Real Estate Law Client Alert: HOAs and COVID-19

With Pennsylvania in the throes of the novel coronavirus pandemic, homeowners associations, as with many organizations, face significant challenges in this new normal. These are some of the major hurdles that associations should expect.

Health and safety: During a pandemic of such scale, keeping residents healthy is the top priority. Therefore, it is important that associations take care to manage common areas, given the social distancing measures being recommended by governments and health officials. Many associations have properly cancelled or postponed community events. It is also critical to determine what measures will be used to decide when it is safe to resume such events. If they have not already, associations should strongly weigh closing common areas and amenities like gyms and pools, and enhancing already existing cleaning and sanitation procedures.

Operation and governance: There may be a question of how a given association’s governing documents address remote meetings and votes that are necessitated because of social distancing. Thought should be given as to whether action needs to be taken to permit remote meetings if that is not already permitted by the association’s governing documents.

Cash flow: Many associations likely will face impacts to cash flow resulting from the expansive shutdown of businesses to achieve social distancing. Unit owners may be delinquent in their assessment fee payments during this cash crunch period.

While different associations take more or less aggressive approaches to collect unpaid assessment fees, many options for enforcement have paused in the short term. In Pennsylvania, most non-essential proceedings in the courts have been suspended. As a result, collection actions for assessment fees or foreclosure proceedings will have to wait until the operations of the courts resume.

However, in some ways, associations will be in a better position than other creditors. For example, the Pennsylvania Uniform Planned Community Act, 68 Pa.C.S. § 5315(a) states that associations hold liens on units for the amount of unpaid assessment fees from the time that the assessment fee becomes due. The same is true pursuant to the Pennsylvania Uniform Condominium Act 68, Pa.C.S. § 3315(a). These provisions will continue to provide a level of protection during this time. Going forward, it is likely that many unit owners will seek adjustments or payment plans. In these negotiations it will be important to abide by the requirements of the association documents and the statutory framework.

Associations, as with all organizations, should be evaluating their potential benefits under any available insurance policy. For more information in this regard, click here.

Further, the CARES Act provides federal support to “small businesses,” which includes nonprofits affected by COVID-19. The “Paycheck Protection Program” (PPP) provides a potentially forgivable loan if certain criteria are met. At the time of this writing, there is some debate as to whether associations may apply for the PPP. However, to the extent the association has employees or independent contractors, the association should evaluate the benefits which may be available.

Should you have any questions regarding home owners associations during the COVID-19 pandemic or any other real estate issue, please contact Brandon B. Rothey at bbr@muslaw.com, any member of the Real Estate & Lending Group, or any other Meyer, Unkovic & Scott attorney with whom you have worked.

This material is for informational purposes only.  It is not and should not be solely relied on as legal advice in dealing with any specific situation.