Resolutions!

Resolutions are one of my favorite tools for boards to use to address routine, common problems and procedures.  CAI describes a resolution as “...a motion that follows a set format and is formally adopted by the board...(they) may enact rules and regulations or formalize other types of board decisions.”  Simply put, resolutions are decisions by the board on topics that are commonly encountered in the day to day business affairs of the association.  Resolutions cannot contradict the rules and restrictions in the governing documents (or state or federal laws) but are instead considered an extension of them.

Resolutions must follow a set format:  citation of authority to adopt the resolution, which may include sections of state or federal statutes or of the governing documents; purpose, which explains why the board is adopting this resolution; scope and intent, which is who this resolution affects and for how long; and finally the specifications, which explains what those affected by the rule are expected to do.*

There are four resolutions that I think all boards should adopt:  payment resolution, insurance and maintenance resolution, architectural review resolution and rules enforcement resolution.  It can also be prudent to have a resolution to explain how resolutions are made and adopted, but it is unclear if that is truly necessary or not.  So what do these resolutions do?  Let’s take each of them in turn.

Payment Resolution.  The payment resolution, which may have several different names, is all about monies due to the association.  This resolution details the frequency of regular assessments, the due date, the grace period (how many days after the due date the payment is still considered not late), the late fee (which may be a dollar figure or a percentage of the assessment), as well as any other fees or penalties for failure to pay.  This resolution also details what actions are taken and in what time frame when an assessment is not received by the end of the grace period.  Typical steps you’ll see in this resolution is notice to the owner at 30 and 60 days, with a demand letter being sent around 90 days (provided this conforms with the governing documents).  It should also detail when an owner’s account will be turned over to a collections attorney (usually an amount or a minimum number of days without payment).  Things like NSF charges, attorneys' fees, etc., are generally also mentioned in this document, so that there’s no question the HOA has the right to recover these costs.

Insurance and Maintenance Resolution.  This resolution is especially critical for condominiums and those planned unit developments where the HOA and the owners share maintenance responsibility for the homes/units.  This two-fold resolution helps owners, the board, and the insurance agent to clarify the items that are the responsibility of the association (versus what each owner is responsible for) in accordance with the governing documents.  In addition to giving an overview of owner versus HOA maintenance responsibilities, it also explains insurance coverages, deductibles, and the procedures for filing an insurance claim.  When the association has its first insurance claim, the board will be glad to have this resolution in place.

Architectural Review Resolution.  Most governing documents give the board the authority to set up an architectural review committee (commonly called ARC or ACC) to help review and approve potential changes to the community.  Developers like to put this clause in their documents (and many owners like to see it in them) because an ARC can help ensure that the standards of the development are upheld and potential neighbor concerns are considered.  This resolution is generally a formalization of the procedures mentioned in the governing documents but may also include specific restrictions (such as no fences may be more than 6’ in height or all homes must use cedar shake or tile roofing).  It also usually includes a form that details the process and information to be provided for consideration.

Rules Enforcement Resolution.  The governing documents for your community most likely include some restrictions on use that may address such issues as rentals, trash cans and recycling bins, recreational vehicles, etc.  This resolution expands on those restrictions by putting into place the procedure to follow when a violation occurs.  Without such a resolution, and the accompanying fine schedule, a board may not be able to enforce the restrictions in its documents.  This resolution usually also includes a recap of the rules for quick reference.  Any board that wants to enforce its rules should adopt this resolution.

One important thing to note about all of these resolutions:  they cannot be contrary to your governing documents nor to state or federal laws.  So if your documents say that a boat cannot be in sight in the community, the board should not adopt a resolution that states that an owner can keep a boat in his/her driveway overnight.  The resolution should match the governing documents.  Likewise, if the governing documents allow owners a 30 day grace period to submit their dues payments, the board cannot opt to reduce that to 10 days in its resolution.

It is also a good idea to have any resolution being considered for adoption by the board be reviewed by legal counsel to ensure there are no invalid clauses nor anything imprudent contained with them, especially if the person drafting them does not have experience doing so.  Even though I’ve written countless resolutions (maybe 75 or so over the years), I still encourage my boards to run them past their legal counsel if they want to do so.

Finally, resolutions must not only be adopted by the board but must also be provided to all owners before they go into effect.  It is not sufficient to post them on the HOA's website; all owners must be notified and receive a copy of the resolutions (electronic or physical) before the board undertakes any enforcement of them.

Resolutions are incredibly powerful and somewhat underutilized tools of the board.  If your community does not have these resolutions in place, please consider which may be appropriate for you.

* This section is based entirely on the text on pages 52-53 of the M-100:  The Essentials of Community Association Management from CAI.

Dealing with "Difficult" Owners

So how do boards deal with their “difficult” owners?  This is something that community managers have to deal with all the time and so we either develop the skills to deal with them or we cease being community managers.  No joke.  When I use the phrase “difficult” owners I’m not implying that these are bad people; they rarely are.  Many times they simply don’t understand what they’ve bought into, and that can cause a negative reaction.  They may also just be frustrated by some other thing in their lives that they can’t control; it may not even really be about the HOA.  So what’s the best way to deal with them?

Here are the strategies that I use when dealing with them:

• Stay calm and try to hear them out.  Sometimes just taking the time to listen to (and really hear) what the owner is concerned about can be enough to diffuse the situation.  Unless the owner is abusive, it’s usually best to let them talk until they’ve talked themselves out.

• Offer information to address whatever they’re concerned about.  If they ask why the dues are so high, you can send them the budget.  If they don’t understand why they received a late fee, you can send them the payment resolution.  It’s good to tell them the information as well, but I have found it is more powerful (and harder to argue against) a document, especially if it’s one they have probably seen before.

• Ask them to put it in writing.  I use this technique quite often if someone is so upset that they can’t talk themselves out.  It’s important that you make this ask in a very particular manner, because you don’t want them to think that you’re simply trying to fob them off.  This is not what this accomplishes!  When you make this request, explain to the owner that you really want to help them get this matter resolved, but that the entire board needs to consider it, and rather than you trying to relay the owner’s concerns, it would be much more helpful to have the owner put his/her concerns in his/her own words, to ensure there is no miscommunication.  What this does is it forces the owner to think very clearly and logically about what s/he is upset about, and it allows the manager or the individual board member to bring the issues to the entire board to determine if these concerns are valid.  One important note:  when you receive that written document, make sure the issues raised in it that require discussion by the board are placed on the next meeting’s agenda and a decision to take or not to take action is made at that meeting.  Otherwise the difficult owner will simply go back into frustration mode and nothing will have been accomplished except that you are more likely to face the final option (below).

• If all else fails, apologize and hang up.  This is a hard decision to make, but no one deserves to be verbally assaulted over the phone.  If the owner cannot be civil and he or she has been warned, it is perfectly acceptable to tell him/her:  “I’m very sorry but I don’t think we can resolve this problem at this time and so I’m ending this call now.  Goodbye.”  In my entire career (13+ years as of the writing of this post), I think I’ve only had to use this technique three or four times in the hundreds (thousands?!) of phone calls I’ve had with owners over the years.  I always try my best to hear them out, alleviate their concerns, provide them information, etc., but there may be an owner that is simply too difficult, and rather than have to accept the abuse, it is okay to end the communication.  At that point, nothing positive will happen anyway.

Remember, the difficult person at the end of the phone may not only be upset about the association.  They may be facing any number of troubles in their lives (personal, professional, financial) that are making them feel angry and hostile.  Try to hear them out, offer information, ask them to put it in writing, and if all else fails, apologize and hang up.

Finding a Team of Experts

Today I’d like to talk about the importance of the board having a team of experts.  In Oregon, members of the board must be individuals and owners of a property in the community in order to serve on the post-turnover board (there are other allowances if the property is owned by a corporation or a trust, but I won’t cover that here).  Owners elected to serve on the board come in only knowing whatever they might have experienced in their personal and professional lives, which may or may not be helpful in the performance of their board duties. That means that board members - like community managers - either have to know a little bit about pretty much everything or have to know where to obtain that information.  

I believe it is critical for a board to get as many of its experts lined up before any of them are truly necessary.  What kind of experts am I talking about?  At a minimum, I think all associations/boards should have a relationship with:  a community manager, an attorney (for general counsel as well as collections), an insurance agent and a certified public accountant.  It is preferable too if these folks have a working relationship with other associations, and not simply just experience in their field.  This does not mean that you use these services all the time, just that you have a relationship with them so that if you need their help (and it stands to reason you’ll need their help at some point, and maybe quite urgently!), you know who to call when the time comes.  If the association is responsible for maintenance of common property, like landscaping or buildings, then I also recommend you have a relationship with a landscape firm and a professional building consultant.

Why is it important to develop relationships with these experts?  The most basic answer to that question is that when association stuff happens, it generally happens very quickly.  Let’s take an experience out of my own management life:  a tree falls through a condominium building.  If this happens at your community and the board is responsible for action, do you know what to do?  If you don’t, but you have a community manager, he or she can get the ball rolling for you (call the insurance agent, file a claim, contact a restoration company).  In this scenario, if you also have a good insurance agent who has helped you get a good policy, he or she will not only be an asset in filing the claim but will also make sure you get the full coverage you’ve been paying for.  Hopefully it won’t be necessary to involve a lawyer, but if the owner of that unit then files suit against the association for failing to properly maintain the trees, you don’t want to be stuck trying to find an attorney to defend you - and what’s the point of having an attorney that doesn’t know association law or doesn’t know you?

Obviously when dealing with an insurance claim it’s helpful to have your experts lined up, but even with a more mundane experience like resolving delinquencies it’s useful to have an established relationship.  The American economy is tight right now and has been so for some time, which means that many associations are seeing delinquency levels (that is, the number of owners who are not paying their dues on time or at all) rise steadily.  Until there is a significant shift in the economy, there’s no reason to think but this trend will continue.  So what to do?  The best thing is to be prepared!  Your two best allies in this situation are your community manager and your collections attorney.  A community manager can help you put together a collections resolution (in keeping with your governing documents and state statute) that reminds all owners of the need to pay their assessments in a timely manner as well as the consequences for failing to do so.  The attorney can use this resolution with the nonpayment to perfect liens, obtain judgments, and get the association any assets of the debtor.  Even if the debtor has no assets now, a judgment can follow him or her for several years, so when he or she begins to earn again, the association can recoup its costs then.  While no one wants to have to sue another owner, boards should remember that they have a fiduciary duty to uphold the governing documents of the community (more about this on another blog).  Why should those who do not pay get the same benefits as those who do not?!

The two best places to find your experts are within our local organizations:  CAI-Oregon and Oregon Washington Community Association Managers (OWCAM).  Here are links to their websites:

CAI-Oregon:  http://www.caioregon.org/link/linkshow.asp?link_id=232780
OWCAM:  http://www.owcam.org/

I have had the privilege to work with many of these experts and would be happy to share my experiences of them with you.  Feel free to give me a call at 971-258-2826 should you be interested in my perspective.

To recap - boards should find their experts and develop a relationship with them so that when the time comes they have people on their side who are ready and able step in and help as needed.

Welcome to My Blog!

The intent of this blog is to provide straightforward, clear information for board members and owners in community associations in Oregon.  In addition to routine information, I also intend to provide less obvious information and experiences that I think will be helpful for owners and boards.

Let’s talk about the phrase “Community Association” and what it means. In the State of Oregon, there are three community association types, only two of which I’ll deal with on this blog: condominiums, planned unit developments, and timeshare communities. Since I’ve not dealt with timeshares, this blog will deal exclusively with condominiums and planned unit developments, both of which are also commonly referred to as HOAs.

There are three statutes in the State of Oregon that are applicable to community associations:

ORS Chapter 65 - Nonprofit Corporations
ORS Chapter 94 - Real Property Development
ORS Chapter 100 - Condominiums

All of these statutes are available online:

http://www.leg.state.or.us/ors/065.html
http://www.leg.state.or.us/ors/094.html
http://www.leg.state.or.us/ors/100.html

All community associations must follow ORS Chapter 65, regardless of whether or not they have been incorporated.  Then, depending on the type of association, they must also follow either ORS Chapter 94 (for planned unit developments, also known as PUDs) or ORS Chapter 100 (for condominiums).  With very few exceptions (and those generally being very old communities), the simplest way to determine if your community is a PUD or a condominium is by looking at the legal name:  if “condominium” or “condominiums” is in the entity’s legal name, then your community is a condominium and follows ORS 100; otherwise it is a PUD.  Some owners mistakenly believe that it is possible to tell simply by looking at how a community is constructed or by the items maintained by the HOA to determine the community type, but that is not the case. I have managed condominiums that were all single-family, detached homes (and the HOA had no maintenance responsibilities for those homes) and I have managed PUDs that were entirely responsible for the exterior of the home.  If  in doubt, consult your attorney to determine whether your community is bound by ORS 94 or ORS 100.

There are many important items that boards must follow in these statutes, so I generally recommend, especially if a community board is mostly or completely self-managed, that each board member have a copy of the current statutes in a notebook or other easy to access location.  As a community manager, I find myself frequently reaching for statute to ensure I  am providing proper guidance.  It is critical that board members follow statute as well as the governing documents for the community; these should be thought of as the three most important documents in your possession.

What’s in these statutes that is so important?  Truthfully I could discuss any number of the provisions that I’ve found boards either don’t know about or don’t understand, but one of the biggest ones that I have seen (usually unintentionally) missed has to do with open meeting laws.  In the State of Oregon, all board meetings are open to owners.  That does not mean that owners can take over board meetings and interrupt whenever they want, but it does mean that they have the right to be in the room and listening to the discussions and decisions being made.  These meetings require proper notice to all owners (which could be as simple as posting a notice at least three days before by the mailboxes or setting out a A-frame sign with the meeting details) and should be held in a location that is near the community and is easily accessible to all owners.  Board members cannot by chance (or intent) thwart holding board meetings or discussing business outside of those meetings.  For example, let’s say your three member board all shows up independently (but at the same time) at the local Starbucks and you begin discussing the proposals for gutter cleaning.  Whether or not a decision is reached, this case is a DIRECT violation of the open meeting laws.

Board members should also use great caution when discussing HOA business via e-mail. While e-mail can be a great tool, it also should not be used to circumvent holding open board meetings. I recommend that boards primarily use e-mail to distribute information, set meeting times/dates/locations (if these are not set in advance), and otherwise wait for the meeting to discuss or consider the items before the board.

For more information about the open meeting laws, please refer to ORS 94.640 or ORS 100.420.

Statutes can (potentially) change with every legislative session, which will now be every year.  So it is prudent for boards to follow the changes and understand how the changes may affect them.

How can you find out about changes to the laws?  There are educational opportunities for board members who would like to know more about community associations, including the laws.  One of the best sources is Community Association Institute (CAI), which has chapters nationwide.  The Oregon chapter, known as CAI-Oregon, holds luncheons at the MAC to discuss and explain changes in the laws and a variety of other important information about HOAs.  October’s presentation was called “Nuts and Bolts of Rules, Fines, and Effective Enforcement.”  You can find out more about CAI-Oregon at its website:

http://www.caioregon.org/link/linkshow.asp?link_id=232780

The next luncheon will be held in January.  In addition to the luncheons, classes are also held at other times throughout the year to provide board members more educational opportunities.

To recap on today’s blog:  1)  obtain a copy of ORS 65 and either ORS 94 or 100, depending on your community type; 2) read and understand how the provisions of these statutes affect the board and the community; and 3) if in doubt, consult your community manager or an attorney that specializes in community associations.