Community Associations Update - November 2013
Recommended Practices for Community Associations When Creating Websites and Using Social Media
By: Kathleen Waldy, Esq.
Takeaway: The use of websites and social media by community associations is a great way for communities to keep their membership informed; however, there are recommended practices that community associations should follow in order to avoid, or at least minimize, their potential for liability exposure.
The Use of Social Media In the Community Associations Context: In order to keep their membership informed and to attract potential new purchasers, many community associations have created their own websites that contain information such as a listing of the governing documents and architectural guidelines, management contact information, and an events page. Occasionally, an association’s webpage will even permit members to post comments. In addition to setting up such webpages, some community associations have started interactive pages for members to make association-related postings, such as setting up Facebook, Twitter, and Nextdoor accounts, or Yahoo groups. With community associations creating more and more platforms for members to post comments on, associations must take affirmative steps in order to protect themselves from potential liability exposure springing from inappropriate postings.
It is important to note that although both the Virginia Property Owners Association Act and Virginia Condominium Act require that associations “establish a reasonable, effective, and free method…for [ ] owners to communicate among themselves” and with the board of directors regarding any matter concerning the association, the law does not require that associations set-up a method that is email or web-based.
However, should a community association desire to create a social media outlet allowing owners to make such communications, it is recommended that the association follow the recommended practices discussed below.
Potential Liability Issues Community Associations Should Be Aware Of: There are three areas where community associations could face potential liability exposure. First, and probably the most likely area leading to potential liability, is defamation. Defamation is a false statement that damages another’s reputation. Defamation occurs when a false statement is published to another, which can occur orally or in some form of writing. Members may not think before they post a comment on the social media outlet, which may not only open that member up personally to a claim for defamation, but may also tag the community association for such a claim. There may be some relief to a community association for defamatory comments posted on its social media outlet under the federal Communications Decency Act, which states that “no provider or user of an interactive computer shall be treated as the publisher or speaker of any information provided by another content provider.” However, if the community association can be linked to promulgating such defamatory comment—whether through an act of a board member, managing agent, or some other association act—the protections of the Act will not shield the association from liability. It is important to note that this Act does not protect against federal criminal liability or violations of copyright and trademark infringement allegations. Lastly, the strength of this particular provision of this Act has not been tested in local state courts so the exact limits of its protection in a state court arena are yet to be seen.
Second, community associations could also face liability stemming from copyright and trademark infringement. Postings that contain text, photos, graphics, or other media content without the author’s permission may constitute a copyright or trademark infringement.
Last, unauthorized use of pictures of association members can expose a community association to liability. For instance, if an association takes pictures of its members at an association-held barbecue, posts the pictures of the members in attendance on its website or social media page, and the members in the photos did not provide their permission for such photos to be posted, the association can open itself up to a potential claim for liability.
Recommended Practices: In order to put a community association in the best position to dodge potential lawsuits, or to avoid or minimize liability, there are recommended practices the association should engage in, which are as follows:
- Create One-Way Webpages: Create community association websites that are one-way—in other words, websites that only permit the association, its board of directors, managing agent, or other designated individual to post content and information on the association’s webpage. This type of website will not allow for third parties to make any postings. The association website should contain information that is helpful to its members and to potential purchasers of homes within the association, such as (a) governing documents, resolutions, and architectural guidelines, (b) board and annual meeting dates, (c) management contact information, (d) dates of community events such as barbecues, and (e) location of association.
- Check Insurance Policies to Determine Coverage: A community association should check its insurance policies, such as its directors and officers, and errors and omissions policies, in order to determine whether it has coverage for claims related to social media use. If an association’s current coverage does not extend to claims resulting from social media, the association should contact its insurance agent to obtain additional coverage.
- Receive Releases from Members before Posting Photos: If a community association wants to post pictures of its members attending association-related events, it is recommended that the association obtain permission from the members in the photo prior to posting such photos to its website or social media outlets. This can be done by placing on the event ticket, invite, or event welcome board that the association has the right to post such photos to its website or social media outlet.
- Seek Legal Guidance: Consult with the community association’s legal counsel in order to discuss potential liability issues and recommended practices related to the creation of and/or usage of association websites and interactive social media.
If members of the board and/or managing agents of a community association have any questions regarding social media issues and recommended practices, please contact your Whiteford, Taylor & Preston community association attorney for assistance.
The Critical Role of the Board in Amending Governing Documents
By: Marla Diaz, Esq.
Evolving community needs and changing legal requirements often present a community association board of directors with a daunting task: amending the association’s governing documents. A well-crafted amendment that complies with applicable law is the obvious objective of any board of directors that is considering proposing revisions to its governing documents. Developing this amendment document itself is generally the easy part of the amendment process if the association is represented by an experienced community association attorney.
More frequently, the hardest parts of amending governing documents are getting the association members’ attention, marketing the amendment to them and obtaining their approving votes. But, unless the necessary majority of members participate, any amendment, no matter how well drafted, is doomed to failure. So, if your board of directors is considering proposing an amendment for approval by your association’s members, getting members engaged and responding likely will be key to a successful amendment. Because of this reality, here are four questions to ponder if your board is proposing to amend its governing documents::
- Is the amendment really necessary?
The amendment process involves significant expense and effort. A smart board of directors will ask whether the issue that the amendment is intended to fix can be addressed in any other way. In consultation with the association’s attorney, the board will want to consider whether, for example, an available statute will serve to address the issue or whether a board resolution would have sufficient authority to avoid the need to go through the amendment process. Similarly, the board will want to consider whether the issue arises so infrequently that attempting to amend the documents in order to address it is not justified.
- Can association members be expected to perceive the value of the amendment?
The members of the board of directors are engaged, often on a nearly-daily basis, in the business of the association. From this perspective, the directors can readily appreciate the value of the proposed amendment. The other members of the association, however, are almost certainly not engaged in the association’s affairs and are involved instead in their daily lives. This leaves them little time to understand or worry about association issues that, to the directors, mandate an amendment to the governing documents. Because of this fact of life, a proposed amendment has a far better chance of membership approval if the need and value of the amendment can be shown to the members in as brief and “non-legalese” a way as possible. One wit has suggested that it must be possible to explain the need and effect of an amendment “before the light changes at Main and Broad.”
Board members should carefully think about “talking points” for use in both oral and written presentations to the members. The talking points must simply and clearly set out the reasons for and anticipated effect of the proposed amendment. These talking points must make the strongest case possible as succinctly as possible.
- What is the “marketing plan” and how will it be implemented?
The approval of at least a majority of members is required by most association documents in order for an amendment to become effective. This, together with the non-involvement of most members in the affairs of the association, calls for a well-thought out plan for marketing the amendment to the members.
Such a plan might include a mailing to members containing the language of the draft amendment, a red-lined copy of the section or sections to be amended showing the change being made, a covering memorandum using the talking points to explain the reasons for and effect of the amendment and reporting the board’s (hopefully, unanimous) recommendation of the amendment and, if approval can be obtained outside of a meeting, a ballot form. The plan might also call for one or more “town hall” meetings of the members to present the amendment and respond to members’ questions.
If the association documents require a vote at a meeting, a formal meeting might replace the town hall meetings. In that case, the package to the owners would include a formal notice of meeting that complies with the association documents and state law. The marketing plan might also provide for a follow up mailing or email to members that addresses any questions or concerns raised by members as a result of the mailed package or during the town hall meetings.
- What steps will be taken to obtain members’ approvals (or disapprovals) of the proposed amendments?
Assuming, as is frequently the case, that members’ approvals may be obtained outside the confines of a meeting, the board will want to plan steps to get members to submit ballot forms. Several things can be done to encourage members to submit written evidence of their approval of the proposed amendment. Forms allowing members to indicate either approval or disapproval of the amendment can be included in the package sent to owners. Such forms can also be available at town hall meetings and members should be encouraged to submit the forms during or at the close of those meetings. Drop boxes at the association property and email responses should be considered if consistent with the amendment and voting provisions of the association’s documents.
The board should have a plan to follow up. This can include email broadcasts to members, telephone trees to contact those who have not previously responded to encourage them to do so and, should it prove necessary, door-to-door campaigns at a time when most members can be expected to be at home. In considering follow up steps, the board will want to remember the need to encourage non-resident members to respond, as non-residents can often make the difference on whether the amendment will be approved or not, even though those members are often the least engaged in the association’s affairs.
If the governing documents require that amendments must be voted on during a meeting of the association, the board should include proxies in the package provided to all owners if the association documents will allow voting by proxy. In this connection, the board will want to consult with the association’s attorney to be sure that the proxy form is valid and to be sure that any limits on the number of proxies a single person may exercise are honored. Follow up emails and, as necessary, telephone trees and door-to-door efforts to obtain proxies should be part of the board’s plan.
Without doubt, carefully crafted amendments and adhering to necessary legal steps and other formalities are necessary for valid amendments. However, a well-represented association can depend on its attorney for these.
The board of directors’ critical role in insuring that a necessary amendment to the governing documents becomes effective lies in developing support among the members for the amendment and in doing what can be done to insure that members vote on the amendment by the necessary majority. The steps described above will help a board of directors more easily get approval for an amendment that it knows to be necessary for the good of its association.
Tax Lien Certificate Sales in DC
By: Alexander Rouhani, Esq.
Tax lien certificate sales pose many questions and potential problems for condominium associations in the District of Columbia. They can strip an Association of all its liens on a property, or act as tool to remove a chronically delinquent owner or even net the Association a substantial profit. As such, it is in the best interest of all Associations to monitor tax lien certificate sales and be cognizant of their rights and options.
In the District of Columbia, if a home- or unit-owner fails to pay his taxes for any given year, the Office of Tax and Revenue (the OTR) may record a tax lien against their property to secure the debt for the outstanding taxes. These liens remain on the property until the owner pays off the tax liens in full. If the owner continues to fail to pay the taxes after the lien is recorded, then the Office of Tax and Revenue may initiate a process that can result in the foreclosure and sale of the property.
By law, the OTR has the authority to auction off tax liens in an effort to collect delinquent taxes. These “tax lien certificate sales” are held once a year. As with any other auction, these sales are advertised, and any interested bidder may attend the auction, bid and potentially purchase a tax lien certificate.
Once the tax lien is sold, the purchaser obtains certain rights to pursue the delinquent taxes, namely the authority to foreclose on the unit. The foreclosure process under a tax lien, though, is very different from a conventional condominium lien foreclosure. The main difference is that the purchaser of the tax lien is not foreclosing by selling the property at auction in satisfaction of the outstanding liens. Rather, they are foreclosing on the rights of all parties with an interest in the property. This means that they are attempting to extinguish all the other liens and deeds of trust secured by the property and obtain fee simple ownership, meaning they would own the property outright.
In order to foreclose on a tax lien, the purchaser must first give notice to all interested parties, including the owner, first trust holder and other parties with a lien on the property, such as an Association. The notice informs the parties that the tax lien certificate has been sold; that they have a right of redemption to pay the delinquent taxes and costs, including attorney fees; and that if they do not act on their right of redemption, a proceeding to foreclose on the property may be initiated. Often times, the first trust holder will act on the right of redemption and pay the delinquent taxes and costs to avoid losing their sizeable interest in the property.
If no party acts on the right of redemption within six months of the tax lien sale, then the tax lien purchaser will have the right to file a lawsuit to foreclose on the right of redemption. The purpose of the lawsuit would be to extinguish the rights other parties have in the property, as mentioned above, and obtain fee simple ownership of the property. In laymen’s terms, the tax lien purchaser becomes the owner of the property, the prior owner is evicted, and the deed of trust and all other liens, including the Association’s, are removed. As such, when tax liens on a property located in an Association are listed for auction by the Office of Tax and Revenue, the Association must evaluate the situation to determine whether it makes sense to bid on and buy the lien and/or act on the right of redemption to stop a tax lien foreclosure.
When to Purchase a Tax Lien at the OTR Auction
An Association should carefully weigh its options when deciding whether or not to purchase a tax lien. There are instances when it could provide great benefits, particularly when it is unlikely anyone else will exercise their right of redemption, but in other situations it may not be worth the effort. In most tax lien sales, the first trust holder will exercise the right of redemption to avoid having its substantial interest in the property, the mortgage, stripped. When this happens, the tax lien purchaser does not realize any gain from the purchase of the tax lien. Instead, they have to go through all the steps of purchasing the tax lien and even filing a lawsuit, but only break even at the end of the day. Accordingly, when a property is encumbered by a mortgage, it usually is not worth purchasing the tax lien.
However, when a property is not encumbered by a mortgage, there is a much higher likelihood that no one will exercise their right of redemption and the Association could feasibly obtain fee simple ownership of the property. This would allow the Association to then sell the property in a regular sale and net a substantial sum. It could also help remove a chronically delinquent owner and replace them with one who pays regularly.
When to Exercise the Right of Redemption After Someone Else Buys the Lien
If an Association does not purchase a tax lien certificate at auction and no other party, such as the first trust holder, exercises the right of redemption, it will have to make a determination of whether or not to exercise the right itself. There is really only one instance when exercising the right of redemption would benefit an Association, which is when there is equity in the property.
As a starting point, if there is no equity in the property, then there is no sense in exercising the right of redemption because it is unlikely that the Association’s liens are worth anything since the property is already fully encumbered by the first trust. In this situation, it is best to let the property be foreclosed upon and secure a new owner who will pay the assessments regularly.
When there is equity in the property, an Association may want to consider exercising its right of redemption. In this situation, the Association could feasibly stop the tax lien foreclosure and initiate a condominium lien foreclosure sale of its own to recognize a gain through the equity in the property. This way, the Association can use the equity in the property to satisfy its liens instead of having them stripped. It is important to note that if the Association can collect against the owner personally, then it might be easier to allow the tax lien foreclosure to take place. That way, it could file a simple collection action against the owner personally to recover the delinquency and avoid the heavy lifting of conducting a foreclosure.
At the end of the day, tax lien certificate sales can greatly affect an Association’s rights. They can strip them of all their interest in a property, but can also be a tool to remedy a situation with a chronically delinquent owner or to net the Association a substantial sum. As such, it is in every Association’s benefit to be aware of tax lien certificate auctions and foreclosures that may be taking place and to be cognizant of their rights throughout the process.