Community Associations Newsletter - January 2017

Date: January 5, 2017

Condominium Unit Owner Bill of Rights Legislation Expected to Clear the DC Council

By: Jane Saindon Rogers, Esq.

Legislation to amend the D.C. Condominium Act  ( the “Act”) was approved unanimously at the second reading on December 20, 2016.  Originally intended to impose a mandatory mediation process before condominium associations could initiate foreclosure on their liens for unpaid assessments, the final legislation instead enhances the notice requirements before foreclosures may occur.

As adopted, the legislation has three main features:  1) it creates a 14-member condominium advisory council consisting of appointees from each Ward as well as certain industry professionals and representatives of D.C. government agencies, to provide a sounding board on matters related to condominiums in the District of Columbia; 2) it creates a Condominium Unit Owner’s Bill of Rights and Responsibilities – basically a restatement of rights and obligations already articulated in the Act and requires that this summary be provided by declarants to new condominium unit owners and that it be posted on the DHCD website; and 3) amends the foreclosure notice provisions of the act to require  condominium associations to provide certain disclosures before undertaking foreclosures.

Among the disclosures that will be required is a statement of the amount to be paid to stop the foreclosure and an affirmative statement as to whether the foreclosure is a “priority lien” foreclosure amount or seeks to foreclose on the full amount of the statutory lien.  A document regarding the availability of resources to assist delinquent unit owners will also have to be provided with all notices regarding impending legal action. 

Simply stated, these new requirements mean that all condominium associations undertaking the collection of delinquent assessments in the District of Columbia will have to modify their existing collection protocols, even if foreclosure is not immediately contemplated. 

It is anticipated that the new provisions of the Act, after being signed by the Mayor, will not go into effect until sometime in March, 2017, after the mandatory congressional review period.

As soon as final enactment has been confirmed, this firm’s clients will be receiving a package of recommendations regarding implementation of the procedural changes mandated by the legislation.  Further information and copies of the final legislation are available upon request.  

Do Community Associations Have the Authority to Regulate Drone Usage on Their Common Area or Common Elements?

By: Kathleen W. Panagis, Esq.

Whether community associations can regulate the usage of drones on their common area or common elements depends first on where the community association is located and second on the authority contained in community associations’ recorded governing documents.  

Laws and Regulations Applicable to Drone Usage 

Drones are technically known as unmanned aerial systems (“UAS”).  Other than Federal Aviation Administration (“FAA”) regulations, there are currently no state laws in Virginia, Maryland, or Washington, D.C. that govern the use of drones.  

Pursuant to FAA regulations, if a community association is located within a fifteen mile radius of Washington, D.C., such community association is in a no-drone zone and drone usage is prohibited, unless the drone operator has received specific authorization from the FAA.  

If a community association is located either between a fifteen to thirty mile radius of Washington, D.C., then the operating a drone for either recreational or non-recreational use is permitted under the following special operating conditions:

            •    Aircraft must weigh less than 55 lbs. (including any attachments such as a camera);
            •    Aircraft must be registered and marked;
            •    Fly below 400 feet;
            •    Fly within visual line-of-sight;
            •    Fly in clear weather conditions; and
            •    Never fly near other aircraft.

If a community association is located outside the thirty mile radius of Washington, D.C., drone usage will be permitted so long as certain conditions are met. The FAA has put forth two sets of rules for such drones:  one set that pertains to recreational or hobbyist use, and another set for commercial usage, which are described in detail below.

      •    Recreational or hobbyist use:  (a) The drone must be registered with the FAA and labeled with such FAA registration number if the drone weighs between .55 pounds and less than 55 pounds; (b) drones cannot be more than 55 pounds (55 lbs.); (c) operators must be at least thirteen (13) years old; and (d) the operator must be a U.S. citizen or legal permanent resident.  Registration for recreational or hobbyist use costs $5 and is valid for three (3) years.  

            The FAA safety guidelines for recreational use of drones are as follows:  

                   o    Fly at or below 400 feet;
                   o    Keep the drone within sight;
                   o    Never fly near other aircraft, especially near airports;
                   o    Must fly no less than 5 miles from airports;
                   o    Never fly over groups of people;
                   o    Never fly over stadiums or sports events;
                   o    Never fly near emergency response efforts such as fires;
                   o    Never fly under the influence; and 
                   o    Be aware of airspace requirements.

      •    Commercial use:  Drones for commercial usage are more regulated.  Commercial usage is considered as in the “furtherance of a business purpose.”  All businesses operating small drones must comply with the FAA’s rules such as (a) the operator must be at least sixteen (16) years old; (b) the operator must pass an initial aeronautical acknowledge test at an FAA-approved knowledge testing center; (c) the operator must be vetted by the Transportation Safety Administration; (d) the drone must be less than fifty-five pounds (55 lbs.), and (e) the drone must be registered. 

      The additional operating rules for commercial use drones are as follows:

                 o    Class G airspace*;
                 o    Must keep the aircraft in sight (visual line-of-sight)*;
                 o    Must fly under 400 feet*
                 o    Must fly during the day*;
                 o    Must fly at or below 100 mph*;
                 o    Must yield right of way to manned aircraft*;
                 o    Must not fly over people*; and
                 o    Must not fly from a moving vehicle*
                 * All of these rules are subject to waiver by the FAA

Whether an Association has the Authority to Regulate Drone Usage

If a community association is either located within a fifteen to thirty mile radius of Washington, D.C. or is located outside the thirty mile radius of Washington, D.C., an association’s authority to regulate drone usage on its common area or common elements is based on the same authority an association relies on to regulate other activities on its common area and common elements.  Any rules and regulations promulgated by an association are, of course, in addition to any and all requirements put forth by the FAA as discussed above.  

Typically, an association’s declaration (if a property owners’ association and sometimes a condominium association) or bylaws (if a condominium association) provides that each person having the right to use the common areas or common elements shall comply with the rules and regulations regarding such use as established by the Board of Directors.  The bylaws for associations usually grant the Board the power to adopt rules and regulations necessary for the benefit and enjoyment of the association, and the bylaws also typically provide the Board with the power to operate, care, provide upkeep and maintain the association property.  In addition, it is common for bylaws to authorize the board to make and amend rules and regulations governing the common areas and common elements.  Lastly, bylaws normally provide that no improper, offensive or unlawful use shall be made of the association property and that all governmental regulations must be followed.

As such, based on the general and oft-typical authority cited above, community associations usually have the power to adopt rules and regulations governing the use of drones on their common areas and common elements—this, of course, always depends on the explicit authority contained in a community association’s declaration and/or bylaws.  Should a community association have the express authority to regulate drone usage on its common areas or common elements, such rules and regulations must be consistent with the FAA’s regulations and should be designed to reasonably address legitimate concerns about the interference that drones represent to other owners’ use of the common areas or common elements.  

Examples of what types of drone-related rules and regulations community associations may be able to promulgate are (a) all owners, residents, or other persons must receive written consent from the Board of Directors prior to operating a drone on the common areas and common elements; (b) such individuals must also sign an indemnification agreement with the association; (c) the association can also require that all owners, residents, or other persons provide proof of insurance covering the drone; and (d) the same rules and regulations will require the owners, residents, or other persons to comply with all federal and state rules and regulations as well as any county, local or municipal ordinances. 

Bankruptcy Issues:  Automatic Stay

By: David Gaffey, Esq.

A resident filing for bankruptcy can have a serious impact on the financial outlook of a community association.  The financial impact on a community association can go well beyond lost dues, however.  A fundamental purpose of the Bankruptcy Code (11 U.S.C. § 101 et seq.) is to give a person in bankruptcy (a “debtor”) a “fresh start.”  To advance this purpose, the code imposes restrictions on creditors, including community associations, once a resident files for bankruptcy.  One of these restrictions is found in Section 362 of the Bankruptcy Code, which imposes an “automatic stay” upon the filing of a bankruptcy case that prohibits certain actions against a debtor in order to give the debtor time to reorganize its financial affairs.  The scope of the automatic stay is extremely broad.  It forbids:

  1. The commencement or continuation of any lawsuit or administrative proceeding against the debtor that could have been filed prior to the bankruptcy case, or to recover a claim against the debtor that arose prior to the bankruptcy case.
  2. The enforcement against the debtor or property of the bankruptcy estate of a judgment obtained prior to the bankruptcy case.
  3. Any act to obtain possession or exercise control over property of the bankruptcy estate.
  4. Any act to create, perfect, or enforce a lien against property of the bankruptcy estate.
  5. Any act to create, perfect, or enforce against property of the debtor any lien that secures a claim that arose prior to the bankruptcy case.
  6. Any act to collect, assess, or recover a claim against the debtor that arose prior to the bankruptcy case. 

Courts interpret the scope of these prohibitions very liberally against creditors; an arguable violation often will be decided in the Debtor’s favor. 

As a result, community associations must alter their collection practices with respect to debtors.  First and foremost, a community association may not file a lawsuit against a debtor to collect any amounts owed prior to the day the bankruptcy case is filed.  Second, a community association may not continue any pending lawsuit seeking payment of amounts owed prior to the bankruptcy filing.  Any pending lawsuits must either be stayed for the pendency of the bankruptcy case or dismissed.   Third, a community association may not garnish a debtor’s wages or bank accounts.  Any garnishments existing as of the bankruptcy filing must be dismissed, and any amounts seized after the filing date must be returned to the Debtor.  Fourth, a community association may not revoke any privileges, such as pool or parking privileges, due to a failure to pay amounts owed prior to the bankruptcy filing.  All privileges previously suspended must immediately be restored.  One bankruptcy court in the Eastern District of Virginia has also held that an association may not suspend privileges for failure to pay post-filing amounts.  Under this court’s analysis, privileges are part of the “bundle of rights” protected by the automatic stay and cannot be taken away, even for a failure to pay post-bankruptcy debts, without court approval.  Finally, a community association may not encourage its other residents to pressure a debtor into paying its pre-bankruptcy debts, such as by including a debtor on a public delinquency list.  In one notable case, a court found that a community had violated the automatic stay by encouraging its residents to shun a debtor and exclude the debtor from social activities until the debtor paid its outstanding debts. 

In a bankruptcy case under chapter 13 of the Bankruptcy Code, which deals with personal reorganizations, a community association also may not take any of the actions described above against any person that owes the debt along with the debtor, such as a spouse, guarantor, or co-obligor.  Therefore, if multiple owners own a property and are delinquent on assessments, but only one owner has filed for bankruptcy, the community association must not take any action against any of that property’s owners during the pendency of the bankruptcy case. 

In chapters 7 and 11, however, there is no general prohibition against collecting pre-bankruptcy debts from any party (other than the debtor) that is also liable on the debt.  Therefore, a chapter 7 or 11 bankruptcy filing by one co-owner does not prevent a community association from attempting to collect unpaid assessments from another co-owner of the property.

Community associations must pay close attention to these rules.  A violation of the automatic stay can result in serious consequences to a community association.  Liability for violating the automatic stay exists as soon as an association learns that a debtor has filed for bankruptcy, regardless of whether the community association knows of the existence of the automatic stay or understands the implications of the bankruptcy filing.  At the very minimum, a community association that violates the automatic stay will be required to compensate the debtor for any actual damages suffered as a result of the violation.  If an association improperly suspends a debtor’s parking privileges, for example, it will be required to compensate the debtor for the cost of an alternate parking garage until the suspension is lifted.  If the violation of the stay was intentional, where the community association knew or should have known of the automatic stay and acted anyway, a debtor can be awarded punitive damages as well.  Depending on the severity of the violation, this can add thousands of dollars of additional expense.  If a violation has already occurred, it should be corrected immediately to minimize the extent of any damages suffered by the Debtor.   

Given the significant consequences for violating the automatic stay, community associations should inform their counsel immediately upon becoming aware that a resident has an active bankruptcy case.  Knowledgeable bankruptcy counsel can help community associations to avoid unintentional violations, and help to resolve any existing violations, before the issue escalates to the point that an association suffers further financial harm.