ASSOCIATION COVENANT ENFORCEMENT

Using your Documents to Help Maintain Your Neighborhood

I.

The Ground Level – Your Governing Documents A. Declaration 1. Declaration is the recorded document that • affects and attaches to the title to the real property 2. Likely where your powers are Assessments • Violations • Attorneys fees/late fees 3. Difficult to amend – usually requires a super majority of members (75%)

B. Bylaws 1. Not recorded (unless you are in a condominium) 2. Instructions on meetings, boards, voting, and general operation of the Association 3. More easily changed, usually just by Board vote Bylaws are not always easily changed!

C. Articles of Incorporation 1. Sometimes voting powers are here.

2. Sometimes Art of Inc. are “ahead in line” to the Bylaws. Does the Association have 3. Art of Inc. are only available where your entity is • a corporation benefit to not On file at VA State Corporation Commission • If your association is not incorporated, you will not have Art of Inc.

D. Rules/Regulations 1. These are rules for conduct on common area 2. Can also include design guidelines

E. Policies/Procedures 1. These are procedures for how the Association conducts itself a. Collections Resolution • Demand letters, late fees, etc.

• Keep in mind Va Code §55-513.3 (amended in 2014):

§ 55-513.3. Assessments; late fees.

Except to the extent that the declaration or any rules or regulations promulgated pursuant thereto provides otherwise, the board may impose a late fee for, not to exceed the penalty provided in § 58.1-3915 , any assessment or installment thereof that is not paid within 60 days of the due date for payment of such assessment.

§ 58.1-3915. Penalty for failure to pay taxes by December 5.

Except as otherwise provided by ordinance under § 58.1-3916 pay any tax if such failure was not the fault of the taxpayer.

, any person failing to pay any county, town and city levies on or before December 5 shall incur a penalty thereon of five percent, which shall be added to the amount of taxes or levies due from such taxpayer, and which, when collected by the treasurer, shall be accounted for in his settlements. No penalty shall be imposed for failure to

Policies/Procedures (cont.) b. Some attorneys interpret this to require late fees to be limited to 5%.

c. Language of the statute states “except to the extent that the declaration provides otherwise” – this appears to allow for higher late fees if specifically written in the Declaration.

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May even permit a Board to set a higher late fee, so long as the Board is given that authority in the Declaration.

Policies/Procedures (cont.) d. FDCPA has restrictions on third-party collectors •

30 day notice requirement

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The Association is the “original creditor” so FDCPA doesn’t apply

Managers and attorneys must adhere to all FDCPA regulations!

Policies/Procedures (cont.) 2. Due Process Resolution a. This is the procedure for holding hearings, finding owners in violation, etc. b. Can be part of a larger “Enforcement Policy” that also contains a collections policy c. Be sure to follow requirements of VA. Code §55-513 as to notice of hearings, notice of results •

Strict timing requirements

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Don’t make your policy any stricter than current law

Policies/Procedures (cont.) 3. Complaints Policy a. Required to be in place by CICB • •

A procedure for owners to complain to the Ombudsman’s office about the Board/Association

4. Parking Policy a. Note what kinds of vehicles are restricted, and be very detailed. § 58.1-3915. Penalty for failure to pay taxes by December 5.

b. Enforcement: Stickers • Towing • Paint curbs • Reserved Spaces

II. The First Floor – Someone’s Done Something Wrong A. Monetary Violation: Unpaid amounts owed to the Association 1. Who keeps the accounts?

2. How late is late? Decide when you will send • accounts to legal, then always send them at that point (Fair Housing) 3. Beware of the five-year statute of limitations Debts older than 5 years are uncollectible if not previously secured by a judgment • Once you obtain a judgment and record in land records, your judgment is valid for 20 years. o

Garnish anytime during that 20 years.

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Judgment lien remains on the property until sold or foreclosed.

B. Non-Monetary Violation: Actions or Omissions 1. Property inspections a. Conduct them regularly and consistently • Have a schedule and establish the process in advance • Give your owners notice that inspections will be happening o

You want them to clean it up, give them a chance to do so before inspections.

• Document the violations with dated pictures

Non-Monetary Violation: Actions or Omissions (cont.) b. Educate volunteers before inspecting • Fair Housing requirements – you cannot give your neighbor a break • Potential personal liability c. Have oversight of the volunteers by a board member • • Give them someone to report back to Someone needs to gather all the information/photos and process them

III. The Second Floor – The Board Takes Action A. Fiduciary Duties of the Board 1. Duty to meet regularly to conduct business of Association 2. Duty to Enforce the Documents 3. Duty to Maintain the Property a. Preserve property values

B. Notice of Violation 1. Law changed in 2014 – must now give notice to the owner of the violation and a reasonable opportunity to correct the violation BEFORE setting the hearing date.

Va. Code § 55-513(c): Before any action authorized in this section is taken, the member shall be given a reasonable opportunity to correct the alleged violation after written notice of the alleged violation to the member at the address required for notices of meetings pursuant to § 55-510 . If the violation remains uncorrected, the member shall be given an opportunity to be heard and to be represented by counsel before the board of directors or other tribunal specified in the documents.

C. Notice + A Hearing 1. Must be sent out at least 14 days prior 2. Must at least provide an opportunity for a hearing.

a. Best approach: Schedule an actual hearing date in conjunction with the Board’s next meeting b. If the homeowner appears, discuss the issue c. If they do not appear, discuss as a board in their absence, and render a decision

D. Results Notice 1. Must be sent out within 7 days of the hearing date • time violation? Very fact Things that need to be 2. Must state the Board’s decision: a. You are found to be in violation. If not corrected by X date, you will be assessed $10/day for up to 90 days b. One-time violations are $50

Results Notice (cont.) 3. The Board may also decide to suspend privileges: parking/rec passes, voting, etc.

a. Some docs provide that voting rights are suspended for nonpayment b. 55-513 provides that rights can be suspended for being 60 days in arrears You must STILL first do the Notice + Hearing steps!

E. The “Violation Charges” Phase 1. TAKE PICTURES!

a. Time and date stamped are best b. Make them clear, not blurry, and wide-angle enough to see the problem in relation to other items • 2. Keep a detailed log book a. The person taking pictures and keeping the log book should be prepared to testify at trial.

For example: If someone left a trashcan on the curb, don’t take a close up of the trash can – I can’t tell from the picture whether it is in the right place or not!

IV. The Third Floor – Filing a Lawsuit A. The Warrant in Debt 1. Can be filed for money damages a. The unpaid assessments b. The Violation charges c. Other fees (late fees/attorney fees) 2. Be sure to have a payment history showing credits for payments received.

Filing a Lawsuit (Cont.) 3. If there is a large running balance, be prepared to explain why – and to trace the account back to zero. Record keeping is really important! a. Keep in mind that when dealing with people’s private info, the Association should take steps to protect it b. Debtor interrogatories often have SSN’s included c. Avoid making personal collection calls to the delinquent homeowner

B. Warrant in Debt (WID) can also be filed for a court order to abate the violation.

1. This is relatively new practice area (2011): Va. Code § 55-513(F): After the date a lawsuit is filed in the general district or circuit court by (i) the association, by and through its counsel, to collect the charges or obtain injunctive relief and correct the violation or (ii) the lot owner challenging any such charges, no additional charges shall accrue. If the court rules in favor of the association, it shall be entitled to collect such charges from the date the action was filed as well as all other charges assessed pursuant to this section against the lot owner prior to the action. In addition, if the court finds that the violation remains uncorrected, the court may order the unit owner to abate or remedy the violation.

2. The court order usually requires action by a certain date.

Warrant in Debt (cont.) 3. If the owner does not comply, the owner has now disobeyed a court order, and the Association may bring a Rule to Show Cause, which is a contempt of court action a. The owner then appears before the judge to explain why he did not obey the court’s order b. The Association can ask for additional attorneys fees and a stricter court order c. If the owner fails to appear at a Rule to Show Cause, the court can issue a bench warrant for his arrest (Capias)

V. Rooftop – The Last Stop A. Collecting on your money judgment 1. Debtor interrogatories 2. Wage Garnishments 3. Bank garnishments 4. Writ of Fiere Facias

B. Taking Other Enforcement Action 1. Towing a. There are County rules for towing b. Follow your parking policy 2. Mowing lawns a. Some associations have vacant homes – foreclosures, etc.

b. Liability issue – what if someone gets hurt on the property – who will insure?

c. If you choose to mow the lawn of a foreclosed home – BE CAREFUL.

• Some banks have contacts – realtors – who can correct issues.