the 2014 legislative session, the Connecticut General Assembly enacted two
public acts concerning community associations, one of which also concerns
to the Common Interest Ownership Act-Public Act No. 14-215 amends a number of
provisions to the Common Interest Ownership Act ("CIOA") as
follows. The majority of these
amendments become effective on October 1, 2014, and apply to all communities in
Connecticut, regardless of when created.
A small number of these amendments are more limited in scope. Some of these more limited amendments become
effective immediately, while others will not take effect until January 1, 2015:
of Directors by Plurality Vote. Public
Act No. 14-215 amends Subsection 47-252(b) to permit associations to elect
directors by a plurality vote.
associations have long conducted elections by plurality vote. However, when the
General Assembly amended CIOA in 2009, in part to clarify what constitutes a
majority vote of the unit owners, it inadvertently called into question the
permissibility of conducting an election by plurality vote.
47-252(b) of CIOA presently states that at a meeting of the unit owners, a
majority of the votes cast shall be the decision of the association, unless
either the governing documents or CIOA requires a higher number. This provision works well when the unit
owners are asked to vote either in favor of or against a certain action.
However, Subsection 47-252(b) does not work as well when it comes to elections
when there are more candidates seeking election than there are open seats.
Act No. 14-215 amends Subsection 47-252(b) to make it clear that associations
may elect board members by a plurality vote.
amendment to Subsection 47-252(b) also applies to the election of officers, but
only if the governing documents of the community require that officers are
elected by the unit owners, rather than the board members. In most Connecticut
communities, the officers are elected by the board members, not by the unit
the association has had a certified public accountant report on its financial
statement during the five years preceding the date on which the resale
certificate is issued, then the certificate must disclose the following:
the association has not had an accountant report on its financial statement,
then the certificate should state so.
Act No. 14-215 amends Section 47-17a to clarify that the association of any
common interest community, regardless of when created, may charge a transfer
fee on the sale of a unit.
amendments will have no impact on any other association.
Method of Foreclosure-Public Act No 14-84, which becomes effective on October
1, 2014, creates a new process for conducting a foreclosure by market
sale. The Act is purportedly designed to
make it easier for homeowners and first mortgage holders to approve and
complete short sales, by making it more difficult, if not impossible, for the
holder of a junior lien to negotiate to receive at least some payment from the
proceeds of the sale.
the holder of a mortgage completes a foreclosure, the association will receive
payment of the its priority lien, equal to nine months' of common charges plus
attorneys’ fees and costs.
Unfortunately, in many or most cases, the association is unable to
collect the junior portion of its lien, which does not enjoy priority over the
alternative to foreclosure, some homeowners will attempt to conduct a short
sale. The owner will put the home on the market and hope to find a buyer that
is willing pay an amount that is close to market value. The owner then asks the mortgage holder to accept,
as payment in full, an amount that is less than what is owed on the mortgage.
there is no foreclosure, any liens that were junior to the mortgage have not
been extinguished. The owner and the
mortgage holder must negotiate with the junior lien holders to accept some
amount, often discounted, as payment in full.
If the homeowner, mortgage holder, and junior lien holders cannot reach
an agreement, then the short sale will not be completed. Instead, the mortgage holder will proceed
with a foreclosure and the junior liens will be extinguished in the
process. Thus, junior lien holders have
some incentive to negotiate with the homeowner and mortgage holder.
Act 14-84 essentially eliminates the need for homeowners and mortgage holders
to reach an agreement with the junior lien holders. The Act will not have any impact on the
ability of associations to collect their priority liens. However, it eliminates the possibility of
negotiating for payment of at least a portion of the junior portion of the
association's lien if the homeowner is able to complete a short sale.
Act applies to situations that meet the following criteria:
these criteria are met, then the homeowner and the holder of the first mortgage
may agree to attempt to sell the unit on the open market. Any proposed purchase and sale agreement must
meet the approval of both the homeowner and the mortgage holder, and
subsequently be ratified by the court.
The process is designed to permit the mortgage holder to obtain a
judgment within three or four weeks of filing the action, and for the sale to
take place within a month or two thereafter.
the home is a unit in a common interest community, the association should
receive notice of the foreclosure, just as it does now with other mortgage
foreclosures. When the court enters its
judgment, the association and all other any junior lien holders are given a
right of first refusal. This means that
a junior lien holder may choose to purchase the unit on the same terms and
conditions as the proposed purchase and sale agreement already approved by the
homeowner and mortgage holder. In most
cases, it will likely make no sense to exercise this right.
the association does not exercise this right, then the junior portion of its
lien will be extinguished. The
association will still collect the nine-month priority from the new owner of
the unit after the sale is completed.