General Assembly Approves Landlord-Tenant Changes; Establishes Homebuyer Savings Accounts

The 2014 Virginia General Assembly passed measures affecting homeownership, the practice of real estate, property rights and landlord-tenant relations. Your state and local Realtor® associations worked to pass several measures on your behalf, including those introduced as part of our 2014 Realtor® Legislative Agenda (marked with an “R” below).

For the first time, this year the Virginia Association of Realtors® will distribute a Report Card that outlines legislators’ votes on key real estate measures. It will cover both Realtor®-introduced legislation and other designated bills (marked below with “RRC”).

A full list of new laws impacting our industry and region may be found at go.nvar/2014laws.  

REALTOR® AND REPORT CARD BILLS
R - First-Time Homebuyers’ Savings Accounts  HB 331 (Greason) 
Saving for a down-payment and closing costs is one of the most difficult hurdles for first-time homebuyers. To aid this process, Realtors® urged the creation of First-Time Homebuyers’ Savings Accounts to be used for real estate transaction costs listed on the HUD-1 statement. Such accounts would be held at a participating financial institution and may contain cash or other marketable securities.

Account holders may contribute up to $50,000 (post-tax), and then withdraw the principal and any interest earned up to a total of $150,000 without paying state taxes on the earnings. The funds must be used solely for down payment and closing costs for first-time home buyers; federal taxes would still be imposed on the account.  Funds withdrawn for other purposes are subject to recapture taxes and penalties.

R - Vested Property Rights  HB 208 (D. Marshall) 
In several Virginia localities, zoning officials identified existing structures that were no longer compliant with current zoning codes and required their removal from the property. Those structures were built before modern zoning regulations or were built with permits that could no longer be located in official records.

In 2008, Realtors® passed sweeping protections, known as vested rights, for these property owners. This bill clarifies vested rights protections, stating that so long as the homeowner has been paying taxes on the property for the past 15 years, the structure is deemed legal but non-conforming. When repairing or replacing a vested structure, the homeowner may be asked to bring the structure up to current code, but cannot be forced to remove it. 

R - False Criminal Accusations HB 259 (Miller)/ SB 302 (McDougle) 
In 2013, the General Assembly passed legislation granting immunity to real estate licensees who rely upon public information in their real estate listings, unless the licensees have knowledge that the information is false. However, there is now a growing trend of plaintiffs suing an agent for false advertising in a civil proceeding, claiming that the licensee is guilty of criminal false advertising, even if the licensee has not been charged or convicted criminally. This legislation requires attorneys in a civil case to state with particularity any such criminal accusations with supporting evidence, as required with any other court pleading.

R - Landlord-Tenant  HB 273 (Loupassi) 
Under the current Code, owners of more than four rental properties in urban areas, or 10 properties statewide, fall under the Virginia Residential Landlord Tenant Act (VRLTA). Individuals with fewer rentals may choose to adhere to the Virginia Landlord-Tenant Act (VLTA, also known as “common law”). This legislation lowers the trigger number for coverage under the VRTLA to more than two rental properties (in addition to a principal residence). 
 
This bill also conforms the two landlord-tenant acts to eliminate the payment of interest on security deposits, beginning in 2015. Any previously earned interest on leases may be paid out to the tenants. Landlords may charge an administrative fee for expedited return of the security deposits at the tenant’s written request. If no forwarding address is given, the landlord may dispose of the security deposit, regardless of the number of the tenants on the lease, in one year and 45 days following lease termination.

RRC - Business Records  HB 301 (Loupassi) 
When submitting business records as evidence in civil proceedings, those records must be authenticated. This bill allows for authentication through witness testimony, certification from the custodian of the records by affidavit or declaration, or a combination of these methods.

Other business records that are by their nature considered certified may be submitted without authentication. Copies of certified business records may be submitted in lieu of originals. The other party shall receive notice that authenticated business records will be submitted and be given an opportunity to challenge those records. 

RRC - Condominium and POA Records Access  HB 550 (Filler-Corn) 
This bill clarifies the process for members of a Condo or Property Owners’ Association to inspect the association’s records. Residents shall be permitted to inspect association records during normal business hours upon five business days’ written notice to a professionally-managed association, or 10 business days’ written notice to a self-managed association.

RRC - Condominium and POA Late Fees  HB 566 (Watts) 
Condo or Property Owners’ Associations may not assess a late fee of more than 5 percent for non-payment of assessments or installments, unless the association’s declarations, rules or regulations allow for a different amount. Previous Code permitted other late fee amounts only if they were included in the declarations.

RRC - Unlawful Detainer; Past-Due Rent  HB 596 (Miller) 
When landlords take their tenants to court for unpaid rent, they include the amount to be collected in the filing. Often, by the time the case is heard before a judge, additional rent is due to the landlord. This legislation allows the landlord to collect all amounts due as of the date of the hearing, rather than just the amount that was due as of the initial filing of the unlawful detainer action.

RRC - Appraisal Management Companies  HB 762 (Minchew) 
This bill clarifies that the Commonwealth is required to regulate AMCs, and that no AMC shall operate without a valid license. This regulation will include initial licensure and background checks beginning in 2014. There will also be a $100,000 bond requirement for AMCs so that if they go out of business, they will have sufficient funds to pay any outstanding fees owed to individual appraisers.

RRC - Change in Circumstances Disclosure  HB 799 (Simon) 
Several years ago, Realtors® requested changes to the Virginia Residential Property Disclosure Act which moved the disclaimer statements to the Real Estate Board website. However, a clause remained in the Code that required sellers to certify in writing that there had been no change in circumstances relating to those disclaimer statements. To simplify this process, the recertification form is eliminated and disclosure is required only when there has been a material change to the property prior to settlement.

R - Condominium and POA Charges  HB 900 (Peace) 
This legislation clarifies several provisions related to fees charged by Condo and Property Owners' Associations. First, associations may not charge separate inspection fees for unimproved lots, except for those fees already outlined in the Code. They also may not charge sellers for website access to request the resale disclosure packet.

The choice of electronic packet delivery is at the option of the seller, and up to five electronic copies of the disclosure packet shall be delivered for the same fee in a professionally managed association. Those five copies may go to the seller, the seller’s agent, the purchaser, the purchaser’s agent and one additional person designated by the requestor. If the resale packet is delivered using a commercial mail delivery service, the right of cancellation is set at three days following delivery. 

RRC - Flood Insurance Coverage  SB 74 (Puckett)
Current Virginia Code prohibits lenders from requiring property casualty insurance in amounts exceeding the replacement value of the improvements on a property. This bill extends those provisions to flood insurance coverage and prevents mortgage lenders from requiring flood insurance coverage in an amount exceeding the replacement value of the property’s improvements. 

OTHER BILLS OF INTEREST
Death or Disability of a Broker  HB 251 (Surovell)/SB 438 (Barker) 
When a broker dies or is disabled, there can be confusion or disputes as to who will assume the responsibility of running the brokerage. The Virginia Real Estate Board is now required to notify brokers of their ability to designate an agent who would run the brokerage for 180 days following the broker’s death or disability. Those agents include, in order of priority: the broker’s personal representative; the person holding power of attorney; the broker’s executor; an adult family member of the broker; or an employee of the broker.

Patent Infringement  HB 375 (O’Quinn)/SB 150 (Stuart) PENDING
In recent years, companies have falsely claimed that small businesses, including some real estate brokerages, have infringed on a variety of patents that the companies hold. These “patent trolls” can target real estate companies by claiming patents on products ranging from document scanners to software that populates company websites with real estate listings. They seek cash awards of tens of thousands of dollars from the brokerages to satisfy the claimed patent infringement, or threaten to take the real estate office to court.

This legislation prohibits making patent claims in bad faith, and empowers the Attorney General to investigate false patent claims. The Attorney General or any Commonwealth’s Attorney may bring action in circuit court against companies making false patent claims.

Property Tax Assessments  HB 525 (Pogge) 
Localities are currently required to provide homeowners an annual assessment statement listing the current and the previous year’s appraised and assessed values of both land and improvements. This bill requires localities to provide the following additional information: the prior two years of values; the new tax rate if established; the prior two years’ tax rates; and the percentage changes in the prior tax rates. Homeowners will also be notified of their ability to review and copy records in the assessor’s office.

Property Tax Exemptions for the Elderly and Disabled  HB 1000 (Minchew)
Existing law allows Virginia localities to offer property tax relief to homeowners who are over 65 or who are permanently and totally disabled. A recent Attorney General’s opinion stated that this tax relief may not be available to these individuals if they hold their properties in a trust or as tenants for life. This legislation clarifies that homeowners holding property in this manner may still claim any local property tax exemption that would otherwise be offered to them.

Carbon Monoxide Alarms in Rental Units  SB 490 (Norment)
Under the Virginia Residential Landlord-Tenant Act , a tenant may now request in writing that a carbon monoxide alarm be installed in the rental unit. The landlord shall have 90 days to install the alarm in accordance with standards set forth in the building code, and may charge the tenant a reasonable fee for the installation. It will be the landlord’s responsibility to maintain the alarm once installed.