Q&A: Ohio Planned Community Act Provisions
The Ohio statute governing HOA’s is the Ohio Planned Community Act, O.R.C. §5312.01, et. seq. (the “Act”). The Act generally gives substantial deference to the declaration recorded by an association and requires that every association record a declaration and bylaws with the office of the recorder of the county in which the association is located. O.R.C. §5312.02(A). Ohio’s Act is less comprehensive than comparable statutes in many states and, consequently, communities are afforded more flexibility in their declarations than in many other jurisdictions.
Which state official has jurisdiction over HOA’s in Ohio?
The Act does not delegate rulemaking or enforcement authority over HOA’s to any specific executive officer or agency. Ohio HOA’s are required to organize as nonprofit corporations. O.R.C. §5312.03(B). Thus, with regard to its organizational structure and general management, an association is subject to the authority of the Ohio Secretary of State. To the extent an HOA’s activities implicate any consumer protection statutes, the HOA is subject to the enforcement power of the Ohio Attorney General.
The Act anticipates that enforcement will occur through the judicial system. O.R.C. §5312.13. Jurisdiction of actions by or against an HOA rests principally with the Court of Common Pleas of the county in which the development is located. O.R.C. §2305.01. However, a civil action in which the amount in controversy does not exceed six thousand dollars ($6,000.00) may be brought in small claims court. O.R.C. §1925.02(A)(1).
Does Ohio law require an HOA board to appoint officers from the elected members of the board?
The Act states that an HOA’s “declaration and bylaws shall provide for the following…The election of the board of directors…[and] The powers and duties of the board.” O.R.C. §5312.02(B). The Act then provides that the “board of directors…shall elect officers from the members of the board, to include a president, secretary, treasurer, and other officers as the board designates.” O.R.C. §5312.04(A) (emphasis added). Thus, to comply with the Act, an HOA must elect board-members in a manner established in its declaration and bylaws, and the board must then elect officers from among the elected board-members.
Does Ohio law permit compensation of any type for HOA directors, including when they are serving as officers?
The Act is silent as to compensation of board-members and officers. However, among the permitted “powers of owner’s association” that an HOA may exercise “through its board of directors” are “powers…conferred by the declaration or bylaws…permitted to be exercised in [Ohio] by a nonprofit corporation…[or] necessary and proper for the government and operation of the owners association.” O.R.C. §5312.06.
Ohio’s Nonprofit Corporation Law permits a nonprofit corporation to adopt regulations for the governance of the organization either within 90 days of the date of incorporation or, if later, by majority vote of the voting members. O.R.C. §1702.10. “The regulations, whether designated a constitution or rules, or by some other term, may include provisions with respect to…the titles, qualifications, duties, term of office, compensation or manner of fixing compensation, and the removal, of officers.” O.R.C. §1702.11(A)(9) (emphasis added). Thus, a board can provide compensation to officers but only if the compensation is provided for in the declaration or included within regulations properly adopted by the association. If the declaration specifically provides that officers shall not receive compensation, then compensation can only be provided through amendment of the declaration.
Does Ohio law require an HOA board to seek member approval for a rate increase?
The Act states that an HOA board “may not increase any assessment for common expenses when the declaration limits the amount of such assessments unless the owners amend the declaration…” O.R.C. §5312.10(C)(2). An amendment to the declaration requires a vote of approval from 75% of the association members. O.R.C. §5312.05(A).
If the declaration does not limit assessments or otherwise set forth the manner in which assessments are calculated, then the statutory means of determining assessments will apply. Pursuant to O.R.C. §5312.06(A)(1), the board shall “annually adopt and amend an estimated budget for revenues and expenditures…[and] collect assessments for common expenses from owners…” If the declaration does not establish a means of allocating assessments, then “the common expense liability shall be allocated equally among all the lots.” Importantly, though, a board "may not charge assessments for common expenses unless the declaration provides for or contemplates the charging of such assessments." O.R.C. §5312.10(C).
Can you ever sue the HOA?
Yes. Both the HOA itself and any owner have the right to bring a civil suit to enforce compliance with the declaration, bylaws, and association rules. O.R.C. §5312.13. A plaintiff may seek money damages or injunctive relief (an order from the court requiring a party either take or refrain from taking certain action), along with court costs and reasonable attorney’s fees. Id. Jurisdiction lies with the Court of Common Pleas of the county in which the association is located. An HOA can be served with process either by delivering a summons to the president of the HOA’s board or, if the HOA is incorporated, through delivery of a summons to the association’s statutory agent. O.R.C. §5312.14.
Can you change the rules?
Yes. The owners can amend either the declaration or bylaws with the consent of 75% of the owners unless the declaration or bylaws specify otherwise. O.R.C. §5312.05. Owner consent can either be obtained in writing or at a meeting of owners. Id. The board is also empowered to adopt rules relating to management of the common elements “and any other rules as the declaration provides.” O.R.C. 5312.06(D)(5). Rules adopted by the board can be amended or repealed by the board. A board can only adopt rules relating to matters within its authority. Thus, a rule adopted by the board which does not relate to common elements and is not within the board’s rule-making authority as set forth in the declaration and Planned Community Law is invalid.
If a rule adopted by the board conflicts with the declaration or bylaws, the declaration or bylaws take precedence. If the declaration or bylaws conflict with Ohio’s Planned Community Law, the statute takes precedence. Hence, if an owner wishes to change a rule adopted by the board which the board does not want to change, the owner can effectively repeal or amend the rule by organizing an amendment to the bylaws and/or declaration via member vote.
What can you do if your HOA is not responsive to your complaints?
Owners can voice their concerns at member meetings, which must be held at least once per year and can also be called by 50% of the members. O.R.C. §5312.04(C). Owners can attempt to amend the association’s declaration or bylaws through 75%-member vote. O.R.C. §5312.05. Any owner can seek election to the board and, if elected, propose changes to rules. O.R.C. §5312.03. In the event the board, association, or another owner is not in compliance with the declaration, bylaws, or rules adopted by the board, an owner can institute a civil action for enforcement. O.R.C. §5312.13.
Is the HOA the ‘final decision maker’ in a dispute or question?
Ultimately, the final decision maker in any dispute between an HOA and an owner is a court of competent jurisdiction. While an association can record a lien and suspend voting rights and common elements privileges for non-payment of assessments, a board does not otherwise have the authority to take “self-help” measures to enforce compliance and must enforce association rules through proper legal channels. If an owner believes the board is exceeding its powers or not meeting its obligations, the owner can institute a civil suit to resolve the dispute. Owners may also appeal to the democratic process to effect change within an association by running for the board, contesting the reelection of a problematic board-member or officer, and/or organizing amendments to the association’s declaration or bylaws by member vote.
How can you safeguard against suspected retribution?
As association has a duty to treat owners equally and enforce rules evenly. Owners who believe they are being treated unfairly should become familiar with the declaration and bylaws to determine their rights vis-a-vis the association and board. In some situations, it would be appropriate for an owner who is being singled out for maltreatment to pursue a civil action against the board for money damages or injunctive relief.
Owners should retain records of any communications or other documents exchanged with the association and keep contemporaneous notes of any verbal communications with a board-member or officer. An owner who refuses to comply with a demand issued by the board should document the reason for noncompliance. Owners also have the right to inspect and copy the books, records, and minutes of the association. O.R.C. §5312.07.