Taking Advantage of Committees in Associations

April 5, 2012

By Curtis G. Kimble.

One of the most powerful but overlooked tools at the disposal of an association board is that of committees.

HOA boards can face a number of issues and be pulled in many directions that would tax any full time, paid board.  But HOA boards are volunteer and are not full time.  To deal with this and to avoid board member burnout, many associations elect a large board – 5, 7 or even 9 members.  However, having a large board presents many difficulties.  It is often difficult to find enough willing and able people to fill a 3 or 5 person board, and larger boards are that much more difficult to fill.  Additionally, it is no small task to schedule and gather together a large board.

Committees are an invaluable tool in HOAs where volunteers sufficiently capable of dedicating the time, attention and skills required to serve on the board tend to be hard to come by.  It is often effective for an association to have a small board and then any number of committees in order to extend the board’s reach, ability and effectiveness.  This allows the benefits of a smaller board without necessarily sacrificing the distribution of workload that comes with a bigger board.  It also helps reduce board member burnout.

For purposes of this discussion, I’ll break committees into two types: committees of the board, and regular committees.

Committees of the Board.  A committee of the board is a small subset of the board and is composed solely of board members.  It has the full power of the board to make decisions and take actions to the extent specified by the board or the governing documents (CC&Rs, bylaws, etc.).  In this way, a committee of the board is like an officer of the association, except instead of just one person, it’s made up of two or more people, all of which must be board members.

While a committee of the board has the power and authority of the full board as to issues within its purview, it is also subject to the same requirements as the board regarding meetings, action without meeting, notice, waiver of notice, and quorum and voting requirements.

Regular Committees.  Regular committees do not have to be composed of board members.  They are established by the governing documents or by the board and they are composed of the members established by the board or the governing documents.  They can be temporary, ad hoc committees, or they can be more permanent, standing committees.

Regular committees do not have the power of the board to make decisions or take actions, i.e., they may not exercise any power or authority reserved to the board by the law or the governing documents.  At the same time, regular committees aren’t bound by the same requirements as the board regarding meetings, action without meeting, notice, waiver of notice, and quorum and voting requirements.  The board or the governing documents establish any rules of procedure for the committee, if desired.  Regular committees provide the advice, service, and assistance to the association and carry out the duties and responsibilities for the association specified in the governing documents or by the board.

With any committee, it is important that, through a board resolution, the board clearly specify the committee’s name, purpose, responsibilities, term, number of members, and designation of the members of the committee, unless those items are spelled out in the CC&Rs or bylaws (which is common for an architectural control committee).  When appropriate, usually with ad hoc committees, there should be a specific termination point by which the committee should have met its objectives.

Examples of committees include, but are not limited to, maintenance committee, nominating (or elections) committee, architectural control committee, budget/finance committee, communications committee, rules enforcement committee, newsletter committee, and social committee.

Committees have many purposes and benefits.  They can prepare members to serve on the board, they let prior board members remain active as association volunteers, they allow members to be active and involved in association issues and operations, and they allow the board to take advantage of the wide range of talents and expertise available via the members of the association.  They can help the board by gathering information and making recommendations.  Finally, committees broaden the board’s knowledge and awareness of the “pulse” of the community, that is, the homeowners’ opinions, attitudes and desires for the direction of the community.

If used effectively, committees can greatly enhance the operation and governance of any homeowners association.

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Posted by Curtis G. Kimble

Some Topical Updates on HOA Issues

March 16, 2012

By Curtis G. Kimble.

On our Facebook page, we share information, articles, links, and developments in condo and HOA issues, in addition to our more detailed posts on this blog.  For those of you who don’t subscribe to our Facebook page, I thought I’d pass on some recent links and news we’ve shared recently:

  • Condo Association Settles Lawsuit with Veteran over Service Dog  By Erin Alberty | The Salt Lake Tribune

“A Park City condo association will pay $20,000 to a disabled veteran, ending a legal conflict over whether the man should be forced to pay fees to keep a service dog that helps him cope with depression and anxiety.

The U.S. Justice Department sued the Fox Point at Redstone condo association and its management company in November, alleging that Thomas Burton, a combat veteran of the first Gulf War, was forced to move out of his rented condo because the association would not waive its pet fees and insurance requirements for Burton’s service dog . . .”   Read more here

  • Who Prepares Your Association’s Tax Return?   by Lisa Magill, Florida Condo and HOA Law Blog

“A Las Vegas HOA is currently fighting with the IRS over the question of whether $2 million held in the HOA’s savings account is subject to income tax at the rate of 30%.

Associations are generally organized as not-for-profit corporations (some older associations are not incorporated) and therefore must file tax returns like other not-for-profit corporations. Associations are not entitled to tax exempt status like charitable organizations. To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in the Code. To be tax exempt under IRC 501(c)(4), a homeowners’ association must operate for the benefit of the general public, i.e., it must provide a community benefit – not a benefit to the owners or residents . . .”  Read more here

  • Although written in Virginia, the same principles apply in Utah:  Is It Time for Your Community Association to Audit Its Governing Documents?  By Susan Bradford Tarley.

“Many communities were established 20-40 years ago with governing documents that worked well for the developer, and for the most part the community association. However, many of these governing documents are outdated. Virginia and federal laws pertaining to community associations have changed substantially. If your board of directors has not engaged in an audit of your communities governing documents in the past 5-7 years, it should.

When should documents be amended?  Although there are many reasons for amending documents, these 7 reasons are the most common: . . .”   Read more here

If you would like to see more information, links and updates on condo and HOA issues in addition to the posts on this blog, be sure to like us on Facebook and you’ll see our Facebook posts in your Facebook feed.  A direct link is on the right of this page, or our page can be found here Richards, Kimble & Winn on Facebook

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Posted by Curtis G. Kimble

FHA Status Impacts Condo Owners Ability to Sell Their Units

February 6, 2012

By Curtis G. Kimble

I thought I’d share this article from the Salt Lake Tribune so that any of you out there feeling frustration over the difficulties the FHA certification process is causing to buyers and sellers of condominium units, as well as the boards of condominium associations, can commiserate knowing you’re not alone:  Thousands of condo owners stuck in condos they can’t sell | The Salt Lake Tribune.

A few years ago, a condominium board may have never heard of certifying their condo project under the Federal Housing Administration (FHA).  The FHA insures private sector loans used for the purchase of a home, so that, under an FHA backed loan, the government helps cover losses to the lender when the borrower can’t pay his or her mortgage.  A few years ago, these loans could be obtained on a unit by unit basis.  Additionally, only about 3% of condominium mortgages were FHA backed five or six years ago.

Now, FHA backed loans have become one of the only options for many borrowers.  But, the whole condominium project must be certified with the FHA before any units within it can be bought with FHA loans.  And today, more than half of new condominium mortgages are FHA loans, making FHA certified status extremely valuable for a condominium project.  Even for buyers not interested in an FHA loan, FHA certification tells a buyer that the condominium association has met certain standards which help ensure the long-term financial viability of the association.

The problem is that the process to get FHA certified is rarely easy.

We routinely help condominium projects throughout Utah obtain FHA certification.  The problems we see the most are inadequate fidelity insurance coverage (not enough coverage or the policy doesn’t name the specific property management company as a covered entity), not enough reserves, too many delinquencies, and having a transfer fee in the governing documents.  If the association has a pending special assessment, is involved in major litigation or has a bank loan, these issues may also prevent the association from becoming certified.

The process for obtaining certification can take anywhere from a couple of months to a year or more.  To make matters worse, the certification expires every two years requiring the association to go through the certification process again and again.    However, obtaining FHA certification can have dramatic benefits to the salability and property value of the units within a project.

The possibility of obtaining FHA certification should at least be examined by every condominium board to determine if it’s feasible for their association.  If the association becomes FHA certified, it will make all the difference in the world to the buyers and sellers of units within the association, as well as to owners of units wishing to refinance with an FHA loan.

Contact us if you’d like help certifying your association with the FHA.

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Posted by Curtis G. Kimble

Understanding Board Executive Sessions

January 22, 2012

Clients and Friends:

I wanted to follow up on a very well done blog entry by my law partner, Curtis Kimble, in which he discussed HOA minutes (please refer to our prior posts).  This entry will go a bit “deeper” and explore the often used procedure of adjourning a Board meeting into “executive session.”  Two topics will be briefly discussed below:  (1) when is it appropriate to adjourn into executive session, and (2) should minutes be taken during executive session?

Our firm is working towards legislation that gives more guidance on executive session but that has yet to come to pass.  In the meantime, we have to rely upon time-tested common law principles and rules of parlimentary procedure to answer the following questions:

1.  When Should the Board Adjourn into Exective Session?  The Board must not use executive session as a means to simply “excuse” members who have shown up at a Board meeting.  Traditionally, there are only a limited number of issues that qualify you to adjourn into executive session:

(a)  Discussions of threatened or pending litigation;

(b)  Personnel matters, assuming you have employees, such as hiring and firing.  This includes discussions about your managment company, attorney, accountant, etc.

(c)  The formation of contracts with third parties (this is because you don’t want sensitive information about competiting bids to be out in the public just yet).

(d)  Member discipline – such as putting someone into collections, or levying a fine against a particular homeowner for a specified violation.

(e)  Other matters which you sense that by naming a homeowner or homeowners in front of non-Board members, that the information is too sensitive for general knowledge in the community (such as issues that are related to privacy of particular member(s)).

2.  Should Minutes be Taken During Executive Session?  I have a mixed response as to this question.

The minutes kept during your regular Board meeting should indicate that the Board adjourned into executive session.  Typically, executive session works best if held at the end of the meeting so any homeowners in attendance can be excused.  However, a debate rages over whether you should take separate minutes in executive session or not.

Prior to addressing this issue, however, after the executive session is over, the regular Board minutes should reflect which decisions were made in executive session (without any detail of the discussion that occurred) and which action will be taken.  You should not, in your regular minutes or in any records kept during executive session, state any specific advice that your attorney gave you simply because you may lose your attorney-client privilege if you do so.  Regardless of which minutes were kept, you simply note what decisions were made.  Make sure the vote of the Board is clearly reflected in the regular Board minutes.

As for taking minutes or other notes during executive session, I do advise that you keep a record of your actions and disucssions made during executive session.  However, remember (see Curtis’ prior blog entry), minutes should NOT be a verbatim re-creation of what was said and discussed.  You should simply address the issue(s) at hand, indicate that discussion was held, and that a vote was taken.  We maintain, as do many other state laws and general rules of procedure, that executive session minutes are privielged from access by the general membership.  Though you have nothing to hide, please remember that a court of law could still require that you reveal anything kept in written or electronic format from an executive session.  This concern should not chill your discussion, but should keep your focussed on the issue for which you have adjourned into executive session and help curtail and tendency to make any inflamantory, defamtory or otherwise insensitive comments that sometimes come out “behind closed doors.”

As always, please contact us for a follow up if you have any questions about executive session meetings and minutes.  This entry is intended to give some general guidance only and each factual situation may result in more detailed advice.

Next time, I’d like to have a discussion about requring Board meetings to be open to the membership by announcing them in advance and encouraging attendance.  Presently, in Utah, there is no express requirement for ‘open Board meetings’ but I have found, probably like many of you, that nothing creates more suspicion in a community than when members have no idea how their Board is acting, when they are meeting and what issues are being discussed.  MORE TO COME!!!

Until then, best regards, John Richards.   john@rkw-law.com

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Posted by John Richards, Esq

Home Ownership and Second Hand Smoke: the American Dream or a Health Nightmare?

January 20, 2012

By Curtis G. Kimble.

How far can a government or an HOA go to dictate what can and can’t be done inside of a homeowners own home? Is an owner of an attached dwelling or a condominium unit able to do whatever they want within the confines of their home as long as it’s not illegal? Is a homeowner entitled to create and distribute from their home a “Class A” carcinogenic substance, which causes cancer and respiratory diseases and disorders, among other problems and which is able to infiltrate neighboring homes?

This is a question being increasingly asked in other states where some state courts have held that smoke transferring between units is a nuisance. But others have determined that the cigarette smoke is like an odor intrusion, a condition of living in a community environment that residents simply have to put up with – a startlingly misguided mentality considering the fact that the EPA has determined that there is no acceptable level of exposure to Class A carcinogens, and considering that second hand smoke causes serious problems for children, including ear problems, middle ear disease, acute respiratory infections, wheeze illness, slowed lung growth, and more severe asthma, and that 430 American newborns die each year from Sudden Infant Death Syndrome (SIDS) caused by second hand smoke.

Incentives offered by the Federal Government have led cities from Austin to Boston to prohibit smoking in public housing. In 2006, a judge ruled that secondhand smoke could be a breach of “warranty of habitability” under New York law.  At least six California cities and counties have banned smoking in all condo units.

Fortunately for Utah residents who don’t appreciate dangerous and toxic chemicals being forced down their breathing passages, Utah law clearly states that smoke transferring between dwelling units is a nuisance and may be the subject of an action brought by “any person whose property is injuriously affected, or whose personal enjoyment is lessened by the nuisance” and “upon judgment, the nuisance may be enjoined or abated, and damages may be recovered.”

A nuisance under Utah law includes tobacco smoke that drifts into any residential unit a person rents, leases, or owns, from another residential or commercial unit and the smoke drifts in more than once in each of two or more consecutive seven-day periods, and is injurious to health, indecent, offensive to the senses, or an obstruction to the free use of property, so as to interfere with the comfortable enjoyment of life or property.

The Utah Condominium Ownership Act states that restrictions in governing documents “regarding the use of the units may include other prohibitions on, or allowance of, smoking tobacco products.”

The Utah Community Association Act, which applies to non-condo HOAs, states that a rule of an association may prohibit an activity within a dwelling if there are attached dwellings, and the activity creates the potential for smoke to enter another lot owner’s dwelling, the common areas, or limited common areas.

Utah law is at the forefront of the national trend to protect the right of every individual to live in their own homes without being subjected to dangerous and toxic chemicals contained in second hand smoke. Contact us to take advantage of these laws and help your association adopt a policy regarding smoking.

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Posted by Curtis G. Kimble

Can a Board Use “Self Help” to Enforce the Covenants?

December 20, 2011

By Curtis G. Kimble.

How to obtain compliance when enforcing a violation of the governing documents can be one of the most vexing problems in a homeowners association.  One of the chief functions of a homeowners association is enforcement of the covenants and rules governing the community.  Even though the individual property owners ordinarily have the power to enforce the covenants, collective enforcement by the community is one of the main benefits of owning property in a common interest community.  However, every board must act reasonably in exercising enforcement powers and must pay careful attention to the law and the association governing documents.  The duty to enforce should not be confused with a requirement for maximum enforcement in all cases.

An association has the duty to use ordinary care and prudence in managing the property and financial affairs of the community, as well as the duty to act reasonably in the exercise of its discretionary powers, including rulemaking, enforcement, and design-control powers.  One aspect of these duties is the duty to avoid creating unreasonable risks of harm to property values by failure to provide for the long term protection and preservation of the property.  On the other hand, overzealous enforcement can create serious problems, including protracted litigation, divisiveness, and disaffection with the community, among other things.

Accordingly, a board must make an informed decision and exercise careful judgment in decisions regarding enforcement.  This fact was completely lost on a board in a Florida homeowners association in a case called Parton v. Palomino Lakes Property Owners Association, Inc.

The governing documents of the Florida association prohibited mobile homes.  A lot owner decided to install a modular home and attempted to have it delivered to the lot.  Three board members literally blocked the delivery of the home by blockading the entrance to the subdivision. This happened on three different occasions.

The lot owner sued the association and the board members individually and won.  The owner was awarded punitive damages of $40,000 against one board member, $50,000 against another and $60,000 against the other.  The owner was also awarded compensatory damages and their attorney fees.

Sometimes “self-help” by the board (correcting a violation directly) is allowed by an association’s governing documents.  For instance, it’s possible that a board may be able to have a professional come in and remove the three feet tall weeds on a lot and charge the cost back to the lot owner.

But how far is a board allowed to go?  Can a board prevent a non-compliant or delinquent homeowner from access to and from the owner’s lot or unit?  Generally, the answer is absolutely not and the failure of this Florida board to make an informed decision and exercise careful judgment before they acted had drastic consequences.  Such extreme personal liability could have been easily avoided if the board had consulted with a qualified attorney beforehand.

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Posted by Curtis G. Kimble

Fire Hazards: Can Policies and Covenants Help Prevent Them?

December 9, 2011

By Curtis G. Kimble.

Last month, I happened to catch several stories about fires that broke out in attached homes or condominiums.  Fires are especially worrisome in attached type housing where owners share walls and roofs because the potential for damage, injury or death becomes so much greater.

In one condo fire in Arizona, firefighters said hoarding fueled the fire after the homeowner lit a cigarette and then tossed his lighter to the side as he went into the kitchen.  Hoarding and fires are a dangerous combination, a combination that is apparently occurring more and more.  In a Murray fire in Utah a couple of weeks ago, firefighters blame a dryer for starting the fire, saying the fire was a reminder to make sure lint filters and dryer vents are kept clean.  In a Thanksgiving day fire in Midvale, two condos were damaged when a fire broke out, apparently caused by faulty wiring in an electrical socket.

The dryer fire story, coupled with a much more tragic story about a dryer fire in Salt Lake about a year ago where a 5 year old died, impresses upon us the importance of maintaining and periodically cleaning out dryer vents.  For boards whose associations perform that maintenance item, don’t forget to make sure this important task is carried out.

Are smoking, hoarding, dryer vents, and other fire hazards addressed in your association’s governing documents?  If not, should they be?  It’s always difficult to enforce restrictions on behavior within units and there is no magic solution to that, but the danger that fire hazards pose underscores the reality that when a person lives in close proximity, shared roof, shared wall housing, their actions and habits can have far reaching and dangerous consequences to more people and property than just them and their unit.  This is why covenants and rules are so important in these communities.

Contact us if you need help enforcing, reviewing or changing your association’s governing documents.

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Posted by Curtis G. Kimble

Who Can Act for the Association?

November 29, 2011

By Curtis G. Kimble.

One issue we see is the question of who can act for and on behalf of the association.  Who can bind the association to a contract?  Who can spend the association’s money?

These questions may come up frequently or infrequently in an association, depending on how well the board and members understand who has the power to direct the business and affairs, and exercise the powers, of the association.

The Board.

Homeowners associations are representative governments and are governed by a board elected by the association members (unless otherwise stated in the governing documents).  The board is entitled to exercise all powers of the association except those specifically reserved to the members.

As the Utah Revised Nonprofit Corporation Act puts it, “all corporate powers shall be exercised by or under the authority of, and the business and affairs of the nonprofit corporation managed under the direction of, the board of directors,” except when governing documents or a statute expressly require approval of members.

Does that mean unanimous consent of the board is required to act? No, if a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the board.

Does that mean a homeowner can’t take action on their own to enforce the governing documents?  No.  A homeowner won’t have all of the remedies that the association will have, such as fining, but generally, the covenants are not just between the homeowners and the association, but between the homeowners themselves. So, as the Utah Condominium Ownership Act states, failure to comply with the governing documents “shall be ground for an action to recover sums due for damages or injunctive relief or both, maintainable by the manager or management committee on behalf of the unit owners, or in a proper case, by an aggrieved unit owner.”

The President and Other Officers.

But what about the association president, doesn’t he or she have the authority to bind or act for the association?

Not necessarily.  Officers, such as the president, must understand that they do not acquire any special power when they are elected or appointed to their position.  Each officer, including the president, only has the very specific authority and power (if any) given to that office by the governing documents or by the board.  In other words, each and every decision, no matter how big or small, must be made by a majority of the board unless decision making authority as to a specific issue has been given to an officer.

Consequently, if a board desires that officers or a manager have certain authority, it is important to specifically grant and define that authority.  If the board wants to enable the president to contract for minor repairs without advance authorization, it should adopt a resolution to that effect.  For instance, many associations allow their managers to contract for repairs or buy supplies so long as they spend less than $500 or $1,000 at a time, or allow the president to work with the landscaper and authorize necessary landscaping repairs or work (replace a shrub here, repair sprinklers there, etc.).

In acting for the association, what standard are directors and officers held to?

The Nonprofit Corporation Act, as well as common law principles, requires a director or officer to discharge the director or officer’s duties:

  1. in good faith;
  2. with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and
  3. in a manner the director or officer reasonably believes to be in the best interests of the nonprofit corporation.

The third standard requires that a director or officer put the interests of the association before their own interests, which is sometimes a difficult requirement because of simple human nature.  Consequently, every director and officer must be diligent in remembering that their own needs, motivations and desires (or lack of motivation or desire), cannot play a part in their decisions as directors or officers.

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Posted by Curtis G. Kimble

It’s Annual Meeting Season

November 10, 2011

By Curtis G. Kimble

It’s that time of the year for many associations – annual meeting season – which means every board will need to remember the new Utah laws and how to comply with them as they prepare for their association’s annual meeting.

Here are some of the key points to remember:

1.  The association’s reserve analysis or reserve study has to be presented to the members at the annual meeting each year.  The members at the meeting vote on whether to fund a reserve account and, if so, how to fund it and in what amount.  The results of that vote have to be reflected in the minutes of the meeting.

Utah law requires that every five years, a homeowner-elected board must perform, or hire someone to perform, a reserve analysis by (1) determining which improvements have a useful life of 3 years or more, then (2) determining what the cost is for maintaining those improvements over the next several years, and (3) then determining what they think the appropriate amount of the reserve fund should be.

The reserve analysis has to be reviewed and, if needed, updated every two years.  The money in the reserve fund has to be kept separate from other funds and may not be used for daily maintenance expenses, unless approved by the owners, or for any other purpose other than the purpose for which the reserve fund was established.  For associations who haven’t conducted a reserve analysis since March 1, 2008 (or ever),  the law requires them to do one by July 1, 2012.

2.  Update your association’s registration info with Utah’s Homeowners Association Registry within 90 days of any change.  Be sure to update the information with the Registry if new directors or officers are elected, as appropriate.

The consequence for not registering an HOA and keeping the registration information current is that the HOA will not be able to enforce its liens against delinquent homeowners.  It’s imperative that every HOA register and keep their info current with the state or they will lose their lien rights when collecting past-due assessments, which could have drastic effects on the HOA’s operations and finances.

3.  For non-condominium homeowners associations (single family homes, PUDs, townhomes, etc.), every homeowner-elected board is required to adopt a budget annually and to then present that budget to the homeowners at a meeting.  Since the budget will have already been adopted by the board, there is no requirement that the homeowners vote to approve the budget at the meeting.   The homeowners can, however, call a special meeting within 45 days of the first meeting and vote to disapprove the budget.  The budget will be disapproved if 51% of the total votes in the association vote to disapprove it “at a special meeting specifically called for that purpose by the lot owners.”

While that budget law doesn’t apply to condominium associations, the bylaws may contain certain requirements regarding adopting a budget.  Do you know what your bylaws say regarding budgets?

4.  Don’t forget requirements in the bylaws or other governing documents.  For instance, do you know if your bylaws require the annual meeting to be on a certain date and at a certain time?  Or if a certain notice timeframe is required?  The overarching requirement applicable to all associations is that notice of the meeting must be given and the notice must be given in a fair and reasonable manner (mailing out notices the night before the meeting won’t cut it).

5.  Don’t forget the requirements of the Utah Nonprofit Corporation Act.  For incorporated associations, the notice of an annual meeting must include a description of any matter that must be approved by the members.  Also, unless otherwise provided by the bylaws, if a meeting of members is adjourned to a different date, notice does not have to be given of the new date, if the new date is announced at the meeting before adjournment.

What about when a home is in the middle of being sold, do you know who is entitled to notice and who is entitled to vote (the buyer or seller)?  The bylaws may fix a date as the record date for determining the members entitled to vote at, and to notice of, a members’ meeting.  If the bylaws do not provide for fixing a record date, the board of directors may fix a future date as the record date.  If a record date is not fixed by either of those methods, members entitled to notice of the meeting are the members at the close of business on the business day preceding the day on which notice is given and members entitled to vote at the meeting are the members on the date of the meeting and who are otherwise eligible to vote.

Contact us if you have questions about interpreting or complying with your governing documents or the law this annual meeting season.

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Posted by Curtis G. Kimble

A Utah HOA Faces $96,000 in Fines in a Pet Policy/Companion Animal Clash

October 28, 2011

By Curtis G. Kimble

A Utah condominium HOA, its property management company and an individual property manager are facing $96,000 in penalties, plus other amounts, as a result of multiple charges of discrimination brought by the Dept. of Housing and Urban Development (HUD).  HUD is alleging that the HOA and property manager violated the federal Fair Housing Act by refusing to accommodate a resident who required an emotional support dog because of a disability and that they assessed illegal fees and fines against the resident for the presence of the assistance animal.

HUD is charging the association for violating the Act when the association required the resident to pay a “pet registration fee,” provide proof of liability coverage, sign a medical release for the board to obtain his confidential medical records, and when the association levied fines for failure to pay the pet registration fee.  The resident provided medical documentation of his need for the assistance animal and obtained liability insurance, but refused to give the HOA board access to his private medical information or to pay the $150 pet registration fee. Even after it acknowledged that the resident’s dog was a medically necessary assistance animal, the association continued to demand that he pay the fee.

This association and property manager did use an attorney during the events above, which just goes to show how important it is that an association use an attorney that can truly advise the board and not just act as a blunt instrument of enforcement.  In this case, there was little wisdom in pursuing a $150 fee at the risk of incurring $100,000 in fines, especially when the $150 was for a “pet registration fee” and, as we’ve explained in the past on this blog, assistance animals are not considered “pets.”

The Fair Housing Act requires HOAs to make reasonable accommodations to no-pet rules for residents with disabilities who need companion or assistance animals.  Don’t risk hefty fines and penalties, contact us for assistance whenever your association faces this tricky and complex issue.

UPDATE: The Justice Department announced a $20,000 consent decree and settled this case.  See the announcement here.

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Posted by Curtis G. Kimble

Minutes Can Make The Difference – Taking Proper HOA Meeting Minutes

October 22, 2011

To know where you’re going, you have to know where you’ve been.  This famous saying is all too applicable to HOAs where institutional memory can be as short as the terms of board members and boards can unwittingly address the same issues over and over again.  This is one reason why minutes are so valuable.  Unfortunately, a common problem we lawyers see is improperly prepared minutes, or worse, no minutes at all.

Perhaps the most important thing to understand about keeping proper minutes is that minutes are the record of the official actions taken by the board or the members and that an official action requires a vote.

What should minutes look like?

Anyone reading the minutes should be able to easily understand, at a minimum, what actions were taken and how they were approved. There is no hard and fast rule regarding the level of detail to be included in minutes, but minutes should reflect what was done, not what was said.  Minutes should not record every detail or statement said at the meeting and they should not reflect conversations. However, there should be enough information to make the minutes useful when they are used for reference or offered as evidence that an action was properly taken or that directors fulfilled their fiduciary duties.  Boards and secretaries tasked with recording or approving the minutes must understand the purpose and eventual use of minutes, and then use their best judgment about the degree of specificity provided in the minutes.

Boards should also be mindful of how they handle confidential or sensitive information. For example, if the board holds an executive session to discuss confidential or sensitive matters, the minutes of the meeting should indicate that the board met in executive session and the topic of the discussion, but the specifics would likely be confidential and appear only in a set of confidential-to-the-board minutes or other notes.  A separate recordkeeping system should be established for such confidential information to easily distinguish it from records that a member would otherwise be entitled to view.

What should minutes not look like?

Minutes should not record discussions or contain owner comments and should never be a transcript of every statement made by directors and others. Doing so creates potential defamation claims, becomes evidence for other claims against the board and the association, and can dissuade potential purchasers and lenders who may believe that a negative issue is much more serious than it really is.  Minutes should reflect decisions and reasons for those decisions, not discussions or specific conversations.

 At a minimum, board meeting minutes should include:

  1. Name of the association (always use the exact legal name).
  2. Date, time, location and type of meeting (regular, special, emergency, executive session).
  3. Names of directors in attendance and directors not in attendance, including the office they hold, if any (president, secretary, etc.), and names of guests in attendance who were invited to speak to the Board (contractors, attorney, accountant, etc.).  Members in attendance should not be listed.
  4. Whether a quorum was established.
  5. Any board actions (e.g., approvals, delegations of authority, directives).  It’s not necessary to show the names of those voting in favor, abstaining and in opposition to a motion, but it’s sometimes not a bad idea, especially to show those dissenting, in order to limit personal liability for the consequences of an action they disagree with.  Also include any actions (decisions, votes) taken between meetings and include details documenting that proper procedure was followed.
  6. General description of matters discussed in executive session.
  7. Once the minutes are approved by the board, they should include the signature of the secretary signifying that the minutes constitute the official record and minutes of the meeting

Once approved by the board, the minutes should be signed by the secretary or other person responsible for authenticating records of the association (See Utah Code 16-6a-818(3)). By signing the minutes, the secretary is signifying that the minutes constitute the official record and minutes of the meeting and the votes by the board occurred as recorded in the minutes.  Minutes then become proof that a vote occurred as recorded.

The official minutes should be included in the minutes book and should also be scanned and kept as electronic files, as a form of backup, among other reasons.

Additional Suggestions:

  • Include alternatives considered for important decisions to show diligence and reasonable care.
  • Consider attaching reports given to the board (so long as they may not be misconstrued to be prejudicial to the organization or to the board).
  • Record recusals from discussions and abstentions from voting;
  • Prepare a list of action items separate from the minutes, what people commit to do.
  • Include whether notice was given and/or attach the notice of the meeting or waivers of notice to the minutes.  That way all the documents relevant to noticing the meeting are also in the minute book.
  • Use a format that clearly indicates when a board action has been taken (e.g., “Resolved,” “Action”).

It’s crucial that minutes are prepared so as to document actions of the board now but without creating problems in the future.  Additionally, with the turnover experienced in association boards, it is critical to have good, complete but concise minutes so that future boards do not find themselves “reinventing the wheel” on issues that have already been addressed.

You can find sample minutes here and a sample list of action items here.

Curtis G. Kimble

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Posted by Curtis G. Kimble

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