By RVAR Counsel David Bullington

Comprehensive legislation creating new regulatory oversight of property owner associations and amending the Property Owner Association Act and other related statutes was enacted by the legislature earlier this year and took effect July 1, 2008.  The new legislation encompasses property owner associations, condominium associations, and cooperative associations, referred to collectively as common interest communities (“CICs”).  The law provides increased financial oversight of CIC managers, as well as new methods of redress for complaints against CIC associations. 

The new law creates a Common Interest Community Board to regulate CICs.  The law requires licensure of persons and entities who manage CICs for compensation, and also requires certification of supervisors and managers of such firms. The law imposes fiduciary duties – the highest degree of legal duties -- on CIC managers, and requires fidelity bonds or employee dishonesty insurance.  The law requires CIC managers to develop management policies and accounting procedures.  Some persons are exempted from these requirements, including residents or board members acting without compensation, and real estate licensees selling or leasing properties within CICs.  Associations that have governing bodies, collect mandatory assessments, and maintain any common areas are subject to the law.

The new law requires CIC associations to establish procedures for the resolution of written complaints, maintain records of complaints, and provide forms and written procedures to individuals wishing to file written complaints.  The law gives the CIC Board broad regulatory powers to investigate complaints, establish regulations, impose monetary penalties, and bring suit or intervene in court actions where Board regulations or statutes are violated.  The CIC Board will be composed of 11 members, drawn from various walks of life, including developers, CIC managers, and citizens who live in CICs.

An important “consumer” feature of the legislation is the creation of the office of CIC Ombudsman.  The Ombudsman can provide assistance to homeowners and others with questions or disputes regarding CIC associations.  The Ombudsman can take and investigate complaints, require production of records from CIC managers, and recommend action to the CIC board.  The Ombudsman should be an excellent contact and resource for homeowners, agents, and others with questions or problems concerning CIC associations, rules, or fees.

The new law imposes an annual assessment of 0.02% of annual gross assessments of CIC associations.  These assessments will be used to fund the CIC Board and Ombudsman, and a transaction recovery fund similar to that for real estate agents and contractors.  

The law also amends pertinent statutes to limit and standardize the fees which may be charged and collected by CIC associations for disclosure packets.  These provisions of the law were requested by VAR as a result of complaints regarding excessive and varying fees being charged by CIC managers in certain areas.  CIC associations may charge $150.00 for a hard copy of a disclosure packet, and $125.00 for an e-mail copy of the packet to two addressees.  An additional hard copy may be obtained for $25.00.  Updates may be requested for up to 12 months for a fee of $50.00.  An inspection fee of $100.00 may be collected for inspecting the exterior of a dwelling if required.  Fees not expressly allowed are prohibited.

For additional information on this new law, there is an excellent video presentation on the VAR website, www.varealtor.com, by Lem Marshall, VAR counsel.