Silent Screening: Should Associations Divulge Details of Denial?
By Donna DiMaggio Berger, Esq.
For most people, the introduction to the community association lifestyle is the dreaded interview with the board to determine whether their lease or purchase application will be approved. I remember my own interview with the president of the condominium I moved into just out of law school. My husband and I were not sure what to expect. We met only with the association president in the condominium clubhouse near the pool. The president did little to put our minds at ease and, in fact, told us he could block our purchase if he “didn't like us.” Fortunately, we passed muster and our sale closed.
At the time of that interaction, I had not yet started my career in community association law. Looking back, I realize that this director was wildly out of order and our association documents did not even require an interview, nor did they empower the board to deny any transfers.
Many community association boards, however, do have the authority under their governing documents to scrutinize proposed leasing and sales transactions and to approve or deny them. Of course, the manner in which they conduct that approval process varies widely depending on the community type, location, and, naturally, the personality and philosophy of the board.
Boards are often advised by legal counsel that it’s safer to simply say that an application was “denied” without going into the details surrounding that denial. If the property owner wishes to know the reason for the denial and pursues it legally, then yes, the board will have to capitulate and provide that reason.
One school of thought is that providing reasons for a denial could fuel unnecessary legal fights. The other school demands transparency and the reasons that the board is exercising its authority to deny when screening renters and purchasers. There may be legitimate reasons to support a denial, and by failing to articulate them, a potential purchaser or renter can leap to an incorrect conclusion that a discriminatory motive was involved.
Regulations May Fuel Claims
Some states and counties are now getting involved in the association approval process. For example, Broward County, Fla., recently passed a new ordinance that requires all Broward County condominium, cooperative, and homeowners associations to give a specific reason in writing for the denial of an application for purchase or rent. In addition, all Broward County associations must also give written notice to the Board of County Commissioners of the status of all pending applications to rent or purchase a dwelling.
Since this new ordinance references the Human Rights Act, one can assume that the Broward County Commissioners suspect that most reasons for denial are discriminatory. But even if that isn’t their suspicion, discrimination filings are likely to increase as a result of this ordinance being passed.
Critics of the ordinance have pointed out that many communities are self-managed and strapped for time as it is, so this new ordinance overlooks how impractical it may be for a volunteer board to advise the county about the status of every pending sales and leasing application. And, since there are already fair housing mechanisms in place to combat discriminatory practices in Broward County (and practically every other location in the country), the public purpose being served by the implementation of this ordinance remains to be seen.
Use Abundance of Caution
For those of you managing associations outside of Broward County, the question remains whether you should communicate the reason an application for purchase or lease was denied. Most association attorneys would agree that any communication in this area should flow only to the owner of the unit and not to the applicant. The reason for this is that the owner has what is called “privity” with the association, meaning it is the party who has standing to enforce the association's governing documents.
If you do communicate a specific reason for the denial, it is then the owner's decision whether to relate that information to his or her applicant. Of course, if your association's governing documents or your state's statutes or county ordinances outline a specific procedure for this communication, then that must be followed.
Some communities have begun requiring owners to conduct their own background checks on the people to whom they plan on renting or selling their property, in addition to the association running one. This protocol results in the owner having the pertinent information at his or her fingertips without the association having to involve itself in the process of relating the reasons for a denial. Of course, if the board is inclined to deny an application and the screening results don't support such a denial, then there’s going to be a problem.
Every application presents its own unique set of facts and circumstances, so it’s essential that you discuss how to handle each with your association attorney. Finally, words count, so the manner in which you frame the association's thoughts and decisions requires deliberation and some measure of finesse.
Donna DiMaggio Berger, Esq. is one of the founding partners of Katzman Garfinkel & Berger (KG&B), a Florida-wide law firm that devotes its practice to the representation of community associations. Attorney Berger can be reached at (954) 315-0372 or firstname.lastname@example.org.