Legislative Trends

(00:01) Speaker: It's time for AMG's Community Leaders Series podcast edition. Over the last three decades, AMG has worked to make the role of community leaders more effective and less of a headache. Seminar topics are a response to which our executive board members have requested. And now here's your host and CEO of AMG, Paul K. Mengert.

(00:22) Paul K. Mengert: Welcome, everyone. This is AMG's 2024 Community Leaders Series podcast edition. In today's episode, we will be discussing Legislative trends. I'm happy and honored to have with us today, Dawn Bauman, the Chief Strategy Officer for the Community Association Institute, as well as Ryan McCabe, a member of the South Carolina House of Representatives who is also an attorney who represents several associations throughout South Carolina and is also a licensed attorney in North Carolina. Um, let me jump right in to introducing the guests in a little bit more detail, as I mentioned, Dawn Bauman is the Chief Strategy Officer for the Community Association Institute. She's also the Executive Director of the Foundation for Community Association Research. So, she knows all about the polling that's done with associations and about the trends that we see taking place. And, of course, many of you are familiar with a lot of the research done by the Foundation that tells us a lot about satisfaction in the industry. Dawn has worked with, uh, community associations for over 20 years across the country and even internationally. She's a true expert in community association housing. She's been interviewed by the Wall Street Journal, US News and World Report, The New York Times, The Washington Post, and if that's not enough, Bank Rate, also. Dawn, we're really, really happy to have you with us today.

(01:57) Dawn Bauman: Hi Paul, thank you so much for having me. I appreciate being here. Looking forward to it.

(02:02) Paul K. Mengert: And this is a little unique because typically we have one guest on our podcast. But today is a double a double hitter. We also have Ryan McCabe who I mentioned is in the South Carolina House of Representatives. He also serves as general counsel to many associations and construction companies. Ryan's a real expert on associations. He went to law school in North Carolina. He's licensed in North Carolina, but his practice is mainly in South Carolina. So, keep in mind any specific things he might mention might be state specific, but we're really here today to talk about trends in the industry. So, I think what you're going to hear will really apply pretty much regardless of where you are. Ryan, thank you so much for being here.

(02:49) Ryan McCabe: Thank you Paul. I appreciate you having me, and I look forward to spending some time with you.

(02:54) Paul K. Mengert: Well, if I can jump right in and maybe ask Ryan our first question. And that would be what are the most significant legislative challenges currently facing homeowner associations in South Carolina, and how do these challenges impact the governance and operations of associations that you may see on the legislative side and on representing them at their board meetings?

(03:21) Ryan McCabe: Yes, I think the biggest challenges that associations face in the legislature are either are usually attempts to limit foreclosures of assessment liens, attempts to limit remedies of, you know, for violations, you know, things such as fines and also attempts to place the industry under a regulatory agency within our state. And all of these issues, obviously, would have a significant impact on associations because they all affect the bottom line, which is financial, the financial health of the association. Without being able to collect assessments, that can be an expensive and burdensome proposition for an association, particularly in South Carolina and North Carolina, where we do not have wage garnishment or a very effective means for collecting unpaid assessments. Foreclosure is the best remedy available for associations. And obviously, as you know, Paul, being able to use remedies such as fines to implement rules and regulations, uh, is much less expensive than, than the alternative which is going to court.

(04:37) Paul K. Mengert: I think one of the themes I see throughout the legislative involvement I've had is that a lot of, uh, challenging law, I might say, or proposed challenging law comes out of associations may be overreaching, where you see legislators wanting to change the procedures on foreclosure because they've heard about somebody's foreclosed on for a very small amount, for example. Dawn, talk to us a little bit about what you see nationally as themes in legislation and is what Ryan is seeing in South Carolina, what you see across the country.

(05:17) Dawn Bauman: Thank you. Yes. You know, Ryan, it's so interesting that he picked those, what's happening in South Carolina. Because what's happening in South Carolina is happening in other states as well. And our trends that we see in other states, foreclosures, fining authority and just overall, um, regulation of the industry. But what's even more, is related to the financial stability of that community association and what it costs to live in a community association. So, reserve studies and funding and maintenance for, especially for condominiums, and how much money the community associations need to be able to fulfill those obligations to the owners in those buildings. All of it costs money. So, the impact of a regulatory agency, the finding authority, payment of assessments, all of that contributes to the financial wheel of a community association. And what we see practically is where is all that money coming from and where is it going? So, if we restrict the opportunity to collect assessments and to have means to, um, collect delinquent assessments that are chronic, if we eliminate that which is a foreclosure, which is very rare, but if we eliminate that, we have a negative impact on the financial model of the association. So, in addition, we see some we're seeing some, um, issues related to insurance, insurance premiums, insurance prices for community associations, even access to insurance. We're seeing that as a significant problem and we're seeing some legislation around that. Also, transparency. So board transparency, access to books and records, transparency and elections. Transparency in financial statements, budgeting, etc. It exists. All of those laws exist in almost every state. But oftentimes the homeowner doesn't recognize that those laws exist. So, it's a bit more of an education process than a legislative process, but legislators sometimes don't know that those laws exist either, when they have a constituent coming to them with concerns related to transparency.

(07:47) Paul K. Mengert: Boy, that's a lot of what I have seen in working with legislators is they end up getting presented a problem, but they don't understand what's already on the books, so, I think it's really important for, our community members and managers and people that practice in this area get involved with their legislators so that they have a relationship because we have a lot of lawyers in our North Carolina and South Carolina legislatures, but not many of them have a lot of experience with, uh, with associations. Well, Dawn and Ryan, thank you both for your thoughts on this so far. We're going to go to the AMG Community Series, newsbreak, and we'll be right back.

(08:38) Speaker: And now it's time for your HOA Solutions Today newsbreak.

(08:41) Newsbreak: San Francisco's Millennium Tower, known for its structural issues, faces new challenges as the board considers fining unit owners up to $10,000 for leaving windows open during high winds. Despite a city mandate to install stronger window support arms, progress has been slow, with only a third of the windows upgraded. Also, the COA has been hit with a $7 million lawsuit from an owner over regular plumbing backups, which some experts linked to the condos leaning and sinking problems. For more information, please go to HOACommunityleaders.com.

(09:19) Paul K. Mengert: We're back. I'm Paul K. Mengert, and I'm here with Dawn Bauman and Ryan McCabe discussing legislative trends today. Dawn, with the increasing regulatory demands on homeowner associations, how can an association be expected to navigate the complexity of new laws that are getting passed or proposed. What resources and guidance are available that a board member might use, uh, in addition to things like this podcast?

(09:52) Dawn Bauman: Excellent question. The more laws that we see passed, um, are typically create compliance requirements and even some complexities for board members to navigate as they're trying to govern their community associations. Keep in mind, in 2025, all 50 states will have their legislature in session. CAI will be tracking more than 2000 pieces of legislation impacting community associations, and we work with a tremendous network of managers, community association lawyers, other business professionals and homeowner leaders to try to advocate for public policy that works for community associations. Oftentimes it does create additional complexities. And so, CAI puts together a lot of resources that are free. Great for our members because we'll tell our members right away that we have these resources. Community associations that are not members of our organization will have to Google and try to find them. But we do a lot of guidance documents, resource documents to help community association boards understand their roles and responsibilities, and how to navigate some of these complexities. Of course, every community association should seek guidance from their community association manager and management company, their lawyers and other professionals that serve them to help navigate some of these complexities as well.

(11:24) Paul K. Mengert: Very interesting. Ryan let's come back to you for your perspective, especially as someone that works directly with associations. How do you see the kind of ever evolving regulatory changes playing out on the ground, and how many associations just don't have any experience to deal with things that are coming up, like the Corporate Transparency Act, for example. How are they handling the increased regulations that they're always facing?

(11:56) Ryan McCabe: I'm glad you mentioned the Corporate Transparency Act because most associations are completely unaware of this. Um, most and if they don't have a management company or somebody who's updating them and letting them know what's going on in the industry on a state and national level, I just foresee many associations, you know, not even making an attempt to comply. You know, as Dawn mentioned, monitoring over 2000 different pieces of legislation, either in state legislature, federal legislature, or in the various agencies on the state and federal level making rules, it can be overwhelming even for those of us who are in this practice area, to keep up with all of the changes. But one thing we know is that we're heading in a direction where there's more regulation, and the associations really need to be prepared to deal with that. Unfortunately, all of this comes at, you know, complying with these things can be rather expensive, as you know. If an association is involved in a dispute within the, say, the Fair Housing, dispute within a state agency or even this Corporate Transparency Act, the cost can be overwhelming. So, it's very important for the associations out there to stay engaged, to have a professional management company that's monitoring these things, and to have a lawyer who is up to date and can advise them accordingly.

(13:30) Paul K. Mengert: Yeah, I'm glad you mentioned that. Having a lawyer that's up to date because, um, not that frequently, but every once in a while, we run into an association that may be working with a fine lawyer, but one who really isn't engaged in this industry. And unfortunately, or fortunately, depending on how you look at it, this industry has become so specialized, it would almost be like going to a general practitioner for brain surgery, because there are so many unique rules and regulations in our industry, you kind of have to really specialize in this. Well, let's go to the next AMG Community Leaders Series newsbreak, and we'll be right back with Ryan McCabe and Don Bowman.

(14:16) Speaker: And here's another HOA Solutions Today newsbreak.

(14:20) Newsbreak: Homeowners in Arizona, reportedly the second most expensive state in the US for HOA fees, are experiencing steep hikes in their fees, driven by escalating insurance costs. An HOA can see its insurance premium jump anywhere between 20% to 300% because of just 1 or 2 claims, with one HOA experiencing a premium increase from $60,000 to $249,000 annually. According to a board member, to mitigate future claims and fee increases, some boards are mandating owners to replace water heaters every seven years and use smoke and fire alarms. To read the full story visit HOACommunityleaders.com.

(15:03) Paul K. Mengert: Welcome back folks. I'm Paul K. Mengert here discussing legislative trends with Ryan McCabe and Dawn Bauman. I want to just kind of jump right back in, because we only have a few minutes left in today's episode. But Ryan, what do you see as the state General Assembly playing out? How do you see it playing out in the state General Assembly, trying to balance the interest and rights of homeowners and associations and developers and how can associations advocate effectively for the rights of their members?

(15:37) Ryan McCabe: So, I think one of the biggest challenges that associations face is that a disgruntled owner can be very loud. And as we all know, the squeaky wheel tends to get the grease. And, you know, one thing I've learned at, serving in the State Legislature is that there are many owners who are very unhappy, and they come to various members of the legislature, and they provide a story about something that's happened to them. And, and many times if the legislator spends the time to look into these situations or the complaints that the homeowners make, we learn that it's not exactly as they tell us. Now, sometimes it is, but usually we're talking about owners who've already worked through the court system. They've been unsuccessful in the court system, and now they're coming to the legislators and they're providing a parade of horribles type scenario. Well, legislators obviously are elected, and they like to make their constituents happy. And so, I find that many of these bills that are at least pre-filed in our state legislature are done at the request of a constituent. So maybe that legislator wants this bill, but maybe it's just to satisfy the requests of a determined constituent. And you know, those things. Um, you know, sometimes that legislation can grow legs. And so, you need to be monitoring that. But I think that that's one of the disadvantages, you know, a disgruntled board of directors is not likely to go run to the legislature and ask for some legislation, whereas in every association there's somebody that's unhappy with the amount of the assessment, or they're unhappy with the fact that they lost an election or various other things they might be unhappy with, such as their architectural request wasn't approved. And so, I think that's one of the biggest challenges that associations face. The other group that's very involved at the legislative level are developers. Obviously, most of them are well funded, and they have an army of lobbyists that are before us. And so, I think that's why it's important to be a member of CAI and to have a professional management company, because you have someone there monitoring this, you know, potential legislation, and they're able to watch it and advise and coordinate when it's necessary to protect the interests of the associations. Again, most of these bills, if passed, almost always have a significant financial impact on the association and thereby its members as well.

(18:34) Paul K. Mengert: Yeah, it's been interesting to me over the years seeing the legislature kind of propose one thing, and then five years later, they kind of propose the reverse. Um, but it is very costly for the associations to change the way they're handling these things. And often the proposals, while maybe a good idea, come with some unforeseen or unintended consequences. I know in North Carolina, one of the things that was proposed, um, I don't believe I know it hasn't been enacted, and I'm hopeful it won't be enacted, but was that notices on violations would have to be hand-delivered? Uh, but we were able to come back and present some news articles where in certain places where they have hand-delivered notices, people have been met with, uh, guns. Or I think in one tragic case, somebody was actually shot. A homeowner volunteer just delivering a notice, asking someone, you know, for example, to cut their grass. I don't recall the exact details, but, you know, it just, you know, I don't think anyone's willing to volunteer for their HOA to the standpoint that they're willing to put their safety at risk. So, you know, we have to kind of balance, because I do think there are a lot of people that have violations that don't really know they have it. I mean, for whatever reason, they're not reading the email or the mail. And if you can have a 1 to 1 conversation with them, that really is a good thing. But you've got to be pretty careful in this day and time. Well, Dawn, I, um, again, I'm just really honored to have both of you with us for this episode. But how does how does what Ryan mentioned, uh, dovetail with your, um, experience across all the states you work with? And how have you found that communities and managers can get more traction from their legislators on hearing their concerns?

(20:32) Dawn Bauman: This conversation. Thank you so much, Paul. This conversation reminds me of an interview I had with The New York Times a couple of years ago. The reporter asked me, and this was right before the Christmas holiday. The reporter asked me about rules related to Christmas decorations and lights, and why on earth a community association would have a rule related to how long lights could stay up in that community. Why couldn't the owners just decide however long they want to have their lights up? And I said, these rules are created by the association and voted on by the majority of the membership. And oftentimes the board members really don't care how long these lights are up, but the neighbors complain to the board and the board is enforcing the rule. So, then the neighbor doesn't like it. They think it's an unreasonable rule. And so, you have one neighbor who thinks one way. Another neighbor who thinks another way. And this is a this is a typical neighborhood, right? We have these conversations in our neighborhood all the time. Well, if the one neighbor really doesn't like it enough, whichever one it could be, the one with the lights or the one without the lights goes to the legislator and tries, goes to their legislator and tries to make some changes. What sometimes is misunderstood is that this is a balance of interests within the community, and the boards are doing the best job they can to balance everybody's interests. Now we are in an environment in our entire country where there's political divide, and there are people who are digging, digging in on their personal preferences and in their personal opinions, and very quickly agreeing to disagree and saying there's no further conversation. So, I think when a legislator hears from a board or I'm sorry, from a constituent, they should be encouraged to ask that constituent, have you worked with your neighbor? Have you worked with your community? Have you worked with your board? There are some states that have a statutory requirement whereby the association has to have a complaint process, and they have to respond to these complaints in writing within 30 days from the homeowner’s interests. And before anything can go to a legislator, a legislator should ask, “Did you go through that process?” Because once that process has gone through and neighbors are talking to neighbors, and neighbors are creating a civil environment among neighbors. I think we'll have a lot less legislation about flagpoles and Christmas decorations and trash cans and things like that. I think a lot of this should start with a conversation, but that's not where we are right now in our environment. And I suspect in 2025, we'll see even more than 2000 bills impacting community associations, because we have people running to their legislators before they start working with their communities. And I think if you have board members listening to this podcast, which I think you will. Board members, I think that it is incumbent upon you as leaders of your community to initiate those conversations. If you're feeling or you're hearing in your community that there are people who are dissatisfied with something, have those conversations. Have an open conversation with members in your community. Statistics show only about 10% of people living in community associations are dissatisfied with their community. We have 75 million people in the US living in community associations. So that means about 7.5 million people who may be dissatisfied. It's a lot of people. It's a lot of people who can call their legislators and complain, um, but it's only 10%. 90% are generally happy with their community association. So, I think we need to keep that in mind.

(24:35) Paul K. Mengert: That's the frustrating part, because what we know is that most of the people are satisfied. And, you know, I've started trying to have this conversation with legislators when they tell me that somebody is upset because they can't park on the street. I, you know, I really have to kind of get them to understand it's probably not the board that's driving that concern, but it's probably their neighbors that are driving that concern. And maybe what they want to park on the street isn't a Buick but a track hoe. And, you know, you really have to get up and listen. I am no way mean to imply that there aren't people with legitimate complaints, because there also are, and I've been trying to help a legislator with an issue in Union County right now where the people are parking on the street, they're not supposed to be parking on the street. But the reality is they don't have anywhere else to park. And, you know, these are really you know, sometimes you just have situations that don't have a good solution. And, you know, the that that member of the North Carolina Senate and I've started talking about what could we do to require there to be adequate parking in neighborhoods that get built because none of the homeowners are the responsible parties for this problem. Because some people say they can't drive down the street, and the other people say their wife doesn't have a place to park, and they're both good, good points. I'm very appreciative of you guys being with me today. Let's go to our final AMG Community Leaders Series newsbreak, and we'll be right back with some final thoughts.

(26:13) Speaker: And now our final HOA Solutions Today newsbreak.

(26:17) Newsbreak: More than 650 condo owners at Florida's Commodore Plaza are concerned about having to leave their units due to a past due 40-year building recertification and an upcoming Miami-Dade County Unsafe Structures hearing. Residents have faced a lack of transparency from the COA and have filed complaints with the state, which has yet to respond satisfactorily. Lawmakers are exploring changes to the new condo law requiring reserve funds for structural repairs to help prevent residents from becoming homeless due to financial strains. Let us know your thoughts by leaving a comment at HOACommunityleaders.com.

(26:57) Paul K. Mengert: We're back everyone. I appreciate our guests today, Dawn Bauman and Ryan McCabe, being with us. As we normally do in our podcast, I like to close out by asking each of my guests to kind of give me their three thoughts from this episode. What would the three takeaways be for you, Ryan, with today's episode?

(27:20) Ryan McCabe: I would encourage your listeners to one, get engaged to be involved. Remember, the folks that are unhappy are the ones that have seem to have the most energy about approaching their legislators. Also, many times we find that the people who have already lost in court or with their association or with their neighbors they're still looking for an audience and they're going to their legislators and they're sharing one side of the story. I would also say, you know, I always try to remind my boards that, you know, you're only one bad PR piece away from some bad legislation or a bad outcome in court, and to remember to not lose your cool with these owners. When you have a problem, handle it. Be the adult even when the owner is being unreasonable and emotional. Treat them fairly. Assume that their motivations are indeed just. And again, just be mindful of how this could be. You know, your problem with this homeowner can be spun by the media or by the homeowner in the press and to the legislature. So, you know, just constantly reminding that again. Also, get engaged with CAI and make sure that you're following their legislative agenda and following the items that they are watching. Again, you know, 2000 pieces of legislation and rulemaking, you know, things out there, it's just important to stay engaged and to know what's happening and to and to be prepared.

(29:03) Paul K. Mengert: And Dawn.

(29:04) Dawn Bauman: Yes. Thank you. Those were great, Ryan. You took a couple of mine, but that's okay. I would say be informed, be engaged. And I'm going to say thank you to the homeowner leaders, those that are serving on their boards. So first be informed. Know what's happening. Know what's happening in your state. Know what's happening on the federal level. Community Associations Institute, our website, we have a lot of information on what's happening in your state. It's free. Go on our website. You'll find a lot of free resources, a lot of free information. So be informed about what's happening. Engage. And don't just engage with your homeowners and your management company and your attorney. Engage with your elected officials. Follow them on Facebook. Go to a town hall meeting. Listen to them, hear what they're saying so that when you have something to share with them, they know who you are. So be engaged. And the third is board members of community associations are, they serve a huge job, a very important job, and maybe one thankless job, I would say. So I would say, on behalf of your homeowners and on behalf of all the homeowners in the country, thank you to your board members who are doing such a great service to your communities. Don't give up. Keep going. Be reasonable, and thanks for all you do.

(30:23) Paul K. Mengert: Dawn, Dawn and Ryan, I really appreciate those thoughts, and I, I, join you in thanking the community leaders and volunteers and professionals that work in this industry, all with the effort of making communities a better place for people to live. My three takeaways are number one, approach the situation by being friendly. Be friendly with people in your community. Be friendly with your legislators, your managers and legislators. Lead with empathy. Try to put yourself in a position of understanding how the other guy might feel. And suppose you were the person that has three cars and only two parking spaces. How would that make you feel and how would you want to be treated in that situation? And the third thing is lead with transparency. Be willing to be open and share the minutes, share the financials, and, uh, just be willing to, uh, to help other people in your community. Remember, we're all on the same side with this. And I think one of the things I do in trying to coach people in neighborhoods to get along is to understand that their big goal is probably the same. That's to make it a nice neighborhood and have higher property values. And the rest of it is really just details, but they're important details. Well, I want to thank you again, Dawn and Ryan are really great to have you with us. It's clear that homeowner associations face many significant challenges, but with the right strategies and the right advocacies, I think we can effectively navigate these situations. Professionals like Ryan and legislators like Ryan, and community leaders and researchers like Dawn Bauman can really help us have better communities for our families. I really appreciate both of your participation today and for all you do for communities. I'm Paul K. Mengert, your host of the 2024 Community Leaders Series Podcast Edition. If you would like to explore more of our podcast episodes or access the 2024 Community Leaders series content, please visit HOACommunityleaders.com. That's HOACommunityleaders.com.

(32:33) Speaker: Thanks for listening to AMG’s Community Leaders Series podcast edition. To find out more information on this episode, please visit HOACommunityleaders.com. This podcast is a production of BG AD Group. All rights reserved.

• Get engaged and involved with your HOA.

• Be informed. Know what's happening in your state and what’s happening on the federal level. Community Associations Institute (CAI) has a lot of information on what's happening in your state, and it's free!

• Lead with transparency. Be willing to be open and share the minutes, share the financials, and just be willing to help other people in your community.

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San Francisco's Millennium Tower, known for its structural issues, faces new challenges as the board considers fining unit owners up to $10,000 for leaving windows open during high winds. Despite a city mandate to install stronger window support arms, progress has been slow, with only a third of the windows upgraded. Also, the COA has been hit with a $7 million lawsuit from an owner over regular plumbing backups, which some experts link to the condo's leaning and sinking problems.

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Homeowners in Arizona, reportedly the second most expensive state in the US for HOA fees, are experiencing steep hikes in their fees, driven by escalating insurance costs. An HOA can see its insurance premium jump anywhere from 20% to 300% because of just one or two claims, with one HOA experiencing a premium increase from $60,000 to $249,000 annually, according to a board member. To mitigate future claims and fee increases, some boards are mandating owners to replace water heaters every seven years and use smoke and fire alarms.

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