By, Griffin Jordan, Licensed Florida Community Association Manager
In November 2022, the North Carolina Supreme Court made a ruling that could impact all community associations. To summarize, the association got lucky that the court decided they were subject to foreclosurelaws passed after the Declaration was adopted because they were missing a crucial sentence that would have made the case much stronger. You can review the case in detail here, or you can keep reading for the takeaways that apply to your community association.
This phrase is not something new. In fact, the case it’s based on, Kaufman vs. Shere, was decided in 1977. But few seem to understand an important takeaway from that case. That is the “Kaufman language”, which is the simple phrase “the declaration automatically incorporates amendments as they are amended from time to time.”Managers and Boards of Directors should check the governing documents, starting with the Declaration, and make sure there’s a sentence like “the ABC Association is subject to state statutes as amended from time to time”.
If the association in North Carolina had that sentence in their Declaration, the case could’ve been decided much sooner. If your documents don’t include that sentence, adding the phrase is recommended. Why?
The answer lies in Florida case law about safe harbor provisions. The Florida courts have set a precedentthat certain statutory language is not enforceable when the governing documents were recorded before the statute was passed unless the documents include the phrase “as amended from time to time”.
Here is a collection-related example: ABC Association was established before the state legislature instituted a new law that gave the association super lien status where their lien is first in right over the lender’s lien for six months of assessments. Maybe the developer never thought that such a statute could or would be passed, and there is no mention of any super lien status. Without Kaufman Language going forward, the association may not have the right to “super lien” status as it is in contradiction of their CC&Rs. Had their documents included Kaufman Language then the association could benefit from the new legislation automatically without having to amend their documents at great legal expense.
You might be thinking these cases don’t apply to your association because it’s not in Florida or North Carolina. State laws do vary. But the truth is, it doesn’t matter where your association is located because courts often look to other states for precedents when reviewing a case. That means a case in Texas or California could end up with a similar ruling. Why not limit the risk and have the sentence added if it’s not already in your documents? It makes sense to make it as clear as possible that the HOA is subject to laws as amended, and not the antiquated ones that existed at development.
If you read the Declaration and it’s missing the all-important sentence, all is not lost. The phrase can be added via an amendment. In the meantime, Axela Technologies can help with collection options. We offerpayment plans that are fair for everyone, and a pre-foreclosure analysis so collection decisions are well-informed. Already foreclosed but having trouble collecting? We can help with that too! Contact us today to learn more about why Axela Technologies is a better solution for collections.