By: Kristie Leff
One of the most important functions of condominium boards is the assessment and collection of common charges. Without a properly funded budget the association will not be able to pay its expense, maintain the property, pay insurance premiums, or fund its reserves. It is essential that the proper budget adoption procedures are followed because the lack of a properly adopted budget could mean that common charges are not collectible. The budget adoption procedures are found in Connecticut General Statutes Section 47-261e(a). Always check the association’s governing documents as well as there may be additional budget adoption procedures that must be followed. The statutory requirements are summarized as follows:
Why is it important to follow these procedures? A Connecticut Superior Court case demonstrates the importance of a properly adopted budget. In the case of Westbury Condominium Association v. Tashjian, 2006 Conn. Super.,LEXIS 3295, November 6, 2006, J.D. of Hartford, the association brought a foreclosure action against a unit owner who refused to pay increased common charges. The association’s budget increased the common charges from $244 to $372 per month. The unit owner continued to pay the $244, but refused to pay the increase. Once the account became delinquent the association brought a foreclosure action. The unit owner filed a special defense alleging that the increase was invalid because the budget had not been properly adopted insofar as the budget summary not provided to unit owners until the day of meeting, and the summary misrepresented the amount of the increase by stating it was a 28% increase when in fact is was a 50% increase.
In court the association argued that validly levied common charges are an absolute obligation and are not subject to special defenses. The court agreed with this, but noted that that the key phrase is “validly levied.” The court found the common charges were not “validly levied” because the budget was not adopted properly—the summary was not provided until the meeting, and the summary misrepresented the amount of the increase—stated it was a 28% increase when in fact is was a 50% increase. The court stated that the purpose of sending notice and a summary of the budget in advance is to put all unit owners on notice of the proposed budget, give them ample opportunity to study the proposed budget, and decide whether or not they will appear at them meeting. The court therefore entered judgment in favor of the unit owner and the association was unable to collect the common charge increase from the unit owner.
This case is a cautionary tale to associations: if budgets are not properly adopted common charges are uncollectible. Avoid this trap and be sure to follow all statutory procedures and any other requirements in the association’s governing documents when adopting budgets.
By: Andrea Dunn
Every Association has dealt with the complaints. One (or more) unit owner who refuses to clean up after their dog. It seems like such an easy thing for a unit owner to do, but for whatever reason, certain unit owners don’t find it necessary to bag the waste and dispose of it properly. This can lead to an infestation of parasites, deer ticks and, sometimes, rats. The property manager has sent letters to no avail or receives a response such as “It’s not my dog’s waste, I always pick it up. Your information is wrong”. What is an Association to do at this point? The rules state that pets are to be on leash and that waste is to be picked up immediately and disposed of properly.
The first thing to consider is what evidence exists to back up the claim. Did another unit owner take a photo of the incident? Is the complaining unit owner willing to come forward and present evidence? Typically, if the warning notice from the property manager does not fix the problem, the Association will have a hearing with the unit owner. This must be done within the statutory framework of the Common Interest Ownership Act, §47-244(a)(11): notice sent to the unit owner with at least ten (10) business days notice prior to the hearing date notifying the unit owner of the rule violation, their right to be heard and attend the hearing and have witnesses and that the Board will issue a decision after the hearing. Remember, that even if the unit owner fails to attend the hearing, the Board can issue a decision. These steps are important and, if not done properly, could result in a court action being dismissed should the matter make its way to a foreclosure action for the non payment of fines issued for the violations.
If the Board votes to fine the offending unit owner daily until the unit owner decides to comply with the rules, this could result in fines ranging into the thousands depending on what an Association’s bylaws allow for fines in a short period of time. So, for example, a Board issues daily fines of $50.00 per day until the unit owner complies. This could result in $1,500.00 in a 30 day month. If the offending unit owner does not pay the fines, within 30 days, a foreclosure action may be started for the fine amount. This should be an easy argument to make to the court, right?
MAYBE. Let’s say the unit owner finally wakes up upon receiving the court summons and decides to fight. His argument? It’s not my dog’s waste. I need to see proof for everyday that a fine was issued that my dog defecated and I didn’t pick it up. There are numerous dogs at the condominium and it could be any of their waste. If you are fining me daily, there should be proof for everyday my account was issued a fine. NOW WHAT? Do you have photos of his dog defecating for 30 days straight? Does your property manager visit the property daily just as the offending unit owner’s dog is doing his business and can testify? Should the unit owner make these types of claims, the association will have to answer to justify the fines. Remember that fines are not to be extra sources of income for the association. Fines are to encourage compliance, not make money.
So what can an Association do to make a better case? If your Association has cameras, pinpoint the times when the dog does his business and keep track or do a sampling of days and keep a file of the offenses for the hearing and court case. Encourage unit owners to speak up and take note of the dates and unit number that witnessed the act. If the property manager makes weekly visits, have him/her check and note the date/time. This may result in fewer days to fine, but your proof will be solid for lack of a better word. If the problem is big enough, ask for volunteers to take shifts in the morning or evening when most dogs are doing their business.
Another option is DNA testing. Yes, this really is a thing. Some communities have policies that require dog owners to submit to DNA testing so that this profile can be kept on file. This way, if there is a problem, the waste can be tested and the offending unit owner is fined. This can be costly and somewhat cumbersome. The property manager would have to be present when the dog is giving the sample so that no shenanigans can occur with unit owners simply using a friend’s dog for the test to prevent their dog from being caught.
My point is not to discourage Association’s from enforcing the rules. These rules need to be enforced as pet waste left on the common areas can lead to infestations. My point is to protect the Association with proof. The proof will save you and when confronted with proof, a unit owner is more likely to comply with the rules. So, get the proof and watch where you step.
Evicting Tenants Under CIOA and Landlord/Tenant Statutes: Statutory Requirements and Procedures Must be Followed to Avoid Dismissal
By: Barbara G. Hager and Kristie Leff
Under the Common Interest Ownership Act associations have the right to evict problematic tenants who violate the Declaration, Bylaws, Rules or Regulations of the association. Associations can evict tenants even though the association is not the landlord/unit owner, and permission of the landlord/unit owner is not needed. However, in order to take advantage of this procedure, the statutory requirements and prerequisites must be properly implemented. Otherwise, the eviction action may be subject to dismissal.
First, before proceeding with an eviction, sections 47-244(d) and (e) of the statute require that notice of the violations be sent to both the unit owner and the tenant, and that a hearing be held to give the unit owner and tenant an opportunity to be heard. Also, the tenant must be given at least 10 days after receiving notice of the violation to cure the violation.
Additionally, section 47-278 of the statute requires that before instituting a proceeding against a unit owner, the association must send a ten business days’ notice letter via both regular and certified mail noticing a hearing for the purpose of giving the unit owner the opportunity to be heard. While an eviction action against a tenant is not technically the institution of a proceeding against a unit owner, our advice is it is a best practice to have all notices comply with section 47-278 in order to avoid problems. This means that the hearing notices should be sent with 10 business days’ notice by both regular and certified mail.
If the violation is not cured and the association needs to proceed with an eviction action, the action will be filed in Housing Court. Housing Court judges are particularly interested in the tenant receiving proper notice of the specific violations, being given the statutory minimum of 10 days to cure the violation, and clearly being informed the lease is terminated and they will be evicted. Therefore, although the CIOA statute is vague on this point, it is a best practice to be sure notice sent to the tenant complies with the requirements of pre-termination notices (a/k/a Kapa notices), in that, in addition to notifying the tenant of the hearing, it notifies the tenant of the specific violations, provides a minimal 10 day cure period, and clearly informs them that their lease is terminated and they are being evicted.
If the statutory procedures are not followed by the association, and if the notices fail to comply with sections 47-244(d) and (e), and section 47-278, the eviction action may be subject to dismissal. Housing Court judges are very strict in applying statutes, and will scrutinize every aspect of the eviction case to ensure the tenant’s rights are protected. If the case gets dismissed, the association will have to start over, costing time, money, and aggravation. In order to avoid dismissal, be sure to follow all statutory procedures and requirements, and implement the best practices as described.
By: Ronald J. Barba
Now comes the lawsuit.
After all the warning notices from the association and demand letters from counsel, the collection turns into a foreclosure matter. The sixty-day notice requirement having elapsed, a complaint is drafted and served upon the unit owner(s), mortgagees and other lienors. The rules of practice set forth the timing of pleadings, defenses, discovery, and judgment. Competent counsel will make every effort to minimize the time it takes to obtain a judgment so as to protect the association’s nine-month priority lien. Unresponsive owners will be defaulted and mortgagees will file pleading to protect their respective interests.
Just prior to moving for judgment, an appraisal of the unit is ordered and sent to the court. Counsel communicates with the association’s property manager to obtain up to date account information and the execution of an affidavit in support of the association’s claim for monies. For self-managed associations, it is critical to establish early in the process which board member(s) will be responsible for providing account information. Any confusion or delay could adversely affect the association’s interest.
The type of judgment to be obtained by the association is dependent largely upon the amount of equity that exists in the unit. In this context, equity is the value of the property minus the total amount of liens against it. If a unit is worth $100,000.00 and there is a $50,000.00 mortgage lien on the title, the equity in that unit is $50,000.00. A unit having little of no equity will likely be subject to a “strict foreclosure”. One with equity of any significance will be subject to a judgment of foreclosure by sale. In a strict foreclosure the court assigns “law dates” by which defendants must redeem their interests (meaning pay the debt). If no defendant redeems, the association becomes the titled owner of the unit and may dispose of it as it deems appropriate. A foreclosure by sale is somewhat more involved in that it involves the appointment of a court-appointed “committee” to facilitate the public auction of the property.
But what about the banks?
Conspicuously missing from the description of events in the collection process is mention of how banks behave when one of its borrowers’ defaults on their common charge obligation. Standard loan documents (Note and mortgage deed) usually attach a separate document called a “Condominium Rider”. Contained with condominium riders are provisions which empower the lender to take steps it deems necessary to protect its interest in the unit should the borrower default in the payments to the association. One commonly used method of protection is when the lender, having been duly advised of the debt, elects to pay the arrearage on behalf of the unit owner.
Banks will attach the amount paid to satisfy the debt to the mortgage debt. It is not uncommon for banks to take this step multiples times where recidivist defaulting owners are involved. Banks may elect to pay early or at any point in the collection process. Any bank wishing to pay on behalf of its borrower must pay all that is owed in order to settle the case or satisfy the judgment. In some instances, lenders will opt to redeem their interests on their law date. In such a case, the lender’s liability is limited to the priority debt plus attorney’s fees and costs. Any common charges or other charges not included in the priority debt are then rendered uncollectible by the association.
So too would the association be limited in its recovery in a foreclosure by sale. After a successful sale, the proceeds (totaling the nine-month priority, attorney’s fees and costs plus committee fees and costs) would be paid first to the association. Any amount in excess of the priority debt would then go to satisfy the first mortgagee’s debt and then the second mortgagee’s debt, if applicable. When there are funds remaining after satisfying the priority debt, the committee and the first and second mortgagees, the association could claim the balance of its debt from the remaining sale proceeds.
After having read the above, it should not surprise the reader that the collection process is a complicated matter fraught with pitfalls and risk. Common charges are the life blood of any common interest community. Every board should fully appreciate the importance of a firm, but fair system that ensures the financial health of the association. With proper planning and a familiarity with the process, boards can better serve their communities.