Many families in Northern Virginia choose to live in neighborhoods governed by Homeowners Associations (“HOAs”) because of the related amenities, which can include gated access and the use of clubhouses, walking trails, and pools. Another reason people choose these neighborhoods is because of the sense of community promoted by shared standards with respect to construction and property maintenance. These benefits, however, come at a cost that impacts the decisions individual homeowners are allowed to make regarding their property. HOAs can be good or bad, depending upon whether you view uniformity as an important decision when purchasing a home.
What Is the Virginia Property Owners’ Association Act?
The Virginia Property Owners’ Association Act (the “Virginia POA Act”) provides important guidelines with respect to the powers of HOAs, the scope of appropriate disclosures with respect to these powers, and the remedies available to homeowners and HOAs in the event of a dispute.
HOAs play an important role in residential real estate contracts. Failure to disclose mandatory bylaws and regulations may allow prospective buyers an out in the pending sale through the Virginia POA Act contingency. Before you sign your contract, make sure you understand the legal implications of failing to make these disclosures in a Virginia residential real estate contract.
What Is a Property Owners’ Association or Development?
Va. Code Ann. § 55-509 defines a development as “real property located within this Commonwealth subject to a declaration (discussed in greater detail below), which contains both lots, at least some of which are residential or are occupied for recreational purposes, and common areas with respect to which any person, by virtue of ownership of a lot, is a member of an association and is obligated to pay assessments provided for in a declaration.”
In a typical scenario, a real estate developer builds a development in the hopes of selling individual lots to individuals who want to share common areas and otherwise take advantage of the rights and responsibilities of HOA membership.
What Is a Declaration?
Developments put the world on notice of their existence and intention to avail themselves of the protections of the Virginia POA Act by filing a declaration in the land records in the jurisdiction in which they are located.
Pursuant to Va. Code Ann. § 55-509, a declaration either:
- Imposes on the association maintenance or operational responsibilities for the common area.
- Creates the authority in the association to impose on lots, or on the owners or occupants of such lots, or on any other entity any mandatory payment of money in connection with the provision of maintenance and/or services for the benefit of some or all of the lots, the owners or occupants of the lots, or the common area.
After the recording of a declaration, the Virginia POA Act generally requires a 2/3rd vote of lot owners to change its terms, Va. Code Ann. § 55-515-1, which is a more onerous burden than the simple majority required to repeal or amend rules or regulations established by the HOA Board of Directors that are consistent with the declaration, pursuant to Va. Code Ann. § 55-513(A).
What Disclosures Must an HOA Make to Potential Purchasers?
Since Va. Code Ann. § 55-515 provides that the failure to comply with the terms of a declaration or rules and regulations promulgated consistent with its authority “shall be grounds for an action or suit to recover sums due, for damages or injunctive relief, or for any other remedy available at law or in equity…,” including prevailing party attorneys’ fees, both due process and fundamental fairness mandate disclosure of these materials to potential purchasers.
Among several other things, these disclosures must:
- Specify whether a lot is located within a development subject to the Virginia POA Act.
- Contain a statement of mandatory fees and assessments.
- Provide information regarding the financial status of the HOA. This includes a current budget, a report regarding the amounts of funds held in reserve, and information regarding legal proceedings with a potentially material impact.
- Include a copy of the current declaration, the association’s articles of incorporation and bylaws, and any rules and regulations or architectural guidelines adopted by the association.
These disclosures should allow a potential purchaser to make an informed decision regarding whether a given HOA is a good fit for them.
Our lawyers at Keithley Law, PLLC, PLLC have represented both lot owners and HOAs in connection with disputes arising out of declarations and other governing documents. Contact us today to schedule an initial consultation to discuss the particulars of your situation.