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Association Charges : Be Aware of Legal Restrictions on Assessments and Charges

As of July 1, 2015, the Virginia Condominium Act provides that no condominium association may impose an assessment or charge against a unit owner unless such charge or assessment (a) is expressly authorized by the Condominium Act (see particularly Va. Code Sec. 55-79.83) and/or by the condominium instruments for the community, (b) represents a fee for service provided, or (c) is a fee for a resale certificate, as provided for in the Condominium Act. Va. Code Section 55-79.42:1.

The Common Interest Community Board has the authority to assess a monetary penalty and/or issue a cease and desist order against an association or common interest community manager who violates this Code section pursuant to its powers under Title 54.1 (“Common Interest Communities”), Sections 54.1-2349, -2351, and -2352. (The Property Owners’ Association Act already included a similar provision regarding assessments and charges in Section 55-509.3, which was amended in 2015 to add the CICB’s enforcement powers.)

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Disclosure Packets and Resale Certificates Revisited: Recent Statutory Amendments

Bills recently passed in the Virginia General Assembly extend the list of items for inclusion in property owners’ association disclosure packets and condominium association resale certificates, and also broaden non-association disclosure requirements.  Effective July 1, 2013, disclosure packets may or must (depending on the item) include the following new items:

 Restrictions on Solar Panels (HB 2305): Disclosure statements for lots within property owners’ associations and resale certificates for condominiums must include a statement setting forth any restriction, limitation, or prohibition on the right of a unit owner or lot owner to install or use solar energy collection devices on the owner’s property or unit. Va. Code §§ 55-79.97(C)(17), 55-509.5(A)(12).

Further, Va. Code  § 55-519(B)(9) provides that the disclosure form required under the Virginia Residential Property Disclosure Act (a Virginia law that spells out, among other things, certain disclosures that most sellers of property must provide, regardless of whether the property is within a community association) must include language to notify purchasers that by delivering the residential property disclosure statement, the owner makes no representations with respect to any right to install or use solar energy collection devices on the property.

Of course, it is always incumbent on the purchaser to read the declaration, bylaws, and rules and regulations for a community association to determine whether the association has established any restrictions concerning the size, place, and manner of placement of solar energy collection devices; or, for an association with a restrictive covenant adopted prior to July 1, 2008, any restriction or prohibition on the installation or use of a solar collection device. 

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Removing a Mechanic's Lien (In the Condominium Context) May Be Easier Than You Think

As any condominium association that has had to deal with one knows, the mechanic’s lien is a powerful hammer to force payment to a contractor. Once it is filed in the land records, a lien often makes it impossible for condominium unit owners to sell or refinance, costs the condominium association time and money (in legal fees) to defend, and generally embroils the condominium association in much unwanted litigation.

The good news is that removing a mechanic’s lien can be easier than you might think. Filing a lien, especially on a large condominium association, is not an easy task. The contractor has to conduct a title search and bring down for each condominium unit. And the Virginia mechanic’s lien statute is full of traps for the unwary. Because the Virginia courts view mechanic’s liens as "purely a creature of statute" and "in derogation of the common law," the mechanic’s lien statute is strictly construed. That is, it must be followed meticulously, or the lien will be invalid. Thus, painstaking analysis is required to ensure that the lien complies with Title 43 of the Virginia Code.

As a result, mechanic’s lien claims can be very defensible. Aside from the critical timing issues, which affect all mechanic’s liens (they must be filed within 90 days, and may only include work done within 150 days, of completion of the work), there are certain property identity and allocation issues that are specific to condominiums.

Here are some important points to remember:

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Is A Member Legally Allowed To Review Voting Records Relating To Elections For An HOA Board Of Directors?

Recently, we had a reader ask whether a member of a homeowners association is legally permitted to review and inspect voting records relating to elections for the board of directors of the member's HOA.

The short answer is that it depends on the nature of the records requested as well as other factors. Virginia Code Section 55-510 spells out when an owner can review certain records for a property owners' association. If an owner (i) is in good standing with the association, and (ii) makes a records inspection request "for a proper purpose related to his membership in the association," then he is entitled to review association "books and records" that do not fall under any statutory exemptions. Section 55-510's discussion of "books and records" needs to be read in conjunction with other provisions of the Virginia Code (and chiefly, the Virginia Nonstock Corporation Act) that elaborate on what exactly constitutes "books and records" (as not every document in an association's possession constitutes a "book and record" as the term is defined in the Virginia Code). As a result, this analysis can sometimes be rather technical, and associations should consult with their legal counsel to ensure that they don't provide for the inspection of any records that they're not legally required to provide.

Under this analysis, assuming that the owner is in good standing with the association, and makes the request "for a proper purpose related to his membership in the association" (and does not, for example, submit the request for the purpose of attempting to pursue litigation against the association), then it would be appropriate for an association to provide the owner with a copy of the vote tally sheet that the association used to count all of the votes. Arguably, ballots and proxies do not constitute "books and records" as defined under Virginia law, and therefore should not be produced by the association. Moreover, if an association's governing documents require or permit voting by secret ballot, producing ballots with names on them or directed proxies would essentially defeat the goals behind such.

Keep in mind that if the association has adopted a records inspection and copying policy, it could charge the owner a monetary fee for expenses related to searching for the records and copying them.

Has Your Homeowner's Association Adopted an Owner Complaint Policy Yet?

If your homeowners association has not yet adopted an owner complaint policy, it should move quickly. Recently, Virginia's Common Interest Community Board promulgated regulations to implement a recent law (Virginia Code Section 55-530(E)) requiring all homeowners associations in Virginia to adopt a policy for receiving and reviewing owner complaints.

Under the regulations, all homeowners associations must adopt a policy by the end of this September. Associations will be required to certify, in their annual report to the Virginia Department of Professional and Occupational Regulation, that a policy has been adopted and is in effect. Moreover, associations are required to include the complaint policy in their disclosure packets. As the regulations contain some fairly detailed requirements as to what terms and conditions must be included in the policy, associations should ask their legal counsel for assistance in drafting a policy.

Has Your Homeowner's Association Adopted a Records Copying Policy Yet?

If your homeowners association has not yet adopted a records copying policy, it should move quickly. On July 1, 2012, a new law in Virginia goes into effect that requires boards of directors of associations to have adopted a cost schedule if the association wants to charge owners for the costs of copies and labor related to producing books and records for inspection, pursuant to records requests by owners. Under the current law, associations are not required to have adopted a formal cost schedule in order to impose such charges.

Section 55-510(D) states that the cost schedule must: (i) specify the charges for materials and labor, (ii) apply equally to all members in good standing, and (iii) be provided to such requesting member at the time the request is made. Because some owners make very broad records inspection records, and because some owners make frequent requests, every association should have a cost schedule in place in order to pass the costs (which can sometimes be substantial) along to the owners. If your association has not yet adopted such a policy, it should contact its attorney shortly so that it can put one it place as soon as possible.

Avoiding the Perils and Pitfalls of the Fair Credit Reporting Act

On Thursday, February 16, 2012, LeClairRyan employment law attorney and Community Association Team member Brian Muse will present a one-hour webinar on the Fair Credit Report Act.

This webinar will provide practical advice to employers on what they need to know to conduct background checks and employee investigations without running afoul of the FCRA. It will address the types of notice that employers must provide prior to background checks and the required procedures for compliance. It will also offer practical advice to employers to avoid legal trouble in this constantly evolving area of the law.

For more information, and to register for this event, click here.

 

Will Sleeth and Liz White Quoted in Virginia Lawyers Weekly Magazine on HOA Collections

Will Sleeth and Liz White were recently quoted in a Virginia Lawyers Weekly magazine article reporting on the challenges that associations and their attorneys face when attempting to collect unpaid assessments. The article (subscription required) discussed the importance of associations and their attorneys strictly complying with the requirements of the federal Fair Debt Collection Practices Act. The article illustrates an important lesson that all associations should keep in mind: when an association attempts to collect on a debt, it should consult with legal counsel to ensure compliance with all applicable laws.

Records Inspection Requests by Members: An Overview

 A reader recently asked us to comment on members' rights to inspect their property owners’ association’s books and records, such as financial information and meeting minutes, pursuant to the Property Owners’ Association Act.

A member’s right to inspect records is not only governed by the provisions of the Property Owners’ Association Act, but also by the provisions contained within the Virginia Nonstock Corporation Act. The provisions of the two acts must be read in conjunction with each other, and therefore the interested member should review not only § 55-510 of the Property Owners’ Association Act in order to understand his rights, but also §§ 13.1-932 – 934 of the Virginia Nonstock Corporation Act as well.

This blog post is limited to a discussion of the provisions contained within the Property Owners’ Association Act, and at some future time we will likely make a post regarding the inspection provisions contained in the Virginia Nonstock Corporation Act.

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POA Disclosure Packets Webinar -- Q&A Follow-up

Thank you to all those who participated in our March 31st webinar on POA Disclosure Packets. To follow up, the following are answers to those questions you submitted that were left unanswered at the end of the program. Thank you for your insightful questions!

Q. Is HB 702, the new law regarding time of payment for disclosure packets (effective July 1, 2010), applicable to professionally managed associations as well as self-managed associations? 

A. The new law will apply only to self-managed associations. For the time being, professionally-managed associations should continue to ensure that fees for disclosure packets are collected at settlement.

Q. Must a copy of an insurance document or certificate for the Association be included in the disclosure packet, or only a notation of the coverage amount?

A. The disclosure packet must include a "statement setting forth what insurance coverage is provided for all lot owners by the association, including the fidelity bond maintained by the association, and what additional insurance would normally be secured by each individual lot owner." A document from the insurance company is not required.

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Upcoming Webinar on POA Disclosure Packets

This Wednesday, March 31st, LeClairRyan's Community Association Industry Team will be hosting a free webinar entitled "What You Need to Know About Property Owner Association Disclosure Packets."

On Wednesday from noon to 1 P.M. EST, attorneys Lori Schweller and Liz White will discuss the Virginia Property Owners' Association Act's requirements, including when disclosure packets are required, who is responsible for requesting and providing them, what they should include, the costs of producing them, and the ramifications of non-compliance.

If you haven't already registered for this free event, click here to register now.