Sometimes we have the unpleasant responsibility of telling a board that the proxy they have sent out (or worse, used) for a membership meeting was invalid due to lack of compliance with their bylaws and/or Virginia Statutes, or that it simply doesn’t constitute a proxy. It seems that many people think that a proxy is something that is simple to do and should not require professional assistance. Unfortunately, that is not the case. There are also a couple of myths about proxies that we need to dispel. Continue Reading Making sure every proxy (and vote) counts
Many Association governing documents require an annual audit. In order for an audit to be meaningful in the Community Association context it must be performed by an independent certified public accountant. The only way to fulfill the requirements is to hire a CPA who is not a member of the Board or even an owner in the community. While your documents may specifically require an audit, you need to be aware that a CPA can do one of three levels of financial examinations to determine if the accounting work is being done properly: a compilation, a review or an audit depending on the requirements set forth in the governing documents. In a compilation, the accountant simply puts the association’s numbers in a proper financial format. The accounts are not examined for accuracy. A review determines if the financial statements require any material modifications. It consists of inquiries into the association’s bookkeeping practices. The audit is the most detailed level of review and, if done properly, it will offer reasonable assurance that the records are free of misstatements. The auditor also looks for irregularities or illegal acts. It is significantly more expensive than the other two reviews.
The American Institute of Certified Public Accounts has standards for doing audits on community associations. By adhering to these standards, an auditor can express an opinion on the association’s financial health. Continue Reading Do we have to have an annual audit?
We have published on this topic in the past, but due to frequent misunderstanding of the process we want to provide more information on this topic. Most community association boards of directors realize the importance of, and requirement for, holding open meetings. There are times however when closed sessions of the board are needed. Fortunately in Virginia the statutes for both homeowners associations and condominium associations are very specific as to when closed meetings can be held. They are generally referred to as executive sessions. The purpose of executive sessions is to allow the board to discuss certain sensitive topics among themselves with no members present. The following are the topics which qualify for a meeting to be closed pursuant to statute:
In the midst of this electoral season, perhaps it is especially timely to discuss sign regulation in communities, particularly as it relates to political signs. You may be getting questions or comments about sign regulation in your communities, so we thought it would be a good idea to let you know what goes, and what does not, in community associations with regard to political signs. There are those that will assume that there is no way that community associations can regulate political signs because it violates their right of free speech under the First Amendment to the Constitution. For reasons we will explain, this is not entirely correct in the community association context.
Of course it is common to have sign regulation in community associations, particularly with respect to “For Sale” signs. Is there a distinction to be made between “For Sale” signs and political signs? Political signs seem to have more to do with free speech than for sale signs. In fact, when analyzing government regulation of speech, courts often distinguish between “commercial speech” and other types of speech, and find that commercial speech is not entitled to the same level of protection as other types of speech. But does that matter in a community association? Continue Reading Political Signs and Community Associations in Virginia
We are often asked by Boards of Directors to assist them in determining the maintenance, repair and replacement responsibilities for certain components in their Association when the provisions in their governing documents are ambiguous about such responsibilities or are absent altogether.
First we need to distinguish the difference between ownership of common elements in a condominium association and ownership of common areas in a homeowners association. In a condominium association each unit is owned individually and the common elements are owned jointly in common with all of the unit owners. In a homeowners association each lot is owned individually, but the common areas are owned by the Association (not by the lot owners). To make it more challenging sometimes condominium units appear to be small lots. We realize these are subtle differences, but it is important for purposes of this discussion. Continue Reading Maintenance Responsibilities: Who is supposed to do what?
A couple of months ago we informed you of major changes coming to resale disclosure requirements and the fees that can be charged for preparing those disclosures. Those changes went into effect on July 1, 2018 and we wanted to remind you that you must now be complying with those changes.
Every homeowners association disclosure for both initial sales by the developer and resales is required to include a form developed by the Common Interest Community (CIC) Board titled “Property Owners’ Association Disclosure Packet Notice.” This form has always been required for homeowners associations initial sales and resales but the form has been revised to include multiple additional disclosures enacted by the Virginia General Assembly. Continue Reading CHANGES TO RESALE DISCLOSURE REQUIREMENTS AND FEES HAVE NOW BECOME LAW
Like any other business, community associations are often faced with delinquent owners seeking bankruptcy protection. In fact, as of May 2018, over 9,800 bankruptcies have been filed in Virginia alone. As such, community associations should be aware of the implications of being an unwilling bankruptcy creditor.
Types of Bankruptcies
The two most common types of bankruptcy that impact community associations are a Chapter 7 and a Chapter 13.
The Chapter 7 bankruptcy is commonly referred to as the liquidating bankruptcy and is what most people think of when they hear the term “bankruptcy.” The idea behind a Chapter 7 is that the court assigns a third-party (a trustee) to review the debtor’s assets and exemptions and sell any non-exempt assets to pay the debtor’s debts. Unfortunately, Most of the time, that doesn’t actually happen. Most chapter 7 cases are “no-asset” cases, meaning there are no un-exempt assets for the trustees to sell. In a rare “asset” chapter 7 cases, the trustee will notice creditors by sending a letter asking for creditors to file “proofs of claim.” A proof of claim is a standard form that a creditor fills out listing the amount and type of debt. A proof of claim must also have “proof” attached detailing the basis of the debt. The trustee then classifies the types of debt and pays those debts based on their classification or priority until the funds are depleted. The end result is a chapter 7 discharge which wipes away all qualifying unsecured debt incurred prior to the debtor filing bankruptcy. However, there are debts that survive a chapter 7 discharge including secured debt, priority debt, and non-dischargeable debt. The easy way for community associations to prevent loss of assessments to a chapter 7 discharge is to speak with an attorney as soon as an owner is 30 days delinquent. Continue Reading When Delinquent Owners File a Bankruptcy – What now?
It seems like we have to say this every year, but the Virginia General Assembly was very busy again this session making amendments to the content and fee structures for condominium and homeowner association disclosure requirements. These changes are significant so we wanted to give association boards and managers time to prepare before these changes go into effect on July 1, 2018.
House Bill 923 focused first on the disclosure form provided by the Common Interest Community (CIC) Board and made significant additions. It now must contain the following statements to alert buyers to certain aspects of ownership in a community association even though some of these items will not apply in every community: Continue Reading Big Changes Coming Soon to Resale Disclosure Requirements and Fees
Question: I live in a townhouse style condominium that is comprised primarily of young families and, consequently, we have quite a few dogs in the community. Our recorded Condominium Declaration states: “No more than two (2) pets shall be maintained per Unit. The Board of Directors may promulgate additional rules and regulations regarding pets.” Our Board of Directors has passed a board resolution changing the number of pets allowed per unit from two (2) pets to one (1) pet. My son is heartbroken that we will have to choose which one of our dogs we have to give away. Can board members just make up their own rules? Continue Reading Can Board Members Make New Rules and Change Old Ones?
If you own a single family home and your roof needs to be replaced, you either have to take money from savings or borrow the funds to pay for it. Either way, it’s your sole responsibility to replace your roof. But what if you own a condominium unit and the roof of your building needs to be replaced or the streets need to be repaved? What if you live in a homeowners association and the pool deck needs to be replaced? Don’t you expect all of the owners in the community to contribute to the costs and don’t you expect there to be enough money in “savings” to pay for it. Continue Reading Making the case for replacement reserves