HOA condo legislation updates (CO, HI, IA, TX, MI, May 2019)

By Deborah Goonan, Independent American Communities

Selected highlights of legislation. Subjects: HOA manager licensing (Colorado); proxies in condo association elections (Hawaii); construction defects “right to cure” (Iowa); MRTA changes and HOA lien status in tax sale foreclosures (Michigan); limiting the HOA developer control period (Texas).

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Colorado

HOA, condo manager licensing statute extended

In May, the Governor approved HB19-1212, which extends the sunset date for HOA management licensing through August 31, 2020.

Stan Hrincevich of the Colorado HOA Forum hoped to extend manager licensing with substantial amendments to improve accountability of the management industry.

For instance, current law allows the HOA management industry to self-regulate, with a licensing review board stacked with stakeholders from the HOA industry.

One of Stan’s recommended changes was to appoint additional non-industry stakeholders to the licensing review board. That request was ignored.

Another recommendation: require management agents to provide documented proof — invoices and receipts — of all management and administrative fees charged to the Association.

Also ignored.

Instead, the Legislature passed an amended version of the licensing bill that makes it harder for housing consumers to enforce state law and professional accountability standards.

At the same time, the renewed program lets community association trade groups reap additional revenue from offering management training courses and seminars, which are required for obtaining and maintaining a license.

Thus HB 1212 salvages a flawed program for one year, avoided home owner requests to improve the program, managed to more industry input, provides a ray of hope with the stakeholder concept for rules changes, and retains one of the few, if only weakly effective, means of enforcing home owner’s rights concerning property management company abuses. —Stan Hrincevich, Colorado HOA Forum

The issue of extending manager licensing beyond 2020 will likely be reconsidered next year.

Reference:

Read HB19-1212

Colorado HOA Forum


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Hawaii

Proposed change to use of condominium owner proxies

Condominium owner councils and individuals support an important amendment to Hawaii statute with regard to proxies.

When a unit owner cannot attend an annual or special meeting, that owner can complete a proxy form, and submit it to the association in advance of the meeting.

A condo owner’s proxy generally allows the following options:

  • For quorum purposes only — meaning the member is counted as “present” at the meeting, but with no votes cast.

 

  • To designate another individual to vote on the owner’s behalf.

 

  • Current law allows a proxy check box that allows a unit owner to assign the proxy to the “board as a whole.” When proxies are given in this manner, the voting majority of the board takes all designated proxy votes.

Condo owner groups supports removing the option to assign a proxy to the “board as a whole.” Thus, HB 347 and SB 724 both strike the following provision:

The proxy shall contain boxes wherein the owner may indicate that the proxy is given:

To the board as a whole and that the vote is to be made on the basis of the preference of the majority of the directors present at the meeting;

And instead add the following provision:

To those directors present at the meeting with the vote to be shared with each director receiving an equal percentage;

 

Owner groups say that doing away with the “board as a whole” proxy designation will prevent long-term entrenchment of incumbent board members.

According to a report by the House Committee on Consumer Protection & Commerce:

Kokua Council, Hui ‘Oia‘i‘o, and several individuals testified in support of this measure.  Associa, Law Offices of Mark K. McKellar, LLLC, Hawai‘i State Association of Parliamentarians, Hawaii Legislative Action Committee of the Community Associations Institute, Hawaii Council of Associations of Apartment Owners, and several individuals have testified in opposition.

Due to the controversial nature of proxies in condominium association, the committee amended HB 347 HD1 by adding an effective date of July 1, 2050. Thus, the House signals the need for further debate and discussion.

The House version of the bill passed on February 28, 2019. HB 347 HD1 was then transmitted to the Senate, where a companion bill (SB 724) has been introduced.

Hawaii’s 2019-2020 legislative session is adjourned until 1/16/2020.

References:

An Open Letter To Hawaii Condo Owners About Proxies
Support legislation to solve the problem of proxies running board associations to the detriment of residents.

Track HB 347 HD1 (passed the House)

Read Current version of HB 347 HD1

Companion bill SB 724


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Iowa

Construction defects legislation provides contractors a “right to cure”

New legislation, effect April 15, 2019, requires a homeowners or condominium association to file a written claim with a general contractor or subcontractor at least 120 days prior to pursuing  class action litigation involving defective construction.

The law gives contractors and subcontractors the right to inspect the property for alleged defects, including the right to conduct destructive testing.

The contractors and subcontractors have 75 days to respond to a claim made by an Association. If the contractors elect not to repair some or all of the named defects, or if the owners’ association does not agree to a settlement offer, the matter can proceed to court on the unresolved defect claims.

Notably, the legislation adds the following provision with regard to Arbitration clauses:

To the extent that an arbitration clause in a contract for the sale, design, or construction of real property conflicts with this chapter, this chapter shall control.

It appears that this change prevents home builders from requiring mandatory arbitration of defect claims on their own terms, while still providing an opportunity to fix problems and possibly prevent expensive and lengthy litigation.

Reference:

Iowa SB 532 (Construction Defects, right to cure)  As signed by Governor


Michigan

Changes to Marketable Record Title Act (MRTA)

Due to recent amendments supported by the Michigan Land Title Association, HOAs have until March 2021 to preserve their 40-plus-year old restrictive covenants and easements.

The bill makes it easier to conduct title searches, but shifts the burden for preserving old restrictive covenants to the property owners, or the owners’ association.

Associations with CC&Rs less than 40 years old would need to file an official notice of preservation within two years of the expiration date.

If not preserved, restrictive covenants could expire after 40 years. That could be a good thing or a bad thing, depending on the nature of the restrictions, and whether they still serve a desirable purpose.

Changes to Michigan law could unravel restrictive covenants on real property
April 12, 2019| By Brian T. Lang |

Public Act 572

Read Legislative Summary

 

HB 4219: HOA-governed communities liens would be paid at tax foreclosure sales

Michigan law currently allows County government to keep all proceeds of a tax sale, even if it’s more than what is owed in taxes. A tax foreclosure sale also wipes out any HOA liens.

HB 4219 would give excess proceeds of tax sale to the homeowner. That’s definitely a plus for real property owners. No government taxing authority should have the right to profit from a tax foreclosure sale. They should only be collecting unpaid taxes, plus interest, collection costs, and reasonable attorney fees.

Not to be left out, HOA attorneys in Michigan are proposing an amendment to the bill. They are advocating for tax sale proceeds to go to local government first, to any HOA liens second, and then, any remaining balance, to the homeowner.

On one hand, if the HOA lien is a valid assessment lien, it only seems fair for the Association to get its share of tax sale money.

But HOA liens frequently include unpaid fines (or fines renamed as assessments), as well as exorbitant attorney fees that often dwarf the amount of unpaid assessments.

If it isn’t right for local governments to make windfall profits from foreclosure sales, then it isn’t right for HOAs either.

Let’s be fair.

References:

Making Sure HB 4219 Helps Community Associations Meisner Law Group (April 2019)

Read HB4219

Track progress


HOA suburb aerial view

Texas

Legislators fail to put an end to long-term developer control of HOAs

House Rep. Tracy King (D) sponsored a bill to end perpetual developer control of planned communities. Under current law, the Declarant (developer) appoints a majority of HOA board members until all, or nearly all, of the parcels are sold to non-affiliated buyers.

HB3445 would have required a developer to hand over majority control of the HOA board to homeowners when 75% of the lots have been sold.

Homeowner Vanessa Perez offered compelling testimony at a hearing on April 23 (See link to video below), explaining that homeowners cannot afford the developer’s unlimited HOA fee increases.

When the HOA fees become unaffordable, homeowners fall behind, and end up in collections, with liens on their homes. Money judgments and HOA foreclosures are the next steps to collect fees from homeowners, ultimately forcing many to sell to escape the high fees and penalties.

Due to pressure from home building industry lobbyists, the bill stalled in committee, shortly after its first public hearing. ♦

References:

Read: TX HB3445 | 2019-2020 -relating to declarant control of certain property owners’ associations.

Vanessa Perez testimony – VIDEO