DRAFT

11/12/06

FUNDAMENTAL RIGHTS OF PROPERTY OWNERS IN

ALL EXISTING AND FUTURE COMMON OWNERSHIP COMMUNITIES

National organizations, such as the American Law Institute, Common Cause, American Association of Retired Persons, and National Conference of Commissioners on Uniform State Laws, are advocating State reforms to protect property owners in common ownership communities. To provide some guiding principles for such reforms, representatives of these organizations are proposing that State legislatures adopt a bill of rights in conjunction with new laws.

The following is a comprehensive set of rights compiled from documents published by these and other organizations. These are fundamental rights that property owners should expect in all existing and future common ownership communities. This is a general statement of rights, which is meant to be inclusive. It not only affirms basic rights that may already be accommodated in existing laws but also highlights rights that are not yet part of those laws. Thus, it provides the justification for existing laws to help prevent later weakening or elimination of those laws and also the impetus to add some much-needed new provisions to those laws.

1. Right of membership. All property owners who are subject to a lien and who must make mandatory payments to an association shall be members of the association, giving them standing so that they have a say and control over the governance of said association, and if the association is a Maryland corporation, the property owners shall have all the rights of membership of corporations.

2. Right to amend governing documents. Property owners shall have the exclusive right to approve amendments to the association’s governing documents, in accordance with rules for quorums and for a deciding vote.

3. Right to ratify major aspects of budget. While the Board of Directors may develop and approve the association’s budget, property owners shall have the right to receive copies, review, and comment on the proposed budget and the right to ratify any proposed special assessment, any proposed increase in annual charges exceeding the rise in inflation, and any bond issue or other proposed financial transaction for any capital improvement exceeding a certain cost, in accordance with rules for quorums and for a deciding vote. In the event a proposal is not ratified, the remaining components of the budget unaffected by the proposal would be considered approved.

4. Right to certified financial information. Property owners have the right to require that books, records, financial reports, and audits of the association be kept and published in accordance with Generally Accepted Accounting Practices and certified by an independent public accountant with appropriate credentials.

5. Right to approve transfers of common property. Property owners have the right to approve any proposed sales, leases, donations, easements, rights-of-way, licenses, and any other conveyances or encumbrances of association-owned real property.

6. Right to assemble. Property owners shall have the right to assemble in a common area or facility of the association to discuss and decide on any matter relating to the operation of the association. At a minimum, they shall hold an annual meeting, and they shall hold special meetings of members of the association if petitioned by a specified percentage of all property owners.

7. Right to vote and fair elections. Property owners shall have the right to self-nominate or nominate another property owner to serve on the association’s governing body and to vote by secret ballot in all elections, in accordance with rules for quorums and fair voting procedures.

8. Right to distribute information and to petition. Property owners shall have the right to distribute information about association matters, either independently or via the association’s methods of distribution. Also, property owners shall have the right via a petition, ballot question, or by vote at a meeting of members to: (1) recall a director or dismiss an officer appointed by the directors, or (2) decide on matters that affect their rights, current and future obligations, and major policy directions.

9. Right to oversight and to speak. Property owners shall have the right to receive reasonable advance notice of all open meetings of the governing body and its committees, including the agendas and texts of any proposed policies, rules, and actions to be discussed at the meetings. Meetings shall be open to the public, except in rare cases when they are closed for certain limited confidential matters. Property owners have the right to speak on any matter during designated periods in all open meetings before that matter is voted upon. They shall also have the right to have timely access to minutes of previous open meetings. The minutes shall be sufficiently detailed to show that fiduciary duty was exercised.

10. Right of timely access to books and records. Property owners shall have the right to inspect and copy all association books and records, except those that must be kept confidential by law. All financial information, the compensation received by each officer and employee of the association, and audio tapes of all open meetings are not considered confidential. The association may impose a charge for copying books and records, but that charge shall not exceed the actual cost of copying. The books and records shall be in a location convenient to the members.

11. Right of disclosure prior to purchase. Prior to purchase of a property, the potential property owner shall receive a disclosure package with the proposed contract of sale. The package shall include the association’s governing documents, financial condition, pending litigation, pending special assessments, and the current operating plan and budget.

12. Right to governance that has limited purposes and is based on democratic principles. Associations must be stewards of common interests, must protect the rights of property owners, and must provide only those functions authorized by State laws and their governing documents and rules. The directors, officers, and employees of the association shall not exercise any power not clearly authorized. Property owners are entitled to due process, equal protection, and reasonable treatment. They are also entitled to governance that is responsive and civil as well as honest, fair, and respectful.

13. Right to resolve disputes without litigation. While property owners shall have the right to litigate, the county or state shall also provide the opportunity for alternative dispute resolution for an association’s alleged violations of governing documents and rules, and a state agency shall provide timely administrative review and enforcement for an association’s alleged violations of State laws.

14. Right to fair treatment in cases of alleged violations. If an individual property owner is accused of violating the association’s governing documents or State law, the property owner has the right to be notified in writing of the alleged violation with the violated section flagged, of hearings, and of proposed sanctions, to have sufficient opportunity to abate the violation, and to present evidence and cross-examine witnesses at hearings.

15. Right to security against foreclosure. Property owners shall not be subject to foreclosure by an association except for willful failure to pay assessments. Foreclosure can be considered only if there is a large amount of unpaid assessments and only after attempts to implement all other alternatives have been unsuccessful. Any foreclosure action shall require judicial review.

16. Right of protection. Property owners shall have their rights protected, and if any provision of the association’s governing documents or State law is violated by the directors, officers, managers, or employees of the association, enforcement procedures and penalties shall be promptly applied by the county or state until the offense is corrected.