Ask the HOA Expert: Governing Documents, Common Property Signs, Disputed Policy Decisions

Written by Posted On Thursday, 29 October 2020 05:00

Question: Our governing documents contain this provision: "No dwelling shall be used for any purpose other than for a single family residence." A board member has been housing a teenage nephew and his friend. No rent is being charged. Does this constitute something more than a single family residence? The situation is causing problems among the neighbors due to complaints of late night parties and traffic.

Answer: Extended family is generally accepted under the "single family residence" definition as long as no rent is being charged. The friend issue is pushing the definition envelope.

However, late night activity that disturbs the neighbors, whether by family or guests, is a violation of HOA rules. This particular homeowner is a board member so the duty to comply with basic rules is even more important.

The real issue is the disturbance, not the rental arrangement. The issue needs to be framed plainly: Either the kids abide by the rules or there will be ramifications (assuming that the HOA has established fines and penalties).

Question: We are having an issue regarding allowing signs on the common property. Our governing documents requires board approval for all signs. In the past, the board has given approval for 'For Sale' signs only -- but not 'For Rent' signs or any other sign. Recently, there were three 'For Sale' signs up at once, all with board approval. Several homeowners complained that the signs were detracting from the appearance of the property and the Board adopted a policy to not allow any signs on the property. Thoughts?

Answer: If the Board has the authority to approve signs, the Board has the authority to enact a Sign Policy. However, the Board cannot enact a policy that prohibits signs since the governing documents imply that signs are allowable. Only an appropriate majority of members as defined by the governing documents can vote to amend the governing documents to eliminate signs altogether.

But such an amendment is not recommended. For Rent and For Sale signs are standard fare in every part of the country with the exception of a few elite communities. These signs are temporary and designed to assist members in a legitimate business enterprise which all will undertake at some point in time. It is, however, appropriate to control the size, look, number, longevity and topic of signs.

Political signs, for example, can only be displayed for, say, 30 days before an election and then be removed within 48 hours of the event.

Question: One of our homeowners sued the board over a disputed policy decision. Our board did not purchase Directors & Officers insurance, even though the governing documents required it, so attorney fees were paid for from the HOA operating funds. Some of us think that's not right. What should be done?

Answer: If the governing documents require the HOA to have Directors & Officers insurance, that's what it means. D&O is specifically designed to provide legal defense for the Board in situations like you describe. There are many HOA Boards that haven't a clue what D&O insurance is and have never read the governing documents to even know there is a requirement for it. As long as the HOA doesn't get sued, they look like heroes because they saved the HOA premium expense. But now that your Board has been sued and there was no D&O, they don't look so smart.

So, was the oversight out of ignorance or deliberate defiance of the requirement? If the board made a conscious decision not to spend the money for this insurance, to quote Ricky Ricardo, "You (The Board) got some 'splaining to do." Since D&O is usually inexpensive, there is no good reason not to have it.

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