Will state bills finally bring accountability to Association-Governed communities?

By Deborah Goonan, Independent American Communities

Both Florida and Pennsylvania Legislatures are considering  bills to create accountability for association-governed communities. But the type of legislation differs vastly.

Florida

In Florida, the legislation under consideration will apply only to condominium and cooperative associations, but not to planned communities of single family homes. SB 1682 and companion HB 1237 would impose criminal penalties for certain acts of election (ballot) fraud or repeated and wrongful denial of member access to condo association records.

Specifically, infractions and criminal penalties (as currently proposed) are:

  • Failure to provide access to records upon a valid request from a member, more than 2 violations in a 12-month period – misdemeanor in the second degree
  • Intentionally defacing or destroying records – misdemeanor of the first degree
  • Failure to provide access to records as above, but with intent to commit a crime or evade detection of criminal activity – felony of the third degree
  • Tampering with or falsifying ballots or knowingly aiding an abetting such activity – felony of the third degree

Opponents of these bills include trade group Community Associations Institute (CAI). Their primary criticism is that getting serious about accountability with criminal penalties will discourage owners from volunteering to serve on their condo or co-op boards.

However, consumer advocacy group Cyber Citizens for Justice (CCFJ) points out that owners that are willing to lead with transparency and follow the law have nothing to fear. Association members are better served when bad actors are weeded out or deterred from serving on the board.

Both bills also prohibit certain conflicts of interest or specific disclosure of possible conflicts of interest, with regard to hiring of contractors related to board members, or hiring of attorneys representing management companies. There are significant additional transparency requirements, including a mandate for associations of 500 or more units to post all records on a password protected website. All condo associations would be required to submit annual financial reports to the state. Term limits of board members are also proposed.

The legislation is progressing nicely through both House and Senate committees, thus far retaining provisions authorizing criminal penalties.

 

Criminal penalties in proposed condo law spur controversy in Tallahassee

By Brenda Medina (Miami Times)

The Florida condo reform bill is moving forward in the state Legislature, but the controversy between those who are in favor of and those who are against criminalizing certain infractions could intensify in the coming weeks.

The bill, led by Miami-Dade lawmakers, seeks to make condo electoral fraud a crime, such as falsifying signatures for condominium elections, and to create penalties for retaining documents to which homeowners are entitled. But lawmakers are facing resistance from colleagues, lobbyists and lawyers who do not favor new criminal punishment.

“We’ve figured out that there is really no teeth in some of the laws that apply to condos and associations,” Republican Sen. René García, of Miami-Dade, said during a committee meeting.

Read more here:

http://www.miamiherald.com/news/local/community/miami-dade/article145337484.html#storylink=cpy

 

Pennsylvania

In Pennsylvania, a bill that started out providing broad consumer protection for owners in all types of association-governed communities, under the State Attorney General, has been amended to limit the types of complaints that would be handled by the Bureau of Consumer Protection. Furthermore, HB 595 would create several obstacles likely to prevent homeowners from filing a complaint in the first place.

Those obstacles include:

A requirement that the member be in “good standing” with the association, in order to file a complaint against that association (a provision that invites potential abuse by the association, possibly fabricating covenant violations or late assessment payments to declare the owner not in good standing)

A requirement for the member to exhaust all internally-mandated Alternative Dispute Resolution (ADR – either mediation or arbitration) prior to filing a complaint with the Bureau of Consumer Protection

 

Pa. lawmakers to mull community mediation

By Bill Cameron, Pocono Record Writer

Excerpt:

Brown’s proposed legislation would broaden the conditions to include other common violations like meetings, quorums, proxies, election integrity and other association records. Right now, those issues can only be referred to a district attorney. Brown said her bill would provide a guaranteed path to mediation, with more direct oversight from state authorities.

“They shouldn’t have to file a suit to protect their rights,” she said. “A lot of times community members can pull together the money to file a lawsuit, but some just don’t have the finances.”

Even with the proposed language added, not all disputes would qualify by law for bureau review. An included clause would encourage — and in most cases, require — parties first seek alternative dispute resolution (ADR) prior to Attorney General office intervention. Brown said the procedures were intentionally crafted to screen out matters that could be handled internally.

“Say you want to paint your door red, but your community tells you to paint it blue — these aren’t those types of issues,” she said. “This law deals with the more serious, procedural violations of your rights. When you’re paying these communities dues to live there and expect things to be done a certain way, you need those rights protected.”

Brown, in conjunction with the Community Association Institute, hosted an educational session about ADR strategies April 8 at the Middle Smithfield Township municipal center. The event gave opportunity for her to meet with several private community directors, whom her bill would also benefit, she said.

Read entire article:

http://www.poconorecord.com/news/20170415/pa-lawmakers-to-mull-community-mediation#vf-widget-art-4C843B8A-2100-2B3E-E053-0100007F871B-pub2327

 

To read the article above, it appears that ADR with the Association would only be required for the types of complaints that would not be handled by the Attorney General, Bureau of Consumer Protection (BCP).

However, the language of the bill does not appear to make that distinction. The ADR requirement would apply to all types of complaints, and would only be waived if the Association did not have an ADR plan and policy in place or if the Association refused to participate in ADR.

Below are screenshots of HB 595 as of today, as posted on the Commonwealth’s website, to prove my point.

This is the language as it applies to condominium associations. The same provisions would apply to cooperatives.

 

Curiously, looking at Planned Communities (HOAs with single family homes), there is one key difference: HB 595 does not include authority for the BCP to accept complaints regarding access to documents. I wonder why?

 

Unlike the Florida bills noted above, PA HB 595, as currently written, offers very little meaningful regulation that would hold boards of association-governed communities accountable.

And, by the way, Florida has already enacted similar laws for regulating its condominium and cooperative associations (but not homeowners associations). Clearly, they have not worked, or the Sunshine State would not now be considering more sweeping and strict regulation.

Florida has a far higher number and concentration of association-governed communities than Pennsylvania. Therefore, the industry is further evolved, and most of the ineherent flaws and chronic problems with this privatized form of corporate governance are well known.

But states with smaller concentrations of association-governed common interest communities would do well to observe the actions, inactions, or missteps of HOA/condo/co-op heavy states such as Florida, California, and Illinois.

Which legislative measures have worked for housing consumers, and which ones have not? Can a state that is just embarking on regulation of the industry learn from the successes and failures of others? Keep in mind that there have been more Legislative failures than successes.

And that begs the question: why does each state attempt to tackle these issues without limited or no awareness of previous attempts in other states?


One thought on “Will state bills finally bring accountability to Association-Governed communities?

  1. Good job. I will be following these bills to see what happens to them. Will they take the same path as in Arizona — nowhere?

    Already we see the Evil Empire at work — mustn’t make it difficult for board members otherwise no directors. No directors, no HOA. Oh don’t talk about training! We have trained HOA directors for over 44 years, so can it! We stand by our track record. If members would only obey the rules without question, then peace and harmony will prevail in HOA-land.

    It’s a huge defect of the HOA legal scheme that provides a “reason for being” for CAI. It’s coercion! It’s tantamount to indentured servitude and stands against all the principles and values that made America great.

    Like

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