House Bill 534 has been proposed in the Ohio legislature which could result in significant changes in condominium operations in Ohio. The first part of the bill proposes an addendum to the Ohio Residential Property Disclosure Form required to be given by sellers of residential property. The addendum would be required for property subject to the condominium law and the planned community act. The seller would need to provide a copy of the association documents, a statement about the common assessments and any deed restrictions and a copy of financial information, such as the budget and the reserves and other financial statements. There is also a requirement to provide information as to the availability of special financing through the United States federal housing authority or other source. This appears to mean disclosing if the condo is FHA certified, but the addition of “other source” makes it wide open to interpretation. The addendum is also to include any information registered with the division of real estate and professional licensing that is available for public inspection. This leads us to another part of the bill.
Under the proposed law, every condominium association would be required to register annually with the State of Ohio and provide certain information and pay a registration fee. The association would be issued a certificate and the information provided would be open for public viewing. The law does not state what information must be provided in the registration form, but it could require contact information for board members and officers. Failure to register can result in a penalty.
Other parts of the proposed law delve into association operations. The board must provide a summary of the budget within 30 days of adoption along with an explanation of the amount and method of calculating and funding reserves, if applicable. Of course, it is applicable. Current law requires adequate reserves or a minimum of 10% of the operating budget unless waived annually by a majority of the owners. This could give owners better information about the reserves if passed.
The law also proposes additions to the records that the association must keep. The additions are records that the association should be keeping anyway. The law does, however, propose changes to the requests for examination and copying of records to include allowing a reasonable charge for copying or supervision of the examination. The law also adds the requirement of blanket fidelity insurance for any person who controls or disburses association funds. Most documents and the secondary mortgage market require this anyway, but the law requirements may be over broad. The law also includes the requirement that any cancellation or substantial modification of the policy be given by 10 days’ notice to the manager or the managing agent and to the division of real estate. The law also proposes a “super lien” for condominium assessments. This has been proposed many times before and probably will never pass.
The law requires that board meetings be open to all unit owners and a portion of each meeting be allocated for comments by unit owners. Owners can send an agent to represent them with a notarized statement and vote for them at board meetings. This indicates that this is not well thought out. Owners do not vote at board meetings, board members do. This law could give owners the impression that they have a right to vote at board meeting. Likewise, if the board wants to have board meeting by electronic means of communicating, as they can now, they must provide that owners can hear and participate. At least five days’ notice of board meetings is required to be given and posted. A curious provision of the law allows votes to be cast by notarized proxy, but the proxy cannot cast votes representing more than 15 percent of the owners.
Of course we have saved the best for last. The law proposes that the State of Ohio establish and maintain an investigation and audit section to investigate complaints and conduct inspections, election audits and other inquiries deemed appropriate by the superintendent. A complaint process would be set up with subpoena power to investigate complaints. This is ridiculous. Any owner who has a beef against the board, and who doesn’t, can complain to the state and the board must justify its actions. While it may cause boards to be more careful in their operations, it is just going to generate more contention, and of course, legal fees.
A similar proposal has been submitted in the past which included manager licensing. That went nowhere. Let’s hope that this proposal suffers a similar fate.