Northwest Condo & HOA Law Blog : Washington & Oregon Construction Defect Lawyer & Attorney : Barker Martin Law Firm : Homeowner Associations, Condos : Seattle, Portland

Email is an incredibly useful tool for board members given everyone’s busy schedule and the number of issues that arise between board meetings. But, like many tools, email can be a dangerous thing if used improperly. Just remember, it is not unusual for owners to request certain association records, including any emails to or from board members about association business. They will  argue that any such email is an association record; and they are therefor entitled to review and copy any such communication. Unit owners can always demand tosee non-privileged association records. For Oregon association see ORS 100.480 and 94.670.For Washington associations see RCW 64.32.170, RCW 64.34.372 (1), RCW 64.38.045.

These days most people view emails as confidential communications and while they are certainly less public than Facebook posts or Tweets, they are not always confidential. Unfortunately, that false sense of confidentiality prompts many people to write things that they would never want to see on the front page of a newspaper or community newsletter. To avoid the disclosure of embarrassing or even damaging board emails, there are two basic steps each board member can take to protect themselves: 

1. Create a separate email for association business. This is a good idea so that you can be certain you have not mixed personal and association emails. It also helps prevent a unit owner from requesting all of your personal email in order to make sure they see every email you sent that involved association business. Lastly, an association email account (e.g., VillaPointeTreasurer@gmail.com) allows for historical and institutional information to be passed down easily.
2. Do not mix personal and business information in the same email.   Assume that every board email will ultimately be made public and draft them accordingly. Emails by and between board members or the manager are not the place for venting. They are business communications and should always be professional.

Draft your board emails as a board member and keep in mind that all of the owners in your association may have the right to read what you are writing. A little vigilance goes a long way.

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In last week’s article, Dan discussed the use of the executive session during board meetings to conduct privileged conversations. As an extension of this topic, we are often asked to consult on how the attorney-client privilege impacts dissemination of the attorney’s opinions to the other members of the Association and requests for association records.

The primary rule is that the actual document containing communications between the lawyer or the law firm and the members of the board should not be copied, published or otherwise shared with the members of the Association. While such a document might technically be an Association record, the document must be withheld to protect the attorney-client privilege.

In Washington & Oregon, the attorney client privilege doctrine is found in RCW 5.60.060(2)(a) and ORS 40.225(1)(d) respectively. The statutes are dissimilar in language, but both provide that neither the attorney nor the client can be compelled to disclose communications made by the client to the attorney, or vice versa, when made in the scope of giving or receiving legal advice. The rule covers oral statements as well as written documents and correspondence passing between the client and the attorney.

When the Association is the lawyer’s client, the documents that are protected are those between the lawyer and the primary control group – the members of the board of directors. Association managers can be included as part of the client group if they are “necessary agents” of the Association. There is no published case in Washington or Oregon that makes this determination, so the determination of whether the community manager is a necessary agent must be made on a case by case basis within the context of the communication itself.

As Dan mentioned last week, the privilege requires that the board have discussions with counsel concerning legal advice in executive session. The actions taken after the session should be reported in the minutes, but the minutes should not say such things as “the association’s attorney advised us to do X” or “the attorney thinks we do not have a good chance of prevailing.” Including such statements in minutes could result in a dispute as to whether or not the Association has waived it attorney client privilege.

As always, the best course of action to take if an Association questions what should be reported in the minutes or receives a request for a document containing potential legal advice is to should consult its attorney before sharing or disclosing any such communications.
 

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The use of executive session is often a confusing and misunderstood function of a community association board’s powers. We commonly see both over and under use of this privilege by well intentioned, but misinformed, boards. The law differs between Washington and Oregon.

In Oregon, both the Condominium Act and Planned Community Act mirror one another and expressly address executive session in the following manner:

All meetings of the board of directors of the association shall be open to owners, except that at the discretion of the board, the board may close the meeting to owners other than board members and meet in executive session to:

(A) Consult with legal counsel.

(B) Consider the following:

(i) Personnel matters, including salary negotiations and employee discipline;

(ii) Negotiation of contracts with third parties; or

(iii) Collection of unpaid assessments.

ORS 100.420(1)( a) (Condo Act); ORS 94.640(8)(a) (Planned Community Act). Note that subsections (A) and (B) are distinct, meaning that executive session can occur when a board consults with legal counsel or considers the three enumerated issues (with or without legal counsel present).

In Washington, there is no requirement under the Washington Condominium Act or Horizontal Property Regimes Act for condominium boards to meet in open; though, we highly recommend they do so. Thus, there is no reference to executive session in either statute.

For Washington HOAs, under the Washington Homeowners Association Act:

Upon the affirmative vote in open meeting to assemble in closed session, the board of directors may convene in closed executive session to consider personnel matters; consult with legal counsel or consider communications with legal counsel; and discuss likely or pending litigation, matters involving possible violations of the governing documents of the association, and matters involving the possible liability of an owner to the association.  RCW 64.38.035(2). The statute goes on to describe procedures for conducting business under executive session that are discussed further below.

Now that we’ve covered what the law says, there are some practical suggestions for community association boards to follow when utilizing executive session (regardless of type of community or state where they reside).

1.         Boards should use executive session in a consistent and uniform manner, that is, avoid varying its use depending upon which owner they are dealing with. 

2.         Executive session should not be used as an avoidance tactic. Boards should not convene or threaten to convene in executive session every time a controversial or contentious issue arises. The issues upon which a board can legally enter executive session are stated expressly within the statute applicable to their association, and the statutes can be used as guidelines for all communities.  

3.         The Washington Homeowners Association Act provides strict procedures when utilizing executive session that are recommended for all boards—condo or HOA, Washington or Oregon:

a.                The board chair should entertain a motion to enter executive session that shall state specifically the purpose for the closed session.

b.               Reference to the motion and the stated purpose for the closed session shall be included in the minutes.

c.                The board of directors shall restrict the consideration of matters during the closed portions of meetings only to those purposes specifically exempted and stated in the motion.

d.               No motion, or other action adopted, passed, or agreed to in closed session may become effective unless the board of directors, following the closed session, reconvenes in open meeting and votes in the open meeting on such motion, or other action which is reasonably identified.

4.         If minutes are taken during executive session, they should be marked as “Privileged” and maintained in the same manner as other confidential documents, i.e., not available for disclosure to homeowners or third parties absent court order or extraordinary circumstances.

When used appropriately and discriminately, executive session can be an effective, and essential, tool for community association boards. Proper procedures are paramount in maintaining the integrity of a board’s decision making process. Do not hesitate to contact the team at Barker Martin if you have any questions relating to executive session, or any related topic.

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This past Saturday, I had the opportunity to co-teach a Community Association Volunteer Leader course for CAI. For those of you that haven’t taken the CAVL course, it’s a basic level course designed to provide fundamental knowledge and problem solving strategies for anyone that works with community associations. I spent the better part of Saturday with a group of eager-to-learn-owners working through the program to better understand the basic governance of community associations. Sharing information about community association operations and practicing the necessary problem solving techniques were educational for the teachers as well as the participants. Walking away from the seminar, I was reminded of how much our clients rely on their association managers, reserve specialists, accountants, attorneys, insurance brokers, bankers and a host of other professionals. We owe it to them to bring our “A” game every day.

Additionally, I was reminded how important it is that we embrace our role as teachers. In order for associations to become the vibrant communities that we all want, it is imperative that we, as an industry, take the time to educate our boards. It’s easy to forget when a new director joins the board that he or she may have never served in that capacity. Without proactive action on our part, board members may become unintentionally rooted in misunderstandings and misinformation.

Industry veterans often “know” (or at least think we know) what is best for the associations we serve. As busy professionals, it’s easy to fall into the trap of identifying an issue and skipping straight to the conclusion. It hurts all involved to make this mistake. The CAVL course recommends a problem solving strategy that requires boards to:

1. Identify the scope of the problem.
2. Determine who has the authority and obligation to act.
3. Consider approaches and resources; formulate and implement the plan.
4. Communicate the plan.
5. Monitor and evaluate the plan.

The lessons learned in a CAVL class apply equally to seasoned industry professionals as well as green board members. It’s important that all of us take the time to analyze issues before an association decides to take action. Of course not everything is a problem or a difficult issue. You obviously won’t go through a five step plan each month to determine whether or not the association should pay their landscaper. But, when creating policy or dealing with a difficult issue, it’s important that we work with our associations and their boards of directors in addressing those issues. Walking them through the CAVL problem solving process will engage the board and make sure that they are invested in the final decision. Without their involvement in the process, board members will inevitably become an unexciting collection of owners that make sure the bills are paid, the manager’s report is reviewed, and maybe the financial statements are read, but little more. Their work will be less beneficial for the association if board members lack the knowledge and ownership over their tasks. Let’s take the extra step to make sure our associations are the vibrant, involved communities that the owners deserve.
 

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Smoking in residential communities often becomes a contentious issue. As more health issues are linked to exposure to second-hand smoke, more homeowners are looking for ways to ensure they are not exposed to smoke. This can lead to disputes between neighbors and sometimes even results in demands that the Association take action to prevent smoke infiltration. It is important for Associations to understand their rights and responsibilities in these circumstances.

The Risk of Doing Nothing.

Most Associations have provisions in their governing documents that give the Board authority to prevent any “nuisance” or interference with owners’ use and enjoyment of their property. Courts in Washington and Oregon have not definitively ruled on whether second-hand smoke qualifies as a nuisance or an offensive activity under this provision, but that would seem to be a likely result.

A California jury recently considered this issue and ruled against a Condominium Owners Association. In the California case, homeowners complained to their Association that their neighbors’ incessant smoking exacerbated their son’s asthma. The neighbors smoked on their own patio and on common area sidewalks, but the smoke traveled into the complaining owner’s unit. The jury awarded $15,500 in damages and determined that the majority of the damages were the Association’s responsibility. The Association did not have specific rules about second-hand smoke, but did have a rule prohibiting noxious or offensive activities.

Associations should seek to prevent the risk of legal liability by doing something to address second-hand smoke concerns, but what can they do?

What Associations Can Do.

The best course is to address this issue before it ever comes up by amending the Association’s CC&R’s or adopting rules to make it clear to all owners how the problem will be addressed. Using the Association’s authority to prohibit nuisances or offensive activities, the Board may seek to adopt rules prohibiting smoking in common areas which include fine schedules providing prompt recourse against violators.

The issue becomes much more complicated if the Association wishes to prohibit smoking within units. A prohibition against smoking inside units will almost always require a super-majority vote in favor of the prohibition and an amendment of the Association’s governing documents. This will be difficult, if not impossible, to achieve if the Association’s members include smokers. However, although owners may be allowed to smoke in their own homes, Associations can require that the owners take action to ensure that their second-hand smoke is contained within their own homes. For example, Associations can require installation of filters or screens to prevent second-hand smoke from infiltrating neighboring units.
Regardless of the approach your Association decides to take, it is certain that we will continue to encounter second-hand smoke complaints and demands that Associations take action on behalf of their residents. Associations should prepare themselves by considering this issue carefully before being faced with a lawsuit.
 

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In last week’s email, we discussed grounds and legal authority for community associations assessing fines. This week, we continue the discussion relating to association fees.

The source of an association’s authority to impose “fees” as opposed to fines may be varied and is the subject of some controversy. The only “fees” (other than attorney and resale certificate fees) explicitly referenced by any of the acts appear in the Washington HOA Act and the Oregon Condo Act. Those acts allow fees for use of the common areas or elements (RCW 64.38.020(10); ORS 100.405(4)(j)) and late fees on assessments (RCW 64.38.020(11); ORS 100.405(4)(k)). The Washington Condo Act and Oregon Planned Community Act reference these and further allow fees for “services provided to unit owners.” RCW 64.34.304(1)(j); ORS 94.630(1)(l). Thus, late fees, common area rental fees, and move-in and move out fees, fees for production of keys, etc. may be justified under the specific language of the Acts as fees for use of common areas or for services provided to owners. Because the Acts differ and declarations differ substantially, you should obtain legal advice with respect to any particular fee to determine whether it is justified under your particular association’s governing documents. If the fee is justified, most people will agree that it should still be contained in a “rule” adopted by the board and published to the owners to ensure proper notice.

Remember, these statutes are subject to the provisions of the declarations, so depending on the language in the declaration, additional fees may be authorized even if they do not relate to delinquencies, use of common areas and services to owners (e.g., move-in and move-out fees). Again, this can only be determined on a case-by-case basis. Similarly, declarations can require that common expenses that benefit fewer than all owners be paid by the owner benefited, which can provide another source of authority for a “fee.” Still other fees, such as a management company’s “delinquency monitoring fee” may be authorized as “costs of collection” of delinquent assessments or fines, authorized by some declarations.

It is important that Associations don’t adopt onerous fees that function as a penalty. Penalties play an important role in the effective governance of associations, but they are not fees. Fees should be charged to cover expenses associated with an activity rather than to discourage the activity. Before adopting a fee schedule, an association must be able to show that the charged fees are reasonably tied to related expenses and that the overall fee is reasonable.

The bottom line is whatever a fee is being imposed or collected from owners, the association should identify the source of authorization for the fee, the basis for the fees to be charged and include such fees (even those fees required by community management companies) in its published “fine and fee schedule.”
 

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Most associations and management companies are aware that fines for violation of the governing documents must be imposed pursuant to notice and an opportunity to be heard in accordance with both the Washington and Oregon community association acts. But what about fees? We are often asked what the difference is between a fine and fee in terms of collections. The short answer is that if done correctly, there is little difference between the two in terms of collections, though the source of the fine or fee and the procedures to impose them usually distinguishes the two. This 2-part email will discuss the source of authority for fines this week and fees next week.

The term “fine” is generally used to describe an amount imposed or assessed against an owner for violation of the governing documents. Notice that I did not say violation of the “rules” because “rules” is a general term that leaves some ambiguity. Fines can be imposed for violation of any provisions in governing documents, whether they are called “rules” or not. Some declarations and bylaws contain provisions that you might expect to find in the “rules,” such as provisions regarding parking or pets, while others are silent on these types of issues, leaving them to the “rules” adopted by the board. Other associations have parallel (though sometimes slightly inconsistent) “rules” in both the declaration and the board-adopted rules. Properly adopted and published fines can be imposed for violations of any provision of the governing documents, whether the rule appears in the declaration, bylaws, rules, house rules, “rules & regulations,” “house rules,” “board resolutions” or “policies” such as collection policies or fine & fee schedules.In any case, both Washington and Oregon condominium and HOA/PCA acts require that a number of prerequisites be met before imposing a fine:
 

• The fine must be included in a “previously established schedule” adopted by the board (or in the governing documents);
• The fine schedule must have been furnished to the owners;
• The association must provide the owner with notice of the violation;
• The association must provide the owner with an “opportunity” to be heard by the board or board representative in accordance with procedures in the governing documents or adopted by the board; and
• The fine must be reasonable.

See RCW 64.34.304(1)(k); RCW 64.38.020(11); ORS 100.405(4)(k); ORS 94.630(1)(n) & (4).

Notably, the provisions in all of the acts are subject to the provisions of the declaration. So it’s arguable whether a declaration that conflicts with these procedures trumps the statutes. However, the ultimate basis for the “notice and opportunity to be heard” concept sounds in the constitutional right to due process, which would trump any governing document provision. Thus, we generally advise that the procedures contained in the Washington and Oregon Acts be followed to avoid such a claim.

In short, reasonable fines for violation of the governing documents not only need to be included in a schedule adopted by the board and published to the owners, but specific procedures must be followed before imposing those fines on an individual owner. Fees, on the other hand, may be treated slightly differently. Tune in next week for a discussion of fees.
 

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Since we just turned our clocks ahead a few days ago, it means that spring is right around the corner. As we awaken from the cold, dark winter, spring will usher in new beginnings, warmer weather and longer days. The coming season is a great opportunity for association members to spend time outside in the common areas, enjoy some good weather and meet and get to know their neighbors better.

As spring arrives, here are four activities homeowner associations can do to foster harmony and good will within their communities:

1. Spring Brunch. Set up a few tables in your clubhouse or common area and ask your homeowners to bring potluck items. You can decorate the tables or the room in a simple springtime-fashion, with colored napkins, flowers and bright table coverings. Sharing food and eating together in a relaxed environment is an easy way to strengthen relations with neighbors and other homeowners. The association’s board of directors may wish to take a few minutes during the brunch to informally address the group, since many homeowners do not attend annual or board meetings.

2. Egg Hunt and other games for the kids. Although eggs are usually considered part of Easter, they need not necessarily be associated with the religious holiday. Children have a lot of fun hunting for eggs or playing other games such as capture the flag or even tag (anything to get them off their displays and outside!). These activities can be organized around spring as a theme, rather than Easter. In exchange for the eggs or participating in the other games, kids could receive creative prizes such as crayons, pencils, watercolors or handicraft tools. Involving children is a great way to increase participation of homeowners with families (offering babysitting and children’s activities is another effective way to increase participation at an association’s annual meeting, too)

3. Plant Potting Workshop for all ages. Another pleasant way for homeowners to spend time with each other is organizing a workshop on potting or re-potting plants. Springtime is ideal for such an event and kids are surely going to enjoy working with the plants and the soil, and learning about how to take care of them. All you need to do is provide the tools, pots, soil and plants (or people can bring their own plants) and the workshop can begin.

4. Spring clean up. What community cannot benefit from a general spring cleaning? Though many homeowner associations have landscape or other committees that maintain common areas throughout the year, why not invite all the owners for a Saturday morning raking, weeding and planting event? Pick a sunny day to maximize participation and offer lemonade and snacks to increase the camaraderie. One note of caution: we recommend that any use of ladders or climbing be restricted to contracted professionals who are properly licensed and insured.

Community building strengthens the ties between homeowners, tenants and board members and certainly promotes a healthy environment within a homeowner and condominium association. Working together and having fun builds relationships, familiarity and trust, which leads to a higher quality of life for all members within the community. For those of us who work with homeowner and condominium associations, there is no better time than now to urge our clients to get outside and foster community.

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Associations must make sure the proper steps and procedures are followed through turnover. A common mistake occurs when the developer continues to exercise control of an association after transition has already occurred. For any association in which the owners aren’t electing 100% of the directors, it’s important to know when transition is to occur because once the requirements for transition are met, the transition happens by operation of law whether or not the owners, developer and/or association manager realize it.

Calculating the date of turnover is an important step in the process. The general rules for transition in Oregon and Washington associations are:

WA Condominiums: Transition starts when 25% of the units are sold, and once 75% are sold, all board members must be owner elected. RCW 64.34.308.

WA Homeowners Act: There is no provision in RCW 64.38, so the association’s governing documents control.

OR Condominium Act: Declarants may elect to control an association for a certain period of time. For single phase condos, declarant control must terminate either at the time of conveyance of 75% of the units or three years from conveyance of the first unit, whichever occurs earlier. If the condominium is a staged or flexible condominium, declarant control must terminate either at the time of sale of 75% of the units which may be created or seven years from conveyance of the first unit, whichever occurs earlier. ORS 100.200.

OR HOA Act: Declarants may elect to control an association for a certain period of time. Transition may occur upon a stated event or timetable in the declaration. Transition may never occur if the development is less than 20 lots and declarant elects in the original governing documents to retain control in perpetuity. See ORS 94.600.

It’s important to distinguish between special declarant rights and declarant control. Unlike the latter, special declarant rights do not necessarily expire at the time of transition. Some rights – for example, the right to control easements or add development phases – may extend for many years (the termination date for special declarant rights are ordinarily contained within the section of a declaration that describes and preserves the specific rights).

Associations should review their governing documents and perform a complete analysis to determine if the period of control has expired and if the declarant has maintained special declarant rights that continue past transition. The process does not have to be adversarial. Once the issues are explained, responsible developers generally cooperate in that analysis given the liability they could incur for failure to transition to the owners.

If you are an owner, board member or manager of a developer controlled association, we would welcome the opportunity to review your association’s status for transition.
 

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