Feature image: State seal of Pennsylvania; image by Henrik on Wikipedia (use permitted with attribution / share alike).
By Deborah Goonan, Independent American Communities
Pennsylvania House Bill 595 is a clear example of a state legislator pushing a bill that, on the surface, looks like it will help housing consumers, but, in reality, it is either unhelpful or downright harmful.
I call it “window dressing,” and in this case, it completely blocks out the sunshine.
As the new legislative session begins, I have received notice that HB 595, introduced by Rep. Rosemary Brown, has been reintroduced for consideration by the Senate. The amended bill passed unanimously in the PA House in 2017.
HB 595 should NOT be supported as written and amended in 2017.
More specific details of HB 595:
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.
At first glance, 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?
By contrast, you can see how the matter of access to records is handled in New Jersey. ADR is not required, and, in fact, not appropriate to handle disputes over statutory protections for consumers.
Although ADR is applied broadly, in recognition of the intent that it be a means to avoid litigation, matters within a board’s legitimate discretion are not subject to ADR because a court will not substitute its judgment in such matters. Owners can address disagreement on matters in which boards properly exercise discretion through the democratic process (petitions, elections, etc. which convey the will of the community). These issues are distinguishable from violations of governing documents or other legal requirements which can be reviewed objectively and on which a court can rule. In ADR, as in a court, you should be prepared to refer to specific laws, portions of the governing documents or rules which you believe the board violated.
The New Jersey Department of Community Affairs, acting through the Association Regulation Unit has authority to require common interest communities to adopt an ADR procedure and to provide it when applicable. The agency does not provide the ADR nor can it address the substance of the dispute, modify outcomes or hear appeals. Please note, the law does not require that associations file their ADR procedures with the agency and there is no requirement to receive agency approval before instituting a procedure. However, if an owner believes the association’s ADR procedure violates the statutory requirements, the agency will review it.
The Association Regulation Unit of the New Jersey Department of Community Affairs has the authority to ensure that associations comply with the open meeting requirements as set forth in the law and regulation cited above. If you are aggrieved by the fact that your association is not adhering to these open meeting requirements, please submit the enclosed “Common Interest Community Association Complaint Form” along with the necessary supporting documentation, to the address listed on the form.
In order to maintain consistency, courts have held that the right of access granted to condominium owners applies to those in other types of associations such as cooperatives and homeowners associations. Part of the right of access is the right to make copies of records. Access to financial records under our jurisdiction is considered to be unconditional and thus may not be denied because an owner is not paid up in association fees or has any outstanding violations. Although an association may require an owner to sign an acknowledgement listing the records to which access was granted or of having received an information sheet on consequences for misuse, it cannot require owners to agree to any confidentiality as a precondition for access or copying.
Because this is a statutory right, the owner need not provide any justification for requesting access. For the same reason, there is no need for any Board vote regarding the granting of access. Owners should allow the association a reasonable time to comply with a request considering the factors involved such as; the size of the association, its resources, the number of records requested, the presence or absence of professional management, the number of other pending requests, the general workload and relevant circumstances. If the association denies access or unreasonably delays or conditions access, the Department, acting through the Association Regulation Unit, has the power to order compliance.
It is critically important that association members in Pennsylvania have transparent access to financial records, meeting minutes, open access to board meetings, and the ability to examine ballots and proxies for all association elections. HB 595 erects barriers that prevent consumers from filing complaints with the BCP (AG) when they face refusal of their association to conduct corporate business in the open and with integrity.
Therefore, The conditions that prevent a homeowner or shareholder from filing a complaint with BCP must be removed:
— the requirement for the member to be “in good standing” and
— the requirement to engage in ADR with the association (to the extent available) prior to filing a complaint against the association
As an additional reference, readers must read the following article that explains why CAI (PA-DEl chapter), the trade group responsible for drafting HB 595, does NOT represent the interests of individual homeowners.