Indiana Legislation Update

Also, pay attention to Senate Bill 0123 introduced (again) by Sen. Waltz:

Homeowners association election disputes. Requires the parties to a dispute involving the election of a director or an officer of a homeowners association or condominium association to attempt to resolve the dispute through the use of mediation before bringing an action in a court.

Provides that, if the parties cannot resolve the dispute and an action is brought in a court, the court: (1) may, on its own motion; and (2) shall, upon the motion of any party to the dispute; refer the case to any appropriate type of alternative dispute resolution selected by the court under the Indiana supreme court rules for alternative dispute resolution.

Complete bill here:
http://www.in.gov/legislative/bills/2009/IN/IN0123.1.html

The Indiana General Assembly convenes today. The following bills affecting homeowners associations have been introduced to date:

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HB 1071

Prohibits a homeowners association from incurring indebtedness or liability on behalf of the homeowners association in an amount that exceeds $5,000 during any calendar year unless incurring the indebtedness or liability is approved by the affirmative vote of a majority of members of the homeowners association. Specifies the procedures that must be followed when conducting the vote.

Provides that all sums assessed by a homeowners association but unpaid for the share of the common expenses chargeable to an owner of real estate are not enforceable as a homeowners association lien on the real estate.

Voids liens established and recorded under the law concerning homeowners association liens after the law became effective.

Repeals other provisions concerning establishment and enforcement of homeowners association liens.

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HB 1088
Homeowners associations. Applies the following to a homeowners association (association) established after June 30, 2009:
(1) Requires an association to maintain a current roster of all members of the association (members).

(2) Requires an association to prepare an annual budget that must be approved by at least 40% of the members.

(3) Requires the board of directors of an association (board) to address an item of business if more than 50% of the members petition the board to address the item.

(4) Prohibits a board from entering into certain contracts without the approval of the members.

(5) Provides that the governing documents of an association must include grievance resolution procedures that provide for the final and binding arbitration of disputes.

(6) Provides that the governing documents of an association must allow the termination of the association if at least 90% of the members agree to the termination.

(7) Specifies that an unpaid regular annual assessment imposed by a homeowners association on a member is enforceable as a lien on real property owned by the member and all other unpaid assessments are not enforceable as a lien on real property owned by a member.

(8) Prohibits an association from suspending the voting rights of a member for nonpayment of annual assessments unless the assessments are delinquent for more than one year.

(9) Provides certain defenses to a member if the association brings a civil action against the member involving an act in furtherance of the member's right of petition or free speech. Allows an association established before July 1, 2009, to elect to be governed by these provisions.

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SB 123

Requires the parties to a dispute involving the election of a director or an officer of a homeowners association or condominium association to attempt to resolve the dispute through the use of mediation before bringing an action in a court. Provides that, if the parties cannot resolve the dispute and an action is brought in a court, the court: (1) may, on its own motion; and (2) shall, upon the motion of any party to the dispute; refer the case to any appropriate type of alternative dispute resolution selected by the court under the Indiana supreme court rules for alternative dispute resolution.

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Well (once again), here’s one person’s comments (I’ll flesh these out a little more when I write my legislator and the folks who sponsored these bills):

HB 1071 – I suspect this applies to special assessments. If so, I don’t think this bill should apply to HOAs whose bylaws already have language requiring a vote by the members (we require homeowner approval for special assessments or if the Board recommends fee increases exceeding 5% from the current year). If the vote was taken properly, the homeowner SHOULD be liable to pay the assessment, and if he/she fails to do so, the HOA should be able to file a lien.
As I’ve said in previous posts, sometimes a HOA does everything right, but then encounters a disaster where repair expenses exceed the reserves and insurance payments.

HB 1088 – I’m glad this would primarily apply to HOAs established to those formed after June 2009. There ARE older HOAs that do have various checks and balances written in their bylaws that (on paper, anyway) protect against rouge board members. The key in those situations is for the homeowners to sit down and read the damn things, so they’ll know what’s right. Sure, some idiot board member may squawk, but I find they quiet down when confronted by a bunch of people at once.

I don’t like the provisions requiring approval of annual budgets or certain contracts by the members. You should be electing a board that’s competent enough to prepare a realistic budget and exercise care when hiring vendors. Given the owner apathy that’s already an epidemic, how would you get anything accomplished waiting for people to cast a vote?
Here again, education is the key – all HOA members should insist on getting a copy of the annual budget and receive updates on actual income and expenses throughout the year. Boards should be publishing periodic newsletters telling people what maintenance or replacement projects are being done and why – if anyone has a question about anything, they can notify the property manager or ask a board member.

A good board isn’t afraid of people asking questions – they may not like the answers, but that’s another matter. That’s why it seems strange that we would need a law requiring the board to address an issue if half the members request it. My question is why do people let things escalate to this point – they don’t know what’s happening, but don’t seem to do anything to find out why. If people live in a community with this type of board, they need to get together and recall the rascals, and then bring in competent people who will behave differently.

It seems to me a HOA should be keeping a roster of homeowners – in my experience, the problem comes with keeping track of which homes are owner-occupied vs. rented. We ask owner/landlords to give our property manager updated information, but usually don’t find out about changes until someone notices a U-haul being loaded up in the middle of the night

I like the grievance resolution provision (also addressed in SB 123) – what Indiana needs is an affordable program where problems can get resolved before both sides spend more money in legal fees and court costs. I say split the costs between the homeowner and association – whoever wins must be reimbursed by the other side AND the parties have to agree in advance to abide by the mediator’s decision. In short, don’t start none, won’t be none – if you’re whining about a certain rule or not paying fees, you better be prepared to duke it out in arbitration or court.

Voting rights – how ridiculous is this???? You want the right to vote, but you won’t pay fees that enable the association to provide services that benefit you? I don’t think so. And I don’t want ANYONE who can’t or won’t pay their fair share making decisions that affect ME, when I’m busting my ass to pay my bills, including my assessments in full and on time! No, you don’t pay, there go your privileges until you’re up to date. You don’t like the decisions that are made while you were delinquent, well, that’ll “learn ya” to keep your fees paid, won’t it?
And then, if you wait a full year, what happens to the bills that still have to be paid in the meantime?

I haven’t had any experiences with the free speech issue – we tell our members they can say anything as long as they keep it clean. During meetings, we don’t allow threats, bad language and that stuff – the homeowner has to stop it or leave (or be escorted out by our security officer, who’s an IMPD officer).

Boy, That Sheila, I wonder how she really feels. AWESOME POST !

Mary,

It seems to me that we (all of us) will always have 2 different views on how to govern our HOAs. Many of us work under the black and white system and others always see the grey area as their norm. I hope this comes out right but as governing boards, we cannot always allow for the unknown. Prepare for huge shortages because of lack of dues being paid? I find that offensive to my sense of what is the right way to govern. You pay or you pay the concequences for not paying. That might be lein, removal of privledges or forclosure.

Don't misunderstand that I always believe in giving EVERYONE a chance to remedy a problem and that everyone deserves their chances to seek help. But there comes a time when a Board has to finally say NO! And having any government override a HOAs ability to continue to operate without interference from them is most important. As I posted earlier, would the State or Federal government offer to pay the association bills when the HOA goes bust because of lack of funds? Most likely, not.

Donna,

Just one comment regard your statement: "Prepare for huge shortages because of lack of dues being paid? I find that offensive to my sense of what is the right way to govern."

With so many bank and mortgage co foreclosures, I think it prudent for the assn to insert a "bad debt" line item in the budget to account for uncollectable assessments. It may not be worth the expense to go after some of the delinquencies and the amounts just have to be written off. Remember the old adage: You can't squeeze blood from a turnip. I'd never, in the past, believed an HOA should have "bad debts", but the current economic situation in our country has caused me to change my opinion.