There was a newspaper story this week about a homeowner in an HOA that gave his house back to the bank and filed for bankruptcy protection.  You can read the story here at azcentral.com.

It’s a common situation in our state, and this homeowner is not alone in his financial struggles.  Some mortgages have become unaffordable and personal income is not what it was a few short years ago.  This homeowner asked the bank and the federal law to give him a “do over.”

But the story doesn’t end there.  The homeowner moved on with life only to be tracked down by his HOA for delinquent assessments.

The basic legal issue is that when someone buys a property in a deed restricted community, the contractual CC&Rs generally proscribe two separate obligations to pay assessments.  First, the CC&Rs (and Arizona statute) establish a lien against THE PROPERTY for any unpaid assessments.  This lien is automatic and attaches to THE PROPERTY.  Sales and transfers of THE PROPERTY do not extinguish the lien.  Generally, and other than a trustee sale on the FIRST MORTGAGE, the lien for those unpaid assessments is intact and valid for three years.

In addition to the lien, most CC&Rs bind THE HOMEOWNER PERSONALLY to pay the assessments. Much like other consumer debt (credit cards, installment contracts), a homeowner is personally obligated to pay assessments for the term of his or her ownership.  You owe for the time you own.

In this story, the homeowner abandoned the property and ultimately the bank foreclosed on the first mortgage.  The trustee sale (foreclosure) on the FIRST MORTGAGE extinguished the lien against THE PROPERTY.  The homeowner also went to the bankruptcy court to obtain a discharge PERSONAL debt.  Bankruptcy law looks at past debt obligations.  Past due amounts owed PERSONALLY by the homeowner can be discharged, but if the homeowner continues to own the property (i.e. the bank is slow in its foreclosure process), the HOMEOWNER PERSONALLY owes the assessments that accrue after the bankruptcy petition is filed.  They still own it so they still owe it.

If the bankruptcy filing and the trustee sale on the first mortgage occur simultaneously, the PROPERTY’s obligation and the HOMEOWNER’S PERSONAL obligation are extinguished and discharged respectively.  But those events are rarely so perfectly timed.  In this market, a bank often does not obtain a trustee’s deed (evidencing ownership) until months after the homeowner has stopped paying and has long moved out.

But before the impacted owners go running to the media and blaming the HOAs and the banks alike, there is another side of this story.  There are OTHER HOMEOWNERS whose timely and thinly stretched assessment dollars are shouldering the burden for non-paying owners.  HOAs and Condos are struggling to keep up with the most basic of services and maintenance costs.  These associations are challenged to pay even the most necessary of expenses (such as the electric bill),  and those owners that pay assessments and keep their properties want to live where the HOA pays its bills and continues to provide the services and maintenance the CC&Rs require.

It is very frustrating and expensive for those left behind to maintain common areas, repair common roofs and clean-up abandoned properties.  Homeowners that choose to stay and enjoy their homes and their neighborhoods are in fear of costly (and fundamentally unfair) special assessments and reduced services.  HOA and Condo Board members are under tremendous pressure to make wise decisions about what services to cut and what services or maintenance or repairs the HOA or Condo can live without.  Discussions at these board meetings are painful and owner frustrations run high.

Not only are paying owners at risk due to the delinquency, but the absent, delinquent homeowner still receives benefits for their membership in the HOA or condominium.  For example, in the case of a condominium, even if the homeowner does not live in the unit, the unit itself is benefited by CC&R provisions that obligate the Condo association to maintain the common property roofs.  How fair is it for an owner to leave the property, file a bankruptcy, but fail to get proper advice about the assessments that become due and owing after the bankruptcy filing (before ownership actually changes)?  If the owner still owns THE PROPERTY, why should the other owners pay both their own share and bear the burden of the wayward (but still contractually obligated) owner?

The AZCENTRAL article and those interviewed suggested something unfair or draconian about the HOA’s position in these former owner cases.  The Judge interviewed was dismayed about HOAs pursuing former owners.  But the opposite should be true.  The “you owe it while you own it” mantra isn’t just catchy, it is a legal concept that is rooted in centuries of contract law.  The HOA shouldn’t be vilified because the law itself assumes that we honor our contractual obligations.  Neither a bank’s inefficiencies nor a bankruptcy lawyer’s ignorance should be to an Association’s detriment.  The fact is that the Association has financial obligations that the owners must together support.  In this case, the bank delayed its ownership and the homeowner continued to own it and owe it.

We live in challenging and uncertain times, but the law recognizes that there is something unfair about an OWNER wanting to wiggle out of OWING.  HOA and Condo board members need to worry less about headlines like these and worry more about pursuing delinquent assessments from owners, former or otherwise.  The HOA will not survive nor can services continue without the assessments.  The contractual CC&Rs demand it.  The Board’s duties require it.  Paying homeowners are tired of it.

Delinquent owners – you owe it, own up to it!

Arizona has a unique statute that allows anyone to walk into any of Arizona’s courts of first impression and file a request for a protective order.  There are no filing fees.  A party requesting such an injunction can defer service of process fess.  In addition, the injunction can be initially granted without notice to the offending party.

The public policy behind Arizona’s Injunction Against Harassment statute is to allow someone who is being harassed or has been the victim of violence a way to obtain immediate protection.  But like all legal procedures, the privilege and protection of these injunctions can be abused.  For the pro per litigant upset with the homeowner association board member, these injunctions become a sword rather than a shield.

Obviously, lawmakers understood that the easy and free access to the system needed to be balanced with due process rights.  Any defendant in these actions has the right to challenge the terms of the injunction by requesting a hearing.

As HOA and Condo lawyers, we sometimes have frantic board members or community managers call us with only days to prepare for such an evidentiary hearing in defense of a homeowner injunction filing.  The facts in these cases are messy and emotions run high.

We went to such a hearing recently.  Like all hearings with pro per litigants, such appearances are never boring.  But in this instance, the homeowner had no evidence of any harassment by the board member.  Sure, there were general complaints about the HOA and its maintenance failures, but the homeowner’s best evidence of “harassment”, his Perry Mason moment, was a photograph.  The photograph was of two gentlemen, one of them was obviously the board member, the other, allegedly the landscaper for the HOA.

The homeowner put the photograph in front of the judge and exclaimed, “See, Judge, here is the photograph of these two board members talking about me.”  The Judge carefully reviewed the photographic evidence as the homeowner hotly offered more testimony, “Look at this photo, this is evidence of the board members defaming me!”

We didn’t really need to check the rules of  evidence.  The hearsay objection was made and sustained.  There were other objectionable issues about offering the photograph.  But the Judge shook her head and ultimately dismissed the request for the injunction.

I have been involved in many of these hearings, but this was the first time a homeowner had offered photographic evidence as proof of HOA board member gossip!  Be careful what you say, someone may just make your words their actionable KODAK moment.

We hear it all.  When folks jump into a full-0n smack-down with the homeowners association, the muzzles come off and harsh words are common.  On occasion, these gems are worth sharing.

Today, one of our lawyers received a voice-mail.  The homeowner’s blistering message about the substance of his beef with the association ended like this:

“I don’t know you, but I don’t like you!”

Ouch.  Thankfully, the ethical rules for attorneys that obligate us to be fair when dealing with opposing parties do not also require us to be likable.  We would be in trouble all the time.

My days are spent with lawyers.  We are fortunate to have a growing and healthy practice and the lawyers I work with everyday are (for the most part and on most days) a true joy.  From the zealous and energetic “newbie” attorney to the wise and experienced (not old) counselor, I am happy to have been in this place for the last 7 years.  The facts of the cases are never boring.  The clients’ problems are always challenging.  But it is the people I work with every day that make all the difference.

But my legal practice did not start out that way.  Like many who are experiencing the tumult of today’s legal market, my entrance into the profession in the middle 1990s was far from financially robust and vocationally satisfying.  Mine was a small firm life and I bounced around between three different firms.  At one brief moment I was the lone associate for six partners.  Later I was alone with one partner who also was a fast food franchisee.  Bouncing between litigator and burger mogul, the law for me was indeed a wicked and elusive mistress.  Most days it felt like she humored and cajoled me as she would an annoying little brother.

Then, I was let go and for almost six months of great uncertainty for me, my wife and my two little boys, I searched for a new job.  I had a temporary job helping people sign mortgage refinancing documents (make sure you are a notary, it’s a good certificate to have when the bar card won’t work).  I wrote a few wills and estate planning documents for friends that knew we needed to eat.  I had countless interviews and had countless rejection letters that I three-hole punched and filed away in my “unemployment” binder.

Finally, I had an offer and a job.  With two years of lawyer and burger-ing as my experience, I was still so green.  But I was also eager to be back at work.  This job opened up a new area, a new client base and allowed me to learn and practice something that I knew I could love.  Unfortunately, the office atmosphere was abysmal and my new boss had a silent and years-long partnership with the Lord of the Legal Underworld.  Misery ensued (I’ll save those special memories for other Musings).

But misery truly does love company and in those two years of working for the spawn of Satan (Oh how I wished it simply could have been “the man”), I fell in love with my practice area and got to work with some great lawyers and more importantly, some great people.

In those years of floundering and catching fiery fallout, I learned a few things.  The legal skills and legal knowledge I gleaned are important and my bread and butter these days.  But what you really need to learn about the law and your love of the profession has nothing to do with writing skills or oral advocacy, but the quality of relationships you have with others.  I have said many times before that the most mundane and repetitive legal work is palatable when you work with people you like.   So, in these challenging and uncertain times for many lawyers, here are a few key pieces of advice as you search for that place to land.  From BIG firms to a government assignment, from small firm life to an in-house gig, I hope some of this helps you as it has helped me.

1.   Be Patient -  Law school took you three, long years.  Finding a place, a people and a practice that you love may take just as long, if not longer.

2.   Be Flexible - The law is always stretching us but dealing with people stretches us more.  The most miserable lawyers I know are not willing to adapt and change.  They are opposed to new methods, new faces and new ideas.  They not only are reluctant to compromise cases but they are recalcitrant about their lives, their relationships and in how they treat people.  You also never know when you might have to be a mobile notary for three months just to feed your family.

3.   Be Reliable – I’m a preacher’s kid and my Dad always used to talk about his favorite parishioners as the ones who were FAT – faithful, available and teachable.  That’s what being reliable is all about.  Don’t try to know the most, write the best or argue the hardest right out of the gate.  Over the long haul in this vocation, it’s your reliability that will be invaluable to the firm.   You’re smart and you can learn the law.  You have skills and they will get better with practice.  But being reliable when called upon has nothing to do with brains and everything to do with character.  As an employer of 10 lawyers and almost 50 support staff, I’ll take the FAT employee over the brilliant legal mind every day of the week.

4.   Be a Friend (not just a referral source) – It’s trite and rather elementary, but building relationships with other lawyers always pays off over time.  Burned bridges, hurt feelings and unfriendly adversarial situations only hurt you, the other lawyer and on occasion, they can hurt our clients.  Our attorney hubris and want to win hurts our relationships and make us less effective in the office, in a case and in life.   And be a friend to the other professionals and staff you work with – your paralegal, your assistant, the expert witness, the process server.  For when you find yourself lost and alone on that career path leading you nowhere, these friendships and connections are invaluable.  My friends have names and all were so helpful along the way – Maura.   John.  Theresa.  Bobbie.  Steve.  Mike.  Nils.  Adam.  Bill.  Jim.   My wife.  Be a friend and get some friends and your legal career will be fuller and richer for it.

Your legal Shangri-La may seem out of reach, but it needn’t be that fantastical and far away.  Just hang in there, let these challenges and the bumps along the road stretch you.  Don’t do it alone and be more concerned with your attitude than your aptitude.  Now, get back to work.

Excuse me while I step in it, but what’s the deal with Roberts Rules of Order?  I am regularly asked that question and often times in meetings board members and homeowners look to me for parliamentary citations.

I’m a lawyer, not a parliamentarian, and as legalities go in the HOA/Condo world, there are few statutes or laws that require HOA and Condo boards to follow the Rules (notice the royal capital “R”) or any special meeting procedure. There are even fewer CC&Rs and bylaws that even mention the late great Major Henry Martyn Robert, III.

Arizona’s state laws and regulations do require proper notice and do allow homeowner participation at board meetings, and HOA and Condo CC&Rs and bylaws do sometimes require certain meeting procedures.  But rare are the documents that actually mandate that a board use Roberts Rules when conducting regular board meetings.   Therefore, in most communities, the religious use of Roberts Rules becomes a hindrance, not a help, when conducting productive, orderly and legal meetings.

Don’t misunderstand, conducting meetings in an orderly manner is essential to good association governance.  But parliamentary zealots and boards who buy into the good book are what make some association meetings unbearably long, unproductive, and boring.  Here are a couple of salient points about why I always encourage orderly meetings but think that Robert’s Rules may not really be helpful at regular meetings of an HOA/Condo board.

1.    Robert’s Rules were not really written for a small assembly of 3, 5 or 7 board members.  Other than the annual or special membership meeting, most association meetings happen at the board level.  Oftentimes, there are only a handful of homeowners in attendance.  Even when there are hundreds at a board meeting, the board meeting is still a small assembly as only the board may vote (some state laws allow member comment and participation).  Even Robert’s Rules recognize the need to relax the Rules in smaller assemblies.

2.  Let the Board President vote already.  In large assemblies, Robert’s Rules make it clear that the presiding officer must appear impartial and vote only if there assembly is divided on a decision.  This isn’t the United States Senate or corporate shareholder meeting,  and in HOAs and Condos, a board president is a director and an officer.  The bylaws may require the board president to conduct the meetings, but I would argue that board president  who does not vote is teetering on a breaching of duty to the association.  At the very least, the board president that won’t commit to voice her vote has violated the trust and confidence of her neighbors  who voted for her.

3.  Robert’s Rules do not trump the Bylaws.  In Arizona, the law recognizes that bylaws are a contract.  If the bylaws are silent about using Roberts Rules, Roberts Rules cannot be used to “suspend” or otherwise alter association’s bylaws on issues related to voting, board vacancies and proxies.  And, watch out for the fervent parliamentarian that pushes Robert’s procedures and ignores state laws.  In Arizona, for example, there is no longer proxy voting in planned community and condominium elections.  Robert’s Rules cannot be used to override state legislative action.

Doing away with Robert’s Rules and conducting a meeting in an orderly manner should be the key.  Good preparation (making an agenda), good communication, compliance with the law, and having one board member preside over the discussion should be sufficient for the board to have good deliberation and to make good decisions.  An HOA or Condo board of three shouldn’t need a 208 page book to discuss and vote on a $500 landscape irrigation system repair.

Blog entry adjourned.

By. J. Roger Wood
Carpenter Hazlewood Delgado & Wood, PLC

We see it all.  When it comes to folks unhappy with their HOA or Condo Association, we know all flavors of shenanigans.  Some write letters.  Some buy 200 parakeets and house them in the condo.  Some people mail feces in a box to the association attorney and the local justice of the peace (wait for a future post about that one).  Still others organize B0ard recalls to bolster member support and they oust the directors.  There are even a few that hire lawyers (or don’t hire lawyers) and file lawsuits.

I was scanning the newspaper this week looking for our firm’s advertisement about an educational seminar in Tucson, March 9 and I stumbled upon this small, but interesting advertisement.

HOA conspiracy theorists and stalwart CAI party-liners alike can enjoy this bit of anti-HOA propaganda.  For my part, I read it, scratched my head and went, “Huh?”.

The advertisement is commendable in that it does not defame or slander anyone or any organization.  There seems to be a passionate concern about association expenditures and the high cost of the assessment, both in dollars and cents and in the impact on the membership.

But the cryptic language and veiled identity (ies) of the DOCD takes the ad to another level.  Who is DOCD (and where is Maxwell Smart when we need him)?  Where can someone who shares a similar disdain for paying assessments join up?  What if I am not that sick, but just deal with seasonal post nasal drip – can I get my assessment obligation canceled?

We see these slings and arrows hurled at our Association clients (and often at us) with regularity.  But we also see these cryptic messages are of little value to the community. In Arizona, deed restrictions are a binding contract. They do run with the land.  The law in Arizona states that any owner (and any potential owner) has record notice of those restrictions if they are properly recorded.  Arizona statutes cap annual assessment increases (without a vote of the membership) at 20%, and boards do enjoy some discretion about how to spend those assessment dollars.  The ad pushes against all of those legalities, but is short on practical ideas for changing the community.

So, today’s free advice for any and all association members with an issue, an axe or an anonymous cryptic advertisement to grind: join a committee, vote at the annual meeting,  pay your assessments, read your community’s governing documents, and go to a board meeting once in a while.  If the issues are serious, call a lawyer, get neighbor support to make a change and just get involved!   But please stop wasting your money on creepy newspaper adverts and don’t overnight me anymore poo!

There was an incredibly interesting story on National Public Radio last week.  Our nation’s turbulent history of racial segregation and is not as far back in our past as we all want to believe.  This is certainly true of racial and ethnic discrimination in housing transactions.  The story not only reminds us of the failings of our past, but spins into a modern day fair housing dispute.  While few of our clients deal with direct discrimination such as  deed restrictions that prohibit ownership or occupancy based on race, fair housing concerns are chief among the discussions we try to have with our Association clients.  For this reason, I thought this story particularly instructive for both its historical remembrances and lessons for today.

In this particular situation, an historic community called Myers Park, located in Charlotte, North Carolina has one of those fair housing situations on its hands.  The controversy has to do with the original deed restrictions placed on these properties back in the early part of the last century.  In addition to the park-like look and feel the original restrictions hoped to protect, these early restrictions also included a prohibition on the sale to or occupancy by people of certain races.    The original deed language, now nearly 100 years old, requires that Myers Park properties “be used for residential purposes only and shall be owned and occupied by people of the Caucasian race.“  Given the social and political situation in pre-civil rights era America, we shouldn’t be surprised about these kinds of restrictions.  But what may be surprising to some of us is that these deed restrictions continue to exist in their original form, even though civil rights laws and the courts have long ago deemed such restrictions unenforceable.

The story does well to discuss the argument to remove such void and obviously socially abhorrent language from  restrictions.  There are smarter folks than I that are studying and researching these kinds of property restrictions.  For the sake of the legacy we will leave to our children and grandchildren, we all need to be aware of the horrible injustices visited upon Americans of different races and ethnic backgrounds.  This was not a pleasant part of our history, but the NPR story and the related research by a Seattle Washington historian are important public discourse.

As if the issue of the discriminatory restrictions were not challenging enough, one phrase in the story stuck out at me as a warning for all HOA and Condo boards.  Obviously this beautiful community cares about how owners maintain these beautiful homes, but the story about a nice community with a challenging history is now a current legal controversy.  For decades, owners and others were aware of the unenforceable deed restrictions, but the void language “wasn’t even an issue until the homeowners association posted a sample deed on its Web site that included the racial wording.”

Boards, Managers, Homeowners, Landlords, Realtors, Title Officers and anyone dealing with Real Property – Fair housing issues are not the stuff of yesteryear.  These claims and issues are real.  The law cares little of your intent.  Here, I have no doubt this board only hoped to have all the neighbors better understand the valid and enforceable recorded restrictions.  The Board’s intent here was to continue to keep the community look-and-feel at the required standards.  The Board wanted to keep values high and the Association members well-informed.

But, fair housing disputes are rarely about intentional discrimination.  Government agencies that enforce the laws and the plaintiff’s attorneys assisting effected homeowners need only to argue the impact of the board’s actions.  Very few clients that talk to us about fair housing claims likely have such an intent, and those that do can easily hide it.  Long is the meeting and difficult the solutions when a well-intentioned board has acted in a way to impact and implicate a fair housing issue.  These cases open the Board to much liability and can cost much in time, attorneys’ fees and in some cases sanctions for board members, community managers and association employees.

And the legal battle at Myers Park rages on. We will watch and we will continue to advise and warn our clients about the trials and travails of fair housing complaints. The lesson is that a simple web-page post can turn into a fair housing problem and unwanted national media attention.

In the end, perhaps Dr. King said it best -

Many of the ugly pages of American history have been obscured and forgotten….America owes a debt of justice which it has only begun to pay. If it loses the will to finish or slackens in its determination, history will recall its crimes and the country that would be great will lack the most indispensable element of greatness –justice.     – Dr. Martin Luther King, Jr., 1967

Jason Smith, one of the Carpenter Hazlewood attorneys and fair housing issue guru, assisted in preparing and editing this entry. Thanks, Jason.