New Law Limits Scope of Red Flags Rule

A new federal law has significantly limited the scope of the Red Flags Rule, a federal law that requires many businesses and organizations to implement a written identity theft prevention program. There has recently been a substantial amount of confusion about whether the Rule imposes new obligations on various persons and organizations (including community associations), and this new law clarifies who must comply with the Rule. The Red Flags Rule now applies to financial institutions and creditors that:

1) obtain and use consumer reports in connection with a credit transaction,

2) furnish information to consumer reporting agencies in connection with a credit transaction, or

3) advance funds to or on behalf of a person, based on an obligation of the person to repay the funds or repayable from specific property pledged by or on behalf of the person.

The third category is apparently intended to cover businesses like payday loan companies that sometimes lend without using consumer reports. Creditors who advance funds on behalf of a person for expenses incidental to a service provided by the creditor to that person are specifically exempted from the Red Flags Rule. Other types of creditors may be required to comply with the Rule if an agency determines that they offer or maintain accounts that pose a reasonably foreseeable risk of identity theft.

The Red Flags Rule does not appear to apply to condominium and homeowners associations under the new law. However, such associations may still choose to adjust their record-keeping procedures to comply with the Rule if they are concerned that it might be interpreted or amended to apply to them or if they want to obtain a heightened measure of protection against identity theft. More information about the Red Flags Rule is available here.

How to Protect Your Condominium’s Pipes From Freezing Temperatures

It’s cold out there, and it looks like it's going to get colder over the next few days. Condominium and homeowners associations in the Seattle area thankfully do not have to deal with extremely cold weather very often, but they should be aware of five simple steps that can help prevent the inconvenience of frozen pipes.

1. Disconnect hoses.

2. Insulate exterior pipes and faucets.

3. Insulate pipes and faucets in attics, basements, garages, and crawl spaces.

4. Drain irrigation and sprinkler systems.

5. Caulk around incoming pipes.

Boards should also encourage owners to leave their taps running slightly on particularly cold nights. If pipes freeze despite these measures, damage can be minimized by promptly shutting off the water until a licensed plumber arrives. Stay warm!

Should Your Association’s Attorney Be a Hired Gun or a Legal Navigator?

Community associations and the owners in them hire attorneys for many different reasons, but they often fall into one of two camps in terms of how they view attorneys’ primary purpose. Some view them as Hired Guns, while others view them as Legal Navigators.

The Hired Gun listens to the stated goal of the client and aggressively pursues that goal without questioning the goal, the likelihood of attaining the goal, or the method advocated by the client to attain the goal. This type of attorney resembles the classic “yes man” found in some corporate board rooms. Clients who want the Hired Gun want an attorney who will charge forward as they instruct with thoughts of nothing but success.

The Legal Navigator seeks to guide the client out of the wilderness it finds itself in by way of the most effective and efficient path. This type of attorney is quite willing to aggressively pursue the client’s goals using its preferred method when the situation calls for it, but he or she will also not hesitate to tell the client that it has made mistakes in the past that require compromise or that its favored plan of action is not the best one under the circumstances. In other words, the Legal Navigator will not shrink from telling clients things that they do not want to hear. In some cases, a well-timed “No” or “I advise a different approach” can result in lower legal expenses and better outcomes.

The “Charge!” approach of the Hired Gun is appealing to many. However, the clients of the Legal Navigator are much less likely to charge off cliffs.

Court Rules that Association’s 55-Plus Age Restriction Violates the Fair Housing Act

Since its beginning in 1953, the Ryderwood community in Cowlitz County, Washington was intended to be used and enjoyed primarily by persons who receive a pension or retirement annuity. Each home’s deed limited ownership based on that purpose. The Ryderwood homeowners’ association later amended its bylaws to require that anyone owning, purchasing, or occupying a home there must be at least 55 years old, except for a spouse of someone over 55 years old. However, several homeowners recently sued the association to allow them to market their homes to persons of all ages, and in August a federal judge ruled in their favor. This decision is now being appealed by the association as an intense struggle over the future character of this community continues to unfold.

The federal Fair Housing Act (“FHA”) prohibits condominium and homeowners associations from discriminating against families with children. The key issue in the Ryderwood case was whether the association qualified for the Housing for Older Persons Act (“HOPA”) exception to the FHA prohibition. The judge decided that it did not. In order to qualify for the HOPA exception, an association must meet the following requirements:

1. The community must be intended and operated for occupancy by persons 55 years and older;

2. 80% of occupied units must have at least one person who is 55+;

3. The community must consistently publish and adhere to policies and procedures that demonstrate the above intent; and

4. The community must comply with federal regulations for verification of the above requirements, such as submitting surveys, affidavits, written policies and advertising examples.

If an association wants to convert into a 55-plus community, it must first achieve the 80% requirement without discriminating against families with children. If you are on the board of a 55-plus community or want to convert your community into one, an experienced community association attorney can help you understand and comply with FHA requirements and the HOPA exception.

King County Health Department Provides Bed Bug Guidance

Bed bugs are unfortunately a significant nuisance in some parts of the Seattle area this year. Condominium and homeowners associations should know how to keep bed bug infestations from spreading and how to eradicate these pests. The King County Department of Public Health’s website contains detailed information regarding those topics. Board members and affected residents should consult this useful resource if they must battle bed bugs.

One of the Department’s main messages is that it is usually necessary to hire a pest control company to get rid of bed bugs. It suggests a number of questions to help associations evaluate companies. Indoor pest control companies operating in King County are required to have proof of insurance and a current registration with the Department of Public Health. Boards can verify registrations here.

The Department also warns that over-the-counter pesticide foggers are not an effective way to kill bed bugs. In fact, those products can make the problem worse by causing the insects to scatter and move into walls and other places that are harder to reach. A combination of specially applied pesticides and non-chemical techniques is said to be the best way to eliminate this scourge.