Wednesday,
July 14, 2010
Here's
a Novel Idea: Make your Expectations Known and Avoid Disputes with
Residents
As
Community Association leaders and property managers, you should always
be vigilant to avoid rules disputes and misunderstandings with residents
regarding deed restrictions. Here are some quick tips* to keep in
mind when reinforcing this notion:
Pre-emptive
Strike
Make use of all available marketing materials to explain your community
to prospective buyers and/or real estate agents. This includes websites,
brochures, videos and welcome packets or any other communication that
folks might use as an information-gathering tool about your community.
New
Residents 101
After move-in, be sure and follow-up with new residents by holding
orientation sessions, visits by the welcoming committee, and other
social events to better integrate them into your community.
Now
that I have them, what do I do with them?
Don't stop! Keep up the pace and periodically refresh residents' knowledge
by publishing the rules in your community newsletter, blog, website,
marquee or other distributed communications.
*Excerpted
from Cecilia Gutierrez, "Spell It Out", Common Ground, July/August
2005
Three
Steps to Minimizing Insurance Premium Hikes
As a follow
up to our last article, this entry details a few things that homeowner
associations can do to manage their insurance policy premiums -- especially
as annual policy premiums continue to spiral upward.
(1)
Consider taking a higher deductible. One way to manage fluctuations
in premium is to request a higher deductible from your insurance carrier.
Generally, there is an inverse relationship between the premium paid
versus the deductible paid on any given policy (since the association
is basically taking on more liability via the deductible for any claim
made against it under the policy). One caution though: before you
start raising the deductible on your polic(ies), make sure to review
any claims made against them in the past few years (a 5-year period
should be sufficient) and compare the savings resulting from the lower
premium versus the chance that if a new claim is made, the association
will have more exposure based on the higher deductible. More often
than not, the association will save money by raising the deductible
if the association’s incident rate for claims can justify the
move.
(2)
Review your coverage limits. Many associations are “overinsured.”
From a practical perspective, the more coverage the association has,
the bigger the target for a plaintiff to attack. While it is equally
undesirable to “underinsure” an association, review your
association’s coverage(s) and make sure they are commensurate
with replacement cost for all insurable property held by the association.
(3)
Don’t be afraid to shop around. Loyalty to one company or agent
is fine provided that the association is getting a good value for
the money spent. But don’t be afraid to shop around and rate-check
from time to time, especially if you haven’t had any claims
against the policy lately – you just might find that the competition
for your business from reputable agencies will lower the total cost
of owning that insurance by just placing a few phone calls. Above
all though, make sure that whatever carrier you choose to do business
with possesses a high rating or grade, which indicates, among other
things, the financial health or stability of any given insurance company.
*Thanks to
Community Association Management Insider, June 2002 edition, from
which excerpts of this article originated.
Bad
Weather Can Wreak Havoc on Association Insurance Policy Deductibles
As
I sit here and stare out the window at the large droplets of rain
pelting my office window, I am reminded of the critical role that
insurance policies play in community association operations.
Of
course, here in the Gulf Coast region of the United States weather
is always a topic of discussion - regardless of the season - since
we are never more than an hour or two away from a massive deluge from
the skies above. Pity the weather forecasters.
Even
though this year’s “hurricane season” is all but
over and, thankfully, our region avoided any major storms, it’s
always a good time to review your Association’s insurance policies
before the next major storm season to make sure that you (1) have
enough coverage, and that (2) the deductibles are commensurate with
the coverage. This two-part article will cover these important issues
in the context of what I call “weather-specific” deductibles.
Many
associations’ insurance policies may include “weather-specific”
deductibles, like for hurricanes, that trigger higher payments in
order to claim damage suffered from a severe weather strike. There
are currently over 17 states that allow for these specific deductibles
to be applied in lieu of the standard deductible in case disaster
strikes in the form of a hurricane, windstorm , hail storm, etc.
These
weather-specific deductibles usually are calculated as a percentage
of the total property value covered, and can range from two (2%) and
five (5%) percent , but can go as high as ten (10%) percent in some
cases based on state and jurisdiction. For example, a typical insurance
policy with a “hurricane” deductible that has a $10,000
deductible to cover most other types of damage won’t cover the
damage covered if a hurricane hits, because the “hurricane”
deductible would apply instead. Let’s say the property value
covered is a $10 million development, then the deductible to replace
the hurricane damage could cost the association between $200,000 and
$500,000! The objective here is to educate board members to review
their association’s policy for these deductibles which could
cost the association a multiple far greater than the original deductible
contemplated when the policy was purchased.
Some types of weather-specific
deductibles include:
1. Hurricane deductible.
2. Wind and Hail deductible.
3. Storm Surge, mud flow.
4. Mechanical breakdown, life cycle wear-and-tear replacement.
5. Plate Glass replacement.
Of
course, you should always check with your Association’s insurance
provider/carrier to determine if/when these coverages are applicable
and/or available as the case may be.
Next
week we will discuss how to manage your association’s insurance
policy premiums in the wake of all this talk about bad weather and
its effects on the association’s operations.
*Thanks to
Community Association Management Insider from which excerpts of this
article were provided, June 2005 edition.
Do's
and Don'ts for Association Fining Systems
I
dusted off this article from June 2002, but the information is as
timely as ever. Especially with the sagging economy, more homeowners
now more than ever might be letting their maintenance accounts slip
or the conditions of their properties slide (because we all know that
upkeep costs money, something that's in short supply these days).
When standard deed restriction enforcement fails to get the required
response from the offending homeowner, then an Association can consider
implementing a fining system to incentivize these homeowners to correct
the violation or other misconduct.
Of
course, whether or not an Association implements a fining system can
be a touchy subject, but a fining system is sometimes needed for those
times when homeowners’ conduct violates the use restrictions
or restrictive covenants within a community and standard demand-letter
correspondence fails to elicit a positive response to cure the misconduct
or other violation.
If
your Association is considering implementing a fining system to enforce
the restrictive covenants within your neighborhood, then there are
six (6) key points to consider:
1.
Make the fining system as broad as possible. The Association needs
to be able to assess fines for a broad range of violative conduct,
including actions that violate the Declaration, the By-Laws, and any
rules and regulations set forth by the Association by and through
its Board of Directors. You can certainly maintain a list of specific
activities that constitute fines under the policy, so as to give the
membership notice of same, but make sure that this list is inclusive
rather than exclusive of any other non-specified, violative conduct.
2.
Make the fining system a FAIR system. Make sure that your fining system
has built into its mechanisms “due process” – notice
to the offending homeowner as well as an opportunity to “cure”
the violative conduct before any fines accrue. Also include a procedure
for allowing the homeowner to air his/her grievance or reasons for
the offending conduct directly to the Board at the next regularly-scheduled
Board of Directors meeting. If applicable, the homeowner can even
bring its legal counsel if one is hired by the homeowner. Now due
process and leniency has its limits: the notice and opportunity to
cure should only be applicable for those “first-time”
offenders who don’t necessarily know that their conduct has
run afoul of the deed restrictions.
3.
Each occurrence of a violation equals a SEPARATE violation. This “multiple”
violation feature of the fining system helps to create a mounting
fee accrual that can incentivize otherwise “laissez-faire”
or slow-acting homeowners that would ordinarily ignore the initial
fine amount, which can be nominal in most cases. By multiplying the
fine amount commensurate with the length of time or frequency by which
the violation exists, this can be the necessary “lever”
to motivate the homeowner to correct the violation. One caveat: the
Board needs to make sure that fine amounts don’t get out of
hand; in other words, Courts are loathe to assess homeowners with
outrageous fine amounts that operate more like a penalty than a fine.
Make sure the fine is proportionate to the violation. For this reason,
consider putting some kind of cap on the fine, if possible.
4.
Avoid using the word “penalty” in your fining system.
As a general rule, Courts don’t like enforcing penalties because
most legal claims provide their own economic or equitable remedy without
assessing a monetary penalty. Instead, make sure that fines correspond
to the severity of the violation.
5.
Don't Skimp on the Notice. Make sure the fining system gives notice
that the Association has the power to collect ALL expenses incurred
in enforcing the fining policy and collecting the fine. Sometimes
these costs escalate rapidly, including attorney’s fees and
court costs, so make sure that the membership is put on notice of
the Association’s ability to collect these sums.
6.
Apply payments to fines before assessments. Typically, and unless
the homeowner indicates otherwise on the payment instrument, the order
of application of payment by a homeowner is: attorney’s fees
and costs, late fees and interest, then to fines, special assessments,
and regular assessments. With this hierarchy of payment, the homeowner
has a greater incentive to pay off the debt.
*special
thanks to the Community Association Management Insider, June 2002,
from which excerpts of this article were originated.
$100-Million
Condo for One?
Amidst
the bevy of economic horror stories in the news assaulting our daily
lives, comes a strange tale of the $100-million condominium project
in Fort Myers, Florida where one solitary family lives in a 32-story,
220-unit highrise. The original link to the story can be found here,
from a story by the Associated Press that originally appeared over
the weekend in Yahoo News.
Evidently,
this Fort Myers condominium (the Oasis Tower One) had been ravaged
by a trinity of recessionary forces -- foreclosures, soaring unemployment
and rising bankruptcies -- and saw all but one of its tenant contracts
get cancelled or otherwise go unfulfilled. The Fort Myers area, like
many counties across the country during this prolonged economic nosedive,
is mired in a recession of historic proportions. The Associated Press
monitors the "Economic Stress Index" of some 3100 counties
nationwide, assigning each county a value in a range from 1 to 100
to indicate the relative level of economic hardship in any one region.
A value of 11 or more on the index indicates that a particular county
is in economic distress. The Fort Myers area rated a value in excess
of 20 on the AP's index.
Fort
Myers was supposed to be blossoming into Florida's next high-profile
center for economic development until the brakes were put on the economy,
that is. Now, the Oasis Tower One stands proud, but deserted, with
scant few lights left on, utility services restricted, and most amenities
either locked up or plans to build them long-abandoned. And what of
that lone brave family that still lives there? They remain, with hopes
for a better future, along with getting a neighbor or twenty.
*the original Yahoo News/Associated Press article can be read
in its entirety by following the link above or by clicking on the
link here, http://news.yahoo.com/s/ap/20090801/ap_on_re_us/us_lonely_highrise
Baked
Alaskans
Forgive
the play on words in the title, but this article originates from an
Alaska Supreme Court case and highlights the notion that Associations
shouldn't necessarily interfere in "neighbor v. neighbor"
disputes, nor do they have the duty to do so under the deed restrictions
in most cases.
The
Court in this case held that there is no actionable claim against
the Association for "insufficient vigilance."
Actually,
and for the very reasons outlined in this case study, the deed restrictions
for a community oftentimes include an "anti-waiver" provision
for Associations to invoke so that the Association isn't forced to
litigate every single nuisance-like occurrence or event reported by
disgruntled homeowners. Sometimes these incidents are between neighbors
who may have a beef with one another -- and not the Association --
but will do anything to drag the Association into their personal vendettas
as the "hired muscle" to bend the offending neighbor to
their will or punish them.
Speaking
from personal experience, Association involvement in arguments that
can be more appropriately characterized as neighborly disputes only
ends in needless (and escalating) legal fees for the Association (which
affects ALL the members when it comes time to planning for annual
budgets and possible assessment increases) and hurt feelings by one
or more of the warring parties.
In
the Alaska case, the homeowner had a series of complaints against
the Association and her neighbors for various items of conduct including:
failure to repair a leaky roof, failure to sand the unit's porch,
failure to remove snow from the unit's porch and driveway, installing
a fence to prohibit parking in the courtyard, verbal harassment and
assault by neighbors, theft of the homeowner's plants, mail and mailbox
tampering, vandalism of the homeowner's vehicle by the residents,
and intentional infliction of emotional stress. Conversely, the Association
also held legitimate claims against the homeowner for violative conduct
against the deed restrictions including parking a vehicle in the Condominium's
courtyard and walking a dog without a leash.
At
trial, the Court ruled that the homeowner had no actionable claim
against the Association for "insufficient vigilance" in
enforcing the deed restrictions, but instead should have sued her
fellow condominium owners to whom she attributed the offensive conduct
against her. The Association was also successful on its claims against
the homeowner for the violations of the deed restrictions. On appeal,
the Alaska Supreme Court sided with the Association, ultimately, because
the evidence tendered by the homeowner was deficient and the Trial
Court had not abused its discretion when issuing its ruling(s) based
on that evidence and the lack of an actionable claim against the Association.
*To read
the full saga of the "Baked Alaskan (neighbors)", see Gilbert
v. Simonka, Nos. S-11470, S-11841, 1282, Alas. Supreme Ct., July 25,
2007.
NORTH|Law