34th Annual CCAL Community Association Law Conference

My associate, Sarah Orme and I have spent the last couple of days at the 34th Annual CCAL Community Association Law Conference, attending a number of informative sessions on community association law, including:

  • The always informative and amusing case law update (community associations present amusing stories, and Wil Washington and George Nowack always make them even more amusing;
  • A keynote speech on influencing people, by New York Times bestseller Joseph Grenny;
  • A Fair Debt Collections Practices Act update;
  • Rogue Board Members;
  • Ethical Issues in Representation of Community Associations;
  • Transparency in Community Associations;
  • Cloud Comuting to Increase Firm Efficiency;
  • The Essentials of Community Association Contracts;
  • Legal and Insurance Ramifications of Water Infiltration and Other Damages;
  • Survey and Analysis of Standard of Care Statutes Across America;
  • Law Firm Management; and
  • iPad Applications for the Community Association Management/ Practitioner

As time permits over the next days and weeks, we’ll summarize what we learned.

CCAL Law Seminar in January

I received a copy of the 2012 College of Community Association Lawyers Law Seminar Brochure; the seminar will be held from January 26-28, in Palm Springs, California. I’ll be there, as I have been for every one of the last nine years, and once again, I’ll be presenting. I don’t have an assigned topic; I’ve been asked to join several other distinguished lawyers on the Panel of Pundits, and we’ll be answering questions from, and posing questions to, the audience.
Other topics will include the always-popular case law update; several sessions on insurance and mortgage trends and issues; sessions on governance, fair housing, and construction defects.

While the majority of attendees have historically been attorneys, recent years have seen an increased attendance from managers, reserve professionals and even board members. An insurance masters program runs concurrently with the conference, so the insurance and risk management fields are also well represented.

Links to 2011 Legislation, Service Providers

Here, for the attendees of the seminar who requested access to the bills discussed at today’s seminar, are links to the bills:

Senate Bill 167 — the major bill, referenced as “UCIOA lite,” which significantly amends association governance, collections and insurance.

House Bill 104 — requiring all Utah community associations to register as a prerequisite to lien-based assessment collections.

House Bill 175 — dealing with record keeping and disclosure requirements

Senate Bill 89 — modifies associations’ obligations respecting reserve accounts

Senate Bill 117 — modifies the voting requirements for community associations that want to amend their declarations.

And here, as requested, is a link to the Community Association Institute’s service provider directory.  This list will lead you to members of the Community Associations Institute, which indicates commitment to that professional trade association; you may also wish to find providers that have received professional designations from CAI.  This database allows you to locate community managers who have earned their Certified Manager of Community Associations (CMCA) certification through NBC-CAM; Association Management Specialist (AMS), Large-Scale Manager (LSM), and Professional Community Association Manager (PCAM), through CAI. Also listed are professionals who have earned the Reserve Specialist (RS) and Community Insurance and Risk Management Specialist (CIRMS) designations, members of the College of Community Association Lawyers (CCAL), and companies that have earned the Accredited Association Management Company (AAMC) designation.

CCAL Law Conference — Financing Availability

Over the past several years, many changes have taken place in real estate financing; one of the less publicized areas of change deals with the availability of financing for community associations.  Lenders and underwriters are changing the way they review and approve those associations that can get federal mortgages.
The panelists for today’s town hall meeting on mortgage financing eligibility include DeLynn Conley, Senior Risk Manager, Project Standards, Fannie Mae; Loura K. Sanchez, Esq., CCAL, Stephen M. Marcus, Esq., CCAL; and George E. Nowack, Esq., CCAL.
FHA Loans
FHA loans are now 30% of the market.  On February 1, spot loans will no longer exist.  Previously, questionnaires would be distributed, and largely ignored.   However, starting on February 1, associations will need to be approved, and those approvals will be expensive to obtain.
There are 3 mortgagee letters that have been issued.  Mortgagee letter 46b provides two methods for approval; currently, all applications are being sought through the FHA.
There are many documentary requirements on applying for certification.  An attorney’s opinion is not required by FHA, but is left to the lender or developer.  The developer or lender may, in turn require a letter.  That opinion will require, in theory, that an association complies with “all applicable laws and regulations…”
Rights of first refusal will be allowed, if not discriminatory.
FHA may have an advantage with respect to pre-sale requirements; in connection with FHA, it will be at 30% through the end of 2010.
FHA used to limit its involvement in a project to 10%; that will be increased to 50% through 2010.  Thereafter, it will decrease to 30%.
FHA appears to have removed legal document requirements, other than a transition limitation.
FHA will be reviewing budgets, and an inclusion of deductible funding for insurance deductibles.
FMAC will follow FNMA and FMAC requirements; FNMA will require 10% reserve funding and deductible coverages for insurance.
Insurance Requirements
FNMA requirements now require insurance to cover 100% replacement cost, including replacement of the Units.  This can be a guaranteed replacement cost policy, or a policy with a replacement cost policy with an agreed value endorsement to cover any coinsurance gap.
Under the new rules, a borrower becomes involved in connection with betterments and improvements.  If the association policy doesn’t cover betterments and improvements, there will be a gap.
Bare Walls – the association’s policy will cover only replacement of the drywall or plaster, and none of the fixtures or improvements.
Single Entity – the most typical coverage, according to Nowack.
All-In  — the association’s policy will cover and replace all contents of the unit, including the improvements and betterments.
If the association does not cover with all-in coverage, the owner must obtain a “walls in” policy.  (Which would be a standard HO-6 policy.)  The policy must cover, at a minimum, 20% of the appraised value of the Unit.  A major problem with this, of course, is that the value of a Unit may well include intangibles such as a view.
Another new insurance requirement is fidelity coverage; the association needs to have a minimum of three months of aggregate assessments, and an amount equal to all of the association’s reserves.
What Next?
Steven Marcus is suggesting that associations be proactive prior to February 1 to obtain certifications; Project Approvals out of Philadelphia is one possible source.
Associations involved in litigation, and associations with special assessments in place, will be reviewed on a case-by-case basis.

CCAL Law Conference — The Unauthorized Practice of Law

Yesterday afternoon, I attended a session on the unauthorized practice of law in community associations, with an emphasis on managers’ conduct.  The hypotheticals were fairly predictable; sales contracts by realtors, interpretation of governing documents and the biggie – managers preparing and filing liens.  Richard Ekimoto pointed out that the unauthorized practice of law constitutes a civil and criminal offense in all 50 states.
Now, the focus has shifted to the aiding and abetting of the unauthorized practice of law – the first question, does an attorney aid and abet by preparing a “standard form” for managers’ use?  This isn’t an issue for me, in light of my declination of representation of management companies, but I have no doubt that my forms are being used as “forms” (and modified) by managers and associations alike.
Richard Ekimoto is telling about having been informed that a management company that he once worked with who admitted to having had a binder full of opinion letters from his firm and others, for review and use by managers within the office.   Needless to say, there are some real problems with that, the least of which is the obvious breach of the attorney/client privilege associated with that conduct.
The audience is suggesting there’s a trend for managers to get more aggressive in their marketing of legal services.  An Arizona manager who apparently asked a question at last year’s seminar is posting materials suggesting that he “spoke at the College of Community Association Lawyer’s seminar.”
Now there’s a backlash from managers who assert that they’re constantly put into an untenable position of being asked to answer legal questions, but told not to call counsel for the answers.  Fortunately, the moderator brought that discussion to a halt before you (and others) heard about it (and the ensuing brawl) on the evening news…
A couple of other points quickly presented as the seminar draws to a close:
· The presence of counsel at a meeting will, if appropriately handled, allow for the protection of candid discussions under the cloak of the attorney-client privilege.
· An association board that relies upon the advice of an appropriate professional will be protected by the business judgment rule, regardless of the wisdom or advisability of the ultimate decision.  The business judgment rule focuses on the procedure associated with decision making rather than the substance of the decision.

Law Conference — The Panel of Pundits

This afternoon’s session is the opportunity for an interactive session, with five practitioners fielding and responding to questions from the audience, and audience members jumping in.  Questions have been submitted in advance, and can be submitted from the floor.
  • · Jim Strichartz, from Washington, says that his firm has 75 active foreclosures pending against lenders, with their goal being to get title to the property, and collect rent through a court-appointed receiver.  Other associations are seeking to remove bank-owned units from the association’s blanket insurance policies, so as to force the lenders to obtain (and pay for) their own insurance.  Obviously, that decision creates some significant risk, particularly where the uninsured units are integrated with other units.
  • Several attorneys in the audience have obtained loans for their client associations through the Small Business Administration to cover uninsured casualty losses arising from earthquakes in California and floods in Georgia.  There are some interesting issues as to how (or if) those loans are being secured.
  • The firm of Hindman Sanchez, in Colorado, offers a monthly “foreclosure hotline” to which homeowners can call in their foreclosure questions.  Loura Sancez reports that they’re not getting many calls, and the services would otherwise be free to their flat-fee clients, but she thinks it’s good marketing…
  • Much of the discussion has now moved to how to deal with the confusing collection issues that are arising daily in today’s economy.  Lots of firms report that clients are moving based upon dissatisfaction with their attorneys’ collection success rates based upon historical expectations.
  • David Swedelson is concerned about his associations that are deferring maintenance and repairs on their associations.  He was watching the news and saw an interview with a client board member, who was explaining that they couldn’t afford to repair the crater.  Needless to say, he called his client the next day to tell him to advise that they fix it immediately.  Some things cannot be deferred.
  • George Nowack  and the members of  his firm are adding language to their declarations specifically providing that apathetic unit owners who don’t respond to several overtures for a vote will be deemed to support “whatever the association wants.”
  • Several panelists and audience members are seeing their clients get unintentionally immersed into collection agency contracts that take not only past due, but also future assessments.   And no one on the panel or in the audience believes that credit reporting is of assistance.
  • George Nowack reports that many of his firm’s associations are offering amnesty or partial amnesty on getting something.  These decisions, made on a case-by-case basis can be warranted by the business judgment rule.  Furthermore, associations have some flexibility in connection with late fees and interest.