The Governor of Ohio, Bob Taft, signed House Bill 135 on April 30, 2004. The new changes become effective July 20, 2004. This new bill makes significant chages to Condominium law. Please review the changes and let us know if there is anything we can do to help you use the new law to your advantage.
This bill, as it exists, changes some of the definitions of terms that are currently in place and adds some new terms. Some of the changes are as simple as substituting titles, such as the “Board of Managers” being called the “Board of Directors”, and “common areas and facilities” being called “common elements”.
CONDOMINIUM : This is a new term. It means a form of real property where a Declaration has been filed. Each owner has an individual interest in their unit and a shared interest or ”undivided ownership interest” with the other unit owners in the common elements of the condominium property.
CONVERTIBLE UNIT : This is also a new term that means a unit that can be converted into one or more units and common elements.
EXCLUSIVE USE AREA : This term is new and it is a common element that your governing document (Declaration) reserves for the Board to delegate to the specific use of certain units. You can exclude other units from using this common element. There will be more on this to follow under the heading “Exclusive Use”.
PURCHASER : The definition will change to include ONLY actual purchasers of condominium property. Prospective purchasers are no longer included in the definition of purchaser.
UNIT : The new law will characterize units by residential, commercial and water slip units.
RESIDENTIAL UNIT : will be property that is used as a residential dwelling.
COMMERCIAL UNIT : will be property that is used or occupied solely for commercial use, industrial use, or other nonresidential or nonwater slip use.
WATER SLIP UNIT : will consist of land that is under the water in a water slip and the land under the piers or wharves that form the slip, and that is used for securing a watercraft.
The interior surfaces of the perimeter walls, floors and ceilings are the boundaries of a residential and commercial unit.
Windows, doors, sashes, thresholds, frames, jambs, and hardware in the perimeter walls, floors, and ceilings are part of the unit.
Supporting walls, fixtures, and other parts of the building within the boundaries of the unit that are necessary for the existence, support, maintenance, safety or comfort of any other part of the condominium property ARE NOT part of the unit.
FOR RESIDENTAL UNITS : ownership includes the right to exclusive possession, use, and enjoyment of interior surfaces of perimeter walls, floors, and ceilings and of the supporting walls, fixtures, and other parts of the building within its boundaries. This includes the right to paint, tile, wax, paper, or otherwise finish or refinish or decorate the unit.
FOR WATER SLIP UNITS : ownership includes the exclusive right to moor a watercraft in the water above the slip and the right to exclusive possession, use and enjoyment of piers and wharves within the boundaries of the unit.
FOR COMMERCIAL UNITS : ownership includes the right to exclusive possession, use and enjoyment of the unit within the boundaries of the unit.
Boundaries between adjoining units can be relocated and the shared interest in the common elements reallocated by amendment to the declaration. To do so certain procedure must be followed and that procedure is presented below.
• Owners of the adjoining units must submit a written application to the Board. The application must include written consent of the holders of liens on those units, except for real estate taxes and assessments not due and payable.
• The Board then must decide if the reallocation of the shared interest is reasonable within 30 days of receipt of the application. If the Board finds it reasonable then the association prepares an amendment to the declaration signed by the owners of the affected units.
• This amendment is prepared at the owners expense.
• The amendment must include: identification of the affected units; words of conveyance; and a specification of the undivided interests in the common elements, the proportionate shares of common surplus and common expenses, and voting powers of each unit resulting from the reallocation.
• i. The total must equal the interests, shares, and powers of the former adjoining units.
• Association then records the amendment at the owners expense along with any drawing, plat or plan necessary to show the altered boundaries and the dimensions and identifying numbers of each unit that results from the relocation and reallocation.
As long as the declaration allows it the rights to limited common elements (those the declaration reserves for the use of certain units to the exclusion of others can be reallocated by amendment also. Again procedures must be followed.
• Owners of the units affected must prepare at their expense and amendment that identifies the units affected and specifies the reallocation rights.
• The owners then submit the amendment to the Board along with written consent of all owners affected and holders of all liens on those units (except for real estate taxes and assessments not due and payable).
• Unit owners must then record the amendment at their expense.
If the declaration reserves a common element as an exclusive use area then the board may delegate it to the use of certain units, excluding all other units.
The unit association can make use of this common element subject to criteria like paying an additional fee that is part of the benefited owners common expenses or maintenance fees. This additional amount is only to be used for the delegated common element.
A convertible unit is one that can be converted into one or more units and common elements, or limited common elements.
To cause conversion of one of these units the owner must prepare and sign an amendment at his expense that describes the conversion and must record the amendment with all drawings that are required. The amendment must specify the undivided interest in the common elements, the share of common surplus and common expenses, and voting powers of each unit resulting from the conversion. The total must equal that of the unit that was converted. The amendment must assign an identifying number to the units formed, allocate a portion of the undivided common interest in common elements, and in limited common elements. This conversion occurs when all appropriate documents are recorded.
The owner must also prepare, file and record drawings that refer to the portion of the building, improvement, or structure that made up the former convertible unit. Drawings must show boundaries, location, designation, length, width, and height of each unit formed, common elements and limited common elements that come out of the convertible unit and a registered architect or engineer must certify them.
The undivided interest in common elements must be computed in proportion to the fair market value of all units on the date the declaration is filed for record originally. It is based on size or par value (percentage) or it is computed on an equal basis.
The undivided interest can be changed by amendment if unanimously approved by all unit owners affected.
The Board, subject to the rules it adopts, may authorize the use of limited common elements for construction of open, unenclosed patios, hedges, decks, fences, or similar improvements provided these improvements are maintained and insured by owner of the unit where this limited common area is located.
Construction of addition or an expansion of a unit into a limited common element or common elements cannot be authorized without consent of all unit owners.
If the Bylaws and Declaration allow, the unit owners association can purchase and hold title to and sell real property that is not declared to be part of the condominium property.
To buy property, approval of 75% of the voting power is required as is authorization of the Board. Expenses incurred become common expenses.
Costs of operation will be included in common expenses along with costs of administration, maintenance, repair, and replacement of common elements.
The Declaration, as filed and recorded or as amended by vote of 90% of the voting power of the unit owners association, may provide that the following common expenses be computed on an equal per unit basis:
• Expenses arising out of administration, operation, maintenance, repair and replacement of security, telecommunications, trash removal, roads, entrances, recreational facilities, landscaping, and grounds care,
• Legal, accounting, and management expenses.
Those expenses not listed above must then be computed on the basis of undivided interest in common elements allocated to each unit (percentage or size).
The person to receive service of process for the unit owners association will no longer have to reside or have a business in the county, within the state is sufficient.
The Board will be able to amend the declaration in any manner necessary without a vote of the unit owners for the following reasons:
• To meet requirements of institutional mortgagees, guarantors and insurers of first mortgage loans, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal Housing Administration, the Veterans Administration and similar institutions;
• To meet requirements of insurance underwriters;
• To bring the declaration into compliance with the Condominium Law;
• To correct typographical errors, clerical errors or obvious factual errors;
• To designate a successor to the person named to receive process for the unit owners association.
This applies to condominium properties submitted to condominium law prior to, on or after the provisions effective date.
A unit owner who is harmed can bring a declaratory judgment action to have the amendment declared invalid. This kind of action must be filed within 1 year from the date the amendment is recorded.
Unless the declaration says otherwise, all meetings of the unit owners association are open to the unit owners and those present in person or by proxy when action is taken during a meeting of the association constitutes a sufficient quorum.
A Board of Directors meeting can be held by any electronic or telephonic communication method. Provided that every member of the board can hear, participate, and respond to every other member of the board.
The Board may also take action by unanimous written consent of all member of the board without a meeting. These written consents must be filed with the minutes of the meetings of the Board.
Unless otherwise provided in the declaration or bylaws, the association through the Board MUST:
• Adopt and amend budges for revenues, expenditures, and reserves in an amount sufficient to repair and replace major capital items through normal operations without the need of a special assessment. The amount set aside annually for reserves must not be less than 10% of the budget for the year unless waived annually by the unit owners by not less than a majority of the voting power of the association.
• Collect assessments for common expenses from unit owners.
The Board MAY:
• Hire and fire managing agents, attorneys, accountants, other independent contractors and employees the board deems necessary to managing the condominium;
• Take part in any action or proceeding in the name of, or threatened against the association, the board, or the condominium property, or if it involves 2 or more unit owners and relates to matters affecting condominium property.
• Enter into contracts and incur liabilities relation to operating the condominium property.
• Regulate use, maintenance, repair, replacement, appearance, and modification to the condominium property.
• Adopt rules to regulate use or occupancy of units, appearance and maintenance of units, common elements and limited common elements when the actions regulated affect other units or common elements.
• Make improvements that become common elements
• Purchase, encumber, or convey units or other real property.
• Acquire, encumber, and convey personal property.
• Hold personal or real property in the name of the unit owners association.
• Grant easements, leases, and licenses through or over common elements.
• Collect fees for the use, rental, or operation of common elements or for services provided to unit owners.
• Impose interest and late charges for late payment of assessments; impose returned check charges, impose enforcement assessments for violating declaration, bylaw or rules of the association (if reasonable), and impose reasonable charges for damage to common elements.
• Adopt and amend rules to regulate collection of unpaid assessments and how to apply payments of delinquent assessments (i.e., what gets paid off first).
• Adopt rules that regulate termination of a utility where a commercial unit is delinquent and the payment of the assessment pays for the service (subject to applicable laws).
• Impose charges to preparing, copying and recording amendments, declaration, resale certificates, or statements of unpaid assessments.
• Enter a unit where there is an imminent risk of harm or damage to common elements, another unit, or the health or safety of occupants of the unit or another unit.
• Assign the association's rights to common assessments or other income to a lender a security for a loan, to the extent provided in the governing documents.
• Suspend voting privileges and use of recreational facilities of a unit owner who is delinquent in paying assessments for more than 30 days.
• Purchase insurance or fidelity bonds the Board consider necessary or appropriate.
• Invest access funds in investments that meet fiduciary investment standards under Ohio law
• Exercise powers that are
• Given by the declaration or bylaws
• Necessary to incorporate the association as a non-profit corporation
• Permitted in Ohio for non-profit corporations
• Necessary and proper for governing and operating the association.
Again, procedure must be followed to impose a charge or assessment for violation of the declaration, bylaws, or rules of the association. The Board must give the unit owner written notice that includes:
• A description of the violation or property damage
• The amount of the charge or assessment proposed.
• A statement that the owner is allowed a hearing before the board to contest the charges
• A statement setting forth the procedure to request a hearing
• A reasonable date by which the owner must cure the violation to avoid the charge or assessment.
To request a hearing : written notice must be given to the board within 10 days after receiving notice from the board. If owner misses the 10-day mark the hearing is waived and the Board can impose the charge. If a hearing is requested, at least 7 days prior to the hearing the Board must give the owner written notice with the date, time and location of the hearing. No charges can then be made until the hearing.
The association, through the board, may allow time to remedy the violation before charges are imposed. Within 30 days of the hearing where a charge is imposed the association must give written notice of the charge or assessment to the unit owner.
These notices must be given by personal delivery, certified mail, return receipt requested, or by regular mail to the unit owner or any occupant of the unit.
Within 30 days of acquiring ownership, a unit owner must provide the association in writing with the following information:
• Home address, home and business mailing address, home and business telephone numbers of unit owners and all occupants of unit
• Name, business address and business phone of any person who manages the owner's unit as an agent of the owner.
Within 30 days of a change of information, a unit owner must notify the association, through the board in writing of the change.
Owner is prohibited from conveying fee title to a unit until all liens and encumbrances (except taxes and assessments of political subdivisions not then due and payable), affecting the unit and any other part of the condominium property are paid and satisfied, the unit is released from the operation of the liens and encumbrances OR the purchaser of the unit assumes the lien.
Where there is damage to or destruction of all or part of the common areas of a condominium property the unit owners, by a vote of a majority of the voting power (before new law it was 75%) may elect not to repair or restore the common element. If this happens the property is then subject to a partition action if an owner files one.
Any net proceeds are distributed to all unit owners in proportion to the undivided interests in the common elements related to their units. No unit owner can receive the proceeds until all liens and encumbrances on the unit are paid, released or discharged (except those of taxes and assessments of political subdivisions not due and payable).
I NSURANCE : fire and extended coverage insurance on all buildings and structures must not be less than 80% of the fair market value.
Unless otherwise provided in the governing documents, the association has a lien for the payment of any of the following expenses that remain unpaid for 10 days after any portion has become due and payable:
• Common expenses chargeable against the unit
• Interest, administrative late fees, enforcement assessments, and collection costs, attorney's fees, and paralegal fees the association incurs if authorized by the governing documents.
The association must credit payment made by a unit owner in the following order of priority (unless governing documents provide otherwise):
• Interest owed to association
• Administrative late fees owed to association
• Collection costs, attorney's fees, and paralegal fees incurred by association
• Principal amount unit owner owes to association for common expenses or penalty assessments.
Liens are effective from the date they are filed. The certificate must contain a description of the unit, name of the record owner of the unit, the amount owed, and subject to adjustment, any unpaid interest, administrative late fees, enforcement assessments, collection costs, attorney fees, and paralegal fees. The president or other designated representative of the association must also sign the certificate.
Foreclosure : the owner of the unit is required to pay a reasonable rental for the unit during the pendency of the action. The association is entitled to have an appointment of a receiver to collect payment. These payments must be applied to the payment of the portion of common expenses chargeable to the unit in the foreclosure action.
The association may become a purchaser at the foreclosure sale.
Unless otherwise provided in the governing documents, an association can begin eviction proceedings under landlord-tenant law to evict a tenant for violating the deed restrictions or the declaration, bylaws or rules of association. The association, as the unit owner's agent, in the unit owner's name, brings the action. The association must give the unit owner 10 days written notice of the intended eviction action. Costs of eviction, including attorney's fees must be charged to the unit owner and be the subject of a special assessment against the unit and made a lien on that unit.
Unless retained by the board for the reserve fund, the common profits and expenses (except as provided in “COMMON EXPENSES” above) must be charged to unit owners according the their undivided interest in the common elements.
A minor cannot vote even if they are owners of record of the unit. The guardian or fiduciary of the minor must provide documentation as such and then can vote on behalf of the minor.
A unit owner or any person entitled to occupy a unit can be liable for damages in a civil action for harm caused to any person or the association by that person's failure to comply with lawful provisions of the condominium instruments.
The Bill also repeals rehabilitation of the condominium altogether. This is where 75% or more of the voting power decide the property is obsolete and votes to renew and rehabilitate the property as a common expense. Those dissenting unit owners may elect to receive fair market value of their unit in return for conveyance of the unit to the association. This section has been repealed.
Please feel free to contact or office with any questions you may have.
1300 E 9th St, Suite 1520
Cleveland, OH 44114
Ph: 216-771-2600
Fx: 216-830-8939
