Act 115 Pros and Cons — a mixed bag of consumer protections
New requirements for HOA elections and HOA bylaw amendment procedures
By Deborah Goonan, Independent American Communities deborahgoonan@gmail.com
Today’s post summarizes the pros and cons of recently enacted HOA consumer protection legislation (House Bill 1795), now known as Act 115. Pennsylvania state law now requires an “independent reviewer” for all elections in common interest ownership communities of 500 or more dwellings. State law outlines a process for smaller community associations to opt in to using an independent reviewer to monitor and tally election ballots. And, in an effort to empower HOA member homeowners — and rein in the power of HOA boards — Pennsylvania law affirms new homeowner rights to vote on amendments to HOA community bylaws.
Final stages of legislative process lead to Senate amendments on the third reading
Last month, I posted on IAC a detailed summary of the status and legislative history of House Bill 1795 (2022). The point of the post was to show readers how a simple and straightforward HOA consumer protection bill can be watered down as it is amended, drastically changing the original intent of the bill.
Shortly after my October 19, 2022 post, I emailed the sponsors of HB1795 and relevant committee members with my concerns, attaching a copy of my previous report.
On October 24, 2022, the Senate Urban Affairs and Housing Committee considered the bill for the third time, making several additional amendments (see PN3513). The Senate then voted strongly in favor of HB1795 (40-8).
The bill returned to the House on October 25, 2022, where Representatives accepted the Senate amendments, and voted in overwhelmingly in favor of the bill (194-6). Governor Tom Wolf officially signed the bill today, November, 3, 2022.
The rest of this article will summarize the pros and cons of HB1795, now chaptered as Act 115.
References: current and previous versions of HB1795
Compare PN 3513 to PN 3585 (current version), Presented to Governor Tom Wolf on Oct. 26, 2022
View HB1795 Voting records and History on PA state Legislative website
The PROS — Senate committee changes that improved HB1795
Several Senate amendments have resulted in a new law that adds several consumer protections for HOA member homeowners.
First, an Independent Reviewer for an HOA election can now be a CPA or any attorney licensed to practice in Pennsylvania. The previous version of the bill required an attorney to specialize in condo/co-op/HOA law or real estate law. That stipulation would have limited the HOA’s choice of attorneys to those who work in of on behalf of the HOA industry — the very same attorneys who aggressively oppose regulation of HOAs. Thankfully, members of the PA Senate were astute enough to recognize the obvious potential for conflicts of interest.
The executive board of an HOA ”shall” (i.e. must) report the certified election results at a meeting of unit owners. The previous printing of the bill said the HOA shall report election results only if they were tallied by a third party vendor.
An Independent Reviewer is still only required for community associations with 500 or more members (homes or units). However, the Senate amended HB1795 to make it easier for any community with less than 500 members to OPT IN to using an Independent Reviewer for its elections or voting on ballot issues. To do so, a community association vote must be taken at a pre-announced meeting for that purpose. And, if a majority (51%) of owners present in person, electronically, or by absentee ballot vote in favor of using an Independent Reviewer, then the HOA must comply.
The previous version of the bill required unit owners to amend their bylaws, a process that would have required 51% of votes allocated to all home/unit owners to OPT IN to using an Independent Reviewer to monitor elections. The Senate was wise to recognize that this is a high bar to reach, in order to simply opt in to a process that can increase owner confidence in future HOA election results.
The Senate also amended HB1795 to remove the use of proxy votes for amending HOA bylaws. It further clarifies that a simple majority (51%) of all home of condo/co-op unit owners are necessary to amend bylaws.
Absentee ballots may be cast for bylaw amendments, but those ballots must be received by the commencement of the meeting scheduled for the purpose of amending the bylaws. Previously, the bill allowed absentee ballots to be received and counted up to 5 days after the meeting date.
NOTE: PA voters will recognize the stark parallels to statewide legal challenges of our 2020 general election, where ballots that were received up to 5 days after the election were counted, without requiring signature verification. That practice has since been challenged in court. The Pennsylvania state Supreme Court just ruled that mail ballots must be received on or before election day, and that undated ballots may not be counted. (see article in the Philadelphia Inquirer: Pa. Supreme Court orders counties to set aside undated and wrongly dated mail ballots and not count them)
State law now makes clear that any audio or video recording of an HOA meeting must be made available to owners for review for at least 6 months after the date of the meeting. The previous version of the bill had imposed a more strict limit of up to 6 months.
The Senate also added important provisions relating to quorum requirements. If the HOA bylaws are silent, at least 20% of owners must be present in person, electronically, or by absentee ballot to constitute a quorum. The bylaws can specify a higher or lower percentage of attendance, not to go below 10%. After two failed attempts to meet quorum, the bill defers to state law governing corporations. State law allows quorum by default for the third meeting, regardless of how few members attend the meeting. Interestingly, HOA Declarations or Bylaws can still overrule state corporate law waiving quorum requirements.
The CONS — Changes to HB 1795 that are not-so-consumer-friendly
The Senate removed all “Independent Reviewer” requirements for Declarant (developer) controlled HOA-governed communities. So, as long as the Declarant remains in control of the HOA, there are no requirements for an Independent Reviewer of elections or other ballot measures, even during the transition process. The previous version of the bill included similar Independent Reviewer provisions for Declarant-controlled communities as well as communities with homeowner volunteer HOA boards .
All HOA Bylaws must still require at least one HOA meeting with unit owners per year, but that meeting no longer has to be in person. There are obvious advantages to holding a meeting in person, when practical. Barring any state of emergency, it seems reasonable for each community to hold at least one in-person meeting annually, even if some of the board members or owners attend electronically.
Requires a pre-election session or meet-the-board-candidates meeting, which is a good thing. However, this requirement only applies if the number of candidates exceeds the number of open seats, and then only if at least one candidate requests a meeting for the candidates to introduce themselves to unit owners. This is obviously an extension of the ”election by acclamation” provisions previously added in the Senate.
However, in my opinion, there’s simply no good reason why incumbent owners running for the HOA board should not be able to introduce themselves to owners who are new to the community since the last election. Plus, it wouldn’t hurt for candidates to re-introduce themselves and update their stance on HOA issues to all members each election cycle. New issues are likely to come up in each election cycle.
A meeting can only be recorded (audio or video) by the executive board, not the homeowners, AND the bylaws can still prohibit recording of HOA meetings. I think this is a blatant attempt by HOA attorneys to limit transparency, by claiming that recordings increase potential liability of HOA board members and management agents.
Bottom line: Act 115 creates some additional consumer protections for owners of HOA-governed homes. However, in my opinion there’s room for improvement.
Prior to this point, unless the governing documents stated otherwise, HOA boards have had sole authority to amend governing bylaws, without a vote of all members in the common interest ownership community. And, let’s be realistic, few HOA governing documents require bylaw amendments to be put on the HOA ballot for a vote.
Obviously, this is a big deal for Pennsylvania homeowners who want to play an active role in deciding how board member elections are conducted, how candidates are nominated, setting qualifications of board candidates, and more. The bylaws also typically spell out the powers and responsibilities of board members, and the proper procedure for enacting rules. Owners are well-served by playing a role in setting limits on HOA board powers.
However, HB1795 started out as a bill that enforced HOA election misconduct by classifying interference with or destruction of ballots as criminal misdemeanors. It seems reasonable for HOA members to expect that the people managing the election, collecting and counting the ballots to be honest and transparent when doing so.
Furthermore, as long as there’s no serious consequence for cheating in HOA elections and skewing the results on important community ballot measures, then community associations will continue to be plagued by unscrupulous owners with a financial or political agenda, or owners with an axe to grind — the kind of people who believe the ends justify the means.
An Independent Reviewer is a great idea, and I believe a neutral third party election monitor should be mandatory for all HOA-governed communities of — at the most — 100 or more dwellings.
Nonetheless, as larger communities adopt this election process, future legislation can be fine-tuned to prevent HOA board and management efforts to circumvent the intent of the law. Additionally, Declarant (developer) controlled HOAs should not be exempt from requirements to use an Independent Reviewer, especially for ballot measures, but also for any election of homeowner board members during the HOA transition process.
Homeowners should be allowed to record HOA meetings, whether the executive board chooses to do so or not. Consider it a check and balance on HOA board authority. Alternatively, state law should require all board meetings to be recorded, no exceptions.
I recognize that 2022 is an important election year for Pennsylvania. I am hopeful that, regardless of election results, our next governor and new slate of state Legislators will continue to improve consumer protections for homeowners in HOA-governed common interest ownership communities.