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2016 Virginia Legislative Updates and Annual Checklist

The Virginia General Assembly approved a number of bills in the 2016 legislative session which impact, directly or indirectly, common interest communities, and the Governor of Virginia signed the following bills into law.

These new laws amend the Virginia Property Owners' Association Act (Va. Code Ann. 55-508, et seq., as amended (1950)) (the “POA Act”), the Virginia Condominium Act (Va. Code Ann. 55-79.39, et seq., as amended (1950)) (the “Condominium Act”), and other statutes that may affect common interest communities. These new laws will take effect on July 1, 2016. Below is a brief summary of the legislation that directly or indirectly influences common interest community associations.

Corporate Action Without a Board Meeting[1] – HB 234

This bill establishes a procedure by which actions of the board of directors of a nonstock corporation may be taken without a meeting. Except to the extent the articles of incorporation or bylaws require action by the board of directors be taken at a meeting, Section 13.1-865 of the Virginia Nonstock Corporation Act authorizes action without a meeting if each director signs a consent describing the action to be taken and delivers it to the corporation. However, this bill now permits action taken by fewer than all of the directors if authorized in the articles of incorporation. Such action without a meeting of the board requires the consent of a majority or quorum of the members of the board. Action under this procedure by fewer than all of the directors requires the corporation to give written notice of the proposed corporate action to all directors not less than 10 business days before the action is taken. Such action is not permitted if any director objects to the taking of such proposed action within 10 business days after notice of the proposed action is given.

Action taken under this section is effective when the last director necessary to satisfy the requirements set forth above signs the consent. However, if the consent specifies a different effective date, then the action taken is effective as of the date specified therein, provided the consent states the date of execution by each director.

This bill does not, however, change the open meeting requirements set forth in the Condominium Act[2] and Property Owners' Association Act.[3] We recommend that a board only take action without a meeting in situations where immediate action is required and the board is not able to meet.  For example, if there is an emergency situation where time is of the essence, of course, the board should obtain the requisite vote and proceed.  After that vote has been obtained, the board should report the vote at its next board meeting and record it in the meeting minutes. 

Please note, Section 13.1-814.1(b) of the Virginia Nonstock Corporation Act provides that certain provisions need not be set forth in the articles of incorporation of a community association and shall be effective if set forth in the bylaws. Taking action outside of a board meeting is, however, not one of the provisions included in Section 13.1-814.1(b). Therefore, authority to act outside a meeting, and without unanimous consent, exists only when provided for in an Association's articles of incorporation.

Land Bank Entities Act[4]- HB 268, SB 414

This bill seeks to address the problem of abandoned and derelict property/lots. It authorizes the establishment of a land bank entity by any locality, or two or more localities combined, to assist in addressing vacant, abandoned, and tax-delinquent real properties. Under the bill,  a locality has the option of (i) creating an authority or a nonprofit, nonstock corporation or (ii) designating an existing nonprofit entity that is exempt from taxation under § 501(c)(3) of the Internal Revenue Code and eligible to receive donations from a locality, pursuant to § 15.2-953, to carry out the functions of such land entity.

The bill provides that land bank entities may acquire real property within or receive transfers and conveyances from the participating localities. Land bank entities are authorized to receive funding through grants and loans from participating localities, the Commonwealth, the federal government, and other public and private sources. In addition, the bill authorizes a locality to deem paid in full all accumulated taxes, penalties, interest, and other costs on any tax-delinquent property in exchange for conveyance of the property by the owner to a land bank entity. The bill also authorizes a participating locality to remit to the land bank entity up to 50 percent of the real property taxes collected on real property conveyed by a land bank entity for up to 10 years after the conveyance. This bill is a recommendation of the Virginia Housing Commission.

Rental of Units and Lots; Disclosure Packets[5] - HB 684

This bill prohibits a unit owners' association or property owners' association from charging an annual or monthly rental fee or any other fee not expressly authorized in the Condominium Act or Property Owners' Association Act, respectively. The bill also (i) provides that an association has no authority to evict a tenant; (ii) provides that if an owner designates a person licensed by the Real Estate Board as the owner's authorized representative with respect to any lease, the association shall recognize such representation without a formal power of attorney; and (iii) adds certain definitions regarding delivery and receipt of disclosure documents. The bill conforms the Property Owners' Association Act to the Condominium Act relating to provision of disclosure documents in electronic form and charges therefor. Furthermore, please note that when an association's governing documents provide authority for certain actions that are otherwise prohibited by this bill, the governing documents will govern and such provisions shall be enforceable.

Additionally, the Condominium Act has been amended such that a unit owners' association is no longer authorized to require a copy of a unit owner's lease with a tenant, or to require a unit owner to complete a unit owners' association document disclosing the name and contact information of the tenants. The unit owners association may still require a unit owner to provide the unit owners association with the names, contact information and vehicle information for such tenants, but unit owners may disclose such information in a format of their choosing.

Automatic Notification of Registration of Sex Offenders[6] – HB 1101

This bill provides that the association for a common interest community may request and receive from the State Police notice of the registration or reregistration of sex offenders whose registered address is in the same or a contiguous zip code as that of the common interest community.

Consent of Common Interest Community Association Not Required[7] – HB 1146; SB 389

This bill prohibits a locality from requiring the consent of a condominium association, homeowners' association, or real estate cooperative prior to the issuance of a permit, certificate, or license, including a building permit or a business license.

Virginia Residential Property Disclosure Act[8] – HB 1264

This bill provides that, in delivering the residential property disclosure statement to a prospective purchaser of residential property under the Virginia Residential Property Disclosure Act, the owner makes no representations with respect to (i) any covenants and restrictions that may be recorded in land records that affect the real property or any improvements located on the property, (ii) the zoning classification or permitted uses of adjacent parcels, or (iii) the costs associated with maintaining, repairing, or inspecting any wastewater system, including any costs or requirements related to the pump-out of septic tanks. The bill replaces a reference to "certified home inspection" with "home inspection," relating to a prospective purchaser's exercise of due diligence. The bill requires the Virginia Housing Commission (the Commission) to study the provisions of the Virginia Residential Property Disclosure Act (the Act) to determine whether the required disclosures contained in the Act may be consolidated or otherwise addressed in a more comprehensive way. The Commission will report its findings and any recommendations for legislation to the Chairmen of the House Committee on General Laws and the Senate Committee on General Laws and Technology by November 1, 2016.

Condemnation of Common Area[9] – SB 237

This bill provides that, for the purposes of condemnation, the value of a portion of a common area of a property owners' association shall be based on the common area's highest and best use as though it were free from restriction to sole use as a common area. The bill also provides that it applies solely to condemnation actions, and no common area shall be reassessed for property tax purposes due to the passage of the bill or the valuation standards described in the bill.

Please note that this legislation does not apply to condominium associations.   

WTP Annual Association Checklist

This best practice Checklist includes certain tasks that Associations should consider performing annually. Please feel free to contact our office if you have any questions regarding the following items.

•   Annual Virginia State Corporation Commission Filings. All HOAs and incorporated Condominium Associations are required to submit an Annual Report and Annual Registration Fee. Keep your Association registered with the state and ensure that the data reported to the SCC is up to date.
•   Hold an Annual Membership Meeting. Associations are required to hold at least one meeting of members each year. Check your governing documents for specifics regarding the requirements for notice and proxies. Please remember that the minimum required notice of the meeting must be provided to all Owners, including those who are not residents, and a quorum must be achieved in order to conduct business. Please contact us if you'd like to review the specific requirements for your Association.
•   Review your Association's Annual Financial Statements. If your Association has been issued an audit report, the board of directors should review the report to identify any concerns and prepare to implement recommendations from the auditor(s).  Ensure that your capital reserves are appropriately funded and consult with management regarding operating expenditures, as necessary. You may also wish to consult with legal counsel to review the status of any accounts in collection.
•   Prepare an Annual Budget. The board must adopt an annual budget. Please reference your Association's governing documents for requirements regarding timing and approval procedures. The annual budget is typically ratified at a membership meeting. You may wish to do this at your annual meeting. 
•   Verify your Association's Insurance. To act in the Association's best interest, the Board should maintain adequate and appropriate insurance coverage. There are many policies available for HOAs and Condominium Associations, including property/casualty insurance; commercial and general liability; umbrella insurance; and workers compensation coverage. A Directors and Officers policy is essential to protect the Association's board members and officers.
•   Reserve Study. Review your Association's Reserve Study and determine if an updated Reserve Study is required. Both the Condominium Act and the Virginia Property Owners' Association Act require that Associations conduct a reserve study at least every five (5) years to determine the necessity and amount of reserves required to repair, replace and restore the capital components; review the results of that study at least annually to determine if reserves are sufficient; and make any adjustments the board of directors deems necessary to maintain reserves, as appropriate.
•   Know Your Association's Governing Documents. Your Association's Articles of Incorporation, Declaration, and Bylaws provide the framework for operating and managing your Association. The Association's Rules and Regulations should reflect the authority granted in the governing documents, and should be reviewed periodically for compliance with state law. The Virginia Condominium Act, Property Owners Association Act, and Nonstock Corporation Act also provide substantive guidance. Please contact our office if the board wishes to review or amend its governing documents. 
•   Consider Joining a Community Association Organization. The Washington Metropolitan Chapter of the Community Association Institute (WMCCAI) offers affordable educational resources relevant to Association board members and volunteers, as well as a number of additional resources for Associations.