Hellmuth & Johnson attorney, Phaedra Howard, discusses various topics with HOALeader.com:
Builder-Friendly Condo/HOA Management Companies: Is This a Thing?
We got wind of a possible problem that’s supposedly prolific in California, where HOA management companies refuse to sue, or discourage HOAs from suing, developers when shoddy workmanship in a new condo or HOA requires repair.
Here, our experts from across the country reveal whether they’ve seen or suspected that a management company was putting its own interests before that of its clients.
For another one of our experts, the closest she’s seen is a situation a colleague at her law firm experienced a few years back. “Our firm’s attorneys have for years been doing the attorney marketing thing by going into different management companies and conducing ask-the-attorney sessions,” explains Phaedra J. Howard, a partner specializing in community association law at Hellmuth & Johnson PLLC in Edina, Minn. “About five or six years ago, one of my colleagues was doing that for a management company that has since been bought out. At the time, the management company was managing a lot of associations that were still under developer control.
“My colleague learned that one developer basically told the management company, ‘Those lawyers sued developers for construction defects,'” states Howard. “Essentially, the developer didn’t want us going in there and telling the managers that they should tell their associations to sue the developer. We stopped doing the ask-the-attorney events for that client.
“But I don’t know that the developer’s comments affected the management company’s association clients,” she adds. “It was just the one management company, and I can’t say that management company carried that beyond anything other than not letting us do our thing there. And we’re back giving such sessions at that management company now.”
Read full article here.
Can You Pay Back an HOA Loan Out of Reserves?
An HOAleader.com reader asks: “Can an HOA that has a bank loan for reserve expenses repay the principal from the reserve account and interest from the operating account? Or do both principal and interest have to be paid from the reserve account?”
It turns out this answer is more complicated than it might seem. Here’s some insight from our experts.
For Phaedra J. Howard, a partner specializing in community association law at Hellmuth & Johnson PLLC in Edina, Minn., there’s the law and there’s a standard of practice. “The law here in Minnesota makes it very clear that your replacement reserve accounts should be used only to replace the parts of the association the association is required to replace.
“That’s the reserve account that’s statutorily required,” she explains. “Associations can’t use those funds for operating expenses, and paying back a loan is an operating expense.
“But the other thing I’d note is that the practice here—and I assume in many other states because a lot of association lenders do business in a lot of states—is that it’s pretty much a requirement that if an associations gets a loan for a project, the bank requires them to levy a special assessment in an amount to cover the loan payments,” says Howard. “You have to collect extra money from the owners because the other money the association possesses is already earmarked, and lenders don’t trust associations to pay back loans unless they do this.
“That requires a vote from the owners and all this other stuff,” she notes. “So if you’re getting a loan here in Minnesota, you’re paying it back with special assessments. That’s how we usually see it done.”
Read full article here.
Is This HOA President’s Tweet Real? Either Way, It’s Instructive
A supposed HOA board president who posted on Twitter (and asking whether he’s the one who’s being a jerk, though he used coarser language) is demanding homeowners keep their garage door open from 8 a.m.-5 p.m. daily because one owner was apparently letting someone live in their garage, and another was offering the garage as a short-term rental.
Owners rebelled at the new HOA rule, with about half ignoring the edict and others opening their garage door only several inches. The response: The board imposed $100-per-day fines.
Even if the rule is unenforceable, the fine might not be. “In Minnesota, a $100 a day fine isn’t reasonable to begin with, even if the rule was reasonable—which I don’t think it is,” states Phaedra J. Howard, a partner specializing in community association law at Hellmuth & Johnson PLLC in Edina, Minn.
Read full article here.
Can You Charge Condo Owners with Washers More for Utilities?
An HOAleader.com reader asks, “My condo association includes water and sewer charges as part of the condo fee owners pay. We’re facing huge increases for this and need to conserve water use or increase the condo fees. Water and sewer charges have increased 60 percent in two years. I was thinking of suggesting to the board to assess owners with washing machines to pay more monthly. Are there other HOAs experiencing the situation, and what action did your board take?”
Increased water costs are truly a problem. Our experts offer a few solutions.
Ideally, your board can install individual meters for utilities and avoid disputes over the fair distribution of costs. But that’s not always as simple as it sounds.
“We’ve had in our Minnesota statutes for years and years that an association can assess the cost of utilities based on usage,” explains Phaedra J. Howard, a partner specializing in community association law at Hellmuth & Johnson PLLC in Edina, Minn. “But it’s not always easy to track that, and a lot of communities don’t do that unless units are separately metered.
This is typically a condo issue, says Howard, because townhomes and detached homes are typically metered individually. “And condos usually aren’t set up to be individually metered, unless they’re set up in a townhome-style way. I’ve had boards ask how they can do this, and it’s a nightmare. Most say it’s not worth it, and they just assess these costs uniformly.”
Read full article here.
Why Expert says “Heck No” to HOA With a Bid from Noncompliant Homeowner
In this week’s tip, we tackle a double conundrum: Doing business with a homeowner and doing business with a homeowner who isn’t following your documents. Awkward!
“There’s nothing that addresses someone’s delinquency in relation to being able to submit a bid,” explains Phaedra J. Howard, a partner specializing in community association law at Hellmuth & Johnson PLLC in Edina, Minn. “Of course, we have conflict of interest rules, but it doesn’t appear this homeowner is a director, so those aren’t directly related.”
Read full article here.
What to Do with Owners Trying to Box in Their Board
Watch this two-part video interview in which Phaedra J. Howard, a partner specializing in community association law at Hellmuth & Johnson PLLC in Edina, Minn. address how to respond when owners used their fellow owners’ email addresses to back the board into a corner.
Watch video here.