By Bruce Jenkins, Attorney, Jenkins Bagley PLLC
The COVID-19 pandemic has impacted the physical and emotional well-being of people across the world. People living in homeowner associations are obviously not immune. Federal, state, and county regulations are proliferating in an effort to slow the spread of the virus. People have lost their jobs and face significant challenges.
The strains placed upon individual owner’s finances will ultimately place a strain on the association’s finances. It is often said assessments are the life blood of the community associations. These assessments are utilized to deliver essential services in maintaining the health, welfare, and condition of the community’s assets. Most associations, however, work on tight zero-based budgets with little to no rainy-day operating reserves. Unfortunately, this pandemic is worse than a rainy day.
Community Association Institute (CAI) is trying to take the lead within the homeowner association community to promote health and safety, while still providing essential services. In part, CAI is taking the lead to self-regulate rather than having additional laws and regulations thrust upon community homeowner associations for failing to properly deal with the pandemic and its multiple side effects.
While collection of assessments is a very important responsibility of the governing board, overly aggressive collection efforts at these perilous times may backfire. In Utah we have already seen push back in the form of S. B. 183 as the result of an association’s collection efforts being considered overly aggressive. S. B. 183 nearly wiped out an associations ability to proceed with non-judicial foreclosures. On the other hand, failure to collect assessments may impair the associations ability to provide essential services and pay its bills.
In response to the national emergency, the CAI Board of Trustees has developed the following principles which the Board recommends that community homeowner associations adopt in relation to assessment collection:
- If an owner is unable to pay assessments on time, the owner should notify their community association to work out a payment plan. Homeowners with a financial hardship should be encouraged to apply for government assistance, if available.
- Community associations should adopt a moratorium on foreclosures for a period of60 days (or until at least June 1, 2020).
- Community associations should waive late fees and penalties for owners who face temporary financial hardships due to COVID-19.
- Community associations should amend, temporarily relax, or follow existing non-foreclosure collection policies that are fair and applied equally to all members of the community association.
- Community associations should continue to record liens to protect their interests.
- Community associations should emphasize the importance of owners paying their assessments on time, if possible.
The CAI Board of Trustees may update these from time to time depending on the length and severity of the ongoing pandemic.
The provision of essential services in community associations is another critical component affected by COVID-19. These essential services become even more sharply focused in high-rise projects. That is, the question becomes whether the essential service is to maintain the building, or to serve the individual owner. As an example: is it an essential service to have a day-care provider come into the high-rise building to babysit children of working parents? Several community association attorneys and managers have concluded that the essential service must relate to maintenance of the building and common areas, and not services to individual owners. The rational is that the association is obligated to maintain the structures and the common area, and thus must tolerate the risk of essential service providers carrying the COVID-19 virus into the community. On the other hand, providing a babysitting service, though important, is not an essential function of the association and is, therefore, prohibited and not worth the risk of introducing COVID-19 to the high-rise building.
Stay at Home Issues
Introducing COVID-19 into the community by those foreign to the community, including friends, guests, and short-term renters, is another significant concern. The issuance of stay-at-home orders in some states has led to a problem in other states. As an example, Florida is facing an influx of people from the northeast who want to “stay at home” in an Air B-n-B or a short-term rental property in Florida. This has led the Governor of Florida to issue an executive order to ban vacation rentals to guard against the influx from out-of-staters who want to “shelter-in-place” in Florida. It may be wise for resort communities within Utah to enact similar legislation.
In these uncertain times community associations are faced with many difficulties. Above all, problems should be handled with civility in an effort to work through the problem rather than respond harshly. Associations do not need the bad publicity of a harsh response to people suffering from this pandemic. May we all act smart and be safe.