Federal Advocacy Summit Tackles Condo and HOA Legislation

Tom Schild recently participated in the Federal Advocacy Summit sponsored by the Community Associations Institute (CAI) in Washington, D.C.  Community association attorneys, managers and homeowners from around the country gathered to learn about federal legislative and regulatory issues with direct financial impact on condos, homeowner associations and housing co-operatives….and carry the message to Capitol Hill.

Among the hot topics was legislation to provide federal disaster relief assistance for the clean up and repair of community association common areas.  This CAI legislative initiative was introduced in the House of Representatives at the end of October, 2015.

As part of the proposed Housing Opportunity through Modernization Act, Congress is also considering changes to the Federal Housing Administration (FHA) standards for condominium project approval to make it easier for condominium associations to obtain and maintain FHA-approval  so condo owners and purchasers can get FHA-insured mortgages.

On the CAI hit list is legislation introduced in both the House and Senate which would require the Federal Communications Commission to invalidate private restrictive covenants in condos and HOAs which prohibit or interfere with amateur radio antennas.

On the regulatory front, CAI is opposed to the actions of the Federal Housing Finance Agency (FHFA) seeking to invalidate state laws which recognize a priory lien for condo and HOA assessments.  FHFA is the government agency which now operates Fannie Mae and Freddie Mac.

With all seats in the House of Representatives and one-third of the Senate seats up for election in 2016,  now is the perfect time for community association leaders and residents to let their congressional representatives know the impact these federal issues have on the financial stability of condominiums, homeowner associations and co-operatives.

POSTED BY:  Thomas Schild Law Group, LLC

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Montgomery County Board Training on Track for 2016

by Tom Schild

Condo, co-op and HOA board members in Montgomery County, Maryland will soon be required by a new County law to take a  class on the responsibilities of serving on the board of directors.

Touted as the first law in the United States to mandate training for community association board members, the requirement applies to any director elected or appointed  beginning in January 2016.  Directors are required to take—and pass– the training class within 90 days of being elected or appointed to the board of a condominium, housing co-op or homeowners association.

The Montgomery County Commission on Common Ownership Communities (CCOC) has developed a free, online training program for directors and others who wish to take it.  According to the CCOC, it will be take about 2 hours to complete, can be taken in steps over time, will be interactive, and will include short quizzes which must be passed in order to move to the next section.

The training program is based on both Montgomery County and Maryland laws, and will include “best practices” for association management..

A director who does not complete the training program is not prevented from continuing to serve on the board..  However, a CCOC dispute resolution panel may consider failure to complete the training  in deciding a dispute between an association and an owner.  And, the CCOC may take legal action to enforce the new training requirement.

POSTED BY: Thomas Schild Law Group, LLC

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Community Managers and the Unauthorized Practice of Law

by Tom Schild

Community association managers regularly assist Condo, Co-op and HOA boards in hiring contractors, collecting assessments, adopting community rules and many other tasks necessary to govern a community. Managers must be knowledgeable of a community’s declaration, bylaws and other governing documents, as well as variety of state, local and federal laws which impact association governance.

However, managers must be careful not to provide legal opinions or prepare documents which constitute practicing law. 

The Florida Supreme Court recently provided guidance on the boundary between activities which may be performed by a community manager and activities which require an attorney.  In a May 2015 advisory opinion, the Court commented on numerous specific tasks related to community association governance.  Although the Court ruling is directly applicable only in Florida, it is instructive for community association managers in Maryland and the District of Columbia.

The standard applied by the Court is that the practice of law “includes the giving of legal advice and counsel to others as to their rights and obligations under the law and the preparation of legal instruments, including contracts, by which legal rights are either obtained, secured or given away, although such matters may not then or ever be the subject of proceedings in a court.”

Nearly 20 years ago, the Florida Supreme Court advised regarding the activities which constitute the unlicensed practice of law and are not allowed to be performed by Florida community managers.   These include:

(1) drafting assessment liens and lien releases;

(2) determining the timing, method and form of giving notice of meetings;

(3) determining the votes necessary for certain actions which require the interpretation of statutes and rules;

(4) advising about the application of law to a matter being considered; and

(5) advising that an action may not be authorized by law, rule or the association’s governing documents.

This was confirmed by the Court’s 2015 advisory opinion. The new ruling also concluded that additional activities which constitute the practice of law include drafting amendments to the association declaration and bylaws; determining who must receive a pre-lien letter; and analyzing statutory or case law to reach a legal conclusion.

However, tasks which are ministerial or do not require interpretation of the association governing documents or law do not constitute the practice of law, and may be performed by community association managers.  This includes preparing certification of the amount of assessment due by an owner; determining the number of days’ notice  required for an action or meeting, if it does not involve interpretation of statutes, rules or governing documents; and drafting meeting notices and mailing affidavits.

THE BOTTOM LINE:  While condominium, co-op and homeowner association managers must have general knowledge of the association’s governing documents and laws related to association governance, managers should avoid the unauthorized practice of law and consult an attorney on matters which require the interpretation of  governing documents or the application of state, local or federal law.

POSTED BY:  Thomas Schild Law Group, LLC

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Single Dwelling Covenant Not Waived By Other Structures

by Tom Schild

A covenant allowing only one dwelling to be constructed on each lot in a Baltimore County community of over 600 homes is not waived by allowing erection of other structures including pool houses, gazebos, guest houses, and sheds, according to a recent ruling of the Maryland Court of Appeals–the highest state appellate court.

At issue in Shader v. Hampton Improvement Association, Inc. was whether a “one dwelling” covenant prohibited construction of a house on each of two subdivided portions of the original lot as it existed when the covenant was first created in 1931. Although the appeals court concluded there had been a waiver of the portion of the covenant which prohibited buildings other than “private dwelling houses”, there had been no waiver of the covenant which prohibited “no more than one dwelling” on each lot.

Explaining that each clause of the covenant is severable and independent of the other restrictions, the Maryland Court of Appeals agreed with the trial court and intermediate appeals court that waiver of one clause did not constitute a waiver of other covenant restrictions.  Therefore, the “one dwelling” covenant remained enforceable to ensure the residential character of the neighborhood and a house was not allowed on each subdivided portion of the original lot.

POSTED BY:  Thomas Schild Law Group, LLC

Community Governance Training For Managers

Tom Schild recently taught a 2-day program on Community Governance in Baltimore, Maryland.  Community association managers from Maryland, Virginia, Pennsylvania and Washington D.C. attended the class to learn about the legal aspects of operating condos, coops and homeowners associations.

The course is part of the Professional Management Development Program of the Community Associations Institute (CAI), a national organization comprised of community association managers, service providers and volunteer leaders.  Topics covered in the Community Governance program include association governing documents; statutes and case law affecting community management; fiduciary responsibilities of association boards and managers; management and service contracts; and developing and enforcing community rules.

Tom is member of CAI’s National Faculty and has taught the Community Governance program since 1998 in many cities throughout the United States. He is also a Fellow of CAI’s College of Community Association Lawyers (CCAL), which is  comprised of fewer than 160 attorneys nationwide who are recognized for their leadership  and contributions in the field of community association law.

POSTED BY:  Thomas Schild Law Group, LLC



Maryland Court Guidance on Access to Association Books and Records

by Tom Schild

Several recent Maryland appeals court decisions provide new guidance to  condominium and homeowner associations on owner inspection of association books and records.

Legal Advice and Billing Records

The Maryland Court of Special Appeals supported a Baltimore condo association’s refusal to provide a unit owner with the written legal advice of condominium attorney.  The court concluded, in 100 Harborview Drive Condominium v. Clark, that the common law and statutory attorney-client privilege — which recognizes the confidentiality of an attorney’s legal advice — pre-empts an owner’s right of inspection and copying the condominium “books and records” allowed by the Maryland Condominium Act, Section 11-116.  Based on the text and legislative history of the Condo Act, the court determined that all written legal advice is protected from disclosure, even if the owner requesting such records is the subject of the legal advice.

However, the July 2015 court decision also ruled that an attorney’s detailed billing records submitted in support of an invoice for legal services must be provided to owners, except to the extent such records include confidential information protected by the attorney-client privilege or work product doctrine.  For instance, billing records which reveal the reason for seeking legal advice, litigation strategy or the specific nature of services provided are protected from disclosure.

Financial Records and Delinquency Reports

Separately, in the May 2015 “unreported” case of Brown v. Commission on Common Ownership Communities,  the Maryland Court of Special Appeals upheld the decision of the Montgomery County Commission on Common Ownership Communities (CCOC) that a condominium had complied with the books and records provisions of the Condominium Act by providing financial records as kept in the ordinary course of business and it did not have to create new documents which re-format its existing financial records.  (An “unreported” appellate decision may not be relied on as precedent in other similar cases).

The CCOC decision upheld by the appeals court also ruled that the books and records provision of the Condo Act requires that, on request,  condominium unit owners must be provided with assessment delinquency reports without redaction of the names of delinquent owners.  That portion of the CCOC decision was not contested in the court appeal.

Confidentiality Agreements

Completing the trilogy of  recent rulings regarding access to books and records, the Court of Special Appeals ruled in August 2015 that a person entitled to inspect and copy corporate records may be required to sign a confidentiality agreement which prohibits disclosing the information to third parties.

Referring to a Maryland court case from 1898 regarding stockholder rights to inspect the books of a business corporation, the court interpreted the statutory right of inspection to allow use of a confidentiality agreement to protect against disclosure and misuse of confidential documents and information.  Although the financial records in Hogans v. Hogans Agency, Inc. involved a business corporation, the ruling is also instructive with regard to providing access to the books and records of condominium and homeowner associations.

Based on this new judicial guidance regarding access to books and records, association boards and managers may be able to avoid inspection disputes by adopting, or amending, a written policy for owner inspection and copying of association records.

POSTED BY: Thomas Schild Law Group, LLC