2024 Virginia Legislative Changes Affecting Community Associations

The Virginia General Assembly had a busy 2024 session with several changes impacting Virginia community associations. We highlight below the new laws of greatest significance to property owners’ associations and condominium unit owner associations, which take effect July 1, 2024.

Assessment Powers

In 2023, the Court of Appeals of Virginia ruled in Burkholder v. Palisades Park Owners Association that pursuant to Va. Code § 55.1-1805, unless a property owners’ association’s declaration “expressly authorized” an assessment, the association could not impose one unless the charge was a fee for services provided or related to the use of common area. The Court of Appeals determined that a lot compliance fee assessment to pay for inspections of properties in the community could not be imposed because it was not expressly authorized in the declaration, notwithstanding that the fees were for the association to enforce its policies.

The General Assembly passed a law in 2024 to ensure that property owners’ associations and condominium associations had the power to require payment of “assessments, charges, or fees to pay the association’s contractual or other legal obligations in the exercise of the association’s duties and responsibilities.” Thus, the new law addressed concerns about associations not being able to financially fulfill their duties in the wake of Palisades Park.

• Amends: Code §§ 55.1-1805 and 55.1-1904

Foreclosure

This legislation imposes thresholds before foreclosure of liens can occur.

No bill to enforce a judgment lien on a judgment debtor’s primary residence can be pursued if the amount of the judgment, exclusive of interest and costs, does not exceed $25,000. In the case of a community association, the threshold is $5,000. 

Actions to enforce a property owners’ association or condominium unit owners association perfected statutory lien(s) by foreclosure also have a $5,000 threshold, exclusive of attorney fees and costs, before these right may be pursued. The time to enforce such liens, however, has expanded from three to ten years.

• Amends: Code §§ 55.1833 and 55.1-1966

Resale Disclosure Act

As you recall, effective July 1, 2023, the various resale provisions were removed from the Virginia Property Owners’ Association Act, Condominium Act, and Cooperative Act and all consolidated into a new single act known as the Virginia Resale Disclosure Act, which is located at Chapter 23.1 in Title 55.1. Effective July 1, 2024, the year-old Resale Disclosure Act will be updated as follows:

• Seller agents have authority to request a resale certificate.
• The resale certificate can be provided to the purchaser’s agent.
• The requirement that either the seller or seller’s agent obtain a resale certificate from the association and provide it to either the purchaser or purchaser’s agent cannot be waived or changed by agreement.
• If no resale certificate is delivered within 14 days after a written request by a seller or seller’s agent, the resale certificate shall be deemed unavailable.
• For cooperatives, the resale certificate must include a statement setting forth whether the cooperative association is aware of any statute, regulation, or rule applicable to the cooperative that would affect an owner’s ability to deduct real estate taxes and interest paid by the cooperative association for federal income tax purposes.
• Sellers are responsible for all fees associated with the preparation and delivery of the resale certificate, including any inspection fees, plus any fees for the preparation and delivery of the updated resale certificate.
• Sellers are responsible for all fees associated with the preparation and delivery of the financial update. However, a settlement agent or other requesting party may pay such fees up front, regardless of whether such settlement agent or other requesting party requests to be reimbursed for such fees from the seller.
• Fees charged by an association for the preparation and delivery of a resale certificate, an updated resale certificate, or a financial update shall be paid when the resale certificate, updated resale certificate, or financial update is requested, unless otherwise provided by the Va. Code § 55.1-2316 or the association. However, if the seller agrees to pay the fees for preparation and delivery of the financial update, the association or association’s management agent shall either (i) upon receipt of the request for the financial update, send instructions by electronic means to the seller for electronic payment or (ii) accept payment of such fees at the time of closing.
• A resale certificate need not be provided in the case of an initial disposition of a unit to a person or entity that is not acquiring the unit for their own residence or for the construction of a dwelling unit to be occupied as their own residence, unless requested by such person. Notwithstanding, the person or entity acquiring the unit shall be obligated to abide by the declaration, bylaws, rules and regulations, and architectural guidelines of the association.

There were some other technical but non-substantive changes to the Resale Disclosure Act that included correcting a nostalgic reference to “disclosure packet” and amending it to the universal term “resale certificate.”

• Amends: Code §§ 55.1-2308 through 55.1-2312, and 55.1-2316 through 55.1-2317

Reserves

A definition of “Reserve study” has been added to the Property Owners’ Association Act and the Condominium Act. Reserve study means “a capital budget planning tool used to determine the physical status and estimated repair or replacement cost of capital components and an analysis of association funding capacity to maintain, repair, and replace capital components.” (Emphasis added.) The intent is to promote proactive financial planning and responsible management of community associations. 

In addition, specific authority was added to each of the Acts that permits a board of directors to (a) borrow money on behalf of the Association for maintenance, replacement, repair, and restoration of capital components and for funding recommended reserves and (b) assign and pledge all revenues to be received, including annual and additional assessments, to secure the repayment of any sums borrowed by the association for such purposes, unless the declaration provides greater or lesser authority. This removed a question mark for many associations regarding authority to fund needed maintenance, repair, replacement and restoration of capital components. 

A statement was added affirmatively stating that a board of directors shall have the discretion to meet repair and replacement requirements through reserves, additional assessments, or borrowed funds. 

The statutes regarding reserves require boards to review the annual budget and annual assessment each year and make adjustments as needed to maintain reserves, as appropriate. While not a new requirement, remember to include in the budget a statement of the amount of reserves recommended in the reserve study.  Consider a loan as a means to help finance needed work on capital components.  Finally, review governing documents for provisions that have greater or lesser authority to borrow and pledge assets as they still apply when considering how to finance projects.

• Amends: Code §§ 55.1-1800, 55.1-1826, 55.1-1900, and 55.1-1965

Special Assessments and Right to Borrow and Assign/Pledge Assets

This legislation is the result of a multi-disciplinary work group that studied and focused on addressing the Association’s ability to keep capital components in good repair, and avoid another Surfside, Florida tragedy. Directors have an obligation to provide for the common expenses. The statutory right of owners to vote to rescind or reduce special assessments has been eliminated. This helps ensure that Board decisions to provide for common expenses, for which there are insufficient funds, will not be overturned by the owners. Those expenses can be an “additional” assessment. The statutes already provide for written notice to the owners giving the amount, reason(s) for and due date(s) for payment. The amendments also add affirmative authority for a Board to borrow money on behalf of the association for maintenance, repair, and restoration of capital components and to fund reserves, and to assign and pledge association revenues to do so, unless the recorded documents provide greater or lesser authority. This legislation provides important mechanisms to fund necessary common expenses and removes unnecessary hurdles to doing so.

• Amends: Va. Code §§ 55.1-1825,55.1-1826, 55.1-1964, and 55.1-1965

Towing

An amendment to a towing statute was made requiring 48-hour advance notice prior to towing vehicles with expired registration or expired vehicle inspection stickers from multifamily dwelling units, but the amendment excludes common interest communities; specifically, developments that are created pursuant to the Virginia Property Owners’ Association Act, and any unit created pursuant to Virginia Condominium Act or Virginia Real Estate Cooperative Act.

Note, however, for any properties located within Planning District 8 or Planning District 16, any written contract between the towing and recovery operator and the owner of the property or their agent shall clearly state the terms on which towing and recovery operators may monitor private lots on behalf of property owners and any local ordinance created pursuant to Va. Code § 46.2-1232(C) may regulate the monitoring practices that may be used by such towing and recovery operators.  Planning Districts 8 and 16 cover certain Northern Virginia areas only. 

• Amends: Code § 46.2-1150, § 46.2-1231 through 46.2-1232

Consult Association Legal Counsel

As shown above, there are several significant changes in the law that will affect associations and other stakeholders when they become effective on July 1. Associations, managers, and business partners should pay close attention to these new laws and reach out to legal counsel for assistance.