Author: Bobby Nails

Anyone who’s lived in or worked with a community association knows that the end of the calendar year usually brings a new board. The annual meeting is almost always the setting for a vote on new directors. This vote typically takes place just before the winter holidays set in with the new board taking the reins of authority sometime in the New Year. Because of the holidays, the moment of transition of authority from the old board to the new board is rarely an issue, as no one is eager to start work before the holidays are over. However, in certain instances, knowing the exact moment that transition occurs can be critical since only a legally seated board can make decisions on behalf of its association. This past year saw a board with two weighty decisions pending as the annual meeting approached. First, a decision was needed regarding an ongoing covenant violation that involved the operation of a business on common property. Second, an association loan was needed to cover the cost of a massive maintenance project to fix a water intrusion issue. The association’s annual meeting took place in early December and decisions on both issues needed to be made before the end of the year. Further complicating matters, both issues were hot topics in the community and several new directors had been elected at the annual meeting because of their vocal opposition to the current board’s position on those same two issues. The question presented to me: when does the new board of directors gain authority to make decisions on those two issues? Of course the first place to look (as is almost always the case) is the governing documents for an association. Generally, the provisions regarding election of directors can be found in the bylaws (although not always!). Sometimes the answer to the question is clear: the new board takes control immediately after the election or on the first day of the new calendar year. In this particular instance the language was unclear – the relevant provision only providing that the board would be elected at an annual meeting and that each director would serve for a year with no clarification as to when the term actually began. Nor was Georgia law much help: there appears to be no relevant case law and the Georgia Nonprofit Corporation Code specifies a time frame for when the first board of directors for a nonprofit corporation begins to serve. The beginning of a term for successor directors following an election is not contemplated. See O.C.G.A. § 14-3-805. In the situation described above, the property manager and 2015 board said that the  practice of the association had been to turn over authority at the first of the calendar year. Since the governing documents and Georgia law provided no further direction, I advised them to continue the practice of having the new board take power on January 1, 2016. Since the term for a director was clearly one year, if the 2015 board had not taken power until January 1, 2015 then  their term would not be up until December 31, 2015 regardless of when the new board’s election took place. While this appears to be an untested issue in Georgia, in this instance that approach was consistent with the law in place regarding a director’s term of office. Luckily, in the association I describe above, the old and new board channeled the light side of the force to amicably settle the issues and ended up agreeing on how to handle both the violation enforcement and association loan. In coming to an agreement, they avoided the whole issue of legal authority. However, if either board had given in to the dark side and not agreed on a course of action the situation could have devolved into a board v. board lawsuit that would have been expensive and destructive to the morale of the community. If your association’s governing documents do not specify when a newly elected board actually takes power, it is a good idea to amend the documents or create a clarifying policy before the transition date becomes an issue and the association finds itself with a costly mess on its hands.

Just as you can’t judge a book by a cover, you can’t judge a community by the way it looks on the outside. If you are looking at the exteriors in a development and you don’t know whether it is a townhome or a condominium community, don’t worry, you are not alone!! From the exterior, condominium and townhome communities can look identical. Even developers sometimes use the words “condominium” and “townhomes” interchangeably, as do real estate agents, without realizing the legal implications, thereby creating more confusion among homeowners. Consider this article a brief tutorial to help you learn and understand more about the legal differences between condominiums and townhomes.

Multi-story condominium units that are connected to another unit by a wall shared with an adjoining condominium unit may look exactly like a townhome from the outside, but the ownership rights with respect to both the interior of each unit and the property outside of each unit are extremely different. Typically, in a condominium, the unit owner buys the interior space of a unit beginning at the studs in the wall and he or she owns the interior of the unit, including the dry wall, windows, doors and air conditioning unit. However, the exterior of the building, the roof, any landscaping outside the building and any pipes or wires that serve more than one unit are owned by all of the condominium owners as tenants-in-common. What many people do not realize is that in a condominium form of ownership the condominium association does not actually own any property. Despite this lack of ownership, the condominium association almost always maintains the roof and exterior building surfaces of each unit and all amenities.

The fact that the condominium association does not own any property can come in particularly helpful during tax season. As April 15 has thankfully come and gone, many of you may have looked at your property tax bills and noticed that the tax bill for your condominium unit contained charges for the unit as well as an additional charge for other improved property. Since the association does not own any property in a condominium, it does not receive a separate tax bill for the property located outside of each unit. This property is owned by all unit owners equally and consequently, each unit owner is assessed his or her fair share of this property which in turn is reflected in each unit owner’s tax bill.

In Georgia, condominiums are governed by the Georgia Condominium Act, which places numerous requirements on developers when they are constructing condominium projects. For those of you who live in a condominium and would like to learn more about this type of ownership, you might find it helpful to review this legislation. It definitely will not be the most exciting work that you have ever read, but it may answer some questions about the contents of the declaration of condominium governing your community.

Townhomes, on the other hand, are owned in fee simple by the unit owner. Even though townhomes are also connected to another unit by a party wall, the homeowner typically owns the dirt below and the air above the unit and perhaps a bit of the property in front or behind the unit as well. Another key difference is that the townhome or homeowners association owns the common property and the amenities. The association’s maintenance obligation with regard to the townhomes themselves is determined by the developer at the time of the drafting of the declaration and consequently, the association’s maintenance responsibility may vary greatly between communities. In some townhome projects the association maintains the exterior of the unit, similar to a condominium, regardless of ownership by the unit owner and in other communities the owners are responsible for maintaining the roof and/or the exterior building surfaces. The declaration of protective covenants applicable to your community should delineate what your association is obligated to maintain. Keep in mind that the more your association is responsible for maintainaining, the higher your annual or general assessments will likely be. On the other hand, having the association maintain the exteriors will ensure that maintenance is performed uniformly and hopefully in a timely manner!

Since the townhome association usually owns the common property in the community, it generally has the right to convey this property to other business entities and can make rules and regulations pertaining to the use of the common property. As you know now, a condominium association does not own any property in the condominium community and therefore can not convey the common elements without the consent of every unit owner in the condominium. In this way, owners in a condominium essentially have more rights with respect to the property outside of their units than owners in a townhome community.

After reading this brief article you may be thinking that you still can’t look at a community and determine whether the homes are condominium units or a townhomes. But now you know how to find out! It is only after sifting through all of the relevant association documents that govern the community that you will truly be able to determine whether you are looking at a condominium or townhome unit and what the differences are between the two.

When do Declarant Rights Terminate?

Eight years ago, Mr. and Mrs. Smith moved into what was planned to be an upscale community containing one hundred single family detached homes with a mandatory membership homeowners association subject to a declaration of restrictive covenants. Since then, the original declarant defaulted on its loan and the unsold property all went back to the bank. The lender, however, did not acquire the rights of the declarant and the declarant rights remained with the defaulting borrower. The community currently contains forty-seven homes. To protect their property values, the homeowners association and the existing homeowners want to amend the declaration to impose a leasing restriction in the community, but the declaration requires that any amendments thereto require the consent of the declarant. The declarant ceased all business activity in the community three years ago and the declaration does not contain any language indicating when the rights of the declarant expire. Unfortunately, in the current real estate market, the above scenario is all too common, leaving many associations to wonder when the rights of the declarant to take, consent to or approve actions under their restrictive covenants expire and whether action taken without the consent of the declarant, if required, is enforceable.

In condominium communities the rights of the declarant expire by virtue of the express language in the Georgia Condominium Act (O.C.G.A. 44-3-70, et seq.). In single family detached and townhome communities sometimes the answer to this question is straightforward as the declaration contains explicit language stating when the rights of the declarant expire. Typical termination language usually provides that the rights of the declarant will expire when the declarant no longer owns any property in the community, all lots intended to be part of the community have been conveyed to owners for occupancy and the declarant no longer has the right to annex additional property to the provisions of the declaration; essentially, when the community has been completed.

However, it is also very common, as with the scenario above, that the declaration is silent with respect to the termination of declarant rights. Not surprisingly, there is very little case law on point, though the Georgia Supreme Court did address this issue in Armstrong v. Roberts, et al (254 Ga. 15; 325 SE2d 769) (1985). This case addressed the ability of the developer to waive restrictions in restrictive covenants. The court held that “a developer of a subdivision who reserved the authority to waive restrictions in covenants running with the land no longer possesses that authority after divesting himself of his interest in the subdivision.” The court essentially held that a developer’s economic interest in the subdivision dictated its rights under the declaration. When the developer no longer owns any property in the community and no longer has the right to add any additional property to the community, it has no economic interest in the subdivision and its rights have arguably expired. It can be argued that the rationale can be applied to any action taken by the declarant under restrictive covenants.

Homeowner associations should examine their governing documents to see if there is a provision setting forth a time period during which the declarant has the right to add additional property to the community. In the absence of such a provision, a strong argument can be made that the developer’s rights have expired when the declarant no longer owns any property and thus, amendments or other actions taken under the declaration would not require the consent of the declarant. Contacting the original developer to see if it would be willing to execute a document to be filed in the land records stating that it has voluntarily terminated its rights under the declaration is recommended. This minimizes potential challenges to amendments or any other actions under the declaration that require the consent of the declarant and eliminates any confusion regarding the status of the rights of the declarant.

If the declaration permits the declarant to annex additional property to the declaration for a certain period of time and that time period has not expired, there are a few options available to homeowner associations to ensure that actions taken without the consent of the declarant are valid and enforceable. As noted above, if the declarant will execute a termination document, this should resolve any outstanding issues regarding the rights of the declarant. In the current real estate climate, a declarant that still has rights under the declaration many have either voluntarily dissolved or been administratively dissolved by the Georgia Secretary of State for nonpayment of the required annual registration fees. In such instances, I recommend that the homeowners association, or its legal counsel or management company, send written correspondence to the last known registered agent and officers of the declarant entity, as shown on the Georgia Secretary of State corporate records, of its intent to amend the declaration or take such other action that requires the consent of the declarant. Additionally, in the case of an amendment, I recommend that the amendment contain language stating why the declarant consent is not required despite the express language in the declaration to the contrary. If an amendment or other action taken by a homeowners association is challenged for failing to obtain the consent of the declarant, and the above referenced actions are taken, it would be difficult for a court to conclude that the association did not take all reasonable and appropriate action to ensure that the amendment or other action is valid and enforceable.

Because the issue of declarant rights is not always clear, associations would be well advised to consult with their legal counsel.

As a retired Magistrate Court Judge (DeKalb County), I was happy to be asked to write an article about the “Pros and Cons” of filing collection cases in Magistrate Court! A little background on Magistrate Courts in general: The first Magistrate Court was created in Georgia in 1961 as a “small claims court” intended for citizens to settle their disputes without attorneys. More than 100 of these courts were created throughout the state over the next few decades, each with its own local rules and jurisdictional limits. The resulting confusion was resolved with the passage of the “new” 1983 Constitution of the State of Georgia which created discrete levels of Courts, including a Magistrate Court with a set of Uniform Rules governing all Magistrate Courts throughout the State. Initially, the jurisdictional limit for civil matters was $2,500, but this has been raised twice and now is $15,000.¹ Of course any lawsuit seeking relief other than a money judgment, such as a covenant enforcement action seeking equitable relief could not be filed in Magistrate Court.

There are some very good reasons to file an assessment collection case in Magistrate Court, and some other good reasons to choose a different forum. There are four principal reasons to file suits in Magistrate Court:

1. Lower filing fees. For example, in DeKalb County, it costs $51.50 to file a civil action in Magistrate Court (plus $35 per defendant for service). In State Court, the filing fee is $217.50 (plus the same $35 per defendant for service). Keep in mind, however that a when judgment is awarded to the Association, the filing fees are included in the award regardless of what court an action is filed in.
2. Speed of adjudication. If a defendant files an Answer to a lawsuit in Magistrate Court, it will be placed on a calendar between 15 and 40 days after the Answer is filed.
3. Self-Representation. Because Magistrate Court is not a Court of Record, a member of the Board of Directors, or even in some circumstances a property manager, can represent the Association.
4. A Judgment is a Judgment. If no appeal is filed, a judgment entered by a Magistrate Court is just as collectible (or uncollectible!) as one entered by any other Court and remains valid for seven years, just as any other judgment.

There are, as you can imagine, a number of reasons why filing in Magistrate Court may not be the best choice. Here are a few matters to consider:

1. De Novo “appeals.” Any decision rendered by a Magistrate Court can be ‘appealed’ by the losing party to either State or Superior Court, not for a review of anything that transpired at the Magistrate Court trial, but for a brand new trial on the merits. This means trying the case all over again. If you have an attorney, it means additional trial and preparation time. If you did not have an attorney representing the Association at the Magistrate Court trial, you will have to hire one now because Associations, as corporations, cannot represent themselves in State or Superior Court.
2. Pro-Se Friendly Tribunal. Magistrate Court is intended to allow citizens to ‘have their day in court’ and Magistrate Court Judges are trained to give great latitude to parties representing themselves. A defendant will be allowed to testify about all of their ‘issues’ with the Association. Attorneys who object to such ‘evidence’ are generally told to hold their objections, be patient, and let the Judge sort it out. This is very frustrating to attorneys!
3. No Civil Practice Act. There is no “discovery” in Magistrate Court. This means that a defendant may file an Answer that says “I don’t owe the money” and you cannot ask why. Sometimes a defendant has a legal reason for not paying assessments, like, the defendant’s property is not subject to the Declaration, but you will not know that, or be able to research that until the time of trial. Also, there are no pre-trial Motions. Even if the defendant states in his Answer that he knows he owes the money but disputes the amount, no Motion can be filed to dispose of the case. There will be a trial.
4. Judges. Magistrate Court Judges are not required by law in Georgia to be licensed attorneys. In the Metropolitan Atlanta area, all of the Magistrate Court Judges are licensed to practice law, and as in all Courts, some are more knowledgeable about contract and property law than others. However, it is not required by statute, and there are many sitting Magistrates in outlying counties who are not lawyers and may not understand obligations created by covenants running with the land at all.
5. Trial times. Most of the Metropolitan Atlanta Magistrate Courts have trials both in the daytime and at night. A calendar which starts at 7 p.m. can often run until 10 p.m. or later which may be inconvenient for attorneys and witnesses alike.
6. Attorneys’ Fees. Even though an Association may be entitled to Attorneys’ Fees by ‘contract’ and in the case of condominiums or POAA associations, by statute, Magistrate Court, intended as a forum for citizens’ easy access to Courts, is generally more reluctant than other courts to award fees.

Just because I have listed more “cons” than “pros” I absolutely do not mean to say that Magistrate Court is not a good option. Every Board should have a frank conversation with their legal counsel placing what weight they will on each of the considerations above and make a decision about what works best for their community!

1^ For comprehensive information about Magistrate Courts, see Wayne Purdom’s Ga. Magistrate Court Handbook (4^th Ed.), Harrison Company 2002.

Should an Association Publish the Names of Assessment Delinquents?

We have all heard the expression “that wheel won’t turn without any grease!” And every member of a Board of Directors of a community association knows that their Association cannot run without the regular and timely payment of assessments. Generally, a community’s Declaration will provide for either a statutory lien for unpaid assessments (for condominiums or homeowners associations subject to the Georgia Property Owners’ Association Act) or lien rights. Declarations also generally allow the association to collect, as part of its lien, interest, late fees, and costs of collection. But as most of us have discovered, collecting assessments through traditional legal channels is expensive and time consuming. Some condominiums are permitted to suspend certain utilities as a remedy for non-payment of assessments, but only after they have obtained a judgment. Many associations are also authorized by their Declaration or Bylaws to suspend an owner’s rights to use the amenities if they are delinquent in the payment of their assessments. Alice Richardson is president of Community Club Management, Inc. which specializes in managing single family communities with extensive amenities. She told me: “I am continually amazed by the number of people who will come to my office with cash in hand for the total amount due, not questioning late fees or interest, the week before the pool passes are issued.”

In addition to these remedies, which are contemplated by a community association’s Declaration, it seems like every Board, frustrated by assessment collection, sooner or later asks its management company or attorney if they can publish a list of the names of owners who are delinquent in the Association’s newsletter, post it at the mailboxes, or display it at the entrance of the community. In Colonial America people were put in stocks, subjected to public dunkings or forced to wear clothing emblazoned with letters reflecting their transgressions. Why not public shaming as a method of debt collection?

The position taken generally by community association professionals is that there is too much potential exposure for liability for the management company and/or the Board in publishing names of delinquents. In Georgia, libel is “a false and malicious defamation of another, expressed in print, writing, pictures, or signs, tending to injury the reputation of the person and exposing him to public hatred, contempt, or ridicule.” (O.C.G.A. Section 51-5-1.) Some Boards have been reluctant to publish names because there is the possibility that the records of the Association may not be current and that upon publication, the list may not be correct. Management companies, which provide the account information, are likewise reticent to certify lists of delinquents to a newsletter committee who may not get the newsletter out for several days or weeks, during which time some homeowners might pay. To publish the name of a person as delinquent if they were in fact current with their payments would almost certainly give rise to lawsuit. Similarly, only the record title owner of a property is generally liable for payment of assessments. Without performing a title examination, it is impossible to know who the record title owner is. Many times we have discovered, prior to filing suit, that the residents, who everyone always assumed were the owners are not. Very often only one spouse is on title to the property.

If the Association’s records are correct and current, a lawsuit for libel arising from the publication of names of delinquents would probably not be successful. The following summarizes the most current statement of the law in this area: “As respects a charge of failure to pay debts, without any imputation of insolvency, it seems to be settled that a writing containing the mere statement that a person who is not a trader or merchant, or engaged in any vocation wherein credit is necessary for the proper and effectual conduct of his business owes a debt and refuses to pay, or owes a debt which is long past due is not libelous per se and does not render the author or publisher of such statement liable without proof of special damages [Cit.]” Sumner v. First Union Nat’l. Bank &c., 200 Ga. App. 729, 409 S.E2d 212 (1991); Estes v. Sterchi Bros. Stores, 50 Ga. App. 618, 179 S.E. 222 (1935).

However, even if an Association is entirely sure that the account information is correct, it may only mean that the Association could successfully defend a lawsuit for libel, not prevent such a lawsuit from being filed. Some of the possible claims plaintiffs would assert against the management company, the Board collectively, and perhaps its members individually, would be injury to reputation, slander of credit, injury to credit and financial standing in the community, defamation and intentional infliction of emotional distress, and seek damages therefor. Because libel is an intentional tort, it is possible that an Association’s Errors and Omissions insurance policy would either provide a defense for the Association under a reservation of rights or perhaps decline coverage altogether. In that case the Association would have to underwrite the costs involved in the defense of the case.

We will come back to the legal issues in a moment, but first let us look at this issue from a pragmatic point of view. Will it work?

People do not pay their assessments for a variety of reasons, these categories are not exhaustive. First, to be blunt, some homeowners are broke and cannot pay their assessments. No one chooses this condition. Some people find themselves financially over-extended as the result of some family tragedy, inflated gas bills, illness or even death. Some arrive there due to poor planning, others by no planning at all, and some by misfortune. But bottom line, no one is thrilled to be broke and if they had the money, they would happily pay their assessments. Publishing the names of people in this category will definitely embarrass them, but it will not translate into money. You have made someone even more miserable than they were before, but not accomplished the objective of collecting the assessments. Second, this is a group of uninvolved or disaffected homeowners. These are the people who claim they never heard there was a homeowners association, have never used and will never use the pool, and do not know any of their neighbors. They will never know if their names are published in the newsletter and could care less. Again, the objective of collecting assessments has not been achieved. Third, this is a troublesome group of people who do not pay bills as a lifestyle. These are perhaps the most annoying delinquents. They generally have nice cars and homes and have jobs. To them, payment of debt is a game. If you want their money, you have to find it and get it. If you read their credit reports, it is astounding that they qualified for a mortgage at all. These people will not pay assessments, will not respond to warning letters from attorneys and generally do not even respond to lawsuits. They simply wait to have a garnishment filed against their bank account or employer. Amazingly, they sometimes do not even call when that happens. These people are callous to the entire collection process. They do not care at all if you publish their names. The fourth group of people have simply made a clerical error and overlooked payment. These people will tell you, “My wife pays the household bills and I pay the mortgage, I guess this fell through the cracks.” As soon as they learn of the oversight they pay. Publishing their names will get you the money but could alienate them in the future. Finally, you have people who are experiencing a temporary financial or personal setback which may have resulted in failing to pay on time. These are loyal and good association members who have paid their assessments every year on time, but this year did not. Do you want to publish their names without asking what the problem is, or seeing if there is anything that you, as a neighbor, can do to lighten their load? With this group you may collect your assessment as a result of publishing their names, but what did it cost you as a community?

While there are no guarantees, I believe an Association could successfully defend itself in a lawsuit arising from the publication of a list of the delinquent owners, as long as the information regarding amount due and the correct owner is current and correct. However, is a Board acting in an Association’s best interests in pursuing a policy which may well subject it to a lawsuit unnecessarily? Will enough money be collected to justify adopting such a policy? Is this a practice which reflects how we treat our neighbors, and how we would want to be treated, in this community? These are just some of the questions a Board should consider before adopting a publication policy.

…Or How to Collect the Judgment Once You’ve Got It”

In Part I of this Article, which appeared in the Second Quarter 2002 edition of Georgia Commons, we explored why it sometimes takes so long to obtain a judgment in Georgia. In the collection wars, many times obtaining the judgment is the easy part of the campaign and the biggest battle, actually getting the money into your association’s bank account, lies ahead. As you will see below, attorneys have many weapons in their arsenals for collecting judgments. But the most effective weapon of all is YOU the board and/or the management company. It is your cooperation that is essential in successfully collecting judgments. The same disclaimer applies to this article: The information provided here is intended to be a GUIDE for association members. No two cases are exactly alike, no two courts are alike and no two attorneys will handle the collection of a judgment in exactly the same way.

1. Preliminary Matters

A judgment is an order entered by a court awarding money to someone. The judgment gives the judgment creditor the right to take certain action against the debtor to secure payment of the debt which they would otherwise not have. It does not require the debtor to voluntarily pay you.

2. Writ of Fieri Facias

Once the judgment is entered, you will want to see that the court issues a Writ of Fieri Facias, more commonly referred to as a fi fa. (Some counties do this automatically under certain circumstances, but not others. Some counties do not issue them at all without a specific request and payment of a fee. Your attorneys will worry about this.) Fi fas are recorded in a book known as the county’s General Execution Docket, or GED. When checking down title on property scheduled to be sold or re-financed, title examiners always examine the GED. Any outstanding fi fa is an encumbrance on any property owned by the debtor in that county, which must be satisfied prior to the sale of the property. Practice tip: If you believe the debtor owns property in other counties, you may record the fi fa in the other counties’ GEDs as well. Fi Fas are valid for seven years but may be renewed. You do not need a fi fa to collect on a judgment, but because the average length of home ownership in the metropolitan Atlanta area is now five years, it is a good idea to have a recorded fi fa. Occasionally you will be pleasantly surprised by a call from a closing attorney asking for a payoff.

3. Ask For Your Money

The least expensive collection strategy is to write a letter to the judgment debtor and let him know that judgment has been entered against him and that he should call you to make payment arrangements to prevent formal collection procedures. Once in a blue moon it works and it costs you very little.

4. Garnishments

A garnishment is a new civil action which intercepts certain assets of the judgment debtor. There are at least three types of post-judgment garnishments in Georgia: bank accounts; rents, and wages. If your association or its management company regularly makes and retains copies of checks, it is simple to garnish a judgment debtor’s bank. There are bank locator services which can sometimes find where an individual banks. Generally you do not pay for this service unless they locate a bank for you. I do not know how these people provide this service and do not really want to know. Nonetheless, once an account is known, a garnishment is filed in the county in which the bank’s registered agent is located. Once the garnishment papers are served on the bank ALL of the judgment debtor’s assets in that institution are frozen. Your attorney will almost always receive a hysterical telephone call asking to release the garnishment. The judgment debtor will offer to pay the judgment as soon as the garnishment is released. BE STRONG. It is a terrible hardship on someone to know that their checks to the mortgage company, for their utilities and everything else are bouncing all over town. Nonetheless, insist on a payment of certified funds before releasing anything.

If a house or unit is being rented out, you can garnish the rent by naming the lessee as the garnishee in a garnishment action. This would be filed in the county in which the property is located and would be personally served on the renter. You must know the name of the renter, and that is another example of why it is critical for the association to be an active participant in the collection process. This is generally an effective method of collection because the entire monthly rent is subject to the garnishment and your judgment may be satisfied fairly quickly.

Wage, or continuing garnishments are, as you would expect, filed against the judgment debtor with his employer as the garnishee. If you know where the judgment debtor works, your attorney’s job is that much easier. If the association does not know where the judgment debtor works, a creditor may run a credit check which sometimes reveals a current employer. Once the garnishment is served the employer is required to file successive answers and pay twenty five (25%) percent of the disposable earnings for each pay period for up to 179 days.

5. Post-Judgment Discovery

If the Association has no information regarding where their judgment debtor works or banks and they still live in the community, you can pursue post-judgment discovery to learn where his assets are. This can be in the form or a series of written questions called interrogatories which are sent to the judgment debtor and which must be answered within thirty (30) days. In addition to questions regarding bank accounts and employment, questions regarding whether the judgment debtor has other assets, like jewelry or paintings or boats are asked. Sometimes the judgment debtor actually responds to these questions and you can file a garnishment. It has been my experience that the debtor does not respond to these questions. You may then file a motion with the court compelling a response within a certain number of days and asking for an award of attorney’s fees for having to have had to file the motion. Once the court has granted that motion, if the judgment debtor does not respond, you can file a motion for contempt, again asking for attorneys fees for having had to go this extra step. Motions for contempt, including a hearing date, must be personally served on the judgment debtor by a sheriff’s deputy. Because the judgment debtor has now disobeyed a court order compelling him to respond to the interrogatories, he may be found to be in contempt of court and can be incarcerated until you or your attorney gets around to going to the county jail and asking them the questions on the interrogatories and getting satisfactory answers.

In addition to, or in lieu of post-judgment interrogatories, you may schedule a post-judgment deposition. This deposition is an opportunity for your attorney to ask the same type of questions discussed above. If the judgment debtor does not appear for the deposition, the same procedure outlined above would be followed.

6. Execution and Levy

Execution and levy is generally a collection procedure of last resort. This is a complicated process which is generally not practical for homeowner and condominium associations because the amounts of the judgments generally do not justify the expense involved in actually seizing and selling assets. Nonetheless, a judgment creditor may identify specific assets, such as a grand piano or a car (which has no outstanding liens on it) to a sheriff who will seize the asset and arrange for its sale on the courthouse steps. Because there is generally very little interest in these items, the Association may not, after paying the sheriff’s fees realize the result it anticipated. Because of the complexity of this process it should not be attempted without the assistance of an attorney.

Of course, at any point in the collection process, either before or after the judgment is entered, the debtor may file bankruptcy. This will stop the process immediately and completely and any further collection will be through the bankruptcy court. A discussion of bankruptcy, and its effect on collections, is beyond the scope of this article.

Not much has changed since a Justice on the Georgia Supreme Court in 1878 wrote: “The true law, everywhere and at all times, delighteth in the payment of just debts. Blessed is the man that pays. The practice of paying promptly, and to the last cent, tends to the cultivation of one of the most excellent traits of human character. . . Debt is the source of much unhappiness. The best possible thing to be done with a debt is to pay it.” Robert v. Tift, 69 Ga. 566, 572 (1878).

Or Why it Takes So Long to Obtain a Judgment in Georgia”

Whether you are a member of a community association or serve on the board of directors, the one thing that really frustrates you is the neighbor who hasn’t paid his/her assessments. Most of my clients wish that, the day after the due date, I could reach into that delinquent owner’s wallet, or take his home . . . or something. In Georgia we do not seize people’s homes easily, as seen recently on a television program about community associations! The Georgia Civil Practice Act, or the legal process by which we obtain a judgment and are entitled to recover it, controls the process. This article is intended to be a GUIDE for association members. No two cases are exactly alike, no two courts are alike and no two attorneys may handle a case in exactly the same way. Hopefully this guide will help familiarize you with the process and while you may not like how long it may take, you will understand why it may take so long to get a Judgment. Keep in mind that this article only gets you to the Judgment and does not even address collecting it. We’ll save that for next time.

1. Preliminary Matters

The Board should have a protocol in place for dealing with delinquencies. Do you refer an account for legal action at a certain dollar amount, or after an account is delinquent for a certain length of time? Do you treat like cases alike? Is the Board communicating clearly with the management company about whose job it is to deal with delinquent accounts? Is it the management company’s responsibility to authorize legal activity, or does the Board want to review those decisions first? Once the decision has been made to pursue legal action, the treasurer or the management company needs to provide the lawyer with a current ledger of the account and give authorization to begin collection action. The numbers following the paragraphs are approximate times to complete that step. It should take no more than 7 – 14 days for the law firm to send a warning of suit letter, once a ledger and authorization is received.

1. A warning of suit letter is sent giving the owner 30 days to pay the outstanding amounts due in full. 35 DAYS
2. Because most people make at least some payment upon receipt of the letter, most law firms require the Board or Management Company to notify them if payment has not been received and authorize a lawsuit.
3. Once a suit has been authorized, a title exam is performed. This can sometimes be done on-line by accessing land records from the internet for some counties but many times requires a “physical” title search in the county land records. This can usually be done within a week or two of the request. 7-14 DAYS

2. The Lawsuit Begins. The Complaint.

1. After receiving the results of the title search, IF the owner is the same as the person who your attorney sent the warning letter to (if it is a different owner, or there is a co-owner, you would have to go back to number 1 a, and, I can’t resist . . . “and do not collect $200”) the lawsuit’s first pleading, the Complaint, would be drafted, reviewed and sent to the courthouse. This should not take more than a week after receipt of the title examination. 7 – 14 DAYS
2. When the clerk of the court in which the suit has been filed receives the Complaint it is docketed in the court’s records and given to the marshal or sheriff’s office to be served.
3. The marshal or sheriff will go to the address and attempt to serve the delinquent owner, now known as the “Defendant.” Service may be perfected in several ways. One is called personal service, which means the marshal or sheriff found the actual Defendant at home and handed him/her the Complaint. Any other competent person who resides at the home may also accept service, this is called notorious service and it will work too. The marshal or sheriff will sign a service return indicating how service was effected and usually who was actually served, with an unflattering description of them in terms of height and weight and return it to the clerk of the court.
4. The clerk returns a copy to your attorney. If all goes well, this can be accomplished in a week or two. 7 – 14 DAYS
5. If the marshal or sheriff tries several times, usually very early and very late in the day, but cannot find anyone at the address, the Complaint will be returned and you will have to consider whether to hire a special agent to attempt service.

3. The Lawsuit Reaches an Amicable End – The Consent Order

1. Many times the Defendant will call the attorney after receiving the lawsuit and want to resolve the lawsuit. If he/she can’t pay the entire amount at once, the association should consider entering into a Consent Order. By signing a Consent Order, the Defendant obligates him or herself to make periodic payments on the past due balance and to pay all current assessments on time.
2. If the Defendant fails to make all the payments on time, your attorney can file an affidavit with the court swearing that the terms of the Consent Order have been breached and asking the Court to enter a judgment. The Court will review the affidavit and judgment will be entered for the amounts still due under the terms of the Consent Order. Sometimes there is quick turn-around by the Court. Sometimes it takes several months to receive the Final Order and Judgment.

4. The Lawsuit Comes to a “Quick” End – The Default

1. A Defendant has 30 days to file an Answer to the lawsuit or it goes into default. (You begin counting the day after the day the marshal or sheriff serves the Complaint.) A default entitled the association to recover the amounts set forth in the Complaint, because the Defendant has “admitted” liability for the amounts due by not contesting the matter. From day 31 to day 46, the Defendant can “open” the default, by paying the costs you paid to file the lawsuit, and still file an Answer. 46 DAYS
2. The law firm will confirm with the court that no Answer has been filed and prepare documents requesting entry of the Default Judgment. 7 – 14 DAYS
3. In some counties, requests for default judgments are presented to the assigned judge the day it is filed. In some counties it can take as long as 3 or 4 months for the file to find its way to the judge for consideration and entry of your Judgment. Average: 60 – DAYSIf you will add up the approximate days above, you can expect it to take, ON AVERAGE, 211 days to receive a Default Judgment. Sometimes it is much faster, sometimes it takes much longer.

5. The Lawsuit Doesn’t Come to a Quick End – The Answer

1. If an Answer is filed by the Defendant, a statutory SIX MONTH discovery period is triggered. During this six month period the association can conduct discovery, that is, ask the Defendant to respond to interrogatories, requests for production of documents, requests for admissions or take the Defendant’s deposition to find out whether there is any merit at all to the defenses raised by the Defendant in the Answer. 180 DAYS
2. Of course, sometimes the Answer states something like: “I admit I owe the money, but the dog needed surgery and I don’t have any extra money.” If no legal defenses to the claim are asserted in the Answer, your lawyer can file a Motion for Judgment on the Pleadings or a Motion for Summary Judgment. 14 – 30 DAYS
3. The Defendant is allowed 30 days to file a response to any Motion. 30 DAYS
4. The Court will either rule on the Motion in its own time or schedule a hearing on the Motion. The association’s Motion should be granted and Judgment entered. 30 – 60 DAYS
5. In the alternative, your attorney may just ask the Court to put the case on the next available trial calendar. Some Courts refuse to do this until the six month discovery period has run, some will automatically put it on the trial calendar as soon as the Answer is filed. It may take several months to come up on a non-jury trial calendar. 90 – 120 DAYS

If an Answer is filed, then you can expect it to take approximately 8 – 12 months to receive your Judgment. At any time in the process, of course, you can amend the Complaint to include the next year’s accelerated assessment if it has come due during the pendency of the suit.

Sometimes the “litigation gods” smile down and this process goes much more quickly, but I think that the lesson is clear: If someone offers to pay you half of the past due now and half in 30 days, you might want to remain flexible. Review your documents and see if there are other remedies, such as restricting access to the pool, which might get you a quicker result. This abbreviated tour of civil procedure was not intended to be an exhaustive guide to what can happen in an assessment collection action, but hopefully will assist you in understanding the process.

We are often asked whether Georgia traffic laws apply to private streets maintained by a homeowners or condominium association. The answer depends on a number of factors ranging from the offense charged to the method in which the roads are used in the community.

The Georgia Code is, as you might expect, somewhat complicated with respect to where traffic laws apply, and it is a matter that is consistently litigated in criminal cases, particularly those involving Driving Under the Influence (DUI) convictions. There are cases which explore the applicability of traffic laws to areas ranging from shopping center parking lots to personal driveways. To provide a bit of background: Title 40 of the Georgia Code addresses traffic violations, the operation of motor vehicles on the highways of Georgia, licensing of drivers and vehicles and other administrative areas related to motor vehicles. Title 40, Chapter 6, entitled “Uniform Rules of the Road”, addresses the majority of moving violations and other issues which are generally referred to as the traffic laws. While Title 40 generally applies to vehicles on public and private streets, O.C.G.A. § 40-6-3 states that Chapter 6 only applies to the operation of moving vehicles upon “highways.” While the reference to highways would appear to resolve the issue, as is often the case with state statutes, there are a variety of exceptions and the meaning of highway is not as obvious as it would at first appear.

As a general rule, minor traffic laws do not apply to private streets and roads, so long as those roads are truly private. If it is a more serious traffic violation, like DUI or reckless driving, there is an exception and the traffic law will apply to private and public streets, parking lots and related areas. Additionally, there is an exception in O.C.G.A. § 40-6-3 which states that the provisions of Chapter 6 apply to “areas which although privately owned are customarily used by the public as through streets or connector streets;” . . . Finally, what constitutes a highway and a private street is more complicated than simply who is responsible for maintenance and upkeep of the road. The case law indicates that if the road is used by the public, and common to the public, then it is a highway and thus the provisions of Title 40, Chapter 6 will apply.

With the above as a reference point, one of the major areas to consider when attempting to determine if state traffic laws apply to your community’s roads is to look at how private the roads really are and how they are utilized. Even if the Association is solely responsible for upkeep and maintenance, if the general public can or does access the roads, it is likely that the state traffic laws apply.

Whether you believe that the state traffic laws apply to your community, it should not be viewed as an authorization for the association to try to enforce such laws. Associations will have limited to no authority to enforce traffic rules and regulations that are not expressly set out in their governing documents and will have difficulty enforcing those that are specifically set out. Even if the Declaration or Association’s Rules and Regulations govern traffic offenses, and the governing documents set out a procedure for fining, the association would still have to be able to prove that the violation occurred and be able to trace the violation to a member of the association. Not only must you see (or video tape) a car rolling through a stop sign, the driver of the vehicle must be identified as well. In practice, both of these can be daunting tasks. Prior to making any effort to privately enforce traffic laws, the association should address the issue and any potential pitfalls with counsel.

Even if your roads are private, if they are used by the public, your local traffic law enforcement agency might be willing to patrol and/or set up surveillance points for you. Be sure to take advantage of the services you are paying taxes for! The Board of Directors or the Association’s manager should be persistent in requesting this type of assistance from local law enforcement.

Unique Concerns in Mixed Use Communities

One of the newest trends in real estate development is the “new urbanism” often involving the creation of mixed use communities.  The concept is not new at all of course.  At least since the Roman Empire, shopkeepers have lived above or behind their stores, craftsman lived above their workshops.  But after World War II, with the advent of automobiles and then multi-car families, suburban subdivisions were built farther and farther away from the city center.  Residential and commercial functions were no longer integrated into a community.  But now, environmental and life-style concerns have brought back the concept, and hopefully we can do it better this time.

There are endless variations of these multi-use, or mixed use communities:  condominiums with hotels, offices and residential units all in one building; master planned communities with country clubs and their own schools, communities with apartments, townhomes, retail and commercial areas.  You name it, it’s on the market now.  Politicians and local governments have embraced the concept of live, work, shop communities in an effort to get people out of their cars and off of the roadways.  The concept harkens back to an easier, friendlier time when people knew the shopkeepers, children walked to school and everyone went home for lunch.  While it sounds idyllic, creating and maintaining a community in which owners of differing types of property which have competing interests and priorities can be a challenge both for the developer and for the members.  Failure of any part of the project will negatively impact on the community as a whole.  Therefore it is critical that owners involved in the administration of these communities be sensitive to the unique concerns and needs of their mixed use neighbors.

How these developments are organized and administered impacts directly on the success or failure of the community.  If the interests of the commercial owners are unchecked, certain commercial functions may interfere with residential owners’ quiet enjoyment of their homes.  For example if controls on types of businesses allowed, signage, hours of operation, traffic and parking are weak or unenforceable, your neighborhood may become the victim of its own success, with endless congestion and noise.  Conversely, if commercial enterprises do not have sufficient parking and customers cannot find businesses because of restrictions on signs, they will fail, resulting in empty shops.  If these competing interests are well considered in the development of the project and a structure established within which both the commercial and residential owners continue to co-operate with each other in the administration of the community, both interests will be protected.  This article will review different systems of organization of these communities, pointing out the advantages and disadvantages of each.

The Unplanned Mixed Use Community

Although many counties, especially in the metropolitan Atlanta community now require, at a minimum, that a subdivision have a mandatory homeowners association (from the county’s perspective, to maintain the detention/retention facilities) some do not.  In the unplanned project, a developer, with the new market trends in mind will plat a traditional subdivision with several lots along the main road for commercial use.  The developer puts no covenants containing use restrictions or mandatory assessments on the property.  The developer builds a stacked stone entry feature with lights and a waterfall pursuant to an easement over the two commercial lots leading into the swim-tennis residential area.  There is a beautiful sign on the wall identifying the community as “Here Today – A Live Work Community”

The community sells out quickly and the developer is on the next project.  The owners are surprised when no one comes to clean the pool and the electricity no longer lights the entry feature and the waterfall is still.  They have no means for raising money.  The dry cleaners at the corner gets cited by the Environmental Protection Agency for pouring used cleaning fluid down the drain and decides to move out in the night.  A store selling products you do not want your children to know exist opens in its place.  They are open 24 hours a day and have the flashing sign letting everyone know, as if you could forget.

Short of getting the city or county to help enforce zoning and ordinance issues with regard to use and signage, the owners in this community are looking at bake sales to raise money for the pool and tennis courts and large legal bills to fix the mess.

The Poorly Planned Community 

In “Slap-Dash – A Mixed Use Community” the developer has created a residential swim-tennis neighborhood.  All of the residential lots were subjected to a Declaration, which was copied from the county land records.  (Never mind that the name of the community wasn’t changed all the way through the Declaration!)   The Declaration contemplates a mandatory membership association, which can raise dues and enforce use restrictions.  In the center of the community, the developer also built a cluster of commercial office buildings.  His concept was that these buildings would house doctors and lawyers and accountants which the residents of the community, and others, would use.  These buildings were developed as a commercial condominium and are subject to a Declaration of Condominium.

The developer built extensive greenspaces along central roadway leading from the main highway, through the residential community to the commercial condominium.  The greenspace areas are owned jointly by the two Associations.  There are no provisions in either Declaration regarding who will maintain, or pay taxes on, the greenspace.  The commercial owners say that they are only there five days a week and make up a small percentage of the total community.  The homeowners feel that the commercial owners should pay to plant the area because they are in business and need to impress their clients.

As the weeds grow taller, the communities realize they have a problem.  Sick of looking at the weeds, representatives from each Association agree to negotiate a cost-sharing agreement which provides for an equitable contribution from each Association to cover the costs of maintaining the greenspace.  A carefully drafted agreement should also provide for representatives from each Association to come together on an annual basis to re-evaluate the scope and costs of greenspace maintenance and provide a dispute resolution mechanism in the event of a dispute between those representatives.

The Master-Planned Community

In “Concordia Centre” the well planned Master-Planned Community there is a Master Association and an umbrella Master Declaration which creates a framework for the administration of the common interests of all members of the community.  There is a master budget which pays for common entry features, shared drainage and detention and water retention facilities and community parks and greenspace.  The Master Declaration also contains provisions which give the Master Association the authority to collect assessments either from the “sub” associations or directly from individual owners an all phases of the development to fund these functions.  The Master Declaration also contains easements, use restrictions and architectural controls which apply to the entire community.

Beneath the Master Association and Master Declaration are Associations, each of which has its own Declaration which protects the interests of that particular phase of the development.   The single family residential phase has a traditional Declaration of Covenants, Conditions and Restrictions.  The residential and office condominiums at “Concordia Centre” have their own Declarations of Condominium.  Owners are bound by the provisions of both the Master Declaration and any other Declaration for their neighborhood.

While it sounds like this would be difficult to administer, the By-Laws of the

Associations determine how many representatives or “voting delegates” each Association has on the Board of Directors of the Master Association.  Likewise, the Master and Association Declarations detail how the budgets of the individual Associations and the Master Association will dovetail.  They also identify how the various Associations are to be managed.

It is imperative that mixed-use communities generally be well thought out from the outset and that the controlling Declarations make provisions for any contingency.   Owners need to respect the diversity of use in the community and the various interests of their neighbors.

As is always the case in community association life, the better the owners know the documents and the more they know before they purchase in such a community, the more likely the ultimate success of the community as a whole.  Owners in Mixed-Use Communities face unique and sometimes very complicated issues which affect the community as a whole and should be prepared to face these challenges in creative and flexible ways.

Community storm water systems are a big deal these days. Counties and municipalities typically require, as a condition of zoning for new planned developments, that storm water detention ponds or other facilities be part of the common property owned and maintained by the community association. Back in the 1970’s and 1980’s, this was not the case. Storm water ponds, even if maintained by an association, might be located on a homeowner’s lot. What could go wrong?

Let’s take the Soggy Bottom Community Association* as an example. Soggy Bottom was developed in the 1980’s. The community’s detention pond was located wholly on an owner’s lot. Plats for the community depicted a fence around the pond and an easement for the association to access and maintain the pond. The plat and the declaration of covenants, consistent with the zoning conditions for the development, obligated the association to maintain the pond and protective fencing. The owner of the lot did not like the looks of the storm water pond located on his property. He was a landscaper by profession and had access to, among other things, a Bobcat skid-steer and a dump truck. As he got well into removing the protective fencing and re-grading the storm water pond, the association received a notice of zoning violation from the county. The county required that the fence be replaced immediately. After several months of back and forth with the owner to try to resolve the issue, the association contacted its legal counsel who issued a cease and desist letter. The gist of the letter: the association maintains the fence and the pond and has easements over the lot to do so. The association has authority to approve or deny modifications of a lot. The owner did not request approval for his modification nor did the association grant such approval. The owner is in violation of the declaration, must pay a fine for each day the violation continues, and must restore the pond and protective fencing to its original condition. If the owner does not restore the pond and fence within 10 days, the association will exercise its right of self-help as provided in the declaration of restrictive covenants, enter the property, and restore the pond and reinstall the fence. Pretty straight forward, right?

Governing documents for many communities authorize the community association to exercise “self-help” in addressing violations of the restrictive covenants. The governing documents will provide that an association, after providing a homeowner with notice and an opportunity to cure, may enter upon a property to abate or remove any structure, thing or condition which violates the community’s covenants or rules. Although the provisions of the declaration may seem pretty cut and dry in granting an association self-help authority, exercising that authority is a whole different story.

Fast forward 10 days at Soggy Bottom following the cease and desist letter. The owner has continued with his work re-grading the pond and adding hardscaping around the pond. The association sends its fencing contractor in to replace the protective fencing, but the police come before the contractor can even unload his truck – when the contractor pulled up, the owner had called to report a trespass. The officer, faced with a homeowner claiming private property rights and association board members waving the declaration and claiming a right to enter on to the property to exercise self-help, punts. The police will not make a determination of legal rights in these situations and likely will not even look at a declaration of covenants being waved at them. Rather, the police officer will tell agents of association to stay off the property until they have a court order authorizing entry.

Typically, a lawsuit asking a court to grant access to a homeowner’s property in order to exercise self-help involves requesting a temporary restraining order to keep the homeowner from continuing to violate the declaration together with authority to abate the violation. This is requested through an expedited “emergency” hearing scheduled through superior court. Of course, courts have lots of other important business to tend to and might not see removal of a fence as an “emergency.” Even if the association “wins” at an emergency hearing, this does not necessarily resolve the association’s underlying claim on its merits. An association may be able to perform some remedial work and temporarily stop a violation of the covenants, but the homeowner is still entitled to a court proceeding on the underlying claim.

For the Soggy Bottom Community Association, the emergency hearing was far from the end of the matter. The homeowner fought tooth and nail. The judge at the hearing, considering the amount of time the association took before commencing legal action, did not find the situation to constitute an “emergency” and ordered the parties to mediation. The parties entered into a mediation agreement, but the homeowner defaulted. Upon filing a motion to enforce the mediation agreement, the court awarded the association judgment together with attorneys’ fees. The entire process extended over years, and the parties came to terms only when a new board of directors was elected who just wanted to see an end to the conflict.

The right to exercise self-help is important to have in a declaration of covenants and can be essential in enforcing a community’s covenants. However, exercising self-help is easier said than done. A lawsuit brought to abate a covenant violation can be expensive and protracted. And just because an association may have some right afforded by the declaration of covenants, there is no way to anticipate how a judge or jury may view that right or the facts in any given situation or whether the association may prevail in the end. When a covenant violation occurs, a board of directors should make an early evaluation of the situation to consider all of its potential remedies, including self-help, and determine which remedies are appropriate and worthwhile for the situation at hand. The association’s legal counsel can assist in determining whether it makes sense for the association to help itself.

*names in this article have been changed to protect the innocent