To "B" Or Not To "B"...

For a community facing what appears to be an overwhelming challenge – perhaps high delinquency rates or a ruinous lawsuit – one option that can be considered is having the Association file for bankruptcy.   Just how viable is this?  While extremely rare, it does occur, but involves more than the typical individual Chapter 13 or Chapter 7 bankruptcy. 

The biggest surprise is the power that the trustee, appointed by the court, has over the Association.  Realize that the trustee’s sole duty is to the creditors:  He is evaluated on how quickly and effectively he pays off debt.  For corporations, debts are not forgiven in bankruptcy.

Once a trustee is in charge, the Board effectively ceases to operate or have any input in to how business is conducted.  What amenities are supported, bills paid, etc. are now all handled by a designated dictator.

This trustee can prosecute, assign or sell all Association claims - and can liquidate all assets to satisfy creditors.  He is paid commission based on selling assets.   Assets include not only items like a lawn mower, pool equipment, or clubhouse furnishings - but actual real estate, such as the land held by the Association (think common areas!).  Imagine what could be done with that piece of green space sold to an outside party or business!  

Assets also include all the money in all the community’s bank accounts, and more importantly, the ability to levy assessments.   Yes, you read correctly:  The power of the Board to establish annual or special assessments is an item that can be sold off, and the one purchasing this power does not have to gain homeowner approval for its usage.  There are no votes on budget approval, and no cap on the amount of a special assessment imposed unilaterally.  Homeowners are faced with the prospect of having assessments of any amount imposed at any time without any avenue of input.  And incidentally, lending institutions will refuse to provide home loans for purchases or refinances, making it nearly impossible for current homeowners to escape.

The trustee can also sell claims, such as the right to pursue the Board for breach of fiduciary duty by permitting the circumstances leading to bankruptcy.  This claim permits the holder to tap the juicy D&O (Directors and Officers) Insurance policy valued at $1 million or more. Attorney/client privilege goes out the window, providing the trustee or claim holder access to any sensitive information that may compromise a Board member’s legal defense.

Before handing away such expansive and sweeping powers, be sure to consult your attorney about any options other than bankruptcy. 

When To Fertilize?

As the temperatures begin to rise and Spring is in the air, its only natural to start thinking about outdoor projects - which usually include tackling that lawn that was neglected all winter long. 

This article was provided to us by Russell Landscape and was written by Clint Waltz, a PhD and Turfgrass Specialist at UGA.  It provides great insight as to when the best time to fertilize your lawn may be. If you have any additional questions, be sure to contact your local garden store or your professional landscape company.

Spring Timing for Warm-season Turfgrass Fertilization

Clint Waltz, Ph.D., Turfgrass Specialist, The University of Georgia 

This time of year we start seeing marketing and commercials promoting “now” is the time to fertilize lawns. Homeowners need to know the proper timing for the spring nitrogen application to warm-season grasses like bermudagrass and zoysiagrass.  Remember that nitrogen (N) is the first number on a fertilizer bag.  Simply, nitrogen should not be applied to warm-season grasses until the soil temperatures at the 4-inch depth are consistently 65° F and rising.  For areas north of Atlanta these environmental conditions may not occur until mid-April.  Also, waiting on proper soil temperatures allows the grass to green-up on its own, typically better than forcing the grass to green-up too soon. 

Four reasons for withholding nitrogen until late spring include:

1.      Good Agronomics – when soil temperatures are below 65° F there is little, to no, root activity for warm-season grasses.  Why apply nitrogen when the grass cannot use it?

2.      Environmental – if not taken-up by the plant, nitrogen can leach through the soil or be lost by runoff.  Why apply nitrogen when the grass cannot take it up and risk contaminating water bodies?

3.      Pest Management – nitrogen fertilization during green-up can make the grass more susceptible to diseases, insects, and open voids in the canopy for weeds to establish.  Why apply nitrogen at a time when the grass is more sensitive to pests?

4.      Economic – when a nitrogen application is mistimed it can be inefficient and costly.  Why spend the money on nitrogen when the grass roots cannot take it up, it can move out of the root zone becoming an environmental hazard, or lead to pest issues that become an additional cost to treat?

To determine if environmental conditions are favorable for spring nitrogen, monitor soil temperatures in your own lawn with a 4- to 6-inch soil thermometer or, visit www.GeorgiaWeather.net to get local environmental conditions.

If your lawn is a combination of bermudagrass and tall fescue, a cool-season species, the two areas in the lawn should be fertilized independently and when the environmental conditions are ideal for each species.  Late February or early March is good for tall fescue but not bermudagrass and zoysiagrass.

Following these simple guidelines for warm-season grasses can lead to healthier lawns, reduced environmental impacts, and less cost. 

Over-Obligated

In a Georgia case earlier this year (Polo Golf and Country Club Homeowners’ Association, Inc. v. Rymer), a homeowner was given the green light to pursue the Association for the maintenance of a storm water system sitting on his property.

The covenants for the community require each individual homeowner to maintain and repair these storm drain systems.  To complicate the situation, years after the community was built the County created an ordinance requiring homeowner associations (HOAs) to take responsibility for all storm water infrastructures.

After the homeowner’s house suffered several floods, he sent demands to both the Association and the County to fix the drainage system.   What followed was a series of delays, and the Association sending mixed messages to the homeowner.  However, none of the communications informed the homeowner that he was responsible for handling the repairs.

Once lawyers got involved, the Association finally pointed to the Declaration requirement of the homeowner’s maintenance responsibilities.  Prior to this, the Association had actually informed the homeowner that he was not responsible.  On another occasion, the Association promised to make the repairs at no expense to the homeowner.  Since the government was also issuing citations at this point, the Association also challenged the County’s ability to force it to assume responsibility.

The court decided the County’s ordinance could not be enforced, since it was created after the development of the community, making the community exempt.  However, the Association had created so much confusion over the responsibilities that the court said the homeowner maintenance provision in the Declaration (in this instance) was also unenforceable.

The Association ended up footing the bill for all repairs, plus legal expenses. If the Board had been clear from the start about the homeowner’s responsibilities, all of this could have been avoided - along with all of the expenses and headaches that came along with it.

As a Board, be very cautious in taking on responsibilities without first reviewing the governing documents!

Do You Have Any Questions?

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.

Assessment Challenges

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.

Basic Responsibilities of the President, Vice President, Secretary and Treasurer of an HOA

This week's post is brought to you courtesy of Mindy C. Waitsman of Moore & Reese, LLC. We often hear from our Board members that when they volunteered to serve on their HOA/COA board - they actually had no idea what they were signing up for. This is a great article explaining some of the duties/responsibilities required of the various Board positions.

Serving on the board of directors for your community is one of the best ways to ensure that your voice is heard when it comes to decisions to be made for the community. In almost all cases, the board of directors is responsible for selecting the officers to operate the Association. Many newly appointed officers want to do what they can for their community but are unsure exactly what their new position means. Though many have heard the terms President, Vice President, Secretary and Treasurer, they volunteer to serve based on the limited knowledge that they have, but they are not sure of their responsibilities in one of these positions. This article will outline some of the common responsibilities for officers together with some standards of conduct.

Since community associations are incorporated as Nonprofit Corporations, the Georgia Nonprofit Corporation Code (the “Act”) controls the actions of the corporation. The Act lists certain standards of conduct for officers and directors. The responsibility for each officer, however, is not clearly outlined in the Act. Instead, you need to look at the Bylaws for your Association (“Association”). The information that follows outlines some of the more common responsibilities of officers. To be sure, however, you must review the Bylaws, corporate records and other governing documents for your Association.

President
The President is the chief executive officer of the Association. Most Bylaws provide that the President is responsible for conducting all meetings. A common Bylaw provision is as follows: “The President shall have all the general powers and duties that are incident to the office of the president of a corporation organized under the Georgia Nonprofit Corporation Code.”

Vice President
Generally, the Vice President is not assigned any specific tasks other than to conduct meetings in the event that the President cannot attend the meeting. Unofficially, the Vice President is often assigned a position as the chair of an active committee (i.e. the Architectural Control or Covenants Committee). A common Bylaw provision provides: “The Vice President shall act in the President's absence and shall have the same powers, duties, and responsibilities as the President when so acting.”

Secretary
The Act requires that all corporations in Georgia maintain certain books and records. Though the financial records are usually maintained by the Treasurer, the Secretary is responsible for the creation of all minutes for both board and membership meetings. The Secretary should also keep records of recommendations and, if permitted by the Bylaws and other Association governing documents, decisions by committees created by the board. If the Bylaws provide for elections by actions without a meeting, it is generally the Secretary who must ensure that the notices of meetings, the ballots and other related materials are properly distributed.
Though it is common for Associations that have professional management to delegate several of the responsibilities of the Secretary to the management company, the Secretary still needs to review the actions of the professional manager to ensure that proper records are maintained and notices are sent out on a timely basis.

Treasurer
The Treasurer is generally given the task of paying bills that have been approved by the Board, creating the budget, keeping up with the collection of assessments and other related matters of a financial nature. Because the creation of the budget is so important to the well-being of a community, the budget, though coordinated and overseen by the Treasurer, is the responsibility of the entire board. Additionally, like the Secretary, there are several tasks of the Treasurer that are often delegated to a professional community association manager. Also like the Secretary’s position, the Treasurer still needs to ensure that proper records are kept and any recommendations for the budget by the manager are reasonable.

Differences between a director and an officer
Many people confuse the responsibilities and obligations of the directors with the responsibilities and obligations of officers. This is further complicated by the fact that, generally, only individuals who have been elected as a director are qualified to be chosen to serve as an officer. There are, however, differences between the two positions.

Directors
Directors are elected by the members of the Association. The Bylaws for most associations provide the number of directors that must be at a meeting to meet quorum requirements and the number of directors that must vote to approve a decision for the Association. Individuals that serve on the board vote in their capacity as a director, not as an officer. Though Robert’s Rules of Order limit the times that a president may vote, this limitation does not generally apply to corporations in Georgia. The individual who is president is actually voting in his or her capacity as an elected director.

Members of the Association are often confused about their authority of the board to direct vendors that work for the Association. (i.e. Why did the board get to choose the pool furniture? I don’t like what they selected and I should have had a voice.) Because the Association is not a person, but an entity, Georgia law had to create a way for the entity to make decisions and take action. The Act and the Association’s governing documents in most instances clearly provide that the board of directors, not the membership, must direct the actions of the Association. A majority of a quorum of the directors is generally the number of individuals that must approve any action to be taken by the Association. Except in some limited circumstances that might be outlined in the Bylaws, (i.e. delinquency of a director), a majority of the members of the Association, not just the directors, must vote to remove a director.

Officers
The officers are appointed by the board of directors, not the membership of the Association. These appointments are generally made at an Organizational Meeting of the board, often immediately after the election of the board members. Under some governing documents of associations, officers are required to also be directors but this is not always the case. Because the board of directors appoints the officers, the board of directors can vote to remove an officer but that individual, if they were also a board member, remains on the board of directors. For example, if there is an issue necessitating the removal of the Treasurer, the majority of a quorum of the board of directors can vote to replace the Treasurer.

A review of your Association’s Bylaws will provide additional guidance for officers and directors of the Association. If you have any questions about your position, please feel free to contact your attorney for more information.

Who Is Representing Whom?

Boards of Directors and Community Association Managers (CAMs) should be mindful of the boundaries that their legal counsel faces.  Too often, a request or inquiry creates a conflict, because the attorney’s first duty is to the corporation, not individual Directors or managers.

 

For example, a Director provides non-Board related services to neighbors in the community.   This could be anything from CPA work, to drafting architectural plans, to handyman construction.  During an executive session, the Board of Directors is notified of a health-safety issue that impacts the clients of this particular Director.  He asks the Association’s attorney what he can and should disclose to his clients.  This is a conflict of fiduciary duties, and the Board should form an executive committee to handle the life-safety issue without the conflicted Director’s involvement.

To compound the situation, the Association’s attorney can’t advise the Director on handling the client-homeowner information conflict.  This Director would need to retain his own attorney for such advice, but that attorney is barred from using the Association’s information regarding the safety hazard.  If the conflicted Director attempts to pass on this information to his attorney, the attorney is obligated to destroy it and notify the Association’s attorney of the attempt.  Quitting the Board does not release the former Director from his duty of confidentiality.

If and when to release this sensitive information is an Association-only privilege:  No single Board member may unilaterally decide to disclose.  The Board as a group will need to consult with the attorney before voting to release any information.  Any Director who releases information without group approval exposes himself to liability and loses the protection of the Association’s Directors & Officers insurance coverage.

Board members and managers should also be aware that any private statements that they make to the Association’s attorney are subject to disclosure in certain situations, at the discretion of the attorney, even if it could expose the Director or manager to personal liability.    The protection of the Association as a corporation comes first. If a lawyer learns that an officer or agent of the community is engaged in or intends to act in a way that violates a legal obligation, leading to substantial harm for the Association, the lawyer is required to take whatever actions are necessary to protect the Association.  A Board member violating his duty to the association by stirring up dissension in the community, or instructing vendors to conduct work without formal Board approval – either of these could trigger the attorney to act. 

Related to this are required lines of communication.  For situations where the Association is being represented by an attorney, all correspondence must be solely to the Association’s legal counsel.  A vendor in a contract dispute, a homeowner in collections, or raging Board member must have the attorney’s consent before reaching out to any Board members directly.

As you can see, the proper handling of Association information is not easy.  After annual elections are held, the Board as a group should invite its corporate counsel to visit and provide in-depth discussion on this topic.

Five Types of Cold Damage to Landscaping Plants

With the unseasonably COLD temperatures that we've experienced in Atlanta this winter, we thought that this article might be both appropriate and helpful. This article was written and published by Crabapple LandscapExperts. For more info, please visit their blog at: http://crabapplelandscapexperts.blogspot.com/

Winter Leaf Scorch,
U DE, R. Mulrooney

Plants vary tremendously in their tolerance to cold temperatures. The U.S.D.A. publishes a Hardiness Zone Map that is based on decades of data and indicates Atlanta is in Zone 8A. This is used as a guide when choosing plants. Crabapple recommends the selection of plants that are reliably cold hardy in our area, and then excellent maintenance during the growing season, as the two best ways to guard against cold damage. Factors that affect plant selection include minimum and maximum daily temperatures, difference between day and night temperatures, and average daytime and nighttime temperatures. Location/site/microclimate in the landscape also plays a role.

Winter Burn or Desiccation Injury

Atlanta is filled with needle leaf evergreens (pine) and broad leaf evergreens such as camellias, tea olives, holly, anise and boxwood that keep the winter landscape green. Unfortunately, the broad leaf evergreens are more prone to winter burn or leaf desiccation injury than dormant, deciduous trees and shrubs. 

Winter Leaf Burn,
photo Glen Jacobsen

Winter burn occurs when the absorption of water by the roots cannot keep up with the amount of moisture lost by the foliage (transpiration). When the soil is frozen the roots cannot absorb water or translocate it up to the leaves to replace what is lost, and this results in leaf desiccation. This occurs on sunny and windy days, on days that are exceedingly cold (or hot), as well as when the soil is frozen and the plant cannot absorb water, or in a drought situation. Injury appears as brown leaf margins or needle tips. Usually the leaves are injured but dormant buds survive.

• A 3-inch layer of organic mulch (pine straw, woodchips, or leaves) helps to insulate the ground and moderate the soil moisture level.   
• The microclimate of a garden plays a big role in actual garden temperature. Changes in elevation, cold air drainage, sun exposure, and thermal heat mass (surrounding buildings, pavement or rocks) will make some gardens significantly warmer or cooler than the temperatures recorded for the area. Air drainage cold air sinks to the lowest spot. 
• Knowledgeable advance siting is important at the planting stage for broadleaf evergreens, and  includes such considerations as protection from winter wind and/or the direct rays of early morning sun. Crabapple accomplishes this by planting in the airy shade of tall pines, or on the west side of a building, wall or hedge.  
• Landscape plants should be well-watered prior to the cold blast. Luckily, there is plenty of moisture in metro-Atlanta soil due to our recent hard rains. 
• Anti-desiccants (brand names include Wilt Proof or Moisturin) can be sprayed on broadleaf evergreens to reduce the amount of water lost through leaves. However, leaves lose water through the same pores that take in carbon dioxide for photosynthesis, so the overuse ofantidesiccants can be toxic to plants.

Freezing injury

Freeze injury to Camellia
blossoms, Geri Laufer

When temperatures get too low, plants are susceptible to freezing injury. Flower buds are frequently affected, for example peach, dogwood, magnolia, forsythia or hydrangea flowers may not bloom well after an extremely cold winter. 

Container plants are more vulnerable to polar cold snaps than in-ground landscape plants and will benefit from some protection. Containerized nursery stock have small, above ground root balls that freeze easily, and newly planted bare uoot or balled-and-burlapped plants with their reduced root systems, are also very susceptible. 

One method of protection: remove branches from discarded Christmas trees (plentiful this week) and lay over the tops of nursery flats or pots. Then bury the whole area in fallen leaves. (Do not cover with plastic, because direct sun hitting the plastic can steam-cook the crops.)   

As for woody ornamentals planted in decorative accent containers, wooden, foam or plastic planters usually come through freezes just fine, but clay pottery can break if subjected to freezing temperatures. Move them to an unheated garage for a day or two to get over the worst of the weather. 

Winter injury, thin bark split
U of OH, "split happens"

Freeze cracks/sun scald

Sometimes it isn't really the cold temperatures that cause problems, but rapid fluctuations between warmth and cold as temperatures climb and plunge. Bark on some trees may split on the southwest side due to rapid temperature changes. Thin-barked trees such as cherries and maples are most likely to crack. Shade protection or wrapping with tree wrap may give protection against frost cracks. If thin-bark trees have split, call Crabapple LandscapExperts to shape and clean the wounds so they can heal over properly.

Frost injury

Frost injury typically occurs in low-lying frost pockets, especially at the beginning or end of the cold season, when summer annuals and vegetables can get that “wilted lettuce look” or camellia petals or early-blooming magnolia flowers are turned brown in a late cold snap. Delicate petals and new leaves are the most susceptible to frost damage. One way to avoid frost damage is to select late-flowering cultivars that bloom in the spring instead of the early ones.

Winter Frost Heave,
Missouri Botanical Garden

Soil heaving

Soil heaving results from alternate freezing and thawing of the soil and is rarely a problem in metro-Atlanta. Shallow perennial plant roots are pushed out of the soil leaving them exposed to cold and drying winds. Good root establishment helps to protect from heaving, but some plants (mums, strawberries) have characteristically shallow roots and are prone to heaving. 

Replant perennials that have been tossed out of the ground and water-in. Reduce heaving with an application of organic mulch, such as 3 inches of pine straw, wood chips or shredded leaves. Snow cover (also rare in metro-Atlanta) also acts as an insulation for perennials and often prevents heaving. 

January 4, 2014

History of Cold Temperatures in Hotlanta

Arctic Blast
10 coldest temps recorded at Atlanta's Hartsfield-Jackson Airport:
1. -8 degrees (January, 1985)
2. 0 (January, 1982)
3. 1 (December, 1985)
4. 5 (December, 1989)
5. 5 (January, 1994)
6. (tie) 6 (January, 1986 and February, 1996)
8. 8 (January, 2003)
9. 9 (January, 1985)
10. 10 (January, 1996)