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House Bill 371- Proposed Amendments To Ohio's Condominium Act, R.c. 5311

H.B. 371 of the 130th General Assembly of Ohio

House Bill 371 was introduced to the Ohio House of Representatives on December 4, 2013. The Bill has not yet made it to committee hearings for a vote, but, if the Bill is eventually signed into law in its current state, it would mean very important additions and changes to the Condominium Act, Ohio Revised Code Section 5311. Many of these changes are not favorable for condominium associations or their boards. Primarily, Board Members found violating certain provisions are subject to criminal prosecution - first degree misdemeanors (max $1,000 fine and 6 months in jail) or even in some cases, fifth degree felony (12 months and $2,500 fine for first time offenders). And we thought getting volunteers was hard now . . .

We are in communication with local state representatives expressing our opposition to the detrimental provisions of this Bill. If you do not know who your local representative is, please let us know and we will provide that information to you. Please contact them and let them know your opinion of this Bill. Grass roots efforts are always the most effective lobbying technique.

A few of the changes write the Best Practices of associations into law, so some of these changes will not impact many associations.

Please see our summary below to learn how it may affect you.

Please let us know what you think.

The Required Registration of Condominium Associations:

Under the Bill, all condominium associations would be required to register each year with the Division of Real Estate and Professional Licensing of the Ohio Department of Commerce and submit the required registration along with a fee (maximum of $3.00 per unit!). Failure to timely register results in a penalty equal to 50% of the renewal fee. The registration information provided would be used to create a public database of the names of all associations. In this version of the Bill, the names of the affected associations are the only piece of information being compiled.

Grievance Committee and its Powers:

As written, H.B. 371 would establish a new state committee to resolve disputes between owners and associations. The Ohio Condominium Dispute Resolution Commission would have the power to hear and investigate complaints between an owner and an association’s board, requests by a majority of owners to audit board election results; and disputes over access to association records. The Commission would also have the power to subpoena or summon witnesses, compel the production of documents or other evidence and set hearing dates. The Governor appoints the seven members to the Commission, two of whom live in associations but are not board members, two of whom are board members, a CPA, a real estate attorney, and one member who does not live in an association. The Commission must meet at least quarterly.

The Bill permits ANY person (not just an owner or tenant) to file a complaint regarding the activity, practice, policy, or procedure of an association. Also, any person may file a complaint alleging a violation of the provisions dealing with unit owners associations and their records and boards of directors that adversely affect the interest of a unit owner. All complaints must be in writing and submitted to the Division of Real Estate and Professional Licensing on their forms. The complaint must be investigated by the Commission. If the Commission believes a violation has occurred, it may request the county prosecutor to initiate appropriate proceedings or the Commission may perform an audit of the association’s records to ensure compliance with the Condominium Law.

The hallmark of the functionality of condominium associations is self-governance. The board is run by owners of the association, and when a dispute arises, it is left to the board to determine the best course of action and investigate the situation with their fellow owner accordingly. This Bill is essentially taking self-governance away from the associations. For example, as the Bill is now written, an owner could request a hearing in front of the board to dispute an enforcement assessment. If the board determines that the enforcement assessment is proper, the owner can now complain to the Condominium Dispute Resolution Committee, who may overturn their decision.

Board Meetings:

All Board meetings must be open and a portion of the meeting must be allocated to unit owner comments under H.B. 371. All voting would be required to be on the record; and it eliminates the current allowed practice of conducting business in lieu of a meeting with unanimous consent. Accordingly, the board would no longer be able to vote via email or phone. There is no exception for executive session meetings. This would include votes taken on collections actions, meaning that the board must vote publicly on those issues as well. This is a concern because implementing this provision would be a violation of the FDCPA (Fair Debt Collections Practices Act). Board meetings would also be required to have time set aside for comments by unit owners, though how much time is required is not specified.

O.R.C. 5311 already provides that condominiums may hold board meetings by any method of communication as long as each board member can hear and respond to every other board member participating in the meeting. H.B. 371 would add a requirement to that portion of the statute that any participating unit owners must also be able to hear and respond to anyone else participating in the meeting.

Notice of a board meeting would also have to be posted in public places, on an association website, if one exists, as well as sent to the owners at least five days before the meeting. In addition to the notice, the Board must make all public materials provided to the Board Members for the meeting available to unit owners who request them.

Record Keeping:

In addition to documents that currently must be kept by an association under O.R.C. 5311, H.B. 371 would add other records that must be kept including the following items:

Under this Bill, the association would be required to make available the board members addresses. There is no legitimate reason for this requirement since the board operates as an entity, not as individuals.

The new requirements for record keeping were not thoroughly thought out. An example of the inherent problems with this Bill is shown by the new requirement to maintain records of all actions taken by the board without a meeting. Yet, just previous to this, the Bill prohibited actions without meetings.

In addition, the Bill requires the record of approval or denial of all requests for design or architectural review applications be made available.

The Bill provides that a person requesting a review (which can be an owner, manager, or managing agent) shall “submit a notice five days in advance of the date of examination.” This means the person requesting can set the date for the examination with the notice, as long as it is five days from the notice. The board or its manager would be unable to set the time, place and date, but rather, be at the mercy of the person making the request. There is no limitation on the number of requests or the volume of the requests an individual may make.

All ballots, proxies and other voting records of the board must be kept for a minimum of one year.

Interestingly, under the Bill, a single person could hold no more than 15% of the proxies of the association. This would limit the number of board proxies that could be issued. The selection of 15% is purely arbitrary, without any rational basis.

Association Budgets:

Under this Bill, a summary of the final, approved budget, including an explanation of the amount and the method of calculating and funding reserves must be circulated to the owners no later than 30 days after the budget has been adopted.

Changes Affecting Property Managers:

Property managers must either hold an active real estate broker’s license or hold an active real estate salesperson’s license and be affiliated with a broker who has executed a management agreement with the association if they are to manage an association with more than ten units.

Associations cannot hire property managers who do not have the required licensing and affiliation with a broker if the association contains more than ten units.

Additional Record Condominiums Must Keep and Access to Owners:

In addition to documents that currently must be kept by an association under O.R.C. 5311, H.B. 371 would add other records that must be kept including: the names and addresses of board members and officers, records of all actions taken without a board meeting, all financial statements and tax returns (kept for a minimum three years), all current contracts, records of all approvals/denials from the association’s Architectural Review Board, and all ballots, proxies and other voting records of the board (for a minimum of one year).

Criminal Penalties for Non-Compliance:

A violation of O.R.C. 5311.083 (the provision that requires the associations to register with the State) would result in a 3rd degree misdemeanor charge. A violation of O.R.C. 5311.08 (Board Meetings), O.R.C. 5311.09 (Records that must be kept by an association), or O.R.C. 5311.091 (who may examine association records and what must be made available for examination) would carry a 1st degree misdemeanor charge. Finally, a violation of O.R.C. 5311.081 (Powers of the Board, Requirement of Distribution of an association’s final budget to the owners) would carry a 5th degree felony charge. It should be noted, however, that who would be responsible for these criminal charges, whether it would be the association, the Board, the Property Manager or all involved parties, has not been laid out.

Application to Homeowners Associations:

Currently H.B. 371 only applies to condominiums, but the question was raised as to whether homeowners associations should fall under the authority of the new proposed law at the Bill’s introduction. It is possible, should the Bill continue along the path to becoming law, that it could be amended to become binding upon homeowners associations as well as condominiums.

If you would like to read the bill, below is a link to the complete text:

http://www.legislature.state.oh.us/bills.cfm?ID=130_HB_371

The Attorneys at Ott & Associates Co., LPA, frequently write and publish legal articles in order to educate clients on continuously changing laws in each practice area.

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