The Value of Rules

One of the benefits of living in an Association is the enjoyment of amenities at a cost that is also shared with your neighbors. The amenities and other shared spaces are referred to as the "common areas". The governing documents and rules and regulations establish how residents are expected to conduct themselves in these "common areas". Some common restrictions relate to pets, trash cans, smoking, and parking.  These exist to promote a harmonious quality of life for the community - so that everyone is able to enjoy the shared amenities!   Examples include:

PET RESTRICTIONS

In many communities pets must be kept on a leash, owners must pick up and properly dispose of excrement, and excessive pet barking must be curbed to acceptable levels. Off-leash pets pose a threat to everyone, as the owner no longer has control over the dog’s actions. The pet may dart away from the owner and get struck by a car or attack another pet or person. Owners are asked to utilize specific areas to allow their pets to use the bathroom and to pick up after their pets. Besides being unsightly, smelly and offensive, pet excrement harms landscaping and contaminates groundwater. Contrary to popular belief, pet urine is not “good” for the landscaping. Social media guru Garth Johnston states the following in his blog “While urea is rich in nitrogen, and plants require nitrogen for leaf growth, urea is also rich in salt. Remember Carthage? The Romans salted the earth so that no crops would ever grow again. Salt sucks moisture from leaves and roots alike and kills beneficial soil microorganisms. Next time you’re in any park, look at the shrubs at the entrance and on corners; they all have a sad brown arc of dead leaves at the base.” This is due to the fact that this spot is usually a pet favorite when entering or leaving a park. 

TRASH CANS

Trash cans left outside well beyond pick up time are not attractive and detract from the overall appearance of the neighborhood, sending a message that the community is unmonitored. This encourages a rolling snowball effect, as the area becomes a trash magnet, branching out into other issues such as graffiti.  Untamed trash cans can become a hazard if they are left tipped over in the street. It is important for community members to know when trash pick-up days are and what is acceptable to be left on the curb.  Related to this topic, the placement of unauthorized items in the common area also detract from the overall appearance of the neighborhood.

SMOKING

A common issue in condo and townhome communities is the transference of odor into the common areas and neighboring units. While this is largely a neighbor-to-neighbor issue the Association is sometimes asked to intervene in extreme cases. The governing documents for communities typically have language about the right to “quiet enjoyment” of one’s home and go on to address offensive odors or obnoxious behavior. The smoker’s right to smoke is equal to the non-smoker’s right to avoid exposure. It is important for smokers to take steps to eliminate odors through mini-air filtration systems, frequent filter changes in the primary HVAC unit, purchasing upgraded filters, or the incorporation of outdoor smoke breaks.  Some legal challenges have started cropping up where owners sue neighbors over this issue.

PARKING

Parking is often a challenge in communities. Parking guidelines are designed to allow continuous ingress and egress through the community. Improperly parked cars that impede flow and usage are not only an inconvenience but often pose a safety hazard. Limited space available for visitor parking at clubhouses and in condo communities also poses challenges. Frequent communications will breed familiarity with the parking guidelines, so homeowners make the appropriate arrangements for their guests.

Living in an Association provides each home with certain rights and responsibilities. It is crucial for the Association to educate the members about rules and regulations that govern the community. When the majority of the membership is educated on the rules and consistently observe them, property values are positively impacted for everyone. At the end of the day, the rules are in place to protect the investment and enjoyment of all residents within the community, and therefore should be taken seriously.

Financial Reversal

As Community Association Managers, we have experienced some interesting economic times in the last several years. The slump in the economy has placed a real strain on everyone, including the Homeowner Association sector. People are deciding which bills they are going to pay first:  “Am I going to pay the mortgage or pay my HOA assessment bill?”   The HOA bill typically goes to the bottom of the pile. This shifts the financial strain from the individual homeowners onto the HOAs themselves (think about the compounding effect of a number of non-paying homeowners within one HOA), forcing the HOAs to tap into reserves.  In many cases they are depleting these reserves completely, leaving no wiggle room when trying to tackle unexpected projects or disasters that come up, let alone the regular monthly bills.  This is a frightening reality for many associations today. 

There are several keys to making sure that you are doing everything you can to recover the funds that homeowners are failing to pay to the association:  

• Staying in constant contact with the association’s attorney is critical.  Even though they may say they are handling your collections, issue frequent email communications just to make sure things are not going off track.
• Only send over the amount of accounts you can afford. If you send every delinquent homeowner over to the attorney at once, you may end up over depleting your funds. As each account is collected and you have received the money for these accounts, send one or two more over to the attorney.
• Have your HOA board set a consistent collections policy. Most attorneys suggest an outside cap of two years for filing liens and three years for filing suit - because after four years you cannot collect due to statute of limitations.
• Work with the attorney on some kind of deferred fee or advanced contingency plan. Both of these actions typically charge the attorney’s fee back to the homeowner and keep the financial burden away from the HOA.
• If the homeowner asks for some kind of payment plan, have the board accept a plan that is reasonable enough for the homeowner. Six or twelve months are typically considered to be reasonable payback periods.
• If the homeowner asks for a settlement, see if there are any fines on the account that can be removed, especially if all violations have been corrected. Since fines are circumstantial and may not survive a court challenge, this becomes a great bargaining tool. Homeowners see this as an act of good faith on the board’s part. Not only will you collect your money, but positive public relations make this a win-win situation.

Besides collections, review your community expenses and see what can be cut. A prime area is landscaping.  If you can get away with not using the landscaper during the winter months, then do so. Tall grass is the biggest landscaping eyesore and since grass does not grow in the winter…   Shutting off the sprinkler system, especially during the winter months is another way to cut expenses.

These are just a couple of the many ways you can tackle financial woes when your HOA hits financial lows.  Some associations that were completely “broke” a few years ago now have tens of thousands of dollars in the bank. It can be done – Don’t give up hope!  There are solutions and as always, Access Management Group is here to help.

"I'm a Professional..."

A common topic Access Management Group responds to are questions on actions taken by individual Board members:

“Recently one of our Board members, on his own, sent out a message to the community soliciting information about management company interactions.  I’m worried it may have been inappropriate.  What is the rule for communications by the Board?”

If an action by a Board member causes unease, don’t ignore your gut reaction:  Boards must operate in a way that is very definitive, with unified messaging, to avoid needless confusion.   How an email or letter is worded may negatively impact the community’s perception of the Board if it is too “familiar” (using words like “I” rather than “We”) in tone, or can be perceived as political in nature. 

Remember:  A community association is a corporation run in the manner of a business, not a city council.  While the natural desire is to be friendly and informal, any communication from the Board or a Board member will be taken as an official pronouncement by some in the community, regardless of intent.

The best policy is for the Board to designate a single point of contact, whether that is the Board president, secretary, or the community association manager.  Whoever is selected should have excellent composition skills:   Misspellings and grammatical errors will distract from any messaging.  Nothing should be sent to the community without review by the Board as a group.  While not every Board member will respond or agree with a particular notice, all should be focused on maintaining the professional image of the Association.

All of this relates to the broader issue of a Director choosing to act independently of the Board.  The Georgia Real Estate Commission, which oversees the licensing of Community Association Managers, has provided the following on dissenting Directors:

• A Director who does not agree with the decision of the group should request that his/her dissenting vote be identified in the Minutes of the meeting

• Although not required by law, a dissenting Director should keep the discussion at the Board meeting confidential even though he/she disagrees with the final result

• If the dissenting Director uses knowledge obtained at a Board meeting to undermine the association, the dissenting Director could be in breach of his/her duties of care and loyalty and personally liable (without indemnification) for any damages their actions create

• The Board should send a cease and desist letter to the dissenting Director

• The Board might need to vote to remove the dissenting Director (sometimes membership must vote to remove a Board member)

• The Board might need to obtain a temporary restraining order against the dissenting Director

As you can see, this is a serious topic that needs to be discussed frankly and frequently among all Board members.  Setting expectations in advance of such negative behavior is key to preventing a dysfunctional and disrespected Board.

A Corporate World

Consider this real-life scenario: Bob purchased shares of Coca Cola stock without first reviewing the company’s performance and future plans.  He was looking forward to earning dividends along the way, and surely he could sell his shares and get out at anytime with extra money in his pocket.

Leading up to the annual meeting, Bob received a mailing from Coke, detailing plans for further expansion in to South America, and he was upset to discover that no dividends would be issued.  Because of liability the company was addressing, the value of his stock actually dropped.  There were other items as well, and he didn’t agree with any of them. 

He immediately sent a series of messages to the Board of Directors, challenging them on various items, claiming they didn’t have the authority to take certain steps without stockholder approval, and threatening legal action.

The Board didn’t respond, as all of Bob’s challenges were invalidated by the regulations spelled out in the company’s governing documents – an educational experience for Bob that came at the cost of hiring an attorney.  When Bob complained that he hadn’t known about these regulations, he learned it was up to him to discover such things.  Ignorance of the law is no excuse.

Unfortunately, many prospective homeowners are like Bob, not taking time to research the community that they plan to purchase in to.  They are shocked to discover the level of authority a homeowners association carries.  Disagreements over budgets, assessments or compliance violations often result from misunderstanding the roles and rules that a person agrees to when moving in to a deed-restricted community.  

Just like Coca Cola, homeowner associations (HOAs) are corporations and operate under the same set of laws.  Many of the restrictions you would face as an employee or an investor in a company apply to HOAs.  While a firm may have a clothing dress code, your association has a housing dress code.  Your employer won’t allow you to set up a camper trailer in the parking lot, and the same trailer would not be permitted in HOA’s common area.   The similarities go on.

With some exceptions, a person is able to contract away many of the rights granted by the U.S. Constitution.   A homeowner may stand up in a community meeting, waiving a copy of the Declaration of Independence or Constitution, and demand the right to post any type of signage he wants in his yard.  However, he is bound by the covenants he entered into when purchasing his home.  These covenants are a contract between all homeowners in the community, and if they require signage to be posted only in the window of a home, the homeowners will need to come together as a group to alter the terms of the contract to permit signs elsewhere. 

Such amendments are not easy to pass, and anyone buying in to a community should assume that the regulations will remain unaltered.   This is not necessarily a negative situation:  It prevents the implementation of truly horrific regulations that would create misery for the neighbors and drive down home values.  The amendment process is intentionally cumbersome, encouraging thoughtful deliberation over a span of months or years.  Slow change is preferable to a whirlwind that leaves your community in shambles.  For items worth changing, working through the process, rather than railing against Board volunteers, is the path to success.

Actions Speak Louder

When homeowners contact the management company or the Board of Directors to lodge a complaint, instead of dismissing them, ask them to volunteer for a committee. This gives them a constructive outlet to be part of a solution on something they are passionate about.  Sometimes in serving on a committee, they discover their complaints are not as valid and what they are trying to accomplish is not as easy as they originally thought; but at least they were provided the choice and know that they were heard.

Boards are typically empowered by the governing documents to appoint residents to serve on committees.  Although it may not be detailed in the governing documents, members of the same household serving on a committee could be considered a conflict of interest, so Boards will usually steer clear of making such assignments.   If a committee member is not doing his job or takes action that could jeopardize the Association, the Board has the ability dismiss this volunteer.

These committees then appoint a chairperson to run meetings and report back to the Board.  Examples of committees are Architectural Control, Finance, Landscaping, Pool and Social.  There are also temporary committees (called ad hoc committees) that are developed for specific purposes or special projects, such as a Budget committee.   Each committee has its own budget which is submitted to the Board for approval annually.

Now for a few examples of concerned homeowners being asked to serve on committees:

One homeowner who had been on the lease waiting list for five years asked if the covenants could be amended to increase the number of homes permitted to lease at any one time.  With the Board’s blessing, she was permitted to send a survey to the community to see how many people were interested in amending the covenants, before the Board went through the expensive and arduous process of getting an amendment passed.  Because of this exercise, the homeowner felt the Board understood her concerns, and she learned first-hand how hard it is to be get people to respond.  In addition, many that did respond were opposed (for various reasons) to changing the covenants.  The matter was dropped. 

Another homeowner complained on how the money was spent and the amount of the assessments.  He was invited to serve on the budget committee.  Despite several attempts to reach him afterward by both the Treasurer and Community Association Manager, he was never heard from again.

A truly legitimate concern calls for a truly legitimate action on the part of the person identifying the problem.  While some homeowners only wish to complain but not help resolve issues, making it a standard that all challenges will be meet with an invitation to a committee will reduce needless negativity and help those who agree to volunteer to gain a better understanding of how and why Associations operate as they do.  

Building Harmony

For Community Association Managers, often the largest and most intense parts of the job are enforcing the covenants, design standards and rules of the community.  Even though every homeowner signs a document acknowledging these regulations at the time of a home purchase, it is a daily struggle to enforce rules with some owners.  Most homeowners are great people to work with; however, there are always those “special” situations that are over the top.

In one Atlanta community, the Association has a rule stating no outbuildings are permitted.  A homeowner made several modifications to a property without approval, including installing an outbuilding.  Upon learning of this, the Association asked the homeowner to submit the modifications for approval to the Architectural Control Committee (ACC) (some communities call it an ARC).  As you may guess, the ACC approved the modifications that were within community standards but disapproved the outbuilding.  The homeowner attended an appeals hearing with the Board of Directors, as is often required in most Associations, where he made an impassioned plea to keep the unapproved outbuilding.  The Board reaffirmed the ACC decision to disallow the outbuilding as it did not meet community standards. 

 

After some time and many letters, the Association filed suit against the homeowner for removal of the outbuilding and damages.  So what makes this situation over the top?  It took over seven years to reach a resolution on this situation!  The outbuilding is now gone and has been replaced by a structure acceptable to both the homeowner and the Association.  The unfortunate outcome is the incredible amount of time and money involved in reaching this resolution, along with the needless stress everyone experienced. 

Lessons?  As a homeowner, it is very important to know and follow the rules of your Association when making any modification to your property.  Simply following the rules in this case could have avoided this entire confrontation.  As an Association, you need to be proactive in resolving disputes.  Be clear on why something is a violation and why it cannot be allowed to continue.  Try to drill down to find the heart of the dispute and work with the owner to find a satisfactory resolution for all.  Unfortunately, a situation like this cannot always be avoided, but in most cases it can.

A decade ago, another Atlanta community had a dispute with a homeowner over flagpoles.  The community rules explicitly stated, “No flagpoles in the front yard”.  The flagpole in question was installed without approval.  The Association required the removal of the flagpole.  Even given the protection of the right to fly the United States flag and the pitched patriotism in the midst of wars in Iraq and Afghanistan, the Association was able to obtain removal of the flagpole. 

Fast forward several years:  Same community, same rules, same situation; much different result.  The Association went to court on the second flagpole case and lost; the flagpole was allowed to stay and all accumulated fines were removed. 

Lessons?  Association rules may tread on the rights of citizens.  It is also true that citizens have the ability to relinquish some of their rights as is done when someone buys a home in an Association.  That being said, rules should be carefully reviewed with a critical eye.  Any rule that could be controversial or sensitive should be well considered. 

In this situation, fighting a veteran flying a flag is certainly not ideal and other options should be considered:  Alternative ways of flying a flag, such as on a pole attached to the house or on a porch, or perhaps determine a way to have flag poles as a harmonious part of an overall landscape plan. 

Proactively harmonizing regulations to reach key goals that enhance the community should be what every Association strives for.  

Hard @ Work

Do you know what your covenants say about home-based businesses?  Although covenants vary, most address the topic of commercial activity under the “Use Restrictions” section of the Declaration.

In this economy, homeowners have been very creative about how they earn a living.  Some are able to telecommute and others provide services that require them to store equipment or inventory.  Let’s not forget about the industrious stay-at-home mom who brings in a little bit of extra income on the side selling kitchen tools or adorable kids’ clothes.

This begs the question:  How do you know such business activity is taking place and does it comply with the covenants?  Often the covenants allow for a business so long as it is not visibly apparent to the community or there is not excessive traffic by clients or suppliers to the home. In other instances, the covenants allow Board of Director discretion when determining what is and isn’t acceptable.

When a home business grows into something more than what a house can contain, it’s time to address the problem with the owner.  What began as a favor for a sister-in-law turns into a full blown day care?  Is there excessive parking on the street from those piano students’ parents? Are employees coming to the home on a daily basis?  In all of these cases, other violations can stem from the original use-restriction of business activity.

If a homeowner becomes resistant to following the covenants in the name of earning a living, the board should first address the problem with a violation notice.  If that fails, the next step is to use any fining provisions in the covenants.  Another option is to seek help from local authorities, such as county code enforcement, the environmental health department or the business license office in the local city or county.  In some instances such as child care, even state agencies, such as Bright from the Start, can be involved.  The Board may also opt to sue for injunctive relief.

If a Board fails to act and the home-based business owner is causing a nuisance to his or her neighbors, these neighbors have the option of enforcing the covenants by taking the owner to court themselves. As long as there are deed restrictions on the property that haven’t expired, these will be enforced the judicial system.

Home-based business regulations drafted twenty years ago need to be applied in a fair and consistent manner that fits with today’s reality.  Balancing neighbors’ expectations with a homeowner’s livelihood requires a solution that is fair and respectful for everyone.