Condo Media - October 2010 - 16

VERMONT N e w s

by Carl Lisman, Esq.

R e g i o n a l

Changes Are Coming in Vermont Law
A Continued Review of the Many Amendments
n last month’s issue, we began a discussion of the many new amendments to the Vermont Uniform Common Interest Ownership Act. In addition to the non-governance related changes addressed in that column other nongovernance change will include: Changes to contents of the declaration. Whether an association should have design and aesthetic review is initially a decision for the declarant. However, unless the power is set out in the declaration, an association will not have the authority to establish and enforce design criteria and aesthetic standards by rule. If the power is authorized and rules are adopted, the rules must specify procedures for enforcement of the standards and for approval of applications, including a reasonable time within which the association must act on applications. Second, the requirement that the plats and plans identify portions of the property that are subject to development rights can be met textually in the declaration, instead of appearing on the plat and plans (§2-109(b)(3)). The rights of the declarant are expanded. Included in “special declarant rights” will be the rights to control construction, design review and aesthetic processes and committees. The declarant may attend meetings of the association; and the declarant has access to association books and records (just like any owner) (§1-103(28)). Clarity for Non-residential and mixed use CICs. The provisions that allow a declarant to “opt out” from coverage under 27A VSA for non-residential communities have been clarified: A non-residential community is

C A I

not subject to the act unless the declaration provides that the entire act applies. Alternatively, the declaration may provide that only Articles 1 and 2 apply or, if it’s a planned community, only the provisions relating to separate title and taxation, local ordinances and eminent domain apply (§1-207).

Governance-Related Changes
A primary goal of the act has been to protect purchasers, owners and associations from overreaching developers. Since the act became law in Vermont (on Jan. 1, 1999), that goal has largely been achieved. However, abuses that the act did not anticipate have appeared in Vermont and elsewhere. These abuses are governance-related; many association boards have become non-responsive at best and downright abusive and arbitrary at worst. In other words, the good reasons for common interest ownership have run up against abuses from within, not from without. Some associations do not have a functioning board and leave the business affairs of the community to those who scream the loudest or are the most intimidating. Standards regarding the duties of care and loyalty of directors are inconsistent, depending on the form of organization of the community. Some associations don’t have bylaws. Some associations never have meetings of members or the board. Here’s how those problems will be resolved: An association may be organized as a corporation, limited liability company (LLC) or other form of organization recognized under Vermont law, or it may be unincorporated. Regardless of the type of organization,

• The association must have an executive board, however denominated or labeled (§ 3-101), even if the association is very small and acts through member votes or consents. This added requirement should not cause problems for small associations as their actions (or consents) will be substantively unchanged, though they may need to recite that they have acted in a dual capacity. • The act will not allow evasion of the protections already given in it. Most importantly, the fiduciary duties of officers and directors (or their equivalent, in non-corporate forms) will be measured against the nonprofit corporate standard, regardless of the form of organization (§ 3-103(a)). Within that standard, boards may exercise their reasonable judgment whether to pursue or impose sanctions and whether to refuse to pursue enforcement under specified circumstances. Failure to enforce in one instance does not prevent enforcement under other circumstances, but the board must always act in a nonarbitrary and non-capricious manner. This addresses the fear that boards can never demur or exercise reasonable judgment (§ 3-102(f)). Most associations now have bylaws, but some do not. An association must adopt bylaws (§ 3-102(a)(i)), though the instrument may have a different name, that sets out rules of procedure and process for governance and addresses specifics regarding directors and officers. The act explicitly authorizes the association to be organized as a profit or nonprofit corporation,

CONDO MEDIA • OCTOBER 2010

Condo Media - October 2010

Table of Contents for the Digital Edition of Condo Media - October 2010