Condos and Condon’ts
Homeowners’ associations (HOAs) are, in a way, the smallest unit of government. Neighbors follow a charter that defines their rights and responsibilities. Alaskans, being famously individualistic, might perceive this arrangement as a nuisance.
For example, “If you leave your trash can and your HOA has a rule about how long you can leave it on the sidewalk, your HOA is the city in that instance, and they will fine you $25 or whatever the rules are,” explains Chris Hoke, president and founding lawyer of HOA Legal Services in Anchorage. “It really is another little government that you agree to live in and abide by the rules.”
Annoying as it might be, some Alaskans do agree to those rules. “The reason people choose to live in these communities is to retain property values and also to get the services that the HOA is obligated to provide by their declaration and rules,” says Sarah Badten, an attorney with Birch Horton Bittner & Cherot. “I too live in an HOA, and I love my HOA. I’ve donated many hours to my own personal HOA. It’s a little community within a community.”
Badten pays association dues on top of housing expenses for a property she already owns. The service may be costly, but she says members get what they pay for.
Hoke agrees. “The magic of HOAs is that you share common expenses, so in your parking lot instead of having twenty different snow plows come through when we get a dusting, we all agree that we’re going to have one company do it, and we all pay,” he says.
Community associations—the broader term for HOAs, whether for detached homes or connected condos—are nominally not-for-profit business entities governed by corporate law, yet the comparison to a tiny hamlet is unavoidable.
Talk to the Manager
In the mini government of an HOA, the board of directors is the legislative branch, setting policies and priorities. It is also the executive branch, in theory, yet that authority is often delegated to a property manager. As the board’s agent, the manager is hired help, as surely as the contractor that changes the light bulbs or picks up the trash.
Although subordinate to the board, a property manager wields enormous power. Managers handle day-to-day business, while resident members interact with management on a month-to-month basis, if at all. Relying on a manager’s expertise is exactly why the board pays them.
It shouldn’t be that way, says Dannielle Mellor with Association Management of Alaska (AMA). “My job is to facilitate the governing body to run their community,” she says. “I am not there to make those decisions for them.”
Mellor oversees twenty-one associations in the Anchorage area in tandem with an AMA colleague. She solves problems touching on people’s most valuable assets. “Money, health, and homes: those three things are so personal, and when you do this kind of job, you are inherently working with somebody on at least two of those components,” Mellor says.
Property management is “my jam,” according to Mellor. “I can’t even explain why. I’ve always loved community, so it’s absolutely my passion beyond just being my job.”
In Alaska, management firms must be overseen by a licensed realtor, but the individual managers don’t require special certification. Mellor sought some anyway, becoming a CMCA (certified manager of community associations) and AMS (association management specialist). “I know it’s not necessary in the field,” she says, “but when I’m working with clients, when I’m working with communities, it’s letting them know, ‘Yes, I’m taking the time to make sure you’re taken care of, too.’”
Her certifications also demonstrate that she is dedicated to best practices. “We should have, as managers, a code of ethics that we abide by when serving communities,” Mellor says.
It’s Always Something
In her office at Association Management of Alaska, Dannielle Mellor keeps track of the twenty-one properties in her portfolio (not including the yellow pins).
Through ongoing education, Mellor has learned about building maintenance, housing regulations, and the logistics of governing documents. “People always say I’m a property manager, and I get kind of funny with them because I don’t manage property,” she says. “I manage communities; it’s more than just the property. It’s so all encompassing.”
Variety is what keeps Badten interested in HOA law. “It always is throwing something new at me,” Badten says. “Probably other than criminal law and maybe employment law—which tend to be the sexier legal areas, people behaving badly—HOAs have a little bit of everything. We have corporate law, bankruptcy law, UCIOA [Uniform Common Interest Ownership Act], Nonprofit Act… A little bit of all areas end up coming into play in the community associations legal area.”
Hoke had his first exposure to HOA law in 2014, when a client called about a foreclosure dispute with an association. By 2020, Hoke established HOA Legal Services to work with associations exclusively, even though it’s an uncommon specialty. “Not many law schools in the country do an entire course on HOA law, so it’s not anything I specifically took course work in, in law school,” Hoke says.
Associations always have vendor contracts or insurance policies that a lawyer must interpret and explain, as well as bylaws, declarations, and house rules. “Often the rules are decades old, depending on the HOA. And worse than that, sometimes they’re actually drafted by the development company,” Hoke says, “and banks require certain language in their HOAs and declarations. Literally, there are HOAs in this town that have bylaws that are written by entities that have no stake in the membership or actual homeownership.”
“The homeowners are the HOA, which is lost when people are saying, ‘Oh, the HOA told me to do this.’”
Who Manages the Managers?
Litigation against an association’s vendors is the biggest lift for an HOA lawyer, Hoke says, but fortunately it’s also his least frequent job. He’d rather keep busy answering board member questions, drafting documents, or collecting overdue bills.
When HOAs sue their own management, the mess compounds. Hoke notes that housing markets in Florida and Nevada have been devastated by rampant corruption among condo managers. Mellor adds that her colleague, AJ Arevalo, witnessed the rot in Las Vegas firsthand.
“A lot of management companies wield a lot of power, and they start to do things for communities and make decisions,” Mellor says. Managers are more liable to make those decisions if the board relaxes its oversight.
Fortunately, Florida has since enacted legislation ensuring managers work with communities on reserve studies, and Las Vegas has added more regulation, too.
Nevada already requires property managers to be specially licensed. In fact, Mellor says, “A lot of the Lower 48 is much more highly regulated than Alaska is, in terms of management.”
A new regulation in Alaska gives HOAs a tool to shore up their finances when dues payments are late. Thanks to Senate Bill 143, which took effect in October, “All associations in Alaska are now entitled to what’s called the ‘super priority lien,’” Badten explains. “That is a lien that jumps ahead of the mortgage lender for six months’ worth of dues. The bank will pay that lien in order to protect its security interest in the property.”
Badten was personally involved in the legislation. “That bill was a lot of blood, sweat, and time. I’ve been trying to get that amendment passed since 2015,” she says.
The bill passed with no opposition. Mortgage lenders don’t mind deferring to associations when it comes to collecting on delinquencies. “These banks need the HOAs to be strong in order to lend into them,” Badten says, “and they want the HOAs to be taking care of the property, which is their secured interest. They have real skin in the game for keeping these HOAs strong.”
“Chicken year was maybe two years ago; it seemed like this overarching theme that everybody wanted to get chickens. Most homeowners’ associations are not keen on the chickens.”
To keep HOAs strong, Mellor recommends that managers follow some best practices.
First, managers should be proactive rather than react to emergencies. Beyond the “ounce of prevention” for building maintenance, Mellor anticipates residents’ demands based on trends that emerge every year. “Chicken year was maybe two years ago; it seemed like this overarching theme that everybody wanted to get chickens. Most homeowners’ associations are not keen on the chickens,” she says. “This last year, the overarching theme has been solar panels. Everybody wants solar panels because energy is costing more.”
It also goes without saying that the best managers are honest. Mellor explains, “When you, as a manager, aren’t abiding by that code of ethics—in terms of you doing your due diligence to provide education, communication, and transparency to a community—then you’re not being a successful manager.”
Hoke agrees that transparency is key. “Nothing should happen in a nonprofit organization that it’s impossible for some homeowner to figure out,” he says.
Mellor believes successful HOAs are those where managers and boards understand their roles. “A board of directors has a very specific set of duties in what they do for their community, and as a manager, I feel, your job is to help educate them as to what those duties are and then try to help them understand and find the resources available to them to be able to do those duties,” she says.
The Board’s Role
Managers must educate board members because there’s so much to learn. “There’s not a requirement in this state for board member education in any way,” says Hoke. “There are in other states. I’ve offered this to board members, but it’s not something that, without being forced, people are often saying, ‘I’ll take you up on this two-hour training.’”
Mellor says boards can observe best practices for themselves, such as obtaining a statement from the HOA’s bank, independent of the manager’s accounting. She adds, “It’s really important that a community or board of directors adopt a code of ethics for themselves and honor their obligation of duty of loyalty, duty of care, and duty to act within their scope of authority as a board.”
The most basic practice for board members, according to Badten, is to follow the governing documents. The board must also treat neighbors fairly and act reasonably. “We do have some great cases in Alaska regarding reasonableness, and all of them have upheld the HOAs’ decisions as being reasonable under the circumstances,” she says. “It’s very difficult to find that a board acted unreasonably; just because an owner disagrees with what a board did or a rule it made does not make it unreasonable.”
Badten also recommends that boards stay on top of delinquent dues payments. “Never let an account get four months behind before you have sent that to an attorney or collection,” she advises. “The reason is you want to send a thirty-day notice to the owner. Then you have to have that thirty days pass. If they fail to pay, if you choose that you want to enforce the lien, the first thing we have to do is order a title report; that takes time.” All the while, the clock is ticking on the six months for a super priority lien.
Likewise, “If people are not following the rules, whether that’s not paying or any other rule, the association really should be taking action to enforce its rules,” Badten suggests. “Or, if it doesn’t like the rule and that’s why it’s not enforcing it, it should amend its documents to take that rule out.”
We the Homeowners
Board member or not, every owner must read the HOA governing documents, at a minimum. “The responsibility is something that every homeowner should know by virtue of having purchased the place and having read that inch-and-a-half stack of documents that you sign when you buy a property,” says Hoke. “However, my general take on that is that most people don’t read 3-page contracts, let alone 100-page contracts.”
When residents join an HOA, they not only agree to follow its rules but they acquire the power to change the rules. “The homeowners are the HOA,” Hoke says, “which is lost when people are saying, ‘Oh, the HOA told me to do this.’ If you don’t want to live in an association that says you have to get a yellow mailbox, well, get a majority of your neighbors to agree we don’t need that rule anymore.
Hoke says it never hurts for HOA members to ask questions. And, he suggests, remember that neighbors are human, too. “To effectively communicate and work with people, it helps sometimes to be nice,” he says.
Members are never powerless in an HOA. Rules which sometimes feel confining also provide remedies.