In 2010, condominiums and homeowner associations faced a number of significant economic challenges outside their control. Yet, in representing hundreds of condominiums and homeowner associations throughout Ohio, we worked with board members who overcame these challenges, proving that one aspect rings more true than ever: “Community association board members are not paid, not because they are worthless… but because they are priceless!”
Two of the biggest challenges boards tackled were collecting from delinquent owners and safeguarding association funds. In some parts of the country, unpaid assessments have resulted in deferred maintenance and cuts in services. Here, most boards have diligently enacted aggressive collection policies, proposed amendments to fortify provisions in the governing documents, and joined together to introduce “Superlien” legislation, which would protect condominiums from unrecovered losses in a foreclosure. Additionally, board members have taken steps to safeguard the associations’ money and ensure that they and their property managers are covered by the Association’s fidelity insurance.
The next time you see your volunteer condominium board member or property manager, say “Thank You!” Because of their hard work finding creative solutions, your community not only survived 2010, but will thrive in 2011.
Kaman & Cusimano, LLC: we do one thing and do it well: Ohio condominium and homeowner association law.
Ohio’s legislative session ends at the end of 2010, and any legislation that is not enacted must be re-introduced in the new legislative session, beginning in 2011. While progress was made, Ohio’s Super Lien legislation was not enacted this year. A community association Super Lien would, in the event of a foreclosure sale, mandate that the association be paid six months of fees prior to all other liens, including the bank’s first mortgages. Due to the importance of this legislation to thousands of Ohio communities, we are seeking to have this legislation re-introduced in 2011. It is our desire to ensure that the 2011 legislation will apply not only to condominiums, but homeowner associations as well. To accomplish this, wide spread support is certainly needed.
With the recent elections over and the new Republican controlled legislature, this effort needs board members who are friends with, or have influence with, Republican State Representatives or State Senators. If you know such a legislator, please contact us at superlien@kamancus.com for more information on how to volunteer and solicit sponsorship and/or support for this much needed legislation.
On Monday, November 8th’s 11:00 p.m. news, News Channel 5 in Cleveland featured Kaman & Cusimano attorney David Kaman in a story about the safety of condominium and homeowner association funds. According to the story:
David Kaman is one of Ohio's leading attorneys specializing in protecting associations and its members. He recommends associations be insured for their funds so they are protected against theft, and encourages members voluntarily pay for yearly audits. [Kaman said] "If anyone is thinking of stealing the association's funds, but they know that a review or audit is being done on a regular basis -- they're going to think twice about it."
Recently, JP Morgan Chase, the third largest home loan servicer in the United States, announced that it has frozen all of its pending foreclosure cases, so that it may review the accuracy of documents filed with the courts. In response to this news, many association board members and property managers have contacted our office questioning the impact on their associations’ pending foreclosure cases. To be clear, this freeze will not affect association foreclosures, provided the board followed Kaman & Cusimano’s recommendation to either file a foreclosure complaint or an answer and cross-claim.
Kaman & Cusimano has strongly encouraged its service option client community associations to be aggressive in pursuing delinquencies. To do so, the firm has always recommended that an association either 1) file a complaint to initiate foreclosure proceedings when a balance become high, or 2) join the bank’s foreclosure by filing and answer and a cross-claim.
Filing a complaint or an answer/cross-claim enables the association to push the foreclosure, continue the court proceedings, and order a sheriff’s sale regardless of the status of the bank’s claim. Additionally, filing these documents enables associations to participate in mediation, to be active in loan modification negotiations, and to receive any excess proceeds from the sheriff’s sale.
Again, if your association has aggressively pursued its delinquent accounts and followed Kaman & Cusimano’s recommendations, the Chase foreclosure freeze will not affect your association’s ability to obtain judgment on its claim, and ultimately order a sheriff’s sale.
Property managers and board members have routinely been receiving “mortgagee questionnaires” from the lenders of potential purchasers, asking the association a variety of questions ranging from reserves, number of delinquent accounts, number of investor owners, and amount of casualty, liability, and fidelity insurance coverage. When filling out this form, many Ohio condominium associations have been asking our office if they possess sufficient fidelity insurance to comply with Federal Housing Administration ("FHA") requirements. Currently, FHA requires sufficient fidelity insurance to cover all of the money in an association’s reserve account, plus three (3) months worth of assessments. For many associations that have been planning and saving for reserves, this amount may be significant, so it is important to verify the amount in the association’s reserve accounts and determine the exact amount of the association’s current fidelity insurance coverage from the association’s insurance policy or agent.
FHA also requires that the association maintain this fidelity insurance for all officers, directors, and employees of the association and all other persons handling or responsible for funds administered by the association. This includes property managers and bookkeepers. Thus, in addition to verifying the dollar amount of coverage, the board should also verify who is covered by the policy. Regardless of whether or not your association desires to be FHA eligible, Kaman & Cusimano strongly recommends that all associations have a Managing Agent Rider (MAR) attached to its fidelity insurance. This will help to ensure that the association’s assets are adequately protected.
For any potential purchasers to close on an FHA insured loan, the association must be able to demonstrate that it maintains this level of fidelity insurance. If the association’s fidelity insurance does not meet FHA requirements, the board must decide whether or not it should raise the association’s coverage, by balancing the increased premiums with the possibility of FHA insured financing.
It is very important to fill out the mortgagee questionnaires accurately and correctly to avoid any disputes or allegations of impropriety in the future. Again, the association must have enough fidelity insurance to cover all of the money in an association’s reserve account, plus three (3) months worth of assessments. If you have any additional questions regarding fidelity insurance, or if your association would like to apply to be on the FHA list of approved condominiums, please contact Kaman & Cusimano for more information.
On Friday, September 10, 2010, the Ohio Planned Community Act became effective. The law, which established Ohio Revised Code Chapter 5312, provides for the statutory framework of the governance and operation of Ohio’s planned communities. Similar to the statute enacted for condominiums, Ohio’s community association owners now enjoy significant consumer protections designed at preserving their communities and property values.
Also important for community associations is that the new law requires that all community association bylaws or code of regulations be recorded within one hundred eighty (180) days after the law became effective. If your association’s bylaws or code of regulations are not recorded, please contact our office immediately for more information regarding the easiest and most cost effective way for your association to be in compliance with the new law. More importantly than the simple act of recording, the Bylaws or Code of Regulations must reference the Declaration and incorporate proper language so that it appears in the chain of title of all homes within the community.
Kaman & Cusimano, LLC Service Option Client community association board members recently received a “special edition” Kaman Report detailing all of the important components of this new law. This includes information on the new laws governing reserves, cost of collections and enforcement, board powers, and records reviews. If your community association is not a Kaman & Cusimano, LLC Service Option Client, please Contact Us for more information on how to receive this important edition of the “Kaman Report.”
To protect owners and occupiers of structures that could contain lead based paint, the Environmental Protection Agency (EPA) released new regulations governing the construction and remodeling of buildings constructed before 1978. The regulations apply to anyone who hires or is paid to renovate, repair, or disturb lead based paint. This specifically includes community board members, managers, painters, electricians, drywallers, and plumbers. Homeowners working on their own homes are not included. The regulations require that renovations involving lead based paint need to be performed by an EPA Certified Firm using Certified Renovators or employees trained and supervised by a Certified Renovator.
Originally slated to become effective in February 2010, the EPA has delayed enforcement of these regulations until October 1, 2010. At that time, any Association constructed prior to 1978 conducting renovations must have the work performed by an EPA Certified Firm using Certified Renovators or employees trained and supervised by a Certified Renovator. Therefore, if any Association constructed prior to 1978 is contemplating renovations or is obtaining bids, please be sure that the Contractors have obtained EPA Certification, and include this requirement in any remodeling based contracts the Association enters into. After October 1, Community Associations could face significant fines and/or legal action if they fail to comply – thus, the best policy is to require Certification.
For more information on these new regulations, please see the EPA’s Lead Based Paint Compliance guide on the “Resources” page Kaman & Cusimano, LLC website, at: http://www.ohiocondolaw.com/resources.htm
As society has changed, Ohio’s community associations have also been forced to change. One previously positive act of the association, which unfortunately has now become a negative, is the publishing of a community directory.
In the good old days now gone by, many communities would publish a directory listing the names, addresses and phone numbers of all residents within the association. Some associations went so far as to even list the names, and sometimes the ages, of children residing in the community. The directory was used to get to know ones neighbors and facilitated “over the fence” neighbor to neighbor discussion.
In recent times community association directories have switched from a positive impact to a negative impact. Criminals have used directories to determine who lives alone and/or which residences are occupied only by a female resident. Instead of calling neighbors, some residents have taken to calling all association members for solicitation of sales of items such as cosmetics, tools, baskets, and candles. Instead of mailing holiday cards, some residents have taken to mailing all association members for solicitation of charitable donations or to obtain real estate listings. Email addresses have been grouped and used to make anonymous disparaging comments about management and/or the board. One member of a 260 home complex even duplicated and attempted to sell the directory to local contractors even though the directory advertised itself as “not being available to anyone outside the community.”
A well-intentioned board does not want to learn that its directory was tied to a break-in or worse type of crime. Boards should recognize the potential liability and/or the potential for a significant negative impact of publishing a directory. At a minimum, provide an “op-out” provision permitting residents to choose whether or not to be included in a directory. A community association board has many duties. It does NOT have a duty to publish a community association directory. A wise board would STOP.
Great News! Today, Governor Strickland signed the Ohio Planned Community Act into law, which will become effective in 90 days. The Act, which established Ohio Revised Code Chapter 5312, provides for the statutory framework of the governance and operation of Ohio’s community associations. Similar to the statute enacted for condominiums, Ohio’s community association owners now will enjoy significant consumer protections designed at preserving their communities and property values.
Kaman & Cusimano, LLC “Service Option” clients and property managers will soon be receiving a detailed Kaman Report newsletter on the new law.
This morning, the Ohio House of Representatives voted 95-1 in favor of the Ohio Planned Community Act. In the next few weeks, the Senate should vote to concur with the House's bill, and then it will be sent to Governor Strickland for his signature. A very big Thank You to all of Ohio's community association board members and property managers who urged the general assembly to pass this important bill.
This landmark legislation will give Ohio's homeowner associations a statutory foundation, similar to Ohio's condominiums. The Act will provide Ohio homeowners with the consumer protections they deserve by protecting their investment through statutorily organized associations creating strong neighborhoods and communities. This includes the ability to amend a declaration, require annual elections, inspect the association's records, and to handle rule enforcement issues in-house to avoid litigation. Stay tuned to www.ohiohoalaw.com for more information and updates as they become available.
Kaman & Cusimano, LLC will soon be distributing to all managers and HOA boards a special edition Kaman Report detailing the new law and its impact.
This week, Kaman & Cusimano LLC attorney Darcy Mehling Good testified before the Ohio House of Representative’s Civil and Commercial Law Committee. Advocating on behalf of Ohio’s thousands of condominium associations and tens of thousands of Ohio citizens living in community associations, Attorney Good urged the House to join with 15 other states and pass the vital “Super Lien” legislation. I copy of her testimony is as follows:
Good afternoon, Chairman Okey, Vice Chairman Murray, Ranking Minority Member Oelslager and other distinguished members of the Civil and Commercial Law Committee. Thank you for allowing me to give testimony today on this important piece of legislation, which is designed to help level the playing field for condominium associations who, through no fault of their own, are literally caught “holding the bag” in the unfortunate situations where units are sold at sheriff’s sales.
Allow me to start by telling you a little about myself: My name is Darcy Good and I am a member of the Community Associates Institute, which is an organization that works for the betterment of community associations with local chapters throughout Ohio and across the country. I also volunteer and serve as the Vice-chair for the Ohio Chapter’s Legislative Action Committee, which promotes legislation to improve community associations in Ohio. Professionally, I am an attorney that represents hundreds of condominium associations across the state and, as a practitioner for over 12 years, have had a front row seat in witnessing the devastating impact that sheriff’s sales have had on these neighborhoods. Finally, I owned and lived in a condominium, serving as Board Secretary for 6 years.
From my personal and professional experiences, I am here today to voice my strong support for this legislation because I know it will help protect and even improve the property values of Ohio’s condominium associations for the direct benefit of its owners, residents, and, although they do not want to admit it, the lenders.
Over the last few months, I have heard the questions asked by even those in support and the arguments raised in opposition. I am here to answer as many of those questions as I can and to set the record straight regarding the myths and falsities circulated by the opposition.
Rep. Murray has asked for statistical evidence to prove that the “super lien” legislation as similarly passed in the other states has had no negative impact on lending. As everyone knows, it is nearly impossible to disprove a negative. Still, as evidenced by the letter that was submitted last week on behalf of CAI and the letter that I attached to my testimony today, there is NO evidence of any reduction of lending or increase in money to be escrowed. I refer you to the letter from Mr. Lombardi from Rhode Island – a state that had a 6-month priority lien in place for almost 20 years before the legislature amended it to strengthen its priority even more. If the lenders in Rhode Island have not required fees to be escrowed after dealing with the law for almost 20 years, why would they in Ohio? CAI is for the betterment of condominium associations. If we didn’t believe this was good for condominiums in Ohio, I wouldn’t be standing here today with the full support of the national organization behind me.
Last week, we heard testimony from the Ohio Bankers League (OBL) and the Ohio Mortgage Lenders Association (OMLA) and I would be remiss if I didn’t correct a number of misrepresentations so not to lose sight of the real issue before us.
First, the condominium model is not “broken” as Mr. Adelman tried to suggest. Even with the number of foreclosures on the rise, the vast majority of condominium owners (approximately 80% of the cases we handle) pay in full to stop the foreclosure process and ultimate sale of their unit. And, all you have to do is drive around Greater Columbus to see the number of condominium associations that are still being built to know they are still a viable product. Second, there is no “taxation without representation” in condominium association as Mr. Adelman surmised. The Ohio Condominium Act mandates that the Board of Directors consists of unit owners elected by the members of association. This is the same mandate that is proposed in SB 187, which you recently passed unanimously out of your committee. Third, if passed, the “Super Lien” is not limitless, as Mr. Steed suggested. Anyone who has a basic grasp of how a condominium operates knows that, also by statute, the common expenses must be charged proportionately in accordance with the assigned percentages of undivided interest and, therefore, an association could NOT raise the fees on just the unit in foreclosure in some devious attempt to recover a greater amount from the lender of a unit sold at sheriff’s sale. Fourth, it boggles my mind how the OMLA could think that the additional fees, such as attorneys, paralegals, and court costs, could be limitless when it knows that in Ohio, we have judicial foreclosures and none of the fees are collectible unless deemed reasonable by the Court and awarded in the Decree of Foreclosure.
Lastly, I want to address the money tree issue. The point that is being missed is that the money tree already exists, just not for condominiums. It has, in fact, long existed for single-family homes. In fact, lenders have provided it voluntarily as every mortgage includes provisions that, if the mortgagor (borrower) fails to do any number of things to protect the property, for example not maintaining sufficient casualty insurance, the lender will step in and pay those costs to ensure that its investment in the property is protected. When necessary, the lender will even hire contractors to maintain the landscaping, snowplowing, and exterior maintenance while the foreclosure case is pending.
When a lender approves a loan in a condominium association, however, it knows that the association bears those costs. In effect, it is shifting the responsibility of protecting its investment to the association and, in reality, requiring the rest of the owners to pay for the maintenance that the lender would pay for in a single-family home. Yet, I am not aware of lenders requiring borrowers of single-family homes to escrow fees to cover those potential costs nor am I aware of any discount offered to borrowers for condominium units on their loans since they do not get the same benefit. So, I believe it is the lenders’ business model that is broken and needs to be fixed. It has put an unfair burden on condominium associations for far too long and, as you are aware, many states have already righted this wrong. It is time Ohio did the same for the hundreds of thousands of its citizens who call condominiums their homes.
And so I conclude with my request that you support this legislation so to level the playing field for condominium associations so that they may continue to properly maintain the condominium property for the benefit of their members and even the lenders by protecting their investments, and the property values of Ohio’s condominium homes.
The EPA has issued new regulations for dealing with lead-based paint. The new law became effective April 22, 2010. The regulations apply to anyone who hires or is paid to renovate, repair, or disturb lead based paint. This specifically includes community board members, managers, painters, electricians, drywallers, and plumbers. Homeowners working on their own homes are not included. The regulations require that renovations involving lead based paint need to be performed by an EPA Certified Firm using Certified Renovators or employees training and supervised by a Certified Renovator.
The first step is to determine the age of your building. If the condominium or homeowner association was constructed post-1978, lead is not a concern. If the construction is pre-1978, the building should immediately be tested for lead based paint. All testing must be done by an EPA certified analysist. A certified analysist is able to ascertain if there is lead based paint and if so, whether it will be disturbed, and what precautions must be taken. Many projects on pre-1978 structures should NOT require any additional work beyond initial testing and a finding of no lead based paint.
If the testing does indeed reflect the existence of lead paint, lead-safe practices need to be followed. The regulations specify that the work must be done by a Certified Renovator or workers trained and supervised by a Certified Renovator. The regulations require specific notification requirements to residents, dust control, warning signs, specific clean up requirements and then more testing. Additionally, if lead based paint is present, practices like sanding, grinding, planning, needle gunning, blasting and other activities that create large amounts of dust are prohibited. After Completion of the project, the Certified Renovator must prepare and deliver test results to the owners and maintain records for 3 years.
Do not perform ANY construction, renovation, repairs, etc on any property that was constructed pre-1978 unless you have an EPA certified professional involved. Fines for doing so can be as high as $32,000 per day and the health concerns are even more significant.
A helpful brochure explaining this new law is available on the “Resources” page of the Kaman & Cusimano websites, www.ohiocondolaw.com or www.ohiohoalaw.com
In support of H.B. 408 - the "Super Lien," and S.B. 187 - the Ohio Planned Community Act, several staff members and lawyers from Kaman and Cusimano, LLC stormed the Ohio State House last week in support of these two essential pieces of community association legislation. Attorney Darcy Mehling Good met with numerous legislators on an individual basis and Attorney David w Kaman testified before the House's Civil and Commercial Law Committee. Attorneys Kaman and Good answered numerous questions in an attempt to try and garner as much support for both bills as possible.
While S.B. 187 enjoys bipartisan support in the House after it was passed 29-1 in the Senate, H.B. 408 still faces strong opposition from the banking lobby and many Republicans. As 15 other states have shown, however, supporting America's community associations through a "Super Lien" is a not and should not be a partisan issue. Therefore, if you have not yet done so, please express your support for H.B. 187 to your local State Representative, and urge him or her to vote yes! A copy of the sample letter is available on the Kaman & Cusimano, LLC website: www.ohiocondolaw.com
Great News! In a victory for all of Ohio's homeowner associations and communities, the Ohio Senate voted 29-1 to pass S.B. 187, the Ohio Planned Communities Act. The Bill will now be referred to the Ohio House of Representatives, where it will be assigned to a committee for further consideration and a vote.
If passed by the House, the Ohio Planned Community Act would give Ohio's homeowner associations a statutory foundation, similar to Ohio's condominiums. The Act will provide Ohio homeowners with the consumer protections they deserve by protecting their investment through statutorily organized associations creating strong neighborhoods and communities. This includes the ability to amend a declaration,require annual elections, inspect the association's records, and to handle rule enforcement issues in-house to avoid litigation.
Thank you for your continued support. Stay tuned to www.ohiohoalaw.com for updates on this important legislation for Ohio's communities.
In 2009, Kaman & Cusimano, LLC collected over Three Million, One-Hundred Thousand Dollars ($3,100,000.00) in 2009 for its community association clients! This figure represents all money collected as a result of bankruptcies, foreclosures, and liens for which we handle the payoffs. It does NOT include the money recovered by the associations directly for countless other liens and collection letters.
As part of the effort to weather and manage the economic crisis, Kaman & Cusimano, LLC has consistently recommended that community associations be aggressive with delinquencies. Collection action is a process. A key part of the process is a foreclosure action. A foreclosure sometimes takes time, but it ultimately yields the best financial result of Ohio's condominium and homeowner association. By taking prompt collections action, associations stop the bleeding of bad debt and give delinquent owners a strong reason to pay. After a foreclosure, related actions such as wage garnishments and bank attachments also prove successful when available information shows the individual is employed or has other resources.
Delinquent maintenance fees and assessments have a tremendous, negative impact on the entire community. Our results have proven that if a Board is proactive and takes strong collections action, the best interests of the community and the property will be preserved and protected.
From January 21-23, several of the Kaman & Cusimano, LLC attorneys attended the national Community Association Institute Law Seminar. The attorneys learned about a variety of topics including Association collections, case law updates, legislative updates, the new FHA guidelines, zoning restrictions, expert witnesses, and the Board's exercise of business judgment. Presented by the College of Community Association Lawyers, to which attorneys David Kaman and Jay Cusimano are members, this seminar provides community association attorneys with a forum to tackle national community association legal issues.
Additionally, Kaman & Cusimano, LLC partner Darcy Mehling Good presented a section of the seminar entitled "Keep Fraud’s Ugly Head Out of Your Community Association." This section included "explaining the factors that foster the opportunity for fraud and discuss and identify proactive measures that an association can take to protect itself."
Kaman & Cusimano, LLC prides itself on its "communication not litigation" philosophy. Attending these national law seminars provides our attorneys with yet another valuable resource in representing our community association clients.
Great news! The Ohio General Assembly has heard the voice of Ohio’s community associations. On January 12, 2010, House Bill 408 was introduced by Representatives Ken Yuko and Brian Williams and is co-sponsored by eight (8) other representatives. House Bill 408 contains the “Super Lien” language that would give Ohio’s condominiums lien priority. If the “Super Lien” legislation is enacted, it would mandate that the condominium lien has priority over the bank’s first mortgage in a foreclosure. This legislation is vital for Ohio’s community associations, especially during the current economic climate. You can find a copy of this important legislation at
While House Bill 408 does not contain a “Super Lien” for homeowner associations, our legislative sources have informed us that once the condominium “Super Lien” and Senate Bill 187 (the HOA legislation) have each, respectively been passed by the General Assembly, it will be easy to move through similar “Super Lien” legislation for homeowner associations. Therefore, it is vital that all Ohioans living in community associations voice their support of this bill to their State Representative.
The “Ohio Needs a Condominium and Homeowner Association “Super Lien” Now! Grassroots Campaign” is currently underway. As you know, this is the second phase of our campaign – a grassroots effort where we ask that you contact your State Representative. A sample letter to send to your Representative indicating support for this vital legislation can be found on the Kaman & Cusimano, LLC website: www.ohiocondolaw.com. In addition, please make copies of the letter and provide it to all unit owners so that they too may send it to their State Representative. To find out who your state representative is and his or her mailing/email address, please visit http://www.legislature.state.oh.us/index.cfm
Kaman & Cusimano receives many of its Service Option Clients' newsletters in the mail. One in particular recently struck our eye. As you can see, Town Square Condominium has developed a unique way to clean up after dogs:
Too bad every association does not have dogs that are this well trained!
If your Association is a Kaman & Cusimano Service Option Client, you can now see many great sample newsletters of other Ohio associations in the "Client Articles" section of our website: www.ohiocondolaw.com
