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The Top Five Issues Affecting Community Associations in 2012 - September 2012

September 12, 2012

          I have dedicated a significant part of my law practice to Common Interest Community Associations, educating both residents and boards of directors and helping them understand their rights and the value of their neighborhood.  As each year comes to an end, I am often asked about the most significant issues affecting community associations throughout the year.  The following is a list if the top five issues affecting community associations in 2012.

(1)      Records Copying Policy

What I am hearing: “I want copies of everything you have and, because I already pay assessments, I’m not going to pay for it.”

          Community associations are frequently asked by owners to copy certain books and records.  These requests are often very broad and can be very expensive for the association.  In order for the association to operate efficiently, this cost must be passed on to the owners.  In the past, associations were not required to have a formal cost schedule in order to charge owners a reasonable fee for copying books and records.  The law has now changed.  Effective July 1, 2012, homeowners associations and condominium associations wanting to charge owners for copying costs and labor related to producing books and records must have adopted a cost schedule.

          The Virginia General Assembly has amended Virginia Code §55-510(D) of the Virginia Property Owner’s Act to provide:D. Prior to providing copies of any books and records to a member in good standing under this section, the association may impose and collect a charge, reflecting the reasonable costs of materials and labor, not to exceed the actual costs thereof. Charges may be imposed only in accordance with a cost schedule adopted by the board of directors in accordance with this subsection. The cost schedule shall (i) specify the charges for materials and labor, (ii) apply equally to all members in good standing, and (iii) be provided to such requesting member at the time the request is made.

          In addition, the Virginia General Assembly has amended Virginia Code §55-79.74.1(D) of the Virginia Condominium Act to provide:D. Prior to providing copies of any books and records, the unit owners’ association may impose and collect a charge, reflecting the reasonable costs of materials and labor, not to exceed the actual costs thereof. Charges may be imposed only in accordance with a cost schedule adopted by the executive organ in accordance with this subsection. The cost schedule shall (i) specify the charges for materials and labor, (ii) apply equally to all unit owners in good standing, and (iii) be provided to such requesting unit owner at the time the request is made.

          Over the past year, associations have anticipated this change.  I am seeing an increase in questions regarding this change in the law.  If your homeowners association or condominium association has not adopted such a policy, I recommend the association contact its attorney for a review of their policies and the adoption of a formal cost schedule.

(2)      Delinquent Assessments.

What I am hearing: “We have a homeowner who is delinquent and believe he is also delinquent on his mortgage, but the bank has not foreclosed.  We are not getting dues. What can we do?”

          Many homeowners have fallen behind on paying their assessments because of a recent job loss or because they are a small business owner and business is down due to the weak economy.  Since most delinquent homeowners are also underwater on their mortgage, there is nothing left to pay the association’s bills.  As a result, community associations begin to run short on necessary funds.

          I recommend associations pay particular attention to their budget and plan for “bad debt”.  Every community association board needs to understand the nature of the collection powers contained in their governing documents and provided by Virginia law.  Most importantly, they must have a collection policy and commit to enforcing it.  I have found myself this past year attending meetings specifically to address what tools the association has available to collect from delinquent owners.  In addition, boards have been inquiring about the possibility of amending their documents to provide for broader collection powers.

(3)      Distrust of Board Action.

What I am hearing: “My association’s Board recently passed an amendment.  They didn’t follow the proper procedure…Their action was illegal.  What can I do?”

          Perhaps the biggest thing I have noticed over the course of 2012 is a growing distrust of board action.  I am finding more and more homeowners are scrutinizing the way boards have chosen to spend the association money.  They are angry.  Over the past year, I have found that I am being asked to review association budgets.  I am also being asked to attend more meetings.

          It is a tough time for many homeowners.  I recommend that boards take this to heart, try to be more open, and provide homeowners additional time during meetings to voice their concerns and ask questions.  I find this helps members (1) feel better about the issue, and (2) more fully understand why the board decided to take the action.

(4)      Deferred Maintenance.

What I am hearing: “Roof, playground equipment, pool, sidewalk, exterior of building, mailboxes, signs…Our Association doesn’t have enough money to perform all of the maintenance.  What can we do?”

          Because of the economy, foreclosures and high delinquency rates, many associations have cut back on maintenance, focusing only on those repairs that are critical and turning a blind eye to other needed repairs.  This is a dangerous practice as those once “smaller” repairs quickly become “major” repairs.  I have found that waiting to perform repairs will only prolong the inevitable and, ultimately, lead to higher net costs.  It is better to complete the work in a timely fashion.  At the very least, develop and implement a plan of action.

          I recommend associations consider loans for maintenance and capital improvements.  If the association can qualify, loan rates are low and now is a good time to, at least, consider this option.

(5)      Rental Restrictions.

What I am hearing: “We have several owners who cannot sell their condominium and the Association’s leasing restriction forbids them from renting.  We do not want the home to fall into foreclosure.  What can we do?”

          Over the past several years, I found myself fielding numerous calls from condominium association board members requesting I draft an amendment to the association’s governing documents, restricting the number of renters allowed in the property.  This year, however, with home sales shrinking, foreclosures on the rise, and delinquencies growing, I am seeing a new trend.  Associations are shying away from leasing restrictions.

          In addition, I am fielding more and more questions from both owners and board members about the possibility of a hardship exemption and a potential waiver of the leasing restrictions.

Written by Jeffrey A. Hunn.