2006 Code of Virginia § 55-344 - Management, regulation and control of subdivisions in which there are common facilities or propert...

55-344. Management, regulation and control of subdivisions in which thereare common facilities or property owners' associations.

A. The covenants, deed restrictions, articles of incorporation, bylaws orother instruments for the management, regulation and control of subdivisionswhich include facilities or amenities for which the lot owners are assessedon a regular or special basis for the use, enjoyment, and maintenance thereofshall provide for, but need not be limited to:

1. Formation of an association to be composed of lot owners within thesubdivision, such formation occurring prior to the sale of the first lotwithin the subdivision by the developer;

2. A description of the areas or interests to be owned or controlled by theassociation, which shall include those facilities or amenities for which thelot owners are subject to special or regular assessments;

3. The transfer of title and control and maintenance responsibilities ofcommon areas and common facilities to the association, which transfer is totake place no later than at such time as the developer transfers legal orequitable ownership of at least seventy-five percent of the lots within thesubdivision to purchasers of such lots or when all of the amenities andfacilities are completed, whichever shall first occur, but in no event anysooner than two years from the date the developer sells his first lot withinthe subdivision should the developer elect to retain title to the commonareas and common facilities for such period. The transfer herein required ofthe developer shall not exonerate him from the responsibility of completionof the common areas and facilities once the transfer takes place.

Nothing herein shall preclude the developer from transferring the commonareas and common facilities for consideration, provided, (i) that suchconsideration does not exceed the lesser of the fair market value thereof atthe time of transfer or the actual cost expended by the developer therefor,and (ii) that the developer affirmatively discloses the following informationto the purchaser, in writing, at the time the initial contract of purchase issigned:

a. That the common areas and common facilities will be transferred only uponpayment of consideration by the association;

b. The terms upon which such transfer will be made; and

c. An estimate of the amount of consideration to be paid by the association.

In the event the developer seeks payment for the areas or facilitiestransferred, the association shall have the option of deferring paymenttherefor evidenced by a deed of trust note covering a period of not less thanfive years at the legal rate of interest allowed in this Commonwealth, andsecured by a deed of trust covering the facilities or areas transferred;

4. Procedures for determining and collecting regular assessments to defrayexpenses attributable to the ownership, use, enjoyment and operation ofcommon areas and facilities transferred to the association;

5. Procedures for establishing and collecting special assessments for capitalimprovements or other purposes;

6. Procedures to be employed upon the annexation of additional land to theexisting subdivision which procedures shall disclose whether or not percapita assessments on account of such annexation shall be subject to anincrease, in the event additional amenities or common facilities are providedlot owners within the subdivision;

7. Such procedures and restrictions, if any, as apply with respect to thevoluntary or involuntary resale of a lot within a subdivision by a purchaseror his agent, which procedures and restrictions, if any, shall be establishedprior to the sale of the first lot by the developer within the subdivision;

8. Monetary penalties or use privilege and voting suspension of members forbreaches of the restrictions, bylaws or other instruments for management andcontrol of the subdivision, or for nonpayment of regular or specialassessments, with procedures for hearings for the disciplined members;

9. Creation of a board of directors or other governing body for theassociation with the members of the board or body to be elected by a vote ofmembers of the association in good standing at an annual meeting or specialmeeting to be held not later than six months after the transfer of the areasof facilities outlined in subdivision 3 above;

10. Enumeration of the power of the board of directors or governing bodywhich are consistent with and not otherwise provided by law;

11. The preparation of an annual balance sheet and operating statement foreach fiscal year with provision for distribution of a copy of the reports toeach member of the association in good standing within ninety days after theend of the fiscal year;

12. Quorum requirements for meetings of members of the association who are ingood standing; and

13. Such other provisions as may be required by Chapter 10 ( 13.1-801 etseq.) of Title 13.1, if the association is a Virginia nonstock corporation.

B. Any developer of a subdivision, successor or otherwise, which subdivisionis subject to the provisions of this chapter, shall be obligated to completethe facilities and amenities as promised and outlined in subsection A of thissection by the initial developer of the subdivision subject to the transferof title and control and maintenance responsibilities of common areas andcommon facilities to the lot owners' association. The foregoing shall not bedeemed to apply to any purchaser at foreclosure or grantee in a deed in lieuof foreclosure, provided the purchaser or grantee is a financial institutionand the mortgagee, creditor, or beneficiary under the instrument beingforeclosed or giving rise to the deed in lieu of foreclosure. The termfinancial institution shall mean a bank, savings institution, real estateinvestment trust, insurance company, pension or profit sharing trust, orother institution regularly engaged in the business of making real estateloans. For purposes of this subsection, the lot owners' association shall notbe deemed a developer if at a meeting of its members in good standing a voteis taken whereby at least fifty percent of the members vote to be exempt fromthe requirements of this subsection.

C. The association, once formed and in existence and the title owner of thecommon areas and common facilities within the subdivision and which has beenin existence for a period of at least five years, shall have the authority topass special assessments against and raise the annual assessments of themembers of the association and to collect said assessments from such membersaccording to law, if the purpose in so doing is for the maintenance of theaforesaid common areas and common facilities. The authority hereby grantedand conferred upon the association shall exist only where the restrictionsand covenants of record have no specific language contained therein whichprecludes the adoption of special assessments or increases the annual dues orassessments.

D. The association shall have a lien on every lot within its subdivision forunpaid regular or special assessments levied against that lot in accordancewith the provisions of this chapter. The lien, once perfected, shall be priorto all other liens and encumbrances except (i) real estate tax liens on thatlot (ii) liens and encumbrances recorded prior to the perfected lien and(iii) any sums unpaid on any first mortgages or first deeds of trust recordedprior to the perfection of the lien for regular or special assessments andsecuring institutional lenders. The provisions of this subsection shall notaffect the priority of mechanics' and materialmen's liens.

Notwithstanding any other provision of this chapter, or any other provisionsof law requiring documents to be recorded in the miscellaneous lien books orthe deed books of the clerk's office of any court, from July 1, 1978, allmemoranda of liens arising under this subsection shall, in the discretion ofthe clerk, be recorded in the miscellaneous lien books or the deed books insuch clerk's office. Any memorandum shall be indexed in the general index todeeds, and such general index shall identify the lien as a lien forsubdivision regular or special assessments.

The association, in order to perfect the lien given by this subsection, shallfile before the expiration of ninety days from the time such special orregular assessment became due and payable in the clerk's office of the countyor city in which the subdivision is situated, a memorandum, verified by theoath of the president of the association, which memorandum shall contain:

1. A description of the subdivision;

2. The name or names of the persons constituting the owners of the lot;

3. The amount of unpaid special or regular assessments currently due or pastdue applicable to the lot, together with the date when each fell due; and

4. The date of issuance of the memorandum.

It shall be the duty of the clerk in whose office the memorandum shall befiled as hereinabove provided to record and index the same as provided inthis subsection, in the names of the persons identified therein as well as inthe name of the association. The cost of recording such memorandum shall betaxed against the person found liable for any judgment or decree enforcingsuch lien. It shall be lawful for such memorandum to be filed as onestatement listing therein the above required information and each of the lotowners whose property within the subdivision is liened thereby. The cost offiling shall be as provided in subdivision A 2 of 17.1-275.

No suit to enforce any lien perfected under this subsection shall be broughtafter one year from the time when the memorandum of lien was recorded;however, the filing of a petition to enforce any such lien in any suitwherein such petition may be properly filed shall be regarded as theinstitution of a suit under this subsection; and provided, further, thatnothing herein shall extend the time within which any such lien may beperfected. Nothing shall preclude the association from filing a single suitlisting all unpaid delinquent and enumerated lot owners as defendants, andobtaining judgment against those so adjudicated by the court hearing thecause.

The judgment or decree in an action brought pursuant to this subsection shallinclude, without limitation, reimbursement for costs and attorney's fees,together with the interest at the maximum lawful rate for the sums secured bythe lien from the time each such sum became due and payable.

When payment or satisfaction is made of a debt secured by the lien perfectedby this subsection, the lien shall be released in accordance with theprovisions of 55-66.3. For the purposes of 55-66.3, the president orsecretary of the association shall be deemed the duly authorized agent of thelien creditor.

Nothing in this subsection shall be construed to prohibit the recovery ofsums for which this subsection creates a lien.

Any lot owner within the subdivision having executed a contract for thedisposition of the lot, shall be entitled, upon request, to a recordablestatement setting forth the amount of unpaid regular or special assessmentscurrently levied against that lot. Such request shall be in writing, directedto the president of the association and delivered to the principal office ofthe association. Failure of the association to furnish or make available sucha statement within five business days from the receipt of such writtenrequest shall extinguish the lien created by this subsection as to the lotinvolved. Payment of a fee not exceeding fifteen dollars may be required as aprerequisite to the issuance of such a statement if the bylaws of theassociation so provide.

E. Upon July 1, 1978, and a subdivision becoming subject to the terms thereofand the requirements outlined in subdivisions 1 through 8 of subsection A ofthis section have not been performed then the requirements shall have to befully complied with within a period of ninety days from July 1, 1978, andupon failure to fully perform all of such requirements within the ninety-dayperiod the failure so to do shall constitute a violation of this subsection.

F. Each lot owner within a subdivision which falls within the definition ofthis chapter shall be responsible for his pro rata share of the cost ofmaintaining the common areas and common facilities owned by the association.For purposes of this subsection, common facilities and common areas shall bedefined to mean only the roads and lakes within the subdivision andmaintenance shall include any orderly program for the continued upkeep andimprovement of such roads and lakes. The association shall have theresponsibility of determining the pro rata share assessed against each lotowner and such amount assessed thereby shall be in addition to the annual orspecial assessment otherwise obligated by each member of the association.

G. Providing the definition of subdivision as detailed in subdivision 4 b of 55-337 is complied with, the property owners' association at the subjectsubdivision shall have the powers and duties enumerated in subsections C, Dand F of this section as well as the rights and authority to establish thoseprocedures outlined in subdivisions A 4, A 5 and A 6 and the penalties insubdivision A 8 herein, but shall also have the obligations imposed by suchsubdivisions and those of subdivisions A 9 through A 12.

(1978, c. 510; 1980, c. 546; 1989, c. 68; 1993, c. 36; 1996, c. 77.)