Part 1 on Virginia’s Unauthorized Practice of Law Rules and HOAs – Where do we find guidance?
Mention the unauthorized practice of law when discussing homeowner and condominium associations and typically the room gets very quiet. Associations, board members and managers strive to keep their budgets low, but compliance with new laws and regulations, keeping up with the collection of assessments, and the upswing in litigation involving homeowner and condominium associations makes it very difficult. When matters become a “legal issue,” board members and managers are best advised to seek legal counsel to ensure that the association is being adequately protected and represented, and that the board members and the managers are not engaging in activities that the Commonwealth might find to be the unauthorized practice of law.
We previously blogged on questions of the unauthorized practice of law when an unlicensed attorney serves on the association’s Board of Directors. In our next two blogs, we will review other issues involving questions of the unauthorized practice of law. In this blog, we discuss where we look for guidance, and in a subsequent blog, we will review Virginia decisions and opinions on the unauthorized practice of law.
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Okay, how do we establish a funding plan for our HOA’s Reserves? (Part 2 of a 3 part series on Reserves)
Once an association has obtained a reserve study, two questions arise: 1) Do we have to fund a reserve account? and 2) If so, how do we fund a reserve account?
The statutes for condominiums and property owners associations require an association’s budget to include, among other things, an annual amount to fund the reserve account that is consistent with the obligations in the reserve study. This means that an association should be placing funds into the reserve account that permits it to meet is obligations to repair, replace and restore capital components based on the estimated replacement cost, the estimated remaining life and the estimated useful life of the capital component.
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Three Factors An HOA Should Consider When Hiring An Attorney
Selecting an attorney is one of the more significant decisions made by the board of directors for a community association. Often times, the association makes its decision based upon price alone. Although “price” is a valid factor to consider, there are other important factors the board should review during its selection process. This article addresses three of the major considerations.
First, the board should determine the prospective attorney’s experience level in the representation of community associations. Attorneys for common interest communities are similar to the general counsel in major corporations because of the wide range of issues that arise. Extensive experience in many of the possible legal issues facing community associations should be a prerequisite.
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Homeowner cannot be forced to join a voluntary HOA
In a case from the Chesterfield Circuit Court, the circuit court judge determined that a homeowner could not be forced to pay association dues to a voluntary association. This result is not surprising.
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A Checklist to improve the effectiveness of your HOA Board of Directors
For your homeowners association, here’s a simple, but effective and invaluable checklist of suggested resolutions to improve the Board of Directors in your community association.
Board Checklist
- Set-up your board of director orientation with Tarley Robinson, PLC. This service is provided at no charge to our clients. We will send out a an email and letter to schedule an orientation shortly after your board of director elections. Email us to make sure you are on our mailing list.
- Review your documents with your manager and attorney, or if self-managed, with your board and attorney, to determine whether you are operating in compliance with your documents and whether your documents comply with the law.
- Encourage civility, applaud the good deeds of neighbors and provide solid leadership. Remember that you are part of a community.
- Schedule an appointment with your insurance agent to review your current policies. Confirm that your policies comply with any insurance requirements in your documents. Find out if you should change your deductibles. Determine if you are paying the best price.
- Implement your Complaint Policy and Copying Policy. You are required to have them.
- Conduct efficient and effective board meetings. Spend some time working on the processes and procedures for your board meetings. Seek input from your board members, manager and attorney.
- Follow the legislation affecting community associations. The Virginia Legislative Action Committee will be working hard to review proposed legislation and determine its impact on community associations. Updates will be posted at http://www.cai-valac.org/
- Review your Reserve Study. Virginia law request annual review of your Reserve Study. If you do not have a Reserve Study to review, resolve to obtain one. It is the law.
- Conduct a risk assessment relative to safety and the use of your Common Areas or Common Elements. Follow-up with appropriate action, be it implementing safety rules, repairing an unsafe area or item, or posting a warning sign.
- Attend seminars provided by CAI. The Central Virginia Chapter Community Association Day, for example, is a daylong event that includes some great educational opportunities.
Tarley Robinson, PLC, Attorneys and Counsellors at Law
Williamsburg, Virginia
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Does Virginia law require an HOA to transition automatically to homeowner control of the Board of Directors?
Over the course of the past few years, homeowners in the Williamsburg development of Kingsmill on the James have become more vocal over the continued control by the community’s developer, Busch Properties, Inc. In May 2010, Kingsmill resident and a William & Mary Law School professor filed a lawsuit against Busch Properties. On August 20, 2010, the Williamsburg/James City Circuit Court heard the demurrer filed by Busch Properties. The court granted the demurrer. The Plaintiff appealed to the Virginia Supreme Court. The Court declined to hear the appeal. The Plaintiff filed a petition for rehearing that the Court refused to hear by an order dated June 16, 2011.
HOA Transition
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HOA Boards of Directors: Two Essential Tips to Effective Management
Many of us can attest to the stress and lost time that results when working on, for, or with a dysfunctional Board of Directors. Boards that do not operate as a team fail to accomplish the tasks that need to be accomplished, and greatly increase the potential liabilities of a community association.
The healthy leadership of a board is essential to the strength of a community. Community associations can build a strong team if board members and owners better understand the roles and responsibilities of their association, the board and each owner. To start building a team, the board needs to lead. The goal of team building is to establish a strong association and build a sense of “community.”
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“Aging In Place” – How can HOAs address aging communities?
When we think of the challenges of overseeing homeowners associations, we might think of overgrown lawns, late assessment payments, and aggressive pets. But another challenge has been waiting in the wings: the aging of America’s “baby boomer” generation, many of whom are choosing to live out their golden years in their homes. This rising trend is presenting new and unique challenges for Community Associations. It is the wave of the future and the future is now.
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Common Interest Community Board revokes a management company’s license
The Common Interest Community Board (the “CICB”) revoked a management company’s license for regulatory violations. In a case reported in the September issue of the Community Associations Institute Law Reporter (Virginia Common Interest Community Board v. Sarraga t/a Lakeside Community Management, File No. 2010-00562, June 24, 2010), the CICB revoked the license of Sarraga t/aLakeside Community Management and issued fines totaling $2,000.
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Lawsuits against HOAs are expensive and time-consuming for all
A Virginia Circuit Court case highlights the expense and time commitment required when a homeowner sues a common interest community (referred to as “HOA” in this article). Furthermore, this case illustrates that HOAs can rarely predict or control when they may be dragged into a lawsuit.
In this case, Hornstein v. Federal Hill Homeowners Association, a homeowner had her house for sale with a pending sales contract. Pursuant to Va. Code Ann. § 55-509.5, the HOA provided a disclosure packet that revealed that the homeowner’s fence was not located on her property. In fact, the homeowner’s own survey confirmed that fact. The pending sales contract fell through.
The homeowner sued the HOA in Fairfax Circuit Court for slander of title and tortious interference with contract, including a claim for “bodily injury,” and “mental anguish.” The HOA prevailed in the case, leading to the homeowner’s petition for appeal to the Virginia Supreme Court. [UPDATED: The Virginia Supreme Court refused to hear the case, meaning that the Circuit Court’s decision stands].
Another battle has been waged regarding whether the HOA’s insurance carrier had a duty to defend the HOA in the underlying litigation. When the HOA’s insurance carrier denied coverage and representation, the HOA sued the insurance carrier. The case was removed to the federal court. The 4th Circuit District Court agreed with the insurance carrier. The HOA appealed and the 4th Circuit Court of Appeals reversed the trial court and held that the insurance carrier had a duty to defend. The insurance carrier has appealed for a rehearing. [UPDATED: the insurance carrier lost its appeal and was ordered to pay the HOA $217,308.86 for the attorneys’ fees the HOA incurred].
For a brief review, the HOA provided the disclosure packet in February 2006. After the homeowner’s pending sale fell through, she sued the HOA in August 2007. As we near August 2010, the underlying case may be close to resolution, but litigation with the insurance company may be far from resolving. Based upon the amount of litigation, we can assume that the HOA’s attorneys’ fees have reached six figures. Obviously, payment for these attorneys’ fees is then passed onto the homeowners (unless the case shifts payment of the attorneys’ fees to the losing party, but even then, courts rarely award the full 100% of the incurred fees).
Many lessons can be drawn from this experience. Most importantly, HOAs need to review their insurance policies to make sure they are covered fully for worst case scenarios. Our experience has shown that “anybody can sue anybody for anything at any time.” Although the plaintiff may not win (and did not win in this case), the ensuing litigation will take abundant resources. We can help you review your documents and insurance policies with the necessary professionals to protect your HOA, and homeowner interests.
Tarley Robinson, PLC, Attorneys and Counsellors at Law
Williamsburg, Virginia
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