While your property manager may not have all the answers, he or she should normally be the first stop in helping the Board of Directors track down expert advice. It is likely that the manager has run across similar circumstances in other communities, and can provide a general sense of what to expect - before the Association takes the next step of hiring a specialist (CPA, attorney, engineer, insurance broker, etc.). Here are a few responses to some interesting situations that homeowner associations have faced over the past year:
Federal Fair Housing Regulations
In communities with multiple swimming pools, one pool cannot be designated as “adults only” – children must be allowed access to all pools. The same is true for a pool or pools in a “seniors-only” community. Children of guests visiting these communities are permitted to use the pool.
However, the Department of HUD has upheld restrictions on children using fitness centers and business centers, based on the need to protect a child from dangerous equipment or certain websites.
Another issue that constantly comes up is parking for mobility-challenged homeowners. The rule of thumb is that the Association needs to accommodate requests to relocate designated parking spaces to provide the closest access to the home as possible. This is true even for secondary or vacation homes, not just for a primary residence.
Lack of Insurance
The State requires a minimum level of insurance coverage for condominiums. During a damage claim, it was discovered that the property insurance policy in place did not meet this minimum. The court ruled that the obligation was on the Association, not insurance company, to confirm correct coverage. Hopefully the Board had a good D&O (Directors and Officers) insurance policy…
Speaking of D&O: Always clarify what this insurance covers. Unlike liability or property insurance policies, D&O is not standardized, and a lot of items you believe are covered are probably not. For one community, the policy only covered claims for actual damages. When two homeowners sued for injunctive relief, they initially only filed for punitive, not actual damages. The Association had to cover the legal defense costs out of their own funds. The insurance only began covering costs once the complaint was changed to include actual damages. Besides nonmonetary damages, the two other items you should be looking for when reviewing your policy are defense for Fair Housing and other discrimination claims, and contract claims. Your Community Association Manager can assist with a preliminary review to identify weaknesses in your coverage.
Be careful in how you structure special assessment payment plans! One community gave owners the option of either paying the entire amount upfront, or having the Association pay via a bank loan, with the owner paying back the Association. In one instance, the bankruptcy court ruled that these Association-loans were unsecured debt.
Another example of lost funds occurred when the highway department took a portion of a community’s land, including a couple of homes, for road expansion. The Association was not able to claim future lost homeowners’ assessments as part of compensation.
In another assessment dispute, the home was owned by a limited liability corporation (LLC) rather than an individual homeowner. An attorney representing the LLC attempted to attend a Board meeting and was turned away. Although association members are entitled to attend board meetings, the member’s attorney does not have the right to attend without permission from the Association.
As always, the facts in your particular circumstance need to be considered. After consulting with your community association manager, the Board may need to seek outside counsel when important issues occur.