Community Association Newsletter

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1 Community Association Newsletter April 2017 In This Issue Legislative Update: 85th Legislature...1 Homeowner Association Board and Member Meeting Notices: What you may not notice, may come back to bite you...2 Taking Off the Kid Gloves: Avoiding Familial- Status Discrimination in Community Associations...4 Fine Enforcement And Collection In Homeowner Associations...6 Attorney Appearances...8 Helpful Resources Legislative Update: 85th Legislature By Brady Ortego The 85th Legislature has been relatively quiet compared to previous sessions, but that certainly does not mean that property owners associations (POAs) do not need to be watching Austin. Chatter surrounds bills related to display of religious items, collection of assessments, and an omnibus bill. While many other POA-related bills are being watched and anything can happen during session, these three remain the most-discussed bills amongst those in the POA industry. We may see a change to Section of the Texas Property Code through House Bill 522 from Representative Schofield. As introduced, the bill greatly expands the ability of an owner to display religious items by removing the existing limitation of the location of the religious item (entry of a dwelling) and removing the existing size limitation (25 square inches). With the removal of these limitations, one s imagination is the limit of what we may see in terms of display of religious items in all areas of the owners yards, on roofs, and perhaps in multiples. House Bill 3528 filed by Representative Vo with its companion Senate Bill 2234 filed by Senator Menéndez may have been filed to protect homeowners from assessment collection charges and/or foreclosure. A pragmatic application of the bills tends to indicate that timely paying owners will pay higher assessments and/or endure reduced association services or amenities that their families have come to enjoy. The bills appear inconsistent with existing provisions in Chapter 209 of the Texas Property Code as it relates to collection of assessments and erode any incentive to timely pay assessments. With a $5,000 minimum of secured debt required before a foreclosure may be filed, application of the 4 year statute of limitations means that numerous associations across the state will lose the ability to foreclose. With the rarity of foreclosures being 1/12 of one percent and the prevalent lack of response to a money judgment lawsuit for assessment collection, the goal of this provision remains questionable. (Cont d on page 3) 1

2 Homeowner Association Board and Member Meeting Notices: What you may not notice, may come back to bite you. By Brady Ortego a. Posting the notice in a conspicuous manner reasonably designed to provide notice to members such as at the entry of the community or marquee AND sending the notice by to each owner who has a registered address; Or b. Posting in a conspicuous manner reasonably designed to provide notice to members on the Internet website maintained by the association or other Internet media AND sending the notice by to each owner who has a registered address. One of the more common arguments from members that do not agree with a board s decision or even a membership vote or election is that the board of directors or community management team did not properly notice the meeting. The argument typically concludes with the statement that the decision at the meeting is therefore invalid. Whether it s a business partner contract, replacement of landscaping, election of directors, election of officers, amendment to a dedicatory instrument, challenging a vote or election based on improper notice will likely follow an improperly noticed meeting. Community managers and boards of directors can avoid the challenge through utilization of one or more notice techniques presented in this article. The notice process set out in this article applies to single family homeowner associations that are subject to Section 209 of the Texas Property Code. The process and procedures for noticing meeting in a condominium association will be the subject of an article in a future edition of the newsletter. Timing of Board Meeting Notices Section of the Texas Property Code provides that regular and special board meetings may be noticed in the following ways: 1. Not later than 10 or more than 60 days before the meeting by regular mail; or hour notice: The most common method that we experience in today s market is the 72-hour notice; however, common oversights do occur. By way of example, some notices will only be posted on the marquee or at the community entryway only without satisfying the required e-blast component. Another example includes only posting the meeting notice on the website/social media site but not e-blasting the community. Lastly, in some cases, the meeting notice is only e-blasted and it is not posted at the front of the community or on the marquee or the notice is not posted on the website/social media. Content of Board Meeting Notices Section (e) of the Texas Property Code requires notice of the date, hour, place, and general subject of the regular or special meeting, including a general description of executive session matters. We do field numerous questions regarding the extent to which subject matter must be described in the board meeting notice. While arguably anything can fall under new business, this practice is not recommended. A better practice is to describe the issue to be considered by the board such that members may decide whether or not to attend the meeting based on what the board of directors will be considering. Lack of transparency is a common complaint, and it is many times associated with vague meeting notices. If you are unsure as to whether or not a description is specific enough to be properly noticed, it may be best to table the issue and vote on it at a future meeting with a notice that describes the issue in greater detail. Below are some examples of vague descriptions: 1. Contract 2. Director 3. Landscape concern 4. Common area issue 5. Increase 6. Amendment 2

3 What follows are better ways to describe the issues above: 1. Contract for lifeguard and pool maintenance services 2. Appointment to fill a vacancy of 1 director seat 3. Owner concerns regarding quality of maintenance of common area landscaping 4. Neighboring commercial developer seeking an easement over common areas to allow access 5. Increase in the number of seats on the board/ increase in the annual assessment 6. Amendment of the Bylaws to reduce quorum Membership Meetings or Association Elections/Votes: Timing and Descriptions Section of the Texas Property Code governs member meeting notices. For an election or vote taken at a meeting of the members, the notice must be sent by regular mail not later than the 10th day or more than 60 days before the date of the election or vote. For an election or vote of owners not taken at a meeting, the notice shall be given not later than the 20th day before the latest date on which a ballot may be submitted to be counted. Subsection (b) of Section of the Texas Property Code provides that this section supersedes any contrary requirement in a dedicatory instrument. A common pitfall exists as it relates to notices of special meetings of the members. While it is rarely, if ever, overlooked to provide notice of an election or community-wide vote at a regular meeting of the members, notices for special meetings of the members often fail to identify the purpose or purposes for which the meeting is called. Special meetings of the members have a tendency to involve contentious issues and an improper notice can further divide a community. While identification of the purpose of the special meeting may seem like an obvious necessity, failure to clearly describe the purpose of the special meeting happens often enough for it to be prudent to address in this newsletter. Although notice may initially appear as a straightforward concept, community disputes arise out of technical deficiencies and do result in resource-draining litigation. Ensuring the timing elements are satisfied and that topic or purposes are adequately explained will work toward avoiding needless litigation. (Cont d from page 1) The omnibus bill is House Bill 1341 from Representative Muñoz. The issues presented by this bill relate to association records, board meetings, and the potential of a fine against an association for up to $25,000. House Bill 1341 expands the ability of an owner to request association records to include regular mail, , and even a telephone call. Currently, Section of the Texas Property Code requires owners to submit a records request via certified mail. This bill additionally allows every owner at least 30 minutes to address the board at every board meeting. With the potential of a $25,000 penalty for even minor, technical violations of Chapter 209, the operation of POAs may come to a crawl and many owners may decline to volunteer to serve on a board of directors. As the session progresses and comes to a conclusion, a clear picture of how POAs will operate going forward will appear. Our Legislative Update for the 85th Legislature will be available as early as June. Contact Cherie Wilson to save a spot for your managers and/or board members to benefit from this presentation by ing cwilson@rmwbhlaw.com. About the Author, Brady E. Ortego Brady Ortego is a shareholder with the firm and is Board Certified in Residential Real Estate Law. Brady s practice areas include Community Association Law where he represents a variety of property owners associations across the state of Texas including master-planned, condominiums, townhomes, commercial, and singlefamily communities. Brady also has experience working with real estate developers in relation to the creation of communities and community associations. He is a frequent educator and author on a variety of topics with his audience being fellow lawyers, community association directors, and/or community managers. Brady is a member of Community Associations Institute and is Co-Chair of the Texas Community Association Advocates. 3

4 Taking Off the Kid Gloves: Avoiding Familial-Status Discrimination in Community Associations By Justin K. Markel Introduction Neighborhood amenities are generally considered family friendly. That is, until the community association receives a housing-discrimination complaint arguing that a rule designed to protect children unlawfully discriminates against them. Community association board members are often surprised to hear that certain rules relating to children violate the Texas and federal Fair Housing Acts, especially if the rules are innocuous or protective. This article provides an introduction to pitfalls relating to familial-status discrimination under the Fair Housing Acts. With this basic primer, I hope that community-association boards will be more aware of the potential for liability and know when to ask for advice from counsel. Familial Status as a Protected Class The Texas and federal Fair Housing Acts prohibit certain kinds of housing discrimination because of an individual s familial status. The term familial status is a bit of a misnomer; it doesn t specifically refer to the makeup of a person s family. Rather, the term generally refers to persons under 18 who live with their parents or legal guardians. (The term also refers to pregnant women and parents in the process of obtaining legal custody over a minor.) This protected class essentially grants children special status, simply because they are children. Prohibited Discrimination The Texas and federal Fair Housing Acts prohibit various kinds of housing discrimination. But for the purposes of this article, community associations board members should be aware that the Acts generally prohibit limiting children s use of community services or facilities. The Acts also prohibit the practice of steering : making statements with respect to the sale or rental of a dwelling that indicate a preference against children. And under relatively new federal regulations, it is also unlawful to engage in hostileenvironment harassment or quid pro quo harassment because of a resident s children. An Unusual Kind of Political Correctness Because familial status is a protected class, community associations should try not to refer to children in their rules, if possible. Instead of requiring babies to wear swim diapers in the pool, the rule should instead refer to persons who are not toilet-trained or are incontinent. Likewise, instead of prohibiting children from engaging in horseplay or boisterous activity in the common areas, the prohibition should be directed at all residents and their guests, even if it s more likely that children would engage in those behaviors. In essence, in many instances, the statute s protection of children imposes an unusual kind of political correctness in community association rules. Troubling Results in Safety-Related Rules When it comes to safety rules, the protected class of familial status causes troubling results. Rules intended to protect children from harm are often found to be unlawful, putting community associations in an awkward position of risking liability under the Fair Housing Acts, or perhaps even greater liability for leaving neighborhood children s safety to their (sometimes inattentive) parents. For example, consider a rule that prohibits children under 18 from swimming in the community pool without parental supervision. The rule is meant to protect children from drowning. Indeed, studies have shown that children are less aware of their own fatigue when swimming, and thus they should be supervised to prevent injury. But a court would find the rule unlawful because it treats children worse than adults. Courts that have addressed these kinds of rules liken them to a rule prohibiting Protestants or women from using the pool. But what about the children s safety? When presented with a legitimate reason for a discriminatory rule, the courts will uphold the rule only if it is the least restrictive means to accomplish the legitimate objective. In other words, the rule can t be (even hypothetically) overbroad. In the case of the rule described above, a court would say that conceivably a 17 year old could swim in the pool without adult supervision. But it is difficult if not impossible to determine where the line is. Indeed, some 7 year olds swim competitively. Does this mean that an association could not require 8 year olds to be supervised at the pool? Definitive conclusions are incredibly difficult to make. 4

5 What s the Matter with Kids These Days? Beyond rules in pools and other community facilities, the protected class of familial status has implications in the harassment context as well. New federal regulations prohibit certain kinds of harassment against residents because of a protected class, including familial status. Under these regulations, a community association may be liable if an agent of the association harasses a resident because of the resident s children. In addition to liability for agents unlawful harassment, the new regulations also impose liability on a community association for unlawful harassment by a third party such as another resident if (1) the association knew or should have known of the harassment, (2) the association has the power to correct it, and (3) the association failed to take prompt action to correct and end the harassment. This thirdparty liability standard gives community associations reason to consider amending their policies and practices with regard to contractors. As discussed above, consider imposing age-neutral rules if possible. For example, when regulating dangerous activities (such as running or horseplay) and noise in the common areas, the rules should not be limited to children. In potentially dangerous association facilities such as pools and gym facilities, it may be better to regulate proficiency rather than age. Ensure that the association has adequate insurance coverages in case of an injury in a community facility. Consider having each resident and guest sign a pre-injury waiver as a condition to using the association s facilities. When reviewing or promulgating association rules regulating children, weigh the potential fair-housing liability against the potential for personal-injury liability. When reviewing or promulgating association rules, consult the association s attorneys. Contractors of the association should be required to follow all applicable laws, including fair-housing laws. To assist contractors understand the implications, the association should consider providing educational pamphlets describing the contractors anti-discrimination and antiharassment obligations. If the association receives a housing-discrimination complaint, notify the association s attorneys immediately. Conclusion Oftentimes, potential liability under the Fair Housing Acts is not intuitive or obvious. As discussed above, the Acts familial status protected class requires associations to reconsider how some rules are drafted, and make hard choices about safety-related rules. With this brief introduction, I hope that community associations board members will be able to identify potential issues arising under these laws. In doing so, board members can more promptly contact their legal counsel and more easily avoid lawsuits and housing-discrimination complaints alleging discriminatory housing practices. About the Author, Justin K. Markel Practical Implications In light of the consequences of the familial status protected class, what is an association to do? Here are a few pointers: Justin Markel is a shareholder practicing in the firm s labor and employment, corporate transactions, and community associations practice areas. Justin regularly advises community associations regarding their obligations under the federal and Texas Fair Housing Acts, and also defends community associations and management companies against agency investigations and litigation involving housing-discrimination claims. Justin is Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization. 5

6 Fine Enforcement And Collection In Homeowner Associations By Paul Gaines Although unpopular amongst individual property owners, fines or monetary penalties are an essential component of the overall management and administration of a homeowners association s affairs. Most homeowner associations utilize fines in order to enforce the terms of the governing documents and deter owners from any future violations. It is well known that some owners will not always follow the rules, and when pursuit of an expensive and lengthy legal action is unnecessary (which is often the case), fines allow an alternative method of obtaining compliance, hopefully suppressing the issue before it expands. Yet, imposing and collecting fines is not as simple as it may seem, and many associations fail to recognize the legal aspects of fine enforcement and collection. If an association opts to levy a fine, it must ensure the process complies with the law. The process set out in this article applies to the single family homeowner association that is subject to Section 209 of the Texas Property Code. The process and procedures for fining in a condominium association will be the subject of an article in a future edition of the newsletter. First things first: A thorough review of the association s governing documents. The declaration will typically state whether or not an association has the authority to levy fines. Key words such as fines, sanctions, and penalties will typically bestow the power upon the association. If an association s governing documents fail to provide such power, an amendment will need to be executed before the association may levy fines against an owner (Note: the Texas Property Code does not provide homeowner associations statutory authority to charge fines). After the authority to impose monetary penalties has been established, it is recommended (whether or not it is required in the governing documents) to institute a fine policy for the community. This document will ensure the fines are consistent and provide owners with awareness and information regarding fine enforcement, rights to a hearing and collection. Now that the association has established its authority to charge fines and executed a fine policy, we must look to the Texas Property Code for further guidance. Section (a) states, in pertinent part, the following: Before a property owners association may suspend an owner s right to use a common area, file a suit against an owner other than a suit to collect a regular or special assessment or foreclose under an association s lien, charge an owner for property damage, or levy a fine for a violation of the restrictions or bylaws or rules of the association, the association or its agent must give written notice to the owner by certified mail. Before an association may impose a fine, notice must be sent to a non-complying owner by certified mail. The law is rigid and failure of an association to observe all requirements will ultimately invalidate the requisite notice, thus barring the fine. In addition to the certified mail requirement, Section (b) sets forth the mandatory content of the notice: The notice must: 1. Describe the violation or property damage that is the basis for the suspension action, charge, or fine and state any amount due the association from the owner; 2. Except as provided by Subsection (d), inform the owner that the owner: A. is entitled to a reasonable period to cure the violation and avoid the fine or suspension if the violation is of a curable nature and does not pose a threat to public health or safety; B. may request a hearing under Section on or before the 30th day after the date the notice was mailed to the owner; and C. may have special rights or relief related to the enforcement action under federal law, including the Servicemembers Civil Relief Act (50 U.S.C. App. Section 501 et seq.), if the owner is serving on active military duty. Again, the content provided above is compulsory and any deviation will void the requisite notice. Furthermore, the notice must identify the date by which the owner must cure the infraction if it is of a curable nature (See (gi) for a more detailed explanation of curable and uncurable violations). If the notice is not sent via certified mail and fails to set forth all the stipulations provided in of the Texas Property Code, the fine will become unenforceable and the association s efforts will be rendered futile. Once a fine has been properly imposed and the association has sent the statutory notice, the association has a right to collect the fine. If the violation has been cured, the association may consider a waiver of the fine. Notices may be sent to the owner requesting payment if the violation persists. If 6

7 the letters are unsuccessful, the association may turn the account over to an attorney for further legal action, such as filing suit for the delinquent amount. However, it is important to note that an association may not utilize foreclosure of an assessment lien if the debt securing the lien only consists of fines (See Tex. Prop. Code ). The association should always consider the amount of the fine and the extent of the violation before proceeding with fine collection. In sum, fines provide a leveraging tool that the association may utilize to seek compliance from a breaching owner. Once fining authority has been established in the governing documents, the association must follow the requirements of the statute above to ensure proper enforcement in accordance with Texas law. Moreover, a fining policy should be implemented to create a consistent and uniform system for monetary penalties. A well-drafted policy will protect the association from discrimination claims and ultimately decrease the stress involved in the fining process. If the imposition of fines is necessary, and the breaching owner continuously refuses to pay, the association should seek legal counsel to determine their options and the best course of action for fine collection. About the Author, Paul Gaines brero, m o S r u o y o t Hold on a Fiesta! g n i w o r h t e r We ATTENTION ALL SAN ANTONIO MANAGERS: You re Invited to the annual Roberts Markel Weinberg Butler Hailey Skeet Shoot April 13 4:00 p.m.- 8:00 p.m. National Shooting Complex 5931 Roft Road San Antonio, Texas You don t want to miss the photo booth, live music, mexican food, and cold beverages! RSVP by ing Grace Gonzalez at ggonzalez@rmwbhlaw.com Paul Gaines is an associate and practices in the firm s Real Estate Section as a member of the Community Association team. He focuses his practice on community association law and represents the firm s clients in the Central and South Texas areas. Mr. Gaines graduated from the University of North Texas in 2012, with a major in Philosophy and a minor in Political Science. 7

8 Attorney Appearances April 6, :30 a.m. - 5:00 p.m. Bench Bar Conference The Civil/Appellate Bench Bar Conference 1910 Courthouse, North Courtroom 1st Court of Appeals 301 Fannin St, Houston, Texas Gregg Weinberg will lead a panel discussion on Pre-Trial Motions: Rule 91a and Anti-SLAPP April 12, :30 a.m. 1:00 p.m Brookhaven Country Club 3333 Golfing Green Dr. Farmers Branch, Texas Brady Ortego and public relations expert, Jeff Crilley, offer a discussion on how to prepare and deal with civil unrest in your community. To register, contact James Nicholson at office@dfwcai.org Austin Office: 111 Congress Plaza, Suite 1620 Austin, Texas (512) Dallas Office: Mockingbird Station 5307 E. Mockingbird Lane, Suite 685 Dallas, Texas (214) Fort Bend Office: Sugar Land Town Square 2277 Plaza Drive, Suite 290 Sugar Land, Texas (281) Houston Office: 2800 Post Oak Blvd, 57th Floor Houston, Texas (713) San Antonio Office: 4630 N. Loop 1604 W., Suite 311 San Antonio, Texas (210) April 12, :30 p.m. The Club at Riverstone University Blvd. Sugar Land, Texas Aaron Dobbs and Rahila Sultanali will be presenting on Securing Your Future: Need for Wills, Asset Protection and Minimizing Tax Liability - Do you have a plan in place to secure your future, your family and your assets from taxes, liability and legal complications? Or do you have a plan that is now obsolete and needs to be revised? Join us for an expert discussion on the benefits of having a will, the pros and cons of creating trusts, the importance of powers of attorneys, what you can do to protect your assets and how you can minimize your tax liability. (800) If you plan on joining, please RSVP with number of attendees to RSVP@Riverstone.com 8