We have received notice of an injunction that suspends the CTA and at least temporarily means that our Associations do not have to file anything. CAI’s message said:
This preliminary injunction applies nationwide, halting enforcement and compliance of the Act’s beneficial ownership reporting requirements across the entire United States. CAI’s legal team believes the injunction applies to all community associations incorporated within the U.S.
CAI’s Lawsuit:
On September 10th, CAI filed a lawsuit against the U.S. Department of the Treasury, Secretary Janet Yellen, and the director of the Financial Crimes Enforcement Network, challenging the application of the Corporate Transparency Act on community associations. This action is being taken to protect our members from the burdensome and unnecessary requirements of the Corporate Transparency Act. Both the lawsuit complaint and motion for preliminary injunction can be found here:
See https://www.caionline.org/advocacy/advocacy-priorities-overview/corporate-transparency-act/
IMPORTANT DATES/FILINGS:
September 7, 2024- Lawsuit filed by CAI to Prevent Enforcement of the CTA
October 2, 2024- Brief in Opposition to Temporary Injunction filed by the Government
October 7, 2024- Brief in Support of Temporary Injunction filed by CAI
October 11, 2024- Hearing Date on the Motion for Preliminary Injunction
We will continue to keep you updated on developments in this important case.
It was a busy legislative session for community associations. New laws on a variety of significant topics were enacted. Among them are significant changes to the sections which deal with reserves for replacing components of the common area and new provisions in the resale certificate procedures and requirements.
Reserves. One of the important topics that was addressed this year was the definition of “reserve study” in both the Property Owners Association Act and the Condominium Act. In sections 55.1-1800 and 55.1-1900 “reserve study” is now defined in the Act as “a capital budget planning tool used to determine the physical status and estimated repair or replacement cost of capital components and an analysis of association funding capacity to maintain, repair, and replace capital components.” A tragedy in Florida several years ago has inspired legislatures in several states to pay closer attention to the need for associations to be vigilant in maintaining reserves so that they are prepared for both anticipated, as well as unexpected, repairs and renovations. The Community Associations Institute has produced an excellent and detailed report on the lessons learned from the collapse of the Florida condo at Surfside. It is entitled Condominium Safety Public Policy Report and can be found on the CAI national website. It covers reserve studies, reserve funding, maintenance and structural integrity. Also, Sections 55.1-1965 and 55.1-1826 were amended to clearly articulate the Board’s duties and authority with regard to repairs and replacements through replacement reserves, additional assessments or borrowed funds.
Resale Disclosure. Effective on July 1 this year the new resale disclosure statute which was enacted last year has been significantly amended in various places. We suggest you locate the new statute and should be read closely to insure that you are in compliance. You can find the statute as amended by a Google search for Senate Bill 526 Virginia General Assembly. The phrases or sentences in italics are the changes made this year. One of the changes allows requests for a Resale Certificate to be made by the seller or the seller’s agent and be delivered to the buyer or the buyers agent and this cannot be changed by agreement. Another new provision states: If no resale certificate is delivered within 14 days after such request, the resale certificate is deemed unavailable. This provides a finite date to the unavailability so that other consequential actions can be taken by the parties to a purchase agreement. Also, a financial update can be requested by anyone authorized by the seller or purchaser.
In the event you have questions about the content of this update please give us a call. You may access our website at www.vahoalaw.com for more information on community association matters and prior updates.
VIRGINIA GENERAL ASSEMBLY WRESTLES WITH ACCESSORY DWELLING UNITS (ADU) AND SHORT-TERM RENTAL (STR) REGULATION; A COURT RESOLVES A CASE ABOUT A COUNTY ORDINANCE- Senate Bill 304 seeks to preempt local authority on both ADUs and STRs and is vague and incomplete in its provisions. The bill requires a locality to include ADRs in its zoning ordinances for residential districts as a permitted accessory use. A property owner must obtain a permit for an ADU and if the property meets certain enumerated requirements the locality must issue the permit. The bill prohibits the locality from requiring special rear or side yard setbacks and prohibits any requirement for any familial relationship between the owner and the occupants of the ADR, thereby making ADRs available for STR. The bill ran into various headwinds, particularly from resort area groups. As a result, it has been carried over until next year’s General Assembly session and there is work to be done to prevent the State from usurping local authority over the content of its zoning ordinances. In the meantime, a locality’s ordinance regarding STR was the subject of court action. A short-term rental ordinance was upheld in Albemarle County. A real estate investor purchased a home at a neighborhood with large lots with the intent to utilize it for short-term rentals. The Board of Supervisors denied the proposed use because the owner wanted a special exception to go beyond the permitted two-bedroom use for short-term rental and proposed five bedrooms. In order to achieve the five-bedroom use there was a requirement that it be determined that the use would not affect the character of the neighborhood. The property owner claimed such a consideration as a component of the public welfare was constitutionally vague and said the Board acted unreasonably by not hearing expert testimony about the neighborhood. The Circuit Court upheld the denial of the permit. The property owner appealed and Virginia Court of Appeals upheld the Circuit Court stating it is clear that when zoning administrators consider the character of the area as a part of their analysis of an application for a permit, that consideration falls within the umbrella of their duty under the ordinances to maintain convenient, attractive, and harmonious communities. Short-term rentals have become more and more popular over the past few years with advent of Airbnb and VRBO among others. It is no surprise that limits of tolerance are being tested, resistance is more frequent and the need for regulation has become more apparent. We will be paying close attention to these issues and will keep you apprised of further developments. In the event you have questions about any of the content of this letter please feel free to give us a call.
CA DAY IS NEXT SATURDAY! On this Saturday, March 16th, our CA TEAM will be at the Virginia Beach Convention Center to participate in the annual CA DAY event. As usual we will have a booth and look forward to seeing those of you who attend. Our Team Member, Jeanne Lauer, will be speaking during a Legal Q&A session which will occur right after the lunch break. Information about the event can be found at www.sevacai.org or by calling the Chapter office at 757-558-8128. As usual there will be a host of vendors and numerous educational sessions on a variety of relevant topics.
In an effort to keep you up to date on changes in the law and regulations, in this edition we want to update you on lender questionnaires for condominium communities and a new law regarding the termination of association management contracts.
Lender Questionnaires – A Call to Action
Two entities, Fannie Mae and Freddie Mac, are the backers for, or purchasers of, most of the conventional loans in the country. These two government sponsored enterprises began developing additional guidelines for project standards after the Champlain Towers South condominium collapse in Florida in June 2021. If you haven’t seen questionnaire changes already you will likely be seeing them in the near future. This is significant for two reasons: (1) your preparations for answering the questionnaires and (2) the implications it has for your association’s maintenance projects and financial status being properly handled.
The additional requirements you will see include requests for insurance policies, budgets, financial reports, reserve studies with funding schedules, documentation regarding special assessments, and building inspection reports. If the association does not provide this information in sufficient detail, the project may be deemed ineligible and put on an ineligible list. In addition, based on information a community must provide it will likely be deemed ineligible for lending if the project (i) needs critical repairs, (ii) there are unfunded repairs totaling more than $10,000 per unit, (iii) the property insurance coverage is not for replacement value, (iv) the budget doesn’t have adequate funding for insurance deductibles, (v) more than 15% of owners are more than 60 days delinquent in paying their assessments, or (vi) commercial space accounts for more than 35% of the total above and below grade square footage.
The reserve study must meet or exceed requirements set forth in state statute, and must comment favorably on the age, estimated remaining life, structural integrity, and the replacement of major components of the property. Building inspection reports and pending litigation also come into play.
We recommend that you notify the unit owner and the purchaser when a request for a completed questionnaire is received from a lender, and obtain written approval to provide the requested information. A copy of the questionnaire should be provided to the unit owner and the purchaser when you request approval to proceed. This recommendation is made because there is some degree of risk of loan denial due to information you provide in response to the questionnaire. Requiring the affected unit owner acknowledge prior approval of completing the questionnaire can potentially avoid any liability to the association or its management.
Management Contracts – Right to Cancel
The 2023 General Assembly passed a bill which sought to provide more certainty and fairness in the relationship between associations and their managing agents with respect to terminating the relationship. Most agreements contain automatic renewal clauses. The termination clauses in management agreements vary greatly relative to the rights of each party to cancel. This new law provides needed certainty, particularly for associations which generally do not negotiate terms with the management companies. The new statute is very short and to the point – it provides the following: A management contract that contains an automatic renewal provision may be terminated by the association or the common interest community manager at any time without cause upon not less than 60 days’ written notice. This new provision is found in Section 55.1-1837 of the Property Owners Association Act and Section 55.1-1940.1 of the Condominium Act.
In the event you have questions about the content of this update please give us a call. Please get access our website at www.vahoalaw.com for more informative articles and legal updates.
This edition of our newsletter focuses on two topics: (1) new legislation concerning appointment of homeowner representatives for association purposes and (2) proper utilization of executive sessions by boards of directors. We decided the best way to approach the executive session topic is to provide a script for proper navigation of this important tool for boards of directors.
Both the Condominium Act and the Property Owners Association Act contain provisions which allow for the board of directors to utilize executive sessions (sometimes called “closed sessions”) to undertake discussion of designated sensitive topics. Voting on motions is not permitted in an executive session. The Virginia Common Interest Community Ombudsman and many others have noted that associations are not getting executive session right despite its longevity. To assist you in compliance with the statute the following “script” is offered.
Board Member #1 says: “I move to go into executive session for the purpose of (RECITE ONE OR AS MANY APPLICABLE CATEGORIES BELOW AS APPLY. IF WHAT YOU WANT TO DISCUSS IS NOT COVERED BY THE CATEGORIES BELOW THEN YOU SHOULD NOT BE IN EXECUTIVE SESSION AS THESE ARE THE ONLY TOPICS PERMITTED BY THE APPLICABLE STATUTES.)
__ to consider personnel matters;
__ to consult with legal counsel;
__ to discuss and consider contracts;
__ to discuss and consider probable or pending litigation; and
__ to discuss and consider matters involving violations of the declaration, bylaws
or rules and regulations for which a unit owner, his family members, tenants,
guests, or other invitees are responsible
__ to discuss and consider the personal liability of owners to the Association
Board Member #2 says: “I second the Motion.”
If a majority of the Board agrees then executive session begins and everyone not needed to be part of the session is required to leave.
WE RECOMMEND YOU STOP TAKING MINUTES AT THIS POINT TO
INSURE THE CONFIDENTIALITY OF THE DISCUSSION.
When discussions in executive session have concluded, the Chair of the meeting announces that executive session is completed and the open portion of the meeting has resumed. At this point it is appropriate for a motion to be made relative to the topic discussed in the executive session; however, no motion is required.
Your Minutes should look like this whenever the Board engages in an executive session:
Board Member #1 moved to go into executive session to (for example consult with legal counsel). The Motion was seconded by Board Member #2 and a majority agreed to proceed to executive session. At the conclusion of executive session, the Board resumed open session and [NO MOTION WAS MADE RELATIVE TO THE TOPIC DISCUSSED] OR [THE FOLLOWING MOTION WAS MADE RELATIVE TO THE TOPIC DISCUSSED: ______. The minutes would then describe what occurred after the motion was made.
Executive sessions are addressed in both the Virginia Condominium Act (Section 55.1-1949) and the Virginia Property Owners Association Act (Section 55.1-1816)
2022 STATUTE AMENDMENT REGARDING OWNER REPRESENTATIVES
We want to bring to your attention legislation which clarifies that associations must recognize persons who are designated in writing by a property owner of a home in an association as the owner’s authorized representative. A power of attorney is specifically not required for this purpose. The bill also in expanded the list of authorized persons to whom a seller or the seller’s authorized agent may provide a written request for the delivery of the association disclosure packet or resale certificate. These new provisions are found in sections 55.1-1823 (POA Act), 55.1-1962 (Condo Act) 55.1-1806 (regarding rental of lots), 55.1-1809 (regarding resale documents) and section 55.1-1973 (regarding rental of units).
Please let us know if you have questions concerning the content of this update. The CA Team stands ready to assist you in taking good care of your associations.
Inman & Strickler is pleased to announce that Robert Timms, Jr. and Gregory J. Montero are named as “Legal Elite” for 2022 by Virginia Business Magazine in the category of Business Law.
We have observed that there are some association boards which are not aware of a distinction between state law requirements and necessary internal procedures for complaints. In this article we distinguish between the process to be followed for a complaint concerning a violation of state law or regulations vs. a complaint about the actions of a unit owner or other resident of the association which violates the declaration, bylaws or rules and regulations.
There is a state statute that requires that all associations have a procedure for filing complaints about state law issues, such as failure of the board to have a reserve study or otherwise not following Virginia law. If there is no resolution of the complaint at the association board level to the satisfaction of the complaining party the “adverse decision” of the board can be appealed to the Ombudsman who is an attorney employed by the State agency that oversees compliance with the law by associations.
Separate from the procedure mandated by the State every association should have Process Procedures for the filing of a complaint by a unit owner concerning violations of the requirements of the association’s governing documents, such as a vehicle regularly parked in an incorrect locations, chronic smoking in a prohibited area by a resident, or frequent improper use of common areas by a unit owner. These are not matters that can be or should be a subject of the state law complaint because there is no state law governing such actions.
Every association should create a due process procedure which provides the steps to be taken in making a formal complaint and having that complaint processed in an orderly and timely manner. Some complaints may be made verbally to officers of the association who can possibly resolve the matter before there is a need for a written complaint. In the event such a resolution is not achieved then the next step is to complete the Complaint Form that is part of the Due Process Procedures. The Procedures document gives structure to the complaint resolution process. The process involves a hearing on the matter before the board of directors in which the parties involved will present their positions and provide documents and witnesses as needed. At the conclusion of the process the board has the authority to impose monetary penalties and require corrective action depending on the subject matter of the complaint. Such penalties and corrective actions are governed by statute.
In the event you need assistance with creating the documents required to satisfy these needed procedures we would be pleased to assist.
We take this opportunity to express our gratitude for having the opportunity to provide counsel to many Virginia associations and to wish you an enjoyable holiday season and a happy New Year. Please visit us at www.vahoalaw.com.
As the popularity of electric vehicles increases the time is here for associations to focus on charging stations and individual charging at the owner’s residence. Virginia statutes require associations to permit electric vehicle charging unless their documents prohibit it. Of course, most documents don’t deal with the topic at all although newer documents certainly will. There are various issues to consider relative to electric vehicle charging.
First, it requires a significant amount of electricity. Consequently, in condominiums it is desirable to have the power used for charging to be supplied from the owner’s residence or via a separate meter. This could be challenging in a mid-rise or high-rise with parking garage but it can be done. In an HOA it is more a matter of aesthetics, especially in a townhouse community.
Most associations will want to have some control over the installation. The relatively new statutes – one for Condos and one for HOAs – provide that the association can control the placement, size and location and number of stations for any one owner with reasonable rules. The statutes take a relatively thorough and conservative approach to electric vehicle charging primarily because of the newness of the technology and the potency of the batteries. Under some unusual circumstances the batteries can become dangerous and be a cause of fire. It is also important to know that in the case of the charging station equipment “one size does not fit all.” Consequently, the statutes allow for a rule requiring detailed plans prepared by a licensed electrical contractor or engineer.
The topic of insurance is also included in the statutes – allowing the association to require insurance “covering claims and defenses of claims related to the installation, maintenance, operation and use” of a charging station and provide a certificate of insurance to the association. Actually, the master policy in a condominium will come into play if there is damage to the common elements caused by a charging station. Both statutes provide that “the unit owner shall indemnify and hold the association harmless from all liability, including reasonable attorney fees incurred by the association, resulting from a claim arising out of the installation, maintenance, operation or use of the charging station.”
We recommend that the board of directors take a close look at the well written and thorough statute applicable to their type of community in order to come up with rules and regulations regarding this type of equipment. The Code sections are: 55.1-1962.1 and 55.1-1823.1. Please let us know if our CA Team can assist you in preparing rules appropriate for your community.
