Finance & Legal minutes: 2015-03-09

Agenda:

Insurance information
Responses to F&'s Questions to Attorney David Keast regarding the
CH Assessment

Minutes:

Present: Becky H., Becky G., Debbi, Keith, Amy



MONKEYS (from this meeting only)



Debbi: Ask Barb Young for her advice in writing and ask for her opinion
about insurance re: guests in the CH guest room; work on proposals for
3/16/15 community meeting.



Becky G. & Becky H. will talk to the household planning to rent as a B&B,
and to the two households that purchased units following foreclosure.



1. Insurance information



Debbi talked to Barb Young, GO's State Farm Insurance agent. Barb was very
clear that a B&B at GO is not advisable from an insurance standpoint. If
someone staying in the B&B were to be hurt while at GO, the Association's
master policy would not cover the liability, nor would it cover any damage
to property. Similarly, Barb has never seen a household condo insurance
policy that would cover any damage to a unit or liability if a guest were
to be injured while here.



Debbi will follow up with Barb to ask for this information in writing, and
to ask about the CH guest room and whether this is at issue, too.



Becky H. & Becky G. will meet with Meg to advise her about the insurance
situation.



We unanimously agreed that it would be a good idea to have a community
agreement about such short-term rentals in our Book of Agreements. Debbi
contacted Gail to request time on the 3/16/15 agenda and will draft a
proposal. The proposal will focus only on insurance issues and not on the
question of whether the community supports this type of rental.



2. Responses to F&L's Questions to Attorney David Keast regarding the
CH Assessment



Attorney David Keast replied to F&L's list of 10 questions about the CH
Assessment on 3/9/15. Amy will ask Willie for help posting the document
among F&L's important documents on the password-protected portion of the
WIKI and will send out the link before the 3/16/15 community meeting. She
will first redact the names of individuals for privacy.



We started by checking to see if any of the responses were pertinent to the
two proposals coming back to the community for a decision on 3/16/15 (the
proposal to allow households to pay their assessment in full (or in varying
amounts) and the proposal to amend the late payment of dues policy). We
did not think anything Keast said would affect these proposals.



We learned that we should place "special assessment liens" when we create
special assessments; these are different from liens against arrears. They
are more like a mortgage, and do not affect an individual's credit rating
the way a lien for past-due debt does. Special assessment liens may be
recorded or unrecorded. Those that are recorded with the Registrar of
Deeds have precedence over second mortgages after first mortgages and tax
liens. Unrecorded liens have less priority than all recorded liens.



Becky diagrammed the order of precedence of liens:



- 1st mortgage lien

- Tax lien

- Special Assessment lien (recorded)

- Junior Mortgage (2nd mortgage)

- Other recorded liens

- Unrecorded liens



Keast informed us that GO's Bylaws are "silent" on the subject of special
assessments, which leaves us open to undesirable situations. F&L was in
unanimous agreement that our Bylaws need to be fixed and that this should
be done with legal counsel. Amy put this item on F&L's cooler list.



We further agreed that it is our fiduciary responsibility to GO to prepare
special assessment liens for the CH Assessment and to record them in the
very specific way recommended by Keast. We'll probably have to have him
write these up for us.



Keast disagreed with the information we got a few years ago from a credit
counselor. He said that a special assessment lien is different than a
mortgage lien. It is not reported to credit reporting agencies and is not
something that they look for or use to negatively affect credit scores.



He does not think that an alternative type of document is a sound approach.



He also thinks that our $1,000 threshold for placing liens on arrears is
too high. Amy put this on the F&L cooler list for later discussion.



Keast reviewed the language Becky G. has been using to communicate with
banks about the CH Assessment in the context of a foreclosure. He said
that the new language we've been using is good, but we need to include not
only the total amount due but also the amount they would need to pay on
that very date (this has to do with the interest calculation).



If there is a recorded special assessment lien, the bank is responsible to
pay for any existing special assessment when there is a foreclosure. The
purchaser at the Sheriff's sale is liable for any new assessments.



We asked if there was time during the foreclosure process for us to record
a lien. Keast said that there would be time only if it's a second mortgage
that's foreclosing. If it's a first mortgage, foreclosure wipes out any
arrears owed on the special assessment, but the buyer then owes what is due
in the future. It's obviously very much in our interest not to allow
people to fall behind.



Legally, we don't have to repay the new owners of the two GO foreclosed
units what they have paid on the CH Assessment since they purchased their
units, but F&L was in unanimous agreement that the mistake was ours, and we
should repay the two households. We will immediately stop charging this
money on their statements now that we know that it is incorrect. We would
like to credit their accounts rather than write checks because one of the
units is in arrears on other components of the monthly statement and a
credit would lower that debt. Debbi will draft a proposal about this and
Becky will present it.



Subsequent to the meeting, Becky G. and Becky H. met with the owners of
these two units to explain the situation and to ask if they would consider
donating the funds they have paid to date (acknowledging that GO would have
to pay tax on this). Both households declined to donate the funds and
requested to have the funds credited back to them if the community supports
the proposal.



Becky G. will work with CPA Len Pytlak to get his professional opinion on
the best way to record these changes if approved.



One recent unit purchase was via short sale. Keast said that in the case
of a short sale, the purchaser still has an obligation to pay the
assessment. Becky H. & Becky G. will communicate this information to the
household.



Keast reassured us that the way we handled arrears for one unit back in
2012 was fine. The household in question has significant arrears, and at
the time we did not want to extend their assessment with a payment plan
because we did not have confidence that it would be repaid. Instead, we
rolled it into the total arrears due so we can record it as a regular lien,
vs. a special assessment lien.



We decided to ask if we could make the entire community meeting on Monday,
March 16 about these several items of F&L business. Debbi wrote to the
agenda planner, Gail, and to the facilitators, Jillian and Susan. Debbi
will work on the various proposals.



3. Next Meeting: March 23 at 7 pm