Some insurance companies have indicated that claims related to COVID-19 will be denied (depending on the nature of the claim and the specifics of the individual policy).  In light of this risk, what protections exist for the individual board members in the event of a claim where insurance coverage does not apply?  The good news is that board members are generally personally protected from such claims so long as the board member was exercising his or her reasonable business judgment in reliance on the advice of professionals.  However, this protection does not prevent a claim from being filed, necessitating a defense.  In most instances, the costs of this defense will become an association expense where insurance denies coverage.

The first place to look for the details specific to your association is in your governing documents.  Depending on the age of the documents, an indemnification clause or other board member protection may be found in your declaration, your bylaws, or your articles of incorporation.  These documents often require the association to indemnify a board member for any claims against them individually that arise out of the board member’s actions and duties as a board member.

If the governing documents do not address the issue, state law contains provisions that provide board member protections as well.  In general, CCIOA provides that board members who are elected by the membership are generally not liable for actions taken in the performance of their duties, except when the board member’s actions are wanton and willful.

Colorado’s Revised Nonprofit Corporation Act provides additional guidance.  This Act limits the liability of directors for acts performed in good faith.  The Act further permits indemnification for directors (current or former) so long as the conduct was performed in good faith and was in the nonprofit corporation’s best interests.  The Act allows the Association to either advance or reimburse a director’s expenses incurred in defending an action against such director.

Therefore, even when there is no insurance coverage, it is clear that there are protections for individual board members who are performing their duties to the association in good faith.  However, the association ultimately remains responsible for the expense of defending an action brought against a board member.  In the event of claims against a board member or the association itself, such defense expenses will be considered common expenses that ultimately all members of the community will be obligated to pay.

Remember, as always, to discuss this sort of matter with your attorney as they can provide you with advice specific to your association’s governing documents, and your situation.

Federal, state, and local responses to COVID-19 are changing quickly.  Our COVID-19 related communications are based on the facts and guidance available today.  Always look for the most up-to-date information when making decisions for your communities.

Social distancing restrictions and recommendations are likely to continue for some time.  In light of this new reality, what happens to Association meetings?  The good news is that, in general, board and member meetings may be conducted using telephonic or video conferencing services under the Colorado Revised Nonprofit Corporation Act, so long as all attendees can hear one another and be heard.  There are many available options, such as Zoom, Google Meet, Gotomeeting.com, Skype, Microsoft Teams, Webex, and FreeConferenceCall.com that you can explore to determine what works best for your community’s needs and budget.

After selecting a service and setting a date and time for the Board or Member meeting, send notice to the community as required by your Bylaws.  Board meetings are open to attendance by all members, so consider the best means of communicating dial-in numbers and passwords.  All community associations should have a policy governing the conduct of meetings.  Consider how the reality of a virtual meeting intersects with your current policy.  You may want to explore more specific details and protocols for muting and selecting attendees to ensure that owners are able to speak at designated times, without turning the meeting into a chorus of “sorry, that was my dog” and microphone feedback.  Many conferencing services allow the meeting host to mute individuals so that the meeting proceeds in an orderly fashion, while permitting homeowners to speak at designated times.  If you amend your policy governing the conduct of meetings, or adopt a new policy for these specific types of meetings, adopt the changes in compliance with your policy governing the adoption and amendment of policies.

Member meetings are another issue altogether.  Generally speaking, under Colorado’s Nonprofit Corporation Act, voting may be conducted by written ballot.  Some matters, like budget ratification, can be handled almost the same as an in-person meeting.  Other matters, such as a contested election for the Board, will take more consideration.  Secret balloting will undoubtedly take a longer time than an in-person vote by acclamation.  You may be able to take action by written ballot, but the nature of the action will dictate the process, as will your individual Bylaws.  It may be that an election only becomes contested when an individual self-nominates from the floor at the meeting.  Be prepared to be flexible, and have a plan for contingencies.  Consider having counsel attend the meetings to help you avoid confusion and errors.

Thoughtful planning will help you lead your communities through this crisis.  Life and community governance are certainly going to change as a result of the pandemic, and your leadership will help keep your community safe and functioning.  As always, please contact your attorney for advice specific to your community’s needs and legal requirements.

This morning, the Colorado Senate on a 32 to 1 vote, passed Senate Bill 20-126 (“SB 126”) on third reading.  Senators Tammy Story (D-Boulder, Denver, Gilpin and Jefferson Counties) and Jim Smallwood (R-Douglas County) are the primary sponsors of the bill and introduced this bipartisan piece of legislation to require HOAs in Colorado to permit the existence of licensed family child care homes in their communities.

These sponsors claim that SB 126 is necessary because many HOAs across Colorado prohibit residents from having day care businesses in their homes and since so many folks live in HOAs in Colorado, this has created a day care desert.  In particular, SB 126 provides that regardless of whether there are prohibitions on day care businesses in the declaration, bylaws or rules and regulations of an HOA, as a matter of public policy, HOAs cannot prohibit the operation of licensed day care homes in their communities.

It is true that it is not uncommon for HOAs in Colorado to prohibit day care businesses in their communities.  This is largely because of the potential liability to the HOAs associated with these businesses, the noise related nuisances that day cares can create and the fact that the common elements and amenities of HOAs are intended for the use of the residents of the HOAs.  The parks, tot lots, swimming pools and other amenities of HOAs, were never intended to become overcrowded by children in day care who do not live in these communities.  In addition, kids will be kids, and it is not uncommon for them to be hurt while using slides, swings, swimming pools or just tripping over a curb.

Luckily for HOAs in Colorado, Senator Angela Williams recognized the risk of kids in day care being hurt on the common elements and while using the amenities and was adamant that this liability should rest with the owners and operators of these day care businesses and should not be passed onto the HOAs.  As a result, Senator Williams passed an amendment on the floor of the Senate which permits HOAs to require the owners and operators of day care businesses to carry liability insurance coverage and that the coverage shall name the HOA as an additional insured and be primary over the liability coverage which the HOA carries.

SB 126 will now move over to the Colorado House of Representatives for consideration.  We expect the bill to pass the House and ultimately be signed into law.  Keep an eye out on this blog for updates on SB 126 and for recommendations on how to address the requirements of this legislative, if it is signed into law.

We all know that the primary function of a community association’s Board of Directors is to do the business of the association, right? In fact, significant parts of most declarations and bylaws are devoted to setting out the powers and authority of the Board. If a community was formed on or after July 1, 1992, the Colorado Common Interest Ownership Act (CCIOA) says that, except as expressly stated in a declaration or bylaws or in CCIOA, the Board may act in all instances on behalf of the association.

In the absence of specific provisions of an association’s governing documents, the Board has the authority to determine when, and how often, it will meet to carry out the association’s business. But sometimes, the regular meeting schedule is not frequent enough to get everything done, or matters come up that cannot wait until the next regularly scheduled Board meeting. What’s the Board to do?

Well, it could change its regular meeting schedule, or it could call a special meeting of the board following the requirements for notice set out in the bylaws or the Colorado Revised Nonprofit Corporation Act. It could also arrange a phone conference by which each director can hear and participate in the meeting. In addition, some Boards elect to take action outside of a meeting as a convenience to the Board, and as a way of not having to meet. CCIOA contemplates that the Board may take action outside of a meeting, either under the authority of the association’s bylaws, or under the authority of the Colorado Revised Nonprofit Corporation Act. The Nonprofit Act sets out a very specific procedure for taking action outside of a meeting if the procedure is not spelled out in the bylaws.

But, here’s the catch – CCIOA also says that, at an appropriate time determined by the Board, but before the Board votes on an issue under discussion, owners or their designated representatives must be permitted to speak regarding that issue. If the Board is taking action outside of a meeting (for example, by email), how are owners being allowed to speak to the issue before the Board votes? There may be several options, but here are a couple: (a) send a broadcast email to all owners inviting their input before the board votes; or (b) discuss the matter at an open board meeting (with the item to be considered being included on the agenda) and allow owners to provide input, then the Board can take action afterwards through email.

Whatever direction the Board decides to take, it should be mindful of CCIOA’s intention to allow owners the right to participate, and provide for transparency, in the decision-making process.

In Shakespeare’s Henry VI, Dick the Butcher suggests killing the lawyers in the context of a revolution. “Killing the lawyers” has been interpreted to either contemplate a nirvana in which annoying attorneys with their endless red tape are no longer around to stop normal people from living happy lives, or to lay the groundwork to prevent the rule of law from stopping a coup before it is too late.

I tend to interpret this line as the latter. I truly believe that attorneys – and especially, attorneys in our field of practice – are necessary to ensure that the law is upheld, respected, and understood by owners, Boards, and managers alike. We are often a “necessary evil.”

Viewing attorneys as something evil, many communities seek to avoid the need for legal counsel. After all, attorneys are expensive, and they often tell Boards and homeowners to stop a particular course of action contrary to the desires of the counseled party. It is incumbent upon Boards and their professional advisers to recognize circumstances where an attorney is necessary or appropriate. When those circumstances occur – CALL THE LAWYER FIRST!

If you know you are going to have a difficult meeting, whether it is a hotly contested election, a controversial special assessment, or a difficult homeowner who won’t take “no” for an answer, call the association’s attorney to check his or her availability before scheduling the meeting if at all possible. Many community association attorneys attend multiple evening meetings every week – particularly during annual meeting, budgeting, and election season – and if you make sure your attorney is available before you schedule a meeting, you will be better able to address the hurdles before you at that meeting. We recognize you can’t always plan for a difficult meeting – sometimes, the difficulty rears its head the day before the meeting occurs – but get your attorney involved early to protect the Association and the rule of law, and make your life easier.

Is your association increasing, or even decreasing, its annual assessment fees for 2020? If so, it is important that the association follow its governing documents when providing notice of the change to all owners.   In addition to providing owners with proper notice of any change, the association should also notify its attorney. This will help to ensure that any accounts and/or payment plans that are with the attorney for collection are properly noted, and any increase is accurately accounted for and collected.

In addition to payment plans that may be affected by the increase of assessment fees, there are also notification requirements and deadlines the association must comply with for certain owners who have filed for bankruptcy.  Advising the association’s attorney of any change will allow the attorney to take the proper measures to ensure that the association retains the right to collect the new assessment fee.

If you haven’t already notified your attorney that your assessment fees have changed, or will change, for the New Year, pick up the phone or send an email to your attorney – I’m sure he or she would love to hear from you!

For those of us who work in the HOA industry, the one constant theme we have heard over the last couple of years is that many people have become just plain mean.  While this nastiness is certainly not across the board and folks in the vast majority of HOAs we work with strive to do the right thing and treat each other with respect, those HOAs that are dysfunctional seem to have an escalation in the lack of civility in their communities.  We all have our theories on on why this is the case, but we will let you contemplate that on your own.

It’s probably safe to say that we have all been taught that we need to set an example with our own behavior.  As a result, we need to be willing to engage in a self-evaluation to determine if we are contributing to the dysfunction and lack of civility in our own communities.   In this blog entry, we will provide a self-evaluation for folks serving on the board of directors of their HOA.  Next week, we will provide a self-evaluation for homeowners. Finally, we will conclude this series on civility with tips for dealing with difficult people in HOAs.

Self-Evaluation for Directors:

  1.  Interaction with fellow directors.  How do you treat your fellow directors?  Do you listen to their perspective?  Do you point fingers at them?  Do you cut them off while they are speaking?  Do you yell or scream at them?  Are you disrespectful to them?  Do you ignore them?  Do you speak to others while another director has the floor?
  2. Interaction with management.  How do you treat your manager and management company?  Do you listen to their reports?  Do you ask their opinion on issues?  Do you yell or scream at them?  Do you treat them with disrespect?  Do you make assumptions about their performance, without first gathering credible information?  Do you have a conversation with your management to set reasonable and obtainable expectations?  How do you handle legitimate conflict with your management?
  3.  Interaction with homeowners.  Do you make stereotypical assumptions about some of the homeowners in your community?  Do you treat all homeowners equally?  Do you treat them respectfully?  Do you yell or scream at them during meetings?  Do you inappropriately cut them off?  Do you ignore them when they are speaking?  Do you make disparaging comments about them?  How do you handle chronic complainers in your community?
  4. Interaction with your ego.  How does your ego impact your conduct in the community?  Are you a know it all?  Are you always thinking about what you are going to say, rather than listening to the individual who has the floor?  Are you belligerent or hostile to others? Is your ego getting in the way of admitting when you are wrong?  Are you disrespectful to others who don’t share you opinion?

Let’s face it, nobody is perfect and we all have moments that we are not proud of.  However, by honestly and privately engaging in this self-evaluation, you can answer for yourself whether as a director you are conducting yourself appropriately in your community.  If you are not acting with civility and basic decency as a director, how are you going to change your behavior?  If you are serving with a director who routinely and destructively engages in incivility, are you willing to professionally and constructively call out their behavior?

Remember, as a leader in your community, the example you set can make a huge difference!

 

 

On Wednesday, the Federal Housing Administration issued new guidelines for condominium project approval. Before the recession, condominium projects could obtain FHA certification, in whole or in part, and that certification did not expire. In 2011, the guidelines were changed to require re-certification every two years, and limited certification to the entire project. Gone were the days of “spot approval.” At the time, it appeared that HUD was no longer interested in backing condominium loans.

The new guidelines bring back spot approval, and now projects only need obtain re-certification every three years. Re-certification has been simplified. In addition, owner occupancy can be as low as 35%. These changes can make it easier for a buyer to obtain an FHA loan, potentially expanding the pool of available buyers for condominiums throughout the country.

The new guidelines go into effect on October 15.

A year ago, Colorado law changed the requirements for budget ratification for HOAs which were created before July 1, 1992.  Whether your HOA was created before, on or after July 1, 1992, join the Aspen Pitkin County Housing Authority (APCHA) to learn what you need to know about the budget ratification process.  In addition, since summertime inevitably brings headaches relative to covenant and rule violations, we will also discuss what you can do to encourage compliance with the governing documents of your HOA, the obligation of HOA boards to comply with and enforce the governing documents of their communities and tools available for enforcement.

If you are a member of the board of directors of your HOA, manage HOAs or live in an HOA, this class is for you!  This class which is sponsored by APCHA, is free of charge and will be held on Wednesday, July 24th from 11:30 am to 1:00 pm in the City Council Chambers at City Hall which is located at 130 South Galena Street in Aspen.  Molly Foley-Healy will be presenting this class for APCHA. To RSVP for this class, please call APCHA at 970-920-5050.

Mediation is a type of alternative dispute resolution with the goal of finding a solution and reaching an agreement that is acceptable to all parties involved. In some counties, mediation is mandatory and if a case becomes contested, the parties are ordered to attend mediation prior to scheduling a trial. In some instances, however, even if not court ordered, it may be beneficial for the parties to attend mediation depending on the facts of the case.

During mediation, the parties will meet with a neutral third party mediator who may sometimes be an attorney or even a judge, but in any case, the mediator is a trained professional whose job is to look at the facts of each case objectively and not to take sides or play favorites.  In mediation, unlike arbitration, a mediator is there to facilitate a resolution of the case but does not have authority to make any rulings or to bind the parties to a particular outcome, as would an arbitrator.  The mediator can also not give legal advice to the parties, but can use common sense reasoning to assist in decision making.

One advantage of mediation is that the parties can come to a resolution on their own terms and essentially control the outcome of the dispute.  At trial, the judge or jury decides the case where the outcome can be less favorable than the parties may have agreed to prior to trial.  Consequently, depending on the facts of the case, the parties may find it more beneficial to resolve the issues on their own terms than face the uncertainty of trial.

An important thing to remember is that mediation is confidential and anything said in mediation, either to the mediator or to the opposing party, is held strictly confidential and cannot be used against that party. The mediator is not allowed to be called as a witness at trial or any other hearing, nor can a party testify to anything that was said during the mediation. This is helpful as it permits each party to speak freely and allows full disclosure of all of the issues which may have otherwise gone unknown or unsaid. Mediation also allows the parties to express his or her feelings about the case in an informal setting. The parties are not, however, required to enter into an agreement and if one cannot be reached, the mediation may be terminated and the case will continue through the court process.

Although mediation may not be a viable option in every case, mediation can be an invaluable tool in assisting parties to work together to reach common goals, which can ultimately help keep relationships intact.