Wednesday, June 8, 2016

"What Happens Now"?-Homeowner Association Sex Offender Restrictions

Your association wants to pass an amendment to its governing documents which prohibits registered sex offenders from living in the subdivision… What Happens Now?  

            Are there registered sex offenders in your community? This is a question that used to be difficult to answer, but in 1993 the United States Supreme Court ruled that information on sex offenders could be posted on the internet. In 1994 the United States Congress passed the Violent Crime Control and Law Enforcement Act of 1994", aka Megan's Law.  Megan's Law makes it mandatory for all states put a method in place for informing local residents when a sexual offender is moves into their community.  While the notification databases which have been created in response to Megan's Law are very helpful, what else can homeowner and condominium owner associations do?  Currently, there are close to 700,000 registered sex offenders in the United States. Some associations have begun trying to ban sex offenders from their communities. This is a hot issue, and is still up for debate. While some lawsuits have been brought to court, precedent has yet to be set for this issue.

           With more common areas in communities, residents are becoming increasingly concerned about sex offenders.  Residents want to feel comfortable sending their children to common areas such as pools or playgrounds and they don't want registered sex offenders in the area.  Many residents are also worried about the negative impact that sex offenders will have on their property values. 
           Is it legal for your homeowner or condominium association to pass an amendment banning sex offenders?  If the owners of a community want to pass an amendment to their governing documents restricting sex offenders, they are most definitely able to do so if they comply with the amendment requirements found in their governing documents.  Enforcing this restriction is the difficult part.  It would be very difficult to restrict a sex offender from buying a home.  Restricting residency within the subdivision would be more effective. This way you would only be preventing a sex offender from living in a community, not restricting them from owning property.  Although a little easier to enforce, restricting sex offenders from living in the subdivision may still prove difficult to enforce against future owners.

           Banning sex offenders does come with its own set of risks.  Banning sex offenders could give residents a false since of security and cause them to live less cautiously than necessary.  There is also a huge financial risk in passing these restrictions. Your community may have to go to court to enforce this restriction at some point and this could prove to be a very expensive and time consuming endeavor, especially if the sex offender is already a homeowner.  The residents of the association must be willing to spend more money to cover the cost of enforcing the restriction; otherwise it should not be approved.

          Courts have held that (1), residency restrictions are a form of civil regulation intended to protect children and thus, the principal argument against these restrictions (that they amount to ex post facto laws) does not apply; (2), the federal constitution does not include a right to live where one chooses; and (3), residency restrictions are rationally related to states' (and the association’s) legitimate interests in protecting children from harm.

         There are many issues to consider before your homeowner or condominium association passes an amendment banning sex offenders.  Before approving or voting on any restrictions you should speak with a lawyer who specializes in community association law.  

"What Happens Now"?-Extreme Hoarding Inside Condominium Unit.

A unit owner in your condominium association has become an extreme hoarder and has allowed her unit to become unkempt with trash, animal droppings, smoking and other conditions. Rancid odors from her unit emanate into the common hallways and into other units.  The Association has written letters, sent emails and imposed fines.  Other unit owners have even offered to pay to clean the unit, but the unit owner refuses to respond...What Happens Now?  
            Most condominium association governing documents contain requirements that unit owners clean and maintain all portions of their unit and keep all parts of their unit in a sanitary condition.  These provisions also normally prohibit rubbish, refuse or garbage from accumulating and prohibiting unit owners from engaging in any use or practice which is or will likely become a source of annoyance to residents and other owners.
            As a means to enforce these provisions, it is not uncommon for condominium governing documents to allow the association to take possession of a unit by filing suit against the unit owner to terminate their ownership interest, evict of the unit owner and sell the unit as the association’s remedy.  
Real estate property rights are some of the most valued and protected rights in the United States. It will be an absolute requirement that the association have well documented evidence of the ongoing and chronic nature of the violation by the unit owner.  Such evidence should include numerous written demands mailed to the unit owner; witness testimony by multiple residents and the management company; pictures of the interior of the unit (if possible); police and health department reports from calls initiated by the association to inspect the unit; testimony from companies hired to clean the unit, etc.
 This is a very extreme remedy and is available only for the most extreme circumstances.  This remedy should be considered only after the association has exhausted all other remedies and means available to convince the unit owner to abate the condition voluntarily.  As the association weighs its options, it should consult closely with its attorney as this remedy could prove to be very expensive and time consuming if the unit owner hires counsel to oppose the association’s use of the remedy (even if the court ultimately rules in favor of the association).  

Thursday, March 17, 2016

"What Happens Now?"-Federal Fair Housing Act

A disabled unit owner in a condominium association has submitted a request to you as a member of the Board of Directors or the association’s professional community association manager, for an assigned parking space located next to his unit, and a curb cut to allow him easier access to the parking spot.  The governing documents define parking spaces as “common elements for the non-exclusive use of all unit owners”… What Happens Now?  

The Federal Fair Housing Act and Tennessee’s Fair Housing laws make it illegal to “discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith [emphasis added], because of race, color, religion, sex, familial status, or national origin.”  And “It shall be unlawful to discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection with such dwelling [emphasis added], because of handicap.” 
With regard to disabled homeowners (or renters), the Fair Housing Act requires associations to make “reasonable accommodations or modifications.” 

What’s the difference between an accommodation and a modification?

An accommodation would be an exception to the association Master Deed, Declaration, By-Laws or Rules & Regulations that would enable the disabled individual to receive equal treatment within the association, such as designating a parking spot near the entrance as a handicapped space; or reassignment of parking spaces; creating an extra wide parking space; or, overruling parking restrictions to allow the parking of a disability van in the driveway or on common areas. Generally, the association is required to pay for accommodations. 

A modification requires physical changes be made, such as building a handicap ramp to the front entrance; a curb cut to allow for easier access by wheelchairs.  Generally, the homeowner is required to pay for any modifications to the property.  They are also required to restore the property to the original state unless it would not hinder the future rental or sale of the unit.  There is some argument they would not be required to restore things that are on the outside of the home like a ramp.  The law is unclear in a homeowner situation as opposed to a rental situation. 

If the association receives a request for an accommodation or modification, it
1.      Ask for documentation that the person is disabled;
2.      Determine if the request is “reasonable”;
3.      Understand who will pay for any physical changes to the association common area or property; and,

4.      Consult with the association’s attorney.  

Friday, December 11, 2015

"What Happens Now"-FHA Financing for Condos

A condominium association wants to obtain Federal Housing Administration approval for FHA refinancing of current unit owner loans and FHA purchase money loans for future owners.  They come to you as the association Board of Directors or the association’s professional community association manager, asking how this can be done… What Happens Now?  

Ensuring that your condo or townhome association is on the FHA approved list is important to everyone because:

1.     Potential buyers may not otherwise qualify to purchase a home in your association.

2.     Current owners who may want to sell one day will have a larger pool of buyers for their unit.

3.     And it’s important to the association itself, as that larger pool of buyers helps create more competition which raises unit prices.

In years past, an FHA-approved association wasn’t so important because lenders could do “spot loans” for specific units.  New laws changed the way things used to be done so that the FHA-approved pool of buyers can now only purchase in associations which as a whole, are approved for FHA financing.

How to Qualify for FHA Approval

The HOA must have:
·        At least 50% occupancy by owners
·        No more than 15% of units being delinquent by 30 days on assessments
·        No more than 25% of total floor space used for commercial purposes
·        At least 10% of the annual budget going to reserves
·        At least two or more units
·        Insurance coverage, including hazard, liability and flood (if needed)
·        No more than 10% of the units owned by a single entity
·        All units and common spaces completely built
·        Association must also be in compliance with state law and other applicable regulations.

How to Obtain or Renew FHA Approval

1.     Find out if your association is currently approved by visiting the HUD website at  Condo and town-home associations must reapply for FHA approval status every two years.

2.     If your association is approved: the HOA must simply reapply when its two-year period is coming to a close. 

3.     If your association is not approved: there are two ways to gain approval:

i.                 If a potential FHA buyer is working with a large lender, that

lender is likely eligible to certify your association through the Direct Endorsement Lender Review and Approval Process (“DELRAP”). Certification can take two to four weeks; or,

ii.               The association can apply directly through the HUD Review and Approval Process (HRAP), which can take four to six weeks.

Both routes have their pros and cons.  The HOA Board will need to discuss what works best for the association.  As with any major policy, the Board should communicate its decision to the homeowners.




Monday, October 19, 2015

"What Happens Now"-Condo Smoking Restrictions

A condominium board is receiving complaints from unit owners about second-hand cigarette smoke emanating from within a unit owner’s unit into adjacent units.  The board wants to put a stop to the second-hand smoke but is afraid that it will violate an owner’s rights.  What can be done?
            Most association governing documents (usually in the By-Laws) give express power to the Board to adopt rules and regulations which govern the administration, management, operation and use of the common elements.  This power allows the Board to adopt restrictions which regulate behavior, use of amenities and common areas within the association, and impose fines to enforce violations.   The association Master Deed and By-Laws also normally have provisions within them on how to amend these documents.

Tennessee’s Non-Smoker Protection Act (the “Act”) prohibits smoking in public buildings, museums, banks, child care facilities, elevators and pretty much any place else which is “customarily used by the general public.” Violations of the Act are punishable by fines.  The Act however, expressly excludes private homes and private residences.  So how can an association protect its members?

            Membership in associations is created by the acceptance of a deed for a unit within the association.  The association members or the association, through its elected board, may vote to make the condominium common areas and/or individual units, smoke free by either amending the association master deed or adopting rules and regulations which prohibit smoking, and defines second-hand smoke as a nuisance, the violation of which is enforceable in the same manner as other restrictions in the governing documents.

            So that existing owners and occupants who wish to smoke are not unduly burdened, smoking restrictions may identify designated smoking areas within the association.  In the alternative, the association may adopt a complete ban on smoking anywhere (including within individual units) within the association property.

            All rules and regulations should have a violation notice requirement, reasonable fine policy and enforcement provision.  Once the members vote to amend the master deed or the Board adopts Rules and Regulations, the document created by the association attorney should be recorded at the County Register of Deeds’ office, and a copy should be mailed to all owners.  If the association has a website, a copy of the recorded document should be posted there as well.

Friday, October 16, 2015

"What Happens Now"-Association Lien Enforcement (Post Bankruptcy)

       There are generally two recognized types of legal jurisdiction in Tennessee.  Personal jurisdiction (in personam) and jurisdiction against property (in rem).    

       Bankruptcy is jurisdiction over the person (in personam).  The idea is that debts owed by the debtor get discharged and the debtor (homeowner) may start over fresh. 

       When an association records a lien, the lien secures the homeowner’s unit or house as collateral for the amount of unpaid association assessments and related fees (in rem). 

       What that means to your association is that a homeowner who receives a discharge in bankruptcy, is relieved from the personal obligation to pay any of the unpaid assessments which accrued prior to the date that he filed his bankruptcy petition.  The lien filed by the association however, is not discharged in the bankruptcy. 

       Although the association cannot pursue a homeowner (personally) for debts discharged in bankruptcy, if the lien was recorded prior to the bankruptcy, and the homeowner requests a full release of the lien after his bankruptcy discharge, the association may require the homeowner to pay ALL unpaid association assessments and related fees (including those which accrued prior to the homeowner’s bankruptcy petition), before a full release of lien will be recorded.


"What Happens Now"-Association Fees in Bankruptcy (In a Nutshell)

     The two main chapters under the US Bankruptcy Code which homeowners most frequently file under, are Chapter 7 and Chapter 13. 

     What are the differences and what do they mean to your community association?

Chapter 7 (complete discharge): 

    If the homeowner fulfills all of the requirements of Chapter 7, he gets a complete discharge from all “pre-petition” association assessments and related fees.

    All association assessments (including late fees, interest, etc) which accrue after the date of the homeowner’s Chapter 7 petition, are non-dischargeable in bankruptcy.

    Most Chapter 7 bankruptcies are completed within 4-5 months.  When the homeowner gets a Chapter 7 discharge, the association may then contact its attorney to begin the collection process.

     If the homeowner does not fulfill all of the requirements for a Chapter 7 discharge (which is not uncommon), the Bankruptcy Trustee will file a motion with the Bankruptcy Court to dismiss the homeowner’s case.  If the order is granted, the association attorney may then begin the collection process for all (pre and post-petition) unpaid association assessments, late fees, interest, etc.

Chapter 13 (re-payment plan):

      If the homeowner files for Chapter 13 protection, you should immediately notify the association attorney.  GOOD NEWS!  In most cases, because of the lien created by the association’s Declaration of Covenants, Conditions and Restrictions, and/or Master Deed (for condo’s), the association is treated as a “secured creditor”.  As such, the association will most likely receive monthly payments as a part of the homeowner/debtor’s re-payment plan once the plan is confirmed. 

     To ensure that the association participates as a secured creditor in the re-payment plan, the association’s attorney must file a Proof of Claim with the Bankruptcy Court. In most cases, after the Proof of Claim is filed and the homeowner/debtor’s re-payment plan is confirmed by the Bankruptcy Court, the association will begin to receive payments for the delinquent and ongoing association assessments.

     Any time bankruptcy is involved there is never a guarantee that the association will receive 100% of the delinquent and unpaid assessments from the homeowner.  It is essential for the association to have an attorney who is knowledgeable in bankruptcy law to ensure that the association has the best chance of recovery after the homeowner files bankruptcy.

     If the association was fortunate enough to have filed a Notice of Lien before the homeowner filed bankruptcy, all is not lost.  See the next edition of “What Happens Now?” for how the association may be able to recover 100% of the unpaid assessments and related fees.