Kentucky Planned Communities: Guidance for Developers in the Greater Cincinnati Area - Part III

Comparison with Ohio Law

This is the third article in a series on Kentucky’s Planned Communities statute (KRS §§ 381.785 – 381.801) (the “Kentucky Act”), which provides guidance to developers in the greater Cincinnati area. If you missed the two previous articles, you can find them here:

• Kentucky Planned Communities: Guidance for Developers in the Greater Cincinnati Area – Part I
• Kentucky Planned Communities: Guidance for Developers in the Greater Cincinnati Area – Part II

This article will compare and contrast Kentucky law and Ohio law pertaining to planned communities. Ohio Planned Community Law (§§ 5312.01 – 5312.16) (the “Ohio Act”) (the Kentucky Act and Ohio Act are collectively referred to as the “Acts”) took effect on September 10, 2010 and has thus been in existence in longer than the Kentucky Act.‍

Similarities

‍Kentucky and Ohio law define planned communities similarly. A “Planned community” is a community comprised of individual lots for which a deed, common plan, or declaration requires that (1) owners become members of an owners association, (2) owners or the owners association holds or leases property or facilities for the benefit of owners, and (3) owners support property or facilities for all owners to use through membership or fees.

Likewise, a “Lot” is defined as a parcel of real estate designated for separate ownership from a larger parcel of real estate.

Next, an “Owner” is a person who owns a lot in the planned community but excludes any person that has an interest in the lot as a security obligation.

Lastly, no significant difference exists in the definition of “Declarant”. Put simply, Declarant is a person who executes and records a declaration to govern a planned community.

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‍Differences

‍Both the Kentucky Act and the Ohio Act stipulate that the declarant must establish an owners association no later than when the first Lot in a planned community is conveyed to a purchaser. Under the Kentucky Act, however, the association may be formed as a nonprofit corporation pursuant to KRS Chapter 273 or an unincorporated nonprofit association pursuant to KRS Chapter 273A. In Ohio, the association must be organized as a nonprofit corporation pursuant to ORC Chapter 1702.

Under both the Kentucky Act and Ohio Act, the declarant control period is defined as the time frame in which the declarant controls the owners association through appointing members of the association’s board of directors. However, both the Kentucky Act and Ohio Act are different in two key respects.

First, the Kentucky Act explicitly provides that during the declarant control period, the declarant may also remove members from the association’s board, whereas the Ohio Act is silent on the declarant’s power to remove. Nevertheless, a declaration executed and recorded in Ohio may (and often, many do) specifically provide for the declarant’s power to remove board members. Simply put, the Ohio Act itself does not explicitly provide this removal power to the declarant. Thus, in Ohio, a declarant should explicitly provide for this power to remove members of the board in the planned community’s governing documents, so there is no doubt the declarant possesses such removal power.

Second, the Ohio Act explicitly states that the period of declarant control period must end when all lots in the planned community have been transferred to owners. Even though the Kentucky Act does not provide this stipulation, the language in the Kentucky Act indicates that the period must end at a certain period. For a planned community in Kentucky, it is reasonable to have the declarant control period end when the sale of the last lot occurs.

However, there may be some flexibility here if, for example, all current lots may have been sold in a planned community, but it may be the case that additional land was contemplated for development in the declaration and the declarant (and even the association) contemplates developing additional lots in the future. In this scenario, it may not be feasible to have the development period end when the sale of the last lot occurs and instead simply put a time period for development, e.g.—seven years from the date of the execution of the declaration.

Unlike like the Kentucky Act, which only requires the recordation of the declaration, the Ohio Act has a requirement to record the bylaws as well. To form a planned community in Ohio, a declarant must execute and record a declaration and bylaws for a planned community in the recorder’s office in the county where the planned community is located.

The Acts have different consent requirements for amending or terminating the declaration.In Ohio, the declaration or bylaws may be amended by the consent of 75% of the owners. A vote to terminate/dissolve the planned community requires a unanimous consent of the owners.

Lastly, to delete as void any provisions that limits the occupancy or use of the property on the basis of protected categories like race, color, national origin, religion, sex, or familiar status, requires just a majority vote of the owners.

In Kentucky, owners may amend the declaration or terminate/dissolve the planned community by a consent of 80% of the owners. Owners may also amend the bylaws by a majority vote. Although Kentucky does not have a provision requiring deleting as void any provision that discriminates against protected classes, other statutes in Kentucky pertaining to the protection of civil rights may be applicable to prevent such discrimination. (See KRS §§ 344.010 – 344.990).

Ohio also has a section on solar energy devices[1], which is absent in the Kentucky Act. In Ohio, unless a declaration specifically prohibits solar energy collection devices, the Ohio Act allows owners to install such a device on the owner’s dwelling unit provided that (1) the cost to maintain, repair, and insure the unit’s roof or alternative location on the lot is not a common expense and solely the owner’s responsibility, and (2) the declaration specifically allows for and regulates the installation of solar energy collection devices.

Kentucky law is silent on regulations pertaining to solar panels in planned communities, so declarants have leeway in preventing solar energy devices or providing specific regulations. Nevertheless, if a declarant seeks to allow solar energy devices in a planned community, the declarant will need to be aware of state and local regulations that apply to solar devices that may affect how the declaration will be drafted.
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‍Regardless of whether you seek to establish a planned community or understand the Act’s impact on an existing planned community, it is important to consult with an attorney to navigate the process.

For questions about the Act or other related issues, contact Austin M. Tinsley at 513-768-9709 or amtinsley@strausstroy.com. Austin regularly handles both commercial real estate and residential real estate matters, and is licensed in Ohio, Kentucky, and Indiana.

‍[1]See ORC 5312.16(D) (citing ORC 5311.192(C)(2) (“"Solar energy collection device" means any device manufactured and sold for the sole purpose of facilitating the collection and beneficial use of solar energy, including passive heating panels or building components and solar photovoltaic apparatus.”)).