How to Manage Your Home Owner s Association for Board Members

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1 How to Manage Your Home Owner s Association for Board Members Do you have questions about the right way to manage your Home Owners Association? Are you fully aware of your legal obligations as a Board Member? Are you aware of your liabilities? Have you ever read your HOA legal documents? Did it sound like legal gobbledygook? Does all this uncertainty stress you out? The attorneys of Andrews, Bongar, Gormley & Clagett can help you with issues relating to your Homeowners Association (HOA)? Whether you are a member of your HOA s Board of Directors, or a homeowner that has questions about your HOA and your HOA fees we have answers for you! We created this Frequently Asked Questions article to give answers to the most common questions faced by HOA board members, and homeowners who are members of an HOA. But knowing the right way to manage your HOA involves a lot more than can be covered in one article. You have to be aware of all your HOA obligations, and how to be sure you meet them. You also must beware of your liabilities, and know how to keep yourself and your HOA safe. Jessica Andritz can assist you with your HOA questions. Her extensive experience in preparing an HOA s Governing Documents (the legal documents formed when your community was first created and constructed) enables her to be familiar with the structures of HOAs, and the issues that HOAs encounter after the builder/developer has transitioned governing authority to the individual HOA members. Jessica Andritz teaches HOA 101, a two-hour informal class that is highly recommended for any HOA Board of Directors (and/or incoming officers). During your HOA 101 class, you will learn about the important aspects of managing your HOA and interpreting important provisions within your Governing Documents (based upon a thorough review of your HOA s Governing Documents ). You will also have an opportunity to ask any questions that you may have. Serving as in-house counsel for your HOA, our attorneys can assist you with updating your Architectural Guidelines, collecting unpaid HOA fees, and assisting with preparing and holding your annual membership meetings (as required by your HOA s Bylaws). To learn more, feel free to contact Jessica Andritz via Andritz@SouthernMarylandLaw.com, or call our office to schedule an appointment.

2 I received a notice in the mail about an Annual Meeting and I would like to be elected to serve on the Board of Directors. What should I know before I ask to be nominated/elected? Your responsibilities as a member of the Board of Directors are outlined in the bylaws of your HOA. Generally, HOAs have anywhere between 3-5 members and must be in good standing with the HOA (no active violations of the covenants and no outstanding HOA fees). Depending upon the size of your community, the Board of Directors will assist the officers (often the same individuals) in managing the community (publishing newsletters, collecting HOA fees, holding monthly board meetings, issuing violations notices, etc.) Or, it is possible that the current Board of Directors has delegated these responsibilities to a property management company, in which case, your job is to ensure that these things are being done in a timely manner. You may also be asked to make certain policy decisions and adopt additional rules/regulations based upon issues affecting the HOA. Bonus: If your HOA Board of Directors needs help with understanding the HOA Bylaws or Covenants, we have attorneys that specialize as HOA management/consultants that can provide an HOA 101 training course, instructing you on how to manage your new responsibilities and properly adopt additional rules/regulations that are fully enforceable. This HOA 101 course is specially tailored for your HOA Board (based upon a full review of the Bylaws and Covenants of your HOA)! What is the difference between being part of the Board of Directors and being an officer of my HOA? The answer can be found in your HOA s bylaws. However, as a general rule, the Board of Directors is the governing body of the HOA, which is elected by the general membership of the HOA (the entire community) at each annual meeting. The Board of Directors is responsible for maintenance in the common areas, establishing and collecting the HOA fees (dues), and to adopt other rules/regulations such as Architectural Guidelines or parking regulations. Depending upon the size of the community, the Board of Directors may oversee the duties of the property management company. As a general rule, the Board of Directors has the authorization to elect (and replace) the officers of the HOA. Generally, HOAs have the following officers: president, vice-

3 president, and secretary/treasurer. The duties of each officer are outlined in the bylaws. As a president of an HOA, you will serve as the chief executive officer of the HOA and will preside over all Board meetings. As vice-president of the HOA, you may be called upon to assist the president (or preside over Board meetings in his/her absence). Depending upon the size of the HOA, the offices of secretary and treasurer may be held by the same person. As the secretary of the HOA, you are responsible for taking the minutes (official notes) of all Board meetings and are required to assist in properly distributing meeting notices and maintaining the records of the HOA (oftentimes, with the help of a property management company). As the treasurer of the HOA, you are responsible for maintaining the funds of the HOA (including providing a budget and an accounting of the funds received by the HOA thru the assessment of HOA fees/dues). I currently serve on the Board of Directors and/or I am an officer within my HOA. I have reviewed the books of the HOA and have discovered that many property owners are in arrears (have not paid their HOA fees/dues). What can I do? As a general rule, your HOA s Declaration of Covenants, Conditions, and Restrictions (commonly referred to as the Covenants ) allows the HOA to charge an annual maintenance assessment (commonly referred to as the HOA dues/fees). The purpose of the HOA assessment, generally, is to pay for the maintenance and upkeep of the common areas owned by the HOA and other recreational facilities, community lighting, landscaping, etc. The Covenants usually indicate that the obligation to pay the HOA fees/dues as assessed by the Board of Directors is a personal obligation (meaning, the property owner must pay the assessment when due). If the property owner fails to pay the HOA fees/dues, the HOA can bring a claim (lawsuit) against the property owner and/or file a lien upon the property (which must be satisfied or paid off before the home can be sold to another person). Bonus: If your HOA needs help in collecting unpaid HOA fees/due, you can contact our office to speak to an attorney that specializes in HOA management/consulting. One of my neighbors has installed a fence, which (I think) is not allowed by our Covenants. What action can be taken against this property owner?

4 You should carefully review the Covenants and Architectural Guidelines (including all amendments and supplements that may have been adopted after the original versions were written). If, after you ve reviewed these documents, you determine that fences are prohibited (or perhaps the type of fence that was installed is prohibited), you may issue a Notice of Covenants Violation to the property owner. The Covenants establish the method of enforcing the Covenants (in this case, a prohibition of fences). As a general rule, the Covenants require that the Notice of Covenants Violation be issued to the property owner, and if the property owner does not respond within the required time period (usually days), the HOA has the authority to assess a fine for non-compliance. Oftentimes, this fine, if not immediately paid, can form the basis of a lien on the property. Bonus: Our attorneys can help your Board of Directors review and interpret the Covenants and Architectural Guidelines to determine what types of improvements (such as fences, light poles, decks) are prohibited (or at least require prior approval from the HOA). We can also assist you in properly issuing a Notice of Covenants Violation to the property owner, and if additional legal action is warranted or required, we can help, too. Some of the homes within our community have not been properly maintained (e.g. lawns are not properly mowed, paint is chipping off the house, one of the shutters is missing). What can the HOA do to maintain the look of our community? Most Covenants require each property owner to properly maintain his/her home and yard. Failure to properly maintain the home/yard likely constitutes a violation of the Covenants. After sending a Notice of Covenants Violation to the property owner, an HOA may issue a fine for a violation of the Covenants. If the violation is not rectified, the HOA may have the authority to enter the property to correct the violation (mow the lawn, secure a broken shutter or missing window, particularly in the case of an abandoned home). If the HOA enters the property and corrects the problem (repairs the broken window, mows the lawn), the HOA can file a lien against the property for collection of the money expended for the repair/maintenance. If you hire an attorney to assist you with this, the property owner is generally responsible for paying the legal costs (of the HOA) for filing the lien (or bringing a claim against the property owner in court).

5 Bonus: Our law firm can assist the HOA with preparing and mailing these Notices of Covenant Violations. Our attorneys are experienced in determining whether a violation has been committed and what remedies are available. If liens must be placed on the property for non-payment of repairs/maintenance (necessitated by a property owner s failure to maintain his home/yard), our attorneys can help with that, too. Some of the homes in our community appear to be vacant. Who is liable for paying outstanding HOA fees and how can we collect these fees? As established in the Declaration of Covenants, Conditions, and Restrictions (commonly referred to as the Covenants ), each property owner is personally responsible for paying HOA fees/dues as assessed by the HOA. As a general rule, a person who has filed for bankruptcy may be exempt from paying past-due HOA fees (from the date of filing for bankruptcy). However, all HOA fees/dues assessed after the date of filing must be paid. If the property owner has defaulted on his/her mortgage, the mortgage lender may be attempting to foreclose on the house (which may be vacant). Because the property owner is required to pay the HOA fees/dues as assessed (as set forth in the Covenants), the original property owner is still obligated to pay these HOA fees/dues. The mortgage lender is not obligated to pay these dues/fees until such time as a Court has ratified the foreclosure (thus transferring legal ownership of the home from the original owner/borrower to the mortgage lender). You can file a claim against the property owner and/or a lien against the property to collect unpaid HOA fees/dues. Bonus: The attorneys in our bankruptcy and foreclosure departments work side-by-side with our HOA attorneys to advise HOAs as how to obtain unpaid HOA fees/dues. We can determine whether certain HOA fees/dues have been/will be discharged in bankruptcy. And, we can determine who owns the property (original owner/borrower or the mortgage company due to foreclosure) and who is obligated to pay the HOA fees/dues. We can also assist you in collecting unpaid HOA fees. Remember, the cost of collecting these fees can be charged to the property owner (and not paid by the HOA). Our community was designed and built in the 1980s and some of the Covenants (and Architectural Guidelines) have become outdated. What can we do to change these?

6 Architectural Guidelines must never contradict the requirements and/or prohibitions of the Declaration of Covenants, Conditions, and Restrictions (commonly referred to as the Covenants. ) Therefore, if the Board of Directors wants to amend the Architectural Guidelines, proper care must be taken to ensure that any amendments to the Architectural Guidelines do not conflict with the Covenants. As a general rule, it is easier to amend the Architectural Guidelines (usually accomplished by a Resolution by the Board of Directors) than it is to amend the Covenants. As a general rule, the Covenants can only be amended by a super-majority (three-fourths, 67 percent, or some other requirement) vote of all the members of the community (one home, one vote). The amendment itself must be approved according to the Covenants; more specifically, proper meeting notice must be sent out, a quorum must be in attendance, and the required number of votes must be cast in favor of the amendment. The amendment must be recorded among the County s Land Records at the County Courthouse. Bonus: If you need help in ensuring that your Board of Directors and/or general membership of the HOA properly amend the Architectural Guidelines and/or Covenants, our HOA attorneys that specialize in HOA management can guide you through this process. How an Attorney Can Help Having in house counsel to advise you on the right way to manage your HOA can be invaluable. A board member has certain obligations, and some liabilities. That means serving as a board member is serious legal business. To protect yourself and your HOA, you should have a lawyer available who can answer your questions and assure you run your HOA in a safe, legal manner. At the very least, we strongly recommend every member of every HOA board should attend Jessica Andritz class HOA 101, her two hour class on the right way to manage your HOA. You need to know your legal obligations. You need to know your potential liabilities. And you need to know what your legal documents say and how to use them to your advantage.