In many condominiums, subdivisions and other planned communities, an HOA maintains common property and sets rules limiting what owners can do on their property.
Functions of the HOA • Care and upkeep of Common Areas • PUD/Condo- maintenance, moving, repairs and replacement • Enforcement of community standards and CC&R’s • Collection of annual or special assessments or dues Governing Documents • Charter • Bylaws • Declaration of Covenants, Conditions and Restrictions(CC&Rs) • Rules and regulations What do the Charter and Bylaws lay out? • Non Profit Corporation • Members • Voting Rights and Procedures • Rights and Responsibilities • Board of Directors What do the CC&Rs define and explain? • Land or lots subject to • Common Areas • Restrictions, terms and conditions • Rights and responsibilities of owners Enforcement of CC&Rs • Property owners have a fundamental right to the free use and enjoyment of their property. Hughes v. New Life Dev. Corp, 387 S.W.3d 453(Tenn. 2012) • However, land owners may voluntarily enter into agreements with other land owners to restrict the use of their property in a way that is mutually beneficial. See id at 475. Restrictive covenants are in essence contractual obligations. Hughes, at 475. • Established rule of law that a person owning a body of land may sell portions thereof and make restrictions as to its use for the benefit of himself as well as those to whom he sells other potions of the land. Carr v. Trivett, 143 S.W. 2d 900 (Tenn. 1940) Interpretation of CC&Rs • Rules governing the interpretation of restrictive covenants are generally the same as those applicable to contracts. Aldridge v. Morgan, 912 S.W. 2d 151 (Tenn. Ct. App. 1995) • The primary task is to determine the intention of the parties as expressed by the plain and ordinary meaning in the covenants. Bernier v. Morrow, No. M2012-01984-COA-R3-CV, 2013 WL 1804072 (Tenn. Ct. App. Apr. 26, 2013 • However, because restrictive covenants are in derogation of the right to freely use and enjoy one’s property, they are strictly construed. Williams v. Fox, 219 S.W.3d 319 (Tenn. 2007) • Courts resolve any ambiguities in a manner which advances the unrestricted use of the property. Williams at 324. • Courts refrain from extending a restrictive covenant to any activity not clearly and expressly prohibited by its plain terms. Id. • When the terms of a covenant may be construed more than one way, the courts must resolve any ambiguities against the party seeking to enforce the restriction. Id. Community Wide Standard • The law does not require that restrictive covenants be specific in their criteria. Avalon Sections 4, 6 & 7 Homeowners Ass’n. v. Chaudhuri, 2014 WL 2949458 (Tenn. Ct. App 2014) • When restrictive covenants establish a review committee but do not contain specific criteria for the committee to follow, the validity of the criteria and the committee’s interpretation will be judged by a standard of reasonableness. Id Common HOA Disputes • Disputes with Developer • Upkeep and maintenance of homes and common areas • Violations of use restrictions • Commercial/Business use of home • Dues and assessments • Collection/Remedies/Liens HOA Board Actions and Decisions • Generally, courts will not disturb a decision by a homeowner association unless it is shown that the association acted unreasonably or in bad faith. Id. • The burden of proof is on the homeowner to show that the HOA acted unreasonably or without good faith. Id.
One of the benefits to having realtors work with us is that their clients are asking questions that they don’t necessarily know the answer to. They are better off giving their clients reassurance having an experienced attorney listen to the question and properly answer it. We are finding ourselves giving our clients great advice as to how they should take title to companies. Or if they are taking out loans to make sure they are structuring the contracts correctly in a way they have enough time to get approved for these loans without the risk of losing deposits. There are many other situations were able to help clients and realtors when they do turn to us.
There are two main factors at work in determining who is responsible for the damage. First you look to the Condominium (or Homeowner) documents. Typically this is the declaration document. We normally see that the association is responsible for all piping inside of the wall. So simply put, if the leak occurs in the wall, the association is responsible. What if the leak occurred outside of the wall? Typically we would see a leak occurring in the attachment to the water tank of a toilet or under a kitchen or bathroom sink. If the leak is on the owner’s side of the wallboard, typically it is the owner who is responsible. Owner may not be responsible However even if the leak occurred in the owner’s unit and not in the wall, the owner may not necessarily be liable for water damage to adjoining (or lower) units. The requirement for the condominium owner to be liable is that, (1) the owner was negligent in not detecting the leak and addressing the leak, (2) the owner was negligent in the matters involving the leak or what caused the leak, and (3) the owner was in violation of the governing documents of the condominium. See Fla Statute 718.111(11)(j), and note that “condominium property” as defined in Fla Statute 718.103(13) is all parts of the condominium. If any of these three elements is present in the conduct of the owner, then the owner is liable to the affected parties damaged by the leak. What if outside the 3 elements? The question is, what if the owner’s conduct does not fall within these three elements? Is the owner not liable even though the leak did occur and did damage the other units? We have a case with this question going on right now. Stay tuned for the outcome! This is the whole reason any homeowner/condominium owner and even renters should carry liability insurance. A little bit of premium can go a long way if and when something unforeseen happens, like a leak, or a fire.
Selective Enforcement Selective enforcement is when an association attempts to enforce the rules against one or a select group of homeowners, while simultaneously not enforcing those same rules similarly against other homeowners. It is unlawful for an association to pick and choose who they want to enforce rules against, as they have a duty to apply the rules fairly and equally to all homeowners. Unfortunately, sometimes associations will target certain homeowners for improper or independent purposes, while simultaneously not applying those same rules to other homeowners. Selective enforcement is an affirmative defense that a homeowner may raise against an association conducting themselves in this manner. If you believe your association may be selectively enforcing rules against you, it is imperative that you speak to an experienced attorney who can analyze your individual situation along side your associations governing documents in order to give you proper advice as to how to handle this conduct. Waiver Associations have a body of governing documents that the association board and homeowners of the community must adhere to. Generally speaking an association has discretion to act or refrain from acting so long as the association is acting in good faith and in accordance with what is known in the business world as, the business judgment rule. Sometimes associations will stop enforcing certain rules of the community. When this happens and continues to happen for a substantial period of time, an event called waiver may occur. Say for example an association’s declaration provides that dogs over 40 pounds are not allowed in the community. While the association has every right to enforce this rule equally upon all homeowners in the community, they typically are not under an obligation to enforce this rule if they choose not to enforce it against any homeowner. The association cannot however, allow 40 pound dogs for numerous homeowners over many years and then arbitrarily begin to enforce the 40 pound dog restriction at whim. When an association fails to enforce a rule for an unreasonable amount of time, waiver has likely occurred and the homeowners may no longer be subject to restrictions of these rules.
4000 HOLLYWOOD BLVD., SUITE 555-S HOLLYWOOD, FLORIDA, 33021 AVAILABLE BY APPOINTMENT
Michigan statutory law - Condominium Act 59 of 1978, MCL 559.101 et seq. AN ACT relative to condominiums and condominium projects; to prescribe powers and duties of the administrator; to provide certain protections for certain tenants, senior citizens, and persons with disabilities relating to conversion condominium projects; to provide for escrow arrangements; to provide an exemption from certain property tax increases; to impose duties on certain state departments; to prescribe remedies and penalties; and to repeal acts and parts of acts. History: 1978, Act 59, Eff. July 1, 1978; Amended 1980, Act 283, Imd. Eff. Oct. 10, 1980; Amended 1982, Act 538, Imd. Eff. Jan. 17, 1983; Amended. 1998, Act 36, Imd. Eff. Mar. 18, 1998. Entity Creation Mandatory vs. Optional * initial origin will be in the CCR*s found within the recorded real estate documentation contained in the Master Deed of the development (which may thereafter be amended pursuant to restrictions), and thereafter as related to each unit of co-owners title work. MCL 559.108; 559.191 There is a need to determine if the word or synonym for *mandatory* is referenced therein to conjoin each unit/lot/condominium or PUD to one another for a mutual benefit. Governance and Oversight Non-profit status * corporation or limited liability company * the initial governance is typically delivered through the developer, which planned and designed the large view of co-owned units, received state and local approvals, recorded original documentation. The governance typically depends upon ownership quantity, values, preferred status, and pro-rations. Transition from governance by the developer to an HOA board of directors based upon ownership, sales and pro-rations is ideally smooth, but oftentimes less so. Leverage and strength based upon ownership, values, exterior resources and dedication to mutual causes and interests have large effect. Board of Directors Obligations Upon creation of an HOA pursuant to Michigan non-profit corporation law, with taxation exemption (state and federal), governance by an HOA can commence based upon the CCR*s, by-laws, and rules and regulations duly adopted by the developer and/or co-owners (*governance documents*). Governance thereafter is similar to any corporate entity created under law, whether for-profit or non-profit. Typically, the first board of directors will be appointed by and with the assistance of the developer, who retains a certain amount of votes, based upon the co-owned units still titled in the developer*s name. Powers and authority of the board of directors are defined within the governance documents, which are amendable by authority of state statute or as provided in the governance documents themselves. MCL 559.190 When seeking participants at this level, set aside social alliances and favoritism in place of persons with leadership and professional skills and individuals seeking to work for the common benefit of all co-owners. Administration and Management Is there a paid, professional management company? How attentive is the designee to the HOA daily operations? If no paid management, who among the board of directors oversees the daily operations? Compensation or no compensation? Voting procedures by co-owners, by mortgagees on individual units, and by the members of the board of directors, are discussed in detail within the Michigan Condominium Act. MCL 559.109a, Common Area Responsibilities and Obligations The major benefit of an HOA is to put the burden and responsibility of management, oversight, maintenance, repair and *house keeping* of common areas upon a designee appointed by memorialized process set forth in the CCR*s, by-laws and rules and regulations. This might be the development entrance signs, or the roads and lanes for ingress and egress to units, or medians within those roads, or park maintenance, or lawn cutting on common areas, storm water runoff basins, or more intensive care of pool and community house facilities. No one co-owner has neither a right nor obligation to tend to any of those examples. Older developments that have no HOA often visibly suffer with regard to care, maintenance and repair or replacement of such examples because the obligation that originally rested with the developer has been passed on to no one in particular. Enforcement Abilities Based upon the authority imposed by the Michigan Condominium Act of 1978, the Master Deed for a real estate development may set forth and be recorded by exhibits, CCR*s, and by-laws for the project a detailed rights and obligations related to each unit or lot within the development with regard to common elements and prorate allocation to the same, both from the standpoint of usage entitlement but also with regard to the obligations to maintain the same. MCL 559.108; 559.173 The by-laws contain mandatory provisions as enumerated in MCL 559.154; 559.165 Moreover, they may also contain broad permissible provisions which don*t in any way conflict other rights or laws, such as limitations upon leasing, occupancy and selling, disability accommodations, rights to insure individual units, as examples. MCL 559.156 Financial obligations and assessments are imposed upon each unit to the degree associated with the maintenance, repair, renovation, restoration, or replacement of the eommon element based upon the percentages of value or other provisions as contained in the Master Deed for appointment of expenses of administration. MCL 559.169 Non-use or waiver of use by a co-owner shall not exempt obligatory contribution by such co-owner. MCL 559.169(4). Benefits to Owners The obvious benefit is the knowledge that common areas will be well maintained by a designee as needed. As a result, visual image will be more pleasing, which affects value per each unit within the HOA, when considering sale, lease or rental values. Other, less monetary benefits, include social desirability, bonding among co-owners, and the general welfare and co-existence within the development. Questions About Owning Before Buying a. Learn the HOA Rules * typically current CCR*s are discoverable on line, through the HOA website and/or the public real estate recordings within the Register of Deeds county records. Such are subject to change, based upon the mechanisms and formulae set forth in the CCR*s and by-laws of the HOA. Attendance at a board or membership meeting can be a good source of information. If such attendance is too restrictive and not transparent to outsiders* attendance, weigh the same when considering a purchase. b. Are HOA requirements properly enforced with administrative oversight? c. Assess environmental practices, with limitations of garden sizes, compost piling, use of fertilizers, pesticides, and sprinkler systems. d. Consider your temperament and customizing home owner desires to comport with HOA rules, oversight and enforcement. Observe social interactions among co-owners and be aware of negative activities that affect welfare and peaceful enjoyment. e. (1) Is there an annual HOA budget? How was it set? Is there management expertise? (2) What are the fees? How are fees set? How do they increase? History dues pattern for the last 10 years? (3) Does the developer still own lots? If so, is the developer a prorata contributor to the revenue of the HOA? (4) Does the HOA maintain a reserve fund for *rainy day* events? With any purchase transaction, will a co-owner apportioned reserve account (similar to an escrow for taxes) be transferred from seller to buyer. What do monthly fees cover? (5) A record of any history of special assessments? Are roads and lanes publically dedicated to the municipality or the responsibility of the HOA? (5) Additional fees for recreational facilities? Pools, tennis courts, club house and park usage are typically in addition to assessments. Ask whether guests and a maximum number of welcomed non-co-owners can participate. (6) Annual audits conducted by a CPA? Copy of minutes from last BOD meeting? Typically, monthly or in other specified interims. Last membership meeting? Typically annually. (7) Is the HOA managed by volunteers or a professional management company * learn the definition of authority, autonomy, oversight, restrictive abilities without additional authority, compensation? f. Prior meeting minutes * board of directors and membership * any current or past conflicts, process for resolution of conflicts, any litigation past or present, discuss with current and past board members, understanding that a volunteer, part-time office is treated differently than a paid employment position. g. Watch for under-management where the administration is not adequately covered? Common area maintenance, cleanliness, trash removal, ground crews, pool maintenance, supervisory oversight of all services (part-time or full time). h. Catastrophic insurance with the HOA as insured * needed for general common areas, such as community pools, club houses, parks, hallways, stairwells, parking lots to insure against floods, tornadoes, fires, and the like. i. Effect/impact of fees upon co-owner personal finances * impact upon home values with HOA typically higher as weig Conclusion Just like any formally created organization, there are well run, compliant entities and, to the other extreme, there are those that exist, with unmanaged, unenforced powers and duties because of inadequate governance documents or simply inexperienced leaders, such as members of the board of directors or management, who are entrusted to apply those document provisions to the administration of the entity.