In Association. COMMUNICATION IS KEY Using Statutory Requirements to Keep Your Members Informed of Association Issues. How the Board Takes Action

Transcription

1 Winter 2015 Volume XV Issue 2 A Newsletter from Perlstein, Sandler & McCracken, LLC 10 Waterside Drive Suite 303 Farmington, CT Telephone (860) Facsimile (860) CTCONDOLAW.COM Inside This Issue Communication is Key...1 Out With the Old, In With the New...4 Grills: A Hot Topic for Some Associations...9 News About Our People...11 How to Contact Us...12 COMMUNICATION IS KEY Using Statutory Requirements to Keep Your Members Informed of Association Issues Healthy community associations require clear channels for communication between their boards and the unit owners. Associations should view the requirements for transparency and accessibility under the Common Interest Ownership Act ( CIOA ) as opportunities for communicating with owners. How the Board Takes Action In general, the board acts for the association. Certain actions, such as amending the declaration and approving a loan secured by an assignment of the association s future income, require owner approval. However, the everyday operation and administration of the community is governed by the board. Most often, the board conducts meetings, where its members follow parliamentary procedures to discuss issues and make decisions. The members make, second, debate, and vote on motions. If a motion passes, then the association acts as stated in the motion. The board can also approve actions without a meeting. Until recently, actions without a meeting required the unanimous written consent of the board members. As of October 1, 2015, the board may act without a meeting by the written consent of two-thirds of its members. qualifies as written consent. The association must give all owners prompt notice of any action taken without a meeting. The Meeting Requirements of CIOA Provide Opportunities to Communicate with the Unit Owners Notices and Agendas. If the board does not meet pursuant to a published schedule, or a meeting is conducted outside of the schedule, then the secretary must send a notice of the meeting, with an agenda, to all unit owners at least five days before the meeting. If the board meeting is conducted pursuant to a published schedule, then the secretary must make the agenda available to the owners at least 48 hours before the meeting. This newsletter has been prepared to provide readers with information concerning the law of condominiums and community associations in Connecticut. It is not meant to be a substitute for competent professional advice. Readers are urged to consult with competent legal counsel before taking action Distribution of Board Packages. Copies of any material distributed to the board before a meeting must be available to unit owners, except for any material that will be discussed during an executive session. Access to board packages may provide owners with the reasons or rationale for actions taken by the board. Access also builds confidence in the transparency of the association s operations. Open Meetings. Meetings of the board must be open to the owners, except for executive sessions which may only be held for certain limited reasons. During the

2 meeting, owners may listen to the board s discussions. The board members should discuss their reasons for voting for or against proposed actions. The discussion will provide the owners with an understanding of the board s rationale. The owners are not entitled to participate in the discussion. Nonetheless, they may learn a lot by hearing it. Unit Owner Comment Periods. Each board meeting must include a unit owner comment period. The comment period provides owners with the opportunity to offer their thoughts regarding any matter affecting the community. It is an opportunity to foster communication between the owners and the board. The board should note any matters that may require future action. At times, it may be appropriate for the board to provide information that is responsive to the comments. However, the comment period is not a time to debate issues. It is the time to hear the owners. The comment period provides owners with the opportunity to offer their thoughts regarding any matter affecting the community. The board may adopt reasonable procedures for conducting the comment period. Actions Taken Without a Meeting. The unit owners do not have the opportunity to watch the discussion on actions taken without a meeting. Therefore, the notice sent to the owners regarding the approved action should include a brief summary of the board s reasons for approving the action. Notices of Certain Types of Actions Notice and Comment. Certain board actions, such as the adoption or amendment of rules, impose obligations that apply throughout the community. CIOA requires the association to provide owners with at least 10 days notice of a proposed rule or amendment to a rule, and an opportunity to submit comments to the board. The notice must include: The text of the proposed rule or amendment, or of the rule to be repealed; and The date on which the board will act, after considering comments from unit owners. The notice gives the board the opportunity explain the reasons for adopting, amending, or repealing a rule. It should also include a statement of the board s authority to adopt the rule. The comment process gives the owners the opportunity to express their thoughts or concerns. The board members must consider any comments from the owners before acting on the proposal. The board should also consider that it is difficult to enforce a rule that lacks support in the community. The comments may prompt the board to revise or even scrap the proposal. After the adoption, amendment, or repeal of a rule, the association must give the owners notice of the board s final action, together with a copy of any new or amended rule. Notice and Hearing. Before the association levies fines or proceeds with legal action against a unit owner, the board must provide the owner involved with notice of the violation and an opportunity to be heard. Page 2

3 The notice must be sent at least 10 business days in advance of the hearing, and should include the following: A description of the violation and the provision of the governing documents that the owner has violated. We suggest including a copy of the provision with the notice. The date, time, and place of the hearing. A statement that the board may levy fines or take other legal action against the owner. A statement that the owner has the right to attend the hearing, to offer information about the violation orally or in writing, and to have a representative attend and offer information. The hearing gives the owner an opportunity to tell his or her side of the story. In some cases, the hearing may result in a resolution of the violation without the need to levy fines or take further action. The board must conduct most hearings during open board meetings. The only basis for holding a hearing in executive session is to prevent public knowledge of an issue that would violate the privacy of any person. This seldom applies to violations that occurred in the open. How the board conducts the hearings will communicate much to the owners. Inspection of Records Owners and their representatives have the right to examine and copy association records. This right is another opportunity to communicate with the owners. The only basis for holding a hearing in executive session is to prevent public knowledge of an issue that would violate the privacy of any person. If the association receives a request that reasonably identifies the specific records that the owner wants to inspect, it must make the records available within five days, during normal business hours. If the association receives a request that does not reasonably identify the specific records, then the association should ask the owner to provide additional details. The association should be responsive to these requests. This will communicate the association s intention to comply with the law and that it is not trying to hide anything from the owners. The records provide a window for owners to view the association s operations and administration of the community. The minutes of board meetings communicate what actions the board took and why. Detailed, written resolutions make the actions easier to understand, interpret, and if ever challenged, to defend. Perlstein s Maxims for Association Communication Over 10 years ago, we published Perlstein s Maxims for Association Communication in this newsletter. They are still relevant: Few boards or managers have ever gotten into trouble by telling owners more than they wanted to know. Page 3

4 Few boards or managers have ever gotten into trouble by telling owners more often than they wanted to know. It is more important for you to be seen providing information to owners, than it is for them to read the information you provided. In the media and the current political climate, people suspect all government and all business. Community associations, being part government and part business, are entirely suspect. The best surprise is no surprise. Anticipate the attacks and objections. Answer all the questions, if possible, before they are asked. Postage is always cheaper than lawyers, and is even cheaper. Eighty percent of communication is listening. The board usually knows better than the owners, but it does the board no good to remind the owners of the fact. Always count noses before you have to count heads. Association politics is politics. Having to listen to malcontents is the price we pay for our democracy. It is sometimes more important to build a community than it is to make the best possible decision. Being a board member is a position of service, not a position of power. Eighty percent of communication is listening. OUT WITH THE OLD, IN WITH THE NEW Amending and Restating Governing Documents In 2013, the Connecticut Bar Association published the Second Edition of the Connecticut Common Interest Ownership Manual. The new manual contains model governing documents for creating new communities. There are several reasons why your association might want to restate your documents now, using the new models as a starting point. The formats of the governing documents for most Connecticut communities are based on one of two models. The first model was published in 1972 and was commonly followed up through The second model was published in 1984, when the Connecticut Common Interest Ownership Act ( CIOA ) was adopted, and has been commonly followed from that time to the present. The documents created using these models have generally served their communities well. However, they do not reflect the many changes in the real world, the law, and Page 4

5 the methods of operating and governing associations, which have occurred over the past 30 or 40 years. The Association IS NOT Required to Restate Its Documents There is no law that requires your association to amend its documents. However, if there is a conflict between the provisions of your documents and the current requirements of Connecticut law, then in most cases you are required to follow the law. Keeping track of when you must ignore the documents to comply with recent changes in the law is a real challenge. Changes in the Law Many of recent amendments to CIOA relate to issues of governance and transparency. Most of these amendments apply to communities created prior to the enactment of CIOA. There have also been changes to other laws and regulations concerning issues such as individuals with disabilities, satellite dishes, families with children, and the use of grills. These other changes impact many communities and the application of their documents. Almost 50 years have passed since the first condominiums were declared in Connecticut. Changes in the Real World Almost 50 years have passed since the first condominiums were declared in Connecticut. Connecticut enacted CIOA more than 30 years ago. During this time, there have been changes in society, in the economy, in business practices, and in technology. These changes have had a significant impact on communities. However, their governing documents do not address these changes: Social changes include an aging population, new ideas concerning what constitutes a single family, the growth in home occupations and two-career families, and an increase in the number of grown children (with cars) returning to live with their parents. Economic changes and current business practices include the centralization of the banking and mortgage industries, online shopping and increased volumes of delivery by UPS, FedEx, and PeaPod, major increases in the amount of insurance deductibles, and the use of trusts and limited liability companies for estate and tax planning. Technological changes include the growth of the internet and telecommunication, changes in the nature and operation of automobiles (like SUVs as private passenger automobiles, and electric cars that need to be plugged in at night) and an increased focus on energy and recycling. Page 5

6 Changes in the Operation and Governance of Associations Based on their experiences, associations and their managers, lawyers, and other professionals, have developed a number of operational and governance changes, such as: Document provisions requiring unit owners to take specific steps to maintain their units to minimize the risk of damage. Document provisions to recover restoration costs not covered by the master insurance policy on account of deductibles, from insurance policies carried by individual unit owners. New procedures for conducting meetings and casting ballots electronically. To get the full benefit of a restatement, and to avoid creating new inconsistencies or other problems, the association should restate all of its documents simultaneously. New procedures to insure that all of the governing documents are available in permanent public records. Many of these changes are addressed in the new model documents contained in the Second Edition of the Connecticut Common Interest Ownership Manual. Other Issues with Governing Documents There may be other issues with your documents that can be addressed by restating them. For example: Many developers did not bother to produce documents that were appropriate for the individual communities they created. They simply copied the sample provisions in the models, without tailoring them to meet the specific needs of the individual community. Amendments adopted by the association may be incomplete, inconsistent with the rest of the documents, or otherwise unclear. For example, many associations have amended their rules to regulate conditions or activities that can only be regulated by the declaration. Sometimes these amendments contradict a provision that is already in the declaration. Often, associations fail to address all document provisions that relate to the subject of the amendment. The Restatement Process The documents of most communities are highly interrelated. There is usually no point in restating the bylaws without also restating the declaration and the certificate of incorporation. Similarly, changes to the declaration intended to reflect the current requirements of CIOA, will likely require changes to the rules as well. To get the full benefit of a restatement, and to avoid creating new inconsistencies or other problems, the association should restate all of its documents simultaneously. Approval Requirements. Amending the declaration requires the highest level of unit owner approval. In most communities, most of the declaration can be amended Page 6

7 by the vote or agreement of unit owners holding 67% of the total voting power in the community. Amendments concerning the use of units and occupancy requirements may require 80% approval. Amendments concerning voting power and the allocation of common expense assessments may require unanimous consent. A typical restatement, however, will not attempt to amend these provisions. If the association has enough votes to amend the declaration, then it has enough votes to also amend its other documents. Document Provisions That Are Amended. In most cases, a restatement amends the document provisions that have been superseded by changes in CIOA or other laws. The restated documents will also include provisions taken from the new model that address changes in technology, insurance, mortgage underwriting, and the other issues discussed above. The restated documents can also address problems that resulted from errors or omissions by the developer, or by the association in adopting previous amendments. The restated documents can also address areas in which the current documents do not adequately serve your community. These may include the size of the board, the process for reviewing and approving requests for modifications, or the need to maintain heat in the units while their occupants are away. Be sure to select a lawyer who is familiar with both the legal and practical issues that associations commonly face. A Restatement Requires an Attorney. Your association s documents are legal in nature. They are a seething mass of cross-references. They often recite statutory requirements. Restating them is a job for an attorney. A lay person should not perform his or her own cardiac surgery. Likewise, a lay person should not attempt to restate the association s documents. Be sure to select a lawyer who is familiar with both the legal and practical issues that associations commonly face. Otherwise, the restated documents could be more problematic than the current documents. Proceeding with the Restatement. Not all associations and attorneys proceed in the same way. Nonetheless, there are some essential steps that apply more or less universally: Obtain a complete set of the current documents. The declaration, surveys, and plans are recorded on the land records. The bylaws and rules may or may not be recorded. Compare the existing documents to the actual physical community. If the documents reference garages, are there any garages in the community? If the community shares a clubhouse and pool with another community, do the documents address control and responsibility for the shared facilities? Identify provisions that aren t working for the association or that are inconsistent, incomplete, or unclear. Page 7

8 Identify provisions that have been superseded by amendments to CIOA or other applicable laws. Identify provisions that can be improved by replacing or revising them. Prepare an initial draft of the restated documents for review and discussion by the owners. Once in final form, present the restated documents to the unit owners for a vote. Once approved, record the restated documents on the land records. Other Thoughts and Considerations A cheap quick and dirty restatement will result in a set of documents that do not fully reflect the community as it actually exists, and that do not fully address its needs. Form a restatement committee to work with the attorney. The committee may consist of some of the board members, together with other interested volunteers. If the association has a manager, then he or she will also assist the committee. Do not get sidetracked by the rules. Typically, some of the rules must be revised to be consistent with the restated declaration or bylaws. However, there may be other rules that the association wishes to amend for reasons other than consistency, such as the description of which vehicles may be parked in the community. Those changes are best left for another day. Discussions over vehicles with combination plates or roof racks can go on for hours. They can result in hard feelings. They can lead to votes against the overall restatement package. Put off those kinds of changes until after the owners approve the restated documents. There is no simple or cheap method of updating your documents. A cheap quick and dirty restatement will result in a set of documents that do not fully reflect the community as it actually exists, and that do not fully address its needs. We have seen several examples of inappropriately drafted restatements: a) A community had water heaters located inside units on the upper floors of the building. These water heaters often failed and leaked, causing damage to the units and common elements below. There is a provision in the new model that permits the association to require unit owners to replace their water heaters before they fail. Unfortunately, the restated the documents did not include this provision. b) A community replaced its bylaws with a new set of bylaws based on the new model. However, it did not restate its declaration. This created ambiguities and inconsistencies between the declaration and the new bylaws, making it very difficult to interpret and implement some provisions. Page 8

9 c) The declaration of a community had been the subject of over fifty phasing amendments. These amendments added units, created new classes of limited common elements, and created new procedures for allocating costs related to certain common elements. The restated declaration addressed only what was contained in the original declaration, without addressing the changes made in the many amendments that had been recorded since. It is a mistake to assume that a document restatement is simply running the model documents through a word processor. The documents must be customized to address the specific needs of your community. The association should engage an attorney that knows how to tailor the documents to suit its individual needs. GRILLS: A HOT TOPIC FOR SOME ASSOCIATIONS The Connecticut State Fire Marshal has amended the State Fire Prevention Code to incorporate the provisions of the 2012 National Fire Protection Association s Fire Code, with some variations. Depending on how the units in your community are constructed, these amendments may prohibit your residents from using or storing their barbeque grills on their decks, and on or under their balconies. At present, the application of the amended code is not entirely clear. Fire marshals from town to town do not uniformly agree on how to apply the amended requirements. We anticipate the State Fire Marshal will provide further guidance at some point in the near future. We will provide our association clients with any new information that we receive. Prohibitions on Grills The amended code provides that if a building contains three or more families, then: Grills may not be stored or used on balconies; Grills may be stored but not used under any overhanging portion of a building, including balconies; and Grills may be stored but not used within 10 feet of any structure made of combustible materials. This means grills cannot be used within 10 feet of any part of the building that could catch fire, or within 10 feet of a wooden deck. However, a grill may be used on a patio constructed of concrete, brick, or pavers, so long as the grill is 10 feet away from any other combustible structure. These Prohibitions Apply to: High-rises; and Garden-style buildings. Page 9

10 These Prohibitions Do Not Apply to: Detached single-family homes; Duplexes; and Townhouses that are attached side-by-side and are no taller than three stories. Types of Prohibited Grills. All types of portable grills are prohibited. The amended code does not distinguish between charcoal, gas, or electric grills. However, permanently installed grills, such as kitchen stoves and built-in grills, which are installed in accordance with applicable codes and manufacturer specifications, are still permitted. Absent any limitations in the governing documents, associations have the authority to adopt and enforce rules regulating the use and storage of grills within their communities. Other Thoughts and Considerations Association Rules Regulating Grills. Absent any limitations in the governing documents, associations have the authority to adopt and enforce rules regulating the use and storage of grills within their communities. The association may adopt rules requiring that grills be placed a certain distance from buildings. The association may even adopt a rule prohibiting the use and storage of grills on decks and balconies, even if such use and storage is permissible under the amended code. Though not required by law, associations of communities that have high-rises or garden-style buildings may wish to incorporate the new code requirements into their rules. By undertaking the process of amending their rules, these associations will be alerting owners of the new requirements of the code. This increases the likelihood that unit owners will comply. Penalties for Violations of the Amended Code. The State Fire Marshal and local fire marshals can issue written citations for violations of the amended code, and levy fines of up to $250. Furthermore, a court may issue orders to mandate compliance with the amended code, and levy additional fines from $100 to $1,000. The court may also have violators imprisoned for three to six months. Violators may also be fined $50 a day for each day that the violation continues. Insurance Requirements. It is possible, even likely, that the association s insurance carrier has its own requirements regarding the use and storage of grills, which may be more restrictive than those of the amended code. Failure to abide by these requirements could result in the cancellation or non-renewal of the master insurance policy. The association should be aware of these requirements and adopt rules to enforce them. Page 10

11 NEWS ABOUT OUR PEOPLE Matt Perlstein served as a speaker at the 2015 Legal and Legislative Symposium, presented by the Connecticut Chapter of the Community Associations Institute ( CAI ). Matt gave a presentation on factors associations should consider when amending and restating their governing documents. Scott Sandler served as a speaker at the 2015 Legal and Legislative Symposium, presented by the Connecticut Chapter of CAI. Scott provided a summary of state and federal legislative issues that could impact associations. He also gave a presentation regarding the relationship between association master insurance policies and insurance policies purchased by individual unit owners. On November 4, 2015, Scott was a co-presenter for a CAI webinar titled The Aging Community: Strategies for Dealing with Extreme Renovation Projects. He discussed options for funding major capital repair projects. In January, 2016, Scott will be taking part in a presentation at the CAI National Law Conference, presented by the College of Community Association Lawyers. He will be speaking on the topic of preparing for and attending contentious association meetings. Scott serves as the chair of the Connecticut Legislative Action Committee for CAI. Additionally, he continues to serve on CAI s Government and Public Affairs Committee, and on the Executive Committee of the Real Property Section of the Connecticut Bar Association. Since 2011, Scott has been listed in Connecticut Super Lawyers list of Rising Stars in the area of Real Estate Law. Greg McCracken served as a speaker at the 18th Annual Conference & Expo hosted by the Connecticut Chapter of the Community Associations Institute. He spoke on the topic of how complying with statutory requirements allows associations to better communicate with their members. Greg will participate in the Lunch with the Experts program at the 19th Annual Conference and Expo. Since 2009, Greg has been listed in Connecticut Super Lawyers in the area of Real Estate Law. He continues to serve on the Executive Committee of the Real Property Section of the Connecticut Bar Association, and he remains a member of the Developers Council of the Home Builders & Remodelers Association of Connecticut, Inc. New Clients: We are often asked if we are accepting additional clients. We are, and we are always happy to meet with interested parties to discuss our firm and the how we may serve them. Page 11

12 HOW TO CONTACT US If you should call our office and the automated answering system answers, you may use the following extensions to reach us if we are in the office or to leave a message in our individual voice mailboxes. You may also contact us at the following addresses: Perlstein, Sandler & McCracken, LLC Providing legal services to condominium and community associations including: Document Amendments Association Borrowing Rules Enforcement Document Interpretation Transition from Declarant Control Common Charge Collection Other Association Legal Matters 10 Waterside Drive Suite 303 Farmington, CT Telephone (860) Facsimile (860) CTCONDOLAW.COM Matthew N. Perlstein: Extension 12 mnp@ctcondolaw.com Scott J. Sandler: Extension 15 sjs@ctcondolaw.com Gregory W. McCracken: Extension 18 gwm@ctcondolaw.com Carole W. Briggs: Extension 16 cwb@ctcondolaw.com George L. Miles: Extension 36 glm@ctcondolaw.com Elizabeth A. Dickens: Extension 10 liz@ctcondolaw.com Jennifer Etheridge: Extension 28 jennifer@ctcondolaw.com Abby H. Humphrey: Extension 14 abby@ctcondolaw.com Diane L. Steeves: Extension 29 diane@ctcondolaw.com Gina C. Gworek: Extension 30 gina@ctcondolaw.com Nancy C. Morrisson: Extension 27 nancy@ctcondolaw.com Karen A. Latozas: Extension 34 karen@ctcondolaw.com Donna DeGray: Extension 13 donna@ctcondolaw.com Page 12