The D.C. City Council is considering a bill that would make more than 100 changes to the D.C. Condominium Act of 1976, revisions that industry experts say would extend new protection to consumers and developers.
The proposed legislation was drawn up by the D.C. Bar Association, which said in a report that it undertook the task to "fine-tune" the city's condominium law after several years of working with the law exposed problems in many sections of it.
The changes are wide ranging but do not add up to a new law, according to lawyers familiar with the proposal. Instead, they correct "a lot of things developers have complained about," while at the same time adding provisions that would make it easier for condominium associations to conduct their business, D.C. condominium lawyer C. William Tayler said.
In one instance that would assist condominium associations, the proposed legislation would eliminate the requirement that a unit owner's signature on a proxy form be notarized. The bill would require only that the signature be witnessed and that the witness sign the form.
The bill also would lift a requirement that condominium association officers who hand-deliver notices of meetings get unit owners to sign a receipt saying they got the notice. Industry experts said that unit owners in some jurisdictions with the same requirment have abused that provision and used it to block meetings on controversial issues. The new bill would require only that the association officer certify that he had delivered the notices.
"These provisions would be very welcome to the average condominium board," Tayler said. "In many cases, it is difficult for an association to get a quorum for a meeting, and this could make that easier."
Among new powers that the proposal would give condo association boards of directors is imposing fines for rules violations if unit owners are given adequate notice and a chance for a hearing. Boards of directors also would be allowed to suspend the voting rights of unit owners who were more than 30 days behind on their association dues payments.
The proposed law would give condominium associations new protection against developers or condominium converters, including lifting a provision that now requires associations to honor contracts set up by the developer during the period of developer control for up to two years after the developer relinquishes control.
The bill also would prohibit developers from setting up special provisions in the laws of the association, such as exclusive contracts, that would get around the requirement that the developer give up control of the association at a certain point. In addition, the new bill would prohibit developers or condominium converters from obtaining power-of-attorney rights from unit owners for certain association business during the period of developer control, a practice common in some jurisdictions.
Condominium associations also would be relieved of the current requirement to keep association records according to generally accepted accounting principles. Under the new law, they only would have to keep the books in a manner that would allow the records to be verified during an audit.
Several proposed provisions would benefit developers of condominium projects, including a six-year statute of limitations on an association's right to file a lawsuit against the developer for structural defects in the property. The current law has no statute of limitation for such a suit.
The new bill also would allow developers to sell condominium units in "as is" condition, and in such cases, they would not have to warranty the structure of the building, as is required now. The new law would require condominium developers to establish a system for all condominium associations to provide reserves to pay for future repairs, particularly because some condos might lack warranties.
The new law also would lift the requirement that all the units in a condominium be either contiguous or on contiguous parcels. Developers in the city long have sought a repeal of this provision.
The proposed legislation also would extend some new protection to lenders who hold mortgages secured by an interest in a condominium, including a protection for lenders foreclosing on developers of projects that would shield them from the developer's obligations under the warranty provisions in the law. Such a shield would not exist, however, if the developer sold his interest to an affiliated company. In that case, the developer and the affiliate would be liable under the warranties.
The proposed law would require for the first time that condominium associations carry property-damage insurance not only on common elements but on individual units when the units are "stacked," as in a high-rise.
Tayler said the justification for this provision was that, without an overall insurance policy for a high-rise, where damage was more likely to spread from one unit to another, insurance companies representing different owners could get into a fight over liability, holding up payments and repairs. The bill also would require insurance payments to go towards repairs, preventing condominium associations from using the money for other purposes.
The proposed legislation also would extend some new consumer protections, including a provision that anyone serving on a condominium board or as an officer of an association must protect the fiduciary interests of all the unit owners.
The bill also would require for the first time in cases where a D.C. resident has purchased a condominium or time-share condominium in another state and has completed at least part of the transaction in Washington, that the condominium must provide a public offering statement that meets the requirements of the D.C. law or the requirements of a jurisdiction with a similar law.
The bill, introduced by City Council member John Wilson (D-Ward 2), has been sent to the Committee on Consumer and Regulatory Affairs, which is planning to hold hearings on the proposal this spring.