Association Governing Board Member Education

Board members of both large and small associations often lack the knowledge of laws and regulations necessary to function as the laws intend. Boards of directors for CICs are typically comprised of volunteers. Depending on the eligibility requirements in the association bylaws, these are more often than not unit owners with no particular specialized skills or professional knowledge required to serve.

Publicly provided mandatory education is a solution to this knowledge gap. Governing board members need readily accessible educational resources, especially during transition from developer control and for novice board members. NVAR recommends a new requirement for all association board members to complete a virtual and web-accessible, on-demand education and training program when elected or re-elected to the governing board of the association. Topics should include, but not be limited to, an orientation to CIC Board resources and association board responsibilities (especially the obligation to maintain, repair and replace common property), management and facilitation skills, reserves, inspections, insurance, and borrowing.

Common Interest Community Board Enforcement Authority

The Common Interest Community Board and the Office of the Common Interest Community Ombudsman were established by Virginia statute and became effective July 1, 2008. The Common Interest Community Board regulates common interest community managers, as well as certain employees of licensed management firms. The Board's authority also includes condominium and time-share program registrations, and extends to transactions occurring within Virginia, even if the property involved is located outside the Commonwealth. The Office of the Common Interest Community Ombudsman is separate and distinct from the Board. The Ombudsman's responsibilities include offering assistance and information to association members regarding the rights and processes available to them through their associations.

Neither entity has adequate enforcement mechanisms to hold Common Interest Communities who violate laws accountable for these actions. NVAR supports allowing the CIC Board and the Virginia DPOR to assess additional penalties or implement appropriate enforcement mechanisms for violations of the POA and Condo Acts and the Resale Disclosure Act.

Reserve Study Qualifications and Funding

Virginia law requires that association governing boards conduct a reserve study at least once every five years but does not specify the qualifications for individuals who must perform the study. The absence of specifications is in recognition of the wide range and variety of capital components in CICs. Though many associations choose to hire independent consultants, such as reserve study firms, professional engineers, or architects, there is no requirement that an independent entity conduct the reserve study. This allows an association governing board to conduct the reserve study, regardless of qualifications, or select agents that may be unfamiliar with conducting a reserve study.

NVAR recommends requiring independent, appropriately qualified entities perform reserve studies for CICs within two years of the issuance of the first occupancy permission (Certificate of Occupancy or equivalent), and every five years thereafter.

While reserve studies are required under law, CICs are not actually required to set aside funds for reserves or provide funding for reserves. As such, NVAR also recommends requiring community associations to fund reserve contributions at a minimum to the levels recommended in the current reserve studies. And to ensure that the reserve funds are actually used and incorporated into the Association budget, NVAR recommends requiring reserve contributions to be adjusted in conjunction with budget development and review, to reflect changes in reserve funding resulting from expenditure of reserve funds or changes reflected in updated reserve studies.

Adding Purchaser's Agent to Resale Disclosure Act

The Resale Disclosure Act requires a seller to deliver the resale certificate to the purchaser. This is contrary to common practice where seller agents typically deliver the certificate to purchaser agents. Not including "purchaser agents" in the code creates liability concerns for seller agents who deliver a certificate to purchaser agents, but not directly to the purchaser themselves. NVAR recommends adding "purchaser's agent" into the resale disclosure act and anywhere else necessary in the code to protect the common practice of seller agents delivering resale certificates to purchaser agents.

Waiver of Rights Under Resale Disclosure Act

Under the new Resale Disclosure Act (RDA) certain language regarding variation by agreement was omitted by the recent recodification. In the old §55.1-1808 of the Property Owners’ Association Act (POAA), subsection (G) stated, “Except as expressly provided in this chapter, the provisions of this section and §55.1-1809 [regarding delivery of the resale disclosure packet to the Purchaser in a real estate transaction] may not be varied by agreement, and the rights conferred by this section and §55.1-1809 may not be waived.” This language has not been included in the RDA, eliminating a significant consumer protection and allowing for the right of cancellation and the right of delivery conferred by the RDA to be waived by the Purchaser in a real estate transaction. These rights were created to give Purchasers the opportunity to review resale certificates to ensure the properties they were purchasing were not subject to violations and were part of common interest communities that had adequate reserves.

Further, §55.1-1902 (Condos) and §55.1-2102 (Co-ops) are still in effect, creating a discrepancy between purchases within property owners’ associations and other types of common interest communities. By these existing statutes, the rights conferred cannot be varied by agreement but this language no longer exists in the POAA. Additionally, §55.1-1972 in the Condo Act lists specific exemptions from the obligations under the RDA, creating another discrepancy as purchasers in general real estate transactions are not listed; however, as the RDA currently reads, purchasers can exempt themselves by agreement, rendering the change to this statute with the recodification useless. NVAR supports adding the language prohibiting variation by agreement and waiver of the rights conferred by the RDA back to the RDA to correct these discrepancies and to protect purchasers of properties within common interest communities.

CIC Transparency and Consumer Protection

Currently, CICs are required to file an annual report with the CIC Board, but the report only includes minimal information including the association’s location and governing officers. As it stands now there is no penalty or incentive for associations to follow the laws.

NVAR supports increasing the information in this annual filing and the enforcement of the registration as a possible solution to some persistent problems such as overcharging fees, the inability for buyers and sellers to obtain timely and complete resale certificates, and associations’ ability to maintain financial stability. NVAR recommends legislation requiring the CIC annual report to include complete copies of the current Resale Certificate with the ability for this annual filing to be maintained on a central database available to the public.