As a Community Association attorney, I’ve been on both sides of the fence as it relates to association litigation. Whether I am initiating litigation against others on behalf of the association or defending the association for claims brought by others, the following holds true: litigation is expensive, time-consuming and emotionally draining for those involved. The purpose of this Blog post is to educate community leaders on how to implement best practices in order to avoid litigation.
Association as a Plaintiff
Collections
Let’s face it: unit owner delinquencies are a problem for most associations. Sometimes avoiding litigation in collections is not possible due to chronically non-paying unit owners. But much of the time, litigation can be avoided if the association stays proactive in its efforts to collect overdue assessments.
To begin, every association should implement, and utilize, a practical collections policy that protects the interests of the association while, at the same time, seeks to resolve the arrears without the necessity of litigation. A multi-tiered policy is often the best way to try and collect the arrears while resorting to litigation as a last step. For example, after the account is deemed delinquent (as “delinquent” is defined in the collections policy), a warning/demand for payment letter is sent to the delinquent unit owner by the association, requesting payment within ten days. Should the owner not pay within the allotted time period, a final warning/demand letter is sent to the delinquent unit owner by the association, requesting payment within five days. Should the unit owner again fail to pay, the matter is to be turned over to the association attorney for collection. Depending on what the collections policy provides, the attorney can either send an attorney demand letter (in compliance with the Fair Debt Collection Practices Act) or immediately initiate suit against the delinquent unit owner in order to collect the delinquent account.
Utilizing this type of collections policy thus allows the association to have a “two (or perhaps three) strikes and you’re out” approach when it comes to collections in an attempt to avoid litigation until it becomes absolutely necessary.
Transition and Declarant Issues
The majority of lawsuits filed by an association against a declarant are filed after many months, or even years, of communication and negotiation between the parties. However, the earlier the parties can begin to communicate and attempt to resolve the disputed issues, the better.
For instance, associations often wait until the formal transition process begins to bring up any outstanding issues related to the common elements. While the declarant certainly needs to address valid issues at transition, there is no reason why the association has to wait until the actual transition to request that the declarant correct a deficiency with the common elements. Rather, the association should open the line of communication early in the process to put the declarant on notice of the issue. Sometimes, if it is logistically/economically feasible, a declarant may handle the issues as they occur in order to keep the relationship between the parties “positive” and to avoid having to handle everything all at once at transition (however, depending on the particular declarant, this may not be possible).
Also, with respect to the formal transition, rather than digging in, puffing out their chests and litigating every issue, the parties are encouraged to respectively discuss and negotiate their positions and enter into a “Transition Settlement Agreement” in order to finalize the remaining issues and send each party on its way.
The moral of the story is that while litigation between an association and a declarant is sometimes unavoidable, if the parties effectively communicate early on in the process, agreements may be reached and litigation may actually be avoided.
Contract Disputes
In the association world, most contractual disputes involve a contractor/vendor that the association believes didn’t live up to its end of the bargain. While breach by the other party is sometimes inevitable despite the terms of the contract, an association can seek to avoid litigation if it can craft/revise/amend the contract in such a manner that fosters the ability of the association and the contractor/vendor to resolve the issue and/or terminate the contract with an agreed-upon recourse (i.e., liquidated damages).
It is recommended that the association have its professional property manager review and assist in negotiating contracts on behalf of the association. Managers generally have many years of experience under their belts when it comes to contracts, and they are a tremendous resource for associations.
When it comes to larger (as far as cost), and more technically complicated, contracts, it is advisable to have the association attorney review the contract to ensure that the association is best protected. Many times, onerous and one-sided (and sometimes unenforceable) clauses are present in the contract and these provisions should be removed from the outset. Other times, there are issues pertaining to breach, notice and damages that the attorney must strengthen and/or bolster for the benefit of the association.
At the end of the day, an association can best seek to avoid litigation by being proactively involved in the drafting process prior to execution of the contract. Otherwise, it might be “too late” and litigation may become the only option available to the association.
Enforcement (injunctive relief)
Similar to collections matters, sometimes avoiding litigation in an enforcement matter is not possible due to perpetually non-compliant unit owners and/or due to the nature of the violation at issue. However, litigation can be avoided if the association stays proactive in its efforts to enforce its covenants.
To start, associations should enact reasonable rules and regulations in compliance with their governing documents and enforce same equally and uniformly against all unit owners. Care should be taken to ensure that the proper notice, hearing and appeal requirements are incorporated into the rules and regulations. Doing so not only ensures compliance with the law (i.e., procedural due process), it also provides a mechanism for the association to try and work with the unit owner(s) to voluntarily remedy the violation prior to engaging in litigation in order to force unit owner compliance.
Finally, associations should make every effort to communicate with the non-compliant unit owner(s) throughout the process in an attempt to resolve the violation. Only after every reasonable opportunity has been exhausted, should an association engage in litigation to seek injunctive relief to cure the violation (the author notes that when the alleged violation involves actual or potential damage to property and/or results/may result in physical harm or bodily injury to a person, the association should expedite seeking a remedy and obtain emergency injunctive relief if required).
Association as a Defendant
Personal Injury – Premises Liability
Associations must manage risk appropriately in order to avoid litigation in premises liability matters. Proactive risk management measures include, but are not limited to:
Asking the association general liability insurer to perform a risk management assessment in order to provide recommendations to the association on suggested risk minimization techniques;
Ensuring that various contractors fulfill their duties in a manner that minimizes risk (i.e., snow plow contractors, security guards, lifeguards, landscapers).
Making sure that the association is properly maintaining common elements to eliminate common risks (i.e., broken/uneven sidewalks, potholes, trees and tree limbs);
Having the property manager perform routine inspections of the property;
Enforcing rules and regulations as required in order to avoid risk caused by unit owner violations.
By being proactive about risk minimization, associations will reduce the number of claims that are brought, and in turn, the likelihood of litigation.
Director and Officer (D&O) Liability Actions – Breach of Fiduciary Duty
Litigation brought by unit owners for an alleged breach of fiduciary duty by the association board of directors is a growing phenomenon. In order to avoid these claims, the board should act in good faith, treat all unit owners equally and perform its duties reasonably and with sound business judgment.
While such allegations will invariably be brought by at least one unit owner in every association, the more documentation an association has to substantiate its actions, the better suited it will be when a claim is made. Accordingly, it is imperative that the association keeps minutes of all board decisions, correspondence to/from unit owners, copies of all contracts and accounting statements and audits, among other things.
Finally, the author notes that associations should obtain adequate director and officer liability insurance coverage in order to best protect the board and the association.
Enforcement Issues
Unit owners frequently bring claims against the association for “selective” or “unequal” enforcement, meaning that the association board is allegedly picking and choosing how it wishes to pursue enforcement of the association covenants and/or is selectively deciding which unit owners they will seek to enforce the covenants against (in other words, the association is allegedly using its enumerated powers to “punish” some owners, and let others “slide”).
Associations can avoid litigation for selective enforcement by always acting: (1) in good faith; (2) reasonably; and (3) with sound business judgment. By following the enforcement procedures set forth in the governing documents (including proper notice, hearing and appeal requirements) and enforcing the covenants equally and uniformly against all unit owners, the risk of such claims is reduced.
Finally, it is noted that claims brought for selective enforcement often concurrently involve fiduciary duty claims (discussed above) and/or fair housing/discrimination claims (discussed below).
Defamation
A suit for defamation can arise in an association when a unit owner (or even a board member) alleges that the association defamed (whether through slander or libel, or both) the owner by communicating about the owner in a manner that has harmed the owner. In the author’s home state of Pennsylvania, and in many other states, when bringing an action for defamation, an owner must prove:
The defamatory character of the communication;
Its “publication” by the association;
Its application to the owner;
The understanding of the recipient of its defamatory meaning;
The understanding of the recipient of it as intended to be applied to the owner;
The special harm resulting to the owner from its publication; and
At times, that abuse of a conditionally privileged occasion had occurred.
While many suits for defamation brought by unit owners are baseless in the law, the association still must defend the suit, which is time-consuming and potentially expensive. Associations should therefore seek to act reasonably and avoid making potentially defamatory communications about the owner. Some frequent issues that have brought about defamation complaints are as follows:
Publishing the name of a unit owner whose account is in arrears to all owners either in a newsletter or by posting on a community bulletin board (whether electronic or physical);
Publishing the name of a unit owner whose account is in arrears on an association website, allowing the “world” to view it; and
Publicly discussing a unit owner’s alleged covenant violation at an open board meeting prior to issuing a final determination on the issue.
Finally, if the association has any doubts on how to handle an issue that may lead to a potential defamation claim, it is encouraged that the association contact its counsel for an opinion on the issue.
Contract Disputes
Contractors and vendors with whom an association contracts often bring claims against the association for breach of contract. More often than not, the association believes that the vendor or contractor has not “performed” pursuant to the contract terms (and/or has overcharged) and has therefore breached the contract. The association then withholds payment, which causes the vendor or contractor to sue the association for breach.
The key to avoiding these suits is for the association to act reasonably in how it approaches a contract dispute, including how it handles the above-referenced situation. Rather than simply withholding payment for an alleged breach by the vendor or contractor, which will likely cause the situation to escalate into litigation, the association should seek to communicate with the vendor or contractor in an effort to amicably resolve the dispute. Frequently, these disputes can be negotiated and resolved in a manner that’s beneficial to both parties when compared with the cost, energy and time involved to litigate a breach of contract dispute.
Fair Housing Claims
Title VIII of the Civil Rights Act of 1968 (“Fair Housing Act” or “FHA”), 42 U.S.C. §§3601 – 3631, and its 1974 amendment, made it illegal to threaten, coerce, intimidate or interfere with anyone exercising a fair housing right or assisting others who exercise that right, or to advertise or make any statement that indicates a limitation or preference based on a protected class, which includes race, color, national origin, religion or sex (gender).The Fair Housing Amendments Act of 1988 (FHAA) added two more protected classes to the FHA: (1) familial status; and (2) individuals with disabilities. The FHA applies to community associations because the FHA prohibits discrimination, by the association, related to any services and/or facilities the association provides related to the residential housing in the association. 42 U.S.C. §3604(b).
The US Department of Housing and Urban Development (“HUD”) has interpreted the FHA to include two types of discrimination: Disparate Treatment and Disparate Impact (also known as “Discriminatory Effect”). Disparate Treatment involves discrimination due to different treatment, i.e., treating someone differently because of race, color, sex, religion, national origin, familial status or disability. Disparate Impact involves discrimination by different impact, i.e., when a neutral policy or procedure has a disproportionately negative impact on a protected class.
Fair housing claims have been increasing steadily against community associations across the country. The most common fair housing complaints in associations are as follows:
Failure to provide a “reasonable accommodation” for a disability – examples include requests for animals (service and emotional support/companion animals) and parking issues;
Failure to provide a “reasonable modification” for a disability;
Familial status violations.
In order to avoid fair housing claims and litigation, associations should be educated on the law, act reasonably when making determinations and, when handling an accommodation/modification request, review same and issue a fair and reasonable determination in a timely manner.
Finally, the author notes that fair housing issues are discussed in greater detail in the author’s Common Ground magazine article entitled “All’s Fair”, in the July/August 2014 issue.
Alternatives to Litigation (ADR)
Finally, sometimes the only way an association can actually avoid litigation is to agree to submit the dispute to alternative dispute resolution (ADR). This can be binding or non-binding in nature, based on the agreement of the parties. Popular forms of ADR include Mediation (generally heard by a sole Mediator and is more of a “summary” proceeding where the parties and the attorneys submit information to the Mediator (ahead of time and/or at the Mediation) without the need for evidence/actual testimony to be introduced/taken at the Mediation) or Arbitration (frequently heard by a panel of Arbitrators and can include testimony and evidence at the proceeding).
By Edward Hoffman, Jr., Esq., CCAL
An abbreviated version of this Blog post was published in Ed Hoffman’s article in the July/August 2015 issue of Common Ground magazine.
I can’t recall exactly how many times I’ve received a call or an email from a Board Member or Community Manager and the question being posed from the other end of the phone related to flags in some manner. As it relates to the American flag, it must have come up dozens, if not a hundred times, and usually as follows:
Q: Must the association allow an owner/member/resident to fly an American flag?
A: Yes, the association generally must (or at least should, what’s the real problem here?), but federal law (the Freedom to Display the American Flag Act of 2005) allows the association to place reasonable restrictions pertaining to the time, place, or manner of displaying the American flag necessary to protect a substantial interest of the association. (It is noted that many states also have enacted their own statutes that deal with the issue as well).
It’s hard to fathom how much litigation has actually ensued over this seemingly simple issue, but generally it’s all due to some type of overreach – either by the owner/member/resident or by the association, and sometimes by both. In my personal experience, I have dealt with issues involving the size of the flag, the size of the pole, the location of the flag, the location of the pole, a flag being flown with no pole, multiple flags being flown instead of one, and innumerable other issues. Usually, after some back and forth, the association and the owner/member/resident find an acceptable middle ground, an American flag stays up, and everyone goes their separate ways.
But sometimes it’s not that easy. In October of 2019, after a rejection by the association and many months of legal wrangling, a Vietnam veteran resident of the Equestra at Colts Neck Crossing active adult community in Howell, New Jersey was finally granted permission to install a non-permanent, staked flagpole to keep his flag hanging in his garden bed. Though the association only allowed flags attached to the home, in support of his request for an upright flag on a pole, the resident contended that it was difficult for him to climb ladders to reach the flags that attach to the siding on the home and that the brackets frequently break, and also that as a veteran he wished to fly the flag at half staff/mast at times. While an amicable resolution was eventually achieved, it came at the expense of time, money and energy of both parties, and it also resulted in local news media covering a dispute between a Vietnam veteran and an association about an American flag.
As recently as January of 2020, some military veteran residents in the Craft Farms North HOA in Gulf Shores, Alabama erected flag poles in their front yards, which the HOA believed was prohibited as the covenants provide that the flag must be attached to the home. So why is an association fighting with veterans out of all people? Because it’s a balancing test: while the veterans clearly are legally permitted to fly the American flag, the private covenants restricted the physical location to being attached to the home, which is also permitted by federal law.
Another fairly well-known legal battle that garnered national attention involves Air Force veteran Larry Murphree and the Tides Condominium at Sweetwater by Del Webb Master Homeowners’ Association in Jacksonville, Florida. The battle over flying the flag started in 2011, when Mr. Murphree put a small flag in a flower pot by his front door. The association asked him to remove the flag, so Mr. Murphree sued. The association eventually settled allowing him to keep the flag so long as it was in compliance with association rules and the law. However, by 2013 the association revised its rules to prohibit anything but the actual plant from being allowed inside a flower pot. The association subsequently began fining Mr. Murphree for the violation, so Murphree sued once again. The case ultimately ended up in state court with each side making claims against the other, and the matter went to trial the last week of February of 2020. The two sides were given another month to present their final arguments in writing. As of the writing of this article, to the author’s knowledge, no verdict has been handed down, likely due to the outbreak of COVID-19 delaying the judicial system on a national basis.
These examples raise the following questions: what is reasonable, what battles should actually be fought, and why are people even fighting over these issues to begin with? From what I have concluded the American flag means a lot of things to a lot of Americans, and it is not just an issue of American pride or some sort or patriotism, but it is also an emotional issue that simply cannot be explained. People are therefore willing to dig in their heels to prove their point as to flying the flag and associations will similarly do so in order to enforce their covenants. The end result is that these disputes will never go away in associations. Perhaps the lesson to be learned is that sometimes seeking an early resolution by way of alternative dispute resolution (ADR), such as through non-binding mediation, may allow for a reasonable discussion to occur and for a third party with “no skin in the game” to make reasonable recommendations for each party to consider. And lest we forget, that foreign to some concept called “common sense” can, and should, be used when issues like these come up in associations.
Old Glory – But Modified
I have also received questions about American flags with other “embellishments” added to the flag (i.e., USMC Semper Fi logo, Army star, a “thin blue line” to support law enforcement, firefighter axes, etc.) and owners/members/residents have argued that these flags are still American flags that the Association can not completely prohibit. However, modified American flags do not qualify as American flags under federal law. To wit, 4 U.S. Code, Chapter 1- The Flag – at Section 1, “Flag; stripes and stars on”, succinctly and unambiguously provides that “[t]he flag of the United States shall be thirteen horizontal stripes, alternate red and white; and the union of the flag shall be forty-eight stars, white in a blue field.” 4 U.S. Code, Chapter 1- The Flag – at Section 2 further provides that “[o]n the admission of a new State into the Union one star shall be added to the union of the flag; and such addition shall take effect on the fourth day of July then next succeeding such admission.” (In 1959, Alaska and Hawaii were the last two States admitted into the Union and represent the 49th and 50th stars added to the flag). Accordingly, any modified version of the American flag is not really the American flag, and as a result the Freedom to Display the American Flag Act of 2005 does not apply. Period.
State Flags
Many states have also passed their own statutes that prohibit associations from completely prohibiting the display of the American flag as well as state flags. This being said, I can honestly say that in all of my years of law practice and in my many years of representing associations, I have never received a question about someone being allowed to fly a state flag. In fact, I can’t recall if I have ever actually seen the flag of the Commonwealth of Pennsylvania or the State of New Jersey (the two states where I am licensed to practice law) being flown in front of a private residence or anywhere other than in front of a courthouse or a state office building of some sort. I will let you all know if this ever changes, but I wouldn’t hold my breath if I were you. (However, my guess is that in Texas the lone star state flag means much more to Texas residents than the Pennsylvania flag does to Pennsylvania residents, so this has probably been an issue in Texas).
“Other” Flags
While I have never encountered a question about flying a state flag, there have been plenty of inquiries relating to owners/members/residents flying or displaying “other” flags in the community, including but not limited to college/alumni flags, professional sports team flags (around these here parts, it’s Flyers, Sixers, Eagles and Phillies flags), decorative/seasonal/holiday flags, Bible verse flags and charitable foundation/issue flags. I am not aware of any federal, state or local laws that would prohibit an association from prohibiting or restricting association owners/members/residents from flying or displaying these types of flags so long as the recorded, private covenants that run with the land specifically allow for such a prohibition or restriction.
Where there is no specific language in a covenants relating to flags, the association must ensure that some other language exists which would support a prohibition or restriction on flying or displaying “other” flags – this is typically in the form of an outright ban on displays or decorative items being placed outside the unit or in some other form of restriction (such as size and location) which would encompass and include “other” flags by its nature. If no language is present in the covenants and the association decides to handle the issue through rulemaking process rather than seeking a covenant amendment, there is risk that such a rule may be deemed to be unenforceable if challenged. Finally, if there is no prohibition or restriction present, and residents are happily flying or displaying “other” flags in the community, an amendment project to prohibit or restrict these flags would likely fail before it even started.
Military Branch and/or POW/MIA Flags
Another recurrent flag issue involves flying military branch (i.e., Army, Navy, Air Force, USMC, Coast Guard (and soon to be Space Force!)) and/or POW/MIA flags. There appears to be no federal protection (though these flags may be flown at federal sites and facilities), but various states including Pennsylvania, Illinois, Texas and Florida have included military branch and/or POW/MIA flags in their state statutes. The advice here is therefore: check with association counsel before making any decision(s) on these flags as your state may actually have a law in place which deals with them.
Flags that People Believe Implicate “Freedom of Speech”
What about those “Hate Has No Home Here” flags? During the 2016 election season, these flags popped up with increasing frequency between owners/members/residents in associations who attempted to assert their “First Amendment freedom of speech rights” in support of the notion that they could fly or display the Hate Has No Home Here flag based upon their “First Amendment constitutional right to freedom of speech” (a battle over this issue actually ensued local to the author in a Philadelphia suburb between an owner and an association, but it appears to have resolved prior to litigation). Are the owners/members/residents correct? To give a definitive legal opinion: probably not.
In very general terms, and as related solely to the discussion of the issues in this article, the First Amendment to the United States Constitution provides that the government (which now includes local and state governments) cannot make laws that abridge freedom of speech:
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
The emphasis on the government in the First Amendment is an important one – there must be “state action” by a “state actor” in order to trigger application of First Amendment rights; in other words, the government must be seeking to curtail or otherwise limit someone’s First Amendment rights in order for the First Amendment protections to apply.
Since a community association is private, and is not an official form of “government”, federal First Amendment freedom of speech protections would not apply to private association restrictions or covenants that may limit such rights. But what about the individual states – how do they apply freedom of speech protections to community associations? While most states do not consider a community association a “state actor” and will therefore not interfere or overturn private association restrictions or covenants that may limit speech, there are states that have actually found in favor of homeowners in matters concerning freedom of speech in a community association. However, Pennsylvania does not appear to be one of these states, at least as it relates to owners/members/residents that have argued that “for sale” signs must be allowed because it is a “freedom of speech” issue.
In Midlake on Big Boulder Lake Condominium Association v. Cappuccio, 673 A.2d 340 (Pa. Superior 1996),the Pennsylvania Superior Court upheld an association restriction which prohibited owners from posting any type of sign on or in a unit or a common element which would be visible from the outdoors. The court held that the association was a private, not governmental, organization and as a result the association was entitled to enforce its restrictions without violating the First Amendment of the United States Constitution. In reaching its decision, the court also found that the owners contractually agreed to abide by the restrictions in the covenants at the time they purchased the home, thereby relinquishing their freedom of speech concerns.
In Anelli v. Arrowhead Lakes Community Association, Inc. (Pa. Cmwlth. 1997), a restriction on “For Sale” signs was contained in the association covenants and homeowners that could not sell their home posted a “For Sale” sign in front of their home. The Pennsylvania Commonwealth Court held the association restriction on “For Sale” signs to be enforceable as the Association is not a governmental entity and was therefore permitted to restrict “free speech” in the nature of posting “For Sale” signs.
Thus, at least in Pennsylvania, it appears that the current trend is that Hate Has No Home Here and similar “flags” would not be afforded protection under First Amendment to the United States Constitution as Associations are not state actors, and the private covenants, if applicable and restrictive, would be determinative. The lesson to be learned here is, contact association counsel if this issue manifests before acting in any manner as your state may have differing state protections that would alter the outcome.
Political Candidate “Flags”
Community association residents have divergent political leanings and opinions on various issues. They are politically active outside of their association. They vote. They want to support their preferred political party and/or its candidates. One way to do so is to support their candidate by putting a sign in the lawn or window of their unit. But since they live in a community association, can they display these political signs if the association’s covenants and restrictions say they can’t, or limit where the signs can be placed? In the state of New Jersey, the answer appears to be “it depends”.
In Committee for a Better Twin Rivers v. Twin Rivers Homeowners’ Ass’n, 192 N.J. 344 (2007), the New Jersey Supreme Court upheld an association’s ability to enforce sign restrictions, including “political” signs, as the contractual (association) restrictions still reasonably allowed for the placement of such signs in a window and in an identified area of the lawn.
Five years later, the New Jersey Supreme Court issued another opinion in Mazdabrook Commons Homeowners’ Ass’n v Khan, 210 N.J. 482 (2012), again on a political sign issue, but in favor of the homeowner this time. In Mazdabrook, a homeowner was running for local political office and posted two of his campaign signs inside of a window and inside of a [glass] door of his home. The distinction between this case and Twin Rivers was that the association’s restrictions in Mazdabrook essentially banned almost all types of signs, except for one “For Sale” sign. The Court held that the association sign restriction violated Article I, Section 6 of the New Jersey Constitution, which provides that “…[e]very person may freely speak, right and publish his sentiments on all subjects, being responsible for the abuse of that right.” In coming to its decision, the Mazdabrook Court compared Twin Rivers and concluded that an owner’s right to post a political sign outweighed the impact on the association’s private property interests.
It appears that the distinction between the Twin Rivers and Mazdabrook cases was that the Twin Rivers restrictions permitted political signs but restricted their location, while the Mazdabrook restrictions did not permit political signs in any manner whatsoever, stifling the homeowner’s right to assert political speech in accord with the New Jersey Constitution.
I would envision that the same analysis would occur if instead of a lawn or window sign, owners/members/residents flew or displayed a “flag” with their preferred candidate’s name emblazoned across the flag – and the following question begs to be asked: is this even really a “flag” or is it merely a political campaign sign or endorsement? In my eyes, it is the latter. I foresee a situation in the not so distant future where owners/members/residents will fly or display a candidate’s political campaign “flag” as “flags” may be permitted by vague covenants when other types of exterior signs or displays may otherwise be prohibited in the community. In Pennsylvania, based upon current precedential appellate case law, such a flag would not be protected, but in New Jersey, it *may* be protected based upon how restrictive the covenants in a community may be as it relates to protections afforded by the New Jersey constitution.
Your state might be different, so please seek the cogent advice of association counsel BEFORE making any decisions that might be contrary to state law and/or your state constitution.
In Closing
Flag issues will always be present in community associations, so Association Boards and community managers must be educated on flag issues and handle them correctly before they go the wrong way. Remember, a little common sense goes a long way – often times, flag issues should, and can, be resolved instead of ending up in court and/or being plastered across social media and cable news networks.
– Edward Hoffman, Jr., Esq., CCAL
A condensed version of the content in this Blog Post was originally published in the September/October 2020 issue of Common Ground magazine in an article entitled “Stars and Stripes and Sleepless Nights”.
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
Over the last month or so, with COVID vaccinations becoming more commonplace and governmental restrictions easing to some extent, Hoffman Law LLC clients have been inquiring about reopening pools, clubhouses and other amenities. Below is a concise (though not exhaustive) summary of where we appear to be at this stage:
Follow current CDC and PA Department of Health restrictions, recommendations and guidelines as it relates to [still] dealing with COVID – masks, social distancing, number of people, outdoor vs. indoor issues, cleaning, sanitizing, disinfecting, etc., and stay informed of potential changes.
The Board must use due diligence, act reasonably and use proper business judgment in making decisions on reopening.
There still appears to be no insurance coverage to Associations available for COVID-related claims.
Legislative immunity for COVID-related claims (for Associations or otherwise) is not yet available in Pennsylvania.
If it is determined that the risk outweighs the potential benefit and/or that the Association cannot adequately and safely handle the opening of pools, clubhouses and other amenities due to budgetary, staffing, logistical or other concerns, the Association should not open them.
If the Association determines that pools, clubhouses and other amenities can be adequately and safely opened given the current state of restrictions, recommendations and guidelines:
At this stage, the Association cannot make vaccinations mandatory for the use of pools, clubhouses and other amenities, nor can the Association ask people if they have (or have not) been vaccinated due to privacy concerns. Similarly, the Association should not “recommend” that people get vaccinated.
Purchase and install “easel” or other appropriate signage for both indoor and outdoor use for the posting of specific instruction(s) related to safety, use and restrictions.
Only Unit Owners and residents/tenants should be permitted to access – no outside guests at this stage.
Advise Unit Owners and residents/tenants that if they feel sick, have a fever, or have other symptoms they should not utilize the facilities.
Utilize a Google Calendar or other virtual tool for “signups” to limit maximum use per hour.
If necessary, move/relocate/remove furniture to ensure proper distancing is occurring.
Limit the number of users for facilities as required (i.e., one person at a time in the fitness room, etc.).
Limit the hours of operation to ensure that proper and timely cleaning, sanitizing and disinfecting of pools, clubhouses and other amenities (including restrooms) can occur in accord with applicable restrictions, recommendations and guidelines.
Ensure that hand sanitizer stations, wipes, sinks, soap dispensers, paper towels and other items are made readily available for people to utilize, as applicable.
Manage expectations of the community as it relates to potentially opening some amenities while keeping others closed.
Communicate with the community before opening and continue to do so following opening to ensure the community is well-apprised of issues, concerns, restrictions and other issues.
Have Unit Owners and residents/tenants execute an assumption of risk/release document prior to allowing use of any facility.
If applicable restrictions, recommendations and guidelines change, and closing pools, clubhouses and other amenities that have already opened is required, facilitate the closure(s) quickly and properly and communicate to Unit Owners and residents/tenants.
Finally, remember that we are all still in this, and are in it together. Feel free to contact Hoffman Law LLC as it relates to reopening or other issues your Association may be facing.
Based upon many years of serving as counsel for and defending associations in all types of litigation, my answer to the above question is yes. However, exactly what is Director & Officer (D&O) Liability Insurance, and what does it cover?
In short, D&O provides protection against claims alleging loss arising from mismanagement or wrongful acts. This may include a breach of duty (fiduciary or other), neglect, error, misstatement, misleading statement, omission or other act done or wrongfully attempted by the directors and officers. Claims may be brought for money damages and/or other types of relief (i.e., injunctive relief to challenge or prevent a board decision or action).
But wait… doesn’t the association’s General Liability policy of insurance cover these types of claims anyway? In short, the simple answer is: probably not. Although the term “general liability” in and of itself leads many people to believe that this type of insurance will cover almost every type of claim imaginable, in reality, General
Liability insurance will not protect directors and officers in the same way as D&O because General Liability insurance usually covers third-party bodily injury and/or property damage claims, not claims for mismanagement or wrongful acts by board members, directors, officers or managers.
Claims which could trigger D&O coverage and are likely not covered by General Liability policies of insurance include:
Defamation;
Disputes over architectural issues and control;
Discrimination claims (i.e., ADA and Fair Housing Act) [note: these types of claims are likely not “covered” by a D&O policy because they are illegal and/or are against public policy, but defense costs might be paid];
Self-dealing;
Willful acts and wrongdoing;
Breach of fiduciary duty;
Failure to properly pay association debts;
Claims of improper personal gain(s) made against directors and officers;
Failure to disclose information which results in harm/damage(s) to the association and/or its members.
Based upon my experience in defending associations against these types of claims, some things to consider when choosing a D&O policy include:
Does the policy cover the association, directors and officers (current andpast), committee members and other volunteers (this is often overlooked), employees and other members of the association acting under the direction of the Board of Directors?
Does the policy also cover the estates, heirs, legal representatives or assigns of board members, directors and officers, committee members and other volunteers?
Does the policy afford coverage for the community association’s manager who is not an “employee” of the association, but rather, is contracted?
Does the policy cover wrongful-employment related claims?
Does the policy cover board members that were developer appointed?
Does the policy cover defense costs for claims of intentional/wrongful conduct?
Does the policy cover defense costs for claims that are contrary to public policy, such as discrimination?
Does the policy cover punitive damages claims?
Does the policy cover claims for non-monetary claims (i.e., injunctive relief sought by an aggrieved unit owner)?
Does the policy provide for defense cost payments to be made directly by the insurer or must the association first pay legal costs and wait for reimbursement by the insurer?
Does the policy include coverage for claims that occurred years ago but are now presented to the insurer (i.e., retroactive date/full prior acts)?
Does the policy provide for coverage of “non-owners” that sit on the Board of Directors?
Finally, the association’s Board of Directors must realize and understand that if there is no D&O coverage present for the association, its directors and officers, committee members, employees, manager and/or other members of the association acting under the direction of the Board of Directors, these people, who are often serving in a voluntary capacity for the benefit of the community as a whole, can potentially become exposed to personal liability for claims that are brought against them and are not covered by the association’s General Liability policy of insurance. Accordingly, obtaining a comprehensive D&O Liability Insurance policy is a must for every association in today’s day and age. Your association really needs it!
– Edward Hoffman, Jr., Esq.
Originally published in the March/April 2020 and January/February 2011 issues of Community Assets magazine.
I am not going to beat around the bush here: it is generally a horrible idea to “publish” a list of delinquent owners for others to see, even if the [usually decades old] governing documents in the community provide that it is permissible. This is even true if a delinquency list is not posted electronically but is still published in paper form and posted on the clubhouse bulletin board to “shame” the delinquent owner (which was the original intent of provisions in governing documents which allowed for such actions) – because all it takes is for someone to take a photograph of the delinquency list on their smartphone and post it on social media – then it is literally disseminated for the entire world to see! Also, for example, what if the delinquency information was viewed and utilized by a potential employer to deny a position to a “deadbeat” applicant, and, what if the delinquency information being relied upon was incorrect? It’s like a snowball that rolls down a mountain and becomes an avalanche.
Moreover, if the Association (or management company) is found by a court to be a “debt collector” under the Fair Debt Collection Practices Act (FDCPA) (which can differ by federal circuit and would, to some degree, be fact specific for each suit or claim), posting a delinquency list could be viewed as “blacklisting” owners and could therefore be found to be discriminatory conduct. The legal repercussions could be severe (i.e., expensive) if a violation of the FDCPA were to be found. See15 U.S.C. §§ 1692-1692p. Section 805 of the FDCPA, “Communication in connection with debt collection”, provides as follows in Section (b), “Communication with third parties”:
Except as provided in section 804, without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a post-judgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.
All of this is becomes especially true if the wrong information is published and disseminated and that information is used to the detriment of the unit owner. This opens a whole new can of worms for liability for the Association (and potentially the management company).
Finally, even if an Association may not currently be considered a debt collector under the FDCPA in many jurisdictions, this should not be the deciding factor on this type of issue. Rather, the Association should examine the entirety of the issue and the risk associated with sharing a delinquent unit owner’s private account information with other unit owners before making a decision that will likely end up costing the Association more (in many ways, not just financially) than it would benefit the Association. The correct analysis is therefore: “we might be permitted to do this, but is it in the best interest of the Association?”. The answer is likely no.
My advice: do not “publish” a list of delinquent owners!
Edward Hoffman, Jr., Esq., CCAL
* The content for this Blog post is based upon the [abbreviated] prior written work of the author as originally published in the March/April 2020 issue of CAI’s Common Ground magazine and in CAI’s HOA Resources Blog.
