HOA Legi-Slate

Last week HUD Secretary Shaun Donovan announced applicants seeking FHA financing are going to face higher costs and tougher credit standards.  What does that mean for home buyers?  Changes being proposed include higher down payments – currently 3.5% but could go as high as 5%; seller concessions cut to 3%; mortgage insurance premiums as high as 3% and a minimum acceptable FICO score not much lower than 620 (which is the score currently used by both Fannie Mae and Freddie Mac.)

In addition, Wells Fargo also announced changes to its’ FHA Condo criteria which went in to affect on 12/8/09.  One item to note is “no more than 50% of the units are occupied by units other than the primary residents.”  Does your condo association currently have a process to track rentals?  How will your association answer this question on the form?  There are many other questions that my be difficult to answer or a "wrong" answer could result in a loan being denied?  If you'd like to know more about the new FHA guidelines see our checklist.

Posted By HindmanSanchez In National News 0 Comments Permalink

Recently, the Virginia-Pilot reported that Catherine Johnston may lose her home because the three decade old condominium association she lives in failed to plan for a major structural repair project which can no longer be put off.  Since the association is unable to obtain a loan to cover the costs, the $2 million dollar tab for the project is being financed by a special assessment of $12,000 to $15,000 per unit and homeowners have 3 months to start making payments.  Ms. Johnston, who is currently unemployed, is unable to pay the special assessment. 

Unfortunately, this is not an isolated example of what can happen when associations fail to plan for future repair and replacement projects.  In fact, we are seeing similar scenarios being played out in Colorado.  Here are the lessons board members and homeowners can learn from this situation: 

Lessons for Board Members:

1. While proposing small incremental increases to regular assessments in order to fund reserves may not be a popular thing to do - failure to do so may result in a major financial hardship for homeowners when significant repair and replacement projects can no longer be put off.  
2.  A thorough understanding of the budget of your association is a must.
3. The necessity of having a reserve study conducted, which should include a recommended funding plan, cannot be overstated.  In fact, HB 1359 requires associations to have a Reserve Policy which must include when the association will have a reserve study conducted and whether the study will be based upon a physical and financial analysis. 
4. Boards must make informed and conscientious choices about reserving and investing.  This information should also be part of your Reserve Policy.  

 Lessons for Homeowners:

1. Review and understand the budget of your association.  This should include a review of whether, and to what extent, your association is contributing to a reserve fund for future repair and replacement obligations.
2. Get involved in your association.  Ask questions about what your association is doing to plan for future repair and replacement obligations.  Offer to assist the association with researching and crafting positive solutions.
3. Do not assume your association is contributing to reserves on an annual basis or has a funding plan in place.  Instead, take the steps necessary to become an informed homeowner. 

To learn more about what your association must do to comply with the HB 1359 reserve policy requirement, please review our May 22nd entry on HOA Legi-Slate.

Posted By Molly Foley-Healy In National News 0 Comments Permalink

The American Clean Energy and Security Act of 2009,  which recently passed the U.S. House,  contains provisions that restrict any association action which impairs the installation, construction, maintenance or use of solar energy systems.  If the act becomes law, as written it would supersede Colorado's current statutes with respect to solar devices and could further curtail the restrictions that associations may impose.  CAI National is following the Act's process and will be working closely with  Senators as the bill is considered in the U.S. Senate.

Posted By Loura K. Sanchez In National News 2 Comments Permalink

With the recent rise in foreclosures, the mortgage industry is tightening up its guidelines and lenders appear to be scrutinizing the answers on condominium questionnaires more closely. For example, we have seen lenders reject a loan claiming the condominium project was ineligible under FNMA guidelines because owners could hold title to more than one unit under a single mortgage. The basis for this rejection was a provision in the association’s declaration that allowed owners to combine two units. Next time you complete a condominium questionnaire asking whether two or more units can be owned by one owner as evidenced by one mortgage, you might want to consider how you answer it.  What relevance do you think the authority to combine units in a declaration has on that question?  It will likely be totally dependent on other provisions in the delcaration so you may need to consult with counsel before you answer completely one way or another.

Posted By Trisha K. Harris In National News 2 Comments Permalink

Most associations are being affected by the economy in one way or another. The biggest consequence is an increase in account receivables. As associations struggle with ways to collect unpaid assessments it is important to remember that:

• your collection policy must be followed
• if your policy doesn’t allow for deviations it should be amended
• if your policy allows for deviations make sure to document why the board is deviating from the policy.

Deviating from your collection policy – even if allowed- may lead to claims of discrimination. Two situations might be:

1. Association sues an owner with a Hispanic surname but doesn’t sue an owner with an Irish surname when both owners have similar balances;
2. Association doesn’t file a lien against builder or developer owned lots but does record a lien on other owners – many who fit within some protected class.

Think before you deviate…

Posted By Loura K. Sanchez In National News 1 Comments Permalink

The nationwide trend of state legislators imposing some form of manager licensing is continuing with Virginia. A bill recently approved by the Virginia General Assembly will go into law on July 1, 2008, if signed by the governor. This bill allows managers to meet licensing standards by holding certification and designations awarded by CAI and NBC-CAM. The bill also creates an ombudsman system, similar to the Florida model, for handling homeowner complaints. 

If this is the trend, then perhaps it is advisable for managers and management companies to push to quickly obtain PCAM, CMCA and AMS designations to be “ahead of the curve” if such legislation comes to Colorado?

Posted By Loura K. Sanchez In National News 3 Comments Permalink

The California Legislature appears to be continuing down the same road as other legislatures in addressing community association issues -- by putting more and more specific details and requirements into the statutes.  A new law recently signed by the California Governor requires associations to distribute an agenda with meeting notices and prohibits boards from discussing anything not on the agenda, with a few exceptions.  For a complete copy of the bill click here.
 
The California legislature is also considering a bill that will mandate board member education (this is a carry-over bill from 2007) and will likely restate the Davis Sterling Act (which is California's version of the Colorado Common Interest Ownership Act.)  Part of the restatement is expected to include sections of other codes being placed in the Davis Sterling Act. This seems to be in line with Representative Carroll's inclusion of a reference to the Fair Housing Amendments Act in bill 08-1135 introduced last week in Colorado.

Posted By Loura K. Sanchez In National News 4 Comments Permalink

9NEWS.com recently posted a story entitled HOA says mother of fallen soldier has to take down flag.  Thanh Truong, a reporter for 9NEWS, reported that Mary Sims - who lives in a community association in Aurora - has been asked by her association to remove the American flag that she has been flying on her front porch.  It was reported that the front porch is part of the common elements and the association has asked Ms. Sims to relocate the flag to a window or her balcony.  Ms. Sims has been flying the American flag to honor her deceased son who was a recruiter for the National Guard and her husband who is currently a civilian worker for the Department of Defense in Iraq. 

As we have noted in previous postings on HOA Legi-Slate, Colorado and federal law specifically address the rights of individuals living in community associations to fly the American flag.  The Colorado Common Interest Ownership Act ("CCIOA") at section 38-33.3-106.5(1)(a), provides that associations may not prohibit "The display of the American flag on a unit owner's property, in a window of the unit, or on a balcony adjoining the unit if the American flag is displayed in a manner consistent with the federal flag code.  The association may adopt reasonable rules regarding the placement and manner of display of the American flag.  The association rules may regulate the location and size of flags and flagpoles, but shall not prohibit the installation of a flag or flagpole."  Consistently, the federal Freedom to Display the American Flag Act of 2005 ("Act") prohibits associations from preventing residents from flying the American flag on their own or exclusive use property.   However, the Act does permit associations to place reasonable restrictions on the time, place and manner in which the American flag is displayed.

Ms. Sims was quoted by 9NEWS as saying "I don't think they have the right to tell me where to hang my American flag."   Whether the association will pursue enforcement in this matter remains to be seen.

Posted By Molly Foley-Healy In National News 9 Comments Permalink

• The Order will apply to existing and future exclusivity clauses in contracts that cable operators enter into with condominium associations and likely all residential community associations.  "Cable Operators" are those cable service providers that hold a franchise from a state or local government permitting them to use rights-of-way.
• The Order does not prohibit community associations from entering into exclusive marketing agreements or bulk billing arrangements with cable operators. 
• The Order does not apply at this time to "private cable operators" which are those cable service providers that do not hold a franchise from a state or local government permitting them to use rights-of-way. 
• The Order does not apply at this time to agreements community associations enter into with direct broadcast satellite providers and other multi-channel video programming distributors (MVPDs).  

1. Ban the use of exclusivity clauses by direct broadcast satellite providers, private cable operators and other MVPDs.
2. Prohibit the use of exclusive marketing agreements and bulk billing arrangements. It should be noted that FCC Commissioner Adelstein expressed concern that costs associated with bulk billing fees are being built into association assessments.

Posted By Molly Foley-Healy In National News 1 Comments Permalink

Did you know that your community association, management company or business may need to take extra precautions to ensure that you do not continue to employ an unauthorized alien?  On September 14, 2007, the Department of Homeland Security's (DHS) Final Rule entitled Safe-Harbor Procedures for Employers Who Receive a No-Match Letter ("Rule") will go into effect.  Here are the basics you need to know about the Rule:

?  The Immigration and Nationality Act ("INA") provides in part that it is "unlawful for a person or other entity, after hiring an alien for employment . . . to continue to employ the alien in the United States knowing the alien is (or has become) an unauthorized alien with respect to such employment." 

?  The new Rule provides guidance for employers on what will constitute knowing employment of an unauthorized alien.  Under the Rule, "knowing" includes actual knowledge that the employee is an unauthorized alien and "knowledge which may fairly be inferred through notice of certain facts and circumstances which would lead a person, through the exercise of reasonable care, to know about a certain condition" - also known as "constructive knowledge."  While DHS will look at the "totality of the circumstances" present in a particular case to determine whether an employer has knowledge that an employee is an unauthorized alien, here are two examples outlined in the Rule where constructive knowledge will be inferred upon the employer:

1.    Written notice to the employer from the Social Security Administration ("SSA") that the name and social security number submitted for an employee does not match SSA records.  This written notice is usually sent to an employer in the form of an "Employer Correction Request" also known under the Rule as a "No-Match Letter." 

2.  Written notice from DHS that the immigration status document, or employment authorization document, presented or referenced by the employee in completing Form I-9  (Employment Eligibility Verification Form) was assigned to another person, or there is no agency record that the document was assigned to anyone.

?  What steps should you take if you receive a No-Match Letter from SSA or written notice from DHS that the immigration status document or employment authorization document presented or referenced by the employee was assigned to another person or does not exist?  The Rule suggests that employers take the following "reasonable" steps to help ensure that the employer is not found to have constructive knowledge that an employee is an unauthorized alien. Employers, who take the steps outlined below in a timely manner, should receive "safe-harbor" from liability associated with employing an unauthorized alien in violation of the INA prohibition.

1.    Within 30 days upon receiving written notification from SSA or DHS of a no-match with government records, an employer should check the appropriate records to ensure that there was no clerical error in the documents sent to SSA or DHS.  If there was an error, the employer should send the corrected documents to SSA or DHS to ensure that there is a match with the appropriate government records.

2.    If no clerical error is found by the employer, the employer should promptly request that the employee confirm the records submitted by the employee to the employer are correct.  If the records of the employer are not correct, the employer should correct the records and send them to SSA or DHS to ensure there is a match with the appropriate government records.  If the employee contends that the records of the employer are correct, the employer should instruct the employee to personally pursue this matter with SSA or DHS to clear-up the discrepancy.

3.       If the discrepancy between the employer's records and the records of SSA or DHS is not cleared-up within 90 days of the employer initially receiving the No-Match Letter from SSA or a discrepancy letter from DHS, the employer may follow a verification procedure described in the Rule. Online verification services are available at the following Links:

Social Security Administration (SSA) Social Security Number Verification Service:  http://www.ssa.gov/employer/ssnv.htm

Department of Homeland Security (DHS) and US Citizenship and Immigration Services Bureau E-Verify: 

https://www.vis-hs.com/EmployerRegistration/StartPage.aspx?JS=YES

4.  If, after going through the verification process, an employer is unable to verify that an employee is not an unauthorized alien, the  employer must decide whether to terminate the employment of the unauthorized alien or face the risk of DHS determining that the employer had actual or constructive knowledge that the employee was an unauthorized alien.      

?  If DHS determines that an employer knowingly retains an employee who is an unauthorized alien, DHS may fine the employer from $250 to $2,000 for each unauthorized alien employee. Further, if DHS determines that an employer has engaged in a pattern or practice of knowingly retaining unauthorized aliens as employees – DHS may fine the employer up to $10,000 for each such employee. 

Finally, under the Rule, DHS encourages employers following the procedures above to retain all documentation and records from the process including notes from applicable telephone calls, records, emails and correspondence with SSA or DHS relative to the employee in question, and records or documentation of any other steps the employer has taken to verify the status of an employee. An employer is required to retain copies of all I-9 forms of an employee for at least one year after the employee has left employment with the employer.

Posted By Molly Foley-Healy In National News 0 Comments Permalink

As was expected the trend towards increased legislation affecting associations continues.  In New Jersey, two homeowners' association bills are pending.  One bill (S805) requires all associations with more than 10 units to hold open meetings and elections, give residents access to records, limit fines, and employ competitive bidding on contracts over $17,500. This bill is very similar to some of the requirements contained in Colorado's SB100. However, if approved the bill would also empower the New Jersey Department of Community Affairs to regulate boards and levy penalties for violations, including removing board members from office.  The second bill (S1608) in New Jersey limits the ability of boards to bring lawsuits against homeowners and would allow board members to be held personally liable for breaking the law (read related article). 

Posted By HindmanSanchez In National News 1 Comments Permalink

Homeowner associations continue to be the subject of state legislation ... This article reports that Pennsylvania State Senator Andrew Dinniman will being introducing legislation that will regulate how HOAs and developers may handle religious displays in front of homes within the community. This legislation is intended to protect homeowners' expressions of faith and control "anti-religious tolerance." Senator Dinniman says that this bill will "ensure the freedom of religious expression guaranteed under the national and Pennsylvania constitutions." Religious displays in common interest communities have not yet been addressed in Colorado, as CCIOA speaks only to political and patriotic expression. It will be interesting to see if the topic of religious displays does eventually become an issue in Colorado.

Posted By HindmanSanchez In National News 0 Comments Permalink

The Madison County Journal reports that the proposed Madison, Mississippi ordinance discussed in this post passed, with all members of the Board of Alderman and the pro tempore mayor voting in its favor. This ordinance states that a violation of an association's covenants constitutes a violation of a city ordinance. Homeowner associations may bring claims against homeowners to the Madison Municipal Court, but must have witnesses to testify that the covenants are being violated. In addition, the association must produce proof that the offending individual has been notified several times of the covenant violations.

Posted By HindmanSanchez In National News 1 Comments Permalink

The Freedom to Display the American Flag Act of 2005 (H.R. 42), which grants homeowner residents the right to display the American flag, was signed into law by President Bush this afternoon. The provisions of this new law should sound familiar as the law is very similar to CCIOA's provision (added by SB 100) addressing this right.

Posted By HindmanSanchez In National News 0 Comments Permalink

SB 551 (discussed in this post) failed to pass out of the California Assembly's Business and Professions Committee. This bill would have created an ombudsman with enforcement authority to watch over the affairs of California's homeowner associations. Although it failed in committee, it is expected that a version of this bill will be re-introduced again next year.

Posted By HindmanSanchez In National News 0 Comments Permalink

If passed, New Jersey Senate Bill 805 would bring New Jersey into the fold of states that have adopted the Uniform Common Interest Ownership Act ("UCOIA"). However, New Jersey's version of UCIOA adds an Article 5 - State Oversight of Associations - to the provisions contained in the uniform act. (Article 5 begins on page 98.)

Posted By HindmanSanchez In National News 2 Comments Permalink

If passed, Senate Bill 551 would establish a Common Interest Development Bureau ('Bureau') to provide oversight to California's more than 41,000 common interest communities. The reasons for this legislation given by the bill's preamble echo those given for the reason for the passage of SB 100 - most board members and owners do not understand their rights and obligations, anecdotal accounts of board member abuses are rampant, and the remedy available to homeowners, private litigation, is expensive and ineffectual.

Posted By HindmanSanchez In National News 2 Comments Permalink

Arizona's Governor Napolitano recently signed House Bill 2824 into law. As reported in this Arizona Republic article, the law allows homeowners to take conflicts against their association to dispute resolution hearings before an administrative law judge in the state Office of Administrative Hearings. A nonrefundable filing fee will have to accompany the petition for a hearing, which is expected to be set around $500.

Proponents of this bill believe that this option will "restore the balance of power between HOAs and homeowners." Opponents maintain that this law will create more difficulties for boards trying to enforce rules and will result in more expense.

Click here for a post that discusses the Colorado Common Interest Ownership Act's enforcement mechanism.

Posted By HindmanSanchez In National News 0 Comments Permalink

An Arizona HOA recently settled a religious discrimination lawsuit brought against it by a group of homeowners who belong to the Church of Jesus Christ of Latter-day Saints ("LDS"). The suit was brought in response to the HOA's adoption of a rule prohibiting religious groups from using its meeting room. (The Arizona Civil Rights Act prohibits discrimination in housing based on a person's race, color, religion, sex, familial status, national origin or disability.) The lawsuit led to a settlement with the Arizona Attorney General's Office.

Posted By HindmanSanchez In National News 0 Comments Permalink

Signed by Arizona's governor on April 10, SB 1007 provides a good example of the growing trend among states to legislate the governance and operations of the HOAs. This new law prohibits associations from foreclosing against a unit unless the owner has been delinquent in the payment of assessments (not including collection fees) for one year OR in the amount of $1,200 or more, which ever comes first.

Posted By HindmanSanchez In National News 0 Comments Permalink

In response to reports of a condominium board prohibiting residents from affixing a mezuzah to their doorways, the Illinois state legislature passed a law guaranteeing the right of condominium residents to hang a mezuzah or other religious object at their doorways. This Chicago Sun Times article reports that Illinois Governor Rod Blagojevich signed the bill into law on Wednesday. This new law illustrates the nationwide trend of state legislatures who do not hesitate to react when HOA boards behave unreasonably.

Posted By HindmanSanchez In National News 1 Comments Permalink