Connecticut Condominium/HOA 2013 Legislative End of the Session Wrap-up
The "long" five month legislative session came to a close at midnight on June 5th. Several bills that impacted the condominium industry were introduced in various committees during the past session. Many of those bills did not survive the session, however four key pieces of legislation identified by the industry as priorities did pass and were signed into law by the Governor. This article is a summary of these four bills and how they impact the condominium industry.
Public Act 13-156, entitled "AN ACT CONCERNING THE RECOUPMENT OF MONEYS OWED TO A UNIT OWNERS' ASSOCIATION DUE TO NONPAYMENT OF ASSESSMENTS"
The Common Interest Ownership Act (CIOA) gives common interest community associations seeking to collect unpaid common charges a priority lien over previously recorded first or second security interests (e. g., mortgages). This act makes several changes affecting this priority lien.
Specifically it: 1. extends the period covered by the lien from six to nine months; 2. specifies that the lien applies in all actions the mortgage holder brings to foreclose its mortgage on the unit as well as all actions the association brings to foreclose its lien for unpaid common charges (presumably, this allows the association to invoke the priority lien more than once, if assessments continue to go unpaid - i. e. , it is an "evergreen" priority lien); 3. excludes from the lien any late fees, interest, or fines that the association assesses against the unit's owner during the nine-month period; 4. specifies that the lien includes only reasonable attorneys' fees; 5. requires an association, before bringing an action to foreclose its lien, to provide mortgage holders with (a) 60 days' notice setting forth specified information and (b) a copy of the demand for payment it must already send to the unit owner (it must provide the copy to the mortgage holder at the same time as the unit owner); and 6. excludes costs or attorneys' fees from the association's priority lien if it fails to provide the required 60 days' notice.
The act specifies that CIOA's provisions concerning the priority of association liens (in regard to all other liens and encumbrances, not just mortgages) apply despite contrary provisions in the association's declaration or bylaws. It also specifies that association assessments under CIOA and related attorneys' fees and costs owed by a mortgagor (i.e., the borrower) and paid by a mortgagee, are part of the debt the mortgagor owes to the mortgagee or lienor.
Public Act 13-182, entitled "AN ACT CONCERNING THE BUDGET AND SPECIAL ASSESSMENT APPROVAL PROCESS IN COMMON INTEREST COMMUNITIES"
This act makes it easier for unit owners in certain large common interest communities to reject annual budgets and special assessments.
Under the existing Common Interest Ownership Act (CIOA), common interest community annual budgets and special assessments are approved unless a majority of all unit owners (not just a majority of those voting), or a larger number specified in the association's declaration, votes to reject them.
The act creates an exception for (1) common interest communities that have more than 2,400 residential units and were established before July 3, 1991 and (2) master associations exercising the powers on behalf of one or more common interest communities or for the benefit of the unit owners of one or more such communities, with the same size and establishment requirements as specified above. The act provides that, for these communities and master associations, a proposed budget or assessment is approved unless (1) a majority of unit owners participating in the vote rejects it and (2) at least one-third of unit owners entitled to vote on the measure vote to reject it.
Under existing law and the act: 1. the absence of a quorum in the vote does not affect the budget's or assessment's approval or rejection; 2. if unit owners reject a proposed budget, the last approved budget continues until they approve a subsequent one; and 3. unit owner approval is not required for special assessments that are (1) small relative to the association's budget (unless the declaration or bylaws provide otherwise) or (2) needed in an emergency.
Public Act 13-289, entitled "AN ACT CONCERNING VARIOUS REVISIONS TO THE COMMON INTEREST OWNERSHIP ACT AND THE CONDOMINIUM ACT"
This act makes several changes affecting condominiums and other common interest communities.
It subjects community association managers to disciplinary action for knowing and material violations of the Common Interest Ownership Act (CIOA) or Condominium Act.
The act exempts board members or association officers under CIOA and the Condominium Act from criminal liability, under certain circumstances, for alleged violations of the state building or fire safety code or a municipal health, housing, or safety code. This immunity applies when the board proposes a special assessment to cover the cost of repairs needed to ensure compliance with the codes and the unit owners vote to reject the assessment. (It appears that for communities governed by CIOA, the immunity only applies if the special assessment is proposed according to the law's procedural requirements for such assessments. )
CIOA generally allows executive boards to provide board members and unit owners a schedule of board meetings instead of providing specific notice in advance of each meeting. Under the act, if the board provides unit owners with such a meeting schedule, the secretary or other officer specified in the bylaws must make an agenda available to board members and unit owners no later than 48 hours before the meeting.
CIOA sets certain conditions for proxy voting. The act specifically allows associations to provide proxy forms to unit owners seeking to vote pursuant to a directed or undirected proxy. (A directed proxy specifies how the vote is to be cast, while an undirected proxy allows the person who is given the proxy to decide how to vote. ) The proxy forms must include a blank space for the insertion of the proxy holder's name. The act also allows the forms to include the name of a person the association designates as the default proxy holder. Such a person is authorized to exercise the proxy if the unit owner does not specify the name of the proxy holder subject to the limitations set forth for proxy voting under CIOA and the act.
Under CIOA, associations must keep detailed records of receipts and expenditures affecting their operation and administration and other appropriate accounting records. The act specifies that this includes records relating to any reserve accounts.
Public Act 13-229, entitled "ACT CONCERNING THE REGULATION OF PRIVATE TRANSFER FEES"
This act bans private transfer fees on and after June 24, 2013. A "private transfer fee" is, with some exceptions, a fee or charge payable (1) upon the conveyance and subsequent conveyance of an interest in real property located in Connecticut or (2) for the right to make or accept the conveyance. Under the act, anyone aggrieved by a private transfer fee imposed on or after June 24, 2013 may sue for damages in Superior Court.
For any private transfer fee obligation in existence as of June 24, 2013, the act requires the obligation to be (1) disclosed in any future sale contract and (2) recorded in the town's land records by December 31, 2013. The act also specifies how real property can become unencumbered by an existing obligation.
In summary, it was a long and challenging, yet successful legislative session for the condominium industry. The industry worked tirelessly on several issues including working with the banking industry to reach a compromise on Public Act 13-156, priority lien bill, as well as working with the Governor's Office and Representative Arthur O'Neill (Republican, Southbury) to narrow the scope of Public Act 13-182, budget and special assessment approval process bill, to apply only to common interest communities with over 2,400 units. Many of the other condominium related bills, which the industry opposed, did not survive the 2013 legislative session.
Prepared by Lori J. Samele-Bates, Law Office of Brown Rudnick on behalf of Imagineers LLC
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