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Homeowners' Association Board Accountability And Transparency

Concerning practices of unit owners' associations, and, in connection therewith, authorizing the enforcement of certain matters regarding unit owners' associations in small claims court and limiting the conduct of unit owners' associations in collecting unpaid assessments, fees, and fines.
2022 Regular Session
Bill Summary

Section 1 of the bill authorizes a party in a matter concerning rights and responsibilities arising under the declaration, bylaws, covenants, or other governing documents of a unit owners' association (HOA) to enforce those rights or responsibilities in small claims court if the amount at issue does not exceed $7,500, exclusive of interest and costs. The party may also seek declaratory relief in small claims court. Section 2 specifies that the authority to enforce rights and responsibilities in small claims court applies to an HOA's collection of fines from a unit owner if the amount of fines, exclusive of interest and costs, does not exceed $7,500.Section 2 also requires an HOA that voluntarily conducts a reserve study to also conduct a reconciliation of all of its reserve accounts at the time of conducting the reserve study.

With regard to a unit owner's delinquency in paying unit owners' association (HOA) assessments, fines, or fees, section 2 also 1 of the bill :

  • Requires an HOA to alert first contact the unit owner regarding the delinquency by, in addition to sending a notice of delinquency to the unit owner as required by current law, attempting to contact by certified mail and by posting a copy of the notice on the unit owner's property, contacting the unit owner by at least 2 one other methods method of communication, including first-class or certified mail, an e-mail, a telephone call or voice mail or a text message. or an in-person contact. The HOA must keep records of its attempts to contact contacts to the unit owner regarding the delinquency. The unit owner may identify a language other than English in which the unit owner wants the HOA to send all correspondence and notices to the unit owner. The unit owner may also identify another person to serve as a designated contact for the unit owner.
  • Prohibits an HOA, or a property management company acting on behalf of an HOA, from referring the delinquent account to a collection agency or attorney unless a majority of the HOA's board of directors vote to refer the matter on the record at a public hearing;
  • Prohibits an HOA from imposing late fees, fines, and interest on a per-diem basis in an amount that exceeds the lesser of $50 per day or $500 total;
  • Prohibits an HOA from assessing late fees and fines in an amount or manner that renders the HOA dependent on the late fees or fines for the purpose of generating revenue for the HOA's general expenses;
  • Prohibits an HOA from imposing daily fines and requires the HOA to provide a unit owner a period to cure a violation of any HOA governing documents before the HOA may fine the unit owner and to provide the unit owner 2 30-day periods to cure the violation before the HOA may take legal action against the unit owner, which legal action for unpaid fines cannot include foreclosure. A violation that the HOA reasonably determines is a threat to public safety or health requires only a 72-hour period to cure before the HOA may fine the unit owner.
  • Along with section 3 , prohibits an HOA from charging a rate of interest on unpaid assessments, fees, or fines in an amount greater than 8% per year;
  • Requires an HOA, on a monthly basis, to send each unit owner with an outstanding balance owed to the HOA an itemized list of all assessments, fines, fees, and charges owed;
  • Prohibits an HOA from assessing a fee or other charge for providing the unit owner a statement of the total amount that the unit owner owes the HOA;
  • Requires an HOA to adopt a policy to provide, the unit owner with contact with a notice of delinquency, information for one or more foreclosure counseling services available in the county in which the unit owner's common interest community is located; and regarding an alleged violation, a description of the steps that the HOA must take before it can take legal action against the unit owner, and a description of the types of legal action that the HOA may take against the unit owner;
  • Before an HOA may initiate a foreclosure action against a unit owner, requires that the HOA offer the unit owner a repayment plan to pay the debt in monthly installments in an amount determined by the unit owner so long as installments are in amounts of $25 or greater , and the unit owner either declines the offer or, after accepting the offer, fails to make at least 3 monthly payments within 15 days after the installments were due; and
  • Along with section 6 , authorizes a party seeking to enforce rights or responsibilities arising under an HOA's governing documents, in relation to the unit owner's delinquency, to file a claim in small claims court if the amount at issue does not exceed $7,500 exclusive of interest and costs.

Section 3 limits the interest rate that an HOA may apply to a unit owner's past due assessment to an amount not to exceed 8% per year.Section 4 limits the amount that an HOA is entitled to recover in any action or suit that the HOA brings against a unit owner to an amount equal to 3 times the amount of unpaid regular and special assessments plus interest. Similarly, section 5 limits the maximum amount of assessments and associated fees, late charges, attorney fees, fines, and interest that an HOA may recover from the unit owner to 3 times the amount of all unpaid regular and special assessments plus interest.Section 2 authorizes the executive board of an HOA to conduct a disciplinary hearing or determine whether to refer a delinquency in executive session, but the unit owner who is the subject of the disciplinary hearing or referral of delinquency may request and receive the results of the vote taken on the matter.Section 4 provides that fees, charges, late fees, and attorney fees may be subject to a statutory lien but are not subject to foreclosure and places limitations on attorney fees. Section 4 also prohibits a member of an HOA's executive board, an employee of a community association management company representing the HOA, an employee of a law firm representing the HOA, or an immediate family member of an executive board member, a community association management employee, or a law firm employee from purchasing a unit on which the HOA has foreclosed its assessment lien.Section 5 requires an HOA to apply a unit owner's payments first to any unpaid assessments and then to any unpaid fines, fees, or charges. Section 5 also allows a unit owner to file a civil suit against an HOA if the HOA violates any foreclosure laws. The unit owner may seek damages in an amount up to $25,000 plus costs and reasonable attorney fees.

(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)

(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)


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