Tuesday, March 26, 2013

You've Got Mail

Most Boards of Directors regularly correspond and reach decisions via email.  This is just a fact of life in this digital world.  However, unless your community's Bylaws specifically provide for this, such decisions may be successfully challenged or invalidated. 

If your Bylaws specifically permit actions to be taken outside of a meeting by a majority of directors, the Georgia statutes (OCGA 14-3-821) provide some wiggle room on email communications.  To qualify, signed consents by the majority of the Board must be received by the Association’s secretary to include with the minutes, before an action can be considered officially approved.  If your documents require approval by all directors, or do not explicitly state that action can be taken outside of a meeting, you will first need to amend the Bylaws with a community vote.  This will typically require a formal meeting of the membership…unless your Bylaws permit mail-in ballots.

While updating your governing documents, check with legal counsel to address other noncontroversial issues such as lowering quorum requirements.  Speaking of quorums, a 2012 Georgia appeals case (Demere Landing Condominium v Matthew) invalidated a vote based on proxies.  The court determined that proxies could not be counted toward quorum unless specifically stated in the Bylaws.  Do your Bylaws permit this?

Your effort to erase pitfalls in documents created ten or twenty years ago will help your community be more effective in facing a fast-paced society.

Tuesday, March 19, 2013

Guilt by Association

It may be hard to believe, but on occasion Access Management Group (and any other management company) may come across a community that is mishandled by its Board of Directors - whether on purpose or not.  Examples include:   
  • Directors “rewarding” themselves for their unpaid services; 
  • Directors ignoring HOA educational opportunities; 
  • Directors fixating over a dissentious item to the exclusion of all others; 
  • Directors setting up shell companies to profit from various vendor services (i.e. landscaping, plumbing); 
  • Directors hiring “cheap” vendors who don’t carry proper insurance or credentials;
  • Directors obligating the Association to address repairs that are the homeowners’ responsibility; 
  • Directors refusing to obtain a reserve study or audit or consult expert advice;
And the list goes on!

The old adage “If you lie down with dogs, you get up with fleas” rings true.  Reputation is key for firms in the HOA industry.  Despite a competitive environment, business might be turned away rather than associating our firm’s name with questionable client choices.  If it is discovered that an existing client is taking such actions, we try to counsel and attempt to work through the problem - but if the Board refuses to change, it may be best to part ways.

The same holds true for reputable Boards:   Be cautious in whom you select to provide vendor services for your Association.  Value is measured by more than money.  Who you are and what you stand for attracts like types.  A long-term mutually respectful relationship brings strong continuity to a community, and constantly increases value for both parties involved. 

Choose wisely.

Tuesday, March 12, 2013

Falling Trees

Last November, the Georgia Court of Appeals addressed an issue of Association liability when a tree fell on a child (Kensington Place Owners Assn., Inc. v. Thomas).

Back in April 2008, a thirteen year old boy and his friends were taking turns pushing a standing dead tree back and forth - while also recording it on a cell phone video.  Some younger kids gathered to watch, and the older boys had everyone move back for safety.  After several minutes of pushing the tree back and forth, the tree started cracking, and after further pushing - the tree finally collapsed, striking and fatally injuring the thirteen year old.

The boy’s mother sued the Association, saying that it should have known about the presence of the dead tree and had failed to take safety precautions to have the tree removed.  The Association defended itself by saying that the boy assumed the risk by choosing to act even though he knew of the danger.

The mother then claimed that a child of her son’s age was incapable of evaluating and accepting the risks, allowing peer pressure to cloud his judgment in a way which an older person would not.The Appeals court noted that in Georgia, it is situational as to whether any particular child between the ages of seven and fourteen is capable of assuming risk. Although courts do not expect children always to appreciate dangers to the same extent as adults, they recognize that children as old as the deceased child were quite capable of appreciating certain obvious dangers.

The fact that the thirteen year old had asked the younger children to move back; that he was present when his older friends also told the younger children to move back; that he moved away from the tree when it first started to move and again when it started to fall; and that he commented during the incident about falling trees and injury - all showed that he knew, understood and appreciated the risk of injury from a falling tree.

In response to the mother’s claim that the children doubted that the tree would fall and did not think that they would get hurt - the court found that this merely reflected the children’s assessment that injury was unlikely; it was not evidence that they denied the possibility that the tree might fall.

Under past cases involving injury, courts in Georgia rely upon the concept of superior knowledge to determine liability.  If the Association is aware of a safety condition that needs to be addressed, and a guest or resident is not - if injury occurs, the Association will be held liable.  However, if Association and resident have equal knowledge, the Association will likely not be responsible for injuries. 

It is critically important that Associations have their grounds frequently inspected to spot potential hazards, and have them addressed immediately. At a minimum, hazardous areas must be immediately roped off with “caution” tape until repairs can be made.  Most communities only order monthly property inspections by their management companies, so it is a good idea for the Board to set up an inspection group to check around one or more times each week to ensure everything is as safe as reasonably possible.

Tuesday, March 5, 2013

Dear Access Management Group,

We are frequently receiving information requests - and we’re happy to assist with such requests, whether or not these requests come from existing clients.  Below is a recent example that we think might be helpful to share. If you happen to have a topic you would like to see covered, feel free to call Access Management at (770) 777-6890.

I attended your free Board of Directors training class a few months back and took away a lot of great ideas that I had hoped to implement in my HOA.  One idea was to form a budget committee, but that went over like a lead balloon with many fellow Board members.  Homeowners have expressed an interest in forming a budget committee, but I don't want to go against the other Board members.  Should I be wary of meeting with these residents?

 Also, we recently approved a large project not planned for in our annual budget or capital project schedule.  It is a continuation of something many of the residents have complained about in the past, questioning the Board’s rationale spending funds on such a project.  I had suggested it be pushed back to be included in the next annual budget, but the other Board members balked.  Ultimately, the project was approved despite my objection, with only two directors voting "No".  As Treasurer, I'm concerned that, even though I fought against it, I could be accused of mismanaging the funds.  Is there a general rule to follow in approving large projects?  Parts of this project will at least give the appearance of benefiting one of the Board members.  Could the residents sue us for something like this?

Our response to this HOA treasurer included the following information: 

Typically, instances where a Board won’t authorize a budget committee are when either it doesn’t want to have to reject a budget proposal, or it is concerned that people on the budget committee might run for the Board positions afterward.  Unfortunately, unless the Board votes to approve the committee, the only way a committee might be established is if homeowners personally appear before a Board meeting and make a public request.

For unbudgeted projects, the best protection is to request that the meeting Minutes be amended to list who voted “yes” or “no” on that particular item.  It will be difficult to hold you responsible for mismanagement if you show you were against it.

Homeowners can choose to sue for anything, but unless they have a lot of money, the cheaper option is just to vote out Board members.  Courtroom judges will rarely second-guess a Board decision, so the homeowners would have to come up with really good documentation showing poor business decisions being made.

For big projects, always involve professionals such as engineers, attorneys, etc. for advice, and obtain at least three qualified bids – this demonstrates due diligence.  At the end of the day, the Board has the ability to make whatever decision it wants, so it is critical that homeowners engaged in each meeting throughout the year.