Sunday, October 21, 2012

Two legal concepts that are misunderstood by many community association members.

A blog reader wrote to me the other day and asked what she could tell a member of her community who claimed he was not bound by the association's governing documents because he had never read them.

I introduced my reader to the concept of constructive notice; just because an association member has never actually read the documents does not mean he or she does not have constructive notice of the terms and provisions of those documents if they were properly recorded in the Official Records of the county where the association property is located. The concept of constructive notice imputes knowledge to a person even though actual notice was not personally delivered to him or her.

In the case of a mandatory association's governing documents, those documents must be recorded in the Official Records to be effective these days and purchase contracts include riders referencing them while title insurance policies similarly list them. Moreover, in a condominium purchase, the underlying covenants are identified by Official Records Book and Page number right on the deed. With all this notice that recorded restrictions exist, there is simply no wiggle room for an association member to legitimately claim a lack of knowledge of their existence. Since association members are already seen as having constructive notice of the governing documents, it is in their best interests to obtain actual knowledge by reading them both before and after purchase.

Another legal concept that creates some confusion in an association setting is the issue of who can legally bind the association? The term apparent authority is used when a reasonable person would understand that an agent had the authority to act on behalf of a principal. In a troubled community association, a question that often arises is, "how could our President have gotten us into such an awful contract?" A landscaper, roofer and any other vendor who is doing business with an association, can reasonably expect that an officer or director of that association has the authority to enter into contracts. It is only when such contractor is put on notice that he or she must obtain actual authority (ie a Board Resolution to enter into the contract) that apparent authority can no longer be relied upon to ensure that the contract remains intact.

Both of these legal concepts rely on passivity: constructive notice imputes knowledge while apparent authority imputes authority. In order to avoid the problems that can accompany both of these concepts, association members would be well advised to actually read the documents that govern their association and boards would be well advised to establish protocol to avoid detrimental, unilateral action by any one board member hiding under the cloak of apparent authority.


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  2. If the association made an error in that notice, it would not be a waiver in terms of charging you the rightful amount under the terms and provisions of your association's governing documents.

    Take a look in your Declaration and see how assessments are charged. Is it pro-rata or based on square footage or unit type? Then grab the budget and do your math. You should also speak to your neighbors with similar units to see what they are paying and if there is a management company or manager in your association, contact him or her and discuss the error.