9 Best Practices for Architectural Review Boards

Your architectural review board is, in many ways, the “hot seat” of your homeowners association. Stakes are high – the board can potentially shoot down some big lifestyle-changing projects, like adding a bedroom for a child – and since very few proposed projects are exactly like projects that have been proposed before, it’s difficult to be consistent when it comes to enforcement. And that inconsistency can create potential liability for the association.

Best practices for your homeowner or condo association's architectural review boardBut the board can’t sidestep the tough decisions, or ignore the proposed projects that come before them. So you’re always going to be left with people doing their best to apply some generalized language in the property CC&Rs to specific, real-world situations.

For this reason, the people handling architectural review for your association need to be some of the most experienced and mature people in your community. This isn’t a job for people who take their responsibilities lightly. The successful member of an HOA’s architectural review board will possess an extraordinary degree of technical knowledge, wisdom, judgment, reserve and tact.

Boards also need to give them the tools to interpret and enforce architectural and aesthetic provisions within the development’s founding documents. Here’s how to go about it.

1. Hold a periodic review of all existing architectural requirements. Do they still make sense? Has anything changed since they were drafted? If there’s someone out of compliance, can you take enforcement action now, before there are multiple owners out of compliance for the same thing? If you let something fester, you could run into charges of selective enforcement down the road if your board does try to enforce that provision later.

2. Verify that the existing architectural and aesthetic provisions still reflect the sense of the board. As seats on the association’s board change hands, so will the tastes and aesthetic priorities, preferences and pet peeves of board members.

3. Clarify. Is there any language in the existing documents that is causing confusion? Are there sections of the CC&Rs and other documents that are vague or missing key provisions?

4. Stress-test your policy against challenges under federal, state and local laws. An association in Raleigh, North Carolina recently paid $20,000 to settle a lawsuit alleging that the association illegally forced a blind resident to remove her wheelchair ramp after her disabled mother who was living in the residence died. The North Carolina Human Relations Commission ruled against the association and the residents sued.

5. Train and educate board members and staff. Provide training to board members on the provisions of the Fair Housing Act, and consider developing an in-house manual on fair housing provisions and discrimination laws.

6. Be clear about why requests for variances are denied. Nobody likes to get a rubber-stamp refusal from a bureaucrat. Someone went through a lot of time and effort to put together a proposal. Boards should have the courtesy of responding. Make sure the requirements for a decision are easily discernable and reasonable, and then provide the owner with a paragraph or two explaining why the board denied the request.

Ideally, the denial letter should specify some ideas for how the project could be modified to meet the concerns of the board and to pass muster. This is a win-win situation: The resident gets to do his or her renovation or project, and the board gets its concerns addressed.

7. Don’t grant variances without a good reason. The board of directors put the policy in place for a reason, and this policy was voted on by the members at large. Subcommittee members should not be subverting their decisions by granting variances willy-nilly. Members of the architectural review board must remember that they are there to look out for the interests of all members of the association.

8. Make sure your enforcement has teeth. There should be mechanisms in your covenant documents that give the board the means to enforce compliance with architectural and aesthetic guidelines.

9. Remember that lawsuits are expensive. Associations should plan on spending at least $10,000 to pursue a lawsuit against a member over a variance issue. Two or three times that, or more, if the issue is contested. Pick your battles carefully. If the process of charging fines isn’t effective, it’s often better for the HOA to go ahead and fix certain issues, and then present the homeowner the bill.

HUD Anti-Discrimination Laws You Didn’t Know You Were Breaking

In 2015, the enforcement division of the Department of Housing and Urban Development announced 10 separate charges against landlords and property managers for various types of discrimination.

No ethical landlord wants to commit unlawful discrimination. But some honest employees or landlords run into trouble accidentally, despite the best of intentions, by making a mistake during the screening process, asking an innocent but misguided question or making an ill-considered remark that can form the basis of a discrimination complaint.

Let’s look at some of the mistakes made by landlords and property managers that led to discrimination charges.

Asking About Mental Health, Medical Status or Diagnoses

In one Minnesota case, a woman diagnosed with bipolar disorder attempted to rent a house with her partner. Shortly before move-in, the landlord’s agent became aware of the applicant’s history of mental health issues, and called the prospective tenant asking if there were any “issues” she wanted to disclose before moving in. The tenant disclosed her diagnosis of bipolar disorder. The agent asked for more information, but the renter told her it was “none of her business.” Subsequently, the landlord refused to rent the dwelling.

HUD Prosecutors deemed the mere inquiry into the mental health diagnosis to be a violation of 42 U.S.C. Section 361(g)(2)(A), and assessed a $16,000 civil penalty against the landlord, in addition to damages.

Discriminatory Advertising Language

In a Philadelphia case, HUD officials were alerted to a Craigslist rental advertisement containing these words: “Not good for young children.” HUD officials investigated and applied to rent the dwelling. Two HUD test coordinators called the lister, one claiming to have a 2-year old daughter, and the other posing as a single man.

The lister told the female caller that the dwelling was directly above a construction business with a lot of heavy truck traffic. The dwelling would be fine for adults, the lister explained, but dangerous to young children. The lister also told the male investigator that he wanted to rent to adults with no children because of the traffic.

HUD officials deemed the actions of the landlord’s representative to constitute illegal discrimination based on familial status. The advertisement was illegal under 42 U.S.C. Section 3604(c) and 24 C.F.R. Sections 100.75(a) and (c)1.

HUD Department officials asked courts to penalize the landlord for each violation, on top of compensatory damages.

Discrimination Based on Limited English Language Skills

An Asian-American man applied to rent a townhome in Champlin, Minn., together with his mother, who was from Thailand. They planned to reside on the property with two children. The property manager took their information and a credit background check. He also collected an application fee of $40 for each of the two adult applicants.

The son’s credit score came back at 725, and his mother’s was 761. Their income qualified the family to rent the apartment. But the manager sent the son an email stating that their rental application was declined. The reason: Both adults would have to sign the lease contract, but the mother had limited English skills. “As I’m told, legal precedent indicates the contract must be translated to her native language,” the manager wrote. “If not, she could easily break the lease.”

The manager also claimed that a certified translation would be required, costing about $500.

The son informed the manager that he had submitted an inquiry to the Department of Housing and Urban Development based on the manager’s statements about his mother’s English language skills.

HUD’s lawyers determined that denying a lease because of limited English skills, as well as the act of requiring a $500 translation fee, amounted to illegal discrimination under 42 U.S.C. Section 3604(a). The Department of Housing and Urban Development is pursuing the property manager for full compensatory damages, as well as a civil penalty of $16,000 per violation.

Conclusions

In at least two of these cases the landlord had some understandable concern apart from the discriminatory aspects of the cases. If an apartment is unsafe for a toddler, no rental property owner wants to see a child injured or killed, nor does he want to get sued if such an event does occur. Nobody wants to enter into a contract only to see it broken by someone who could claim she never understood the terms. But reading through the filings, the rental property owner’s concerns were not considered in mitigation at all. You would be well advised to take a strict view of housing discrimination compliance.

If your rental property presents a safety issue that could endanger small children, you may want to discuss it with experienced legal counsel who is looking at these precedents along with the issues specific to your property.

Does Restricting Rentals Make Sense for Your Association?

The issue of restricting residents’ ability to rent out their homes or condos is always a hotly contested one in HOAs and COAs because the interests of owner-occupants and investors are directly at odds. But as much as we’d all like to grant the maximum economic liberty to all association members, the development as a whole can be economically harmed if too many units are rented out.

Here are some considerations for homeowner and condo associations regarding rental restrictions:

Lending Considerations

There is a litany of reasons why rental restrictions make sense for some associationsIt’s a fact: Lenders commonly look at the number of units in a condominium or other development that are owner-occupied versus rented out. If the owner-occupied ratio (OOR) drifts too high, lenders could require more money down, or enact more stringent credit requirements on some prospective buyers.

For example, FHA requires that 50 percent of the units in a condominium development be owner-occupied to finance a new buyer. Fannie and Freddie also will not back loans on properties that are more than half rentals unless the buyer is going to be an owner-occupant. They don’t want to finance investors in these developments.

Quality of Life Considerations

There are quality of life issues for current residents to look at, too: Renters just aren’t prone to take care of the property as well as owners are. Renters also move more often, which means frequent moving vans, new neighbors, increased exposure to potential criminal activity, etc.

If you choose to enact a rent or lease restriction, you then have the challenge of enforcing it. To head trouble off ahead of time, take these steps:

Check Your State Laws

Some states have passed laws that limit the authority of HOAs to pass lease restrictions. Notably, California has passed a law that prohibits HOAs from imposing a rental restriction that was not already in place prior to 2012. It’s always a good idea to consult an experienced HOA or condo law attorney who’s licensed in your state before taking any action.

Hate being your association’s rule enforcer? Get a professional association manager to do it for you >>

Pay Attention to Process

Make sure your own processes in passing the lease restriction can stand up to legal challenges. That means the restriction was included on the public HOA meeting agenda, the meeting was publicized in accordance with your own HOA bylaws, a quorum of directors was present, the vote was recorded in the secretary’s minutes, etc.

Define Your Terms Carefully

If an owner is currently renting out a unit, or you otherwise grant a grandfather exemption to current owners when you pass a new rental restriction, under what circumstances does the grandfather clause no longer apply?

In the case of an outright sale to another party, that’s pretty clear-cut. But what about transfers of ownership to a trust? What if another owner buys a fractional interest in the unit? What about transfers to a family member? What about inherited properties? You’ll also have to consider transfers of ownership that occur as a result of divorce.

You have to be very specific about how you will administer the grandfathering status when you begin enforcing a new lease restriction in your development.

Get the Word Out

The best time to do this, of course, is when you have a new purchaser buying into the community. Have an addendum document warning owners that there are restrictions on their ability to rent out their units. Include this information, in writing, in your CC&Rs as well. You can use a cover sheet on your CC&R document.

It might be worthwhile to also send a copy of your updated CC&Rs to each owner by email (return receipt requested) or registered mail (again, return receipt requested).

Work With People

There are times when unforeseen circumstances will require an owner to rent out a unit for a time. It’s acceptable to have a process in place that allows the board of directors to request a waiver of the policy for reasons of extreme personal or financial hardship of an unforeseeable nature. For example, a member of the Reserves or National Guard could be ordered to active duty, or a member may have to relocate for a time to care for an ailing family member or seek medical treatment.

Don’t be a pushover, though. Your other residents are depending on you to protect their interests, and you don’t want to be granting waivers to anyone who pleads ignorance, claims they didn’t know about the policy, or who’s really an investor trying to pull a fast one.

Find a Property Manager