owed 11 days before the sale. The 11th day before the sale is the borrower’s last chance to reinstate the loan by making up back payments and any additional costs. After that date, the lender does not have to accept anything less than full payment of the entire loan balance, plus costs.

STEP FOUR
Trustee’s Sale
The trustee’s sale is a public auction held at the court house, with the sale to the highest bidder. Only cash, cashier’s check or a combination of cash and cashier’s check are accepted. Usually the sale is to the lender for the amount owed to the lender at the time of the sale.

STEP FIVE
Trustee’s Deed and Possession
Following the sale, the trustee issues a trustee’s deed to the highest bidder. The new owner is entitled to possession of the property 20 days after the sale. If the borrower does not move out by then, the new owner can evict them using the same procedure a landlord would use to evict a tenant.

Small Claims Court - One Association's Experience

By: Yvonne Thompson, Applewood Condominiums

A Board member in an association Bell-Anderson manages wrote this great article for our Newsletter. The Association has been successful once in Small Claims Court and will very likely be successful again. This article shows to other struggling Boards that there is a way to collect a prior debt without paying out to an attorney.

Here is what happened:

1. The Board reviewed the account and decided to pursue the delinquency in small claims court. The maximum amount that can be claimed in small claims court is $5,000.00.

2. I visited the county website to get information on the small claims process and downloaded the required packet. The forms are located on the right-hand side of the page in PDF format at: http://www.kingcounty.gov/courts/DistrictCourt/SmallClaims.aspx

3. I completed the required form (be sure to check with Bell-Anderson for the delinquent amount owed and name/address information on file.) After completing the form, I visited the courthouse on 4th in Kent to file. The filing fee is $35.00. Once filed, you are given the small claims form back with a court date and receipt. You will also receive a duplicate copy of the form that must be served upon the delinquent party. Both forms are forwarded to Bell-Anderson; however I also made copies for the court date.

4. Bell-Anderson serves the delinquent party via certified mail or you may hire someone to physically serve them. You must be sure the party is served a minimum of ten days prior to the court date. At this point, you may need to hire an investigator to locate the delinquent party, especially if they have already vacated the property (as in a lender foreclosure.)

5. In preparation for court, Bell-Anderson forwarded all required documentation via email attachment to me. I printed it and took it with me on the court date as evidence of our claim. Bell-Anderson also provided the original postmarked certified return receipt to take to court as proof of service.

6. The trial took place in Renton. The court offered an "out of court" mediator service to try to negotiate/satisfy the delinquency prior to going through with the trial. If the association plaintiff decides to move forward with the trial then you will appear before the judge when called and provide all documentation for the claim. In our case, the delinquent party (defendant) appeared and the judge granted a judgment against them in our favor. Note: Be sure an actual Board member, preferably the Board President, goes to court because the plaintiff must have authority to represent the association or the case will be thrown out.

7. The defendant has 30 days to pay the judgment plus interest to Bell-Anderson on the association’s behalf. If the defendant fails to pay the judgment, Bell-Anderson and our attorney will pursue a garnishment against the defendant.

8. If the defendant fails to pay within the allotted 30 days, a Board member must re-visit the courthouse to have the judgment transferred to a civil docket for a $20.00 filing fee and forward the receipt to Bell-Anderson who will advise the attorney so they can initiate garnishment proceedings.

The Carrot Approach to Collecting Assessments

Courtesy of Valerie Farris Oman, Attorney with Condominium Law Group, PLLC

Association attorneys can talk all day long about the “stick” approach to collecting delinquent assessments, because that’s what we do – we get involved after a delinquency already exists. However, the “carrot” approach to collecting assessments – essentially preventing or at least reducing delinquencies – is equally important and can save associations a lot of time and money spent trying to collect delinquent dues.

The first way an association can adopt the carrot approach is to educate and inform your owners about the reasons behind a particular budget decision. Are you raising the dues? Educate your owners as to why. Considering a special assessment? Hold an association meeting to discuss the reasons for the special assessment with your owners. Well-informed owners are far more likely to pay both regular and special assessments than owners who feel like they are being “taken for a ride.”

The next piece of the carrot approach is to make paying assessments as easy as possible for your owners. Some ideas include:
Have the option of automatic withdrawal for monthly dues;
Have a drop box on the property where owners can put their monthly payments;
Use payment coupons so owners have a concrete reminder they can see.

Next, consider somewhat unusual strategies that encourage payment and even pre-payment of dues. For example, at your annual budget meeting, discuss the idea of offering prepayment incentives, such that owners who prepay their dues for a year in advance can receive a “rebate” or “discount” of 5%. Or, offer prizes for on-time payment of dues or for pre-payment. You might purchase raffle prizes and give all owners who pay that month’s dues on time the opportunity to win a prize. A more valuable prize, such as a free round-trip plane ticket or a free annual gym membership might be a tantalizing incentive for owners who can pre-pay their dues a year in advance.

Finally, consider offering “amnesty” from penalties under certain circumstances to reduce a high delinquency rate. An association with 200 units with a 25% delinquency rate, for example, might offer that for a period of 60 days, all delinquent owners who pay their accounts in full may receive a one-time forgiveness of all accrued late fees and interest charges. We have heard of at least one association that successfully reduced their delinquency rate as a direct result of an “amnesty” program.

Collecting assessments on time is (Captain Obvious alert!) much easier than collecting delinquent assessments. Associations should employ all strategies available to them to educate owners and make paying assessments easy and convenient.

If you have any questions we can answer, please feel free to leave a comment on the Condo Law Group Blog or contact us directly.

WSCAI Law Day

On May 22nd, board members, property managers, and other representatives will get together in order to benefit WSCAI's Legislative Action Committee. This is a one day seminar offering many different classes that are beneficial to all types of communities. Classes range from rental restrictions to legal issues boot camp for new board members. We strongly encourage all of our board members to take advantage of this opportunity and attend this seminar!

The seminar will be held at the Lynnwood Convention Center and is from 8am to 3:30pm and includes a continental breakfast and lunch. The fee is $85 for all attendees regardless if you are a CAI member or not. Contact our office for a registration form!

Hope to see you there!

Successful Board Training Seminar

BOARD TRAINING SEMINAR~“Delinquent Accounts, Collections and Foreclosures” Held on Tuesday, April 13, 2010. Due to the overwhelming interest and support from the last Board Training Seminar, Bell-Anderson hosted the first seminar of 2010. The topic of discussion was Delinquent Accounts, Collections and Foreclosures. Expert Attorney’s Dean Pody & Patrick McDonald of Sundberg & Pody Law Office, PLLC presented this informational seminar. Many great questions were presented and answered and the participates felt the information was extremely beneficial. Everyone (Bell-Anderson staff included) gained a bit more knowledge in this complex area. If you would like an emailed copy of the seminar outline that was handed out at the meeting, please contact your Property Manager. A big thank you to all who attended!

Janice McCurley

The Role of the Attorney for the Community Association

Adapted from: Community Associations: A Guide to Successful Management
Co-Authored by: Vickie Gaskill, CPM®, MPM®

The community association may want to consider the services of an attorney, preferably one whose expertise is in real estate law and/or community associations. Oftentimes the Board of Directors will shy away from hiring a legal representative because of the costs involved, but there are far too many issues that can come up. Also, there are very few associations who have attorneys on their membership roles. Even when they do, the attourney members either don’t have the proficiency in the field or they aren’t able to give their services pro bono (for free). Remember, the members of the association are going to hold the board accountable if they fail to work with a legal specialist at a time when decisions stand a chance to jeopardize their own personal homes. Associations have been sued and their members' homes have been liened in order to pay off the rewards from large lawsuits.

Before the community looks for an attorney, they first must identify what it is they need an attorney for. What issues do they have that may require legal assistance? Following are a few of the type of services that may require the assistance of an attorney:

· Original Construction of the CC&R’s, Bylaws, Articles of Incorporation (Governing Documents)
· Interpretation and enforcement of the Governing Documents
· Assistance with the collection of past due assessments including placing liens and following up on foreclosure actions
· Represent the community association in litigation brought forth by members of the association or other third parties
· Provide guidance towards proper operations and helping the Board of Directors to understand their roles and responsibilities
· Assistance in the rewrite and/or amending of the governing documents
Occasionally attend meetings that have the potential of “spinning out of control” (oftentimes this is because of a very heated issue that may be on the agenda for the meeting)

Once the Board has gone through this exercise, there are a number of places that they can look for their legal specialist. Local and state bar associations list their members online and in the yellow pages, but be sure and look for those that specialize in community associations. http://www.lawyers.com/ is a great place to find attorneys in your community’s geographical area. Many attorneys in the community association field belong to trade associations representing the same (i.e. http://www.caionline.org/, http://www.irem.org/. etc.) Generally speaking, the attorneys in these trade association are very active in their respective organizations, oftentimes sharing invaluable informationwith their fellow members, at little or no cost. Boards need to do their homework when going through the selection process for their legal representative.