tag:blogger.com,1999:blog-59764313393648489742024-03-05T08:03:54.801-05:00North Carolina HOA Law BlogA blog reporting and commenting on legal developments of note affecting HOA/condo/property owners associations and small businesses in North Carolina.zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comBlogger41125tag:blogger.com,1999:blog-5976431339364848974.post-16602471184715309792023-08-07T18:20:00.001-04:002023-08-08T15:38:28.293-04:00Board of Directors Attendance Requirements - Mandatory or Permissive?<p><span style="font-family: arial; font-size: medium;">The bylaws (note that it's one word; not "by-laws" or "by laws") of many homeowners associations and condominum associations often contain a provision stating that the board of directors "shall have the power to remove any board member who misses 3 or more consecutive board meetings", or words to that effect. This is a very common provision which appears in almost every HOA’s bylaws, although at least in North Carolina such a provision is not required by law. What is the board to do with such a provision?</span></p><p><span style="font-family: arial; font-size: medium;">While a board certainly does not want to encourage its members to skip meetings, these provisions are almost always permissive, not mandatory – they <u>allow</u> the board to remove a director who misses too many meetings, but do not <u>require</u> the board to do so. Check your own homeowners association's bylaws to be sure, but "powers" of the board are things it <u>may</u> do if it wishes, but is not required to do.</span></p><p><span style="font-family: arial; font-size: medium;">Contrast these powers with what is often the next section of many association bylaws, which provides a list of "duties" which the board is <u>required</u> to undertake. Duties are things the board members must ensure are reasonably accomplished on a regular basis in order to fulfill their fiduciary duties, and those of the board as a whole. </span></p><p><span style="font-family: arial; font-size: medium;">Bottom line, provided that removal of a board member who misses too many meetings is only listed in your bylaws as a "power" and not a "duty", the board of directors is not required to remove a director who misses too many meetings, but it does have the power to do so, and should definitely strongly consider doing so if there is a director with repeated attendance issues. Boards should at the very least discuss the matter with the problem director and make sure there is a clear expectation in place of regular attendance, or else encourage the director to step down in favor of someone with more time to devote.</span></p><p><span style="font-family: arial; font-size: medium;">What about other behavior problems with board members, like sharing internal board discussions throughout the neighborhood, failing to keep legal or collection matters confidential, or refusing to abide by a properly-made board decision? For that you need a separate ethics and confidentiality policy which ties in with your bylaws to allow disciplinary action to be taken. But that is a subject for another blog post! In the meantime, if we can be of assistance to your North Carolina or South Carolina homeowners association, property owners association, or condominium association, drop us a line at info[at]moretzlaw.com or visit us online at <a href="http://www.moretzlaw.com">www.moretzlaw.com</a> and <a href="http://www.HOAninjas.com">www.HOAninjas.com</a>. Thanks for reading the NC HOA Law Blog!</span></p>zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-20680369558965826402022-06-17T14:26:00.007-04:002024-02-21T16:37:01.915-05:00North Carolina Supreme Court Limits HOAs' Ability to Restrict Solar Panels<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEivmaV6m3HwWAXPtCOmrUcv4qrXF5lmpmbnD4A8-7SdLk3Pb_qE_s6VuWny8AmV7WBJMnIkUHOjikiUQo6fskiY7Wetf5bQgTOQf-JxiabbrJ81bl6VRCkCdnAfqTpLSxWNuamorFZH7yRjj0GKK712Edj4dDiOUQnIpoRch4sCaNFZiXhRXRv1tKa2jQ/s624/farwig%20home.png" style="display: block; margin-left: auto; margin-right: auto; padding: 1em 0px; text-align: center;"><img border="0" data-original-height="362" data-original-width="624" height="232" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEivmaV6m3HwWAXPtCOmrUcv4qrXF5lmpmbnD4A8-7SdLk3Pb_qE_s6VuWny8AmV7WBJMnIkUHOjikiUQo6fskiY7Wetf5bQgTOQf-JxiabbrJ81bl6VRCkCdnAfqTpLSxWNuamorFZH7yRjj0GKK712Edj4dDiOUQnIpoRch4sCaNFZiXhRXRv1tKa2jQ/w400-h232/farwig%20home.png" title="The Farwig home" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;">Here's the house in question: What do you think?</span></td></tr></tbody></table><br /><div style="text-align: justify;">
Today the N.C. Supreme issued its ruling in favor of the homeowners in the case concerning the HOA’s authority to prohibit solar panels on the front of a home via an architectural review decision as opposed to where such panels are specifically prohibited in the recorded restrictions for the HOA. The decision by the Supreme Court overruled both the trial court’s and the Court of Appeal’s decisions. The Court was divided 4-3 and the opinion includes strong dissents by three conservative justices including the Chief Justice. </div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The case involved the interpretation of N.C. Gen. Stat. 20B-20, which generally prohibits unreasonable restrictions on the installation of solar collectors, but which contains a very specific exception in subsection (d) thereof allowing homeowners associations to prohibit solar collectors on the fronts of homes. That exception reads as follows:</div><div style="text-align: justify;"><br /></div><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px;"><div style="text-align: justify;">(d) This section does not prohibit a deed restriction, covenant, or similar binding agreement
that runs with the land that would prohibit the location of solar collectors as described in subsection
(b) of this section that are visible by a person on the ground:
(1) On the facade of a structure that faces areas open to common or public access;
(2) On a roof surface that slopes downward toward the same areas open to common
or public access that the façade of the structure faces; or
(3) Within the area set off by a line running across the façade of the structure
extending to the property boundaries on either side of the façade, and those
areas of common or public access faced by the structure.</div></blockquote><div style="text-align: justify;"><br /></div><div style="text-align: justify;">Seems pretty clear, right? In a somewhat tortured analysis, the majority determined that this language allows homeowners associations to prohibit front-facing solar panels <u>only </u>if the restriction appears in the association's recorded restrictions, and <u>not</u> if the prohibition is made by the association (or its architectural review committee, in this case) pursuant to its architectural review process, even if its architectural review is granted very wide latitude in the recorded documents, as it was in this case.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">A number of liberal (North Carolina Attorney General Joshua Stein's office) and pro-solar-industry groups weighed in on the case by submitting briefs encouraging the Court to overrule the Court of Appeals, and it appears that the decision had an unenunciated policy basis behind it aimed at encouraging the use of solar power, which is admittedly the stated intention of the statute.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">In our mind, the dissent (and the Court of Appeals) makes the better argument, and of course we are in general in favor of decisions which support rather than limit community associations' authority to determine what is best for their neighborhoods. But like it or not, the decision of the majority controls, meaning that HOAs now <u>do not</u> have authority to prohibit solar collectors on homes unless that authority is specifically set forth in the HOA’s recorded restrictions, or an amendment thereto - the decision cannot be simply based on the HOA's architectural review authority. The case is <a href="https://appellate.nccourts.org/opinions/?c=1&pdf=41507" target="_blank">Belmont Association v. Farwig</a>.</div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><a href="mailto:info@moretzlaw.com" target="_blank">Contact us</a> if we can assist your association in implementing its own enforceable restrictions and rules and regulations.</div>zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-69575705260510212272022-05-23T18:44:00.006-04:002022-05-23T18:48:59.698-04:00HOA transfer fees - are they enforceable in North Carolina? What about in South Carolina?<p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><span style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><a href="https://www.wsoctv.com/news/local/south-carolina-hoas-can-charge-substantial-fee-leave-neighborhood/T6F74HYOTZEZPJ33QU5JUZL4RM/" target="_blank"><img alt="WSOC-TV interview" data-original-height="731" data-original-width="750" height="502" src="https://blogger.googleusercontent.com/img/a/AVvXsEgSoUUAOu3dzKbadJDnei8YcQn5nkR9HCTevFxTLZJqSUrDQvGqr8NrNSnf2avUc1CB7HkFLLrfemepUMqnA-tTVvMg4gLGLsdLQPnunka9mnitAhpxz5kX7p-ksIALdSTvWoSs36vLEF2kmMuAdPwGMn8GFO1m7Qa_sqcUewMb1ZX4OJRQLyKK3rUdXw=w640-h502" title="WSOC-TV interview with Zac Moretz re HOA transfer fees" width="640" /></a></span></td></tr><tr><td class="tr-caption" style="text-align: center;"><a href="https://www.wsoctv.com/news/local/south-carolina-hoas-can-charge-substantial-fee-leave-neighborhood/T6F74HYOTZEZPJ33QU5JUZL4RM/" target="_blank"><span style="font-family: arial; font-size: x-small;">WSOC-TV interview re HOA transfer fees</span><br /></a></td></tr></tbody></table><span style="font-family: arial;"><br /></span></p><p><span style="font-family: arial;">We were pleased to be featured on today's WSOC-TV news in an investigation by reporter Scott Wickersham about HOA transfer fees. You can watch the report here: </span><a href="https://www.wsoctv.com/news/local/south-carolina-hoas-can-charge-substantial-fee-leave-neighborhood/T6F74HYOTZEZPJ33QU5JUZL4RM/" style="font-family: arial;" target="_blank">South Charlotte HOA charges substantial fee to leave neighborhood</a></p><p><span style="font-family: arial;">We could write pages about the topic, but suffice it to say that for any North Carolina HOA or condominium created on or after July 1, 2010, transfer fees, meaning any fee paid to the HOA or anyone else, are prohibited <u>except for from the first purchaser from the developer</u>. </span></p><p><span style="font-family: arial;">While HOAs or condominiums created prior to that date are excluded from this prohibition, any HOAs considering enforcing a transfer fee by lien or other legal action should take great care and consult with their attorneys first.</span></p><p><span style="font-family: arial;">Fees paid to the HOA or the HOA's management company for closing certifications or payoff letters are NOT considered transfer fees as long as they do not exceed $200 (plus an additional $100 rush fee if needed within 48 hours.)</span></p><p><span style="font-family: arial;">In South Carolina, transfer fees are NOT regulated and are purely a matter of your HOA's recorded restrictions. You have read those, right?</span></p><p><span style="font-family: arial;">As always, you need to get involved in your HOA and be aware of not only where its money is going, but also where it is coming from - it could be from you when you go to sell your home.</span><span style="font-family: arial;"> All associations are required to have an annual meeting, and in North Carolina, additionally are required to have an annual budget meeting where the budget for the upcoming year is reviewed with the members. </span></p><p><span style="font-family: arial;">Avail yourself of these opportunities to be aware of where the association’s funds come from and where they go! Get involved in the budget process so you are not surprised when charges may become due at closing.</span></p><p><span style="font-family: arial;"></span></p><p><span style="font-family: arial;">At closing, buyers and sellers can only be made to pay what they have legally agreed to pay as between the two of them. The closing attorney works for them. Subject to the terms and conditions of the purchase agreement between the parties, the closing attorney should not put anything on the final closing statement which is objected to by either party.</span></p><p><span style="font-family: arial;">Folks buying or selling homes need to review the closing disclosures carefully <u>and as far ahead of time as possible!</u> Be prepared to delay closing if necessary until your concerns regarding what you are being charged at closing are satisfied. This means not having movers scheduled at the home for the same day that closing is scheduled, for example. Sellers in particular have little bargaining power at the closing table, and even more so if there are movers moving their furniture out the front door at the same time they are reviewing the closing documents for the first time.</span></p><p><span style="font-family: arial;"><b><i>We represent HOAs and condominium associations throughout North Carolina. We DO NOT represent homeowners in disputes with their HOAs. Please <a href="mailto: info@moretzlaw.com" target="_blank">contact us</a> if we can be of service to your HOA.</i></b></span></p><p><br /></p>zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-37622503408891465362021-10-18T11:52:00.003-04:002021-10-18T11:52:28.683-04:00Special Assessments: What HOA and Condominium Board Members, Owners and Buyers Need to Know<p><span style="font-family: Calibri, sans-serif; font-size: 12pt;"><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody><tr><td style="text-align: left;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgGbnSzW4eb5fb8E-gi4pALkNI5X4PF8eKpMYSh3Z6e9UX1ZDlvursw8KMnwXoQqxXuf37bEDuzLCjL_rqJEq0SNNXfLzAoxpb4ehLzpEjU3BuG1X9lO0f-lQ2rIBcbqD6-E833MtkOJ0dL/s2048/champlain+towers.jpg" imageanchor="1" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img alt="Champlain Towers condominium collapse" border="0" data-original-height="1536" data-original-width="2048" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgGbnSzW4eb5fb8E-gi4pALkNI5X4PF8eKpMYSh3Z6e9UX1ZDlvursw8KMnwXoQqxXuf37bEDuzLCjL_rqJEq0SNNXfLzAoxpb4ehLzpEjU3BuG1X9lO0f-lQ2rIBcbqD6-E833MtkOJ0dL/w320-h240/champlain+towers.jpg" title="Repairs to the Champlain Towers over time funded by special assessments might have helped avoid the disaster." width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: left;"><i>Repairs to the Champlain Towers over time funded by special assessments might have helped avoid the disaster.</i></td></tr></tbody></table><br />Special assessments are a topic
that comes up only occasionally with most single-family residential homeowners
associations, but can come up more frequently with townhome associations or
condominium associations, and even more often for condominiums located at the
coast.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">That's because buildings on the
coast suffer weather-related effects that can require major, costly repairs to
the exteriors of the buildings. </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">The recent </span><span style="font-family: Calibri, sans-serif; font-size: 16px;">Champlain South Towers condominium collapse disaster in Surfside, Florida has brought scrutiny to the issue of how homeowners and condominium assocations can undertake costly maintenance.</span></p>
<p class="MsoNormal" style="mso-outline-level: 1;"><span style="font-family: Calibri, sans-serif; font-size: 12pt;">The North Carolina Bar
Association and North Carolina Association of Realtors have also recently adopted
revisions to the sections addressing special assessments in their jointly-approved
residential Offer to Purchase and Contract, effective July 1, 2021. These
revisions have generated questions.</span></p>
<p class="MsoNormal" style="mso-outline-level: 1;"><span style="font-family: Calibri, sans-serif; font-size: 12pt;">This post looks at the issue of
special assessments from three perspectives – that of HOA or condominium board
members, that of HOA or condominium owners, and that of someone considering
buying a home in an HOA or condominium.</span></p>
<h3 style="text-align: left;"><span style="font-family: Calibri, sans-serif; font-size: 12pt;">Board of Directors Considerations Regarding Special Assessments</span></h3>
<p class="MsoNormal" style="mso-outline-level: 1;"><span style="font-family: "Calibri",sans-serif; font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-bidi-font-size: 10.0pt; mso-fareast-font-family: Times;">If you are a officer or director serving
on the board of a homeowners association, what do you need to know about
special assessments?<span style="mso-spacerun: yes;"> </span>First, special assessments
are not really addressed in the North Carolina Planned Community Act or the
North Carolina Condominium Act.<span style="mso-spacerun: yes;"> </span>Since
they are solely a creature of your association's governing documents, you need
to carefully read those documents to see what they say about what special
assessments can be used for and the process required for them to be
approved.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoNormal" style="mso-outline-level: 1;"><span style="font-family: Calibri, sans-serif; font-size: 12pt;">As always, read your main
declaration first, but also don't forget to read any and all amendments which
may have been made to it, as well as your bylaws.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">Some associations have restrictions on how
special assessments may be used - for example, only for capital improvements,
rather than for operating expenses - and almost all have specific requirements
for how special assessments must be implemented.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">Typically, a membership vote is required, and
oftentimes the required vote is a higher percentage than is otherwise
required.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">Pay special attention to
whether the approval percentage required is a percentage of the </span><u style="font-family: Calibri, sans-serif; font-size: 12pt;">entire</u><span style="font-family: Calibri, sans-serif; font-size: 12pt;">
membership of the association, or just of those voting at a meeting or by
ballot at which a quorum has been established.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span></p>
<p class="MsoNormal" style="mso-outline-level: 1;"><span style="font-family: Calibri, sans-serif; font-size: 12pt;">While it is common to see special
assessments only allowed for capital expenses, and with super-majority voting
requirements of the membership required for approval, these are generally a bad
idea in our opinion.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">An association has
to be able to pay its bills, and in the case of a condominium with serious
structural or water intrusion issues, the process should not be so difficult as
to prevent the association from moving forward with needed repairs.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">If you need further proof of that statement,
see the Champlain South Towers condominium collapse. If your HOA has significant restrictions on how special assessments must
be passed or how the funds can be used, consider speaking with an experienced
HOA attorney about amending them, especially if your HOA consists of stacked (i.e.,
multi-floor) condominium units.</span></p>
<p class="MsoNormal" style="mso-outline-level: 1; page-break-after: avoid;"><span style="font-family: Calibri, sans-serif; font-size: 12pt;">Once a
special assessment is approved by the membership, it must then be formally
adopted by the board of directors of the association.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">(Note: These two steps could happen in
reverse order depending on the association’s documents, but the bottom line is
that special assessments typically must be approved by both the board and the
membership.) At the time a special assessment is adopted by the board, the
board should be very specific in adopting procedures as to how the assessment
may be paid by the owners, since typically a special assessment is a larger
amount and often boards will allow homeowners to pay them over time.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span></p>
<p class="MsoNormal" style="mso-outline-level: 1; page-break-after: avoid;"><span style="font-family: Calibri, sans-serif; font-size: 12pt;">The
proper procedure is to add the full amount of the special assessment to the
homeowner's account at the time it has been approved by both the board and the
membership and has become effective.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">The
board may allow owners to make payments over time, but this should only be
extended to creditworthy owners who are current on all their obligations to the
association. The board should also consider including details making the
special assessment payable in full should the home change hands.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">In addition to allowing the association to
receive the funds that it needs, doing so also provides certainty to sellers
and buyers when there is a sale.</span></p>
<h3 style="break-after: avoid; text-align: left;"><span style="font-family: Calibri, sans-serif; font-size: 12pt;">Homeowner Consideration Regarding
Special Assessments</span></h3>
<p class="MsoNormal" style="mso-outline-level: 1; page-break-after: avoid;"><span style="font-family: "Calibri",sans-serif; font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-bidi-font-size: 10.0pt; mso-fareast-font-family: Times;">If you are
an owner in an association which is considered a special assessment, look into
the matter carefully and make sure that the board has done its due diligence in
determining that the special assessment is really needed, and also in obtaining
multiple bids if a major construction or renovation project is involved.<span style="mso-spacerun: yes;"> </span>(We recommend always getting the
association's attorney involved if there is major construction involved. Renovation
construction projects, especially on condominium buildings, can be very
complicated, and such contracts need to be drafted very carefully to address
all sorts of contingencies which are outside of the scope of this article, but which
can make a huge difference in whether the project is successful or not.)<o:p></o:p></span></p>
<p class="MsoNormal" style="mso-outline-level: 1; page-break-after: avoid;"><span style="font-family: "Calibri",sans-serif; font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-bidi-font-size: 10.0pt; mso-fareast-font-family: Times;"><o:p> </o:p></span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">Don't be
one of those people who votes no on anything that might raise your dues.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">The board members are homeowners as well, and
they don't want to pay a special assessment any more than you do.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">A special assessment will probably only be proposed
if it's really necessary.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">At the end of
the day, it is the board's job to keep the property values up and maintain the
common elements, and if a special assessment is needed to do so, this benefits
all owners in the community, even if the immediate financial commitment is difficult
at the moment.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">Again, see the Champlain
South Towers condominium collapse disaster if you have doubts regarding the
duty of all owners to chip in to make sure needed repairs get done.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">Or, consider what happens to the value of
your investment in your home if it becomes known to the public that your
association if unable to generate the funds necessary to properly to maintain its
buildings.</span></p>
<h3 style="break-after: avoid; text-align: left;"><span style="font-family: "Calibri",sans-serif; font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-bidi-font-size: 10.0pt; mso-fareast-font-family: Times;"><o:p> </o:p></span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">What if
You Are Considering Buying Into an HOA with Special Assessments?</span></h3>
<p class="MsoNormal" style="mso-outline-level: 1; page-break-after: avoid;"><span style="font-family: "Calibri",sans-serif; font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-bidi-font-size: 10.0pt; mso-fareast-font-family: Times;">Finally,
if you are a potential buyer within a homeowners association, especially if it
is a condominium association with multi-floor buildings, or located at the
coast, inquire very specifically as to whether there are any special
assessments, either under consideration or in place, and get it in writing.<span style="mso-spacerun: yes;"> </span>Sometimes you will see the term “confirmed
special assessment”. <span style="mso-spacerun: yes;"> </span>That is a
redundancy - this just means it's an actual special assessment that is due and
payable.<span style="mso-spacerun: yes;"> </span>If so, the amount due will need
to be prorated at closing between you and the seller, and this can sometimes be
confusing if the payments are due over time.<span style="mso-spacerun: yes;">
</span>See the discussion above on this topic.<span style="mso-spacerun: yes;">
</span>As a buyer, you will want to get as much in writing as possible from the
board and the seller as to how much is due and a clear understanding of what,
if any, your future obligations will be based on how much is paid between the
two parties at closing.<o:p></o:p></span></p>
<p class="MsoNormal" style="mso-outline-level: 1; page-break-after: avoid;"><span style="font-family: "Calibri",sans-serif; font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-bidi-font-size: 10.0pt; mso-fareast-font-family: Times;"><o:p>We are attorneys licensed in the state of North Carolina only, and this post is obviously general in nature and does not constitute legal advice. </o:p></span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">Please
reach out to us if we can help your association with a special assessment
approval process or an upcoming construction project.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">While we hope our blog posts are instructive
for all folks interested in community association matters, keep in mind we represent associations exclusively and do
not represent homeowners in disputes with their associations.</span><span style="font-family: Calibri, sans-serif; font-size: 12pt;"> </span><span style="font-family: Calibri, sans-serif; font-size: 12pt;">Thank you for reading!</span></p>zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-27198992679325867182021-09-03T07:12:00.000-04:002021-09-03T07:12:31.809-04:00Recent Cases Cause Uncertainly Regarding Residential Restrictions and the N.C. Real Property Marketable Title Act<p class="MsoNormal" style="text-align: justify;"><a name="_Hlk81489531"><span style="font-family: arial;">You may have heard about the recent
pair of cases decided by the North Carolina Court of Appeals involving the
North Carolina Real Property Marketable Title Act, which is codified at NCGS
Chapter 47B. The two decisions are <u>C
Investments 2, LLC v. Auger et al.</u>, and <u>C.E. Williams III et al. v.
Reardon et al.</u> These decisions will have a significan adverse impact to North Carolina HOAs and condominiums if allowed to stand - but we don't believe that they will be allowed to stand.<o:p></o:p></span></a></p>
<p class="MsoHeader" style="tab-stops: .5in; text-align: justify;"><span style="font-family: arial;">The Marketable Title Act was passed
almost 50 years ago and was designed to extinguish certain title flaws or
encumbrances, if they had not appeared in any recorded documents within a given
chain of title within the past 30 years.
The point was to clarify title and remove minor, old or forgotten
matters of title if they had not reoccurred, been rerecorded, or been litigated
within the past 30 years of when the title was being examined. The Marketable Title Act has a number of
exceptions for things which are <u>not</u> extinguished even though they may be
more than 30 years old, including an exception for "covenants
applicable to a general or uniform scheme of development which restrict the
property to residential use only, provided said covenants are otherwise
enforceable." This exception had
always been interpreted by real property and homeowners association lawyers to
mean that restrictive covenants for residential subdivisions were excepted from
the Marketable Title Act and therefore remain in place in perpetuity, as most
covenants specifically provide, even if they are older than 30 years and
even if they don't appear in a given chain of title within the past
30 years.</span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: arial;"><o:p></o:p></span></p>
<p class="MsoNormal" style="text-align: justify;"><span style="font-family: arial;">The Court of Appeals unfortunately
ruled contrary to the longstanding common opinion and practice, interpreting the
above-quoted provision to mean that residential restrictive covenants which
have not appeared in a given chain of title within the past 30 years are
completely extinguished, <u>other than</u> any provision specifically
restricting the property to residential use only. While the Court of Appeals took the position
that this was a plain reading of the plain words of the statute, that reading
if allowed to stand would upend every subdivision with restrictive covenants
30 years or more old and cause chaos in the chains of title of thousands
of homes and residential subdivisions statewide.</span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: arial;"><o:p></o:p></span></p>
<p class="MsoNormal" style="text-align: justify;"><span style="font-family: arial;">For example, imagine an older
subdivision with residential restrictive covenants of the typical sort, which
were originally recorded more than 30 years ago. Mr. and Ms. Jones reside on Lot 1
and have lived in their home for 31 years.
Mr. and Ms. Smith live on Lot 2 and just bought their home
last year. Based on these Court of
Appeals rulings, the covenants are now extinguished on Mr. and Ms. Jones'
property, other than the restriction that it can only be used for single family
residential purposes. So they can quit
paying dues, maintain old junked cars on cinderblocks in their front yard, and
allow their home to fall into complete disrepair. On the other hand, what is the situation next
door at the Smiths? It depends on what
the deed they received said, and what the deeds of all the other folks in the
chain of title for their lot in the past 30 years said. If the recorded restrictive covenants were
mentioned in any of those deeds, then by the Court of Appeal's reasoning, they
have been revived and the Smiths must comply with every provision of those
restrictions. If none of the deeds
mentioned the restrictions, then they get to be scofflaws just like their
neighbors the Joneses. What if their
deed said something vague like, "This deed is subject to all documents of
record"? Who knows? The Court of Appeals doesn't tell us. Thus, chaos.</span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: arial;"><o:p></o:p></span></p>
<p class="MsoNormal" style="text-align: justify;"><span style="font-family: arial;">It is a universal opinion among real
property and homeowners association attorneys in the state that these decisions
were wrong. The General Assembly is
currently reviewing legislation to make corrections to the Marketable Title Act
that will put things back the way they have always been. The chaos which will result if that does not
happen it is a strong assurance that it will. </span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: arial;">Bottom line: We do not believe that this is a situation which should be of
concern for North Carolina HOAs or condominiums at this time. We believe the General Assembly will remedy the matter. Of course we will be monitoring the
situation and will provide further updates as they occur.</span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: arial;">Contact us if we can provide any further information, and thank you for following the NC HOA Law Blog.</span></p>zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-91301746848872941872021-05-28T17:20:00.001-04:002021-05-28T18:04:47.706-04:00When it Rains, it May Pour on Your Homeowners Association<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto;"><tbody><tr><td style="text-align: center;"><span style="font-family: arial;"><img border="0" data-original-height="640" data-original-width="480" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEip87FN9M_r3JAThO9Dy3x3SFvvUkpfVoZfh2IHzEw7ouvYh1cLB8TjDn_kFKtI4PbpkoiQQfWsTR6PCpSIl6SIquMGVSjVBpNebX1VeUUC-ftq16uFBadhNICwFvQesszI_pn0-YWRh4S-/s320/storm+pipe.jpg" style="margin-left: auto; margin-right: auto;" /></span></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="text-align: left;"><span style="font-family: arial;">Do you have one of these lovely structures in your yard?</span></span></td></tr></tbody></table><div style="text-align: left;"><span style="font-family: arial;"> </span></div><div style="text-align: justify;"><span style="text-align: left;"><span style="font-family: arial;">It seems like it rained most all of this past winter. It rained for 4 days straight as this post
was being written, and regardless of your beliefs regarding climate change, it
is a fact that we in the Carolinas have had more than our fair share of rain
over the last few years.</span></span></div><p class="MsoNormal"><span style="font-family: arial;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial;">Rain, and the flow of it across the ground that we call
storm water management, is probably the most common issue we face regularly as
homeowners association attorneys. I've
certainly been fielding a lot of calls lately about it. </span></p><p class="MsoNormal"><span style="font-family: arial;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial;">The general rule regarding storm water is that a property
owner is not liable to neighboring property owners for storm water flowing
across his or her property onto their property, unless the property owner has
changed the natural flow of storm water across his or her property in a way
that adversely affects the neighbor by directing more water onto the neighbor's
property than would otherwise naturally occur. </span></p><p class="MsoNormal"><span style="font-family: arial;">Thus, in general, each homeowner in a homeowners association is
responsible for storm water flow across his or her property and cannot blame
his or her uphill neighbor for storm water naturally flowing downhill onto his
lot, unless he can show that the neighbor made changes to his lot which are
directing an unnatural amount of water onto him/her. It is important to keep this common law
concept in mind if you are having grading work done on your property or putting
in an in-ground swimming pool, for example.
You must do so in a way in which manages the storm water on your own
property and does not direct additional storm water onto your neighbors.</span></p><p class="MsoNormal"><span style="font-family: arial;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial;">We often hear from our homeowners association clients when
property owners in the neighborhood demand that the association step in to
correct adverse drainage across the owner's lot. Take a look at this awful situation:</span></p><p class="MsoNormal"></p><div class="separator" style="clear: both; text-align: center;"><iframe allowfullscreen='allowfullscreen' webkitallowfullscreen='webkitallowfullscreen' mozallowfullscreen='mozallowfullscreen' width='320' height='266' src='https://www.blogger.com/video.g?token=AD6v5dy2rgv5_deycJ8WNXd4PLWOhi2pb4uQ-jG1JfS5c8a8LKUkR-rPsMKt__lZaKiM_R2Cx4CRCHrT9LYirfNLZQ' class='b-hbp-video b-uploaded' frameborder='0'></iframe></div><span style="font-family: arial;"><br /></span><p></p><p class="MsoNormal"><span style="font-family: arial;">Unfortunately in almost all cases, the homeowner's wish to make poor drainage the
association’s responsibility is headed down the drain. </span><span style="font-family: arial;">Unless the restrictive covenants provide otherwise, storm water pipes, drains, swales, ditches, and the like on a homeowner's lot are that homeowner's responsibility to maintain, and an individual homeowner rarely has recourse against any other parties for excessive storm water coursing across the surface of his or her lot, or for the maintenance and repair of storm water pipes installed within their lot. That bell tolls for him or her and no one else.</span></p><p class="MsoNormal"><span style="font-family: arial;">In general, homeowmers own their lots down to the
center of the earth and up into the sky as far as the eye can see, and
everything in between. This includes any
storm water pipes installed on or under the property, even though the storm
water pipe was probably installed by the developer or the home builder, not the
homeowner, and even though the storm water pipe may drain water from other
lots, common areas, or roads of the neighborhood and not just from the
homeowner's own lot. </span></p><p class="MsoNormal"><span style="font-family: arial;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial;">From the prospective of the homeowner's association, this is
the correct result. The primary purposes
of a homeowner's association are to maintain property values and maintain the
common elements. It is not a police
force, nor is it a public works department.
The association did not design, approve, or construct the lots or the roads, nor does it usually have the right to go upon lots to correct topography or drainage, nor does it typically have the financial resources to do so. The homeowner must generally look to his or her own resources or confer with their neighbors to address storm water
problems. </span></p><p class="MsoNormal"><span style="font-family: arial;">Occasionally, storm water
apparatus may be maintained by the local municipality, and if so that
municipality should always be the first recourse to assist with storm water
issues. Most cities and counties have
storm water engineers on staff due to the increasing requirements of the
federal government under the Clean Water Act and most are more than willing to
come out and meet on site to examine issues.
Occasionally, there may also be issues with storm water catch basins or
drains constructed within city streets or state-maintained roads, so the city
transportation department or North Carolina Department of Transportation, if a
state road, are often good resources.
Remember that in North Carolina, counties do not maintain roads, so do
not call your local county government with street or road related issues in
most cases.</span></p><p class="MsoNormal"><span style="font-family: arial;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial;"><o:p> </o:p>The only instances where a homeowner's association might
have liability for storm water issues are where the association owns adjacent
common area. If the association itself
has made topographic changes to common area it owns and which is causing
adverse drainage onto a neighbor's lots, then it of course may be liable. And in some case, the restrictive covenants for
the neighborhood specifically provide that the association is to maintain the
storm water management structures throughout the neighborhood. (This would occur more often in a commercial
property owners association, or sometimes in a condominium or townhome situation
– almost never in a single-family detached subdivision.) </span></p><p class="MsoNormal"><span style="font-family: arial;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial;"><o:p> </o:p>If the subdivision has private roads which are maintained by
the association, the same situation as described above with city or state roads
might apply, so the association needs to make sure any catch basins or storm
drains within its privately-maintained roads are properly maintained so that
they are draining the roads as originally designed. But again, the association did not design,
approve, or construct the roads, so it generally cannot be held liable for
inadequate design, but only for failing to reasonably and properly maintain
those specific storm water management devices which are within its private roads,
or any catch basins or similar devices it owns or maintains. Storm water pipes, ditches, drains, and
swales on individual lots generally do not fall within this area of
responsibility.</span></p><p class="MsoNormal"><span style="font-family: arial;">Don't
hesitate to contact us if we can assist your association, whether during rain
or shine or sleet or dark of night!</span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEip87FN9M_r3JAThO9Dy3x3SFvvUkpfVoZfh2IHzEw7ouvYh1cLB8TjDn_kFKtI4PbpkoiQQfWsTR6PCpSIl6SIquMGVSjVBpNebX1VeUUC-ftq16uFBadhNICwFvQesszI_pn0-YWRh4S-/s640/storm+pipe.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><br /></a><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEip87FN9M_r3JAThO9Dy3x3SFvvUkpfVoZfh2IHzEw7ouvYh1cLB8TjDn_kFKtI4PbpkoiQQfWsTR6PCpSIl6SIquMGVSjVBpNebX1VeUUC-ftq16uFBadhNICwFvQesszI_pn0-YWRh4S-/s640/storm+pipe.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgrLbXGsDX4QJSeOkZVGL7AowgzBVvRjSMIuXSiB9W-xzxhbZxcz-98HC7a1eX59LDGEWVvgbQiSGZx0qR8q5sE4AdeU_KdBvJrDkHLyzqQObjTXyDI-urguKh6omhDY6TyE19uUDWUGue2/" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="572" data-original-width="442" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgrLbXGsDX4QJSeOkZVGL7AowgzBVvRjSMIuXSiB9W-xzxhbZxcz-98HC7a1eX59LDGEWVvgbQiSGZx0qR8q5sE4AdeU_KdBvJrDkHLyzqQObjTXyDI-urguKh6omhDY6TyE19uUDWUGue2/" width="185" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><br /></div><br /><p></p>zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-9761845426561809342020-10-20T08:10:00.001-04:002021-05-28T17:23:06.947-04:00Huge Investment Funds Are Snapping Up Hundreds of Thousands of Single Family Homes and Turning Them Into Rentals<p class="MsoNormal"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgWszxHE6rNPDlS6u0fIy7q4LygufV1c7a2g5SjP102oEClUBIgSr-G-6e5r2Zp2-OVqgPym0o-wtiPW66nsHgRSZn-tdKm4-lRVpsWvk6yP5kWq87JGuCg6rN2HZwZ2Uqyan_TC91n97oX/s1920/original.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1080" data-original-width="1920" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgWszxHE6rNPDlS6u0fIy7q4LygufV1c7a2g5SjP102oEClUBIgSr-G-6e5r2Zp2-OVqgPym0o-wtiPW66nsHgRSZn-tdKm4-lRVpsWvk6yP5kWq87JGuCg6rN2HZwZ2Uqyan_TC91n97oX/s320/original.png" width="320" /></a></div><br />"Real-estate investors have a mountain of money looking
for a home. Lately a lot of it is ending up in suburban single-family
houses."<p></p><p class="MsoNormal">Invitation Homes, one of the largest single-family home rental
companies, just received another $1 billion of funding in order to add more
rental houses to its 80,000-home portfolio. American Homes 4 Rent and Tricon
Residential are aggressively buying as well. Links to a couple of articles on the subject are posted below.</p><p class="MsoNormal">Huge investment funds would be happy to take over your neighborhood. Homeowners' associations need to
be aggressive in adding and enforcing rental restrictions, especially those in
the $150,000 to $300,000 price range, or they will find themselves quickly
turning into rental communities. </p><p class="MsoNormal">Contact us if you'd like help protecting your
HOA.</p><p class="MsoNormal"><o:p></o:p></p><p><a href="https://www.wsj.com/articles/invitation-rockpoint-forge-1-billion-rental-home-venture-11602067500" target="_blank">https://www.wsj.com/articles/invitation-rockpoint-forge-1-billion-rental-home-venture-11602067500</a><br /></p><p><a href="https://www.theatlantic.com/technology/archive/2019/02/single-family-landlords-wall-street/582394/" target="_blank">https://www.theatlantic.com/technology/archive/2019/02/single-family-landlords-wall-street/582394/</a><br /></p>zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-44001020927673253462020-08-31T10:03:00.005-04:002020-08-31T10:04:50.279-04:00Community Association Management Insider Quotes Moretz Law Group on Association Easements<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWXe_YrYjqawTQK_xi0kaK1Ch40TI-mjgSjr7BPOLcd827jhiy0A-Rl41BvLPYz8qQh808SUlvBKWR3QMheHMT3ZZExBbdUcW8Rasobm6lefWSgTiUx82mhM6NVNj40YsCG9yu_A2fA5Jk/s964/fiorentino+at+sea+watch.JPG" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img alt="Sea Watch at Kure Beach boardwalk" border="0" data-original-height="550" data-original-width="964" height="183" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWXe_YrYjqawTQK_xi0kaK1Ch40TI-mjgSjr7BPOLcd827jhiy0A-Rl41BvLPYz8qQh808SUlvBKWR3QMheHMT3ZZExBbdUcW8Rasobm6lefWSgTiUx82mhM6NVNj40YsCG9yu_A2fA5Jk/w320-h183/fiorentino+at+sea+watch.JPG" title="The Sea Watch at Kure Beach boardwalk & tiki hut which was in dispute in the case." width="320" /></a></div><br />Were were pleased to be quoted in <a href="https://www.communityassociationinsider.com/court-upholds-hoas-right-to-tiki-bar-on-access-easement/?access_code=68993" target="_blank">this recent edition of Community Association Management Insider</a> on the topic of easements encumbering HOA common areas and lots and benefiting the homeowners in the association.<p></p><p>Bottom line: Be careful when granting or receiving an easement. Always state what the intentions of the parties are, and be sure to think about what might be needed in the future so your easement is not too narrow, if you're the one receiving it. On the other hand, if your property is being encumbered by the easement, make sure you are specific as to any limitations involved, or you could end up like the homeowners in the <u>Sea Watch at Kure Beach Homeowners Association</u> case <a href="https://nchoalaw.blogspot.com/2020/04/stay-out-of-my-tiki-hut-court-of.html" target="_blank">discussed in the article and also in our blog post here</a>.</p><p>Read the full Community Association Management Insider article <a href="https://www.communityassociationinsider.com/court-upholds-hoas-right-to-tiki-bar-on-access-easement/?access_code=68993" target="_blank">here</a>.</p><p>Read our April, 2020 blog post on HOA easements <a href="https://nchoalaw.blogspot.com/2020/04/stay-out-of-my-tiki-hut-court-of.html" target="_blank">here</a>.</p><p>Consider hiring us or an experienced HOA attorney regarding any easement issues.</p>zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-17283769541634521862020-04-21T18:22:00.000-04:002020-04-21T18:22:59.849-04:00Stay Out of My Tiki Hut! Court of Appeals Explores Extent of Access Easements in Recent Case<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmhrDDo2OHfcQH-HAPIOX9GqDPd_mBEOVNJV5-c4_TvVkzo1iy9B3NECMKwb2XOkWEJGX25j9cddOK22Alb4AEmt2PYdwvHmK375FezOfKO-Ot0pNVZFVIX1GPOLUmWWpoAvdXNztWtESF/s1600/fiorentino+at+sea+watch+from+the+street.JPG" imageanchor="1" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="760" data-original-width="664" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmhrDDo2OHfcQH-HAPIOX9GqDPd_mBEOVNJV5-c4_TvVkzo1iy9B3NECMKwb2XOkWEJGX25j9cddOK22Alb4AEmt2PYdwvHmK375FezOfKO-Ot0pNVZFVIX1GPOLUmWWpoAvdXNztWtESF/s320/fiorentino+at+sea+watch+from+the+street.JPG" width="279" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">The Fiorentino home as seen from the street,<br />with the beach access boardwalk.</td></tr>
</tbody></table>
<br />
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">The North
Carolina Court of Appeals issued an entertaining decision in <i>Sea Watch at
Kure Beach Homeowners' Association v. Fiorentino</i> in November 2019. In this case, a developer of a seaside residential
community had reserved an access easement across a homeowner's lot, Lot 6, for
other residents to access the beach. Eventually,
the access area was expanded to include not only a wooden boardwalk, but also a
deck area, bathrooms, and a tiki bar. After
these improvements had been in place and in use for approximately 10 years, a
homeowner who bought Lot 6 demanded that the improvements be removed and the
easement area returned to its original documented use as set forth in the
easement agreement for access to the beach only. The homeowners association eventually filed
suit and requested a declaratory judgment, which is a request for the court to
declare the respective rights and obligations of the various parties.<o:p></o:p></span></div>
<div class="MsoNormal">
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjsfOKrOU5CH4XMJxJnmCh67x44HatuMmpxxtz5jn_kJVyvQlTTMIfQ9hhZCQihI-ysUb7T0bHcjHd1nAAeO4AA0jDXmX5SG3VfPcbBpe_RNMON9Tp4iIjaC7_lEOxqcGF39XzQHSJ8FUw0/s1600/fiorentino+at+sea+watch.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="550" data-original-width="964" height="227" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjsfOKrOU5CH4XMJxJnmCh67x44HatuMmpxxtz5jn_kJVyvQlTTMIfQ9hhZCQihI-ysUb7T0bHcjHd1nAAeO4AA0jDXmX5SG3VfPcbBpe_RNMON9Tp4iIjaC7_lEOxqcGF39XzQHSJ8FUw0/s400/fiorentino+at+sea+watch.JPG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">The Fiorentino home in question is at top in this picture with what admittedly looks like a pretty large tiki hut on the walkway between the two homes shown.</td></tr>
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<o:p><span style="font-family: Arial, Helvetica, sans-serif;"> </span></o:p><span style="font-family: Arial, Helvetica, sans-serif;"> </span><span style="font-family: Arial, Helvetica, sans-serif;">After a
Superior Court trial, the trial court ruled in favor of the HOA and dismissed
the counterclaims of the owner of Lot 6. The court stated that the improvements
were allowed to remain, and the association was allowed to continue to use of
the deck, bathrooms and tiki bar even though the written easement agreement
only provided for an access easement.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="mso-tab-count: 1;"> </span>The trial
court analyzed the history of the use of this area and made the legal
determination that an "access easement" "is not merely one of
ingress and egress; public representations made by the developer expanded the
easement to one involving use of the improvements" as well. <span style="mso-spacerun: yes;"> </span>The court seemed to also feel that it was
important that the improvements had been in use for a substantial period of
time and in fact, it appeared that the owners of <span style="mso-spacerun: yes;"> </span>Lot 6 had had the use of them along with all of
the other homeowners in the community for about 5 years, which was the amount
of time that the owners of Lot 6 had lived in the neighborhood prior to
purchasing Lot 6.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="mso-tab-count: 1;"> </span>This case
is important for a couple of reasons.<span style="mso-spacerun: yes;"> </span>First
of all, it underlines the need for easements and other similar documents to be
very specific as to the use which is intended by the original parties.<span style="mso-spacerun: yes;"> </span>In this case, the court refused to interpret
the phrase "access easement” strictly and ruled that an access easement
could include the use of these types of pretty significant improvements since
the easement document itself provided no specific limitations on what was meant
by "access".<span style="mso-spacerun: yes;"> </span>Homeowners associations,
developers, and others entering into easements or placing restrictions on land
should be explicit in describing what their intentions are in entering into the
agreement as well as very specifically describing the various rights and duties
granted in the document itself.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="mso-tab-count: 1;"> </span>In
addition, the court found it important that the tiki bar and other improvements
had been in existence for approximately 10 years<span style="mso-spacerun: yes;"> </span>and were apparently well known to the Lot 6 owners
even before they purchased Lot 6.<span style="mso-spacerun: yes;"> </span>This
brings up a couple of other important points.<span style="mso-spacerun: yes;">
</span>The doctrine of estoppel is very important in understanding contract law
and homeowners association law.<span style="mso-spacerun: yes;"> </span>This is
the doctrine of the enforcement of reasonable expectations between contracting parties.<span style="mso-spacerun: yes;"> </span>In this case, the Lot 6 owners had purchased Lot
6 well knowing of the existence of these substantial improvements and
therefore, the court found that they were estopped from later complaining about
them. Estoppel is a key legal concept which prevents a party from reneging upon
an expectation it reasonably induces in another party to the bargain. <o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="mso-tab-count: 1;"> </span>This
decision also highlights that real property purchases are almost always a
"buyer beware" transaction.<span style="mso-spacerun: yes;">
</span>Notwithstanding the fact that sellers in North Carolina are required to fill
out lengthy disclosures in residential real estate transactions, the law of the
state of North Carolina with regard to the purchase of residential property is
generally very buyer adverse. In other words, it is very difficult to sue a
seller, or in this case a third party developer, for any condition on a piece
of land which the buyer was aware of, or should have been aware of, or could
have discovered using reasonable due diligence. Generally, even if the seller
completely lies in a real property disclosure, that lie will not be actionable
unless there is no way the buyer could have detected the true state of the
property using reasonable due diligence prior to closing.<span style="mso-spacerun: yes;"> </span>This decision further exemplifies the rule
that a buyer generally buys property subject to any and all conditions that
they could have reasonably discovered prior to closing.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"> Please reach
out to us if we can assist your homeowners association with any legal matters,
or if you are a developer who prefers to stay out of court!</span></div>
zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-75774842684131946892020-04-17T18:06:00.000-04:002020-04-17T18:06:15.829-04:00Virus Check: What do Businesses Need to Know About COVID-19 Liability?<br />
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<span style="color: #201713; font-size: 24pt;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Virus Check:
What is Your Liability as a Business?</span><span style="font-family: Raleway, serif;"><o:p></o:p></span></span></h2>
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<span style="color: black; font-size: 12pt; letter-spacing: 0.35pt;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></span></div>
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<span style="letter-spacing: 0.35pt;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The current situation we are facing is unprecedented from a legal standpoint. The ability to enforce contracts, loans, leases and all manner of legal relationships is now in question based on financial hardships as well as our court system working at greatly diminished capacity. Reasonableness, negotiation and working cooperatively are now more important than ever before.<o:p></o:p></span></span></div>
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<span style="letter-spacing: 0.35pt;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Businesses of all types are concerned about being sued. What do you need to know?</span></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><strong style="overflow-wrap: break-word;"><span style="letter-spacing: 0.35pt;">Negligence </span></strong><span style="letter-spacing: 0.35pt;">is your first concern.Can a business be sued if an employee or customer were to contract a communicable disease at the employer’s workplace, or from a co-worker or customer? It depends on whether the business took reasonable actions to protect its employees and customers in light of the information available to it – in </span><span style="letter-spacing: 0.35pt;">other words, whether the business was negligent. </span></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><span style="letter-spacing: 0.35pt;">Tort law, or the law of negligence, applies </span><span style="letter-spacing: 0.35pt;">in this situation. It holds that a person can be liable to another person to </span><span style="letter-spacing: 0.35pt;">whom the first person owes a duty if the first person commits an act which is </span><span style="letter-spacing: 0.35pt;">unreasonable (or fails to take a reasonably necessary action) which could </span><span style="letter-spacing: 0.35pt;">reasonably be anticipated to cause damage to the second person, and the second </span><span style="letter-spacing: 0.35pt;">person did not help cause the wrongful act or omission. </span></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><span style="letter-spacing: 0.35pt;">For example, the Governor of North Carolina had previously prohibited all “mass gatherings” of 50 or more people (since reduced to 10); therefore, it was legal at that time (at least in most counties) to have mass gatherings of less than 50. But would this be reasonable in light of the </span><a href="https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/prevention.html" style="letter-spacing: 0.35pt; overflow-wrap: break-word;" target="_blank">CDC’s warnings</a><span style="letter-spacing: 0.35pt;"> against gatherings of more than 10 people? It depends on the situation, but a strong argument could be made that such would not be reasonable - in other words, we could not assure you that you would not get sued if someone got sick from such a gathering.</span></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><span style="letter-spacing: 0.35pt;">You owe a duty of reasonable care to your members, customers and employees; failure to take reasonable care to protect these parties from infection could result in liability. Reasonableness is the touchstone, based upon all the facts and circumstances involved. Failure to abide by local orders or regulations when they are directly intended to preserve public safety, as well as customary standards of care, have been held to constitute actionable negligence in other contexts. Cruise ship operators are already facing numerous lawsuits from those sickened while onboard based on this legal theory. Please </span><a href="mailto:zac@moretzlaw.com?subject=Virus%20check%20question" style="letter-spacing: 0.35pt; overflow-wrap: break-word;">contact us</a><span style="letter-spacing: 0.35pt;"> if we can help you work through liability issues of concern. </span></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><strong style="overflow-wrap: break-word;"><span style="letter-spacing: 0.35pt;"><br /></span></strong></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><strong style="overflow-wrap: break-word;"><span style="letter-spacing: 0.35pt;">Workplace safety</span></strong><span style="letter-spacing: 0.35pt;"> is also obviously very much in play today. In addition to the above negligence standards, workplaces of all types must abide by federal and state occupational health and safety requirements, typically as determined by OSHA. Employers must take efforts to maintain a hazard-free workplace, while still safeguarding the privacy rights of any affected employee. <o:p></o:p></span></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><span style="letter-spacing: 0.35pt;">OSHA requires that employers provide a safe workplace for all employees which is "</span><a href="https://www.osha.gov/as/opa/worker/employer-responsibility.html" style="letter-spacing: 0.35pt; overflow-wrap: break-word;" target="_blank">free from recognized hazards … likely to cause death or serious bodily harm</a><span style="letter-spacing: 0.35pt;">."</span></span></div>
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<span style="letter-spacing: 0.35pt;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">OSHA has not adopted specific regulations regarding COVID-19 in the general workplace at this time, but has instead recommended that <a href="https://www.osha.gov/SLTC/covid-19/standards.html" style="overflow-wrap: break-word;" target="_blank">employers follow CDC guidelines</a> regarding personal safety, as well as any state or local guidelines or requirements - <a href="https://www.labor.nc.gov/coronavirus-disease-2019-covid-19#solutions" style="overflow-wrap: break-word;" target="_blank">North Carolina's being found here</a>. </span></span></div>
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<span style="letter-spacing: 0.35pt;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">The North Carolina Department of Labor, like OSHA, has not adopted specific regulations, but has emphasized the need to follow social distancing guidelines, maintain a clean workplace, and work from home where possible, and has emphasized the importance of proper personal protective equipment. Both the
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<span style="letter-spacing: 0.35pt;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">NC Department of Labor and OSHA have especially emphasized worker safety with regard to respiration - in other words, being sure workers working with the public wear face masks, or more intensive respirators for those in healthcare, janitorial staff working with hazardous cleaning materials, and the like. </span></span><br />
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<span style="letter-spacing: 0.35pt;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">OSHA’s "free from recognized hazards" standard places much discretion in the hands of federal and state regulators if they feel an employer has not taken all reasonable steps to provide a hazard-free workplace for its employees. To be safe, employers should also implement procedures designed to promptly identify and isolate potentially infectious workers, per OSHA guidance. Illness or potential illness by employee must be kept confidential to the extent possible per federal ADA requirements; <a href="mailto:zac@moretzlaw.com?subject=Virus%20check%20question" style="overflow-wrap: break-word;">contact us</a> if you run into this issue. <o:p></o:p></span></span></div>
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<span style="letter-spacing: 0.35pt;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;"><strong style="overflow-wrap: break-word;"><span style="letter-spacing: 0.35pt;">Contract law and force majeure clauses.</span></strong><span style="letter-spacing: 0.35pt;"> Many contracts contain a <em style="overflow-wrap: break-word;">force majeure</em> clause, which translates from French as “superior force.” It refers to uncontrollable events that are not the fault of any party and which interfere with a party’s ability to complete its end of the bargain or receive what it bargained for in the deal. Common examples are hurricanes, riots, labor stoppages and war. At first blush, it would appear that a pandemic would constitute a force majeure, but the terms of the contract control. You must review the specific language of the contract in question. Language such as “circumstances outside our control” is very broad and will cover the current situation and allow the party benefited by the provision to avoid the contract. More specific language such as the common “acts of God, war, insurrection, civil strife, riots or labor disturbances” may not be as helpful depending since the list arguably excludes pandemics. </span><span style="letter-spacing: 0.35pt;">If you are facing language which may not </span><span style="letter-spacing: 0.35pt;">cover the current situation, you may have to negotiate and reach an agreement </span><span style="letter-spacing: 0.35pt;">with your opposing party. If you do so, please, please document the agreement. </span><span style="letter-spacing: 0.35pt;">Obviously, we can help. But even an exchange of emails can be sufficient to </span><span style="letter-spacing: 0.35pt;">amend a contract if both parties agree. </span></span></div>
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<span style="letter-spacing: 0.35pt;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: large;">Common law force majeure, or the doctrine of impossibility, may also apply if it is impossible or illegal for the parties to carry out the purpose and intent of the contract. <a href="mailto:zac@moretzlaw.com?subject=Force%20majeure%20question" style="overflow-wrap: break-word;">Send your contract to us for review</a> if you have issues or concerns. If upon reviewing your contracts, you find provisions which do not suit your needs in the current climate, do not forget that you may amend the current contract or at least change it going forward. We can quickly supply you with alternative language and have already done so for some of our business clients.</span></span></div>
zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-85348672908788611332020-03-26T11:03:00.000-04:002020-03-26T11:20:31.742-04:00Virus Q&A for your HOA; Cabarrus County Institutes Stay-At-Home Restrictions<h4 style="background-color: white; color: #201713; letter-spacing: 0px; line-height: 1.5em; margin: 0px auto 0.3em; text-align: center; text-rendering: optimizelegibility; white-space: pre-wrap;">
<span style="font-family: "verdana" , sans-serif; font-size: large; font-weight: normal;">Virus Q&A for your Association; Cabarrus County Institutes Stay-At-Home Restrictions</span></h4>
<div class="" id="yui_3_17_2_1_1585179201219_193" style="background-color: white; font-size: 16px; letter-spacing: 0.46px; overflow-wrap: break-word; white-space: pre-wrap;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgKONlDv66Peh-_PRbXmSVllkNCXEa6ijWKGAjR9Vr7dA2dtkCd8t88Eetkszkj2p21SOMxfaMNoa1ojdQP87jb2LvOdo5trzRhaZQzrEAM77LBdDtlIt5vUqzgzAci0JL3-on9FuBSimX3/s1600/essential+big+deal.JPG" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="588" data-original-width="960" height="196" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgKONlDv66Peh-_PRbXmSVllkNCXEa6ijWKGAjR9Vr7dA2dtkCd8t88Eetkszkj2p21SOMxfaMNoa1ojdQP87jb2LvOdo5trzRhaZQzrEAM77LBdDtlIt5vUqzgzAci0JL3-on9FuBSimX3/s320/essential+big+deal.JPG" width="320" /></a><span style="font-family: "verdana" , sans-serif;">On March 25 Cabarrus County instituted a stay-at-home order. Residents must stay home and may not report to work or engage in non-essential travel other than for supplies, food, exercise and health care. As with the Mecklenburg County order, <strong style="overflow-wrap: break-word;">many industries are deemed Essential and are thus exempt</strong>. <a href="https://mkglawfirm.sharefile.com/d-s947759ce0634968b" id="yui_3_17_2_1_1585179201219_192" style="background: transparent; color: rgba(0, 110, 255, 0.7); overflow-wrap: break-word; text-decoration-line: none;" target="_blank"><strong id="yui_3_17_2_1_1585179201219_198" style="overflow-wrap: break-word;">Click here</strong></a> to view the Cabarrus County order in its entirety. <span style="overflow-wrap: break-word;">Note that the order became unavailable from the Cabarrus County website around 7 pm on March 25. The version provided here was downloaded by us before that happened. At this time we do not know if the order is being changed or if this is simply a problem with the County’s website</span>. The Cabarrus County order is very similar to the Mecklenburg County order in most respects.</span></div>
<div class="" id="yui_3_17_2_1_1585179201219_193" style="background-color: white; font-size: 16px; letter-spacing: 0.46px; overflow-wrap: break-word; white-space: pre-wrap;">
<b style="font-family: Verdana, sans-serif; letter-spacing: 0.46px;">How do the current restrictions affect your community association? Here are answers to some common questions we are hearing:</b></div>
<div class="" id="yui_3_17_2_1_1585179201219_193" style="background-color: white; font-size: 16px; letter-spacing: 0.46px; overflow-wrap: break-word; white-space: pre-wrap;">
<span style="font-family: "verdana" , sans-serif; letter-spacing: 0.46px;"><b>- Will we be able to hold board meetings?</b> The limitation is on 10 or more people gathering together, but it is advisable not to meet in person but to meet via teleconference or video conference. There are free conference call and free video calling options available online. Boards should be meeting regularly at this time to assess the effects of these events on your HOA.</span></div>
<div class="" id="yui_3_17_2_1_1585179201219_193" style="background-color: white; font-size: 16px; letter-spacing: 0.46px; overflow-wrap: break-word; white-space: pre-wrap;">
<span style="font-family: "verdana" , sans-serif; letter-spacing: 0.46px;"><b>- Will we be able to hold our annual meeting?</b> Probably not. The size of most annual meetings would exceed 10 people. North Carolina law requires an in-person annual meeting each year. Boards will need to postpone any immediately upcoming annual meetings and investigate means for holding them online if the stay-at-home orders continue through the summer. Again, there are technological solutions for online meetings and voting which you may wish to investigate. T</span><span style="font-family: "verdana" , sans-serif; letter-spacing: 0.46px;"><span style="color: #373737;">he </span><a href="https://www.caionline.org/pages/default.aspx" style="border: 0px; color: #1982d1; margin: 0px; outline: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;">Community Associations Institute</a><span style="color: #373737;"> lists some electronic elections services companies in its </span><a href="https://directory.caionline.org/SearchResults?SearchText=&searchForItems=Chapter+%2F+Category&chapter=&state=&companyNameTextBox=&contactFirstNameTextBox=&contactLastNameTextBox=&distanceListItems=5&milesListItems=mi&zipPostalTextBox=&categories=10&x=34&y=16" style="border: 0px; color: #1982d1; margin: 0px; outline: 0px; padding: 0px; text-decoration-line: none; vertical-align: baseline;">Professional Services Directory</a><span style="color: #373737;">.</span></span></div>
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<span style="font-family: "verdana" , sans-serif; letter-spacing: 0.46px;"><b>- Your last year's budget and assessments should continue in place during this time.</b> You won't be able to hold a budget ratification meeting so it will be difficult to adopt a new budget, and therefore change assessment amounts. It may be possible to do the budget ratification via online vote or postcard/mail-in vote. We are investigating this and will have more information forthcoming. </span></div>
<div class="" id="yui_3_17_2_1_1585179201219_193" style="background-color: white; font-size: 16px; letter-spacing: 0.46px; overflow-wrap: break-word; white-space: pre-wrap;">
<span style="font-family: "verdana" , sans-serif; letter-spacing: 0.46px;"><b>- What if our association is facing important issues upon which we need to hold a membership vote soon?</b> Remember that in North Carolina by law, and according to the covenants of most HOAs and POAs, membership votes can be accomplished by electronic vote or mail-in ballot without the necessity of an in-person membership meeting. Only the annual meeting, where the board members are to be elected, is required to be in person. We can assist you in preparing the notice, ballot and proxy documents necessary to have a vote by mail or electronically.</span></div>
<div class="" id="yui_3_17_2_1_1585179201219_193" style="background-color: white; font-size: 16px; letter-spacing: 0.46px; overflow-wrap: break-word; white-space: pre-wrap;">
<span style="font-family: "verdana" , sans-serif; letter-spacing: 0.46px;"><b>- Can we continue maintenance and janitorial work?</b> Janitorial services are specifically deemed essential and to the extent your HOA has common hallways, lobbies, etc. that need to be maintained or kept clean, those activities are even more important now and should be maintained according to CDC cleaning standards. Maintenance work can continue if it is necessary repair or maintenance, as opposed to optional upgrades or improvements.</span><br />
<span style="font-family: "verdana" , sans-serif; letter-spacing: 0.46px;"><b>- Can we collect on overdue assessments at this time?</b> Assessments are still owed and your homeowners should be paying as normal. At the time of this writing, no changes to consumer debt laws have been passed which would prevent collection efforts; however, there have been discussions in Congress of instituting limitations on the collection of consumer debts during the virus situation. We will keep you apprised. In the meantime, courthouses remain open although with skeleton staffs, so we are still able to file liens and other legal proceedings; however, no hearings are currently being scheduled until June 1 and after. We are scheduling hearings in June now but expect those dates to quickly become filled, so you should not expect to be able to proceed with foreclosures or other legal proceedings quickly in the current environment. Therefore, we <b>strongly recommend</b> that all HOAs redouble their efforts to work out payment arrangements with homeowners in order to avoid the coming backlog of court proceedings.</span></div>
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<b><span style="font-family: "verdana" , sans-serif; letter-spacing: 0.46px;">We will provide further details as developments occur </span><span style="font-family: "verdana" , sans-serif; letter-spacing: 0.46px;">at </span><a href="https://www.moretzlaw.com/corona-updates" style="background-color: transparent; font-family: Verdana, sans-serif; letter-spacing: 0.46px;">https://www.moretzlaw.com/corona-updates</a><span style="font-family: "verdana" , sans-serif; letter-spacing: 0.46px;">. Stay safe, and stay essential!</span></b></div>
zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-63233217484409602032020-03-25T11:22:00.000-04:002020-03-25T11:29:59.704-04:00Coronavirus/COVID-19 Updates for Businesses and Community Associations<br />
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background: white; color: black;">Coronavirus/COVID-19 Updates for Businesses and Community Associations</span></span></h2>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="background: white; color: black; font-family: "verdana" , sans-serif;"><br /></span></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="font-family: "verdana" , sans-serif;">The
coronavirus situation is changing rapidly and each change has the potential to
affect your business dramatically. Gatherings of 50 people or more are now
prohibited statewide as of March 23, and the Mecklenburg County health director
on March 24 instituted a stay-at-home order (although </span><a href="https://www.mecknc.gov/news/Documents/COVID-19-Stay-at-Home-FAQ.pdf">many
business are deemed essential</a><span style="font-family: "verdana" , sans-serif;"> by the order and therefore are exempt.) How
is your business affected? Because the COVID-19 situation is rapidly evolving, businesses
must stay informed. Your course of action may be governed by focusing on
employee morale or health, a desire to slow the epidemic, a need to address
customer demands, public perception, and other imperatives. Your response will
also vary depending upon your type of industry such as service or manufacturing.</span><span style="font-family: "verdana" , sans-serif;"> </span><span style="font-family: "verdana" , sans-serif;">In this article, Moretz Law Group addresses several
areas of law and stakeholder groups that are most heavily impacted by the
pandemic response.</span></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: xx-small;"><b><span style="background: white; color: black; font-family: "verdana" , sans-serif;"><br /></span></b></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b><span style="background: white; color: black;">New Employee
Leave Laws</span></b><span style="background: white; color: black;"> – The Families First
Coronavirus Response Act ("FFCRA") has become law and takes effect
April 2. What do you need to know as an employer?</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpFirst" style="background: white; mso-list: l1 level1 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; color: black;">Applies to all private
employers with 500 or less employees. Note that this is much broader than the
FMLA, which excludes employers of 50 or less employees.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; mso-list: l1 level1 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; color: black;">Adds “Emergency Paid
Sick Leave” (a new mandate) and “Emergency Family and Medical Leave” (an enhancement
to currently-required FMLA leave.)</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; mso-list: l1 level1 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><b><span style="background: white; color: black;">Emergency Family and
Medical Leave:</span></b><span style="background: white; color: black;"> Expands the FMLA to require
paid leave for employees who are unable to work (including working from home)
because they have or may have COVID-19 or are seeking a medical diagnosis, or who
must stay home to care for such a person, or who must stay home to care for
children whose school has been cancelled due to coronavirus concerns. </span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; color: black;">Employee must have been
employed for at least 30 days.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; margin-left: 1.0in; mso-add-space: auto; mso-list: l1 level2 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; color: black;">Only applies when the
employee cannot work from home or at the office.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; color: black;">The first 10 days are
unpaid, but the employee can use paid time off if the employer offers it;
maximum period, as with the FMLA, is 12 weeks.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; margin-left: 1.0in; mso-add-space: auto; mso-list: l1 level2 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; color: black;">After the initial 10 days,
the employee must receive pay at a rate at least 2/3 their regular pay, not to
exceed $200 per day or $10,000 total.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; margin-left: 1.0in; mso-add-space: auto; mso-list: l1 level2 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; color: black;">The employer will be
reimbursed by the federal government by a quarterly credit to the employer’s
payroll tax liability, including the employer’s share of any health insurance
premiums if any.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; mso-list: l1 level1 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><b><span style="background: white; color: black;">Emergency Paid Sick
Leave: </span></b><span style="background: white; color: black;">Requires paid sick leave
for employees who are unable to work (including working from home) because they
have or may have COVID-19 or are seeking a medical diagnosis, or who must stay
home to care for such a person, or who must stay home to care for children
whose school has been cancelled due to coronavirus concerns</span><b><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></b></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; margin-left: 1.0in; mso-add-space: auto; mso-list: l1 level2 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; color: black;">All employees are
covered even if just hired.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; margin-left: 1.0in; mso-add-space: auto; mso-list: l1 level2 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; color: black;">Only applies when the
employee cannot work from home or at the office.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; margin-left: 1.0in; mso-add-space: auto; mso-list: l1 level2 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; color: black;">Two weeks of paid time
off in which the employee must receive pay at a rate at least 2/3 their regular
pay, not to exceed $200 per day or $10,000 total.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; margin-left: 1.0in; mso-add-space: auto; mso-list: l1 level2 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; color: black;">Employee cannot be required
to use other PTO first.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; margin-left: 1.0in; mso-add-space: auto; mso-list: l1 level2 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; color: black;">Does not apply where the
employee is laid off, furloughed, or the business closes – in those cases, the
new stronger unemployment insurance should apply.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="background: white; margin-left: 1.0in; mso-add-space: auto; mso-list: l1 level2 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">o<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; color: black;">The employer will be
reimbursed by the federal government by a quarterly credit to the employer’s
payroll tax liability for the full amount paid to the employee, including the
employer’s share of any health insurance premiums if any.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b><span style="background: white; color: black;">Public
Health Law and Stay-At-Home Orders</span></b><span style="background: white; color: black;"> - On
March 10, Governor Roy Cooper declared the <a href="https://files.nc.gov/governor/documents/files/EO116-SOE-COVID-19.pdf">a
state of emergency</a> in North Carolina due to the COVID-19.<span style="mso-spacerun: yes;"> </span>NC <a href="https://www.ncleg.gov/EnactedLegislation/Statutes/PDF/BySection/Chapter_166A/GS_166A-19.3.pdf">G.S
Chapter. 166A-19.3(6)</a> defines an emergency as “[a]n occurrence or imminent
threat of widespread or severe damage, injury or loss of life or property
resulting from any … public health, … incident.”<span style="mso-spacerun: yes;"> </span>This declaration increased funding to address
COVID-19 (e.g. monitoring, investigating, testing, disinfecting) and kicked in
some of the consumer protections laws (for example, against price gouging). <span style="mso-spacerun: yes;"> </span>The laws clearly outline who has the authority
to take specific actions to protect the public by cancelling events, closing
schools and other facilities, and restricting the movement of individuals.<span style="mso-spacerun: yes;"> </span>Public health law allows county health
directors to take very wide-ranging steps to protect public health. The steps
taken so far, <a href="https://www.mecknc.gov/news/Pages/County-Issues-'Stay-at-Home'-Order-for-Next-21-Days.aspx">including
today’s lockdown in Mecklenburg County</a> through April 16, appear initially
severe, but there are often helpful exceptions. For example, many businesses
are excluded from that order as “essential” – <a href="https://www.mecknc.gov/news/Documents/COVID-19-Stay-at-Home-FAQ.pdf">please
review the FAQ information carefully, especially the list of essential services
on page 3</a>, and determine if your business is excluded.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b>Negligence</b> – While too complex to fully discuss here,
we are being asked whether a business could be sued if an employee or customer
were to contract a communicable disease at the employer’s workplace, or from a
co-worker or customer. It depends on whether the business took reasonable
actions to protect its employees and customers in light of the information
available to it – in others words, whether the business was negligent. Tort
law, or the law of negligence, applies in this situation. It holds that a
person can be liable to another person to whom the first person owes a duty if
the first person commits an act which is unreasonable (or fails to take a
reasonably necessary action) which could reasonably be anticipated to cause
damage to the second person, and the second person did not help cause the
wrongful act or omission. For example, the Governor has prohibited all “mass gatherings”
or 50 or more people; therefore it is legal (at least in most counties, as of
this writing) to have mass gatherings of less than 50. But would this be
reasonable in light of <a href="https://www.cdc.gov/coronavirus/2019-nCoV/index.html">the CDC’s warnings</a>
against gatherings of more than 10 people? It depends on the situation, but
reasonableness is the touchstone given all the facts and circumstances involved.
Failure to abide by local orders or regulations, when they are aimed at public
safety, has been held to constitute negligence in the past. We can help by
drafting waivers or releases, for example, if you do need to hold a gathering
or are concerned about liabilities to employees or customers in the current
situation. Don’t hesitate to call or email us. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b><span style="background: white; color: black;">Contract
Law and Force Majeure Clauses</span></b><span style="background: white; color: black;"> – Many
contracts contain a <i>force majeure</i> clause, which translates from French
as “superior force.”<span style="mso-spacerun: yes;"> </span>It refers to
uncontrollable events that are not the fault of any party and which interfere
with a party’s ability to complete its end of the bargain or receive what it
bargained for in the deal. Common examples are hurricanes, riots, labor
stoppages and war.<span style="mso-spacerun: yes;"> </span>At first blush, it
would appear that a pandemic would constitute a force majeure, but the terms of
the contract control. You must review the specific language of the contract in
question. Language such as “circumstances outside our control” is very broad
and will cover the current situation and allow the party benefited by the
provision to avoid the contract.<span style="mso-spacerun: yes;"> </span>More
specific language such as the common “acts of God, war, insurrection, civil
strife, riots or labor disturbances” may not be as helpful depending since the
list arguably excludes pandemics. Common law force majeure, or the doctrine of
impossibility, may also apply if it is impossible or illegal for the parties to
carry out the purpose and intent of the contract. Send you contract to us for
review if you have issues or concerns. If upon reviewing your contracts, you
find provisions which do not suit your needs in the current climate, do not
forget that you may amend the current contract or at least change it going
forward.<span style="mso-spacerun: yes;"> </span>We can quickly supply you with
alternative language and have already done so for some of business clients.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b><span style="background: white; color: black;">Insurance</span></b><span style="background: white; color: black;"> – Business Interruption Insurance, a type of
property insurance, applies when a business is damaged from an insured peril
(e.g. fire or flood) and the collateral damages such as decrease in
orders/sales, loss of customers, employees leaving result.<span style="mso-spacerun: yes;"> </span>Business interruption insurance protects
against financial loss and allows businesses to insure its income. The
application of Business Interruption Insurance to the pandemic is not clear in
all cases.<span style="mso-spacerun: yes;"> </span>Often an exclusion is written
into an insurance contract.<span style="mso-spacerun: yes;"> </span>For example,
the ISO policy exclusion form CP 01 40 07/06 is frequently included in
commercial insurance policies. It states, “We will not pay for loss or damage
caused by or resulting from any virus… that induces or is capable of inducing …
illness or disease.”<a href="file:///M:/Misc%20Documents/aCOVID-19/COVID-19%20blog1.docx#_edn1" name="_ednref1" style="mso-endnote-id: edn1;" title=""><sup><span style="mso-special-character: footnote;"><!--[if !supportFootnotes]--><sup><span style="background: white; color: black; line-height: 106%;">[i]</span></sup><!--[endif]--></span></sup></a><span style="mso-spacerun: yes;"> </span>Whether business interruption insurance applies,
and what losses it may cover if it does apply, will vary from case to case.<span style="mso-spacerun: yes;"> </span>For example, if a manufacturing plant closes
down upon governmental order, coverage may be available as loss due to a
competent authority’s denying access, rather than due to a virus capable of
causing disease.<span style="mso-spacerun: yes;"> </span>Statutes, executive
orders, and the rulings of administrative agencies can affect the
interpretation of contract language based on particular circumstances.<span style="mso-spacerun: yes;"> </span>Please contact us if we can assist.<span style="mso-spacerun: yes;"> </span></span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b><span style="background: white; color: black;">Employment
Law Issues</span></b><b><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></b></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="background: white; color: black;">Employment
law in the face of the COVID-19 is certainly wide-ranging and beyond the
general scope of this update. We can provide specific advice for your
particular issues, but typically concerns involve the Americans with
Disabilities Act. Employers cannot take actions which might single out those
with disabilities or which would require employees to disclose specific
conditions which could potentially lead to discrimination, including being regarded
as having a disability even if there is no actual disability. The questions we
are hearing most often are:</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
<span style="font-size: medium;"><br /></span>
<br />
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<li class="MsoNormal" style="background: white; mso-list: l2 level1 lfo1;"><span style="font-family: "verdana" , sans-serif; font-size: xx-small;"><span style="background: white; color: black;">May employers monitor the health of employees
at work?<span style="mso-spacerun: yes;"> </span>Yes, but this must be done
even-handedly and in the same manner for all employees. Employees may not
be asked about pre-existing conditions or personal attributes which may
make them more susceptible to the virus, but may be asked general
questions applicable to all employees. See this guidance by the EEOC: <a href="https://www.eeoc.gov/facts/pandemic_flu.html">https://www.eeoc.gov/facts/pandemic_flu.html</a></span></span></li>
</ul>
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<li class="MsoNormal" style="background: white; mso-list: l2 level1 lfo1;"><span style="font-family: "verdana" , sans-serif; font-size: xx-small;"><span style="background: white; color: black;">How about monitoring asymptomatic employees? Yes,
this can be done via questionnaire which is worded in a general manner.
See the example on the EEOC website above. </span></span></li>
</ul>
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<li class="MsoNormal" style="background: white; mso-list: l2 level1 lfo1;"><span style="font-family: "verdana" , sans-serif; font-size: xx-small;"><span style="background: white; color: black;">Can an employee with a cough or other symptoms
be sent home? Yes.</span></span></li>
</ul>
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<li class="MsoNormal" style="background: white; mso-list: l2 level1 lfo1;"><span style="font-family: "verdana" , sans-serif; font-size: xx-small;"><span style="background: white; color: black;">If so, with or without pay? Whatever the
employer’s specific policy is with regard to sick leave. North Carolina
employers are not required to provide paid sick leave, but if your company
does, any such leave should exhaust all PTO prior to becoming unpaid.</span></span></li>
</ul>
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<li class="MsoNormal" style="background: white; mso-list: l2 level1 lfo1;"><span style="font-family: "verdana" , sans-serif; font-size: xx-small;"><span style="background: white; color: black;">How should an employer treat an employee who
becomes infected or one who has been quarantined?<span style="mso-spacerun: yes;"> </span>What measures should be taken in the
workplace to avoid stigma?<span style="mso-spacerun: yes;"> </span>Private,
personal information of employees is required to be kept confidential pursuant
to N.C. Gen. Stat. § 75-66 and other statutes.<span style="mso-spacerun: yes;"> </span>All information and records which may identify
a person who has or may have a disease required to be reported by the
North Carolina Commission for Public Health must be strictly confidential.
N.C. Gen. Stat. § 130A-143. Therefore, any information that an employee
may have tested positive for COVID-19 or any other communicable disease
should be kept confidential.</span></span></li>
</ul>
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<li class="MsoNormal" style="background: white; mso-list: l2 level1 lfo1;"><span style="font-family: "verdana" , sans-serif; font-size: xx-small;"><span style="background: white; color: black;">HIPAA, while generally not applicable to
employers since they are not health care providers, does apply where
employers have private personal medical information in their records. Such
information is required to be maintained in a separate, locked file only accessible
to those with a genuine need for it. Thus, such information cannot be
disclosed formally or informally.</span></span></li>
</ul>
<span style="font-size: medium;"><span style="background-color: white; font-family: "verdana" , sans-serif;">Of
utmost importance, implement policies consistently and evenly among all
employees.</span><span style="font-family: "verdana" , sans-serif;"> </span><span style="background-color: white; font-family: "verdana" , sans-serif;">Communicate your message
frequently and before you communicate check the facts from reliable sources and
check them again.</span><span style="font-family: "verdana" , sans-serif;"> </span><span style="background-color: white; font-family: "verdana" , sans-serif;">Consider issuing your
company policies/directives in this growing situation in writing and as
amendments to your company employee handbook.</span></span><br />
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b><span style="background: white; color: black;">Realtors</span></b><span style="background: white; color: black;"> – The NC Real Estate Commission has allowed 90 extra
days to complete all continued ed, and all continuing ed must now be completed online
or via webcast, not in person. See </span><span style="color: black; mso-color-alt: windowtext;"><a href="https://www.ncrec.gov/">https://www.ncrec.gov/</a></span><span style="background: white; color: black;"> <span style="mso-spacerun: yes;"> </span>More
information also available from the NC Association of Realtors - see </span><span style="color: black; mso-color-alt: windowtext;"><a href="https://www.ncrealtors.org/nc-realtors-coronavirus-information/">https://www.ncrealtors.org/nc-realtors-coronavirus-information/</a></span><o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b><span style="background: white; color: black;">Real Estate
Transactions</span></b><span style="background: white; color: black;"> – Recording of deeds
and other real estate documents is continuing electronically and we have in
fact recorded a transaction just this morning electronically, which proceeded
as normal with no significant delay from the Register of Deeds office. No in-person
business can be conducted at the Register of Deeds office – call and make an
appointment if you need a marriage license or your notary commission renewed,
for example.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b><span style="background: white; color: black;">Legal Proceedings
and Courthouses</span></b><span style="background: white; color: black;"> – Courthouses are still
open but running on skeleton staffs. We are able to file lawsuits, motions,
pleadings and the like, but no hearings will be held until the stay on all but
emergency court hearings is lifted by the N.C. Supreme Court and the N.C.
Administrative Office of the Courts. This does not change or extend any statutes
of limitations! In addition, any filings which were due between March 16 and
April 17 have now been extended until close of business on April 17. The legal
system is considered an “essential service” and is therefore not directly
affected by Mecklenburg County’s stay-in-place order issued on March 24, 2020. </span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b><span style="background: white; color: black;">Landlords,
Homeowners Associations and Lenders</span></b><span style="background: white; color: black;"> – Your
tenants, members and borrowers are still required to pay you and nothing is anticipated
to change that at this time. Residential borrowers may receive special
dispensation from the federal government but that is unlikely to apply to any
private mortgage transactions. Lawsuits, liens and foreclosures may still be
filed, but no hearings will be held until the stay on all but emergency court hearings
is lifted by the N.C. Supreme Court and the N.C. Administrative Office of the
Courts. We can assist you in getting things filed so that matters can be
immediately heard once the stay is lifted.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b><span style="background: white; color: black;">Homeowners
and Condominium Associations</span></b><span style="background: white; color: black;"> – Annual
meetings are likely to have to be postponed since most associations require these
to be held in person. Board meetings can, and should, be held telephonically in
the current situation – all directors must be able to hear each other for the
meeting to be valid. No such allowances exist by law in North Carolina for annual
membership meetings to be held electronically. Boards should be meeting
regularly by teleconference to adjust and react to current events. (Contact us
if you need a review of your governing documents to see if there are ways to
accomplish meetings electronically or other than in person.) Regarding common
areas, be sure to read the section about Negligence elsewhere in this article.
There is now <a href="https://www.cdc.gov/coronavirus/2019-nCoV/index.html">plenty
of information available from the CDC</a> and others for best practices in
keeping common areas clean and avoiding personal contact to quell the spread of
disease – disregarding them could constitute negligence, making the association
liable.</span><span style="background: white; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b><span style="background: white; color: black;">Taxes</span></b><span style="background: white; color: black;"> - </span>An delay from April 15 to July 15 was
announced by Treasury Secretary Steven Mnuchin for federal income tax filing for
all taxpayers and businesses. North Carolina has also extended its state tax
filing deadline to the same date. No specific written guidelines or rules had
been published at the time we wrote this update, so be sure to consult your CPA
for further details before relying completely on this informal announcement at
this time.<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b>Breweries, Distilleries and Other ABC Licensees</b> – The
NC Alcoholic Beverage Commission has issued very specific rules in response to
the Governor’s COVID-19 Executive Orders. These new rules need to be followed strictly
in order to ensure that you are not both in violation of the Executive Orders –
a class 2 misdemeanor – as well as putting your ABC license in jeopardy. See
the ABC Commission announcement: <a href="https://abc.nc.gov/PublicResources/LegalAnnouncement/261">https://abc.nc.gov/PublicResources/LegalAnnouncement/261</a><o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b>Unemployment Benefits</b> – This is an important
change which provides a streamlined process to access benefits for those newly
unemployed or with reduced hours or wages. Employees should be sure to specify
that they are temporarily out of work or working reduced hours due to COVID-19
when filing a claim to make sure they are eligible for any extra benefits and
to ensure that the employer’s unemployment insurance account is not charged for
these benefits. Employers should be sure to indicate that the separation was
due to COVID-19 when/if they receive a request for separation information from
the NC Employment Security Commission. Details here: <a href="https://des.nc.gov/need-help/covid-19-information">https://des.nc.gov/need-help/COVID-19-information</a>
<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><b>Parties, Events and Mass Gatherings</b> - On March 23,
2020 Governor Cooper issued new Executive Order No. 120 adding further
restrictions to businesses and <b>prohibiting all mass gatherings of 50 or more
people</b> - down from 100 or more previously. <a href="https://governor.nc.gov/news/executive-orders">Read the Executive Orders
here</a> for details.<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;">Briefly, the Governor's orders cancel public
schools (K-12) <b>until May 15</b> and <b>prohibits mass gatherings of 50 or
more until further notice</b>. The prohibition of mass gatherings has specific
definitions and is worthy of clarification. <b>These orders have the
rule of law - violation constitutes a Class 2 misdemeanor
pursuant to N.C.G.S. 14-288.204</b>. There are more details on our website
<a href="https://www.moretzlaw.com/corona-updates#march-16">here</a>.<o:p></o:p></span></div>
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<b><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="color: black; mso-color-alt: windowtext;">Stay tuned for more legal updates from us on this
continually evolving issue.</span><o:p></o:p></span></b><br />
<b><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="color: black; mso-color-alt: windowtext;"><br /></span></span></b></div>
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<b><span style="font-family: "verdana" , sans-serif; font-size: medium;">Resources for Businesses to Stay Informed:<o:p></o:p></span></b></div>
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<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><a href="https://www.cdc.gov/coronavirus/2019-ncov/community/organizations/businesses-employers.html">https://www.cdc.gov/coronavirus/2019-ncov/community/organizations/businesses-employers.html</a><o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><a href="https://www.osha.gov/Publications/OSHA3990.pdf">https://www.osha.gov/Publications/OSHA3990.pdf</a><o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><a href="https://www.eeoc.gov/facts/pandemic_flu.html">https://www.eeoc.gov/facts/pandemic_flu.html</a><o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><a href="https://www.ncdhhs.gov/divisions/public-health/coronavirus-disease-2019-covid-19-response-north-carolina/businesses-employers">https://www.ncdhhs.gov/divisions/public-health/coronavirus-disease-2019-covid-19-response-north-carolina/businesses-employers</a><o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><a href="https://abc.nc.gov/PublicResources/LegalAnnouncement/261">https://abc.nc.gov/PublicResources/LegalAnnouncement/261</a><o:p></o:p></span></div>
<div class="MsoPlainText" style="margin-left: .5in; mso-list: l0 level1 lfo3; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><a href="https://governor.nc.gov/news/executive-orders">Read the Executive Orders
here</a><o:p></o:p></span></div>
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</span></span><!--[endif]--><a href="https://des.nc.gov/need-help/COVID-19-information">https://des.nc.gov/need-help/COVID-19-information</a><o:p></o:p></span></div>
<div class="MsoPlainText" style="margin-left: .5in; mso-list: l0 level1 lfo3; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><a href="https://www.mecknc.gov/news/Documents/COVID-19-Stay-at-Home-FAQ.pdf">https://www.mecknc.gov/news/Documents/COVID-19-Stay-at-Home-FAQ.pdf</a><o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><a href="https://www.mecknc.gov/news/Documents/COVID-19%20Frequently%20Asked%20Questions.pdf">https://www.mecknc.gov/news/Documents/COVID-19%20Frequently%20Asked%20Questions.pdf</a><o:p></o:p></span></div>
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</span></span><!--[endif]--><a href="https://www.cabarrushealth.org/555/Coronavirus-Information-Page">https://www.cabarrushealth.org/555/Coronavirus-Information-Page</a><o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: medium;"><span style="color: #212121;">Moretz Law Group is prepared to help you with
your business needs</span><span style="color: black;"> in this situation</span><span style="color: #212121;">. </span><span style="color: black;"> <b>We are fortunate to have Marjorie Benbow as part of our firm
due to her expertise in virology and public health</b>.</span><span style="color: #212121;"> </span><span style="color: black;">Prior to receiving her J.D. and M.B.A degrees from Wake Forest, </span><span style="color: #212121;">Marjorie
received her Masters of Science in Public Health </span><span style="color: black;">from</span><span style="color: #212121;"> UNC</span><span style="color: black;">-</span><span style="color: #212121;">Chapel Hill. She worked as a <span style="background: white;">virologist
at Burroughs Wellcome after finishing her coursework. </span></span><span style="background: white; color: black;">S</span><span style="background: white; color: #212121;">he </span><span style="background: white; color: black;">also </span><span style="background: white; color: #212121;">worked
</span><span style="color: #212121;">for
the state's health agency in the areas of epidemiology focusing on communicable
diseases. </span><span style="color: black;">Marjorie is also a registered patent
attorney and assists our clients with trademarks and copyright matters as well
as with brewery and distillery law. Marjorie can be reached <a href="https://www.moretzlaw.com/marjorie-contact">here</a>. Reach Zac Moretz <a href="https://www.moretzlaw.com/zac-contact">here</a>. Our coronavirus updates
are <a href="https://www.moretzlaw.com/corona-updates">here</a>.</span></span></div>
zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-19590197227617066372019-07-23T14:37:00.002-04:002019-07-23T14:37:55.630-04:00Agency Law and Your HOA or Small BusinessA client recently posed this question:<br />
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"If a singular board member of an HOA incorrectly tells an owner that a requested fence installation is approved, does it bind the
HOA? I recently had a board member tell an owner he was approved incorrectly."<o:p></o:p></div>
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Seems simple, right? If an architectural review request did not go through the right procedure and was not properly approved by the board or the Architectural Review Committee (aka the "ARC"), then no approval can be valid, right? Or, if an employee signs a contract on behalf of a company, but that employee had no authority to do so, the company is not bound by the contract, is it? Well, it depends.</div>
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This question involves the legal theory of <u>agency</u>. Agency law addresses under what circumstances one person (the "agent") can legally bind another person or an entity (the "principal"). Unfortunately, agency issues come up all too often in the practice of HOA and small business law because HOAs and other small businesses are generally run by volunteers or others without legal training who sometimes speak when they should not.</div>
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(Note: We are not talking about the law applicable to real estate "agents" here. While the law applicable to real estate agents, more commonly called "brokers" nowadays, certainly includes agency law, we are speaking here of agency law in general - i.e., the legal ability of one person to legally speak or act on behalf of another person or entity - and not with regard to any particular type of agent.)</div>
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There are generally two types of agency authority: <u>actual authority</u> and <u>apparent authority</u>. Actual authority is of two types - <u>express</u> and <u>implied</u>. From an HOA perspective, <u>actual authority</u> occurs, for example, where the board has met and considered whether to approve a fence request, has approved it, and has authorized the president of the HOA, as its agent, to communicate the approval to the homeowner. The president has actual, express authority to legally bind the HOA, the principal, as its agent in communicating the approval to the homeowner. The approval is binding on the HOA.</div>
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<u>Implied actual authority</u> to legally bind an entity as its agent is the authority that naturally and reasonably comes with an officer's position in a company. For example, the president of the company or HOA has the natural ability to sign checks, issue purchase orders and the like in the ordinary course of business, and third parties who know that person is in fact the president need not worry whether the president has the actual express authority to do such things - they can rely on his or her implied authority as the holder of that office.</div>
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<u>Apparent authority</u> is more problematic. This is the authority that a person <u>appears</u> to have from their words and actions, and which may appear to be reasonable to a third party, but which may or may not have been authorized by the board of directors or other governing body of the entity. </div>
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The problem with apparent authority is that an agreement or commitment entered into with a third party by an agent of an entity who may have no authority <u>may still be binding on the entity</u> even if completely unauthorized, if the agent had apparent authority to do so in the eyes of the third party.</div>
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Apparent authority will arise when the agent appears to have authority and holds themselves out as having it, and when such authority would not be unreasonable for he or she to have when viewed by the third party, and when the third party has no reason to know that the agent may not in fact possess such authority. If the third party then changes their position in reasonable reliance upon the commitment of the agent - for example, spends the money to erect the fence in reliance upon the approval - the commitment of the agent will then be binding upon the principal even if completely unauthorized by the principal. This is also an example of the legal doctrine of "estoppel".</div>
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Back to our situation with the improper fence approval. This is how I answered my client:</div>
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"If it was just a board member and not the president or a vice
president, or the head of the ARC, communicating the fence approval improperly, I would say it was clearly not binding upon the HOA. But the general rule
of agency is, did the recipient have a reasonable belief that the speaker was
authorized to bind the entity? If so, then the entity can be bound
notwithstanding that the speaker did not have actual authority. Sorry to answer
with an "it depends", but that is the law. Officers generally have
apparent authority to bind the entity, even if not actual authority. So based
on only the facts you gave me, the answer is no. But there could be more to the
story..."<o:p></o:p></div>
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You can see how apparent authority can be an issue for HOAs and other small businesses. It is important to have clear roles established for officers, and where certain responsibilities have been delegated to committees, draw up a written committee charter which clearly specifies what that committee can and cannot do. Can the ARC chairperson communicate approvals or disapprovals to applicants? Bad idea. Have that done through the board, which is the governing body of the HOA. Make clear to officers what they can and cannot do without express board authority. And make sure that board and committee members know that serving on a board or committee gives them <u>no authority whatsoever</u> - only the officers of the company generally have authority to legally bind the company in any way.</div>
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<a href="mailto:info@moretzlaw.com" target="_blank">Be in touch</a> if you have questions or concerns regarding agency and your HOA or small business.</div>
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<br />zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-66875004598481388732018-12-17T09:58:00.000-05:002018-12-17T09:58:10.956-05:00Update on New South Carolina HOA Legislation - Don't Miss the January 10 Deadline!<br />
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While this is generally a North Carolina HOA law blog, we represent many South Carolina HOAs as well, and as most of them are aware by now, the
new South Carolina Homeowners Association Act was enacted on May 17th,
2018 and was the first major
legislation in South Carolina to regulate homeowners associations. The major
focus of this new law is to provide owners access to all of a community’s
governing documents and rules, regulations, policies and procedures.<span style="mso-spacerun: yes;"> Obviously, this applies to HOAs located in South Carolina only.</span><o:p></o:p></div>
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<span style="text-indent: -0.25in;">On or before January 10, 2019, all “governing
documents” and rules and regulations must be recorded with the register of
deeds’ office to remain enforceable. All governing documents </span><u style="text-indent: -0.25in;">other than
bylaws</u><span style="text-indent: -0.25in;"> must be recorded already under present law, so no change there.</span></div>
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<span style="text-indent: -0.25in;">All “rules and regulations”, which presently
need not be recorded, must now </span><u style="text-indent: -0.25in;">also</u><span style="text-indent: -0.25in;"> be recorded by January 10 to remain
enforceable. This includes:</span></div>
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<o:p></o:p></div>
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</span></span></span><!--[endif]-->Bylaws;<o:p></o:p></div>
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</span></span></span><!--[endif]-->Rules and regulations;<o:p></o:p></div>
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</span></span></span><!--[endif]-->Architectural guidelines;<o:p></o:p></div>
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</span></span></span><!--[endif]-->Any other policies and procedures, such as
collection policies.<o:p></o:p></div>
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</span></span></span><!--[endif]-->Basically, anything you want to be enforceable
against a homeowner or a lot or unit in your HOA.</div>
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<ul>
<li style="text-align: left;">In addition to the recording requirement, all “rules and regulations” must be made accessible to members upon request, or posted conspicuously on the common areas, or posted on the community’s website.</li>
<li style="text-align: left;">Any amendments to any of the above made after January 10 must be recorded by January 10 of the year following their adoption. </li>
<li style="text-align: left;">The act also requires the South Carolina Department of Consumer Affairs to collect and publish online data regarding complaints by and against homeowners associations. It will provide copies of any complaint to the HOA and/or the owner. The Department will publicly report the complaints in a searchable database.</li>
<li style="text-align: left;">The act provides that small claims court is now a proper forum for resolving disputes between homeowners and HOAs. </li>
<li style="text-align: left;">Finally, the act requires sellers of homes in HOAs to provide additional disclosures to prospective buyers.</li>
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<b style="mso-bidi-font-weight: normal;"><u>If you're a South Carolina HOA, make sure you don't miss the January 10 deadline!</u></b></div>
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<li>Contact your attorney or management company and get your documents compiled and to your county Register of Deeds or Clerk of Court (depending on how your particular county handles these types of recordings).</li>
<li>You should also post all of these same documents
in PDF form on your website.</li>
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<span style="text-indent: -0.25in;">Call us if we can help! Good luck!</span></div>
zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-39238704466544981692018-06-21T10:32:00.003-04:002018-06-21T10:32:53.494-04:00The Wild West, Tamed a Bit<br />
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Although far from comprehensive, the South Carolina
legislature has successfully taken its first steps to regulate homeowners’
associations. The <u>South Carolina Homeowners Association Act</u> (“Act”) became
official on May 17, 2018 when the governor signed it into law. Up to this
point, South Carolina has never had a comprehensive law governing homeowners’
associations. Until now, there was only the South Carolina Horizontal
Property Act, which governs condominiums, and the South Carolina Nonprofit
Corporation Act, which deals with operational issues within nonprofit
corporations and generally applies to homeowners’ associations since they are
non-profits.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman", serif; font-size: 12pt;">The Act places new requirements upon homeowners’
associations. It defines a homeowners’ association as any entity developed
to manage and maintain a planned community or condominium in which there is a
recorded declaration requiring a person to pay assessments. This
definition covers all mandatory homeowners’ and condominium associations.</span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The Act requires every homeowners’ association to have <u>recorded</u> its
declaration and bylaws by January 10, 2019 in order for those
documents to remain enforceable. This does not present a new
requirement for declarations; declarations already had to be recorded to
be enforceable. The requirement to record bylaws, however, is new. <span style="mso-spacerun: yes;"> </span>Most HOAs do not typically record their
bylaws, so those whose bylaws are not presently recorded will need to do so
prior to January 10, 2019 (some declarations have the bylaws attached as an
exhibit when they are recorded and in that case the bylaws will not need to be
re-recorded independently, unless they have been modified since they were first
recorded.) The unspoken requirement is that the bylaws must be formally
adopted by the HOA, which is sometimes an overlooked corporate formality during
the rush to incorporate an HOA. By way of comparison, North Carolina does not
require HOA bylaws to be recorded. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A note regarding what we mean by the term “recorded”. This
term means filed with the county office which oversees land records.<span style="mso-spacerun: yes;"> </span>Originally known as the “Register of Mesne
Conveyances”, the name of the land records office in some counties is known as
the Register of Deeds, or in some counties, the Clerk of Court’s office records
land records (“mesne” is an Old English term referring to the office which
records the documents making up the chain of title for a particular piece of
real estate). Upon recordation, a recorded document serves as public notice of
the contents of that document to all the world. <br />
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In an unprecedented move, the Act also requires HOA rules and regulations
to be recorded by January 10, 2019 to be enforceable, and by January
10 of each successive year to remain enforceable. Somewhat confusingly, the Act
states that rules and regulations are effective at the time they are properly
adopted by the HOA, but to remain effective as of January 11 and thereafter,
they must be recorded by January 10 of each year. So again, this provision does
not affect the current enforceability of an HOA’s current rules and
regulations, but HOAs must record them by January 10th of each year. And, given
that they will now be a public record, HOAs may now wish to be more careful in
the wording of their rules and regulations, and most likely, make sure they
have been vetted by legal counsel to ensure, for example, that they do not
contain provisions which could be deemed to be discriminatory.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The rules and regulations must also be made accessible to
members. The Act allows such accessibility through a website
maintained by an HOA, or by posting the rules and regulations in a
conspicuous area within the common areas. This makes sense since arguably rules
and regulations are not enforceable if there is no way for members to know of
them.<br />
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Unincorporated homeowners’ associations, a rarity nowadays, must now
provide members with notice at least 48 hours in advance of a meeting where the
budget is to be increased in a given year. Incorporated HOAs are presently
subject to lengthier notification requirements, and are therefore exempted from
the 48-hour notification provision.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The Act authorizes Magistrates Courts (generally referred to
as “small claims court”) to hear HOA disputes, provided the dispute does not
exceed the jurisdictional limitation of small claims court, currently
$7,500.00. This is new, as it was previously uncertain whether the very limited
subject matter jurisdiction of small claims court allowed HOA disputes to be
heard there.<br />
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The Act authorizes the South Carolina Department of Consumer Affairs to produce
and disseminate educational information to the general public about homeowners’
associations and rights, responsibilities and the roles of homeowners’
associations, boards of directors and homeowners. The Department is directed to
collect and publish data about homeowners’ complaints against homeowners’
associations, or homeowners’ associations’ complaints against homeowners,
including the HOA name and any property management company. Notably, personal
identifying information of the complaining party may not be published, allowing
the complainant to remain anonymous while spotlighting the HOA and management
company publicly, which we hope does not end up becoming a harassment tactic
for disgruntled homeowners.<br />
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BOTTOM LINE: As with most new laws, time will tell how effective this new
legislation is at enabling homeowners to educate themselves about their
subdivision’s governing documents. In general, we are big believers in transparency
and are in favor of HOAs’ governing documents, including rules and regulations,
being publicly available and easily accessible. We are glad that the South
Carolina General Assembly did not seek to regulate the content of declarations,
bylaws or rules and regulations, but only seeks to ensure that they are
publicly available. We hope this legislation may silence some of the dubious
complaints that we sometimes hear that a member did not know about the
homeowners’ association or what was required for compliance. It should also
result in more accountability for board members. We query whether the reporting
of conflicts between owners and their associations will have a positive effect.
At least in our experience, a single or small group of vocal complainers may
give the appearance of systemic disagreements; however, in reality, most
interactions between homeowners’ associations and their members are
positive.<br />
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Please stay tuned as this new law is implemented, and of course feel free to
contact us to discuss any of these issues and steps needed for compliance, or
any other issues affecting your South Carolina or North Carolina HOA.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The full legislation is available </span><a href="https://www.scstatehouse.gov/query.php?search=DOC&searchtext=h3886&category=LEGISLATION&session=122&conid=9313120&result_pos=0&keyval=1223886&numrows=10"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">here</span></a><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">.</span><o:p></o:p></div>
<br />Anonymoushttp://www.blogger.com/profile/01247933298532991318noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-3423771013347845802018-03-03T19:43:00.002-05:002018-03-03T19:43:38.493-05:00Caselaw Update: Supreme Court Reverses Willowmere Decision re HOA's Lack of Standing<h3>
Caselaw Update! </h3>
The North Carolina Supreme Court, in a decision filed on March 2, 2018, <b><u>REVERSED </u></b>the Court of Appeals' decision discussed below. You can read the Supreme Court's decision <a href="https://appellate.nccourts.org/opinions/?c=1&pdf=36662" target="_blank">here</a>. As we discussed in our blog post below, which we posted on December 14, 2016, we disagreed with the Court of Appeals' reasoning, and thankfully the Supreme Court did also. The Supreme Court confirmed the longstanding rule that only <u>members </u>of an association can contest whether the board properly followed its own internal procedures in making the decision to bring a lawsuit - failure to follow the bylaws or other requirements <u>cannot </u>be used by the third-party, non-member <u>defendants </u>to claim that the association did not have standing to bring the lawsuit. In this case, two Charlotte-area homeowners associations can now proceed with their lawsuit against the City of Charlotte for approving a rezoning which would allow lower-income housing next door to the two associations.<br />
<br />
However, our <b><u>bottom line</u></b> below still stands - while it may sometimes be a pain to follow board meeting and voting procedures, a cavalier attitude can come back to bite you. In this case, years of litigation and many tens of thousands of dollars in legal fees were wasted due to the failure to follow simple procedural steps. Don’t let that happen to your HOA.<br />
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<tr><td style="text-align: center;"><img alt="Empty meeting table" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjDNMOYyyi5NvWnQtqNvLMSNDmWB8cyKMrTDZlB17JRoYcKr0o-K0KoNALkNS2S3cbU_Gd-sPUWB0450YeV3W3rRvceDmNs1PXCARZjvA3pf4vt2RHGZq3bGidz3IRt9Tjz9UV-WKeLYOwk/s320/empty+meeting+table.jpg" style="margin-left: auto; margin-right: auto;" /></td></tr>
<tr><td class="tr-caption" style="text-align: center;"></td><td class="tr-caption"><span style="font-size: 12.8px;">An unused meeting table does not do your HOA much good.</span></td><td class="tr-caption"><br /></td></tr>
</tbody></table>
There are times in the practice of homeowners’ association law when courts make rulings with which we as attorneys disagree but where an underlying principle or best practice is affirmed. A prime example is the N.C. Court of Appeals’ opinion of November 1, 2016 in the case of Willowmere Community Association Inc. and Nottingham Owner’s Association Inc. v. City of Charlotte and Charlotte-Mecklenburg Housing Partnership. As is generally the case whenever an HOA case reaches the North Carolina appellate courts, the HOAs lost.<br />
<br />
The two associations filed suit to challenge the rezoning of land that was approved for the development of moderate-income multifamily housing adjacent to their single-family subdivisions.However, the Mecklenburg County Superior Court never reached the merits of the challenge, instead ruling that the HOAs did not have legal standing to bring the challenge at all. It stated that the associations “did not have standing to bring the action because they failed to follow the requirements in their respective bylaws with regard to their decisions to initiate this litigation.”<br />
<br />
Without “standing”, generally regarded as the plaintiff’s having suffered sufficient individualized harm from the actions of the defendant, the court system does not have jurisdiction to hear the plaintiff’s plea at all. Standing is designed to ensure that cases are grounded in actual, specific disputes and deter the filing of cases based upon theoretical or conjectural wrongs. Since lack of standing “bars the door to the courthouse” for the plaintiff and can prevent valid legal claims from being adjudicated, courts typically use great care in throwing a case out due to lack of standing.<br />
<br />
In this case, the N.C. Court of Appeals agreed with the trial court, focusing on the failure of the two HOAs’ boards of directors to follow proper procedures in making the decision to sue. Both boards had determined to sue via email or telephone discussions, without formal board meetings or even written and signed consents to action without a meeting by the board members.<br />
<br />
Willowmere HOA argued that its board unanimously authorized the lawsuit through a chain of emails, and that this satisfied the N.C. Nonprofit Corporation Act which allows a board to take action without a meeting through “unanimous consent”, but the Court ruled that even if this were true, the Willowmere bylaws also required “an explanation of the action taken to be posted at a prominent place within the Common Area within three (3) days after the written consents of all the Board members have been obtained.” Unfortunately for Willowmere, there was no evidence showing that an explanation of the action was posted in the Common Area.<br />
<br />
The Nottingham HOA board did not call a formal board meeting to discuss filing a lawsuit and did not act via unanimous written consent. Rather, a few of the board members conducted a telephone conversation with the management company and did not refer to the basic requirements of the bylaws regarding the power to initiate a lawsuit. They did not deliberate and make a decision in a formal meeting or unanimously in writing.<br />
<br />
The Superior Court judge inquired into the standing issue on his own motion – neither of the defendants had argued that the HOAs lacked standing to bring the challenge. But North and South Carolina courts are generally disposed to rule against HOAs, and in this case the failure to follow the basic requirements in the bylaws and statutes for conducting business gave the Superior Court all the ammunition it needed to find that neither association had standing to bring the lawsuit, and the Court of Appeals agreed.<br />
<br />
We question the judges’ reasoning on the standing issue. It would appear that the HOAs could have suffered significant and specific damages had an improper rezoning been approved adjacent to them, which should have been enough to confer standing. A failure to follow corporate formalities would typically be something for which an association member could sue or take other action to attempt to rescind the decision, but it has not to our knowledge prior to this case been used to actually deny an association its right to be heard in a court of law.<br />
<br />
Whether or not a non-HOA member may challenge standing based on the internal procedures of the HOA since the non-member is not subject to those procedures, we can agree that an HOA member may make such challenge to board action if the board does not follow the proper procedures, so certainly the HOA boards here were at fault to some extent.<br />
<br />
<b><u>Bottom line</u></b>: Don’t get in a hurry when making decisions. HOA boards must follow the requirements of both the governing documents and the statutes when taking action, and avoid taking action by email in any significant matter. Remember, in general, actions taken without a meeting, like via email, must be unanimous. (Meetings can be held over the phone provided all board members can clearly hear one another.) Calling a meeting is almost always the best option for making decisions concerning serious matters. The use of the unanimous written consent procedure is a useful tool if a board is simply unable to meet, but boards should take great care in preserving the emails documenting the unanimous agreement. We also recommend that, at the next board meeting following a decision made without a meeting, all items approved via unanimous written consent be formally ratified with such ratification reflected in the written minutes or via formal written resolution. Finally, adherence to additional procedures such as the posting of an explanation, as with Willowmere, is required to ensure that the action will withstand a subsequent challenge on procedural grounds.<br />
<br />
While it may sometimes be a pain to follow these procedures, a cavalier attitude can come back to bite your board. In this case, years of litigation and many tens of thousands of dollars in legal fees, not to mention the opportunity to challenge an unwanted development next door, were wasted due to the failure to follow simple procedural steps. Don’t let that happen to your HOA.<br />
<br />
<i>Please give us a call or drop us an email if our HOA law team can assist your HOA or management company with your corporate procedures, or if we can be of assistance in any other way regarding legal issues facing your community. Please be aware that we represent HOAs only – we do not represent homeowners in disputes against their HOAs. We appreciate your reading our HOA law blog and encourage you to share it with others who may be interested. Thank you</i>!zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-54775533840574554702018-02-22T20:57:00.001-05:002018-02-22T20:58:33.106-05:00NC Community Association Mediation Program (CAMP) Now Available <div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: "calibri" , sans-serif;">For homeowner in North Carolina homeowners associations,
access to a mediation process, for their HOA-related grievances, recently
became much more accessible.<o:p></o:p></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZ0AALj1Bnw8Sa6j-VLlZPRAJbxR3g9cKWKq-qxe050yx6J9rBeOO82eYPp1u-_0FzpKYpP17Kpvc2zyMAnudDS5vIw0BdF7WUt9VBkebWMCAkS4fd6Cuj9rFCiIhWCHS-C42_NmVJtCmF/s1600/AdobeStock_108302643.jpeg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="567" data-original-width="1600" height="112" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZ0AALj1Bnw8Sa6j-VLlZPRAJbxR3g9cKWKq-qxe050yx6J9rBeOO82eYPp1u-_0FzpKYpP17Kpvc2zyMAnudDS5vIw0BdF7WUt9VBkebWMCAkS4fd6Cuj9rFCiIhWCHS-C42_NmVJtCmF/s320/AdobeStock_108302643.jpeg" width="320" /></a></div>
<b><u><br /></u></b>
<br />
<div style="margin-bottom: .0001pt; margin: 0in;">
<b><u><span style="font-family: "calibri" , sans-serif;">Background</span></u></b><span style="font-family: "calibri" , sans-serif;"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: "calibri" , sans-serif;">In 2013, the North Carolina legislature passed a
law encouraging homeowners associations and aggrieved members to agree to
voluntary, non-binding mediation to resolve HOA-related disputes (see our 2013
blog discussing the law </span><a href="http://nchoalaw.blogspot.com/2013/09/about-new-required-notice-of-voluntary.html"><span style="font-family: "calibri" , sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin;">here</span></a><span style="font-family: "calibri" , sans-serif;">). The law has mostly gathered proverbial dust, and we have
not actually seen any owners or HOAs avail themselves of it.<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: "calibri" , sans-serif;">Recently, the </span><a href="https://cai-nc.site-ym.com/" target="_blank"><span style="font-family: "calibri" , sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin;">North Carolina Chapter of the Community Associations Institute</span></a><span style="font-family: "calibri" , sans-serif;">, a group which gathers no dust and is deeply involved with
educating homeowners and property managers throughout the state, began offering
mediation services through its new CAMP program (CAMP stands for Community
Association Mediation Program). In full disclosure, we as a firm are
members of CAI-NC, and we strongly believe in its mission, education and
advocacy. We are excited that this new program may provide a cost-effective
means for working out HOA disputes without the necessity of court proceedings.<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<b><u><span style="font-family: "calibri" , sans-serif;">CAMP Program
Details</span></u></b><span style="font-family: "calibri" , sans-serif;"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: "calibri" , sans-serif;">The program offers to locate an experienced
mediator with significant HOA experience, who is either a professional
community manager or an attorney, to preside over an owner-versus-HOA
dispute. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: "calibri" , sans-serif;">The cost for this process is $500.00, which is
evenly split between both sides. The fee ensures a minimum, 2-hour mediation,
although the parties may engage the mediator for longer time periods, paid by
the hour. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<br />
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: "calibri" , sans-serif;">Neither party is required to hire an attorney
for representation during the mediation, although the parties may be represented by
counsel if they wish. <o:p></o:p></span></div>
<div>
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<o:p></o:p></div>
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<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4q1JAktjgZoXiWeu-xwmhPHTskwIoQbWhzYelalMlt5i_9aMbbhdt5ydnS4o9DOTwnYWdMrzxTPM_OjffHIjDAYGvYpadS92yX4EGhj1ahGqmP41b-bKbiKoNqe639n7Mci9Ey3WmbhYV/s1600/AdobeStock_84878728.jpeg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="800" data-original-width="1600" height="160" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4q1JAktjgZoXiWeu-xwmhPHTskwIoQbWhzYelalMlt5i_9aMbbhdt5ydnS4o9DOTwnYWdMrzxTPM_OjffHIjDAYGvYpadS92yX4EGhj1ahGqmP41b-bKbiKoNqe639n7Mci9Ey3WmbhYV/s320/AdobeStock_84878728.jpeg" width="320" /></a></div>
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<b><u><br /></u></b></div>
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<b><u><br /></u></b></div>
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<br />
<div style="margin-bottom: .0001pt; margin: 0in;">
<b><u><span style="color: black; font-family: "calibri" , sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin;">How Parties
Enter the CAMP Program</span></u></b><span style="color: black; font-family: "calibri" , sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="color: black; font-family: "calibri" , sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin;">Since mediation is voluntary, both parties must
agree to mediation by filling out an </span><a href="https://cai-nc.site-ym.com/?Mediation" target="_blank"><span style="font-family: "calibri" , sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin;">online application on the CAMP webpage</span></a><span style="color: black; font-family: "calibri" , sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin;">. Each party must pay its half of the mediation fee at this
time. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="color: black; font-family: "calibri" , sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin;">Upon submitting the required forms and
paperwork, a mediator will contact the parties within thirty days. The
mediator is permitted to speak with the parties before the mediation commences,
and to hold separate meetings or discussions with the parties prior to or during
the mediation. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="color: black; font-family: "calibri" , sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin;">The mediator may also request the parties to
provide a written statement summarizing the dispute and to request the parties
to submit all documents supporting their claims and the dispute.<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="color: black; font-family: "calibri" , sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin;">All information received by the mediator will
remain confidential. The mediator’s role is that of a settlement
facilitator; the mediator <b style="mso-bidi-font-weight: normal;"><u>does not</u></b>
render a decision about which side has the better argument or would win the
case if a lawsuit were filed, but assists the parties in reaching a mutual
settlement.<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="border-bottom: solid windowtext 1.0pt; border: none; mso-border-bottom-alt: solid windowtext .5pt; mso-element: para-border-div; padding: 0in 0in 1.0pt 0in;">
<div style="border: none; margin-bottom: .0001pt; margin: 0in; mso-border-bottom-alt: solid windowtext .5pt; mso-padding-alt: 0in 0in 1.0pt 0in; padding: 0in;">
<span style="color: black; font-family: "calibri" , sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin;">It remains to be seen whether the CAMP program will breathe new
life into the statutory mediation program, although hopefully it will result in
more disputing parties finding “common elements” to resolve their
disputes. If you have any questions as to how your association could use
the CAMP program, or any other HOA-related questions,</span><a href="https://www.mkglawfirm.com/"><span style="font-family: "calibri" , sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin;"> please contact us</span></a><span style="color: black; font-family: "calibri" , sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-hansi-theme-font: minor-latin;">.<o:p></o:p></span></div>
</div>
<br /></div>
</div>
Anonymoushttp://www.blogger.com/profile/01247933298532991318noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-68870179084789321452018-02-12T13:35:00.003-05:002018-02-12T13:36:50.852-05:008 Homeowners Association Collection Laws<div>
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihzJLQb1gwhsaCObANiJ28UuYauGEuH-ox7EQ4U33hJmL_4UMPUncjQD8sp2lgTt_s49F4tEQJiVDsaNDq5LYkrvGWkPtezvoFXR6ax41zDrJ-pa2TCfeqSDG2mWzLg64pFt-5POogmJVw/s1600/house-2417417_1280.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="646" data-original-width="1280" height="100" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihzJLQb1gwhsaCObANiJ28UuYauGEuH-ox7EQ4U33hJmL_4UMPUncjQD8sp2lgTt_s49F4tEQJiVDsaNDq5LYkrvGWkPtezvoFXR6ax41zDrJ-pa2TCfeqSDG2mWzLg64pFt-5POogmJVw/s200/house-2417417_1280.jpg" width="200" /></a><span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: 12.8px;">It's HOA collection season, so our HOA Ninjas want to remind you of the 8 laws of HOA collections to help your homeowners association help its members pay their assessments on time. </span></span><br />
<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: 12.8px;"><br /></span></span>
<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: 12.8px;">Following these laws will collect more dues more quickly, and keep your HOA in compliance, so you'll have the best chance to win any potential court cases that may arise.</span></span><br />
<h2>
<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: 12.8px;"><u>HOA Collection Laws</u></span></span></h2>
</div>
<ol start="1" style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12.8px; margin-bottom: 0in; margin-top: 0in;" type="1">
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px;"><div style="text-align: left;">
<span style="font-size: 12.8px;"><b>Collect early and often</b></span></div>
<u></u><ul style="margin-bottom: 0in; margin-top: 0in;" type="disc">
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px; text-align: left;">Don’t delay collections in your HOA. You don’t do the HOA or the homeowner any favors if their balance mushrooms to an amount they can’t pay all at once – then payment plan costs, interest, late fees and attorneys’ fees can start to stack up, and they all hurt your association’s cash flow.<u></u><u></u></li>
</ul>
</li>
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px;"><div style="text-align: left;">
<span style="font-size: 12.8px;"><b>Follow your policies</b></span></div>
<u></u><ul style="margin-bottom: 0in; margin-top: 0in;" type="disc">
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px; text-align: left;">Have a written collections policy and follow it with each and every homeowner. Not only does this allow your board members to avoid pleas from their neighbors to cut them a break, but it also insulates your HOA from accusations of discrimination, which can arise when everyone isn’t treated the same.<u></u><u></u></li>
</ul>
</li>
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px;"><div style="text-align: left;">
<span style="font-size: 12.8px;"><b>Prioritize collections</b></span></div>
<u></u><ul style="margin-bottom: 0in; margin-top: 0in;" type="disc">
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px; text-align: left;">Someone on your board needs to be responsible for making sure collections is a regular monthly habit, and they need to be honest and accountable to the board for the numbers at every meeting. If you don’t have such a person, get professional help.<u></u><u></u></li>
</ul>
</li>
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px;"><div style="text-align: left;">
<span style="font-size: 12.8px;"><b>Make payment easy</b></span></div>
<u></u><ul style="margin-bottom: 0in; margin-top: 0in;" type="disc">
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px; text-align: left;">Does your HOA accept credit cards, ACH payments, personal checks, even cash? Why not? The first rule of business is to make it easy for the customer to pay.<u></u><u></u></li>
</ul>
</li>
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px;"><div style="text-align: left;">
<span style="font-size: 12.8px;"><b>Keep contact info current</b></span></div>
<u></u><ul style="margin-bottom: 0in; margin-top: 0in;" type="disc">
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px; text-align: left;">If your homeowners association doesn’t have current email addresses and telephone numbers for its members when they are current with their dues, take our word, members probably aren’t going to share that information when you’re in “bill collector” mode. Have a system to update contact info based on checks, emails and phone calls your HOA receives.<u></u><u></u></li>
</ul>
</li>
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px;"><div style="text-align: left;">
<span style="font-size: 12.8px;"><b>Stay alert to clues</b></span></div>
<u></u><ul style="margin-bottom: 0in; margin-top: 0in;" type="disc">
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px; text-align: left;">The broken window theory suggests that failing to police small crimes sends a signal of decay and lawlessness which can lead to bigger problems. Keep an eye out for homes that suddenly seem to be less-well maintained or have an increase in violations. These could signal changes in the home that could impact your association economically.<u></u><u></u></li>
</ul>
</li>
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px;"><div style="text-align: left;">
<span style="font-size: 12.8px;"><b>Show respect and expect respect</b></span></div>
<u></u><ul style="margin-bottom: 0in; margin-top: 0in;" type="disc">
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px; text-align: left;">Every HOA member is a neighbor and deserves respect from the board, property managers and attorneys. Showing respect and understanding can be one of the best ways to get a sum collected and turn a potential adversary into an advocate – we’ve even gotten thank-you notes from homeowners we’ve collected on.<u></u><u></u></li>
</ul>
</li>
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px;"><div style="text-align: left;">
<span style="font-size: 12.8px;"><b>Never give your opponent ammunition</b></span></div>
<u></u></li>
<ul style="margin-bottom: 0in; margin-top: 0in;" type="disc">
<li class="MsoNormal" style="line-height: 13.568px; margin: 0px 0px 8pt 15px; text-align: left;">Violating fair debt laws or failing to treat all homeowners equally can land your homeowners association in hot water that will cost you thousands in attorneys’ fees to escape. Always follow all laws and your covenants, bylaws and policies to a T – you’ll be glad you did in the off chance the case does wind up in court. Just remember everything you learned in kindergarten and you’ll stay clear of most regulatory violations.<u></u><u></u></li>
</ul>
</ol>
<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: 12.8px;">Following the above laws won't guarantee collection, but they will make the process stronger, more accountable, and more successful. If you have any questions, give us a call at </span></span><span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: 12.8px;">(704) 721-3500, or <a href="https://www.mkglawfirm.com/contact-form" target="_blank">fill out the form on our website. </a></span></span><br />
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Anonymoushttp://www.blogger.com/profile/01247933298532991318noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-49933616432275748572018-01-19T13:34:00.000-05:002018-01-19T13:34:11.127-05:00Case Alert: A Very Un-Jolly Christmas for One North Carolina Homeowners Association<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhNDSnRtfjlfzY6vsUQ_cUN1v-WjJEi02NZfXXaCZZjev8qdkwbJjC6W_xSqSko8qNOMz-y7HmCupGTq5UibriatzwYNe8W6ClIrjSFDgji4MtGeus6CJxnhyphenhyphenBwOSmDaRVZV7l5veJbOMV/s1600/coal+with+bow.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="245" data-original-width="190" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhNDSnRtfjlfzY6vsUQ_cUN1v-WjJEi02NZfXXaCZZjev8qdkwbJjC6W_xSqSko8qNOMz-y7HmCupGTq5UibriatzwYNe8W6ClIrjSFDgji4MtGeus6CJxnhyphenhyphenBwOSmDaRVZV7l5veJbOMV/s1600/coal+with+bow.jpg" /></a></div>
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<span style="font-family: "times new roman" , "serif";">The
North Carolina Court of Appeals delivered a lump of coal to one homeowners
association this winter. In <u>McVicker vs. Bogue Sound Yacht Club, Inc.</u>,
available </span><a href="https://appellate.nccourts.org/opinions/?c=2&pdf=36015"><span style="font-family: "times new roman" , "serif";">here</span></a><span style="font-family: "times new roman" , "serif";">, which came out on December
20th, the Court of Appeals ruled
that a homeowners association had exceeded its authority when it attempted to
collect a construction bond from an owner, and again when it fined that same
owner for failing to timely deposit the impermissible construction bond. <o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "times new roman" , "serif";">The
facts appear to be relatively straightforward. The homeowners, not
realizing that they had to obtain prior approval, hired a contractor to clear
their lot of brush and other debris. As the clearing was underway, the
association notified the owners that the clearing required prior approval from
the architectural review committee. <o:p></o:p></span></div>
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<span style="font-family: "times new roman" , "serif";"><br /></span></div>
<h4 style="text-align: justify;">
<u style="font-family: "Times New Roman", serif;">CASE DETAILS</u></h4>
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<span style="font-family: "times new roman" , "serif";">At
issue was one of the policies enacted by the board of directors which required
any owner, as a condition to the architectural review committee’s consideration
of any architectural plan, to submit a $250 construction bond. The
construction bond was intended to offset the costs of any damage to the
community’s common areas. The bond was
not provided for in the association’s restrictive covenants, but was apparently
adopted by the board as a part of its architectural approval process. Such
bonds or deposits are not necessarily unusual; we know of some high-end
associations which charge as much as $10,000 as a deposit to ensure compliance
during the construction process.<o:p></o:p></span></div>
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<br /></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDkMEHdWou83gKAK6IMxPfHzVKdLBa_OBZ7xrhnnbaWjjuxNLhJKiTqEFBkTbjwxw13RMp4fRoAEV8T6_POAeXThuoT3ANB7kB96YmA3zy-Vjznmv3wVUA884tvY8XC_FhTK7za_-8T-8i/s1600/NeighborhoodStreet.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" data-original-height="1068" data-original-width="1600" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDkMEHdWou83gKAK6IMxPfHzVKdLBa_OBZ7xrhnnbaWjjuxNLhJKiTqEFBkTbjwxw13RMp4fRoAEV8T6_POAeXThuoT3ANB7kB96YmA3zy-Vjznmv3wVUA884tvY8XC_FhTK7za_-8T-8i/s320/NeighborhoodStreet.jpg" width="320" /></a><span style="font-family: "times new roman" , "serif";">After
a violation hearing, the board of directors in this case required the homeowners to submit an architectural
plan describing what they intended to do with the property and to deposit the
construction bond, or face a fine of $100.00 per day. The homeowners
submitted their plans late, which the board retroactively approved. The
owners did deposit the construction bond, albeit late and “under protest”, at
the time they submitted the plans. The board levied fines for fourteen
days, totaling $1,400.00 for the failure to submit the construction bond within
the required time period, although the board later reduced the fine to
$1,050.00. The owners argued that the board had neither the authority to
require a bond nor the authority to impose a fine for a failure to deposit the
bond, since the bond requirement was
only a policy adopted by the board, not a requirement explicitly set forth in
the restrictive covenants.<o:p></o:p></span></div>
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<span style="font-family: "times new roman" , "serif";"><br /></span></div>
<h4 style="text-align: justify;">
<span style="font-family: "times new roman" , serif;"><u>OUTCOMES</u></span></h4>
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<span style="font-family: "times new roman" , "serif";">Although
the amounts of money at stake are fairly trivial, it appears that neither the
board of directors nor the owners were willing to back off of their respective
positions. The homeowners lost in the trial court, however they appealed.
</span></div>
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<span style="font-family: "times new roman" , "serif";"><br /></span></div>
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<span style="font-family: "times new roman" , "serif";">On appeal, the appellate court noted that the association was without
proper corporate authority to impose a construction bond in the first place.
The court reviewed the association’s declaration of covenants, conditions
and restrictions, and noted that there was no explicit provision which would
authorize the collection of a construction bond. </span></div>
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<span style="font-family: "times new roman" , "serif";"><br /></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjewB7BbkZJispXjRs3-Z2GBMSZezc5OhV44S77agra2SyMZQfEjmH5aQZmtbThFM7uNIsK6yqnEeToefo3HUd-5piNaJqcWx_x7qVxUHK6u5rO28wFaO55JIrb_X40wAMwTHJvNl682VmS/s1600/Justice+2.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="720" data-original-width="960" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjewB7BbkZJispXjRs3-Z2GBMSZezc5OhV44S77agra2SyMZQfEjmH5aQZmtbThFM7uNIsK6yqnEeToefo3HUd-5piNaJqcWx_x7qVxUHK6u5rO28wFaO55JIrb_X40wAMwTHJvNl682VmS/s320/Justice+2.jpg" width="320" /></a><span style="font-family: "times new roman" , "serif";">The court cited
the long-standing North Carolina law which states that a restrictive covenant
is to be narrowly construed, and a homeowners association cannot expand that
authority beyond the limits set forth in the restrictive covenant. The
association also argued that since it had blanket authority to govern the
upkeep of the common areas, that its authority could be extended to require a
construction bond since the purpose of
the bond was ostensibly to protect the common areas. </span></div>
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<span style="font-family: "times new roman" , "serif";"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "times new roman" , "serif";">The court
disagreed on this point as well: restrictive covenants that are “clearly
expressed may not be enlarged by implication or extended . . .”.
Similarly, since the association could not charge the construction bond
in the first place, it could not fine the owners because they failed to timely
deposit the construction bond.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "times new roman" , "serif";">Notably,
there was a dissenting opinion which argued that the appellate court exceeded
its scope of review, because the bond was ultimately refunded, rendering the
question moot, and also that the homeowners
had asked only whether the association followed proper procedures to impose the fine, not whether the association
had the authority to demand the bond.
The presence of a dissent means that the case may be further heard by the North Carolina
Supreme Court, if it believes the case
warrants further review. <o:p></o:p></span></div>
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<br /></div>
<h4 style="text-align: justify;">
<span style="font-family: "times new roman" , "serif"; text-transform: uppercase;"><b><u>The Bottom Line</u></b></span></h4>
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<span style="font-family: "times new roman" , "serif"; text-transform: uppercase;">a</span><span style="font-family: "times new roman" , "serif";"> homeowners association is bound
by the explicit authority granted to it in the governing documents, and that authority may not be expanded without amending the declaration. The
proper remedy in this situation was to amend the governing documents to grant
the authority to charge the
construction bond. Boards of
directors may, and should, adopt policies and procedures to flesh out their
restrictive covenants and ensure that decisions are made in fair, uniform and
even-handed ways, but in doing so they must take care not to add substantive
requirements for which there is no authority in the document itself.<o:p></o:p></span></div>
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<br /></div>
<br />
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "times new roman" , "serif";">If
you have questions about the scope of authority in your community’s governing
documents, <a href="https://www.mkglawfirm.com/">please contact us to discuss in further detail.</a><o:p></o:p></span></div>
Anonymoushttp://www.blogger.com/profile/01247933298532991318noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-76616938406332578592017-09-28T14:20:00.000-04:002017-09-28T14:20:02.805-04:00Case Alert: Emailed Notices of Foreclosure Under In Re Ackah<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiia-ZdNfM7zlyoi8PHqrZ28JixNMjEO-PzgjKTFDzYjqHc4xdD87oQRwFEvY2l_vMwouhjgx8Tduftdyyc9NxbpwJG6cVvYyPxujHgsXIxLvcHsWMFvogQ88FIMCFQiXGh8bq6EWn1NBsE/s1600/ack.jpg" imageanchor="1" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="240" data-original-width="210" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiia-ZdNfM7zlyoi8PHqrZ28JixNMjEO-PzgjKTFDzYjqHc4xdD87oQRwFEvY2l_vMwouhjgx8Tduftdyyc9NxbpwJG6cVvYyPxujHgsXIxLvcHsWMFvogQ88FIMCFQiXGh8bq6EWn1NBsE/s1600/ack.jpg" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">This was our response when we first read<br />the N.C. Court of Appeals' opinion in<br />the new case of <u>In re Ackah</u></td></tr>
</tbody></table>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;"><u>In re Ackah</u>: Must Planned Communities Now Serve Notices of Foreclosure Hearing Via Email?</span></h3>
<div>
<span style="font-family: Verdana, sans-serif; font-size: small;"><br /></span></div>
<span style="font-family: Verdana, sans-serif;">The North Carolina Court of Appeals issued an opinion on September 5, 2017, that appears to add an additional requirement for foreclosure trustees regarding the due diligence necessary to properly serve the homeowner in an HOA foreclosure proceeding. The case, "In re: Ackah," is a Wake County case where he HOA foreclosed on Ms. Ackah’s home and a third-party bidder bought the home at the foreclosure sale. The lower court held that the foreclosure was invalid because the trustee should have emailed the debtor, and also that the deed to the third-party bidder could be invalidated, returning ownership to Ms. Ackah.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">The relevant facts are that Ms. Ackah, the owner of the property, rented the property out when she moved to Africa in 2012. She provided no notice to the HOA that she had moved or rented the property, although she presented evidence that in the past the property management company had emailed her at various times when it sent out community-wide notices. There was no evidence that Ms. Ackah ever used the email address to respond to any of the notices. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">Ms. Ackah became delinquent in her HOA assessments in 2014 and a lien was filed. At various times, the HOA or the trustee mailed letters to the addresses it had for Ms. Ackah’s mother and uncle in South Carolina, where she had had her mail forwarded. Ms. Ackah’s uncle received the letters, but apparently never informed Ms. Ackah. When the HOA decided to commence foreclosure proceedings to recover the delinquent assessments, it mailed notice to the property and to Ms. Ackah at her mother’s address and her uncle's address. Notices were mailed both certified and regular mail, and the evidence was that the uncle, at least, received the mail, but failed to realize its importance or forward it on to Ms. Ackah.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">Importantly, the notice of hearing was also posted on the front door of the property by the sheriff’s office, although the tenant failed to inform Ms. Ackah of this. The law allows a foreclosure notice to be served by posting on the front door if the homeowner does not respond to mailed notices. No foreclosure notice was ever emailed to Ms. Ackah. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">A foreclosure hearing was held and the property was subsequently sold to a third party bidder, the Joneses. Ms. Ackah sued to invalidate the foreclosure, arguing that she first learned of the proceeding when her tenants received a notice to vacate the property following the foreclosure sale. At issue was whether the foreclosure trustee had exercised due diligence when attempting to serve Ms. Ackah with the hearing notice since the HOA had her email address but failed to use it to notify her of the impending foreclosure.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">All lawsuits, including foreclosures, must be “served” on the adverse party for the court system to have jurisdiction over the parties and to render a binding judgment. Without proper service, no lawsuit can move forward, and no judgment rendered is effective upon any party not properly served. Service is generally effectuated by the sheriff, or by certified or overnight mail with a signature receipt. Foreclosures can also be served by posting on the property itself if the homeowner does not sign for service via mail or overnight delivery. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">The Court of Appeals reviewed the notice requirements set forth in Section 3-116 of the North Carolina Planned Community Act, and in Rule 4 of the North Carolina Rules of the Civil Procedure, which is the service rule. The Court stated, without citing any real authority, that Rule 4 requires the exercise of "due diligence" when serving a homeowner with a foreclosure notice, and that since the HOA had Ms. Ackah’s emails address but failed to use it to notify her of the impending foreclosure, the HOA had failed to exercise due diligence before resorting to posting the notice on the property. Therefore, the posting was ineffective to constitute proper service of the lawsuit, and the foreclosure was deemed to be invalid, at least as it pertained to Ms. Ackah. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">Specifically, the Court stated, “[w]hen the notice letters came back ‘unclaimed,’ Rule 4 due diligence required that the HOA at least attempt to notify Ms. Ackah directly through the email address it had for her rather than simply resorting to posting a notice on the Property.” </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">The second part of the opinion dealt with an analysis of what to do about the Joneses, the third party bidder who purchased the home at the foreclosure sale and who had no way of knowing that Ms. Ackah was not properly notified. There is a state statute which says that a bona fide purchaser (i.e. an innocent buyer without reason to know of any procedural or legal defects) is protected against an invalidation of its purchase at a foreclosure sale. Therefore, the Court ruled that the Joneses could keep the property, and that Ms. Ackah could get financial restitution from the HOA, but could not get the home back.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">The takeaway from Ackah is that HOAs, their management companies and their attorneys now (at least until the Supreme Court considers and hopefully overrules this case) have an additional inquiry to make when conducting a foreclosure when attempts to serve a defendant (other than by posting) prove ineffective. Our advice is that if an HOA or a management company knows of an email address used by an owner, then it needs to be provided to the foreclosing trustee prior to commencement of the foreclosure. The trustee is obligated to determine whether the notice of hearing must also be sent to the email address. This necessarily requires that email addresses with owners be kept up-to-date, but this is something that most management companies and HOAs do already. If they don’t, they need to start. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">Some attorneys have stated that the Ackah case appears to require that all communications preceding the foreclosure must also be sent via email, which is creating a lot of angst among management companies and HOAs alike. Although a court or the legislature may one day require all pre-foreclosure communications to be sent by email, Ackah does not specifically require this and we do not recommend it at this time. We are of the opinion that Ackah addresses only the trustee’s efforts at the foreclosure stage when mailed or personal service is ineffective, and that its ruling should be limited to that situation only. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;"><b><u>The bottom line:</u> </b>Many HOA attorneys are distressed at this holding by the Court of Appeals. In fact, Rule 4 of the North Carolina Rules of the Civil Procedure says nothing about due diligence, except for in one particular subsection, not applicable here, which addresses the rare instance of serving someone by publishing a notice in the newspaper rather than personally or by mail. The Court completely invents this requirement. It does cite an earlier 2015 case in which a plaintiff failed to use due diligence in notifying his ex-wife, whom he knew to be in New York City, before “serving” her via publication in Charlotte with a divorce lawsuit. The case said nothing about email except in passing in a footnote. Therefore, our opinion is that the case is poorly reasoned and should be strictly limited in its application. We hope the N.C. Supreme Court will take up the case, which we understand has been further appealed, and will reverse the Court of Appeals’ unfortunate decision.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">Unfortunately, Ackah is North Carolina law at this time unless overturned by the Supreme Court or the General Assembly. If an HOA or management company has any sort of email addresses for an owner, it should provide them to the attorney handling the foreclosure. As foreclosure trustee, if other attempts to serve the owner with the foreclosure fail, the Ackah case requires that notification via email must also be attempted before service by posting can be effective. Thus, this adds an extra step for the notification process for a trustee when foreclosing on an HOA claim of lien. This case does not require emails to be used in any other scenario. </span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">Here's a link to the opinion itself: <a href="https://appellate.nccourts.org/opinions/?c=2&pdf=35255" target="_blank">https://appellate.nccourts.org/opinions/?c=2&pdf=35255</a></span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">Here's a link to Rule 4 of the North Carolina Rules of Civil Procedure: <a href="http://www.ncga.state.nc.us/EnactedLegislation/Statutes/HTML/BySection/Chapter_1A/GS_1A-1,_Rule_4.html" target="_blank">http://www.ncga.state.nc.us/EnactedLegislation/Statutes/HTML/BySection/Chapter_1A/GS_1A-1,_Rule_4.html</a></span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="font-family: Verdana, sans-serif;">As always, if you have questions regarding this case or other areas of HOA law, please contact us.</span><br />
<div>
<br /></div>
zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-38321138362126433632017-08-16T13:47:00.001-04:002017-08-16T13:47:04.237-04:00Unhappy Property (Manager) Loses in South Carolina“If you think hiring a professional is expensive, try hiring an amateur.” - Anonymous<br />
In South Carolina, as in most states, there exist various consumer protection and licensing laws, intended to protect the public from the unauthorized practice of law (or “UPL”, as it is often referred). Of course, only lawyers licensed in the state in question can practice law in that state, but the question sometimes arises as to what actually constitutes “practicing law”. Community Management Group, which manages HOAs in the coastal, lowcountry part of South Carolina in and around Charleston County, was the subject of a recent South Carolina Supreme Court case. CMG was found to be in violation of the UPL laws in the recent case of Rogers Townsend & Thomas v. Peck, et al. <br />
CMG represented its HOA clients in magistrate’s court where it prepared the lawsuit and went to court on behalf of its HOA clients to collect outstanding assessments. When it obtained a judgment, CMG would then file the judgment with the circuit court, thereby making the judgment a circuit court judgment against the debtor. <br />
Additionally, CMG would prepare and record liens against debtors, and in its own words, intended the lien to “put a cloud on the title”, rendering the property unsaleable until the lien was paid. <br />
Finally, CMG advertised itself as capable of “hand[ling] collections, lien filing and Small Claims Court actions in house.” <br />
The South Carolina Supreme Court determined that all of the foregoing acts by CMG were, in fact, the unauthorized practice of law which required representation by an attorney. Underlying the court’s ruling is longstanding law that defines the practice of law to include the preparation of court documents, the management of proceedings on behalf of clients before courts, and the preparation and recording of legal instruments.<br />
The court was requested to hold that CMG’s practice of interpreting declarations of restrictive covenants, “addressing disputes” (we are not exactly sure what this phrase means) between HOAs and owners, and advising HOAs on remedies to collect unpaid assessments, also constituted the unauthorized practice of law. The court declined to opine as to whether these acts were UPL because it had no specific evidence in front of it.<br />
The case is not groundbreaking, but it is a stark reminder that the courts in South Carolina, and in most other states, strictly regulate what is, and is not, the practice law within the state and those who exceed the bounds are asking for trouble. When in doubt, it’s best to leave court filings and, always, court appearances, to licensed attorneys. To read the case, click <a href="https://www.sccourts.org/opinions/HTMLFiles/SC/27707.pdf">here</a>.<br />
<br />
Please give us a call or <a href="mailto:zmm@moretzandskufca.com">drop us an email</a> if <a href="http://www.moretzandskufca.com/practice-areas/homeowners-associations/">our HOA law team</a> can assist your HOA or management company with manager loses, or if we can be of assistance in any other way regarding legal issues facing your community. Please be aware that we represent HOAs only – we do not represent homeowners in disputes against their HOAs. We appreciate your reading our HOA law blog and encourage you to share it with others who may be interested. Thank you!zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-47150758922082476432017-05-06T11:11:00.001-04:002017-08-07T16:34:39.076-04:00Video: Pool Rules - How to Do it Right<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjS4-L5jilhUDiM9_DXP8N0Cq4969W6j6a8-KCJbjWmJdjs_oGmEou3PeqtaljM0BNWSKe4ynPeXon4-T3onsxpzno8ytdT08sA0P8BjoQD6R2MpBTL_yny26ovrfU23M5YLq6hui2zZOsK/s1600/pool+closed.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="214" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjS4-L5jilhUDiM9_DXP8N0Cq4969W6j6a8-KCJbjWmJdjs_oGmEou3PeqtaljM0BNWSKe4ynPeXon4-T3onsxpzno8ytdT08sA0P8BjoQD6R2MpBTL_yny26ovrfU23M5YLq6hui2zZOsK/s320/pool+closed.png" width="320" /></a></div>
Pool season is here! Watch this short video with Moretz & Skufca HOA Ninja Chris Gelwicks and Key Community Management's Cyndi Sullivan for all you need to know about instituting proper rules and regulations for your homeowners association's or condominium's pool: <a href="https://youtu.be/flNNLIKBBiQ" target="_blank">Pool Rules: What You Need to Know</a>zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-82968037788001005802017-02-25T15:30:00.003-05:002017-02-25T15:30:55.095-05:00How to Handle HOA/Condo Board Member Resignations<div class="MsoNormal" style="text-align: justify;">
By Chris Gelwicks, Esq.</div>
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From time
to time we receive questions regarding the resignation of directors, term
expiration and what to do in the event of a mass resignation by the existing
board. The North Carolina Planning
Community Act, Condominium Act, and the Non-Profit Corporation Act address
certain issues with regard to directors’ terms and how to fill vacancies. Generally, the remaining board members
appoint a replacement to serve out a resigning director’s term. But what
happens when directors resign and do not appoint their successors, or when
there are not enough remaining directors left to appoint replacements? </div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgp31rr3kFvSpLeBBat18obypsejhC1KQIOhMBvyNuUxUuGTRlBnpGaynVhGPzioUMBfXYehnz1-9JgqQHhAzt2OkMcmEHdvsh2eLnAlfRXlCjZBbW3DsFi6RhLBHihFa3cX746iudjvD7y/s1600/i+resign+right+meow.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgp31rr3kFvSpLeBBat18obypsejhC1KQIOhMBvyNuUxUuGTRlBnpGaynVhGPzioUMBfXYehnz1-9JgqQHhAzt2OkMcmEHdvsh2eLnAlfRXlCjZBbW3DsFi6RhLBHihFa3cX746iudjvD7y/s1600/i+resign+right+meow.jpg" /></a></div>
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Section 55A-08-05(d) of the North Carolina Non-Profit Corporations Act provides that when the term of a
director <u>expires</u>, that director continues to serve until his or her
successor is appointed or elected and takes office. This seems to be in contrast with Section
55A-08-07 which indicates that a director’s <u>resignation</u> is effective <u>upon
communication</u> of that resignation to the board (unless the resignation sets
forth another effective date). The key difference
between the two statutes are the terms “expire” and “resign”. Normally, in either case, the remaining
directors would appoint someone to fill the empty seat unless the bylaws
indicate differently. The board could also choose to hold an election for the
empty seat(s).</div>
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Where we
run into problems is where an entire board resigns at once and no successors
are appointed. Pursuant to Section
55A-08-30, directors on boards have a duty to act in good faith, with
reasonable care, and in a manner that is in the best interest of the association. Such fiduciary duties include that directors
enforce the declaration of covenants, collect assessments, and ensure that the
association is run and continues to be run effectively. It is a reasonable conclusion that if an
entire board resigns at once and appoints no successors to fill vacancies, then
the association cannot be effectively run.
Those directors who resigned en masse potentially subject themselves to liability
by not finding and appointing replacements; those directors, by basically
abandoning their posts, could be construed to have violated their fiduciary
duties. </div>
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<span style="text-indent: 0.5in;">The same could also apply if so
many directors resign that the board can no longer reach a quorum to make a
decision on appointing replacement directors. Keep in mind that the bylaws of your homeowners
association ultimately control and can provide a different procedure than these
North Carolina state statutes. If you
are reading this and are on the board of your association, you may wish to
review your bylaws to determine what they say in these situations and whether
changes might be necessary to provide better procedures, such as stating that
even board members who resign also continue to serve until their successors
take office.</span></div>
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The bottom
line is this: Resignations, vacancies and the like are not to be taken lightly. Directors who resign should always find a
successor if at all possible and submit those names to the remaining board
members. If an entire board intends to
resign – which is an extremely bad idea to begin with and should be avoided at
all costs – they should do so in a manner that allows successors to be
appointed and the association to continue to function. For example, the resignations may be staged
over time to allow replacements to come aboard.
And remember that, at least in North Carolina, board members whose terms
<u>expire</u> continue to serve, and continue to have fiduciary duties to the
association and the members, until their replacements take office.</div>
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<span style="text-indent: 0.5in;">Failure to appoint successors in a
way that results in a dysfunctional board can result in personal liability to
the resigning directors for breach of fiduciary duty. As always, don’t hesitate to contact us to
discuss strategies, procedures and potential liabilities when dealing with
board matters.</span></div>
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<span style="text-indent: 0.5in;"><a href="http://nchoalaw.blogspot.com/2016/12/failure-to-hold-formal-board-votes.html" target="_blank">Click here</a> for another of our blog posts regarding board of directors matters.</span></div>
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<span style="text-indent: 0.5in;">More good stuff on our <a href="http://hoaninjas.com/" target="_blank">HOA Ninjas website</a>.</span></div>
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<br /></div>
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<a href="https://twitter.com/HOANinjas" style="text-indent: 0.5in;" target="_blank">Follow our HOA Ninjas on Twitter</a><span style="text-indent: 0.5in;"> for bite-sized info and tips.</span></div>
zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-40032783236915770282017-02-11T14:55:00.000-05:002017-02-11T14:55:01.411-05:00The immigration ban case - a primer for nonlawyersI read the full Ninth Circuit Court of Appeals opinion on the immigration ban and thought it might be helpful to provide a little background for those of you who are not lawyers or haven't read it. This is an explanation as of February 11, 2017; if you're reading this much after that date, then the case has probably proceeded along since then and this explanation may no longer be as helpful. This is not a political post, just explaining where the case is right now. Bottom line, the substantive issues involved have not even been heard by the trial court yet – all that has happened so far is that the trial court and the court of appeals imposed a stay on enforcing the immigration ban until the substantive legal issues can be fully argued at the trial court level. The Court of Appeals opinion is easily found online should you wish to read it yourself, although it will be a bit of a slog for nonlawyers.<br />
<br />
The lawsuit filed by the states to try to stop the immigration ban has not been heard by the Federal District Court. All the District Court has done so far is to place an injunction on the enforcement of the ban until a full trial is held on the legality of the ban. To grant the injunction, the District Court had to make the threshold determination that irreparable harm would occur if the executive orders were allowed to go forward prior to a full trial, and that the states challenging the ban are more likely than not to win their challenge at the full trial. Again, no hearing or trial has actually been held yet on the substantive issues involved.<br />
<br />
The Trump administration appealed the injunction, arguing that the executive order should remain in place and be enforceable pending the full trial. Remember, all an appeals court does is review what the trial court did and determine if there was a proper legal basis for the trial court's determination. An appeals court does not re-hear the factual issues in the case or make any factual determinations. In fact, an appeals court does not hear testimony or really weigh evidence at all, it only looks at what was done at the trial court below and listens to the arguments of the attorneys as to whether or not what the trial court did was proper. The appeals court generally defers to the factual determinations of the trial court since the trial court judge actually heard all the evidence and testimony and the appeals court does not.<br />
<br />
In this case, the Ninth Circuit Court of Appeals looked at the injunction put in place by the trial court and declined to reverse the trial court's conclusion that an injunction was proper in this case until a full trial on the substantive issues could be held.<br />
<br />
I cannot take great offense at these rulings and they are not out of the mainstream with regard to how court cases generally proceed. The trial court basically said that there is no great emergency requiring the immigration ban to take effect immediately and that it made sense to keep the status quo as it existed prior to the ban until the legality of the ban can be fully determined. Personally I believe there are parts of the ban that are perfectly enforceable and there are parts of it that obviously are not. I would have preferred for the trial court to have enjoined the parts that were not enforceable and to let the other parts proceed, but it chose not to do that and the Court of Appeals really does not have the authority to delve into that level of detail at this point in the case. The case will proceed at the District Court level presumably and I believe ultimately parts of the ban will be upheld and parts of it will not be. But I think it is important to understand that the substantive legal issues have not even been fully heard at this point. I hope this explanation was helpful.zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.comtag:blogger.com,1999:blog-5976431339364848974.post-48730026854919344232016-12-04T17:26:00.000-05:002018-03-03T19:35:16.721-05:00Failure to Hold Formal Board Votes Dooms Two Charlotte HOAs <h3>
<b>Caselaw Update! </b></h3>
<div>
The North Carolina Supreme Court, in a decision filed on March 2, 2018, <b><u>REVERSED</u></b> the Court of Appeals' decision discussed below. You can read the Supreme Court's decision <a href="https://appellate.nccourts.org/opinions/?c=1&pdf=36662" target="_blank">here.</a> As we discussed in our blog post below, which we posted on December 14, 2016, we disagreed with the Court of Appeals' reasoning, and thankfully the Supreme Court did also. The Supreme Court confirmed the longstanding rule that only <u>members</u> of an association can contest whether the board properly followed its own internal procedures in making the decision to bring a lawsuit - failure to follow the bylaws or other requirements <u>cannot</u> be used by the <u>defendants</u> to claim that the association did not have standing to bring the lawsuit. In this case, two Charlotte-area homeowners associations can now proceed with their lawsuit against the City of Charlotte for approving a rezoning which would allow lower-income housing next door to the two associations. Of course, our takeaway below still stands - while it may sometimes be a pain to follow board meeting and voting procedures, a cavalier attitude can come back to bite you. In this case, years of litigation and many tens of thousands of dollars in legal fees were wasted due to the failure to follow simple procedural steps. Don’t let that happen to your HOA.<br /><br />-----------------------------<br /><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjDNMOYyyi5NvWnQtqNvLMSNDmWB8cyKMrTDZlB17JRoYcKr0o-K0KoNALkNS2S3cbU_Gd-sPUWB0450YeV3W3rRvceDmNs1PXCARZjvA3pf4vt2RHGZq3bGidz3IRt9Tjz9UV-WKeLYOwk/s1600/empty+meeting+table.jpg" imageanchor="1" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img alt="Empty meeting table" border="0" height="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjDNMOYyyi5NvWnQtqNvLMSNDmWB8cyKMrTDZlB17JRoYcKr0o-K0KoNALkNS2S3cbU_Gd-sPUWB0450YeV3W3rRvceDmNs1PXCARZjvA3pf4vt2RHGZq3bGidz3IRt9Tjz9UV-WKeLYOwk/s320/empty+meeting+table.jpg" title="" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">An unused meeting table does not do your HOA much good.</td></tr>
</tbody></table>
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<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: "arial" , "helvetica" , sans-serif;">There are times in the practice of homeowners’
association law when courts make rulings with which we as attorneys disagree
but where an underlying principle or best practice is affirmed. A prime example is the N.C. Court of Appeals’
opinion of November 1, 2016 in the case of <i>Willowmere
Community Association Inc. and Nottingham Owner’s Association Inc. v. City of
Charlotte and Charlotte-Mecklenburg Housing Partnership</i>. As is generally
the case whenever an HOA case reaches the North Carolina appellate courts, the
HOAs lost.<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: "arial" , "helvetica" , sans-serif;">The two associations filed suit to challenge the
rezoning of land that was approved for the development of moderate-income multifamily
housing adjacent to their single-family subdivisions.However, the Mecklenburg
County Su<a href="https://www.blogger.com/null" name="_GoBack"></a>perior Court never reached the merits of the
challenge, instead ruling that the HOAs did not have legal standing to bring
the challenge at all. It stated that the
associations “did not have standing to bring the action because they failed to
follow the requirements in their respective bylaws with regard to their
decisions to initiate this litigation.”<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Without “standing”, generally regarded as the
plaintiff’s having suffered sufficient individualized harm from the actions of
the defendant, the court system does not have jurisdiction to hear the
plaintiff’s plea at all. Standing is
designed to ensure that cases are grounded in actual, specific disputes and
deter the filing of cases based upon theoretical or conjectural wrongs. Since
lack of standing “bars the door to the courthouse” for the plaintiff and can
prevent valid legal claims from being adjudicated, courts typically use great
care in throwing a case out due to lack of standing. <o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: "arial" , "helvetica" , sans-serif;">In this case, the N.C. Court of Appeals agreed with
the trial court, focusing on the failure of the two HOAs’ boards of directors
to follow proper procedures in making the decision to sue. Both boards had determined to sue via email or
telephone discussions, without formal board meetings or even written and signed
consents to action without a meeting by the board members. <o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Willowmere HOA argued that its board unanimously
authorized the lawsuit through a chain of emails, and that this satisfied the N.C.
Nonprofit Corporation Act which allows a board to take action without a meeting
through “unanimous consent”, but the Court ruled that even if this were true, the
Willowmere bylaws also required “an explanation of the action taken to be
posted at a prominent place within the Common Area within three (3) days after
the written consents of all the Board members have been obtained.” Unfortunately for Willowmere, there was no
evidence showing that an explanation of the action was posted in the Common
Area. <o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: "arial" , "helvetica" , sans-serif;">The Nottingham HOA board did not call a formal board
meeting to discuss filing a lawsuit and did not act via unanimous written
consent. Rather, a few of the board members
conducted a telephone conversation with the management company and did not
refer to the basic requirements of the bylaws regarding the power to initiate a
lawsuit. They did not deliberate and
make a decision in a formal meeting or unanimously in writing.<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: "arial" , "helvetica" , sans-serif;">The Superior Court judge inquired into the standing
issue on his own motion – neither of the defendants had argued that the HOAs
lacked standing to bring the challenge.
But North and South Carolina courts are generally disposed to rule
against HOAs, and in this case the failure to follow the basic requirements in
the bylaws and statutes for conducting business gave the Superior Court all the
ammunition it needed to find that neither association had standing to bring the
lawsuit, and the Court of Appeals agreed.
<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: "arial" , "helvetica" , sans-serif;">We question the judges’ reasoning on the standing
issue. It would appear that the HOAs could have suffered significant and
specific damages had an improper rezoning been approved adjacent to them, which
should have been enough to confer standing.
A failure to follow corporate formalities would typically be something
for which an association member could sue or take other action to attempt to
rescind the decision, but it has not to our knowledge prior to this case been
used to actually deny an association its right to be heard in a court of law.<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Whether or not a non-HOA member may challenge
standing based on the internal procedures of the HOA since the non-member is
not subject to those procedures, we can agree that an HOA member may make such
challenge to board action if the board does not follow the proper procedures,
so certainly the HOA boards here were at fault to some extent. <o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Bottom line:</b> Don’t
get in a hurry when making decisions. HOA boards must follow the requirements
of both the governing documents and the statutes when taking action, and avoid
taking action by email in any significant matter. Remember, in general, actions taken without a
meeting, like via email, must be unanimous.
(Meetings can be held over the phone provided all board members can
clearly hear one another.) Calling a
meeting is almost always the best option for making decisions concerning serious
matters. The use of the unanimous
written consent procedure is a useful tool if a board is simply unable to meet,
but boards should take great care in preserving the emails documenting the
unanimous agreement. We also recommend
that, at the next board meeting following a decision made without a meeting,
all items approved via unanimous written consent be formally ratified with such
ratification reflected in the written minutes or via formal written resolution. Finally, adherence to additional procedures
such as the posting of an explanation, as with Willowmere, is required to ensure
that the action will withstand a subsequent challenge on procedural grounds.<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: "arial" , "helvetica" , sans-serif;">While it may sometimes be a pain to follow these
procedures, a cavalier attitude can come back to bite your board. In this case, years of litigation and many
tens of thousands of dollars in legal fees, not to mention the opportunity to
challenge an unwanted development next door, were wasted due to the failure to
follow simple procedural steps. Don’t let that happen to your HOA.</span><span style="font-family: "times new roman" , serif;"><o:p></o:p></span></span></div>
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<i><span style="background: white; color: #222222; font-family: "arial" , "sans-serif"; font-size: 11.0pt;">Please give us a call or </span></i><a href="mailto:zmm@moretzandskufca.com" target="_blank"><i><span style="background: white; color: #888888; font-family: "arial" , "sans-serif"; font-size: 11.0pt;">drop us an email</span></i></a><i><span style="background: white; color: #222222; font-family: "arial" , "sans-serif"; font-size: 11.0pt;"> if </span></i><a href="http://www.moretzandskufca.com/practice-areas/homeowners-associations/" target="_blank"><i><span style="background: white; color: #888888; font-family: "arial" , "sans-serif"; font-size: 11.0pt;">our HOA law team</span></i></a><i><span style="background: white; color: #222222; font-family: "arial" , "sans-serif"; font-size: 11.0pt;"> can assist your HOA or management company with your corporate procedures, or if we can be of assistance in any other way regarding
legal issues facing your community. Please be aware that we represent HOAs only
– we do not represent homeowners in disputes against their HOAs. We appreciate
your reading our HOA law blog and encourage you to share it with others who may
be interested. Thank you!</span></i></div>
</div>
zacharymoretzhttp://www.blogger.com/profile/06651628182813794481noreply@blogger.com