Category: Articles

Do your Association’s Use Restrictions Bar Political Yard Signs?

Like mushrooms after the rain, they appear out of nowhere. What? Advertising for candidates for political office, of course. While few people would want to thwart the democratic process, do we really have to look at yards with multiple yard signs for months at a time? Doesn’t the Declaration of Protective Covenants specifically say that no signs are permitted within the community? And if it does, does that mean the Association cannot let my neighbors know who my candidate of choice is? Doesn’t this restriction violate an owner’s right to free speech as guaranteed by the United States and the Georgia Constitutions?

In 1994 the United States Supreme Court issued a decision in a case from Missouri called the City of Ladue v. Gilleo. This case did not consider a restrictive covenant, but a city ordinance. A homeowner in Ladue had placed a 24 by 36 inch sign on her front lawn which said “Say No to War in the Persian Gulf, Call Congress Now.” The sign disappeared. She put up a second sign which was knocked over. When she reported these incidents to the police she was told that the signs violated a city ordinance which generally prohibited signs. She asked the city for a variance and was denied. She then filed an action against the city, the mayor and the members of the city council in Federal Court asserting that her civil rights had been violated. In response to the lawsuit, and perhaps recognizing that its ordinance was over-broad, the city enacted a new, more specific ordinance. The homeowner amended her lawsuit challenging the new ordinance as well. The trial court agreed with the homeowner and issued a ruling prohibiting the city from enforcing its ordinance. The city appealed to the court of appeals which balanced the city’s substantial interests in enacting the ordinance (interests such as obstructing views, distracting motorists, etc.) with the homeowner’s constitutional rights of free speech and concluded that the city’s interests were not sufficiently compelling to justify the abridgment of the homeowner’s rights. The U.S. Supreme Court agreed.

While the City of Ladue v. Gilleo case dealt with a city ordinance and not a restrictive covenant, it caused great concern in community association circles. See “Sign of the Times: Will a U.S. Supreme Court Decision on municipal sign restriction affect association CC & Rs?” Common Ground, September/October 1994. That article predicted that covenant restrictions of signs would be challenged in a court and warned “There is no telling how a court may rule, but one thing is certain: few associations will wish to cross that bridge. Associations should be cognizant of constitutional rights and make every possible effort to ensure that such rights are honored and protected.”

It did not take too long in Georgia for the case involving a sign restriction to be decided. (Bryan v. MBC Partners, L.P., 246 Ga. App. 549 [541 S.E.2d 124] [2000].) Skyler D. Bryan bought a home in a planned community established by MBC Partners, L.P. He hung a seven foot by three foot sign on the front of his house which stated “Before You Buy a Home In Here PLEASE See US.” MBC Partners petitioned the court for a temporary restraining order, which was granted. After an evidentiary hearing, the Superior Court enjoined the display of the sign and found that the presence of seasonal decorations and inherently temporary signs, such as a yard sale sign or a notice of a lost pet do not fall within the covenant restriction regarding signs. Interestingly, the Superior Court ruled that enforcement of the sign restriction did not violate Bryan’s free speech rights. Bryan appealed the case to the Supreme Court of Georgia, which curiously transferred it to the Court of Appeals. The Court of Appeals made short work of Bryan’s argument that the restrictive covenant violates public policy with respect to restraint of free speech. The Court wrote: “[A] person may waive or renounce what the law has established in his favor when he does not thereby injure others or affect the public interest. This ancient rule applies to all the private relations in which persons may place themselves toward each other, and includes the waiver of constitutional rights.” In the Court’s view, Bryan contracted to abide by the restrictive covenants when he bought his property, and that in so doing, he had freely waived a constitutional right to express himself through the erection of signs on his property.

In it’s holding, the Court of Appeals in the Bryan case said that the trial court did not abuse its discretion in restraining Bryan’s violation of the restrictive covenants by hanging this unapproved non-commercial sign from his residence. This raises a question about whether other types of communications, such as political free speech would be viewed in the same way. Political speech, the City of Ladue case aside, has traditionally been treated with more scrutiny by the courts.

Because a yard sign promoting a particular political candidate is “inherently temporary” such as the yard sale or lost pet signs referred to in Bryan, and because it constitutes political speech, I believe it may well fall outside of a restrictive covenant which bans signs. Nonetheless, an Association, pursuant to its rule making authority, can certainly limit the size, number, placement of political yard signs as well as the length of time that such signs can be displayed.

How Residential Associations Relate to their Commercial Neighbors

With the downward turn in the economy and the upcoming trends regarding environmental and life-style concerns, a new focus has been brought on the concept of developing projects to include both residential and commercial components. Generally conceived closer to city or as their own “town” centers, mixed-use projects may include multi-story buildings consisting of offices and stacked residential flats over street level retail or restaurant spaces, “horizontal” developments consisting of street front commercial units with a residential component at the back of the project, or any other number of variations.

The interests and priorities of commercial occupants in a mixed-use project do not always square with those of the residential occupants. For example, while retailers may want increased vehicular and foot traffic and vibrant “street life” to foster their business, residents may want to restrict traffic to foster a quieter, “more residential” feel. Residents may want to focus maintenance dollars on amenities and other interior common areas from which the commercial occupants are probably restricted. To say the least, operating and maintaining a community in which owners of differing types of property have competing interests and priorities can be a challenge for both business owners and residents. In master-planned mixed-use communities, the manner in which the community is legally established will impact the extent to which the residents may exercise authority over the use and maintenance of certain facilities serving the community and allocation of association costs. This article will consider three areas of concern in to mixed-use communities where the legal framework impacts the extent of such authority: parking, cost sharing and use.

The amount and location of available parking is often at issue in mixed-use communities. In most municipalities in the metro Atlanta area, zoning requirements mandate a certain number of parking spaces for a project based on the size and use of the commercial areas and the number of residential units. The community’s governing documents determine who has rights to use and control the parking areas of a project. For example, if a mixed-use community is structured under the umbrella of a master association with each of the residential and commercial components under separate sub-associations, the parking area might not even legally be part of the residential component. In situations like this, the residents may have rights to use certain parking spaces, but they have no authority to control access or traffic patterns. The residents may be in a similar position where the residential and commercial components are completely separate tracts without an umbrella association but are covered by an easement and cost sharing agreement, which establishes a shared use, maintenance and cost sharing arrangement. Some developments have separate, stand-alone parking components that are leased back to a residential association or another third party. These arrangements are completely project specific, and it would be prudent for a board of directors to review the legal framework for their community in order to understand the scope of their association’s authority in this respect.

The allocation of common expenses in mixed-use communities also tends to cause a great deal of confusion. The 2009 opinion of the Georgia Court of Appeals in Museum Tower Condominium Association, Inc. v. The Children’s Museum of Atlanta, Inc., 297 Ga. App. 84 (2009), illustrates this. That case involved a mixed-use condominium consisting of 167 stacked residential flats over 2 street-level commercial units. The condominium declaration established certain interior areas and amenities of the building as limited common elements available only for use by the residential units. The condominium association levied assessments against the commercial units based on the percentage interest in the common elements for all association expenses and without any setoff for expenses related to those limited common elements exclusively serving the residential units. The commercial unit owner insisted that they should not be charged for costs associated with areas of the condominium available for use only by the residential units. In reviewing the language of the assessment provision of the condominium declaration, the Court found that the board was required to assess any expenses associated with the limited common elements against the units to which the limited common elements are assigned. Therefore, the association could not charge the commercial units for these areas. Similar to the situation with parking, the manner in which costs may be allocated in a mixed-use community depends on the particulars of the governing documents and, therefore, may vary from project to project.

A long-standing general rule under Georgia law is that the owner of land has the right to use the property for any lawful purpose, and restrictions upon an owner’s use of the property must be clearly established and must be strictly construed. If the residential and commercial components are under a single association, the governing documents generally will spell out some specific allowed and prohibited uses; however, the commercial component will likely be treated differently than the residential component with respect to use restrictions, maintenance obligations and common expense assessment obligations. Further, the governing documents may require that, to be effective, any covenant amendment or rule that adversely impacts the commercial component must be approved by the commercial owner(s). Where the residential and commercial components are established as separate sub-associations under a master association, any issue the residential association has with the commercial uses would likely need to be addressed at the master association level. Both the residential and the commercial components likely will have representation on the master association board; and any significant changes or enforcement action would likely require cooperation and compromise on behalf of both groups. Similarly, where the different components are established as separate tracts covered by an easement and cost sharing agreement, the residential component will have little say into how the commercial component operates unless expressly set forth in the easement and cost sharing agreement and as controlled by local or state law.

The legal framework of mixed-use communities presents unique and, sometimes, complicated issues with respect to how the owners within the various components interact and may give input into the governance of the community. Regardless of the legal framework, if both the commercial and residential owners are sensitive to the interests and concerns of their mixed-use neighbors and actively cooperate in the administration of the community, the interests of both parties will be protected. The better the owners know the governing documents and the more they know before they purchase in such a community, the more likely it is that their expectations with respect to the community’s governance will be met and that community as a whole ultimately succeeds.

SOME HINTS AND GUIDELINES TO CONSIDER WHEN USING E-MAIL

LOL, $0.02, B4N, F2F* Do you recognize any of these expressions? If so, you may be spending some time “on-line” communicating with others. E-mailing has become a part of many people’s daily personal and professional lives. Community Associations recognized very quickly that e-mail and web-hosting is a very effective method of reaching their membership and keeping owners up to date on all the neighborhood news: due dates for assessments, parties by the pool, and available baby-sitters. Many Boards of Directors routinely use e-mail to communicate with each other and their service providers, including their attorneys. Unfortunately it seems like no good thing comes without a cost, and the ease of e-mail has created certain exposure to Boards and members of associations who: 1) Are not circumspect in what they write in e-mails; 2) Are not careful in who they send e-mail to; and 3) Do not realize that e-mail communications are not necessarily private.

WATCH WHAT YOU SAY, HOW YOU SAY IT AND WHO YOU SAY IT TO!

1. E-mail is sometimes an extension of previous conversations or is sent in response to a situation. The context of the e-mail is missing, however, and therefore it is easy for recipients of such e-mails to misinterpret the message. This causes a more serious issue when e-mails are produced as “stand alone” documents at a later date. For example, a simple request to move some files from an office to the file room could be made in an e-mail as: “Please get rid of the files in my office.” Imagine how this could be misinterpreted if read out of context!
2. The “tone” of e-mails is often misunderstood. Some e-mailers will capitalize words they want to emphasize, but the recipient may well take this as “shouting.” Likewise many words have multiple meanings and it is difficult to know exactly what someone is intending when you cannot immediately question the sender about their true intent and jump to erroneous conclusions.
3. Be sure to proof read and spell check e-mail. Errors in spelling and punctuation reflect poorly on the sender. Some e-mails are so sloppy that it is difficult to even take the sender seriously.
4. E-mail users need to be careful about what you say. Recently I was forwarded an e-mail in which an owner who did not identify himself by name in the e-mail (but used his street address as his e-mail address) accused the Board in a community chat room of “falsifying documents” regarding the safety of the community pool. Publication of any statement wrongfully accusing individuals of dishonesty or illegal activity constitutes libel in Georgia, an intentional tort. In fact, the owner was just disgruntled about the level of training of the pool attendants, but that is not what he conveyed in the subject line! The owner could well have been sued by the Board.
5. Finally, remember that the “Reply” and the “Reply to All” buttons are right next to each other. Be careful in who you send your e-mail to. A corollary to this rule is that any e-mail can easily be forwarded. If you may not want some people to read your communication, the best strategy is not to send it at all.

E-MAIL IS NOT AS PRIVATE AS IT SEEMS!
E-mail is now an important tool in litigation and as shown above can be the critical piece of evidence in a case. There is no legal privilege for most e-mail communications between individuals and recent federal and state cases have considered and upheld a party’s right to subpoena and review e-mail communications in the same way as letters, faxes and other documents. Drafters, intended receivers and people merely copied on e-mails have been compelled to have their depositions taken to ask about the content and context of e-mails. Recently developers and owners of a parcel of property filed suit in Gwinnett County Superior Court over the denial of a rezoning request. Neighborhood activists were subpoenaed to explain their e-mail communications with county commissioners. According to a recent article in the Atlanta Journal Constitution (“Rezoning battler finds e-mails aren’t private” June 25, 2004), e-mail communications often are primary evidence in discrimination lawsuits. The article quotes John Palfrey, executive director of the Berkman Center for Internet & Society at Harvard Law School: “’People have very little sense of how detailed a record we’re leaving in the Internet space.’”

It is also critical that Board Members discuss whether e-mails to and from their attorney are privileged and create a policy to follow regarding those communications. (See the American Bar Association Formal Opinion (No. 99-413) regarding the Confidentiality of Unencrypted E-Mail between an attorney and her client.)

There is no denying that e-mail can be an easy, quick method of communications, but, as in all communications common sense and a cool head can go a long way to avoiding e-mail disasters. B4N.

*“Laugh Out Loud” “Throwing in your two cents’ worth” “Bye For Now” and “Face to Face.”

 Some Things to Know when Planning and Preparing for an Annual Meeting

At this time of year, the boards of directors of many community associations across the state have already begun to plan for their association’s annual meeting. Holding an annual meeting is required by law for any community association established under the Georgia Nonprofit Corporation Code; however, it is also an opportunity for the board to take stock of the past year’s accomplishments and present the board’s plan for the coming year to the members. The “main event” at many annual meeting is often the election of directors for the coming year. In addition, the board of directors likely has an obligation to report on the affairs, finances, and budget projections of the association, whether by virtue of the Georgia statutes under which the community was established or the community’s bylaws. In any event, board members should be familiar with the general procedures and requirements for annual association meetings.

Notice

Step one in holding a successful annual meeting is letting the members know about it in advance! Meeting notices should be in writing and should be given to each member of the association within the timeframe and format required by the applicable law and/or the association’s bylaws. For example, condominium associations and homeowners association subject to the Georgia Property Owners’ Association Act must give notice at least 21 days before an annual meeting. The bylaws of other associations may prescribe a certain timeframe. Notice of the meeting should state the time, date and place of the meeting and should mention any significant matters to be considered at the meeting, such as election of directors or a vote on a proposed amendment to the restrictive covenants. The notices should be sent in accordance with the applicable law and the association’s governing documents, for example, by first class mail, hand delivery or electronically. If an association’s annual meeting notice is not sent within the proper timeframe or by the proper method and/or does not contain the proper information, the actions at that annual meeting, including election of directors, may be open to a legal challenge. Board members should review their community’s bylaws and the applicable law carefully to familiarize themselves with the requisite method and timeframe of delivery and content of the meeting notice.

Budget

A report on the financial condition of the association must be given at the annual meeting. This generally involves a presentation of income and expenses for the past year and presentation of the proposed budget for the coming year. A community’s governing documents will generally set out a procedure regarding adoption of the budget. Generally the board of directors has the authority to adopt a proposed budget and, depending on the governing documents, the budget will either become effective when it is affirmatively approved by the members or, in the alternative and more commonly, it will become effective unless disapproved by the members. The bylaws of many communities require that the proposed budget be sent to the members prior to the annual meeting, sometimes even before the meeting notice. Unless the governing documents require affirmative approval of the budget by the members, a membership vote on the budget usually is not required and it is not good practice to allow a vote on it. That said, failure to follow the proper procedures with respect to adopting the budget may expose the budget to a challenge by a discontented owner. The board should become familiar with the budgetary procedure early in the year and be sure that the association strictly adheres to the procedure. In addition, at the annual meeting the board may want to explain any significant changes to the budget from the previous year in order to avoid any confusion and opposition that may arise if a member feels there is not a reasonable basis for the budget change.

Conduct of Meeting/Agenda

The conduct of an annual meeting is usually established by the association’s governing documents, which in many instances applies Robert’s Rules of Order. In most associations, the president of the association presides over the annual meeting and is charged with keeping the meeting on track and moving through the business items. Prior to an annual meeting, the board members should familiarize themselves with some of the basic parliamentary procedures related to running an association meeting, such as calling the meeting to order, making motions and calling for votes. These parliamentary procedures can help in running the annual meeting so that the association’s business can be conducted successfully.

In addition, the board should adopt an agenda in contemplation of the annual meeting and be sure to follow it at the meeting. Distributing and following a clear agenda can assist the board in smoothly running the annual meeting and making sure that inappropriate topics do not derail the association’s regular business. Some boards find it helpful to adopt an agenda which allocates a certain amount of time for consideration or discussion of each agenda item or to reserve time at the end of the meeting for any questions.

Quorum/Proxies

A certain number of association members must be present at the annual meeting in order to call the meeting to order and conduct business. This is called the “quorum.” If quorum is not met, the association may have options for adjourning the meeting to a later date when more members are present. Members may be present in person or by proxy to count toward quorum. A member may designate a third person – either a particular individual or, for example, the acting secretary of the association – on a written proxy to attend the association meeting and cast a vote on their behalf. Proxies must be signed and dated to be valid and may be revoked if the member who gave the proxy attends the meeting. By providing proxy forms to members at the same time as notice of the annual meeting, a community association can facilitate member participation at the annual meeting and better ensure that the association can hold votes and otherwise conduct its business at the meeting. However, an owner is not required to use the proxy form provided by the association. Before the annual meeting, board members should review their community’s governing documents to determine how many members must be present at the annual meeting in order to meet quorum so the association to conduct business.

Votes

Various issues may be presented to the membership for a vote at the annual meeting. For example, directors may be up for election, an amendment to the restrictive covenants or the association bylaws may be proposed, or matters of procedure may arise. Each of these items requires approval by a particular number of members. For example, in many associations, the individuals receiving the most votes at a meeting are elected to the board, while in others, electing a director requires approval of a majority of the members in attendance at the meeting. An action such as adopting an amendment may require approval of 2/3 of all members regardless of whether they are in attendance. Prior to the annual meeting, board members should review their community’s governing documents and determine the requisite vote necessary to adopt any measures that will be proposed to the members.

In addition, board members should become generally familiar with how votes are allocated among association members and how to count those votes. For example, in some condominiums, because of the variation in size among the units, owners may be entitled to weighted votes based on the square footage of their unit or even the number of bedrooms. Thus, a majority of the voting power may be more (or less) than a majority of the owners by number. In others, members cast equal votes.

Prior to their community’s annual meeting, board members should become familiar with the general procedures for association actions and the reporting and voting requirements set out in the community’s governing documents and plan accordingly. Many other considerations may play into each of the items discussed above depending on the nature of your community and the particular circumstances surrounding the meeting, including, for example, specific provisions of the governing documents and law applicable to your community and the particular actions your association is proposing. Board members may consult the association’s legal counsel if they have any questions about planning or preparing for the annual meeting or determining some of the legal procedures and requirements related to holding their community’s annual meeting.

Using Initiation Fees as a New Source of Income for your Community

How many Associations are looking for a way to raise revenue without increasing the annual assessment? Without having to organize a bake sale, there is one method Associations can borrow from real estate developers who have devised and incorporated into the Declarations for their projects the means to fund capital reserve funds or to increase the general operating expenses at the front end of a development. Initiation fees. Initiation fees are a sum of money paid to the Association at the transfer of ownership of property. Generally these developer generated provisions obligate payment of initiation fees when the property is conveyed (only) to the first owner of the property for residential purposes. Developers do this for three reasons: 1) they do not want to increase the cost of the lots to builders; 2) because it is the first residents who will use and benefit from the community’s amenities; and 3) the developer is not generally concerned with the Association’s long term budget issues. An initiation fee provision can be drafted, however, so that an initiation fee is paid to the Association not only upon transfer to the first residential owner but on every successive transfer of the property as well.

The obligation to pay initiation fees has to be set forth specifically in the Declaration. If your Association’s Declaration does not provide for initiation fees, your Declaration can be amended to add such a provision. However, there are several issues for the Board to consider before suggesting that your Declaration be amended to add an initiation fees provision to the membership at large. First: What should the initiation fee be used for? You may look upon the collection of initiation fees as a windfall, and as such want to earmark their use to a capital reserve fund. Alternatively, the Board may not want to restrict the use of the funds and retain the flexibility to apply these extra monies either to the reserve account or for use in the general funds on an as needed basis. Second: How much should the initiation fee be? The Board will have to balance how much the Association needs with how much buyers in your community’s price range will be able to pay. This leads directly to the third issue: The Board must give some thought to whether the potential downsides to such an Amendment would outweigh the benefits. If the Board is considering a substantial initiation fee (probably anything in excess of $1,000) would this have a chilling effect on prospective purchasers considering homes in your community? Finally, the Board needs to assess whether there would be sufficient support for such an Amendment to pass. Before incurring the expense of having an Amendment drafted by the Association’s attorney, the Board should review past attempts to pass Amendments in the community.

Once the Board has hammered out all of the issues above there are a few general considerations to be given to the amendment itself. The initiation fee provision should specifically state that the initiation fee constitutes a specific assessment against the lot and that the fee shall be in addition to, not in lieu of, the annual general assessment and shall not be considered an advance payment of any assessment. This ensures that owners can not argue that they withheld payments of general and/or other assessments because they thought the initiation fee constituted an advance payment of such assessments. Your Association’s management company, or treasurer, if self-managed should be instructed to call attention to the initiation fee amendment in all pay-off letters given to closing attorneys.

If, after considering the issues above the Board determines that amending the Declaration to include initiation fees is desirable, there may still be some issues regarding passage. In addition to following the amendment provisions of your community’s Declaration, be aware of O.C.G.A. Section 44-5-60(c)(4) which provides that “no change in the covenants which imposes a greater restriction on the use or development of the land will be enforced unless agreed to in writing by the owner of the affected property at the time such change is made.” Although no Georgia court has considered the issue, it may be that an amendment to a Declaration imposing an initiation fee would constitute an imposition of a greater restriction on the use of the land which would require every owners consent. Of course, the Association’s argument is that an initiation fee is not a restriction on the use or development or the land and does not affect title in a material way. If the Association is a mandatory homeowners’ association and is subject to the Property Owners’ Association Act (O.C.G.A. Section 44-3-220, et seq.), the amendment would have to be passed in accordance with the Act’s amendment provision, which requires a two-thirds affirmative vote or such higher percentage as is specified in your Association’s Declaration.

In many communities, initiation fees can be an effective tool for raising revenue for your Association. Amending your Declaration to provide for the imposition of these fees is a relatively inexpensive way to provide a new source of income. So Board Members, how about initiating something positive for your community?!?

The who, what, where, when and how of choosing your community’s Board of Directors and Officers

There is little doubt that when a community buildout goes as It must be that time again.  The familiar buzz is in the air about the upcoming election.  We’re not talking about Republicans and Democrats, but your association’s own exercise in the democratic process:  The election of the members of the Board of Directors of condominium and homeowners associations throughout Georgia.  While your community’s elections hopefully are not as contentious as its governmental counterparts, the process can probably be as involved and confusing, especially because it is up to the members of the community to administer the whole election process.  For this reason, it is best to acquaint, or reacquaint yourself with the proper procedures to be followed in your community before the fact and learn the who, what, where, when and how of your community’s elective process: Who can serve on behalf of the Association?  What is the significance of each vote?  Where can I cast my vote?  When is a position open for election?  How can a vacancy be filled?

Commonly, mandatory membership community associations are organized under Georgia law as corporations.  Indeed, condominium association and homeowners associations subject to the Georgia Property Owners’ Association Act are required by statute to incorporate.  Although the applicable statutes allow for an association to form either as a for profit or a nonprofit corporation, most incorporated community associations will form as nonprofit entities to be governed by the provisions of the Georgia Nonprofit Corporation Code, O.C.G.A. § 14-3-101, et seq. (the “Code”), and this discussion will presume that your Association has been so established.  Although the Code contains provisions addressing the election and terms of members of the Board, it often defers to applicable provisions included in an association’s governing documents—the Articles of Incorporation, Bylaws, Declaration of Restrictive Covenants or Declaration of Condominium, and other pertinent documents.  Similarly, the Code contains various provisions concerning the appointment of officers of an Association; however, the Code allows that many of the specifics concerning such officers are as described in the governing documents.  While the Code mandates each Association which is a nonprofit corporation to have a board of directors to conduct the business and affairs of an Association, it also says that each Association “has the officers described in its articles or bylaws or appointed by the board of directors in accordance with the articles or bylaws.”  In general, the Board of Directors of an Association is the decisions makers, and the officers of an Association – such as a president, secretary and treasurer – put the Board’s decisions into action.  Commonly, an Association’s annual elections involve the selection of members to the Board of Directors, which, in turn, selects the officers.  However, some Bylaws provide for election of each officer in the same manner as the directors.  Thus, while the Code can be instrumental in your understanding of the workings of your community, the governing documents of your Association are invaluable with regard to shedding light on issues concerning the elections of directors to the Board and the appointment of officers of your Association.

“Who can serve on behalf of the Association?”

The Code contains very few impediments to eligibility of a corporation’s directors: essentially a director must be a living, cognizant human who is at least 18 years old.  Despite the loose qualifications set out in the Code, your community’s governing documents may set stricter qualifications on its Board members.  For instance, many but not all communities’ documents provide that that in order to serve as a director of the Association, an individual must be a member of the Association.  In such case, because the directors live in the community that they are charged with administering, they have a vested interest in their work on the Board and achieving the best interests of the community.  Thus, if a director moves from the neighborhood, she becomes ineligible for service on the Board.

Similarly, the Code does not have much to say concerning the eligibility of an Association’s officers.  An Association “has the officers described in its articles or bylaws or appointed by the board of directors in accordance with the articles or bylaws.”  Also according to the Code, the same individual may hold more than one office at a time, unless the Articles or Bylaws provide otherwise.  Variations to the Code’s “anything goes” stance are fleshed out in the provisions of an Association’s governing documents.  For instance, such documents may provide that certain offices, such as that of the president or the treasurer, must be filled from among the members of the Board.  But keep in mind that in some communities officers do not have to be Board Members.  In addition, some documents provide that Association members who are delinquent on the Association accounts or otherwise in violation of the governing community documents cannot serve in certain Association offices.

            When preparing for elections in your community, check the governing documents of your Association to be sure that the individuals who intend to serve on behalf of the Association are eligible to do so.

“What does each vote count to?”

Unless otherwise provided by the governing documents, directors are elected by a majority of the votes cast by the members entitled to vote in the election.  How does a majority block come together though?  While this may seem like an easily answerable question, a majority of the voting power is not necessarily the same as a majority of the owners in your community.  For example, some condominium documents, because of the variation in size among the units, provide that owners are entitled to weighted votes based on the square footage of their unit.  Thus, a majority of the voting power may be more (or less) than a majority of the owners.

In addition, the election of directors may be through straight voting or cumulative voting scheme.  While most Associations operate on a straight voting scheme, where members are allowed a single vote to be cast for a director and the director with the most votes wins, the governing documents may provide for election of directors by cumulative voting, whereby a member may cast votes in an amount equal to the product of the number of votes to which that member is entitled multiplied by the number of directors for whom the member is entitled to vote.  The member voting in a cumulative system may cast all her votes for a single candidate or may distribute the votes among all eligible candidates.

Furthermore, some members may be ineligible to cast their votes.  Many community documents provide that membership privileges, including the right to vote, may be temporarily suspended if an owner is delinquent on the Association accounts or for infractions of the community’s covenants or rules and regulations.

When tallying votes after an election, check the governing documents of your Association to be sure that each vote was cast by a member who is eligible to cast the vote and that weight of each vote cast is properly considered. 

“Where can I cast my vote?”

While when most people think of Association elections they think of filing into the clubhouse or other meeting hall at the annual meeting, hearing out the candidates and marking an “X” on a ballot, the casting of votes is not necessarily tied to a specific place or specific time.  For instance, members may designate a proxy to attend the Association meeting in their stead and cast a vote on their behalf.  In addition, under the Code and many communities’ governing documents, members of an Association may take any action by written ballot or consent outside of an Association meeting as they could in an Association meeting.  Furthermore, recent amendments to the Code provide for certain actions to be taken by electronic transmission such as facsimile or electronic mail.  Thus, voting in your community may no longer necessitate attending Association meetings.  These various manners in which votes may be cast may make Association elections more accessible to members of your community by providing readily available approach to participation and, thereby, increasing interest in the governance of your community.

When preparing for your community’s elections, check the governing documents of your Association to determine the various methods available to your community by which members may cast votes.    

“When is a position open for election”?

In homeowner-controlled community Associations, unless otherwise provided in the governing documents, directors are elected by the membership at each annual meeting; each director serves one year and can be elected for successive terms.  Thus, under the Code, if everything goes as planned, all directors on the Board are up for election each year at the Association’s annual meeting.  In reality, however, Board members may serve staggered terms which are more than a year long.  Similarly, the term of officers in your Association is defined in your community’s governing documents: some documents set out a one year term and some are silent on the issue.  Regardless of the term set out, the Code and most governing documents provide that the officers of the Association serve at the pleasure of the Board and can be removed by the Board at any time.

When preparing for your community’s elections, check the governing documents of your Association to determine which positions are open for election. 

“How can a vacancy be filled?”

Vacancies occur on Boards for many reasons: of course, a director may have served a full term and now that position is up for election.  Further, a director may move out of the community and become ineligible to serve on the Board, may lose interest and resign, or may be removed by the other directors or the membership pursuant to the governing documents of the community.  Under the Code, members of an Association may fill some vacancies on the Board of Directors unless the Articles or the Bylaws say otherwise.  Thus, a vote on the open position could occur at a meeting of the members.  However, many documents provide that vacancies may be filled by the remaining directors on the Board.  In fact, many governing documents provide that only the Board may fill a mid-term vacancy.  With regard to vacancies of the offices of the Association, many governing documents provide that officers of an Association are to be chosen by the Board of Directors and the Board has the sole authority to fill any vacancies.  Thus, the members may not have a direct choice with regard to who serves as an officer of the Association.

When an office or a seat on your community’s Board comes open, check the governing documents of your Association to determine how that vacancy may be filled. 

While election time for a community association is often a time of change it does not need to be unmanageable or mystifying to the members or to those individuals in charge of coordinating the voting process.  Many communities are governed by documents which set clear parameters regarding the election process; and where a framework is not clearly laid out, many Associations can look to the Code as a guide.  You may want to ask you legal advisor how your community can stage its elections and whether the proposed course is allowable under your community’s governing documents.  As your Association winds up for this election season, take time to renew your acquaintance with the governing documents of your community and the who, what, why and how of the election process before the members start filling out their ballots, and you won’t be caught flipping through your Bylaws on election night!

A Cautionary Tale

The U.S. Supreme Court recently decided an interesting case which had nothing to do with community associations but which has some interesting implications on how an association’s board of directors may operate. The decision in New Process Steel v. N.L.R.B., 560 U.S. ____ (June 17, 2010), invalidated hundreds of decisions made by the National Labor Relations Board (“NLRB“) because those decisions were made by a Board which had fewer than the required number of members. Governing law provided that the NLRB was to be composed of 5 members, but any powers of the Board could be delegated to a group of 3 or more members. The quorum for the Board – the number of members necessary for the Board to take valid action – was 3 members; however, if powers were delegated to a smaller group, 2 members would constitute a quorum. Due to vacancies on the NLRB, the Board consisted of only 2 members for over two years, during which hundreds of decisions were made by the two-member Board. This issue came before the U.S. Supreme Court when some of the NLRB’s decisions made during this time were challenged as being invalid due to the make-up of the Board.

The NLRB argued, in part, that during a time when there were four NLRB members, all of the Board’s powers were delegated to a smaller group of 3 members. Following such delegation of power, the argument continued, any two members of the group to which power was delegated “constitute a quorum that may continue to exercise the delegated powers, regardless whether the third group member… continues to sit on the Board and regardless of whether a quorum remains in the full Board.” Id. at 9 (internal quotations omitted). A majority of the Supreme Court found this line of argument unconvincing, and the majority opinion provides “the fact that there are sufficient members participating to constitute a quorum does not necessarily establish that the larger body is properly constituted or can validly exercise authority.” Id. As the Court’s majority put this into other words: the provision of law governing the make-up and quorum of the NLRB “does not authorize the Board to create a tail that would not only wag the dog, but would continue to wag after the dog died.” Id. at 14.

Although the Supreme Court’s decision in New Process Steel has nothing to do with community associations, some of the NLRB’s governing provisions contemplated in the opinion have similar counterparts in most community association’s governing documents. For example, if the Bylaws for your community say that the “Board of Directors shall be comprised of no fewer than five (5) members” then it is a possibility that a disgruntled owner (and what community doesn’t have one of those) could successfully challenge any action taken by a Board having fewer than the requisite number of members. The word “shall” is a mandatory word, as opposed to “may” which is discretionary; and a vacancy on the Board may raise a question as to whether the Board “is properly constituted or can validly exercise authority.”

Further, your community’s Bylaws may also state that “a majority of the directors shall constitute a quorum for the transaction of business at all meetings of the Board of Directors, and the votes of a majority of the directors present at a meeting at which a quorum is present shall constitute the decision of the Board of Directors.” Based on this language, for a 5-person Board, three directors would constitute a quorum; and where 3 directors convene a valid Board meeting, the votes of two directors constitute a decision of the Board.

As in the New Process Steel case, although the decision of only 2 directors may direct the actions of the Board at the end of the day, that decision cannot be made outside of the context of a validly held Board meeting at which a quorum is present. If these procedural requirements are not followed, your community’s “disgruntled owner” could again successfully challenge an action taken by a Board taking action without a quorum being present.

Service on a community association’s Board of Directors is voluntary, and volunteers are not always readily available. Once a full Board is assembled, it is not always easy to organize meetings at times when every member can be present. Members of a community association’s Board of Directors, however, should be aware of quorum and other procedural requirements that govern the Board’s actions and the potential consequences of failing to follow these. In addition, members of a Board of Directors should be aware of the various means that may be available to them to fill vacancies, participate in meetings by telephone and fulfill other procedural requirements. If a question arises, the Board may want to consult their association’s attorney to assist in assessing the Board’s options.

Taking on Additional Maintenance Obligations

The exterior lights outside of each unit in the Passé Pointe Townhome community were past their prime. In connection with giving the community a “face lift,” the Passé Pointe Townhome Association wanted to update the exterior light fixtures to something more modern. The board of directors had even found a supplier and a contractor to install the new lights at a bargain price. In reviewing their community’s declaration of restrictive covenants, however, it became clear that the owners, not the association, had the obligation and, thereby, the authority to maintain, repair and replace the exterior lights. The association wanted to take on replacement of the lights, but at what cost?

The maintenance obligation of a homeowners association or condominium association is usually set forth in the community’s governing documents. Generally, community associations are obligated to maintain the common areas, but there may also be other areas, not owned or otherwise managed by the association, that the association is expressly obligated to maintain. Sometimes, the obligation to maintain a particular portion of property or the improvements thereon is not clearly stated in the governing documents, regardless of the need to perform such maintenance. An association may want to assume the obligation to maintain certain property or improvements, for example, if the need to perform maintenance on certain property or improvements is recognized but is not addressed in the governing documents, if the board of directors of the association determines that having certain maintenance performed in a uniform manner throughout the community is in the best interests of the association, or if the association historically has maintained a particular property. There may be obvious benefits derived from an association assuming additional maintenance: on-going preservation of community facilities, uniformity of maintenance and aesthetics, and economies of scale. These or other benefits may outweigh any risks associated with the association performing assumed maintenance. However, before an association assumes additional maintenance obligations, the board of directors should be aware of the implications of doing so.

First, the board members should determine whether their association has authority to assume maintenance for items not specifically contemplated in the community’s governing documents. The governing documents of some community associations expressly authorize the association to assume maintenance obligations in addition to those specifically set forth in the governing documents. If an association has express authority to assume additional maintenance obligations, the board should make a determination as to whether assuming such obligation is in the best interests of the association and its members. If the association’s authority to perform such maintenance is not clear in the governing documents, the association’s decision to perform such additional maintenance may be challenged by a discontented homeowner. For example, the individual board members may be exposed to potential liability for misappropriation of association funds and/or breach of fiduciary duty. Similarly, if performance of the maintenance is found to be unauthorized, the Association’s common expense assessments imposed on homeowners to recover the costs of such maintenance may be challenged as illegal and improper.

In assuming a maintenance obligation, the association may create an on-going obligation to perform such maintenance. For example, this may occur if the association’s history of performing such maintenance is found to create an implicit agreement to perform such maintenance. Or, if the maintenance performed by or on behalf of an association proves to be defective, the association would likely be held responsible for performing remedial repairs and may be held liable for ancillary damage such defective work may have caused. If, for instance, the Passé Pointe Townhome Association went forward and replaced all of the exterior lights, it may be found responsible for any on-going maintenance or repair needed for such lights. Additionally, if the installation were done improperly and, for example, caused water to leak into the wall behind the light, the association may be responsible for any damage caused.

The board may determine that the benefits associated with the association performing additional maintenance outweigh any potential risks. While it is rarely advisable for a board of directors to act in contravention of the community’s governing documents, the board may have a compelling reason for doing so. In making a decision to take on a greater maintenance obligation than the association is legally obligated to, a board of directors should examine its decision and should record its reasoning in well documented minutes. The board should also consider alternative means of meeting the association’s end goal without having to take on a new maintenance obligation. In the Passé Pointe Townhome community, for example, the board decided to adopt a rule regarding the type of replacement lighting that may be installed in the community. The association also made an arrangement with a contractor to offer the lights to owners at a reduced bulk-price as incentive for the owners to have the lights replaced.

Whenever a community association would like to take on additional maintenance, a unique set of circumstances is presented. The community’s governing documents and the prior maintenance history of the community each may affect the potential benefits and risks to the association and the board members if the association assumes maintenance in a given situation. Members of the board of directors should become informed as to the association’s actual legal obligations with respect to performing maintenance on various properties or improvements, the implications to the association if it assumes additional maintenance, and any alternative options the association may have to assuming such maintenance. The association’s legal counsel may be helpful in performing such an assessment. By understanding some of these issues up front, the board will be in a better position to fulfill its duties and protect the association’s best interests.

All but one of the homeowners bought their houses in the Leafy Green subdivision because they loved the way the developer had left the back yards wooded.  Squirrels scampered from tree to tree, birds made their homes in high nests, and in the summer it seemed cool.  Imagine the human residents’ surprise, then,  when they got home from work one day and saw that one of their neighbors had clear cut the trees to the property line.  The angry calls to the members of the Board of Directors of the Leafy Green Homeowners Association, Inc. began immediately.  While there is no way to replace an old growth forest overnight, the Board knew that several remedies were available and pursued them at once.

Governmental Regulations

There is no Georgia state statute regulating the removal of trees generally.  HB 557 (Burkhalter’s Tree Bill) was recently passed in the Georgia House of Representatives, but was not passed by the Senate.  Many metropolitan Atlanta counties and some incorporated municipalities, however, have tree ordinances which vary in their specifics but generally are intended to do the following:  1) Protect existing and certain designated “specimen” trees; 2) Establish tree save areas in development areas; 3)  Require planting of shade trees in parking lots and other areas as appropriate; 4) Protect existing trees from damage during construction; 5) Require replanting where trees have been cut down; 6) Require that trees along public right of ways be pruned in a healthy and attractive manner; and 7) Set goals of no net loss of trees in the jurisdiction.  These ordinances are enforced by the County or the City.  If you see a violation in your City or County you (or the Board) should contact the City or County arborist or code enforcement officer who may be able to help you even if there is not a local ordinance in effect.  Trees Atlanta, an organization whose mission is to protect, beautify, and preserve our metropolitan environment by planting and conserving trees, has compiled the following list of government contacts:

COUNTY	CONTACT	TELEPHONE
Clayton	Mike Alexander	770-477-3678
Cobb	Les Brewer	770-528-2124
Cherokee	Christine White	770-479-0449
Coweta	Coweta County has no ordinance
DeKalb	Tom Clairborne	404-371-4913
Fulton	Gene Calloway	404-730-7531
Gwinnett	Wayne Ledford	770-822-7652
Henry	Dale Hall	770-954-2457

CITY	CONTACT	TELEPHONE
Alpharetta	Jennifer Hite	678-297-6200
Atlanta	Frank Mobley	404-330-6874
Chamblee	Will Wiggins	770-986-5024
Clarkston	Bill Adams	404-296-6489
College Park	Don Shannon	404-669-3762
Conyers	None
Decatur	Hugh Saxon	404-370-4104
Duluth	Ken Seddarth	770-476-1790
East Point	Tahirah Elliot	404-209-5183
Fayetteville	Maurice Ungaro	770-460-4255
Lithonia	Karen Smith	770-482-8136
Marietta	Rusty Roth	770-794-5670
Newnan	Michael Furbush	770-352-2682
Norcross	John Lawler	770-448-4935
Pine Lake	Mavis Crossley	404-292-4250
Roswell	Kurt Greenhaw	770-641-3780
Smyrna	Robin Broil	770-319-5387
Snellville	Jeff Timler	770-985-3514
Stone Mountain	None

Copies of many of the local ordinances are available on the internet, for example, Fulton County is at www.fultonecd.org.

Government entities have the power to issue citations, fine and/or require replanting.  The penalties for violating tree ordinances can be severe.  In Fulton County any person violating any of the provisions of the tree ordinance shall be liable for a fine of up to $1,000.00 per violation per day.  Each calendar day a violation continues to exist is considered a separate offense.  There is no maximum fine.  Enlisting the help of your local governmental entity in cases of unapproved tree cutting is often an efficient and cost-effective method of ensuring compliance and may give almost immediate results.  If you are unsuccessful in reaching, or getting assistance from the ordinance enforcement officers, call your county commissioner or other elected representative.

Restrictive Covenants

In some communities, such as the City of Decatur, the tree ordinance does not apply to trees on residential properties.  Even if your community government is not able to assist you, however, your neighborhood may have a remedy.  Most Declarations of Protective Covenants, Conditions, Restrictions and Easements contain provisions, often in the article relating to use restrictions, that prohibit removal of trees of a certain size and trees of certain species regardless of size.  In addition to violating local ordinances then, a wholesale cutting of trees would constitute a violation of the neighborhood’s covenants as well.  The remedies available to the association for violating these provisions generally includes fining and/or seeking equitable relief.  In the case of a homeowner who clear cuts his property, an association would have to carefully follow the procedures set forth in the Declaration and By-Laws of the Association before imposing fines and filing liens.  The Association may well want to file suit quickly to collect the fines and, maybe more importantly, to ask the Court for a mandatory injunction to order the homeowner to replant the trees.

It is important that a representative from the Association document the condition of the property as soon as possible after the incident by taking photographs and videotapes.  It is imperative that the Association determine the number of and species of trees cut.  This should be done immediately before the tree removal company has the opportunity to remove the trees and grind the stumps, making it much more difficult to ascertain damages.

Preventive Measures

The best defense is always a good offense.  Be sure that your association includes articles in its newsletter about the importance of obtaining approval before cutting any trees.  Put an item on the association’s web page.  Remind everyone at the annual meeting to review the use restrictions in the Declaration, including the provision about trees.  Trees Atlanta says it best:  “It’s easy to replace a hundred year old tree.  Plant a new one, then wait a hundred years.”

Selling Common Areas

Aspiration Heights Condominium is located on one of the most desirable blocks in the city. Part of the condominium is an undeveloped and largely unused field adjacent to the condominium building. The condominium has received several inquiries from prospective purchasers about selling the field for use in future development. On the other side of town, the Arid Flats Homeowners Association owns a storm water detention pond that collects water off of the public streets in the community. The board of directors is concerned about the association’s on-going obligation to maintain the pond and its exposure to liability arising from ownership of a pond that does not appear to provide a direct benefit to the members. An adjacent homeowner expressed interest in purchasing the pond area to include as part of his lot. In still another part of town, the Slender Lane Townhome Community was laid out with narrow swaths of common area located between the fenced backyards of homes located back-to-back on the same block. The board would like to convey the narrow strip to the adjoining homeowners and let each of them take over the maintenance. There are many reasons why a community association may want to sell its common areas to a third-party. When making a determination about whether to pursue the sale of its common area, there are several issues an association’s board of directors should consider.

Whether an association’s common area has value to someone other than the association is a fact-specific question. Common areas of homeowners and condominium associations are usually subject to a declaration of restrictive covenants or declaration of condominium for the community and are designated as common area or common elements on the recorded plats for the community. In some instances, owners within the community want to purchase the property and retain it as undeveloped open space, so the fact that it is subject to restrictive covenants might not be of paramount importance. A prospective purchaser from outside of the community who wants to purchase the common area for future development will probably require removal of the restrictive covenants from the property in connection with the sale. As discussed further below, in the context of a condominium, the association will need unanimous approval of all of the unit owners and their mortgagees to withdraw the property from the condominium and to facilitate a sale. For associations other than condominiums, unanimous approval of the owners will also be necessary to remove the property from the coverage of the covenants unless the community’s governing documents specifically contemplate removal of a portion of the community from the coverage of the covenants or generally allow amendments to the governing documents that have non-uniform effect.

If the common area has value to a prospective purchaser, as a first step, the board must determine whether the association has authority to sell its common areas. Homeowners and condominium associations in Georgia are usually established as nonprofit corporations pursuant to the Georgia Nonprofit Corporation Code (“Nonprofit Code”). The Nonprofit Code authorizes an association’s board of directors to sell, convey, exchange, and otherwise dispose of all or any part of the association’s property unless a community’s governing documents say otherwise. See Nonprofit Code Section 14-3-302(5) and Section 14-3-801(b). In non-condominium communities, the association usually holds title to the common areas. Most declarations of restrictive covenants for these communities contain a provision authorizing the board of directors to sell a portion of the common area under certain circumstances, most often upon receiving approval to do so from the membership. The board may sell the common area so long as the voting procedure outlined in the governing documents is properly followed and documented in the association’s records.

Selling the common area of a community established as condominium pursuant to the Georgia Condominium Act, O.C.G.A. § 44-3-70, et seq. (the “Condominium Act”) is more difficult to accomplish. In condominiums, the common areas, referred to as “common elements,” are generally owned by all of the unit owners as tenants-in-common. In order to sell off a portion of the common elements, the property must be “withdrawn” from condominium in accordance with a procedure set out in the Condominium Act. Withdrawal of property from the condominium requires the approval of unit owners holding at least four-fifths of the votes in the association and their mortgagees. Once the property is withdrawn from the condominium, however, it is still owned by all of the unit owners as tenants-in-common, and all of the unit owners and all of their mortgagees must consent to a sale of the property.

Once the board determines whether their association can sell its common area, the board should consider whether the Association should proceed with the sale. As noted above, many declarations of restrictive covenants authorize the board of directors to sell common area under certain circumstances, such as receiving approval to do so from the membership; however, whether the board pursues such a sale is usually discretionary. If proceeding with such a sale, Georgia case law generally requires that the board’s actions be procedurally fair and reasonable and that the board’s decision to proceed be made in good faith, and be reasonable and not arbitrary and capricious. In addition to following whatever procedural requirements are necessary under the community’s governing documents, the Board should examine why it is pursuing conveyance of a portion of the common area and should record it’s reasoning in well documented minutes.

Several issues can impact the determination of whether the association should sell its common area. The association should obtain assurances from the prospective purchaser that any use of or rights associated with the property that are necessary to the association will be preserved. For example, if there are improvements on the property that require on-going maintenance, such a storm water detention pond, the association will probably want the new owner to assume such maintenance obligation. Similarly, if the association benefits from use of the property in some way, for example, if other property owned by the association drains storm water over the property or if utility lines serving the community run under or through the property, the association should establish appropriate easements or other rights over the property to ensure continuation of such benefits. Further, the original zoning conditions for some communities may require a certain amount of open space or may specify a certain use for association common area. The association may want to get assurances from the new owner that they will not use or develop the property in such a way that will expose the association to liability due to a zoning violation.

The association should also be aware of any potential uses for the property that could affect the community in the future. For example, current zoning regulations would control the uses to which the property could be put; however, a new owner may be able to obtain a variance from the current zoning for a special use or may attempt to rezone the property altogether. Any future use may result in more traffic, noise or other disturbances in or around the community. Structures built on the property may be visible from the community and further affect the community. There may be other governmental requirements or encumbrances on the property which influence the use and activities allowed on the property. The association may be able to negotiate agreements with the prospective purchaser to establish reasonable guidelines on the use of the property and construction activities on the property. If the association wants such an agreement to be binding on future owners of the property, it should be in the appropriate form and recorded in the land records.

As noted above, there are many reasons why a community association may want to sell its common areas. In connection with the prospective sale of an association’s common areas, members of the board of directors should become aware of potential obstacles to selling the association’s property and the potential impact on the community of doing so. By understanding some of the issues up front, the board will be in a better position to fulfill its duties and protect the association’s best interests. Because of the complexity of these transactions, it would not be advisable to “try this at home” without contacting the association’s legal counsel!