Articles by Team Members

Like any other business, community associations are often faced with delinquent owners seeking bankruptcy protection. In fact, as of May 2018, over 9,800 bankruptcies have been filed in Virginia alone.  As such, community associations should be aware of the implications of being an unwilling bankruptcy creditor.

Types of Bankruptcies

 

The two most common types of bankruptcy that impact community associations are a Chapter 7 and a Chapter 13.

Chapter 7:  Liquidation

 

The Chapter 7 bankruptcy is commonly referred to as the liquidating bankruptcy and is what most people think of when they hear the term “bankruptcy.” The idea behind a Chapter 7 is that the court assigns a third-party (a trustee) to review the debtor’s assets and exemptions and sell any non-exempt assets to pay the debtor’s debts. Unfortunately, Most of the time, that doesn’t actually happen. Most chapter 7 cases are “no-asset” cases, meaning there are no un-exempt assets for the trustees to sell. In a rare “asset” chapter 7 cases, the trustee will notice creditors by sending a letter asking for creditors to file “proofs of claim.” A proof of claim is a standard form that a creditor fills out listing the amount and type of debt. A proof of claim must also have “proof” attached detailing the basis of the debt. The trustee then classifies the types of debt and pays those debts based on their classification or priority until the funds are depleted. The end result is a chapter 7 discharge which wipes away all qualifying unsecured debt incurred prior to the debtor filing bankruptcy.  However, there are debts that survive a chapter 7 discharge including secured debt, priority debt, and non-dischargeable debt. The easy way for community associations to prevent loss of assessments to a chapter 7 discharge is to speak with an attorney as soon as an owner is 30 days delinquent.
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By: Lindsey Flaherty

What exactly is limited residential lodging?  It is, in essence, renting of rooms or entire homes or condo units for short term occupancy i.e. less than 30 days. Airbnb   provides a searchable online marketplace that enables homeowners to list for rent all or a portion of their homes and prospective customers can choose to rent from one night to several months.  While this type of rental may present a great economic opportunity for some homeowners it causes increased traffic and parking issues in associations and has resulted in excessive noise and damage to common areas.  Essentially the problem seems to be that homeowners who choose to participate in it are introducing a business in to residential neighborhoods. This business involves providing lodging to transient people who are primarily on vacation.


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     Consider the situation where the Board of Directors has decided that they want to upgrade the appearance of an aging townhouse style condominium and they are talking about requiring all the unit owners to replace certain areas of vinyl siding with Hardiplank or similar high grade exterior product which is a much more expensive material. They are also going to require solid wood decorative shutters on some of the windows. The plan is to get bids, enter into a contract, and assess the owners because the association doesn’t have any money in reserve for this project. Some owners consider these improvements to be upgrades and say that the Board shouldn’t be able to require the owners to pay for upgrades as opposed to replacements.   This article can also apply to some degree to townhouse communities which are not condos but where the association has the responsibility to maintain the exteriors of dwelling units and common facilities.


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With the federally mandated switch from analog to digital signals the interest in satellite dishes has increased. A brief refresher on the Rules is in order. OTARD, the acronym for Over the Air Reception Devices prohibits community associations from enacting restrictions that unreasonably impair the installation, maintenance, or use of antennas used to receive video programming.


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