Archive for August, 2012

From Sacramento: Tweaking Davis-Stirling

August 30, 2012

Apparently, California has signed into law a revision to its Common Interest Development Act.  California, unlike Idaho and a shrinking handful of other jurisdictions, recognizes the important role played by HOAs and other common interest ownership associations.  One California Court said:

Indeed, the homeowners associations function almost ‘as a second municipal government, regulating many aspects of [the homeowners’] daily lives.’ [Citation.] ” ‘ “[U]pon analysis of the association’s functions, one clearly sees the association as a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government.

Wikipedia(citing Villa Milano Homeowners Association v. Il Davorge).  

On the surface, the new California laws, Assembly Bills 805 and 806 simply simplify the existing common interest ownership law:

In response to concerns that the Davis-Stirling Act is not well organized or easy to use, the California Law Revision Commission (CLRC) recommended that the existing Davis-Stirling Act be repealed and replaced with a revised version that would continue the substance of existing law in a more logical and user-friendly form.

Senate Rules Committee Digest.  In the judicial committee hearing  minutes regarding AB 806, arguments in favor were summarized as follows:

…this bill and its companion measure, AB 805, will bring much needed logical order to the Davis-Stirling Act, making it much easier for board members and practitioners to navigate and clarifying the relative authority of statutory law, by-laws, and different types of governing documents.

However, at least one commentator identifies 16 substantial changes.  CAI promises to educate its members on the changes before the law goes into effect.

 

Rather than dive into legal analysis of another state’s statutes, I would just like to point out that Idaho has an opportunity to learn from the experiences of other states.  Idaho could adopt a nice, clear, concise statute from the start, number its sections in a clear way for ease of use, and avoid overhauls like California is undertaking.  But first, Idaho needs to recognize the the value and service that HOAs, Condo associations and other CIDs provide.

-Jeremy

P.S.

If, like me, you try to follow news relating to homeowner associations, you no doubt have noticed that there is not much of it.   If you live somewhere like Idaho, relevant news is even more thin.  Only occasionally do we see an embezzlement scandal or a flare-up about American flags or the like.

This blog is going to try to avoid taking the route of mindless content farming.  I’ll try to comment on  a real event.  Or a real issue that has really stuck in my craw.  So, out of necessity, I’ll have to watch national, as well as Idaho, news. Anyway, that’s a long way to apologize for talking, again, about California law.

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From Scranton: How not to act at the office

August 24, 2012

In case you needed one, from Scranton, setting of TV’s “The Office,” we now have another reminder not to commit sexual discrimination at work.   HOAs, just like any other work environment, are subject to federal workplace harassment law.

Explore the history of The Office on the updated Facebook Timeline. Check out key dates, plus tons of clips and photos.

No kidding.  I don’t know what else to say about that.

From The Times-Tribune:

According to the lawsuit, Bushkill resident and former public safety employee Heike Obergantshnig is suing Saw Creek Estates Community Association Inc. claiming she has been harmed by “sex-based harassment, sex-based discrimination (and) a hostile work environment” from a Saw Creek watch commander, Brian Kaiser.

What I can’t tell from the article is the nature of employment of a “public safety employee” in a Pennsylvania HOA, or what a “watch commander” is.  Sounds like a professional neighborhood watch is used there.  As a former direct employee of the HOA, it sounds like Ms. Obergantshnig’s claim will have to be addressed, and an attorney paid for, by the association.  Maybe they needed a more active HR.    Toby Flenderson will have his day.

Arbitration Clauses Binding On HOAs In California (!?)

August 23, 2012

Courts: The Judicial Branch of California

On August 16, the California Supreme Court issued a ruling in Pinnacle Museum Tower Association v. Pinnacle Market Development (US), LLC, et al.  that could affect Idaho HOA cases and others here in the Ninth Circuit as well.  It could effectively strip the right to jury trial from condominium owners and associations.

As the Court summarized:

Petition for review after the Court of Appeal affirmed an order denying a motion to compel arbitration in a civil action. This case presents the following issues: (1) Is a homeowners association bound by an arbitration provision contained in the covenants, conditions and restrictions for a common interest development that were executed and recorded prior to the time the association came into existence? (2) Did the Court of Appeal err by applying the state law doctrine of unconscionability only to the arbitration provision, and not to other provisions in the covenants, conditions and restrictions, in light of federal law prohibiting the application of state law to treat arbitration provisions differently from other provisions of the same agreement? (See Allied-Bruce Terminix Cos. v. Dobson (1995) 513 U.S. 265.)

Historically, many have argued against the application of arbitration clauses to HOAs.  A developer creates the HOA, after all, and drafts the CC&Rs, representing both his own interests and (to a much lesser extent) those of the future HOA.  The future owners and future association have little or no say in any of the terms that the developer inserts into the CC&Rs.  As a result, many courts have found that it would be unconscionable to enforce arbitration clauses against the party that had no representation in the drafting of the documents.

The Pinnacle opinion held, to the contrary:

…even though the association did not exist as an entity independent of the developer when the declaration was drafted and recorded, it is settled under the statutory and decisional law pertaining to common interest developments that the covenants and terms in the recorded declaration reflect written promises and agreements that are subject to enforcement against the association.  We conclude that the arbitration clause binds the association and is not unconscionable.

What is interesting for those of us outside of the Golden State is that the California Supreme Court based its opinion on provisions in the Federal Arbitration Act.  The same federal provisions would apply to any state.  In particular, the Court held:

…the FAA pre-empts state laws which ‘require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration…Likewise, the FAA precludes a court from construing an arbitration agreement “in a manner different from that in which it otherwise construes nonarbitration agreements under state law.  Nor may a court rely on the uniqueness of an agreement to arbitrate as a basis for a state-law holding that enforcement would be unconscionable, for this would enable the court to effect what . . . the state legislature cannot.

I will leave it to the courts and legal scholars to analyze the strength of California’s analysis.  However, if the arguments relied on by this Court are seen as persuasive, we may be seeing a major shift in how condominium and association construction defects are handled across the country.

Thanks to California’s Miller Law Firm for summarizing the decision.

Going Up In Smoke

August 20, 2012

I just spent a great weekend in Idaho’s Sawtooth Mountains.  Wow.  It was sunny and warm, and the water was glacier-blue and clear.  This blogger’s photo makes it look too dark:

Great blogpost on US States

Unfortunately, there is a serious forest fire nearby.  It isn’t even the Idaho fire you have heard of.

The Halstead fire has burned close to 90,000 acres of beautiful central Idaho mountain land.  I’m sure the locals are glad that their communities are not in danger, but one Stanley business owner I spoke to was very troubled that the media coverage of the fires was keeping their bread-and-butter tourists away.  Instead of tourists, there are large field full of firefighters, who, by the way, seem to be doing a great job.

When these massive fires burn wilderness, it is bad enough.  When they turn on neighborhoods, it can be tragic.  Sometimes HOAs on the edges of Boise are affected.

Besides addressing the obvious questions of sustainable locations, what can HOAs do to prepare for the unexpected?  Obviously, they can make sure that they are insured as required by their governing documents and by common sense.

Some associations also make plans for emergencies by organizing the neighborhood in advance.  Appointing block captains, getting resources from groups like CERT and making first-aid training to local residents can also help.

So, when you are not out enjoying Idaho’s beautiful wilderness areas this summer, take a minute to think through how your neighborhood prepares for major disasters. Oh… or host a firefighters bbq!

Jeremy O Evans

 

HOA is where the heart is: Association as community

August 16, 2012

Not all homeowner associations take on extra responsibilities, but when one does, it deserves some kudos.  The Opequon Meadows HOA in West Virginia is stepping in to help pay expenses for their uninsured, unemployed neighbor who was killed in an auto accident.

Originally from Jamaica, Richards had lived in the Opequon Meadows subdivision north of Martinsburg for about 20 years, Denise Winslow, president of the HOA, said in a telephone interview Wednesday.

“He worked at the tannery in Williamsport (Md.), but when it closed, he lost his job,” she said. “He had no life insurance. He took any local jobs. He struggled through life.”

Winslow has met with the family and they “have absolutely zero resources,” she said. The family cannot afford the $6,000 to bury Richards, she said.

The HOA plans to make a cash donation and Winslow has reached out to community members to donate funds for the funeral expenses, she said.

Nice work.  That is certainly above and beyond the call of duty.

 

A Ditch Runs Through It

August 14, 2012

Ok, I admit it, the fly fishing photo is a red herring.  Idaho is well known for its fly fishing, but it ought to be just as well known for its amazing irrigation systems.  These canals, and the institutions that maintain and operate them, allow thousands of us to live and farm in what was once a rocky desert.

In Idaho’s Treasure Valley, the canal system and farmland that it supports is steadily being moved, buried, and reshaped into HOA-governed slices: many what the New York Times called “a quintessential slice of American suburbia.” Some Idaho associations run irrigation or well systems, so irrigation is a central part of their role.  However, for most suburban HOA-dwellers and boards, this engineering marvel is a scenic backdrop, but not much more. This should not always be the case.

When a developer moves in and builds homes where there was once open farmland, the canals are buried, put in pipes, or put into concrete spillways along major roads.  Sometimes the open canals get attention when a child is tragically swept away, but usually they remain in the background for suburban and urban (sic) Idahoans.

But buried or not, canals require maintenance and care.   Often large volumes of water flow through these arteries.  Roots can catch onto debris and block the flow of water.  Clogged canal pipes can flood and damage homes and property.

Idaho code requires the owners of the canals–irrigation companies–to maintain their canals:

42-1204. Prevention of damage to others. The owners or constructors of ditches, canals, works or other aqueducts, and their successors in interest, using and employing the same to convey the waters of any stream or spring, whether the said ditches, canals, works or aqueducts be upon the lands owned or claimed by them, or upon other lands, must carefully keep and maintain the same, and the embankments, flumes or other conduits, by which such waters are or may be conducted, in good repair and condition, so as not to damage or in any way injure the property or premises of others.

Idaho caselaw has interpreted statute to mean that when a landholder puts a canal into a pipe, the landholder becomes responsible only for any increased maintenance costs.  However, these questions are usually not left to statute or courts.  When a developer seeks to move or bury a canal, the easement-holding irrigation company most likely will require a “license agreement.”  These license agreements are recorded documents in which the developer will take responsibility to maintain the now-buried canal.  The developer, in turn, may pass this duty along to the association in the CC&Rs.

If the CC&Rs of your Association require the Association to maintain a buried irrigation pipe, the Board should have a plan in place to regularly perform this maintenance.  Not only could an Association become liable to downstream water users in the event of a disruption of water, but it could find common areas and private lots swamped in the process.

Jeremy

Some History and Background:

Foreclosing on the Forecloser: HOAs take on the banks

August 13, 2012

For most homeowners, foreclosure is the end of the story.  The end of a long, painful story, for most.

 

A slideshow on foreclosure and bankruptcy law basics

 

But many homeowner associations could only hope that foreclosure were the end of the story.  For HOAs, foreclosure usually follows a lengthy period of unpaid assessments, collection efforts, and perhaps ongoing maintenance violations.  The foreclosing bank may even have dragged its feet on taking title until it had a post-foreclosure buyer lined up.  I have tried to summarize foreclosure basics for HOAs here.

In Idaho, this tactic leads to increased liability for the original owners of the property, and probably increased chances of bankruptcy.  For the most part, the bank that takes title following a foreclosure is responsible and pays assessments from the date of the foreclosure forward. However, this is not always the case.

In what is often a David and Goliath story, some HOAs are seeking to even the odds by foreclosing against the bank on their post-foreclosure assessments.  This article makes several good points about the pros and cons of this approach, and the position taken by banks.  It applies as well in Idaho as in Florida.

 

Most of the bank in possession has a strong interest in maintaining clear title so that the property can be sold.  Foreclosure, though a drawn-out and relatively expensive process, puts the pressure back on the bank to get current.

Jeremy O. Evans 

 

 

 

 

Las Vegas’s HOA Scandal: Bringing Out The Best In HOA Crooks

August 10, 2012

I have argued before, and often, that we need more laws in Idaho for homeowner associations and condominiums: Just a few guidelines to keep boards, accountants, and managers on the straight and narrow.  So, when the hokey pokey that is known as the Las Vegas HOA Scandal (it looks better in neon) came along, I thought I’d found a gift that would keep on giving.  Fake elections with straw buyers and counterfeit ballots, millions stolen, suicidal lawyers, all this needed was a some official cover-up, and you’d have a world-class headline.

It made my job easy.  Throw up the latest development, and “jackpot!” Arguments for reform don’t come much easier.

The problem is that Nevada already has HOA legislation.  A lot of it.  If anything, Nevada’s law only drove the sheisters to new levels of creativity.

Here in Idaho, we don’t get big HOA scandal headlines, because our scammers are low-profile and uncreative.  All you have to do to skim a little off the top is write some checks, take some vacations and spend as you go.  If the board is not paying attention, you can get away with it for years.  When you get caught, it is barely news, because who hasn’t heard of a treasurer or manager running off with association funds before?

In the Gem State, you are on your own.  But don’t pack for Idaho yet, potential scammers.  That can cut both ways.  We also love our guns.

The Unspoken Rule: Discrimination in Unenforced Covenants

August 9, 2012

Can something discriminatory written and recorded in your Idaho CC&Rs decades ago still pose a liability for your association today?  Today, a blog for the Orlando Sentinel discusses the state of the law in Florida, and recommends a professional review of governing documents to find and remove offending restrictions. Not surprisingly, in Florida’s litigious society, there are municipal and county fair housing regulations.  Florida associations have been found liable for discrimination for “publishing” rules and regulations that caused a tenant “emotional distress,” even where those rules are not enforced.  That 1997 decision is online here.

The question remains how to regard that decision and legal advice here in Idaho, where the legal climate is as different from Florida’s as Idaho’s high desert climate is different from Florida’s coastal humidity.  Certainly the federal fair housing laws still apply, even if we do not see much additional municipal and county fair housing regulations.

Idaho’s Supreme Court found in a 2002 case, D & M Country Estates v. Romreill, that Idaho statutes restricting discrimination in zoning laws do not apply to covenants.   The Court found that because the governing documents in question were specific and unambiguous in limiting housing use to two “families,” the Idaho association was acting within its rights to prohibit use of a house by eight unrelated adults in a group home setting.  Unfortunately, in that case, claims based on the Idaho Human Rights Act were not properly before the Court, and so did not factor into the decision.  Indeed, the Human Rights Commission no doubt would urge Idaho courts to follow the Florida ruling that recorded “published” governing documents indeed can have a discriminatory effect.

In my experience, unenforced clauses in Idaho governing documents have not led to court liability.  However, I have seen such unenforced clauses lead to discrimination charges against associations and their boards.  Even unsuccessful fair housing claims require legal representation and defense.  Rather than face that uncertainty and expense, a preemptive review and amendment of governing documents is still as good an idea here in Idaho as in Florida.  But it may not be the only option.

An option that has not been explored here in Idaho is the use of a recorded cover sheet, as is required in California.  This would involve recording a statement that any discriminatory language in the remaining covenants is to be ignored.  The cover sheet would explicitly void any discriminatory covenants.

Either amending covenants to change language or to add a cover sheet would require the same supermajority vote by the owners.  In Idaho, we have no uniform common interest ownership act to make the process any easier than it sounds.  At the moment, either approach would require legal assistance and membership participation.

Imagining HOAs’ Future

August 7, 2012

A while back, I enjoyed author Neal Stephenson’s imagining of a United States where neighborhoods exercised virtual national sovereignty, with extreme border security and visa requirements restricting even the movements of a high-speed katana-wielding pizza deliveryman.  While this would certainly be an unexpected evolution of today’s covenant-based associations, there has been some evolution of HOAs over the years.  I sometimes wonder how HOAs will evolve in the near future.

First, I think we can all agree that homeowner associations are inherently conservative organizations.  They are based on covenants conditions and restrictions that are recorded on real property and that often remain unchanged for decades.  Usually CC&Rs can only be amended by a supermajority of the owners: an action that takes coordination, participation, and consensus.

It is no surprise then,  that HOAs are not weather vanes of social change.  Instead, we see conservative covenants challenged by owners with particular agendas, be they environmental responsibility, political activism, or the like.  Those who challenge covenants no doubt see precedent set in federal legislation that has retroactively outlawed covenants creating racially segregated housing communities, age-specific restrictions (except in retirement communities) and other fair housing issues, in addition to less-obvious federal rules regarding satellite dishes.

It would be interesting to see if HOAs could play a leading role in even more politically-charged social areas.  For instance:

  • Could an HOA ban undocumented residents?
  • Could an HOA ban guns of any kind?
  • Could an HOA require smart meters, solar panels, or laundry lines?
  • Could an HOA dive into the marriage debate?

Of course, we always advise our clients to avoid issues that might lead to litigation.  But that doesn’t mean attorneys can’t enjoy imagining legal problems yet to arise.

Update: These Colorado HOA attorneys just blogged about another social topic:  smoking bans.