Imagineers Spring 2011 Newsletter

Legislative Update - Condominium / HOA

The 2011 Legislative Session is the most difficult the Connecticut General Assembly has faced in decades. The "long" five month session convened on January 5th and will adjourn on June 8th. Connecticut has a new Governor - the first Democrat elected in twenty-four years and many new members in the General Assembly. Currently, the state faces over a $3.2 billion dollar deficit for fiscal year ending June 30, 2012. Projections for fiscal year 2013 indicate a deficit of over $3.5 billion. All state revenue sources have declined and the unemployment rate remains at approximately 9%. Governor Malloy has proposed a "shared sacrifice" budget that cuts spending and increases taxes on all income levels. The Democratic controlled Appropriations Committee will report its version of the budget by its April 26th deadline. Although not many changes are expected by the Appropriations Committee, the Governor's budget relies on $2 billion in state employee concessions over the next two years. Governor Malloy is currently formulating an ancillary budget which will include deep spending cuts and lay-offs if an agreement is not reached with the state employee unions.

The Legislature is still considering over 2,000 bills during this long and challenging session. Not all bills are budget related and the Judiciary and Insurance Committees have considered several bills that affect the condominium industry. Only six of these condominium industry related bills received public hearings and therefore, are the only bills that can be acted upon by the committee.

The following is a summary of the content and status of these several pieces of legislation:

1.) SB 1205, "An Act Concerning Foreclosure Actions Against Unit Owners in Condominiums or Common Interest Communities for Overdue Assessments" was introduced by Senator Paul Doyle (D, Wethersfield). This bill would prohibit a condominium or common interest community association from foreclosing on a unit unless the overdue assessments and fees are at least three months past due. It received a public hearing by the Judiciary Committee, however, the bill's proponent has said it will most likely not be approved by the Committee this session.

2.) SB 1208, "An Act Concerning Financial Reporting by Condominium and Common Interest Community Associations". This proposal, which would establish additional financial reporting requirements for executive boards of common interest communities, including those created prior to 1984, was introduced by Senator Bob Duff (D, Norwalk), on behalf of condominium owners. The condominium industry testified in opposition to the bill at the public hearing and is currently working with Senator Duff to modify this proposal prior to approval by the Judiciary Committee.

3.) HB 6620, "An Act Concerning Condominiums and Common Interest Ownership Communities". This proposal was introduced by the Judiciary Committee. Among other things, it establishes an Office of Condominium Ombudsman to resolve disputes between condominium owners and condominium associations. The industry testified against this aspect of the bill, favoring instead, a system of alternative dispute resolution. In addition, the proposed bill makes a major change to the budget approval process for some common interest communities. In essence the proposed bill would change the number of condominium owners needed to reject a budget and/or special assessment equaling more than 15% of the total of the annual budget, from a majority of "all" owners to, a majority of only the owners voting at the meeting. This bill received much testimony and discussion during the recent Judiciary Committee public hearing. The Attorney General submitted testimony in favor of the Condominium Ombudsman stating "no office exists to effectively assist these unit owners." However, the industry argues that major changes to the Common Interest Ownership Act were recently passed by the Legislature creating transparency and due process in the system. Some legislators argued to let the process created last year move forward to see if it works before additional changes are made. The industry will continue to work to modify this proposal which will most likely be approved by the Judiciary Committee but it remains uncertain if it will pass the full General Assembly prior to the June 8th adjournment.

4.) HB 6613, "An Act Concerning Insurance Requirements Under the Common Interest Ownership Act" was introduced by the Judiciary Committee. The bill eliminates certain insurance requirements under the Common Interest Ownership Act enacted in Public Act 09-225, including requirements with respect to buildings containing units divided by vertical boundaries and applicability of requirements to common interest communities created before January 1, 1984. At the Judiciary Committee public hearing, only one person testified in opposition to the bill.

5.) HB 6237, "An Act Concerning Insurance Required Under the Common Interest Ownership Act" was introduced and approved by the Insurance Committee by a 10 yea/ 7 nay vote. This bill requires a community association manager acting on behalf of a residential common interest community to obtain rate quotes from at least two different insurance agencies for certain insurance policies required under the Common Interest Ownership Act (CIOA). The bill was recently referred to the Judiciary Committee for approval. It remains unclear if the Judiciary Committee will support passage of this proposal prior to its April 15th deadline. While the Independent Insurance Agents of Connecticut, Inc. testified against this proposal stating "this two quote requirement will not improve any part of the process of procuring insurance", several condominium owners testified in favor.

6.) HB 6234, "An Act Concerning Elections of the Executive Boards of Directors of Condominium Unit Owners' Associations and Changes to the Common Interest Ownership Act". This bill also originated in the Insurance Committee and was recently referred to the Judiciary Committee. It prohibits the providing, offering, or acceptance, by an executive board member of a common interest community or a person seeking election as an executive board member any item of value based on any understanding that the vote, official action or judgment of such member or person seeking election would be or has been influenced, and prohibits the managing agent or manager of an association from soliciting proxies from unit owners or campaigning for any candidate seeking election as an executive board member. The Judiciary Committee is currently reviewing this bill.

In conclusion, as of this writing, it is difficult to predict the fate of these bills this session. Many bills, including those related to condominiums, could conceivably get lost in the budget debate and die on the calendar. There is also the possibility of a budget stalemate which could promote the passage of non budget related bills, with little controversy, prior to the June 8th adjournment. Most likely, any bill with a fiscal note (one that costs the state money) will not survive the legislative session.

Prepared by Lori J. Samele-Bates, Law offices of Brown Rudnick on behalf of Imagineers LLC

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