March 26, 2020
Foreclosures and Evictions During Coronavirus
Americans are now familiar with the “flatten the curve” tactic to prevent spikes in coronavirus cases from overwhelming health care systems. Governors impose limits on the number of people who may publicly congregate and encourage people to stay at home to slow viral communication. Otherwise, the ill may soon go to the hospital and discover that there are no beds or doctors available. There is another “curve” that poses a lesser-but-still-dangerous threat. Because of the restrictions on business, many wage earners and self-employs are now out of work. Even if workers can telecommute, closure of daycares and schools adds financial burden on families. Many Americans are now unable to make their rent or mortgage payments. Many citizens are at risk of eviction before the states lift stay-at-home orders. Defaults are worse beyond the reach of the public safety net into commercial property. Millions do not know how long they will be at home.
Washington, D.C. is trying to mitigate a spike in foreclosures, bankruptcies and evictions. The Washington Post recently reported (“Homeowners are getting federal mortgage relief, but renters aren’t so lucky”, Renae Merle, March 20, 2020) that the U.S. Department of Housing and Urban Development, Federal Housing Finance Agency, Fannie Mae, and Freddie Mac directed loan servicers to halt all foreclosures until mid-May 2020. The FHFA wants to establish a mortgage forbearance program as done in the 2008 financial crisis. Borrowers who cannot pay their mortgages can apply to the servicers for a deferral of their payments. They may still have to pay the money back later. Servicers do not have to automatically grant the loan modification request. Many people had bad experiences with that loan modification process. It is unclear whether this program will be more user friendly. These loan modifications don’t release the debt, they just push payment out. Pausing foreclosures until mid-May or beyond doesn’t make the loan defaults go away, it just postpones action.
As federal mortgage regulators hit the foreclosure “pause” button, the courts are restricting access to legal remedies for loan or lease defaults. The courts based their orders to defer scheduled hearings and trials in civil cases on social distancing concerns, not housing policy. In Virginia, all civil cases are continued through April 6th by general, emergency order of the state Supreme Court. Some local courts have stayed eviction orders. Continuance of “non-essential” civil cases will likely be pushed out past April 6th, but no one knows how long. The courts are under a lot of pressure to get things moving again while also promoting social distancing. The eviction or small claims dockets of some courts normally have hundreds of people in the courtroom. The longer courts push out unlawful detainer dockets, the greater the spike in cases after they return to their regularly scheduled dockets. These government actions aren’t flattening the curve on foreclosures, bankruptcies and evictions. They are merely postponing the increase until whenever restrictions disappear. Many owners will have less money then.
During the previous recession, mortgage servicers and foreclosure law firms made many mistakes because the sheer number of defaults overloaded the system. They frequently ignored the terms of mortgage documents and statutes to maximize volume-based profits. Sometimes servicers would foreclose on borrowers who went through a rough patch but had well-paying jobs. For example, if a worker has a decent salary from a government contractor, they could be furloughed if their employer lost a big contract to a competitor. The employee would then put their resume out to other government contractors. Months later they could find a new, good paying job. But loan servicing policies didn’t distinguish between such individuals from those who were incapable of making a mutually acceptable workout feasible. I predict that we are going to see similar things in 2020 and 2021 as workers go through periods of intense financial hardship before getting back to work.
During the 2008 financial crisis, I worked on numerous foreclosure-related litigation matters. I represented banks, borrowers or foreclosure sale purchasers. Many owners will have legal options for resisting foreclosures that will not be easily found by a keyword internet search. The servicers and foreclosure attorneys are going to be under a lot of pressure to handle a sudden, large volume of loan defaults. Borrowers will have some time in which to figure out how they are going to reinstate the loan or obtain a modification or forbearance. Even where they aren’t making mistakes, there are nonetheless opportunities to keep homes. The biggest mistake that owners or tenants can do is to simply ignore the notices that come in the mail or becoming easily discouraged by the confusing and unhelpful things that the servicers may be saying on the phone. Owners will not have unlimited time to stave off foreclosure and eviction. When there is a sudden explosion of foreclosures and evictions, there will be scam artists who will promise frightened borrowers that if they give their money to the foreclosure rescuer, then the foreclosure rescuer will stop the foreclosure and use the money to obtain a modification. However, these scams put owners ultimately in a worse position than had they done nothing. Owners receiving threatening letters from a foreclosure trustee or law firm may need to retain a qualified attorney to protect their rights. In a few days I’m planning on posting a “part two” to this that includes a timeline of what usually happens after a mortgage loan default in Virginia.
March 19, 2020
Do HOAs Have to Meet Openly During the Coronavirus?
Updated March 20, 2020
Landowners frequently complain that the board for their HOA or condo association makes important decisions in secret. Virginia law imposes significant “open meeting” requirements on community associations, allowing for attendance and participation by members. This is almost always in person. Open meeting laws can protect landowners from arbitrary or self-interested board action. The Coronavirus pandemic poses unique challenges to “open” HOA operations. State governments currently impose limits on the number of people that may legally congregate simultaneously in one place. Some states are starting to impose even stricter limits than the 10-person rule. The virus is easily communicable through sneezed or coughed droplets in the air. HOAs and condominium residents are at risk, especially older residents, who chose these communities because of the services offered. Older Americans tend to be more civic minded than younger citizens, and devote more time to community organizations, including HOAs. Residents have a civic duty to obey the mandates and recommendations of federal, state and local health officials to “flatten the curve” in the fight against the epidemic. HOAs provide important services to their members, especially at a time when many people confine themselves to their neighborhoods. In this hour, questions about the open or fair management of community associations ought not to be trivialized. Owners must pay their assessments regardless of whether they presently have income or HOAs responsibly spend the money. In condominium buildings, effective response to the threat of spread of Coronavirus may be a matter of life or death to the residents and perhaps the greatest challenge that board will ever face as a group. High-rise condominiums include shared, enclosed facilities such as elevators, hallways, fitness facilities, and so on. Owners may need to use enclosed common areas to access their units. The community association statutes and governing instruments generally do not consider how to carry on necessary business under such circumstances. So, this is an aspect of the epidemic that is below the radar for many people.
This blog post focuses on what Virginia statutes say and how lot and unit owners can protect their rights and determine their responsibilities with respect to the business of association boards and committees during the Coronavirus epidemic. I’m not going to focus on annual meetings or elections. I’m interested in owner interaction with boards and committees in the context of architectural approval applications, notices of violation, and direct negotiations between owners and boards. The following applies to HOAs that qualify as an “association” for purposes of the Property Owners Association Act or a condominium organized under the Condominium Act.
The Condominium Act and Property Owners Association Act obligate boards and committees to meet, deliberate, and make decisions in settings open to all members. Boards may not use “work sessions” or informal gatherings to circumvent statutory open meeting requirements (this is already a common practice despite the statutory prohibition). Boards and committees are supposed to provide owners with notice of upcoming meetings. Except for matters to deliberated in executive session, packets of information provided to directors and committee members are supposed to also be provided to owners who attend. Boards may meet in closed session during a noticed meeting, but such restrictions are only supposed to be used for attorney-client communications, personnel matters, litigation, pending contracts, and other statutory purposes. Any member may record a meeting using equipment. Boards can use telephone conference or video conference, but at least two members of the board are required by statute to be physically present at the noticed meeting place. Boards and committees may not vote by written or secret ballot.
Virginia statutes require boards to establish reasonable, effective, and free methods for lot owners to communicate with the association’s representatives. Declarations and bylaws also contain express or implied duties and rights for communications between boards and their members. There is no authority for boards to suspend their communications with members during an emergency. If anything, the existence of a health or safety issue of community concern ought to heighten such duties.
In Virginia, if the declaration allows for the board to impose fines for violations of covenants or rules, the member is entitled to a reasonable opportunity to be informed of the alleged defect and a period of time in which to correct or address it. Boards cannot simply shut off an owner’s use of a common area, facility or service because of an alleged violation when they don’t want to hold meetings. Before imposing fines, the board must provide the owner with notice of a hearing before the board or committee where defense against the violation may be heard. Virginia statutes state that HOAs and condominiums have a duty to provide owners with “due process” in the conduct of such hearings. While due process is a flexible standard, at a minimum it includes proper notice and the right to be heard. There is no statutory authority for dispensing with “due process” requirements because the board or committee wants to impose a punishment without a proper hearing, even if the documents require an in-person meeting.
Virginia law allows for associations to use technology in the conduct of their open meetings. However, few HOAs or condominiums are set up for this (yet). In fact, few city or county boards, commissions and authorities are set up for remote participation in public hearings. Many declarations and bylaws don’t provide for remote participation. Virginia law provides that if an owner doesn’t want to participate through technology, then arrangements must be made for them to participate “live.” So remote access is practically unavailable.
Homeowners associations that are also nonstock corporations are also governed by the Virginia Nonstock Corporation Act. The POAA and NSCA both have provisions with respect to board and committee meetings, but the provisions are not the same. Because the POAA is more specific to HOAs than the NSCA, courts are very likely to find that the POAA controls over the terms of the NSCA to the extent that they vary. However, case law also requires judges to make every attempt to harmonize, whenever possible, when two statute sections apply to the same set of facts.This already controversial in Virginia because when disputes arise between owners and boards over open meeting requirements, HOAs tend to cite the NSCA as authority and owners point to provisions of the POAA that support their arguments.
For example, the NSCA allows for boards to act without an actual meeting if each director signs a consent describing the action to be taken and delivers it to the corporation. Under the NSCA, if the articles of incorporation allow, the board may act without the written consent of all the directors if no less than a majority sign written consents. There are provisions in the NSCA for objecting directors to submit notices. Va. Code § 13.1-865 has specific requirements for actions by directors without a meeting. Use of this statute by HOA boards is controversial. The Supreme Court of Virginia has not ruled on whether or not the boards in HOAs that are also non-stock corporations can make use of this statute allowing for action without a meeting. I expect that this controversy to intensify as the Coronavirus crisis grows. It’s unlikely that the courts would construe 13.1-865 so broadly as to allow an exception to swallow the rule.
Many HOAs, large and small, conduct business to some degree without open meetings. HOAs are going to be under intense pressure to maintain and operate common areas and services without interruption and without contributing to the spread of the virus. As far as owners communicating with HOAs about individual concerns, I think that often they are not prejudiced by the lack of an open meeting. Some owners may have no reason to object to the failure of their HOA to not follow the open meeting statutes in particular instances. They want to get to a resolution with the HOA without delay. It’s the other owners who may be impacted by such a decision that may be prejudiced by the lack of open deliberations and an opportunity to be heard. So, an owner must consider whether they believe that insisting upon exercise of the open meeting statutes or related provisions in the governing instruments is in their best interests.
In the context of the Coronavirus, the lack of technological participation methods, and the open meeting statutes, it will be easier for owners to use legal counsel to postpone the decision of matters that require an open meeting to be convened in person. This means that “due process” hearings on notices of alleged violations of covenants and rules will be pushed back in many cases. That said, many HOA boards, especially those that don’t use lawyers or managers much will want to press forward with enforcement or architectural review matters because of the personal opinions of the officers of the association. Bullies will use any convenient circumstances to try to impose their will on others. At the HOA level of “government,” there are often conflicts of interest or personal animosities that play large roles in the dynamic of board-owner relations. The public health emergency isn’t going to make those conflicts go away, it’s only going to intensify the stress of the parties.
If a HOA or condominium fails to follow the statutes or its governing instruments in their procedural handling of making a decision, is the result legal? Under Virginia law, corporate actions that are legally deficient may be found to be “void ab initio” or merely “voidable.” A resolution is void ab initio if the board or committee had no authority to do what they did even if they followed all of the procedural requirements that would apply. In such instances, the result would be a legal nullity. If the board had the authority to do the kind of thing they were doing but performed it in a procedurally deficient matter, then the resolution may later be voided by a court or new board. The improperly procured decision may also be later ratified in a proper meeting. Its more difficult for an owner to challenge a voidable decision than a void one. Challenge to an action that is merely voidable is susceptible to litigation defense tactics than something that is an outright nullity. The parties may not know whether or not the action was legitimate, void or voidable without court review. Such questions are best considered with the advice of legal counsel.
All these controversies are going to occur while the parties may not be able to get a court to hear a petition for redress. Virginia courts are continuing “non-essential” civil matters, and there are no HOA exceptions. When the courts go back to hearing civil cases, there is going to be a huge backlog, and trial dates will be pushed out even further than they are now. It will likely take more than a year to get a trial date in many civil cases. Owners should consult with counsel if it seems that their HOA is improperly pressing forward with something prejudicial to them while the courts, schools and other businesses are closed.
Va. Code §§ 55.1-1807 & 55.1-1939
Va. Code §§ 55.1-1816 & 55.1-1949
Va. Code §§ 55.1-1817 & 55.1-1950
Va. Code §§ 55.1-1819 & 55.1-1959
Va. Code §§ 55.1-1832 & 55.1-1935
Va. Code § 13.1-865
March 18, 2020
HOA Regulation of Trees and Shrubs
Spring is prime planting season, and many landowners are now making decisions on what landscaping changes they want for 2020. Trees, shrubs and other plants fill essential roles in residential subdivisions. They unlock the value of property by providing shade, screening, beauty, use transitions, and erosion control. Property owners like to control the planting, trimming and cutting of plants on their property. Disputes frequently arise between owners of coterminous lots (or with the HOA regarding common areas) over boundaries, trimming, aesthetics, obstructed views, or the effect of root systems on structures or improvements. Association covenants and local land use ordinances frequently regulate trees and shrubs less strictly than walls, fences or other contractor (or factory) creations. Nonetheless, HOAs frequently seek to force lot owners to remove, trim or replace trees or other plants that do not conform to the Board’s view on architectural harmoniousness. Disputes between HOAs and lot owners frequently arise in the context of landscaping issues ancillary to requests to approve additions, decks, fences or other proposed structures. In any subdivision dispute over vegetation, the threshold issue is the location of the existing or proposed trees or shrubs. Is the location entirely on a lot? Is it within an easement defined by a deed or declaration? Is it on a common area adjacent to an owner’s structure? Some trees sit on boundary lines or mark the corners of property, and specific legal doctrine applies to them. State laws and the associations’ governing documents typically grant boards substantial discretion in removal, maintenance, and replacement of trees on defined common areas.
Many owners, directors and committee members operate on mistaken beliefs regarding the authority of HOAs to regulate trees and shrubs on owners’ lots. The courts will look to the declaration, amendments and rules & regulations to determine what, if any authority the HOA may have. Many older HOA declarations of covenants do not contain significant restrictions on the cutting or planting of trees and shrubs or delegate the authority to the board to make rules and regulations regarding such things. Its common for the declaration to be mostly silent on such issues because the developer is not concerned about the long-term growth or disease of trees in the subdivision. Many years later, boards may struggle with tree issues. If the declaration (or valid amendments) are unambiguous or “clearly silent” on tree issues, then its easier for lot owners to determine the extent of their rights and responsibilities on such issues. However, many declarations are unclear in defining the scope of rulemaking powers or what changes require architectural approval. In Virginia or other states, the silence of the declaration on a topic may mean that the board does not have the authority to regulate it. Rarely, courts will find a restriction to be absent from the express language of the document but reasonably implied by the terms of the covenants. It is common for HOA declarations to specifically require committee or board approval for “structures or improvements” to property. Sometimes the term “structure” is well defined. In other instruments, the parties are left to try to determine from context what the terms “structure” or “improvement” means. Black’s Law Dictionary defines “structure” as “Any construction, production, or piece of work artificially built up or composed of parts put together.” In my opinion, a living thing such as a tree is not a “structure” because it isn’t put together by human hands. A tree would become a structure if someone cut it down and carpentered it into something such as a fence or playground. But a developer could easily lay down specific restrictions regarding trees or delegate authority to the board to make rules, enforce them in hearings or require architectural approvals by submission of plans to a committee.
To the extent that an association’s declaration and amendments do not regulate trees or authorize the board to regulate trees, this silence often will make the planting, cutting, or pruning of trees and shrubs by an owner on her lot largely “by-right” and only limited by common law considerations such as nuisance or encroachment. Sometimes HOA boards will adopt rules and regulations applying to trees and shrubs in the absence of legal authority to do so or enforce such things. The authority to make and enforce rules regarding trees is important, because in Virginia and many other states, the HOA cannot take advantage of out-of-court remedies such as fines, liens, foreclosures, suspension of common privileges or voting rights in the absence of clearly delineated authority. Otherwise, the board could end-run the amendment provisions of the declaration or statute by simply voting to enforce rules that aren’t in the declaration.
In the wording of some governing instruments, the lot owner may be held to maintain the plants on their property to substantially conform to the landscaping design originally adopted by the builder. However, it may be difficult for the owners or directors to determine what that design was and how it would apply to tree questions. Sometimes drawings are lost.
If the planting, cutting, and maintenance of trees in a subdivision is largely or entirely “by right,” then that makes it much easier for lot owners to use plants to maintain and develop their property as they see fit. A good example of this is with the use of arbor vitae or other vegetation to define a boundary between adjacent parcels or to soften the visual impact of a fence, wall or building. Some lot owners use arbor vitae near their boundary lines because you can grow trees taller than the height restrictions imposed on fences. In Virginia, an adjoining owner can trim branches up to the boundary line. But the trees don’t have to be planted on the boundary line.
It takes time for trees and shrubs to mature and achieve their potential as screening or buffering between uses or adjoining properties. Lot owners ought to carefully consider the location and variety chosen (in addition to whether or not HOA approval is required) because if the trees die or taken down, it may take years for replacements to mature.
To untangle a tree law question, a lot owner may need to consult with a qualified attorney, surveyor, arborist or designer to avoid making decisions or failing to act in a manner that is prejudicial to one’s own rights. When HOAs in Virginia issue notices of violation or schedule fine hearings or architectural improvement requests, owners may only be given a few days to act in response to action by the board, committee, or an adjoining owner. Tree or shrub issues are not an inconsequential matter to which the owner should feel compelled to subordinate their interests to a board or committee in the absence of proper authority. However, agreements can often be achieved through negotiations that avoid the necessity of court review. Vegetation grows or dies, and consideration of an architectural application or notice of violation must consider the long-term effect of how one handles a tree dispute.
March 17, 2020
Be Safe When Property Disputes Coincide with a Public Crisis
When a public crisis occurs, pre-existing problems don’t go away. The crisis falls on top of all other burdens and conflicts of life. The Coronavirus epidemic is no different. This pandemic poses unique challenges not present in other crises. No one knows how long this will last, how many people will be affected or how far governmental restrictions will go. Some things can be deferred indefinitely without much difficulty, especially if they are only in the planning stages. If you have always wanted to put an addition on your house and planned on doing it in 2020 but haven’t bought anything, signed any contracts or other preparations, it’s easy to just put it on hold.
Other problems are not so easily deferred. For example, if a tenant is behind on her rent and the landlord wants to evict, the landlord’s mortgage payments aren’t going to be excused simply because the tenant isn’t paying, and the courts are not hearing eviction cases. Likewise, if an owner is in the middle of a major construction project requiring many people to be on the jobsite at the same time while the government is encouraging everyone to stay at home and delivery of materials are not coming on schedule, then decisions have to be made now. In this blog post, I would like to share a few thoughts about handling property-related disputes amid a public health crisis. This is not intended to replace the instructions of the authorities or other best practices to avoid getting sick. Note that these ideas may become obsolete as the situation continues to evolve. Generally, people should put health concerns first. However, sometimes there are urgencies or deadlines that must be considered.
- Availability of Court Remedies Will be Substantially Delayed. In Virginia, the District of Columbia and other places, courts are cancelling trials, postponing hearings and discouraging the sick, elderly and those with health conditions from coming. As a practical matter, while the doors of the courts may be technically open for filing, aggrieved parties may not be able to get a hearing anytime soon. When the Courts return to their regular schedule, the system will be clogged with a backlog of rescheduled hearings. Nonetheless, statutes of limitation and other deadlines may still be in effect. People should not assume that they can ignore a summons just because the governor is encouraging everyone to stay home.
- Consult with Counsel Before Exercising Self-Help. Sometimes, parties can exercise self-help legal remedies without court assistance. For example, residential landlords can’t just throw a tenant’s belongings out and change the locks just because they stop paying rent. They need a court order to direct the sheriff to transfer possession. However, on the commercial side, self-help may be an option. When adjoining owners have boundary or easement disputes, they may want to simply construct a fence in a disputed location, lock a gate across an easement or dispose of encroachments in the face of an adverse neighbor and without the blessing of the courts. However, there are potential unapparent risks of self-help, especially when the conflict has already escalated. For example, self-help can sometimes lead to threats of violence or someone calling the police. Landowners should consult with counsel to determine if some form of self-help would be helpful or risky.
- Law Enforcement and Regulators are Overwhelmed. Sometimes when disputes between adjoining owners, HOAs, contractors or landlords and tenants escalate, people may want to call the police, county departments or other regulators to protect themselves. During a public health crisis, law enforcement is already overwhelmed and may not view a neighborhood dispute with the same sense of urgency as someone living there. Code enforcement officials may be swamped with other work because of persons taking leave or other urgent matters. Unless there is an eminent threat of physical harm, theft or other crimes that cannot wait for a lawyer to respond to an inquiry, landowners ought to consider consulting with an attorney before contacting law enforcement.
- Avoid Physical Confrontations or Defects Posing Safety Threats. Sometimes neighborhood disputes escalate to the point that the parties come to fisticuffs or leave their property in a dangerous condition. Landowners should take every precaution to avoid contributing to a situation where someone gets hurt or must go to the doctor or hospital, and further burden the healthcare system.
- Avoid Homeowners Association Meetings, Hearings, and Events When Possible. The Coronavirus epidemic poses a unique threat to Americans living in condominiums and HOAs. This is because the community association form of living requires people to interact with each other to manage common concerns. The residents of associations tend to be older and at higher risk of infection. Governing instruments and state laws require “open” meetings which take place in person with the entire community free to attend, unless closed session is available. Owners are legally entitled to use common areas and facilities. Few statutes or declarations address emergency management or remote access to meetings. Many managers or directors will pursue their own agendas despite warnings from experts. Smart boards and committees will postpone nonessential meetings, prevent or discourage unnecessary gatherings and take commonsense measures to prevent common areas from becoming a venue for transmission of the virus. If an owner receives a notice of violation letter from the HOA or condominium board, she should consult with legal counsel if a postponement is not offered.
The Coronavirus has the potential to make deadlocked property disputes worse because everyone will be under greater stress, economic hardship and the legal system offers fewer immediate remedies. However, the advice of a trusted advisor such as a qualified attorney can lead to devising a self-protection strategy when the ordinary rules do not seem to apply.