The Merriam-Webster Dictionary defines “lifeblood” as “a vital or life-giving force or component” (https://www.merriam-webster.com/dictionary/lifeblood). In a community association, assessments are quite literally the lifeblood of the association as they are the vital component related to the association’s ability to operate and maintain the common areas. When owners fail to make timely assessment payments, the deficiency impacts the community as a whole as the community is receiving less money than budgeted for operations, common area maintenance, and reserve funding. The greater the percentage of owners that don’t pay, the greater the impact will be on the association to properly function.
Just how large a problem can assessment delinquencies become in a community association? To put it in perspective, according to CAI’s 2021 National Statistical Review (which is the most recent available), there are 358,000 community associations in United States that collected approximately $106.4 billion in assessments from homeowners. $106.4 billion! While delinquency rates for communities vary widely depending on the type of community, geographic location and a myriad of other specific factors, it is not out of the question for a community to have a delinquency rate between five and ten percent in a well-run community and between ten and twenty percent (or higher) in a community where the collection of delinquent assessments is left unchecked. These delinquency rates would lead to associations collectively receiving a total of $5.32 billion to $21.28 billion less per year in assessments from homeowners – which can lead to large financial problems for many community associations and the owners that live in the communities.
What do owners who live in community associations feel their communities should be doing to properly handle assessment delinquencies? According to CAI’s [April] 2022 Homeowner Satisfaction Survey (which is the most recent available), fifty-nine percent of owners believe that the community should insist that every owner pay assessments, and involve attorneys only if the delinquent accounts are not brought up to date after sufficient notification. Only fifteen percent of owners believe that the loss caused by delinquencies should be made up by increasing assessments for paying owners and ten percent believe that the association should curtail services and amenities and delay improvements and maintenance.
Accordingly, a majority of owners believe that all owners should pay assessments, and should they fail to do so, the delinquent owners should be put into collection after sufficient notification of the deficiency is provided and no payment is made. This is undoubtedly because owners who are delinquent in their assessments typically continue to benefit from the services provided by the association to the detriment of owners who actually are paying their assessments.
Since association boards have a fiduciary duty/responsibility to ensure that assessments are levied and collected, the best thing a community association can do to avoid serious financial issues related to assessment delinquencies is to be (and stay!) proactive as it relates to the collection of delinquent assessments. The first step in being proactive is for the association to adopt a formal collection policy for the collection of delinquent assessments in accord with the association’s governing documents. CAI’s Best Practices, Report # 4, Financial Operations, provides that an effective collection policy should:
1. Be established by a formal resolution of the board that:
a. Specifies the problem to be solved (e.g., collection of delinquent fees);
b. Delineates the procedures to be followed;
c. Designates the circumstances under which the procedures are required or permitted.
2. Specify only actions that are within the power of the community association and its board.
3. Set a firm due date for assessments.
4. Outline the steps to be taken by the person(s) responsible for collecting assessments when a payment is late with a specific timeline for each step of the process.
5. Allow for discretion in special cases (the burden of requesting special consideration should be placed upon the owner). The discretionary power should be under the control of the board of directors.
6. Specify when a delinquent assessment should be referred to legal counsel (this step should be automatic once a delinquent assessment reaches a specific age or amount).
7. Provide for the collection of any costs associated with collecting delinquent assessments.
Once a collection policy is adopted, it must be distributed to every owner in the community. Following distribution, the collection policy must be uniformly enforced as to and against every owner in the community. Consistency is key to effective enforcement, so the board must ensure that the collection policy is utilized and followed as it pertains to every delinquent owner in the community.
Being proactive in assessment collections also means pursuing any and all available legal remedies that are available to the community association (which vary by jurisdiction) including, but not limited to:
Seeking a personal judgment against the owner(s) of the property in accord with the pertinent statute of limitations which exists in the jurisdiction for such a claim;
Executing on a personal judgment by way of levy upon and sale of personal property, vehicle sale, bank account garnishment (or wage garnishment in some jurisdictions) and garnishment of rental income (if an owner’s unit is leased to a tenant);
Filing a lien against the property (if applicable in jurisdiction);
Foreclosure (judicial sale) of the property on a judgment lien;
Foreclosure (judicial sale) of the property on a statutory lien.
Since there are times when delinquent owners purposefully ignore delinquency notices, demand letters and even lawsuits, but care about the use of recreational facilities or association amenities (this is especially true in resort communities), associations should also examine their governing documents and review their common interest community statutes to determine what amenities or other privileges may be properly withheld from a delinquent owner. In Pennsylvania, the common interest community statutes were amended in 2018 to provide that, subject to the provisions of the community declaration (covenants), an association has the power to impose charges for late payment of assessments and, after notice and an opportunity to be heard, “[f]or any period during which assessments are delinquent or violations of the declaration, bylaws and rules and regulations remain uncured, suspend unit owners’ rights, including, without limitation, the right to vote, the right to serve on the board or committees and the right of access to common elements, recreational facilities or amenities.”
Associations must also proactively and properly handle issues such as bankruptcy, bank foreclosures, tax sales and short sales of units in order to preserve any claims the association may have in the event any of any of these occurrences. It is recommended that the association utilize counsel as these issues can be complex and there are timelines associated with the claims the association can bring.
With bankruptcy in particular, the automatic stay “freezes” all collections efforts the association is engaged in and the association must adjust its practices pertaining to notices of delinquency and other issues related to the pre-petition assessments. The association also may have to file a Proof of Claim in a Chapter 7 or Chapter 13 bankruptcy proceeding that has been filed by an owner and, in appropriate circumstances, may wish to seek relief from the automatic stay to pursue the real estate pursuant to the association’s statutory lien on the unit even though it cannot pursue the owner (debtor) on his or her personal obligation to pay the assessments because of the protection afforded to the owner from the bankruptcy filing. Associations should know the difference between a “discharge” of the bankruptcy (which discharges the debt of the delinquent owner related to assessments that were owed prior to the bankruptcy filing) and a “dismissal” of the bankruptcy for some reason (which does not discharge the debt of the delinquent owner related to assessments that were owed prior to the bankruptcy filing). Also important is to understand the distinction between a Chapter 7 liquidation proceeding where the owner is typically surrendering the unit in the association to the bank and all debt gets discharged (liquidated) and a Chapter 13 reorganization proceeding where the owner typically attempts to keep the unit (if the owner resides in the unit) and make payments to the creditors, including the association, in accord with a “reorganization” Plan approved by the bankruptcy court. Finally, depending on the jurisdiction (determined by federal Circuit), the bankruptcy courts handle issues pertaining to the owner’s responsibility to pay, and/or the association’s ability to collect, post-petition assessments owed by an owner (i.e., assessments that come due and owing afterthe bankruptcy petition is filed) differently.
Associations must proactively handle bank foreclosures of units so as to attempt to maximize recovery. In a bank foreclosure setting, the association will typically end up with a statutorily prescribed maximum pursuant to any super priority lien which exists in the association’s jurisdiction (for instance, six months of assessments, charges and fees in the author’s state of Pennsylvania). The association lien must be listed on the sale affidavit or other document so the association gets paid from the proceeds of the sale rather than having to chase the bank (or other purchaser) down for the assessments that the association is entitled to receive. It is also noted that after a foreclosure occurs, the bank (or other purchaser) must pay the current assessments owed on the unit until the bank or other purchaser’s ownership interest in the unit ceases.
Tax sales of units can vary tremendously by jurisdiction, but in many jurisdictions there are different levels of tax sale (which keep progressing should a unit remain unsold) and associations must understand how each type of tax sale works in order to properly attempt to collect delinquent assessments that are owed. For instance, in Pennsylvania, there is an upset sale, a judicial sale and a repository sale. At each level of tax sale, the liens and encumbrances (including association liens) vary. At upset sale, the property is sold to the buyer subject to all liens and encumbrances at the time of sale. This means that the association can assert a judgment and/or statutory lien be paid by the buyer if a property is sold at upset sale – obviously a good outcome for the association. The association should always ensure that its lien(s) are listed with the tax claim bureau or other entity selling the property so the association can be paid some or all of its lien amounts if sufficient excess proceeds exist following the sale. If a property is not sold at upset sale and moves to judicial sale or repository sale, it is sold free and clear of all liens and encumbrances, including any that are held by the association – which means the association will typically receive nothing (unless the jurisdiction allows for the association to be paid based on excess proceeds that exist in accord with a prior claim made by the association pursuant to a statutory lien).
It is also recommended that associations implement a general policy for handling short sales of units in the association. A short sale is a private sale of a unit where the unit owner sells the unit for less than the mortgage (or other secured lien) amount that is owed on the unit. To accomplish a short sale, all lien holders, including the association, typically agree to accept less than the amount owed on the unit. In many situations, if a short sale falls through, the unit owner cannot afford to pay the mortgage on the unit and the property will end up in bank foreclosure where the association will end up with the statutorily-prescribed maximum pursuant to any super-priority lien which exists in the association’s jurisdiction. Foreclosure proceedings can take a long time to get to disposition (sometimes years) and during this time, the association is typically not receiving any assessment payments from the delinquent owner. It is therefore generally a better outcome for an association if a short sale occurs instead of a foreclosure, even if the association compromises its claim in some manner, because the association may be able to negotiate to receive an amount in excess of the amount it would receive in foreclosure and because the short sale will occur faster, placing a new owner in the unit that will begin to pay assessments.
Bringing this all together, it is important to remember that assessments are the lifeblood of the association and delinquencies drain the lifeblood away from the association. To ensure the overall health and survival of the association, every association leader and board member must act to fulfill his or her duty to collect delinquent assessments. Through proactive measures, associations can stay on top of delinquencies and collect the lifeblood for the benefit of all owners in the community.
Edward Hoffman, Jr., Esq., CCAL
* The content for this Blog post is based in part upon the prior written work of the author as originally published in the September/October 2019 issue of CAI’s Common Ground magazine.
While this is not a Bill which seeks to amend the three Common Interest Community Statutes in Pennsylvania (PA Condominium Act, PA Uniform Planned Community Act or the PA Real Estate Cooperative Act), this Bill, if it becomes law, could have an impact on new construction community associations in some manner related to residential real property improvements owned by the association, or, at minimum, upon unit owners in the community associations in new construction communities. PA HB 377, found here, provides:
If a builder becomes aware of a construction defect in an improvement to real property constructed or facilitated by the builder, the builder shall notify the owner of the real property. The builder shall also notify the owner of any real property for which the builder constructed or facilitated construction of an improvement if the builder has reasonable cause to suspect the existence of a substantially similar construction defect. The following shall apply:
(1) The notification shall include all of the following: (i) A description of the construction defect or suspected construction defect. (ii) The reason that the builder knows or suspects that the construction defect exists. (iii) Contact information for the builder. (2) The notification shall be made within 30 days after the builder knows or has reasonable cause to suspect that the construction defect exists. (3) The builder shall provide the notification by certified mail to the address of record for the owner of the real property. (4) The notification is not required if at least 15 years have elapsed since completion of construction of the defective improvement. (5) The notification shall not constitute evidence of the builder’s liability for the construction defect, nor shall the notification relieve the builder from any liability which may exist as the result of the construction defect. (b) Failure to comply.–A builder who willfully or negligently fails to notify an owner of real property as required by this section shall be liable for the amount of actual damages suffered by the owner as a result of the builder’s failure to notify the owner. This subsection shall not be construed to restrict or expand the authority of a court to impose punitive damages or apply other remedies applicable under another provision of law. (c) Statute of limitations.–An action for damages as the result of a violation of this section must be commenced within two years of the time that the owner of the real property becomes aware of the builder’s failure to comply with this section.
The definition of “construction defect” provides as follows: “A material defect that results from a deficiency in the design, planning, supervision or observation of construction or construction of an improvement to real property. The term includes a material defect that results from the use of defective building materials or from the improper installation of building materials.“
Interestingly, HB 377 provides that notification of the defect is not required after 15 years since the constriction of the defective improvement has occurred; this is greater than the 12 year statute of repose in Pennsylvania for claims related to construction.
Finally, a builder who fails to notify an owner, would be liable for the amount of actual damages suffered by the owner and the ability to impose punitive damages under some other law would not be limtied by this Bill if it becomes law.
After another client contacted us inquiring about the Corporate Transparency Act (CTA), we thought it was time to write a brief summary on this law and what it means to community associations.
The CTA was enacted by the United States Congress on January 1, 2021. The stated purpose of the law is to generally address “the disclosure of corporate ownership and the prevention of money laundering and the financing of terrorism”. I know, you’re asking – how in the world does this apply to community associations? The simple answer is, it wasn’t really intended to, and community associations appear to be “stuck in the middle” of it (as is often the case). A *very* brief summary and discussion about the CTA is below.
It appears that associations are “Reporting Companies”, for the most part.
The exemptions listed in the CTA do not appear to apply.
It appears that as of now, Board members would qualify as “Beneficial Owners” under the CTA because in their capacity as Board members (or the governing body as a whole), they exercise “substantial control” over the association as a Reporting Company.
Reporting Companies must provide general information (name, address, tax ID, formation info, etc.) as well as specific information on each Beneficial Owner (i.e., Board member) – name, DL or passport, DOB, etc.
A failure to report may result in civil fines and/or criminal fines for fraudulent reporting or a purposeful failure to report.
Based upon our review of the current iteration of the CTA and agency Rule(s) related to same, we believe that the vast majority of Pennsylvania community associations (especially those registered as a non-profit corporation with the PA Department of State) will likely be subject to the law, as it currently stands. But don’t panic, we still have some time to figure this out – the filing requirement becomes effective on January 1, 2024 (and the report must be filed by 1/1/25 for existing Reporting Companies).
We will continue to monitor the CTA and will update the Hoffman Law Blog as soon as we learn any new information.
Those of you who follow Hoffman Law LLC may remember our post from a few years back reminding you to get your Decennial (i.e., 10 year) Reports filed with the PA Department of State to save your name:
NEWS ALERT – THIS HAS ALL CHANGED – EFFECTIVE BEGINNING IN 2025 AN ANNUAL REPORT IS REQUIRED! What does this mean to your Community Association? The Pennsylvania Department of State has provided the following guidance (in pertinent part(s)):
On November 3, 2022, Governor Wolf signed into law Act 122 of 2022, and the law became effective on January 2, 2023. Among the many changes made by this legislation, Act 122 created an annual report requirement (like that imposed by most states) for domestic and foreign filing associations. The long-time decennial report requirement for these associations has been repealed. The new annual report filing is required for many types of entities, including domestic nonprofit corporations (which includes many Community Associations).
Here is the good news – we have some time. The annual report requirement begins in calendar year 2025. Similar again to other states, failure to file the annual report will subject a nonprofit corporation Community Association to administrative dissolution/termination/cancellation and loss of the protection of its name.
The annual report will include the following:
Community Association Name
Jurisdiction of formation
Registered office address
Name of at least one director, board member, etc., depending on type of Ass’n
Names and titles of the principal officers, if any
Address of the principal office
Entity number issued by the Pennsylvania Department of State
The fee for the new annual report is $0 for nonprofit corporations (which includes many Community Associations) and the deadline for filing the annual report is June 30 of each year.
The Department of State will mail notice to the registered office address of each nonprofit corporation Community Association required to make an annual report at least two months prior to the respective deadline, reminding it of the need to make an annual report. It is critical that affected nonprofit corporation Community Associations keep all information on file with the Department up-to-date, particularly registered office address, to ensure that they receive notice of how and when to make annual reports. Nonprofit corporation Community Associations also have the ability to provide emails for additional notifications. However, failure by the Department to deliver notice to any party, or failure by any party to receive notice, of an annual report filing requirement does not relieve the nonprofit corporation Community Association of the obligation to make the annual report filing.
The new annual report requirement is a significant change for Pennsylvania. Therefore, Act 122 requires that the Department provide nonprofit corporation Community Associations with a transition period before imposing any dissolution/termination/cancellation for failure to file annual reports. Beginning with annual reports due in 2027, nonprofit corporation Community Associations that fail to file annual reports in the 2027 calendar year will be subject to administrative dissolution/termination/cancellation six months after the due date of the annual report.
Should a nonprofit corporation Community Association discover that it has failed to make a required annual report and has been dissolved or terminated, it has the opportunity for reinstatement, with no limitation on the period of time for such reinstatement. Such reinstatement must be accompanied by the application for reinstatement fee and a fee for each delinquent annual report that was not previously paid (if a fee is then applicable, as it is currently listed to be $0).
During the time of administrative dissolution/termination/cancellation, the nonprofit corporation Community Association’s name is made available to any other entities. If another entity has taken the name of the existing (senior/original) nonprofit corporation Community Association seeking reinstatement, the other nonprofit corporation Community Association that has appropriated the name may keep the name and the existing (senior/original) nonprofit corporation Community Association seeking reinstatement must choose a new name.
IT IS THEREFORE CRITICAL TO FILE AN ANNUAL REPORT BEGINNING IN 2025 TO CONTINUE TO PREVENT DISSOLUTION/TERMINATION/CANCELLATION OF YOUR COMMUNITY ASSOCIATION … AND TO CONTINUE TO SAVE YOUR NAME!
Source for this Blog Post: https://www.dos.pa.gov/BusinessCharities/Business/Resources/Pages/Annual-Reports.aspx
Many clients of Hoffman Law LLC are aware that Ed Hoffman serves as the current Chair of the Community Associations Institute (CAI) Pennsylvania Legislative Action Committee (PA LAC) and have increasingly been inquiring about PA House Bill 1795 which was signed into law on November 3, 2022 and becomes effective on May 2, 2023. The Amendments, now known as Act No. 115 of 2022, made various changes and additions to the three Pennsylvania common interest community statutes: the Uniform Condominium Act (UCA), the Uniform Planned Community Act (UPCA) and the Real Estate Cooperative Act (RECA) (we will discuss the changes to the UCA and the UPCA below). While it’s not on the level of Peter Frampton, House Bill 1795 has indeed come alive!
Independent Reviewer
To begin, for condominium associations and master associations that have over 500 units, votes in an election of the association must be submitted to an “independent reviewer” pursuant to amendments to Sections 3303(e)(3) of the UCA and 5222(e.1) of the UPCA. (It is noted that §5222 of the UPCA specifically applies to “master” associations, so if the intent was to have it to apply to all planned communities, the UPCA will presumably need to be amended once again).
What is an independent reviewer? An independent reviewer is defined in §3103 of the UCA and §5103 of the UPCA as a person who is selected by the Executive Board of a condominium and/or planned community and satisfies all of the following:
(1) Holds a certificate as a certified public accountant issued by the Commonwealth, is
licensed to practice law in this Commonwealth, or is a “vote management system”. (A “vote management system” is defined in §3103 of the UCA and §5103 of the UPCA as “a third-party vendor who operates a digital or subscription service that securely manages the conduct of elections and voting procedures” – in other words, a commercial, association voting management solutions provider).
(2) Is not a unit owner of the condominium or planned community, directly or indirectly.
(3) Has no immediate family relationship (i.e., parent, child, spouse, brother or sister) with a unit owner of the planned community or the condominium or planned community manager.
(4) Has no financial interest shared with a unit owner of the condominium or planned community manager.
(5) If compensated by the declarant, a director, the association or the condominium or planned community manager, has disclosed the terms of the compensation to all unit owners of the condominium or planned community at a scheduled meeting.
While the above provisions related to an independent reviewer apply to all condominium associations and master associations that have over 500 units, Sections 3303(e)(3) of the UCA and 5222(e.1) of the UPCA also allow condominium associations and master associations that are under 500 units to essentially “opt in” to utilize an independent reviewer, when approved by a vote of at least 51% of the unit owners.
Finally, Sections 3303(e)(3) of the UCA and 5222(e.1) of the UPCA provide that the board shall (i.e., must) present the official election results based on the certified election report from the independent reviewer at a meeting of the unit owners and shall (i.e., must) enter the results in the meeting records.
Removal of Board Members in Condominium Associations
Section 3303(g) was added to the UCA to clarify how board members can be removed with 2/3 of vote of the unit owners:
Removal of member of executive board.–Notwithstanding any provision of the declaration or bylaws to the contrary, the unit owners, by a two-thirds vote of all persons present and entitled to vote at any meeting of the unit owners at which a quorum is present, may remove any member of the executive board with or without cause, other than a member appointed by the declarant, provided notice of the intention to remove a member of the executive board is given with the notice of the meeting at which such removal is considered, as provided under section 4303(g) (NOTE: TYPO IN AMENDMENT? – the referenced section is from a different statute) (relating to executive board members and officers).
(It is noted that the UPCA already had a similar parallel provision at Section 5303(f)), therefore a new section was not required to be added to the UPCA).
Removal of Board Members and Officers – Required Bylaw Language
Section 3306(a)(3) of the UCA and Section 5306(a)(3) of the UPCA both provide that the Bylaws for an association must provide for the qualifications, powers and duties, terms of office and manner of electing executive board members and officers and removing executive board members and officers under section 3303(g) and 5303(f) (relating to executive board members and officers) and filling vacancies.
Good Standing
As it applies to condominiums and master associations, Sections 3303(e)(3) of UCA and Section 5222(e.1) of the UPCA now provide that “in order to be eligible to vote in the election, a unit owner shall be in good standing with the association.” (It is noted that a “unit owner in good standing” is already defined in §3103 of the UCA and §5103 of the UPCA as a unit owner who is current in payment of assessments and fines, unless the assessments or fines are directly related to a complaint filed with the Bureau of Consumer Protection in the Office of Attorney General regarding §3308 of the UCA or §5308 of the UPCA (relating to meetings); §3309 of the UCA or §5309 of the UPCA (relating to quorums); §3310 of the UCA or §5310 of the UPCA (relating to voting; proxies); and §3316 of the UCA or §5316 of the UPCA (relating to association records)).
Electronic Meeting Notices
A unit owner can now receive meeting notices for a condominium or planned community by electronic means if the unit owner has agreed in writing (opts in) to accept the notice by electronic means or where the bylaws permit electronic notices. See §3308(a) of the UCA and §5308(a) of the UPCA.
Electronic Meetings
Board and association meetings in condominiums and planned communities can be now be held using remote technology, i.e., virtually or by telephone conference, unless the bylaws provide otherwise. See §3308(c) of the UCA and §5308(c) of the UPCA.
While the bylaws must still require that a meeting of the association occur at least once each year, the requirement that the yearly meeting be held in person was eliminated. See §3308(a) of the UCA and §5308(a) of the UPCA.
Participation in Board or Association Meetings By Remote Technology
Unless the bylaws provide otherwise, an individual may now participate in a meeting of the board or association by means of a conference telephone or other remote electronic technology, including the internet, which allows participants in the meeting to hear each other. Participation in such a meeting shall be deemed in-person attendance at the meeting. See §3308(c) of the UCA and §5308(c) of the UPCA.
Bylaw Requirements for Delivery of Notice of Virtual Meetings
Pursuant to Sections 3308(b) of the UCA and Section 5308(b) of the UPCA, Bylaws in condominium associations and planned communities must [now] require that notice of virtual meetings of the association be given by:
(1) First class or express mail, postage prepaid, or courier service, charges prepaid, to the
mailing address of each unit or to any other mailing address designated in writing by the unit owner. Notice shall be deemed to have been given to a unit owner when deposited in the United States mail or with a courier service for delivery to the unit owner.
(2) Facsimile transmission, e-mail or other electronic communication to the unit owner’s facsimile number or address for e-mail or other electronic communications supplied by the unit owner, provided that the unit owner has agreed in writing to accept the notice by electronic means or where the bylaws expressly permit means of delivering electronic notice. Notice shall be deemed to have been given to the unit owner when sent.
Approved Methods of Voting – Now Includes Electronic Voting
Sections 3310(e) of the UCA and 5310(e) were added to the UPCA related to approved methods of voting, and provide as follows:
(1) Except to the extent expressly prohibited in an association’s declaration or bylaws, the voting rights of a unit owner may be cast or given in the following ways:
(i) in person or by proxy at a meeting of the association;
(ii) by absentee or electronic ballot; or
(iii) by another method of voting expressly provided in the association’s declaration or bylaws.
(2) An absentee or electronic ballot may:
(i) Be counted as a unit owner present and voting for the purpose of establishing a quorum, and otherwise, only for agenda items appearing on the ballot.
(ii) Not be counted even if properly delivered, if the unit owner attends the meeting to vote in person. A vote cast at a meeting by a unit owner supersedes a vote submitted by absentee or electronic ballot previously submitted for that agenda item.
(3) The term “electronic ballot” means a ballot cast or given by electronic transmission
over the internet, vote management system or the association’s community network, whether by direct connection, intranet, telecopier, electronic mail or other technological means, if the identity of the unit owner submitting the ballot can be confirmed and a receipt of the electronic transmission and ballot can be made available to the unit owner.
Acclamation (for an uncontested election)
Section 3310(f) was added to the UCA and Section 5310(f) was added to the UPCA with respect to acclamation for uncontested elections. Unless the bylaws of the association provide otherwise, these new statutory provisions provide that in the event that an election for a position on the board is uncontested, the officer or chair presiding at the election meeting may declare the nominee(s) elected by acclamation after determining there are no further nominations.
Pre-Election Sessions (Meet the Candidates) for Contested Elections
Pursuant to Sections 3308(d) of the UCA and Section 5308(d) of the UPCA, Bylaws in condominium associations and planned communities must require that in the event that there are more candidates than open positions on the executive board (i.e., a contested election), then, upon request of one or more of the candidates, the association shall hold a special session at least seven days before the election of a board member to allow the unit owners to meet each candidate for an executive board position. Each candidate for an executive board position shall have equal time to address the unit owners during a special session.
Recorded Meetings
Pursuant to Sections 3308(e) of the UCA and Section 5308(e) of the UPCA, unless the bylaws provide otherwise, meetings of the association may be recorded by the board via audio or video technology, provided that an announcement is made by the presiding officer at the commencement of the meeting that the meeting will be recorded. A recorded meeting shall be maintained and available to unit owners for a period of no less than six (6) months after the date of the meeting.
Quorum for Association Meetings After Multiple Attempts
Pursuant to Sections 3309(a)(2) of the UCA and Section 5309(a)(2) of the UPCA, except as otherwise provided in the declaration or bylaws of the association, if the association can’t obtain a quorum for any meeting of the association and fails to meet a quorum at two subsequent meetings, the association may utilize the following provisions contained in Section 5756(b) of the PA Non-Profit Corporation Law (relating to quorum) to meet quorum requirements:
(b) Exceptions.–Notwithstanding any contrary provision in the articles or bylaws, those members entitled to vote who attend a meeting of members:
(1) At which directors are to be elected that has been previously adjourned for lack of a quorum, although less than a quorum as fixed in this section or in the bylaws, shall nevertheless constitute a quorum for the purpose of electing directors.
(2) That has been previously adjourned for one or more periods aggregating at least 15 days because of an absence of a quorum, although less than a quorum as fixed in this section or in the bylaws, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if the notice states that those members who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter.
Amendments of Bylaws
Sections 3306(a)(6) of the UCA and Section 5306(a)(6) of the UPCA were amended to clarify how bylaws may be amended, as follows:
(i) The bylaws may be amended only by vote or agreement of unit owners of units to which at least:
(A) fifty-one percent of the votes in the association are allocated;
(B) any larger majority as specified in the bylaws; or
(C) a smaller majority as specified in the bylaws if all of the units are restricted
exclusively to nonresidential use.
(ii) The vote may be taken only at a scheduled meeting and following notice to the unit owners as provided under sections 3308 of the UCA or 5308 of the UPCA (each relating to meetings) that was advertised 14 days in advance to the unit owners. Absentee voting shall be permitted to unit owners provided that the ballots must be submitted to an independent reviewer by the commencement of the scheduled meeting.
Retroactivity
At this stage it is not entirely clear what the desired intent was with respect to retroactivity of the amendments to communities that precede the enactment of the UCA and/or the UPCA, or with respect to general principles of statutory retroactivity in general. It is expected this may become an issue that will arise during the 2023-2024 legislative session, especially if challenges to the applicability of any of the amendments begin to be raised by communities.
Parting Words
This discussion of PA House Bill 1795, now known as Act No. 115 of 2022, and specifically, the various changes to the UCA and the UPCA, is intended to provide a summary of the current state of the statutory amendments as of the posting date of this Hoffman Law LLC Blog post on January 30, 2023. (The amendments, as passed, can be found here). It is expected that certain provisions may change or be further amended during the 2023-2024 legislative session – in other words, House Bill 1795 will continue to stay alive! Stay tuned.
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