The Norfolk & Portsmouth Bar Association

Tuesday, October 1, 2013

presents

FENCES, TREES & DOGS: NEIGHBORHOOD LAW

13.1-825      General Powers and purposes of the Nonstock Association

13.1-827      Emergency Powers

13.1-847      Proxies

13.1-870      Standards of Conduct for Directors

13.1-871      Conflicts of Interest

Lots of other important topics, like voting and meetings, are discussed in the Nonstock Corporation Act so if you can’t find a ready answer in the Declaration and Bylaws for your Association maybe the solution is waiting in Title 13.1 of the Virginia Code.

In looking for housing keep in mind that a condominium is not a type of housing but simply a form of ownership. There are condominium apartments, townhouses, single-family detached homes and even trailer parks. Condominium ownership means you own your "home" or "living space" the same as you would a traditional single‑family home. But you own all the common elements “'in common" with the other owners. If you have trouble locating someone to talk with about the association it may be self-managed. All associations are required by law to be registered annually with the Common Interest Community Board in Richmond. By contacting that agency you can determine the current officers with whom you can talk.

The older associations will need to provide you with a “Resale Certificate”. Under Virginia condominium law, the seller of a “resale” condominium unit must obtain a resale certificate from the association and provide it to you. Your purchase agreement should be contingent on your being satisfied with the contents of the package you receive.  The seller should request a resale certificate from the secretary or president of the condominium association or the management company which is normally paid for by the seller. The law requires the association to provide the certificate within fourteen (14) days after the request is made and may charge a “rush fee” if faster service is offered.

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The certificate will include such valuable information as:

1.    The amount of unpaid assessments regarding the unit you wish to buy.

2.    A statement on upcoming additional assessments for such things as pool renovations, that have been approved by the Board of Directors of the association.

3.    The amount of assessments charged against the unit on a regular basis.

4.    The amount and status of reserve and replacement funds for maintenance, repair and replacement of the common elements.

5.    Any suits or judgments filed against the association which will have a material impact on the association or the unit being purchased.

6.    Insurance coverages.

7.    A statement that any changes to the unit made by the current or previous owners do not violate the condominium covenants.

8.    A copy of the association's financial statements.

9.    A copy of the association's governing documents including rules and regulations.

Ideally, you should have an experienced real estate attorney familiar with condominium law look over the public offering statement or the resale certificate. The attorney can quickly focus on the documents’ key parts and may have other beneficial advice. 

If you wish to go it alone, though, here's what to do:

1.    Review the condominium's documents. Buyers should read the disclosure package they receive. Questions should be directed to the seller, real estate agent or an attorney. Buyers need to make sure they can live with the condominium's rules and regulations. A dog owner, for instance, might find a 30‑pound limit on pets unacceptable.

2.    Find out whether the association is professionally managed by an experienced person or company.

3.    Look for expansion rights in newer communities which do not appear to be built out ‑ that is, how much land, if any, can still be added to the community. Find out what can happen to that land if the developer chooses not to build on it. Determine how many units may be ultimately built.

4.    Find out when the recreation facilities or other common amenities ‑‑ swimming pool, tennis courts and extra parking ‑‑ will be completed, if they are not already built.

5.    If the property is still under development, determine how long construction will continue and whether you are willing to tolerate such activity for that period. State laws regulate the length of time for the completion of a project.

6.    Ask about the number of delinquencies in the payment of assessments.

7.    Get the latest financial statement, which should state the reserves for replacement and maintenance. This information should be not more than 6 months old. The financial status of the condo association is important. Nothing produces more discontent and difficulty for condominium owners than a community association in bad financial health. Review the budget and financial status of the condominium association. Buyers should make sure the association is financially healthy. This includes having enough cash on hand to fund long‑term replacement reserves.

8.    Visit the community at several different times of the day and week. Not every person fits every community.  For instance, a retired couple may not want to move into a community full of young singles. Also, the owner of a large dog needs to consider the size of the unit and the availability of space to walk the dog.

9.    Once you have reviewed all of the above, you will be in a position to make a purchase. By choosing carefully, you are more likely to enjoy your new home and community.

Condominium living is not free of responsibility. Although someone else might cut the grass and paint the buildings, you will need to pay assessments on time. You should also attend the condominium association's annual meeting and even volunteer to serve on a committee or the Board of Directors. Active participants in a condominium community help protect and enhance its property values.

It’s a good day to talk to you about due process procedures which are needed when you wish to formally take action on a covenant violation without filing a law suit or possibly suspend services or use of facilities for an owner who is more than 60 days delinquent in the payment of assessments.  

The authority for suspension and levying charges must be included in your governing documents in order to be available to you. That is required by the pertinent statute.  If you do not have those provisions you need to amend your documents to acquire them.  Most of your documents will contain the pertinent language.  If so you still need a formal procedure to follow which details when and in what form an owner will be put on notice, time frames for processing the matter, establishing what body will conduct the hearing (the board or a committee), rules pertaining to evidence and testimony, and other rules to be followed so as to establish some uniformity to the process that every member can rely upon.  Every association’s procedure is not the same and the procedure can be tailored to the needs of each community.  Some associations want those proceedings to be held in a closed session - others do not handle it in that manner. Even if you have a procedure you should review it periodically to insure you are following it and, if not, you should amend or rewrite it.  We are pleased to help you with due process procedures so that your enforcement actions are handled smoothly, fairly and effectively.

You can learn about this and other association topics at an all-day event sponsored by the Community Associations Institute which will be held on Saturday March 9, 2013 at the Virginia Beach Convention Center. This one day gathering covers a variety of topics and a chance to meet with both vendors and other homeowners in community associations. More information can be obtained by calling the local chapter at 757-558-8128 or checking the website at www.sevacai.org.

Q:  Our townhouse development has recorded covenants which require upkeep of the exterior to a high standard by each owner.  Not all owners follow the requirements. Some hire third rate contractors who do a poor job or take months to finish what they start.  We need to find a way to get better quality work done by our homeowners and get it done quickly after starting. Our board is thinking about starting a list of acceptable contractors who we have seen perform well and requiring the owners to use them.  Any suggestions?

First, meet with the homeowner and find out the reason they have not started the work, or, if it is started but dragging on, why there is a delay in completion.

You may find that the owner is not sure of a contractor to call.  You may wish to provide a few names of contractors that you have observed to be competent and reliable. We would caution that you not get in the business of requiring the use of any particular contractors so that you cannot be in a position of being blamed if the owner is not pleased with the recommended contractor.  You may wish to pass a rule requiring the use of contractors who have obtained a contractors license from the State, as this will assure a certain degree of competence and experience, including knowledge of the requirements of the Building Code. This license is different from a business license issued by the City or County.  You might also urge your owners to have written agreements with their contractors which specifically provides for a completion date and a payment schedule.  This will help avoid work delays due to misunderstandings.

If the owner simply delays without any good reason, you may have the ability under your declaration of covenants to hold a violation hearing and levy a fine on the homeowner of $10 per day that the work is not done, up to 90 days.  This is often very therapeutic for slow moving homeowners.  If that method is not effective, the law, and probably your declaration, provide that you can obtain an injunction order from the court.   The court order will require the owner to perform the necessary maintenance in a timely manner and you are entitled to recover your reasonable attorney's fees incurred to accomplish the enforcement of the covenant.  You will find that if you consistently use your enforcement powers, the word will get out that you are doing so and you should have fewer instances of poor maintenance requiring your involvement as a board.

You can learn about this and other association topics at an all-day event sponsored by the Community Associations Institute which will be held on Saturday March 9, 2013 at the Virginia Beach Convention Center. This one day gathering covers a variety of topics and a chance to meet with both vendors and other homeowners in community associations. More information can be obtained by calling the local chapter at 757-558-8128 or checking the website at www.sevacai.org.

Agenda will include: Criteria used by Fannie Mae, FHA and VA; Obtaining FHA and VA Project Approval; role of managers and Association officers in “shaping up” the Association if deficient; expiration of approvals.

Lesson to be learned; action required - The lesson to be learned here is that each association needs to make sure that it has provisions in its governing documents which adopt the language set forth in Sections 55-79.80:2 of the Condominium Act or Section 55-513 (B) of the VA Property Owners Association Act.  To be free from challenge this must be done by declaration amendment pursuant to the amendment provisions in the documents.  This is especially important for older documents that predate the statute which was passed in 1993. If you need for us to review your documents to make a determination for your association we are pleased to do so for a minimal cost.  Hopefully you will not need an amendment but, if you do, we can assist you in working through that process.

Should you have questions about the above information please do not hesitate to email us or give us a call.

If you have questions about this event please contact Rebecca Woodring, the Chapter's Executive Director, at Rebecca@sevacai.org

Further information is available on the chapter’s website http://www.sevacai.org 

I understand that at this time all associations are required to have a complaint procedure in place in order for their members to be able to let the CIC Board know of issues they have with their association. I also know that the Annual Report form requires an Association to state whether or not it has a complaint procedure. What is the consequence if an association fails to comply after getting the DPOR’s letter about non-compliance when they have checked “no” on the Annual Report?

If the association representative checked “no” on the Annual Report, the CIC Board will send a letter requiring that they provide proof that they have a complaint process in place. If they do not implement a procedure, then the Board will keep the registration in limbo, essentially, until the Association has satisficed the requirement that they have a complaint procedure in place. 

So, that means that until the Association has a complaint process in place, an association is violating at least two provisions of Common Interest Community law and regulations – they have failed to register the association (18VAC48-60-30. Annual report by condominium association; 18VAC48-60-40. Annual report by cooperative association; and 18VAC48-60-50. Annual report by property owners' association), and they have failed to adopt a complaint process (55-530(E) and 18VAC48-70-30- Requirement for association to develop an association complaint procedure).

The CIC Board has clear jurisdiction under 54.1-2352(A) to issue a cease and desist order if the association fails to register/file an Annual Report.  Finally, all associations are required to provide a copy of the complaint procedure with any disclosure packet or resale certificate (18VAC48-70-60 Distribution of association complaint procedure).  In addition, registration of the association is a requirement under the law (§ 55-79.93:1. Annual report by unit owners' association; § 55-516.1. Annual report by association; § 55-504.1. Annual report by associations) and must be confirmed in any disclosure packet/resale certificate (55-79.97; 55-509.5;55-484).

Ultimately, the CIC Board’s goal is compliance.  If the Board learns that an association has not adopted a complaint process it would much rather encourage them to adopt one then “punish” them for not having one.  If the association works toward getting its complaint process in place in a reasonable timeframe it really shouldn’t have any problems.  But if an association chooses to ignore its legal obligation to have a complaint process in place, even after being asked to adopt a complaint procedure, the matter will be referred to the Common Interest Community Board for whatever action it deems appropriate under the law and regulations.  The CIC Board has the authority to issue a cease and desist order, levy a monetary penalty, or pursue some form of legal action or intervene in existing legal action if necessary.

We are pleased to report that recently we got word that finally FHA has relented on several of the troublesome application issues that CAI and others have been working on. FHA modified the Certification so that the signer no longer certifies that they will advise FHA of any changes in circumstances that would disqualify the project after approval. FHA substituted “to the best of my knowledge” at the appropriate spot where it used to be unqualified.  The penalty for false statements remains. It has been and remains my opinion that proof of intent or gross negligence would be required. Enforcement would be rare, as you can well imagine, given the shortage of resources available to pursue such in the great scheme of things….probably way behind Medicare fraud.  This was a great breakthrough achieved primarily by the relentless pursuit of it by the Government Affairs Office of the Community Associations Institute.

(i)            No more than 15% of the units can be 60 days delinquent vs. 30 days (this should help more associations qualify since there are typically more owners 30 days delinquent than 60 days), 

(ii)          No more than 50% of the units can be owned by any one individual or entity (used to be 10%).   This is a huge help as many developers still own large numbers of units. If they rent units they count toward that 50% (formerly 10%) and thus often caused projects not to qualify. In most cases developers own and rent significantly less than 50%.

(iii)        A project is considered an existing project after 1 year (it used to be 2 years) - existing projects are easier to get qualified than new construction.  

These changes will expire on August 31, 2014 unless extended at that time.

Should you have questions about the above information please do not hesitate to email us or give us a call.

The Community Associations Law Team

757-486-7055

Basically the statutes cited above require that records of the Association be made available to its members for noncommercial purposes; that is, to understand, and keep current on, the business of the association. A few owners are typically more interested in the details than most other owners. However, the statutory provisions referred to above provide a list of certain records which can be withheld from inspection by members, which are as follows:

1.       Personnel matters relating to specific, identified persons or a person’s medical records;

2.       Contracts, leases and other commercial transactions to purchase or provide goods or services currently in or under negotiation;

3.       Pending or probable litigation. Probable litigation means those instances where there has been a specific threat of litigation from a party or the legal counsel of a party;

4.       Matters involving state or local administrative or other formal proceedings before a government tribunal for enforcement of the condominium instruments or rules and regulations;

5.       Communications with legal counsel which relates to subdivisions 1 through 4 which is protected by the attorney-client privilege or the attorney work product doctrine;

6.       Disclosure of information in violation of law;

7.       Meeting minutes or other confidential records of an executive session of the executive organ held pursuant to subsection C of §55-79.75;

8.       Documentation, correspondence or management or executive organ reports compiled for or on behalf of the unit owners’ association or the executive organ by its agents or committees for consideration by the executive organ in executive session; or

9.       Individual unit owner or member files, other than those of the requesting unit owner, including any individual unit owner’s files kept by or on behalf of the unit owners’ association.

Please note that the statute is permissive, not mandatory, as to the withholding, so that the board could, in some instances, decide to provide copies of documents in the categories listed in the Code provision. Please also note that drafts of minutes or other documents not yet finalized by the board can be withheld. Also, salary information about employees is not available on an individual basis, only on an aggregate basis, that is, the total wages paid to all employees. A contract which has been signed by a vendor and the association is obtainable by a member as it is no longer “in negotiation”.

We trust this will give you the necessary guidance to respond to requests for records from your owners.

Please contact us if you wish to proceed with the drafting or review of your complaint procedures. It will require up to three months for a typical board to review and provide feedback to counsel on the procedure initially drafted, so the time to get started is NOW.