Rolf Berger, 1951-2009

The Utah legal community, and particularly the Utah community association law community, lost a very good friend and colleague, Rolf Berger, earlier this week.

Here's Rolf's obituary, from the Salt Lake Tribune and Deseret News:

Rolf Helmut Berger 1951 ~ 2009 Rolf Helmut Berger, 58, passed away at his home on December 28, 2009 surrounded by his family after a bout with cancer.Rolf is survived by his beloved wife, Carla McBride Berger, children David Rolf Berger, Nicholas James Berger (Jessica), Joseph Helmut Berger (Amanda), and Alisa Jane Saba (Bryan). His grandchildren, Alexis, Andrew, Madeline, Avery, and Lily adored their grandfather and were the delight of his life. He is preceded in death by daughter Katherine Johanna and his parents Helmut and Gerda Berger. Rolf was an active member of The Church of Jesus Christ of Latter-day Saints and worked as an attorney for the law firm of Kirton & McConkie. Rolf served many selflessly, and will be greatly missed. A viewing will be held at Larkin Sunset Gardens at 1950 East and 10600 South on Wed., December 30 from 6-8 p.m. Services will be held at the LDS Chapel at 9855 S. 2300 E. on Thurs., Dec. 31 at 12:00 noon, with a viewing one hour prior. In lieu of flowers donations may be made to the LDS Church's Perpetual Education Fund. 

Rolf was a great contributor and regular participant in the Utah Chapter of the Community Associations Institute, and contributed significant time and effort to the practice of community association law in Utah.    

Rolf will be greatly missed.

Rest in Peace, Rolf.

Check this Out -- GoogleLaw

Google, in its continuing quest to take over the World, is entering the field of legal research. At a subpage of Google scholar, you can research cases by name or by citation.

A search for Hermansen v. Tasulis pulled up 39 hits in .05 seconds; unbelievably faster than the alternatives, and presumably more thorough.  The hits include the opinion itself; cases following the opinion and articles and briefs related to the opinion.  A search for "Lincoln W. Hobbs" pulled up 16 reported opinions in which I've been involved, several of which I had forgotten.  A rather handy research option for clients and counsel.

The jury's still out (sorry) on how valuable this will be, but I'll be looking into it over the next while.

To use the new resource, go to www.scholar.google.com, click on the legal opinions and journal option and type your query.

Now Available on Facebook

For those of you who are a bit frustrated with following and trying to post comments through Blogger, I'm pleased to announce that I'm now on Facebook at the Utahcondolaw page. It appears it will be easier to post there.

And for my Facebook friends who don't care about community association law, I will soon be pulling my Utahcondolaw feed from my personal page. (As soon as I figure out how it is feeding.)

So, condo and other community association friends, if you want to follow this blog on Facebook, be sure to become a fan of the Uthacondolaw page. Other Facebook friends, please accept my apology for this and past boring posts on community association law. You can continue to look forward to my witty[?], inspiring[?], thoughful and always humble posts on Facebook.

Posting Comments...

I've received a few emails, from a few of you, expressing your frustration and confusion in connection with attempts to comment. The publisher of another blog that I follow set forth the following instructions, which I think will help. (Note: you will need a Google account.

Step 1: Open blog, read post and find a small underlined link directly under the post on the right side. It will say '0 comments' or '12 comments' or however many comments there are.
Step 2: Click on that link and it will bring you to the comments page.
Step 3: Write your comment in the box on the right (anyone who has access to the blog will be able to see your comment, so keep that in mind)

(From here, follow whichever step 4 relates to you...)
Step 4a: If you are already 'logged in' to your google account, you will be able to publish your comment immediately by clicking on the button that says Publish.
Step 4b: If you are not already logged in, you will need to do that (sign in boxes will be below the comment box) and then you can publish the comment.
Step 4c: If you don't have an account, you will need to create one before you can publish. Once you log in, follow steps above.

I'm guessing most people hit a snag if they don't have a google/blogger account so watch for that step.

Thanks to Sara Pearson, for the instructions.

Directors and Officers Coverage is Not the Same as Fidelity Coverage

I was in court today, involved in a dispute about (among other things) inadequate unit owner access to association records and inadequate insurance. In response to my claim that the Association had no fidelity bond (as the Declaration required), the opposing counsel waived the Association's Directors and Officers policy, arguing that its coverage was "the same" as that provided by a fidelity bond.

He's wrong. I may need to hire an expert to testify to that, but you don't need to. Ask your Association's competent community association insurance agent, and they'll tell you that the two policies are entirely different, and that your Association needs both.

A fidelity bond (sometimes called fidelity insurance, but often referred to in governing documents as a bond) provides coverage for "loss of money, securities, or any other property due to acts of dishonesty committed by an employee acting alone or in collusion with other persons..." Directors and Officers coverage, on the other hand, provides coverage for "mismanagement or [intentionally] wrongful acts." The covered wrongful acts may have been intended, but if the intent was to steal from the Association, the Directors and Officers will not be there to help.

Lesson for today: Your Association should have Directors and Officers and fidelity coverage. If your insurance agent tells you otherwise, it's time to find a new insurance agent. Look at the resource directory at the UCCAI web page for a list of agents specializing in community association insurance.

And if your attorney tells you otherwise, you know where to find a new attorney. ;)

Golf Photos are Posted, at Last

All of those who attended the UCCAI Golf Tournament had a great time; I shot photos for several hours on the fourteenth hole; after taking a short trip out of town for a deposition, and a few days catching up, the photos are finally posted.

There are a couple of options to track them down; here's the link to the Utahcondolaw Facebook page, where you can tag yourself and others; for those of you who refuse facebook, here's a link to my Picassa page.

Justice Department Files Lawsuit Alleging Disability-Based Housing Discrimination Against Idaho Condominium Developer

Justice Department Files Lawsuit Alleging Disability-Based Housing Discrimination Against Idaho Condominium Developer

This post was actually intended for the sister site, Idahocondolaw but since it's here, and may be of interest to some of my readers, I'll leave it...

Davencourt -- The Economic Loss Portion

Section 1: The Economic Loss Rule

The Davencourt opinion begins with the analysis of the most eagerly anticipated portion of the opinion; how the Court would deal with the economic loss rule.

Background on the Economic Loss Rule

The economic loss rule, as it applies to construction disputes in Utah and more particularly with community associations, began with the 1996 ruling in the case of American Towers Owners Ass’n v. CCI Mechanical. In that case, the Court held that in the absence of physical property damage to “other property,” or personal injury, economic losses could not be recovered through a negligence claim. (Simply stated, a negligence claim involves an assertion that one party failed to comply with duties involved to another – in building, for example, to meet the “standard of care” expected of a contractor.) Because of the American Towers ruling, it has been difficult for community associations to pursue claims against developers.

In 2002, the Court limited the Economic Loss Doctrine somewhat in the case of Hermansen v. Tasulis; in that case, the court held that the doctrine did not bar claims where one party owed an “independent duty” to the other party. The Hermansen case, which we filed and argued, involved claims against real estate agents.

Davencourt’s Holdings Respecting the Economic Loss Rule

The plaintiff homeowners association, and I acting as amicus counsel for the Community Associations Institute, had hoped that the Court would further limit, or even overrule the American Towers case, because of its adverse consequences to community associations. The ultimate goal would have been the elimination of the doctrine, at least as it related to construction defect claims asserted by community associations which, by their nature, do not have contractual relations with the builders. A lesser, but still desirable result, would have been the establishment of an independent duty to be owed from builders to the purchasers in community associations.

In Section I.A. of the opinion, the Court rejected an outright reversal of American Towers, stating that the doctrine was “particularly applicable to claims of negligent construction.” Furthermore, the opinion expressed an inability to overrule the doctrine based upon the “codification” of the doctrine in Utah Code Ann. 78B-4-513. (That section of the code arose from the Legislature's passage of Senate Bill 220, in 2008.

In Section I.B., the Court next refused the Association’s request that the Court recognized that the unique status of community associations warranted that the doctrine not be applicable to associations. The Court declined, asserting that contractual expectations created in the contracts among the Unit Owners, the Developer and the Builder” could not be ignored. Under the ruling, then, neither an individual owner nor an association can pursue a claim, in negligence, against the Builder.

The third argument rejected by the Court was a contention that various components of the structures had been damaged by defects in other components, triggering the “other physical damage” exception to the doctrine. Again, the Court rejected this argument, finding that Unit Owners had not bargained for individual components, but rather for “a finished product, which included the integral components of the roof, the foundation and the siding.”

Turning to the review of “independent duties,” the Court rejected a request to extend the independent duty between a contractor-seller and a home purchaser to a similar duty between a contractor-seller and the Association. Interestingly, however, the Court appears to have clearly established that a contractor-seller’s duty “to disclose known material information” to a buyer. If the Developer of a condominium project was also the contractor-seller, that developer/contractor-seller would owe each unit owner a duty to disclose known defects in the units and the common areas, an interest in which was also being sold.

Next, the Court held, to a limited degree, that the developer’s limited fiduciary duty to the Association does fall outside of the doctrine. The Court expressly recognized and acknowledged “the inherent conflict that a developer faces in promoting and marketing property for a profit, while simultaneously ensuring the interests of a homeowners association and its members…” In light of the conflict, the Court expressly adopted Section 6.20 of the Restatement (Third) of Property, which establishes several clear and important duties owed by a developer to an association. These duties, set out in full here, include 1) “reasonable care and prudence in managing and maintaining the common property;” 2) establishment of a sound fiscal basis for the association; 3) disclosure of developer subsidies, if any; 4) records and an accounting; 5) compliance with governing documents; 6) disclosure of “material facts and circumstances affecting the condition of the property that the association is responsible for maintaining; and 7) disclosure of “all material facts and circumstances affecting the financial condition of the association…”

The Court’s opinion stated: “In adopting this limited fiduciary duty, we recognize that it constitutes a newly-recognized independent duty of care in Utah.” These types of claims, the Court stated, “lie outside of the economic loss rule.” Recovery under this independent duty, however, is restricted to the common areas. The Court indicated that the association could “bring its claims for negligence and negligent misrepresentation against the [developer] insofar as the claims stem from the limited fiduciary duty owed.”

In the next successive sections of its opinion, the Court declined to find an independent duty to comply with the building code, and declined an independent duty to build without negligence in the construction of a home. The Court’s opinion seems to intentionally leave open the possibility, however , that the Court could find such a duty in a sale between a contractor/seller of a new home, and a buyer.

An Outline of the Davencourt Opinion

As promised, I'm trying to figure out, and to help others to figure out, what the new Davencourt v. Davencourt opionion means; I plan on spending a few hours reviewing the case while I'm on a plane tomorrow, continuing that quest. In anticipation of that, and to help make this more manageable, I've typed out the case outline, as set forth in the opinion. In the next several posts, I'll comment on each of these sections, and I'll update each of them with a link, when I do. Hopefully, that will be helpful.

The Davencourt Opinion -- An Outline

I. THE DISTRICT COURT ERRED, IN PART, IN APPLYING THE ECONOMIC LOSS RULE

A. The Economic Loss Rule Remains in Force

B. The Economic Loss Rule Applies Despite Whatever Unique Relationship Exists Among the Association, Developer, Builder and Unit Owners

C. Construction Components Integrated into a Finished Product Do Not Constitute “Other Property”

D. The Existence and Scope of Independent Duties

1. Neither the Builder, the Developer, Nor Woolstenhume, in Their Respective Expertise and Relationships, Owe the Nonpurchasing Association an Independent Duty

2. The Limited Fiduciary Duty Owed by a Developer in Control of a Homeowner’s Association Falls Outside the Scope of the Economic Loss Rule

3. Utah Does Not Recognize an Independent Duty to Conform to the Building Code

4. Utah Does Not Recognize an Independent Duty to Act Without Negligence in the Construction of a Home

II. UTAH RECOGNIZES A CAUSE OF ACTION FOR BREACH OF THE IMPLIED WARRANTY OF WORKMANLIKE MANNER AND HABITABILITY

III. THE DISTRICT COURT MISAPPLIED THE COLLATERAL RIGHTS EXCEPTION OF THE MERGER DOCTRINE TO DISMISS THE CONTRACT AND EXPRESS WARRANTY CLAIMS

A. Contract and Warranty Claims Regarding the Quality of Construction Are Collateral to the Conveyance of Title

B. The Absence of an Act After the Delivery of the Deed Is Not Conclusive Evidence of the Parties’ Intent

IV. THE DISTRICT COURT ABUSED ITS DISCRETION IN DENYING THE ASSOCIATION’S MOTION TO AMEND THE COMPLAINT AND REINSTATE DISMISSED CLAIMS

A Quick Read of the Davencourt Opinion...

and it looks like a mixed bag. The Court refused to overrule the American Towers case (I think a bad thing, but ameliorated by the rest of the opinion), expressly adopted Section 6.20 of the Restatement, Third of Property (I think a very good thing), and adopted an implied warranty of habitability on the sale of new property (also a very good thing).

They also made some really interesting rulings and made some interesting comments on the independent duties that will result in allowable negligence claims, even despite the economic loss doctrine. It will take some time, and probably more rulings, to clarify this area of the law.

I'll post some more details, which will presumably be more meaningful to non-followers of the law, in the next few days.

Davencourt, at last!

I'm wrapping up a jury trial (hence the hour of this post), but have been informed by a reliable source that the Utah Supreme Court's opinion in the Davencourt opinion (dealing with the "economic loss doctrine") will be issued to the public at 10 a.m. tomorrow.

That's all for now; check back tomorrow for updates. (It won't be at 10 a.m., that's the scheduled time for arguments to the jury.) I will, however, post an update and a link to the opinion at my earliest opportunity; that will be followed by a summary, sometime tomorrow or this weekend.

Golf Tournament

Utahcondolaw.com is proud to be a hole sponsor for the upcoming Utah Chapter of the Community Association Institute's Golf Tournament, to be held October 21, at the South Mountain Golf Club.

"There's Nothing Like a Dog to Raise the Spirits..."

Regular readers of this post know that I have opinions about what I consider to be legitimate and illegitmate requests for service dogs. United States Senator [delayed] Al Franken also appears to have some views on service dogs:
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Feeling confused? It's a tough issue. Legitimate service dogs and animals of all types should be liberally allowed. That having been said, I see a lot of what I think is abuse on the alleged need for service animals.

Is Your Association Distressed?

My colleague, Julie Ladle and I are preparing the materials for an upcoming NBI Seminar, Common Interest Community Issues in a Distressed Market, which will be held in Salt Lake City on December 9, 2009.

Since stories and facts are much more interesting and enlightening than case law discussions, we're seeking your help. How's the economy impacting your association? What are you doing to respond to the economic conditions.

Our specific agenda items include: Disclosure Requirements When Selling Condominiums, Development Agreement Defaults, and Successor Developers: The Legal Implications of Takeover. If you have any experience with any of these issues, give us a call or drop us an email. You'll find contact information for both of us at haolaw.com.

Climbing Out of the Basement?

New data from the National Association of Realtors shows a "leap" in the sale of existing homes during July, according to this article in today's New York Times. The NAR press release on the topic can be found here.

Meanwhile, Ben Bernanke thinks the U.S. Economy is ready to rebound, but this article, dealing with the "plight" of the very wealthy, suggests that the recovery may lead to less wealth inequity. Do the very wealthy even have basements?

Interesting morning of economic news, to say the least.

Live Blogging -- Conflict Resolution

I'm at the Utah Chapter of the Community Association Institute's monthly meeting, and John Richards is presenting on conflict resolution in communities.

The first question to ask, suggests John, is should the association be involved in the conflict? Good question; not surprisingly, there are differing opinions in the audience. Dale Gifford, PCAM, suggests that the association should, at a minimum, investigate and listen empathetically to the unit owner's concerns.

There's some discussion about whether owners' complaints should be directed initially to the association's board, rather than to the association's manager. John has seen at least one article that suggests that is a form of conflict avoidance by the board; that generated a lively discussion amongst the managers who are present.

I'd respectfully suggest that I don't know many board members who are interested in fielding such complaints; beyond that, I question whether many board members have the training and experience to appropriately respond to these complaints. I would hope that professionally trained managers would know better than the average board member as to how to deescalate a conflict.

WVC Architectural Committee?

In what appears to be an HOA dispute on steroids, the West Valley City leaders are backing down on a proposed effort to require paved surfaces, rather than gravel. This KSL story sounds an awful lot like a community association dispute.

Isn't it comforting to know that Utah's second largest city has similar problems to your (or your clients') associations?

Quality Building Award

After the posting on this blog several months ago about the builder who tried to sell a condominium unit without plumbing fixtures and appliances, and after this KSL story about Ivory Homes' installation of a fence around a yard without including a gate, I'm thinking I should start giving out "Quality Building Awards."

The first recipient is Ivory Homes, who responded to the woman's complaint by blaming her and her Realtor for the omission of a gate. According to their spokesperson Nate Parker:

"Paula had a Realtor acting as the buyer's agent for the transaction. The buyer's agent has the fiduciary responsibility to review paperwork to ensure that it represents the buyers' wishes."

I've reviewed Ivory Homes' standard paperwork and am quite certain that if anyone read it and understood it, they'd realize that it wouldn't represent any intelligent buyer's wishes. Of course that's only my opinion.

White is the New Green

I've seen many articles over the past several months, and several in the last couple of weeks, including this article in the New York Times, all of which discuss the energy advantages to a white, as opposed to the traditional black, roof.

If your association is facing a re-roofing project, you should look into the potential advantages of white roofing over black. There may even be tax advantages in choosing to go with white.

Similarly, if your architectural/design guidelines deal with roofing colors, you might want to add white as an option. (Along with getting rid of the clothesline, solar panel and awning prohibitions.)

Vote for Julie!

Members of the Utah Chapter of the Community Associations Institute should have recently received ballots for the upcoming Board election; those of you who know Julie Ladle probably ought to take note that she's a candidate. If you know her, you'll support her, and she'd appreciate your support.

It's not looking like it will be a tight election, but as Al Franken would tell you, you can't take anything for granted.

Local Home Sales are Also on the Rise

Yesterday's post reported a national increase in home sales; today's Salt Lake Tribune has some reporting on the local market. Bottom line: the same statistics are not kept on a local basis, but sales are up here based upon various sources of information.

KSL.com also has its own story, using different sources, here.

New Home Sales Increase

New home sales are up sharply, and well above what was expected, according to a Commerce Department report released today, and reported here, in the New York Times. Sales are still way down from last year, and some economists doubt the trend will continue, but we can hope...

Transfer Fees Exposed!

I'm out of the office this week, presenting to the Utah State Bar on "Utah Community Association Law: Past, Present and Future," and my attention was just drawn to an article on ksl.com, regarding transfer fees. The article correctly suggests that

If you plan on buying a home, insist that your title company provide you with a copy of all the Covenants, Conditions and Restrictions tied to the house. Comb through those documents. If you see a transfer fee on the home you want to buy, either negotiate to buy the house for less, demand that the transfer fee be removed or walk away.

My only dispute with this statement is that not all transfer fees are created equally. When you review the C,C & R's, look to where the fees go; if they go to the community association in which you live, for clearly designated purposes, they may be to your ultimate advantage. If they go to the developer's bank account, they are clearly not to your advantage and (IMHO) may, in fact, be illegal.

I hope to talk to the reporter on this story regarding the potential benefits of transfer fees and the possible illegality of the self-serving version of such fees; check this site for updates and links, if they are warranted.

Major [?] Water Conservation Efforts in St. George

ksl.com has an amusingly reported story on the "major effort" to save water in St. George. It's short, so I'll post the whole thing:

ST. GEORGE -- A major effort is underway to conserve water in St. George.

The city council passed a new plan that asks residents and businesses to voluntarily take steps to save water. Those steps can be as simple as washing only full loads of laundry, checking for leaks and repairing sprinkler heads.

The council also agreed to restrict watering during daytime hours.

WOW! I sure hope that the residents can handle these sacrifices!

New Utah Case Regarding Fiduciary Duties

At today's CAI trade show, I spoke about a case issued this morning by the Utah Court of Appeals, Stevensen 3rd East v. Watts. It's an interesting case dealing with fiduciary duties, if you're into that sort of thing; I'll blog about it in the next few days, but if you just can't wait, you know have a link to the 23 page opinion.

Happy reading!

Trade Show Tomorrow!

The Utah Chapter of CAI's Trade Show is tomorrow afternoon and evening; exhibitors and presenters (myself included) will be providing valuable knowledge and information to community association members, board members, managers and service providers.

The event will be at the South Town Expo Center in Sandy, Utah; more information on the show, and a link to register, can be found here for the dinner and show, or here, for just the show.

Best Practices -- Green Communities

I'm pleased to announce that the Best Practices Report on Green Communities, which was presented at the recent CAI National Conference in New Orleans, is now available for free download. And, the report can be reproduced and distributed:

Readers can download and reproduce this report for community association managers, board members, individual homeowners and community association-related industry professionals without permission of the Foundation for Community Association Research provided the following terms are met: the document,including the use permission statement, must be reproduced in its entirety and may not be added to, modified, amended, or otherwise altered from the original as presented here. Readers and users agree not to sell copies of this document or otherwise seek compensation for its distribution.

I'd like to thank all of the following, for their assistance in compiling and supporting the report:

Foundation Representatives
Ellen Hirsch de Haan, ESQ., Becker & Poliakoff, P.A.
Lincoln W. Hobbs, ESQ., Hobbs & Olson, L.C.
Sandra Matteson-Pierson, LSM, PCAM, Capital Consultants Management Corporation
Team Members
Amy Bray, Esq., Andersen, Tate & Carr, P.C.
Joe Bunting, CMCA, AMS, LSM, PCAM, Kiawah Island Community Association, Inc.
Leslie Fellows, CMCA, Today Management, Inc.
Marjorie J. Meyer, CMCA, PCAM, Associa, Inc.
Harry Richter, CMCA, Charter Management
Debra A. Warren, CMCA, PCAM
Foundation Staff
Sara Drake, Community Associations Institute
Jake Gold, CAE, Community Associations Institute
David Jennings, CAE, SPHR, Community Associations Institute
Editor
Terry White, T&S White Company
Special Thanks
A special thank you to the CAI Large-Scale Managers Committee for supporting the development and distribution of this Best Practices report.

City Creek in The New York Times

A recent New York Times article gives some great coverage to Salt Lake City and the City Creek Center project that is quickly changing downtown Salt Lake City's skyline.

Most of the information on the project has been covered before, but there are a couple of new and interesting details in the article. For one, the project will include "Fountains that include fire and bells — designed by the company responsible for water features at the Bellagio hotel in Las Vegas . . . " (Does that mean that what happens at the fountain will stay at the fountain?)

Another interesting fact is that one bedroom, Temple view condominiums are being sold for more than $900,000. The price isn't that surprising; the fact that they're building and selling one bedroom units with that view is. Then again, I suppose there aren't that many families who could afford a larger condo with the same view. (Interestingly, a New York Times article from about 18 months ago made me speculate, in an earlier post, just how much the view would be worth.)

They're Not Just in Your Brain, Anymore

This interesting tidbit about micro-chipped trees was in the Daybreak Community Update:

Understanding the importance and value of trees, the Daybreak community has made trees an integral part of everyday life. This effort coincides with their commitment to be a sustainable and walkable development. This is evidenced by the anticipated investment of 100,000 trees to be planted throughout Daybreak of which 8,500 have already been planted. Collectively, the urban forest has the ability to improve the air quality and reduce energy consumption while contributing to a beautiful and memorable community.

In response to this need, Daybreak is working with the Salt Lake County Million Tree Program, South Jordan City and G. Brown Design, Inc. to develop an urban forestry management program. This program is the system by which the trees will be properly monitored and provide a streamlined management approach through the use of a tree inventory and mapping system. The inventory contains information about each tree including: Unique Tree # using a RFID (Radio-frequency identification) tag that is 1/2” long x 1/8” diameter glass capsule embedded into each tree, Scientific Name, Common Name, Location, Tree Condition, Caliper Size, Canopy Size, and Photo. After the tree has been tagged and evaluated, it becomes part of a tree database and computerized mapping system.

In order to ensure that a tree is correctly associated with the data, a RFID tag is embedded into each tree which provides the ability to identify and track individual trees. Once embedded into the tree, the tag can be read by waving a RFID scanner in close proximity to the tag. The RFID scanner functions similar to a barcode scanner at a grocery store. The ID# is then read by the scanner and transmitted to a computer via a Bluetooth connection. This number can then be used to properly identify and update any tree specific information. For example, if a homeowner association member locates a tree that needs to be maintained (i.e., pruned, removed, staked, etc.) then the tree can be identified using the RFID technology. This RFID # and associated map location could be included in a report given to a maintenance crew. The maintenance would then be recorded as part of the tree inventory. In this way, information about a tree can be transmitted effectively, thus saving time and resources.

Trees provide both environmental and aesthetic contributions to the Daybreak community. As the seasons pass and trees mature, they develop their own unique character and beauty while contributing to an overall look and feel of a place. The urban forest is a significant and valuable investment to residents of Daybreak. With proper monitoring and maintenance, Daybreak’s urban forest will remain healthy and viable into the future.

So, I wonder when we'll be able to get an IPhone application to read info about trees in the urban forest.

Everything You Always Wanted to Know About HOA and Condo Insurance...

but were afraid to ask.

Two former executive directors of the Utah Chapter of the Community Associations Institute, Marla Mott-Smith Bowers and Tiffany Dominguez, are in the process of starting a new professional education provider, and for their first seminar, they've arranged for a presentation by two of the nation's foremost authorities on community association risk management.

The Seminar, Community Association Liability, Insurance & Risk Management, will be held on Thursday, May 28. The speakers will be Cliff Treese, recent recipient of the Community Association Institute's Byron Hanke Award for his support of education and research for homeowners and homeowners associations, will be speaking with Joel Meskin, Esq, another national authority on Community association risk management issues.

Mr. Meskin is VP Community Association Products McGowan & Co., Inc., a leading provider of Community Association and Property Manager Insurance Products nationwide. For 15 years he was a trial attorney specializing in insurance coverage and related litigation.
Joel has insured over 50,000 community assocations nationwide. He has produced insurance policy products and engaged in risk management. He lectures to organizations and associations nationwide about homeowner association related insurance issues: fraud, claims, property manager claims, and association risk management.

Mr. Treese is a nationally recognized practitioner in common interest community underwriting, risk management and insurance. His community association management experience includes asset management, information services and technology, human resources and payroll processes, and national quality award criteria and ISO
9000. Cliff has worked with developers and general contractors in all phases of the association development and construction.
He is a past national president of the Community Associations Institute (CAI) and its Research Foundation and a recipient of the Institute’s Distinguished Service Award. He has been involved for over two decades in CAI professional management development programs and has authored several publications for the institute.

Additional information on the seminar is available at this link.

Live Blogging The Managers' Munch -- Problem Board Members

I’m here at the Utah CAI Chapter's Monthly Manager’s Munch; the presenters are John Morris, Jamie Nopper and a law clerk, Michelle Kasteler, from the firm of McKay, Burton and Thurman. Today’s topic is “Dealing With the ‘Problem’ Board Member”.

The first archetype of the problem board member is “No Show Ned”. That description is pretty self-explanatory. Recommended suggestions include the creation of expectations for attendance and follow-through; in-person communications with Ned about his obligations; possible removal (with a strong recommendation of legal counsel.

“Power-Crazy Patty” is a common participant on association boards; characteristics include decision-making and acting alone; failure to share information, and the bullying of members. Suggestions for dealing with Patty include education about her status as a member of the board; standard procedures for distribution of information; and (once again) removal. (And another reminder about the importance of obtaining legal advice.)

Next is “Rules-Don’t Apply to Me Ronald” First, the board (or manager or counsel) needs to remind this board member that he will be treated like others; excuse him from voting on issues in which he is directly concerned; and lastly, “seek legal advice on removing him as a board member”.

"Agenda-Pursuing Agnes" is the somena who ran for the board with a personal agenda; the example given being the woman who wants to get her cousin hired as manager. She only wants to focus on her agenda, and has little or no concern about the well-being of the association as a whole. Suggestions inclued the identification of her conflict of interest and dealing with them pursuant to the association's governing device. Then you may need to resolve that issue (which they ironically refer to as her "pet" issue); with timeframes for reconsideration, if necessary.

"Contentious Carl" thrives on conflict, is insulting and offensive; he turns every meeting into a shouting match. Sometimes these individualys threaten violence. Suggestions inclued formal procedures and protocol during meetings; call the police if necessary.

"Terri Traitor" leaks the association board's privileged information; she may be suspected of aligning herself with dissident owners. Suggestions for her type include reminders of the importance of confidentiality, including a written acknowledgement of the need for confidentiality. If the board member's opposition is known, she can be excluded from strategic sessions; if it is suspected, a separate committee can be formed to consiere and address the meetings. John Morris is considering an amendment to his stock documents requiring the preservation of confidential and privileged information.


"Penny Pincher Pete" never wants to spend association money or raise assessments, defer major projects, and complains about all of the bids being "rip offs". First suggestion here is to advise him of his duties and responsiblities; secondly, get advice from the manager and other professionals; lastly, invite Pete to seek and obtain other bids.

"Suzy Stickler" is described as "the one board member who always reads the documents and knows what they say". (Most of the "Suzy Sticklers" that I know only think that they know them.) The panel's position (probably related to their definition as opposed to mine), is that these types are not a problem. The board's suggestion is that she may not, in fact, be a problem. Compliance with the rules, they say, is a problem.

Facing Financial Crisis

The subtitle of this section is "Foreclosures and Community Associations"

Surprised? Ha!

An insurance professional and three lawyers are discussing the pitfalls and risks associated with foreclosures; both those done correctly, and those which have problems.

The moderator, Jamie Schraff, is recommending communications with association members. Barry Postman, Esq., who disclaims pursuing collections as part of his regular practice, is suggesting communications with owners and a case-by-case analysis on whether or not to pursue individual collections. Leonard Siegel suggests inquiring as to the debtor's solvency prior to the commencement of a foreclosure.

Florida now mandates, via statute, a "meet and confer" conference with the debtor prior to commencement of the proceedings.

An attorney in the audience has thrown a curve to the panel by suggesting that an effort to contact the unit owner may constitute a violation of the Fair Debt Collection Practices Act. The panelists are acknowledging that to be a "fair point"; Mr. Postman is attempting (unsuccessfully in my humble opinion), to draw a distinction between "gathering infromation" and commencing collection proceedings.

Ms. Schraff has reminded all of the participants that CAI's listing of Rights and Responsibilities calls for foreclosure to be used only as a last resort...

All of the panelists are encouraging the obtaining of directors and officers coverage.

Now the panel is discussing the transfer of collection rights to debt collectors; the panel is rightly warning Associations to carefully scrutinize these relationships to make certain that the Board is not improperly delegating its responsibilities. And, they are all advising, make certain that the parties making these offers are not looking primarily to their own interests.

Bare Coverage in New Orleans

The first session that I'm attending today is entitled "Bare Walls, Bare Coverage? -- The Great Coverage Debate. The subject matter is insurance, not Bourbon Street.

The most interesting new knowledge to me is that Fannie Mae is essentially requiring HO-6 coverage in connection with mortgages. Additionally, FNMA regulations which have long required reserves for deductibles, are beginning to be enforced; that is impracticable for many associations which are carrying larger deductibles as a means of having adequate insurance.

Another main focus of the session is the fallout from a recent Maryland case, Anderson vs. Gables on Tuckerman, which led to insurance legislation. In that case, in an opinion which reached a similarly absurd result as the Flores v. Earnshaw case, the Maryland Court of Appeals ruled, as explained by Robin Manougian, CIRMS:

“the Maryland Condominium Act does not require the council of unit owners to repair or replace property of an owner in an individual condominium unit after a casualty loss.” The basis of the Court ruling [was] its conclusion that the Condominium Act requires the unit owner to make all repairs to the unit regardless of the cause of the damage."

Ms. Manougian further explained:

The vast majority of the Condominiums that our Agency insures (and by and large associations insured throughout Maryland) want to maintain traditional Single Entity coverage – master policy property insurance that covers the units, minus improvements and betterments made or acquired by the unit owners. This continues to be the best way to insure condominium associations because of:
-- The interdependency of the units to the common elements
-- The difficulty of adjusting losses between two or more adjusters – one for the association to the extent common elements are damaged, and one or more for the unit owners depending on the number of units affected at time of loss.
-- The insurable interest that the Association effectively has in the units. If the units are not properly insured, uninsured or underinsured losses affecting the units can impact value, adversely affecting the entire property.
-- Certificates of Insurance: The lenders have not reacted en mass as of this writing. Some have contacted us to verify that either Single Entity of Bare Walls coverage is in place. We suspect these calls will increase with time, and this means that they will look for affirmation of master policy unit coverage, or will begin requiring two certificates: One from the Condominium Association, and one from the unit owner.
-- Overall Costs. Single Entity coverage allows the unit owners to buy unit coverage in bulk. The overall replacement value, even if bare walls coverage is rendered, will not change much if at all, which means the premium for the Master Policy will not change, while the premiums for HO-6 based on increased dwelling coverage will increase.
-- The Maryland Condominium Act does not require that owners carry HO-6.* (see Fannie Mae requirement effective March 01, 2009)
-- Even if HO-6 coverage is carried, the possibility exists that unit owners will fail to have or maintain unit/dwelling coverage at full replacement value at time of
loss.

The insurance industry and Maryland's CAI Legislative Action Committee sponsored and managed to get legislation passed that will fix the result, by allowing associations, through their master policy, to insure the units and the betterments therein.

Live Blogging the CAI Conference -- Day 1

I'm at the Community Association Institute's National Conference, and will be live-blogging some of the conference proceedings the next couple of days.

Happy Earth Day!

I'm in New Orleans this week for a Foundation for Community Association Research strategic planning meeting and the Community Association Institute's National Conference; one of the conference highlights (at least in my opinion) is the release of the Foundation's Best Practices Report on Green Communities. It's the culmination of a project that I and others have been working on for many months; it will be available, soon, for free pdf downloads. I'll give you a link, as soon as it's available.

You Wanted a Toilet in Your Condominium?

The Utah Court of Appeals, in an opinion last week, came out with a rather absurd result in a dispute between a condominium developer and unit purchaser.

The case, Flores v. Earnshaw, involved Mr. Seadhna Flores' purchase of a yet-to-be-built condominium unit. Mr. Earnshaw and Mr. Flores both signed a Real Estate Purchase Contract (REPC) which called for a purchase price of "$144,950, less the $10,000 previously paid when Flores had exercised the earlier Option Agreement." About a month later, Earnshaw called "to express concern about the selling price..." Earnshaw sought to revise the contract to increase the price of the unit to $179,950; Flores rejected this offer, and ultimately sued, seeking specific performance of the contract.

Following a trial, the trial court decided that the contract was ambiguous as to whether the parties intended to convey a fully built-out unit, or just a shell of a unit. The court found that the form language in section 1.l was ambiguous, and considered evidence outside of the contract to ascertain the parties' intent. The court thus ordered the sale of a fully built out for $144,850. Earnshaw appealed.

The issue addressed by the Utah Court of Appeals involved whether or not the trial court was correct in allowing and considering the evidence outside of the contract. Ultimately, the court concluded that the court could only look to the contract to determine if it was ambiguous; it the contract itself did not appear ambiguous, the extrinsic evidence should be excluded. Looking only at section 1.1, the court found no ambiguity. Unfortunately for Mr. Flores, that section called for inclusion of "plumbing, heating and air conditioning fixtures, and equipment; ceiling fans; water heater; built-in appliances; light fixtures and bulbs; bathroom fixtures; curtains, draperies, and rods; window and door screens; storm doors and windows; window blinds; awnings; installed television antenna; satellite dishes and system; permanently affixed carpets; automatic garage door opener and accompanying transmitter(s); fencing; and trees and shrubs," only to the extent that they were presently owned and attached to the property. Because none of the items were "owned and attached" as of the date of the contract, the court found the language unambiguous, and held that the admission of the extrinsic evidence was improper. Thus the court remanded the case (sent it back to the trial court) "for further proceedings consistent with this opinion."

This is, obviously, an absurd result even if the case was decided correctly pursuant to evidentiary rules. There is no doubt, when the extrinsic evidence is considered, that Flores was expecting to buy, and Earnshaw originally intended to sell, a completed unit, with toilets and appliances. The court noted that the parties (and presumably the real estate agents, erred by using an REPC for completed construction. That fact, while true, is of little consolation to Mr. Flores.

The appellate court gave a few hints, and possible solutions, to Flores, in noting that the existence of an ambiguity can be found by reviewing the "contract taken as a whole." Furthermore, the court noted that the parties had not argued "mutual mistake, reformation, impossibility or any other theory to support their positions."

At this point, Mr. Flores and his counsel have the option to ask the Utah Supreme Court to review the Court of Appeals' decision, or they can try to get the trial court's reconsideration as to whether the contract, as a whole is ambiguous; Mr. Flores and his counsel could also seek to pursue some of the other theories suggested by the trial court. That may or may not be successful, depending upon the posture of the case.

This case should serve as a reminder of several things; the need for the assistance of competent advice in the purchase of property, the need to deal with an honest and reputable builder, and the need to carefully evaluate and pursue all legal options and theories when everything else fails. Although I had no familiarity with the case prior to last Thursday, (when the opinion was issued), I strongly suspect that the attorneys fees incurred by both both parties likely approached or exceeded the $35,000 difference in the original and proposed purchase price. And now, they get to go back to the trial court to fight some more.

Legislative Update Forthcoming

Regular readers will notice that my legislative tracking widget is no longer posted; with the adjournment of the legislature, it seems rather meaningless.

Of the bills being watched, only HB 243 survived; that bill dealt with "Rental Restrictions on Condominiums and Common Interest Communities". A couple of readers and clients have asked for my thoughts on that; unfortunately, I haven't had time to read and consider it. It is, however, on my "short list", and I'll update on it and other legislation of note in an upcoming blog.

Live Blogging The Managers' Munch -- Rentals

I'm attending the Utah Chapter of the Community Association Institute's monthly Manager's Munch today; the subject is Rentals in Community Associations. The first speaker, Paul Smith of the Utah Apartment Association is advocating the regulation, but not the prohibition of, rentals in associations.

Paul recommends using a local, attorney-reviewed lease contract; he also recommends that the board suggest the screening, by owners, of the potential tenants. If you do that, he says, make certain that the information regarding tenants is kept confidential. Next, require owners to identify their tenants.

Paul suggests that tenants should also be kept abreast of the owners' deficiencies; he suggests that associations advise tenants of pending amenity disruptions. Leases should inform unit owners of the association's governing documents.

According to Paul, cities are actively encouraging participation in the Good Landlord programs, in which municipalities provide disproportionate fees for non-participating landlords, in order to encourage training and education.

Paul contends that most cities won't touch a definition of a family; that's the first matter upon which he and I differ significantly. I suggest that my associations look to and incorporate those definitions into their restrictions; Paul's co-presenter, Kirk Cullimore more or less retracted that assertion.

Now Kirk Cullimore is up, taking on the difficult task of attempting to explain conflicts and overlaps between municipality, state and federal laws. His advice, with which I agree, is that you find the most restrictive requirement, and comply with it.

Kirk recommends that associations should inspect units more than they traditionally have. He suggests that utility companies may be willing to provide information as to the recipients of bills. Kirk also suggests using the state DMV database; I'd recommend extreme caution in that area, because the subscription agreement on that information contains significant limitations on its proper and improper use.

Kirk is now talking of nuisance evictions; he contends (and I agree) that they are difficult in Utah. A "three day comply and vacate" notice is often ineffective by itself; even if it's not, they make a good trail, and can lead to the service of what Kirk calls a "Three Day Get the Hell Out" notice. (I like that term, but probably wouldn't put it on a pleading...)

Kirk suggests a required lease addendum for the community; I agree that this approach is superior to the imposition of a form lease.

Rental Restrictions in Bylaws?

The Wisconsin Supreme Court, in an opinion released last Friday, issued an opinion which affirms the validity of rental restrictions included in a community association's bylaws, as opposed to the association's declaration. Several courts around the country have dealt with this issue in the past several years, with opinions coming down on both sides of the issue. And in this case, the Court was divided, with a dissenting justice arguing that the amendment to the bylaws were contrary to the declaration and the statutes, and that the restrictions needed to adopted, if at all, as an amendment to the declaration.

The case, Apple Valley Gardens Association, Inc. v. MacHutta, involved an association formed in July of 1979, by Steven MacHutta (yes, that MacHutta). The original declaration included a sentence providing that "Any lease...shall not relieve an owner from his obligation to pay common expenses or any other obligations..."

In 2002, the Association members amended the Association's bylaws to prohibit rental of units. Ms. MacHutta, the declarant's spouse was renting her unit, and challenged the amendment. Existing tenancies were "grandfathered", as the dispute did not ripen until 2004, when the board refused her petition to enter into a lease with a new tenant. Nonetheless, she rented the Unit and the Association sued.

The Court framed the first question as to whether lease restrictions must be included in the declaration; the court held that the rental restriction fell within the statutory provision providing that bylaws could include "any restriction on or requirement respecting the use and maintenance of the units...," which the Court held could include rental restrictions.

The Court next held that the provision respecting the joint liability of owners for assessments, by allowing leases, was contrary to the restriction against leases.

"Condominium ownership is a statutory creation that obligates individual owners to relinquish rights that they might otherwise enjoy in othr types of real property ownership", the Court stated. Amendments to the bylaws were foreseeable and enforceable, even if not as readily discoverable by virtue of recordation, and even if more easily achievable than declaration amendments. "The fact that lenders and purchasers rely on recorded declarations is irrelevant. If lenders and purchasers wish to know whether and under what conditions a condominium unit may be rented out, they may easily inquire as to both the declaration and the bylaws."

Next, the Court held that the declaration's reference to the conditions under which leases must be made did not mandate that they be allowed. The Court stated: "this provision neither grants a right to rent one's unit nor prohibits it..."

Lastly, the court dismissed a statutory-based challenge to the provision, holding that a marketability statute did not prohibit the bylaw.

The dissent disagreed, arguing first that restrictions such as rental restrictions must be in the declaration to be valid. Furthermore, the dissent argued, the amendment was contrary to, and hence prohibited by, the Declaration.

Apple Valley provides support for the Association that cannot, for whatever reason, provide rental restrictions in a declaration as opposed to bylaws. Nonetheless, this author, and the majority of practitioners in the area, encourage associations to make such significant changes in the declaration, rather than the bylaws.

Abandoned...

Monday's New York Times had an article on the continued (and apparently increasing) tendency of lenders to walk from properties, rather than foreclose on them.

This article, however, reveals a new twist to the problem: the owners, who think their homes have been foreclosed, are being charged by municipalities for the clean up, and sometimes the demolition of, these residences. So it's not just community associations that are facing non-responsive lenders, but also the owners of those units. Previous posts on this blog have advocated vigilance in the monitoring of units in this day and age; this gives another reason. And just because a lender threatens foreclosure, don't assume it will be completed.

Pet, or Service Animal? (Again...)

A new Florida Federal District Court case has some good reasoning and guidance dealing with the pet vs. service animal distinction, and how an association should respond to requests for a service animal accommodation.

The case, Hawn v. Shoreline Towers Phase 1 Condominium Association, involved the Davis C. Hawn's assertion that his Labrador retriever, Booster, was a service animal who was "dually trained to help [Mr. Hawn] both physically and psychologically.

Booster was originally introduced to the association's board as a "pet", and Mr. Hawn sought a six month trial period "to give folks a chance to prove that they love their pets as onel would love any other family member." There's no evidence that the association did anything in response to this letter, but about a year later, Mr. Hawn sought permission to keep Booster as his "service animal". His letter asserted physical and psychological disabilities, supported by a letter from a psychologist and a chiropractor.

The association thereafter attempted on two different occasions to get more information regarding Mr. Hawn's alleged handicap; no further information was provided. As a result, the association sent a letter stating "at this time, we must deny your request..."; Mr. Hawn responded by filing a complaint with the Florida Commission on Human Relations (FCHR). The FHCR ultimately found in favor of Mr. Hawn; following that, he filed his claim in the Florida Federal District Court, alleging violation of the Federal Fair Housing Act and the intentional or reckless infliction of emotional distress.

The defendants moved for summary judgment, contending that Haws had failed to meet his burdens. The court, while assuming that Hawns was handicapped, found for the association based upon the fact that the association had no knowledge or reason to know that he was, in fact handicapped. The court noted that the association had never denied the accommodation, but rather had twice requested -- unsuccessfully -- to obtain additional evidence of the handicap and/or the need for the accommodation.

The court, in its opinion, reviewed and relied extensively upon a Hawaii case of several years ago, Prindable v. Association of Apartment Owners of 2987 Kalakaua, 304 F.Supp.2d 1245 (D. Hawaii 2003), affirmed, Dubois v. Association of Apartment Owners of 2987 Kalakaua, 453 F.3d 1175 (9th Cir. 2006). The Prindable/Dubois case, like this case, involved a patient association which sought, unsuccessfully, to receive medical evidence to support the need for an alleged service animal.

Haws provides strong support for associations' rights to request competent evidence for the need for a requested service animal. In those instances where the need for a service animal is not obvious, associations can and should insist upon adequate and appropriate medical evidence, so that legitimate requests for accommodation are granted, and unwarranted requests are denied.

Live Blogging -- The Fair Debt Collection Practices Act

Several of my colleagues in the office are gathered in the conference room, listening excitedly to a seminar on the Fair Debt Collection Practices Act (the "Act"). Since I know that so many of you are interested in the subject, I'm going to live blog it.

The presenter, J. Scott Watson, is regaling the audience by letting us know that he knew (and worked for) Mr. Lieberman (presumably not Joe), who was the defendant in the leading case which established that lawyers are "debt collectors", under the Act.

A creditor, collecting its debts in the name of another, will be responsible for its conduct in connection with the collection of debts. In other words, an association whose representative uses a name other than the association, may be imposing the association and himself or herself to liability.

All debt collectors, including attorneys, are precluded from contacting debtors who are known to be represented by counsel. This is a non-issue to lawyers, as the Rules of Professional Conduct otherwise preclude such conduct.

The speaker suggests "reading the act in its entirety..."

A case called Foti established that a message on a voice mail, without the purpose of the call, violated the Act. On the other hand, identification of the reason for the call would be a violation, assuming a third party answered the call. The suggestion.

The speaker offers no suggestions; my suggestion -- don't leave messages on voice mail machines.

Never discuss a debt with anyone other than the debtor. If you are seeking someone's location from a third party (which is allowed under a specific exemption), don't disclose the reason for your inquiry. If someone contacts you purporting to be counsel for a debtor, request confirmation in writing, before proceeding.

Calling a deadbeat (er, I mean debtor) at work can be a real problem.

If a debtor requests that the debt collector cease collection activities, the debt collector must stop; the only exception will be the pursuit of judicial proceedings.

Perhaps the most troublesome aspect of the Act is the "least sophisticated debtor"; that requires that communications cannot be confusing to the least sophisticated debtor. That is, needless to say, a pretty low standard.

A new trend in litigation, according to the speaker, is suits arising from efforts to collect an amount that the debtor is not entitled to. For this reason, associations and managers must use extreme caution in referring collections to make certain that the information conveyed is accurate.

The recent Hicks case, from Florida, involved Section 1692; the debtor alleged that the voice mail messages were improper, in that they did not disclose the debtor's identity, and the purpose of the call. The message said, "this is in regard to a personal matter...." The court certified a class action, based upon the assumption that the auto-dialer had most likely called a large number of individuals.

Campuzano involved a letter being sent, with the necessary warnings; it made an "offer" of a discount, for a quick call. The plaintiff suggested that it was deceptive in that the officer who had purportedly signed the letters had not actually been involved; the court noted that the officers of the company did not need to have personal knowledge of the letters in order to avoid liability. The court noted that the executives were not lawyers, suggesting a different standard for lawyers.

In McKinney v. Cadleway Properties, Inc., the court addressed the status of a successor who had acquired a debt; the successor will be treated as a debt collector.

Romano case involved an attempted call to Ruben Romano; he was speaking to Ruben, Sr., rather than Ruben, Jr. The discussion with the father disclosed the debt to the son. Either the speaker didn't say, or I didn't catch, what the court did under those facts. I'll track it down, and supplement.

Fogel involved the collection of student loans from a law school graduate (oops!); the lawsuit was filed in the district of the primary Rutgers campus, which was in a different county than the law school, and the residence of the graduate. Again, I'll follow up with the result.

Interesting question for the end of the seminar: If you have two debtors, should you send a letter to both? The speaker advises yes. That, of course, leads to another question; if you do so, can you bill for both?

What's a Short Sale?

I'm live blogging today from the UCCAI Manager's Munch; the topic of the day is -- you guessed it -- the economy. More specifically, "The Effects of Short Sales and Foreclosures on Homeowners' Associations".

The speaker is Paul Newton, Backman Title Services.

Paul's beginning with an explanation of "race notice" -- the concept that the first to record their property interest will have priority.

Utah's Condominium Act provides priority to mortgage holders over association liens in condominiums; in the HOA setting, there was no law prior to 2004. Nonetheless, most declarations (in HOAs and condominiums) provide similar protections to lenders.

Backman's office was opening 150 foreclosure files a month in 2007; now it's a thousand per month.

Paul appropriately points out that the language of a declaration is critical respecting the association's rights; some declarations give priority to first mortgages; others give priority to all mortgages. Needless to say, at least for a while, that's a significant issue.

Another good point arises with respect to the "due date" of assessments in non-condominium associations. Most declarations have assessments on an annual basis. If assessments become due on the first of the year, but are billed monthly thereafter, the association may have priority relating back to January 1. Careful lenders avoid this predicament by receiving a payoff, and assuring that assessments are current at the time of transfer.

Paul says that their company appreciates the filing of a new lien, even post-foreclosure, so that the title companies know whom to contact. John Morris questions whether the filing of a lien against lenders may create a "selective enforcment" issue. That's a good point; a solution to that may be an amendment to the association's debt collection policy; a policy distinction which is reasonable should eliminate that argument.

John Richards inquired about how to pursue lenders who don't take care of their property; Paul recommends contacting the lender at the address on the deed, and the trustee who conducted the sale. (There are a lot of very busy foreclosure lawyers who will really enjoy that additional mail.)

A short sale, as defined by Paul, involves a proposal for a sale where not all lienholders will be made whole; the first lienholder will dictate who gets what, and the title company must close within those parameters. Obviously, the frequency of these short sales is increasing.

What's a Short Sale?

Mortgage Cram-Down Update

Last night, the U.S. House of Representatives passed H.R. 1106, allowing for bankruptcy court intervention in renegotiating the terms of certain mortgages. The bill does not directly refer to association's, but CAI's Public Affairs team was (and is) encouraging community association leaders to follow the legislation, and share your concerns about the potential of interference with community association assessments. Here's a snippet of the info sent from CAI this morning:

On Thursday, March 5, the House of Representatives passed HR 1106 with some technical amendments by a vote of 234 to 191. Although the concerns raised by CAI and others have not yet been fully resolved, your efforts in expressing concern have helped us get Congress’s attention, and members of the Judiciary Committee have committed to work with us to clarify and address these issues.

CAI continues to have concerns that the legislation will have a negative impact on associations in states with priority assessment liens, and that the grant of authority to bankruptcy courts, absent clearer direction and limitations, may be used to modify a homeowner’s assessment obligations to his/her community association. Again, thanks to your efforts, Congress is now aware of these issues and we will continue to work with legislators as the bill moves into the Senate.

Your efforts will help us ensure that this legislation will not have negative unintended consequences for common interest communities across the country and the residents who are current in their assessments. A well-crafted plan, that helps those in distress while protecting those who are current, will benefit us all.

I'll post updates here on this blog, and on the www.utahcondolaw.com parent page, and on our new collection site, www.caalrs.com

The End of the Line...

...as far as we go...

regular TRAX riders will understand that reference. I invite the rest of you to take a ride on TRAX, so you can catch it.
The End of the Line



Julie Ladle and I had a meeting out at Daybreak today; while we were there, I wanted to visit the terminus of the rails of the new Mid-Jordan TRAX line to Daybreak.

When completed (currently anticipated to be sometime in 2011-12), the spur will travel from Daybreak to the Fashion Place (6400 South) Station, where it will connect to trains running to Downtown, and ultimately to West Valley City, the Airport, and the University of Utah.

The course to Daybreak will be rather indirect, but it will allow many other residents to avoid the need to fight traffic and dump carbon into the atmosphere. This link will take you to the latest information on the progress of this extension.

No More Non-Judicial Foreclosures?

Those who know me, and those who follow this blog, are aware that I've never been an advocate of non-judicial foreclosures of community association assessment liens. And at the the CCAL Law Conference last month, the pundits were agreeing.

I've had a number of reasons to dislike nonjudicial foreclosures; I think they usually take longer than a letter followed (when necessary) by a complaint; I think they are unduly aggressive in a number of situations; I think they unduly impose excessive costs on the association and ultimately the unit owner, and I've always questioned their legality under Utah statutes. And now, there's published evidence that confirms that a Utah trial court has found them problematic, and an appelate court won't review that decision, at least for now.

The case, McQueen v. Jordan Pines Townhomes Owners Association, Inc., involved challenges on a number of grounds to the legitimacy of a condominium non-judicial foreclosure; the trial court essentially held that ambiguities and omissions in the Utah Condominium Act would not justify the absence of a "trustee" in a nonjudicial foreclosure, and hence the attempted sale by the association's counsel was set aside. The association's counsel appealed, but that appeal was very quickly rejected by the Utah Court of Appeals, based upon the absence of a "final ruling" from which the association was appealing. Remaining controversies between the parties preclude consideration of the appeal at this time; I strongly suspect that the costs of further litigation will preclude further litigation and the eventual appeal.

I think it's a very important case; we'll be exploring it in more depth in connection with an upcoming CAALRS collection seminar. Keep an eye on this blog, and/or Utahcondolaw.com for information on the date, time and other subjects to be covered.

CAALRS, Utahcondolaw.com and this blog are all sponsored by the law firm of Hobbs & Olson, L.C.

UCIOA Consideration Postponed

Marla Mott-Smith Bowers, Chair of the Utah Legislative Action Committee (ULAC), has advised that the Utah Legislature will not be considering the adoption of the Uniform Common Ownership Interest Act this session, as had been hoped and anticipated. From her press release:

Due to the magnitude of UCIOA and Legislative Research time restraints, Senator Greg Bell will not submit UCIOA this session. Instead, he will submit it during the interim session to be held sometime in May or June, 2009.

Senators Michael Waddoups and Greg Bell recognize the need in Utah for the type of comprehensive act we have proposed and remain committed to the passage of UCIOA.

Get Your Pools and Spas Fixed NOW!

Last Friday's uccai meeting addressed pool safety and the need to modify your pools pursuant to the Virginia Graeme Baker Pool and Spa Safety Act; seven months ago I suggested in this post that you shouldn't even have waited for the law to take effect before modifying your pools and spas. (The law took effect in December.)

Now, unfortunately, there's news of another unfortunate death due to a pool drain. Five-year-old Linnea Rose Oldham of Snyderville, Utah was killed in a tragic drain-related incident while vacationing in Mexico; according to the article in the Park Record, the family wants the story to get out, in hopes that it will prevent other similar tragedies.

Please, if your association's pools and spas have not been modified, shut them down and get them fixed now.

My thoughts and condolences to Linnea's family and loved ones.

It's Happening Here, Too!

No, this is not an alarmist blog entry about Jon Huntsman's support of civil unions for gay couples. That's not the subject of this blog.

What I'm referring to is the stripping of units that are being foreclosed, which I blogged about last month, when I was live blogging from Palm Springs.

KSL is reporting that some foreclosed homeowners in Utah are stripping and/or vandalizing their foreclosed homes. According to the article, "Michael Leavitt, a home inspector, says the bigger problem comes when people buy foreclosed homes at an auction and don't actually see the house."

(The article didn't say, but I don't think that's our former governor Michael Leavitt, although sources do say that he recently lost his job...)

Apparently here, as in Florida, both theft and/or vandalism occasionally follow foreclosures. Once again, vigilance and observation of foreclosed units seems to be prudent.

Housing Tax Breaks

Yesterday's New York Times has an article on the proposed housing and other tax breaks under the proposed stimulus plan; for homes purchased after April 9, 2008 and before July 1, 2009, "first time homebuyer" couples can receive up to $7,500 tax credit. "First Time Homebuyers" are defined broadly; there are phase outs for higher income categories.

All of this is subject to change, of course, as the House and Senate work to reconcile their bills.

Interesting Planning Meeting in Park City

Wednesday night's meeting of the Park City Planning Commission ought to be a little more interesting than most; on the agenda is consideration of the proposed Treasure Hill Development, a rather large (as you can see) proposed development in Park City.

Time and energy permitting, I plan to attend. If I do, I'll let you know what happens.

Here's a link to the 360 page agenda for Wednesday's meeting. (Note that a mere 170 pages deal with this proposed project.)

New Legislation Watch

I've added a new Utah Legislature Watch Widget; the top left corner of this blog will be devoted, at least through the duration of the legislature, to monitoring the progress of bills related to condominiums and other types of community associations. I'm going to skip the liquor bills and the "message bills"; you can watch those elsewhere.

The list should be updated automatically; we'll see how it works.

And if there are any other bills that are related to the industry and which you think should be posted, please let me know.

Congratulations to the New Utah CMCAs.

The National Board of Certification for Community Association Managers (NBC-CAM) has announced that five Utah association managers became certified as Certified Managers of Community Associations during the latter half of 2008.

The new Utah CMCA recipients include:

Kevin Flewell | West Jordan, UT
Jeffrey Holt | Kaysville, UT
Jennifer Jones | West Jordan, UT
Kathie Savage | Park City, UT
Cheryl Wagoner | Lehi, UT


The CMCA signifies that a manager has passed NBC-CAM's national exam and met the requirements for managing condominium, cooperative and homeowner associations.

To obtain CMCA certification, managers must complete a 16-hour classroom course, the Essentials of Community Association Management, and pass the NBC-CAM CMCA Examination. (Since these recipients were all students of mine, I can personally attest that they were good students, and well instructed in their 16-hour course.)

Certified managers must adhere to the CMCA Standards of Professional Conduct and take continuing education courses for recertification. CMCA recipients who don't comply with the Standards of Professional Conduct are subject to disciplinary action, up to and including suspension or revocation of the credential.

NBC-CAM is the first and only national organization created solely to certify community association managers and to help consumers identify managers who have demonstrated fundamental competency and knowledge in this profession.

Get Your Butts Out of Here!

The city of Belmont, California passed an ordinance in November of 2007, which is becoming effective this month; the ordinance prohibits smoking in:

(3) Multi-unit residence common areas; except that a landlord or common interest development may designate a portion of the outdoor area a smoking area. A designated smoking area:
(i) must be located at least twenty (20) feet from any operable window or door used by the public of an indoor area of a multi-unit residence where smoking is prohibited;
(ii) must not include, and must be at least twenty (20) feet from, outdoor areas primarily used by children including, but not limited to, areas improved or designated for play or swimming;
(iii) must be no more than twenty-five (25) percent of the total outdoor area of the premises for which it is designated;
(iv) must have a clearly marked perimeter;
(v) must be identified by conspicuous signs; and
(vi) must not overlap with any area in which smoking is otherwise prohibited by this chapter or other provisions of this Code, state law, or federal law.
(4) Individual units of multi-unit residences, if such units share at least one common floor or ceiling with another such unit.

A copy of the ordinance is available here.

So, unless you are in a single family residence in Belmont, you'll need to get your butt outside, if you want to have a smoke.

I Saw This One Coming...

A Sacramento woman has been ordered not to bring her "service pit bull" to classes at the American River College; she says he gives her "protection" and a thirty minute advance warning of epileptic seizures; she also alleges "he's been certified through the county as a service animal". County officials dispute that, saying that they don't certify service animals.

My source is this story; if I find more on this controversy, I'll post it.

Saving Beaver County

The Utah Supreme Court issued an opinion yesterday in the case of Save Beaver County v. Beaver County, which confirmed the rights of the citizens of Beaver County to challenge, by referendum, the County's approval of the proposed Mount Holly Club.

The Supreme Court opinion succinctly described the proposed Mount Holly Club:

As planned, Mt. Holly is a gated club with an 18-hole golf course, a private ski resort, and up to 1,204 residential units.

A private ski resort ?!?!?!

The proposed plan met with some opposition, but Beaver County proceeded to adopt an ordinance to the land code, and published its "Notice of Adoption of Ordinance" on May 12, 2007. That same day, twelve residents requested applications for referendum petitions. These petitions were filed, seeking a vote by the residents in the November 2008 election. 845 signatures were obtained; more than enough to support the referendum.

The opinion sets forth a lengthy analysis as to whether the County was acting administratively or legislatively, but ultimately held that the County's action was legislative, thereby triggering the citizens' right to a referendum, which the Court appears to consider rather important:

Because the power of the people to legislate directly through referenda is a constitutionally guaranteed right, it is the responsibility of this court to “defend it against encroachment and maintain it inviolate".

Hence the voters will get to decide, in the end, whether Mount Holly Club will be allowed. (Although my strong suspicion is that the current economic conditions may have already doomed Mount Holly Club.)

Alphabet Soup

This afternoon's discussion, continuing in the economic theme, is a discussion on lending in the community association industry. Several representatives of private project approval companies, a representative of FannieMae, and a developer's attorney (who explains that he has inadvertently become a banker's attorney are discussing the current state of financing in the U.S.

Historically, FHA was the first government-related association to assist in condominium funding; that was ultimately followed by the VA, then FNMA and FMAC. These entities all had underwriting standards relating to which projects they would lend upon; community associations could seek and obtain approval, once that approval was obtained the approval would be posted, and would be permanent, in the absence of litigation, or certain other significant adverse actions.

In November of 2007, however, FNMA stopped granting approvals and deferred the approval decision to lenders. That caused great consternation, as lenders did not know what they were doing, and loan availability suffered.

Recently, FNMA has indicated that it will resume the project approval program, with several different options.

An attorney, who is the past president of CAI, is suggesting that a price protection plan for homes will solve the World economic problem. Simplified greatly, he's proposing that new homeowners be assured of a repurchase of their home, at the original purchase price, after a two year period.

One drafting suggestion to the practitioners is that association governing documents allow board modification of provisions relating to secondary mortgage markets.

Several of the panelists are reminding attendees that the agencies will, even in otherwise noncompliant projects, grant exceptions in appropriate circumstances.

CCAL Case Review -- Part 2.

Back to the case review:

The first case of the morning's discussion is Pacific Hills Homeowners Association v. Prun, a case involving an association's five-year long pursuit for the removal of a fence. The lawsuit came five years after the first letter; the unit owner defended based upon laches, and waiver.

Park Ridge Condominium Association, Inc. v. Callais involved an association that refused to produce records based upon a contention that the request was designed to harass; the production was required, and fees were awarded.

Ritter & Ritter, Inc. Pention and Profit Plan v. The Churchill Condominium Association, involved a dispute between a unit owner and an association, relating to required repairs to slab penetrations between units. The court reaffirmed the board's fiduciary duty, but then analyzed the decision on the business judgment rule. Judicial deference applied to the board, but not the association; the association owed a duty to the members, and the association had to repair the problem. In other words, the board was not liable for deciding not to make the safety repairs, but the association had a duty to make them.

Thompson v.Toll Dublin, LLC involved a builder's effort to force an association into arbitration in connection with its construction defect; the developer knew of the defects, resulting in fraud claims against the developer. The Court rejected the effort to force non-statutory claims into arbitration; the court also found the arbitration provisions to be unconscionable.

A California case, Treo @ Kettner Homeowners Association v. The Superior Court of San Diego County involved a condominium provision which purported to take away the unit owners' right to a jury trial in a construction defect case. The Court denied the enforceability of the provision, based upon the absence of meaningful negotiation in connection with the declaration's provisions.

An Arizona case, The Lofts at Fillmore Condominium Association v. Reliance Commercial Construction, Inc. held that a builder was liable rof breach of the implied warranty of habitability, even where the seller was not the builder. The implied warranty arose between the builder and the ultimate buyer, even in the absence of contractual privity.

Lake Buckhorn Property Owners Association, Inc. v. Townsend involved architectural restrictions in a declaration which were supplemented by a more restrictive regulation respecting the size of a septic tank. The court restated the black letter law that an association's regulations which are inconsistent with a declaration are invalid.

Miller v. Savana Maintenance Association, Inc. is a fair housing case which affirms an association's right to insist upon medical records to substantiate a claimed handicap under the Fair Housing Act.

Chesler v. Conroy involved outrageous behavior among the residents of a three unit condominium; the parties clearly treated each other inappropriately; nonetheless, the court held that this particular case did not rise to a federal fair housing claim, based upon disability. The Court did reaffirm the potential, in appropriate cases, of a hostile environment fair housing claim.

Bloch v. Frischholz was a religious discrimination case; it involved a woman who challenged an association rule based upon its interference with her right to mount a mezuzah (a religious symbol) on her door, in a common hallway. The Court held that the religious discrimination prohibitions in the fair housing act does not require a religious accomodation, and facially neutral restrictions were permissible.

On to Alternative Dispute Resolution

Things are getting more interesting now; the discussion has moved to whether or not mediation works.

A few lawyers are saying that it never works; most lawyers are in jurisdictions where mediation is mandatory. Benny Kass is speaking favorably of the process; he laments only that mediation comes at the end of the case. There seems to be a consensus in the room that if mediation fails, it is often due to poor choice of a mediator.

On to leasing restrictions... Once again, participants are talking about "rental prohibition regret" -- the situation where partially vacant associations are wishing that they could allow rentals, in order to stop or slow foreclosures, or provide for some income that might allow for the payment of assessments. A panelist who will remain unnamed is suggesting, with a chorus of "boos" that "A board doesn't necessarily have to follow its bylaws." The contention is that the times warrant the action. Jim Strichartz is suggesting that boards should seek adoption of temporary moratoriums on enforcement. Another participant reminded that any such hardship should be conditioned upon continued payment of assessments.

Similarly (as discussed yesterday), what about the age-restricted communities? First and foremost, associations are reminded not to lose their exemption status in connection with the granting of such hardship exemptions.

Another suggestion: Can a board exercise its business judgment, in light of financial difficulties, not to pursue enforcement of violations during the financial crisis? Most panelists (and I) think that's a rather scary proposition, because it might lead to widespread violations, which could lead to waiver of the provision.

CCAL Law Conference -- Day 2, Part 3 -- The Economy, Again

Another session dealing with the economy -- this time, "How to Guide Your Firm Through the Economic Slump". Four partners/shareholders of various sized firms are addressing the economy's effect on firms; all of these firms are seeing dramatic increases in revenue, and (unfortunately) parallel increases in accounts receivable.

One bit of consistent advice from all of the panelists (Hobbs & Olson clients beware) is that firms be more aggressive in following up on accounts receivable. All of the panelists report terminating clients who haven't been paying.

Two collection attorneys in California report that due primarily to the California statutory restrictions, they are accessing each routine collection matter at least 50times. Suddenly, the weather in Southern California is not quite as inviting...

All of the attorneys on the panel insist upon payment for their collections rather than accepting contingent referrals; the consistent response: "You get what you pay for..." Contingent firms, these panelists say, tend to focus only on gathering the "low hanging fruit". Those easy cases, of course, are not the most important cases to be pursuing.