Homeowners’, Condo, Co-op Association Policy News August 2016

Shared by Deborah Goonan, Independent American Communities

STATE LEGISLATION

Feniger & Uliasz Law of NH Explains New Condominium Act Changes

Under the new law all associations must establish a board of directors and specify the powers and responsibilities of that board. The bylaws must also specify which powers may be delegated to a managing agent.

The next area of change will affect meetings and in some ways the power of the board of directors to control the process and operate the association. The statute also mandates the use of Roberts Rules of Order, Newly Revised (11^th edition) for the conduct of meetings and procedures. All Boards should have a copy of that book handy. The section is RSA 356-B:37, also repealed and rewritten in its entirety in the new law. Some important requirements compelled by the new law are that a unit owners association meeting must be held at least once a year but, in addition, there must be four, open, board of director meetings each year, not less than one per quarter.

The duties of the Board of Directors is addressed making clear that the Board acts on behalf of the unit owners association and the board of directors shall have a fiduciary relationship to the members of the unit owner’s association. The law distinguishes between board members appointed by a Declarant and those elected. There are also changes to the procedure for adoption of budgets and special assessments under the new law at RSA 356-B:40-c. In short, if two thirds of the unit owners vote against the proposed budget it will not be ratified. However, there is no requirement of a quorum at the ratification meeting.

Read more:  http://www.digitaljournal.com/pr/3038449#ixzz4HFWvwp00

 

Commentary: Readers should take note that laws governing condominium and homeowners’ associations vary considerably from state to state. For example, although Roberts Rules of Order is now the law in New Hampshire, few other states are required to conduct meetings under these rules. Some states require open board meetings, and others do not. Many state laws are silent on the number of meetings required each year. 

One problem I see in the revised NH law is that no quorum is required to attend the budget ratification meeting, and to defeat it, two thirds of owners must vote against it rather than voting for approval of the budget. This just opens the door for the board to schedule the budget meeting at an inconvenient time and place, and on short or inadequate notice, where just a few people can approve the budget without objection.  

COMBATTING FRAUD

County Commission approves proposal to create police network to combat fraud in condominiums

Article Courtesy of El Nuevo Herald (Translated by Google)
By Enrique Flor

Published June 14, 2016

A police initiative to create a network specialized in the fight against fraud in Miami-Dade condominiums was approved Tuesday by the county commission.

The proposal to create a network between different police departments in Miami-Dade was approved by the unanimous vote of the 13 commissioners, in the midst of a crisis characterized by abuses against residents of several residential complexes.

Read more: http://www.ccfj.net/condoFraudTaskForceMD.html

Commentary: South Florida is one of the most culturally diverse regions in the U.S., and certainly one of the most diverse among the Southern states. A large proportion of condo residents and owners in Miami-Dade County are Latino, which explains why the attached article had to be translated to English from Spanish. The translation is a bit imperfect, but it’s still clear that South Floridians are fed up with corrupt management, self-dealing boards, and fraudulent elections in their condominium associations. Florida’s state Legislators have ignored their constituents for years, failing to pass any meaningful regulation for Association Governed Housing Developments. Certainly state level industry lobbies, including  local chapters of Community Associations Institute (CAI), have vigorously opposed laws meant to curb corruption and increase accountability of Association Boards, Managers, and Attorneys. So Miami-Dade County is taking matters into its own hands, and hoping to push for real reform at the state level in the 2017 Legislative session. 

 

 

SUPER (PRIORITY) LIEN

Court of Appeals rules that Nevada HOA liens do not supersede first mortgages
Older version of state’s laws ruled unconstitutional

According to the Ninth Circuit’s decision, Nevada state law contained a “peculiar scheme” for providing mortgage lenders with information about when an HOA intended to foreclose on a property.

“Even though such foreclosure forever extinguished the mortgage lenders’ property rights, the statute contained “opt in” provisions requiring that notice be given only when it had already been requested,” the Ninth Circuit wrote in its opinion.

“Thus, despite that only the homeowners’ association knew when and to what extent a homeowner had defaulted on her dues, the burden was on the mortgage lender to ask the homeowners’ association to please keep it in the loop regarding the homeowners’ association’s foreclosure plans,” the court continued. “How the mortgage lender, which likely had no relationship with the homeowners’ association, should have known to ask is anybody’s guess.”

…

“The non-judicial foreclosure of a Nevada HOA super lien cannot constitutionally extinguish a mortgage lender’s security interest, the Ninth Circuit Court of Appeals has held,” Ballard Spahr’s attorneys state. “This holding will affect many lawsuits in federal courts seated in Nevada, and may affect hundreds of lawsuits in Nevada State courts between mortgage lenders and investors who have brought HOA-foreclosed properties.”

The attorneys also write that the decision will have a “strong persuasive authority (at the very least)” in actions currently pending in Nevada state court.

Read more here:

Court of Appeals rules that Nevada HOA liens do not supersede first mortgages

Commentary: Aside from the fact that this decision reverses the lower court’s ruling on HOA super lien status: Isn’t it interesting how a Judge can recognize the Constitutional rights of mortgage lenders, but cannot seem to recognize Constitutional rights of individuals and their private property rights? If a bank is entitled to proper notice of HOA foreclosure and opportunity to pay off the lien, why isn’t a homeowner entitled to at least an equal level of notice and opportunity to pay off the lien and avoid foreclosure? Take it one step further. Why is it deemed Constitutional by “contract” to allow an HOA to foreclose without Judicial review (as is allowed in Nevada), and for a debt that represents a minuscule fraction of the value of the property? The HOA has no collateral interest in private property. And why is it legal to sell an owner’s property for a few thousand dollars – well below fair market value? In some cases, the amount and existence of the HOA lien itself cannot be validated, particularly if the HOA engaged in sloppy or shady bookkeeping  or if the account was handed over to unethical collection agents.

 

 

 

BUSINESS JUDGMENT RULE

California Court Restrains Business Judgment Rule

Court of Appeal Holds that the Business Judgment Rule does Not Protect the Actions of Businesses’ Members Who Also Sit on the Board of Directors

In Palm Springs Villas II Homeowners Association, Inc. v. Parth, the California Court of Appeal held that the business judgment rule does not shield an organization’s members for actions that harm the organization simply because they sit on the board of directors. Specifically, the Court of Appeal held that the President of the subject Association could not claim the protection of the business judgment rule simply because she was sitting on the Board of Directors.

Read more: http://www.selmanlaw.com/newsandevents/news/california-court-restrains-business-judgment-rule

Business Judgment Rule Does Not Protect the Willfully Ignorant

The Business Judgment Rule generally shields directors from personal liability that may result from their erroneous decisions, provided that the decision was made (1) with care, (2) in good faith, and (3) was based upon what the director believed to be in the best interest of the HOA. Making a decision “with care” generally requires that directors exercise reasonable diligence to investigate the issues surrounding the decision so that they are able to act on an informed basis.

But how broad are the protections of the Business Judgment Rule? Does it automatically shield a director who chooses to remain willfully ignorant as to the issues surrounding her actions or the scope of her authority? According to the Court of Appeal in the recent case of Palm Springs Villas II Homeowners Association v. Parth(2016) 248 Cal.App.4th 268, that answer appears to be no…

Read more: http://hoalaw.tinnellylaw.com/2016/08/business-judgment-rule-not-protect-willfully-ignorant.html

Commentary: California often leads the way when it comes to holding HOAs accountable to their members. This new Case Law is likely to cause angst as it ripples across the U.S. For several years, legal scholars have been opining about the wisdom of the Business Judgment Rule as a defense for the poor decisions and inappropriate actions of HOA board members. Finally, some common sense prevails. No longer can a member of a California HOA board remain ignorant of the facts, or willfully fail to carefully investigate issues or consult experts when necessary. Too often, HOA leaders don’t even read the CC&Rs or follow their own ByLaws. There’s simply no excuse for this sort of behavior, and Palm Springs Villas II HOA v. Parth now creates a higher level of accountability for HOA Board members to conduct due diligence before making important judgments and decisions that affect Association members. 

 

 

http://portal.hud.gov/hudportal/documents/huddoc?id=16-13ml.pdf

Commentary: HUD is holding the line on FHA condo certification process modifications for now. The agency has some time to modify its Condominium Approval Process, and to present evidence that justifies holding the line on current owner-occupancy requirements, if they choose to do so. For information on Housing Opportunity Through Modernization Act of 2016, see my previous blog. Link to HOTMA blog.

 

 

FHA makes it easier for struggling borrowers to keep their homes

Announces “streamlined” loss mitigation process for mortgage servicers

The FHA said Thursday that it is announcing new procedures to “strengthen the process mortgage servicers use to help struggling families avoid foreclosure and remain in their homes.”

To that end, the FHA is “streamlining” the loss mitigation protocols that mortgage servicers must use considering and utilizing “home retention options,” which are foreclosure alternatives that allow delinquent borrowers to retain their home.

According to the FHA, these changes specifically apply to the process mortgage servicers use when evaluating borrowers for the FHA-Home Affordable Modification Program.

The FHA said that the changes, which servicers must begin using by Dec. 1, 2016, will reduce the number of steps that a servicer and borrower must take to resolve a delinquency and enter into a loss mitigation home retention product.

FHA makes it easier for struggling borrowers to keep their homes

Commentary: It remains to be seen whether this “streamlined” solution will be any more effective than either HARM or HARP at preventing foreclosure and keeping owners in their homes with affordable mortgage payments.