June News from theHOAteam

The information provided in this newsletter was done so by our partners AFTERDISASTER of Charlotte, Foster Lake & Pond Management, and Offit Kurman Attorneys at Law.

Summer is Back!

We know that everyone is excited to feel the heat once again. Nothing like these hot, humid North Carolina summers. Regardless of whether you are inside or outside right now, theHOAteam has put together some content that is worth your review. Simply click on the sections below to view the full article.

Condos: Special Assessments and Getting them Passed

AFTERDISASTER of Charlotte

Most sales and marketing experts will concur that you must “sell” your proposal or entreaty to those making the buying decisions. This includes a condo or homeowner’s association  trying to implement a special assessment fee.

Special assessments are fees paid by homeowner’s associations (and charged to unit owners) to cover the cost of building repairs that exceed the amount in the current budget or reserves. Many special assessments occur in emergency situations such as a natural disaster. For example, a hurricane could blow the roof off the community clubhouse and the insurance might not cover a large portion of the replacement.

Special assessments need to be handled delicately considering most homeowners don’t want to spend more money than their regular monthly assessments. Advice from experts who have been through the process of getting a special assessment passed:

Don’t use the term special assessment until it’s necessary. Owners need time to process the idea of an assessment. Some boards will give them at least six months to adjust to the idea. Obviously, this isn’t possible when it is an emergency situation. Some board members may scoff at this idea, but it helps to talk with the owners and allow them to process their feelings about it. It is similar to the grieving process; they may first have a shock reaction, then anger, then blame, and then acceptance. If you were to have voting too soon they wouldn’t have gone through the progression.

It is also important to explain why you need the funding over that six-month period. Be transparent and show where your association is financially and how it will benefit owners in the end. If it will increase property value or enhance living in the community, they should understand the advantages. It is important to go through all these steps including sharing with them comprehensive and well-written information regarding why you need this and the experts that were consulted in the decision-making process.

Have as many meetings with them as necessary, with at least one open meeting and the back-up information as to why the assessment is necessary.

If they are alarmed about paying or the special assessment is a large fee you should have a payment plan available. Lisa Magill, a shareholder and association attorney in Florida states, “All kinds of payment options are being evaluated by associations. I’ve seen associations divide special assessments into 12-month, 3-year or 5-year payments, or half now, half later. Theyunderstand that owners may not have sufficientcash flow to pay a large special all at once.”

James R. McCormick Jr. a partner at Peters & Freedman LLP in California who represents associations says, “Another option is to break up the payments, with each due on a certain date. That changes who’s responsible for payments if the unit is sold while payments are being made, which would normally be whoever owns the unit on the date the payment is imposed.”

Before making payment terms over several years, check your CC&R’s first. Though NC and SC laws don’t address special assessments, many community governing documents require that special assessments may only be levied and payable in one calendar year. One alternative is to take to other communities that have had their special passed successfully, find out what they did.

SUMMARY
When dealing with special assessments there is always the possibility that there will be complaints and gripes from homeowners. There is also a possibility that the homeowners will challenge it. It is the board’s job to make sure that they have everything in line to prepare the owners for the facts, legalities and reasons why the need for the additional expense can be an advantage to them in the long run.

Harmful Algal Blooms (HABs) in Lakes, Ponds and Stormwater Devices

Foster Lake & Pond Management, Inc.

Harmful algal blooms are occurring unusually early this year. (Like we need another problem to worry about!) Above normal rainfall through the winter washed stormwater containing abundant nutrients into ponds. Now, very dry and suddenly hot weather is contributing to early cyanobacteria growth. Until recently, this surface film was considered a form of “blue-green algae”. Blue-green algae are now classified as bacteria and are correctly called cyanobacteria. As bacteria, they are mobile and can rise and sink through the water column. They have chlorophyll and can produce food for themselves through photosynthesis. Possible colors range from yellow to red to violet to green to deep blue, blue-green, gray, and black.

Probably the oldest living forms of life, cyanobacteria are not well understood. They exist everywhere. Nevertheless, nuisance blooms are increasingly troublesome throughout the Southeast. Cyanobacteria blooms are nuisances because they are ugly, smell bad and can produce toxins. The blooms are not very stable and often crash in a relatively short period of time.

Unlike desirable plankton, cyanobacteria do not contribute significant amounts of dissolved oxygen. Cyanobacteria reproduce relatively slowly, about 1 time per day. Dead decomposing cells consume available dissolved oxygen. They are also not good oxygen producers like green plankton algae. The slow recovery of low oxygen levels contributes to occasional fish kills.

Harmful Algal Blooms (HABs) almost always include cyanobacteria. Public attention is increasing as we learn more about these HABs. They can cause illness and possibly death in pets, livestock, fish and humans. The toxins may even cause some health issues when airborne. Toxin production in cyanobacteria is not consistent nor easy to predict. Preventing thick concentrated blooms is important. Here are some techniques and factors we utilize battling HABs:  

Agitation - Flushing, mixing and turbulence all reduce cyanobacteria growth. If water flushes through the lake faster than the nuisance can bloom, problems are reduced. If mixing can overcome the ability of the bacteria to maintain its position in relation to light and available nutrients, growth is reduced. Shear turbulence can disrupt colonies and break up filaments. Aeration with fountains, and even diffused bubbles, can significantly reduce surface film formation.

Reduce excess nutrients - High levels of nitrogen and phosphorus are associated with cyanobacteria blooms. If the nutrients are reduced for months and years, blooms have been shown to diminish. Low phosphorus lawn fertilizers and proper stormwater management are good starting places. Products are available to permanently sequester phosphorus eliminating it from being a contributing growth factor.

Beneficial bacteria/enzyme concentrates - Beneficial bacteria concentrates may compete with cyanobacteria for available nutrients. These probiotic and catalyst products have become very popular over the past few years for improving water quality, reducing organic “muck” deposits on pond bottoms and making certain chemical treatments more effective.

Chemical Treatments – Algaecides and many bactericides kill or suppress cyanobacteria. We use granular algaecides to control growth on the pond bottom. We generally use liquid products to control algae that is floating or suspended in the water column. Active ingredients can be copper, peroxides or herbicides approved and labeled for aquatic use. Determining which product to use, the method of application and the treatment strategy can be complex and is beyond the scope of this article.

Plants – Shoreline and aquatic plants can be very beneficial for lakes, ponds and stormwater devices. Shoreline plants reduce erosion and keep nutrient laden soil out of the water. Aquatic plants utilize nutrients in the water that might otherwise contribute to HABs. Vegetative shelves (shallow plant beds) and now even floating plant rafts can be attractive, improve water quality and reduce excessive cyanobacteria growth reducing their toxins.    

All these factors are considered in our stormwater management recommendations and activities. Proper stormwater device inspection, maintenance and repairs leading to good water quality is the best way to avoid problems with HABs. I hope this information is helpful. Please do not hesitate to contact me if you have questions or need additional information.

Older Condominiums Thrown a Curve Ball by NC Court of Appleals

Offit Kurman Attorneys at Law

The North Carolina Court of Appeals has issued a “published” opinion (meaning the case is binding authority for similar cases) effectively eliminating an important and effective tool for collection of delinquent assessments for older condominiums: the “power of sale” foreclosure (“POSF”).  Also known as “non-judicial foreclosure,” the POSF essentially utilizes the same legal process as mortgage foreclosures, where a neutral third-party trustee oversees the foreclosure from commencement of the foreclosure through the sale of the property.  This process is more efficient, less expensive, and faster than lawsuits, and unlike traditional lawsuits the issues that can be raised are limited.

Condominiums formed on or after October 1, 1986 are governed by the North Carolina Condominium Act, Chapter 47C of the General Statutes.  The Act details the procedures for POSFs, and has provisions that expressly make POSFs available as a remedy for condominiums formed prior to 1986 – which are otherwise governed by older law, the Unit Ownership Act (Chapter 47A), which is silent on the issue of POSFs.

The case, Executive Office Park of Durham Association, Inc. v Rock, involved a pre-1986 office condominium in Durham.  The owner of several units fell behind in payment of his assessments (a fact which he disputed); the Association filed a Claim of Lien and later commenced a POSF.  The Clerk of Court hearing the case granted the Association’s petition to move forward with a foreclosure sale.  Mr. Rock appealed to the Superior Court, which upheld the foreclosure order.  Mr. Rock appealed to the N.C. Court of Appeals.

The Court properly noted that the neither the 1982 Declaration for the condominium nor the statutory provisions governing pre-1986 condominiums (the Unit Ownership Act) provided for POSF.  The only foreclosure procedure available to the Association, according to the court’s opinion, was a “judicial foreclosure,” which is a “traditional” lawsuit without the streamlined oversight of a trustee in a POSF.  The Court reversed the prior rulings of the Clerk of Court and Superior Court, thereby voiding the right to pursue POSF for this and some similarly situated pre-1986 condominiums.

Inexplicably, the Court did not even mention in its very short (7-page) opinion, much less acknowledge, the unambiguous provisions in the Condominium Act that make POSF available to pre-1986 condominiums – despite the fact that the Association’s counsel specifically raised this argument in the appellate brief filed by the Association.  For that reason, it is our opinion that this case was wrongly decided, and should be and will be reversed either by a requested re-hearing of the case before the Court of Appeals, or on appeal to the North Carolina Supreme Court. 

What does this case mean for pre-1986 condominiums?  Unless and until this decision is reversed on a rehearing or appeal to the Superior Court, those associations will need to have their attorney review their declaration to determine if POSF is an available option.  If not, the Association can (i) file a Claim of Lien and wait for the ruling to be reversed by the courts; (ii) pursue a judicial foreclosure, or (iii) pursue a small claims court lawsuit in the magistrate’s court.

Click Here to View the Full Court Opinion

theHOAteam of Charlotte Partners

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