Today is the day. At noon today (January 11, 2017) the Virginia General Assembly will be called to order and the 2017 session will begin. As a bi-yearly, “short session,” the 2017 Session will span only 45 days and the General Assembly will consider between 2500 and 3400 bills (beginning January 11, 2017 and ending, sine die, on February 25, 2017). In 2015, the last “short” session, 2776 bills were introduced (1513 bills were passed; 1497 bills failed).
In 2016, the House of Delegates and Senate voted to carry over 242 bills for consideration in the 2017 session. Several bills affecting common interest community associations are included in the carried over bills and we expect a busy session. In addition to those carry-over bills, the Virginia Legislative Action Committee of CAI (VALAC)(chaired by Jeremy Moss) has been working closely with legislators and stakeholders throughout the off-session on a number of other legislative initiatives.
In 2017 we expect bills to be introduced to address a variety of issues affecting community associations - legislation we have seen recently (related to short-term rentals, home-based business, recycling, service of process, camping and fair housing) and new legislation never before introduced (related to unanimous written consent).
Members of the House of Delegates are limited to introducing 15 bills pre-session. Once the session commences, delegates may introduce an additional five measures. The Senate does not have similar limitations. Even with these limitations on the House of Delegates, we project a very busy session in 2017.
The Virginia Housing Commission – A Quick Primer
The Virginia General Assembly and Department of Legislative Services relies on the Virginia Housing Commission to identify and recommend legislative priorities and policies for adoption or examination by the General Assembly, and to study and provide recommendations to ensure and foster the availability of safe, sound and affordable housing in Virginia.
The Virginia Housing Commission also studies and make recommendations relating to such other housing, real property, and community development issues as requested by the Virginia General Assembly.
During the 2016 session of the General Assembly, four bills affecting community associations (related to short-term rentals, home-based businesses, recycling and fees that may be charged by self-managed communities) were referred to the Virginia Housing Commission for study. Several initiatives considered by the Housing Commission will be considered further as legislation during the 2017 session.
Short-Term Rentals and “Limited Residential Lodging”
In 2016, the Virginia General Assembly Senator Jill Holtzman Vogel (R-Fauquier) introduced Senate Bill 416, the Limited Residential Lodging Act, establishing a statewide framework for short-term rentals, like those provided through AirBNB or VRBO, by preventing localities from prohibiting the “limited residential use” or a private home or attempts to regulate those homes as if there were commercial lodging establishments (such as hotels or motels).
Amendments were added to the bill to clarify the provisions do not alter restrictive covenants limiting short-term rentals.
The measure narrowly passed the Senate (20-19) on the last day of consideration before crossover. However, a substituted bill in the House included a “re-enactment” clause, requiring a year of study and re-enactment before the law becomes effective. The substituted bill received significant support in the House (90-8-1) and Senate (32-7), and allowed additional time for stakeholders to consider the impact of the bill.
Throughout the off-session, limited residential lodging has been studied by the Virginia Housing Commission, soliciting input from local governments, the state lodging industry and hosting platforms (AirBNB, VRBO, etc.).
Consensus among the stakeholders has been difficult to achieve (an understatement) and consensus legislation was not approved by the Housing Commission. Competing stakeholders have held proposed legislation “close to the vest” and as of January 9, 2017, no legislation has been introduced.
We forecast that several bills will be introduced addressing short-term rentals. Legislation similar to that which passed last year is likely from short-term rental proponents, but we also expect much more restrictive legislation coming possibly from any of the Senate Republicans (even though this issue has not seen divisive party support or opposition). Finally, we expect legislation somewhere in the middle, attempting to strike a balance between the competing interests.
For more information about short-term rentals in community associations, refer to Short Term Rentals: A Practical Guide, available here.
Home-Based Businesses & Child Care
In 2016, Senator Chap Petersen (D-Fairfax) introduced Senate Bill 238 to provide that a property owners’ association may not prohibit a lot owner from operating a home-based business within his personal residence if the operation of the home-based business is in compliance with all applicable state laws and local ordinances.
Under current law, changed only several years ago, operation of a home-based business may be prohibited if the prohibition was provided in the recorded declaration.
As it has done with all legislation that attempts to abrogate existing, restrictive covenants, VALAC expressed opposition to the bill. Ultimately, a substitute bill was introduced by Senator Petersen in committee. The substitute included specific reference to licensed child care providers, providing that such providers shall “be considered an accessory residential use and shall not be prohibited unless specifically prohibited by the declaration.” The effect of the legislation would have been significant, allowing large child care facilities in any residential community unless expressly prohibited.
The bill was ultimately “passed by” in committee, but referred to the Virginia Housing Commission for study. Vandeventer Black attorney, Jeremy Moss, testified before the Housing Commission in opposition to the bill. The bill was not reported out the Housing Commission. Nonetheless, we can expect an identical (or similar) bill will be introduced by Senator Petersen in 2017.
Resale Fees for Self-Managed Property Owners’ Associations
In 2008, as part of the omnibus bill, House Bill 516 (the same legislation that created the Common Interest Community Board and Ombudsman), the Property Owners’ Association Act was amended to distinguish between those associations that are professionally managed, and those that are not, for the purpose of the assessment and collection of fees related to the provision of association disclosure packets.
Delegate Vivian Watts (D-Fairfax), in 2016, introduced House Bill 710 to conform the maximum fees that may be charged by property owners’ associations for the provision of an association disclosure packet, regardless of whether an association is professionally managed, or not. House Bill 710 was continued to the 2017 session by the House Committee on General Laws Housing Subcommittee to allow study of the proposal by the Housing Commission.
The Housing Commission reviewed the proposed concept at their December 2016 meeting, but consensus legislation could not be a consensus. We expect several different legislative proposals in 2017 to remove the distinction between professionally-managed and non-professionally managed communities for the purpose of resale, but ultimately expect those proposals to be referred again to the Housing Commission.
Fair Housing: Gender and Sexual Orientation
Senate Bill 822 has been pre-filed by Senator Wexton (D-Leesburg) to add discrimination on the basis of an individual's sexual orientation or gender identity as an unlawful housing practice under the Virginia Fair Housing Act. Senate Bill 822 includes a definition of sexual orientation and gender identity.
Senator Wexton introduced similar legislation in 2016 (Senate Bill 67), which was passed by the Senate (25-15), but was not reported out of the House Committee on General Laws Subcommittee #4. Similar efforts to add sexual orientation as a protected class also failed in the 2014 and 2015 sessions.
Service of Process
Senator Wexton also pre-filed Senate Bill 823, requiring that an employee or agent of a common interest community with restricted access (i.e., a gate or key-controlled access doors) must grant entry to a person attempting to serve process on a party who resides in, occupies, or is known to be present in the community.
In 2016, additional protections for community associations were added to a similar bill, requiring the process server be authorized to serve process and (ii) presents to the owner, or its employee or agent, a valid identification and evidence of the process to be served. The bill was not reported out of the Senate Committee for Courts of Justice (was defeated 8-7), but has been reintroduced.
Proposed changes to Section 13.1-916 of the Virginia Nonstock Corporation Act have been proposed by Delegate Albo (House Bill 1527) that would allow for reinstatement of a corporation’s status, regardless of the length of time that has passed since the corporate status was terminated.
Section 13.1-916 of the Virginia Nonstock Corporation Act currently allows for reinstatement within five years and the uniform law provide a period of only two years. Such a significant derivation from current state law and the uniform act is unlikely to garner support, although we favor an increase in the time permitted for reinstatement.
Termination of association’s corporate status, particularly the purging of a corporation after five years, can have significant implications for a community association. It is critical that corporate filings are timely made and corporate records of such filings are kept among the association books and records.
Amendments – Property Owners’ Associations
On February 12, 2016, the Virginia Supreme Court overturned a lower-court decision in Tvardek v. Powhatan Village Homeowners Association, Inc. determining that an amendment recorded in the land records did not include signatures of the lot owners who voted in favor of the amendment.
The Court also held that ratifications signatures are required by the Virginia Property Owners’ Association Act (even if an amendment was approved pursuant to the declaration) and that unless an amendment is ratified pursuant to Virginia Property Owners’ Association Act, an amendment will never become “effective” and the one-year statute of limitations would never begin to run, making amendments subject to challenge in perpetuity.
The ruling in Tvardek v. Powhatan Village Homeowners Association, Inc. has had significant consequence: creating significant uncertainty in the land records, imposing addition burdens and costs on associations, and, potentially, misreading the application of the Act on associations.
House Bill 1554, introduced by Delegate David Bulova (D-Fairfax), proposes changes to the Virginia Property Owners’ Association Act to address concerns raised by Tvardek, clarifying the Act provisions apply only when a declaration is silent on amendment and including the statute of limitations language from the Condominium Act (providing that an action may not be brought to challenge an amendment more than one year after the amendment is recorded). An identical bill, House Bill 1670, was introduced by Delegate Joe Lindsey (D-Norfolk/Virginia Beach), but we expect only House Bill 1554 to move forward.
Significant stakeholders are in support of the anticipated changes (including CAI) or neutral.
Written Consent to Board Decisions
Delegate David Bulova (D-Fairfax) also introduced House Bill 1553 related to the use of unanimous written consent by the boards of directors of property owners’ associations. As you may know, Section 13.1-865 of the Virginia Nonstock Corporation Act allows for boards of directors to take action by written consent, without a meeting of the board.
Written consents (usually required by governing documents to be unanimous) are typically used by nonstock corporations, including incorporated property owners’ associations and condominium unit owners’ associations, to ensure that time-sensitive opportunities are not missed by the board.
House Bill 1553 amends Section 55-510.1 of the Property Owners’ Association Act adding additional requirements for the use of written consents by boards of directors of property owners’ associations (not condominium unit owners’ associations). The changes
- require consents be delivered to the secretary, included in agenda packet and minutes, and kept in the association records;
- expressly provide that owners may comment on the action during open forum;
- expressly provide the action may be rescinded by the board; and,
- clarify the effective date of the action.
Both the Property Owners’ Association Act and Condominium Act were amended in 2015 and 2016 to enact limitations on restricting rentals. We expect similar legislation in 2017 related to sales. Specifically, we expect legislation providing that except as expressly authorized in governing documents or condominium instruments, no association may (1) require a specific sign provided by the association (at a fee or for free), or (2) causes a violation of the Virginia Real Estate Board regulations.
The anticipated legislation will include authority for associations to regulate signs on common area and address specific issues related to real estate signs through the adoption of rules.
Size of Common Interest Community Board
Legislation introduced in 2016 by Senator Chap Petersen (D-Fairfax) to increase the size of the Virginia Common Interest Community Board and number of resident-members was carried over to the 2017 session for consideration after Board staff-supplied statistics demonstrated the difficulty in selecting and maintaining volunteers to the Board.
Nonetheless, Senate Bill 689 will again be considered by the General Assembly in 2017.
Association Disclosure Packet – Required Form
Throughout the off-session, there has been significant discussion about the effectiveness of Commonwealth-mandated resale disclosure. Provisions of the Code related to resale are among the most-often amended by the General Assembly (the Condominium Act provisions related to resale certificates, for example, have been amended 37 times in the 42 years the Act has been in effect) and those changes have resulted in the required provisions of hundreds of pages of documents to prospective purchasers (to be read, digested and acted upon in three days).
Public policy dictates that homeowners should be informed about association matters that may impact their decision to purchase a home/unit and will educate them about their personal rights and responsibilities with regard to the community association.
Disclosure documents/resale certificates are invaluable consumer information tools because it is vital that buyers know what they are buying. But, care should be given to ensure disclosures are effective in identifying the rights and responsibilities of purchasers that may become members of an association.
In an attempt to address issues related to the effectiveness of disclosures (for Property Owners’ Associations only), Delegate Robert Orrock (R – Caroline and Spotsylvania Counties) pre-filed House Bill 1475 that will require the Common Interest Community Board to revise its one-page disclosure packet cover sheet to summarize “how covenants may impose obligations on the association and upon the land use of individual lot owners.”
Dam Safety – State Funding
Delegate Mark Cole (R- Spotsylvania) and Senator Jennifer Wexton (D-Loudoun) have introduced House Bill 1562 and Senate Bill 1079, respectively, allowing state funds to be dispersed in the form of grants to common interest communities, as defined in § 54.1-2345, that own dams in order to protect public safety and welfare. The grants can be used for the design, repair, and the safety modifications of dams identified in safety reports. The legislation was put in by Delegate Cole expressly by request of a constituent and the Community Associations Institute Virginia Legislative Action Committee, of which Jeremy Moss serves as Chair, supports both bills.
Merger of Property Owners’ Associations
Several years ago, Delegate Jimmie Massie introduced a bill establishing a method for the merger of condominium unit owners associations. At the time, Delegate Massie did not address merger of property owners’ associations because a procedure for merger was already provided for in the Virginia Nonstock Corporation Act.
During the off-session we have been involved in discussions with legislators about easing the ability of property owners’ association to merger, providing economic and administrative reprieve for smaller associations. From these discussions, legislation may be proposed, but will not fundamentally alter the method for merger provided in the Virginia Nonstock Corporation Act.
Although we cannot predict all the legislation that will be introduced affecting community associations in 2017, we can easily predict that the 2017 Session will be an active one.