You asked about 2009's sSB 1119 and Nevada's condominium ombudsman law. You also wanted to know about Nevada's ombudsman's workload, types of complaints received, and other states that have comparable licensing programs.

SUMMARY

In 2009, the Connecticut General Assembly considered sSB 1119, which would have established an Office of Condominium Ombudsman within the Department of Consumer Protection (DCP), and given the DCP commissioner certain powers relating to investigating and resolving complaints and analyzing and making recommendations concerning the laws that govern common interest communities. The bill requires each condominium association or common interest community association to establish a dispute resolution process for complaints regarding association compliance with the laws and association bylaws. Any complaint not resolved through this process may be filed with the Office of Condominium Ombudsman. The bill failed in the General Law Committee and did not become law.

Nevada law requires rules governing homeowners to be reasonable and fairly enforced against all homeowners and establishes the Office of Ombudsman for Owners in Common-Interest Communities. Nevada law requires financial disclosures and other information to be provided to persons considering the purchase of property in a common-interest community from a previous owner or a developer. It also requires most records and meetings to be open to unit owners and reforms election processes.

Both the proposed Connecticut office and the existing Nevada office are tasked with reviewing complaints to help resolve issues regarding violations of the laws, although the Connecticut office would limit this to violations regarding condominium association funds, meetings, or records. Also, in Connecticut, the complaint must be reviewed through the association review process, if one exists. The Nevada office is also required to compile an informational database about associations, and may request certain records or subpoenas for the production of witnesses and records. The Nevada ombudsman assists owners and board members to understand their rights and obligations under the law and their governing documents and assists homeowners in resolving disputes through arbitration and mediation.

According to an investigator in the Nevada ombudman's office, many of the complaints received are protesting fines or assessments and recently, concerning rising assessments due to foreclosures on condominium properties.

We found a similar office in Florida. The Florida ombudsman's duties include issuing reports and recommendations for legislation and procedures; serving as a liaison between the state, associations, boards, and unit owners; helping parties understand their rights and responsibilities; coordinating reference material; and monitoring and reviewing disputes.

sSB 1119

sSB 1119 was favorably reported out of the Judiciary Committee on April 1, then referred to the General Law Committee, where the bill failed on May 13.

Applicability

Certain Common Interest Ownership Act (CIOA) provisions automatically apply to condominiums created in Connecticut before January 1, 1984, but only with respect to events and circumstances that occur after December 31, 1983 (CGS § 47-216). The bill makes the following additional provisions in CIOA apply to these older common interest communities:

1. CGS § 47-236(b) requires that court challenges to the validity of an amendment the association adopts be brought within one year after the amendment is recorded and

2. CGS § 47-236(i) specifies that if any provision in a common interest community declaration requires the consent of a security interest holder in a unit as a condition of amending the declaration, the holder is deemed to have consented if the association does not receive a written refusal to consent within 45 days after it delivers notice of the proposed amendment or mails it by certified mail with return receipt.

DCP Commissioner: Powers and Duties

The bill authorizes the DCP commissioner or his designee to:

1. investigate, mediate, and resolve complaints concerning unit owners, boards of directors, executive boards, community association managers, and managing agents of condominiums or common interest communities;

2. analyze the laws regarding condominiums and common interest communities and recommend legislation to the governor and the General Assembly;

3. publish information concerning laws and regulations related to condominiums and common interest communities;

4. refer any complaint received by the office to the appropriate law enforcement agency for prosecution, deemed appropriate by the commissioner; and

5. adopt regulations to implement the bill.

Dispute Resolution Process

The bill requires that by January 1, 2010, each condominium association or common interest community association establish a dispute resolution process for unit owner complaints regarding compliance by the association with the law and any association bylaw concerning the matters the bill gives the DCP commissioner power to investigate.

The dispute resolution process must provide the opportunity for the unit owner to be heard. Any complaint that is not resolved through this process may be filed with the Office of Condominium Ombudsman on or after January 1, 2010.

Complaints from Unit Owners

The bill allows any unit owner or group of unit owners to file a request with the Office of Condominium Ombudsman that the DCP commissioner or his designee review their complaint regarding alleged violations of CIOA, the Condominium Act, or a condominium association or common interest community association bylaw concerning:

1. the budget and appropriation of condominium association or common interest community association funds,

2. the calling and conduct of condominium association or common interest community association meetings, or

3. access to public records of the condominium association or common interest community association.

The bill allows this only if:

1. the complaint of the unit owner or group of unit owners was reviewed through the dispute resolution process the bill establishes or

2. the unit owner or group of unit owners has filed a sworn affidavit that the association has not established such a dispute resolution process.

Review Process

The request must be in writing, on whatever form the commissioner prescribes, and be accompanied by a $ 35 fee.

The commissioner must notify the condominium association or common interest community association that is the subject of the complaint if he first determines that the complaint (1) presents a “colorable claim” of a violation of any law or the association's bylaws and (2) was not filed with malicious intent to unjustly vex or trouble the association. (The bill does not define the term “colorable claim” but apparently it means a claim that could be reasonably asserted given the facts presented and the current law (Black's Law Dictionary)). The bill requires the association to pay to the commissioner a $ 35 fee within 30 days after receiving notice. If the association fails to pay the fee within 30 days, the commissioner must assess a $ 100 penalty against it in addition to the $ 35 fee.

Commissioner's Power and Authority

The bill authorizes the commissioner to conduct an investigation and make findings and recommendations.

After notice and hearing, the commissioner may:

1. issue an order to any person found to have violated the law or association bylaws to cease such violation;

2. order any violator to make restitution for damages caused by such violation;

3. assess a penalty of up to $ 200 for each knowing violation; or

4. through the attorney general, petition the Superior Court for the judicial district where the violation occurred for the enforcement of any order the commissioner issued, appropriate temporary relief, or a restraining order, and certify and file in the court a transcript of the entire record of all hearings, including all testimony upon which such order was made and the commissioner's findings and orders.

The bill requires the commissioner to provide written notice of the filing of the petition to the association within three business days after the date the petition is filed in the Superior Court. The court may grant relief by injunction or otherwise, including temporary relief, as it deems equitable and may make and enter a decree enforcing, modifying, and enforcing as so modified, or setting aside, in whole or in part, any order of the commissioner. The bill authorizes any person aggrieved by the commissioner's final decision to appeal to the Superior Court. It requires any fee or penalty collected to be deposited in the General Fund.

Reports

Beginning January 1, 2010, the bill requires each condominium association and common interest community association to provide annually to the DCP commissioner a certified copy of the last annual or biennial report of the association filed with the secretary of the state, and pay the commissioner a fee of:

1. $ 50 for each association with 20 or fewer units;

2. $ 100 for each association with more than 20 but fewer than 100 units; and

3. $ 250 for each association with 100 or more units.

Any association that fails to pay the fee must, in addition to the fee, be assessed a penalty of $ 100 for each year the fee was not paid. The attorney general, upon referral by the commissioner, may bring an action in the Superior Court to collect the fees and penalties.

Association Power and Duties

Current law allows an association to assign its rights to future income, including the right to receive common expense assessments, to the extent the declaration explicitly authorizes it to do. The bill instead gives them this authority except to the extent the declaration limits this right. Thus under current law, if the declaration is silent, the association may not assign its rights to future income; under the bill the association would be able to do so since the declaration contains no limitation. The bill specifies that the association may assign its rights to future income only by majority vote of the unit owners.

Association Records

The bill eliminates the requirement that at least 14 days before entering into any loan agreement on the association's behalf the executive board (1) disclose in writing to all unit owners the amount and terms of the loan and the loan's estimated effect on any common expense assessment and (2) give the unit owners a reasonable opportunity to submit written comments to the executive board regarding the loan.

The bill establishes more detailed requirements for retaining and sharing CIOA association records with unit owners than is provided by existing law.

Both current law and the bill require an association to keep financial records sufficiently detailed to enable the association to comply with the resale notice requirements CIOA imposes. The bill also requires the association to keep:

1. detailed records of receipts and expenditures affecting the association's operation and administration and other appropriate accounting records;

2. minutes of all meetings other than executive sessions, a record of all actions taken by the unit owners or executive board without a meeting, and a record of all actions a committee takes in place of the executive board on the association's behalf;

3. the names of unit owners in a form that permits preparation of a list of the names of all owners and the addresses at which the association communicates with them, in alphabetical order showing the number of votes each owner is entitled to cast;

4. its original or restated organizational documents, if any, and its bylaws and all amendments;

5. all financial statements and tax returns of the association for the past three years;

6. the names and addresses of its current executive board members and officers;

7. its most recent annual report delivered to the secretary of the state, if any;

8. copies of current contracts to which it is a party;

9. records of executive board or committee actions to approve or deny any requests for design or architectural approval from unit owners; and

10. ballots, proxies, and other records related to voting by unit owners for one year after the election, action, or vote they relate to.

Examination and Copying. Subject to the exceptions specified below, the bill makes all records an association retains available for examination and copying by unit owners or their authorized agents (1) during reasonable business hours or at a mutually convenient time and location and (2) upon five days' notice that reasonably identifies the specific records requested.

The bill allows an association to charge a fee for providing copies of any records and for supervising the unit owner's inspection, provided the fees may not exceed the actual cost of any materials and labor the association incurs.

Under the bill, any right to copy records must include the right to receive copies by photocopying or other means, including copies through an electronic transmission if available and the unit owner asks for it.

The bill specifies that (1) an association is not required to compile or synthesize information and (2) information provided pursuant to the bill may not be used for a commercial purpose.

Protected Records. The bill allows records to be withheld from inspection and copying to the extent that they concern:

1. personnel, salary, and medical records relating to specific individuals;

2. contracts, leases, and other commercial transactions to purchase or provide goods or services, currently being negotiated;

3. existing or potential litigation, mediation, arbitration or administrative proceedings;

4. existing or potential matters involving federal, state, or local administrative or other formal proceedings before a governmental tribunal for enforcement of the declaration, bylaws, or rules;

5. communications with the association's attorney that are otherwise protected by the attorney-client privilege or the attorney work-product doctrine;

6. information, which if disclosed, would violate law other than CIOA;

7. records of an executive session of the executive board; or

8. individual unit files other than those of the requesting owner.

The bill requires the association to withhold from inspection and copying any record that is required to be maintained as confidential under any state or federal law or any regulation of a federal or state agency.

Greater Access to Records. The bill provides that an association may provide unit owners with greater access to association records than it requires.

Community Association Managers

The bill increases the registration fee from $ 100 to $ 400 for a certificate of registration as a community association manager. The bill makes the registration certificate expire biennially instead of annually. It increases the renewal fee for a certificate from $ 100 to $ 400.

NEVADA'S LAW

In 1997, the Nevada Legislature passed Senate Bill 314, which included provisions regarding the rights and obligations of homeowners living in common-interest communities. In 1999, the legislature passed Senate Bill 451, which clarified and extended the provisions enacted in SB 314 (NRS § 116. 001, et seq. ).

Applicability

The Common-Interest Ownership Act, applies to all common interest communities, however communities created prior to 1992 do not have to amend their governing documents to conform to the new law.

Member Access and Meetings

If there is no designated meeting date in the governing documents, a meeting must be held one year from the date of the last board meeting. If the last meeting did not occur within the past year, a meeting must be held on March 1.

The law requires that members (1) receive notice of, (2) be allowed to attend and speak at, and (3) have access to the minutes of, all meetings of the association including board meetings, except executive sessions. Executive sessions are permitted only to discuss proposed or pending litigation with the association's attorney, personnel matters, or alleged violations of the governing documents. Members alleged to have violated the governing documents may demand the hearing be held at an open meeting.

If the board changes the governing documents, a copy of the changes must be sent by prepaid United States mail or hand-delivered to all unit owners within 30 days.

Elections

SB 451 contained several provisions about homeowners' rights to serve on the association boards and elect board members. Board member terms are limited to 2 years, with the possibility of re-election to new terms. Homeowners must be notified of their right to seek election to the board. Elections to the board must be conducted by secret written ballot mailed to each homeowner. The votes must be counted in public.

Proxies may not be used to elect board members, but are permitted for votes on other issues. Proxies may be given only to (1) a member of a homeowner's immediate family, (2) a tenant of the homeowner living in the community, or (3) another homeowner living in the community. Proxies must include or be accompanied by voting instructions from the person giving the proxy. Holders of proxies must disclose the number of proxies held and how they will be voted at the beginning of the meeting at which they will be voted. A proxy terminates immediately after the conclusion of the meeting for which it was executed.

Financial Control and Accountability

At the conclusion of his or her control of the association, a developer of a common-interest community must provide a study of the association's reserves and control of the reserve account. The account must contain the developer's share of reserves. A developer in a pre-1992 community who has failed to pay his or her share of reserves may have up to three years to pay the deficiency. A developer must also disclose in writing the amount by which he or she has subsidized the association's dues on a per unit or per lot basis so that homeowners will receive an accurate picture of dues requirements after control has passed to the association.

All associations must have a budget for their daily operation and a reserve to cover the repair, replacement, or restoration of major elements. Associations must provide members annually a copy of the budget, including an analysis of reserve requirements, or a summary of the budget and notice of the right to inspect and obtain a copy of the full budget. The board must (1) conduct a study of required reserves at least once every five years, (2) review the results at least annually, and (3) make any necessary adjustments to maintain adequate reserves.

Reserves may not be used for daily maintenance. Two signatures are required to withdraw reserve funds.

The board must review at least quarterly a current reconciliation of its operating and reserve accounts, actual revenues and expenses, amounts budgeted, income and expense statements for operating and reserve accounts, and the status of any civil litigation or claim submitted to arbitration or mediation. Homeowners must receive written notice before the association makes an assessment for a capital improvement or commences civil litigation. The association may generally commence or continue litigation when a majority of homeowners vote to do so. Before seeking approval or ratification of litigation, the association must provide members with information relating to the litigation together with an estimate of its costs and an explanation of potential benefits and risks.

An association must permit its members to review its books, records, and other papers including its financial statement, budgets, and reserve studies. Personnel records or records relating to another unit's owner are exempt. The association must provide copies of requested documents within 14 days after a written request and may charge no more than 25 cents per page for copies. A homeowner who is unable to review or obtain copies of records may request the Ombudsman for Owners in Common-Interest Communities to obtain a subpoena compelling their production.

Rules Governing Homeowners

Rules governing homeowners must be reasonable and fairly enforced against all homeowners. They may be enforced by a fine only if the person alleged to have violated the rule has (1) received written notice of the rule and its alleged violation and (2) been given an opportunity for a hearing. In most cases, fines may not exceed the lesser of $ 100 per violation or a total of $ 500, and may not be enforced by foreclosing against a member's home. If continuing violations are not cured within 14 days of the initial fine, the board may impose additional fines for each seven-day period without further notice and an opportunity to be heard. Homeowners' associations are not permitted to exercise the power of eminent domain or condemn an owner's property.

Prospective Owners

SB 314 requires additional information to be provided to persons considering the purchase of property in a common-interest community from a previous owner or a developer. Prospective purchasers must be given (1) the association's current financial statement and operating budget which reflect the amount set aside for reserves, (2) information regarding judgments or pending litigation, and (3) a simplified disclosure statement setting forth the most important aspects of ownership. The statement must inform prospective owners that there will be restrictions on their freedom of choice regarding their home and lifestyle, they will have to pay homeowner's assessments for as long as they own their home, and they can lose their home through foreclosure if they fail to pay their assessments.

Ombudsman for Owners in Common-Interest Communities

SB 314 created the Office of Ombudsman for Owners in Common-Interest Communities within the Department of Business and Industry, Real Estate Division. The ombudsman assists owners and board members to understand their rights and obligations under the law and their governing documents. The ombudsman also assists homeowners in resolving disputes through arbitration and mediation. The ombudsman must also compile an informational database about registered associations. The ombudsman is authorized to request certain records from associations and may also request the Real Estate Commission to issue subpoenas for the attendance of witnesses and the production of books and records.

The office is funded through an annual per-unit assessment of up to $ 3. Any interest earned on the fund is returned to it, and the fund is used solely to defray the costs and expenses of administering the office. To the extent funds are available and set aside for that purpose, the Real Estate Division may use a portion of the fees collected to support the Office of Ombudsman to pay the fees for a mediator or arbitrator to resolve disputes involving common-interest communities.

The office is staffed by 17 full-time employees and seven commissioners. Table 1 shows the operating budget for the Office of Ombudsman.

Table 1: Operating Budget for the Office of the Ombudsman

Source: 2009-2011 Biennium budget summary, Office of the Ombudsman

The budget does not include an additional training officer position approved in a legislative bill, nor an enforcement piece to the Ombudsman's conferencing/resolution/education program which is handled by the Real Estate Division and attorney general's office.

Other Protections

With some exceptions, persons offering professional management services to homeowners' associations must be licensed or certified by the Real Estate Division of the Department of Business and Industry. The division may establish standards of practice for property managers, conduct investigations to ensure compliance with standards, and impose discipline for failure to comply.

COMMON COMPLAINTS IN NEVADA

David Garrick, an investigator in the Nevada Office of the Ombudsman for Owners in Common-Interest Communities, stated that many of the matters handled by the office deal with money, specifically, complaints about fines or assessments. Residents regularly lodge complaints alleging injustices stemming from a board's failure to (1) punish a violation of the governing documents or (2) enforce the governing documents uniformly. More recently, foreclosures on condominium properties have sparked a number of complaints relating to assessments on the remaining property owners.

COMPARABLE STATES

Florida

Created by the legislature in 2004, the Office of the Condominium Ombudsman was established as a neutral resource for unit owners, board members, condominium associations, and others (Fla. Stat. § 718. 5012). The ombudsman's duties are to:

1. prepare and issue reports and recommendations to the governor, the Department of Business and Professional Regulation, the real estate division, the Advisory Council on Condominiums, the Senate president, and the House speaker;

2. make recommendations for legislation relative to division procedures, rules, jurisdiction, personnel, and functions;

3. act as liaison between the division, unit owners, boards of directors, board members, community association managers, and other affected parties;

4. develop policies and procedures to assist unit owners, boards of directors, board members, community association managers, and other affected parties to understand their rights and responsibilities;

5. coordinate and assist in the preparation and adoption of educational and reference material;

6. monitor and review procedures and disputes concerning condominium elections or meetings, including recommending that the division pursue enforcement action where there is reasonable cause to believe that election misconduct has occurred;

7. make recommendations for changes in rules and procedures for the filing, investigation, and resolution of complaints from unit owners, associations, and managers;

8. provide resources to assist members of boards of directors and officers of associations to carry out their powers and duties; and

9. facilitate voluntary meetings with and between unit owners, boards, community association managers, and other affected parties to assist in dispute resolution.

Fifteen percent of the total voting interests in a condominium association, or six unit owners, whichever is greater, may petition the ombudsman to appoint an election monitor to attend the annual meeting of the unit owners and conduct the election of directors. The ombudsman must appoint a division employee specializing in condominium election monitoring or a licensed attorney as the election monitor. All costs associated with the election monitoring process are paid by the association. The division must adopt a rule establishing procedures for the appointment of election monitors and the scope and extent of the monitor's role in the election process.

In 2008, the office reportedly logged 16,000 phone calls. The office is funded by an annual fee of $ 4 per condominium unit and $ 5 per mobile home lot, as well as a $ 2 timeshare fee per seven-day period. The fund generates an average of $ 15 million in revenue from the fees, enough to cover the Division of Condominium, Timeshares and Mobile Homes' annual budget of over $ 7 million and the ombudsman's budget of roughly $ 400,000. At the end of 2008, the fund had a cash balance of over $ 29 million, before the legislature voted to remove $ 26 million. As of May 2009, the fund's cash balance was $ 9 million (http: //www. ccfj. net/condotapfund. html).

MR: ts