2018 Legislative Update: New Laws Impacting Commercial Real Estate Clients

Below is our annual update on legislative changes impacting the real estate industry. All common interest communities are based on a foundation of real estate law, and thus changes to these laws can often impact common interest communities and their associations.  Moreover, we also specifically highlight notable changes to community association laws, in an effort to keep you up to date on the latest developments.

On July 1, 2018, new laws passed during the 2018 General Assembly session went into effect in Virginia that may impact you as someone interested in commercial real estate.  This year's slate of new legislation is particularly heavy with statutes pertaining to the real estate industry, containing both old stalwarts like eminent domain procedures and tax updates, as well as laws addressing newer issues like solar facilities and the revitalization of abandoned schools.  Many of these changes will be particularly notable to those in the development industry, presenting both new challenges and new opportunities for projects in Virginia.  Those working with common interest communities should also take note of the new laws passed impacting community associations.

Of course, these are just some of the thousands of bills proposed during this year's session.  As a result, isolating the changes to Virginia law that impact your business can often be challenging.  In an effort to assist you in meeting this challenge, we have prepared our annual list highlighting some of the most notable additions to the Code of Virginia, including excerpts from the bill summaries prepared by the Virginia Division of Legislative Services.  For the full summaries, simply click on the applicable bill number.

Community Associations/Common Interest Communities

House Bill 674 / Senate Bill 443- Virginia Real Estate Time-Share Act; Common Interest Community Board; developer may obtain surety bond or letter of credit.

This bill provides that in lieu of escrowing deposits made in connection with the purchase or reservation of a time-share product a developer may obtain a corporate surety bond or letter of credit with the Common Interest Community Board where the time-share project consists of more than 25 units. Currently, the developer is required to escrow the individual deposits for every purchase and file with the Board a bond or letter of credit or cash for the purpose of protecting all deposits

House Bill 923 - Common Interest Community Board; information on covenants; association disclosure packets and resale certificates.

This bill requires the Common Interest Community Board (Board) to reconfigure its current one-page form that accompanies association disclosure packets that are required to be provided to all prospective purchasers of lots located within a development that is subject to the Virginia Property Owners' Association Act as a cover form to accompany both association disclosure packets and resale certificates that are required to be provided to all prospective purchasers of units located within a condominium that is subject to the Condominium Act. The bill also requires the Board to expand the breadth of information that is included on the form to provide potential purchasers with additional information regarding restrictive covenants that the potential purchaser may be subject to as a member of a property owners' association or a unit owners' association and which may affect the potential purchaser's decision to purchase a lot or unit located within a common interest community.

House Bill 1031 - Common interest communities; disclosure packets.

This bill requires that as a prerequisite to charging any fees for the preparation of disclosure packets, both professionally managed property owners' associations and property owners' associations that are not professionally managed must register with the Common Interest Community Board, file annual reports, and make annual assessment payments. Additionally, a professionally managed property owners' association must provide the disclosure packet electronically if so requested by the requester in order to charge fees. The bill allows a property owners' association that is not professionally managed to charge fees at the option of the seller or the seller's agent for (i) expediting the inspection, preparation, and delivery of the disclosure packet; (ii) providing an additional hard copy of the disclosure packet; and (iii) providing third-party commercial delivery service. A property owners' association that is not professionally managed may also charge and collect fees for inspection of the property, the preparation and issuance of an association disclosure packet, and such other services as provided by professionally managed property owners' associations as long as the association provides the disclosure packet electronically if so requested by the requester and complies with the other requirements of collecting fees for disclosure packets by professionally managed property owners' associations.

Senate Bill 722 - Condominium Act and Property Owners' Association Act; access to association books and records; duty to redact.

This bill provides that books and records kept by or on behalf of a unit owners' association or a property owners' association shall be withheld from inspection and copying in their entirety only to the extent that an exclusion from disclosure enumerated in the Condominium Act or Property Owners' Association Act, as applicable, applies to the entire content of such books and records. The bill provides that, otherwise, only those portions of the books and records containing information subject to an exclusion may be withheld, and all portions of the books and records that are not so excluded shall be disclosed at the requesting member's expense.

Eminent Domain

House Bill 1564 - Eminent domain; empanelment of commissioners.

This bill increases from at least six to at least eight the number of names of qualified persons each party shall submit to the court if they cannot agree upon five to nine qualified persons to act as commissioners. The bill also increases from nine to 13 the number of names the court shall select as potential commissioners from the submitted lists.

Senate Bill 278- Eminent domain proceedings; distribution of funds to owner or owner's attorney.

This bill requires that any funds due to the owner, whether such funds are in the possession of the court or are outstanding, shall be payable to the owner or, with consent of the owner, to the owner's attorney within 30 days of a settlement or final determination in an eminent domain proceeding. The bill further provides that the payment provision does not alter the priority of liens or any obligation to satisfy or release any outstanding liens on the property or the funds.  This bill received Governor’s recommendations.

Senate Bill 809 - Eminent domain; calculation of lost profits, amends definitions.

This bill amends, in the definitions of "lost profits" and "business profit" for the purposes of eminent domain, the period for which lost profits are calculated to a period not to exceed three years from the later of (i) the date of valuation or (ii) the date the state agency or its contractor prevents the owner from using the land or any of the owner's other property rights are taken. Under current law, lost profits are calculated for a period not to exceed (a) three years from the date of valuation if less than the entire parcel of property is taken or (b) one year from the date of valuation if the entire parcel of property is taken. The bill specifies that the person claiming lost profits is entitled to compensation whether part of the property or the entire parcel of property is taken. The bill further specifies that if the owner is not named in the petition for condemnation, he may intervene in the proceeding and that proceedings to adjudicate lost profits may be bifurcated from the other proceedings to determine just compensation if the lost profits claim period will not expire until one year or later from the date of the filing of the petition for condemnation, but such bifurcation shall not prevent the entry of an order confirming indefeasible title to the land interests acquired by the condemning authority

Evictions/Collections/Unlawful Detainers

House Bill 311 - Unlawful detainer; foreclosure.

This bill provides that a former owner who remains in possession of a single-family residential dwelling unit on the date of a foreclosure sale becomes a tenant at sufferance. The bill further provides that the successor owner may file an unlawful detainer action three days after giving the tenant written termination notice. Finally, the bill provides that the tenant shall be responsible for payment of fair market rental from the date of the foreclosure until the date the tenant vacates the dwelling unit, as well as damages, and for payment of reasonable attorney fees and court costs.

House Bill 755 / Senate Bill 422 - Foreclosure; notice of sale when owner is deceased.

This bill provides that when the owner of a property to be sold by a trustee pursuant to a deed of trust is deceased, the notice of the sale shall be delivered to the last known address of the deceased owner, any personal representative of the deceased's estate, and any heirs of the deceased as recorded in the land records where the property is located. The bill further provides that the trustee of a deed of trust for property that is sold after the death of the owner shall include (i) any remaining subsequent debts and obligations secured by the deed and (ii) any liens of record inferior to the deed of trust under which the sale is made, with lawful interest, in the list of debts to be paid off using any surplus from the sale prior to paying the remainder of the surplus to the decedent's personal representative.

House Bill 856 - Unlawful detainer; execution of writ of possession.

This bill permits a judge, upon request of the plaintiff, to issue a writ of possession immediately upon entry of judgment in an unlawful detainer case. The bill requires the sheriff to serve notice of the writ, including the date and time of eviction, on the defendant at least 72 hours prior to execution of the writ. The bill further provides that a sheriff shall not evict the defendant from the dwelling unit sooner than the expiration of the defendant's 10-day appeal period.

Senate Bill 108 - Orders of publication to enforce tax lien; limited-value property.

This bill provides that an order of publication for the enforcement of a lien for taxes owed on real property that has a value of $50,000 or less need be published only once. Under current law, such order is required to be published at least once a week for two successive weeks.

General Real Estate Interests

House Bill 162 - Proceeds of a sale, a partition suit, or condemnation proceeding; persons under a disability, etc.

This bill increases the amount of funds that a court can distribute, without the intervention of a fiduciary, to a person under a disability who is the recipient of those funds pursuant to a suit for the sale or lease of lands, a partition suit, or condemnation proceedings. The bill further provides that such funds may be distributed to a special needs trust at the request of an appointed fiduciary or guardian ad litem of the person under a disability or upon the court's own motion.

Landlord / Tenant

House Bill 855 / Senate Bill 197 - Landlord and tenant law; notice requirements; landlord's acceptance of rent with reservation.

This bill changes the landlord and tenant law notice requirements for landlords to accept full or partial rent while continuing to proceed with a court action to obtain an order of possession and subsequent eviction by creating a single notice and removing the requirement for second notice for the time period between entry of an order of possession and prior to eviction. The bill provides that the landlord may accept full or partial payment of rent and still receive an order of possession and proceed with eviction if the landlord states in the written notice to the tenant that any payment of rent, damages, money judgment, award of attorney fees, and court costs would be accepted with reservation and not constitute a waiver of the landlord's right to evict the tenant from the dwelling unit. The bill also provides that if a dwelling unit is a public housing unit or other housing unit subject to regulation by the Department of Housing and Urban Development, written notice of acceptance of rent with reservation need not be given to any public agency paying a portion of the rent under the rental agreement.

House Bill 857 - Landlord and tenant law.

This bill removes remaining differences between general landlord and tenant provisions and the Virginia Residential Landlord and Tenant Act by conforming provisions pertaining to residential dwelling units in the following areas: (i) termination of a nonresidential tenancy by self-help eviction or by filing an unlawful detainer action; (ii) tenant obligations to maintain a dwelling unit; (iii) notice to the tenant in the event of foreclosure; (iv) wrongful failure to supply heat, water, hot water, or essential services; (v) prohibited provisions in the rental agreement; (vi) early termination of a rental agreement by military personnel; and (vii) remedies for the landlord's failure to deliver possession. The bill also makes the following changes to landlord and tenant law: (a) clarifies the lease termination process; (b) provides that if a tenant allows his renter's insurance to lapse, the landlord may provide coverage and require the tenant to pay the premium; (c) establishes protection for landlords who provide tenant information to a federal census official; (d) authorizes a landlord or property manager to appear in court to seek final rent and damages related to a dwelling unit; and (e) clarifies remedies for a tenant's failure to prepare the dwelling unit for insecticide or pesticide applications.

House Bill 1227 / Senate Bill 286 - Landlord and tenant law; transient lodging as primary residence for fewer than 90 consecutive days; self-help eviction.

This bill clarifies that the availability of the use of self-help eviction in certain circumstances to the owner of transient lodging shall not preclude such owner from pursuing any civil or criminal remedies under the laws of the Commonwealth.

Localities / Zoning

House Bill 709 - Zoning violation penalties.

This bill increases the maximum fine for failure to remove or abate a zoning violation after conviction from $1,500 to $2,000 for succeeding 10-day periods after two previous failures to remove or abate the violation in accordance with court-imposed deadlines.

House Bill 796 - Zoning; disabilities.

This bill requires a locality to give consideration to the need for reasonable modifications in accordance with the Americans with Disabilities Act or state and federal fair housing laws when preparing a zoning ordinance. The bill also alters the standard by which a variance shall be granted by requiring approval if such approval (i) will alleviate a hardship by granting a reasonable modification to a property as requested by a person with a disability and (ii) meets several other conditions as required by existing law. Any variance granted to provide a reasonable modification to a property requested by a person with a disability may expire when the person benefited by it is no longer in need of the modification to such property provided by the variance. If a request for a reasonable modification is made to a locality and is appropriate under the provisions of state and federal fair housing laws, or the Americans with Disabilities Act, as applicable, such request shall be granted by the locality unless a variance from the board of zoning appeals is required in order for such request to be granted.

House Bill 594 / Senate Bill 451 - Local government; authority to require abatement of criminal blight on real property.

Authorizes any locality to enact an ordinance that requires corrective action to address criminal blight conditions on certain real property. The bill defines criminal blight to include conditions on real property that endanger residents of the community by the regular presence of persons using the property for controlled substance use or sale and other criminal activities, specifically commercial sex trafficking or prostitution or repeated acts of the malicious discharge of a firearm within a building or dwelling. Current law allows local governments to enact an ordinance for taking action against a property owner with regard to illegal drug activity on such real property within the locality. As introduced, this bill was a recommendation of the Virginia Housing Commission.

House Bill 609 / Senate Bill 391 - Housing; installation and maintenance of smoke and carbon monoxide alarms.

This bill creates a statewide standard for the installation and maintenance of smoke and carbon monoxide alarms in rental property. The bill requires a landlord (i) to install a smoke alarm but does not permit a locality to require new or additional wiring or the upgrading of smoke alarms under certain conditions and (ii) to certify annually that smoke alarms have been installed and maintained in good working order in a residential dwelling unit pursuant to the Statewide Fire Prevention Code (§ 27-94 et seq.) and the Uniform Statewide Building Code (§ 36-97 et seq.). The landlord is also required to install a carbon monoxide alarm upon request by a tenant; the installation and subsequent maintenance must be in compliance with the Statewide Fire Prevention Code and the Uniform Statewide Building Code. A tenant of a rental dwelling unit with a smoke alarm or both smoke and carbon monoxide alarms shall not tamper or remove such alarms. Under the bill, a reasonable accommodation must be made for persons who are deaf or hearing impaired, upon request. Localities that have enacted a fire and carbon monoxide alarm ordinance must conform such ordinances with these state standards by July 1, 2019. The bill also requires the Department of Housing and Community Development, in consultation with the Department of Fire Programs, to develop a form for landlords for use in certifying inspections that summarizes smoke alarm maintenance requirements for landlords and tenants. The bill, as introduced, is a recommendation of the Virginia Housing Commission.

House Bill 1179 / Senate Bill 448 - Abandoned school revitalization.

This bill allows localities to establish by ordinance one or more abandoned school revitalization zones for the purpose of providing incentives to private entities to purchase or develop real property or to assemble parcels suitable for economic development that include an abandoned school site. Each locality establishing an abandoned school revitalization zone may grant incentives and provide regulatory flexibility. The incentives may include, but not be limited to, (i) reduction of permit fees, (ii) reduction of user fees, (iii) reduction of any type of gross receipts tax or any other type of local tax as permitted by state law, and (iv) waiver of tax liens to facilitate the sale of property, if deemed appropriate. A school located in an abandoned school revitalization zone shall be eligible for participation in the Virginia Shell Building Initiative

HB1595 / Senate Bill 972 - Vested rights; existing landscape cover materials.

This bill provides that, notwithstanding any local ordinance to the contrary, an owner of real property who has an occupancy permit issued as of January 1, 2018, shall not be required to retrofit existing landscape cover materials. The bill further provides that such owner shall not be prohibited from continuing to use, supplement, or refurbish existing landscape cover materials at such property. This bill received Governor’s recommendations.

Solar Facilities

House Bill 508 / Senate Bill 429 - Local regulation of solar facilities.

This bill provides that a property owner may install a solar facility on the roof of a dwelling or other building to serve the electricity or thermal needs of that dwelling or building, provided that such installation is in compliance with any height and setback requirements in the zoning district where such property is located as well as any provisions pertaining to any local historic or architectural preservation district. Unless a local ordinance provides otherwise, a ground-mounted solar energy generation facility shall also be permitted, provided that such installation is in compliance with any height and setback requirements in the zoning district where such property is located as well as any provision pertaining to any local historic district. Any other proposed solar facility, including any solar facility that is designed to serve, or serves, the electricity or thermal needs of any property other than the property where such facilities are located, shall be subject to any applicable zoning regulations of the locality. The bill requires that any ground-mounted solar energy generation facility existing as of January 1, 2018, be deemed a legal nonconforming use, with certain exceptions. The bill has a delayed effective date of January 1, 2019, with respect to ground-mounted solar energy generation facilities.

House Bill 509 / Senate Bill 179. Comprehensive plan; solar facilities.

This bill provides that a solar facility subject to provisions requiring the facility to be substantially in accord with a locality's comprehensive plan shall be deemed to be substantially in accord with the comprehensive plan if (i) such proposed solar facility is located in a zoning district that allows such solar facilities by right or (ii) such proposed solar facility is designed to serve the electricity or thermal needs of the property upon which such facility is located, or will be owned or operated by an eligible customer-generator or eligible agricultural customer-generator under § 56-594 or by a small agricultural generator under § 56-594.2. The bill authorizes a locality to allow for a substantial accord review for other solar facilities to be advertised and approved concurrently in a public hearing process with a rezoning, special exception, or other approval process.

Senate Bill 902 - Property tax exemption for solar energy equipment and facilities.

This bill limits the property tax exemption for solar equipment and facilities owned and operated by a business, which exemption currently applies to 80 percent of the assessed value of certain projects, to those projects equaling less than 150 megawatts. The 150-megawatt cap applies only to projects for which an initial interconnection request form was filed on or after July 1, 2018.

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