December 20, 2024
Can a Community Association Sue Its Members for Defamation?
Harassment is a reoccurring topic with Homeowners Associations and Condominiums. The Association carries on business, while members of the community communicate about it. When disagreements arise, personal offences are common. When arguments escalate to a certain point, a homeowner may feel that their rights are at risk. The board may view repeated complaints as interference with the conduct of business. These disputes can become personal and reputational. Sometimes managers or volunteer leaders threaten to resign, which could disrupt continuity of operations. Can a Community Association sue its members for defamation? For language to be defamatory, it must have requisite “sting,” resulting in injury of reputation, with such shame or disgrace that renders the person infamous. For Community Associations, applying the law of defamation can be problematic because the parties are required to communicate in matters of business. Someone might identify a duty to point out that someone has shown a lack of trustworthiness.
In a 2023 Court of Appeals of Virginia case, Theodore Theologis sued several fellow homeowners for defamation and conspiracy after they publicly criticized his conduct as the President of Fieldstone Townhome Association, Inc., a 225-lot subdivision in Winchester, Virginia. In July 2020, defendants Daria Collins, Tricia James, Khai Wisler and Mark Weiler wrote a letter to community members, them to vote Mr. Theologis out of office. The Defendants accused Theologis of imposing more stringent policies than those set forth in the covenants and for usurpation of authority. At the special meeting, not enough members voted to remove Mr. Theologis, so he remained as president. Before the December 2020 HOA meeting, Mr. Weiler posted a message on NextDoor, urging members to attend and voice their concerns. Mr. Weiler wrote that, “Theologis is capricious in his enforcement of [HOA] policy (even as he has broken our HOA bylaws)” and that Theologis, “should be leaving the board at that date and you should have more reasonable people on the review board.” Theologis sought one million dollars in damages. He alleged that the defamation injured his professional reputation as a private practice attorney and real estate broker. The Defendants filed demurrers in response, arguing that the July 2020 letter and December 2020 social media post attached to the lawsuit were not defamatory. The Circuit Court agreed and dismissed the case.
On appeal, the Court focused on whether an allegation that someone breached a contract, easement, or covenant is sufficient to be considered defamatory. According to case law precedent, the violation of an easement or restrictive covenant, in itself, does not carry the requisite “sting” that would accompany an allegation of reprehensible conduct. Calling someone a contract breaker, with nothing more, lacks adequate defamatory connotation. This does not mean that accusations of violations of covenants are never defamatory. It means that there must be something more harmful contained in the disparagement. This makes sense, because such disputes are ordinarily resolved by property law, which is suited for resolving such issues on the merits.
The Court of Appeals observed that the context in which the letter and the social media post were made show that they were not defamatory. The purpose of a special meeting to decide if the president ought to be removed from office is to evaluate whether he was fulfilling his legal duties. Questions as to whether he was following the governing instruments are germane to such a meeting. The opinion does not discuss whether the posting of the message on NextDoor meant that the context for that communication was different because it was published to a broader audience than just the voting members of Fieldstone. The Court reasoned that because there was no defamation, there could be no conspiracy to defame. The Court of Appeals affirmed the Circuit Court’s dismissal of the defamation complaint. This appeals case only resolved the defamation issue, not whatever business or property issues that gave rise to the disagreements.
The Theologis case does not address a situation where a member disparages someone regarding a community concern where the allegations are more slanderous. Under Virginia case law, communications between persons on a subject in which the persons have an interest of duty, such as an employment disciplinary deliberations, are protected by Qualified Privilege. Qualified Privilege can be overcome with respect to defamatory statements made by malice. The absence of malice is presumed. If the privileged statement is communicated to persons outside of the protected context, the privilege is lost. Qualified Privilege is different from Absolute Privilege. I discussed that in an October 21, 2021 post, “Absolute Privilege and Damages Caused by False Statements in Legal Papers.”
Qualified Privilege was found in the community association context in a 1995 Missouri case, Century Management, Inc. v. Spring. Certain members of the Walden HOA circulated a document complaining about the way Century Management, Inc. managed the HOA. The letter accused Century of misleading the community about the work they were doing and called for members to put their assessments into escrow instead of sending them to the manager. Century and its managers sued those members for defamation and interference with the management contract. Several defendants called themselves the “Townhomes Liaison Subcommittee.” The Court of Appeals recognized that the homeowners’ statements were protected by Qualified Privilege because they were reasonably calculated to further a matter of common interest. Under Missouri law, Qualified Privilege only protects communications made in a reasonable manner and for a proper purpose. The Court recognized that Qualified Privilege does not protect a deliberate lie. A knowing misrepresentation or reckless disregard for veracity would give rise to a finding of malice that would vitiate the privilege. The court also found that it was not possible for Century to sue these homeowners for tortious interference, because they were party to the same contract. A claim of tortious interference with contract cannot be brought by one party against another party to the same contract.
Not discussed in these cases is the the free speech protections of the state or federal constitutions. In general, a court may not enter an order that restrains a party from exercising their free speech rights. These parties sought money damages. I discussed HOA’s and prior restraints against free speech in a 2017 post to this blog, ”Freedom of Speech is a Hot Topic in Community Associations.”
Can a Community Association sue its members for defamation? It is difficult but they can try. Community Associations are increasingly willing to sue their members for harassment and vice versa. It is possible for officers, directors or managers to be deeply offended by the conduct of a member that does not constitute defamation. Homeowners need to be aware of the law of defamation and qualified privilege when the war of words escalates, so as to avoid mistakenly communicating something that someone may be offended by but may not be protected speech.
Legal Authority:
Theologis v. Weiler, 76 Va. App 596, 883 S.E.2d 241 (2023).
Larimore v. Blaylock, 259 Va. 568, 528 S.E.2d 119 (2000).
Century Management, Inc. v. Spring, 905 S.W.2d 109 (Ct. App. Mo. 1995).
October 2, 2024
Should a Member of an Association Sign a Civility Pledge?
One reoccurring topic in HOAs and condominiums is the lack of civility and what sort of decisions the board can make to require civility. This is also a hot issue in nonprofits, houses of worship and private school organizations. Should a member of an association sign a civility pledge? I view civility as a core value of humanity. I spend much of my time litigating or resolving disputes for my homeowner clients with their community leaders. I have observed many situations where civility was deficient on the part of someone, be they an elected, vendor, or member. Community associations make decisions in deliberative gatherings of owners or directors. Civility is a prerequisite to a discussion or conducting a vote. Everyone is partially responsible for civility. Ordinarily, civility is achieved among strangers by rules of order. While civility does not necessarily require one to defer to others in matters of judgment, sometimes a dissenter must respect the outcome of the process when matters of business judgment are made through proper procedures.
One approach is to create a “civility policy” that the board adopts for the directors to use in dealing with each other, or it may take the form of a policy resolution, or a more aspirational pledge. The purpose of this blog post is to provide a director, committee member or homeowner with food for thought when asked to sign a civility pledge by leaders in their condominium or HOA. One can be committed to civility while skeptical of such pledges.
The Community Association Institute, an influential trade association, is all-in on civility pledges. CAI professionals know from experience that volunteer boards in our present day and age push back hard on the use of formal rules of order to structure decorum. We live more in an age of emotion, not motions. CAI provides their members (HOA lawyers, managers, vendors and leaders) with a Civility Pledge form. They say the board can address the lack of civility by formally adopting the “Community Association Civility Pledge” as an official policy. The form includes some well-meaning language about accountability, respect, common ground, civil discourse, and so on. The Civility Pledge refers to CAI’s “Rights and Responsibilities for Better Communities,” a similar form. The latter is a confusing two-page document. This summary is vague regarding the rights of homeowners and the duties of directors, while sharing an expansive view of the prerogatives of the board and the duties of homeowners. However, each association has its own governing instruments which vary from what is stated on this summary.
Many board majorities have become so frustrated by protracted disagreements with certain directors or homeowners that they ask their attorney to sue that person for harassment. The lawsuit seeks an injunction against the defendant from continuing her conduct towards directors, managers or other agents. In some situations, these lawsuits run afoul of law, which does not generally permit judges to restrain defendants in advance from speaking. Such lawsuits try to rely upon certain provisions of recorded instruments that prohibit owners from using the property or common areas for an “improper” or “nuisance” uses. However, such provisions typically contemplate a misuse of property, not interpersonal disputes over exchanges of words. Sometimes, the association’s attorney will threaten such a lawsuit to try to deter unwanted conduct. The specter of such litigation often lurks behind discussions about civility.
Do community associations really need civility pledges in addition to the recorded instruments they already have? Or does this question obscure the real issue? Unfortunately, once a level of acrimony arises, pledges do not really provide the band aid that is needed. The disagreeing parties may simply continue to argue, only now saying that their opponent is violating the pledge. Or the refusal to sign a pledge may be complained of as evidence of a lack of civility.
What has been lost (and needs to be regained) is a sense of trust or confidence that another person or group will do what they ought to do, under the laws and recorded instruments . . . without being forced by a judge. Acrimony arises because of the sense that trust is missing, and disagreement continues. Trust can be built over a period of years, only to be lost in an instant.
We live in a moment in which faith in institutions is at a low point. There is much confusion about the difference between earning the confidence of team members versus a kind of apparent respect that is actually a fear of retaliation (i.e., power-based persuasion). How can owners, directors and professionals thrive when there is lack of trust, faith in others, and confidence all around them? Here are a few ideas:
- Focus on resolving disputes amicably, when possible, rather than arguing about civility.
- Inspiring confidence and respect ought to be a continuing effort, rather than simply expecting respect because you have power over others (or exercisable personal rights). If trust has been completely broken, one has to consider whether to try to rebuild it where one is, or to sell the home and move elsewhere for a fresh start.
- It is possible to have all sorts of disagreements with others where there are different viewpoints based on varying interests in the matter where the dispute may not be about the character flaws of someone involved. Because someone disagrees does not necessarily mean that one of the parties involved have a serious character flaw.
- Consider following Robert’s Rules of Order. The idea behind Robert’s Rules of Order is that without commonly accepted procedures, communications in meetings can be a free-for-all, with certain individuals trying to gain control of decisions by talking over others. While this may seem old-fashioned, rules of order provide a framework for civil discourse.
Proponents of civility point out that in many associations there is one or two owners (who may also be directors), who are so misanthropic that they poison things for everyone, and the civility policy is necessary to show what is the root problem. But truly misanthropic personalities will not be tamed by a civility pledge.
What should a director or committee member do when asked to sign or vote on the CAI Civility Pledge or some other policy resolution regarding civility? Should a member of an association sign a civility pledge? One ought to read such materials carefully. Sometimes, the resolution may be captioned or titled as such, but if you read the fine print, it actually functions as something of a waiver of the rights of a dissenting director, limits statutory rights to obtain and share information regarding the finances, or otherwise changes the business of the board or committee from a deliberative body to a rubber-stamping activity. Sometimes, a pledge or resolution can actually make civility worse. One ought not to be browbeaten into agreeing to a civility pledge when what is really needed is for resolution of an underlying dispute and further work to rebuild trust.
Other related article on this blog: Does Civility Still Matter in Community Associations?
March 19, 2024
Can a Homeowner Obtain a Declaratory Judgment Against a HOA?
Every lawsuit must have a rational objective in the form of one or more remedies the Court ought to award against the defendant. Civil remedies can include money damages, possession, or an injunction. However, sometimes the claimant is interested in having the rights or duties of the parties resolved for purposes of present or future dealings. Such rulings allow the controversy to be resolved without one party testing validity by breaching or waiting indefinitely for the opponent to breach whatever instrument or law is disputed. The legal name for this sort of remedy is a “Declaratory Judgment.”
Determination of the size and shape of rights is a reoccurring theme of community association controversies. The difference between being made whole in the wake of a breach versus declaration or rights regarding a legal instrument or statute can seem like an abstraction, because the former would seem to follow the latter. Yet, courts are sensitive to the concern that it is not their job to step in and take over the management of a board or committee. Thus, there may be important questions where the court’s ability to take active jurisdiction is not clear. Declaratory relief can provide a remedy where there may not be a clear breach but there nonetheless is a controversy that is ripe for decision.
Where an actual controversy exists, circuit courts “shall have power to make binding adjudications of right” in the form of declaratory judgments. Va. Code § 8.01-184. Under the English common law (which forms the basis of law in Virginia and almost every other state), declaratory relief was not something that was an option. It is a statutory innovation. The declaratory judgment statutes are remedial legislation enacted to remove the common law requirement of actual injury. Declaratory judgments are binding adjudications of the rights of the parties, guiding them in their future conduct together, relieving them of the risk of taking undirected action incident to their rights, which, without direction, would jeopardize their interests. However, the power to make a declaratory judgment will not be exercised where some other mode of proceeding is provided. Because the driving purpose behind declaratory judgments is to resolve disputes before a right is violated, where claims and rights asserted have fully matured, and the alleged wrongs have already been suffered, a declaratory judgment is not available (because one ought to be proceeding for breach of contract or statute, or some other theory).
In many cases it is not clear whether bringing a declaratory judgment in a complaint or counterclaim is necessary, because the court would like to have to make a finding or ruling answering such a question in the court of addressing other claims. In some cases, some other kind of offensive or defensive pleading fits better. Where granting declaratory judgment is duplicative of the relief already available to the claimant, courts may decline to exercise jurisdiction.
Some counterclaims for declaratory relief are better suited to be presented as pleas or affirmative defenses instead. A counterclaim is a cause of action which seeks affirmative relief, while an affirmative defense defeats the plaintiff’s cause of action by denial or confession and avoidance. In contrast, a counterclaim is a claim for relief asserted against an opposing party after an original claim has been made; especially, a defendant’s claim in opposition to or as a setoff against the plaintiff’s claim. One would expect Virginia state courts to be more permissive in terms of raising issues by counterclaim than their federal counterparts, where there are stricter pleading requirements.
Declaratory judgments with related injunctive relief are common remedies in cases involving community associations. In a 1997 Loudoun County Circuit Court case, Cornwell v. Main St. Village HOA, a homeowner brought a suit in equity for declaratory and injunctive relief, challenging the enforcement of a parking policy as ultra vires under the HOA’s governing instruments. The court entered an order granting a declaratory judgment that the policy was void as ultra vires and entered an injunction against enforcement of the void policy.
In a Chesterfield County Circuit Court case, Robins v. CMH Homes, a property owner counterclaimed against a person exercising architectural approval in a subdivision. The owner sought declaratory and injunctive relief. The homeowner argued that based on the covenants, architectural approval was being wrongfully withheld. The court granted declaratory and injunctive relief in favor of the owner.
In 2011, the Circuit Court of Fairfax County rejected a HOA’s demurrer to the propriety of declaratory relief in a HOA governance case. The Farran family sued Olde Belhaven HOA for violation of the POAA, NSCA, and its declaration, while asking for declaratory and injunctive relief. The Farrans disputed the HOA’s denial of their request to add a roof and deck and challenged mismanagement of reserves. The HOA demurred to the claim for declaratory judgment, arguing the alleged breaches already occurred. The Circuit Court overruled this ground to demurrer because the Farrans’ complaint focused on the interpretation of legal rights under multiple HOA documents and statutes for determinations necessary for the parties to understand how to operate in the future under the governing documents and state statutes.
In closing, bear in mind that while courts traditionally have been reluctant to grant equitable relief, the modern trend is to allow declaratory or injunctive relief to be sought, if the allegations can adequately be proven. The declaratory judgment statutes are supposed to make the courts more generous, not less so. Whether a homeowner has been sued by a HOA or is trying to evaluate whether to bring suit, declaratory relief ought to be considered.
Legal Authority:
Pure Presbyterian Church of Washington v. Grace of God Presbyterian Church, 296 Va. 42 (2018).
Liberty Mut. Ins. Co. v. Bishop, 211 Va. 414 (1970)
Bd. of Supervisors v. Hylton Enters., 216 Va. 582 (1976)
Godwin v. Bd. of Dirs. of Bay Point Assn, 82 Va. Cir. 215 (Norfolk 2011).
61A Am. Jur. 2d Pleading § 276.
Black’s Law Dictionary 451 (8th ed. 1999)
Cornwell v. Main St. Village HOA, 42 Va. Cir. 48 (Loudoun Jan. 16, 1997).
Robins v. CMH Homes, 103 Va. Cir. 8 (Chesterfield 2019).
Farran v. Olde Belhaven Towne Owners’ Assn, 83 Va. Cir. 286 (Fairfax Aug. 24, 2011).
February 1, 2024
Christmas at West Hayden Estates First Addition HOA
I enjoy seeing properties adorned with colored lights and other decorations for holidays. It is unusual for a homeowner to set up holiday decorations or host activities that cause a genuine nuisance to neighboring properties. In my view, personalized holiday displays enhance the living experience. It is fun that they are all different. Some are ostensibly religious, others feature Peanuts or Dr. Seuss characters. In December, I saw several inflatable Grinch figures, small and large. The Grinch endures in pop culture because in most people there is a small place in the heart that is jealous of other people’s happiness.
Some people take a different view. To them, that there are certain practices, such as too many lights, leaving them up too long, or too many signs that are not to their taste. Many people who volunteer for HOA leadership positions believe that some residents need firm direction as to what is not acceptable. A process of self-selection brings forth candidates for boards and committees who want to see changes. Their ideas tend to involve stricter rules or increased charges. Personally, I am not much of a libertarian. An orderly sort of liberty requires a few rules. Developers design subdivisions and multifamily buildings according to particular standards and expectations. Usually, the original governing instruments reflect those designs. Many problems seen with HOAs are the result of subsequent boards of directors who want to take the community into a different direction, through a variety of amendments and new policies at odds with what the purchasers fairly though they were buying their families into. Developers rarely show any interest in establishing community standards for holiday displays, because such things are seen as temporary. HOAs are known for instigating enforcement against homeowners who erect holiday displays. Few of those stories ever make it into the news.
One high-profile, ongoing HOA dispute concerns Christmas at West Hayden First Addition HOA in Idaho. Homeowners Jeremy and Kristy Morris have been in disputes with this HOA since 2015. They have a pending appeal in the federal court system. Jeremy Morris is an alumnus of Liberty University in Lynchburg, Virginia. When the Morrises wanted to purchase their home, they reached out to the Board of Directors to ask them if they would oppose the type of Christmas displays and programs that drew crowds to their previous residence. This began a longstanding conflict between the Morrises, the board and other lot owners regarding the holiday activities. Former director Larry Strayer found out about the Morrises inquiry and submitted for the board’s consideration a strident draft letter stating:
And finally, I am somewhat hesitant in bring up the fact that some of our residents are avowed atheists and I don’t even want to think of the problems that could bring up. It is not the intention of the Board to discourage you from becoming part of our great neighborhood but we do not wish to become entwined in any expensive litigation to enforce long standing rules and regulations and fill our neighborhood with the riff-raff you seemed to attract over by WalMart. [sic] Grouse Meadows indeed!!! We don’t allow “those kind” in our neighborhood.
The board did not like the incendiary wording of this draft. The directors made edits to the letter. Director Pat Kellig sent to the Morris family a revised version including the following language:
And finally, I am somewhat hesitant in bringing up the fact that some of our residents are non-Christians or of another faith and I don’t even want to think of the problems that could bring up. It is not the intention of the Board to discourage you from becoming part of our great neighborhood but we do not wish to become entwined in expensive litigation to enforce long standing rules and regulations and fill our neighborhood with the hundreds of people and possible undesirables. We have worked hard to keep our area peaceful, quiet, and clean. Neighbors respect the CC & R’s [sic] and show common courtesy to those around them. These are why people want to live here.
This version was sent by Ms. Kellig to the Morrises without the approval of the other directors. When the Morrises obtained a copy of Mr. Strayer’s initial version, they saw it as evidence of an anti-Christian animus within the HOA.
The case ended up in the U.S. District Court for Idaho. The Judge found that the purpose of the Morrises Christmas program was to support charities and to engage in religious ministry. They did not request or obtain approval from the HOA to conduct the five-day long program. They decorated the house with 200,000 Christmas lights. They invited thousands of people. The attendees arrived by the busload or drove themselves and parked on the street. The program included people dressed as the Grinch, Frosty the Snowman, Clifford the Big Red Dog, Roman soldiers and Santa Claus. Someone brough a live camel and donkey to enhance the nativity scene. The program included amplified Christmas music. Neighbors complained about the traffic, parking and noise problems. As you can imagine, this Christmas program drew strong pro and con reactions within the community.
The Morrises presented evidence that various residents of the community exhibited threatening behavior towards them regarding the Christmas program. Mr. Morris described receiving a “death threat.” However, the Morrises could not prove that the threats shouted at them were made by board members. The Judge later concluded that whatever statement that resident made did not amount to a “death threat.” The opinion suggests that the angry resident said that he would “take care” of Mr. Morris.
At trial, the jury found in favor of the Morrises on their religious discrimination claim. They awarded the Morrises $60,000.00 in compensatory damages and $15,000 in punitive damages. The HOA filed a motion challenging the basis for the jury’s verdict and sought entry of an injunction to order the Morrises to stop conducting their Christmas program on the grounds that it violated the restrictive covenants.
The Judge agreed with the HOA. The Judge’s view was that the HOA letters introduced into evidence did not evidence a discriminatory animus on the part of the board with regard to the family’s Christian religion. The Judge observed that the original version of the letter was not written by a director, and that the version that was actually sent was toned down and reflected a sense of religious pluralism. To some, approval of the Morris Christmas celebration would suggest favoritism towards Christianity. Also, it came out at trial that the members of the board were also of the Christian religion.
The opinion does not state to what extent any of the board’s deliberations were conducted in an open meeting or duly convened executive session. The letters in this case illustrate how directors, managers and lot owners ought to conduct themselves in a civil fashion, realizing that the communications may eventually come out. I don’t understand why the board agreed to field this question. In my view, the covenants ought to speak for themselves, and the board should not be considering architectural “applications” from persons who haven’t even purchased their homes.
Regarding the residents shouting at the Morrises, the Judge considered to what extent the HOA could be responsible for threats made by persons not proved to be directors. A handful of courts have considered to what extent a HOA board may be found responsible under the Fair Housing Act for the discriminatory animus of persons who are not on the board or some other position of authority. HUD interprets the Fair Housing Act to only hold landlords or boards responsible for the discriminatory actions of other residents if the person in authority knew about the discriminatory conduct and had the power to correct it. If the HOA board doesn’t have meaningful ability to control or correct the harassment, then they can’t be held liable for the discrimination. Sometimes, HOAs and condominiums justify harsh litigation or enforcement activity on the grounds that the failure to do so could result in fair housing claims. However, if the declaration and the statutes do not give the HOA the authority to regulate the activity, then this is not an adequate justification.
The judge set aside the jury’s verdict in favor of the Morrises as not adequately supported by the evidence. Readers, please be aware that setting aside a jury verdict is ordinarily considered to be an extreme decision, only taken where there is a miscarriage of justice. A jury’s verdict is supposed to be upheld even if the judge disagrees with the jury’s findings regarding the credibility of the witnesses.
The judge’s decision also considered the HOA’s request for an injunction against future Christmas celebrations by the Morris family. The HOA’s restrictive covenants contained typical provisions that one sees in recorded instruments throughout the country from the past 10-15 years. The “modern” trend is to have general language that allows the HOA to adopt rules and regulations governing the architectural alternations or decorations to the property, and to require lot owners to apply and obtain approval for changes. The judge found the Morrises holiday celebrations excessive and not in keeping with the residential character of the development. The Judge found the impact of the glare, noise, parking and traffic to be a nuisance. The judge didn’t really consider what, if any holiday decorations or observances that the Morris family could have without approval or provide any guidance on what the HOA ought to approve.
The focus of the Morrises and the judge was the question of anti-Christian discriminatory animus. However, what’s important when it comes to religious liberty is the free exercise of sincerely held religious beliefs. The First Amendment to the U.S. Constitution protects us against governmental action that infringes upon freedoms of speech, assembly and religion. Generally speaking, this does not speak to situations where a private citizen or corporation, such as a HOA or landlord, infringes upon such freedoms. In the context of enforcement of HOA rules and covenants, there are other public policy considerations that may make a covenant or rule unenforceable on the basis of civil liberties. For example, a state constitution may have protections of civil liberties that may be broader than the U.S. Constitution.
If this case was all about temporary religious or political decorations, I would be inclined to take Jeremy Morris’ side. From reading this opinion, I can’t tell whether any of his neighbors’ ability to drive to their houses was impaired by the traffic or parking. Also, it’s not clear whether the lights or the music interfered with the ability of a person of normal sensitivity to fall asleep at night, even with the windows closed. That said, I do sympathize with the Morris family’s concerns. For many homeowners, trying to fight their HOA over decorations is too difficult. His case brings some publicity to important issues that might not be otherwise considered by the public.
Lastly, I want my readers to note that Jeremy Morris is an attorney and he represented himself and his wife in this federal lawsuit. Many of the homeowners, officers, directors and committee members who are active in HOA and condominium disputes and business went to law school or work in law offices. It’s natural for people with legal training or experience to find the legal affairs of their HOA to be interesting. However, it’s difficult to represent oneself in a major federal lawsuit. There is an adage, (which is sometimes attributed to Abraham Lincoln), “The man who represents himself has a fool for a client.” This saying is particularly true for attorneys who find themselves the party to the suit. As a result of this case, Mr. Morris is under investigation by the Idaho State Bar, because he made some public statements about the judge who ruled against him. It’s hard to say whether the Morris case would have gone better if they had hired another lawyer to advise and represent them.
The appeal in this case was argued before the Ninth Circuit Court of Appeals on June 5, 2020. That court has not made a ruling yet. The Morris family’s disputes over Christmas at West Hayden First Addition HOA have been going on for eight years and the litigation is not resolved. Whatever decision the appeals court makes will only address narrow questions and give specific directions to the trial court. Courts cannot take the reins of the operation of a private business or government agency. These neighbors are going to go on living with each other until someone moves.
Case Citation:
November 20, 2023
What Happens When a HOA Fails to Timely Approve or Deny an Architectural Application?
Many homeowners experience frustration with their community associations when they sense they are going around in circles. For example, they receive notice that something must be applied for or removed because of the architectural guidelines. The homeowner determines that it is not a violation, and board members agree in a conversation. Later, the homeowner receives another notice from the HOA, again asking for the same “violation” to be corrected. Architectural disputes with HOAs go beyond mere “aesthetic” issues such as statuary, plant pots or flag displays. Most architectural applications involve major financial commitments. The architectural control committee has substantial power over the property and lives of the residents. Understanding the limits of those powers can help owners exercise greater control over their own lives.
Recorded covenants and architectural guidelines contain detailed standards and procedures that can be difficult to interpret. Often, the declaration of covenants limits the time the committee or board may take to consider an architectural application, usually 30 or 45 days. Deadlines, if properly contrived, can allow for property-related disputes to be timely resolved. What happens when a HOA fails to timely approve or deny an architectural application? Such rules say that if the HOA does not deny the application within the time allotted, it is deemed approved. Such deadlines prevent associations from desk-drawering (“sitting on”) an application to prevent it from being approved.
Not all HOAs or condominiums have such provisions in their documents. No Virginia statute imposes a 30- or 45-day limit where it is not expressed in the instruments. Without such provisions, the parties look to the doctrines of waiver or estoppel to determine if the association abandoned their right to deny. When things drag out, the homeowner and the committee often disagree as to whether the passage of time barred a denial of a particular application. For example, what if the association responds to an application with a request for additional information, or announces that a hearing will convene only a few days outside of the allotted 45? Is the 30 day or 45-day time limit more flexible than its language would suggest?
The Court of Special Appeals of Maryland (now called the Court of Appeals of Maryland) considered such a case, Raj Yadav vs. Pindell Woods Homeowners Association, Inc., in a December 26, 2017 opinion. Howard County residents, Rita and Raj Yadav planted a row of trees along their property line to enhance privacy screening between their “street front” lot and a “flag lot” behind theirs, owned by the Olaniran family. “Pipestem” driveways connecting flag lots to the right-of-way allow developers to add more lots into a subdivision. Lots using or burdened by driveway easements tend to have more legal disputes than ordinary lots. https://cowherdplc.com/problems-with-pipestems/ The Yadavs wanted to screen a line of sight between their house and the Olaniran’s driveway. The Olanirans complained about the trees. On April 28, 2014, the Yadavs applied for approval of the trees. The HOA asked the Yadavs to resubmit their application, which they did in May 2014. The HOA denied their applications. The Yadavs removed two trees and submitted a third application for the thirteen remaining trees. After the Yadavs refused to remove all but seven trees, the HOA denied the application. The HOA said that when the trees matured, they would block motorists’ sight lines. In court, the Yadavs argued that the covenants did not allow the HOA to prohibit them from planting trees wheresoever on their property. They argued that even if the HOA may regulate trees, it erroneously determined that the trees constituted a hazard. A sentence in the covenants read, “No trees or shrubs shall be located on any lot which block the view of operators of motor vehicles so as to create a traffic hazard.” Not all recorded covenants give the HOA design-control power over plants on owners’ lots. Maryland courts defer to internal decisions of organizations by applying the business judgment rule (BJR). In Maryland, exceptions to the BJR concern (1) whether the board’s decision was one they were authorized to make, i.e., “ultra vires” action, or were the result of (2) fraud or (3) bad faith. In evaluating a HOA dispute, one must first determine if the board has the authority to make a particular decision at all. Ultra vires is an important doctrine for homeowners. The Court of Appeals ruled that the BJR applied to Pindell Woods HOA’s tree decisions. In Virginia, there is another approach, that of reasonableness, which sometimes presents an intermediate standard between the strict ultra vires and deferential BJR. In my opinion, the BJR is not appropriate for design control powers of parcels of land not owned by the Association, unless it is a condominium, or the recorded instruments expressly adopt the BJR. Control over another person’s land is not properly within the “internal” functions of a corporation; it looks outward to the affairs of its members. In the Yadav case, the HOA did not determine that the trees currently presented a traffic hazard. They concluded that if the trees grew, eventually they would obstruct a line of sight. The court opinion does not discuss if this could be resolved by a condition to keep the trees trimmed. Pindell Woods’ covenants said that any application not decided by the Architectural Committee within 30 days is deemed approved:
Unless the architectural committee, by written notice to the applicant, disapproves any plans submitted or approves them only upon the satisfaction of any specified condition, as aforesaid, within thirty (30) days after such … plans are submitted the architectural committee shall conclusively be deemed for all purposes of this Declaration to have approved such plans unconditionally for each lot for which they were so submitted.
The Yadavs called for this provision to be applied by its plain meaning. The HOA wanted it to be viewed flexibly, to accommodate negotiations between the homeowner and the committee. The declaration was silent as to whether the 30-day “clock” could be paused or restarted. The Court of Appeals concluded that because the committee has the power to condition its approval, that shows a general purpose to, “create a cooperative, interactive process by which the Architectural Committee and the application negotiate a mutually acceptable resolution.” The Court of Appeals ruled that the HOA had the power to pause and restart the 30-day clock when it is trying to resolve matters cooperatively. To require the HOA to deny all applications that it is not yet prepared to accept to prevent itself from forfeiting its design-control powers would have the adverse effect of homeowners receiving mysterious denials where re-application on different terms is suggested or implicit. If the homeowner submits a clarification within 30 days, does that re-start the clock or have no significance for the question of waiver?
The Yadavs’ and Pendell Woods HOA’s negotiations continued from April to December 2014 regarding trees that had already been planted. The Yadavs did not rely upon silence to add trees. The Court of Appeals ruled that the HOA’s request for supplemental information “operated to pause the 30-day clock.” The HOA’s later denial of the application was not erroneous.
The court’s Yadav ruling reflects a desire for the HOA and homeowner to work out the details of architectural applications in earnest. Yet, the approach adopted gives the HOA leverage in such negotiations. A homeowner may find herself trapped in a salad of notices and applications. The Yadav decision assumes that HOAs will “pause” the 30- or 45-day clocks with requests or demands for additional information in a thoughtful way that does not render the deadline meaningless. The court also affirmed the award of attorney’s fees in favor of the HOA and against the Yadavs.
Contrast the Yadav outcome with the Circuit Court of Fairfax County’s approach in a 2007 unpublished decision by Judge Jonathan Thatcher. South Run Regency HOA sued Catherine K. Crosby, seeking removal of a fence she erected on her property. The declaration stated that, “all applications not acted upon within forty-five (45) days shall be deemed approved.” The architectural standards and guidelines provided that, “any time the ARB requires additional information for proper evaluation of an application, the application shall be disapproved and returned requesting more specific information.” After erecting the fence, Ms. Crosby applied on August 25, 2005 for the ARB to retroactively approve it. On September 12, 2005, the ARB sent Ms. Crosby a letter stating that the ARB needed additional information to consider the application. This letter did not deny the application, nor did it return it to her. Ms. Crosby did not respond to this letter. On October 11, 2005, the ARB voted to disapprove the application. This fell outside the 45-day time limit. Judge Thatcher found that the instruments unambiguously required the ARB to deny or return the application if additional information was required. The court entered an order in Ms. Crosby’s favor, deeming the application approved by the passage of the 45 days.
These two courts took different approaches on similar (but not identical) situations. Virginia and Maryland courts tend to apply different standards and points of emphasis in HOA architectural control matters. When a homeowner applies to her HOA for architectural approval, she ought to give careful attention to the wording of the declaration of covenants, bylaws, and the architectural guidelines.
In Virginia, there are provisions in the Property Owners Association Act and the Condominium Act that require boards and committees to conduct business in properly noticed, open meetings. Boards and committees cannot conduct business in unnoticed meetings or “work sessions.” For the board or committee to make a binding business decision on an owner’s architectural application, the vote must comport with the open meeting statutes. This means that some HOA denials of architectural decisions may be void on account of the informality by which they were made.
If a homeowner believes that the HOA is barred from denying an application because of the passage of time, it is best to consult with qualified legal counsel before embarking on a project pursuant to that applied for design, particularly where the cost to later change things could involve financial waste. Many architectural control matters involve a major addition to the house, construction of retaining walls, a swimming pool, or other expensive commitments. There are things that homeowners can do to prevent their association from leading them around in circles or allowing them to remain trapped in “limbo” where a NOV ought to be removed or an application ought to be treated as approved. The homeowner’s right to have the 30- or 45-day “clock” can easily be waived in the course of negotiations. It’s not always best to proceed with a project in the face of uncertainly, particularly if the application is incomplete or inadequately describes what is desired.
For Further Reading:
South Run Regency v. Crosby, No. CL-2006-1582, 2007 Va. Cir. Lexis 156 (Fairfax Co. 2007).
November 6, 2023
Work Group Report to Virginia Legislature Regarding Funding Reserves to Maintain Structural Components in Condominiums
Tomorrow, November 7, 2023, Virginians go to the polls to vote for all seats in the House and Senate. The 2024 session is expected to include legislative deliberation regarding the safety and affordability of aging housing stock, including condominiums. Developers and policymakers view condominiums as growing the tax base of the community while allowing for affordable housing. However, realities of condominiums present threats to unit owners, such as surprise assessments of $10,000-$45,0000, stalking neighbors, constricting rental policies, damage from leaking pipes, or even loss of one’s investment in deconversion. For owners of older condominium units with inadequate reserves and dysfunctional polity, sometimes it is best to sell the unit before the burdens become too great. However, for many unit owners, there are few housing options in their metropolitan region that they can afford. Many homeowners simply must find a way to make their current housing investment work for them.
On November 23, 2022, I posted an article to this blog, “Virginia Structural Integrity and Reserves Work Group,” concerning efforts to reform community association laws in Virginia. The 2022 General Assembly directed the Department of Professional and Occupational Regulation (DPOR) to appoint a panel of industry experts to develop recommendations for how state laws may be strengthened so that community associations can adequately fund projects necessary to renovate structural components and critical building systems. I was not a member of this work group, but I did attend one of their meetings as a public citizen. The legislature and the work group both understand that many, if not most, community associations do not have sufficient reserves to fund renovations essential to intended use, health, and safety. In April 2023, this work group published a lengthy report. I expect we will see a flurry of bills in the legislative session that convenes on January 10, 2024. For condominium unit owners, this two-month legislative session may result in a sea change that splashes waves throughout urban habitats in the Commonwealth. Failure to address such matters can lead to buildings losing insurance coverage, the inability of purchasers to obtain conventional financing, or even condemnation. If mishandled, unit owners can experience tremendous financial hardship with little guarantee that the renovation will succeed.
The industry of property managers, board attorneys, accountants, contractors, landscapers, and other businesses exert more influence over HOA policymaking than the homeowners do. Advisors and vendors to condominiums do not want boards to continue to defer maintenance until something catastrophic happens. If the advisors must tell the boards to do something difficult, they want to present it as necessary and feasible. Boards can replace the professionals with others if they do not like the service they receive. When a structural collapse or personal injury happens, the victims and unit owners often point fingers at the board and their advisors. The work group wants to facilitate reserve studies, collect assessments faster, and make contracts to replace critical components. The governing documents of common interest communities contemplate homeowners electing worthy candidates to the board to wisely fulfill legal responsibilities for the whole community. However, directors tend to make collective decisions according to their personal views, with a bias towards short-term solutions, or without doing their homework. If all the policies the work group wants are implemented, unit owners will have less control over the governance of their communities, while shouldering onerous financial obligations. Let us take a closer look at a few of the work group’s recommendations.
Use of Reserve Study Professionals: Virginia law requires associations to renew their reserve studies every five years. The work group wants to strengthen this with amendments requiring the study to be done by qualified professionals. Reserve studies evaluate the remaining life of various aspects of the common elements, and how much money ought to be set aside. This is not an easy task, because we are talking about millions of dollars. Reserve studies do not include a business plan for fundraising or bid-solicitation. The work group wants to prevent boards from doing the studies themselves, asking a committee of homeowners to do it, or relying on an estimator who is working for a contractor who wants the work. The firms that specialize in reserve studies often have professional relationships with the managers and attorneys who work closely with the boards. Even if the association purchases a professional reserve study, it may not provide all answers that are needed for the board to make decisions. With a statutory mandate to raise assessments and spend on critical components, according to the reserve study, the work group wants to keep the boards listening to the industry experts. However, boards can replace professionals with those willing to see things their way. Community associations are supposed to make important decisions in duly noticed, open meetings where owners can review the materials and speak if they so desire. An eight-figure commitment to be imposed upon the unit owners by an assessment ought to be managed in an “open” way. The board is forcing people to purchase something expensive together that they will be living with for as long as they own their homes. Such business meetings can get wild. Many unit owners are disengaged. Those who are engaged have strong opinions. There is a tendency to shift the discussion of the details out of the open and into an executive session, an informal committee, or to assign a director or manager to confer with the reserve specialist, contractor or engineer to discuss details and report back. Community associations are organized by recorded instruments that vest power in the board of directors, where the duties and prerogatives are defined. The members have the right to remove or replace the directors. Directors can change the direction things are going by replacing the professionals hired by the previous board. I agree that reserve studies ought to be done by qualified individuals. However, the problems are complex enough that regulating the professional field is not necessarily going to solve the problem. But the reserve studies will cost more because there will be fewer companies authorized to do the work.
Unit Owner Rescission of Additional Assessments: In community associations, there are situations where the members can override a board decision by a vote at a special meeting. The right of rescission may be set out in a statute or recorded instrument. I summarized statutory rescission rights in my post, “Can HOA Boards be Overridden through Group Action by Owners?” The Virginia Condominium Act allows unit owners to rescind board approved additional assessments:
All unit owners shall be obligated to pay the additional assessment unless the unit owners by a majority of votes cast, in person or by proxy, at a meeting of the unit owners’ association convened in accordance with the provisions of the condominium instruments within 60 days of the delivery or mailing of the notice required by this subsection, rescind or reduce the additional assessment.
Va. Code § 55.1-1964(E). This is a powerful tool which, if used wisely, allows unit owners to exercise oversight over board decisions. This cancels or reduces an imposed assessment without undoing related board decisions such as loans or contracts.
The work group takes aim at this procedure. Some view the provision as allowing the wrong kind of interference. The work group cites conflicts between several types of owners. For example, investors favor cosmetic improvements. Older owners tend to view reserve funding as a subsidy to future owners. The work group views boards of directors as more responsible and wiser and the unit owners as a majority as self-interested. All directors and members of condominium associations are under some sort of conflict of interest by the fact that they are investors and residents in the property subject to group decision-making. I touched upon these issues in my post, “Condominium Director Conflict of Interests and the Business Judgment Rule.” This reality is inherent, but the community still must govern itself through business decisions. Some business is to be conducted by the board, other business by the unit owners acting as a group. The owners individually retain certain rights which cannot be voted away even by 99% of the other members. Who is to say that the board or owners are more trustworthy when it comes to a huge decision? Many condominium bylaws were made when the statutory right of rescission was on the lawbooks. To take that procedure away now would in a sense rewrite the “contact.” The work group’s report fails to mention that even where the statutes do not provide an owner rescission procedure, homeowners may be able to block or undo board decisions by filing a lawsuit. In my opinion, the right of rescission ought to be retained, and broadened to include related subject-matter, because the unit owners need the ability to hit the “pause” button without necessarily having to file a lawsuit.
Use of Loans to Finance Major Renovations: The work group’s report recommends that the statutes be amended to authorize borrowing by associations for repair of capital components. A loan might make sense as a last resort for an urgent, essential project for which there are insufficient reserves in the bank but the unit owners are capable of repaying. Many people assume that HOAs and condominiums have the power to borrow money because they are businesses. The POAA and Condo Act do not authorize borrowing. The Virginia Nonstock Corporation Act lists borrowing as a corporate power. Unincorporated associations do not have an inherent ability to borrow money. However, declarations and bylaws may authorize borrowing, even for unincorporated entities. The issue of borrowing is tied to assessments. It is usually the unit owners who push for a loan option. However, bylaws typically do not have provisions that provide a framework for pass-through financing. If the board borrows money, typically the whole community becomes responsible in the event of a default. This can create controversy because responsible owners who pay off their portion initially upon demand do not want to later have to bail out their impecunious neighbors. From the lender’s perspective, the association’s cashflow is collateral, not the property itself. If poorly considered, legal reforms that loosen restrictions on condominiums borrowing money may result in unit owners becoming trapped in their investment. The condominium model was not designed around borrowing. Unit owners do not want the critical components of their building to fail. They also do not want the burdens of ownership to become like those seen in housing cooperatives or timeshares. I am concerned that the legislative proposals may address short term funding needs but change the nature of condominium investments into something more like cooperatives.
Aggressive Collection Tactics: Any attempts to fund reserves will require associations to intensify their debt collection with more liens, lawsuits, garnishments, and foreclosures. The work group recommends that the laws mandate that boards assess and collect sufficient funds to fully fund reserves. The general assembly already provided community association boards with powerful tools for debt collection. I discuss this in my article, “Memorandum of Association Assessment Lien.” The few consumer protection guardrails in the statutes for assessment liens and foreclosures are frequently ignored by HOA debt collectors. When they find themselves trapped in a cycle of community association debt collection, there are steps that a homeowner can take to protect themselves from later discovering that their HOA sold their home to an investor in foreclosure without their knowledge. For example, it is important for the homeowner to keep their association up to date with any changes to their snail mail address, and to confirm that the association acknowledged such updates.
Termination and Deconversion of Condominium: The work group’s report includes some vague statements about promoting redevelopment of condominium property. Usually, condominium termination results in substantial investment losses for those unit owners who are not in league with the developer acquiring the property. My analysis of the most recent amendments to the termination statutes are summarized in my previous post, “Proposed Virginia Legislation Would Empower Developers to Oppress Rights of Unit Owners in Sale of Terminated Condominium Developments.” Sometimes these terminations seem like legalized theft.
So where do things go from here for condominium unit owners? The work group mentions in its report that this mess arose because of the economic bias of current owners against future owners. While there is a natural human tendency to kick the can down the road, the solution for a particular community is going to be unique. Factories do not construct tailored suits. It is understandable that the industry that currently serves condominiums and HOA corporations, when their leaders are organized into such a work group would look for opportunities to present themselves and their friends as solutions. I suspect that the industry lobbyists will propose bills they will argue reflect the recommendations. However, I suspect that the language of the bills may go in a variety of directions. I hope that the General Assembly uses this as an opportunity to protect consumers. One can step back and observe that the condominium concept was flawed from the beginning and should not have spawned so many homes. However, even if legal reforms forbade new condominiums, the plight of current unit owners would remain. Reform of state laws could be of some help to condominiums struggling to address the cash crunch that plagues their efforts to renovate the critical structural components or major building systems. Despite whatever the legislature does, condominiums will still have to devise their own solutions. For many unit owners, the best means of self-protection is to sell their units while they still can. For those from whom that is not an option, they will need to plan to invest their own time and money in a group activity to resolve these problems.
Legislative Update (January 18, 2024):
The 2024 General Assembly is underway in Virginia. One proposal under consideration is House Bill No. 1209 which could fundamentally change what it means to own a condominium unit, particularly the financial obligations. Presently, if a Condominium Board makes a bad decision regarding additional assessment, let’s say they adopt a resolution to impose an additional assessment of $20,000-$40,000 per unit to do some sort of project, but the whole thing is poorly considered and needs to be redone, the unit owners can convene a special meeting to vote to rescind the additional assessment, without having to go to the trouble of removing the directors from office or file a lawsuit. HB 1209 would take the right to vote for rescission away from the unit owners. The rescission procedure could be refined through amendment, but the proponents of this bill want to do away with it entirely. Most developers did not put the rescission option into the bylaws because it was already in the statute.
Also, Virginia condominium associations do not have the ability to borrow funds unless the bylaws already allow it. HB 1209, if adopted, would allow the boards to borrow funds for any reason, only limited by what amounts the banks would be willing to lend, at whatever interest rates and terms the boards and the banks agree. Under this amendment, the boards can borrow as much as they want, and the unit owners must pay off their percentage “share” of this to sell their units. Under these amendments, condominium unit owners would need to track all of the board’s deliberations regarding borrowing money, so as to be aware of what additional burdens might be imposed on them as a unit owner. In a condominium where the board is urged to be aggressive with fundraising, this would lead to a approach to assessments whereby the unit owner would not be made aware that a large financial obligation was imposed on her personally for long after the time the loan is agreed upon. This is because boards commonly do not disclose much about their contract negotiations. This borrowing power amendment could have more consumer guardrails added, if attention is paid in the legislative process.
Every condominium unit owner in older (and newer) buildings in Virginia have a stake in this legislation.
Selected Legal Authority:
Va. Code § 55.1-1965 (Condo Act – Annual budget; reserves for capital components)
Va. Code § 55.1-1826 (POAA – Annual budget; reserves for capital components)
Va. Code § 55.1-1964 (Condo Act – Liability for common expenses; late fees)
Va. Code § 55.1-1825 (POAA – Authority to levy special assessments)
Va. Code § 13.1-826 (NSCA – General powers)
Va. Code § 55.1-1958 (Condo Act – Tort and contract liability; judgment lien)
Va. Code § 55.1-1966 (Condo Act – Lien for assessments)
Va. Code § 55.1-1833 (POAA – Lien for assessments)
June 23, 2023
Do Security Cameras in HOAs and Condominiums Infringe on Privacy Rights?
Use of security cameras is widespread in HOAs and condominiums, but it can also be controversial. Cameras are often positioned to view both the owners’ lot and nearby property. When disputes arise, homeowners want the community to take their side. However, the legal obligations often are not clear. The developer constructs the community and includes use restrictions in the land records. Thereafter, general law and technology evolve at separate paces. Residents install security cameras based on generalized fear or in reaction to a specific incident. Often, someone finds this objectionable because it records their lot or common area (or could easily be reconfigured to do so). Many associations install video cameras on common elements in response to security complaints. Video cameras allow property owners to easily monitor their property while doing other things. This can cause neighbors to feel a loss of useful value to the “open” portions of their property due to a feeling of being surveilled. . . .
March 10, 2023
Court Declares Cryopreserved Human Embryos May be Partitioned, Auctioned, and Sold
When co-owners of cannot agree as what to do with property, the ordinary remedy is to bring a lawsuit for partition. In partition, the preference is for the property to be subdivided among the co-owners. If the property cannot be equitably divided among the co-owners (such as there being a single family dwelling that takes up the land), then the entire property may be sold at auction and the proceeds divided. This is a process that most people try to avoid because it can be time-intensive for the attorneys billing by the hour.
By statute, real estate is the only property that can be partitioned. Personal property (“chattels”) can also be partitioned. On February 8, 2023, Judge Richard E. Gardiner of Fairfax County Circuit Court issued an opinion that addressed the partition of something unusual: cryopreserved human embryos. This opinion discusses a number of my own interests: property litigation, bioethics, and Virginia history. Property law can “touch and concern” just about any aspect of human relations.
The use of IVF raises numerous ethical questions, such as what to do with “leftover” stored embryos after the couple conceives the number of children they both desire to have together. People are not property, at least not anymore. The law treats stored embryos as property. At some point, the parents must start thinking of their offspring as a person. The way parents relate to their child begins before the time that the law starts treating the offspring as a person. Otherwise, the notion of trying to have (or avoid having) children doesn’t make sense. These issues will continue to present thorny questions as these technologies evolve and human moral standards change. The law plays catch-up.
Honeyhline and Jason Heidemann divorced in 2018. During the marriage, the Heidemanns used in vitro fertilization due to difficulty conceiving. This resulted in three embryos. According to the paperwork, the parties agree to joint ownership of any embryos produced. The Heidemanns used one embryo to conceive one child (a daughter) during the marriage. In the divorce, the Heidemanns signed a property settlement agreement that addressed the embryos, basically deferring their disposition to be resolved by agreement or court order at a later date. The parties agreed to continue to jointly own the embryos and pay for their storage in the meantime. After the divorce, Ms. Heidemann wanted to use the remaining embryos to conceive more children because chemotherapy rendered her infertile. Mr. Heidemann did not agree, viewing this to interfere with his asserted right of “procreational autonomy.” In November 2021, Ms. Heidemann filed a Complaint for Partition of Personal Property. The lawsuit asked the Court to award her both or one of the stored embryos.
Mr. Heidemann opposed the lawsuit with numerous arguments. First, he asserted that the embryos could not be sold because they constitute “human fetal tissue” for purposes of federal statutes. Second, the embryos were not “goods or chattels” that having monetary value and therefore could not be partitioned by statute. Third, under the PSA there could be no use of the embryos without his consent. Fourth, allowing use of the embryos without his consent would violate his 14th Amendment rights. The Court found that none of these arguments warranted short circuit of the lawsuit in Mr. Heidemann’s favor.
Judge Gardiner disagreed that the PSA precluded the action. The PSA contemplated that the embryos be disposed of by agreement or a court order. The plain meaning of the PSA did not give Mr. Heidemann veto power that could prevent a judge from determining the parties property rights in partition.
The Court did not reject Mr. Heidemann’s argument outright that he had a right of personal “reproductive autonomy” under the 14th Amendment that would prevent partition of the embryos. Instead, the Court found that such arguments would have to be considered at a later stage in litigation. I would infer that Mr. Heidemann did not argue that the 14th Amendment requires treating the embryos as something other than property.
Mr. Heidemann argued that the embryos cannot be partitioned pursuant to Va. Code § 8.01-93 because they are not “goods or chattels,” observing that they are “distinct, unique and not fungible” and thus of a character different from parcels of land. Judge Gardiner observed that Mr. Heidemann had already agreed to treat the embryos as properties by signing the PSA.
The Court observed that the “goods or chattels” referenced in the statute is not limited to personal property laying upon or attached to real estate that is also being partitioned. The opinion letter discusses the history of the partition statute. Originally, only real estate could be partitioned. The statute expanded this to include personal property, and for many years it also included people enslaved within the definition of partitionable property. By 1849, enslaved persons were partitionable in kind (divided by individual among the co-owners) or subject to sale (for example, a single person sold and the proceeds divided among the former owners). Before 1819, the law was unsettled as to whether enslaved persons were considered to be property rights appurtenant to the real estate upon which they lived and worked for purposes of partition.
I will pause my summary of the opinion to add a few thoughts of my own: Its interesting that the opinion discusses the question as to whether enslaved persons are the “direct” property of their owners or “indirectly” as tied to the owned land. Serfdom was understood to be something related to landlord-tenant law, whereby the serfs were in a binding “contractual” relation to the land upon which they lived and did agricultural labor. Personal servitude was abolished in the context of the Civil War. Good riddance! Serfdom is compared to “sharecropping,” which also includes conflates notions of employment with ties to the land. All of this is alien to our modern understanding of a contract as a bargained-for meeting of the minds. Yet, the notion of “servitudes” continues in other forms, such as real (predial) servitudes, whereby one parcel of land is yoked to another parcel by a covenant or easement. Being a sharecropper, tenant or owner of servitude-burdened property is not the same as serfdom. Yet, the concepts are not alien to each other. Once land is burdened by obligations to another person’s interest in the same or appurtenant property, the person with an interest in land so burdened cannot retain the real estate interest and walk away from the burden without the other’s permission or adjudication of a legal right. This language of servitudes lives on in easement terminology. There is a “dominant” parcel that enjoys a privilege with respect to a “servient” parcel. After slavery was abolished, in the same time frame in which “Jim Crow” laws developed (including heavy use of “sharecropping” with many blacks, but also whites), use of real servitudes, particularly restrictive covenants, developed to manage subdivisions newly created to house in the suburbs a new middle class created by the industrial revolution. Some of these “servitudes” were expressly discriminatory against African-Americans, others were irksome to everyone. Real servitudes (together with landlord-tenant law and zoning laws) developed to control people through restrictions placed on land use. Real estate, development/construction, and land use law are used to indirectly control the movement and activity of people. The relationship between real and personal property in the context of partition is important, because partition does not “clean” or redefine property (beyond the dilemma of deadlocked common ownership), it merely divides, sells or disposes of a set of rights and duties that already exist. Also consider that in the event that the terms of condominium statutes or recorded instruments do not provide a streamlined framework for disposing of the property in termination, the property in the development goes into a cumbersome, time consuming process of partition.
Getting back to the Judge Gardiner opinion. In 1819, a statute declared that “all Negro and mulatto slaves . . . shall be held, taken, and adjudged to be personal estate.” From his study of the legislative history of the partition statute, with focus on its use with slavery, Judge Gardiner concludes that the present day partition statute, Va. Code § 8.01-93 must be interpreted to include personal property not attached to land, and its use with respect to the same in not limited to situations where the goods or chattels are found on or attached to the land being partitioned. Judge Gardiner did not find that the legal status of human embryos is analogous to slavery, but his opinion stimulates such thoughts.
Judge Gardiner rejected Mr. Heidemann’s argument that frozen embryos cannot be partitioned because they cannot be sold pursuant to federal law. There is a federal statute that says that “human fetal tissue” cannot be sold for consideration such as money. The problem with this argument is that the statute defines “human fetal tissue” as tissue or cells from a dead human embryo or fetus. The embryos fought over in this lawsuit were cryopreserved. Remarkably, dead embryos or fetal tissue have greater legal protection than the living, at least in the Commonwealth of Virginia. Rejecting all of these arguments, the court overruled Mr. Heidemann’s demurrers and permitted his ex-wife’s partition suit to proceed to the next stage. Personally, I find the application of the general laws for partition in the context of human embryos to be problematic, and warranting a legislative fix, because an auction to the highest bidder of embryos seems, in my view, susceptible to corrupting of morals. But, in the absence of any other legal process, this is the only way to handle it. When the parties are deadlocked in their negotiations, the law channels them into an existing system of procedures and remedies.
March 10, 2023 Addendum:
An interesting article about this case was published yesterday, March 9, 2023. The article focuses on an aspect of the opinion that some people found troubling, that Judge Gardiner made use of the legislative history regarding partition of enslaved persons in his attempt to try to interpret the current statute. That article is by Matthew Barakat and is entitled, Judge Uses Slavery Law to Rule Frozen Embryos are Property.” This is worthwhile reading. Barakat quotes Georgetown Professor Susan Crockin saying that, “she’s not aware of any other judge in the U.S. who has concluded that human embryos can be bought and sold. She said the trend, if anything, has been to recognize that embryos have to be treated in a more nuanced way than as mere property.” However, the article does not explain what other courts have held and on what basis. The history of Virginia legislation is replete with slavery references and other horrible policies. I would agree with Professor Crockin that embryos ought not to be treated as property, which leads to the appalling result that they can be auctioned off to the highest bidder. However, it is my impression that, based purely on reading the letter opinion, that Judge Gardiner believes that the governing law of Virginia is woefully inadequate. Laws are words written in code books, case precedents, and the like. The General Assembly really needs to take action. It is the judge’s job to apply the law, and not to engage in exercises of creative writing in order to achieve results that comport with abstract notions. People feel troubled because they should.
March 14, 2023 Addendum:
Note that there currently is partition reform legislation that the General Assembly passed in its 2023 that awaits the governor’s signature. House Bill 1755 does not address the issue of frozen embyros specifically, but it does add language that would likely be litigated in such cases. The bill, among other changes, adds a new subsection B to Va. Code § 8.01-81:
“If the court orders partition in kind, it shall consider: 1. Evidence of the collective duration of ownership or possession of any portion of the property by a party and one or more predecessors in title or predecessors in possession of the property who are or were related to the party; 2. A party’s sentimental attachment to any portion of the property, including any attachment arising because such portion of the property has ancestral or other unique or special value to the party; 3. The lawful use being made of any portion of the property by a party and the degree to which the party would be harmed if the party could not continue the same use of such portion of the property; 4. The degree to which a party has contributed to the physical improvement, maintenance, or upkeep of any portion of the property; and 5. Any other relevant factor.”
Of course, these reforms are woefully inadequate to address the controversies illustrated in the February 2023 Fairfax demurrer ruling. These legislative amendments have “normal” property in mind.
Legal Authority:
Heidemann v. Heidemann, CL-2021-15372, 2023 Va. Cir. Lexis 13 (Fairfax Feb. 8, 2023).
Note that the photograph used for this blog post is a stock image downloaded from Shutterstock and does not show anything specifically referenced in the article.
February 8, 2023
2023 Statutory Amendment Would Stimulate HOAs to Fine Virginia Homeowners Even More
Fines are one of the most unpopular features of Virginia community association law. Despite the well-known tendency for HOAs and condominiums to misuse fine systems, a 2023 statutory amendment would stimulate HOAs to fine Virginia homeowners even more. Yesterday, the House of Delegates approved H.B. 2098 by a vote of 91-7. It is unclear to me what the Virginia Senate will do. In the HOA context, fines are a process for imposing a charge, usually $10.00 per day, for a perceived rule violation. Americans are accustomed to being fined by their government. For example, parking tickets or zoning notices of violation. In such instances, the agency can impose a monetary charge for a violation without first taking the resident to court. Usually the citizen can “appeal” the fine to a review board or official as an intermediary step before a court challenge. In Virginia community associations, the homeowner may be able to “appeal” a decision by the committee to the board of directors, but to go above that they usually have to go to the courts.
HOA fines differ from governmental fines in other ways. Government officials don’t ordinarily have a personal stake in the way a perceived violation is handled. By contrast, the association directors are neighbors with strong personal opinions about the rules and what they see as a problem in the community. Its common for the directors and homeowners to know of each other. It is difficult for a volunteer homeowner to separate their personal interests from their “directorial” duties regarding a perceived violation on a neighbor’s lot. Covenant enforcement is often delegated to a manager and attorney to manage. This can help ease the “interpersonal,” but the managers and attorneys have business interests in the management of covenant enforcement procedures.
2023 Virginia House Bill 2098 would change the statutes to make authorization to fine a “default” power of HOAs and condos, instead of requiring enablement by specific language in the recorded instruments. Also, it would make it easier for the association to impose additional charges for “repeat” rule violations.
I would like to use a hypothetical example to explain why I think this proposed amendment would make the world of HOA fines worse. Imagine a person in a community association who struggles to manage his property because of a physical disability. He decides to temporarily store a few personal items in plastic boxes on his patio. The boxes are visible from the sidewalk if one happens to be peering into the guy’s backyard. Someone complains about the plastic boxes to the manager. The recorded instruments say nothing about outdoor storage boxes. The recorded covenants require committee approval of any outbuildings, additions, swimming pools or structural changes to the house itself. The recorded restrictions forbid accumulation of trash or building materials. The covenants allow the board to adopt additional rules in furtherance of those contained therein. The covenants do not allow for fines, they only talk about going to court for enforcement. Ten years ago, the board voted to approve a resolution that limits items that can be kept on patios and decks to plants, furniture, grills, small appliances or other items expressly approved by the architectural committee. The patio resolution has never been challenged legally.
The manager sends a letter to the homeowner, who doesn’t come to the next meeting because of the mobility problem. The attorney explains to the board that they cannot fine the homeowner, because the existing statutes require the power to impose fines to be enabled in the recorded instruments. Va. Code § 55.1-1819(B) & § 55.1-1959(B). The HOA would have to file a lawsuit to compel compliance. Such efforts would be doubtful because the recorded instruments don’t say anything about regulation of storage boxes on the patio. The language about trash and building materials don’t quite give them this. Va. Code § 55.1-1819(A) & § 55.1-1959(A). The board has an unwritten policy to only sue homeowners as a last resort when they really want to come down hard on somebody. No suit is filed. No extrajudicial fines are imposed.
Suppose we add to the facts that H.B. 2098 is enacted as an amendment to the statutes. The HOA’s attorney sends all of her clients a newsletter announcing that the statutes no longer require the recorded instruments to specifically authorize the association to conduct fines according to Va. Code § 55.1-1819 & § 55.1-1959. With this change, the law is now the opposite: “The board of directors shall also have the authority, unless the declaration provides otherwise, to . . . assess charges against any member for any violation . . .” H.B. 2098. According to this new enactment, silence in the instruments regarding fines means that fines are allowed (instead of meaning that they aren’t allowed). In our hypothetical, the board of directors gets excited, because it seems to provide a work around. No longer would the HOA have to spend its own money pursuing a homeowner in court, with an uncertain outcome. With fines, the HOA can conduct its own hearing, where its agents act as the prosecutors, witnesses and judges of the notices of violation. With the power to conduct extrajudicial fines, the board shifts the burden to challenge onto the homeowner. As a practical effect, this emboldens the associations to be more aggressive in their approach to covenant enforcement, asserting broad, favorable interpretations of their own instruments. One of the problems of the fine statutes is that it stimulates fanciful readings of recorded instruments and adoption of regulations by the boards that go beyond what the covenants reasonably authorize.
H.B. 2098, if adopted, would present a difficulty when it comes to previously created HOAs and condos where the authority to fine was not discussed at all in the recorded instrument. Under current law, the omission of fine authorization language is construed to mean that the drafter-developer intended for the association to not have the power to fine. Given the current language of the statutes, the rules that the courts use to interpret legal texts, and the drafting of such a declaration or bylaw, it would be preposterous to read into the “contract” an understanding that the legislature could later adopt an amendment that would cause the document to switch its meaning to the exact opposite of its intended effect. A contract or deed is normally interpreted to include by implication all relevant law in existence at the time it is made. H.B. 2098, as presently worded, would seem to invite litigation regarding any retroactive effect where the association tries to use it when the declaration or bylaws are silent on the issue of fines or reference such enforcement mechanisms in a manner made confusing or uncertain by statutory changes. Contracts would be cheapened if their intentional silence on an issue is later used as an opening for the legislature to completely reverse the meaning. In a hypothetical lawsuit challenging the retroactive application of H.B. 2098, our homeowner is demonized by others in the community for selfishly attacking the HOA’s volunteer efforts to promote good order in the community. The lawsuit drags on for years, coming down to an issue of how to construe the statutes, covenants, and handbooks.
H.B. 2098, if enacted, would render community associations law “wonky-donkey” regarding fines. Ordinarily the homeowners expectations regarding the subdivision are defined by how the developer physically constructed things, what the initial purchase contracts require, and what the disclosure packet of HOA documents says. After the developer implemented such plans, and the buyers join in by purchases, to then turn that upside down by such legislation turns the tables on the homeowners unfairly. Any changes to the recorded instruments and handbooks ought to conform to the “reasonableness” requirement (already used by the courts), so that communities can make adjustments to the “contract” as a consensus and changing circumstances allow, and not by a legislative trick.
The fine statutes are important for another reason. Once imposed, the fine can be used to pursue a foreclosure against the unit owner, or it can be used to initiate a lawsuit to convert it into a money judgment from which garnishments can issue. The fines are not just irksome pieces of paper, they can be used to harass or dispossess homeowners.
H.B. 2098 also proposes to no longer require the HOA to send out an additional notice for a “repeat” violation of the same rule or covenant in the same 12-month period. I also oppose this. More “due process” is needed, not less. With this wording, associations are going to start imposing fines for things that are not the same as the initial “violation,” the only commonality being the section cited in the rules.
Yesterday, H.B. 2098 was passed by the House of Delegates, by a vote of 91-7. The bill now goes to the Virginia Senate. I don’t see this bill helping anyone other than those people who like fining people or are paid to manage the process. This bill, if enacted, will solidify some of the things that give HOAs a bad name. I don’t think that people want to wake up in early July 2023 and find a Notice of Violation in mailboxes all across Hoaville, Virginia.
I would like to see the General Assembly delete the fine language out of the statutes. No more fines, prove your damages or basis for an injunction. If a HOA wants to tell a homeowner what to do with their own property, they ought to have to stand in line at the courthouse for a hearing date, and then prove their case under the rules of evidence. The practical effect of this would be to stop certain misuses of covenant enforcement from moving forward on doubtful grounds in the first place. This would not prevent the HOA from performing its core function of common area maintenance.
UPDATE: On February 21, 2023, H.B. 2098 was DEFEATED by a vote of 8-32 after Virginia Senate floor debate. Hopefully this bill will not be brought back next year.
January 12, 2023
Are New Rail Stations Good or Bad for Neighboring Condo Unit Owners?
Many people would beam with excitement if someone told them that a new metro station will pop up within a mile of their property. If they have a condominium or cooperative, their home ownership is full of surprises because they are in a business relationship with strangers. Are new rail stations good or bad for neighboring condo unit owners? Decades ago, the Northern Virginia communities of Tysons, Reston, Herndon, Dulles and Ashburn developed around transportation infrastructure that allowed residents to easily commute to Washington, D.C.. Local streets and the Dulles Toll Road connected these homeowners to Metro’s orange line. The lower density in these communities reflected demand for quiet neighborhoods and the lack of immediate rail transport. In time, the region suffered a crush of automobile traffic. Addition of housing congests key roads. Regional leaders teamed together to bring in the silver line. Opening in 2014, Phase 1 extended the metro from Falls Church to Tysons Corner and portions of Reston. Phase 2 extended to Herndon, Dulles Airport and Ashburn. Phase 2 opened in November 2022. The extension of the silver line did more than allow more people to access public transportation closer to their homes. This new infrastructure impacted the property owners whose properties are within walking distance. Such lands became significantly more valuable. The silver line prompted local government to change the way they regulate development. Because of rail extension, more density became possible. Anyone who drives along the Dulles toll road or elsewhere along the sliver line can see construction cranes and large trucks bringing materials.
Construction of Silver Line Rail Stations: A casual observer might conclude that these changes present a financial windfall (or at least a new convenience) to anyone with land located within a mile of any new station. However, reality it is not so simple when you have dozens or hundreds of co-owners. Decades ago, many properties in Tysons, Reston, Herndon, and Ashburn were developed as residential or commercial condominiums. The builders did not plan for the construction of new metro stations where they now appear. Most of the owners who purchased units in these condominium associations did not anticipate how the addition of a metro station would later change their communities. Many of these condominium unit owners rely upon their units as their primary housing or business location. As families and businesses grow, they become more settled in. Humans naturally resist being kicked out to suit the interests of others.
Other people have their own reasons for wanting to embrace the changes. Some unit owners may already be ready to sell. Potential buyers see old buildings cluttering valuable land. Redevelopment may add taller buildings.
This tends to divide condominium associations into factions. Many unit owners want to go using the properties they chose to buy, and do not want to be pushed out. Successful people purchase their homes or locate their businesses for thoughtful reasons. There are specific reasons why a particular condo unit might be ideal for aging in place. If they wanted a temporary arrangement, they would have just signed a lease. When developers eye these pieces of land that happen to have people living or working in them, there are usually some association members who would rather sell the property to a developer now at market rates. Some see no reason to continue to maintain the aging structures as neighboring buildings are torn down and holes are filled with newer, larger buildings. However, there are numerous reasons why a unit owner’s share of the proceeds of a termination sale might be inadequate. For example, specialized health professions require expensive buildouts to make use of generic condominium units. County planners don’t really understand the value of or needs of “light industrial” land uses.
Dramatic Assessment Increases: For silver line condominium unit owners, the construction of the rail stations is not the only complication. In 2022, the General Assembly directed the Department of Professions and Occupational Regulation to establish a Work Group to develop recommended legal reforms for condominiums and HOAs. The legislature did this out of a concern that many communities need major renovations to avoid structural failure or repairs to present building system failure. On November 23, 2022, I posted an article to this blog, “Virginia Structural Integrity and Reserves Work Group.” The work group will probably recommend reforms which will lubricate the process of condominium termination, sales, and deconversion. Also, the Work Group will probably recommend legal reforms that will encourage boards to collect more money and spend that money on capital improvement projects. If fulfillment of such requirements is opposed or unsuccessful, many communities may slide towards condominium termination.
Problem of Inflation: Things are more expensive now. While the Washington, D.C. metro area has a strong real estate market, inflation impacts condominiums more than single family houses. Rising interest rates put downward pressure on sales. Inflation drives up the cost of labor and materials for construction projects. My June 6, 2022 blog post, “Renovation of Condominium Limited Common Elements” discusses how such projects are financed and managed.
Baby Boomers on the Move: The perfect storm has yet another factor. Many baby boomers have already retired or are planning to change their careers. When workers retire or shift their careers into a new phase, their interests in property refocuses. The nature of condominium unit ownership presents particular challenges to retirement age owners, which I discussed in my October 20, 2022, post, “Are Condominium Units Good for Retirement-Age Buyers.”
How Condominium Termination Rules Work: Condominium law provides procedures to bring an end to the condominium, sell the entire property and split the proceeds. This is called condominium termination or deconversion. What many people don’t understand is that if a certain amount of support exists, then the opposing unit owners can be kicked out of their units and given a share of the sale that was not negotiated with their consent. I blogged in more detail about the mechanics of condo termination in a May 14, 2015 post, “You May Be Targeted for Condominium Termination” and on February 6, 2020, “Proposed Virginia Legislation Would Empower Developers to Oppress Rights of Unit Owners in Sale of Terminated Condominium Developments.” The statutes provide few protections to insure that unit owners will obtain fair market value in termination or other considerations of their unique situation. The developer and their friends on the board tend to “drive the bus.” The statutes assume that free-market forces and the democratic governance of the association will protect the unit owners rights. However, the business of a community association is rife with conflicts of interest. Depending upon how the termination is conducted, an individual unit owner may experience a windfall or, in some cases, financial ruin.
The Virginia Condominium Act (Va. Code § 55.1-1937) provides “default” termination procedures. In residential developments, termination requires a 4/5 (80%) agreement among unit owners, or such larger majority as the instruments may specify. If no units are residential, the instruments May specify a majority smaller than 4/5 (80%). Termination is achieved by a written contract that provides for the termination of the condominium association, the sale of the property to the buyer, and the disposition of the proceeds. The real estate industry succeeded in convincing the General Assembly to streamline condominium termination to make it easier to force the sale of the units. Things get complicated when the unit owner has a mortgage that exceeds the value of the proceeds for that unit or a long-term lease.
As interest in deconversion grows, the proponents may try to use nondisclosure agreements to control the flow of information. The proponents of termination may seek to amend the declaration or bylaws to facilitate termination. Officers or directors favoring termination sale may neglect repairs or allow reserves to deplete, or they may aggressively pursue renovations because that increases the purchase value of the property. Typically interested purchasers will buy at least one unit so that they can participate in the meetings of the association as a member, or they will work closely with allied members. This can disrupt ordinary life and interfere with a family’s ability to make plans.
What can unit owners whose condominiums are located near a new rail station do to protect their interests? There are many options, including:
- Selling one’s unit before change accelerates.
- Communicating with one’s state or county elected officials about pending or anticipated legislation or ordinances.
- Litigation with the condominium association if they breach the statutes or bylaws.
- Developing alliances with other unit owners to elect friendly directors, put pressure on the board, or bring certain petitions for vote by the membership at a special meeting.
- Stay informed about things that are happening in the community.
Are new rail stations good or bad for neighboring condo unit owners? There will be loud, poorly informed voices in the community that will make themselves heard. If a condominium association is going through a major dispute or transition related to capital improvements, special assessments or a termination, such matters are usually too complicated to handle on one’s own, because there are multiple technical issues. On the legal side, an attorney is necessary to review the declaration, bylaws, amendments and the statutes to determine if what the proponents or an amendment or termination agreement is legal. Cowherd PLC leverages experience in these matters so that the unit owners can protect their own interests in an ecosystem where large groups of people and money can threaten their plans and peace of mind.
December 4, 2022
Activists Use Proxies to Change Their Community Associations
Proxies are the currency of power in HOA and condominium governance. Homeowners first discover such forms enclosed with meeting notices. Proxies allow the member to cast an instructed vote on an issue or chose among candidates. Proxies can also be used to delegate one’s vote to another person participating in the meeting. Sometimes proxies are used merely to establish a quorum. Virginia statutory law imposes rules for proxies. Most HOA or condominium instruments include additional rules. Owners whose associations are incorporated can also enter into a “voting agreement” with other mutually interested members to achieve common objectives. Incumbent leaders like to use proxies as means of maintaining continuity. The board enjoys an advantage in soliciting proxies because the management company works for them. Members who may not agree with the board majority can use proxies in elections or other business. Allied homeowners can explore achieving their objectives through elections and governance as an alternative to litigation. How do activists use proxies to change their community associations for the better? The validity of proxies can make or break an important vote. The board majority and opposition groups may compete for proxies amongst the same pool of undecided members. Understanding proxies is essential to “community organizing” in community associations. Proxies may be used in conjunction with efforts to override board action through a meeting of the members.
A proxy is not to be confused with a mail in ballot, although they may function in a similar way. A proxy is an instrument that designates a particular person, be it another member, a director or some other person the “representative” of the homeowner for purposes of an item of business or meeting. A “general” proxy allows the holder to do all the member could do at the meeting. General proxies are not always wise. The interests of the owner and the delegate are not necessarily aligned. With an instructed proxy, the designee is told how to vote. A proxy is not the same thing as an opinion survey. The latter solicits feedback and does not bind the decisionmakers. A proxyholder is an agent of the homeowner granting the proxy. Like any agent, the proxyholder is a fiduciary, for purposes of the scope of the agency granted.
The Property Owners Association Act, Nonstock Corporation Act, and Condominium Act allow for use of proxies in community association matters, unless the instruments for that community provide otherwise. Adult children who take care of their elderly parents may be familiar with the Uniform Power of Attorney Act. Unless the community’s instruments provide otherwise, homeowners are not required to sign a formal power of attorney instrument to designate a proxy. A proxy (or other delegation to exercise voting rights) ordinarily does not need to comply with the UPOAA. That said, POAs are one way of delegating voting rights.
Use of proxies is more regimented in condos than in HOAs. The Virginia Condominium Act states that,
The votes appertaining to any unit may be cast pursuant to a proxy duly executed by or on behalf of the unit owner, or, in cases where the unit owner is more than one person, by or on behalf of all such unit owners. No such proxy shall be revocable except by actual notice to the person presiding over the meeting, by the unit owner or by any of such persons, that it be revoked. Except to the extent otherwise provided in the condominium instruments, any proxy is void if it is not dated, or if it purports to be revocable without the required notice. Any proxy shall be void if not signed by or on behalf of the unit owner. If the unit owner is more than one person, any such unit owner may object to the proxy at or prior to the meeting, whereupon the proxy shall be deemed revoked. Any proxy shall terminate after the first meeting held on or after the date of that proxy or any recess or adjournment of that meeting. The proxy shall include a brief explanation of the effect of leaving the proxy uninstructed. Va. Code § 55.1-1953(D).
The issue of revocability is important. Unit owners sometimes submit proxies and later change their minds before a meeting. In some associations, all owners are encouraged to submit a proxy of some kind, even if they plan on attending the meeting. This practice helps to ensure that business gets done.
Attempts to “pool” voting authority in a private entity to certain members acting as representatives of a “voting block” can be confusing. In an October 14, 2022 letter opinion, Fairfax Judge David Oblon considered whether members of an LLC who granted their voting rights to another member through an agreement, which is silent as to revocability, can unilaterally revoke their assignments. Voting agreements are also called “voting trusts” or “pooling agreements.” With stock corporations, a proxy is irrevocable only if coupled with an interest, made part of a voting agreement, or given as security. Judge Oblon discussed the legal principle that a “naked agency” is freely revocable, but if the agency is “coupled with an interest,” it is irrevocable. This distinguishes situations where the agent acts for the principal from those where someone gets the power to act as the principal. Judge Oblon distinguished between the shareholder agreement with a proxy. A proxy votes for someone. A voting agreement vested the assignee with the assignors’ voting interests.
The authority to vote in an organization is a feature of the membership interest. Whether a membership interest is freely assignable depends upon what kind of entity it is and the terms of its governing instruments (such as covenants or bylaws). LLC statutes allow voting interests to be severed from economic rights in the company. The nonstock corporation act allows two or more members to make an enforceable, written (or electronic) agreement regarding the manner in which they will vote. By contrast, membership interest in an unincorporated association is ordinarily not transferrable without the consent of the association itself (or as provided in its governing instruments). In a community association, be it incorporated or not, membership in the association is appurtenant to title to the home.
HOA or condominium association meetings in Virginia are governed by open meeting statutes that generally require all business of the association be conducted in properly noticed meetings that members can attend, record and speak at. When communities handle elections by mail in ballot or proxies, the actual election meeting may be sparsely attended, but it is still a meeting. If a vote is contested the homeowners ought to ask to review the votes and proxies cast to determine if there are any irregularity.
The use or exclusion of proxies plays a powerful role in the conduct of community association member meetings. It can be difficult to navigate a proxy contest without the assistance of someone familiar with the unique legal and practical features of HOA voting. Activists use proxies to change their community associations as a feature of an overall strategy of engagement and teamwork. In incorporated community associations, the ability to make a voting agreement allows groups of homeowners to pool their voting power in ways that is different from a proxy. The voting agreement is an underutilized means of achieving solidarity among similarly interested homeowners that is less cumbersome that soliciting proxies every time a vote is scheduled to be taken. A voting agreement is something that can be made as an electronic document.
Selected Legal Authority:
Va. Code § 13.1-847. NSCA – Proxies.
Va. Code § 13.1-852.2. NSCA – Voting agreements.
Va. Code § 55.1-1815. POAA – Access to association records; association meetings; notice.
Va. Code § 55.1-1823. POAA Designation of authorized representative.
Va. Code § 55.1-1953. Condo. Act – Meetings . . . voting by unit owners; proxies.
Va. Code § 55.1-1962. Condo Act- Designation of authorized representative.
Va. Code § 64.2-1601. Applicability of the UPOAA
Roscigno v. Deville, 28 Va. Cir. 96 (Fairfax Co. 1992)
AV Automotive, LLC v. Bavely, CL-2019-2804, Fairfax Co. Cir. Ct., Oct. 14, 2022 Letter Op.
7 Corpus Juris Secundum, Associations § 40
Wrightington, Law of Unincorporated Assn’s and Business Trusts, § 55
November 23, 2022
Virginia Structural Integrity and Reserves Work Group
On June 24, 2021, high-rise condominium Champlain Towers South in the Surfside suburb of Miami, Florida partially collapsed, killing 98 people and injuring eleven others. One factor identified by investigators was the failure of a section of reinforced concrete damaged by water infiltration. This was truly a horrific tragedy.
Following Surfside, condominium communities and state governments across the country gave added consideration to avoiding similar disasters elsewhere. Many condominiums did not wait for government to act first. The problem of aging, deteriorating buildings and inadequate reserves is nothing new. However, Surfside was a sea-change moment in the community association world. There are certainly lessons to learn from what happened on June 24, 2021. The question is what ought to be done. Most proposals would require unit owners to pay significantly higher assessments.
Virginia initiated a process to carefully identify what, if any, legislative reforms are warranted. In April 2022, the general assembly enacted legislation sponsored by Senator Scott Surovell. Senator Surovell’ s district encompasses portions of Virginia’s Washington, D.C. suburbs. Mr. Surovell is also a well-regarded trial attorney. Senate Bill 740 required the Department of Professional and Occupational Recreation to establish the Virginia Structural Integrity and Reserves Work Group to study:
- How common interest communities are initially developed to self-finance.
- Governing documents.
- Reserve study requirements and disclosure of the same to purchasers.
- Budget requirements.
- Board authority to budget reserves, spend money, make assessments and borrow.
- Liability of associations and boards.
- Building inspections by localities.
- Insurance coverage and inspections.
- Education of directors and members of communities.
- Judicial remedies, including those involving assessments or funding.
- Self-management and professional management.
The Virginia Structural Integrity and Reserves Work Group is supposed to report to the legislature by April 1, 2023. This work group was formed earlier this year. It is chaired by Lucia Anna “Pia” Trigiani, an Alexandria HOA attorney. The Work Group includes people who are knowledgeable about HOA matters. Many are involved in selling services to common interest communities. I am not a member of the Work Group, not affiliated with it and do not speak for it in any way. Information about the Virginia Structural Integrity and Reserves Work Group is publicly available through the DPOR’s website and “Townhall” email notifications. The activities of the Work Group are relatively low-profile, despite the fact that, according to trade industry data, over 2,000,000 Virginians live in approximately 9,000 community associations. The large packet of documentation accessible through DPOR does not give the reader a sense of what the Work Group ‘s views and recommendations might be.
The Work Group works in conjunction with DPOR, O.D.U.’s Dragas Center for Economic Analysis and Policy, G.M.U.’s Center for Regional Analysis, and Virginia Tech’s Center for Housing Research, and the Community Association Institute. CAI is a trade association of HOA managers, attorneys, directors, and vendors that lobbies congress and state legislators across the country to strengthen board powers.
Mr. Surovell observed that the risk that something like the Surfside tragedy might happen in Virginia is unknown, because of lack of public data. Surovell observed that associations are failing to raise dues to maintain reserves, there is a lack of transparency, localities are not involved in inspections, professional management is lacking, and there is “zero accountability for boards that fail to honor their fiduciary responsibilities to other property owners.” Senator Surovell calls for, (a) “enhanced insurance products,” (b) requiring directors to follow recommendations of reserve studies and inspections to enjoy legal immunity, (c) transparency regarding underfunded reserves, and (d) increased regulation of community managers.
I follow what the Virginia Structural Integrity and Reserves Work Group is doing because I advise individual HOA lot owners and condominium unit owners. Any reforms this Work Group may recommend will likely have an impact on owners. Anyone who owns a home in a HOA or condominium in Virginia ought to consider what the Work Group may recommend. In early December, an academic institute partnering with the Work Group will send out written surveys to all state-registered condominium and HOA boards across Virginia to solicit input from the public. I hope that any readers who has an opportunity to submit such a survey will take it seriously. I am not certain what weight or interpretation the Work Group will ascribe to any results. In February and March, 2023, the Work Group will determine what their focus and legislative recommendations will be. By the time a bill is introduced in the 2024 general assembly, it will be unlikely that the Virginia Structural Integrity and Reserves Work Group will go back to and rehash its work based on citizen input to the legislators. It’s possible that some members of the Work Group already have an idea of what reforms they will recommend.
On November 16, 2022, I attended their meeting in Arlington, Virginia as an observing member of the public. What is reported here ought not to be taken verbatim as the opinions of DPOR, the Work Group, any of its members, or myself. I’m trying to summarize the issues so that my readers can have a basic understanding of what is being deliberated.
The Work Group discussed use of reserve studies. Virginia condominiums are supposed to conduct reserve studies every five years. Reserve studies identify the remaining useful life of the components of the condominium and calculate an estimate to renovate or repair the component towards the end. Ideally, reserve studies are conducted by professionals. The board is supposed to use the reserve study in its budget process, so that a component of the annual assessment includes an appropriate amount to fund the reserves needed for major projects. Boards tend to succumb to pressure to keep assessments from increasing dramatically. In so doing, they ignore reserve studies or other recommendations that would require major increases. This approach underfunds reserves. Later when expensive deferred maintenance projects are overdue, there is insufficient funds. In such situations, the board is left to evaluate a variety of unpleasant alternatives, such as a major additional assessment (which many may be unable to afford), borrowing money, selling off a portion of the common areas, losing insurance, or termination of the condominium. To complicate matters, there are differently constructed communities and buildings that fall under the heading of “common interest communities.” This ranges from huge subdivisions of single-family homes to small condominiums with only two units, to little HOAs with only a short driveway to take care of, to high rise multifamily buildings. One challenge recognized by members of the Work Group is that given this wide variety, it’s difficult to adopt a one-size-fits-all legal reform. Any changes to require boards to take reserve studies seriously is going to lead to dramatic increase in assessments.
There was a presentation about Common Interest Community Insurance. This topic can be very technical, and I am not going to try to outline all of the issues here. There were discussions about whether insurance companies ought to use inspections to help associations identify maintenance issues that could result in future claims, and whether premium adjustments ought to be associated with such inspections. The Work Group discussed how many HOA directors are unaware of what insurance may be required or practically necessary. Some favor legislative changes to require boards to diligently conduct risk management assessments in the process of insurance renewals. Some governing instruments have detailed insurance requirements, which were put into the documents to address concerns by lenders, and not consumer demand. It would not surprise me if the Work Group were to recommend that the statutes require or strongly encourage purchase of more insurance. Robust insurance coverage is important, but like anything else, this will lead to higher assessments.
The Work Group discussed legislative action to make it easier for boards to use loans to finance capital renovation projects. The POAA and Condominium Act do not specifically authorize boards to borrow money. The statutes contemplate that project financing would come from assessment income. I would anticipate that the borrowing issue would be seriously considered by this Work Group as something that could be facilitated by statutory amendment.
The Virginia Structural Integrity and Reserves Work Group discussed condominium terminations. I previously wrote about condominium terminations, the last time that the General Assembly amended the laws. Condominiums consider termination for a variety of reasons. One reason is that the cost of renovating the condominium property is beyond what the unit owners want or are able to handle, and there is a developer who wants the land for redevelopment. Condominium unit owners are unaware of the possibility of future termination when they buy. Many condominium unit owners on fixed or limited incomes have few alternatives to own their own homes. Loss of a condominium unit with compensation of only a fraction of the investment cost can be a catastrophic loss for the owner. Unit owners are inadequately prepared for such a turn of events.
There was a discussion about provisions in the Condominium Act that pertain to additional assessments. If the board determines that the existing funds are inadequate to pay for necessary renovations, they can vote to impose an additional assessment on all of the unit owners, without waiting for the next annual budget. These additional assessments can be lump sum or installment payments. There was discussion about removing language from the condo statute that allows unit owners to call a special meeting to vote to reduce or rescind the additional assessment. Some people think that this recission option presents a moral hazard, whereby a majority of unit owners motivated by financial concerns can prevent essential renovations from being funded. According to this view, directors ought to be required to fulfill fiduciary duties to raise money through assessments and spend that money, and the unit owners at large should not interfere with the decisions being made about the who, what, when, where why and how much money of assessing and spending. Such a change will mean that the unit owners will have less say in such situations. A fundamental question is, “Who gets to participate in the decisions of what assessments are imposed and what projects are pursued? A board can dramatically raise assessments, even to the point of forcing out several owners, and identify a long list of projects, and nonetheless mismanage the whole thing, to the harm of the unit owners and the community’s future. A board can be ambitious while failing to be wise. If the balance of power shifts further away from the unit owners and onto a board increasingly constrained by statutory obligations, not only is it no longer much of a “mini-democracy,” its not going to be an environment where private property rights will be cherished. Condos become more like a speculative group of financial investments.
Even without any legislative reforms, community associations are already facing budget crises driven by inflation and aging buildings. I recently posted an article to this blog about the risks and challenges of using condominium units as retirement homes. The reforms being discussed may save some developments from a tragedy, and that is a good thing. However, whatever the Virginia Structural Integrity and Reserves Work Group proposes, it will most likely put strong upward pressure on community association budgets, make it more difficult for homeowners to assert certain kinds of challenges, facilitate aggressive collection mechanisms such as liens and foreclosures, and probably drive many communities into termination. These changes will push many people on reduced or limited incomes, particularly retired people and struggling families out of the communities due to financial hardship, replacing them with other owners, many of whom will be investors who will rent out the units, driving down owner occupancy and owner engagement with the board and committees.
Does this mean that all hope is lost, and that homeowners should give up on realizing their dreams of making a home in a community association their long-term future? No. Selling and moving, when a viable option, is often less uncertain than staying and having to spend large sums on assessments (or legal fees). But not always. Many adults’ despairs when they feel that they have little control over decisions made by people around them that impact them directly. Most people want a sense of control when it comes to their own home, in both the investment and daily living aspects.
If these communities function as social contracts of self-government, at the end of the day they will have to solve their own problems. Certainly, the state or local governments may be able to help. The physical characteristics of construction, governing instruments and people in each common interest community are unique, such that none of the 9,000 statewide are the same. I think that the Virginia Structural Integrity and Reserves Work Group understands that the same therapeutic regimen cannot be imposed on all of them. What is needed is a system of methods through which the leaders of approximately 9,000 can formulate customized plans to safeguard their properties in a way that considers both public safety, health and the economic shock effect of a large additional assessment. This is a policymaking process that everyone ought to participate in, on both a state and community level.
Disclaimer: The author of this blog post is NOT a member, affiliate or spokesman of the Structural Integrity and Reserves Work Group.
The building depicted in the photo associated with this blog post does not have any structural problems known to the author of this blog. The photo was chosen at random.
