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LEGISLATIVE UPDATE - 2009 "REAL ESTATE AND BANKING INDUSTRY"

June 17, 2009

REAL ESTATE AND BANKING INDUSTRY
VIRGINIA LEGISLATIVE UPDATE – 2009
(prepared by Williams Mullen PC)

The following bills have been passed by both houses of the Virginia General Assembly and approved by the Governor. For more information about the General Assembly or any of the legislation it considered in 2009, please visit http://legis.state.va.us/ or http://leg1.state.va.us/.

1. Local Government

HB 1671 - Derelict buildings. Defines derelict buildings as a building, whether or not construction has been completed, that might endanger the public’s health, safety, or welfare and has been (i) vacant, (ii) boarded up in accordance with the building code, and (iii) not lawfully connected to electric service from a utility service provider or not lawfully connected to any required water or sewer service from a utility service provider for a continuous period in excess of six months. Authorizes local governments to incentivize owners' timely submission of a plan for demolition or renovation, by providing real estate tax abatements and fee refunds. Simplifies tax lien enforcement and blight provisions and encourages action on derelict buildings by adjusting time frames. This bill is recommended by the Virginia Housing Commission. (This bill is identical to SB 1094).

HB 2096 - Waiver of certain fees; affordable housing. Allows localities to waive certain fees for 501(c)(3) organizations with a primary purpose of assisting with the provision of affordable housing.

2. Land Use

HB 1637 - Boards of zoning appeals; when actions may be taken. Allows local boards of zoning appeals to take action when a majority of those present and voting vote. Maintains the requirement that a quorum be present to initiate a hearing.

HB 1680 - Vested rights; Act of God. Provides that the term "act of God" includes a hurricane, tornado, storm, flood, high water, wind-driven water, tidal wave, earthquake, or certain fires. Specifies that a fire caused by an individual other than the property owner shall not adversely affect the rights vested in the affected property. The bill also limits the owner's right to repair, rebuild, or replace the building to its original nonconforming condition only if such building is damaged greater than 50 percent.

HB 2029 - Subdivision ordinance; bonding requirements. Reduces the bonding requirement from 25 percent to 10 percent of estimated construction costs for the administrative allowance required from a developer. This provision will sunset in 5 years.

HB 2034 - Plats; period of validity. Extends the period of plat validity with phased developments.

HB 2055 - Transfer of development rights. Makes extensive changes to provisions initially passed in 2006 for the purpose of making the transfer of development rights process more useable for property owners and localities. The amendments make clear that development rights may be severed but not immediately affixed to a receiving property. Other changes state that a locality may provide in its ordinance for (i) the owner of such development rights to make application to the locality for a real estate tax abatement for a period up to 25 years, to compensate the owner of such development rights for the fair market value of all or part of the development rights, (ii) the owner of a property to request designation by the locality of the owner’s property as a "sending property" or a "receiving property," and (iii) the receiving areas to include such urban development areas in the locality established. Also, any proposed severance or transfer of development rights shall only be initiated upon application by the property owners of the sending properties, development rights, or receiving properties, and a locality may not require property owners to sever or transfer development rights as a condition of the development of any property. This is a recommendation of the Joint Subcommittee Studying Transfer of Development Rights. (This bill is identical to SB 1418).

HB 2077 - Plats and site plans; period of validity. Extends the period of validity for certain preliminary and recorded plats and final site plans, as well as certain other land use approvals, to July 1, 2014.

HB 2326 - Boards of zoning appeals; variances. Changes the standard by which a variance can be granted by eliminating the requirement for a showing of a hardship "approaching confiscation."

SB 1335 - Conditional zoning; public hearing. Provides that where an amendment to proffered conditions is requested by the proferror, and where such amendment does not affect conditions of use or density, a local governing body may waive the requirement for a public hearing.

SB 1524 - Permitted provisions in zoning ordinances. Broadens the zoning administrator's authority to determine vested rights in certain circumstances.

SB 1533 - Special use permits; extension of validity. Extends the expiration of special use permits that were valid and outstanding as of January 1, 2009, to July 1, 2011.

3. Environmental

HB 1828 - Localities and water authorities; rate incentives for green roof construction. Allows localities and water authorities to offer rate incentives for green roof construction.

HB 1975 - Local incentives for green roofs. Authorizes counties, cities, and towns to grant incentives or provide regulatory flexibility to encourage the use of green roofs in the construction, repair, or remodeling of residential and commercial buildings. The incentives or regulatory flexibility could include (i) a reduction in permit fees when green roofs are used, (ii) a streamlined process for the approval of building permits when green roofs are used, or (iii) a reduction in any gross receipts tax on green roof contractors as defined by the local ordinance. (This bill is identical to SB 1058).

HB 1991 - Establishment of stormwater programs by localities. Extends the period of time that localities have to adopt a local stormwater management program. Currently, they are required to adopt a program no sooner than 12 months and no later than 18 months after state regulations have become effective. This bill would extend the time for adoption from no sooner than 15 months to no later than 21 months. The Virginia Soil and Water Conservation Board can grant an extension to the locality of an additional 12 months if the Department of Conservation and Recreation finds that such an extension is warranted. A locality can adopt a program earlier than the minimum time frame with the consent of the Board. The bill also requires that the regulation that establishes local program criteria and delegation procedures not become effective until after July 1, 2010.

HB 2168 - Stormwater offsets. Authorizes permit issuing authorities to allow stormwater permit holders to comply with nonpoint nutrient runoff water quality criteria by acquiring nonpoint nutrient offsets that have been certified under the Chesapeake Bay Nutrient Exchange Program. The offsets have to be in the same tributary as the permitted activity and generated in the same or adjacent eight digit hydrologic unit code. The permit issuing authority may only allow the use of nonpoint nutrient offsets when the permit applicant demonstrates that (i) alternative site designs have been considered that may accommodate on-site best management practices (BMPs), (ii) on-site BMPs have been considered in alternative site designs, (iii) appropriate on-site BMPs will be implemented, and (iv) full compliance with postdevelopment nonpoint nutrient runoff compliance requirements cannot practicably be met on site. The bill also requires an offset broker to pay the permit issuing authority a fee equal to six percent of the amount paid by the permittee for the offsets.

SB 982 - Regulation of stormwater. Requires localities to provide full or partial waivers of charges to any person who develops, redevelops or retrofits outfalls, discharges or property so that there is a permanent reduction in post-development stormwater flow and pollutant loading, as long as a stormwater permit has been obtained from either the Department of Conservation and Recreation or the Department of Environmental Quality when such permit is required. Under current law, localities have the option of providing such waivers and permits.

4. Taxes

HB 2098 - Real property tax; agricultural use assessment. Provides that real property that is otherwise devoted to a use qualifying it for special land use assessment (i.e. agricultural, horticultural, forest, or open-space) does not lose such designation solely because (i) a portion of the property is being used for a different purpose pursuant to a special use permit or otherwise allowed by zoning, or (ii) utility lines are located on the property. In addition the bill provides that, in determining whether real property qualifies for special land use assessment, zoning designations and special use permits shall not be considered.

HB 2135 - Recordation taxes; basis. Changes from a Class 2 to a Class 1 misdemeanor the criminal penalty for knowingly misrepresenting the consideration for the interest in property conveyed for purposes of recordation and grantor taxes. The bill also would provide a penalty equal to 100 percent of the tax due on the understatement of the consideration in cases in which the understatement is false or fraudulent with the intent to evade a tax. (The bill incorporates HB 1823 and is identical to SB 1157).

HB 2308 - Effect on rate when assessment results in tax increase; public hearings. Provides that notice of the public hearing a locality must hold prior to increasing its real property tax when that locality's assessment of real property results in a tax increase shall be given at least 14 days before the date of the hearing in any year in which a general appropriation act or amendments to a general appropriation act have not been enacted by April 30. (This bill is identical to SB 1003).

HB 2479 - Real property tax rate; commercial property in Northern Virginia. Reduces the rate of the additional real property tax that may be imposed on commercial property by localities embraced by the Northern Virginia Transportation Authority from $0.25 per $100 to $0.125 per $100. The bill has a sunset date of June 30, 2013.

SB 1309 - Recordation tax; exemption. Expands the recordation tax exemption statewide for an organization exempt from taxation under § 501 (c) (3) of the Internal Revenue Code that is organized and operated primarily to acquire land and purchase materials to erect or rehabilitate low-cost homes on such land, which homes are sold at cost to persons who otherwise would be unable to afford to buy a home through conventional means, when the organization is the grantor. Under current law only such organizations located in the City of Lynchburg or Amherst County are exempt.

5. Transportation

HB 1580 - Hampton Roads Transportation Authority. Abolishes the Authority and the taxes, fees, and charges dedicated to financing its operation and programs. The bill also makes several technical changes. (This bill is all but identical to SB 1018).

HB 1995 - Transportation; supplemental funding for Northern Virginia. Adds the City of Fairfax to the localities in Northern Virginia who are to use the first 50 percent of the revenues received by the Northern Virginia Transportation Authority solely for urban or secondary road construction and improvements and for public transportation purposes. (This bill is identical to SB 1137.).

HB 2480 - Real property tax; commercial property in Northern Virginia and Hampton Roads. Requires localities to use the revenue from the special real property tax on commercial property in localities embraced by the Northern Virginia Transportation Authority or the Hampton Roads Transportation Authority solely for (i) new road construction and associated design and right of way acquisition, (ii) new public transit construction and associated design and right of way acquisition, (iii) other initial capital costs related to new transportation projects and the operating costs directly related thereto and (iv) the issuance costs and debt service on bonds to support the capital costs permitted in (i) through (iii). Under current law, the localities must use the revenue for transportation purposes that benefit the special regional transportation tax district to which the locality belongs.

6. Landlord/Tenant - Residential

HB 2080 - Landlord and tenant laws; rights and obligations of tenants. Requires the landlord to give the same notice to the tenant for the application of insecticides as is required for pesticide applications, and requires the tenant to prepare the dwelling unit for the application of insecticides or pesticides in accordance with any written instructions of the landlord, and if insects or pests are found to be present, to follow any written instructions of the landlord to eliminate the insects or pests following the application of insecticides or pesticides. The bill also (i) eliminates the landlord's obligation to pay all costs for mold remediation where the mold is a result of the tenant's failure to maintain the dwelling unit; (ii) eliminates a tenant's right to repair, replace, or clean a damaged item in the dwelling unit and instead allows the landlord to do so and charge all costs to the tenant, which costs shall be due on the next rent due date; (iii) changes the cap on liquidated damages penalties included in a rental agreement to 150% of the per diem of the monthly rent; and (iv) amends the schedule of interest rates on security deposits between January 1, 2009 and December 31, 2009. The bill requires the landlord to provide notice to the tenant in the event of foreclosure under certain circumstances. The bill contains technical amendments.

7. Property Owners’ Associations/CDAs/Cooperatives

HB 1785 - Exceptions to disclosure requirements. Adds to the list of exceptions to disclosure requirements a disposition of a lot by a sale at an auction, where the association disclosure packet was made available as part of an auction package for prospective purchasers prior to the auction sale.

HB 2289 - Real and personal property taxes; duty to provide information to commissioner of the revenue. Adds the owners and operators of self-service storage facilities to the list of entities that are required to provide the name and address of renters or lessees to the local commissioner of revenue upon his request. The bill also would require property owners’ associations, condominium unit owners’ associations, and proprietary lessees’ associations to provide a list of owners of the properties administered by such associations, to the extent that such list is maintained, to the commissioner upon his request. (This bill is identical to SB 896).

HB 2305 - Property Owners' Association Act; access to books and records. Provides that actual salary information of the six highest paid employees of a property owners' association making over $75,000 shall be available for examination and copying by association members. Currently, only aggregate salary information is required to be open. The bill also specifies that all books and records of the association, including individual salary information for all employees and payments to independent contractors, are available for examination by a member of the board of directors.

HB 2408 - Community development authorities. Makes comprehensive changes to provisions related to the creation and operation of community development authorities (CDA). Changes include codification of the current practice of altering the boundaries of a CDA under certain circumstances and clarification of the process for creating a CDA if it is located wholly or partly within a town.

HB 2599 - Real Estate Cooperative Act; amendment of declaration; revival of expired declarant rights. Provides that if the time limit specified in the declaration for the creation of cooperative interests or the exercise of special declarant rights has expired, with the approval of the persons entitled to cast at least two-thirds of the votes in the association, other than any votes allocated to cooperative interests owned by the declarant, or any larger percentage as the declaration specifies, the declaration may be amended to (i) revive and reinstate any or all of the expired rights to create additional cooperative interests and any or all of the expired special declarant rights, and (ii) vest in any person, including the original declarant, any or all of the powers, rights, privileges, and authority to which a declarant is entitled under the Act regarding the exercise of the revived and reinstated rights with respect to any parcel of real estate that is a common element or any additional real estate that such amendment permits to be added to the cooperative. In no event, however, shall any such amendment extend or renew a period of declarant control of the association or provide a new period of declarant control.

8. Deeds of Trust and Foreclosure

HB 1887 - Cancellation of property insurance policy upon foreclosure. Authorizes the cancellation of a policy insuring an owner-occupied dwelling on grounds that the property secured by the policy has been sold pursuant to foreclosure of a deed of trust encumbering the property.

HB 2651 - Real property tax; sale of tax-delinquent property. Provides that a party whose interest in tax-delinquent property is secured by a properly recorded deed of trust is not required to file a notice in order to have his claim paid upon the judicial sale of such property.

SB 1291 - Limitation on enforcement of deed of trust or mortgage. Provides a transition period for mortgages and deeds of trust for which enforcement rights may have been cut off as a result of 2008 legislation that reduced the time in which a deed of trust or mortgage may be enforced from 20 years to 10 years after the maturity of the underlying obligation. The measure provides that if the secured obligation became due and payable between July 1, 1988, and July 1, 2000, the instrument may be enforced until July 1, 2010. If the instrument is not enforced by that date, its enforcement will be time barred unless the beneficiary of the deed of trust or mortgage has extended the limitations period, for 10 additional years, by filing a certificate in the circuit court. The measure addresses obligations that matured within the 20 years preceding the effective date of the 2008 legislation and for which the beneficiary's ability to extend its limitation period was curtailed. However, the bill shall have no effect on the rights of a person who (i) acquired an interest in the real property securing such deed of trust or mortgage between July 1, 2008, and the date of enactment of this subsection and (ii) would otherwise have priority over or take free of such deed of trust or mortgage under the laws of the Commonwealth at that time. This bill contains an emergency clause.

SB 1546 - Proposed sale in execution of deeds of trust. Provides that when written notice of proposed sale in execution of a deed of trust is given as provided by general law, there shall be a rebuttable presumption that the lienholder has complied with any requirement to provide notice of default contained in a deed of trust.

9. Miscellaneous

HB 1703 and SB 1105 - Virginia Indoor Clean Air Act; penalty. Establishes a statewide ban on smoking in restaurants. The bill contains several exemptions from this prohibition where smoking may be permitted, including a restaurant that is constructed in such a manner that areas where smoking may be permitted are structurally separated from the portion of the restaurant in which smoking is prohibited and such areas are separately vented. The bill contains technical amendments.

HB 1776 - Mortgage Lender and Broker Act; broker duties and liability. Prohibits a mortgage broker from failing to use reasonable skill, care, and diligence in exercising the broker's duty, which is created hereby, to make reasonable efforts to secure a mortgage loan that is in the best interests of the applicant, considering the applicant's circumstances and loan characteristics. A borrower who suffers a loss as a result of a breach of such duty may bring an action to recover actual damages. (This bill is identical to SB 1020).

HB 1845 - Occasional remote access to land records; pilot program; fee. Allows the clerk of the Circuit Court of Prince William County to establish a pilot program under which a daily fee is assessed for occasional remote access to land records by the general public. The clerk shall also assess a separate fee per image downloaded in an amount not to exceed the usual copying fee. The clerk shall make a report on the pilot program to the House and Senate Committees for Courts of Justice on or before September 30, 2012. The bill expires September 30, 2012. (This bill is identical to SB 935).

HB 2040 - Real Estate Board; compensation to referring attorneys prohibited; exception. Provides that an attorney-at-law referring a client to a licensee shall not receive any compensation from a listing firm or offered in the common source information company to cooperating brokers, unless the attorney is also licensed as a real estate broker or salesperson.

HB 2291 - Release of deed of trust; assignment of penalty. Prohibits settlement agents and real estate attorneys from facilitating an assignment, to any third party designated by them, of their client's right to the $500 penalty levied on lenders that fail to timely deliver a certificate of satisfaction releasing a deed of trust. (This bill is identical to SB 888).

HB 2568 - Consumer Real Estate Settlement Protection Act; disclosures. Expands the disclosure that is required to be included in certain real estate purchase contracts to include statements that (i) the provisions of the Consumer Real Estate Settlement Protection Act may not be varied by agreement and rights conferred by the Act may not be waived and (ii) the seller may not require the use of a particular settlement agent as a condition of the sale of the property. The measure also makes technical changes to the required disclosure regarding the choice of settlement agent.

SB 959 - Fraudulent conveyances; attorney fees. Provides that attorney fees shall be awarded to a creditor in an action where a gift; deed; conveyance, assignment, or transfer of or charge upon the estate of a debtor; suit commenced or decree, judgment, or execution suffered or obtained; or bond or other writing is declared void. The award of attorney fees shall be paid out of the proceeds of a resulting judicial sale, if any, but shall not affect a prior lien creditor not represented by the attorney. This bill is a recommendation of the Boyd-Graves Conference.

SB 1277 - Land records; social security numbers. Requires, beginning July 1, 2012, that land records posted via secure remote access to the Internet may contain only the last four digits of the social security number of any party.


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