CathyA3 (Ohio)
Posts: 6,299
Posts: 6,299
Posted:
Up until now, Kentucky has lacked a uniform law governing the development and operation of HOAs. (Condominiums already have such a law.)
Senate Bill 120, which has been signed into law and takes effect in June, has some important provisions. Most are consistent with laws in other states, but some of them surprised me a bit. These provisions include:
* The Declaration must spell out a period for developer control and specify the time and manner in which developer's control ends.
* Boards must adopt a budget, and that budget may include funding for reserves. (*May?!* Yipes.)
* An annual financial report must be prepared every year, with the level of detail in the report tied to the communities' annual revenue levels.
* Proposed assessment increases of more than 15% over the prior year must be approved by the owners, and owners may rescind or reduce special assessments. (Translation: don't get yourselves into an emergency or other budgetary hole, because you may be unable to dig yourselves out of it. Your remaining option of a loan may be off the table as well since repayment could push assessment increases over 15%, at least in the initial year of repayment. If you must borrow, you will have to spread out repayments to keep below the 15% threshold, which will increase your overall borrowing costs but make the bank very happy. Feh...)
* The association must keep certain records, including those related to payments, common expenses, and meeting minutes.
* Meetings of the membership must be held once a year, and the quorum is 10% unless the bylaws say otherwise. Proxies are permitted and can be effective up to one year. Cumulative voting is prohibited.
* Board meetings, except for executive session, must be open to the membership.
* The board can only levy fines for violations if the owner is given written notice and an opportunity for a hearing prior to levying the fine.
* Collection remedies for non-payment of assessments have been clarified. The association may recover attorney's fees from the delinquent owner, may file a continuing lien, and may suspend an owner's right to use the common elements except for streets.
Opinion:
I've seen an article or two that touts the "important consumer protections" provided by the new law. This seems mostly accurate, since much of the bill is consistent with best practices in other states.
I disagree with this viewpoint regarding the provisions dealing with finances, especially the one on assessment increases. It appears homeowner-friendly on the surface - but when you think about consequences, you realize that it allows homeowners to get themselves into financial trouble and makes it more difficult to get themselves back out of it. Paired with the provision that makes reserve contributions optional, these seem to push HOAs toward financial difficulty and then force troubled associations to resort to borrowing - and that increases costs to the association over time. A truly homeowner-friendly law would make it difficult for HOAs to get themselves into financial trouble in the first place.
Text of SB 120
Senate Bill 120, which has been signed into law and takes effect in June, has some important provisions. Most are consistent with laws in other states, but some of them surprised me a bit. These provisions include:
* The Declaration must spell out a period for developer control and specify the time and manner in which developer's control ends.
* Boards must adopt a budget, and that budget may include funding for reserves. (*May?!* Yipes.)
* An annual financial report must be prepared every year, with the level of detail in the report tied to the communities' annual revenue levels.
* Proposed assessment increases of more than 15% over the prior year must be approved by the owners, and owners may rescind or reduce special assessments. (Translation: don't get yourselves into an emergency or other budgetary hole, because you may be unable to dig yourselves out of it. Your remaining option of a loan may be off the table as well since repayment could push assessment increases over 15%, at least in the initial year of repayment. If you must borrow, you will have to spread out repayments to keep below the 15% threshold, which will increase your overall borrowing costs but make the bank very happy. Feh...)
* The association must keep certain records, including those related to payments, common expenses, and meeting minutes.
* Meetings of the membership must be held once a year, and the quorum is 10% unless the bylaws say otherwise. Proxies are permitted and can be effective up to one year. Cumulative voting is prohibited.
* Board meetings, except for executive session, must be open to the membership.
* The board can only levy fines for violations if the owner is given written notice and an opportunity for a hearing prior to levying the fine.
* Collection remedies for non-payment of assessments have been clarified. The association may recover attorney's fees from the delinquent owner, may file a continuing lien, and may suspend an owner's right to use the common elements except for streets.
Opinion:
I've seen an article or two that touts the "important consumer protections" provided by the new law. This seems mostly accurate, since much of the bill is consistent with best practices in other states.
I disagree with this viewpoint regarding the provisions dealing with finances, especially the one on assessment increases. It appears homeowner-friendly on the surface - but when you think about consequences, you realize that it allows homeowners to get themselves into financial trouble and makes it more difficult to get themselves back out of it. Paired with the provision that makes reserve contributions optional, these seem to push HOAs toward financial difficulty and then force troubled associations to resort to borrowing - and that increases costs to the association over time. A truly homeowner-friendly law would make it difficult for HOAs to get themselves into financial trouble in the first place.
Text of SB 120