Artificial Intelligence, or AI, has seemingly become an everyday term these days. People are using AI to write resumes, create rough drafts of stories based on variables that the end-user inputs, and also perform all types of tasks for personal and professional use … and … it’s evolving (quickly!). But, as I learned from an awesome acronym from my computer programming (go Basic, Fortran and Pascal!) classes way back in the stone age … GIGO. Wait, GIGO? What does this mean? Quite simply: “garbage in, garbage out“.
In the context of AI utilized in the provision of legal services, it means that the information and data that AI is gathering and aggregating from the internet for attorneysto use in real-world (i.e., not “AI-world”) court filings is oftentimes replete with utter and absolute garbage – including but not limited to absolutely incorrect legal analyses and [caselaw] summaries and citations, and other big “no-nos” for attorneys – which, as you may have already guessed, is a massive problem not just for attorneys and their law firms, but also for the clients of these lawyers and law firms.
About a week ago, on August 19, 2024, the Honorable Karoline Mehalchick, a United States District Judge for the Middle District of Pennsylvania, issued a Civil Practice Order entitled “Use of Generative Artificial Intelligence”, which provides as follows:
Increased use of Artificial Intelligence (âAIâ), particularly Generative AI(including, but not limited to, OpenAIâs ChatGPT or Googleâs Bard), in the practice of law raises a number of practical concerns for the Court, including the risk that the generative AI tool might generate legally or factually incorrect information, or that it might create unsupported or nonexistent legal citations. As such, any party, whether appearing pro se or through counsel, who utilizes any generative AI tool in the preparation of any document to be filed in any matter pending before Judge Mehalchick, must include with the document a Certificate of Use of Generative AI in which the party must disclose and certify:
The specific AI tool that was used;
The portions of the filing prepared by the AI program; and
That a person has checked the accuracy of any portion of the document generated by AI, including all citations and legal authority.
What exactly does this mean? It means that if your Association’s attorneys/law firms are representing your Association in a matter in front of Judge Mehalchick, they must certify that AI was used (and which type(s)), identify which portions of the filling are prepared by AI, and that someone (a real live person – go figure!) checked the accuracy of any portion of the filing prepared by AI, including all citations and legal authority. A failure to do so may result in sanctions.
While this Civil Practice Order only applies to matters in front of Judge Mehalchick in the [federal] District Court for the Middle District of Pennsylvania, Community Association attorneys, and their clients, throughout all of Pennsylvania, as well as virtually (no pun intended) in every other jurisdiction in this country, should understand that all of this is coming to a courthouse near you … and soon. Judges do not want to deal with GIGO filings in their courtrooms, so attorneys and law firms should take heed of the risks associated with the use of AI in legal practice – NOW.
If you’ve been paying attention, Hoffman Law LLC previously advised of updates to the Pennsylvania Breach of Personal Information Notification Actâ (âBPINAâ) in 2022/2023 in a prior Blog post found here. This Blog post is an update to same.
NEW:
Pennsylvania Senate Bill 824 (SB 824) changed the BPINA in numerous ways, and the changes become effective on September 26, 2024. We will summarize the recent changes provided by SB 824 below, not in its entirety, but as it may apply to/impact Community Associations.
1.NOTIFICATION OF BREACH. BPINA used to require notification to credit reporting agencies when 1,000 or more PA residents were impacted in the event of a breach. SB 824 brings that number of impacted residents down to 500 or more PA residents.
2. CREDIT REPORTING/MONITORING. SB 824 requires that qualifying entities provide impacted PA residents with access to a credit report and credit monitoring services, free of charge, if the following apply:
a. there was a breach of the “security of the systems” as defined by PA law; and
b. the data accessed as a result of the breach included the individualâs name (first and last name, or first initial and last name) in combination with their SS #, bank acct. # or driverâs license/state identification card #.
If the two aforementioned requirements have both been triggered, the Ass’n must provide the impacted PA individual with access to an independent credit report from a consumer reporting agency if the individual is otherwise not able to obtain an independent credit report free of charge. The Ass’n must also provide the impacted PA individual with an offer of twelve (12) months of credit monitoring services, and advise that same is available free of cost.
3. PA Attorney General. SB 824 requires that an Ass’n notify the Pennsylvania Attorney Generalâs Office (PA AG) whenever it provides notice of a breach under PA law to more than 500 residents of the Commonwealth (used to be 1000!). The notification to the PA AG must be provided at the same time of the notice provided to impacted individuals, and must include the following information (if known at that time):
Ass’n name/location;
Date of breach;
Summary of incident that led to breach;
Estimated total # of impacted individuals; and
Estimated total # of impacted residents of PA.
Finally, we still recommend that community associations review BPINA as amended, as Act No. 33 of 2024 (June 28, 2024), which can be found here, and discuss with their counsel, managing agents, and/or any service providers that handle personal information (especially association software providers), and confirm proper insurance coverage with association insurance professionals. As it relates to insurance, community associations should obtain adequate cyber-liability insurance to offset risk and cover a breach incident (it is noted that the cost of proper notification is tremendous, especially if the breach (now) involves notification to over 500 persons at one time (because all consumer credit reporting agencies must also be notified, as well as the Pennsylvania Attorney Generalâs Office).
I was recently listening to my 70âs playlist on Spotify, and the Steve Miller Bandâs âFly Like an Eagleâ came on. One of the verses we all know form the song suddenly stuck out to me:
Time keeps on slippin’, slippin’, slippin’ ⊠Into the future
Time indeed does slip ⊠into the future. To wit, itâs already 2024 (where did 2023 go? Or 2022, 2021 and/or 2020 for that matter?). As it pertains to the community association world, what exactly is on the horizon for the future â in 2024 and beyond? Letâs discuss some of the emerging technologies in community associations to see how far weâve come, and what is coming down the road (pun intended, electric vehicle (EV) joke here).
Electric Vehicles
A couple of years ago, I wrote an article for Community Assets entitled âPlug and Play â Solar Panels and Electric Vehicles in Common Interest Communitiesâ (Nov/Dec 2021 issue). Itâs still a very hot topic nationally. While there is currently limited pushback related to EV charging in associations with single family detached units (usually related to aesthetics of installing outside of the unit/garage vs. inside the garage), in stacked condominium and townhome communities itâs been a different story.
The debate about EVs in these communities still relates to how and where electric vehicles will be charged if the vehicle is parked away from the unit because, most of the time, the current infrastructure present in older communities will substantially limit the ability to actually install charging stations in common areas, in addition to association-related logistical, legal and technical issues such as the location of the charging stations, use of parking spaces, deeded spaces, limited available parking, insurance, tremendous expense, disturbance of common facilities and common elements, liability, who will pay for the electricity, commercial EV charging providers on the premises, Level 1, Level 2 and Level 3 charging, and more.
The shift to EVs is rapidly accelerating (another EV pun, intended) as the technology evolves and the cost of EVs continues to decrease. Our industry must proactively figure out how to handle EVs â in old communities and in new communities. It will obviously be much easier to deal with this in new communities where the necessary infrastructure required for EV charging stations is installed at the time the improvements are installed in the units, common areas and common facilities.
I am still not aware of any actual EV legislation that has been formally introduced which would impact community associations in Pennsylvania, but I do believe itâs coming at some point soon, in some manner. And when I say soon, I mean, very soon â PA Senator John I. Kane issued a Co-Sponsorship Memorandum on August 31, 2023 entitled âResidential Electric Car Charging Stations.â Pursuant to the Memorandum:
âI am introducing legislation to allow residents of condominiums and common interest communities to install electric car charging stations in their designated parking spaces. Residents will be responsible for the cost of installing the electric car charging stations. The legislation will bar unreasonable restrictions and enforcement against the use and expansion of electric car charging stations as well as the deliberate disregard of applications. Electric Vehicles have major benefits including improving air quality by lowering emissions and creating new jobs in the manufacture and distribution of these products. That is why leading auto manufacturers including General Motors are ramping up production of electric vehicles and are planning to phase out most gasoline or diesel-powered vehicles. My legislation is modeled after New Jersey’s and New Yorkâs efforts to facilitate the expansion of electric car charging stations. Letâs join our neighboring states in their mission to make electric car ownership hassle-free and accessible. Itâs time to take important steps to address climate change while also addressing the barriers that may impeded electric vehicle ownership.â
Iâve asked this before for various issues: shouldnât we be in front of this issue, rather than behind it? Shouldnât newresidential construction in Pennsylvania be constructed with the necessary infrastructure to support EV charging stations? Yes, it should.
However, for existing communities with old (aging) infrastructure and other limitations, this will be far more difficult, so any legislation requiring existing Associations to allow EV charging in common area parking situations must be carefully reviewed. If a legislator is reading this article and is considering going down this road (pun intended â EV joke # 3) with respect to existing communities, I would recommend that the legislature identify and/or create funding sources (i.e., state energy grants) which community associations could utilize to install the required infrastructure for EV charging. I am happy to discuss this with any legislator that wants to listen.
Solar Energy
Currently, 29 states (including neighboring New Jersey and Delaware) and the District of Columbia have laws which serve to prohibit association covenants or restrictions from applying to homeowners who seek to install solar panels and associated devices on their homes. Twelve more states have laws that protect easements and their establishment on a legal contractual basis without having an express solar rights law in effect. While Pennsylvania currently has no such solar law(s) in effect, solar panel legislation which would impact community associations has previously been introduced multiple times: Senate Bill 1039 â Residential Rights to Solar Energy (2017-2018 Session); Senate Bill 436 â Removing Obstacles to Residential Rights to Solar Energy (2019-2020 Session); and Senate Bill 826 â Ensuring All Residential Homeowners have Access to Solar Energy (2021-2022 Session). The common theme exhibited in the first two Senate Bills is that community associations would not be permitted to prohibit or restrict the installation or use of a solar energy system on a detached unit.
Senate Bill 826 (from the 2021-2022 Session), took it one step further to provide that Associations would not be permitted to prohibit or would not be permitted to prohibit or restrict the installation or use of a solar energy system on a detached roof or a townhouse unit. Currently, in the 2023-2024 Session, similar legislation has been introduced â Senate Bill 31 and House Bill 1759 â Solar Energy Systems. This legislation, as proposed, provides that a community association may not prohibit or restrict the installation or use of a solar energy system on a detached roof or a townhouse unit for which the repair of the of the unit is an owner responsibility and not the responsibility of the community association.
Thus, all of the bills that were previously introduced, as well as the current sessionâs bills, focus on preventing community associations from prohibiting or restricting the installation or use of a solar energy system on units in the community association. If solar is indeed the future, why are legislators still focusing on preventing associations from acting in some way? Because most community associations (the Boards and/or the owners) still do not want solar in the community and/or do not want to deal with solar issues in any way. Just like the EV issue we just discussed – shouldnât we be in front of the issue, rather than always behind it? Community associations must begin to reconsider how they look at solar issues because itâs coming, and there will be no looking back.
Management Software
I know, Iâm the community association attorney â what do I know about management software? We work with manymanagement companies in representing the interests of our mutual community association clients all over Pennsylvania, and we see that management software solutions have been evolving, and rapidly. Using the latest software solutions, community association managers and staff can:
Take payments electronically;
Perform site visits and issue violation notices, with photographs, immediately from their smartphones;
Communicate directly, and instantaneously, with all of the unit owners in the community via a communication portal and/or email blast; and
Communicate with vendors regarding association issues.
Management is also able to offer mobile apps to end user unit owners to be able to view their owners portals and communicate directly with the management regarding their accounts, and notify management of any complaints, issues or violations. Board members can also utilize mobile apps to view and conduct Board business, which was unheard of only a few years ago.
Technology is therefore allowing management to do its job better â and faster â than ever before. Expect to see even more positive changes happen in this area in 2024 and beyond.
Electronic Voting and Meetings
At some point, electronic voting and meetings in community associations will be the norm, not the exception, in Pennsylvania. While we still need to work out the wrinkles statutorily for existing communities in Pennsylvania, the Bylaws that are being drafted for new communities in Pennsylvania already reflect the change to allow emerging, electronic technologies to be utilized for voting and/or meetings (Board and/or association). These technologies, as they exist today, were not really being utilized in community associations even just five years ago â yet, today, they have become the norm.
Social Media
In a nutshell, to say that social media has changed the community association landscape is an understatement, and to say that the use of social media in community associations has drastically changed (whether good, bad, ugly or indifferent) is an even bigger understatement. Social media can be used by community associations in a positive manner, and it can also have negative implications (i.e., unofficial social media pages/online presences which are not run by the association). At the end of the day, social media use in community associations is not going away.
I have been discussing social media issues for well over a decade, and one thing that is clear is that social media issues continue to evolve.  To say that media has changed the community association landscape is an understatement, and to say that the use of social media in community associations has drastically changed (whether good, bad, ugly or indifferent) is an even bigger understatement.  Social media can be used by community associations in a positive manner, and it can also have negative implications (i.e., unofficial social media pages/online presences which are not run by the association).  At the end of the day, social media use in community associations is not going away.  Be prepared for it, and handle it appropriately. Â
– Edward Hoffman, Jr., Esq., CCAL
* This Blog post by the author was originally published in the Jan/Feb 2024 issue of Community Assets Magazine, a publication of CAI’s Keystone Chapter.
There’s a chance that we might fall apart before too long
(We Can Work It Out, The Beatles)
In my career as a community association attorney, I canât begin to count the number of times I have heard from clients that life in a community association is akin to life in paradise ⊠no muss, no fuss, no bother. Now that I have your attention, letâs talk turkey. Life in a community association is just like life in the rest of the world ⊠while it can be wonderful and rewarding, it can also be challenging to say the least. The distinction is that challenges and disputes that arise in a community association have as their genesis not only ordinary societal issues (including differing attitudes, disagreements and a divided country), in a community association, disputes often arise as a result of non-compliance with the communityâs governing documents, covenants and restrictions.
A couple of years ago, I authored a piece entitled âPeace of the Puzzleâ which discussed best practices in avoidingconflict in community associations (Common Ground, May/June 2021 issue). But what happens when conflict cannot be avoided and it results in a dispute that needs to be resolved? We will discuss dispute resolution as it applies to community associations in this article.
Communication
Communication by and between the disputing parties is critical to resolving the dispute. Time and time again, I have witnessed parties engaged in a dispute actually stop communicating with one another. A practical question arises as it pertains to this strategy: how in the world will ceasing communication between the parties actually help resolve the conflict? The simple answer is: it wonât. In fact, it will generally make things worse. For clarification, I am not suggesting that parties who are engaged in a dispute where one party is abusing, intimidating or harassing the other (or a situation of such mutual behavior) should attempt to talk it out. I am suggesting (and recommending) that when parties can discuss their dispute professionally and in a civil nature, they should. This may actually lead to resolving the dispute, or may assist in getting to a resolution faster than if the parties were not communicating.
From the perspective of a community association being a party to a dispute with a unit owner (unrelated to the collection of delinquent assessments), I generally recommend that the association (through its Board and/or with a Community Manager) seek to meet with the adverse unit owner either formally or informally to discuss the dispute and try and resolve the matter.
Similarly, a unit owner battling with his or her community association or with another unit owner should strongly consider meeting with representatives of the association or with the other unit owner, as may be applicable, to attempt to resolve their dispute. Communication by and between any of the adverse parties can be worth its weight in gold.
Exhaustion of Internal Remedies
In virtually every community association in every jurisdiction, the governing documents and/or the controlling common interest community statutes will provide that when the association is enforcing its governing documents against a unit owner for a violation, the association must provide notice of the violation to the unit owner, and an opportunity to be heard (due process) on the violation to the unit owner prior to issuing the violation against and/or assessing a fine to the unit owner. (Statutes vary by jurisdiction, but the gist is the same; check with your community association attorney to ensure the required steps are being handled correctly). Following this process correctly would serve to exhaust all of the required internal remedies as it relates to the violation, and, if need be, would permit the association to move forward with further action(s) if the unit owner disputes the violation and relief from the court or some other remedy, such as a form of Alternative Dispute Resolution (ADR), such as mediation or arbitration, is sought to resolve the dispute.
As part of the internal remedy procedure, some states (like New Jersey, where I am licensed to practice) statutorily require that community associations affirmatively offer ADR to unit owners prior to going to court on all, or some, issues. Other states, such as Pennsylvania (where I am also licensed, and primarily practice) statutorily provide for voluntary ADR as part of the internal remedy procedure. The Pennsylvania statutes provide that: (1) All parties must agree to ADR; (2) ADR is not mandatory; any party may seek a private cause of action or other relief; and (3) Costs for ADR (excluding attorneysâ fees) are to be assessed equally against all parties to the dispute.
The common interest community statutes and/or association governing documents in many jurisdictions also permit a unit owner to file a complaint against the association for violations (generally for allegedly failing to enforce the covenants and restrictions) and/or for other disputed issues. In many jurisdictions, the statutes and/or the governing documents also require a unit owner to exhaust internal remedies as may be required prior to filing an agency complaint or taking the association to court on all or some issues. For example, Pennsylvaniaâs statutes permit a unit owner in good standing to file a complaint with the Pennsylvania Office of Attorney Generalâs Bureau of Consumer Protection for a limited number of issues (meetings, quorums, proxies, voting and association records). However, before a unit owner can file a complaint with the Pennsylvania Attorney General, all existing internal remedies must first run their course, and, if the associationâs governing documents provide for internal ADR to first occur, a unit owner canât file with the Pennsylvania Attorney General until ADR is exhausted and no resolution results, or one-hundred days have passed with no resolution. A unit owner can immediately file a complaint with the Pennsylvania Attorney General if the governing documents do not contain ADR provisions or if the governing documents provide for ADR but the association refuses to agree to engage in ADR with the unit owner.
It is therefore strongly recommended that parties determine if their governing documents and/or respective jurisdictionâs statutes require ADR or some other dispute resolution mechanism to occur prior to engaging in other dispute resolution efforts or litigation. A final note: the required internal remedies that we have discussed invariably may lead to â you guessed it â some form of communication occurring between the parties that are engaged in the dispute ⊠which, as we know, is better than no communication.
Actively Working to Resolve the Dispute Outside of Court
If communication and the exhaustion of internal remedies do not resolve the dispute, itâs time to seek other options. I generally recommend exploring if a formal or informal meeting with/between the party/parties to try and resolve the dispute is possible (even if attempted in the initial communication phase) â after all, it canât hurt to try. The best case scenario is that the dispute gets resolved.
If a formal or informal meeting doesnât work, or simply doesnât happen, then the parties should explore formal Alternative Dispute Resolution (ADR) using a third party for a non-binding or binding mediation and/or arbitration based on the agreement of the parties (of course this need not be utilized if the parties were required to engage in ADR in exhausting the administrative remedies and it was not successful. The parties can attempt a second ADR session if they so choose at this point, which may or may not be successful). ADR is a popular and often much less expensive choice for associations who seek to resolve disputes without the need for full-blown litigation in court.
The two most popular types of ADR utilized by associations are mediation and arbitration. Mediation is generally heard by a sole mediator and is more of a âsummaryâ proceeding where the parties and the attorneys submit information (usually mediation memoranda) to the Mediator (ahead of time and/or at the mediation) and discuss their cases with the mediator and/or with the mediator and one another without the need for evidence/actual testimony to be introduced/taken at the mediation). The mediator issues a recommendation for resolution at the conclusion of a non-binding mediation that the parties may choose to accept or turn down, or in the situation of a binding mediation, the mediator issues a mediation order which the parties agreed to abide by (sometimes the mediation order gets filed with the court and a judge enters an order, unless the mediation proceeding and/or the result is to remain confidential).
Arbitration is generally a more formal and technical proceeding that can be performed by a sole arbitrator or a panel of arbitrators. Arbitration memoranda are typically submitted by the attorneys prior to the proceeding, testimony is taken and evidence is introduced at the proceeding. The arbitrator or arbitration panel issues a recommendation for resolution at the conclusion of a non-binding arbitration that the parties may choose to accept or turn down, or in a binding arbitration, the arbitrator or arbitration panel issues a binding arbitration order which the parties agreed to abide by (sometimes the arbitration order gets filed with the court and a judge enters an order, unless the mediation proceeding and/or the result is to remain confidential).
I am typically a bigger fan of a non-binding mediation session over a binding ADR session, whether it is a binding mediation or arbitration, except in rare situations where a binding, final outcome is the best available option for the particular dispute. Being a non-binding session allows the parties to attempt to formally resolve the dispute with the assistance of a mediator who is a third party with no vested interest in the outcome (aside from his/or her fee). I have been involved in complex, multi-party litigation where multiple mediation sessions were required to resolve a dispute with finality, but even three, four or five mediation sessions is vastly cheaper and more efficient than participating in a four to six week trial which would be subject to appeal.
The Last Straw: Going to Court
Sometimes, despite our best intentions and attempts at resolving a dispute outside of court â we end up in court â because we have to. While cases often settle on the courthouse steps and/or during the trial itself, cases need to be prepared to go the distance, which is time-consuming and expensive for the litigants. A few thoughts about going to court are as follows:
When to go to court.  This seems obvious, but sometimes it isnât.  Court is not just the âlast resortâ option when all else fails.  Parties can actually spin their wheels for a long time attempting to resolve a dispute, where one party is purposefully leading the other party down the primrose path.  In this situation, going to court sooner, rather than later, may be more beneficial and actually end up being more cost effective. Â
ÂÂFocusing on Whatâs Important and Picking our Battles. I often tell clients, donât sweat the small stuff, sweat the big stuff. In other words, focus on whatâs important and pick your battles when identifying your litigation strategy â look at what the desired end result, and work to achieve that instead of getting lost in the weeds battling over minutiae.
Cost-Benefit Analysis. Every party in litigation should engage in a cost-benefit analysis as it relates to the desired outcome and the cost to get there. If the cost exceeds the desired outcome, then settlement of the dispute in lieu of trial is likely the best option.
Risk-Benefit Analysis. If the risk of losing at trial is greater than the potential benefit of going to trial, then settlement of the dispute in lieu of trial is likely the best option.
Impact on the Association, Board and Members/Owners. Litigation is expensive, time-consuming and can be emotionally exhausting. The association will need to pay its counsel to go to court and the Board and any impacted members/owners will need to deal with the case from inception through trial â many times this causes Board members to resign and members/owners sometimes move out of communities after being involved in protracted litigation.
After the suit – now what? To the victor go the spoils, or so they say. But is this really true in an association setting where it is association vs. unit owner? While there is a formal âwinnerâ at the end of the litigation, the parties (Board members on behalf of the association and the unit owner) must still live next to one another as neighbors and attempt to coexist amicably. This is tough following a drawn-out court case, but the parties should do their best to put the past behind them and forge a new path moving forward. This is obviously much easier said than done, as human nature and behavior often get in the way. Sometimes the greatest goal following litigation for some parties is that they wonât end up in court again.
Parting Thoughts on Conflict Resolution
I am not trying to sound like a self-help guru, but my advice to association residents would be to keep an open mind, act in good faith and be neighborly – this may go a long way when a dispute arises and a resolution is required. As the Beatles taught us: we can work it out.
– Edward Hoffman, Jr., Esq., CCAL
* Content in this Blog post is also contained in an abbreviated/edited article by Edward Hoffman, Jr., Esq., CCAL, published in the November/December 2023 issue of CAI’s Common Ground magazine, entitled “We Can Work It Out”.
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.
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