Register Now for Our Seminar on New HOA Laws

June 8, 2011

What is it?  Major changes were made this year to the laws that affect all community associations (HOAs).  We have had numerous requests to present this information to our clients and to property managers in a concise yet detailed manner. We will be providing an informative and educational 2 hour seminar that you must not miss in order to make sure that your actions as a board member comply with Utah law.

When?  Saturday, June 18, 2011, starting promptly at 9:00 am until 11:00 am.

Where?  Our Salt Lake office, 2040 E. Murray Holladay Rd, Suite 106, Holladay, UT 84117 (about 4800 south, just behind the Holladay Bank and Trust). Phone: 801-274-6800.

Cost?  No charge as part of our educational commitment to our clientele.

RSVP Required?  Yes.  Seating is limited to the first 50 people that RSVP.  We kindly ask that no more than 2 people per association attend in order to ensure seating for everyone.  Please RSVP by June 16, 2011, by calling 801-274-6800 or by submitting the following form:

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Posted by Curtis G. Kimble

How the New Laws Affect You: Non-Condos

June 2, 2011

For non-condo HOAs (all HOAs except condominiums), here’s a summary of how the new Utah HOA laws that went into effect on May 10, 2011, affect you most, as well as some recommended “action items.”  Contact us for help with any action item.  Also, see the other posts on this blog for more detail on the new laws.  This blog does not contain a comprehensive list of the new laws, just those that affect your daily operations the most.

1.  Register or No Lien.  Register as an HOA (separate and apart from registering as a nonprofit corporation) with the State of Utah and keep it updated when directors change, or else you can’t enforce any liens against delinquent owners.  *Action item:  subscribe to this blog (on the right side of this page under “Email Subscription”) and we’ll post the info on how to register as soon as we know about it.

2.  Insurance.  All HOAs in Utah must have property and liability insurance coverage for their common areas (this was not required before in non-condominium HOAs).

Unless the CC&Rs require each homeowner to insure the homeowner’s dwelling, all HOAs with attached housing (such as townhomes) are required to have 100% replacement cost coverage for all permanent improvements, including fixtures and betterments to an attached dwelling made by a homeowner.  The association must set aside an amount equal to the amount of the deductible (or $10,000, whichever is less).  The master policy must be primary, even for unit related losses.   However, the law gives the HOA a method to allocate or transfer risk to the homeowner or homeowner’s policy.  For claims against the association’s master policy which are associated with a particular home, the association can require that homeowner to pay the deductible if a notice had already been sent to all homeowners stating they will be responsible for the deductible on the association’s master policy.  *Action item: send notice to all owners regarding payment of the deductible, and make sure your deductible is somewhere in the $2,500 to $10,000 range to reduce minor or frivolous claims against the master policy by homeowners that drive up the premiums.

3.  Rules.  As of May 10th, rules can no longer be changed or adopted without giving notice to all homeowners 15 days in advance of the board meeting where the rule change will be considered and allowing homeowners an opportunity to be heard at that meeting.  The new or changed rule must then be sent out to all homeowners within 15 days of being adopted.  The homeowners can call a special meeting and disapprove a new rule within 60 days from the date it was adopted, if 51% of the total votes in the association vote to disapprove at the special meeting.

4.  Payoff Info.  An association is now prohibited from charging a fee for providing payoff information needed for closing on a unit, unless the fee is authorized by the CC&Rs, bylaws or rules, and, no matter what, the fee can’t exceed $50.  Payoff information must be provided by the HOA within five business days from when a closing agent makes a proper request for it (has to be in writing, signed and dated by the owner, etc.), or the lien is not enforceable at closing.

When a unit owner is closing on a unit and the owner needs payoff information because he or she has not been paying their share of the common expenses, providing that payoff information is an administrative burden on the HOA that is appropriately paid for by the offending/delinquent owner, not by the other paying owners.   *Action item:  adopt a rule authorizing a fee for providing payoff information.

5.  Reserves.  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 reserve analysis has to be presented to the homeowners at the annual meeting each year where the homeowners 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.

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.  *Action Item: for those who haven’t conducted a reserve analysis since March 1, 2008,  the law requires you to do one by July 1, 2012.

6.  Budgets.  A new law requires a homeowner-elected board 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.”

7.  Electronic Notice.  A new law states that you can provide notice to homeowners solely by electronic means (e.g., email, website) if authorized by your CC&Rs, bylaws, or rules (unless a homeowner opts out in writing).  *Action Item: adopt a rule authorizing electronic notice instead of notice by mail, at least for certain things.

Curtis G. Kimble

2 Comments | Governance, HOA Finances, Insurance, New HOA Laws, New Non-Condo HOA Laws, Non-Condo HOA, Reserves | Tagged: , , , , , , | Permalink
Posted by Curtis G. Kimble

How the New Laws Affect You: Condos

May 31, 2011

So, here’s a summary of how the new Utah HOA laws that went into effect on May 10, 2011, affect you most, as well as some recommended “action items.”  Contact us for help with any action item.  Also, see the other posts on this blog for more detail on the new laws.  This blog does not contain a comprehensive list of the new laws, just those that affect your daily operations the most.

If you’re a condo:

1.  Register or No Lien.  Register as an HOA (separate and apart from registering as a nonprofit corporation) with the State of Utah and keep it updated when directors change, or else you can’t enforce any liens against delinquent owners.  *Action item:  subscribe to this blog (on the right side of this page under “Email Subscription”) and we’ll post the info on how to register as soon as we know about it.

2.  Insurance.  A condominium association’s insurance policy that is renewed or issued after July 1, 2011, is required to have liability coverage and 100% replacement cost coverage for all permanent improvements, including fixtures and betterments to a unit made by a unit owner.  The association must set aside an amount equal to the amount of the deductible (or $10,000, whichever is less).  The master policy must be primary, even for unit related losses.  However, the law gives the HOA a method to allocate or transfer some risk and responsibility to the unit owner (or unit owner’s policy) for unit related issues.  For claims against the association’s master policy which are associated with a particular unit, the association can require the owner of that unit to pay the deductible if a notice had already been sent to all unit owners stating they will be responsible for the deductible on the association’s master policy.  *Action item: send notice to all owners regarding payment of the deductible, and make sure your deductible is somewhere in the $2,500 to $10,000 range to reduce minor or frivolous claims against the master policy by unit owners that drive up the premiums.

3.  Payoff Info.  An association is now prohibited from charging a fee for providing payoff information needed for closing on a unit, unless the fee is authorized by the CC&Rs, bylaws or rules, and, no matter what, the fee can’t exceed $50.  Payoff information must be provided by the HOA within five business days from when a closing agent makes a proper request for it (has to be in writing, signed and dated by the owner, etc.), or the lien is not enforceable at closing.

When a unit owner is closing on a unit and the owner needs payoff information because he or she has not been paying their share of the common expenses, providing that payoff information is an administrative burden on the HOA that is appropriately paid for by the offending/delinquent owner, not by the other paying owners.   *Action item:  adopt a rule authorizing a fee for providing payoff information.

4.  Reserves.  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 reserve analysis has to be presented to the homeowners at the annual meeting each year where the homeowners at the meeting vote to determine 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.

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.  *Action Item: for those who haven’t conducted a reserve analysis since March 1, 2008,  the law requires you to do one by July 1, 2012.

5.  Electronic Notice.  A new law states that you can provide notice to homeowners solely by electronic means (e.g., email, website) if authorized by your CC&Rs, bylaws, or rules (unless a homeowner opts out in writing).  *Action Item: adopt a rule authorizing electronic notice instead of notice by mail, at least for certain things.

In the next day or two, I’ll post a summary of how the new laws affect non-condo HOAs (all other HOAs).

Curtis G. Kimble

2 Comments | Condo, Governance, HOA Finances, Insurance, New Condo Laws, New HOA Laws, Reserves | Tagged: , , , | Permalink
Posted by Curtis G. Kimble

New Law on Budgets

May 19, 2011

Because of a new Utah law that went into effect on May 10, each homeowner-elected board in a non-condo HOA 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 need or requirement for the board to hear input or objections or to conduct a vote of the homeowners on the issue 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.”

If a budget is disapproved, the budget that the board last adopted that was not disapproved by members continues as the budget until and unless the board presents another budget to members and that budget is not disapproved.

Note that the vote to disapprove the budget can only take place “at a meeting specifically called for that purpose by the lot owners,” which would not normally be the meeting where the budget is first presented by the board because that first meeting would not normally be called by the lot owners or be called for the specific purpose of having a vote to disapprove the budget.  The reason for requiring a separate subsequent meeting is unclear, but it may be to ensure that adequate notice to all lot owners is provided regarding the purpose of the vote, and also possibly because there should be a degree of difficulty in the process of overturning the decision of the board on this issue, since the board is in the best position to determine the budgetary requirements of the association, rather than the homeowners.

Curtis Kimble

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Posted by Curtis G. Kimble

Assistance and Service Animal Update

May 6, 2011

To my displeasure, I have found that more and more frequently, a common “counterclaim” to an Association’s enforcement actions (regardless of what the Association is enforcing) is an allegation that the Board has violated the Fair Housing Act (“FHA”).  This blog entry deals with Assistance and Service Animals and recent meetings I have had personally with the Utah Anti-Discrimination and Labor Division on the topic (the “UALD”).

 Please remember, that each case is fact specific and this blog entry is for general information only and should only serve as to alert you as to issues to consider.

 People with disabilities are afforded certain federal and state housing privileges to help them cope and deal with their disabilities.  I think we all can agree that this is a fair, moral and good legal concept.  One of the accommodations that MUST be made is a reasonable accommodation for a service or companion animals, but only if strict conditions and requirements are met.  Owners do not have a unfettered right to have an assistance or service animal.

 First and foremost, “service animals” will not be the topic of the Article.  I do not think anyone would disagree that a visually or hearing impaired individual should not have access to a service animal to help them overcome and live better with their challenges.

 However, the issue becomes much more complicated when a request from an owner is made for an “assistance animal” based on a medical condition that may not be as apparent.  This issues often arises in ‘no pet’ communities.

 If you take anything from this Article it should be that a properly permitted assistance animal is NOT deemed a pet in the eyes of the law.  A rough analogy would be such an animal is just as crucial as a wheelchair.  Thus, your pet policies do not apply.

 I am sure you are wondering what entitles someone to have an “assistance animal” in the first place.  First, they must have a disability which limits a major life function.  This can, and in some cases should, be question.  But be careful as to how you go about finding this out.  As described below, it is a health care provider’s job to make this determination – not the Board’s.  Second, a licensed health care provider must provide a “link” between the disability and the animal that is being requested as an assistance animal.

 Most Associations require their members to have their doctor fill out a form that evidences both a disability and certifies that the animal will be of a therapeutic and helpful nature.  To be very concise, if the health care provider certifies this to be true, then the Association really does not have grounds to question the certification.

 If the Association is presented with the doctor’s note; a prescription form; etc; you do have the right to follow up with the issuing health care provider to make sure it came from them and is legitimate but that is about as far as you are allowed to inquire.

 You have no right to inquire about the nature of the disability and your forms and/or questions should not go down that path.

 You are likely asking yourself “what does John mean by a health care provider?”  A physician’s assistant and nurse, etc., will likely qualify as such.  I have tried to argue in the past that the doctor or health care provider must have some training with respect to whatever type of a disability is being alleged.

 For example, I have personally not agreed with an “ear, nose and throat” doctor giving a prescription for an assistance animal for an emotional condition.  However, I have been told (and we will update this blog as more information develops) that it is the doctor or health care provider who puts their name on the line if they certify something that they cannot diagnose properly.

 Therefore, you are allowed verify that the “note” came from a certain person and that this person is a trained health care professional.  But, in most instances, your scrutiny will stop there.  (There will always be exceptions and issues on this topic – but for now – please use this information as your default mindset.  Another question arises – can a chiropractor prescribe an assistance animal?  More to come).

If you make a request upon your owners for a health care provider’s certification, and you do not get it back within a reasonable time, you do not need to make the accommodation until such note is received.

 If someone wants or has “2” cats, the health care provider must prove a need for 2 cats.

 Further, just because an owner had approval for a prior pet, does not mean that that approval extends to the “next pet.”  For example, if a pet dies or is lost, the owner must make a request again.  Remember, this analysis is all about the current pet being the appropriate pet for the particular challenge of the owner.

 You can ask for a medical opinion about the breed or type of animal and whether or not it truly provides a medical benefit over other breeds or types of animals.  However, be careful.  If someone has a “scary dog” that simply does not mean it cannot be an assistance animal. The key consideration is not the breed, but whether it (1) stays under control; (2) stays on a leash; (3) does not physically attack or threaten other owners; (4) does not unreasonably bark or make noise or (5) cause damage to the common areas, etc., that you cannot reasonably remedy.

 Unless a City Ordinance disallows a certain type of breed of dog or other animal you probably cannot challenge the breed unless it shows violent tendencies or is inherently dangerous. In such cases, I believe the Anti-Discrimination Division will defer to the City and PERHAPS allow you to ban that particular type of animal.

 Questions arise about exotic pets – snakes, etc.  This will be discussed in a follow up entry.

Remember, the accommodation that you must give is not unlimited – the owner must be given a reasonable accommodation.  Not all requests will be reasonable.

If you start on a path of enforcing a pet policy, make sure that it is uniform and consistent amongst all owners with the above considerations for assistance animals.  You should accept both verbal and written complaints from other owners who complain about pets in the community and then do your due diligence to make sure the pet is properly in the community pursuant to the law discussed above and your policies.  Please keep a file on each approved assistance animal.

This topic is a complicated one and this blog entry cannot do it full justice.  Please contact us before engaging in any pet enforcement program or if you simply have assistance and service animal related questions.  As stated above, more to come on pets AND Fair Housing Rules related to swimming pools; weight rooms; etc.

Best regards, John Richards

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Posted by John Richards, Esq

Important Follow Up – Electronic Notice Law

May 4, 2011

As a quick follow up to my post below, I want to point out that another law goes into effect on May 10 allowing both condo and non-condo HOAs to stop mailing out notices to homeowners and to instead provide notice by electronic means, such as by email or by posting on the association’s website (or even by text message), if it’s authorized by the CC&Rs, bylaws or rules, and if, considering all the circumstances, the notice is fair and reasonable.  The new law will be in the Condo Act at § 57-8-42, and in the Community Association Act at § 57-8a-214.

The reason I’m mentioning this as a follow up to my post below is that, because of the new requirements for adopting new rules in non-condo HOAs which I explain below and that go into effect on May 10, a board may want to quickly meet (or take action by written consent without a meeting) before then and adopt a rule authorizing notice by electronic means.  Even if it’s too late for that, every board should definitely consider this important tool, at the very least for certain types of notice.

Curtis G. Kimble

2 Comments | Condo, Governance, New Condo Laws, New HOA Laws, New Non-Condo HOA Laws, Non-Condo HOA | Tagged: , , , | Permalink
Posted by Curtis G. Kimble

New Laws on Rule-Making Procedures & Authority

May 2, 2011

Two new laws that go into effect on May 10, 2011, deal with rule-making authority and procedures in non-condo HOA’s.  These two new laws will become part of the Utah Community Association Act (but not part of the Utah Condo Act, so you condominiums can ignore them).

Utah Code § 57-8a-217.  From now on, before a board can adopt or change a rule (including architectural guidelines or design criteria), they have to provide an open forum at a board meeting giving lot owners an opportunity to be heard.  The board has to send out notice at least 15 days before that board meeting to every owner stating that the board is considering a change to a rule.  The board also has to send out notice within 15 days after a new rule is adopted.

This means a board has to listen to homeowner concerns before it makes a final decision.  The board does not need to conduct a vote of the homeowners to adopt a rule.  The decision to initially adopt a new rule is still entirely up to the board.

However,  the homeowners can disapprove a new rule by calling a special meeting within 60 days from the date it was adopted.  If 51% of the total votes in the association vote to disapprove the rule at the special meeting, then the rule will be nullified.  The procedure for lot owners to call a special meeting is usually set forth in the bylaws or CC&Rs.  The board has no obligation to call a meeting of the lot owners to consider disapproval unless lot owners submit a petition in accordance with the procedures in the bylaws or CC&Rs.

This is a big change, and an unfortunate one at that.  While it has value as a “checks and balances” type recourse for homeowners faced with unfair or inappropriate rules, it simply goes too far and is much too burdensome, especially for larger HOAs.  The law doesn’t go into effect until May 10, so it doesn’t apply to any rules a board adopts before then (so you’ve still got a few days to adopt that rule you’ve been putting off adopting without having to go through these new steps).

Utah Code § 57-8a-218.  This law mostly just restates common sense and common law principles regarding rules that I and other HOA attorneys have long been preaching (e.g., a rule must be reasonable, an association can adopt generally applicable rules for the use of common areas, and a rule can’t be contrary to the CC&Rs).

However, a couple of new things do come out of it.  For one, it states that an association may require a minimum lease term by rule alone (as long as it wouldn’t be contrary to the CC&Rs).  So, if you don’t have such a rental restriction in your CC&Rs already, the board can simply adopt a rule prohibiting rentals of less than X amount of time (e.g., 30 days, 6 months, 1 year).

Another thing that’s helpful in this law is that, even if not authorized in the CC&Rs, now an association may by rule:

  • impose a fee or charge 1. for the use, rental, or operation of the common areas, and 2. for a service provided to a lot owner, or
  • impose a late fee for late payments.

Finally, the law states that a rule may prohibit smoking inside attached dwellings (e.g., townhomes) if such smoking “creates the potential for smoke to enter a neighboring unit, the common areas, or limited common areas.”  So, for instance, without amending the CC&Rs, an association could adopt a policy stating that smoking is prohibited anywhere, including inside a unit, if it is possible that smoke will drift into another unit or into the common area or limited common area.

This new law parallels the existing law in the Utah Condo Act and it underscores the Utah Legislature’s position that smoking is a health and safety issue first and foremost.  Smoking is not a right, but rather it is every homeowner’s right to enjoy their dwelling free from the carcinogens and health hazards forced upon them at the whim of their smoking neighbors.  That is why the law provides that this is not an issue that needs to be voted on by the homeowners, a board can simply adopt a rule protecting the health of the residents and the livability of the units.

Curtis G. Kimble

3 Comments | Governance, New HOA Laws, New Non-Condo HOA Laws, Non-Condo HOA | Tagged: , , | Permalink
Posted by Curtis G. Kimble

New Utah Law Requires Registration by HOA’s

April 28, 2011

A new Utah law for HOA’s  goes into effect shortly that requires both condo and non-condo  homeowners associations to register as an HOA with the State of Utah by July 1st, 2011, and to keep info updated when directors change over time.  This is completely separate from registering as a nonprofit corporation with the Division of Corporations. Now HOAs that are nonprofit corporations will need to do both (the law doesn’t require an HOA to be a nonprofit corporation, but it is recommended and is typical).

The consequence for not registering an HOA and keeping the information updated is that the HOA will not be able to enforce its liens against delinquent homeowners.  This is a huge (and harsh) consequence, obviously.  So, it is imperative that HOA’s register and keep their info current with the state, or they will lose their lien rights when collecting past-due assessments.

Along with a registration fee not to exceed $37.00, each HOA has to provide the following to the state and kept it updated whenever the information changes :

  • The name and address of the homeowner association
  • The name, address, and telephone number and, if applicable, email address of the president of the association
  • The name and address of each management committee member and contact information for the manager, if applicable
  • The name, address, telephone number, and, if the contact wishes to use email or fax for communicating information, the email address or fax number of a primary contact person who has the lien payoff information a closing agent needs in connection with the closing of the sale or refinance of a lot/unit

Another new law states that lien payoff information must be provided by the HOA within five (5) business days from when a closing agent makes a proper request for it (has to be in writing, be accompanied by a written consent for the release of the payoff information signed and dated by the owner, etc.), or the lien is not enforceable at closing.  Also, the association is now prohibited from charging a fee for providing payoff information needed for closing on a unit, unless the fee is specifically authorized by the CC&Rs, bylaws or rules, and the fee can’t exceed $50.  Ascertaining payoff information for a delinquent owner is an administrative burden on the HOA that is appropriately paid for by the offending owner, not shared by the other innocent, paying owners.  So, the board should adopt a rule right away authorizing a fee for providing payoff information.

It’s important to note that assessments are both a lien on a unit and a personal debt of the owner.  So, while the lien may become unenforceable by failing to adhere to this new law, the past-due assessments will still remain the personal debt of that owner, even after they sell their unit and move on.  So, an action in court could still be pursued by the HOA.

The state has not set up a way to register yet, but we’ll provide updates on this issue and more information on how to register as it becomes available.

UPDATE: The registry is up and running. Read about it in this post.

Curtis G. Kimble

3 Comments | Governance, New Condo Laws, New HOA Laws, New Non-Condo HOA Laws | Tagged: , , , , | Permalink
Posted by Curtis G. Kimble

April 2011 HOA University – New Insurance Requirements

April 20, 2011

We had a great discussion at our HOA University in April.  We discussed the new Utah laws governing insurance requirements and reserves.  The new laws are summarized in the handout here:  HOA University – April 2011 Handout, but the highlights of our discussion were:

1. condominium owners associations are required by a new law to insure all permanent improvements, including those that are within a unit,

2.  for claims against the association’s master policy which are associated with a particular unit, the association can require that unit owner to pay the deductible if a notice is first sent to all unit owners stating they will be responsible for the deductible on the association’s master policy.  Note that the unit owner can generally obtain insurance which will pay the association’s master policy deductible.

3. Utah now requires all homeowners associations to have property and liability insurance coverage for their common areas, (this was not required before in non-condominium HOAs, like single family home PUDs, or non-condo townhomes, but is now by this law),

4. all HOAs with attached housing (usually called townhomes) have the same requirements for insurance as condominiums (as mentioned above), unless the HOA was established before January 1, 2012, and the CC&Rs already require each lot owner to insure their own dwelling unit.

Curtis G. Kimble

7 Comments | HOA University, Insurance, New Condo Laws, New HOA Laws, New Non-Condo HOA Laws | Tagged: , | Permalink
Posted by Curtis G. Kimble

New Utah Law Versus Fiduciary Duty

March 28, 2011

Because association reserves perhaps play a more important role than any other issue, with the exception of insurance, in the long term viability of a homeowners association, I’m hard pressed to find an issue that triggers the concept of fiduciary duty more than the decision of whether or not to fund an association reserve account and in what amount to fund it.

Every board member is legally bound by a fiduciary duty to his or her association.  It is the duty to act in good faith and in the best interests of the association.  This means a board member cannot put his or her own interests before those of the association.  This duty imposed by law is a very powerful tool.  It is not taken lightly by the courts and breaching this duty subjects a board member to personal liability.

A new law was passed in Utah that is a little disconcerting to me.  It completely circumvents the tool and safeguard of fiduciary duty when it comes to association reserves.  It requires the board to present a reserve study to the homeowners at the annual meeting each year and that a simple majority of those homeowners that show up at the meeting will determine whether to fund a reserve account and the amount of the reserve account, thereby taking the decision completely out of the hands of the board.

If there’s one thing I’ve learned in my years of practice in HOA law, it’s that the individual owners don’t always have the best interests of the association in mind. It’s usually the other way around, they are concerned with their own best interests.  There’s nothing wrong with that, it’s human nature – something the folks on Capitol Hill don’t get, apparently.

As an owner of a home within an HOA myself, I personally have no interest in what the other homeowners in my HOA think about whether to fund a reserve account and in what amount to fund it.  The only individuals who are legally obligated to put the association’s best interests before their own are the members of the board.  The individual homeowners are free to put their own interests first, to be selfish and short sighted, to take the attitude that they may not live here in a few years, so why should they fund expenses ten or fifteen years down the road.  Board members are not.  They are bound by fiduciary duties to the association as a whole.  If board members breach this duty, that’s a different issue and there are remedies for that.  But, as a homeowner, I want that duty to be attached to decisions regarding funding of reserves.

As an attorney who has had to repeatedly deal with the fallout and consequences of inadequate or nonexistent reserve accounts, I hope the collective wisdom of a majority of homeowners at a meeting will allay my above concerns as this new law goes into effect.

Curtis G. Kimble

Leave a Comment » | Governance, HOA Finances, New Condo Laws, New HOA Laws, New Non-Condo HOA Laws, Reserves | Tagged: , , , | Permalink
Posted by Curtis G. Kimble

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