Written by Benny L. Kass
D.C. Council members are studying a controversial measure that would provide new protections for condominium owners.
First, it would require mediation before a board can foreclose on a condominium unit.
Next, it would establish a Condominium Association Advisory Council to provide association members an open forum to discuss and resolve issues.
And finally, it would establish a Statement of Rights that every new owner must receive when they buy into the condominium association.
Two of these proposals should not raise objections from the various players in community associations. However, the mediation requirement will be bitterly objected by association boards and their attorneys.
Here are some pros and cons of the measure’s three components:
Condominium Advisory Council: this will be an advisory board to the Mayor, the DC Council and the various government agencies. It will have 11 members, consisting of community representatives from each of the 8 wards as well as the Director of the Department of Housing and Community Development and two others appointed by the Mayor and the DC Council.
We are a litigious society where hundreds of lawsuit are filed daily on issues ranging from pets to parking, pools to patios. The proposed bill is designed in part to resolve the many disputes arising between owners and their boards of directors.
It is unclear what authority this council will have. If the District council seriously wants to resolve and curtail the numerous disputes between owners and their association, it should look at the Montgomery County Commission on Common Ownership Communities (CCOC). That Commission has been in existence for many years, is financially supported by every association in the county, and their decisions can be enforced by the Montgomery County Courts.
An advisory council — while a possible good first step — may become only a debating forum unless it has the authority to enforce its decisions.
Condominium Bill of Rights: The proposal contains such issues as (1) meetings of associations and boards can only be conducted with a quorum present; (2) right to attend and participate in meetings of the association at least once a year; (3) the right to cure any financial default prior to foreclosure by tendering payment in full, and (4) the right of access to all books and records of the association.
Many of these provisions are already incorporated in the DC Condominium Act, and I suspect when the council holds hearings on this bill, this will be extensively discussed.
Instead of enacting the language in the proposed bill, I would recommend that the DC Council consider the Uniform Common Interest Owners Bill of Rights, drafted by the Uniform Law Commission. It can be downloaded atwww.uniformlaws.org
Mediation: According to the proposed law, before a condominium association consisting of 5 or more units can foreclose on a delinquent unit owner, that owner has the right to mediate the matter before a neutral mediator appointed in accordance with rules prescribed by the Mayor. The mediation must take place no later than 60 days after the condo association sends the delinquent owner a notice of default.
The proposed mediation is almost identical to the mediation required before a mortgage lender can foreclose on any District residential borrower. And that has not been successful. Instead of going to mediation, lenders are taking their borrowers to court, which adds to the expense. And many borrowers cannot afford to retain lawyers to assist them in the courts.
The proposed bill addresses that issue and prohibits the association from taking any foreclosure action without first going through the mediation process. I question whether such a restriction on the right to go to court meets Constitutional requirements.
Community association representatives have already fought this concept when the lender mediation bill was enacted several years ago. Boards of Directors, their attorneys as well as the Community Association Institute (CAI) — a nationwide organization representing all aspects of community living — successfully argued that condo associations were not mortgage lenders. If a lender had to go through the mediation which could take months, the lender would not really be impacted. Commercial lenders are not relying on the mortgage payment of one or two delinquent borrowers for their survival.
But condos — especially small ones — are dependent on prompt payment from every owner. Many of the less affluent associations have numerous delinquencies, but they still have to pay such things as insurance, water bills, etc. Will the City Council abate the water bills during the lengthy mediation session? And what was the rationale for excluding four unit condos from mediation? Why not exclude 10 or 20 unit condos? All have the same financial concerns as the smaller ones?
The District does not have any regulatory authority for dealing with disputes involving community associations. The proposed advisory council and the Bill of Rights are good first steps. But mediation, in the opinion of this columnist, will seriously impact many of the older associations in the District –associations which need money to make sure that the outdated plumbing, electricity, elevators and heating and air conditioning systems are maintained or replaced as needed. Associations exist solely to serve their unit owners. The added delay and expense required if mediation is mandatory serves to damage the very consumers it is obligated to protect.
Hopefully, the council hearings will flush out all of these issues.