Risk Management Assessment for Condos and HOAs

Here is a link with tips on how to be sure you are covered by your association’s Directors and Officers (D&O) insurance.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.

Keeping the Reins: Beware of Underhanded Boards and Their Tactics to Remain in Power

Although the SC Nonprofit Code and the governing documents of an association maintain safeguards for fair elections, many boards are coming up with crafty ways to ensure re-election. An article in the Orlando Sentinel lists these as the most popular methods for power-corrupt boards to hold on to their seats:

1. Create a Nomination Committee, stacked with spouses and friends of the sitting board members. They plainly nominate the sitting board members – nobody else — and the ballot mailed out to the eligible voters will only contain the names of the “wanted” candidates, because the committee declares every other candidate who volunteers not fit to serve. Any owner trying to “nominate himself or herself as a candidate for the board at a meeting” has anyway no chance. The written mailed-in ballots already give the sitting board members the votes necessary for re-election.

2. HOA elections normally require a quorum of 30% of the total voting interests present in person or by proxy. 30% is quite a high hurdle, and the proxies collected by the board will only be used if it serves the advantage of the sitting board. It’s much easier to declare: “No quorum present” – therefore the old board is the new board.  Before anybody can object, the board and its supporters quickly leave the meeting room. Election won – no matter how many of the other owners complain about procedure.

3. Mail out general proxies, claiming these proxies only serve the purpose to fulfill the quorum requirements. But since they are actually made out as general proxies, they can be used by the board secretary to count as votes – if necessary.

4. Intimidation is another often used method to swing the election. Sitting board members go door-to-door to “collect” proxies with themselves named as proxy- holders. Especially the many elderly will often sign the proxy, just to live in peace. Violation letters and fines are the common threats used to “convince” the owners who are not voluntarily willing to sign over their voting rights!

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.

Proposed Gun Range in Posh Condo Penthouse

Here’s an article from the Balitmore Sun about a penthouse unit owner in the Baltimore Ritz-Carlton Residences seeking to obtain a permit to build a gun range inside the unit.  Condo association rules, state laws and local ordinances may prove to be a difficult burden to overcome in getting the firing range approved. 

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.

Association Meetings Must be Properly Noticed

Bd. of Managers of Park Regent Condo. v. Park Regent Assoc., No. 2009-04227, N.Y. Supr. Ct., App. Div., March 30, 2010.

A condominium regime in New York was recently involved in litigation over the validity of an association member annual meeting. Several unit owners called the meeting and purported to elect a new board of managers for their regime. The board of managers in place prior to the meeting brought suit for a declaratory judgment that the meeting was invalid for lack of proper notice; therefore no new board members were elected. A unit owner also sued past and current board members for fraud and breach of fiduciary duty. The trial court held that the unnoticed meeting was invalid and issued a permanent injunction against the board members elected at the meeting, preventing them from acting as members of the board. The appeals court affirmed this holding.

The individual unit owner later amended his complaint to recover attorney’s fees and expenses, as permitted in the regime’s governing documents. This motion was also granted.

In sum, when associations fail to properly give notice of member meetings and board meetings very costly results may follow. Associations should closely read their governing documents for notice requirements and follow these requirements to the letter. Contact an attorney for help in complying with your governing documents.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Ambiguous Covenant Construed to Permit Pet Bird

Breakwater Cove Condo. Ass’n v. Chin, No. A-1420-09T3, N.J. Super. Ct., App. Div., Dec. 2, 2010.

A unit owner at Breakwater Cove kept two birds in her unit. The association informed her that she was in violation of the master deed and her birds were a nuisance to other owners. The Master Deed provides: “No bird, reptile or animal of any kind shall be raised, bred or kept in any unit or anywhere else upon the property except that dogs, cats or other household pets are permitted, not to exceed two in the aggregate, provided they are not kept, bred or maintained for any commercial purpose, are housed within the unit and abide by all applicable rules and regulations. No outside dog pens, runs or yards shall be permitted.”

The association pursued alternative dispute resolution with a mediator in hopes of resolving the dispute. When mediation did not resolve the issue, the association sued the owner. The trial court sided with the association, finding that the owner’s birds did not qualify as “other household pets” under the master deed. The trial judge also determined that the birds were a nuisance based on testimony of other owners.

On appeal, the court determined that the pet policy in the master deed was ambiguous because it is reasonably susceptible to two meanings. The court held that based on this ambiguity, the covenant did not provide fair notice to unit owners and could not be upheld.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.

Association Can Enforce Zoning Regulations

Ariyan v. Pine Orchard Ass’n, Inc., No. CV084034207S, Conn. Super. Ct., Dec. 3, 2010.

The court in this case held that the Pine Orchard Association had the authority to enforce zoning regulations within the association.  Ariyan began constructing a gazebo on her lot, which is zoned with a 20-foot rear setback. Behind her lot is a private, unimproved right-of-way.  Ariyan did not initially seek approval of the zoning board before starting construction.  However, she eventually did submit an application for a permit, which was denied.  She later submitted a second application for a permit and that was also denied based on the setback requirement.

Ariyan then submitted a variance request for the setback requirement, arguing that because there was no barrier between her property and the private right-of-way, the gazebo would not be noticeable if it violated the required setback requirement.  Her variance was also denied, and was shortly followed with a cease and desist order for the partially constructed gazebo.  Ariyan was asked to remove the gazebo.  After the Zoning Board of Appeals upheld the decision, Ariyan appealed to the Connecticut Superior Court.

Ariyan argued on appeal that the decision was illegal, arbitrary and an abuse of discretion.  She based most of her argument on the fact that the regulations did not define “structure.”  The court found this unconvincing and held that “structure” is defined using its common and usual meaning.  The court also held that the appeal lacked merit because zoning regulators are required to apply the regulations when appropriate, and the fact that the gazebo would not obstruct her neighbors’ views was irrelevant.

This site and any information herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.

Lien for Unpaid Assessments is Superior to Unrecorded Tax Lien

Mira Owners Ass’n v. Lawrence, No. C10-630RAJ, U.S. Dist. Ct., W. Dist. Wash., Feb. 16, 2011.

An association member became delinquent on assessment payments and also failed to pay his federal income tax.  In November, 2008, the association brought suit to foreclose on its lien.  Subsequently, the IRS filed a federal tax lien on January 16, 2009.  The Washington district court determined that the association was a secured creditor and its lien related back to the time that the assessments became delinquent.  Additionally, the court also held that the association’s lien was automatically perfected at the time of delinquency; recording the lien was not necessary for perfection.  The association’s governing documents provided that the association’s lien was superior to all other liens except “liens for real property taxes and other governmental assessment or charges against the unit.”

Although a tax lien arises automatically when the tax is assessed and tax liens are usually superior to other liens, the court held that there is an exception to the general rule when the IRS and another secured party are battling for lien priority.  Priority then turns on when the IRS filed notice of its lien.  Because the federal tax lien was filed after the association’s lien became perfected, the association’s assessment lien had priority over the tax lien.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.

Disabled Resident’s Abusive Conduct Violates Covenants

Connor v. Lake Dexter Woods Homeowners Ass’n, Inc., No. 2D09-5382, Fla. App. Ct., Dec. 29, 2010.

The Lake Dexter Woods Homeowners Association sued for an injunction against a disabled resident with an “angry” personality disorder.  Watson, the developmentally disabled resident, lives in the subdivision under the care of his guardian advocate, Connor.  The trial court determined that Watson’s longstanding behavior constituted a nuisance and violated the declaration of covenants, conditions, and restrictions for Lake Dexter Woods.  Based on the facts, Watson frequently yelled abusive obscenities at other residents, made physical threats against them, and drove his car erratically, often aiming at pedestrians.

The appeals court reluctantly affirmed the injunction, in spite of the fact that it is unlikely to remedy the problem.  The guardian advocate is charged with taking all reasonable steps to keep Watson under control, and has spent more than $47,000 in legal fees for Watson’s defense.

Although this is an unfortunate situation, the board of directors in this case likely decided that the risk of personal injury was too much to ignore the problem any longer and seeking an injunction was the association’s only viable option.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Liability for Wood Floor Installation in Unit

Baldwin v. Village Walk Condo., Inc., No. FSTCV085007925S, Conn. Super. Ct., Nov. 19, 2010.

A Connecticut condo owner recently sued her neighbors, her condo association, and the property management company for 42 claims resulting from her upstairs neighbors’ installation of hardwood flooring.  Baldwin claims the wood floors caused an excessive noise level and prevented her from selling her unit. While the court dismissed most of Baldwin’s claims, allegations of intentional infliction of emotional distress, unjust enrichment, breach of contract, and a few others survived the defendants’ motions to strike.

Baldwin alleged that her neighbors and the association should have known that removing carpet and installing wood flooring would create an intolerable noise level to the unit below.  In her claim for unjust enrichment, she alleged that the association and property management company profited by “failing to perform their duty to inspect and abate the nuisance.”  Furthermore, Baldwin was forced to pay for expensive soundproofing improvements to her unit as a result of the wood flooring above her.  The court denied her claims of unjust enrichment against the association and property management company.

Baldwin also alleged that the defendant neighbors were unjustly enriched at her expense because the wood flooring in their unit increased their property value while simultaneously reducing her property value because of the excessive noise.  The court upheld her allegations against the defendant neighbors.

Finally, the court upheld Baldwin’s allegations of breach of contract, finding that the declaration is a contractual agreement,  and determined that she had standing to assert the claim.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.