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Ohio Planned Community Act Signed into Law

Ohio Planned Community Act Signed into Law

OHIO REVISED CODE-CHAPTER 5312

Planned Community Act

Senate Bill 187 was passed by the Ohio’s Congress and signed into law by the Governor.  The law became effective September 10, 2010.  As a result of this bill, planned communities (other than condominiums) in Ohio will be governed by a new Chapter 5312 of the Ohio Revised Code.

Application to Existing Associations:

The law is not intended to be retroactive.  What this will mean for existing associations is that your existing governing documents will continue to apply and will control.  If there is a conflict between a provision in your documents and the statute, your document provisions will still apply.  If your governing documents are silent on an issue covered by the statute, then the provisions of the statute will apply.

New Associations:

The statute requires that any person or developer establishing a new planned community must file a declaration and bylaws providing for the operation of the planned community with the county recorder.  New associations must abide by the provisions of the statute.

Administration of Association:

The association will be administered or run by a board of directors that have specific duties and powers as provided for by the statute.  The association must be organized as a non-profit corporation under the laws of the State of Ohio.  Meetings of the board of directors will be open only to directors.  No owner, other than the directors, may attend or participate in discussion or deliberation of a meeting unless the board expressly authorizes that owner to attend or participate.

The owners association is comprised of owners of lots in the community and the board is elected from the owners and their spouses.  If an owner is not an individual, then any principal, member of a limited liability company, partner, director, officer, trustee or employee of the owner may be elected to the board.  The association will be required to carry property insurance on common elements, liability insurance, and directors & officers coverage.

Unless otherwise provided, the documents can be amended by a 75% vote of the owners in writing or at a meeting for that purpose.

Any dissolution of the association will require a unanimous consent of all owners holding an interest in the association.

The association will be required to maintain adequate books and records of accounts, minutes, collection records, expense records,  and names and addresses of owners.  Those records must be available for review by owners.

The association is responsible for reasonable maintenance, repair and replacement of common elements unless otherwise provided by the documents.

Finances:

The board must adopt a budget on an annual basis for revenues and expenditures.  The budget shall include reserves in an amount adequate to repair and replace major capital items in the normal course of operations without the necessity of special assessments, unless the owners, exercising not less than a majority of the voting power of the association, waive the reserve requirement on an annual basis.

Assignment or Conveyance of Assessments or Interests:

The new statute will prohibit the association from assigning the right to assessments or future income from assessments or conveying a security interest in any portion of the common elements unless the declaration specifically allows it or 75% of the owners agree (or whatever percentage required in the declaration).  Conveyance of any fee interest in a limited common element or a security interest in a limited common element requires approval of all owners of the lots to which those limited common elements are allocated.  Any proceeds of a conveyance are assets of the association.

Rules Regarding Board of Director Meetings, Common Expenses, and Assessments:

  1. Officers must be elected from among the board members.
  2. The board can appoint a member to fill a board vacancy for the unexpired portion of a term.
  3. The association must have an owners meeting at least once a year.
  4. A special meeting can be called by 50% of the voting power of the association, or lower if the documents specifically allow.
  5. In lieu of a board meeting, the board can take action with unanimous written consent that is filed with the minutes of the meeting.
  6. The board can have telephonic or electronic meetings as long as each member can hear or read in real time and participate and respond to every other member.
  7. No discrimination is permitted.
  8. The association, through the board, has the authority to:
    1. Hire and fire a property manager, attorneys, accountants and other professionals.
    2. Commence, defend, intervene in, settle or compromise any action in the name of or threatened against the association, the board or the property involving two or more owners and relating to matters affecting the property.
    3. Enter into contracts and incur liabilities relating to property operation.
    4. Enforce the provisions of the governing documents.
    5. Adopt and enforce rules for maintenance, repair, replacement and modification of common elements.
    6. Acquire, encumber, convey or transfer real or personal property subject to the provisions herein.
    7. Hold title to property.
    8. Grant easements, leases, licenses, and concessions through or over the common elements.
    9. Collect fees or charges for use, rental or operation of common elements.
    10. Levy late fees, returned check charges, enforcement assessments and for damages to the property.
    11. Adopt rules regarding collection of assessments and the application of payment of assessments.
    12. Suspend voting and use of recreational facilities.

Assessments and Collections:

If the declaration limits the amount of assessments that can be charged, the board cannot increase the assessment or fee without a 75% vote.  If the declaration does not provide for division of assessments, then it shall be divided among all owners equally.

Owners can be charged for enforcement assessments and assessments for utility services and expenses the board incurs in collecting those assessments.  Owners can also be assessed for damage to common elements due to willful or negligent acts including attorneys’ fees and court costs.  Any of the costs associated with enforcement of the governing documents are assessable to the owner.

Payments of assessments are to be credited in the following order:

  1. Interest
  2. Late fees or enforcement assessments
  3. Collection costs, attorney fees
  4. Principal

The association has a statutory lien for assessments that includes interest, collection costs, attorney and paralegal fees.  Any lien filed with the county recorder’s office must be signed by the board or other designated representative.  Liens are continuing in nature and are subject to automatic adjustments to reflect additional assessments on the property.  The association may also appoint a receiver on the property to collect the rents, if any.

In any action relating to a property in the association, the association will be required to be named as a party to the action.  This will require all banks and mortgage companies to name the association in all foreclosure actions on the property.  It will not be a defense to non-payment in a foreclosure action that the association failed to provide an owner with any service, goods, work, or that the board failed in any other duty.

Due Process:

In enforcing the governing documents, the board will be required to provide due process prior to issuing an enforcement assessment.  Prior to an assessment, the board must issue a notice to the lot owner.  The notice must include: a description of the property damage or violation; the amount of the proposed assessment; a statement that the owner has a right to a hearing before the Board to contest the assessment; the procedure to request the hearing; and, a reasonable cure date to avoid the assessment.

To request a hearing an owner must give the Board written notice within ten (10) days of receipt of the notice.  Failure to make the request will result in the hearing being waived and will allow the board to immediately impose the assessment.  If properly requested, the board shall set the hearing and the time, date and location of the hearing shall be provided to the owner by written notice no later than seven (7) days before the hearing date.  No assessments will be permitted prior to the hearing being held, if one has been requested.  Once the hearing is held, the board must issue a written notice of the charge or assessment imposed as a result of the hearing.

Rights and Responsibilities of Planned Community Lot Owners:

Owners are permitted to examine and copy the books and records pursuant to reasonable standards including, time, location, and reasonable fees for copying.  No owner will be permitted to view personnel records, communications with the attorney(s) regarding litigation, confidential information, transactions currently under negotiation, enforcement information or other information state and federal law prohibits disclosure of.

An owner may file an action for discharge of a lien they feel is improper.  If it is found that the lien was improper, the lien shall be discharged and the court is permitted to award the owner his or her attorney fees if the court feels it is appropriate.

All owners, tenants, residents, and other persons lawfully in possession must abide by the governing documents and rules of the association.  Failure to do so is grounds for the association, or any owner, to file a civil action for damages, injunctive relief, or both and the court may award court costs and reasonable attorney fees in both types of actions.

Maintenance and Repair:

The association is responsible for reasonable maintenance, repair and replacement of common elements.  Each owner is responsible for maintenance, repair and replacement of their lot and improvements to said lot, including the dwelling unit and utility lines serving that unit.

Owners must provide association agents, employees and/or contractors access through their lot and dwelling so that the association can fulfill its duties and obligations.  Any damage to common elements, lot, or dwelling because of the access is the responsibility of the owner that caused the damage or the association if it is responsible for the damage.  Each is liable for prompt repair of any damage and, if it is irreparable, then for the value of the damaged property or item as it existed immediately prior to the damage.

For the full text of the bill, please visit: http://www.legislature.state.oh.us/bills.cfm?ID=128_SB_187