Community Associations with units that share walls (condominiums and townhomes) frequently run into problems when an owner fails to pay utility bills and allows the heat to be shut off in the middle of the winter. The pipes sometimes freeze and burst causing damage in that unit and others nearby.
House Bill (HB) 304 is an attempt to help solve that problem. In short, it would allow HOAs to give notice to the power and gas company and require them to: (1) give notice to the association if they intend to shut off power or gas to a unit, and (2) allow the association to pay the bill if it wants to keep the heat on. It also clarifies the right of the association to enter any unit for the purpose of winterizing the unit if the association receives notice that the power or gas are going to be shutoff and the the association elects not to pay the bills. To read the bill, click HERE.
This bill is another effort by the Utah CAI Legislative Action Committee with the help of Represenative Dixon Pitcher. Morris Sperry remains heavily involved in this committee and with supporting both the Utah Legislative Action Committee and the Community Association Institute generally.
The Federal Aviation Administration (FAA) has finally released the long-awaited proposed regulation (rules) governing the use of Drones. The proposed regulation contains some very interesting and potentially limiting requirements like the requirement that the drone pilot retain "Visual line-of-site" at all times. One can imagine drone pilots clammoring for access to roof tops and other positions that would allow a greater range while complying with FAA requirements. In addition, the pilots would require vetting, training, and testing by the FAA. The FAA will also require reports of any crashes that cause property damage or personal injury, aircraft registration, and markings on the aircraft like current planes. The drones would be limited to 55 pounds in weight. Cameras are permitted without any limitation. The drones also cannot be flown over people who are not involved in the flying of the drone, although the FAA proposes an exception for "microUAS" drones with proper certifications and knowledge. For an overview of the proposed rule, click HERE. To see the Department of Transportation Operation and Certification of Small Unmanned Aircraft Systems notice that provides the proposed rule and links for making comments, click HERE.
Once again, Morris Sperry projects that within five years Drones will be entering community associations delivering prescriptions and taking photographs for all sorts of commercial enterprises. Moreover, it certainly makes both economic and practical sense for both associations and managers to consider using drones for property inspections as a cost saving effort that might also allow for inspections of areas such as roofs and balconies that in some cases may have been previously impossible. Careful consideration and balancing of prvacy interests will be required when using drones for these types of inspections.
The Las Vegas Consumer Electronics Show was swarming with new drones last week. There were drones small enough to hold in your hand and large enough to carry a twenty-pound payload. The new rage is drones that will follow ("Auto-Follow") a person either by recognizing the person or a logo on the person or by following a device or controller carried by a person. In the next five years community associations will be swarming with drones of all sizes doing all sorts of tasks, the most common of which is taking high definition video or photographs. One can only imagine the issues these drones will raise in society in general and in condominium and homeowner associations.
Consistent with their absolute drive to remain on the cutting edge of HOA law, Morris Sperry is now including provisions in governing documents to address the inevitable arrival of these versatile devices. When you get your governing documents (declaration, bylaws, rules, articles of incorporation, CC&Rs) rewritten by Morris Sperry, you get thousands of hours of work and fine tuning in our template, including ongoing additions and modifications to address new technologies and changes in the law. With a great template to start with, the lawyers at Morris Sperry customize that template to your association with a extensively tested process that produces great documents. That process also maximizes the chances that the association will get the owner approval needed to adopt the new governing documents.
John Morris appeared and testified again before the Senate Business and Labor committee regarding House Bill 98 (HB 98) (HB0098S01), substituted Senate Bill 118 (SB 118) (SB0118S01), and substituted Senate Bill 80 (SB 80) (SB0080S01). All three bills passed out of committee today and are headed to the floor of the Senate. HB 98 is the compilation bill that will clarify and update the requirements for HOA fines in Utah. It will also have a big impact on an association's rights related to rental units in the association and the association's right to impose rental restrictions through amendments to the governing documents. Charges that an Association might impose on rental units just because they are rental units will be a thing of the past as will other blatently descriminatory practices against rental units in associations. SB 118 addresses restrictive provisions in governing documents that make it overly difficult to amend those documents. It will void requirements that 100% of the owners approve amendments in older condominiums, 100% requirements for mortgagee approvals for amendments, and any requirement that a particular owner approve an amendment. If it passes, SB 80 will require certain disclosures at the time of sale of a unit or home in a community association if the association is in the developer control period. This will help provide more information to purchasers about hoa reserve accounts as well as other association financial information.
John Morris testified before the Senate Business and Labor committee last week regarding new HOA laws in Utah. HB 99 will require condominium, townhome, HOA, PUD, and homeowner associtaions to all open their board of directors', management committee', or board of trustees' meetings to owners. John Morris answered questions about the law and addressed concerns of Senators that the law does not go far enough in protecting the rights of owners to attend board member meetings. John explained that the law is a first step and that the industry does not want to create to much of a burden on managers or associations, while nonetheless preserving the right of an owenr to attend board meetings. John continues his work on good laws in Utah on the Community Association Insitute (CAI) Utah Legislative Action committee. House Bill 99 is sponsored by representative Mike Shultz in District 12. HB 99 originated in the local Utah Chapter and was the product of almost three years of discussion among managers, owners in HOAs, board members, HOA attorneys, and other industry vendors and participants.
Leon Benzer pleaded guilty Friday January 16, 2015, in a massive scheme to take over and defraud several homeowners association in the Las Vegas area.
Benzer, a former construction company boss and who prosecutors say is the mastermind behind the scheme, entered a total of 19 guilty pleas, which include conspiracy, fraud, and tax evasion in two separate federal indictments.
In his plea agreement with prosecutors, Benzer provides an explanation of his role in the multi-million dollar scheme. But his agreement does not include testifying against the remaining defendants charged in the HOA conspiracy. Prosecutors allege that this occurred at 11 HOAs across Las Vegas valley between 2003 and 2009.
Prosecutors are recommending that Benzer’s prison time be reduced because of his acceptance of responsibility for his crimes. However, Justice Department lawyer Charles La Bella said prison time will be left to Mahan and his assessment of the federal sentencing guidelines.
Benzer, who once owned Silver Lining Construction Company, and 10 other people were indicted in the scheme in January 2013. These charges relate to more than $7 million that Benzer and his company obtained through fraudulent contracts with the Vistana condominium development to do construction defect work.
The investigation that led to the indictments is thought to be the largest public corruption case federal authorities have brought to Southern Nevada. In all, 36 defendants have pleaded guilty since August 2011. Most are cooperating and waiting to be sentenced after the trial.
Prosecutors are seeking almost $25 million in restitution for the HOAs and lending institutions that were defrauded in the takeover scheme.
Benzer’s goal was to gain control of the HOA boards and steer construction defect litgation contracts to Quon’s (former construction defect lawyer) law office. Quon, now deceased, was to give Benzer 10% of any defect judgments she won. Benzer would also obtain construction defect repair contracts from the corrupted HOA boards.
According to prosecutors, Benzer, Quon and others are to believed to have funneled more than $8 million through secret bank accounts to help them land the contracts.
In his plea agreement, Benzer admits he had the scheme covered from all angles, including setting up buyers to infiltrate HOA communities and get elected to their boards.
Members that were loyal to Benzer were elected through ballot stuffing, bribery and other tricks. Attorneys on Benzer’s payroll were hired to provide legal advice to the boards and oversee the election rigging, putting the Benzer-friendly community management firms in place.
The conspirators gained control of half of the HOA boards and were working on the others until authorities broke up the scheme in 2008 with raids across the valley.
To read the full article, click here.
House Bill 98 (HB 98) just passed the house and has been refered to the Utah Senate for Consideration. HB 98 contains some compromise legislation on landlord/HOA issues and also contains a substantial revision to the HOA fine laws for both condominiums and for homeowners associations governed by the Community Association Act. These provisions allow commercial condominium associations to assess fines for the first time in Utah. Morris Sperry will be ready to help with updates to Rules and CC&Rs to facilitate this new opportunity. The new fine changes also clarify continuing verses repeated violations, the content of warning and fine letters, the procedures related to the issuance of fines and warnings, and the right of board members and owners to attend fine hearings remotely. These fine changes are good for associations and owners. Morris Sperry attorney John Morris is proud to be part of the Utah CAI Legislative Action Committee that worked on this bill and to be one of the primary drafters of the fine law changes in this bill. Morris Sperry remains committed to this volunteer effort and to keeping at the forefront of changes in community association law so that their HOA, townhome, homeowners association, condominium, and PUD clients receive legal advice that is timely and accurate.
Will drones be used by an HOA for enforcement of covenants and common area inspections? Will drones be used by third parties for the delivery of pizzas, delivery of prescription medications, taking photoragraphs for real estate listings, and other uses in a condominium association? Will drones "land" in an HOA? Will we need "drone ports"? Is vaping or use of E-cigarettes "smoking" or covered in no smoking policies? Should they be? Are there secondary risks from these devices? Is medical use of Marijuana a problem for community associations in Utah? Will the use of Google Glass, Microsoft Hololense and similar "eyeglasses" that can photgraph or video surepticiously exacerbate the already difficult issue of recording annual meetings and board meetings?
Morris Sperry attorneys are attending seminars and talking about these issues at the National HOA law seminar this week in San Francisco California.This is part of the ongoing effort by Morris Sperry lawyers to stay ahead of these cutting edge issues in the drafting and enforcement of governing documents.
Two new hoa laws, HB 98 Association Amendments and HB 99 Open meetings, passed through House Business and Labor Committee by unanimous vote of the committee members and HB 99 just passed the house and is on the way to Senate. John Morris of Morris Sperry was involved in the drafting of both bills. HB 99 will guarantee owner access and the right to notice of regular meetings of the board of directors and management committees in condominium and homeowners associations in Utah. HB 98 contains long negotiated changes to further balance the relationship between HOAs and owners who rent their units and homes. Utah HB 98 also contains new provisions clarifying HOA fine provisions and changes that will finally allow commercial condominiums to fine owners rather than have to initiate lawsuits in every enforcement action. Morris Sperry is at the frontline in the drafting and passage of balanced laws affecting community assocaitions.
Continuing their dedication to keeping ahead of the industry on important legal issues, five Morris Sperry lawyers are attending the CAI national law seminar in San Francisco California. Once again, Morris Sperry sends more Utah lawyers to the law seminar than any other firm in the state. The only Morris Sperry lawyer not attending has the one great excuse nobody could argue with - a new baby born two days ago!
In December, 2012, a lawsuit was brought against a Condominium Association and client of Morris Sperry. The plaintiff claimed over $700,000 in damages. The Morris Sperry team, working aggressively in defense of the lawsuit, prevailed on summary judgment in a hearing before Judge Andrew Stone on May 6, 2013. The judge ruled in favor of Morris Sperry's client based on theories advocated and advanced in a cross-motion for summary judgment brought early in the case. This brought a prompt end to a lawsuit brought against a Morris Sperry client.
In a never ending committment to advancing their skills, John Morris and Quinn Sperry completed the 40-hour course required to become court approved mediators. This advanced training in mediation and the extraordinary dedication of time and effort is just one more clear demonstration of the commitement of the Morris Sperry attorneys to unparalled service to their clients. Not only are the attorneys at Morris Sperry excellent litigatators, they do an excellent job of keeping their clients out of litigation whenever possible. The Morris Sperry team is commited to resolving their clients' disputes as economically and efficiently as possible.
John Morris was appointed to the Board of the local chapter of the Community Association Institute. He will serve in that capacity completing a two-year term. This is a further demonstration of Morris Sperry's commitment to the industry and to all homeowners, board members, and industry partners who rely on and look to the local chapter for education and standards. John is excited to begin work as a new member of the board and looks forward to helping and supporting an already great team.
With the additional new staff at Morris Sperry, Quinn has been focusing extra effort and time on the HOA and community association assessment collections. Morris Sperry's advanced collection software allows both managers and board members immediate access to up-to-date account information via the web, anytime and anyplace. Morris Sperry's flexible collections program works with PUDs, Townhomes, Condominiums, HOAs, and every other type of homeowners association.
In a packed house at the Alta Club, John Morris gave an update to Utah attorneys on recent legislation and case law in the area of community association law. The lunch was excellent and the real property section leaders did a great job organizing the event. In a little over an hour, John covered the three most important bills affecting community associations in the 2013 legislative session, HB 101, SB 64, and SB 90. He also discussed and summarized several community association appellate law cases decided in the last year, including one of his own cases. Having participated in the drafting and legislative process of the bills, John added rare insight and perspective, including the history behind the bills and what to potentially expect in the future.
John Morris attended the CAI legislative update. The board members in attendance had a great chance to talk directly to vendors in the industry and were presented with a good explanation of the Community Association legislation that passed in the 2013 session. John Morris helped present along with other members of the CAI Legislative Action Committee. The facilities at Thanksgiving Point were wonderful.
Morris Sperry is excited for the arrival of Sydney Allen as our new Administrative Assistant. She is in the process of completing her degree in Exercise and Sports Science at the University of Utah while simultaneously working on a paralegal certificate. She has a strong work history and brings a great personality and professional demeanor to the Morris Sperry team. We are confident that she will be a key person helping to ensure that our clients experience professionalism in all dealings with Morris Sperry.
Quinn Sperry has written a comprehensive article explaining both the reasons behind amending and options for amending CC&Rs. Check out the article at: http://uccai.net/blog-post/legal/amending-ccrs/
John Morris, Tanner Blackburn of Property Management Systems, and others sat on a panel discussing bidding community association services. The event was well-attended and the facilities and food at Stonebridge golf club were excellent. A good time was had by all.
John Morris appeared with other members of the Utah Community Association Institute Legislative Action Committee (CAI LAC) at the capitol on Thursday, February 14, 2013. SB 64 was introduced in a committee hearing. The CAI LAC opposes this bill and John Morris, along with two other members of the CAI LAC, testified against the bill. SB 64's purpose is to unnecessarily punish associations that have not yet complied with reserve requirements already existing in Utah law. Even more problematic, this bill would punish associations by creating a legal trap that could be used to invalidate special assessments for much needed repair projects or delay repair projects. SB 64 would also define "special assessment" in the statute differently than in existing governing documents, leading to confusion and legal expense for associations as they try to figure out what this definition means for them. This bill is a nightmare for associations, managers, developers, and builders. On behalf of the community association industry, John Morris is working tirelessly to prevent this bill from becoming law or to see it modified to eliminate all of its problems.
On October 3, 2013, a judge in Missouri ruled that an association's ban on political signs was unconstitutional. In a detailed opinion, the judge applied prior authority from a well known New Jersey case, holding that the community association's ban on political signs did not satisfy constitutional standards. Fortunately for Morris Sperry clients who have engaged us to review or draft their rules, we have been warning about this possibility since the ruling in New Jersey several years ago. If your association's rules ban political signs either expressly or implicitly, call the lawyers at Morris Sperry to help you consider your options with experienced, thoughtful, and balanced advice.
The topic of "open meetings" was discussed at another successful CAI leadership Luncheon. In a very lively discussion moderated by John Morris of Morris Sperry, opponents and proponents of open meeting legislation had a chance to express their thoughts. The discussion explored many aspects of the proposed legislation including notice to owners, the burden on management companies, the value of open meetings, and the mechanics of making it work in a way that avoids litigation. Open meetings continues to be a difficult topic that requires the careful balance of competing interests.
In a previous news story, Morris Sperry reported on an association that banned unmarried couples from moving into the association. That rule, passed in mid-July 2013, was recently abandoned by the association in the face of tremendous national publicity. The story also ignited a nationwide debate among HOA lawyers over the various claims that might be brought against the association and whether the rule addressed issues that should or should not be within the discretion of an association to regulate. This issue highlights how ongoing social and cultural changes in our society can directly impact community associations. It is frequently the case that rules and board actions in associations unknowingly violate the law and/or modern social norms. Well run associations with educated managers and HOA experienced legal counsel typically avoid these types of problems or at least make decisions knowing the risks.
On August 13, 2013, the Justice Department announced that the Townhomes of Kings Lake HOA Inc. (HOA) and Vanguard Management Group Inc. have agreed to pay $150,000 to settle a lawsuit alleging violations of the Fair Housing Act (FHA). The lawsuit alleged that the HOA adopted and both defendants enforced occupancy limits that discriminated against families with children at the Townhomes of Kings Lake, a 249-townhome community in Gibsonton, Florida. Under the proposed consent decree, which must still be approved by the Court, the defendants will pay $45,000 to the family that initiated the original complaint filed with the U.S. Department of Housing and Urban Development (HUD), $85,000 into a victim fund to compensate other aggrieved families, and $20,000 to the United States as a civil penalty. In addition, the proposed consent decree prohibits the defendants from discriminating in the future against families with children and requires the defendants to receive training on the requirements of the FHA.
In a new and unexpected twist, a Florida condominium has apparently adopted a declaration amendment or a rule banning anyone from moving into the association who is "living in sin." The ban allows couples of any gender and sexual orientation to move in, so long as they are married. But, if they are "a couple" and are not married, the association intends to restrict them from moving in. While we can certainly talk about the legal and moral issues arising out of this decision, a more important issue is clearly implicated. Should the owners or board members in a condominium association be regulating this type of behavior at all? One can only imagine the "investigation" that will ensue when the first couple attempts to purchase a unit and professes that they are merely roommates, not "living in sin." Should a board be in the business of investigating and verifying someone's sexual activity? Moreover, exactly how would they do that?
Many people have watched the prosecution of George Zimmerman and the recent not guilty verdict. For Mr. Zimmerman's past neighbors, however, a much more intimate lawsuit was resolved in April 2013. George Zimmerman lived in a community association (HOA). After Mr. Zimmerman fatally shot Trayvon Martin, Trayvon's family filed a lawsuit against the HOA. Hopefully there was insurance coverage for the HOA, but either with our without insurance, a lawsuit against the HOA can be a very stressful process. The case was settled in a confidential settlement in April 2013 and we think it is safe to assume that some payment was made to Trayvon's family.
This incident highlights the serious legal issues involved in community associatoin neighborhood watch programs and with any sort of self policing of associations. Morris Sperry is pleased to post on our website a helpful overview of HOA neighborhood watch programs provided by Beat Koszinowski of the Buckner Company. Go to the Resources tab of this website and look under Articles for the Neighborhood Watch article. At a minimum, any community association considering a neighborhood watch program should talk both to their legal counsel and their insurance agent.
In 2008, an owner in a 2000 single-family home association in Illinois was driving through the community at 34 miles per hour. The posted speed limit was twenty-five miles per hour. The HOA's private security officer pulled the owner over with flashing lights and issued him a fine. The Rules also provided that if the owner had not pulled over, he could have been fined an additional two hundred dollars. The owner fought back and challenged the stop in a lawsuit that ultimately made it to the Illinois Supreme Court. The Illinois Supreme Court held that the Association had the right to pass rules allowing for security personnel to stop owners, to use radar guns and flashing lights on vehicles, and to issue fines for exceeding speed limits. The Court's opinion can be viewed here.
The latest in a never-ending stream of HOA embezzlement stories involves a management company accounts payable employee stealing $180,000 in condominium association funds. For over four years (2009-2013), the employee wrote checks to herself and cashed them at banks and stores. This story, along with all of the others we hear about, highlights the need for vigilance in reviewing financial statements for managers as well as board members. Serious consideration should be given to requiring board members to sign checks and for regular audits or reviews. Finally, it is always important to review the crime/dishonesty insurance policy and any fidelity bonds of any management company retained by the association. Morris Sperry is preparing training specifically on this topic and will be making that training available to board members and managers in the fall of 2013.
In a very aggressive action, a Florida Condominium Association has prevailed in collecting $98,000 in assessments, late fees, and collection costs (in addition to attorney fees), from Federal National Mortgage Association (FNMA) after a bank foreclosure. The case is now on appeal and could take a year or more to get finally resolved. Look to Morris Sperry for cutting edge community association law news and services.
The Federal Housing Administration (FHA) recently decided that a common provision in condominium declarations violates Section 513 of the National Housing Act. It is, therefore, refusing to provide FHA approval to condominium associations with this provision. Declarations commonly restrict short term occupancy (hotel and transient occupancy) of less than 30 days. Occasionally, you will also have an exception to this provision for lenders who take title through foreclosure. The FHA has targeted the lender exception and decided it violates Section 513. No condominium association with this exception will get or remain FHA approved and the FHA has flatly taken the position that any such exception must be amended out of the declaration to get or retain FHA approval. According to the Community Association Institute (CAI), associations around the country are being denied FHA approval based on this decision. CAI continues to lobby nationally to try to resolve this problem without amendments to declarations, but the FHA decision stands for now. If your condominium association wants become or remain FHA approved, Morris Sperry can quickly determine whether you have this provision and if you do, prepare an amendment allowing your condominium association to remain FHA approved. According to CAI, FHA has no intention of taking away FHA approvals already granted, but will strictly apply this decision in any future renewal or first-time application.