Changes, Changes, and More Changes: Amending Governing Documents in Oregon

Community associations have varying reasons to amend their governing documents and we previously discussed when to amend governing documents in our February 2014 weekly email. Sometimes, a current rule does not fit a community. Other times, an association wants to impose additional rules or changes are needed because of inconsistencies. Depending on the type of amendment and the specific document that is being amended, varying procedures must be followed. In general and because of the varying requirements, amending governing documents is not often for the faint of heart.

In a planned community or a condominium association, unless otherwise provided in the governing documents, amending the declaration or bylaws begins with an amendment proposal offered by a majority of the board of directors or by at least 30 percent of the owners. After the amendment is proposed, then owners vote on the amendment. If owners approve the amendment, we are often asked if the amendment becomes effective immediately. Instead, there is an important additional step for an amendment to become effective: recording the amendment in the real property records. It’s important to ensure your association does not miss this last step.

Upon recording, an amendment puts current and future owners on notice that the amendment is effective. If the amendment is not recorded and the association proceeds as though the amendment is effective, it can become difficult to untangle the issue down the road.

Declaration/CC&R Amendments: Requirements for Approval

Planned community associations may only amend their declarations with the approval of owners representing at least 75 percent of the total votes in the planned community or any larger percentage specified in the association’s declaration. In general and barring a couple of exceptions, the same is true for condominium associations. For both condominiums and planned communities, some specific types of declaration amendments may even require 100% approval. For condominiums, depending on the type of declaration amendment, the Real Estate Commissioner, the county assessor, and/or the county tax collector may have to approve the amendment before it can be recorded.

Bylaw Amendments: Requirements for Approval

Condominium associations may amend their bylaws if the amendment is approved by at least a majority of the owners. In condominiums that are exclusively residential, the bylaws may not provide that greater than a majority of the owners is required to amend the bylaws unless the amendment relates to the following:

1) age restrictions,

2) pet restrictions,

3) limitations on the number of persons who may occupy units, or

4) limitations on the rental of units.

Those specific types of amendments are only effective if approved by 75 percent of owners or a greater percentage specified in the association’s bylaws. In addition, for a condominium association, the Real Estate Commissioner must approve any bylaw amendment that occurs within five years of the recording of the initial bylaws.

Planned community associations may amend their bylaws if the amendment is approved (unless otherwise provided in the bylaws) by a majority of the votes in a planned community present, in person or by proxy, at a duly constituted meeting, by written ballot in lieu of a meeting or other procedure permitted under the association’s governing documents.

Notably, if a provision in the bylaws is required to be in the declaration under the Oregon Planned Community Act or the Oregon Condominium Act, the voting requirements for amending the declaration shall also govern the amendment of that specific provision in the bylaws.

The procedures and approval requirements set forth above are often supplemented or adjusted by an association’s governing documents; therefore, it’s important to carefully review your association’s specific procedural and approval requirements before embarking on the amendment process. Please let us know if you have any questions.

For further reading please visit Barker Martin’s Northwest Condo and HOA Law Blog. As always, please feel free to contact me with specific questions on this or any topic of interest to you regarding common interest associations.

Discrimination

I recently noticed a blog post based on how to challenge your community association. A quick search revealed that there are many postings or websites devoted to the topic. A recurring theme among those posts: If you want to challenge your Association, consider whether or not you might be a victim of discrimination.

Is your Association engaging in discrimination? Rare is the situation where an association purposefully discriminates with intent to cause harm. When an association unlawfully discriminates, it is typically unintentional. For example, owners might enjoy quiet time around the Association swimming pool. If that quiet time is achieved by instituting adult only swim hours, the Association may have unintentionally discriminated against families.

Other discriminatory practices may include limiting the number of family members within a home, or imposing broad tenant screening requirements. Though not discriminatory against a protected class of individuals, community associations may also inadvertently violate federal statutes relating to satellite dishes, personally identifiable information or even displaying of Old Glory.

It might also surprise associations that local laws often provide additional and broader owner protections than those promulgated at the federal level. Oregon and Washington State laws both provide greater protections than those under the Fair Housing Act and American with Disabilities Act. Many, if not most, city and county jurisdictions have even more restrictions. Applicability of these rules varies depending on several factors, including the type of amenities offered and whether or not they are “private.” Associations with any questions regarding the laws that apply and whether or not their rules run afoul of those laws, should seek legal counsel to assess their situation.

As always, please feel free to contact me with specific questions on this or any topic of interest to you regarding community associations.
 

The Aftermath of Damage

In the fall of 2013 our weekly email discussed preparing for emergencies and knowing what to do when an emergency like a pipe failure occurs. Knowing what to do when there is sudden damage at your association is always the most immediate concern, but knowing what to do in the aftermath is equally important and frequently more confusing.

After the immediate problem is addressed the questions begin. Who pays for the repairs? Who controls how and when the repairs are performed? Those are the primary questions, but there are a host of secondary questions that are equally important. Was the damage to a unit, limited common elements, or common elements? Was it the result of negligence or malfeasance by an owner or their guest? Do your governing documents have a provision regarding damage caused by the fault or malfeasance of an owner or their guest? Is the damage covered by insurance? If it is covered, who pays for the deductible? If some or all of the repair costs are not covered by insurance who pays for that?

Unfortunately, there is no universal answer to these questions. The statutes that govern your type of association will provide some general guidance, but the final answers will depend upon the language of your governing documents. You must look at your governing documents as a whole. Your governing documents will likely have sections devoted to damage, insurance, maintenance and repair, assessment rights and obligations, and sometimes a fault provision that requires unit owners to pay for damage they cause. All of those sections must be read together with the applicable statutes in order to properly answer the questions that come up in the aftermath of damage.

Ordinarily, the goal of our Barker Martin emails it to provide you with a quick answer to a common problem. Unfortunately, not all problems have an easy answer. But, even in this instance, there is an answer. It just takes a little work and we are happy to help.
 

The Difference Between Cats and Dogs: What Do Your Governing Documents Say?

Managers, board members and homeowners take note: YOUR ACTIONS (OR INACTIONS) WILL BE JUDGED FIRST BY WHETHER OR NOT YOU ARE COMPLYING WITH YOUR GOVERNING DOCUMENTS. Too many boards of directors assume that their decisions, actions and inactions will be judged by a reasonableness standard. They wrongfully assume that so long as their decisions are reasonable, both they and their associations will stay out of trouble or avoid liability. Reasonableness certainly plays a part in any board’s fulfillment of their duties and the lawfulness of their actions. However, an otherwise reasonable action can still be unlawful if the Association fails to comply with its governing documents.

It’s often said, and important for boards to remember, that following your governing documents is generally considered reasonable and failing to follow your governing documents is generally considered unreasonable. However, sometimes boards miss the crucial steps of reviewing their governing documents and skip straight to making a decision. Even if that decision seems rational and fair, the association can end up on the losing end of litigation if that rational and fair decision doesn' comply with their own governing documents.

I have a favorite case that demonstrates how easy it is to forget about following your governing documents while believing that you are acting reasonably on behalf of the Association. The case, from a Florida Appeals Court, involves the Forest Villas Condominium Apartments, Inc. (“Association”) which sued one of its owners, Loretta Prisco, claiming that she kept a dog in her unit in violation of the Association’s governing documents (Prisco v. Forest Villas Condominium Apartments, Inc. (2003)). Since 1979, the Association’s governing documents included a pet restriction which said:

[W]ith the exception of these [grandfathered] dogs, no pet of any kind whatsoever, except fish and/or birds, shall ever be permitted to be harbored in FOREST VILLAS . . .

Ms. Prisco claimed that the Association had abandoned the rule and was selectively enforcing it against her and her dog. In support of her argument, Ms. Prisco proved there were several cats and dogs living in the condominium, all with the board’s knowledge. As part of its ruling, the trial court specifically found that evidence of cats living in the condominium didn’t support a claim of selective enforcement because:

“Cats are not the same as dogs, and the condominium allowing a cat on the premises does not equal to disallowing a dog” because “dogs clearly bark, cats do not, dogs need to be walked outside of their home, cats do not as they use litter boxes for the most part.”

Seems reasonable, right? The trial court agreed that the board could reasonably treat dogs and cats differently. Cats are, in fact, different than dogs. They don’t make as much noise or impact neighbors like a barking dog that must be walked outside on a regular basis. The trial court went along with the Association’s argument and based its ruling on whether or not the Association’s actions were reasonable, and the Association prevailed.

The point is, if a trial judge can ignore the plain language of an association’s governing documents because the end result seems reasonable, then it’s easy to see how an association board of directors can make the same mistake. Unless you happen to get in front of this Florida judge, you can’t ignore your governing documents, basing decisions solely on what you believe to be a reasonable approach to association governance. Applying reasonableness without reference to the governing documents might work some of the time – but not always.

The Florida case didn’t end with the trial court. Ms. Prisco appealed the trial court decision . . . and she won. She prevailed on appeal because the higher court didn’t care about the differences between cats and dogs or whether cats pose a greater or lesser impact on neighboring unit owners. All the appellate court cared about was the Association’s governing documents. In its decision the court found:

The [pet] restriction is clear and unambiguous and states that, other than fish and birds, “no pets whatsoever” shall be allowed. The fact that cats are different from dogs makes no difference. What does matter is that neither a cat nor a dog is a fish or a bird, so both should be prohibited. Restrictive covenants should be narrowly construed, but should not be construed in a manner that would defeat the plain and obvious purpose and intent of the restriction. In this case, the clear purpose of the restriction is to prohibit all types of pets except fish and birds. The trial court's interpretation defeats that plain and obvious purpose. Thus, with regard to this issue, Prisco has shown that the Board is selectively enforcing the restriction and the summary judgment in favor of Forest Villas must be reversed.

In other words, it doesn’t matter how reasonable a board’s action might be if their decision is inconsistent with the association’s governing documents. If your governing documents contain provisions that your community won’t or doesn’t want to enforce, then consider amending those policies to better reflect the community’s values. Unless your governing documents match the actions being taken by the board, there will always be one or more potential plaintiff out there that could sue the association for failure to comply with its governing documents.

So what are some steps that associations can take to make sure they’re enforcing their governing documents?

1. Don’t assume you know what your governing documents say. Read them and refer to them often.

2. Anytime a Board starts to consider whether or not to enforce a provision in its governing documents, take pause and tread lightly. This is not to say that boards don’t often make decisions that involve an exercise of discretion. But sometimes, boards take the liberty of assuming discretion when their governing documents don’t provide for it.

3. Know the difference between exercising discretion and ignoring your governing documents. If your governing documents require notice not less than 10 and not more than 60 days in advance, you don’t have the discretion to send notice out 65 days in advance. If your governing documents require a vote of the owners to approve a specific action, the board can’t unilaterally take the action as an exercise of its “discretion.”

4. If the best authority you have for an action includes, “we’ve always done it this way” then don’t do it.

5. Don’t forget about procedures. Boards sometimes find that they have authority to take an action but forget to follow the procedures they are required to follow in the exercise of that authority. For example, many architectural control provisions require board to take action within a set period of time. Some require that the decision-makers visit the lot or review specific submissions prior to rendering a decision. The failure to follow proper procedures could invalidate an otherwise proper action.

6. Have your governing documents reviewed for compliance with applicable law. Following your governing documents is the prudent action except when those documents conflict with applicable law. Having your governing documents reviewed periodically will allow your board to enforce them with confidence.

As always, please feel free to contact me with specific questions on this or any topic of interest to you regarding common interest associations.
 

"Assessments"..."Fines"..."Dues" - Does it Matter?

 We often hear homeowners, and sometimes board members and managers, interchange “dues,” “fines,” and “assessments.” This inadvertent transposing of terms should raise eyebrows, as there are important legal distinctions between the words.

“Dues” is defined as “a regular fee or charge payable at specific intervals.” Consequently, some people think that community associations impose monthly, quarterly or annual “dues.” However, you won’t find the term “dues” anywhere in a condominium or homeowner association declaration. Instead, the declaration will refer to authority of the association to impose regular “assessments” upon owners for their share of common expenses. Some declarations also describe and define “special assessments” as other than regular assessments imposed upon homeowners for unusual or unplanned common expenses.

“Fines” are often assessed against owners who violate one or more covenants, restrictions or rules. Following adherence to proper due process protocols (often requiring a hearing or other opportunity to be heard), assuming the violation is upheld, the fine turns into an “assessment” owed to the association.

Thus, an “assessment” that arises from a CC&R violation has the exact same legal weight and meaning as a regular or special “assessment.”

It is important to distinguish between the different terms because under both Oregon and Washington law, condominium associations have automatic, stautory lien rights that attach to a unit for any “unpaid assessments.” The same is true in Oregon for homeowner associations under the Planned Community Act (ORS 94.709). Though the Washington Homeowners Association Act does not provide for statutory lien rights, most HOA declarations include such a provision.

In summary, Oregon and Washington community association have enhanced lien rights for unpaid “assessments.” When describing amounts owed to an association, to get the most “bang for your buck,” make sure you are using the right term.

If you have specific questions, please feel free to contact me at www.barkermartin.com.

Oregon Liens: Can We Cut in Line?

We are often asked about the similarities and differences between planned community and condominium association liens in Oregon.

An in-depth understanding of an association’s lien rights is essential to determine the best steps for an association to take in the collection of delinquent assessments.

In Oregon, the planned community lien and the condominium lien have similar features. Most importantly, in both a planned community and a condominium, when an owner fails to pay an assessment levied by the association, the association has an automatic lien on the lot or unit for the amount of the unpaid assessment. Pursuant to both the Oregon Planned Community Act and the Oregon Condominium Act, the recording of the association’s declaration constitutes record notice and perfection of the lien for unpaid assessments.

In other words, as long as the association’s declaration is recorded (which is important to an association for a variety of reasons), when an owner fails to pay assessments in accordance with the association’s governing documents, the association has a lien against the owner’s lot or unit without having to take any additional action. Although association assessment liens are automatic, associations can record a lien on an owner’s property. Notably, both the Oregon Planned Community Act and the Oregon Condominium Act require an association to record a notice of claim of lien before an association can begin a suit to foreclose its lien.

Despite their similarities, there is a significant difference between planned community liens and condominium liens. That difference concerns lien priority. In both a planned community and a residential condominium, an association’s lien for unpaid assessments is junior to (1) tax and assessment liens, and (2) a first mortgage or trust deed of record. Otherwise, an association’s lien is prior to a homestead exemption and all other liens or encumbrances upon a unit or lot. The difference is that a condominium association’s lien may be able to gain priority over the first mortgage or trust deed of record if the association complies with the requirements set forth in the Oregon Condominium Act.

In other words, if a condominium association meets the statutory requirements, the association’s lien can cut in line in front of the lender to receive payment upon the sale or conveyance of the unit. In that way, lien priority is a lot like Black Friday. The ability to cut in line could make all the difference.

In sum, although association liens for condominiums and planned communities share similarities, a condominium association’s ability to cut in line in front of the first mortgage or trust deed is a significant benefit. Although the automatic lien can protect both planned community associations and condominium associations, condominium associations should note the added lien priority benefit when determining the best approach in the collection of delinquent assessments.

For further reading on when to amend governing documents please visit Barker Martin’s Northwest Condo and HOA Law Blog.

As always, please feel free to contact me with specific questions on this or any topic of interest to you regarding common interest associations.
 

Governing Documents - When Should They Be Amended?

As general counsel to numerous community associations—both condos and homeowners associations—one of the most frequently asked questions we receive is: When should we amend our governing documents?

To begin, there is no one right answer for when an amendment is necessary. Sometimes an immediate amendment is needed, such as when a board discovers an amendment is necessary to comply with HUD/FHA lending certification requirements, or when two owners request to swap parking space assignments. Other times, a community can cruise along for years (decades, even!) without so much as a conflict or issue to suggest any amendment is needed. A good rule of thumb is to consider having legal counsel review your documents near the beginning of your association’s life (such as, after developer turnover), and then every 5-7 years after that, to determine what amendments your board might consider.

Between legal reviews, directors should be observant of signs that an amendment may be needed. For example, if your association suffers from governance problems, such as inability to adopt the proper budget or obtain quorum to elect directors, this may be a sign that an amendment is needed to add or simplify budget ratification provisions, adjust quorum levels, or to introduce streamlined director election or appointment mechanisms. Similarly, if your association has found it difficult to enforce its rules and regulations, faces persistent owner challenges or threats of legal action then perhaps your association’s collection, enforcement, notice, and hearing provisions need to be reviewed, evaluated and updated. Another red flag might be if your association has dealt with same issue over and over again, such as guest parking problems or landscaping compliance. This can be a sign that an amendment to one of the governing documents is needed to avoid repeated incidents.

Directors should also be on the lookout for one of the most common amendment precursors: when an association’s governing documents are inconsistent. Documents can be internally inconsistent (e.g., Declaration Section X prohibits dogs, but Declaration Section Y contains dog leash requirements); and, inconsistencies can arise amongst different documents (e.g., Declaration Section X imposes 10% interest on delinquencies, but Rule Y imposes 12%). Not all discrepancies require an immediate amendment, but if you discover these types of issues, it’s important to determine which standard should be applied to avoid confusion.

Even when the need for an amendment is obvious, it is not always apparent which document—the recorded declaration/CC&Rs, the Bylaws, the Articles or the rules—must be revised. The law requires certain provisions (like restrictions on use) to be contained in the recorded declaration, while others may be adopted by rule. Likewise, amending the CC&Rs nearly always requires owner consent, while changing rules can normally be accomplished by board resolution. Creating a rule when a declaration amendment is needed can result in big problems for an association. Amending a declaration when only a rule is needed, can result in unnecessary expense.

Finally, if your board is struggling with the question of when to amend the association’s governing documents, it is probably also dealing with the questions of what must be amended, and how to accomplish an amendment. These are areas where a board would be wise to consult with its management and legal teams.

Call us if we can be of assistance.
 

Transparency...

Boards sometimes ask us: What information are we required to provide to owners?

As lawyers, we dutifully review their governing documents and the applicable statutes and provide a response. However, seldom should this be the end of the analysis because…

In every association, a percentage of the owners assume and fervently believe that YOU (directors, officers and managers) are personally out to get them. They are convinced that their association board, working in concert with the manager, is secretly plotting to deprive them of their hard earned money and personal freedoms. They will claim that the board operates in complete secrecy at undisclosed locations under cover of darkness, away from prying eyes of owners.

Not all boards are created equal. There are undoubtedly boards that deserve any suspicion heaped on them by the owners. However, a vast majority of boards operate in good faith and at all times with the association’s best interest in mind. These boards can become frustrated when accused of secretly plotting against the association they have so graciously volunteered to support.

There will always be that percentage of owners that distrusts and sometime actively combats their association leaders. It cannot be avoided. Transparency, above and beyond what the law might require, is a key component in neutralizing these detractors.

Associations should consider utilizing a newsletter, community website, social media, owner forums, community social event or bulletin board to help increase communication with owners on a regular basis. Boards should look for opportunities to post meeting minutes, agendas, notices and communicate an invitation for involvement by the owners.

If your association has a new or creative way of communicating with or engaging with owners, we’d love to hear about it.
 

Introductions & Welcome to the Team

We don’t normally use this weekly blog to blow our own horn. Our goal is to be responsive to our clients’ needs and provide the best professional legal services in the industry.

It is in this spirit that we would like to introduce you to our new employees, each of whom has joined the team here at Barker Martin with the express purpose of complementing our General Counsel, Litigation, and Collection services.

Drum roll please:

We are excited to introduce you to the newest members of our team: Amanda Anderson and Matt Coussens. Amanda and Matt recently joined the General Counsel and Collections practice groups in our Portland office.

Amanda K. Anderson is an associate attorney in Barker Martin’s Portland office and she focuses her practice on community association general counsel and collections matters, as well as, construction defect litigation. Amanda brings a wealth of experience in community association law having represented numerous community associations throughout Oregon in general counsel matters and construction defect and product liability litigation. Amanda graduated from Willamette University magna cum laude and was the Managing Editor of the Willamette Law Review. She is an active member of Oregon Community Association Institute (CAI-OR) and Oregon Washington Community Association Managers (OWCAM).

Matt Coussens is a paralegal in Barker Martin’s Portland office and he assists Amanda with condominium and homeowner association general counsel and collections matters. Matt joined Barker Martin after a year working in the same area of law at an established Portland area law firm. Prior to becoming a paralegal, Matt was a project manager for a public relations firm in Seattle. He received his Bachelor of Arts degree in political Science and History from Gonzaga University in Spokane, WA.

As the demand for effective and efficient community association legal services continues to grow, including General Counsel and Collection Services continues to grow, Barker Martin stands ready to deliver uncompromised quality to each of our clients.

Please join me in welcoming these professionals to our Team!
 

 

Lessons from 12th Man Mania

This Sunday at 3:30 (PST) legions of football fans (and casual observers) will tune into the big game.

An estimated 70% of Seattle-area residents will be glued to their televisions watching the Hawks (and Broncos) compete in Super Bowl XLVIII. Over the past several weeks, 12th Man signs, flags and banners have been prominently displayed from rooftops, office buildings, homes and vehicles. The Seattle evening skyline is aglow in Seahawk blue and green lights.

It’s intriguing that a professional football team can capture the emotions, attention and support of so many people (an estimated 30,000 fans lined the roads as the team departed for New York last weekend). How did a sports team span across social, economic, cultural and ethnic divides to unite an entire region? In reflecting on the amazing Seahawks’ playoff run, I came up with three concepts which homeowner association managers and board members might take from the 12th Man Mania to utilize in building community within their own neighborhoods:

1. Embrace diversity and identify common goals. Consider some of the personalities that make up the Seahawks. How do Russell Wilson, Richard Sherman, Marshawn Lynch and Pete Carrol work together? They have such divergent personalities and life experiences. The answer: they share common goals and do not let personalities distract from achieving collective goals. What goals are important to your community? Are personality differences standing in the way of success? The key is identifying core values, establishing common goals and putting aside personal differences to achieve collective success.

2. Exhibit strong leadership. The Seahawks are successful in large part due to the organization’s stellar leadership, which includes the owner, coach, quarterback and team captains. Similarly, a successful community association must exhibit strong leadership from its professional manager, board president and officers.

3. Communicate, promote involvement and celebrate successes. The “12th Man” campaign is absolute genius – anyone and everyone who desires can be part of the team. Of course, the Seahawk organization has an entire Public Relations (PR) team with a large budget to help drive that message. Community associations may not have professional PR folks, but that shouldn’t deter promoting the value of your association to community members. Association boards should work to ensure regular and transparent communication with the homeowners. Association websites, newsletters, open board meetings and an occasional “town hall” get-together do wonders in facilitating community involvement and good will throughout a community. Further, an association board should not be bashful in promoting successes, such as completion of construction or renovation projects, particularly effective committee work, or even well attended barbecue or other social events around the community—celebrate together.

Regardless of whether the Seahawks win on Sunday, there is little doubt they’ve had a terrific season and galvanized an entire region. Perhaps community association leaders and managers can take a few pointers from the team to help facilitate and promote community within our neighborhoods.

Go Hawks!!