Reporting Crimes and Sex Offender Restrictions
December 31, 2013

Liability for associations is a common concern for Boards of Directors.  Some associations in Tennessee, in an attempt to mitigate liability, have inserted provisions in their CCRs or master deed that prohibit sex offenders from residing in the development.  Setting aside whether such provisions are enforceable in Tennessee, there is a question as to whether such provisions are wise from an enforcement standpoint.

Generally, such provisions state that individuals listed on the state’s sex offender database are prohibited from residing in the development.  The question then becomes, what is the Association doing to follow up on this matter?  Is the Association running background checks on every person residing in the development on a periodic basis?  If not, why not?  For example, someone could move into the development and not be on the registry.  Over the years, they could commit a crime and be placed on it.  Or, a non-owner who resides at the property (an adult child or significant other) could be on the registry.  If the Association does not conduct periodic investigations of its residents, then is it exercising its fiduciary duties under the CCRs or Master Deed?

We recommend that Associations remove such sex offender restrictions from their CCRs or Master Deeds.  This may seem counterintuitive.  However, Associations seldom investigate their members, and if they do not and someone is injured then the Association may bear some liability.  For example, if an association were to have such a provision and it were not to investigate and a sex offender were to move in and such individual were to commit a crime in the development, a plaintiff’s attorney would certainly investigate the potential liability of the Association.

On the other hand, you have what occurred recently in Clarendon County, South Carolina to James E. King.  Mr. King owns a unit in the Santee Resort condominiums.  The Santee Resort Board obtained information from the South Carolina Sex Offender registry regarding a William James King who is a registered sex offender.  The Board put together a flyer with William James King’s name, photo, and sex offender status and circulated it in the Santee Resort community claiming that William James King was one and the same as James E. King.  The Board was horribly wrong.  Not only did they have the wrong man, but James E. King does not have a criminal record.

James E. King sued the Santee Resort condominiums and obtained a jury verdict in the amount of $890,000.00.

On the one hand, failing to investigate may lead to liability.  On the other, actually investigating may lead to liability.

There are numerous lessons in this case.  First, an Association should only publish notices regarding its meetings.  Second, the Board of Directors should consider its governing documents and determine whether provisions of such documents may cause potential liability issues the Association.  Third, the Board of Directors should review its insurance, annually, to insure that the Association is properly covered.

Finally, we wish all of you happy and prosperous New Year!

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