Condo Act amendments draw criticism from Ohio businesses, residents

Since its introduction in the Ohio House of Representatives back in early December 2013, House Bill 371 has seen a significant amount of criticism heaped on it by Ohio businesses, associations and residents.

Backed by House Republicans Cheryl Grossman of Grove City and Rick Perales of Beavercreek, the legislation proposes several amendments to the current Condominium Act in place in the state. As it stands, the bill would hamper the ability of condominium associations to attract and retain volunteer board members.

What the Bill Proposes
As proposed, HB 371 would establish new procedural and recordkeeping requirements for condominium owner associations, and new oversight responsibilities for the Division of Real Estate. Specifically, condominium associations would be required to register with the Division, hold public meetings, vote on record, and make records open for inspection.

Additionally, HB 371 would create a new Condominium Dispute Resolution Commission, would establish criminal penalties for failing to register an association with the Division, and would require a manager or managing agent of a condominium association of 10 or more units to hold a real estate broker’s or sales person license.

Problems with this Bill
Most troubling is the fact that the legislation would subject volunteer condominium board members and property managers to criminal prosecution should they violate certain provisions of the Condominium Act while serving in their capacity as association members. The chilling effect of this provision would be substantial, making it difficult for condominium associations to attract volunteers.

Also problematic is the legislation’s changes to condominium association corporate governance.   Typically, a unit owner has the right to attend an annual meeting and elect the governing board.   Thereafter, the board runs the day-to-day affairs of the association much like a publicly traded corporation’s board of directors manages its corporation.  The proposed changes would subject otherwise routine decisions to a public hearing type process –far less efficient, far less discrete, and far more likely to become litigious.

Most individuals who buy a condominium unit do so with the understanding that this form of ownership requires abdicating a certain amount of control.  For these owners, the benefits of common ownership, the ease of use, and the ability to delegate maintenance decisions to others, outweighs the control they are giving up. However, some owners struggle with giving up control.  These individuals challenge the board’s decisions on principle rather than on the merits of a decision.  In such circumstances, it is unclear that holding a public hearing improves the process.

Finally, it is unclear that any benefit will be achieved by shoe-horning management companies and managing agents into Ohio’s real estate sales licensure regime.  The skills and training required to facilitate a real estate sales transaction are significantly different that than skills and training required to manage a condominium association.

Should Anything be Salvaged?
With a lame duck session approaching, it is unlikely that HB 371 will come to a vote before this legislature adjourns.  If this bill is resubmitted next term, revisions will need to be made or it will receive renewed criticism.  Consequently, the question becomes: what, if anything, from the existing legislation should be retained?  Unfortunately, not much.  With good intentions, namely to increase transparency and accountability, this bill proposes a number of regulations that would have negative unintended consequences. Volunteer board members play an active and vital role in healthy, well-functioning condominium communities.  Ohio policy makers should work with these groups to design and develop programs that empower these communities and their leaders to act responsibly for the good of their collective interests.

© 2014

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