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What Community Associations Need to Know about Operating During the COVID-19 Crisis

Please note: This information is updated as of April 10, 2020

The COVID-19 pandemic has created a whole new set of issues that community associations must now deal with for the first time. Although the situation is fluid and is constantly changing, here are some things to keep in mind as you try to navigate through the issues and try to maintain a safe environment for your residents.

Common Amenities and Facilities

If your community has recreational facilities or other common gathering areas, it is strongly recommended that these be closed if possible and that they remain closed until the CDC or other governmental authorities indicate that it is safe to relax some of these restrictions. This would include fitness centers, swimming pools, community rooms, guest rooms and other common facilities. There is no way to ensure that the surfaces in these amenities are cleaned well enough or often enough to prevent the spread of the virus if an infected person were to use the facilities. Although it is believed that the chlorine in a pool would kill the virus and/or keep it from spreading through the water, there are plenty of other areas and surfaces within a pool and pool area that cannot be so easily sanitized. A little inconvenience now is better than facing a potential lawsuit if someone contracts the virus in your pool or exercise room and then dies as a result. It may not be physically possible to close outdoor amenities such as playgrounds, but you should consider sending notice to residents and/or posting signage indicating that these are closed to prevent the further spread of the coronavirus. Under the Minnesota Common Interest Ownership Act (“MCIOA”) and most association’s governing documents, the board has the authority to regulate the common areas of the association, so closing these temporarily for the good of the community should fall within that authority. For other common areas, such as hallways, lobbies, mail rooms, etc., the board should consider placing restrictions on how many people can be in an area at a time and should consider implementing procedures for safer pickup of mail and packages. This may include heightened restrictions for persons who have symptoms of the virus or have tested positive or been exposed to anyone who has tested positive for the virus or for whom the CDC is recommending a self-quarantine.

Guests

Guests and invitees to the community may create a higher risk that the COVID-19 virus will be spread throughout the community. While some guests, such as caretakers or health care workers, are likely essential to the resident to whom they are visiting and are exempt from the Stay at Home Order that is in place as of the time this article was written, other persons, such as social guests, contractors or non-essential repair persons, may not be essential to the health and welfare of the owners even if they are generally exempt from the order. While it is unadvisable to try to implement a complete ban on non-residents entering the property (unless this is mandated by governmental authorities), associations should encourage owners to avoid allowing nonessential visitors into the community for the time being. This may also include changes in procedures for delivery of food, packages, etc. to residents to minimize the exposure of additional persons in the buildings.

Board Meetings

The Minnesota Nonprofit Corporations Act does allow for board meetings to be held remotely, so long as each board member can simultaneously speak and hear each other. There are a number of phone and web-based platforms that allow people to attend and participate in meetings through their phone and/or computer. Many associations and management companies are already moving to these platforms. Boards should research and be aware of the privacy and security policies of any such platform, however, and beware of hackers trying to hijack their meetings. It is also important to note that MCIOA and many associations’ governing documents require board meetings to be open to the members, subject to being able to close a portion of the meeting to discuss certain sensitive topics.  Therefore, if you are going to hold your board meetings through a teleconference or web-based meeting platform, you will need to provide notice of that fact along with the meeting notice and ensure that members who wish to attend the meeting can do so by logging or dialing in. Members still do not have any right to participate in the meeting, but they are entitled to listen in if they choose to do so. Holding a homeowner forum via remote means may prove challenging, depending on the technology and meeting platform used, so boards may wish to forgo that for the time being and ask owners to submit their concerns or suggestions in writing instead. Once the Stay at Home Order is lifted, some boards may be leaning toward holding their meetings in person again if they believe that attendance at such meetings will not exceed the maximum number recommended by the CDC and/or they can set things up to maintain an appropriate distance between attendees. However, this may not work if the meetings are required to be open to the members, as members would have the right to attend if they so desire, which could defeat the board’s efforts if a lot of owners show up and/or someone who has been exposed to the virus decides to attend.

Annual Meetings

Annual meetings are a bit tougher than board meetings because the members do have a right to participate in the discussion. Also, board elections usually take place at the annual meeting and many association documents require written ballots and/or percentage voting. One option is for associations to simply postpone their annual meeting if it is scheduled to take place in the next couple months and have the current directors continue to serve until the rescheduled meeting. If your governing documents require the annual meeting to take place on a certain date or in a certain month, you will have to more carefully weigh your options. Unlike some other states that have written into their community association laws authority for the board to suspend procedures or take certain actions in emergencies, Minnesota does not have any “emergency exception” in its statutes. While we would hope that most homeowners would appreciate the situation and not raise any issues over a postponed meeting, there is currently no law that would support a decision by the board to act in contravention of its documents if they specify when the annual meeting is to take place. However, the likelihood that a court would rule against a board in this situation is pretty low, assuming that the complaining homeowners can even get a hearing in a timely manner. If postponing is not a good option for whatever reason, associations can look at holding their annual meetings remotely as well. This presents additional challenges with ensuring that quorum is met, verifying who is or is not in attendance, and conducting elections. However, if your governing documents allow for voting by mail ballot and/or electronic means for the election of directors and any other issues that may come up for a vote of the membership, the association could conduct those votes by mail and/or electronic means and then use the remote meeting platform as a means of simply delivering the annual report, announcing the election results and providing general updates and information to the members but not for voting on any matters. Recall that MCIOA prohibits associations from combining a vote by mail or electronic ballot with a vote at a meeting, so you can only do one or the other but not both. If your documents do not allow for voting or conducting elections of the board by mail or electronic ballot, then it is advised that you postpone the meeting until such time as it can be safely held in person after any and all Stay at Home orders are allowed to expire.

Assessments

With the current financial crisis related to the COVID-19 outbreak, boards may be asked or tempted to waive or reduce assessments for owners that have been directly impacted by business closures. However, we would strongly advise against this. First, MCIOA and the governing documents set forth how the assessments for each unit are to be determined based on the total annual budget of the association. Therefore, an association cannot waive or reduce assessments for some owners without doing the same for everyone in accordance with their assessment obligations. It is unlikely that the association’s overall expenses are going down, unless the budget includes some large projects that must be postponed to another year due to the coronavirus outbreak. Therefore, it would be inappropriate for the board to lower the assessments if that money is still needed for operating. Additionally, as nobody knows right now how long the emergency will last, it would be very hard to predict whether budgeted expenses may still be incurred yet this year or not. Rather than reducing assessments, it is recommended that associations wait and evaluate things at the end of the current fiscal year and potentially adjust the budget accordingly for the next year. Some owners may complain that they should not have to pay the full assessment amount since they are not able to use the pool, fitness room, etc. However, the assessments are used to maintain those common areas and do not represent a use or membership fee for using the amenities. The Association must still maintain the common areas even if nobody is using them right now, so there should be no reason to reduce the assessments on this basis. As far as owners that are or become delinquent in their assessments, it is recommended that associations not cease or postpone collection of assessments, as that could put the association at risk of defaulting on its obligations. Associations should continue to send delinquency notices and to follow their collection policies and timelines and file lien statements to protect their interests. However, boards can still be sympathetic toward members that are facing legitimate financial hardship as a result of the COVID-19 crisis by accepting reasonable requests from owners requesting a payment plan. Boards can also consider waiving interest and/or late fees for owners that comply with their payment plans. Any such policies that are tailored for the current situation should apply equally to all similarly situated owners who request them.

It has been suggested by the Community Association Institute (CAI) that associations should voluntarily adopt a moratorium on all foreclosures for at least 60 days until things calm down a bit. However, these guidelines and recommendations do not take into account individual circumstances that may play into an association’s decision to foreclose or not or situations where associations may be running into statute of limitations issues in pursuing claims or foreclosing liens.  Not all owners have been or will be negatively financially impacted by the virus outbreak. While many people are being furloughed or laid off, other businesses are doing very well during these times and are hiring additional workers. Also, those owners that were already not working because they are retired, disabled, etc., will not be impacted by these layoffs that are resulting from businesses being ordered closed. In other cases, an owner may have been delinquent long before the current pandemic and/or the delinquency may be the result of fines for rule violations or other charges that were avoidable. Allowing owners whose delinquency bears no relation to the current situation to shield themselves behind these protections that are intended for people who actually have been impacted by COVID-19 is not fair to anyone. As such, I recommend that associations continue to address collection matters on a case-by-case basis but with added compassion and flexibility for those owners who have been affected by the current crisis.

Violation Notices

As with the collection of assessments, boards have a fiduciary obligation to enforce the governing documents, and a failure to do so can affect the value of the property. As such, it is not advisable to stop or postpone dealing with violations of the rules or governing documents, unless the violation itself is caused by the current crisis. If an owner requests an exception to a particular rule or restriction or an extension of time within which to correct a violation due to the coronavirus or other health issues, the board should give serious consideration to the request and consult with legal counsel if necessary to determine whether exceptions may or must be granted under the circumstances. Since MCIOA requires notice and an opportunity for a hearing before any fines can be levied for rule violations, boards should also be prepared to conduct such hearings remotely if possible. If for whatever reason such a hearing cannot be effectively conducted remotely, the board should consider postponing the hearing or otherwise working with the homeowner to reach a resolution without a hearing. Some associations are finding that the owners and residents are not complying with the Governor’s Stay at Home order and that they are congregating in and around the property despite the order and all related recommendations for social distancing. While it may be tempting to try to fine owners for doing so, boards should first consider whether or how they can or should try to police the community in this way. A better option might be to first warn and then report violators to the local authorities and let law enforcement deal with it.

Notification of COVID-19 in the Community

Whether a board should notify owners or residents of a person testing positive for COVID-19 is problematic. First, boards should consider the source of the information and whether it is reliable or not. Even if it is reliable, any notification that identifies the presumed infected person can present issues for a board or any other person that spreads the information within the community. If the information is false or not known to be reliably true, anyone who publishes that information to other parties can be liable for defamation. If the information is true, that still raises privacy concerns that can also lead to potential liability. It is strongly recommended that any notification to the owners about any resident who has or who may have contracted the virus not provide any information that would identify the affected individual. If one or more individuals in the community are infected or have been exposed to someone who is infected, the board and management should work with that person to ensure that they are abiding by the recommended self-quarantine guidelines and not exposing others to possible infection. That might mean connecting them to resources that can assist with things such as getting groceries, caring for family members or pets, etc. It is not recommended that boards take on these responsibilities themselves, as doing so could expose them not only to the virus but also to potential liability. But having and sharing a list of resources that can offer such help to the community would be a good idea. If someone who is infected or has been exposed to the virus refuses to self-quarantine, consult with your attorney on ways to protect the association from exposure and liability.

Develop a Plan for Your Community

If you have not already done so, you should immediately develop a COVID-19 plan for your community. This plan should include consideration of policies and procedures relating to: vendor access and activity in the community; access to amenities and other common areas; making sure that all necessary insurance coverages are in place, addressing the timing of board and membership meetings and finding alternatives to in-person meetings; rescheduling any non-essential repair or improvement projects; implementing restrictions on non-critical home improvements by the members; placing limitations on events and meetings to comply with current “social distancing” recommendations and any national, state or local orders, curfews, Stay at Home orders, etc. that have been or may be implemented; and dealing with active and known infections within the community. The plan should also address the need for hand washing/sanitizing stations, the continual monitoring of and restocking of cleaning supplies and other products used in the bathrooms, management offices and other common areas, actively updating and enhancing cleaning protocols, especially for actively used common areas and things such as elevator buttons, door handles, and other frequently touched surfaces, and implementing a process to monitor and follow CDC information and guidelines as they continue to be updated. The plan and any changes to it should be actively, immediately and frequently communicated to your residents.

Given the unprecedented and rapidly changing nature of the current situation, it is important for boards and managers to stay well informed of the current status so that they can quickly adjust and/or implement new protocols, practices and procedures to handle the existing circumstances at your property. Boards need to make informed decisions as to operations and develop a reasonable plan for the community that benefits all members and to be transparent and clearly communicate with the members the actions that the board has taken or is taking in response to the crisis. Having protocols and procedures in place and following them will be vital to keeping the association safe and to defending the association against any claims should litigation arise in connection with the COVID-19 outbreak.

For questions about the above or any issues regarding community associations, please contact Phaedra Howard, phoward@hjlawfirm.com, (952) 746-2142.

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