Coronavirus: What Condos and HOA’s need to know about reopening recreational facilities

Michiganders living in condominiums and homeowners associations have been subject to some form of a stay-at-home order since March 24, 2020 due to COVID-19. However, Governor Gretchen Whitmer has started reopening portions of Northern Michigan, and it is expected that the restrictions on recreational facilities in community associations throughout Michigan will be relaxed in the near future. However, at the present time, recreational facilities, such as gyms, fitness centers, recreation centers, indoor sports facilities, indoor exercise facilities and exercise studios, remain closed until at least June 12, 2020, pursuant to Executive Order 2020-69 , Executive Order 2020-96 and Executive Order 2020-100. Some local governments have also ordered that pools remain closed indefinitely or for the entire summer season. Accordingly, this article will address the risks and steps for minimizing potential liability that a community association must consider when deciding whether to reopen recreational facilities as stay-at-home restrictions are lifted.

What are the risks that HOA’s must evaluate with respect to coronavirus when deciding whether to reopen recreational facilities?

Health and Safety Concerns

The first priority of any community association board should be protecting the health and safety of its residents. There are good arguments to keep recreational facilities closed for the remainder of the year, including: (1) the potential health and safety concerns created by reopening recreational facilities as there is still much that is unknown about COVID-19; (2) the additional expense created by reopening recreational facilities in compliance with federal, state and local guidelines; and (3) a community association’s potential inability to efficiently enforce new rules that will be required for residents to safely use the recreational facilities. Accordingly, at this point in time, community associations should consider keeping recreational facilities closed for the remainder of the year.

However, as a practical matter, some community associations may choose to reopen recreational facilities as the operation of recreational facilities always has some degree of risk. It is always possible that somebody breaks an ankle playing basketball, a weight falls on a resident’s foot in the gym or somebody slips and falls at the pool. Recent guidance from the Centers for Disease Control and Prevention (the “CDC”) demonstrates that touching surfaces is not the primary method of transmission of COVID-19, and the CDC has stated there is no evidence that COVID-19 can spread through water in properly maintained pools and hot tubs. Even so, community associations that choose to reopen must implement social distancing and additional safety rules as COVID-19 is most commonly spread through in-person contact.

Accordingly, when recreational facilities can be reopened under state and local law, it may be reasonable for a board of directors to exercise their business judgment in determining that certain recreational facilities can be reopened based upon current CDC guidance. Specifically, MCL 450.2541 permits directors and officers of a nonprofit corporation, such as a condominium or homeowners association, to rely on information, reports or statements prepared by persons on matters that the director or officer reasonably believes are within that person’s professional or expert competence. However, a community association also should consult with its attorney, insurance agent and service providers when deciding whether to reopen its recreational facilities as such reopening will result in unanticipated cleaning, operational and supervisory expenses. Accordingly, the board of directors must ensure additional safety protocols are put into place and enforced and that it either has sufficient funds to cover these unanticipated expenses or is willing to impose an additional assessment to do so.

Criminal Prosecution and Fines

As of the date of this article, Governor Whitmer has issued approximately 100 exceutive orders related to COVID-19. Executive Order 2020-96 divides Michigan into 8 separate regions, and there are now different restrictions in place for each region. A violation of the Governor’s executive orders is a misdemeanor. In addition to the Governor’s executive orders, many counties and municipalities also have issued health orders that restrict certain activities. By way of example, the Oakland County Health Department issued an order requiring that all playgrounds remain closed until further notice. Accordingly, community associations must comply with all applicable state and local orders when reopening recreational facilities. Given that executive orders are changing on an almost daily basis, board members should consult with an attorney to determine whether recreational facilities can be legally reopened and what additional rules may apply. It is also important to note that many insurance policies contain an exclusion for criminal acts and that there may not be insurance coverage if a community association is illegally operating a recreational facility that is required to be closed, even if they are sued for a claim that is not related to COVID-19.

Civil Liability

Reopening recreational facilities may subject community associations, and their directors and officers, to a lawsuit by a co-owner, tenant or their guest if they are exposed to COVID-19. Lawsuits already have been filed against cruise ship operators and employers related to alleged COVID-19 exposure. While the issue of causation (proving how a person contracted coronavirus) may be a difficult hurdle for plaintiffs to overcome, the mere fact that a lawsuit has been filed could create problems for a community association.

Many community associations mistakenly assume that insurance will cover any lawsuit resulting from COVID-19 exposure. However, many insurance policies contain an exclusion for loss or damage that is caused directly or indirectly by any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease. Accordingly, some insurance carriers have taken the position that they do not have a duty to defend (pay for an attorney to defend a lawsuit) or a duty to indemnify (pay a judgment) based on the above exclusionary language related to COVID-19. Accordingly, community associations that reopen recreational facilities must be prepared to accept the risk of paying unbudgeted legal fees in defending such claims that will likely be seeking significant damages.

In contrast, if a community association or its board of directors is sued by a co-owner for not opening a recreational facility, such a claim is likely covered under the directors’ and officers’ insurance policy. Furthermore, if a court ordered the recreational facilities to be reopened and a person was exposed to COVID-19, then the community association would have a defense that they did not make the decision to reopen the recreational facilities. If the community association decides to keep its recreational facilities closed, the Michigan Condominium Act prohibits a co-owner from withholding or claiming a refund of assessments based on their lack of access to the recreational facilities. MCL 559.169(4) states that “a co-owner may not be exempted from contributing his or her share of the common expenses by nonuse or waiver of the use of any common element or by abandonment of his or her unit.” Accordingly, while a community association and its directors and officers may be exposed to a lawsuit no matter what decision they make, there appears to be less risk for the community association from claims based on a decision to keep the recreational facilities closed.

How can an HOA minimize potential liability related to COVID-19 if it reopens recreational facilities after stay-at-home restrictions are lifted?

Amending the Articles of Incorporation to Limit Director and Officer Liability

In 2015, the Michigan Nonprofit Corporation Act was amended to allow additional liability protections for volunteer directors and officers. MCL 450.2209 permits a community association to amend its articles of incorporation to exempt directors and officers from liability unless they intentionally harm the members of the corporation. Accordingly, community associations that decide to reopen recreational facilities should review their governing documents to determine what the current standard of liability is for its volunteer directors and officers. If the directors and officers may be liable for negligent or grossly negligent acts, a community association may want to consider updating its articles of incorporation to avoid having to pay legal fees or potential judgments related to COVID-19 exposure in the event that insurance coverage does not exist. This is especially true given that a community association may potentially have to pay for legal defense costs and indemnify a director or officer that is sued.

Amending the Master Deed or Declaration to Limit the Association’s Liability

Many master deeds and declarations are silent as to a community association’s responsibility and potential liability related to cleaning the common elements. However, the governing documents are contractual in nature and the Michigan Court of Appeals has held that a “ … contractual waiver of liability also serves to insulate against ordinary negligence, but not gross negligence.”  Xu v Gay, 257 Mich App 263, 269; 668 NW2d 166, 170 (2003). Accordingly, we recommend a community association amend its governing documents to waive potential negligence or breach of covenant claims arising out of COVID-19. Specifically, we recommend that a community association that is reopening its recreational facilities amend their governing documents to include the following provisions:

  • A notice indicating that the association will perform cleaning that it deems appropriate but that it is still possible that an owner, tenant, invitee or licensee may be exposed to COVID-19, or other forms of bacteria or viruses, that may cause bodily injury, sickness or death, notwithstanding the cleaning efforts undertaken by the association.
  • A requirement that each co-owner, along with their tenants, invitees and licensees, acknowledge the above risks, that they will be solely responsible for these risks and that they waive any potential liability against the community association.

Create Safety Rules

Condominiums and homeowners associations can implement rules to protect the health, safety and welfare of the residents when using recreational facilities. Examples of rules that the board of directors should continue implementing, even as stay-at-home restrictions are lifted, include:

  • Equipment Rules. Requiring residents to bring their own equipment to recreational facilities, such as basketball balls, beach chairs, grilling utensils, tennis rackets or towels.
  • Health Screening Rules. While not legally required for private recreational facilities at the time this article was written, community associations should consider whether to implement health screenings, similar to those required by employers. Executive Order 2020-96 requires employers to conduct daily health screenings to determine if employees have a fever or any other symptoms of COVID-19. Accordingly, community associations may want to consider installing infrared wall mounted thermometers to monitor temperatures and require users of recreational facilities complete health screening questionnaires.
  • Capacity Rules. At the time this article was written, Executive Order 2020-96 only permits social gatherings of 10 people or fewer. Even after this restriction is lifted, the capacity of any outdoor or indoor recreational facilities should be limited based on any further executive order, and at a minimum, to the extent that would permit social distancing at all times. Community associations with highly used recreational facilities may want to create staggered schedules so that residents may only use recreational facilities during certain time periods.
  • Rules Limiting Contact. The CDC recommends that social distancing of at least 6 feet be maintained while engaged in recreational activities. Accordingly, community associations should enact rules to limit the use of areas such as basketball courts, gazebos and grills to avoid in-person contact. Similarly, after pools are allowed to reopen, some community associations may want to limit the use of pools to lap swim to prevent residents from accidentally coming in contact with each other.
  • Rules Limiting or Prohibiting Guests. Limit the number of guests that may use a facility or limit the use of the facility to residents only. Similarly, limiting the time period during which a recreational facility is in use may also limit the number of users and permit additional time for cleaning.
  • Rules requiring Masks. Executive Order 2020-96 requires individuals in an enclosed space that is open to the public to wear a homemade mask, scarf, bandana or handkerchief if they are medically able to tolerate a face covering. Accordingly, community associations should consider requiring users of indoor recreational facilities and other common areas to wear masks if possible.

Comply with the Fair Housing Act

It is not uncommon for community associations to inadvertently violate the Federal Fair Housing Act (the “FHA”) while making rules related to recreational facilities. Section 3604(b) of the FHA prohibits discrimination “against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of… familial status….” A federal court recently held that a community association in Idaho violated the FHA and engaged in familial discrimination by enacting rules and posting signs that the clubhouse was for “adult use only”, that no one under the age of 14 was permitted to use the pool unless accompanied by an adult, that residents ages 14 through 18 were limited to one guest when using the pool (while residents over the age of 18 could have six guests) and posting a sign that stated “Quiet Swimming Only.” Accordingly, community associations must be careful when adopting new rules in response to COVID-19 to ensure they do not unfairly discriminate against families with children that use recreational facilities, even though such rules may be well intentioned.  Accordingly, community associations should either have legal counsel draft any new safety rules, or at the very least, have an attorney review the proposed rules.

Create and Update Signs

In Michigan, a defendant can avoid liability if a danger is open and obvious. A danger is “open and obvious” if “… an average user with ordinary intelligence [would] have been able to discover the danger and the risk presented upon casual inspection.” Novotney v Burger King Corp (On Remand), 198 Mich App 470, 475, 499 NW2d 379 (1993). Similarly, “[f]or general negligence, the standard for determining if a defendant breached its duty to warn is whether the defendant warned the plaintiff of foreseeable danger that could arise from the defendant’s conduct.” See Osman v Summer Green Lawn Care, Inc, 209 Mich App 703, 532 NW2d 186 (1995).

In applying the above concepts to slip and fall cases, the Michigan Court of Appeals has held that placing several signs throughout a store provided more than adequate notice that wet conditions could exist anywhere in the store. See, e.g., Foster v M & H Party Store, Inc, unpublished per curiam opinion of the Court of Appeals, issued Feb 16, 2017 (Docket No. 328283), p 2; Maness v Carlton Pharmacy, unpublished per curiam opinion of the Court of Appeals, issued Oct 22, 2009 (Docket No. 287486), p 2. While it remains to be seen whether the existence of COVID-19 on or within the recreational facilities constitutes an “open and obvious” danger, given the general public knowledge of the virus, the placement of signs warning that COVID-19 may be present on or within the recreational facilities certainly will help provide a defense to a community association that is sued. We recommend that a community association consult with an attorney to create warning signs for recreational facilities that accomplish the following:

  • Require all users to follow safety precautions, such as not using recreational facilities if they are sick, wearing masks, washing hands, practicing social distancing and following any specific safety rules adopted by the community association.
  • Notify that COVID-19 may be present, notwithstanding any cleaning undertaken by the association, and that the user will use the facility at their own risk.
  • Comply with state mandated requirements for pool signs.
  • Posting CDC posters that identify appropriate safety protocols.

Implement Safety Protocols

Condos and HOA’s that reopen recreational facilities also will need to implement additional safety measures. Accordingly, community associations should consider the following issues:

  • Air Quality. The CDC has made recommendations related to airflow, HEPA filters and UV light filters to minimize the spread of coronavirus. Consult with an HVAC specialist to determine whether additional precautions should be taken with respect to air quality in the facility.
  • Cleaning. Create a plan for increased cleaning based upon CDC guidance. The following guidance is useful in implementing cleaning procedures for various recreational facilities:

Clubhouses and Other Indoor Areas – The CDC has issued the following general guidance on disinfecting facilities.

Gyms – A group of Michigan gym owners have created cleaning protocols for gyms and fitness areas.

Pools – The CDC has issued the following guidance on best practices for operating public swimming pools and considerations for public pools, hot tubs and water playgrounds during COVID-19. The State of Michigan also has minimum legal requirements to operate a pool, which include ensuring that a person with “an infection or communicable disease” does not use the pool.

  • Enforcement. Rules and safety protocols will only be useful and protect a community association if they are enforced. Accordingly, board members should create a plan for enforcing any new policies and work with property managers, lifeguards, security guards or the vendors to ensure that safety protocols are being enforced.
  • Furniture. Rearrange chairs, tables, furniture and other fitness equipment to maintain 6 feet of social distancing. Consider moving furniture or fitness equipment into storage to promote social distancing.
  • Floor Markings. Place tape or striping on the floor in order to maintain 6 feet of social distancing.
  • Hand Sanitizer Stations. Install hand sanitizer stations at entrances and exits to the recreational facilities.
  • Keyless Entry. Consider installing keyless entry to recreational facilities to minimize touch points.

When adopting new safety protocols, the board of directors should adopt formal resolutions approving contracts or other action taken by the board to document the efforts undertaken to prevent COVID-19 from spreading.  Formally documenting such decisions will demonstrate that the board acted reasonably and exercised business judgment in the event that the association, a director or an officer is sued.

Please click here to review the updated requirements imposed by Governor Whitmer on June 5, 2020 via Executive Order 2020-114 and Executive Order 2020-115 that were issued after this article was written.

Waivers

A community association that obtains individual waivers from those that use the recreational facilities may have additional legal defenses. However, waivers must be carefully drafted. In finding that an intended waiver did not release a negligence claim, the Michigan Court of Appeals has held as follows:

We find that the language in the alleged release is unambiguous, and clearly states that defendant would not assume responsibility for “any injuries and/or sicknesses incurred to [sic] me or any accompanying minor person as a result of entering the premises and/or using any of the facilities.” However, this provision does not inform the reader that he is solely responsible for injuries incurred or that he waives defendant’s liability by relinquishing his right to sue, nor does it contain the words “waiver,” “disclaim,” or similar language that would clearly indicate to the reader that by accepting its terms he is giving up the right to assert a negligence claim… we believe that, at a minimum, a release should explicitly inform the reader regarding the effect of the release. Therefore, we find that the language at the top of defendant’s sign-in sheet was insufficient to operate as a release, absolving defendant of any liability for its own negligence….
Xu v Gay, 257 Mich App 263, 275-76; 668 NW2d 166 (2003).

Accordingly, an individual release must indicate that the user of the recreational facility assumes the risk that they may contract COVID-19, that they are solely responsible for any injury and that they “waive” or “disclaim” their claims against the community association. However, community associations should be aware that some owners may not be willing to sign a waiver, minors cannot sign waivers and it will be difficult to monitor whether a person using a recreational facility has, in fact, executed a waiver. Furthermore, an individual may only waive negligence, as opposed to gross negligence and willful or wanton misconduct. Accordingly, given the practical issues and limitations presented by standalone waivers, we recommend that they should only be used in conjunction with the above identified steps.

Conclusion

Board members for community associations will be faced with many difficult decisions regarding reopening recreational facilities. Keeping recreational facilities closed for the time being, even if the current executive orders are rescinded, presents the least amount of risk. However, some community associations will exercise their business judgment to reopen recreational facilities as there is always some degree of risk that is inherent in the operation of a recreational facility. Community associations that choose to reopen should consult with their attorney, insurance agent and qualified vendors to ensure that they can reduce the multitude of risks associated with operating a recreational facility to the maximum extent possible.

Kevin Hirzel is the Managing Member of Hirzel Law, PLC and concentrates his practice on commercial litigation, community association law, condominium law, Fair Housing Act compliance, homeowners association and real estate law. Mr. Hirzel is a fellow in the College of Community Association Lawyers, a prestigious designation given to less than 175 attorneys in the country. He is also a member of the Community Associations Institute’s (“CAI”) National Board of Trustees. Mr. Hirzel has been a Michigan Super Lawyer’s Rising Star in Real Estate Law from 2013-2020, an award given to only 2.5% of the attorneys in Michigan each year. Mr. Hirzel has been named a Leading Lawyer in Condominium & HOA law by Leading Lawyers Magazine from 2018-2020, an award given to less than 5% of the attorneys in Michigan each year. He represents community associations, condominium associations, cooperatives, homeowners associations, property owners and property managers throughout Michigan. He may be reached at (248) 478-1800 or [email protected].