The 2005 legislative session marked a low point for Oregon homeowner associations. Budget woes generally being experienced by the state captured virtually all of the legislators’ time while homeowner association bills received short shrift. Added to the lack of attention that the homeowner association-related bills received was the new phenomenon of a variety of bills being presented from diverse and sometimes opposing constituencies. Some attempts were made to resolve the concerns, but for the most part bills simply languished and ultimately died on sine die.
The one bill which survived the session and actually adopted new law was Senate Bill 955. Now codified at Chapter 534, Oregon Laws 2005, Senate Bill 955 made a seemingly small change to the requirements relating to reserves and reserve studies.
A brief history of the bill is appropriate. Senate Bill 955 was proposed by a group of developers in the Portland area who appear to have been motivated by the concerns surrounding construction defect suits in cases where there is some question about whether or not the project has properly been maintained. On its face, this certainly is an altruistic desire for the developer to address, but the bill had some fundamental flaws. From a homeowner association standpoint, the largest of these flaws was that it would have essentially limited claims to strictly warranty claims, and it dropped from 10 years to 3 years the statutory time frame within which a homeowners association could bring a claim.
Naturally, we opposed Senate Bill 955, and in the compromise meetings held in Salem, it was agreed that a new requirement be imposed upon associations to adopt a maintenance plan.
It is important first to understand how this new law applies. The reader should remember that the law ties the requirement for a maintenance plan to the sections for reserves and reserve studies. Let’s review when reserves (and thus now a maintenance plan) are required. The answer is relatively simple.
Condominiums created on and after January 1, 1982 must establish reserve accounts. All other condominiums must establish reserve accounts if required by the declaration or bylaws. The same holds true for planned communities. All planned communities created under the planned community act (remember that many planned communities opted out) on and after July 1, 1982 are required to have a reserve account. All other planned communities (pre-1982 and post-1982 projects not under the act) are only required to have reserves if required by the declaration and bylaws.
The question of a reserve study is entirely different. All condominiums created on and after October 23, 1999 must have a reserve study. All other condominiums must have a reserve study only if the declaration and bylaws require it and a board of directors resolution has been passed to apply the provisions of the act to that association or the board has received a petition signed by a majority of the owners. If these requirements are satisfied, then the association must conduct a reserve study within one year of the date of adoption of the resolution or submission of the petition. Once again, for planned communities, the law is essentially the same. For all planned communities created on or after October 23, 1999, a reserve study is required and for all other planned communities (those created prior to October 23, 1999 and those projects not subjected to the provisions of the act) must go through the same steps as outlined above for condominiums.
Finally, we must ask ourselves, “What is a maintenance plan?” While a reserve study requires analysis of all components which will require replacement between three and thirty years, the reserve study does not appear to be so limited. Essentially, the law requires that the maintenance plan deals with all repair and replacement of common elements and address issues including, but not limited to, the useful life of the common elements and association properties. It is important to note that for planned communities, the act appears to be limited to items of common property and may not cover items requiring common maintenance.
In any event, we are recommending to associations that they assess all of their maintenance obligations, including landscaping, painting, roofing, etc. and provide for a clear and objective process to make sure that the maintenance is properly done. Obviously, there is a great deal of overlap with the preparation of a maintenance study and the preparation of a reserves budget. We note that the legislature including the language that the plan shall “be appropriate for the size and complexity of the common property. . . .” Associations are cautioned not to use this language as an excuse to say that they don’t have enough money to properly perform a maintenance plan.
We are hopeful that qualified professionals will emerge who are in a position to provide opinions supported by their professional integrity and firm resources should those opinions not be found reasonable. We urge associations to be careful in considering choice of these service providers.
A. Richard Vial
Attorney at Law