After another client contacted us inquiring about the Corporate Transparency Act (CTA), we thought it was time to write a brief summary on this law and what it means to community associations.
The CTA was enacted by the United States Congress on January 1, 2021. The stated purpose of the law is to generally address “the disclosure of corporate ownership and the prevention of money laundering and the financing of terrorism”. I know, you’re asking – how in the world does this apply to community associations? The simple answer is, it wasn’t really intended to, and community associations appear to be “stuck in the middle” of it (as is often the case). A *very* brief summary and discussion about the CTA is below.
It appears that associations are “Reporting Companies”, for the most part.
The exemptions listed in the CTA do not appear to apply.
It appears that as of now, Board members would qualify as “Beneficial Owners” under the CTA because in their capacity as Board members (or the governing body as a whole), they exercise “substantial control” over the association as a Reporting Company.
Reporting Companies must provide general information (name, address, tax ID, formation info, etc.) as well as specific information on each Beneficial Owner (i.e., Board member) – name, DL or passport, DOB, etc.
A failure to report may result in civil fines and/or criminal fines for fraudulent reporting or a purposeful failure to report.
Based upon our review of the current iteration of the CTA and agency Rule(s) related to same, we believe that the vast majority of Pennsylvania community associations (especially those registered as a non-profit corporation with the PA Department of State) will likely be subject to the law, as it currently stands. But don’t panic, we still have some time to figure this out – the filing requirement becomes effective on January 1, 2024 (and the report must be filed by 1/1/25 for existing Reporting Companies).
We will continue to monitor the CTA and will update the Hoffman Law Blog as soon as we learn any new information.
Those of you who follow Hoffman Law LLC may remember our post from a few years back reminding you to get your Decennial (i.e., 10 year) Reports filed with the PA Department of State to save your name:
NEWS ALERT – THIS HAS ALL CHANGED – EFFECTIVE BEGINNING IN 2025 AN ANNUAL REPORT IS REQUIRED! What does this mean to your Community Association? The Pennsylvania Department of State has provided the following guidance (in pertinent part(s)):
On November 3, 2022, Governor Wolf signed into law Act 122 of 2022, and the law became effective on January 2, 2023. Among the many changes made by this legislation, Act 122 created an annual report requirement (like that imposed by most states) for domestic and foreign filing associations. The long-time decennial report requirement for these associations has been repealed. The new annual report filing is required for many types of entities, including domestic nonprofit corporations (which includes many Community Associations).
Here is the good news – we have some time. The annual report requirement begins in calendar year 2025. Similar again to other states, failure to file the annual report will subject a nonprofit corporation Community Association to administrative dissolution/termination/cancellation and loss of the protection of its name.
The annual report will include the following:
Community Association Name
Jurisdiction of formation
Registered office address
Name of at least one director, board member, etc., depending on type of Ass’n
Names and titles of the principal officers, if any
Address of the principal office
Entity number issued by the Pennsylvania Department of State
The fee for the new annual report is $0 for nonprofit corporations (which includes many Community Associations) and the deadline for filing the annual report is June 30 of each year.
The Department of State will mail notice to the registered office address of each nonprofit corporation Community Association required to make an annual report at least two months prior to the respective deadline, reminding it of the need to make an annual report. It is critical that affected nonprofit corporation Community Associations keep all information on file with the Department up-to-date, particularly registered office address, to ensure that they receive notice of how and when to make annual reports. Nonprofit corporation Community Associations also have the ability to provide emails for additional notifications. However, failure by the Department to deliver notice to any party, or failure by any party to receive notice, of an annual report filing requirement does not relieve the nonprofit corporation Community Association of the obligation to make the annual report filing.
The new annual report requirement is a significant change for Pennsylvania. Therefore, Act 122 requires that the Department provide nonprofit corporation Community Associations with a transition period before imposing any dissolution/termination/cancellation for failure to file annual reports. Beginning with annual reports due in 2027, nonprofit corporation Community Associations that fail to file annual reports in the 2027 calendar year will be subject to administrative dissolution/termination/cancellation six months after the due date of the annual report.
Should a nonprofit corporation Community Association discover that it has failed to make a required annual report and has been dissolved or terminated, it has the opportunity for reinstatement, with no limitation on the period of time for such reinstatement. Such reinstatement must be accompanied by the application for reinstatement fee and a fee for each delinquent annual report that was not previously paid (if a fee is then applicable, as it is currently listed to be $0).
During the time of administrative dissolution/termination/cancellation, the nonprofit corporation Community Association’s name is made available to any other entities. If another entity has taken the name of the existing (senior/original) nonprofit corporation Community Association seeking reinstatement, the other nonprofit corporation Community Association that has appropriated the name may keep the name and the existing (senior/original) nonprofit corporation Community Association seeking reinstatement must choose a new name.
IT IS THEREFORE CRITICAL TO FILE AN ANNUAL REPORT BEGINNING IN 2025 TO CONTINUE TO PREVENT DISSOLUTION/TERMINATION/CANCELLATION OF YOUR COMMUNITY ASSOCIATION … AND TO CONTINUE TO SAVE YOUR NAME!
Source for this Blog Post: https://www.dos.pa.gov/BusinessCharities/Business/Resources/Pages/Annual-Reports.aspx
The first question that Board members usually ask is – what is fiduciary duty?
The Merriam-Webster Dictionary defines fiduciary duty as follows:
“A duty obligating a fiduciary (as an agent or trustee) to act with loyalty and honesty and in a manner consistent with the best interests of the beneficiary of the fiduciary relationship (as a principal or trust beneficiary).”
There are various duties associated with fiduciary duty, and depending on the jurisdiction these duties may include:
Duty of Care;
Duty of Loyalty;
Duty of Confidentiality;
Duty to Act Within Scope of Authority;
Duty of Good Faith;
Duty of Prudence; and
Duty of Disclosure.
How does fiduciary duty apply to community associations?
In the context of a community association, a fiduciary duty entails the duty that a Board of Directors (and/or a member thereof) owes the Association (which is typically a non-profit corporation). The Board has a fiduciary duty to act in the best interests of the Association with every decision that it makes.
What standard of review do the courts utilize as it relates to fiduciary duty?
Courts in most jurisdictions utilize some form of the “business judgment rule” (BJR) as it relates to fiduciary duty issues. Under the BJR, board members must make decisions within the scope of their given authority, in good faith, using ordinary care and in the best interest of the Association.
Under the BJR, courts do not substitute their judgment for that of the board of directors and will not interfere with the internal management of the Association unless the acts complained of constitute fraud, bad faith or gross mismanagement, or are unlawful. Kelso Woods v. Swanson, 692 A.2d 1132 (Pa. Cmwlth. 1997), Mulrine v. Pocono Highland Community Association, 616 A.2d 188 (Pa. Cmwlth. 1992).
In order to establish a cause of action for breach of fiduciary duty against an association for actions taken by its board members under the BJR, the party complaining must allege facts which would establish that the actions of the board members were unauthorized, or that the actions had been taken fraudulently, in bad faith, or constituted self-dealing. Lyman v. Boonin, 635 A.2d 1029 (Pa. 1993).
In Pennsylvania, the Non-Profit Corporation Law of 1988, 15 Pa.C.S. § 5101 et seq. (NPCL), addresses the standard of care related to board members of non-profit corporations, which include Associations:
§ 5712. Standard of care and justifiable reliance.
(a) Directors. — A director of a nonprofit corporation shall stand in a fiduciary relation to the corporation and shall perform his duties as a director, including his duties as a member of any committee of the board upon which he may serve, in good faith, in a manner he reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. In performing his duties, a director shall be entitled to rely in good faith on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by any of the following:
One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented.
Counsel, public accountants or other persons as to matters which the director reasonably believes to be within the professional or expert competence of such person.
A committee of the board upon which he does not serve, duly designated in accordance with law, as to matters within its designated authority, which committee the director reasonably believes to merit confidence.
(b) Effect of actual knowledge.–A director shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that would cause his reliance to be unwarranted.
(c) Officers.–Except as otherwise provided in the bylaws, an officer shall perform his duties as an officer in good faith, in a manner he reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. A person who so performs his duties shall not be liable by reason of having been an officer of the corporation.
15 Pa.C.S. § 5712.
The NPCL also speaks to the personal liability of directors:
§ 5713. Personal liability of directors.
General rule.–If a bylaw adopted by the members of a nonprofit corporation so provides, a director shall not be personally liable, as such, for monetary damages for any action taken unless:
The director has breached or failed to perform the duties of his office under this subchapter; and
The breach or failure to perform constitutes self-dealing, willful misconduct or recklessness.
Common Interest Community Statutes — In Pennsylvania, pursuant to both the Uniform Condominium Act, 68 Pa. C.S. § 3101 et seq. and the Uniform Planned Community Act, 68 Pa.C.S. § 5101 et seq., board members stand in a fiduciary relation to the association and shall perform their duties, including duties as members of any committee of the board upon which they may serve, in good faith in a manner they reasonably believe to be in the best interests of the association. See 68 Pa.C.S. § 3303(a) and § 5303(a). Under the Pennsylvania Uniform Acts, Judicial review of board decisions is available even when a condominium or HOA was organized prior to the adoption of the Uniform Condominium Act, 68 Pa. C.S. § 3101 et seq. and/or the Uniform Planned Community Act, 68 Pa.C.S. § 5101 et seq.
Finally, a large percentage of community association Bylaws also speak to board members’ responsibilities and duties, and what standard is utilized to determine if a board member has acted appropriately. To wit, many Bylaws provide for indemnification for actions filed against the board and/or its members and specify when indemnity would apply given how a board member is to act on behalf the association (and at times, Bylaws will specify what actions would lead to no indemnification occurring, i.e., self-dealing, failure to act in the best interest of the association, etc.).
Insurance and claims.
Obtaining appropriate insurance to cover potential breach of fiduciary duty claims is critical for every association. Associations should work with insurance professionals that specialize in association matters in order to ensure that the association is receiving the best possible insurance product and coverage available.
As it relates to fiduciary duty claims, these claims can be brought under many legal theories (and for which it appears that the list of such potential legal theories is constantly growing), including:
Use of association property;
Buying/selling property;
Expenditure of association funds;
Hiring/firing;
Vendor and bidding issues;
Staff issues;
Election issues;
Member issues;
Collections disputes;
Operation of the association;
Self-dealing;
“Out of Control” board or board member(s) and Declaratory action(s) to remove;
Maintenance issues;
Design/Architectural issues;
Defamation;
Premises liability issues for an alleged failure to maintain;
Discrimination;
Failure to hold Annual Meeting;
Business decisions – insurance, reserve issues, FHA mortgage approvals; and
Enforcement of covenants/selective enforcement.
Fiduciary duty claims should be submitted to the association’s carrier for review under the association’s Officers (D&O) Liability Coverage. The D&O coverage part is generally drafted to include a myriad of potential claims, coverage for many of which may include a “wrongful act”. Board members must be considered an “insured” under the policy and required that the “insured” be acting in the scope of their capacity as a board member. There are also exclusions, defense cost issues and other issues pertinent to insurance that must be reviewed. The moral of the story is that D&O policies vary tremendously, so it is crucial that the association review their specific policy with its insurance professional in order to clearly understand their policy terms, conditions and exclusions.
Defense of fiduciary duty claims.
Typically, the threshold issue with the defense of breach of fiduciary duty claims is whether the BJR applies. The BJR is applied, in some form, whether through common law or statute, in the vast majority of jurisdictions. Standing to sue will be analyzed, as will the duties owed (i.e., is the duty owed to the association or is it also owed to individual members/owners?), conflicts/potential conflicts of interest, privilege and immunities and other issues like offers of judgment should be considered.
Claims, threats and suits should be submitted to the association’s D&O carrier so the carrier can make a coverage determination. It is important to notify the carrier as soon as possible so a defense can be provided, if applicable. Carriers will often open a file to “monitor” a fiduciary duty claim in the event the claim escalates and so defense to the claim may be provided to the association by the carrier.
Best practices.
How can associations attempt to avoid claims based upon an alleged breach of fiduciary duty? In a nutshell, board members should: (a) act within the scope of their given authority; (b) act in good faith; (c) use ordinary care; (d) act in the best interest of the association; (e) act reasonably with respect to enforcement of covenants and rules and regulations; and (f) act reasonably when making management and business decisions. Of course, each situation a board will face may be different, but at the day, acting reasonably will go a long way to overcome an allegation of a breach of fiduciary duty.
– Edward Hoffman, Jr., Esq., CCAL
* A version of this Blog post was drafted by Edward Hoffman, Jr., Esq., CCAL and originally included in his portion of the written materials for his presentation at CAI’s 2018 Community Association Law Seminar in Palm Springs, CA.
Time flies. Since about 2010, I have been counseling community associations on risks involving potential breaches of personal information and the fact that Pennsylvania has a specific statute related to such breaches, literally called the “Breach of Personal Information Notification Act” (“BPINA”). BPINA was recently amended and signed into law by Governor Wolf on November 3, 2022 (and effective in 180 days).
As a general BPINA primer, community associations qualify as “businesses” under BPINA and are covered “entities” which do business in the Commonwealth of Pennsylvania. BPINA defines “Personal information” as follows:
(1) An individual’s first name or first initial and last name in combination with and linked to any one or more of the following data elements when the data elements are not encrypted or redacted:
(i) Social Security number.
(ii) Driver’s license number or a State identification card number issued in lieu of a driver’s license.
(iii) Financial account number, credit or debit card number, in combination with any required security code, access code or password that would permit access to an individual’s financial account.
(iv) Medical information. (Added as amended on 11/3/22)
(v) Health insurance information. (Added as amended on 11/3/22)
(vi) A user name or e-mail address, in combination with a password or security question and answer that would permit access to an online account. (Added as amended on 11/3/22)
Most community associations do not keep social security numbers, medical information and/or health insurance information (and likely should not be if they are), but many have access to and keep records of driver’s licenses, financial accounts and credit/debit cards. Many also have portals which contain a user name or e-mail address, in combination with a password or security question and answer that would permit access to an online account (usually an association account of some kind). (Note: the last section re: email addresses and login information was added as amended on 11/3/22 so community associations should use due diligence to protect the information and comply with BPINA as amended, even if they were properly handling records of driver’s licenses, financial accounts and credit/debit cards prior to the recent BPINA amendments).
Hopefully any and all of this personal information is being properly handled and kept (maintained) offsite on properly encrypted systems run by third-party providers and/or contactors to attempt to offset and/or limit liability (I note that managing agents also keep this information as well, and there should be similar considerations/protections for maintaining such data).
BPINA has always required notification of the breach of the security of the system, but the November 3, 2022 BPINA amendments added additional notification requirements, including the following new Section 3(a.3):
(a.3) Electronic notification.–In the case of a breach of the security of the system involving personal information for a user name or e-mail address in combination with a password or security question and answer that would permit access to an online account, the entity, to the extent that it has sufficient contact information for the person, may comply with this section by providing the breach of the security of the system notification in electronic or other form that directs the person whose personal information has been materially compromised by the breach of the security of the system to promptly change the person’s password and security question or answer, as applicable or to take other steps appropriate to protect the online account with the entity and other online accounts for which the person whose personal information has been materially compromised by the breach of the security of the system uses the same user name or e-mail address and password or security question or answer.
Accordingly, community associations should be aware of not just the general (preexisting) notification requirements pertinent to a breach of personal information, but associations should also understand how to handle notification involving the breach of the security of the system involving personal information for a user name or e-mail address in combination with a password or security question and answer that would permit access to an online account in accord with BPINA as amended.
Finally, this post was not intended to serve as a discussion of how to properly handle a breach of personal information nor was it intended to be an exhaustive review of BPINA in general and/or as amended; rather, the intent was to notify our community association clients and industry colleagues of changes in the law, so proper due diligence can be undertaken. For some reason lawyers [still] love to use a dead language – Latin – to make their points. Our question is therefore: parati estis? … or, are you ready?
To get ready, we recommend that community associations review BPINA as amended, which can be found here, discuss with their counsel, managing agents, any service providers that handle personal information (especially association software providers), and confirm proper insurance coverage with association insurance professionals. As it relates to insurance, community associations should obtain adequate cyber-liability insurance to offset risk and cover a breach incident (it is noted that the cost of proper notification is tremendous, especially if the breach involves notification to over 1,000 persons at one time (because all consumer credit reporting agencies must also be notified)).
Perhaps you remember the chorus in Dave Mason’s 1977 soft rock hit, “We Just Disagree”:
So let’s leave it alone ‘cause we can’t see eye to eye. There ain’t no good guy, there ain’t no bad guy, There’s only you and me and we just disagree. Ooh-ooh-ooh, oh-oh, oh-oh-oh.
I know, you, the reader, isn’t happy with me as you won’t be able to get the song out of your head (I think it’s actually a pretty good song, by the way) … but, there’s a message here. The message is that residents in community associations won’t always see eye to eye on every issue … and, that’s ok because we simply aren’t wired to agree on every issue. However, sometimes a simple disagreement rises to the level of conflict in an association, which can impact the entire community. As a community association attorney and litigator, I believe the path to reducing conflict in associations begins with proactively and intentionally acting in a manner which will serve to avoid the disagreements, issues and other frustrations that ultimately lead to conflict. This article will outline some best practices that community associations should follow to reduce the likelihood of conflict.
Consistency and Uniformity in Enforcement
In every community association, the Board is charged with the responsibility to enforce the community’s covenants, restrictions and rules & regulations for the benefit of every member/owner in the community. This responsibility is not voluntary; rather, the Board has a fiduciary duty to (1) ensure that the covenants, restrictions and rules & regulations of the community are adhered to/followed by the members/owners; and (2) enforce the covenants, restrictions and rules & regulations against a unit owner who fails to adhere/follow them. Examples of frequently encountered enforcement issues include but are not limited to pools, trash, outdoor elements (architectural control), parking, pets/animals, curtains, outdoor storage, maintenance and playgrounds. Enforcing the governing documents with consistency and uniformity – regardless of the unit owner that is the subject of the enforcement – will greatly reduce the possibility of conflict in the association as well as potential liability for the association. How does an association do this?
Actually enforcing the covenants, restrictions and rules & regulations.
Though it is seemingly ridiculous to have to mention this, every association must actually enforce its own covenants, restrictions and rules and regulations. A failure to do so will lead to cries of inconsistent enforcement by unit owners, which will invariably lead to conflict.
Not playing favorites.
A Board MUST enforce its covenants, restrictions and rules and regulations against Ms. Jones in Unit B1 and Mr. Smith in Unit B2, even if Ms. Jones is the community pariah and Mr. Smith is the kindest person in the entire community. In other words, a Board must not play favorites. Picking and choosing some but not all unit owners as it relates to enforcement will certainly lead to conflict.
Avoiding stupid decisions.
Let’s not sugarcoat it. Community leaders make stupid decisions. Sometimes these stupid decisions lead to inconsistent enforcement of the community’s covenants, restrictions and rules & regulations. The key is either avoiding stupid decisions to begin with, or if that horse has already left the gate, recognizing and reversing course on the stupid decision before it becomes a problem for the association and leads to conflict. Stupid decisions can be avoided by adopting and implementing an enforcement policy which will be applied uniformly and equally to all owners.
Ensuring due process is provided to unit owners before fining.
In the author’s home state of Pennsylvania and many other jurisdictions, the statutes provide an association with the power to levy reasonable fines for violations of the declaration, bylaws and rules and regulations of the association – after notice and an opportunity to be heard is provided to the unit owner. Fining a unit owner and/or engaging in a related enforcement action prior to and/or without providing a unit owner with notice and an opportunity to be heard may lead to a successful lack of due process defense by the allegedly offending/violating owner, and will surely lead to conflict.
Stopping unofficial enforcement.
Unofficial enforcement involves situations where a Board member, committee member or some other person with actual or apparent authority to act on behalf of the association tells a unit owner to do something as it relates to the covenants, restrictions and rules & regulations, but without the consent (vote) of the [entire] Board of Directors. For example, a landscaping committee member unilaterally advises a unit owner to remove a tree because the committee member believes the tree is in violation of the covenants. This is unofficial enforcement because the committee member may be viewed to have authority to tell the unit owner to remove the tree although the committee member, in actuality, had no authority to do so. If a unit owner actually removed the tree as a result of the directive of the committee member, and the tree did not have to come down, conflict would likely be the result. Boards must therefore be cognizant of the propensity for this type of activity to occur and must properly educate and train all community leaders and volunteers to stop unofficial enforcement from occurring. Doing so will serve to reduce conflict in associations.
Good Governance
What does “good governance” in a community association mean, and how can it serve to avoid conflict? Good governance means that the Board makes good decisions for the benefit of the community and that it undertakes this process correctly. To clarify this issue a bit, in Pennsylvania, and similarly in many other jurisdictions, the Business Judgment Rule provides that Board members must make decisions (1) within the scope of their given authority; (2) in good faith; (3) using ordinary care; and (4) in the best interest of the Association (i.e., not in the best interest of the Board Members). The simple process of making decisions correctly will likely serve to reduce conflict, as unit owners will likely be less upset with Board decisions on certain issues and will be less apt to contest Board actions and initiate litigation.
Communication Between Association and Residents – Make Owners Feel Heard
An issue that has always caused strife and conflict between community associations and unit owners involves unit owners feeling and complaining that the Board doesn’t listen to unit owners – in other words, the Board doesn’t allow unit owners to feel heard on association issues, whether big or small. In my practice, I have actively advised and recommended to my clients that the Board should make considerable effort to listen to unit owners on issues – and, sometimes, unit owners bring great perspective and are “right” on the issues they want to be heard on.
In jurisdictions that do not require “open” Board meetings, such as Pennsylvania (absent requirements in the governing documents, of course), my recommendation would be to make some of the Board meetings open to the unit owners to attend. For example, if there is a Board meeting every month, I would suggest that the Board offer to make 25% of the meetings, or three Board meetings a year, open to the unit owners to attend (even if virtual, assuming it is permitted). This would go a long way to having the Board and unit owners actually get to know one another, and will likely lead to reduction in potential conflict between unit owners and the association.
Take Neighbor Against Neighbor Disputes Seriously
We have discussed conflict between the association and unit owners, but what about conflict between unit owners? “Neighbor against neighbor” disputes have been around since people have actually been neighbors to one another and such disputes frequently occur between unit owners in community associations. An association may choose to act as an intermediary between unit owners in order to facilitate harmony, avoid conflict and perhaps reach a potential resolution – and this action may in fact, actually be deemed necessary under HUD’s 2016 Final Rule entitled “Quid Pro Quo and Hostile Environment Harassment and Liability for Discriminatory Housing Practices under the Fair Housing Act”.
To boil it down to its essence as it relates to Hostile Environment Harassment, the Final Rule explains that “the reasonable person standard under which hostile environment harassment is assessed”is“‘[w]hether unwelcome conduct is sufficiently severe or pervasive as to create a hostile environment is evaluated from the perspective of a reasonable person in the aggrieved person’s position.’” In the association world, this means that a run of the mill neighbor against neighbor dispute may also trigger alleged violations of the Fair Housing Act so long as a member of a protected class (i.e., race, color, national origin, religion or sex (gender), familial status and individuals with disabilities) is making the claims against his or her neighbor.
Why is this a problem for associations if it is one unit owner accusing another unit owner of such conduct? An association’s Achilles heel as it relates to this issue is the fact that the Final Rule was revised to clarify that a housing provider (including a community association) is liable under the Fair Housing Act for third-party conduct (including but not limited to the conduct of a unit owner) if the housing provider knew or should have known of the discriminatory conduct, has the power to correct it, and failed to do so. The Final Rule provides that a community association would be liable for negligence for failing to take prompt action to correct and end a discriminatory housing practice by a third-party of which it knows or should have known was occurring.
With respect to dealing with third parties, HUD explains that a community association generally has the power to respond to third-party harassment by imposing conditions authorized by the association’s CC&Rs or by other legal authority. HUD further explains that community associations regularly require residents to comply with CC&Rs and community rules through such mechanisms as notices of violations, threats of fines, and fines. HUD submits that it “understands” that community associations may not always have the ability to deny a unit owner access to his or her dwelling and that the Final Rule “merely requires the community association to take whatever actions it legally can take to end the harassing conduct”. Thus, if a unit owner allegedly harasses another unit owner who is a member of a protected class under the Fair Housing Act, and the unit owner who is the subject of the alleged harassment advises the association of same, the association appears to have a duty to investigate the issue and affirmatively get involved in some manner to try and stop harassing conduct. If the association fails to do so, it may face liability for violating the Fair Housing Act in accord with the Hostile Environment Harassment provisions of the Final Rule, under the third-party liability rule.
Accordingly, if such allegations are made, the association may have a legal obligation to take swift action to enforce its covenants if applicable, or at least offer to get involved and assist in resolving the issue in order to reduce conflict between the unit owners for their benefit and for that of the association.
Govern With Empathy
Real people face real struggles in life. People were, and are, on edge, and many are ready to jump out of their skin. In an association setting, health, employment and other personal struggles impact unit owners’ jobs, which impact their ability to pay assessments. Personal struggles also impact owners’ ability to maintain their properties in accord with the covenants due to financial issues. When speaking to my clients about these issues, I advised that they should govern with empathy and utilize emotional intelligence, in addition to good faith and due diligence, in making decisions during this time period. I often repeated the mantra, “don’t leave empathy at the door when making important decisions”, and many associations took that advice to heart.
I believe that COVID really changed our outlook on what the concept of “community” really is – I also believe that we took “community” for granted. I know I see it, and I believe that you do as well. Community begins at home, and we had a lot of time at home to closely examine this concept in our own lives. We were, and still are, in all of this together. We must realize that we don’t live on an island onto ourselves and we should prioritize creating a safe and peaceful “community” where we treat others as we want to be treated and where we love our neighbors as we love ourselves.
Finally, if Boards govern with some level of empathy during this time period, it will serve to not only avoid conflict now, it’ll set the tone for when we get through this difficult time – and we will likely see a renewed concept of “community” in our associations.
– Edward Hoffman, Jr., Esq., CCAL
* The content for this Blog post is based in part on the prior written work of the author as originally published in the May/June 2021 issue of CAI’s Common Ground Magazine in an article entitled “Peace of the Puzzle”: https://lsc-pagepro.mydigitalpublication.com/publication/?i=702268&ver=html5&p=21
Your community association may, or may not, have received a postcard from the Pennsylvania Department of State as it relates to filing a Decennial Report. I’ve been getting some questions related to what this is all about, so I thought I would share my thoughts on this issue with you.
To begin, all domestic and foreign business corporations, including non-profit corporations (such as non-profit corporation community associations) that have not made a new or amended filing with the Pennsylvania Department of State’s (DOS) Bureau of Corporations and Charitable Organizations from January 1, 2012 thru December 31, 2021 mustfile a report that they continue to exist. This is true even if your community did not receive a postcard from the DOS. This report must be filed during the calendar year in 2021. Fictitious names and trademarks are not required to make decennial filings.
Why is this required and why am I recommending that community associations take this seriously and file the Decennial Report? Because if a community association fails to do so, the DOS may allow for the reissue of your association’s corporate name as the Commonwealth of Pennsylvania may believe that your association’s name is no longer being used by your association (I would also recommend trademarking your association’s name, for other reasons, but that’s a discussion for another day). The end result in failing to file a Decennial Report would be that your association would no longer have exclusive use of its name on or after January 1, 2022. While the association, as a business entity, would continue to exist, the association’s name becomes available for any entity registering to do business in the Commonwealth of Pennsylvania which may request it.
To file the Decennial Report, a community association must complete and file a Decennial Report of Association Continued Existence and pay a filing fee of $70.00. Should your community need assistance with filing its Decennial Report, please contact our office and we will be happy to assist.
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