Landmark Legislation in Virginia
By Ronald P. Kirby and John H. Rust, Esquire
In 1974, the Virginia General Assembly passed the Virginia Condominium Act which was the first second-generation consumer oriented legislation governing the creation and operation of the condominium form of ownership in the nation. Later, 33 states passed similar legislation, using Virginia as a guide, for their statutes. In fact one state copied it so closely that it failed to remove the “Commonwealth of Virginia” from their adopted law.
Well, Virginia has done it again with the passage of House Bill 516 (Act) (Delegate Terrie Suit – Virginia Beach, Patron) and the companion Senate Bill 301(Act) (Senator Margaret Whipple – Arlington, Patron). Both bills passed the General Assembly on March 4, 2008 and, was signed by the Governor’s April 23, 2008. Both bills are expected to take effect on July 1, 2008.
This legislation creates a Common Interest Community Board under the Department of Professional Occupation; creates the Office of the Common Interest Community Ombudsman; establishes a criteria for licensing of management companies; establishes a criteria for the certification of managers who perform direct services to communities; requires new and enhanced fidelity bond insurance for management companies and Associations; establishes a Common Interest Community Management Recovery Fund; and establishes the requirements and charges for resale disclosure documents for condominiums, cooperatives and property owners associations in Virginia.
Common Interest Community Board (CICB)
The CICB will consist of eleven members, including three managers of common interest communities, one Virginia attorney whose practice includes representation of Associations, one Virginia certified public accountant whose practice includes providing audit services to Associations, one shall be a representative of the Virginia time-share industry, two shall be representatives of developers of Virginia common interest communities, and three shall be Virginia citizens, one of whom serves, or who has served, on the governing board of an association, and two of whom reside in a common interest community. The CICB assumes the responsibilities now being accomplished by the Virginia Real Estate Board for regulation and administration of condominiums, cooperatives, time-shares and property owners associations including the registration. The CICB will determine criteria for the licensure of common interest community managers to ensure the appropriate training and educational credentials for the provision of management services to common interest communities. Additionally, the CICB will establish the certification of employees of common interest community managers who have principal responsibility for management services provided to a common interest community or supervisory responsibility for employees who participate directly in the provision of management services to a common interest community; approve the criteria for accredited common interest community manager training programs; approve accredited common interest community manager training programs; and establish by regulation both standards of conduct for common interest community managers and employees of common interest community managers certified in accordance with the provisions of this chapter; as well as an education-based certification program for persons who are involved in the business or activity of providing management services to common interest communities. This Board will have the authority to approve training courses and instructors. The awarding of the Accredited Association Management Company (AAMC) designation by CAI will satisfy the licensing portion of the act, while awarding of the Professional Community Association Manager (PCAM), Association Management Specialist (AMS) or Certified Manager of Community Associations (CMCA) designations will satisfy the manager certification requirements of the Act.
The Act provides for broad powers of the CICB in enforcing all provisions of the law, including issuing cease and desist orders and the appointment of a receiver for common interest community managers.
Office of the Common Interest Community Ombudsman
The role of the Ombudsman is to reduce and resolve conflicts among associations and their members, and monitor changes in federal and state laws relating to common interest communities.
The Ombudsman shall be a member in good standing in the Virginia State Bar and shall assist members in understanding their rights and the processes available to them according to the declaration and bylaws of the association. The Office is charged with answering inquiries from members and other citizens by telephone, mail, electronic mail, and in person; provide members and other citizens with information concerning common interest communities upon request; receive notices of filed complaints; assist members in using the procedures and processes available to them within their association, including nonbinding explanations of laws or regulations governing common interest communities or interpretations thereof by the Board, and make referrals to public and private agencies offering alternative dispute resolution services.
Common Interest Community Manager Licensing
The Act defines "Common interest community manager" as a person or business entity, including but not limited to a partnership, association, corporation, or limited liability company who, for compensation or valuable consideration, provides management services to a common interest community. Additionally, the Act defines “Management services” as an entity who is (i) acting with the authority of an association in its business, legal, financial, or other transactions with association members and nonmembers; (ii) executing the resolutions and decisions of an association or, with the authority of the association, enforcing the rights of the association secured by statute, contract, covenant, rule, or bylaw; (iii) collecting, disbursing, or otherwise exercising dominion or control over money or other property belonging to an association; (iv) preparing budgets, financial statements, or other financial reports for an association; (v) arranging, conducting, or coordinating meetings of an association or the governing body of an association; (vi) negotiating contracts or otherwise coordinating or arranging for services or the purchase of property and goods for or on behalf of an association; or (vii) offering or soliciting to perform any of the aforesaid acts or services on behalf of an association.
Excluded from the licensing requirement is an employee of a duly licensed common interest community manager providing management services within the scope of the individual’s employment by a duly licensed common interest community manager; an employee of an association providing management services for that association’s common interest community; a resident of a common interest community acting without compensation,; a member of the governing board of an association acting without compensation ; a person acting as a receiver or trustee for bankruptcy in the performance of his duties as such or any person acting under order of any court from providing management services for a common interest community; a duly licensed attorney-at-law representing an association or a common interest community manager in any business that constitutes the practice of law; a duly licensed certified public accountant providing bookkeeping or accounting services to an association or a common interest community manager; a duly licensed real estate broker or agent selling, leasing, renting, or managing lots within a common interest community; or an association, exchange agent, exchange company, managing agent, or managing entity of a time-share project registered pursuant to the Virginia Real Estate Time-Share Act (§ 55-360 et seq.) from providing management services for such time-share project.
Provisional Licensure
The CICB will issue provisional licenses to any Common Interest Community Manager who applies prior to December 31, 2008 provided the licensee meets the fidelity bond requirements outlined further in this article. The provisional license expires on June 30, 2011 and may not be renewed. After June 30, 2011 Common Interest Community Managers must comply with all licensing requirements of the Act in order to receive a license to manage common interest communities.
Manager and Employee Certification
On or after July 1, 2011, it shall be a condition of the issuance or renewal of the license of a common interest community manager that all employees of the common interest community manager who have principal responsibility for management services provided to a common interest community or who have supervisory responsibility for employees who participate directly in the provision of management services to a common interest community will hold a certificate issued by the Board certifying the person possesses the character and minimum skills to engage properly in the provision of management services or shall be under the direct supervision of a certified employee of such common interest community manager within two years of employment with the common interest community manager. Additionally, a common interest community manager shall notify the Board if a certificated employee is discharged or in any way terminates his active status with the common interest community manager.
Common Interest Community Management Information Fund
The Act expands the Common Interest Community Management Information Fund (Fund) to include assessment of each common interest community manager an amount equal to the lesser of $1,000 (or such other amount as the Board may establish by regulation) or 0.02 percent of the gross receipts from a common interest community manager during the preceding calendar year, to be remitted to the State Treasurer. Additionally, the annual report filed by each Association shall be accompanied by a fixed fee in an amount established by the Common Interest Community Board, together with an annual assessment in an amount equal to the lesser of $1,000 (or such other amount as the Board may establish by regulation) or 0.02 percent of the association's gross assessment income during the preceding calendar year to be remitted to the State Treasurer and shall be placed to the credit of the Common Interest Community Management Fund.
The Act also creates a Common Interest Community Management Recovery Fund to be used in the discretion of the Board to protect the interests of associations. Each common interest community manager, at the time of initial application for licensure, and each association filing its first annual report after the effective date hereof shall be assessed $25, which shall be specifically assigned to the Fund. Initial payments may be incorporated in any application fee payment or annual filing fee and transferred to the Fund by the Director within 30 days.
Fidelity Bond and Employee Dishonesty Insurance
The Act requires that the issuance or renewal of the license of a common interest community manager shall be conditioned upon the common interest community manager obtaining and maintaining a blanket fidelity bond or employee dishonesty insurance policy - insuring the common interest community manager against losses resulting from theft or dishonesty committed by the officers, directors, and persons employed by the common interest community manager. Such bond or insurance policy shall include coverage for loss of client funs by the common interest community manager resulting from theft or dishonesty committed by the officers, directors, and persons employed by the common interest community manager. Such bond or insurance policy shall provide coverage in an amount equal to the lesser of $2 million or the highest aggregate amount of the operating and reserve balances of all associations under the control of the common interest community manager during the prior fiscal year; the minimum coverage amount being $10,000. The Act also requires any unit owners' association collecting assessments for common expenses to obtain and maintain a blanket fidelity bond or employee dishonesty insurance policy insuring the unit owners' association against losses resulting from theft or dishonesty committed by the officers, directors, or persons employed by the unit owners' association, any common interest community manager or employees of the common interest community manager. Such bond or insurance policy shall provide coverage in an amount equal to the lesser of $1 million or the amount of reserve balances of the unit owners' association plus one-fourth of the aggregate annual assessment of such unit owners' association. The minimum coverage amount shall be $10,000. At the Association’s expense, the executive organ or common interest community manager may obtain such bond or insurance on behalf of the unit owners' association.
Resale Disclosure Requirements and Charges
The Act clarifies the provisions of the resale disclosure changes made during the 2007 General Assembly session allowing for fees charged by a management company or Association for statute requirements. They are: $100 for a property inspection (exterior for POA’s and interior for Condominiums if the association documents require it); $150 for preparation and delivery of two hard copies of the resale certificate or $125 for electronic format; an expedite fee of $50 if delivery within 5 business days is requested; $25 for an additional hard copy; and actual costs of delivery. The Act also allows a post closing fee of $50 and a fee of $50 for an update of the resale disclosure or financial update without an inspection. The Act requires that all fees or charges are to be made at the closing of the property/transaction. If the transaction does not close, the Association may assess the unit for the charges/fees 90 days after delivery of the disclosure package. Finally, the Act requires inclusion of the most recent 6 months of minutes of Board of Directors meetings, as part of the Resale Disclosure package.
To summarize, this legislation is the most comprehensive community association legislation since the 1974 Condominium Act. This legislation could not have been accomplished without the valuable input of the Virginia attorneys representing Associations, lead by Pia Trigiani and the cooperation of the Virginia Association of Realtors, Virginia Builders Association and the Department of Professional Occupation and Regulation, Commonwealth of Virginia.
Ronald P. Kirby is the current President of the Virginia Association of Community Managers (VACM). He is the past President of Community Associations Institute, WMMCAI Chapter President and Chairman of the AAMC Review Board of CAI National. Ron is the retired Chairman of the Board and CEO of Community Management Corporation.
John (Jack) H. Rust, a former Delegate in the Virginia General Assembly, is a consultant to the Virginia Association of Community Managers (VACM) and was the primary draftsman for HB516 and SB 301.
