The Governor signed House Bill 1040 into law last week, enshrining into law the obligation for community associations to provide notice to community members should it need to restrict access to common elements for more than seventy-two hours. While this is an appropriate, fair, and laudable goal, many other provisions of House Bill 1040 create liabilities and ambiguities for common interest communities.
The bill mandates that associations “preserve and protect unit owners’ ability to use and enjoy common elements.” In other words, a Board’s business decision to close common elements is now subject to an affirmative duty to preserve and protect, not withstanding extenuating circumstances that make use and enjoyment of the common elements detrimental to the rest of the community. Just today I worked with a client with a common element hot tub that is obsolete, only used by a few short term renters, and that will cost tens of thousands of dollars to maintain (and six figures to replace) when the community has many other more pressing financial obligations. Does the association breach its fiduciary duty if it spends money to pay its other bills rather than having the hot tub open and tested even when no one uses it?
The association will probably have to raise its assessments to pay the bills, rather than make a decision to close the tub for an undetermined time and risk litigation from a short term landlord. Would be a shame if it couldn’t collect on those assessments.
The bill also prohibits associations from “unreasonably” restricting or prohibiting access to, or enjoyment of, any common element.
You know that boiler rooms, roofs, and management office spaces are typically common elements in condominiums, right? Some condominiums even rent out common element management units to third parties. Are Boards really now prohibited from excluding owners from drunken rooftop picnics on flat roofs? Sure, that exclusion is probably reasonable, but why should Boards even have to justify this level of control? And if you were on Mars in 2020, you might not be aware of the conflicts between homeowners and Boards regarding common element pool and clubhouse closures related to COVID-19. Many homeowners considered closures to be completely unreasonable, and just as many considered them to be necessary and reasonable. This bill undermines a Board’s decision to close common elements in the face of a new and unknown virus and the risks associated with death and, even worse – no insurance. I hope we won’t have another pandemic any time soon.
I firmly believe that owners are entitled to reasonable information from their Boards about common element closures. Unfortunately, House Bill 1040 goes beyond that intention to create ambiguities and liabilities for Boards that exercise reasonable business judgment in light of their duties to the community as a whole.
And one last consideration; while the bill does not amend the CCIOA section that outline the CCIOA provisions that apply to communities formed before July 1, 1992, its language indicates it probably does apply to those pre-CCIOA communities. Plan accordingly.