Reprinted with permission from the Daily Journal of Commerce
The Oregon Legislature has approved three pieces of Condominium and Planned Community Act legislation and is expected to approve a fourth any day. The collective legislation will make a large number of changes. HB 2665 and 2666 cover many topics and resulted from the efforts of a legislative action committee made up of the Community Associations Institute, The Condominium HOA Working Group, and the Oregon Washington Community Association Managers. A coalition of apartment tenants sponsored HB 3186 tightening up the condominium conversion requirements and this Bill is expected to pass any day. Finally, Community Association Banc obtained passage of SB 543 respecting the requirements for the deposit of association funds in federally insured bank accounts. SB 543 has an emergency clause and will be effective upon signing by the governor which is expected soon. HB 2665 and 2666 will be effective on the 91st day after adjournment of the legislature and HB 3186 will be effective January 1, 2008. Those who deal with condominiums or planned communities and their home owner associations will need to review and revise documents and operating procedures to conform to these changes.
Board of Directors Appointments Eased
HB 2665 supplements the Planned Community Act and the Condominium Act so that if a homeowner association fails to fill vacancies on the board sufficient to constitute a quorum, an owner or its lender may request the circuit court appoint a receiver to manage the affairs of the association. The salary of the receiver would be a common expense.
Previously there was no statutory remedy if members of a homeowner association failed to elect a board to perform its duties. This hampered developers in turning over association control to uncooperative buyers. HB 2665 provides that if a home builder has complied with its responsibilities and yet the owners still fail to elect the directors and assume control the declarant is relieved from further administrative responsibility.
The bill also simplifies the administrative process so that if any meeting cannot be organized because of a lack of a quorum of owners present in person or by proxy, the meeting may be adjourned and a new meeting held, at which a much lower quorum requirement will be applicable to facilitate a successful meeting.
Communications, Voting Expanded
HB 2665 also allows greater flexibility in the dissemination of information and clarifies the process for association voting. At discretion of the board, any required notice or information may be e-mailed or faxed notwithstanding any requirement under the declaration or bylaws.
However, electronic communications may not be used to give notice of certain matters such as of failure to pay assessments, foreclosure of an association’s lien or an action the association may take against an owner.
Vote-by-mail has also been expanded to allow voting by e-mail, but there is an opt-out provision so owners cannot be forced to use e-mail for communications or voting.
Annual meetings still have to be held in person, except for second home associations.
Maintenance Plan Clarified
In the previous legislative session a bill was passed to require an annually updated condominium maintenance plan to avoid unnecessary repair and replacement expense and disputes due to inadequate maintenance.
HB 2665 reflects the clarifications and changes needed based on experience with this relatively new maintenance plan requirement. It helps the association determine how much owners must pay into the operating account for maintenance work and into the reserve fund for the future repairs and replacements of the common elements as they wear out.
Condominiums are exempted from these reserve and maintenance requirements unless there are more than two units in the condominium. Most home owner associations will, however, be subject to the reserve and maintenance requirements.
Insurance Law Updated
HB 2665 updates the law on insurance for condominiums and planned communities. If the declaration and bylaws do not assign payment responsibility for the deductible in an association’s insurance policy, the board may adopt a resolution to assign responsibility to all owners or specific owners affected by the loss.
Among other insurance changes, the bill addresses the problem of old documents having deductible limits too low due to not being inflation indexed.
Last, the bill allows the board to exceed maximum deductibles specified in bylaws if it is in the best interest of the association.
House Bill 2666 Amends Condo, Community Acts
HB 2666 covers a variety of unrelated clarifications, updates and improvements to the Oregon Condominium and Planned Community acts The bill, if passed, would enact several changes:
- An association would be incorporated prior to the recording of a plat if the property is to be conveyed to the association.
- The sale of non-residential condominium units would be exempt from the disclosure statement and other sales requirements intended to protect residential unit purchasers.
- Associations would be incorporated if a condominium were to consist of more than two units.
- Unit boundaries would be clarified with respect to windows and doors.
- A sub-condominium could be created within a master condominium unless prohibited by the declaration.
HB 2666 would amend the Oregon statutes governing condominiums and planned communities, Oregon Revised Statute 94. It is expected to be enacted into law with an effective date 90 days after the legislative session ends.
HB 3186 Tightens Condo Conversion Requirements
HB 3186 was introduced at the request of the Community Alliance of Tenants to tighten the requirements for conversion of apartment buildings into condominiums. The increased conversion of apartments to condominiums compelled the tenants to request greater protections. This bill has passed the House and, if passed by the Senate, will amend the current conversion requirements in the Condominium Act. It will likely be effective January 1, 2008.
Developers currently must abide by a 120-day notice requirement that will be changed. HB 3186 allows rehabilitation of apartments during the 120-day notice period but only during normal business hours.
Also, according to the bill, a landlord must assure each tenant always has safe dwelling unit access during rehabilitation work. During the 120-day notice period, a landlord may not terminate tenants without cause. Also, during the 120-day period, landlords cannot increase rents beyond the inflation rate.
A tenant may recover statutory penalties for violation of these legal requirements. Tenants asserting these claims will, however, have the burden of proof, and the prevailing party will be entitled to attorney fees under the residential landlord/tenant statute.
SB 543 Guides Arizona Bank Into Oregon Market
Senate Bill 543 was introduced at the request of Community Association Banc to require association funds to be deposited in Federal Deposit Insurance Corp.-insured bank accounts but allowing the use of out-of-state banks for such purposes. This bill would permit Oregon homeowner associations to move their checking and savings accounts to Community Association Banc, an Arizona bank that specializes in serving homeowner associations around the United States and is entering the Oregon market. Previously some associations have invested their funds in questionable ways and have in some cases have lost all or part of the association’s funds as a result.
SB 543 is expected to pass into law, and because it contains an emergency clause, it will be effective immediately upon passage.