Does Virginia law require an HOA to transition automatically to homeowner control of the Board of Directors?
Over the course of the past few years, homeowners in the Williamsburg development of Kingsmill on the James have become more vocal over the continued control by the community’s developer, Busch Properties, Inc. In May 2010, Kingsmill resident and a William & Mary Law School professor filed a lawsuit against Busch Properties. On August 20, 2010, the Williamsburg/James City Circuit Court heard the demurrer filed by Busch Properties. The court granted the demurrer. The Plaintiff appealed to the Virginia Supreme Court. The Court declined to hear the appeal. The Plaintiff filed a petition for rehearing that the Court refused to hear by an order dated June 16, 2011.
The Kingsmill Declaration of Covenants and Restrictions (“Declaration”) provides three classes of membership. Busch Properties is the Class C member, and according to the Declaration, shall remain a Class C member until “it no longer desires to be a Class C member.”
The Declaration provides that the Class C member shall appoint six members to the Board of Directors, and the lot owners shall elect three members to the Board. This composition of the Board of Directors shall continue until the Class C membership expires. Therefore, Busch Properties maintains the majority of members on the Board of Directors.
The Plaintiff argued that the Virginia Code, as interpreted by the Virginia Attorney General in an unrelated case, provided support for the court to rule that the lot owners of Kingsmill should control the Board of Directors. He based his argument upon Va. Code Ann. § 55-509.2. That section, entitled “Documents to be provided by declarant upon transfer of control,” provides as follows:
[O]nce the majority of the members of the board of directors are owners of improved lots in the association and the declarant no longer holds a majority of the votes in the association, the declarant shall provide to the board of directors or its designated agent the following [documents]. (emphasis added).
The Plaintiff reasoned that this section requires transition to occur automatically when the declarant no longer holds a majority of votes in the association. However, in addition to other issues, the Plaintiff’s reasoning glosses over the first requirement of that statute: that the majority of members of the board must own improved lots in the association.
The majority of the Kingsmill board of directors are NOT owners of improved lots. Under the Kingsmill Declaration, Busch Properties shall continue as the Class C member until it no longer desires. As the Class C member, Busch Properties shall continue to appoint 6 of the 9 members of the Kingsmill Board of Directors. Consequently, Va. Code Ann. § 55-509.2 does not support the Plaintiff’s argument.
In essence, the Plaintiff attempted to extend the automatic time limits contained in the Virginia Condominium Act to the Virginia Property Owners’ Association Act. In fact, it is well understood that such time limits do not currently exist in the Virginia POAA. In the past session of the General Assembly, a bill was introduced to establish time limits for the period of declarant control. However, that bill died without being enacted. Furthermore, I doubt that the statute would be applied retroactively to established associations with recorded declarations, like Kingsmill.
In conclusion, this controversy over the length of time of declarant control highlights the need for another review of Virginia’s statutory provisions governing common interest communities. To state, however, that the courts “got it wrong” is incorrect, because both the Circuit Court and the Virginia Supreme Court accurately interpreted the current statutes when dismissing the Plaintiff’s lawsuit. Your option is to contact your Virginia legislator and urge them to change Virginia law.
Tarley Robinson, PLC, Attorneys and Counsellors at Law
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