Community Associations Update - Summer 2009

Date: July 8, 2009

Virginia Common Interest Communities 2009 Legislative Changes
By: Edward J. O'Connell, III

The 2009 General Assembly session proved to be an active one here in Virginia. At the outset, eleven bills were signed by the Governor that will directly or indirectly impact common interest communities in Virginia. The new laws deal with the resale disclosure requirements for Virginia Property Owners' Associations; access to books and records; Common Interest Community Board monetary penalties and fees; parking and towing legislation; solar power covenants; and smoking in commercial establishments. These new laws all took effect on July 1, 2009, unless noted otherwise herein. Below is a brief summary of the legislation.

Disclosure Packet Exception: Virginia Property Owners' Association Act
House Bill 1785 - The General Assembly amended the exceptions to the contract disclosure requirements in Section 55-509.4 of the Virginia Property Owners' Association Act ("VPOAA") and the association disclosure requirements in Section 55-509.5 of the VPOAA and in the resale provisions in Section 55-509.10 of the VPOAA. Under the new legislation, an association disclosure packet need not be provided in a case where a disposition of a lot is by a sale at auction, where the association disclosure packet was made available as part of the auction packet for prospective purchasers prior to the auction sale. This change to the resale disclosure requirements does not change any of the other requirements that currently exist with respect to providing an association disclosure packet.

Access to Books and Records: Virginia Property Owners' Association Act
House Bill 2305 - This Bill amends the books and records provisions under the VPOAA. Specifically, associations are now required to provide to their members the actual salaries of the six highest compensated employees of the association earning over $75,000 per year and aggregate salary information for all other employees of the association. However, the individual salary information is not available for examination and copying during the declarant-control period. Previously, associations only had to provide aggregate salary information for the employees of the association. In addition, the bill further provides that all books and records are available to any member of the Board of Directors in the discharge of his or her duties as a director.

Cooperatives; Amendment of Declaration & Revival of Expired Declarant Rights: Virginia Real Estate Cooperative Act
House Bill 2599 - The Real Estate Cooperative Act was amended to provide that if the time limit specified in the declaration for the creation of cooperative interests or the exercise of special declarant rights has expired, then with the approval of the persons entitled to cast at least two-thirds of the votes in the association, other than any votes allocated to cooperative interests owned by the declarant or any larger percentage as the declaration specifies, the declaration may be amended to (i) revive and reinstate any or all of the expired rights to create additional cooperative interests and any or all of the expired special declarant rights, and (ii) vest in any person, including the original declarant, any or all of the powers, rights, privileges, and authority to which a declarant is entitled under this chapter regarding the exercise of the revived and reinstated rights with respect to any parcel of real estate that is a common element or any additional real estate that such amendment permits to be added to the cooperative. In no event, however, shall any such amendment extend or renew a period of declarant control of the association or provide a new period of declarant control.

Common Interest Community Board - Monetary Penalties; Annual Report Fees & Technical Amendments
Common Interest Communities Statutes; Virginia Property Owners' Association Act Virginia Condominium Act; Virginia Real Estate Cooperative Act Senate Bill 1143 - The new legislation limits the authority of the Common Interest Community Board ("CIC Board") to impose monetary penalties against governing boards of common interest communities rather than individual members of the governing boards, and adds requirements for a hearing before imposing a fine.

The new legislation also changes the formula for determining the amount of the annual assessment collected by the CIC Board from common interest community managers, condominium unit owners' associations, real estate cooperative associations and property owners' associations. Common interest community managers will pay the lesser of (i) $1,000, (or such other amount as the CIC Board may establish by regulation), or (ii) five hundredths of one percent (0.05%) of the gross receipts from common interest community management during the preceding calendar year. No payment shall be less than $10. Condominium unit owners' associations, real estate cooperative
associations and property owners' associations shall pay the lesser of: (i) $1,000 or such other amount as established by agency regulation or (ii) five hundredths of one percent (0.05%) of the unit owners' associations gross assessment income during the preceding calendar year. A minimum assessment of $10' is also provided.

The new legislation also makes several technical amendments, including (i) conforming provisions related to the expedited delivery of association disclosure packets by property owners' associations, and (ii) changing the venue for board actions from the City of Richmond to Henrico County.

Commissioner of Revenue - Obligation to Provide Lists of Owners
House Bill 2289 and Senate Bill 986 - The new legislation amends Section 58.1-3901 of the Code of Virginia, relating to the provision of information to the local commissioner of revenue. Specifically, every property owners' association established pursuant to the Property Owners' Association Act, condominium unit owners' association established pursuant to the Virginia Condominium Act, and proprietary lessees' association established pursuant to the Virginia Real Estate Cooperative Act shall, upon the written request of the commissioner of the revenue, provide a list of the owners of the properties administered by such association, to the extent that the association
maintains such a list, to the commissioner for use in administering local property taxes. Any person failing to comply with this section shall be guilty of a Class 4 misdemeanor.

Public Streets and Towing Legislation
House Bill 1694 - The new legislation amends Section 46.2-1224B of the Code of Virginia. The amendment enables the governing bodies of (i) counties with populations greater than 500,000 and of towns located therein, and (ii) counties with populations of at least 210,000 but less than 217,000 (i.e. Fairfax County, Prince William County, and the towns of Clifton, Herndon and Vienna) to adopt regulations and ordinances prohibiting on-street parking of any truck more than 20 feet in length (other than commercial vehicles used by public service companies or by others working on its behalf, or commercial vehicles used in the provision of cable television service or commercial vehicles used in the provision of propane gas service) or any other vehicle carrying commercial freight in plain view. This legislation applies only in these jurisdictions noted in the legislation.

House Bill 1724 - This Bill amends Section 46.2-1232 of the Code of Virginia which relates to the local regulations imposed by counties and cities and towns relating to the removal and immobilization of trespassing vehicles. The new legislation provides that local ordinances may require towing and recovery operators to obtain, at the time the vehicle is towed, verbal approval of the agent designated in the local ordinance. It also provides that local ordinances requiring "second signatures" before trespassing vehicles can be towed away only apply if the tow is performed during normal business hours of the owner of the property from which the vehicle is towed. The new legislation essentially makes it easier to tow vehicles off community association property.

Senate Bill 882 - This new legislation added Stafford County to the list of counties and towns that have the authority to adopt an ordinance to regulate the parking of watercraft, boat trailers, motor homes and camping trailers on public streets. The Counties of Arlington, Fairfax, and Prince William and the Towns of Clifton, Herndon, and Vienna already had such authority under previous legislation.

Smoking in Commercial Establishments
House Bill 1703 - This Bill is also known as the "Virginia Indoor Clean Air Act." The new legislation establishes a state-wide ban on smoking in restaurants. It is similar to the bans that were adopted by the State of Maryland and the District of Columbia in recent years. It contains some exceptions to this prohibition where smoking may be permitted, including a restaurant that is constructed in such a manner that areas where smoking may be permitted are structurally separated from the portion of the restaurant where smoking is prohibited or in such areas that are separately vented. The Bill also contains some technical amendments.

Solar Power
House Bill 2417 - This legislation amends the solar power legislation that was adopted last year by the General Assembly. Specifically, it clarifies that restrictive covenants in community associations prohibiting the installation of solar panels existing prior to July 1, 2008, may be amended to allow such installation if the amendment is adopted by the membership of the community association in accordance with the community association's governing documents.

Please feel free to contact any of the attorneys of our Community Association Industry Group should you have any questions regarding the legislation that was enacted this year.

Community Associations in the District of Columbia and the Virginia Graeme Baker Pool and Spa Act of 2007
By: Matthew L. Troiani

On December 17, 2007, President Bush signed into law the Virginia Graeme Baker Pool and Spa Act of 2007 ("the Act"). The Act was designed to create universal standards for public pool and spa facilities in order to protect children from drowning, the second-leading cause of death of children under the age of 14. Owners and operators of public pools and spas had until December 20, 2008, to come into compliance with the federal standards.

"Public pools" as defined under the Act specifically include pools that are open solely to members of residential real estate developments like community associations. Associations must therefore comply with the standards set forth by Congress. All public pools must be equipped with a drain cover that is sold in the United States and meets the standards established by Section A112.19.8 of the American National Standards Institute as published by the American Society of Mechanical Engineers (ASME/ANSI standards). The Act requires that all public pools with one main drain include at least one of the following entrapment prevention safety systems: 1) a safety vacuum release system; 2) a suction limiting vent system; 3) a gravity drainage system with collector tank; 4) an automatic pump shut-off system; or 4) a drain disablement system. The requisite entrapment prevention systems must also meet the standards of ASME/ANSI Sections A112.19.8 and A112.19.17. Public pools equipped with an unblockable drain must have a drain cover, but are exempt from the entrapment prevention system requirement.

In order for a state to be eligible for funding under the Act, the state must adopt the federal standards for drain covers and safety systems. The state must also require by statute that public pools be enclosed by barriers that will effectively prevent small children from accessing the pool without supervision in order to receive a federal grant.

The District of Columbia is subject to all federal statutes and has recently adopted regulations through the Department of Health implementing and establishing the federal statutes and standards for public pool drain covers and safety systems. The District of Columbia has also adopted by regulation a requirement that public pools be enclosed by a fence or barrier.

Please do not hesitate to contact any of our community association attorneys with questions regarding compliance with the Baker Pool Act, ASME/ANSI standards, or District of Columbia requirements consistent with the Act.

District of Columbia Department of Consumer and Regulatory Affairs Will Not Require D.C. Condominiums to Obtain a Basic Business License
By: Tiffany R. Murray

Over the past few months, many D.C. condominiums received notices from the District of Columbia Department of Consumer and Regulatory Affairs (D.C.R.A.) that condominiums in the District are required to obtain a Basic Business License for the "Cooperative Association" pursuant to the NAICS Code and D.C. Code 29-901; 42-2002; 47-2801; and 47-2851.

After receiving several telephone calls from condominium associations regarding this requirement, D.C.R.A. conferred with its General Counsel and decided that a Basic Business License is not required for D.C. condominiums. D.C.R.A. determined that the regulation was misinterpreted because a condominium is not a business venture and is not offering services to the public; thus, a condominium does not need a Basic Business License. D.C.R.A. is in the process of drafting a notice to D.C. condominiums regarding the misinterpretation of the regulation and will also refund money to condominiums associations that have already applied and paid for a Basic Business License.

How to "Green" Your Community: Key Considerations1
By: Martha L. Perkins, Esq.

As society becomes more environmentally conscious, as energy prices continue to soar, as governments mandate more green and high-performance buildings, more communities will be constructed green, retrofitted green, and managed green, including condominiums, cooperatives, apartment buildings, and homeowner associations. Communities that engage in green renovation and retrofitting and green management -- without the proper green knowledge and understanding -- do so at their peril.

Even on the most vanilla renovation or retrofitting project, the design and construction process has the potential for miscommunication, claims, and litigation. A green project adds another layer of complexity to this already complicated process. Additionally, while green issues are currently at the forefront of media blitz, most entities involved in green design and construction are inexperienced--"green lite," you might say. Therefore, it is simply good sense (and cents) for a community to be extra-vigilant when evaluating whether to jump--and how far--into a particular green initiative. That evaluation, requires, among other things, background knowledge on green issues and understanding and managing the risks.

What Is "Green"?
The word "green," in the environmental context, means different things to different people. It is essentially the design, construction, and operation of a building to reduce the use of natural resources, encourage re-use of construction materials, and encourage site development and maintenance to minimize injury to the natural landscape and community. Use of sustainable management practices reduces energy and utility costs, reduces waste, and minimizes the impacts on the environment and surrounding community.

The benefits of going green, either through retrofitting green features or incorporating green management practices into the community, include reduced long-term costs, less negative footprint on the environment, potentially enhanced property value, and justifiable pride in a green community.

LEED Rating System
The U.S. Green Building Council ("USGBC") is a non-profit private organization that publishes voluntary green building rating systems and certifies projects that meet those goals through its Leadership in Energy and Environmental Design ("LEED") green building rating system. Although there are other third-party green certification programs, such as the Green Building Initiatives' Green Globes rating system, the LEED certification system is by far the most widely accepted green building rating system in the United States.

LEED is a performance-based rating system through which buildings earn points for satisfying criteria addressing specific environmental impacts in design, construction, and operations of a building. The certification levels -- Certified, Silver, Gold, and Platinum -- are awarded based on the total number of points earned. While LEED certifications are voluntary, most green building legislation that mandates public, and sometimes private, green building is tied to the LEED certification levels issued by the USBGC.

The LEED certification system is tailored to different types of building projects, including LEED for New Construction and LEED for Existing Buildings: Operations and Maintenance. The LEED certification system is organized into the following six categories: (1) Sustainable Sites; (2) Water Efficiency; (3) Energy and Atmosphere; (4) Materials and Resources; (5) Indoor Environmental Quality; and (6) Innovation and Design.

Green Practices in Renovations and Property Management
Many opportunities exist at communities to implement green features during renovations and to implement green property management practices at any time. A number of community associations are initiating a variety of practices to make them more environmentally friendly. Even those communities that do not seek LEED or other green certification can implement green initiatives, many of them with cost-saving benefits. Green renovation and property management practices include, among others, the following:

1. Renovation

  • Reduce waste generated during renovation work
  • Control air quality during renovation work
  • Use environmentally friendly materials and products
  • Use materials that are produced within 500 miles of the community
  • Consider energy-efficient systems, technologies, and appliances
  • Consider a green roof,2 where appropriate

2. Landscaping

  • Reduce water and chemical usage
  • Use native plants
  • Reduce impermeable pavement

3. Sustainable Sites

  • Bicycle storage
  • Priority parking spaces/discounts for hybrid cars

4. Outdoor and Indoor Lighting

  • Reduce energy consumption by using energy-saving bulbs
  • Replace energy inefficient fixtures
  • Install motion sensors to control lights
  • Install timers to control lights

5. Storm Water Management

  • Reduce storm water discharged into municipal systems
  • Collect rain water to use for landscape watering
  • Minimize erosion

6. Waste Management

  • Recycle
  • Reduce and recycle waste generated during renovations
  • Use waste from landscape maintenance for mulch or compost

7. Cleaning Practices

  • Use natural cleaning products
  • Reduce waste generated by cleaning

Top Six Legal Obstacles to Green Renovations and Management Practices
1. What Does "Green" Mean?
Any time a community signs a contract for green renovations or green services, the community should ensure that all parties to the contract have the same understanding of the term "green." Because there is no widely accepted definition, the contract should affirmatively define "green" to reduce the risk of confusion and conflict. Everyone needs to be on the same page with the community, whether architect, engineer, contractor, vendor, or service contractor.

2. What Color Green Does Your Community Want To Be?
Each community considering going green has to establish its green goals and then implement a plan to achieve those goals. A community may want to seek green certification or implement a few green management practices. These goals can be established with a team that includes community members, Board members, and the community manager. Education of the entire community will help facilitate the implementation of the green goals. The community newsletter or other means of mass communication to the community members is an effective means to both educate and enlist the assistance of the members to achieve those goals.

3. Green Team
The green landscape is rapidly changing, with a steep learning curve for communities, managers, design professionals, contractors, subcontractors, suppliers, and consultants. It is critical that a community assemble a knowledgeable and experienced green team. A community must beware of "greenwashing," which is disinformation disseminated by an organization in order to present an environmentally responsible public image. A community must exercise due diligence prior to signing a green contract to ensure that the contractor has participated on other green projects, is familiar with green rating systems, and is knowledgeable about the relevant green laws.

4. Green Renovation/Retrofitting Contracts
Contracts for green services and products must be carefully drafted to achieve the desired goals. Green goals should be clearly set forth in the contract. Because these contracts are new and largely untested in the courts, it is critical for the contract to appropriately allocate the risks to the party in the best position to control that risk. While we have not seen much green litigation and arbitration so far, there is enough to know that the disputes often arise out of poorly considered and drafted contracts that do not properly set out responsibilities of the parties. Any performance goals should be clearly defined in the contract and responsibility for failure of any goal should be allocated in the contract.

5. Marketing Your Community as Green
When marketing a community with green features, it is important that no statements be made, whether written or verbal, that include exaggerated or overstated benefits or performance, misrepresentation, or outright fraud. Health claims and promises should be avoided, as should any vague or undefined assertions about the community's green features. The Federal Trade Commission, which regulates marketing claims in all industries, has recently updated its "Guides for the Use of Environmental Marketing Claims" and recommends that green marketing be very specific and factual. Any specific green assertion about the community should be verifiable and measureable.

6. Green Initiatives Can Violate Rules and Covenants
Green and environmentally friendly initiatives at community associations are often prohibited by their rules and covenants. For example, common restrictive covenants forbid solar devices and drying clothes outdoors. Increasingly, states are enacting laws that override environmentally unfriendly covenants. In 2008, Maryland and Virginia enacted laws that provided community associations can not prohibit installation of solar devices, although each permitted associations to establish reasonable restrictions for the installations. Additionally, in 2009, Maryland and Virginia each debated a bill -- right-to-dry legislation -- that would have prohibited community associations from using restrictive covenants to ban the use of clotheslines by a resident on private property. Although these bills were defeated this year, it is important that associations considering green initiatives stay aware of the relevant laws in their specific jurisdiction.

When a community association considers "going green" -- either through its renovations and /or its management practices, it must define its green goals, assemble an experienced and knowledgeable green team, negotiate proper green contracts, and identify and manage those risks that are unique to green renovation projects and management practices.

1. The author notes that much of this material was included as part of the presentation, "Green Property Management: How to LEED Your Community Towards Environmental Sustainability," which she presented with Doug White, Thomas Downey, Ltd., and Jim Nitschke, CMC Management, at the Washington Metropolitan Chapter of the Community Association Institute Conference on March 28, 2009.

2. Green roofs come in two general types: the well-known vegetated roof (if the structure permits) and the lesser-known reflective roof.