The Virginia General Assembly approved a number of bills during its 2024 legislative session. Some of the bills impact, directly or indirectly, common interest communities. The Governor of Virginia signed the following bills into law and the new laws will take effect on July 1, 2024. We have outlined the legislative action taken by the Virginia General Assembly that we believe most directly affect both homeowners and condominium associations.
The following bills amend the Property Owners’ Association Act (Va. Code Ann. 55.1-1801, et seq., as amended (1950)), the Virginia Condominium Act (Va. Code Ann. 55.1-1900, et seq., as amended (1950)), and other statutes that may affect common interest communities. Please feel free to contact us if you have questions regarding any of the following legislative changes.
HB1209 – Additional Assessments
HB1209 amends multiple provisions in both the Virginia Property Owners’ Association Act and the Virginia Condominium Act to authorize the Board of Directors to levy an additional assessment against its members if the purpose of doing so is (i) in the best interests of the Association and (ii) the proceeds of the additional assessment are to be used primarily for the maintenance and upkeep of the common area and/or common elements including the maintenance, repair, and replacement of capital components. This legislation also removes the statutory language which previously authorized the membership to rescind or reduce the assessment within 60 days of notice.
The same legislation further provides that, unless the governing documents provide otherwise, the Board of Directors may borrow money on behalf of the Association for the purpose of funding recommended reserves and is authorized to assign revenue from the additional and/or annual assessments to secure repayments of a loan. In order to protect individual owners against the Board’s expanded borrowing authority, the new legislation allows an individual owner to pay off his percentage common element interest of the loan in case of the Association’s default. In that way, the lender cannot assess that owner’s Unit for payment of the amount upon which the Association may have defaulted. Finally, this legislation includes a definition of “reserve study” and provides that the Board of Directors with broad discretion to meet repair and replacement requirements outlined in the reserve study with replacement reserves, additional assessments, or borrowed funds.
This new legislation is a major change to both Acts as it broadens Associations’ authority to levy additional assessments for the maintenance, repair, and replacement of capital components without the need of a vote of the membership and without the membership’s ability to block the additional assessment by and through a vote of the membership. By enacting this legislation, the Virginia Legislature is heeding the warnings brought by the Surfside, Florida condominium collapse and took steps to ensure Virginia Associations are able to adequately save for, assess, and borrow funds in order to repair and replace capital components as required by the reserve study.
HB880 & SB341 – Foreclosures
HB880 & SB341 amends § 55.1-1966 of the Virginia Condominium Act and § 55.1-1833 of the Virginia Property Owners Act, as well as § 8.01-463 of the Virginia Code related to debt collection. This legislation has resulted in multiple important changes to community associations’ authorities related to enforcement of assessments through foreclosure. As you may recall, in 2021, Va. Code § 8.01-463 was revised to prohibit foreclosure on judgment liens if the property was the owner’s sole place of residence unless the principal amount of a single judgment lien was above $25,000.00. However, this legislation revised Va. Code § 8.01-463 once again to allow judgment liens for association assessments to be enforced through foreclosure if one or more judgment liens total $5,000.00 or more. The judgment amount restriction was not only reduced from $25,000 to $5,000.00, but Associations are able to pursue foreclosure if more than one judgment lien adds up to $5,000.00.
This means that an Association must withhold a foreclosure action until it has secured a total of $5,000.00 in liens against a property. However, the good news is that this legislation extends the statute of limitations for lien foreclosures from 36 months to 120 months. In other words, liens now can be enforced for up to 10 years after they are recorded. This legislation gives much more flexibility and time to Associations to foreclose on their liens and brings positive changes to an Association’s ability to collect assessments.
SB672 – Association Charges and Association’s Ability to Levy and Use Assessments to Pay Legal Obligations
SB672 amends both the Virginia Property Owners’ Association Act and the Virginia Condominium Act’s provision on Association charges. Most importantly, this legislation is intended to provide Association Boards broader authority to utilize the owners’ assessments to fulfill the Association’s legal or contractual obligations as provided under the Association’s governing documents. The legislation is designed to address the negative impact from recent Virginia Court of Appeals decisions that challenge a Board’s authority to take actions that are not explicitly articulated in the Association governing documents. The Appeals Court’s narrow interpretations of Association’s authority essentially stripped association Boards of their ability to make reasonable business decisions that are implicitly authorized by the governing documents unless the authority was explicitly stated in the governing documents.
This legislation clarifies that no provision of either Act is intended to prevent an Association from levying or using assessments, charges, or fees to pay the Association’s contractual or other legal obligations in the exercise of the Association’s duties and responsibilities. In other words, Association Boards may continue to exercise reasonable discretion in utilizing the assessment revenue to satisfy the Association’s legal and contractual obligations. This legislation also clarifies that charges may be imposed against some, but not all owners, based upon the benefits those charged owners are receiving as a result of the Board’s decision. This legislation further provides that a Property Owners’ Associations may not impose a charge against one or more but less than all lot owners unless the fee is (i) a fee for a service provided (ii) related to use of the Common Area or (iii) a fee as expressly authorized by the resale certificate statute enacted last July. In regard to condominium associations, the new legislation provides that the Association may not impose a charge against one or more but less than all Unit Owners unless the charge is (i) authorized under the common expense and late fee provision of the Virginia Condominium Act (§55.1-1964) (ii) a fee for a service provided or (iii) a fee expressly authorized under the resale certificate statute.
HB723 – Meetings of Virginia Property Owners’ Associations’ Boards of Directors
HB723 amends §55.1-1816 of the Virginia Property Owners’ Association Act only and provides that meetings of the Board of Directors shall be conducted in accordance with the provisions of the Property Owners’ Association Act whether or not such Association is incorporated. The same provides that the legislation shall not be interpreted to supersede corporate authorities otherwise established by law or the governing documents.
The addition of this language is an attempt by the Virginia Legislature to reign in incorporated Property Owners’ Associations’ reliance on certain provisions in the Virginia Nonstock Corporation Act which, at times, provide loopholes to the more stringent meeting requirements in the Virginia Property Owners’ Association Act.
SB308 & HB634 – 30 Day Rentals
SB308 & HB634 adds a provision to the Powers of Local Government statute in the Code of Virginia. Specifically, the new law prohibits a locality from enacting or enforcing any ordinance which prohibits renting out a dwelling Unit for 30 days or longer. So as to say, no longer may an ordinance prohibit any short-term rentals for a period of 29 days or less.
The good news for Common Interest Communities who may be concerned with Airbnb or VRBO, amongst other short-term rental scenarios, is that the new legislation expressly defers to the recorded covenants as to the cap on minimum lease terms, whether it is 6 months, one year, or 2 weeks. All provisions found in an Association’s recorded governing documents related to leasing remain in full force and effect.
HB1461 – Short-Term Rentals
HB1461 amends Va. Code § 15.2-983 to prohibit the localities from barring “an operator” from offering a property as a short-term rental provided that the property owner has granted permission for such use as short-term rental. An “operator” means not only the owner, but can be a lessee, sublessee, mortgage in possession, or licensee. The localities can however limit the lessee or sublessee to only one short-term rental within that locality.
For community associations, this is a positive change because it allows a locality to limit the number of properties an individual renter can operate as a short-term rental. Limiting short-term rentals in a locality certainly addresses the concerns regarding the negative impact that these short-term rentals could have on the housing supply.
HB214 – Resident Services
HB214 provides that a resident of a common interest community association who is providing bookkeeping, billing or recordkeeping services for the Association for compensation will be presumed to be an independent contractor and not an employee of the Association. This language is an addition to Va. Code § 54.1-2347 which provides certain exemptions to the licensing requirements under Va. Code § 54.1-2346. The purpose of this legislation is to ensure that a common interest community is not considered an employer for purposes of § 54.1-2346 if a resident of that community is providing certain services for the Association and that the resident will not be required to have a license in order to provide that service.
SB526 & HB876 – Unavailable Resale Certificates
SB526 & HB876 amends the resale certificate statute enacted in 2023 to eliminate the ability of the contracting parties to change or waive the seller’s statutory obligation to provide a resale packet. It also clarifies that if no resale certificate is delivered within 14 days after such request, the resale certificate is deemed “unavailable.”
The revised statute will further allow the purchaser to cancel the contract within a time period agreed upon by all parties in the real estate contract if the resale certificate is incomplete or unavailable. If the real estate contract is silent as to cancellation, this legislation provides that the purchaser may cancel the contract within three days of receiving the resale certificate or three days of receiving notice that the resale certificate is unavailable.
Finally, this legislation provides that no resale certificate is required to be provided in the case of an initial disposition of a Unit to any person or entity that is not acquiring the Unit to be occupied as his own residence, unless requested. Nevertheless, the person acquiring the Unit shall be obligated to abide by the declaration, bylaws, rules and regulations, and architectural guidelines of the Association as to all matters.
