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The Committee that acted for the National Conference of Commissioners on Uniform State Laws in preparing the Uniform Common Interest Ownership Act (1994) was as follows:
CARL H. LISMAN, P.O. Box 728, 84 Pine Street, Burlington, VT 05402, Chair
WILLIAM R. BREETZ, JR., 22nd Floor, CityPlace I, 185 Asylum Street, Hartford,
CT 06103, National Conference Reporter
DALE G. HIGER, Suite 1015, One Capital Center, 999 Main Street, Boise, ID 83702
BENNY L. KASS, Suite 1100, 1050 Seventeenth Street, N.W., Washington, DC 20036
HIROSHI SAKAI, 902 City Financial Tower, 201 Merchant Street, Honolulu, HI 96813
RICHARD C. HITE, 200 West Douglas Avenue, Suite 630, Wichita, KS 67202,
President
W. JACKSON WILLOUGHBY, Placer County Municipal Court, 300 Taylor Street,
Roseville, CA 95678, Chair, Division B
FRED H. MILLER, University of Oklahoma, College of Law, 300 Timberdell Road,
Norman, OK 73019, Executive Director
WILLIAM J. PIERCE, 1505 Roxbury Road, Ann Arbor, MI 48104,
Executive Director Emeritus
Gurdon H. Buck, American Bar Association
Norman Geis, American College of Real Estate Lawyers
Wayne S. Hyatt, American Bar Association, Section of Real Property, Probate and
Trust Law
§ 1-101. Short Title
§ 1-102. Applicability
§ 1-103. Definitions
§ 1-104. Variation by Agreement
§ 1-105. Separate Titles and Taxation
§ 1-106. Applicability of Local Ordinances, Regulations, and Building Codes
§ 1-107. Eminent Domain
§ 1-108. Supplemental General Principles of Law Applicable
§ 1-109. Construction Against Implicit Repeal
§ 1-110. Uniformity of Application and Construction
§ 1-111. Severability
§ 1-112. Unconscionable Agreement or Term of Contract
§ 1-113. Obligation of Good Faith
§ 1-114. Remedies to be Liberally Administered
§ 1-115. Adjustment of Dollar Amounts
§ 1-201. Applicability to New Common Interest Communities
§ 1-202. Same; Exception for Small Cooperatives
§ 1-203. Same; Exception for Small and Limited Expense Liability Planned Communities
§ 1-204. Applicability to Pre-existing Common Interest Communities
§ 1-205. Same; Exception for Small Pre-existing Cooperatives and Planned Communities
§ 1-206. Same; Amendments to Governing Instruments
§ 1-207. Applicability to Nonresidential Planned Communities
§ 1-208. Applicability to Out-of-State Common Interest Communities
§ 2-101. Creation of Common Interest Communities
§ 2-102. Unit Boundaries
§ 2-103. Construction and Validity of Declaration and Bylaws
§ 2-104. Description of Units
§ 2-105. Contents of Declaration
§ 2-106. Leasehold Common Interest Communities
§ 2-107. Allocation of Allocated Interests
§ 2-108. Limited Common Elements
§ 2-109. Plats and Plans
§ 2-110. Exercise of Development Rights
§ 2-111. Alterations of Units
§ 2-112. Relocation of Boundaries Between Adjoining Units
§ 2-113. Subdivision of Units
§ 2-114. [ALTERNATIVE A] Easement for Encroachments
[ALTERNATIVE B] Monuments as Boundaries
§ 2-115. Use for Sales Purposes
§ 2-116. Easement Rights
§ 2-117. Amendment of Declaration
§ 2-118. Termination of Common Interest Community
§ 2-119. Rights of Secured Lenders
§ 2-120. Master Associations
§ 2-121. Merger or Consolidation of Common Interest Communities
§ 2-122. Addition of Unspecified Real Estate
§ 2-123. Master Planned Communities
§ 3-101. Organization of Unit Owners' Association
§ 3-102. Powers of Unit Owners' Association
§ 3-103. Executive Board Members and Officers
§ 3-104. Transfer of Special Declarant Rights
§ 3-105. Termination of Contracts and Leases of Declarant
§ 3-106. Bylaws
§ 3-107. Upkeep of Common Interest Community
§ 3-108. Meetings
§ 3-109. Quorums
§ 3-110. Voting; Proxies
§ 3-111. Tort and Contract Liability
§ 3-112. Conveyance or Encumbrance of Common Elements
§ 3-113. Insurance
§ 3-114. Surplus Funds
§ 3-115. Assessments for Common Expenses
§ 3-116. Lien for Assessments
§ 3-117. Other Liens
§ 3-118. Association Records
§ 3-119. Association as Trustee
§ 4-101. Applicability; Waiver
§ 4-102. Liability for Public Offering Statement Requirements
§ 4-103. Public Offering Statement; General Provisions
§ 4-104. Same; Common Interest Communities Subject to Development Rights
§ 4-105. Same; Time Shares
§ 4-106. Same; Common Interest Communities Containing Conversion Buildings
§ 4-107. Same; Common Interest Community Securities
§ 4-108. Purchaser's Right to Cancel
§ 4-109. Resales of Units
§ 4-110. Escrow of Deposits
§ 4-111. Release of Liens
§ 4-112. Conversion Buildings
§ 4-113. Express Warranties of Quality
§ 4-114. Implied Warranties of Quality
§ 4-115. Exclusion or Modification of Implied Warranties of Quality
§ 4-116. Statute of Limitations for Warranties
§ 4-117. Effect of Violations on Rights of Action; Attorney's Fees
§ 4-118. Labeling of Promotional Material
§ 4-119. Declarant's Obligation to Complete and Restore
§ 4-120. Substantial Completion of Units
§ 5-101. Administrative Agency
§ 5-102. Registration Required
§ 5-103. Application for Registration; Approval of Uncompleted Units
§ 5-104. Receipt of Application; Order of Registration
§ 5-105. Cease and Desist Orders
§ 5-106. Revocation of Registration
§ 5-107. General Powers and Duties of Agency
§ 5-108. Investigative Powers of Agency
§ 5-109. Annual Report and Amendments
§ 5-110. Agency Regulation of Public Offering Statement
The Uniform Common Interest Ownership Act ("UCIOA") was adopted at the 1982 Annual Meeting of the National Conference of Commissioners on Uniform State Laws (the "ULC"). It combined, in a single comprehensive law, prior uniform laws in this area (the Uniform Condominium Act (1980), the Uniform Planned Community Act (1980), and the Model Real Estate Cooperative Act (1981)). By 1994, UCIOA had become the law in at least five States, while the Uniform Condominium Act, or substantially similar laws, exist in 21 States. The Uniform Planned Community Act is the law in one State.
In 1994, the ULC adopted significant amendments to UCIOA. Following an intensive study of UCIOA by the Joint Editorial Board for Real Property Acts,(1)
the ULC appointed a Drafting Committee to write the necessary amendments and additions. Changes to UCIOA should result in corresponding changes in these prior laws; consequently, practitioners in approximately half the American jurisdictions need to have a basic understanding of the changes.
The following is a brief summary of the proposed changes:
1. The definition of "common elements" (Section 1-103(4)), which is a very basic concept, has been amended to clarify that (a) the common elements may include easements, including easements for the benefit of unit owners and (b) real estate may be owned or leased by the association and not be subject to the declaration.
2. A fundamental precept of UCIOA is that full and adequate disclosure to purchasers is a viable alternative to governmental registration and supervision. Declarants are bound by representations made in the declaration, by the models or samples they use, and by the public offering statements, and are held to statutory limitations and standards to protect consumers. Among the basic representations made by declarants are those which describe the scope of development rights and their duration. See, Section 2-105(a)(7), (8), (9), and (10).
However, in very large projects, a declarant's ability to predict the future of a project to be built out over a longer period of time is very limited. Changes in market conditions, the economy, and demographics can occur without warning, forcing changes in even the most preliminary of plans. For that reason, a new Section 2-123 has been added. By its terms, if the declaration identifies the community as a "master planned community," reserving the right to create at least 500 units for residential purposes and the declarant owns or controls more than 500 acres on which those units may be built, then much of the information which otherwise must appear in the declaration from the outset is not required until the declaration is amended as units are created. Further, the public offering statement requirements apply only to units being offered or which have been declared. Finally, the provisions of Section 3-103 regarding transition of control of the unit owners association are amended to permit longer declarant control. As a result, additional flexibility is given for "master planned communities," but the declarant continues to be subject to the obligations of good faith and the standards of unconscionability.
3. Section 2-105(a)(12), as originally crafted, required that a declaration must contain "any restrictions (i) on use, occupancy, and alienation of units ... ." Taken literally, if a declaration does not contain any restrictions, none could be imposed by rule or regulation of the association. But compare Section 3-102(a)(1) (an association may adopt "rules and regulations") and Section 3-102(a)(6) (an association may "regulate the use, maintenance, repair, replacement, and modification of common elements").
In considering the implications of this result, the ULC agreed that uses or occupancy of a unit which affect other units or the common elements are appropriate for regulation, and that unit uses or occupancies with no measurable impact on other units or the common elements should be subject to a different approach to regime regulation as detailed in new Section 3-102(c).
For these reasons, Section 2-105 has been amended to (a) permit (rather than mandate) the declaration to contain restrictions on use and occupancy of units and (b) permit the association to adopt rules and regulations of units to prevent uses which violate the declaration, and to adopt reasonable rules and regulations regarding occupancy of or behavior in units insofar as the occupancy or behavior might affect other unit owners. Section 3-102 has been amended to add subsection (c).
4. As originally drafted, only the most basic provisions of UCIOA Section 1-203 applied if a planned community contained no more than 12 units and was not subject to development rights or if the declaration limited the common expense liability to a relatively small amount. Further, if a planned community contained more than 12 units or was subject to development rights, but the declaration limited the common expense liability to a slightly higher amount, no public offering statement was required to be delivered to an original buyer and no resale certificate was required on resale. See UCIOA (1982) Section 4-101(b)(7).
The 1994 Act has deleted Section 4-101(b)(7). An amendment to Section 1-203 expands that provision so that only the very basic provisions of the Act will apply if a planned community is not subject to development rights and either (1) contains no more than 12 units or (2) is of any size so long as the annual average common expense liability, exclusive of optional user fees and insurance premiums paid the association, does not exceed $300 (subject to the adjustment provisions of Section 1-115).
5. UCIOA's thrust in the area of consumer protection is to protect residential purchasers. Revised Section 1-207(a) provides that a common interest community is not subject to UCIOA at all if it contains only units restricted to nonresidential use, unless the developer elects otherwise. Nonetheless, developers of some commercial and industrial regimes might want the UCIOA's benefits, subject to its burdens. Section 1-207 also provides that the declaration may explicitly opt into UCIOA or only the basic three provisions of Sections 1-105, 1-106, and 1-107, and gives commercial developers greater flexibility.
6. Unlike most laws which, when enacted, contain repealer provisions for laws on the same subject, UCIOA contemplates that pre-existing laws governing common interest communities will remain in effect. Section 1-206 contains provisions allowing "old Act" regimes to come under the provisions of UCIOA and describes the procedures that must be followed. Amendments to the section clarify the original intent of UCIOA in this regard.
7. The role of surveyors and architects may be lessened by amendments to Section 2-109. In some instances, approximations will suffice and, if the declaration contains a narrative description, unit boundaries and common elements need not be shown on plats and plans.
8. Amendments to Section 2-112 permit relocation of boundaries between units and common elements in order to accommodate additions to units.
9. As originally crafted, UCIOA mandated that the declaration set forth a time limit within which reserved development rights and other special declarant rights must be exercised. See UCIOA (1982) Section 2-105(a)(8). UCIOA (1994) has added a provision which will permit the time limit to be extended.
10. Unruly and disruptive tenants have been a significant problem in association administration. Revised Section 3-102 gives rights to associations to enforce the declaration, bylaws, and rules and regulations not only against the unit owner but also the tenant. Associations may now levy fines against tenants and enforce the rights of the unit owner as landlord.
11. UCIOA and its predecessors distinguished between the standards of conduct applicable to executive board members appointed by the declarant and elected by the unit owners. Section 3-103(a). Experience under this Act demonstrates that the stated standards require further clarity. As amended, UCIOA sets out clearer (and more easily understood) standards: members of the executive board appointed by the declarant will be subject to the standard of care applicable to trustees, and members elected by the unit owners will be subject to the degree of care required of a director of a nonprofit corporation, subject to the business judgment rule.
12. Revised Section 3-111 clarifies that no period of limitation regarding an association's claims against the declarant will run against the association, including warranty claims, until the period of declarant control terminates.
However, because a declarant ought not to warrant the common elements for an inordinate period of time (which may be the result if the period of declarant control is substantial), Section 4-116(d) authorizes the declarant to cause an independent committee of the executive board, during the period of declarant control, to evaluate and enforce warrant claims involving the common elements.
This section has also been amended to require that a tort claim based on ownership of common elements be brought against the association, and not against individual unit owners.
13. UCIOA permitted a condominium association or a planned community association to convey or encumber common elements under the restrictions of Section 3-112(a). Subsection (g) stated the general rule that a conveyance or encumbrance would not affect the priority or validity of pre-existing encumbrances. UCIOA (1994) better protects the rights of the holders of those interests.
14. In order to ensure that association rights in bankruptcy are protected, Section 3-116 provides that the association's lien is a statutory lien and makes clear that the lien for unpaid assessments arises, as a matter of law, upon adoption of the statutory amendment for all existing associations and from the creation of the regime for all regimes created after adoption of the amendments.
15. The contents of the resale certificate have been revised. All too often, preparers of these certificates have been unsure about the degree and extent of information required to be provided. The changes make more objective the information to be provided.
Nearly without exception, UCIOA achieves the goal of uniformity among all three forms of ownership simply by consolidating the three prior Acts of the Conference and adding a very few generic definitions. The principal new definition is "common interest community."
Because of the use of consistent definitions and policies in the three Acts preceding UCIOA, consolidation of the three in the merged Act was a relatively simple task. The section numbering system of UCIOA is entirely parallel with the other three Acts, and the language of UCIOA tracks, as applicable, with the cognate sections of those three Acts. Differences in result between the three Acts are preserved where appropriate. At the same time, during the drafting of UCIOA, in a few instances, it became clear that some differences in result were of form rather than legitimate substance. In those cases, the substantive result of one or more of the three Acts was changed to reflect a policy generally applicable in all forms.
The result is that a State wishing to consider legislation in the common interest ownership field has a range of choices from which to select. Many States will wish to adopt comprehensive legislation, providing maximum flexibility and certainty to all developers, lenders, and title insurers, while at the same time providing all unit purchasers and their associations a uniform level of disclosure, warranty protection, and other rights. In those States, the consolidated Act is a workable and desirable long-term solution. Other States may wish simply to adopt a modern condominium statute to replace an existing but plainly outdated, statutory structure. In those States, UCA alone is the obvious choice. Finally, in States where existing "second" or "third" generation condominium statutes are seen as satisfactory, but a need for additional certainty and structure is desirable for planned communities or cooperatives, the two Acts governing those forms of ownership are available. Following adoption of one of the three constituent Acts, it would be very feasible, by a few carefully considered amendments, to adopt UCIOA and thereby extend coverage to include all forms of ownership in the field.
SECTION 1-101. SHORT TITLE. This [Act] may be cited as the Uniform Common Interest Ownership Act.
SECTION 1-102. APPLICABILITY. Applicability of this [Act] is governed by [Part] 2 of this [article].
SECTION 1-103. DEFINITIONS. In the declaration and bylaws (Section 3-106), unless specifically provided otherwise or the context otherwise requires, and in this [Act]:
(1) "Affiliate of a declarant" means any person who controls, is controlled by, or is under common control with a declarant. A person "controls" a declarant if the person (i) is a general partner, officer, director, or employer of the declarant, (ii) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than 20 percent of the voting interest in the declarant, (iii) controls in any manner the election of a majority of the directors of the declarant, or (iv) has contributed more than 20 percent of the capital of the declarant. A person "is controlled by" a declarant if the declarant (i) is a general partner, officer, director, or employer of the person, (ii) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than 20 percent of the voting interest in the person, (iii) controls in any manner the election of a majority of the directors of the person, or (iv) has contributed more than 20 percent of the capital of the person. Control does not exist if the powers described in this paragraph are held solely as security for an obligation and are not exercised.
(2) "Allocated interests" means the following interests allocated to each unit: (i) In a condominium, the undivided interest in the common elements, the common expense liability, and votes in the association; (ii) in a cooperative, the common expense liability and the ownership interest and votes in the association; and (iii) in a planned community, the common expense liability and votes in the association.
(3) "Association" or "unit owners' association" means the unit owners' association organized under Section 3-101.
(4) "Common elements" means (i) in the case of (A) a condominium or cooperative, all portions of the common interest community other than the units; and (B) a planned community, any real estate within a planned community which is owned or leased by the association, other than a unit; and (ii) in all common interest communities, any other interests in real estate for the benefit of unit owners which are subject to the declaration.
(5) "Common expenses" means expenditures made by, or financial liabilities of, the association, together with any allocations to reserves.
(6) "Common expense liability" means the liability for common expenses allocated to each unit pursuant to Section 2-107.
(7) "Common interest community" means real estate with respect to which a person, by virtue of his ownership of a unit, is obligated to pay for real estate taxes, insurance premiums, maintenance, or improvement of other real estate described in a declaration. "Ownership of a unit" does not include holding a leasehold interest of less than [20] years in a unit, including renewal options.
(8) "Condominium" means a common interest community in which portions of the real estate are designated for separate ownership and the remainder of the real estate is designated for common ownership solely by the owners of those portions. A common interest community is not a condominium unless the undivided interests in the common elements are vested in the unit owners.
(9) "Conversion building" means a building that at any time before creation of the common interest community was occupied wholly or partially by persons other than purchasers and persons who occupy with the consent of purchasers.
(10) "Cooperative" means a common interest community in which the real estate is owned by an association, each of whose members is entitled by virtue of his ownership interest in the association to exclusive possession of a unit.
(11) "Dealer" means a person in the business of selling units for his own account.
(12) "Declarant" means any person or group of persons acting in concert who (i) as part of a common promotional plan, offers to dispose of his or its interest in a unit not previously disposed of or (ii) reserves or succeeds to any special declarant right [, or (iii) applies for registration of a common interest community under [Article] 5].
(13) "Declaration" means any instruments, however denominated, that create a common interest community, including any amendments to those instruments.
(14) "Development rights" means any right or combination of rights reserved by a declarant in the declaration to (i) add real estate to a common interest community; (ii) create units, common elements, or limited common elements within a common interest community; (iii) subdivide units or convert units into common elements; or (iv) withdraw real estate from a common interest community.
(15) "Dispose" or "disposition" means a voluntary transfer to a purchaser of any legal or equitable interest in a unit, but the term does not include the transfer or release of a security interest.
(16) "Executive board" means the body, regardless of name, designated in the declaration to act on behalf of the association.
(17) "Identifying number" means a symbol or address that identifies only one unit in a common interest community.
(18) "Leasehold common interest community" means a common interest community in which all or a portion of the real estate is subject to a lease the expiration or termination of which will terminate the common interest community or reduce its size.
(19) "Limited common element" means a portion of the common elements allocated by the declaration or by operation of Section 2-102(2) or (4) for the exclusive use of one or more but fewer than all of the units.
(20) "Master association" means an organization described in Section 2-120, whether or not it is also an association described in Section 3-101.
(21) "Offering" means any advertisement, inducement, solicitation, or attempt to encourage any person to acquire any interest in a unit, other than as security for an obligation. An advertisement in a newspaper or other periodical of general circulation, or in any broadcast medium to the general public, of a common interest community not located in this State, is not an offering if the advertisement states that an offering may be made only in compliance with the law of the jurisdiction in which the common interest community is located.
(22) "Person" means an individual, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision or agency, or other legal or commercial entity. [In the case of a land trust, however, "person" means the beneficiary of the trust rather than the trust or the trustee.]
(23) "Planned community" means a common interest community that is not a condominium or a cooperative. A condominium or cooperative may be part of a planned community.
(24) "Proprietary lease" means an agreement with the association pursuant to which a member is entitled to exclusive possession of a unit in a cooperative.
(25) "Purchaser" means a person, other than a declarant or a dealer, who by means of a voluntary transfer acquires a legal or equitable interest in a unit other than (i) a leasehold interest (including renewal options) of less than 20 years, or (ii) as security for an obligation.
(26) "Real estate" means any leasehold or other estate or interest in, over, or under land, including structures, fixtures, and other improvements and interests that by custom, usage, or law pass with a conveyance of land though not described in the contract of sale or instrument of conveyance. "Real estate" includes parcels with or without upper or lower boundaries, and spaces that may be filled with air or water.
(27) "Residential purposes" means use for dwelling or recreational purposes, or both.
(28) "Security interest" means an interest in real estate or personal property, created by contract or conveyance, which secures payment or performance of an obligation. The term includes a lien created by a mortgage, deed of trust, trust deed, security deed, contract for deed, land sales contract, lease intended as security, assignment of lease or rents intended as security, pledge of an ownership interest in an association, and any other consensual lien or title retention contract intended as security for an obligation.
(29) "Special declarant rights" means rights reserved for the benefit of a declarant to (i) complete improvements indicated on plats and plans filed with the declaration (Section 2-109) or, in a cooperative, to complete improvements described in the public offering statement pursuant to Section 4-103(a)(2); (ii) exercise any development right (Section 2-110); (iii) maintain sales offices, management offices, signs advertising the common interest community, and models (Section 2-115); (iv) use easements through the common elements for the purpose of making improvements within the common interest community or within real estate which may be added to the common interest community (Section 2-116); (v) make the common interest community subject to a master association (Section 2-120); (vi) merge or consolidate a common interest community with another common interest community of the same form of ownership (Section 2-121); or (vii) appoint or remove any officer of the association or any master association or any executive board member during any period of declarant control (Section 3-103(d)).
(30) "Time share" means a right to occupy a unit or any of several units during [five] or more separated time periods over a period of at least [five] years, including renewal options, whether or not coupled with an estate or interest in a common interest community or a specified portion thereof.
(31) "Unit" means a physical portion of the common interest community designated for separate ownership or occupancy, the boundaries of which are described pursuant to Section 2-105(a)(5). If a unit in a cooperative is owned by a unit owner or is sold, conveyed, voluntarily or involuntarily encumbered, or otherwise transferred by a unit owner, the interest in that unit which is owned, sold, conveyed, encumbered, or otherwise transferred is the right to possession of that unit under a proprietary lease, coupled with the allocated interests of that unit, and the association's interest in that unit is not thereby affected.
(32) "Unit owner" means a declarant or other person who owns a unit, or a lessee of a unit in a leasehold common interest community whose lease expires simultaneously with any lease the expiration or termination of which will remove the unit from the common interest community, but does not include a person having an interest in a unit solely as security for an obligation. In a condominium or planned community, the declarant is the owner of any unit created by the declaration. In a cooperative, the declarant is treated as the owner of any unit to which allocated interests have been allocated (Section 2-107) until that unit has been conveyed to another person.
1. The first clause of this section permits the defined terms used in the Act to be defined differently in the declaration and bylaws. Regardless of how terms are used in those documents, however, terms have an unvarying meaning in the Act, and any restricted practice which depends on the definition of a term is not affected by a changed term in the documents.
Example: A declarant might vary the definition of "unit owner" in the declaration to exclude himself in an attempt to avoid assessments for units which he owns. The attempt would be futile, since the Act defines a declarant who owns a unit as a unit owner and defines the liabilities of a unit owner.
2. The definition of "Affiliate of a declarant" (Section 1-103(1)) is similar to the definition of 12 U.S.C. Section 1730a, which prescribes the authority of the Federal Savings and Loan Insurance Corporation to regulate the activities of savings and loan holding companies, and in 15 U.S.C. Section 78c(a)(18), which defines persons deemed to be associated with a broker or dealer for purposes of the federal securities laws.
The objective standards of the definition permit a ready determination of the existence of affiliate status to be made. Unlike 12 U.S.C. Section 1730a(a)(2)(B), no power is vested in an agency to subjectively determine the existence of "control" necessary to establish affiliate status. Thus, affiliate status does not exist under the Act unless these objective criteria are met.
As a result of this definition, the association may, in some instances, be a declarant. Under the definition of "Affiliate of a declarant," it is possible that 20% of the unit owners may "act in concert" to control the activities of the association. While the mere casting of these votes at an association meeting would not normally constitute "concerted action" by those unit owners, other acts by individual unit owners might constitute such concerted action. The consequences of that result are determined under Section 3-104.
3. Definition (2), "Allocated interests," refers to all of the interests which this Act requires the declaration to allocate to the common interest communities.
"Allocated interests" is defined differently with respect to the three forms of Ownership.
First, the important interests, common to all projects, are the proportionate shares of common expense liabilities, and votes in the association, allocated to each unit. In either a cooperative, condominium, or planned community, every unit in the project must have a share of the votes and common expense liabilities.
Second, because the common elements are "owned" by the association in a planned community or cooperative, in contrast to a condominium, there is no common element interest allocated to unit owners in a planned community or cooperative.
Third, in a cooperative, because unit owners have traditionally had an ownership interest in the cooperative corporation, either in the form of stock or a membership certificate, the Act continues to require allocation of an "ownership interest in the association" to each unit.
The common element or ownership interest has limited significance. One situation in which the common element interest allocation would be important, however, is the distribution of insurance proceeds following a loss where an entire condominium project is not repaired or replaced and insurance proceeds are distributed to unit owners. See Section 3-113(h). See also Section 2-118(j)(2).
4. Definition (4), "Common elements" is bifurcated. The Act adopts the UCA and MRECA definition with respect to condominiums or cooperatives. However, the Act adopts UPCA's definition with respect to planned communities.
5. Definitions (4) and (31), treating "Common elements" and "Units," should be examined in light of Section 2-102, which specifies in detail how the differentiation between units and common elements is to be determined in any given common interest community to the extent that the declaration does not provide a different scheme. No exhaustive list of items comprising the common elements is necessary in this Act or in the declaration, as long as the boundaries between units and common elements can be ascertained with reasonable certainty. The common elements include by definition all of the real estate in the condominium or cooperative not designated as part of the units.
6. The 1994 amendment to the definition of common elements in Section 1-103(4) addresses and clarifies a real estate arrangement found in some common interest planned communities - that is, easements or other forms of servitudes which benefit the community and which run either to the unit owners association or to all the unit owners in the association. Examples of such interests include access easements to a land locked parcel on which the community is located, easements for shared parking, etc. This easement, as any commonly held interest in real estate, is and should be a common element. In reciprocal easement communities, the easements may be the only common elements.
7. The drafters also seek to distinguish between real estate owned or leased by the unit owners association which is subject to the declaration, and similar real estate which is not subject to the declaration.
In a planned community, if that real estate is subject to the declaration - that is, it is "within the planned community" - it meets the definition of a common element. If that real estate is not within the planned community, title may be held by the association, but it is not a common element unless the declaration is amended in accordance with this Act to incorporate that real estate as part of the real estate subject to the declaration.
Most common interest communities are not likely to experience a need to acquire real estate in addition to the land originally submitted to the declaration. However, it is not difficult to envision cases where that result would be desirable to the unit owners - for example, to acquire additional parking areas or open space. There is no reason to either prohibit the association from securing this result, or to require the formalities of an amendment of the declaration to redefine the boundaries of the common interest community; this would typically require a two-thirds vote of the unit owners under Section 2-117(a).
This distinction will have practical consequences. For example, real estate which is not a common element may be taxed by the local assessor, unless exempt under other state law, notwithstanding the rule in Section 1-104 of the Act that the common elements may not be separately taxed. Further, non-common element real estate may be bought and sold by the association without the need to observe the requirements for conveying or encumbering common elements stated in Section 3-112.
In a condominium, fee title to the common elements is vested in the unit owners, not the unit owners association. Thus, in the condominium, all the real estate subject to the declaration, except the units, is a "portion of the common interest community" and therefore is a common element. Real estate which is not subject to the declaration is neither a unit nor a common element.
However, the desired substantive result discussed above is the same for all forms of common interest communities. Accordingly, the drafters contemplate that the condominium or cooperative association could also acquire title to real estate which is physically located outside the condominium or cooperative boundaries, in its own name, which would not automatically become a common element.
8. Definition (7), "Common interest community," is new to this Act. The term creates one comprehensive definition of those interests governed by the Act. This generic definition, derived from the definition of planned community in UPCA, is used through the Act to refer collectively to the three particular forms of common interest community: condominiums, cooperatives, and planned communities.
Each of those forms in turn, has a separate definition. "Condominium" and "cooperative" are defined precisely as they are in the Acts which apply to those forms. The definition of "planned community," however, is new, and, under UCIOA, becomes a residual concept. Any ownership arrangement which is a common interest community but which does not meet the definition of either a condominium or cooperative, would be a planned community. Thus, there are but three forms of common interest community: (1) condominiums; (2) cooperatives; and (3) everything else.
9. Definition (8), "Condominium" makes clear that, unless the real estate title to the common elements is vested in the owners of the units, the project is not a condominium. Thus, for example, if title to the common elements is in an association in which each unit owner is a member, the project is not a condominium, but a planned community.
10. Definition (9), "Conversion building," is important because of the protection which the Act provides in Section 4-112 for tenants of buildings which are being converted into a common interest community. The definition distinguishes between buildings which have never been occupied by any person before the time that the building is submitted to the cooperative form of ownership, and buildings, whether new or old, which have been previously occupied by tenants. In the former case, because there have been no tenants in the building, the building would not be a conversion building, and no protection of tenants is necessary.
11. Definition (10), "Cooperative," makes clear that the Act applies only to cooperatives which constitute common interest communities. The common interest community real estate, moreover, must be owned by the association, which, under Section 3-101, may be organized as a profit or non-profit corporation, trust, trustee, partnership, or depending on the option adopted in a particular State, as an unincorporated association. In requiring, as does Section 3-101, that the association consist exclusively of "unit owners" - defined in MRECA as "proprietary lessees" - the definition tracks the usual requirements of cooperative instruments, which exclude from association membership persons who are not owners or proprietary lessees of the units.
The definition also recognizes the fundamental link between association membership and occupancy rights in providing that unit owners who are the members of the association are entitled to exclusive possession of their units under a proprietary lease - see Definition (24) - by virtue of their ownership interests in the assets of the association.
The ownership interest of a cooperative unit owner is a composite interest, which consists of the owner's ownership interests in the association and his right to occupy a unit pursuant to a proprietary lease. This interest, since it includes the proprietary interest under a lease, may not, as a theoretical matter, exist until a proprietary lease has in fact been executed by the declarant for the units in the cooperative. The definition "unit" resolves this theoretical gap by providing that the declarant is treated as the owner of cooperative interests which have not yet been created.
12. Definition (11), "Dealer," is a newly defined term in UCIOA. It was not used in any of the three separate Acts. It replaces, in many sections, the words "person in the business of selling (either) real estate (or) cooperative interests for his own account." Use of the term in UCIOA does not change the substantive results in any of the three Acts.
13. Definition (12), "Declarant," is designed to exclude persons who may be called upon to execute the declaration in order to ratify the creation of the common interest community, but who are not intended to be charged with the responsibilities imposed on all declarants by this Act if that is all they do. Examples of such persons include holders of pre-existing liens and, in the case of leasehold common interest communities, ground lessors. (Of course, such a person may become a declarant by subsequently succeeding to a Special declarant right.) Other persons similarly protected by the narrow wording of this definition include real estate brokers, because they do not offer to dispose of their own interest in a unit. Similarly, unit owners reselling their units are not declarants because these units were "previously disposed of" when originally conveyed.
If the association, itself, or in conjunction with another declarant, is offering units for sale to others, and if those units have not previously been sold or otherwise disposed of, then the association itself is a declarant.
Finally, a person who, while in control of the association, chooses not to exercise that control, is still a declarant.
The last bracketed clause in this definition must be deleted in any State which chooses not to enact Article 5 of the Act.
14. Definition (13), "Declaration," is defined as "any instruments, however denominated, that create a common interest community, including any amendments to those instruments." Thus, the term would not only include the traditional condominium declaration with which most practitioners are familiar, or the declaration of covenants, conditions, and restrictions (CC & R's) so common in planned unit developments. It would also include, for example, a series of deeds to units with common mutually beneficial restrictions, or to any other instruments which create the relationship which constitutes a common interest community. If those recorded instruments create that relationship, then those documents constitute a declaration and must contain, for new projects, the information required by Section 2-105.
The declaration of a cooperative does not include the proprietary leases of the individual units, although a sample of such a lease might be attached as an exhibit to the declaration.
Similarly, the definition of "declaration" of any common interest community does not refer to the bylaws of the association or the documents creating the association. Such documents do not "create" the common interest community, but merely regulate its use after creation. The bylaws may, but need not be, an exhibit to the declaration.
15. Definition (14), "Development rights," includes a panoply of sophisticated development techniques that have evolved over time throughout the United States and which have been expressly recognized and regulated in the case of condominiums, in an increasing number of jurisdictions, beginning with Virginia in 1974.
The concept of "development rights" lies at the heart of one of the principal goals of the Act, which is to maximize the flexibility available to a developer seeking to adjust the size and mix of a project to the demands of the marketplace, both before and after creation. The principal constraint on that flexibility is the obligation of disclosure, and its impact on marketing. Thus "development rights" include the rights to:
(a) Increase the size or density of a project, either by adding real property to it, or by creating new units, common elements or limited common elements on either the original land or within the original buildings, or on any other land or buildings subsequently added;
(b) Change the mix of units, common elements, and limited common elements, either by subdividing units, or by converting units into common elements or limited common elements; and
(c) Reduce the size of a project by withdrawing real property - whether land, entire buildings, or particular units - from it.
As a matter of simple logic, there are few other things that could be done to a real property regime which are not include within the concept of development rights. This great flexibility, particularly when coupled with the broad definitions of "unit" and "real estate," the power to create leasehold projects, and the right to subordinate unit mortgages to blanket mortgage on either the units or common elements, is an important element in the Act.
For example, a declarant may be building (or converting) a 50-unit building on Parcel A with the intention, if all goes well, to "expand" the common interest community by adding an additional building on Parcel B, containing additional units, as part of the same common interest community. If he reserves the right to do so, i.e., to "add real estate to a common interest community," he has reserved a "development right."
In certain cases, however, the declarant may desire, for a variety of reasons, to include both parcels in the common interest community from the outset, even though he may subsequently be obliged to withdraw all or part of one parcel. Assume, for example, that in the example just given the declarant intends to build an underground parking garage that will expand into both parcels. If the project is a success, his documentation will be simpler if both parcels were included in the common interest community from the beginning. If his hopes are not realized, however, and it becomes necessary to withdraw all or part of Parcel B from the common interest community and devote it to some other use, he may do so if he has reserved such a development right "to withdraw real estate from the common interest community." The portion of the garage which extends into Parcel B may be left in the common interest community (separated from the remainder of Parcel B by a horizontal boundary), or the garage may be divided between Parcels A and B with appropriate cross-easement agreements.
The right "to create units, common elements, or limited common elements" has frequently been useful in the case of commercial or mixed use common interest communities, where the declarant needs to retain a high degree of flexibility to meet the space requirements of prospective purchasers who may not approach him until the common interest community has already been created. For example, an entire floor of a high-rise building may be intended for commercial buyers, but the declarant may not know in advance whether one purchaser will want to buy the whole floor as a single unit or whether several purchasers will want the floor divided into service units, separated by common element walls and served by a limited common element corridor. This development right is sometimes useful even in purely residential common interest communities, especially those designed to appeal to affluent buyers. Similarly, the development rights "to subdivide units or convert units into common elements" is most often of value in commercial common interest communities, but may be useful in certain kinds of residential common interest communities as well.
16. Definition (15), "Dispose" or "Disposition," includes voluntary transfers to purchasers of any interest in a unit, other than as security for an obligation. Consequently, the grant of a mortgage or other security interest is not a "disposition," nor is any transfer of any interest to a person who is excluded from the definition of "Purchaser," infra. However, the term includes more than conveyances and would, for example, cover contracts of sale.
17. Definition (18), "Leasehold common interest community," should be distinguished from land which is leased to a common interest community but not subjected to the common interest community regime. A leasehold common interest community means, by definition, real estate which has been subjected to the common interest community form of ownership. In such a case, units located on the leasehold real estate are typically leased for long terms. At the expiration of such a lease, the common interest community unit or the real estate underlying the unit would be removed from the common interest community if the lease were not exercised or renewed. On the other hand, real estate may not be subjected to common interest community ownership, but may be leased directly to the association or to one or more unit owners for a term of years.
18. In this Act, in contrast to UPCA, Definition (23), "Planned Community," is a residual concept. That is, any common interest community which fails to fall into the category of a condominium or a cooperative is, by definition, a planned community. The definition also indicates that a planned community may have a condominium or cooperative as a constituent element.
19. Definition (24), "proprietary lease," describes that instrument initially executed by a cooperative association with the purchaser of a unit, granting the right of exclusive occupancy of a unit. The term and its significance is more fully treated in the Comments to the definition of "Unit."
20. Definition (25), "Purchaser," includes a person who acquires any interest in a unit, even as a tenant, if the lease including renewal options, entitles him to occupy the premises for more than 20 years. Excluded from the definition, however, are mortgagees, declarants, and dealers. Persons excluded from the definition of "purchaser" do not receive certain benefits under Article 4, such as the right to a public offering statement (Section 4-102(c)) and the right to rescind (Section 4-108).
21. Definition (26), "Real estate," is very broad, and is very similar to the definition of "real estate" in Section 1-201(16) of the Uniform Land Transactions Act.
Although often thought of in two-dimensional terms, real estate is a three-dimensional concept, and the third dimension is usually important in the condominium and planned community context. Where real estate is described in only two dimensions (length and width), it is correctly assumed that the property extends indefinitely above the earth's surface and downwards to a point in the center of the planet. In most condominium and planned communities, however, as in so-called "air rights" projects, ownership does not extend "from the center of the earth to the heavens" because units are stacked on top of units or units and common elements are interstratified. In such cases, the upper and lower boundaries must be identified with the same precision as the other boundaries.
22. The definition of "residential purposes" includes "recreational purposes." This common sense definition is used in order to avoid repeated use of a lengthier defined term, such as "residential or consumer owned recreational purposes."
The Act contemplates that "recreational purposes" would be "consumer owned" recreational purposes commonly marketed for sale to individual owners - uses such as dock spaces for boats, campgrounds, airplane tie downs, etc. By including these kinds of uses within the definition, the Act intends to provide the same consumer protections which it offers to individual residential purchasers - persons who typically buy for their own use - as distinguished from commercial users. Thus, the definition would exclude commercial recreational facilities which are operated as a business or available to the public on a fee for use basis, such as movie theaters, athletic or country clubs, golf courses, and the like.
Further, the definition is not intended to override, and thus perhaps expand on, existing local zoning ordinances which permit only "residential" use.
However, by including these recreational purposes within the defined term "residential purposes," no change in the plain and traditional meaning of the word "residential" is intended. Thus, the drafters recognize that owners of residential units - i.e., a unit which is designed for use as a residential dwelling - may hold those units for investment purposes, or that individual owners may occasionally or regularly rent their units on an individual or rental pool basis. This is a common practice, for example, with residential communities built near ski or ocean resort areas. Rental occupancy does not change the residential character of the common interest community, or the consumer protections that must be offered to purchasers.
23. Definition (28), "Security interest," encompasses any interest in real or personal property which secures payment or performance of an obligation. Thus, for example, regardless of whether or not the units in a cooperative are treated as real or personal property pursuant to Section 1-105(a), a lender's interest in a unit securing the debt is a "security interest." This definition is adapted from Sections 3-102 and 3-103 of the Uniform Land Transactions Act.
24. Definition (29), "Special declarant rights," seeks to isolate those rights reserved for the benefit of a declarant which are unique to the declarant and not shared in common with other unit owners. The list, while short, encompasses virtually every significant right which a declarant might seek in the course of creating or expanding a common interest community.
Any person who possesses a special declarant right would be a "declarant," including any who succeed under Section 3-104 to any of those rights. Thus, the concept of special declarant rights triggers the imposition of obligations on those who possess the rights. Under Section 3-104, those obligations vary significantly, depending upon the particular special declarant rights possessed by a particular declarant. These circumstances are described more fully in the Comments to Section 3-104.
25. Definition (30), "Time share," is based on Section 1-102(14) and (18) of the Model Real Estate Time-Share Act.
When this Act was first promulgated in 1982, such concepts as "time share" and "interval ownership" were relatively new; they were neither fully developed nor generally accepted in the marketplace. Moreover, the nature of the relationship between the various forms of common interest ownership and time fractionalization of real estate was not at all clearly understood.
In these circumstances, the Conference adopted a "minimalist" approach in dealing with the concept of time sharing. To that end, the Act simply defined the term "time share" in Section 1-103(24) and then required disclosure of any time share provisions in the common interest community; see Section 4-105. Otherwise, this Act did not attempt to regulate time sharing or any of the other forms of interval ownership. That task was left to the Model Real Estate Time Sharing Act.
Experience over the intervening dozen years suggests that this minimalist approach remains appropriate. Without a doubt, the evolving field of interval ownership of both personal and real property poses important issues of public policy. However, this Act does not regulate those substantive issues. Instead, whether or not a particular interval ownership project must comply with this Act depends on whether or not the ownership arrangement meets the definition of a "common interest community." If it does, then the Act would apply in the same degree as it would to any common interest community.
26. Definition (31), "Unit," describes a tangible, physical part of the project rather than a right in, or claim to, a tangible physical part of the property. Therefore, for example, a "time-share" arrangement in which a unit is sold to 12 different persons, each of whom has the right to occupy the unit for one month does not create 12 new units - there are, rather, 12 owners of the unit. (Under the section on voting (Section 2-110), a majority of the time-share owners of a unit are entitled to cast the vote assigned to that unit.)
Similarly, in a cooperative, the unit remains a physical part of the real estate; its legal title is vested in the association while the right to possession is held by the unit owner under a proprietary lease. The definition, however, makes it clear that the associations's interest in the unit is unaffected by transfers of interests in that unit to or by unit owners. The unit owner's interest is a composite interest, which consists of an ownership interest in the association, coupled with the right to occupy a unit pursuant to a lease.
The definition makes clear that in the case of a cooperative, if a unit owned by a unit owner is sold, conveyed, or encumbered or otherwise transferred by the unit owner, the interest in such unit which is affected is the right to possession of that unit under a proprietary lease, coupled with the allocated interests of that unit. In recognizing the relationship between the physical "unit" and the nature of a unit owner's interest in that unit, and by describing that relationship concisely in the definition, the merged Act was able to delete the definition of "cooperative interest" as it was used in MRECA.
27. Definition (32), "Unit owner," contemplates that a seller under a land installment contract would remain the unit owner until the contract is fulfilled. As between the seller and the buyer, various rights and responsibilities must be assigned to the buyer by the contract itself, but the association would continue to look to the seller (for payment of any arrears in common expense assessments, for example,) as long as the seller holds title.
The definition makes it clear that a declarant, so long as he owns units in a common interest community, is the unit owner of any unit created by the declaration, and is therefore subject to all of the obligations imposed on other unit owners, including the obligation to pay common expense assessments. This provision is designed to resolve ambiguities on this point which have arisen under several existing state statutes.
In the special case of a cooperative, the declarant is treated as the owner of a unit or "potential unit" to which allocated interests have been allocated, until that unit is conveyed to another.
SECTION 1-104. VARIATION BY AGREEMENT. Except as expressly provided in this [Act], its provisions may not be varied by agreement, and rights conferred by it may not be waived. Except as provided in Section 1-207, a declarant may not act under a power of attorney, or use any other device, to evade the limitations or prohibitions of this [Act] or the declaration.
1. The Act is generally designed to provide great flexibility in the creation of common interest communities and, to that end, the Act permits the parties to vary many of its provisions. In many instances, however, provisions of the Act may not be varied, because of the need to protect purchasers, lenders, and declarants. Accordingly, this section adopts the approach of prohibiting variation by agreement except in those cases where it is expressly permitted by the terms of the Act itself.
2. One of the consumer protections in this Act is the requirement for consent by specified percentages of unit owners to particular actions or changes in the declaration. In order to prevent declarants from evading these requirements by obtaining powers of attorney from all unit owners, or in some other fashion controlling the votes of unit owners, this section forbids the use by a declarant of any device to evade the limitation or prohibition of the Act or of the declaration.
3. The second sentence of the section is an important limitation upon the rights of a declarant. Today it is the practice in many jurisdictions, particularly those proscribing expansion of a condominium or planned community by statute, for a declarant to secure powers of attorney from all unit purchasers permitting the declarant unilaterally to expand the condominium or planned community by "unanimous consent" to include new units and to reallocate common element interests, common expense liability, and votes. With such powers of attorney, many declarants have purported to comply with the typical provision of "first generation" condominium statutes requiring unanimous consent for amendments of the declaration concerning such matters. The Act bars this practice.
4. The following sections permit variation:
Section 1-103 (Definitions). All definitions used in the declaration and bylaws may be varied in the declaration, but not in interpretation of the Act.
Section 1-105 (Separate Titles and Taxation). This section permits the declarant of a cooperative to determine whether unit owners' interests are real or personal property.
Section 1-107 (Eminent Domain). The formulas for reallocation upon taking a part of a unit, and for allocation of proceeds attributable to limited common elements, may be varied.
Article 1, Part 2, Sections 1-202, 1-203, 1-205, 1-206, and 1-207, permit a variety of elections to declarants and unit owners with respect to applicability.
Section 2-102 (Unit Boundaries). The declaration may vary the distinctions as to what constitutes the units and common elements.
Section 2-105 (Contents of Declaration). A declarant may add any information he desires to the required content of the declaration.
Section 2-108 (Limited Common Elements). The Act permits reallocation of limited common elements unless prohibited by the declaration.
Section 2-109 (Plats and Plans). There is a presumption regarding horizontal boundaries of units, unless the declaration provides otherwise.
Section 2-111 (Alterations Within Units). Subject to the provisions of the declaration, unit owners may make alterations and improvements to units.
Section 2-112 (Relocation of Boundaries Between Adjoining Units). Subject to the provisions of the declaration, boundaries between adjoining units may be relocated by affected unit owners.
Section 2-113 (Subdivision of Units). If the declaration expressly so permits, a unit may be subdivided into two or more units.
Section 2-115 (Use for Sales Purposes). The declarant may maintain sales offices, management offices, and model units only if the declaration so provides. Unless the declaration provides otherwise, the declarant may maintain advertising on the common elements.
Section 2-116 (Easement to Facilitate Exercise of Special Declarant Rights). Subject to the provisions of the declaration, the declarant and unit owners have easements for the purposes described.
Section 2-117 (Amendment of Declaration). The declaration of a non-residential common interest community may specify less than a two-thirds vote to amend the declaration. Any declaration may require a larger majority.
Section 2-118 (Termination). The declaration may specify a majority larger than 80 percent to terminate and, in a non-residential common interest community, a smaller majority. The declarant may require that the units be sold following termination even though none of them have horizontal boundaries.
In a cooperative, upon termination, the declaration may specify that association creditors have priority over the rights of unit owners, and their creditors.
Section 2-119 (Rights of Secured Lenders). The declaration may require lender approval of specified actions of unit owners or the association.
Section 2-120 (Master Associations). The declaration may provide for some of the powers of the Executive Board to be exercised by a master association.
Section 2-122 (Addition of Unspecified Real Estate). The declaration of a planned community may grant a declarant the right to add additional real estate to the project without stating the location of that real estate in the original declaration.
Section 3-102 (Powers of the Association). The declaration may limit the right of the association to exercise any of the listed powers, except in a manner which discriminates in favor of a declarant. The declaration may authorize the association to assign its rights to future income.
Section 3-103 (Executive Board Members and Officers). Except as limited by the declaration or bylaws, the Executive Board may act for the association.
Section 3-106 (Bylaws). Subject to the provisions of the declaration, the bylaws may contain any matter in addition to that required by the Act.
Section 3-107 (Upkeep of the Common Interest Community). Except to the extent otherwise provided by the declaration, maintenance responsibilities are set forth in this section, and income from real estate subject to development rights inures to the declarant.
Section 3-108 (Meetings). The bylaws may provide for special meetings at the call of less than 20 percent of the Executive Board or the unit owners.
Section 3-109 (Quorums). This section permits statutory quorum requirements to be varied by the bylaws.
Section 3-110 (Voting; Proxies). A majority in interest of the multiple owners of a single unit determine how that units' vote is to be cast unless the declaration provides otherwise. The declaration may require that lessees vote on specified matters.
Section 3-112 (Conveyance or Encumbrance of Common Elements). The declaration may vary the percentages of unit owners whose approval is required to convey or encumber common elements.
The declaration may also provide that a conveyance or encumbrance of common elements defeats prior encumbrances on those common elements.
Section 3-113 (Insurance). The declaration may vary the provisions of this section in non-residential common interest communities, and may require additional insurance in any community.
Section 3-114 (Surplus Funds). Unless otherwise provided in the declaration, surplus funds are paid or credited to unit owners in proportion to their common expense liabilities.
Section 3-115 (Assessments for Common Expenses). To the extent provided in the declaration, common expenses for limited common elements must be assessed against the units to which they are assigned, common expenses benefiting fewer than all the units must be assessed only against the units benefitted, insurance costs must be assessed in proportion to risk, and utility costs must be assessed in proportion to usage.
Section 3-116 (Lien for Assessment). Unless the declaration provides otherwise, fines, late charges, and other fees are treated as assessments for lien purposes.
Section 4-101 (Applicability; Waiver). All of Article 4 is modifiable or waivable by agreement in a common interest community restricted to non-residential use.
Section 4-115 (Warranties). Implied warranties of quality may be excluded or modified by agreement.
Section 4-116 (Statute of Limitation on Warranties). The six-year limitation may be modified by agreement of the parties.
5. While freedom of contract is a principle of this Act, and variation by agreement is accordingly widely available, freedom of contract does not extend so far as to permit parties to disclaim obligations of good faith, see Section 1-113, or to enter into contracts which are unconscionable when viewed as a whole, or which contain unconscionable terms. See Section 1-112. This section derives from Section 1-102(3) of the Uniform Commercial Code.
SECTION 1-105. SEPARATE TITLES AND TAXATION.
(a) In a cooperative, unless the declaration provides that a unit owner's interest in a unit and its allocated interests is real estate for all purposes, that interest is personal property. [That interest is subject to the provisions of [insert reference to state homestead exemptions], even if it is personal property.]
(b) In a condominium or planned community:
(1) If there is any unit owner other than a declarant, each unit that has been created, together with its interest in the common elements, constitutes for all purposes a separate parcel of real estate.
(2) If there is any unit owner other than a declarant, each unit must be separately taxed and assessed, and no separate tax or assessment may be rendered against any common elements for which a declarant has reserved no development rights.
(c) Any portion of the common elements for which the declarant has reserved any development right must be separately taxed and assessed against the declarant, and the declarant alone is liable for payment of those taxes.
(d) If there is no unit owner other than a declarant, the real estate comprising the common interest community may be taxed and assessed in any manner provided by law.
1. Subsection (a) of this section follows the MRECA provisions. The classification of the unit and its allocated interests as real property or as personal property is significant for purposes of such matters as tenure, sales, recordation, transfer taxes, property taxes, estate and inheritance taxes, testate and intestate succession, mortgage lending, the perfection, priority and enforcement of liens, and rights of redemption.
Subsection (a) resolves an important theoretical and practical issue which pervades the cooperative field: whether a unit owner in a cooperative holds an interest in real or in personal property. Subsection (a) permits the declarant to decide that issue for each cooperative on a project-by-project basis.
The issue arises from the fact that the unit owner's interest in the cooperative typically has elements of both real and personal property. His interest includes both a beneficial interest in the association - either through stock ownership or membership - which is clearly a personal property interest, and a long term "proprietary" or ownership interest under a proprietary lease in an apartment - clearly an interest in real estate.
While this is in many ways a highly theoretical issue, it has many practical consequences. For example, if the unit owner's interest is a real estate interest, then that interest - aside from the association's interest - may be subject to real property taxes and conveyance taxes; the recording laws would apply to conveyance of those interests; and real estate foreclosure laws would apply to foreclosure of a lien against those interests. Moreover, a security interest in the unit owner's stock or membership certificate would not be effective against the stock without a security instrument being recorded on the land records. In general, none of Article 9 of the Uniform Commercial Code would be applicable to that interest, and all of the conveyancing rules would apply.
On the other hand, if the interest is a personal property interest - the result required by this section in the absence of a provision in the declaration that the interest is real property - then all of Article 9 of the Uniform Commercial Code would apply to security interests in the unit, the real estate conveyancing rules would not apply, and the interest would be treated for all purposes as personal property.
2. This Act, of course, would apply in all respects regardless of the characterization of the unit owner's interests. Thus, for example, recording to the declaration is required, whether or not the owner's interest in a cooperative interest is real or personal property, because the cooperative itself is the real estate.
3. Whether an institutional lender may lawfully make loans on the unit owner's interest may or may not depend on whether that interest is characterized as real or personal property. That issue is not affected by this Act, however, but by other state law which may permit loans to be made by certain institutional lenders only if secured by an interest in real estate.
4. If a unit owner's interest is a real property interest, recordation of the proprietary lease in the land records is constructive notice of the unit owner's rights. If the unit owner's interest is a personal property interest, recordation of the lease in the land records would be ineffective as constructive notice of that interest, and Article 9 of the Uniform Commercial Code does not provide a mechanism for filing evidence of that ownership interest. It is likely, however, that holders of security interests in units which are personal property would adopt a procedure similar to that followed in Illinois with respect to land trusts, which have been held to be personal property in that State. Under Article 9 of the Uniform Commercial Code and Illinois common law, the secured party files notice of the lien and the lien is thereby perfected for five years, when it must be renewed.
5. Subsection (b) integrates the language of UCA and UPCA regarding condominiums and planned communities. A condominium or planned community may be created, by the recordation of a declaration, long before the first unit is conveyed. This happens frequently, for example, with existing rental apartment projects which are converted into either condominiums or planned communities. Subsection (d) spares the local taxing authorities from having to assess each unit separately until such time as the declarant begins conveying units, although separate assessment from the date the common interest community is created may be permitted under general state law, which permits or requires separate taxation of individual parcels of real estate. When separate tax assessments become mandatory under this section, the assessment for each unit must be based on the value of that individual unit, under whatever uniform assessment mechanism prevails in the State or locality. Importantly, no separate tax bill on the common elements is to be rendered to the association or the unit owners collectively, even though, in the context of planned communities, the common elements owned by the association might be subject to taxation as a separately owned parcel of real estate, in the absence of this provision. Any common element subject to development rights, however, must be separately assessed and taxed to the declarant, see subsection (c), in recognition of the independent economic value that those development rights have. This would be true even if the real estate subject to development rights is a part of the common interest community and lawfully "owned" by the unit owners in common, since the rights are in fact an asset of the declarant.
6. If there is any doubt in a particular State whether a unit occupied as a residential dwelling is entitled to treatment as any other residential single-family detached dwelling under the homestead status, this section should be modified to ensure that units are similarly treated.
7. Unlike the law of some States, this section imposes no limitations on the power of a jurisdiction to tax units based on the fair market value of the individual units, rather than on the project as a whole. In most jurisdictions, experience has shown that upon conversion of an apartment building to a common interest form of ownership, the fair market value of the units exceeds the fair market value of that building prior to conversion. Accordingly, a jurisdiction under this Act may impose real estate taxes on common interest community units which reflect the fair market value of those units in the same way that the jurisdiction taxes other forms of real estate.
8. Questions have arisen regarding the consequences of foreclosure of a tax lien on units or development rights in a common interest community.
Under one theory, because real estate taxes are liens on real estate which have priority over all subordinate interests, foreclosure of the real estate tax lien on a unit could result in partial termination of the common interest community, and thus remove the unit from the common interest community. This result would follow if the tax lien were treated under Section 2-118(l) as a "lien . . . against a portion of the real estate comprising the common interest community [which] has priority over the declaration . . . ."
Such a result, however, is inconsistent with the expectations of other unit owners in the complex. The appropriate result is that because, under this section, each parcel of real estate is a separate parcel for tax purposes, foreclosure of a tax lien on that parcel simply results in a sale or transfer of an interest in that parcel, as part of the common interest community, unless the parcel being foreclosed is withdrawable real estate.
9. It is also possible that a taxing authority may seek to foreclose on a declarant's development rights. Foreclosure of real estate taxes levied against withdrawable real estate, just as in the case of a foreclosure by a voluntary lienholder, may result in removal of that real estate from the common interest community; see Section 2-118(k). However, foreclosure of real estate owned by the declarant which has not yet been added to the common interest community will have no effect on the common interest community unless the taxing authority also acquires the development right to add that real estate to the common interest community.
10. Under Section 3-104(c), of course, foreclosure of a tax lien for unpaid taxes levied against development rights would permit the taxing authority to take title to those development rights and exercise or transfer them as they could any other interest in real estate. However, development rights lapse pursuant to Section 2-110 if they are not exercised within the time limit established by the declaration. This result, implicit under the Act, is expressly the law in some States. See, e.g., Conn. Gen. Stat. Section 47-229(e). If development rights lapse when a tax lien against those rights exists under Section 1-105(c), then whether or not those development rights apply to common elements which have previously been added to the common interest community makes no difference; the municipal lien holder is in no different position than a lender who holds a security interest in those development rights. Accordingly, while the tax lien itself would not be enforceable against the land it would continue to be the obligation of the declarant, as provided in the last clause of this subsection.
SECTION 1-106. APPLICABILITY OF LOCAL ORDINANCES, REGULATIONS, AND BUILDING CODES.
(a) A building code may not impose any requirement upon any structure in a common interest community which it would not impose upon a physically identical development under a different form of ownership.
(b) In condominiums and cooperatives, no zoning, subdivision, or other real estate use law, ordinance, or regulation may prohibit the condominium or cooperative form of ownership or impose any requirement upon a condominium or cooperative which it would not impose upon a physically identical development under a different form of ownership.
(c) Except as provided in subsections (a) and (b), the provisions of this [Act] do not invalidate or modify any provision of any building code, zoning, subdivision, or other real estate use law, ordinance, rule, or regulation governing the use of real estate.
1. The purpose of this section is to resolve the relative roles of the state and local communities in regulating the creation of common interest communities. The underlying concept is to make clear that the municipality has a legitimate interest in regulating the use of real estate, in accordance with long established zoning, building code, and similar practices, and that such practices continue to have equal applicability to common interest communities as they do to purely rental projects. With respect to forms of ownership, however, this Act, as a state enactment, preempts the field and accordingly, except as provided in the Act, the municipality may not regulate the form of ownership, as opposed to the use of that real estate.
2. Consistent with the concept described in Comment 1, subsection (a) prohibits discriminatory application of building codes against common interest communities by local law making authorities. Thus, if a building code imposes a requirement which cannot be met if property is owned as a common interest community but which would not be violated if all of the property constituting the common interest community were owned by a single owner, this section makes it unlawful to apply that requirement or restriction to the common interest community. For example, in the case of a high-rise apartment building, if a building code requirement imposing a minimum fire wall rating between apartments would not prevent a rental apartment building from being built, this Act would override any requirement that might impose a higher fire wall rating between apartments merely because the same building might be owned as a common interest community.
3. While subsection (a) prevents discrimination against all forms of common interest communities under building codes, subsection (b) does not prevent local law making authorities from using zoning, subdivision, and other real estate regulations to specifically regulate the planned community form of ownership, in ways different from rental project, or condominiums. This distinction simply recognizes the existing practice in some communities that permits a local zoning board, as a condition of granting a cluster housing zoning permit, to require the right of prior plan approval. However, such regulations may not be used to proscribe the condominium or cooperative form of ownership, or to discriminate against these two types of common interest communities. Accordingly, a community could not prevent a condominium conversion by applying setback requirements between apartments which would not apply if all the apartments were owned by a single owner, or by requiring more parking for condominiums than for rental apartments.
4. Subsection (c) makes clear that, except for the prohibition on discrimination against common interest communities under building codes, and except for the prohibition on the use of zoning, subdivision, and other real estate laws, ordinances, or regulations to ban or discriminate against cooperatives and condominiums, the Act has no effect on real estate or personal property laws. For example, a particular parcel of real estate submitted to the common interest community form of ownership might be of such size that all of the real estate is required to support a proposed density of units or to satisfy minimum setback requirements. Under this Act, part of the submitted real estate might be subject to a development right entitling the declarant to withdraw it from the common interest community, but the mere reservation of this right would not constitute a subdivision of the parcel into separate ownership. If a declarant or foreclosing lender at a later time sought to exercise the option to withdraw the real estate, however, withdrawal would constitute a subdivision and would be illegal if the effect of withdrawal would be to violate setback requirements, or to exceed the density of units permitted on the remaining parcel.
SECTION 1-107. EMINENT DOMAIN.
(a) If a unit is acquired by eminent domain or part of a unit is acquired by eminent domain leaving the unit owner with a remnant that may not practically or lawfully be used for any purpose permitted by the declaration, the award must include compensation to the unit owner for that unit and its allocated interests, whether or not any common elements are acquired. Upon acquisition, unless the decree otherwise provides, that unit's allocated interests are automatically reallocated to the remaining units in proportion to the respective allocated interests of those units before the taking, and the association shall promptly prepare, execute, and record an amendment to the declaration reflecting the reallocations. Any remnant of a unit remaining after part of a unit is taken under this subsection is thereafter a common element.
(b) Except as provided in subsection (a), if part of a unit is acquired by eminent domain, the award must compensate the unit owner for the reduction in value of the unit and its interest in the common elements, whether or not any common elements are acquired. Upon acquisition, unless the decree otherwise provides, (i) that unit's allocated interests are reduced in proportion to the reduction in the size of the unit, or on any other basis specified in the declaration and (ii) the portion of the allocated interests divested from the partially acquired unit are automatically reallocated to that unit and to the remaining units in proportion to the respective allocated interests of those units before the taking, with the partially-acquired unit participating in the reallocation on the basis of its reduced allocated interests.
(c) If part of the common elements is acquired by eminent domain, the portion of the award attributable to the common elements taken must be paid to the association. Unless the declaration provides otherwise, any portion of the award attributable to the acquisition of a limited common element must be equally divided among the owners of the units to which that limited common element was allocated at the time of acquisition.
(d) The court decree must be recorded in every [county] in which any portion of the common interest community is located.
1. The provisions of this statute are not intended to supplant the usual rules of eminent domain but merely to supplement those rules in addressing the unique problems which eminent domain raises in the context of a common interest community. Nevertheless, because the law of eminent domain differs widely among the various States, the law of each State should be reviewed to ensure that the eminent domain code and this section are properly integrated. For example, subsection (a) uses the words "the award must include compensation to the unit owner." This language, a change first made in MRECA, suggests that, under other state law, compensation for other interests may be required in an appropriate case and the section does not limit that result.
2. When a unit is taken or partially taken by eminent domain, this section provides for a recalculation of the allocated interests of all units.
Example 1: Suppose that all allocated interests in a nine-unit common interest community were originally allocated to the units on the basis of size. If eight of the units are all equal in size and one is twice as large as the others, the allocated interests would be 20% for the largest unit and 10% for each of the other eight units.
Suppose that one of the smaller units is removed from the common interest community by a condemning authority. Subsection (a) provides that the allocated interests would automatically shift, at the time of the taking, so that the larger unit would have 222/9% while each of the small units would have 111/9%.
Example 2: Suppose, in Example 1, that the condemnation only reduced the size of one of the smaller units by 50%, leaving the remaining half of the unit usable. Subsection (b) provides that the allocated interests would automatically shift to 55/19% for the partially taken unit, 2110/19% for the largest unit, and 1010/19% for each of the other units. Note that the fact that the partially taken unit was reduced to half its former size does not mean that its allocated interests are only half as large as before the taking. Rather, that unit participates in the reallocation in proportion to its reduced size. That is why the partially taken units' reallocated interests are 55/19% rather than 5%.
3. An important issue raised by this section is whether or not a governmental body acquiring a unit by eminent domain has a right to also take that unit's allocated interests and thereby assume membership in the association by virtue of its power of eminent domain. While there is no question that a governmental body may acquire any real property by eminent domain, there is no case law on the question of whether or not the governmental body may take a unit as part of a common interest community or must take the unit and have the unit excluded from the common interest community.
Subsection (a) merely requires that the taking body compensate the unit owner for all of his unit and its allocated interests, whether or not any common elements are acquired. The Act also requires that the allocated interests are automatically reallocated upon taking to the remaining units unless the decree provides otherwise. Whether or not the decree may constitutionally provide otherwise in the case of a particular taking (for example, by allocating the allocated interests to the government) is an unanswered question.
4. In the circumstances of a taking of part of a unit, it is important to have some objective test by which to measure the portion of allocated interests to be reallocated. Subsection (b) sets forth a formula based on relative size, but permits the declaration to vary that formula to some other more appropriate formula in a particular circumstance. The right to vary the formula in the declaration is important, since it is clear that the formula set forth in the statute may in some instances result in gross inequities.
Example 1: Suppose in a commercial common interest community consisting of four units, each unit consists of a factory and parking lot, and the declaration provides that each unit's common expense liability, including utilities, is equal. Suppose further that the area of the factory building and parking lot in unit number one are equal, and that 1/2 the parking lot is taken by eminent domain, leaving the factory and 1/2 the lot intact. Under the formula set out in the statute, unit number one's common expense liability would be reduced even though its utilities might not be reduced at all, thus resulting in a windfall for the unit owner.
Example 2: Suppose that a common interest community contains ten units, each of which is allocated a 1/10 undivided interest in the association. Suppose further that a taking by eminent domain reduces the size of one of the units by 50%. In such case, the ownership interest of all the units will be reallocated so that the partially-taken unit has a 1/19 undivided interest in the common elements and the remaining nine units each has a 2/19 undivided interest in the common elements. Thus, the partially-taken unit has a common element interest equal to 1/2 of the common element interest allocated to each of the other units. Note that this is not equivalent to the partially-taken unit having a 5% undivided interest and the remaining nine units each having a 10% undivided interest.
5. Even before the amendment formally acknowledging the reallocation of percentages required by this section is recorded, the reallocation is deemed to have occurred simultaneously with the taking. This rule is necessary to avoid the hiatus that otherwise could occur between the taking and the reallocation of interests, votes, and liabilities.
SECTION 1-108. SUPPLEMENTAL GENERAL PRINCIPLES OF LAW APPLICABLE. The principles of law and equity, including the law of corporations [and unincorporated associations], the law of real property, and the law relative to capacity to contract, principal and agent, eminent domain, estoppel, fraud, misrepresentation, duress, coercion, mistake, receivership, substantial performance, or other validating or invalidating cause supplement the provisions of this [Act], except to the extent inconsistent with this [Act].
1. This Act displaces existing law relating to common interest communities and other law only as stated by specific sections and by reasonable implication therefrom. Moreover, unless specifically displaced by this statute, common law rights are retained. The listing given in this section is merely an illustration, no listing could be exhaustive.
2. The bracketed language concerning unincorporated associations should be deleted if the enacting State requires incorporation of a unit owners' association. See the parallel language contained in Section 3-101.
SECTION 1-109. CONSTRUCTION AGAINST IMPLICIT REPEAL. This [Act] being a general act intended as a unified coverage of its subject matter, no part of it shall be construed to be impliedly repealed by subsequent legislation if that construction can reasonably be avoided.
This section derives from Section 1-104 of the Uniform Commercial Code.
SECTION 1-110. UNIFORMITY OF APPLICATION AND CONSTRUCTION. This [Act] shall be applied and construed so as to effectuate its general purpose to make uniform the law with respect to the subject of this [Act] among States enacting it.
This Act should be construed in accordance with its underlying purpose of making the law uniform with respect to all forms of common interest communities, as well as the purposes stated in the Prefatory Note of simplifying, clarifying, and modernizing the law of common interest communities, promoting the interstate flow of funds to common interest communities, and protecting consumers, purchasers, and borrowers against common interest community practices which may cause unreasonable risk of loss to them. Accordingly, the test of each section should be read in light of the purpose and policy of the rule or principle in question, and also of the Act as a whole.
SECTION 1-111. SEVERABILITY. If any provision of this [Act] or the application thereof to any person or circumstances is held invalid, the invalidity does not affect other provisions or applications of this [Act] which can be given effect without the invalid provisions or applications, and to this end the provisions of this [Act] are severable.
SECTION 1-112. UNCONSCIONABLE AGREEMENT OR TERM OF CONTRACT.
(a) The court, upon finding as a matter of law that a contract or contract clause was unconscionable at the time the contract was made, may refuse to enforce the contract, enforce the remainder of the contract without the unconscionable clause, or limit the application of any unconscionable clause in order to avoid an unconscionable result.
(b) Whenever it is claimed, or appears to the court, that a contract or any contract clause is or may be unconscionable, the parties, in order to aid the court in making the determination, must be afforded a reasonable opportunity to present evidence as to:
(1) the commercial setting of the negotiations;
(2) whether a party has knowingly taken advantage of the inability of the other party reasonably to protect his interests by reason of physical or mental infirmity, illiteracy, inability to understand the language of the agreement, or similar factors;
(3) the effect and purpose of the contract or clause; and
(4) if a sale, any gross disparity, at the time of contracting, between the amount charged for the property and the value of that property measured by the price at which similar property was readily obtainable in similar transactions. A disparity between the contract price and the value of the property measured by the price at which similar property was readily obtainable in similar transactions does not, of itself, render the contract unconscionable.
This section is similar to Section 2-302 of the Uniform Commercial Code and Section 1-311 of the Uniform Land Transactions Act. The rationale and Comments provided in those sections are equally applicable to this section.
SECTION 1-113. OBLIGATION OF GOOD FAITH. Every contract or duty governed by this [Act] imposes an obligation of good faith in its performance or enforcement.
This section sets forth a basic principle running throughout this Act: in transactions involving common interest communities, good faith is required in the performance and enforcement of all agreements and duties. Good faith, as sued in this Act, means observance of two standards: "honesty in fact," and observance of reasonable standards of fair dealing. While the term is not defined, the term is derived from and used in the same manner as in Section 1-201 of the Uniform Simplification of Land Transfers Act, and Sections 2-103(i)(b) and 7-404 of the Uniform Commercial Code.
SECTION 1-114. REMEDIES TO BE LIBERALLY ADMINISTERED.
(a) The remedies provided by this [Act] shall be liberally administered to the end that the aggrieved party is put in as good a position as if the other party had fully performed. However, consequential, special, or punitive damages may not be awarded except as specifically provided in this [Act] or by other rule of law.
(b) Any right or obligation declared by this [Act] is enforceable by judicial proceeding.
SECTION 1-115. ADJUSTMENT OF DOLLAR AMOUNTS.
(a) From time to time the dollar amount specified in Section 1-203 must change, as provided in subsections (b) and (c), according to and to the extent of changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers: U.S. City Average, All Items 1967 = 100, compiled by the Bureau of Labor Statistics, United States Department of Labor, (the "Index"). The Index for December, 1979, which was 230, is the Reference Base Index.
(b) The dollar amount specified in Section 1-203 and any amount stated in the declaration pursuant to that section, must change on July 1 of each year if the percentage of change, calculated to the nearest whole percentage point, between the Index at the end of the preceding year and the Reference Base Index is 10 percent or more, but
(i) the portion of the percentage change in the Index in excess of a multiple of 10 percent must be disregarded and the dollar amount shall change only in multiples of 10 percent of the amount appearing in this [Act] on the date of enactment;
(ii) the dollar amount must not change if the amount required by this section is that currently in effect pursuant to this [Act] as a result of earlier application of this section; and
(iii) in no event may the dollar amount be reduced below the amount appearing in this [Act] on the date of enactment.
(c) If the Index is revised after December, 1979, the percentage of change pursuant to this section must be calculated on the basis of the revised Index. If the revision of the Index changes the Reference Base Index, a revised Reference Base Index must be determined by multiplying the Reference Base Index then applicable by the rebasing factor furnished by the Bureau of Labor Statistics. If the Index is superseded, the Index referred to in this section is the one represented by the Bureau of Labor Statistics as reflecting most accurately changes in the purchasing power of the dollar for consumers.
1. The 1994 revision deleted the reference to Section 4-101(b)(7) to reflect the fact that another amendment deletes that section from the Act.
2. Subsection (c) requires recalculation of the Consumer Price Index if the Reference Base Index should be changed by the Department of Labor.
In 1987, the Bureau of Labor Statistics did in fact change the CPI for Urban and Clerical Workers, which used a 1967 base year, by adopting a rebasing factor. The new Index uses a base year of "1982-84 = 100."
While the index referenced in this Uniform Act is now obsolete, the drafters declined to modify the Uniform Act to delete reference to the old index. As of mid-1993, all the States which had adopted a version of UCIOA incorporated this indexing section. There is no reason to suggest that those adoptions were in error or that they even require amendment, since the statute as drafted has a functioning and mandatory self-correction mechanism.
However, States which choose to adopt this Act after 1994 should revise subsection (a) - as Nevada did, for example - to refer to "1982-84 = 100," rather than "1967 = 100."
Subsection (c) of the Act requires an adopting State to revise the Reference Base Index when, as is now the case, the "revision of the index changes the Reference Base Index." The rebasing factor for the 1967 Index furnished by the Bureau of Labor Statistics is 0.3357175. Applying that rebasing factor to the original December, 1979 Reference Base Index of 230 yields a Revised Reference Base Index of 77.215, or 77.
The December 1994 Index (using the 1982-84 = 100 Base) was 147.2. Accordingly, a recalculation of the $300 figure in Section 1-203 as of July 1, 1995 would be done as follows:
December 1979 Index = 77 (1967 Reference Base Index of 230,
multiplied by the rebasing factor and
rounded to the nearest whole percent).
December 1994 Index = 147.0 (Using 1982-84 = 100 Index for the
end of 1994, the year preceding 1995,
rounded to the nearest whole percent).
Difference = 70.0
70 is 90.9% of the Reference Base Index, or more than a 10% increase. Thus, on July 1, 1995, the $300 amount specified in Section 1-203 would increase. Because the amount of increase "in excess of a multiple of 10% must be disregarded," the dollar amount of $300 increases by 90%, or $270. Therefore, as of July 1, 1995 the triggering dollar amount would be $570, or $47.50 per month.
SECTION 1-201. APPLICABILITY TO NEW COMMON INTEREST COMMUNITIES. Except as provided in Sections 1-202 and 1-203, this [Act] applies to all common interest communities created within this State after the effective date of this [Act]. The provisions of [insert reference to all present statutes expressly applicable to planned communities, condominiums, cooperatives, or horizontal property regimes] do not apply to common interest communities created after the effective date of this [Act]. Amendments to this [Act] apply to all common interest communities created after the effective date of this [Act] or subjected to this [Act], regardless of when the amendment is adopted in this State.
1. The question of the extent to which a state statute should apply to particular common interest communities involves two major conceptual problems: (1) whether the statute should require or permit different results for common interest communities created before and after the statute takes effect; and (2) whether differences in the forms of ownership, and the history of their development, requires different levels of applicability to those various forms.
Two conflicting policies are posed when considering the applicability of this Act to "old" and "new" common interest communities in the enacting State. On the one hand, it is desirable, for reasons of uniformity, for the Act to apply to all common interest communities located in a particular State, regardless of whether the common interest community was created before or after adoption of the Act in that State. To the extent that different laws apply within the same State to different common interest communities, confusion results in the minds of both lenders and consumers. Moreover, because of the inadequacies and uncertainties of common interest communities created under prior law, if any, and because of the requirements placed on declarants and unit owners' associations by this Act which might increase the costs of new common interest communities, different markets might tend to develop for common interest communities created before and after adoption of the Act.
On the other hand, to make all provisions of this Act automatically applicable to "old" common interest communities might violate the constitutional prohibition of impairment of contracts. In addition, aside from the constitutional issue, automatic applicability of the entire Act almost certainly would unduly alter the legitimate expectations of some present unit owners and declarants.
Accordingly, the philosophy of this part reflects a desire to maximize the uniform applicability of the Act