Thursday, April 11, 2013

In which community would you rather live??

I was recently reading a post on a very popular business networking website (you know, the one that asks you to “link” with other professionals!).  The post came from the board member of a homeowners association.  The board member asked, “We have one Owner 15 days passed due with his Special Assessment should I turn it over to our Lawyer and start charging daily late fees?”

That isn’t a typo, the question was should an attorney get involved because someone is fifteen days late.  Note, he/she also asks if they should start charging daily late fees.

The first two responses came from community association managers.  Here, in the exact order of the postings are their comments:

Response #1
“Not no but heck no. Even the evil-ones at megabanks won't even try something that aggressive. Actions like that make for tense and unhappy association. There are times when collections efforts are needed but it should take months to get to that point. Not days. Translation - be neighborly.”

Response #2
“It's not your money. Neighborly has nothing to do with it. When the special assessment went out it should have had deadlines and information on what would happen "IF." Follow the "IF," or contact the Board for their direction. I'd rather have someone no [sic] like me for doing my job then for NOT doing my job.
What state? In Florida, generally anything past 10-15 days can be considered as delinquent. A reminder is sent, then if past 30 days referred to the Law firm for collections. No [sic] a matter of being non-neighborly, just a matter of business.
During this 30 day period, the Unit owner can writew [sic] to the Board regarding any circumsatnaces [sic] that will allow the Board to consider a payment plan; however, they have to be careful not to set a precendent [sic] that would affect all Unit owners. (I left in the misspellings in this posting because I wanted you to see that the writer made the response so quickly and possibly without careful thought, that there were several misspellings.)

Let’s step back for a moment and think about why we even have homeowners associations.  First, as developers began to build communities consisting of several homes, the necessary government permits and approvals came with a price tag.  The governmental entity would allow the construction if the developer took on the costs and the subsequent maintenance of certain infrastructure necessary for the community, such as drainage, stormwater management, or street lights.  The developer happily accepted these requirements because they simply passed the future responsibilities and costs to maintain onto the subsequent home purchasers.  They filed restrictions in the Public Records that attached to the land that ensured that all future owners of the property would be responsible for these facilities.  They also established non-profit corporations, referred to as associations, that would be run by the homeowners who would be responsible for overseeing that money was collected from the owners and the maintenance was performed.

Then the developers began to see a market that many people found desirable, living in a community in which all of the houses and yards would be consistently maintained and free from junk and decay.  So the developers began to add to the restrictions in order to help “protect property values.”  The right to ensure this protection finds its roots in the original U.S. Supreme Court cases that upheld zoning laws (and other similar laws), finding that municipalities held “police powers” that could be asserted for the protecting the public welfare, health and safety of the community, which included passing laws putting restrictions on what can and can’t be done with ones own real property.

The problem then became, how do we enforce these restrictions that are suppose to ensure that we retain our property values?  Associations then started to charge fees to pay for the community’s obligations and a whole new cottage industry emerged consisting of community association management companies and lawyers, whose sole purpose was to ensure conformity and to ensure payment of the assessments necessary to ensure conformity.

The question is….do these restrictions really protect our property values?  Is your property really going to lose its value because your neighbor painted their house orange instead of beige?  Are people not going to want to buy in your community because the guy across the street parks his car in the driveway instead of the garage?  Maybe, but then again, maybe not.  Certainly some people only want to live in perfectly maintained homes and communities that ensure this quality is where these people will seek to live.  On the other hand, some of the most desirable and highest valued homes today are in old, urban neighborhoods that have gone through a massive revitalization but where there are still some homeowners that have no intention of renovating and updating their homes.  These neighborhoods see multi-million dollar homes built right next to 1950’s style houses that haven’t been painted in over 30 years!  The owner of the multi-million dollar home may not like that the neighbor's house is old and in decay but they don't care because the are is the new "hot" community and people are paying high prices to live there.

I pose this question, if your primary purpose for living in a specific neighborhood is to maintain your property value, wouldn’t advertising that your community is run by a “neighborly and friendly association” be a good marketing tool?  Isn’t there a market for people who want to buy a new home, within a nice community with rules and restrictions but one that is run by people who are reasonable? Why do we believe that a house that is painted orange will lower your property values but overzealous associations do not? The second respondent to the post (above) states that you don’t want to set a “precedent”!  But what precedent are you setting?  That you are understanding and willing to be neighborly and work with people?  That you are not unreasonable, unyielding and intolerant of a possible oversight or worse, personal crisis that resulted in the missed payment?

To be sure, many, many people simply stop paying their required dues because they are either in a fight with their association or they simply are playing games.  But there are also many, many people who have very good reasons for missing one or more payments.  Imagine your community having a newspaper article written about it because the community showed compassion for a neighbor.  Then imagine your community having a newspaper article written about it because you went forward with foreclosing on someone’s home because they were delinquent in paying their yearly association dues of $175.00 (I chose $175 because of a recent mediation that I facilitated – stay tuned for my next post).  In which community do you think prospective home purchasers would want to live?  Do you want to live in the community that is managed by poster #1 or poster #2?

As always, stop and consider talking to each other and if you can’t resolve the issue then consider calling a mediator.  If it still can’t be resolve, that’s when you should call your attorney.

Monday, February 18, 2013

I'm On a Mission...

I recently read an article about a Homeowner's Association in Fairfax, Virginia, that has been forced to file for bankruptcy protection because of a legal battle that resulted in legal fees of over $400,000.  Nestled within the community was a beautiful community square that was home to beautiful trees and gardens and was the site of many community festivities over the years.  Now, that beloved square is destined to be auctioned off to the highest bidder by the bankruptcy trustee in order to pay back some of the massive legal debt amassed by the Association.

Just what was the issued that the Association needed to fight in order to prevent "chaos" (a word actually used by one of the residents when the issue came to light)?  A neighbor had the audacity to put an "Obama" sign in their yard when then-senator Obama was running for President in 2008.  You see, the sign was bigger than what was allowed under the community's restrictive covenants.  After receiving a few rather harshly worded letters from the association that informed the owners of their massive violations, the owners responded by cutting the sign in half and placing two signs in their yard reading "OBA" on one and "MA" on the other.  And then the battle began! (read the Washington Post article:

Unfortunately, these types of disputes are not unusual.  Over and over again you hear, "it's the principal of the matter", or "we can't allow it, it will set an unwanted precedent".  So I'm on a educate Owners, Association Board Members and Community Property Managers that these disputes can very easily be settled through mediation.

First let's talk about what mediation is.  Mediation is a form of alternative dispute resolution (commonly referred to as "ADR").  Phrased a bit differently, it is a way to resolve a dispute by different (alternative) methods rather than through the court system.  Mediation is a way for the parties to negotiate and settle their disputes.  In the mediation world this is called "self determination".  The parties involved in the dispute are the only persons who determine the outcome.  There are no winners and no losers.  In addition, the mediation itself is completely confidential and any resulting settlement can also be required to be confidential.  Therefore, no "unwanted precedent".

Now let's talk about what mediation isn't.  Mediation is not arbitration.  Yes, arbitration is also a form of ADR, but in an arbitration, the arbitrator determines the outcome.  The arbitration is like a trial and the arbitrator is like a judge.  Arbitration is considered ADR because it is a faster, cheaper and easier way to settle a dispute.  However, there are winners and there are losers in arbitration. Moreover, although cheaper than resolving through the courts, arbitration can still be expensive and both parties can still end up spending ten's of thousands of dollars in attorney's fees and arbitrator fees.

Just exactly what kind of disputes can be settled in mediation?  In a word, EVERYTHING!  Oftentimes I will read the blogs or comments of "authorities" involved in the community association world (attorneys, community association managers, etc.) who point out that while the Florida laws governing homeowner associations (Chapter 720 of the Florida Statutes) do require mediation before a suit is filed (involving disputes between the owner and association), the condominium laws (Chapter 718 of the Florida Statutes) do not require mediation before a suit is filed.  True, but that does not mean that mediation can't be requested.  Again, this is about "self determination".  If the parties resolve the dispute themselves and all agree that the settlement is binding and confidential, then the dispute is settled, end of story.

Yes, I admit, stating that everything can be mediated is a bit over simplistic and actually, not very realistic.  In some cases, the dispute is best settled through arbitration.  In addition, mediation of association disputes can only be significantly successful if the representative(s) of the association, who are attending the mediation, have full authority to settle the mediation without the need of post-mediation board approval.  Remember the mediator is a trained professional who knows how to help the parties understand why a particular offer is in the best interests of all involved and why a settlement should be considered (and hopefully accepted).  If a settlement is contingent upon the later, post-mediation approval of one or more parties who did not attend the mediation and who did not have the benefit of listening to the mediator's wisdom, then emotions and misconceptions may creep back into the forefront of the issue, resulting in a non-approval and a failed process.

One more thing, did you know that disputants are nearly twice as likely to comply voluntarily with mediated agreements than with court-imposed judgments?  Eighty percent of mediated parties who agreed to perform some obligation for another party had fully complied with the obligation within 6-18 months.  Compare that with a 44.5% rate for defendants who had a judgment rendered against them by a court of law.  Why the difference?  Because mediated agreements are more likely to reflect what the parties want or are willing to accept rather than what a court forces upon them.

So I'm on a mission...Owners, Associations, Community Association Managers (AND Attorneys), please call me, call other mediators, call other associations that have used mediation - this does work!

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