Does Pennsylvania Need a Condo Ombudsman?

Feb 28, 2012

Legislation was recently introduced in the Pennsylvania State House that would establish the Office of the Cooperative and Condominium Ombudsman and provide for its powers and duties. House Bill 2155, introduced by Representative John Galloway, also seeks to impose a residential unit fee and establish the Office of the Cooperative and Condominium Ombudsman Fund. The office would fall under the jurisdiction of the state’s Attorney General.

What would such an office do? The Ombudsman, which the legislation requires to be an attorney with extensive experience in real estate, cooperative and condominium law, would be a full time state position, with additional staff to carry out the mission of the office.  The office would educate and inform unit owners, property managers and professionals working withe associations of their legal rights and responsibilities, coordinate and assist in the preparation and publication of educational and reference materials about cooperatives and condominiums. The office would also conduct meetings and workshops to educate unit owners and managers of condominiums and cooperatives. The legislation also calls for the office to establish alternative dispute resolution programs to assist in the resolution of cooperative and condominium disputes as an alternative to litigation.

In addition to disseminating information, providing education and alternative dispute resolution, the office would also be empowered to “offer procedures, monitors and vote counting services to assure fair elections for members and officers of an executive board” of a condo or cooperative association. Under this provision, “15% of the total voting interests in a cooperative or condominium, or unit owners of six residential units, whichever is greater, may petition the office to attend and conduct an election of executive board members and officers. All costs associated with the election monitoring process shall be paid by the cooperative or condominium.”

What does this last provision mean, in layman’s terms? In short, a lawyer from the Attorney General’s office may be at your next election to make sure no one is breaking the law or violating the rules. And, your association will bear the cost of such election monitoring. Of course, the underlying assumption of this legislation is that most associations can’t conduct their own elections in a fair and trustworthy manner.

CAI met with the sponsor of the Bill and provided background material on how the concept of an Ombudsman has worked in the four states with such an office, including Florida, Nevada, Virginia and Colorado. CAI believes the efficacy of the Ombudsman offices in these states is at best, a mixed record in support of homeowners living in community associations. Such offices face several obstacles in meeting its statutory objectives. Among these obstacles are structural issues, the lack of mutuality in the ombudsman process, added cost/complexity for homeowner dispute resolution, lack of education of boards and homeowners, the lack of need for such programs and more effective alternatives to expanding state control over locally elected community association boards.

CAI’s Memorandum on Offices of Condominium Ombudsmen, prepared by the Department of Government and Public Affairs at CAI’s national office in Falls Church, VA, outlines both CAI’s objections to various Ombudsman provisions, as well as information on whether such programs are really necessary. From the Memorandum:

“Over the years, CAI has conducted national surveys on homeowner satisfaction in community associations. This survey, entitled, What do Americans say about their Community Associations, was prepared in conjunction with the survey firm Zogby International[1]. This survey is conducted every two years and the findings on owner satisfaction with their community associations have been remarkably consistent, with close to 9 of 10 residents expressing positive views of their association in 2005, 2007 and 2009. This same survey also finds that residents are consistently satisfied with the actions of their elected boards, with 99 percent of residents surveyed reporting that the board absolutely or ‘for the most part’ serves the best interest of their community. This empirical and longitudinal data demonstrates that community association boards serve the needs of their residents and that a majority of cases of complaints, as supported by the findings of the Nevada office as well, are unfounded. The notion that association problems are wide spread is not supported by national surveys.

CAI does not dismiss the fact that there are homeowners in community associations who have difficulty with their association and could benefit from mechanisms to assist in dispute resolution. CAI does believe that there are more appropriate alternatives that serve to empower residents and associations rather than expanding state government powers. CAI believes that these mechanisms work to provide greater transparency and clear processes to assist with dispute resolution in community associations.

First, CAI supports requirements that community association boards adopt an internal dispute resolution process if state law does not already impose such a requirement. Having a clear process helps manage the expectations of the board and the residents in managing and working through problems. CAI also supports the ability of the community association to adopt bylaws or amendments to their governing documents to mandate alternative dispute resolution (ADR) prior to litigation. ADR allows for a neutral entity to assist the parties in finding a resolution to a dispute outside of court and often at a lower cost to the parties. CAI also supports mandated disclosures to purchasers in community association prior to closing. CAI believes that all buyers in a community association should be provided with the opportunity to understand their rights and obligations prior to moving into a community association. Finally, in many states, the laws that govern community associations are outdated and do not adequately address the rights and responsibilities of homeowners, boards, developers and other key parties in community associations. CAI supports the adoption of the Uniform Common Interest Ownership Act (UCIOA) for states currently operating under older legal frameworks for community associations.

In light of our concerns and the availability of less intrusive remedies for dispute resolution in community associations, CAI is skeptical and inclined not to support the imposition of ombudsman offices at the state level.”

Finally, there’s one big obstacle to the creation of such an office in Pennsylvania. From a practical point of view in Pennsylvania, there is no way to determine what amount of funds would be raised from the fee to support such an office, because Pennsylvania does not track, and, by its own admission in a recent Joint State Government Commission study, cannot identify, how many condominiums and cooperatives even exist in the Commonwealth. From a practical point of view, this Bill, if enacted, could not be enforced.

CAI’s Pennsylvania Legislative Action Committee will continue to monitor this Bill and report on its progress.

[1] What do Americans Say About Their Community Associations?, Community Associations Institute w/Zogby International, 2009

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