Washington State Chapter
COMMUNITY
ASSOCIATIONS
INSTITUTE
The professional organization providing
education, resources, and advocacy
for community association living.
10 Most Common
Association Problems…
And How To Fix Them
Law Day – May 2013
Presented by:
Bob Goff
Danny DeWalt
Goff & DeWalt, LLP
Overview
• The GOALS of today’s presentation are to:
1. Identify the most common problems leaders
in community association’s face; and
2. Provide practical tools to address and
resolve these problems when they arise.
Over-Arching Principles
1. Be Reasonable
•
“The decisions of homeowner’s association's must be
reasonable.” (Riss v. Angel)
2. Be Consistent, Not Arbitrary
3. Seek Professional Help
1.
A director shall be entitled to rely on information, opinions,
reports or statements…prepared or presented … by counsel,
public accountants, or other persons as to matters which the
director believes to be within such person’s professional or
expert competence. (RCW 24.03.127)
4. Maintain transparency with members
Problem #1: Building a
Community Within the Association
• Know the demographics of your members
• Families? Busy professionals? Retirement?
• Facilitate opportunities for community
• BBQ’s, potlucks, work parties, holiday parties,
guest speakers
• Establish Traditions
• Be Transparent and Open
• Community Takes Commitment!
Problem #2: Maintenance & Repair
• CONDO ACT (RCW 64.34.328(1)): … the
association is responsible for maintenance, repair,
and replacement of the common elements,
including the limited common elements…
• HOA ACT (RCW 64.38.020): Unless otherwise
provided in the governing documents, an
association may: (6) Regulate the use,
maintenance, repair, replacement, and
modification of common areas;
Maintenance & Repair
• Do the governing documents clearly
allocate responsibility?
• Act quickly to avoid further damage!
• Repairs or Capital Improvements?
• If capital improvement,
check Declaration for owner
approval requirements (usually
for any expenditure on “addition
or capital improvement” over
$5 - $10k.)
Maintenance & Repair:
Have A Plan!
• Business Judgment Rule: Obtain and rely
on experts for investigation, repair and
recovery process.
• Conduct timely Building Envelope
investigations prior to expiration statutory
rights.
• Implied Warranties under the Condo Act
– RCW 64.34.445: Four Year Statute of
Limitations
Have A Plan!
• Follow a Maintenance Schedule
• Document, document, document!
• Reserve Studies (Apply to both HOA’s and
Condominiums)
– HOA: RCW 64.38; Condo: RCW 64.34
• Comply with RCW 64.55 when applicable.
Problem #3: Enforcing Governing
Documents
• Purpose: To promote and protect property
values for all association members
• Problems arise when:
• Governing documents are enforced
inconsistently or not enforced at all
• Board members emphasize “rules” over
“relationship” with members
• Board is perceived as a dictatorship
Enforcing Governing Documents
• To properly ENFORCE the governing documents
Board members must KNOW their contents and
UNDERSTAND how they work together.
• Declaration/CC&R’s
• Bylaws
• Rules & Regulations
• Articles of Incorporation
• Highlight every provision in the
governing documents that includes
“shall,” “must,” or “may.”
Consider This…
• Does the Board have the authority to act?
• Is the rule reasonable?
• In enforcing this rule is the Board acting
reasonably or selectively?
• Did the member have notice of the rule?
• Is there an action we can take to resolve this
in a relational manner?
Example: Are Pet Weight
Restrictions Reasonable?
This Dog Would Meet Virtually
Every Weight Restriction
Attorneys Fees Recoverable?
• The governing documents should provide for
the recovery of reasonable attorneys fees
and costs for the prevailing party where the
enforcement of the governing documents is
necessary.
“In any action to enforce the governing documents,
the prevailing party will be entitled to recover any
costs and reasonable attorneys' fees incurred in
connection with the action.”
Problem #4: Vendor Contracts
• Associations often unknowingly enter
contracts with vendors that include provisions
that can expose the Association to liability
and/or significant unnecessary costs
• Vendor contracts are often lacking detailed
specifications outlining the extent (and
limitations) of the vendor’s duties.
Key Elements of a Contract
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Parties to the contract
Scope of work to be performed
Total cost of work performed
Deadline for completion
Penalties for delay/nonperformance
Payment timeline and methods
Insurance requirements
Responsibility for obtaining licenses, permits and warranties
Who conducts progress inspections
Notification procedure for cost overruns
Notice required to terminate contract
Contract Clauses to Look Out For
• Indemnification and Hold Harmless
Agreement
• Attorneys Fees
• Insurance
• Limitation of Liability
• Dispute Resolution
Helpful Tips
• It’s more than the bid!
• Utilize vendors that you are confident will do a
good job for the Association –
• WSCAI Members
• WSCAI approved vendors will likely appreciate
the nuances of working with Associations
• Legal
• Hire an attorney to review your contract before
signing OR have the attorney draft a form
vendor contract
Problem #5: Smoking
• Issue: Can a condominium association ban a
member from smoking inside their own unit?
• In RCW 70.160.011, the legislature passed a
bill stating “the people of the State of
Washington recognize that exposure to
secondhand smoke is known to cause cancer
in humans” and, as a result, the statute bans
smoking in “public places.”
Condominium a “Public Place?”
• RCW 70.160.030: “No person may smoke in
a public place or in any place of
employment.”
• However, as defined by the statute, “public
place” does not include a private residence
unless the private residence is used to provide
licensed childcare, foster care, adult care, or
other similar social service on the premises.
Smoking in Condominiums
• Possible Legal Theories:
• Trespass? Nuisance? Violation of “noxious and
offensive activities” clause in Declaration?
• While association’s have the right to ban smoking in common
and limited common areas, Washington courts have been
unwilling to ban smoking inside units.
• Units can be made smoke free if the Declaration is amended
by vote of the owners. However, because this is a “change
in use,” passage of the amendment requires approval of
90% of all owners, plus 100% approval of owners that are
“particularly affected” by the change (i.e. owners that smoke).
Problem #6: Communication
• Effective communication with members of the
association is more important than any other
act the Board will take.
• Reasons for Communication Breakdowns:
• Owner’s Lack of Trust in the Board
• Past Failures
• Buyer’s remorse
Effective Communication
• Frequent
• Utilizes as many methods as possible
– Correspondence, Newsletters, Websites/Email,
Blog, Meetings, Twitter
• Positive, open and direct
• Regular, consistent Association meetings
• Listen
Problem #7: Reserve Studies &
Reserve Accounts
• What is it?
• A reserve study is a planning tool and
disclosure document for owners, buyers and
others, addressing the most significant
maintenance, repair & replacement expenses
an Association is likely to face over time
What is Required by Law in WA?
Condos (RCW 64.34) & HOA’s (RCW 64.38)
•
•
Association is encouraged to establish a Reserve Account.
Unless doing so would impose an “unreasonable hardship” an
association with “significant assets” shall prepare and update a
Reserve Study.
• Unreasonable Hardship: cost of preparing study exceeds 5% for HOA’s) or
10% (for condominiums) of the association’s annual budget.
• Significant Assets: Current total cost of major maintenance, repair and
replacement of reserve components is ≥50% (Condo) or ≥75% (HOA) of the
gross budget of the association, excluding reserve acct funds.
•
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At least every three years, the study must be prepared and based upon
a visual site inspection by a Reserve Study Professional.
Must estimate anticipated major maintenance, repair and replacement
costs, whose infrequent and significant nature make them impractical to
be included in an annual budget.
Reserve Study - Exemptions
HOA’s (RCW 64.38.090)
Condo’s (RCW 64.34.392)
• Cost of reserve study
exceeds 5% of the
association’s annual
budget; or
• Association does not
have “significant assets”;
or
• 10 or fewer homes in the
association
• 10 or fewer units; AND
• 2/3 of the owners agree
to exempt the association
from the requirements.
•
NOTE: Unit owners must agree to
maintain an exemption by a 2/3
vote every three years and the
association must disclose it does
not have a reserve study in its
resale certificates
The Right Approach
1. Know and understand legal requirements.
2. Raise assessments to keep up with inflation.
3. Choose funding levels based on a financial
plan that is based on the long-term health of
the association rather than on emotion or
current circumstances.
4. Seek and follow the advice of professionals.
Problem #8: Dealing with Difficult
Owners
• How satisfied are you with your HOA?
Satisfied 72%...Neutral 19%...Dissatisfied 9%
• 74% of homeowners believe their HOA protects their
property values. Only 3% believe the HOA is
harmful.
• Ultimately, the vast majority of the difficulties and
concerns come from a very limited minority of the
HOA members.
Source: Community Associations Institute
http://www.yourhoamanager.com/blog/
Practical Solutions
• If you can’t beat ‘em, have them join you! Try to turn the
disgruntled owner into a contributor to the association.
• Give the owner a proper forum to voice his/her concerns
and viewpoints
• Place the owner on a committee
• Build member consensus on Board decisions.
• Minimize the costs of dealing with the owner; both monetarily
and in terms of the interference with association operations.
• Follow the procedures of your governing documents closely.
• DO NOT make decisions which favor others over the owner.
• Don’t go to court unless you’re certain the association can
win.
Legal Options (If Necessary)
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Fines/Liens/Collections
Injunctions/Temporary Restraining Orders
Specific Performance
Civil Action for Damages
Criminal Action
• Police should always be contacted if there is a
concern for safety because of actions by a
member of the association.
Problem #9: Failing to Protect the
Association’s Rights
• Important Statutes of Limitations
• 3 Years: Oral contracts; Survival Statute
• 4 Years: Condo Act Warranties
• 6 Years: Written Contracts
Problem #10: Social Media
• More and more community associations are
using social media to convey information,
encourage owner involvement and build
community.
• Methods include:
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Facebook
Twitter
Linked In
YouTube
Social Media: Risk vs. Reward
Benefits of Social Media
• Communicate a message
to a large audience
• Little, if any, cost
• Access to younger
demographic of members
• Create a forum for owner
involvement
Risks Posed by Social
Media Use
• Increased liability
• Libel
• Copyright infringement
• Invasion of privacy
• Exposure of confidential
and/or personal
information
• Increased potential for
miscommunication
• Lack of accountability
Protections Against Liability
• Strictly control access and use of the medium to
members only.
• Where open comment is permitted, post a disclaimer
stating the goal is to encourage the open exchange
of ideas, but views expressed do not reflect the
position of the association.
• Establish, publish and maintain standards for usage
of the medium.
• Ensure the Association’s insurance covers claims
that may be brought related to social media usage.
Protections Against Liability
• Prohibit publication of any confidential or
embarrassing information that may violate a
member’s privacy rights.
• Establish procedures for screening content
before it is posted and for removing content
deemed offensive, potentially libelous, or
otherwise inconsistent with pre-established
standards.
Resources
(caionline.org)
CAI and the
Washington State Chapter of CAI
Working Together to Serve You
National CAI
caionline.org
(888) 224-4321
Washington State CAI
wscai.org
(425) 778-6378