The most recent version of HB2800 has 8 sections and focuses on document retention, homeowner notification, fee disclosures, financial transparency, and restrictions on community associations (HOAs for short). The original HB2800 contained significantly problematic language regarding short-term and long-term rentals, but that language has since been removed from the bill. HB2800 hasn't improved with age. You can read the current version here.
HB2800 still contains significantly problematic language, and if adopted into law it would create chaos, confusion, conflict, and worst, more attorney’s fees for Oklahoma HOAs, which are most often administered by volunteer, non-compensated community association boards and officers. Duplicative of existing law, conflicting with existing law, and even conflicting with itself, this is a bill that cannot be improved with revision because the reasons for adopting such a law escapes a plain reading of the bill.
After reading my analysis below about HB2800 you agree the bill is harmful to Oklahoma HOAs and those living within an HOA, I urge you to contact your state senator and representative to communicate your concerns about this bill. If you are a volunteer board member or officer, explain to your senator or representative how a bill like this will affect your non-compensated work serving your neighbors. Here is a link where you can find your legislator and there contact information: https://www.oklegislature.gov/findmylegislature.aspx
Section 1 → Document Access
Section 1 of this bill requires the “managing entity of a real estate development” to retain and provide electronic access to a number of governing documents. However, it is unclear who or what is a “managing entity of a real estate development.” This undefined term could include a developer, builder, manager, one or more board members, or an HOA’s attorney. Under existing law (60 O.S. §851 et seq.) the term “real estate development” could mean commercial HOAs. Further, all of these documents are all already available and housed, many for free to the public, at the county clerk’s offices and websites. Does reference to the county clerk’s office satisfy the law’s requirements?
Section 1 further requires the “managing entity” to provide access to these instrument following request within 3 business days, a patently unreasonable timeframe. Existing law (18 O.S. 1065) provides for a 5-day response period on records requests to incorporated HOAs, yet this new law requires copies to be provided within three days.
Section 1 goes on to reference more undefined terms, such as “all parties to a home transaction.” Do “all parties” refer to real estate professionals to a transaction such as realtors, closers, and home inspectors? Who knows, because the proposed law provides no clues, but given later requirements on title companies (See Section 7 below), one must wonder. Does this language mean Section 1 only applies to residential HOAs? Again, one must wonder.
Section 2 → Notification of Updates
Section 2 requires an owner’s association to notify all homeowners within their “jurisdiction” “via email” or postal mail of any adoption of updated covenants, conditions, and restrictions. However, it is unclear what is an ““owners association’s jurisdiction.” Further, the language “via email” assumes the existence of an email address and that homeowner under the “owners association’s jurisdiction” has provided that email to an association. Further, what if a homeowner receives their mail at a location other than the address within the HOA’s “jurisdiction?” Is the burden on the HOA to locate a mailing address? Each of this points to not only the significant questions generated by the bill’s terms but also highlights to unreasonable burden placed on non-compensated volunteers who will be impacted by this law if adopted.
Section 2 requires covenant amendment notification to be within 5 business days after “adoption.” However, “adoption” may occur weeks or even months before filing of a covenant amendment. It may take a week or more to count amendment ballots. It is unclear under the proposed law whether “adoption” occurs when the ballots are counted and it is known that a sufficient percentage was reached to file the amendment or if “adoption” occurs when the amendment is actually recorded.
Again, it is not clear in reading the bill what problem this section is intended to solve. In practice, the vast majority of covenant amendments are adopted following actual notice and a voting process by the property owners. Then, each lot owner has constructive notice of the amendment once it is recorded with the county clerk (16 O.S. §16). So, what issue is this language supposed to cure?
Section 3 → Fee Disclosure and Limits
Section 3 requires “all entities tasked with managing an owners association” to disclose “individual fees.” However, it is unclear again what “all entities tasked with managing an owners association” includes or means. While there appears to be some attempt to define what constitutes “individual fees,” the bill language is lacking as explained below.
Section 3 also puts a cap on these “individual fees” at $175.00. However, the bill excludes fines, assessments, and services from these “individual fees.” It is unclear what is covered under “services.” Is a clubhouse rental a “service” that must be disclosed and is to be capped at $175.00? Moreover, the hard cap on “individual fees” fails to account for regional cost differences, labor intensity, complexity, or even inflation. This could create further budget constraints on HOAs already struggling to keep up with operating expenses.
Section 3 requires “upon request of documents reporting the condition of a property for sale, a homeowner shall not be charged a fee for a report on said property.” However, it is unclear what this means. Does this language create a statutory right to receive an inspection report they didn’t pay for? Is the idea that an HOA must store and provide such information? If so, this could cause some financial burdens on smaller HOAs that may not have the resources to store and provide such information, if they are even able to obtain this information. This language needs significant clarification and if it is a serious consideration, likely needs to be relocated to the residential disclosure act.
Section 4 → Financial Records and Good Standing
Section 4 requires owners associations to keep records with regard to the financial condition of the owners association. However, HOAs are likely already doing this as a matter of course. Incredibly, Section 4 includes “audits” in the required financial records; however, an audit is likely cost prohibitive for all but a few Oklahoma HOAs.
Section 4 says that upon written request, they must issue a “good standing” statement regarding dues and fines within 5 business days, with a maximum fee of $50.00. The same issues raised above equally apply to the cap and lack of definition in Section 4.
Section 5 → Fee Structure Documentation
Section 5 requires owners associations or their “managing entities” to describe the fee structure and any potential charges in a “document” for homeowners. However, it is still unclear what “managing entities” means and what it includes. Again, why would Oklahoma need a law to require what covenants and bylaws already provide? Would a dues and fine structure set out within covenants or bylaws, as they often are, discharge the law’s description mandate?
Section 6 → Fine Schedule and Updates
Section 6 requires owners associations or their “managing entities” to describe the schedule of fines for violations in “documents” for homeowners. Again, “managing entities” is not defined. It is not clear what “documents” means like is a board-adopted rule good enough?
Section 6 arbitrarily restricts fines updates to once per calendar year at an annual association meeting. Again, the language generates questions: does the law override governing documents and varying adoption procedures? Does the lack of due process requirements in the statute supplant such common provisions in governing documents? Does the governing body adopt the once annual fines update at the annual meeting or are we to assume any updates can only occur on the vote of the general membership? If the general membership, does it take a simple majority? While I am certainly in favor of clear statutory allowance for and governance of monetary penalties, the proposed law needs significant improvement.
Section 7 → Title Insurance and Document Delivery
Section 7 concerns amendment to current statute pertaining to title companies and them providing copies of governing documents.