On June 14, 2022 from 8 a.m. to 3 p.m. the local Community Associations Institute Chapter is putting on the Annual Legislative and Legal Update. It will be held at the Holiday Inn in Newport News just off of I-64 at J. Clyde Morris Blvd. Our firm’s CA Team members, Jeanne Lauer and Matt Weinberg will be speakers at the event.  Jeanne serves on the Statewide Legislative Action Committee for CAI and will be providing the latest news from the General Assembly session. Matt will be speaking on methods of dealing with difficult owner situations which have legal implications. Please take a look at the event info on the sevacai.org web site or call the CAI office at 757-558-8128.

A Guide to Successful Transition

If you live in an association which is still under developer control there are often changes desired by the community but the members are not yet in control of the association and no easy method to call meetings. So, what can you do?  Most HOA documents allow the developer to transition control when it suits until a certain higher percentage of the units are sold — then transition is mandatory.  Some developers will still want to stick around and maintain control over the community in which they continue to have a large investment and a desire to insure a quality level is maintained.

Having a successful transition from developer control to owner control in a homeowners association or a condominium association is not necessarily a difficult process.  It does requires open lines of communication and information, common sense, perseverance, and some smart, energetic people who aren’t afraid of making a commitment to their community for a couple of years.

When an association is first started, the developer is investing large amounts of time and dollars to construction of the project, its infrastructure and amenities. In order to protect the developer’s investment, the legal documents have provisions built in that allow the developer to exercise control over the direction and processes of the community until a time certain, either a firm date several years in the future or when a certain percentage of units have been sold to homeowners. This means that the developer control period can last a couple of years and sometimes more depending on the rate of sale of the homes and size of the community. During that time, the developer’s appointees serve as members of the Board of Directors and they have a fine line to walk, since some decisions which are right for the community may result in extra expenses for the developer.

We recommend that during the period of declarant control, the developer should give the homeowners some exposure to, and limited participation in, the affairs of the association. These steps can include formation of an advisory committee to make recommendations to the Board, and/or phased-in appointment of homeowners to the Board of Directors, or the day to day operating of certain committees, such as the Architectural Standards Committee.

Many types of issues tend to arise during this period. Is the developer going to put in the pool that was promised? Why are some of the landscaped areas in an unkept state? Are all assessments owed by the developer up to date? One of the most frequent is the issue of warranty repairs. When do they begin and when do they end? That is one question that can only be answered by the applicable state or local law and the board should seek legal counsel on this topic.  But having homeowner involvement early in the association can provide those answers and ease the concerns of the owners.  Many developers encourage homeowner involvement and training along the way so that the owners are well prepared to assume the responsibility of directing association operations.

Transition is usually accomplished at a special meeting held for the purpose of electing homeowners to serve on the Board of Directors. Once the owners are in control, the real work begins! The only thing that ends at that meeting is the developer’s control over the association operations, not his responsibility to it and its members and not his involvement and interest in it. He may still be selling homes and may retain a seat on the Board.

The newly elected owner board members now have several responsibilities relative to the transition. They must insure that (1) the developer provides the association with any and all pertinent information; (2) the association reviews that information and questions the developer on any vague or ambiguous issues; and (3) the Board develops a strategic plan to go forward from that point.  Make sure when electing the Board that you select those individuals who are clearly committed to the entire community and not just a single issue.  If you have had an advisory committee during the developer control period, then the members of that committee can bring a great deal of experience and knowledge to the new board.

One of the first steps a new Board should take is an examination of the association’s financial situation. It is important for members of the Board, as well as all the owners, to satisfy themselves that while the developer was in control, all income and expenses were properly accounted for. That includes, but isn’t limited to, the financial obligation of the developer himself, if any, and aggressive pursuit of delinquent accounts.

All association boards, but especially condominiums, should consider hiring a professional engineer or architect to perform a comprehensive inspection of the property and its physical plant. This will serve two purposes: (1) it will determine if there are any warranty defects that may be the responsibility of the developer; and (2) it will serve as the basis for a repair and replacement reserve analysis. Such an analysis will estimate the useful life of a component, such as a building roof, the projected cost to replace it, and how much money needs to be set aside to ensure that special assessments are not necessary to maintain the association’s assets into the future.  This study is required every five years under state statutes in both the Condominium Act and the Property Owners Association Act.

Good legal advice can also be important to the community. The association should retain independent counsel who is well versed in community association law and who can ensure that the new board and the developer abide by their respective legal obligations and commitments.

The following are documents an association management should obtain during the transition.  This list is by no means exhaustive, but can serve as a checklist to guide you. Keep in mind that jurisdictional requirements may vary in terms of time frames for developer responsibility and specific transition documents.  If your developer utilized professional management during the development period, you may find that your management has most or all of the following items in its files.  The following are required to be provided by statute in Virginia:

1- All association books or records, financial and otherwise, held by or controlled by the developer (or its association management company) along with a statement of receipts and disbursements during the declarant control period.

2- Any and all contracts in which the association is a contracting party.

3- Complete set of site plans and as-built drawings, including detailed measurements and dimensions for any common buildings or amenities

4- Written warranties of the contractors, subcontractors, suppliers, and manufacturers, if any, involved in the construction and/or maintenance of the association’s facilities.

5- List of manufacturers of products and specifications used in the maintenance, repair or replacements in or on common areas or common elements.

Copies of any bonds or letters of credit posted with any state or local agency should also be requested.

Throughout the transition process described above, professional management can and should serve as an advisor to the Board, custodian of the association’s books and records and the entity to which the Board turns to assist in the development of long-term plans and goals to make sure that a community’s early due diligence translates into future continued success and financial stability for the owners. If that happens, all parties involved including the developer, transition board members, future board members, owners, and management will gain great satisfaction in a job well-done.

Please let us know if you have any questions about this topic.  We wish you well in all of your endeavors but especially at the critical period of transition.  We can be reached via email at the addresses shown on our website: www.vahoalaw.com. or by phone at 757-486-7055.

CA DAY is approaching. After being called off for the last two years it will be held on March 12 all day at the Virginia Beach Convention Center.  You can read all about it on www.sevacai.org.  An excellent day of information and interaction is planned. Mike Inman and Jeanne Lauer are presenters in two of the morning sessions. Mike is teamed up with Peter Miller and Kellie Dickerson to discuss various issues and new board responsibilities arising from the disastrous condominium collapse in Surfside, Florida last year. Jeanne will be teamed up with other attorneys to engage with the audience about a variety of legal topics.  Over 50 business partners will be in booths to discuss their offerings to association boards and members.

Now let’s talk risk management and security. About a year ago an Arlington mid-rise condo had an unwelcome visitor.  The problem is no one did anything about it.  A man found his way past security measures and gained access to the building. He knocked on a couple doors posing a maintenance man who they did not recognize.  He was turned away and 2 unit owners notified the front desk personnel.  They did not take any action. Upon trying a third time he was successful in being admitted to the unit and severely injured the resident.  The family of the injured owner made a claim against the Association. A law suit was filed and the Association tried to get the case dismissed arguing there was no duty breached.  The judge disagreed and ruled that the security measures provided by the Association created an expectation of a certain level of scrutiny of unauthorized persons being on the property, especially after being alerted to the situation. The judge said the staff should have taken action to attempt to locate and remove the apparently unauthorized individual.

This court case and the collapse of the building in Florida raises the issue of risk management for associations. This is a significant concern of  any board of directors. In order to take it seriously a formal committee within any association of significant size needs to be appointed to formulate the areas of risk responsibility, such as safety of persons and  property as well as the association common elements.  This should involve meeting with the association’s insurance advisor periodically. Initially the committee’s areas of responsibility need to be defined – they should include risk control, risk financing (insurance or other means), claims management, and evaluation of new proposals for insurance coverage.

We hope to see  you on CA Day to discuss this topic and many others.

The Community Associations Law Team

Michael A. Inman

Jeanne S. Lauer

Gregory J. Montero

Robert V. Timms, Jr.

Matthew J. Weinberg

Under the Fair Housing Act, there are requirements with respect to “accommodations” and “modifications.” “Accommodations” are requests to be exempt from certain rules or policies such as a request to have a service animal when there are pet rules that would exclude that particular type or breed of animal. “Modifications” are physical changes to the property to enable a disabled person to use the property in the same manner as others.  As an example, a modification is often requested for an alteration to the exterior of a building to allow the construction of a wheelchair ramp or addition of a sidewalk for ease of access to the dwelling or building entrance from a parking area.  The distinction is important because reasonable accommodations are undertaken at association expense, while modifications are done at the expense of the party requesting the modification. It is wise for management or association officers to discuss with their counsel any owner request which appears to implicate the Fair Housing Act.  Complaints alleging violations of the Fair Housing Act are investigated by the Virginia Fair Housing Office which has the authority to impose substantial financial and other penalties.  It is considerably less expensive for counsel to help you avoid legal minefields and thereby avoid substantial financial penalties permitted under the Act.  We have substantial experience in advising associations on Fair Housing Issues as well as the Americans with Disabilities Act.

This is an important task that generally does not get accomplished as often as it should. There are three primary reasons for a review of your rules every couple of years: (i) laws and regulations change, (ii) “best practices” change and (iii) desires of the community change.  When you do undertake this task consider the following steps.

STEP 1 – The board of directors should establish an ad hoc committee on rules to periodically review and suggest changes (not make changes!).

STEP 2 – Those suggestions would be reviewed by the association manager with comments being given to the committee and the board of directors.

STEP 3 – The board finalizes the desired changes subject to review by counsel.

STEP 4 – The proposed changes are sent to the association’s attorney to review them for clarity, appropriateness and enforceability.  There could be issues due to a proposed rule (1) having inartful or vague language or (2) having a provision that is not permitted by statute or (3) having a conflict with a provision in the declaration or bylaws.

STEP 5 – Suggested revisions will be made by the attorney either in a meeting with the board or committee followed by a written report.  We often see association rules created by boards that include provisions that Virginia statutes require to be included in a recorded Declaration or Bylaws including, but not limited to: (1) charges for violations of governing documents; (2) late fees and suspension of services for delinquent assessments; (3) restrictions on for sale signs, (4) restrictions regarding rental of units and association charges connected with rentals, and (5) certain provisions regarding special assessments.  Attorney review is critical to ensure that rules do not violate statutory requirements and are not ambiguous either of which could cause the rule to be unenforceable.

STEP 6 – The Board reviews and, if satisfied with the version provided to them, approves the new rules and publishes them to the members indicating the effective date.

Two new changes in the law have an impact on community associations court actions.

The first is an increase in the jurisdictional limit of the general district court from $25,000 to $50,000 (exclusive of interest and attorneys’ fees.)  It is very helpful to be enabled by this statutory change to pursue larger claims in the lower court which will significantly speed up the process of obtaining a judgment or settlement. See Virginia Code Section 8.01-195.4.

The second is an amendment to the Property Owners Association Act which will make it mandatory, rather than discretionary, for a court to award reasonable attorneys’ fees and court costs to the prevailing party in a suit to enforce rules and regulations.  Also, the Condominium Act was amended to address the authority of boards of directors to adopt, publish and enforce rules pertaining to the common elements usage and other areas of responsibility provided for in the governing documents. Finally, this statute provides condo unit owners with the right to repeal or amend any board-adopted rule at a duly-called special meeting of the membership. See Sections 55.1-1959 of the Condominium Act and 55.1-1819 of the POA Act.

STAND BY FOR INFORMATION ON AN UPCOMING EDUCATION EVENT IN WHICH WE WILL DISCUSS LESSONS LEARNED FROM THE SURFSIDE CONDO COLLAPSE. WE EXPECT TO HAVE A VERY QUALIFIED GROUP OF PANELISTS.

Inspired by the COVID experience which hampered association meetings and, therefore, effective governance the General Assembly enacted a landmark bill to assist in all associations. It is finally the time of year for the new laws to go into effect.  Once an Association has complied with the conditions in the amendments quorums for annual meetings can be more easily achieved.  Both the Condominium Act and the Property Owners Association Act were amended to provide enhanced authority to vote by proxy or absentee ballot and also to vote by electronic means.  The amended statutes provide that unless expressly prohibited by the governing documents votes at a membership meeting may be cast in person, by proxy or by absentee ballot.

The amendments also allow for voting to take place by electronic means if authorized by a resolution of the board of directors which provides guidelines.  In both statutes there is a provision which states that those members voting by proxy or absentee ballot are deemed to be present at the meeting.  The term electronic means is defined to include meetings via teleconference, videoconference, internet exchange or other electronic methods.  Consistent with the foregoing new provisions, there is no longer a statutory requirement for two board members to be present at the meeting place.

If a member does not have the capability or desire to conduct business by electronic means an association is required, at its expense, to make available a reasonable alternative for such person to conduct business without the use of electronic means.  This requirement could result in the necessity for some meetings to be in person.

If you need a resolution to implement these new meeting options the CA Team will be pleased to assist you.

The recent Fourth Amendment to Governor Northam’s COVID related Executive Order, effective as of April 1, 2021, has updated the limitations for private in-person gatherings.  It states as follows:

All public and private in-person gatherings of more than 50 individuals indoors and 100 individuals outdoors are prohibited. A “gathering” includes, but is not limited to, parties, celebrations, or other social events, whether they occur indoors or outdoors. The presence in person of more than 50 individuals indoors, or 100 individuals outdoors, performing functions of their employment or assembled in an educational instructional setting is not a “gathering.” The presence of more than 50 individuals indoors, or 100 individuals outdoors, in a particular location, such as a park, or retail business is not a “gathering” as long as individuals do not congregate. This restriction does not apply to the gathering of family members, as defined in section I, subsection D, paragraph 2, living in the same residence. (emphasis added in various locations) Continue Reading YET ANOTHER RULE MODIFICATION FROM GOVERNOR ON IN-PERSON MEETINGS

The recent Third Amendment to Governor Northam’s COVID related Executive Order has updated the limitations for private in-person gatherings.  It states as follows:

All public and private in-person gatherings of more than 10 individuals indoors and 25 individuals outdoors are prohibited. A “gathering” includes, but is not limited to, parties, celebrations, or other social events, whether they occur indoors or outdoors. The presence in person of more than 10 individuals indoors, or 25 individuals outdoors, performing functions of their employment or assembled in an educational instructional setting is not a “gathering.” The presence of more than 10 individuals indoors, or 25 individuals outdoors, in a particular location, such as a park, or retail business is not a “gathering” as long as individuals do not congregate. This restriction does not apply to the gathering of family members, as defined in section I, subsection D, paragraph 2, living in the same residence. (emphasis added in various locations) Continue Reading NEW RULE FROM GOVERNOR ON IN-PERSON MEETINGS

Last Spring as part of emergency legislation the General Assembly authorized association boards of directors to meet virtually but did not include member meetings.  This has caused significant delays in elections and other important meetings requiring a membership vote.  I am pleased to report that new amendments, just signed by the Governor, will make life so much easier for all of us involved in community association governance.  The new legislation affects both the Property Owners Association Act and the Condominium Act but does not become effective until July 1, 2021.  In order to make the virtual meeting option available the amendments of several statutes approach the issue by allowing electronic communications unless the governing documents prohibit it.  This approach eliminates the need for document amendments in order to utilize electronic means.  That said, there are explicit requirements for the board to adopt guidelines for use of these more liberal forms of communication and voting to ensure that the rights of owners are protected in the process. Most governing documents do not address the topic of electronic communication and voting – especially ones not written recently.  Here are the important new “rules of the road” on use of technology with regard to meeting notices, assembly and voting – the italicized words are taken from the relevant statutes: Continue Reading GENERAL ASSEMBLY MAKES VIRTUAL MEMBER MEETINGS LEGAL …. WITH CONDITIONS

We often get calls from new board members after transition from developer control. They have questions like this one: Some of the homeowners have added fences, above ground pools and sheds without getting approval from the Association. Many of these changes do not appear to meet the standards that are part of our documents. No action has been taken to correct these violations. How do we go about enforcing the covenants and rules?

The first step is to examine the architectural guidelines and the enforcement provisions in the governing documents. Usually an association’s declaration establishes a committee, often called the architectural standards committee, and grants it powers and duties.

There are often architectural guidelines in the nature of rules and regulations which detail the standards for the community and the procedures for enforcement. If these do not exist, the board of directors should pass a policy resolution that clarifies the standards in the association’s governing documents with greater detail and sets the procedures for enforcement.  This policy resolution is generally referred to as a “due process procedure.”

One of the most important reasons that these procedures need to be in place is that the actions of the committee are subject to review in any legal action in which the association may become involved. The more clearly the resolution defines the procedures and the more closely the committee adheres to them, the more likely they are to be successful if enforcement of a covenant or rule goes to court. Continue Reading “OUR NEW BOARD JUST INHERITED A HOST OF OLD VIOLATIONS – WHAT SHOULD WE DO? “