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Autumn 2010 - Sweeping Changes Made to Connecticut's Condominium Law

On July 1, 2010 sweeping changes to the laws governing condominiums in Connecticut became effective. Amendments to the Connecticut Common Interest Ownership Act ("the Act") were signed into law in July of 2009 and are likely to affect almost all common interest communities. The effective date for most of the amendments was delayed for a year so that associations would have time to plan for the amendments and to implement changes in their governing documents and procedures, with assistance from their professional advisors.

While some of the changes will apply to all common interest communities, others will apply only to communities created on or after January 1, 1984. The amendments include new requirements for open meetings, meeting notices and access to association records, all of which are designed to make governance by community associations more transparent.

Association leaders and managers need to invest the time and effort to assure compliance with these changes. They will need to meet with their legal counsel and other professional advisors to determine the best course of action for their communities. The following is a summary of amendments to the Act which will apply to all common interest communities.

MEETINGS AND NOTICES

The amendments require associations to hold an annual meeting at which unit owners are given a reasonable opportunity to comment on any matter affecting the community or the association. Either the declaration or bylaws may permit meetings of unit owners to be conducted by telephone, video or other conferencing process. If the required number of unit owners requests that the association's secretary call a unit owner's meeting and the secretary fails to send a notice to all unit owners within fifteen days, unit owners have been given the right to send notice of the meeting to all of the unit owners. This amendment empowers unit owners to compel a special meeting notwithstanding a Board's unwillingness to do so.

Board meetings and committee meetings must be open to unit owners and their designated representatives, with the exception of executive sessions limited to specific matters. All final actions and votes of the Board and committees must be made in open sessions. At all Board meetings, unit owners must be provided with the opportunity to comment on any matter affecting the association or the community. These new provisions are intended to make association governance more open and responsive to unit owners.

Unit owners must be given ten days notice of all Board meetings and be provided with the meeting agenda and copies of any other items which have been distributed to Board members before the meeting. Items not listed on the agenda cannot be added to the agenda or acted on by the Board without another ten day advance notice being provided. A Board may not use social or other informal gatherings to avoid these open meeting requirements. While a Board may act without holding a meeting, any actions taken without a meeting must be by unanimous consent and the secretary of the association must then give prompt notice to unit owners of the actions taken.

The amendments require that association meetings be conducted under Roberts of Order unless the bylaws or declaration provide otherwise or two-thirds of the voting power at a meeting vote to suspend the use of Robert's Rules. In the long run, it may be more practical for associations to adopt a simpler set of parliamentary rules for their meetings.

Voting requirements have been substantially amended. A quorum established at the beginning of a Board meeting can be lost if members leave. A majority of the votes cast at a meeting of unit owners is the decision of the unit owners, unless the declaration provides for a greater number (higher requirements in any bylaws are superceded). Unless prohibited by the bylaws or declaration, unit owners may vote by referendum (without a meeting) using paper or electronic ballots. For the first time, provision has been made for both directed and undirected (unrestricted) proxies to be used.

BUDGETS, ASSESSMENTS AND COLLECTIONS

Not later than 30 days before adopting an annual budget, the Board must give unit owners a summary of the proposed budget, including an explanation of how any reserves would be funded and calculated, and set a date between 10 and 60 days thereafter for their vote on the proposed budget. The budget is deemed approved unless a majority of the unit owners to whom votes are allocated vote to reject it at a meeting.

Unit owners are not required to approve special assessments under the amendments unless the proposed special assessment, together with all other special assessments and emergency assessments during the same calendar year, exceed 15% of the annual budget.

Emergency assessments may be implemented upon a two thirds vote of the Board alone, provided that unit owners are notified promptly thereafter and the Board spends the funds only for the purposes authorized by the vote. Such emergency assessments become effective immediately in accordance with the vote.

The amendments also require that three conditions be met before an association may commence a foreclosure action against a delinquent unit owner: (1) the amount owed by a unit owner must equal at least two months of common expenses under the current budget; (2) the association must make a written demand for payment; and (3) the Board must specifically vote to commence the foreclosure action against a unit, unless the Board has adopted a standard collection policy for foreclosures.

RECORDKEEPING

The recordkeeping requirements for associations have been expanded dramatically under the amendments. Detailed financial records must be kept for all expenses and receipts, budgets, reserves, delinquent assessments, collection actions and the last three years of financial statements and tax returns. The names and addresses of all Board members, officers and unit owners, together with the number of votes allocated to each unit owner, must be available for inspection by unit owners. Governance documents (including the declaration, bylaws, rules and annual reports filed with the Secretary of State) must also be available for inspection by unit owners. Records of the minutes and votes taken at all Board, owners and committee meetings; association actions to approve or deny requests for architectural and design approvals; existing contracts; and ballots and proxies going back for one year, must be kept and made available for inspection.

With limited exceptions (litigation, employment, medical and other confidential documents), associations must make records available for inspection and copying within five days of a unit owner's written request. An association does not need to assemble or create information to respond to a unit owner's request and may charge a reasonable fee for copying and supervising the inspection.

INSURANCE

The insurance obligations of associations have been expanded under the amendments. All associations are required to purchase fidelity insurance to cover losses from theft and other crimes. The most significant change concerns association master policies. All communities having attached or stacked units with common walls or common ceilings and floors, must have a master policy which covers not only the common elements and original unit components, but also all unit owners improvements and betterments, unless either the declaration or the Board opts out of the new requirement to insure unit owner improvements and betterments. If an association does not insure all unit owner improvements and betterments, then it must: (1) prepare and maintain a list of the fixtures, improvements and betterments in the units which it considers standard (and covered by the master policy); (2) provide the unit owners with this list at least once a year; and (3) include this list in all resale certificates issued by the association.

Boards are also given authority to shift the costs of repairing damage from the association to the persons responsible for causing the damage. The Board may hold a hearing to allocate such losses and charge them back to an owner, if the damage was due to the willful misconduct or gross negligence of an owner, tenant or guest, or to the failure to comply with a written maintenance standard.

COMPLYING WITH THE AMENDMENTS

Associations need to know how the CIOA changes impact the requirements of their governing documents. Certain provisions in the governing documents will need to be supplemented and other provisions may be completely superceded by the CIOA amendments. Here are some steps to get started:

  • Conduct a review of your governance documents (declaration, bylaws, rules and policies) and consult with your legal counsel about amendments needed to comply with the Act's new requirements;
  • Read Robert's Rules. Then decide whether to operate under these rules or to adopt your own parliamentary procedures. Determine how you will notice Board meetings and distribute agendas and meeting packages to unit owners;
  • Compile the records required to meet the new recordkeeping requirements of the Act. Then organize them in a manner where they can be easily inspected by owners and updated by your association. Meet with your manager, if you have one, to decide where they will be maintained and how requests for inspection and copying by owners will be handled in a timely manner;
  • Meet with your insurance broker to discuss whether you will insure unit owners' improvements and betterments under your master policy and the costs associated with doing so;
  • Update your lists having the names and addresses of Board members, officers and unit owners; the names of vendors; the contracts in effect; and pending litigation;
  • Prepare a list of regularly used forms and determine which ones require revisions. These may include resale certificates, ballots, proxies and maintenance policies.
  • Most importantly, confer with your professional advisors if you haven't already done so. To comply with the CIOA amendments, you will either need to amend your association's governing documents or review them to determine which provisions have been supplemented or superceded.