• Ohio Planned Community Law Gives New Rights and Responsibilities to Homeowners’ Associations
  • July 2, 2010 | Author: David J. Lindner
  • Law Firm: Buckingham, Doolittle & Burroughs, LLP - Cleveland Office
  • Homeowners’ associations, or “HOAs,” are nothing new in Ohio. In fact, they have existed for decades. They range from simple platted subdivisions with minimal restrictions and few common areas to master associations with complex voting structures and extensive amenities. What may surprise most people is that until now, Ohio did not have a law governing the operation of HOAs. Developers were, for the most part, free to set up the association however they saw fit. Unfortunately, the governing documents prepared by developers sometimes failed to address numerous important issues concerning the operation and governance of the association. For example, unless the developer placed such a requirement in the declaration, there was no requirement for the association’s by-laws to be recorded with the county recorder. Consequently, new purchasers of homes within a subdivision often did not have prior notice of the by-laws. Worse still, associations would informally amend and revise their by-laws over the years, leading to confusion over which unrecorded document actually controlled.

    Governor Strickland recently signed into law the Ohio Planned Community Law (the "HOA Act") to enumerate and clarify the powers that may be exercised by an HOA, or “planned community,” as they are referred to in the HOA Act, and to set forth a more structured framework for their day-to-day operation. The effective date of the HOA Act is September 10, 2010. The HOA Act applies to all Ohio homeowners’ associations (this does not include condominiums, which are subject to a separate statute). Unlike the Condominium Act, which provides detailed requirements for the initial development of a condominium as well as the operation of the association, the HOA Act’s provisions apply mainly to the operation of the association.

    Among the most significant provisions are the following:

    • An association’s by-laws must now be recorded. Previously, many developers recorded the declaration, but the by-laws were contained in a separate unrecorded document. Existing associations with unrecorded by-laws must file them for record within 180 days of the effective date of the HOA Act.
    • The HOA Act specifies that the developer control period may last for whatever period is specified in the declaration, but not beyond the time at which all lots have been transferred to owners.
    • No owner other than a director may attend or participate in any discussion or deliberation of a meeting of the board of directors unless expressly authorized by the board.
    • Unless otherwise specified in the declaration, owners may amend the declaration with 75% approval. This is helpful because some older declarations fail to specify how the declaration may be amended.
    • The association is required to adopt an annual budget that includes a reserve for capital expenditures, unless waived annually by majority vote of the owners.
    • The association must, to the extent applicable and reasonably available, maintain property and liability insurance on the common elements, and directors and officers liability insurance.
    • The association has the right to assess individual owners for costs associated with the enforcement of the declaration, rules and regulations, including attorneys’ fees. Prior to making such an assessment, the owner has the right to notice and a hearing, similar to the process set forth in the Condominium Act.
    • The association may file a lien for unpaid assessments, including attorneys’ fees, and this lien is valid for five years. Many older declarations are unclear about the association’s lien rights so this new provision will be helpful to those associations.

    It is important to note that the new HOA Act requires action on the part of existing associations. If you serve on the board of an HOA, you must determine whether your by-laws have been properly recorded. If not, they must be recorded by no later than March 9, 2011. Thereafter, any amendments to the by-laws must also be recorded within 60 days after the date the amendment is adopted. This is the perfect time to review the by-laws and making any necessary amendments.