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ASK THE HOA EXPERT – June, 2021
Q: What is the definition of an “executive session”? Can a meeting begin as an executive session, and end as an open session, or vice versa?
A: There may be a state statute that defines “executive session”. If so, you need to follow it. If there is not a statute, the board generally is permitted to hold an executive session to discuss litigation, employee or contractor issues, or collection matters involving specific individuals. The board should not abuse this by using it to discuss controversial topics normally discussed in regular board meetings. As a rule, executive sessions should be rare. Executive sessions can be announced at a regular board meeting when a topic arises that warrants it. The board then goes into private chambers to discuss and vote on the matter and then returns to the public meeting. An executive session can also be scheduled in advance but should disclose the general nature of the meeting, so the members understand why the meeting is not public.
Q: What can the homeowner association do with bank owned properties that go delinquent or let their tenants break the rules?
A: Bank owned properties can become common in HOAs when the real estate market is not moving homes quickly enough. Foreclosed homes can remain vacant for long periods, may have yards full of weeds, maintenance issues and HOA fees may go unpaid for months. If your HOA is having such problems with bank owned properties, here are several good options for solving these problems:
• Treat the bank like any other owner – don’t wait for a resale to get paid.
• Use liens to ensure payment of assessments and correction of rule violations.
• Aggressively pursue foreclosure if the bank refuses to pay.
Since there is no longer a mortgage against a bank-owned property, any HOA lien will be in first position. This means it is extremely likely the HOA will be paid quickly after a foreclosure action begins. If the owner-bank does not pay in full and a foreclosure sale is completed, the HOA would end up owning the property free and clear!
POOL GUEST RULES
Q: Our HOA prohibits guests from using the pool unless accompanied by a resident. We have a resident who is challenging this rule because of an injury which prevents him from doing so.
A: Having residents accompany their guests is a standard that should be upheld. If it’s not in place, what’s to stop a resident from inviting their friends over to swim any time they want? Hold the line on this one.
BOARD POSITION QUALIFICATION
Q: We have an unmarried resident couple and only the woman is a legal owner. Does her partner qualify to run for the board or serve on a committee? And if they are legally married but he is not an owner, does that change things?
A: In most HOAs, only owners are allowed to serve on the board. You need to read your governing documents to see if that is the case in yours. On the other hand, committee members can be unmarried partners, renters, and non-residents.
PROPERTY MANGER EVALUATION
Q: The board is thinking about circulating a survey to evaluate the manager company’s effectiveness. Do you have any suggestions?
A: Since many owners are disconnected from the day-to-day HOA business and have little understanding of the manager’s scope of work, most would not have an informed basis for evaluating the manager’s effectiveness. An input form might be more effective. List the various tasks the HOA is responsible to perform in general categories like General Maintenance, Landscaping, Pool, Janitorial, Communications, Newsletters, Rules Enforcement, Financial Reporting etc. and ask for specific recommendations for improvement. If the suggestions are related to things the manager should be taking care of, the board has something concrete to discuss about job performance.
HOA WEBSITE SECURITY
Q: Our website protocol states, “No password protection except for member information.” Why would the HOA not want to password protect certain information like the Reserve Study or the financial statements?
A: Concealing information that an informed buyer needs to know is a major weakness of the HOA system. There are few business matters that an HOA should conceal from potential buyers. The budget and reserve study are high on the list of things to disclose. Protecting individual owner privacy is another matter and should be respected.
Q: Our current landscape committee chair has offered to take over the landscape contractor’s job and save the HOA money. He has run his own business in the past but has never been in the landscaping business. Would it be prudent for us to enter in such a contract with an owner?
A: It is bad business to hire an HOA member to do HOA work because there is a clear conflict of interest even if the member is competent to do the work. And if the member turns out to be incompetent, the board will end up firing him and likely create a long-term enemy. Unless this person provides a service that is unavailable elsewhere, stick with outside professionals.
DISCLOSING DELINQUENT OWNERS
Q: What approaches have you seen to boards take to inform their members about other members who are in arrears? Our board likes to post names and amounts in arrears as well as put the information in the minutes.
A: Do not post delinquent member names! The board should refer to a collection only by the amount owed, time past due and status of the collection process. Naming names is a sure way to alienate neighbors and trigger litigation for defamation of character. Besides, all collections are not created equal. Some may have a legitimate reason for not paying (disabled, unemployed), others don’t pay because of a matter of principle: “I’m not paying until the board (fill in the blank) and some may simply be jerks. To avoid favoritism, the board should institute and use a Collection Policy which is uniformly applied to all members, including themselves. Even better, the Collection Policy should be enforced by a hired professional manager since no board member should be put in the position of personally enforcing collections on other members.
RULE ENFORCEMENT GUIDE
One of the functions of a homeowner association (HOA) is to enforce certain rules, regulations, and covenants. It’s good to periodically review old practices and check against established norms to confirm that your HOA runs a sound enforcement program.
Generally, it is the board’s fiduciary duty to enforce the rules, but the board has some latitude when and what to enforce based on its best business judgment. The key is for the board not to be selective, arbitrary, or capricious in how it handles enforcement. It is impractical to expect that a board can maintain absolute vigilance and catch every rule violation. Instead, the board should react when informed by a reliable source. Here is a list of the typical remedies available to an HOA that seeks to enforce its rules:
1. Impose a Fine. This power is typically derived from the governing documents. A fine could be monetary or a suspension of privileges like pool or clubhouse. Of course, suspension of privileges is only effective if the member actually uses the amenities. Monetary fines can be escalating (like $5/day until cured).
2. Impose a Lien. If a fine is not paid, the HOA usually has the right to file a lien against a member’s HOA property. This may not immediately get the fine paid but in most cases, the threat of filing a lien alone will. The HOA is usually entitled to reasonable attorney, collection and related fees as well which will increase the amount owed. This is also a great incentive to getting the fine paid early.
3. County Court or District Court. The HOA is always represented by an attorney since these courts have rules and procedures which only lawyers understand. Court litigation is expensive and should not be undertaken lightly. Make sure the expense and effort fit the crime. We’ve all read about the time, emotion and money squandered on “matters of principle.” The board has the power to compromise when it’s in the best and financial interest of the HOA.
4. Self-Help. In certain circumstances, the HOA can self-help by correcting the violation. Examples include hauling a junk vehicle, cleaning up an overgrown lot and removing a violating fence. Rather than ratcheting up legal and collection fees, it makes sense to take action and bill the offending member which, granted, may require legal action to collect. Even so, at least the offending issue is dealt with. If self-help is contemplated, make sure to keep copies of all correspondence that outlines that option if the member does not respond. Take photos of the offense for the record as well.
5. Mediation. Mediation can be very cost-effective and less confrontational way to cure a violation when a member has dug in their heels. Mediators are trained in the art of compromise. Many jurisdictions provide mediation services free or cheaply. 6. Using the Police. All municipalities have ordinances against nuisances, inoperable vehicles, disorderly conduct, disturbing the peace, etc. The HOA should always consider contacting the local authorities when handling certain violations as these agencies are better equipped and authorized to deal with some matters. At the very least, the HOA should maintain a good rapport with local law enforcement and government offices and cooperate with them when these entities are brought in to investigate a resident’s misconduct.
ASPHALT PAVING 101
Asphalt paving is a common road and parking lot surface in homeowner associations. While cheaper to install than concrete, it must be regularly maintained to achieve its longest useful life. Asphalt has two major weaknesses that limit its useful life:
1. Poor resistance to UV radiation (sunlight). Asphalt pavement is a combination of rock, sand and liquid asphalt that binds everything together. UV radiation breaks down the asphalt glue so that it no longer holds the rocks and sand together, gradually eroding the top surface. The most obvious sign is the gradual change in color from black to gray. Next, the asphalt begins to look rough, and piles of sand appear in the low areas of the parking lot. In the later stages, the bigger rocks fall out. Because the asphalt is oxidizing under the UV radiation, it loses its flexibility. Flexibility is extremely important because asphalt can take great loads and bounce back to its original condition. As asphalt loses flexibility it becomes brittle, cracks and breaks.
2. Poor resistance to petroleum products. Petroleum products like oil and gas cause damage since asphalt is a petroleum-based product. Gasoline and oils will dissolve the asphalt, soften the structure, and cause major damage to asphalt. Based on the poor resistance to UV radiation and chemicals, it is logical to conclude that some sort of coating should be used to protect the asphalt from the harmful elements. Asphalt can be effectively protected by using a seal coating which acts as a barrier between the harmful elements and the asphalt. A coal tar emulsion sealer is highly resistant to water, gas and oil, salt, chemicals, and UV radiation. Before seal coating, the asphalt must be cleaned to be free of all dirt, vegetation, and other foreign debris using blowers, sweepers, brooms, and sometimes high-pressure washers. Once the pavement is cleaned, existing oil spots should be primed so that the sealer will adhere. Normally two coats of sealer are applied by squeegee or spray. Once the seal coating is completed, it is important to keep traffic from the sealed surface for 24 hours. Traffic before 24 hours will cause premature wear and increased tire marking. During this cure period the striping can be accomplished so that after the 24 hours, your parking lot is completely ready for traffic.
Another great asphalt preventive maintenance is crack sealing which should be done in conjunction with seal coating. If cracks are left unattended, water could penetrate to the base to destroy its strength and load bearing capabilities. It is evidenced by “alligator” cracking, sunken areas, and potholes. Cracks at least 1/8″ or wider should be treated with a hot poured crack sealant which remains effective for 3-7 years. Seal coating and crack sealing can double or triple the useful life of the asphalt at a fraction of cost of an overlay. Seal coating also gives great curb appeal and the impression of good overall maintenance. There is much to gain by caring for paving. Engage in no fault asphalt maintenance practices.
Richard L. Thompson, Esq.
The HOA Expert™