Boards being asked for assessment relief
Q: Due to the impact of COVID-19 and the related closures of businesses, owners in our association who have been, or who anticipate being laid off, have inquired whether the association will suspend the payment of assessments. Can the association legally either postpone, or defer altogether, the collection of association assessments?
A: In general, associations do not have the legal authority to forebear the collection of assessments, and owners continue to be responsible for assessments even during these difficult times of (unfortunate) unemployment.
Associations rely on cash flow from assessments to pay the association's expenses and, unlike the U.S. government and large corporations, cannot generally withstand income interruption. And there are a variety of programs, including unemployment benefits, available to these owners.
That said, the association can certainly work with an owner on a case-by-case basis, on a payment plan (or can waive late fees on a case-by-case basis).
However, a blanket moratorium/suspension of payment of assessments does not seem financially prudent. It may be more prudent to wait and see the full economic picture that plays out before implementing any measures intended to reduce the financial burden of assessments on owners.
Q: All of our association's landscape work is done under a two-year contract with one contractor, "XYZ." There is frequently a need to get landscaping work done that is not specifically itemized in the contract. We frequently find that XYZ starts with a high-priced option (for example, sod replacement instead of seeding) and then the board spends a lot of time and effort investigating and negotiating with XYZ for a less expensive option. My question is, can the board contract with a third party (other than XYZ) to provide a service not in the contract, plant several trees for example, and then require XYZ to maintain the trees? Note that there is no language in the ABC contract that specifically forbids this.
In the past ABC has implied that they will not maintain any item that they have not installed. What are our rights as a customer of ABC?
A: In the absence of language in the XYZ contract that gives it a right to do such work, the board can contract with a third party to perform services not set forth in the XYZ contract. Unless the XYZ contract includes language that limits the scope of services to materials it has installed, the board can contend XYZ is required to perform such maintenance. This is an example of why it is so important to make sure contract terms are clear.
Q: The board of our association has an ongoing debate about whether to distribute draft minutes to owners. What is your suggestion?
A: In general, I do not suggest posting or otherwise distributing draft minutes to the owners, even if they are clearly marked "draft." That is because the draft minutes could include incorrect or inaccurate information. That could lead to confusion, and exposure to liability.
Sometimes draft minutes are "spot on," or only require minor revision to be approved. However, I have seen many situations where the draft minutes were seriously flawed, and the distribution created issues, even if marked "draft."
I recall one particular situation where the draft minutes, prepared by a third party and not reviewed by the board, were posted to the association's website. The draft minutes reflected that a significant and controversial project was not approved by the board, when it actually was! That created quite a stir and claims that it was intentional. It created a lot of unnecessary headaches for board members and owners alike.
Minutes are not "official" until they are properly approved by the board at a board meeting. In my view, it is simply not a good idea to distribute a document to all of the members of an association that is supposed to be an official record of corporate action before the minutes are formally approved. The risk of distributing draft minutes that may contain significant errors is simply too great, Even if marked "draft," you simply can't "unring" that bell.
At the end of the day, the law does not prohibit such a distribution, and it is going to be a board decision.
• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in the Chicago suburbs. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.