Category: Articles

Non-Member Use of Community Amenities

With the onset of summer, communities around Georgia are readying their recreational amenity areas for a new season. In addition to regular use by association members, many communities allow non-members to use the recreational facilities by virtue of hosting swimming competitions and tennis tournaments or by allowing members or non-members to offer recreational instruction, such as swim or tennis lessons, to other members or non-members. The threshold determination for the board of directors is whether allowing use of the association’s amenities in this manner is a proper association function and in the best interests of the members. Presuming the answer is “yes,” before allowing these types of activities, members of the Board of Directors should know and understand some of the implications of allowing non-members to use their association’s recreational facilities and should plan accordingly.

A Board of Directors should ensure that their recreational facilities are appropriately sized to accommodate both the proposed special event and the availability of the facility as anticipated by the Association members. Typically, the maximum number of people allowed to use a community’s recreational facilities is fixed by the local health department. Concerns regarding capacity and the practicalities of, for example, hosting a large number of contestants and attendees for a competition event may require that during the special event the swimming pool or tennis courts, as the case may be, are unavailable for regular member use. For larger events, parking and accommodation for spectators should also be considered.

An increase in the number of people using an association’s recreational facilities typically results in a corresponding increase in the association’s exposure to liability for claims arising from personal injury. Typically, community associations protect against these claims by carrying liability insurance covering potential claims for injuries or damage which may occur on association property. Such liability insurance may protect the association as to claims made by owners and their individual guests; however, it likely would not cover teams that have been invited to the community for competition nor would it cover commercial activities such as swim or tennis lessons offered independently to third parties by a community member. In connection with allowing use of the amenities for competition or lessons, the association should require the coordinator of the event to obtain and maintain adequate liability insurance naming the association and its directors and officers as additional insureds and to provide evidence of the coverage before the event. The board of directors should consult with the association’s insurer to determine the coverage amounts sufficient to protect the association from the risks inherent in the proposed activities. For example, the risk of a personal injury claim in hosting a swim meet or allowing a member to offer swim lessons to children may be greater than the risk inherent in allowing a member to offer meditation classes in the clubhouse. In addition, it is always a good idea to have event organizers sign a waiver and indemnification agreement to the effect that if they or one of their guests are injured on the association’s property, they will not hold the association responsible and will protect the association from any claim brought by the injured party.

The board of directors should bear in mind that they do not have recourse against non-members under the recorded covenants if, for example, an event rental fee for the amenities is not paid or if an attendee causes property damage. Under most recorded Declarations, an association may specifically assess costs incurred for services provided at the request of a member and costs for repair and maintenance arising from a member’s activities. These charges, if left unpaid, would become a lien against the member’s property and collectable as assessments. The association does not have these tools with respect to non-members, and collecting against a non-member could only be through a civil action. Any recourse the association has for property damage or failure to pay an event rental fee should be detailed in the event contract between the event coordinator and the association. The association should consider requiring payment of a damage deposit that may be applied to any repair necessitated by property damage incurred during the event.

Finally, the board of directors should consider potential unintended consequences of hosting non-members in association facilities. For example, typically, associations do not have to comply with the Americans with Disabilities Act (“ADA“) if the association strictly limits the use of its recreational facilities to residents. However, if an association allows non-member use of its amenities, for example by hosting swim competitions or selling memberships to members of the public or even allowing members to host events that are open to non-members, its facilities are more likely to be considered a “public accommodation” that is subject to the ADA. Application of the ADA to an association’s amenity area may require that the association perform expensive upgrades to its facilities, such as retrofitting pools with lifts or ramps to ease access for disabled visitors. Of course, an association may already be obligated to make certain modifications or accommodations under the federal Fair Housing Act, to which all associations are subject. In addition, any revenue collected by the association for rental event fees or similar charges would be considered taxable income resulting in federal tax liability. Such income and any associated taxes can be addressed in the association’s annual tax return, however, the board of directors should anticipate the tax liability and plan for it before tax time.

There are many reasons why an association may want to allow non-members to use their community’s recreational facilities. Before permitting such use, members of the board of directors should understand the implications of doing so. Depending on the proposed use and the terms of such use, board members would do well to consult the association’s insurer, accounting professional and legal counsel for assistance in planning accordingly to ensure that the association and its interests are protected.

A Sweet Partnership?

With the burgeoning interest in locally grown produce and all things “green,” could the return of home beekeeping have been far behind?  In addition to making honey, pollinators are essential to a good garden, production of food crops and the health of flowering trees and bushes.   Locally grown honey surely is better than what comes in those plastic bears at the supermarket.  In fact, there is a huge resurgence in hobby beekeeping nationally and in Atlanta as well.  Emory University has bee hives, and this spring Georgia Tech is putting hives on a meadow growing on the roof of Clough Commons, the new LEED certified undergraduate science center.  Even the White House is on Board.  See, www.whitehouse.gov/blog/2010/06/23/secret-life-white-house-bees.  I recently attended a seminar sponsored by the Metro Atlanta Beekeepers Association, Inc.  There were over 200 attendees and registration had been closed for over two months prior the event!  As I listened to the speakers talk about the benefits and mechanics of beekeeping my mind naturally drifted to how my condominium and homeowner association clients would react to finding out that an Owner intended to put a beehive in his backyard . . .

Georgia law is generally friendly toward bees. Official Code of Georgia Annotated Section 2-14-41.1 provides:

No county, municipal corporation, consolidated government, or other political subdivision of this state shall adopt or continue in effect any ordinance, rule, regulation, or resolution prohibiting, impeding, or restricting the establishment or maintenance of honeybees in hives.

Recently, Cobb County Code Enforcement cited a beekeeper under Cobb County’s livestock ordinance.  When the officer went to serve the violation notice, however, the beekeeper explained that there is no way that bees could be considered livestock and the citation was dismissed.   While it is clear that no governmental agency can prohibit the keeping of bees, that proscription would not mean that a community’s own documents could not have an enforceable covenant prohibiting bees.  But does the language in most covenants address bees?   Keeping the usual caveat in mind, that you need to check the covenants for your specific community, most “Animals and Pets” provisions start out something like this:

No animals, livestock or poultry of any kind shall be raised, bred or kept on any Lot; provided, however, dogs or cats may be kept on a Lot, not to exceed a total of three (3) such animals, provided they are not kept, bred or maintained for any commercial purposes.

Is a bee an animal?  Under some broad definitions, anything that is not a plant or a mineral is an animal, but other definitions limit animals to mammals as opposed to reptiles, fish and insects.   Arguably, that provision would not bar an Owner from keeping bees because a bee is not an animal, livestock or poultry and, as we all know, covenants are strictly construed in favor of free use of property.  Some covenants contain a slightly more tailored provision which addresses “Insects” as follows:  “No Person shall permit any thing or condition to exist upon any Lot which shall induce, breed or harbor noxious insects.”  But is a honeybee “noxious?”  I met several hundred people in one day who would say “No!”

Could the presence of bees be a “nuisance” as that term is used in covenants?  Nuisance provisions are always the provision of last resort when trying to find some provision to fit a condition that the Association wants to address.   Nuisance provisions usually contain language such as:  “No plants, animals, device or thing of any sort shall be maintained in the Community whose activities or existence is in any way noxious, dangerous, unsightly, unpleasant or of a nature as may diminish or destroy the enjoyment of the Community by other Owners and Occupants.”  The primary reason an Association or other Owner may want to prohibit the keeping of bees in the community has to be the fear of being stung.  But how dangerous is a bee sting?  And would it rise to the level of being “noxious” to satisfy a nuisance provision?

I thought the speakers at the beekeeping seminar might be minimizing things when they said that it is perfectly normal for a bee sting to cause swelling, and that you only need to worry if you stop breathing.  No one wants to get stung, but unless you are actually opening a hive to work with the bees, or step on one, bee stings are rare.  And, to put it in perspective:  According to the Centers for Disease Control, in 2010, 33,687 people died in traffic deaths; 42,917 people died of poisoning, 31,672 people died from firearms and 50 died from bee stings.  Of course no one want to know, or be, one of the 50, but the risk of serious complications arising from a bee sting is certainly rare.

Taking another approach:  A beehive is, under most definitions, a “structure” which would require advance written approval of the Architectural Control Committee or the Board.  However, I was surprised to learn that beehives now come in all colors and can be painted green or brown to be camouflaged into its surroundings.  Some even have copper or other ornamental tops.  So, before denying such a request out of hand, the ACC or the Board may want to review any submitted plans on a case by case basis.

Even if a community decides that keeping bees on individual lots is not in keeping with its ‘community-wide standard,’ a hive or two may be a great addition to the community garden or the common elements.  Bee thinking!!

Financing these Expenses Through a Loan

Chuck N. Little felt a tiny bump on the head. He stared up in distress at his multi-story condominium building, scratched his head and shouted, “The Condo is Crumbling! The Condo is Crumbling! I must tell the Board.”

It is easy to feel overwhelmed when capital improvements and major renovations are needed in your Community. Whether you live in a multi-story condominium project, a single family detached subdivision or side-by-side with your townhome dwelling neighbors, eventually capital improvements of some sort will be needed to the common areas in your Community. Often times an Association does not have sufficient funds in their reserve account to cover the expenses of renovating, repairing or replacing capital improvements in a particular Community or in some cases may not have a reserve account at all. Timing may be critical as the situation will presumably continue to degenerate and may become more costly to repair as time goes on. An Association then faces the unpleasant choice of not making the repairs or, at the very least, deferring the maintenance until the members pass a large special assessment to cover the costs and waiting for the funds to be collected. Instead of reacting like Chuck N. Little, the Association should consider applying for and obtaining a term loan to cover these costs. Many banks and lenders across the country now offer attractive loans to homeowners and condominium associations to pay for major construction projects. A loan of this sort is typically secured against the “stream of assessments” in the Community and the costs can be spread out over time as the funds become available.

Obviously, there are pros and cons to consider before deciding to obtain a loan. On the upside, a loan is typically less of a financial burden on the homeowners. Rather than having all the costs of the maintenance and repairs due at one time, necessitating a special assessment that is immediately due and payable, the Association can spread the costs out over the term of the loan, often as long as fifteen years, and include the expense in the annual budget as part of the general assessment. In the alternative, the Association could also levy a special assessment to fund the loan re-payment but allow the homeowners to pay back the special assessment over time. In either of the above scenarios, the Association would not need to wait until all the money is collected from homeowners before beginning renovation. On the downside, there are fees associated with closing a loan such as the loan origination fee, attorneys’ fees for the attorney who represents the Association as well as the attorney who represents the bank and miscellaneous fees for the title examination and recordation of the loan documents. Also, the Association must pay interest on the outstanding balance. However, the interest rates today are at record lows and the expense of obtaining a loan can sometimes seem relatively small when compared to the increase in property values in the Community as a result of the capital improvements and repairs.

As with all loans, a variety of issues must be considered when determining which lender to go with: Who has the best terms and lower up front costs? Which closing process is less onerous? Typically a lender will provide the Association with a loan commitment letter which lays out the terms of the loan including the proposed interest rate, term of the loan and a date by which the offer will expire. An Association can and should shop the loan market and obtain commitment letters or at least discuss terms with several lenders. The Association can then decide which proposal is the most favorable and advantageous for their Community and can execute the commitment letter from that particular lender. At that point the loan is locked in and must close by the date shown on the commitment letter or the Association must renegotiate a loan at possibly less favorable terms.

Before an Association commits to obtaining a loan, they should first review their documents to determine if they have the authority to obtain a loan of this sort, and if so, what procedures must be followed to approve the loan. Typically the documents provide that the Board has the authority to enter into a loan upon the approval by a certain percentage of the homeowners. However, some documents provide that the Board of Directors can approve the loan without a vote of the homeowners. In some rare cases, the documents may have to be revised in accordance with their existing amendment procedure to allow the Association to borrow money for the purpose of renovating, repairing or replacing capital improvements. Additionally, Lenders usually require a low percentage of delinquencies in the Community, a title exam, certified articles of incorporate from the Secretary of State, financial statements of the Association, general operating budget, minutes of meetings and the authority of officers to sign closing documents as well as an opinion letter from the attorney representing the Association which provides that the proper procedure was followed to acquire the loan. So, what does all this mean in terms of costs and fees to the Association? Dollar amounts vary, but generally an Association can expect to pay the following: loan origination fee (percentage of the amount to be borrowed), interest rate over the term of the loan (whatever that may be), attorney fees in connection with the review of documents, opinion letter, etc. ($2,000 – $3,500), attorney fees to close loan and represent the bank ($1,500 – $2,000).

Closing the loan is usually swift and painless if all the leg work is done correctly. Banks usually require the establishment of a bank account with that particular bank and will sometimes request a minimum balance in that account or a money market fund. Sometimes they will simply transfer the funds into the general operating account of the association. Once the documents have been signed and the money is in the bank, the Association can begin to draw on these funds and start the repairs.

When confronted with major renovations and repairs to capital improvements in your Community, a long term loan is an excellent way for the Association to finance these costs and protect homeowners from the burden of an immediately payable special assessment. The Association should review their community documents to make sure they have the ability to obtain a loan of this type, research the terms offered by several lenders, and consider the benefits and burdens of this type of loan on its members. Remember, your condo may be crumbling, but your Association has tools at its disposal to make sure the financial fall-out may not be so bad after all.

Strategies for Addressing Issues Associated with Residents with Mental Illnesses

At first it looked like one of the residents was just a poor housekeeper. Plastic bags of garbage were visible through the windows of her condominium unit and dozens of cats were clawing at the windows. The Board was concerned about the presence of rats in the community and the smell emanating from the unit. They wanted to exercise the Association’s right of abatement to remove the trash and clean out the unit. After giving proper notice, the management company arrived with a cleaning crew. The resident called the police. Despite having been shown the provision in the Declaration of Condominium, the officer, not well versed in community association law, refused to let the cleaners in without an order from a Superior Court Judge. The Association’s attorney filed an action seeking to enjoin the resident’s interference with the Association’s right of abatement. At the hearing, the resident appeared and it was clear to the Judge that the resident suffered with mental illness. The Judge, the resident and the Association’s attorney worked out mutually agreeable dates for the Association to come in to the unit and clean.

According tostatistics compiled by the National Institute of Mental Health, an estimated 22.1 percent of Americans aged 18 and older, approximately 1 in 5 adults, suffer from a diagnosable mental disorder in any given year. This figure translates into 44.3 million affected people. While these statistics include some conditions which are not disabling, 40 percent of people who qualify for disability benefits receive them for mental disorders including major depression, bipolar disorder, schizophrenia, and obsessive-compulsive disorder.¹ In the last year, this firm alone has had four serious cases dealing with behaviors which were technically covenant violations but clearly were the result of mental illness. Multiply that by the number of law firms and attorneys practicing in this area and it is easy to see that it may be time to have a discussion about strategies for dealing with mental health issues.

Pursuing remedies available through an Association’s governing documents may provide permanent relief through the termination of a lease of a tenant, or temporary relief as in the case above. Fines, while meaningful in some instances, may be well beyond the concern of someone who is suffering with severe mental illness. Sometimes the remedies contemplated by an Association’s governing documents will address the behavior but not the problem. Minor but persistent violations of the covenants can be frustrating to other residents and members of Associations’ Boards of Directors, but may not reach the level of warranting the expense associated with obtaining equitable relief. Doing nothing violates the Board’s duty to the other members, but if using the remedies available in the documents won’t work, what is the Board to do?

As a threshold matter, the Board of Directors needs to be mindful of the Federal Fair Housing Act, 42 U.S.C. § 3601 et seq. (1968, 1988) (“FHA”) which contains several provisions which hold that mental illness is a handicap which is encompassed by the FHA.² This may impact an Association’s policies on dealing with residents suffering with mental illnesses. In Schroeder v. De Bertolo, 879 F. Supp. 173 (D.P.R. 1995) the family of a deceased condominium unit owner sued the individual board members and a staff member claiming that they had brought groundless civil claims against the owner, entered the unit without permission in an effort to intimidate the owner, and prohibited her from using the common areas because of her mental illness handicap. While we do not know how the case ultimately was resolved, the Court refused to dismiss the claims finding that a condominium board and staff who interfere with an owners right to quiet enjoyment and use of the unit and common areas may be liable under the FHA. The FHA requires Associations to make reasonable accommodations to persons with handicaps, including mental illness. Therefore, even if it violates an Association’s controlling documents, courts may find that a mentally disabled person may be entitled to have a pet. This was the holding in a case involving an apartment lease, in which a court found that under the FHA if the pet is necessary to ameliorate the mental disability of the resident, then the FHA would over-ride the provisions of the lease. Crossroads Apartments Associates v. LeBoo, 578 N.Y.S. 2d 1004 (City Ct. 1991). Even disruptive behavior may be entitled to some protection under the FHA. Finally, while the FHA states that a housing provider is not obligated to permit an individual to live in a dwelling if the tenancy would constitute a direct threat to the health or safety of other individuals, nonetheless the resident is entitled to a reasonable accommodation if the disruptive behavior is caused by a mental illness. Housing Authority of the City of Boulder, 909 F.Supp. 814 (D. Col. 1995). It may be advisable for associations to include handicaps generally and mental illness in particular, in the non-discrimination provisions in their Declarations in order to avoid or ameliorate challenges brought under the FHA.

Clearly Boards would prefer to never deal with situations arising from the manifestations of mental illness. Nevertheless, enlightened Boards may choose to see these situations as an opportunity to educate themselves and the membership of the Association about mental illnesses and to try to move beyond their own prejudices. This is an opportunity to be a positive influence in someone’s life and to intervene at a crisis point in a constructive manner. The first step would be to ascertain whether the resident has any local family members or friends who can be contacted in the event that a crisis appears to be building. This should ideally be done when the resident is not symptomatic. The Board may generate an “emergency contacts” directory for all of the members. Secondly, Boards should consider whether they need to cite symptomatic individuals for every covenant violation. If someone is not cutting their yard, for example, it may be possible to provide that service for them for a limited time and bill it back to their account as a specific assessment. Oftentimes numerous communications from the Association and/or its management company or attorney will only add to the stress and exacerbate a person with mental illness’ condition. Third, every county in Georgia has a Department of Family and Children Services who will investigate calls of neglect. Fourth, many counties, at least in the metropolitan Atlanta area, have specially trained mental health units of the police departments who will come and interview people and suggest available treatment options. If it appears that an individual is a danger to themselves or others, the investigating officer may obtain an emergency court order for involuntary in or out patient evaluation. Fifth, any person may file an application with the community health center for a court ordered evaluation. The community mental health center will then make a preliminary investigation and, if the investigation shows that there is probable cause to believe that the person requires involuntary treatment, then it will seek a petition in Probate Court for an order compelling treatment. (O.C.G.A. § 37-3-61 (1).) Individuals may petition the court directly, but those petitions need to be accompanied by a certificate from a physician or psychologist, a requirement which may be difficult to meet. Most people who suffer with mental illnesses, of course, are not violent and the criminal justice system is ill-equipped to constructively respond to these issues. However, as a last resort, if a resident actually injures someone else, or is threatening other residents in such a manner that others have a reasonable apprehension of immediately receiving a violent injury, it may be necessary to call law enforcement for assistance.

As pointed out by Gary Poliakoff: “These situations create serious moral and ethical questions as to the obligations we have to each other when we live in a communal setting. In many instances there is no legal duty on the association’s part to cope with an individual unit owner’s problems. However, the absence of a legal obligation does not eliminate the community’s moral and ethical obligations.” ³

1 These statistics are compiled at www.nimh.nih.gov. Similar statistics can be reviewed at the National Mental Health Association’s website: www.nmha.org.

2 For a general discussion, see Richard S. Ekimoto’s “An Overview of Reasonable Accommodations Under the Federal Fair Housing Act,” J. Comm. Assoc. Law Vol. 4, No. 2 (2001).

3 Gary A. Poliakoff, “Coping with Problems of Aging and Infirm Owners,” Common Ground, September/October 1986.

Many prospective purchasers and homeowners seek out home financing insured by the Federal Housing Administration (“FHA“) in order to purchase or refinance condominium units.  In general, these loans have less stringent income requirements than solely private financing and require less of a down payment toward a purchase.  These loans are so popular that, reportedly, up to 50% of the condominium units nationwide are financed by FHA-backed loans.  Obtaining a loan insured by the FHA has become more difficult in the past few years, however, due in part to a wholesale change to FHA’s guidelines governing qualification for these loans.  Not only must a loan for a particular condominium pass underwriting muster, but the condominium project must also meet a specific set of guidelines including with respect to owner-occupancy ratios, assessment delinquency rates, and the amount of commercial space.  The manner in which some of the FHA’s guidelines are construed during the submittal process, however, may result in what amounts to a comedy of errors.  The latest example of this involves a provision of the Federal National Housing Act that provides, in part, that no portion of the housing covered by a mortgage insured by the FHA shall be used for “transient or hotel purposes.”  The National Housing Act defines transient or hotel purposes to mean: (1) any rental for a period less than 30 days, or (2) any rental if the occupants are provided customary hotel services such as room service, maid service, laundering of linens and similar services.

Most condominium association board members might breathe easy when, upon reviewing their condominium’s leasing restriction provisions, they see that the condominium declaration specifically prohibits use of a unit for transient or hotel purposes.  However, many leasing restriction provisions provide an exemption for lease transactions entered into by the association or by a lender that has taken possession of a unit through foreclosure.  These exemptions are usually intended to exempt a mortgagee or the association from a restriction on the number of units that may be in lease at any given time; however, the way many are written, the entire leasing restriction provision falls under the exemption.  To the FHA, this exemption is basically taken as allowing use of units for transient or hotel purposes and causes an otherwise eligible condominium project to be ineligible for FHA-insured financing, even if the condominium had previously been approved.

To the extent that a board of directors of a condominium association has determined that obtaining FHA condominium approval is an association function and in the best interests of the condominium, the FHA’s interpretation of its guidelines has historically put the board between a rock and a hard place.  As a general matter, the foreclosing lender exception cannot be removed from the declaration or modified without an amendment approved by the requisite membership vote (usually 2/3 of the eligible votes).  Section 44-3-106(c) of the Georgia Condominium Act does allow a board of directors to amend the condominium declaration “as may be required to conform to mandatory provisions of this article [Georgia Condominium Act, O.C.G.A. § 44-3-70, et seq.] or of any other applicable law without a vote of the unit owners”; however, compliance with the FHA guidelines is mandatory only to the extent that condominium project approval is sought.  There is no reported case law in Georgia supporting the position that, where a condominium project does not have FHA condominium project approval, a condominium association’s board of directors may unilaterally amend its declaration of condominium in order to comply with the FHA guidelines that do not yet apply.

Recently, however, the FHA began allowing a second route to attaining FHA condominium approval even if a condominium’s declaration “allows” use of a unit for transient or hotel purposes.  The association’s board of directors may provide a signed and dated written statement on association letterhead that pronounces there are no units within the condominium currently rented for less than 30 days and no units where tenants are receiving “any services normally associated with a hotel.”  If the association provides this type of statement rather than amending the condominium declaration, then the lender originating an FHA-backed loan and the borrower each must also provide a statement to the FHA that they will not allow use of the unit for transient or hotel purposes.

While at first glance it appears easier for an association to provide an additional certification from the board regarding transient rentals than to have an amendment to the declaration adopted by the membership, one must wonder what the board member signing this new certification to the FHA needs to do to assure him or herself that no units in the condominium are being rented for less than 30 days and no tenants are receiving services normally associated with a hotel.  With its new policy, FHA seemingly has replaced one hoop that an association must jump through in order to obtain FHA condominium project approval with another one that perhaps is slightly lower – instead of obtaining the affirmative vote of approximately 2/3 of the members to amend the declaration by deleting the foreclosing lender exception, the board must now obtain information from every unit owner leasing their unit about the length of term and services provided to their tenants.  It’s almost enough to make one throw their hands up in the air and laugh out loud!

Who Owns the Property, Anyway?

More and more frequently our office has been told by an owner in response to a demand for payment of their annual or special assessments or to enforce their community’s use restrictions that: “I don’t own that home anymore, I sold it under a lease-purchase agreement.” Until the sale of the home closes, however, a lease-purchase is a lease, plain and simple. Lease-purchase agreements, in and of themselves, do not convey title to the home nor do they release the owner from his or her obligations under the community’s Declaration. The tenant (lease-purchaser) will usually have certain rights and obligations under the Declaration as a tenant or as an occupant; however, these rights and obligations are not equivalent to the rights and obligations of ownership. In addition, the lease-purchase arrangement would be subject to any leasing regulations contained in the community’s governing documents.

Usually people enter into lease-purchase agreements (these agreements have many names, including “lease options,” “options to purchase,” etc.) because they are unable to obtain conventional home financing. Generally, the tenant agrees to lease the home for some specified time period after which a closing will take place and the tenant will purchase the home. The landlord agrees to put a certain percentage of the monthly rent toward the down payment. If the tenant does not make all of the payments until the time of the closing or is unable to close on the date specified, the agreement terminates, the landlord keeps all of the money earmarked for the down payment and either evicts the tenant or renegotiates the agreement.

Regardless of the terms of a lease-purchase agreement, until a deed conveying the home to someone else is recorded, the owner is still the record title owner of the home for purposes of the community’s Declaration. Most Declarations, whether applicable to fee-simple lots or to condominium units, provide that an “Owner” is the record title owner of the home; that is the person or persons (except for a mortgagee) shown on a conveyance deed recorded in the land records of the county in which the property is located. Therefore, where record title has not been transferred, under the Declaration, the lease-purchaser is treated as a tenant and the owner is, well… the owner.

Generally, lease-purchase arrangements are subject to a community association’s leasing regulations contained in the Declaration because those regulations usually define “leasing” broadly as occupancy of a home by any person other than the owner for which the owner received any consideration or benefit, including, but not limited to, a fee, rent, service or gratuity. If applicable, leasing regulations might cap the number of homes allowed under lease at any one time, provide for a minimum lease term, require that leases be in writing and address violations of the community’s rules and regulations by a tenant. Despite the broad definition of “leasing”, leasing provisions might exclude certain situations if there is a special relationship between the owner and lease-purchaser, for instance, allowing occupancy by a roommate of an owner-occupant, occupancy by a member of the owner’s family, occupancy by one or more wards if the home is owned by their legal guardian, or occupancy by one or more beneficiaries of a trust if the home is owned in trust by the trustee.

Lease-purchasers generally cannot exercise rights of membership in the association, but may have rights to use and enjoy common property or recreational amenities serving the community. Similar to the definition of “Owner” in most Declarations, membership in the community association, including the authority to exercise the rights of membership, is usually reserved for the record title owner of a home in the community. On occasion, a Declaration will provide that owners may (or automatically are deemed to) delegate to their tenants the right as members of the association to vote on association matters and hold a position on the board of directors or as an officer of the association. More often, however, the occupant of a home who is not the record title owner, whether a tenant or otherwise, only has privileges to use the recreational facilities and other amenities of the community. Regardless, a lease-purchaser has no greater rights with regard to the association than does any other tenant who is not the record title owner.

Under each community’s Declaration, an owner, not the lease-purchaser, is primarily responsible for paying annual and special association assessments charged against his or her home. Some governing documents may authorize the association to collect those charges from the lease-purchaser in the event the owner fails to pay the charges; however, such authority does not excuse the owner from the initial obligation and does not obligate the association to look to the lessee first, or at all. Regardless, if the association assessments are not paid by either the owner or the tenant, the association will usually have lien rights against the home, placing the issue quite literally at the owner’s door step.

In addition, owners are usually responsible for ensuring that occupants of their home, including lease-purchasers, abide with the provisions of the community’s Declaration, Bylaws and rules and regulations. While many Declarations authorize the association to enforce its governing documents directly against a tenant, they will also provide that the owners are responsible for making their tenants aware of the governing documents and ensuring that the tenants comply with such documents. In fact, if enforcement action against a tenant is not effective, many associations have the authority to charge and collect fines from the owner for the tenant’s violations. Further, if applicable, a community’s leasing regulations may provide that a lease-purchaser’s violation of the Declaration, Bylaws or rules and regulations of the association constitutes a default under the terms of the lease, and may authorize the owner, or in some cases the association if the owner is unwilling, to terminate the lease and evict the lease-purchaser in accordance with Georgia law. Regardless, most Declarations are clear that, in the end, the homeowner is responsible for ensuring that occupants of their home comply with the Declaration, Bylaws and rules and regulations and will remain fully liable for any violations.

In summary, lease-purchase agreements do not transfer title to the home, do not change the rights and responsibilities of the homeowner under a Declaration to ensure that his or her home complies with the community’s governing documents and that the assessments charged against the home are timely paid, and do not afford the lease-purchaser membership in a homeowners association. Rather, when a lease-purchase agreement is entered, under the community’s Declaration, the lease-purchaser should probably be treated as any other non-owner occupant and the owner will be treated as an owner. The bottom line is that a lease-purchase is a rental until a closing occurs and really shouldn’t be looked at as anything else.

This article is intended as a general overview of some of the issues and considerations associated with the treatment of parties to a lease-purchase agreement under a community’s governing documents; however, lease-purchase arrangements are all different, as are each community’s governing documents, and the discussion above will not necessarily apply universally. As such, we would suggest that community associations contact their legal counsel for advice if interested in determining the various rights of the parties to a lease-purchase agreement with regard to the association.

Life on the Golf Course

The house I grew up in was on a street called Golf Avenue. No house on the street had a view of the golf course. In fact, the street dead ended into a large, nicely landscaped privacy fence behind which was a parking lot for the city course. Interesting marketing! Nonetheless, the golf course played a large role in my life. It provided all of the neighborhood children with perfect snow sledding hills in the winter and a constant source of income in the summer. We spent hours collecting balls from the woods near the fairways and set up shop on Saturdays near the green on the first hole where we sold the balls back to the golfers for twenty five cents each. Our parents told us that the ponds and streams had live electrical wires running through them which would electrocute us if we so much as put a foot into them. I still marvel that my brother survived. As teenagers, the course was the perfect place for other pursuits on a summer night. With the explosion of interest in golf and advent of growth of golf communities, the relationship between golf courses and people living adjacent to them has become a little more complicated. Before buying a house which is either in such a community or which sits on the course itself you should keep several issues in mind.

Relationship to the Golf Course

When looking at a house which is on or near a golf course you need to ask a lot of questions! What is the relationship between you and the course? Can you even use the course? If so, on what terms? Sometimes the entity which developed the subdivision retains ownership of the golf course and runs it as a public course which allows people to pay and play. Other times it is operated as a private club. As an owner, you may have the right to join the club and use the course, but what will that cost? There are some communities in which the restrictive covenants require you to join a privately owned golf club when you purchase property in the community. This is definitely something you want to know up front. Is the course an amenity owned by your homeowners association? If so, what does it cost to operate it and are there adequate reserves? Remember, what the sales agent tells you may or may not be true with regard to your legal relationship to the course and your right to use it! Sales agents are generally representing the builder and may have only superficial or in some cases completely incorrect information about the golf course. Visit the club house and find a knowledgeable representative of the golf course owner or operator who can answer your questions.

Who Owns What?

There are often interesting property line issues associated with property adjacent to a golf course. Golf courses often install Out of Bounds markers along or near the boundary with adjacent property. To a golfer, these markers mean that the ball cannot be played from beyond the marker. Even though most players know the rules and will take a stroke and drop a ball inbounds to resume play, it does not mean that a golfer will not go into that area and look for an expensive ball! Keep in mind that the Out of Bounds markers may or may not be the property line. Many owners of homes adjacent to golf courses complain about golfers in their yards, on their patios, in their garden beds looking for balls! Owners may or may not be able to install fences, some restrictive covenants may prohibit them, or limit the style and/or height of the fence. Many golf courses snake their way throughout a community and there can be easements for golf carts across an owner’s property. This may become a maintenance issue as well as a trash issue, as inconsiderate golfers may leave wrappers or cans along the way instead of depositing them in proper trash receptacles. Finally, be aware that there may be non-disturb buffer areas on an owner’s property. While some golf courses have wide open vistas from the houses overlooking the golf courses, some golf course designers value a more wooded and natural look. In conjunction with these designs, there may be twenty five or even fifty foot strips on an owner’s lot upon which an owner cannot cut trees or clear vegetation. Be sure you know both where the property line is and whether there are non-disturb buffers which have been reserved.

Will the course be there forever?

If the homeowners association does not own the golf course, are there restrictions on the property which would prevent it from being developed in the future as homes, a school or a shopping center? In Knight v. City of Albuquerque, 794 P.2d 739 (1990), a court prevented the City of Albuquerque and the developer of the subdivision from using the golf course, which was shown on the subdivision plat, for other purposes even though the developer had reserved the right to build other phases of homes on the golf course property in the restrictive covenants. That court held that the developer had induced people to buy lots by representing that there would be a golf course and that to then retain the power to alter that use would be unfair and violate public policy. Similarly, in Shalimar Association v. D.O.C. Enterprises, Ltd., 688 P.2d 682 (1984), a court prevented the alternative development of a golf course by a subsequent owner of the golf course property until 2025 because the course was shown on a plat and sales materials stated that the golf course would be maintained until 2000 with an additional provision that there could be a twenty five year extension. Georgia has a strong tradition of favoring the free use of property and it cannot be said that courts here would reach the same result. Therefore, if you are concerned about the status of the golf course property, you should check with an attorney before paying a premium for a golf course lot.

Landscape Maintenance Issues

It is not easy to keep a golf course looking perfect. Remember that the grass is going to be cut often, particularly in the summer months, and that they will not be cutting it the middle of the day when the golfers like to play. Many homeowners are surprised when the mowing machines start at five in the morning. Likewise, grass does not stay green without fertilizer and pest control. Expect at least a few days each season of chemical smells. Aeration is another noisy and unattractive process which is necessary to maintain the grass. Irrigation systems may also be noisy and generally run in the late evening or very early morning hours. Don’t be surprised if the irrigation system is fed by treated effluent from the sewer plant serving the area. The treated water is generally more than safe enough for irrigation use but has not gone through the same treatment process as drinking water and will have higher concentrations of things like Fecal Coliform that may not be damaging to your heath but certainly sound distasteful. Finally, it may be necessary or desirable to re-design portions of the course which may involve major earth moving equipment and cause disruption of the view.

General Nuisance Issues

The obvious danger of living adjacent to a golf course is that balls may be sliced or hooked and cause damage to adjacent property or cause injury. Most golfers and golf courses take the approach that owners next to a golf course “came to the nuisance” and assume the risk of damage or injury. Check with your insurer to see whether your homeowners policy will cover broken windows, and if so, how many! Noise has also been cited as an issue. Golfers can be noisy, more often at tee or green areas, but expect “Fore” to be shouted out if you are on the fairway. If the course sponsors a tournament, you can expect hundreds, or even thousands of people to attend.

The thought of living adjacent to several hundred acres of open space which you do not have to maintain is generally appealing and a privilege for which purchasers will pay a premium. Advance planning and consideration of potential issues can eliminate some unwelcome surprises.

As the end of the year approaches, many community associations prepare for annual meetings, holiday parties and similar gatherings that often include sharing food and drink. These get-togethers can be good forums for thanking community volunteers, meeting neighbors, and generally fostering good will throughout the community; however, these gatherings are not always without peril. Where an association-sponsored event includes drinking alcoholic beverages, the association may be exposed to greater liability in the unfortunate event of an alcohol-related injury or death. The general rule in Georgia is that those who sell, furnish or serve alcoholic beverages should not be held liable for injury, death or property damage caused by an intoxicated person except in certain circumstances. See O.C.G.A. 51-1-40(b). These exceptional circumstances include when someone provides alcohol to a minor or to someone who is noticeably intoxicated. Id. In order to minimize an Association’s exposure to this type of “imputed liability,” a board of directors should carefully plan and manage Association events and take certain precautionary measures.

First, the Association should not sell alcoholic beverages unless it is properly licensed to do so and maintains adequate liability insurance. Selling alcoholic beverages includes “indirectly” charging for drinks, including by selling tickets to “exchange” for drinks or charging an additional admission fee for attendees who intend to drink.

If the Association is not licensed but would like to provide alcoholic beverages at an Association-sponsored event, the Association should designate responsible individuals to serve the beverages. These individuals should understand their responsibility with respect to not serving alcohol to a minor or to a noticeably intoxicated person, and the Board should establish some basic procedures to lessen the chances of this. This can include limiting the number of alcoholic drinks each person may have during the course of the event, limiting the number of drinks a single person can order at one time, and verifying the age of anyone the server does not recognize as being of legal drinking age.

In addition, the Board should have some procedures in place to prevent any guest who does become intoxicated from driving. For instance, if the meeting is held in the community, the Board could encourage members to walk to the event. If the event is held outside of the community, the Board could encourage carpooling with a “designated driver” and also arrange for a car or taxi service to be on call for the event. The Association should take reasonable steps to prevent an intoxicated person from driving, but does not need to go through extreme measures such as restraining an intoxicated person.

If the Association hires a caterer to provide alcoholic beverages or otherwise arranges for a cash bar at the Association gathering, the Association should be sure that the servers are properly licensed and insured. The contract for the bar service should include an obligation for the server to indemnify the Association in the event a minor or intoxicated person is served and then causes injury or death. If the Association does not want to provide alcohol, but would like to allow alcoholic beverages at an Association-sponsored event, it can allow attendees to bring their own beverages. By not directly furnishing the alcohol, the Association’s exposure to liability may be significantly reduced; however, at any Association event that involves drinking alcohol, the Board would be wise to designate some responsible individuals to take reasonable steps to ensure that no minors are drinking alcohol and that any intoxicated persons do not drive.

Finally, when planning for the event, the Board should consider obtaining additional host liquor liability insurance coverage. The Association’s insurer should be able to advise the Board as to what types of situations this coverage applies and what situations are excluded from coverage.

End-of- year Association gatherings can be beneficial to a community in many ways. An alcohol-related injury or death associated with such an event would negate any such benefit and open up the Association to liability. With careful planning and management, a board of directors can reduce the Association’s exposure to liability for alcohol-related accidents and can help keep community members safe and happy for the coming year.

“Eighty percent of success is showing up” – Woody Allen

The quote “Eighty percent of success is showing up” has been attributed to Woody Allen in reference to the notion that if one wants to aspire to something –whether it is writing, acting or something else – he or she needs to start doing that thing. While Allen discussed “showing up” in this manner in a metaphorical sense, a literal interpretation can apply to community associations. If the board of directors of your community association would like the association to take some action that requires approval of the members, the best way to ensure success is to have the association members actually show up at an association meeting where the action is to be considered. When proposing association actions to be approved by the membership, many boards of directors collect votes by proxy, by which a member entitled to vote but unable or unwilling to attend a meeting may delegate its voting rights to another individual who will be present at a meeting. Boards also often rely on proxies to count toward establishing a quorum for an association meeting. The bylaws of some associations specifically authorize a quorum requirement to be satisfied based on the presence of a certain number of members “in person or by proxy.” In the absence of this or similar language, however, an association action taken at a meeting where quorum was established through the use of proxies may be successfully challenged. Sometimes you really need members to show up.

The importance of having association members “show up” is illustrated by a recent opinion of the Georgia Court of Appeals in Demere Landing Condo. Assn. v. Matthews, (Ga. App., Feb 22, 2012). The dispute considered in Matthews involved a condominium association that gathered for a special meeting in order to consider and vote on a special assessment to pay for replacement of the roofs in the condominium. The bylaws of the association specifically authorized members to cast votes by proxy. The bylaws also provided that in order to establish a quorum – the number of members who must be present in order to legally call the meeting to order and take action – there had to be present “members entitled to cast 51% or more of the total authorized votes” of the association. The number of individuals present at the meeting together with the number of proxies submitted would have satisfied the quorum requirement; however, a homeowner objected to calling the meeting to order, stating that the proxies should not be counted toward the quorum requirement. The special assessment was adopted over this objection, the roofs replaced, and the special assessment billed to each owner. The objecting owner refused to pay and eventually filed suit against the association to challenge the special assessment on the grounds that it was not properly adopted due to lack of quorum at the association meeting. The Georgia Court of Appeals agreed that the special assessment was not valid.

In coming to its conclusion, the Court in Matthews applied the longstanding Georgia common law rule that use of a proxy – whether to cast a vote or to establish quorum – is not allowed. The Court looked to a Georgia Supreme Court decision from 1928 and to the provisions of the Georgia Condominium Act for the proposition that proxies cannot be used in establishing a quorum “[u]nless the condominium instruments or bylaws provide otherwise….” See O.C.G.A. § 44-3-103. In other words, in the absence of language specifically authorizing the use of proxies to count toward the quorum requirement, the requisite number of members must show up.

Most directors of community associations want association members to actively participate in community association matters. The recent decision of the Georgia Court of Appeals has made it clear that, unless your bylaws authorize members to cast votes and be represented at meetings by proxy, having members show up to meetings can mean the difference between an association’s actions being upheld or invalidated. Before proposing actions for approval by the association membership, board members should review their community’s governing documents to determine the requirements for taking such action and for holding a valid meeting at which such action is considered, including by satisfying the quorum requirement. After all, the success of a proposed action to be approved by membership may depend on having the members show up.

Not Always an Association Issue

At Blue Sky Condominium, Phyllis Morris had just plopped down on the couch after a hard day’s work when the smell of cigarette smoke wafted in from the condominium unit next door. She grabbed her laptop and furiously typed out an e-mail to the members of her Association’s Board of Directors demanding that the Association take enforcement action against her neighbor to cause him to stop smoking inside or, in the alternative, to install smoke filters and other mitigation devices. Across town in the Picket’s Landing Community, after several weeks of arguing with his obstinate neighbor about how the fence separating their respective yards should be maintained, Bobby Frost calls the Association’s property manager insisting that the Association use its authority to compel performance of the maintenance in a particular manner. All the while, down the road, the Board of Directors of the Echo Walk Condominium Association is considering an issue brought to light by a member whose upstairs neighbor removed the carpeting in his unit and installed hard wood floors which amplify the sound of each footstep taken upstairs.

Community associations are frequently called upon to resolve disputes between neighboring residents or to otherwise stop behavior that one neighbor may perceive as harmful, annoying or threatening. The behavior may be specifically prohibited by the community’s restrictive covenants or it may be covered by an anti-nuisance provision in the governing documents that generally prohibits activities that endanger another resident’s health or unreasonably disturb, embarrass or cause discomfort to other residents. Obviously, where a particular behavior is not addressed in a community’s Declaration of Covenants, the Association may not have authority to address the situation. Even if the behavior at issue is proscribed by the restrictive covenants, Association action to enforce a violation of the Declaration may not be appropriate. For example, some complaints may be driven by an unrelated personal disagreement between the parties. Accordingly, members of a Board of Directors should approach neighbor disputes with caution and be mindful about “taking sides.”

When presented with a dispute between neighbors, Board members would do well to listen to each side of the story and consider whether becoming involved is in the best interest of the Community. In general, each member of Board of Directors should discharge his or her duties in a manner the director believes in good faith to be in the best interests of the Association. See O.C.G.A. § 14-3-830. In determining whether the Association should pursue an action to enforce their community’s restrictive covenants in a given situation, the Board should first ask whether taking such action would be procedurally fair and reasonable, and whether the substantive decision as to whether to take such action was made in good faith and is reasonable and not arbitrary and capricious. See Atlanta Georgetown Condo. Assoc., Inc. v. Chaplin, 235 Ga. App. 460, 461 (1998). For example, the Board of Directors should consider whether the complained-of-behavior affects members other than the complainant and/or the membership at large; the likelihood of prevailing if enforcement action were commenced; the cost of pursuing enforcement; whether the Association has enforced the covenants in similar situations in the past and addresses these situations in a uniform manner; and whether the Board intends to pursue such enforcement actions in the future if a similar situation occurs.

Finally, Board members should be aware of alternatives for resolving neighbor disputes other than the Association taking action to enforce the Community’s restrictive covenants. For example, individual owners have the right and authority to enforce their Community’s restrictive covenants in the same manner as the Association. Because an individual owner may be the only one harmed, he or she may be in a better position than the Association is to seek a remedy under the applicable governing documents. As this article goes to press, a news article came out describing litigation involving a homeowner who performed landscaping work in contravention to the restrictive covenants, resulting in a neighbors’ lot flooding. The injured homeowner sued the Association to compel enforcement of the covenants but also separately sued and then came to a settlement with the offending neighbor. A Gwinnett County Superior Court judge found that the homeowners association had no affirmative duty to correct the flooding in light of the injured homeowners’ right to enforce violations of the restrictive covenants and their settlement agreement with the neighbors. It is unclear whether the focus of the decision rested on the fact that the injured homeowners had their own remedy apart from any action by the Association, or that the injured homeowners came to a settlement agreement with their neighbor and should not be able to force the Association to take further action in this respect. The article indicates that the injured homeowners may appeal the Court’s decision.

In any event, applicable law and this recent Court decision suggest that Associations have a choice as to whether to become involved in disputes between neighbors. In coming to a decision either way, an Association’s Board of Directors should investigate the situation, consider why it is coming to its decision and record its reasoning in well documented minutes so that, in the event that challenge is made, there is sufficient evidence to defend the Association’s actions or inaction in any given instance. Following this course might not always result in peace and harmony between neighbors, but Board members should sleep well know that they have fulfilled their duty to the membership.