By Michelle E. Reid
You finally found the time to volunteer and you garnered the votes. Now, what?
One of the first steps after securing a spot on your HOA board is to determine what the board is authorized to do and how it may carry out those authorized acts. The keys to answering these questions are the declarations, the HOA’s bylaws, and the Ohio Planned Community Law, O.R.C. § 5312.01, et seq. The what?
Prior to September 10, 2010, planned communities or “PUDs” operated without statutory law and sought direction from condominium laws. For instance, once condominiums were authorized by statute, the practice of recording declarations to create a PUD became the norm. This was done despite the fact that there was no statutory authorization for the recorder to accept and record declarations for PUDs or statutory authorization to create PUDs in this manner. A PUD would then create an HOA that would adopt bylaws to enforce the declarations. So long as the HOA acted pursuant to the bylaws and enforced the declaration’s terms, there was never really any issue.
But on September 10, 2010, Ohio’s Planned Community Law, O.R.C. § 5312.01, et seq. (“Act”) became effective. Like all real property laws, the Act was not exactly pushed out by the traditional media—leaving volunteer board members like you in the dark and at a disadvantage.
The Act was designed to supplement rather than invalidate any existing declarations or other organizational documents that were recorded before September 10, 2010. The recorded declaration still remained the ultimate governing document and HOAs could continue to carry out the terms of the recorded declaration.
The Act also did not require that existing PUDs adopt bylaws. But if an existing PUD had adopted bylaws, the Act required that the bylaws be recorded within 180 days of the Act’s effective date. PUDs that adopted bylaws or amendments to the bylaws after September 10, 2010 are required to record their bylaws or amendments thereto within 90 days or 60 days of adoption, respectively.
Failure to record the bylaws in a timely manner does not invoke a monetary penalty, but the HOA is prevented from filing lawsuits to enforce the bylaws. The Act’s provisions become the default governing law until the bylaws are recorded instead. In other words, if an HOA failed to timely record its bylaws pursuant to the Act, the HOA likely should have been acting according to the Act and not the bylaws. Amendments to the bylaws in particular are explicitly ineffective until they are recorded with the County recorder.
This raises the most concern with respect to any actions the HOA took which do not meet or exceed the Act’s standards after September 10, 2010, especially bylaw amendments or steps taken to enforce assessments. For example, an HOA’s bylaws may permit an amendment of the bylaws with a majority vote. The Act, however, requires the consent of 75% of the owners. If the bylaws were not recorded after September 10, 2010 and the vote occurred after that date, there is an argument that the amendment is ineffective because the HOA should have followed the requirements of the Act.
Without panicking, take away the lesson to be learned from this. As a board member you are entrusted with the duty to carry out the declaration and bylaws according to their terms and not-so-well-known laws. That is why review of the declarations and bylaws is one of your first steps after your election. If after your review you are unsure if your HOA is in compliance with the Act, your second step may be to give us a call. We will help you analyze the situation, identify issues (if any exist), and develop practical solutions to get your HOA back on track.
Michelle E. Reid is an attorney in the Real Estate and Finance Group of Strauss Troy. She can be contacted at MEReid@strausstroy.com or 513-621-2120. She is licensed in both Ohio and Kentucky.