Legislative Update - Condominium / HOA
Prepared by Karl Kuegler, Director of Property Management, Imagineers Kkuegler@imagineersllc.com , & Lori J. Samele-Bates, Law Office of Brown Rudnick on behalf of Imagineers LLC.
We want to take this opportunity to share with our client board members some of the important legislative matters at the state capitol that may impact the condominium industry with this legislative update. 2014 is a state wide election year and, in addition to the Governor and the constitutional offices, all 187 legislative seats are on the ballot. This legislative session convened on February 5th and will adjourn at midnight on May 7th. At the beginning of the session, Governor Malloy delivered his State of the State address along with his proposed state budget adjustments. Highlights from his address included some minor tax relief; adding to the state's rainy day fund as well as long term debt reduction and education spending on both K-12 and higher education. The Governor's call for reform in these areas are just some of the issues that the legislature has to address during the "short" three month session.
The Legislature is considering over 1,000 bills during this brief and challenging session. The Judiciary and Banks Committees have considered several bills that affect the condominium industry. Listed below is a summary of the three priority bills that the condominium industry is working on this session that we wanted to share through our newsletter. All three of these bills received a public hearing and were approved by their respective committees. In order to become law, these bills would have to be acted upon by the full General Assembly prior to the May 7th adjournment.
The following is a summary of the content and status of these three pieces of legislation:
1) HB 5590, "An Act Establishing a Pilot Program for the Mediation of Condominium-Related Disputes"
This bill was introduced by the Legislature's Judiciary Committee. It specifically requires the chief court administrator to establish a pilot mediation program for disputes between two unit owners, or a unit owner and the executive board of a condominium or other common interest community. The administrator must establish the pilot program in the Hartford, New Haven and Stamford-Norwalk judicial districts. The bill also establishes a process for a party to request mediation. Participation is voluntary for both parties. The requesting party must pay a $50 initiation fee and an additional $200 fee if the other party agrees to mediate and pays a $250 filing fee. If mediation is successful, the bill requires the parties and the special master conducting the mediation to prepare and sign a written agreement.
It also requires the chief court administrator to establish qualifications for attorneys experienced in community association law to serve as special masters for the mediations. His office must then develop a process for attorneys to apply to serve as special masters and create a list of such attorneys and make it available to participating courts. The bill requires the civil session presiding judge of any participating court to maintain annual statistical data on the pilot program and the chief court administrator must report this data by January 15, 2017 to the Judiciary Committee.
Imagineers and the condominium industry have worked closely with the co-sponsor of this proposal, Representative James Albis (D, East Haven). Imagineers testified in support of this bill at the Judiciary Public Hearing held on March 24, 2014. The bill was approved by the Judiciary Committee on March 28, 2014 and is now awaiting action on the floor of the House of Representatives. Concern however exists that the bill will not be voted on or passed since a review by the Office of Fiscal Analysis indicated that it would pose an expense to the state if implemented.
2) SB 457, "An Act Concerning Revisions to the Common Interest Ownership Act"
This bill was introduced by the Judiciary Committee but it has several co-sponsors including: Representative Berger (D, Waterbury), Representative Albis (D, East Haven), Senator Doyle (D, Wethersfield) and Representative Mike Alberts (D, Woodstock). It makes various revisions to the Common Interest Ownership Act (CIOA) and related laws affecting condominiums and other common interest communities. Specifically, it requires the minutes of executive board meetings to indicate how each board member voted on any final action the board proposed to take, unless the board approved the action unanimously. Under CIOA, the default rule for unit owner meetings is that the majority of votes cast represent the owners' decision. Current law provides an exception if other CIOA provisions, other laws, or the community's declaration requires a larger number or fraction of votes. The bill instead provides that other CIOA provisions, other law, the declaration or bylaws can require something different than a majority vote. The situation where this most often will come into play is the election of directors. Many associations will place the candidates receiving the highest amount of votes, such as may occur being if there are two positions open and five members running. Associations typically will place the two members that received the most votes yet they may not have garnered votes from more than 50% of those casting ballots.
The bill adds to the information that an association must include in the resale certificate provided to a buyer requiring a disclosure of whether the association has had a financial report prepared by a CPA in the last 5 years and indicating what form of report was issued. It doubles the maximum fine, from $500 to $1,000, for certain criminal acts regarding community association management services. Under the bill, dues, assessments or other amounts payable to associations of common interest communities as defined under CIOA, not just those communities organized under CIOA, are exempt from the law's restrictions on private transfer fees. The CIOA definition covers all common interest communities, including those organized before CIOA was enacted in 1984. Thus, the exemption applies to all common interest communities, regardless of when they were formed.
Imagineers testified in favor of this bill with certain revisions on March 24, 2014 before the Legislature's Judiciary Committee. Imagineers was successful in presenting alternate language which was incorporated in the bill. The bill was approved by the Judiciary Committee by a 40 yea / 0 nay vote on April 2, 2014 and is now awaiting action by the Senate.
3) HB 5514, "An Act Concerning an Optional Method of Foreclosure"
This proposal was introduced by the Legislature's Banks Committee. By law, in a foreclosure proceeding involving real property, the court may issue a judgment of foreclosure by sale or strict foreclosure. This bill adds another option for certain residential properties called, "foreclosure by market sale," which is a court-approved sale on the open market upon the mortgagee's (lender's) request and with the mortgagor's (borrower's) consent. The bill limits this option to a mortgage that is the highest priority lien on a one-to-four family residential property that is the mortgagor's principal residence.
The bill establishes procedures for the foreclosure by market sale option. It requires a mortgagee to notify a mortgagor, in a specified manner, of the loan default and the option of foreclosure by market sale. It also allows a mortgagee, by filing an affidavit, to proceed with a foreclosure action if certain foreclosure by market sale conditions are not met. It also specifies that it should not be construed as requiring either the mortgagor or the mortgagee to (1) proceed with discussions after the foreclosure by market sale notice has been sent, (2) reach an agreement regarding a listing agent, or (3) approve any purchase offers received.
The condominium industry testified in opposition to this bill at the Banks Committee public hearing held on March 11, 2014. The bill was approved by the Banks and Judiciary Committees and is now awaiting action by the House of Representatives. The condominium industry would like clarification that this bill does not violate any due process rights and that it does not disrupt the condominium priority lien bill that passed last session.
As of this writing, it is difficult to predict the fate of these three condominium related bills. While the condominium industry continues to work with legislative decision makers on final language, these bills could conceivably die on either the House or Senate calendars due to the time constraints of the session's May 7th deadline.
Thank you for reading the Imagineers Board Newsletter. If you have any question or need any additional information on any articles provided in this newsletter, please contact us at 1-800-560-7268.
Imagineers LLCEmail: Gpassacantando@imagineersllc.com
Phone: 1-800-560-7268
Fax: 860-236-3951
Web: http://www.imagineersllc.com
