Real Estate Development

Condominiums, Subdivisions and Home Owner Associations Facing Regulatory Changes

October 2010

By Erik Newman*

The rules regulating condominiums and subdivisions in New Hampshire were recently amended and more changes could be on the horizon. A legislative study committee was established this past summer to consider changes to the laws regulating condominiums, subdivisions and homeowner associations (“HOA’s”). These developments reflect regulators’ and legislators’ enhanced attention to consumer protection and reverse a recently abandoned proposal to discontinue the N.H. Department of Justice registration requirement for certain New Hampshire condominium and subdivisions developments in favor a disclosure model.

Changes Affecting The Registration of Condominiums and Subdivisions

On September 8, 2010 the Department of Justice adopted revisions to the administrative rules governing registration of condominiums and subdivisions under Jus 1400 and Jus 1300. Many of the revisions were housekeeping measures intended to improve internal consistency and clarity of the rules. However, developers should take note of the following substantive changes.

Changes Affecting Developers

  • The maximum registration fee has increased from Two Thousand to Five Thousand dollars and the per unit / per lot registration fee has been doubled to Sixty dollars.
  • The registration requirement concerning submission of “financial statements” has been clarified to require “income” and “cash flow” statements in place of the historic requirement of “profit and loss” and “changes in financial condition” statements. This change should alleviate deficiency notices that had frequently resulted from confusion over what information had to be disclosed in a “profit and loss statement” or “change in financial condition statement”.
  • The requirement that financial statements be certified has been relaxed to permit the submission of statements that have been either certified or reviewed by a licensed CPA. The historic requirement of certified financial statements necessitated an audit, which is typically more expensive than conducting a review.
  • The regulation of gifts and prizes as an inducement to visit a property has historically applied only to gifts of intangibles (i.e. coupons and vouchers). Under the revised rules, offers of both intangible and tangible property is regulated. Also, whereas offering gifts of intangibles had previously required an application for an exemption at least 10 days before making the offer, the new rules require an application for a permit for the offer of tangible or intangibles from the Consumer Protection and Antitrust Bureau of the Dept. of Justice at least 60 days in advance of making the offer.

Future Changes May Affect Homeowners Associations

Additional changes to the condominium and subdivision laws that would affect the administration of HOA’s are also likely. Recent meetings of the legislative study committee included discussion of significant potential reforms primarily targeting the administration of HOA’s, such as:

  • Licensing of property management organizations and a requirement that HOA’s use licensed firms;
  • Creating a board to adjudicate or mediate disputes between HOA’s and members, modeled on the New Hampshire Manufactured Housing Board which resolves disputes among housing park owners and tenants;
  • Adopting statutes regulating Cooperative housing (Co-op’s) and Planned Unit Developments (PUD’s); and
  • Enhancing the transparency of HOA boards by implementing changes in the member notice of meetings requirements and improved access to meeting and board decision records.

The legislative study committee has neither a fixed deadline for proposing further revisions to the laws nor a termination date. Preliminary hearings demonstrate that the study committee has wide ranging interests. An initial report is due in November 2010 and should provide further insight as to future changes in the condominium, subdivision and HOA laws.

* Erik Newman is admitted in New Hampshire.

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