Community Associations Update - May 2015

Date: May 13, 2015

"Just the Facts" Virginia Common Interest Communities 2015 Legislative Changes

By: Kevin A. Kernan

The Virginia General Assembly approved a number of bills in the 2015 legislative session which impact, directly or indirectly, common interest communities, and the Governor of Virginia signed the following bills into law.

These new laws amend the Virginia Property Owners’ Association Act (Va. Code Ann. 55-508, et seq., as amended (1950)) (the “POA Act”), the Virginia Condominium Act (Va. Code Ann. 55-79.39, et seq., as amended (1950)) (the “Condominium Act”), and other statutes that may affect common interest communities. These new laws will take effect on July 1, 2015. Below is a brief summary of the legislation that directly or indirectly influences common interest community associations.

Allowable Charges, Rental Restrictions And Resale Disclosures

Virginia Condominium Act

Virginia Property Owners’ Association Act

House Bill 2100 – This bill amends provisions relating to allowable charges, rental restrictions and required disclosures in resale certificates and disclosure packets.

Allowable Charges - This bill amends Section 55-509.3 of the Property Owners’ Association Act and adds new Section 55-79.42:1 to the Virginia Condominium Act.  By adding this new section, this bill conforms the Condominium Act to the POA Act regarding the prohibition on a unit owners’ association from charging any fees not expressly authorized by law or in the condominium instruments and creates the potentials for sanctions for violations of this statute.  Specifically, the statute provides that “no unit owners' association may make an assessment or impose a charge against a unit owner unless the charge is (i) authorized under § 55-79.83, (ii) a fee for services provided, or (iii) related to the provisions set out in § 55-79.97:1. The Common Interest Community Board may assess a monetary penalty for a violation of this section against any (a) unit owners' association pursuant to § 54.1-2351 or (b) common interest community manager pursuant to § 54.1-2349, and may issue a cease and desist order pursuant to § 54.1-2349 or 54.1-2352, as applicable.” 

Rental Restrictions: This bill adds new Section 55-79.87:1 to the Condominium Act and a new Section 55-509.3:1 to the POA Act.  The new statutory provisions provides that associations shall not, unless expressly authorized in their recorded documents, (a) condition or prohibit owners from renting their unit or lot and shall also not charge fees for any rental or other processing fees in excess of $50 as a condition of approval of the rental; (b) require owners to use leases prepared by the associations; or (c) charge a security deposit nor can it require the owner to use a lease prepared by the association.  It’s important to note, however, that associations may require owners to provide (a) a copy of the lease with the tenant or a document that discloses the names and contact information of the occupants under the lease, and (b) the tenant’s acknowledgement of and consent to the association rules and regulations. These new provisions may have direct implications for associations that have adopted leasing policies  

Resale Certificates/Disclosure Packets: This bill further amends Sections 55-79.97, and 55-79.97:1 of the Condominium Act and Sections 55-509.5 and 55-509.6 of the POA Act by providing new rules for providing disclosure documents electronically.  Specifically, the bill requires the resale certificates and disclosure packets shall be delivered electronically if the seller requests, and if it’s provided through website links, associations must maintain the website links for at least 90 days.  The preparer may not charge another fee within the subsequent 12 month period, except for an update fee of $50.00 after ninety (90) days from the issuance of the resale packet.  

The legislation also requires the settlement agent to escrow a sufficient amount of funds to pay for the resale packets delivery at settlement for associations that are professionally managed.  

Lastly, Section 55-79.97 of the Condominium Act was further amended to provide that an electronic copy be provided to each of the following named in the request: the seller, the seller's authorized agent, the purchaser, the purchaser's authorized agent, and not more than one other person designated by the requestor. If so requested, the association or its community manager may require the seller or his authorized agent to pay the fee specified in § 55-79.97:1. The preparer of the resale packet shall provide such resale packet directly to the designated persons. 

Workers’ Compensation

Virginia Property Owners’ Association Act

House Bill 1285 – This legislation amends the definition of “employee” as defined in the  Virginia Workers’ Compensation Act (“VWC Act”) to specifically exclude from the definition noncompensated employees and directors of any entity that constitutes a property owners’ association pursuant to the POA Act.  It further excludes noncompensated officers of property owners’s association from the definition of “Executive Officer” as defined in the VWC Act. 

It is important to note that this legislation does not exempt property owners’ associations from obtaining workers’ compensation coverage.  Moreover, the term ‘”employee” is broadly defined under Virginia law.  Accordingly, boards should consult with the management professionals, insurance professionals and legal counsel before making any changes with respect to workers’ compensation coverage being maintained by their associations.   

Please note that this legislation does not apply to condominium associations.   

Common Interest Community Board

Virginia Property Owners’ Association Act

House Bill 1632 – This bill requires the Common Interest Community Board to develop and publish best practices for the content of declarations consistent with the requirements of the POA Act.  This bill may provide guidance to property owners associations that are considering amending their declaration, but it’s important to note that each association is different and the guidance provided by the Common Interest Community Board will not be the only determining factor in whether an association should amend its declaration.   

Suspension of Voting Rights

Virginia Condominium Act

House Bill 2055 – This bill amends Sections 55-79.76 and 55-79.77 of the Virginia Condominium Act and provides that, except to the extent that the condominium instruments provide otherwise, the voting interest allocated to a unit or member who has been suspended by the unit owners’ association pursuant to the condominium instruments shall not be counted in the total number of voting interests used to determine quorum for a meeting or a vote pursuant to the condominium instruments.  The bill essentially lowers the quorum requirement for associations who have suspended owners voting privileges because the suspended owners are not included in the calculation of quorum for association meetings.  The bill also contains a technical amendment. 

Notice of Sale Under Deed of Trust

Virginia Condominium Act

Virginia Property Owners’ Association Act

House Bill 2080 and Senate Bill 1157 – These bills amend Section 55-79.41 of the Condominium Act and Section 55-509 of the POA Act and adds a new Section 55-79.84:01 to the Condominium Act and a new Section 55-516.01 to the POA Act.  These bills clarify that the required notice of a foreclosure sale that must be provided to community associations now also applies to the sale of individual residential lots located in communities subject to the POA Act.  Current law applies only to condominium units and single family detached and attached dwellings.

These bills also provide that, upon receipt of a foreclosure sale notice, the governing body of the association shall exercise whatever due diligence it deems necessary with respect to the unit or lot subject to a foreclosure sale to protect the association’s interests.  Furthermore, these bills 1) amend the definition of “unit owner” in the Condominium Act and “lot owner” in the POA Act to include any purchaser at a foreclosure sale, regardless of whether the deed is recorded in the land records.  This final amendment should eliminate claims by new owners that they do not owe assessments unless or until it records a deed in the land records following their purchase of the lot or unit via foreclosure sale.   

Statement of Unit and Lot Owner Rights

Virginia Condominium Act

Virginia Property Owners’ Association Act

Senate Bill 1008 – This bill adds a new Section 55-79.72:3 to the Condominium Act and a new Section 55-509.3:1 to the POA Act. This bill essentially restates the present law and provides that every unit owner under the Condominium Act and every lot owner under the POA Act who is a member in good standing of the unit owners’ association or property owners’ association has the right: 1) of access to all books and records kept by or on behalf of the association; 2) to cast a vote on any matter requiring a vote by the membership in proportion to the unit or lot owners’ ownership interest; 3) to have notice of any meeting of the executive organ of the association or board of directors and to record and participate in such meeting; 4) to have notice of any proceeding conducted against the unit or lot owners to enforce any rule or regulation of the association, and the opportunity to be heard and represented by counsel at such proceeding; and 5) to serve on the executive organ or board of directors if elected.

Meetings of Unit Owners Associations

Virginia Condominium Act

Senate Bill 1390 – This bill amends Section 55-79.76 of the Condominium Act and it is designed to allow condominium associations to hold election of directors even if it consistently fails to reach quorum.  The bill allows a unit owners’ association or a unit owner to petition a circuit court to order a meeting of the unit owners’ association for the purpose of electing officers.  The court may set the quorum for the meeting and enter any other orders necessary to convene the meeting and allow for the election of officers, but before the court may do so, the association or unit owner must show that 1) no annual meeting has been held due to the failure to obtain a quorum of unit owners as specified in the condominium instruments and 2) the unit owners’ association has made good faith attempts to convene a duly called annual meeting of the unit owners’ association in three successive years that have been unsuccessful because of the failure to obtain quorum.  It’s important to note that before a unit owner files a petition under this section, he/she must provide a copy of the petition to the association executive organ at least ten (10) business days prior to filing.  

Corporate Procedures

Virginia Nonstock Corporations Act

House Bill 1878 – This bill compiles multiple revisions to the Virginia Nonstock Corporation Act. The following provisions are relevant to common interest communities: 1) providing a process for people to provide that for corporate or board action without a meeting, a written consent by any person (whether or not then a member) will be effective at a future time not exceeding 60 days after the consent is provided. In order for the consent to be effective, the person providing the consent must be a member at such future time and the person must not revoke the consent prior to such future time.  The bill also provides that 1) any required notice of a new meeting date for an adjourned meeting shall be given not less than 10 days before the meeting date; 2) updating procedures relating to the duties of inspectors with regard to determining voting results; and 3) establishing procedural requirements for legal actions to determine matters relating to elections, voting, appointment and removal of directors and officers, and nominations.

Private Roads and Covenants

Senate Bill 1312 – This bill provides that, notwithstanding any provision of a recorded deed or plat to the contrary, a private road serving a subdivision of 50 or fewer lots may be dedicated for public use and may be taken into the state’s secondary highway system if, prior to making such a dedication and before the requirements of acceptance into the secondary highway system are met, the owner of the fee interest in the private road obtains the written consent of (1) every lot owner in the subdivision whose lot is served by the road and (2) the holder of any restrictive covenant or easement rights over the private road. This consent shall be recorded in the land records.  

Montgomery County Finds Way to Handle Delinquent Landlords

By: Tiffany M. Releford, Esq.

In Montgomery County, Maryland, owners who want to rent their homes must obtain a residential rental license from the County.  It is a Class A violation of the County Code for an owner to rent without a rental license, which could result in a fine of up to $500 per day.  More often than not, owners are renting their homes and deriving an income from the rental while at the same time failing to pay homeowners, condominium or cooperative fees to the community association.  However, the County is attempting to stop this practice.  

Effective June 12, 2015, Montgomery County has a new law that authorizes the Licensing and Registration Office of the Department of Housing and Community Affairs to deny, suspend, revoke, or refuse to renew a rental housing license for a dwelling unit in a common ownership community if the owner fails to pay the common ownership community fees for the unit.  This means that owners in a homeowners association, condominium or cooperative who rent their homes may be prevented from doing so if the owner is more than 30 days past due in payment of a common ownership community fee.  The law defines “common ownership community fees” as fees charged by the association for services or the benefit of common areas in the community.  

In order to obtain a rental license, the owner must certify that the owner is current on payment of common ownership community fees.  The law authorizes associations to charge a fee to certify that the common ownership fees for a home have been paid, but the fee may not exceed $25.00.  In addition, the association may submit proof to the enforcing agency that an owner has unpaid common ownership community fees.  This can be done by producing a recorded statement of lien or an unsatisfied judgment against the owner. 

This new law does not mean associations who currently use lease addendums to collect rent from tenants of delinquent owners should discard those practices.  Instead, we recommend the association continue to use lease addendums and this new law to make sure landlords pay common ownership community fees.