April 25, 2010

Interview Examines Scope of Homeowners Association's Authority

I was recently interviewed for the third part of an article entitled "New Cases Scrutinize HOA Architectural Committee Decisions" on HOAleader.com. The Washington case discussed in this article illustrates the negative consequences that can occur when a condominium or homeowners association fails to comply with its declaration or CC&Rs. Here is a link to the article: Here is a link to the article: http://www.hoaleader.com/public/417.cfm

April 16, 2010

New Wave of Lender Foreclosures Threatens Community Associations

According to a recent industry report, the number of U.S. homes taken over by banks jumped 35 percent in the first quarter from a year ago. If the current pace of foreclosures continues, more than one million homes will be seized this year. Rick Sharga, a senior executive at RealtyTrac, Inc., indicated that banks are beginning to work their way through the backlog of distressed properties and predicted that the pace of lender foreclosures will accelerate in the months ahead.

If a Washington condominium or homeowners association receives a notice of default or a notice of trustee’s sale with regard to a delinquent unit, it should take prompt action to record a lien on the property and notify the trustee of its interest. Once these initial steps have been taken, the board should evaluate whether it should establish a receivership over the property or pursue a personal lawsuit against the owner in advance of the trustee’s sale.

If an owner's lender completes a foreclosure, the association’s lien for delinquent assessments will be mostly or completely erased. If a limited priority lien remains on the property after the foreclosure, the association can ask the new owner to pay it. The association can also obtain a personal judgment against the former owner for the full amount of the debt and pursue garnishment remedies.

Aggressive legal action to collect a debt can produce results even with a lender foreclosure on the horizon, but this is not always the appropriate response. In some circumstances, the best course of action may be to simply wait for a lender’s foreclosure to occur.

April 9, 2010

Know the Boundaries and Respect the Trees

The Washington Court of Appeals recently filed an unpublished opinion that involved Washington’s timber trespass statute. This law requires persons that cut down or injure trees on other people’s land without lawful authority to pay treble damages. In the appellate case, the claimed damages were $225,000, so the total amount of the award was $675,000. This case did not involve a community association, but it does raise an important issue for such associations.

Condominium and homeowners associations in Washington sometimes trim or cut down trees in common areas adjacent to other properties. In many situations, such as when an old or sick tree poses an unacceptable risk to people and property, this is the right course of action. However, associations should also be careful to avoid the liability associated with inadvertently removing or pruning trees on neighboring properties. If there is reason to doubt the exact location of a boundary line, the board should consider obtaining a professional survey before firing up the chainsaw.

April 2, 2010

Enhancing Your Association's Bylaws

A community association’s bylaws focus on procedure. The Washington Homeowners’ Associations Act and the Washington Condominium Act contain similar requirements regarding bylaws. Under both laws, bylaws must describe the number of board members and officers, their qualifications, their powers and duties, their terms of office, and the manner of their election and removal. Both laws also require bylaws to specify which, if any, of the Association’s powers the Board may delegate to a managing agent. The Washington Condominium Act (but not the Washington Homeowners’ Associations Act) also states that bylaws must include a statement of the applicable standard of care for officers and board members (ordinary and reasonable care for elected positions).

Some associations’ bylaws may impede good policies by imposing unduly burdensome procedural requirements. Associations may want to reduce quorum size, allow electronic notices, or allow voting by mail to facilitate action on issues that affect them. However, boards that are pursuing such changes should confirm that the proposed amendments to the bylaws are consistent with their associations’ declaration or covenants and state law. If they are not, then the amendments will be invalid.