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D R A F T
FOR APPROVAL
AMENDMENTS TO UNIFORM COMMON
INTEREST OWNERSHIP ACT
NATIONAL CONFERENCE OF
COMMISSIONERS
ON UNIFORM STATE LAWS
MEETING IN ITS ONE-HUNDRED-AND-SEVENTEENTH YEAR
BIG SKY, MONTANA
JULY 18 - JULY 25, 2008
AMENDMENTS TO UNIFORM COMMON
INTEREST OWNERSHIP ACT
WITHOUT PREFATORY NOTE AND WITH PARTIAL NEW COMMENTS
Copyright 82008
By
NATIONAL CONFERENCE OF
COMMISSIONERS
ON UNIFORM STATE LAWS
The
ideas and conclusions set forth in this draft, including the proposed statutory
language and any comments or reporter=s notes, have not been passed upon by the National
Conference of Commissioners on Uniform State Laws or the Drafting
Committee. They do not necessarily
reflect the views of the Conference and its Commissioners and the Drafting
Committee and its Members and Reporter.
Proposed statutory language may not be used to ascertain the intent or
meaning of any promulgated final statutory proposal.
DRAFTING COMMITTEE ON AMENDMENTS TO
UNIFORM COMMON INTEREST OWNERSHIP ACT
The Committee appointed by and
representing the National Conference of Commissioners on Uniform State Laws in
amending this Act consists of the following
individuals:
CARL H. LISMAN, 84 Pine
St., P.O. Box 728, Burlington, VT 05402, Chair
OWEN L. ANDERSON, University of Oklahoma College of
Law, 300 Timberdell Rd., Norman, OK 73019
MARION W. BENFIELD, JR., 10
Overlook Circle, New Braunfels, TX 78132
DAVID D. BIKLEN, 153 N.
Beacon St., Hartford, CT 06105
ELLEN F. DYKE, Legal
Department 52/923, 10400 Fernwood Rd., Bethesda, MD 20817
JOHN S. GILLIG, P.O. Box
4285, 91 C Michael Davenport Blvd., Frankfort, KY 40604
DALE G. HIGER, 1302 Warm
Springs Ave., Boise, ID 83712
DONALD E. MIELKE, 7472 S.
Shaffer Ln., Suite 100, Littleton, CO 80127
HIROSHI SAKAI, 3773 Diamond
Head Circle, Honolulu, HI 96815
NATHANIEL STERLING, 4180 Oak Hill Ave., Palo Alto,
CA 94306
YVONNE L. THARPES, Legislature of the Virgin
Islands, P.O. Box 1690, St. Thomas, VI 00804
NORA WINKELMAN, Office of General Counsel, 333
Market St., 17th Flr., Harrisburg, PA 17101
LEE YEAKEL, Western
District of Texas, P.O. Box 164196, Austin, TX 78716‑4196
WILLIAM R. BREETZ, JR., Connecticut Urban Legal
Initiative, 35 Elizabeth St. Rm K‑202, Hartford, CT 06105, National
Conference Reporter
EX
OFFICIO
MARTHA LEE
WALTERS, Oregon Supreme Court, 1163 State St.,
Salem, OR 97301‑2563, President
WILLIAM H. HENNING, University of Alabama, Box
870382, Tuscaloosa, AL 35487‑0382, Division Chair
AMERICAN
BAR ASSOCIATION ADVISOR
GARY A.
POLIAKOFF, 3111 Stirling Rd., Ft. Lauderdale, FL 33312‑6525, ABA
Advisor
REBECCA ANDERSON
FISCHER, 633 17th St., Suite 3000, Denver, CO 80202, ABA Section Advisor
EXECUTIVE
DIRECTOR
JOHN A. SEBERT,
111 N. Wabash Ave, Suite 1010, Chicago, IL 60602, Executive Director
Copies of this Act
may be obtained from:
NATIONAL CONFERENCE
OF COMMISSIONERS
ON UNIFORM STATE LAWS
111 N. Wabash Ave.,
Suite 1010
Chicago,
Illinois 60602
312/450-6600
www.nccusl.org
AMENDMENTS TO UNIFORM COMMON INTEREST OWNERSHIP ACT
TABLE OF CONTENTS
[ARTICLE] 1GENERAL PROVISIONS
[PART] 1DEFINITIONS AND OTHER
GENERAL PROVISIONS
SECTION 1-101. SHORT TITLE................................................................................................. 1
SECTION 1-102. APPLICABILITY............................................................................................. 1
SECTION 1-103. DEFINITIONS................................................................................................. 1
SECTION 1-104. NO VARIATION
BY AGREEMENT............................................................ 10
SECTION 1-105. SEPARATE TITLES
AND TAXATION...................................................... 10
SECTION 1-106. APPLICABILITY OF
LOCAL ORDINANCES, REGULATIONS, AND BUILDING CODES........................................................................................................................................... 11
SECTION 1-107. EMINENT DOMAIN..................................................................................... 11
SECTION 1-108. SUPPLEMENTAL
GENERAL PRINCIPLES OF LAW APPLICABLE. 13
SECTION 1-109. CONSTRUCTION
AGAINST IMPLICIT REPEAL.................................... 13
SECTION 1-110. UNIFORMITY OF
APPLICATION AND CONSTRUCTION..................... 13
SECTION 1-111. SEVERABILITY............................................................................................ 13
SECTION 1-112. UNCONSCIONABLE
AGREEMENT OR TERM OF CONTRACT........ 14
SECTION 1-113. OBLIGATION OF
GOOD FAITH................................................................ 14
SECTION 1-114. REMEDIES TO BE
LIBERALLY ADMINISTERED................................. 14
SECTION 1-115. ADJUSTMENT OF
DOLLAR AMOUNTS................................................. 15
[PART] 2APPLICABILITY
SECTION 1-201. APPLICABILITY TO
NEW COMMON INTEREST COMMUNITIES....... 16
SECTION 1-202. EXCEPTION FOR
SMALL COOPERATIVES......................................... 16
SECTION 1-203. EXCEPTION FOR
SMALL AND LIMITED EXPENSE LIABILITY PLANNED COMMUNITIES............................................................................................................... 16
SECTION 1-204. APPLICABILITY TO
PRE-EXISTING COMMON INTEREST COMMUNITIES 17
SECTION 1-205. SAME; EXCEPTION FOR APPLICABILITY
TO SMALL PRE-
EXISTING COOPERATIVES AND PLANNED COMMUNITIES............................... 18
SECTION 1-206. AMENDMENTS TO
GOVERNING INSTRUMENTS............................... 19
SECTION 1-207. APPLICABILITY TO NONRESIDENTIAL AND MIXED-USE
COMMON INTEREST COMMUNITIES........................................................................ 19
SECTION 1-208. APPLICABILITY TO
OUT-OF-STATE COMMON INTEREST COMMUNITIES 21
SECTION 1-209.
OTHER EXEMPT REAL ESTATE ARRANGEMENTS.......................... 21
SECTION 1-210.
OTHER EXEMPT COVENANTS.............................................................. 21
[ARTICLE] 2CREATION, ALTERATION, ANDTERMINATION OF
COMMON INTEREST COMMUNITIES
SECTION
2-101. CREATION OF COMMON INTEREST
COMMUNITIES......................... 23
SECTION 2-102.
UNIT BOUNDARIES.................................................................................... 23
SECTION 2-103. CONSTRUCTION AND VALIDITY OF DECLARATION AND
BYLAWS.......................................................................................................................... 24
SECTION 2-104. DESCRIPTION OF
UNITS.......................................................................... 24
SECTION 2-105. CONTENTS OF
DECLARATION.............................................................. 24
SECTION 2-106. LEASEHOLD COMMON
INTEREST COMMUNITIES........................... 27
SECTION 2-107. ALLOCATION OF
ALLOCATED INTERESTS........................................ 28
SECTION 2-108. LIMITED COMMON
ELEMENTS.............................................................. 29
SECTION 2-109. PLATS AND PLANS................................................................................... 30
SECTION 2-110. EXERCISE OF
DEVELOPMENT RIGHTS.............................................. 33
SECTION 2-111. ALTERATIONS OF
UNITS......................................................................... 34
SECTION 2-112. RELOCATION OF
UNIT BOUNDARIES................................................... 34
SECTION 2-113. SUBDIVISION OF
UNITS............................................................................ 36
[SECTION 2-114. EASEMENT FOR
ENCROACHMENTS................................................. 36
[SECTION 2-114. MONUMENTS AS
BOUNDARIES........................................................... 36
SECTION 2-115. USE FOR SALES
PURPOSES................................................................ 37
SECTION 2-116. EASEMENT RIGHTS.................................................................................. 37
SECTION 2-117. AMENDMENT OF
DECLARATION.......................................................... 38
SECTION 2-118. TERMINATION OF
COMMON INTEREST COMMUNITY....................... 41
SECTION 2-119. RIGHTS OF SECURED
LENDERS.......................................................... 46
SECTION 2-120. MASTER
ASSOCIATIONS........................................................................ 46
SECTION 2-121. MERGER OR
CONSOLIDATION OF COMMON INTEREST COMMUNITIES 48
SECTION 2-122. ADDITION OF
UNSPECIFIED REAL ESTATE....................................... 49
SECTION 2-123. MASTER PLANNED
COMMUNITIES...................................................... 49
SECTION 2-124.
TERMINATION FOLLOWING CATASTROPHE...................................... 50
[ARTICLE] 3MANAGEMENT OF THE
COMMON INTEREST COMMUNITY
SECTION 3-101. ORGANIZATION OF
UNIT OWNERS ASSOCIATION............................ 52
SECTION 3-102. POWERS AND
DUTIES OF UNIT OWNERS ASSOCIATION.............. 52
SECTION 3-103. EXECUTIVE BOARD
MEMBERS AND OFFICERS.............................. 58
SECTION 3-104. TRANSFER OF
SPECIAL DECLARANT RIGHTS................................. 61
SECTION 3-105. TERMINATION OF
CONTRACTS AND LEASES OF DECLARANT... 64
SECTION 3-106. BYLAWS....................................................................................................... 65
SECTION 3-107. UPKEEP OF COMMON
INTEREST COMMUNITY................................. 66
SECTION 3-108. MEETINGS................................................................................................... 66
SECTION 3-109. QUORUMS QUORUM................................................................................ 71
SECTION 3-110. VOTING; PROXIES;
BALLOTS................................................................. 71
SECTION 3-111. TORT AND CONTRACT
LIABILITY; TOLLING OF LIMITATION PERIOD 75
SECTION 3-112. CONVEYANCE OR
ENCUMBRANCE OF COMMON ELEMENTS.... 76
SECTION 3-113. INSURANCE................................................................................................ 78
SECTION 3-114. SURPLUS FUNDS...................................................................................... 82
SECTION 3-115. ASSESSMENTS
FOR COMMON EXPENSES..................................... 83
SECTION 3-116. LIEN FOR ASSESSMENTS;
SUMS DUE THE ASSOCIATION; ENFORCEMENT 84
SECTION 3-117. OTHER LIENS............................................................................................. 90
SECTION 3-118. ASSOCIATION
RECORDS........................................................................ 91
SECTION 3-119. ASSOCIATION AS
TRUSTEE................................................................... 93
SECTION 3-120.
RULES.......................................................................................................... 94
SECTION 3-121.
NOTICE TO UNIT OWNERS...................................................................... 95
SECTION 3-122.
REMOVAL OF OFFICERS AND DIRECTORS....................................... 96
SECTION 3-123.
ADOPTION OF BUDGETS........................................................................ 97
SECTION 3-124.
LITIGATION INVOLVING THE DECLARANT........................................... 98
[ARTICLE] 4PROTECTION OF
PURCHASERS
SECTION 4-101. APPLICABILITY;
WAIVER....................................................................... 101
SECTION 4-102. LIABILITY FOR PUBLIC OFFERING STATEMENT
REQUIREMENTS......................................................................................................... 101
SECTION 4-103. PUBLIC OFFERING
STATEMENT; GENERAL PROVISIONS........... 102
SECTION 4-104. SAME; COMMON
INTEREST COMMUNITIES SUBJECT TO DEVELOPMENT RIGHTS........................................................................................................................................ 107
SECTION 4-105. SAME; TIME SHARES............................................................................. 109
SECTION 4-106. SAME; COMMON
INTEREST COMMUNITIES CONTAINING CONVERSION BUILDINGS........................................................................................................................................ 109
SECTION 4-107. SAME; COMMON
INTEREST COMMUNITY SECURITIES................. 109
SECTION 4-108. PURCHASER'S RIGHT
TO CANCEL.................................................... 110
SECTION 4-109. RESALES OF UNITS............................................................................... 111
SECTION 4-110. ESCROW OF
DEPOSITS....................................................................... 113
SECTION 4-111. RELEASE OF LIENS............................................................................... 113
SECTION 4-112. CONVERSION
BUILDINGS..................................................................... 114
SECTION 4-113. EXPRESS
WARRANTIES OF QUALITY............................................... 115
SECTION 4-114. IMPLIED
WARRANTIES OF QUALITY................................................... 116
SECTION 4-115. EXCLUSION OR MODIFICATION OF IMPLIED
WARRANTIES
OF QUALITY.................................................................................................................. 117
SECTION 4-116. STATUTE OF
LIMITATIONS FOR WARRANTIES................................ 118
SECTION 4-117. EFFECT OF VIOLATIONS ON RIGHTS OF ACTION;
ATTORNEY=S FEES.................................................................................................... 119
SECTION 4-118. LABELING OF
PROMOTIONAL MATERIAL......................................... 120
SECTION 4-119. DECLARANT'S
OBLIGATION TO COMPLETE AND RESTORE...... 120
SECTION 4-120. SUBSTANTIAL
COMPLETION OF UNITS............................................. 120
AMENDMENTS TO UNIFORM COMMON INTEREST OWNERSHIP ACT
[ARTICLE] 1
GENERAL PROVISIONS
[PART] 1
DEFINITIONS AND OTHER GENERAL PROVISIONS
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 In this [act]:
(1) AAffiliate of a declarant@ means any person who controls, is controlled by, or
is under common control with a declarant.
(A) A person Acontrols@ 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.
(B) A person Ais
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) AAllocated interests@ means
the following interests allocated to each unit:
(i)(A) In in
a condominium, the undivided interest in the common elements, the common
expense liability, and votes in the association;
(ii)(B) in a
cooperative, the common expense liability, and the ownership
interest, and votes in the association; and
(iii)(C) in a planned
community, the common expense liability and votes in the association.
(3) AAssessment@
means the sum attributable to each unit and due to the association pursuant to
Section 3-115.
(3)(4) AAssociation@ or Aunit owners= owners
association@ means the unit owners= owners
association organized under Section 3‑101.
(5) ABylaws@ means the instruments, however denominated, that
contain the procedures for conduct of the affairs of the association regardless
of the form in which the association is organized, including any amendments to
the instruments.
(4)(6) ACommon elements@ means:
(i)(A) in the case
of:
(A)(i) a
condominium or cooperative, all portions of the common interest community other
than the units; and
(B)(ii) a planned
community, any real estate within a planned community which is owned or leased
by the association, other than a unit; and
(ii)(B) in all
common interest communities, any other interests in real estate for the benefit
of unit owners which are subject to the declaration.
(5)(7) ACommon expenses@ means expenditures made by, or financial
liabilities of, the association, together with any allocations to reserves.
(6)(8) ACommon expense liability@ means the liability for common expenses allocated
to each unit pursuant to Section 2‑107.
(7)(9) ACommon interest community@ means real estate described in a declaration with
respect to which a person, by virtue of his the person=s
ownership of a unit, is obligated to pay for a share of real estate
taxes, insurance premiums, maintenance, or improvement of, or services or
other expenses related to, common elements, other units, or other real
estate described in a that declaration. The term does not
include an arrangement described in Section 1-209 or 1B210. For
purposes of this paragraph, AOwnership
ownership of a unit@ does not include holding a leasehold interest of
less than [20] years in a unit, including renewal options.
(8)(10) ACondominium@ 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)(11) AConversion 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)(12) ACooperative@ 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 the member=s
ownership interest in the association to exclusive possession of a unit.
(11)(13) ADealer@ means a person in the business of selling units for
his the person=s own
account.
(12)(14) ADeclarant@ means any person or group of persons acting in
concert who:
(i)(A) as part of a
common promotional plan, offers to dispose of his or its the
interest of the person or group of persons in a unit not previously
disposed of;or
(ii)(B) reserves or
succeeds to any special declarant right [,; or
(iii)(C) applies for
registration of a common interest community under [Article] 5].
(13)(15) ADeclaration@ means any the instruments,
however denominated, that creates a common interest community, including
any amendments to those that instruments instrument.
(14)(16) ADevelopment rights@ means
any right or combination of rights reserved by a declarant in the declaration
to:
(i)(A) add real
estate to a common interest community;
(ii)(B) create
units, common elements, or limited common elements within a common interest
community;
(iii)(C) subdivide
units or convert units into common elements; or
(iv)(D) withdraw
real estate from a common interest community.
(15)(17) ADispose@ or Adisposition@ 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)(18) AExecutive board@ means the body, regardless of name, designated in
the declaration or bylaws to act on behalf of the association.
(17)(19) AIdentifying number@ means
a symbol or address that identifies only one unit in a common interest
community.
(18)(20) ALeasehold 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)(21) ALimited 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)(22) AMaster association@ means
an organization described in Section 2‑120, whether or not it is also an
association described in Section 3‑101.
(23) ANonresidential purposes@ means use for a purpose other than a residential
purpose.
(21)(24) AOffering@ 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)(25) APerson@ means an individual, corporation, business trust,
estate, trust, partnership, limited liability company, association,
joint venture, [public corporation, government, or
governmental subdivision, or agency, or instrumentality,] or
any other legal or commercial entity. [The term does not include a
public corporation, government or governmental subdivision, agency, or
instrumentality.] [In the case of a land trust, however, Aperson@ means the beneficiary of the trust rather than the
trust or the trustee.]
(23)(26) APlanned 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)(27) AProprietary lease@ means
an agreement with the association pursuant to which a member is entitled to
exclusive possession of a unit in a cooperative.
(25)(28) APurchaser@ 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) a leasehold
interest (, including renewal options), of less
than 20 years,; or
(ii)(B) as security
for an obligation.
(26)(29) AReal 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. AReal estate@ The
term includes parcels with or without upper or lower boundaries, and
spaces that may be filled with air or water.
(30) ARecord@, when used as a noun, means information that is
inscribed on a tangible medium or that is stored in an electronic or other
medium and is retrievable in perceivable form.
(27)(31) AResidential purposes@ means
use for dwelling or recreational purposes, or both.
(32) ARule@ means any policy, guideline, restriction,
procedure, or regulation of an association, however denominated, which is not
set forth in the declaration or bylaws and which governs the conduct of persons
or the use or appearance of property.
(28)(33) ASecurity 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)(34) ASpecial declarant rights@ means rights reserved for the benefit of a
declarant to:
(i)(A) 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)(B) exercise any development right (Section 2‑110);
(iii)(C) maintain sales offices, management offices,
signs advertising the common interest community, and models (Section 2‑115);
(iv)(D) 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)(E) make the
common interest community subject to a master association (Section 2‑120);
(vi)(F) merge or
consolidate a common interest community with another common interest community
of the same form of ownership (Section 2‑121); or
(vii)(G) 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)).;
(H) control
any construction, design review, or aesthetic standards committee or process;
(I) attend
meetings of the unit owners and, except during an executive session, the
executive board; and
(J) have
access to the records of the association to the same extent as a unit owner.
(30)(35) ATime 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)(36) AUnit@ 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)(37)
AUnit 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.
NEW COMMENTS
Regarding
the definition of Acommon expense,@
the definition of Aassessment,@
the power to charge for services under 3-102(a)(10), and the relationship of
Sections 3-115 and 3-116.
#1
on common expenses B what they include
#2
on common interest community and time share B how they relate
The
term Arule@ has appeared in this Act since its original
promulgation in 1982; see, e.g., ' 3-102 (a):AY[t]he association may (1) adopt and amendYrules and regulations=. However, the definition of ARule@ is new in the 2008 amendments to UCIOA. It has been added for several reasons.
1. First, uncertainty existed regarding those
subject matters that must be adopted as rules after notice to unit owners and
an opportunity to comment, as provided in Section 3-120. In those appropriate cases, the Act makes
clear that the association must follow formal adoption procedures, rather than
simply approving informal policies or written guidelines.
The definition thus
highlights two fundamental subject matters where the rule adoption process must
be followed: one is personal conduct and the other is the use and appearance of
property.
In
addition, the committee recognizes that developing law in some jurisdictions
permits the association to regulate to some degree the behavior of unit owners
and their guests and tenants even when those persons are acting outside the
boundaries of the common interest community.
[insert citations to cases]. Most
commonly, these issues arise when associations seek to regulate parking on
public streets that serve the community. This Act takes no position on whether
such an extension of the association=s
authority is or is not appropriate in any instance and the Act cannot be read
either to authorize or prohibit such authority.
However, to the extent other law of an adopting State confirms that the
association possesses such authority, the definition makes clear that the
association=s policies in those regards B unless they appear in the declaration or bylaws for
that common interest community - must be adopted only after notice and comment.
2.
The Act recognizes that the same subject matters that may be regulated by >rules= may instead be controlled by language in the
declaration or bylaws. See, e.g.,
'3-106(d).
Indeed, in some instances, certain conduct and use restrictions must
appear in the declaration as a condition to their effectiveness. See, e.g., '2-105(a)(12).
In other instances, the association may only adopt rules governing a
particular subject matter if the declaration affirmatively empowers the
association to do so. See, e.g., '2-105(a)(14).
Thus, in any given common interest community, the pattern of various
provisions of the declaration, the bylaws and the rules must be considered
together in order for those who live in that community to gain a full
understanding of what they may and may not do.
It is common, for that reason, for associations to compile the
regulatory matters from those different sources into a single document for
distribution to unit owners.
3. Finally, in defining what subject matters may
be subject to the rules adoption process, Section 3-120(g) clearly exempts the
Association=s internal business operating procedures from that
process. In those instances, there is no obligation that the procedures be
adopted as rules. Instead, the executive
board or management company might adopt or amend such procedures at will. It may be useful to provide some examples.
$ The
association chooses to solicit bids from potential contractors for a particular
project, or for services that it requires. To the extent the executive board
wishes to adopt a procedure for soliciting, reviewing and accepting bids, such
a policy would not require notice to unit owners or the right to comment.
Indeed, since it is not subject to the rules adoption process, the executive
board is free to act in the absence of any formal policy whatsoever.
$ The
Board approves a management contract with an outside management company. That contract
may contain a variety of procedures governing how the manager must carry out
its duties in the management of the association.
$ The
Board may adopt filing procedures, check writing procedures, document retention
policies or an employee handbook, all without the need to adopt rules in those
respects.
$ There
will be cases, of course, where the line between >conduct= or >use= on the one hand and >internal operating procedures= may be less clear.
The principle set out in the definition, however, should guide the
decision-maker to the appropriate result.
SECTION 1‑104.
NO 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.
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.
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.
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.
Legislative Note B (11/07):
The practice of the states may vary with respect to the documentation of
eminent domain awards, and the word Adecree@ should therefore be considered for amendment as appropriate.
SECTION 1‑108.
SUPPLEMENTAL GENERAL PRINCIPLES OF LAW APPLICABLE. The principles of law and equity, including the law
of corporations [,] [and] any other form of organization authorized by law
in this state [,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].
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.
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.
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.
Legislative Note: Include this
section only if this state lacks a general severability statute or a decision
by the highest court of this state stating a general rule of severability.
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.
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.
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 AIndex@). 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.
[PART] 2
APPLICABILITY
SECTION 1‑201.
APPLICABILITY TO NEW COMMON INTEREST COMMUNITIES. Except as otherwise provided in Sections
1‑202 and 1‑203 this [part], 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.
SECTION 1‑202.
EXCEPTION FOR SMALL COOPERATIVES. If a cooperative contains no more than 12
units and is not subject to any development rights, it is subject only to
Sections 1‑106 (Applicability of Local Ordinances, Regulations, and
Building Codes) and 1‑107 (Eminent Domain) of this [act] unless
the declaration provides that the entire [act] is applicable.
SECTION 1‑203.
EXCEPTION FOR SMALL AND LIMITED EXPENSE LIABILITY PLANNED COMMUNITIES.
(a) If a
planned community that is not subject to any development right:
(1) contains
no more than 12 units; or
(2) provides,
in its declaration, that the annual average common expense liability of all
units restricted to residential purposes, exclusive of optional user fees and
any insurance premiums paid by the association, may not exceed $300 as adjusted
pursuant to Section 1‑115 (Adjustment of Dollar Amounts), it is subject
only to Sections 1‑105 (Separate Titles and Taxation), 1‑106
(Applicability of Local Ordinances, Regulations, and Building Codes), and 1‑107
(Eminent Domain) unless the declaration provides that this entire [act] is
applicable.
(a) Unless
the declaration provides that this entire [act] is applicable, a planned
community that is not subject to any development right is subject only to
Sections 1-105, 1-106, and 1-107, if the community:
(1) contains no more than 12 units; or
(2) provides
in its declaration that the annual average common expense liability of all
units restricted to residential purposes, exclusive of optional user fees and
any insurance premiums paid by the association, may not exceed $768, as
adjusted pursuant to Section 1-115.
(b) The
exemption provided in subsection (a)(2) applies only if:
(1) the
declarant reasonably believes in good faith that the maximum stated assessment
will be sufficient to pay the expenses of the planned community; and
(2) the
declaration provides that the assessment may not be increased above the
limitation stated in subsection (a)(2) during the period of declarant
control without the consent of all unit owners.
SECTION
1‑204. APPLICABILITY TO
PRE-EXISTING COMMON INTEREST COMMUNITIES.
(a) Except for a cooperative and planned community
described as provided in Section 1‑205 and nonresidential
common interest community described in Section 1-207, (Same; Exception for Small
Pre-Existing Cooperatives and Planned Communities), the following
sections apply to a common interest community created in this state before [the
effective date of this act]:
Sections 1‑105
(Separate Titles and Taxation),;
1‑106 (Applicability of Local Ordinances,
Regulations, and Building Codes),;
1‑107 (Eminent Domain),;
1-206;
2-102;
2‑103 (Construction and Validity of
Declaration and Bylaws),;
2‑104 (Description of Units),;
2‑117 (h) and (i);
2-121 (Merger or Consolidation of Common Interest
Communities),;
2-124;
3‑102(a)(1) through (6) and (11) through (16)
(Powers of Unit Owners' Association),;
3‑103 3-111 (Tort and Contract
Liability),;
3‑116 (Lien for Assessments),;
3‑118 (Association Records),;
3-124;
4-109 (Resales of Units), and;
4‑117 (Effect of Violation on Rights of
Action; Attorney's Fees),; and
Section 1‑103
(Definitions) to the extent necessary in to construing
construe any of those sections., apply to all common
interest communities created in this state before the effective date of this
[act];
(b) but those The sections described
in subsection (a) apply only with respect to events and circumstances
occurring after [the effective date of this [act] and do not
invalidate existing provisions of the [declaration, bylaws, or plats or plans]
of those common interest communities.
SECTION 1‑205.
SAME; EXCEPTION FOR APPLICABILITY TO SMALL PRE-EXISTING
COOPERATIVES AND PLANNED COMMUNITIES. If a cooperative or planned community created
within this state before [the effective date of this [act]
contains no more than 12 units and is not subject to any development rights
right, it is subject only to Sections 1‑105 (Separate Titles
and Taxation), 1‑106 (Applicability of Local Ordinances,
Regulations, and Building Codes), and 1‑107 (Eminent Domain)
unless the declaration is amended in conformity with applicable law and with
the procedures and requirements of the declaration to take advantage of the
provisions of Section 1‑206, in which case, all the sections
enumerated in Section 1‑204 apply to that cooperative or planned
community.
SECTION 1‑206.
AMENDMENTS TO GOVERNING INSTRUMENTS.
(a) The
declaration, bylaws, or plats and plans of any common interest community
created before [the effective date of this [act] may be amended
to achieve any result permitted by this [act], regardless of what applicable
law provided before this [act] was adopted.
(b) Except as otherwise provided in Section
2-117(j), an An amendment to the declaration, bylaws, or plats and
plans authorized by this section must be adopted in conformity with any
procedures and requirements for amending the instruments specified by those
instruments or, if there are none, in conformity with the amendment procedures
of this [act]. If an amendment grants to
any a person any a rights right, powers
power, or privileges privilege permitted by this [act], all
any correlative obligations obligation, liabilities
liability, and or restrictions restriction
in this [act] also apply applies to that the
person.
SECTION 1‑207.
APPLICABILITY TO NONRESIDENTIAL AND MIXED-USE COMMON INTEREST
COMMUNITIES.
(a) ANonresidential common interest community@ means a common interest community in which all
units are restricted exclusively to nonresidential purposes. Except as otherwise
provided in subsection (e) (d), this section applies only to
nonresidential common interest communities.
(b) A
nonresidential common interest community is not subject to this [act] unless
except to the extent the declaration otherwise provides.
that:
(c) The
declaration of a nonresidential common interest community may provide that
(1) the this entire [act] applies
to the community;
(2) [Articles] 1 and 2 apply to the community; or that
(3) in the
case of a planned community or a cooperative, only
Sections 1-105 (Separate Titles and Taxation), 1-106 (Applicability
of Local Ordinances, Regulations and Building Codes), and 1-107 (Eminent
Domain) apply to the community.
(d)(c) If the entire [act] applies to a nonresidential
common interest community, the declaration may also require, subject to Section
1‑112 (Unconscionable Agreement or Term of Contract), that:
(1)
notwithstanding Section 3‑105 (Termination of Contracts and
Leases of Declarant), any management, contract maintenance,
operations, or employment contract, lease of recreational or parking areas
or facilities, and any other contract or lease between the association and a
declarant or an affiliate of a declarant continues in force after the declarant
turns over control of the association; and
(2)
notwithstanding Section 1‑104 (Variation by Agreement),
purchasers of units must execute proxies, powers of attorney, or similar
devices in favor of the declarant regarding particular matters enumerated in
those instruments.
(e)(d)
A common interest community that contains
units restricted exclusively to nonresidential purposes and other units that
may be used for residential purposes is not subject to this [act] unless the
units that may be used for residential purposes would comprise a common
interest community that would be subject to this [act] in the absence of
the nonresidential units or the declaration provides that this [act] applies as
provided in subsection (b) or (c) or (d).
SECTION 1‑208. APPLICABILITY TO OUT-OF-STATE COMMON INTEREST
COMMUNITIES. This [act] does not apply to a common
interest communities community or units located outside
this State, but the public offering statement provisions (Sections 4‑102
through 4‑108)state, but Sections 4‑102 and 4-103 and, to
the extent applicable, Sections 4-104 through 4-106 apply to all a
contracts contract for the disposition thereof of a
unit in that common interest community signed in this state by any party
unless exempt under Section 4‑101(b) [and the agency regulation
provisions under [Article] 5 apply to any offering thereof in this state].
SECTION 1-209.
OTHER EXEMPT REAL ESTATE ARRANGEMENTS.
(a) An
arrangement between the associations for two or more common interest
communities to share the costs of real
estate taxes, insurance premiums, services, maintenance or improvements of real
estate, or other activities specified in their arrangement or declarations does
not create a separate common interest community. If the declarants of the common interest
communities are affiliates, the arrangement may not unreasonably allocate the
costs among the common interest communities.
(b) An
arrangement between an association and the owner of real estate that is not
part of a common interest community to
share the costs of real estate taxes, insurance premiums, services, maintenance
or improvements of real estate, or other activities specified in their
arrangement does not create a separate common interest community. However,
assessments against the units in the common interest community required by the
arrangement must be included in the periodic budget for the common interest
community, and the arrangement must be disclosed in all public offering
statements and resale certificates required by this [act].
SECTION 1-210.
OTHER EXEMPT COVENANTS. A covenant that requires the owners of separately
owned parcels of real estate to share costs or other obligations associated
with a party wall, driveway, well, or other similar use does not create a
common interest community unless the owners otherwise agree.
[ARTICLE] 2
CREATION, ALTERATION, AND
TERMINATION OF COMMON INTEREST COMMUNITIES
SECTION 2‑101.
CREATION OF COMMON INTEREST COMMUNITIES.
(a) A common
interest community may be created pursuant to this [act] only by recording a
declaration executed in the same manner as a deed and, in a cooperative, by
conveying the real estate subject to that declaration to the association. The declaration must be recorded in every
[county] in which any portion of the common interest community is located and
must be indexed [in the grantee's index] in the name of the common interest
community and the association and [in the grantor=s
index] in the name of each person executing the declaration.
(b) In a
condominium, a declaration, or an amendment to a declaration, adding units may
not be recorded unless (i) all structural components and mechanical systems of
all buildings containing or comprising any units thereby created are
substantially completed in accordance with the plans, as evidenced by a
recorded certificate of completion executed by an independent [registered]
engineer, surveyor, or architect [, or (ii) unless the agency has approved the
declaration or amendment in the manner prescribed in Section 5‑103(b)].
SECTION 2‑102.
UNIT BOUNDARIES. Except as provided by the declaration:
(1) If walls,
floors, or ceilings are designated as boundaries of a unit, all lath, furring,
wallboard, plasterboard, plaster, paneling, tiles, wallpaper, paint, finished
flooring, and any other materials constituting any part of the finished
surfaces thereof are a part of the unit, and all other portions of the walls,
floors, or ceilings are a part of the common elements.
(2) If any
chute, flue, duct, wire, conduit, bearing wall, bearing column, or any other
fixture lies partially within and partially outside the designated boundaries
of a unit, any portion thereof serving only that unit is a limited common
element allocated solely to that unit, and any portion thereof serving more
than one unit or any portion of the common elements is a part of the common
elements.
(3) Subject
to paragraph (2), all spaces, interior partitions, and other fixtures and
improvements within the boundaries of a unit are a part of the unit.
(4) Any
shutters, awnings, window boxes, doorsteps, stoops, porches, balconies, patios,
and all exterior doors and windows or other fixtures designed to serve a single
unit, but located outside the unit's boundaries, are limited common elements
allocated exclusively to that unit.
SECTION 2‑103.
CONSTRUCTION AND VALIDITY OF DECLARATION AND BYLAWS.
(a) All
provisions of the declaration and bylaws are severable.
(b) The rule
against perpetuities does not apply to defeat any provision of the declaration,
bylaws, or rules, or regulations adopted pursuant to Section 3‑102(a)(1).
(c) In the
event of If a conflict exists between the provisions of
the declaration and the bylaws, the declaration prevails except to the extent
the declaration is inconsistent with this [act].
(d) Title to
a unit and common elements is not rendered unmarketable or otherwise affected
by reason of an insubstantial failure of the declaration to comply with this
[act]. Whether a substantial failure
impairs marketability is not affected by this [act].
SECTION 2‑104.
DESCRIPTION OF UNITS. A description of a unit which sets forth the
name of the common interest community, the [recording data] for the
declaration, the [county] in which the common interest community is located, and
the identifying number of the unit, is a legally sufficient description of that
unit and all rights, obligations, and interests appurtenant to that unit which
were created by the declaration or bylaws.
SECTION 2‑105.
CONTENTS OF DECLARATION.
(a) The
declaration must contain:
(1) the names
of the common interest community and the association and a statement that the
common interest community is either a condominium, cooperative, or planned
community;
(2) the name
of every [county] in which any part of the common interest community is
situated;
(3) a legally
sufficient description of the real estate included in the common interest
community;
(4) a
statement of the maximum number of units that the declarant reserves the right
to create;
(5) in a
condominium or planned community, a description of the boundaries of each unit
created by the declaration, including the unit's identifying number or, in a
cooperative, a description, which may be by plats or plans, of each unit
created by the declaration, including the unit's identifying number, its size
or number of rooms, and its location within a building if it is within a
building containing more than one unit;
(6) a
description of any limited common elements, other than those specified in
Section 2‑102(2) and (4), as provided in Section 2‑109(b)(10) and,
in a planned community, any real estate that is or must become common elements;
(7) a
description of any real estate, except real estate subject to development
rights, that may be allocated subsequently as limited common elements, other
than limited common elements specified in Section 2‑102(2) and (4),
together with a statement that they may be so allocated;
(8) a
description of any development rights right (Section 1‑103(14))
and other special declarant rights (Section 1‑103(29)) reserved by
the declarant, together with a legally sufficient description of the real
estate to which each of those rights applies, and a time limit within which
each of those rights must be exercised;
(9) if any
development right may be exercised with respect to different parcels of real
estate at different times, a statement to that effect together with:
(i) (A)
either a statement fixing the
boundaries of those portions and regulating the order in which those portions
may be subjected to the exercise of each development right or a statement that
no assurances are made in those regards,; and
(ii) (B)
a statement as to whether, if any
development right is exercised in any portion of the real estate subject to
that development right, that development right must be exercised in all or in
any other portion of the remainder of that real estate;
(10) any
other conditions or limitations under which the rights described in paragraph (8)
may be exercised or will lapse;
(11) an
allocation to each unit of the allocated interests in the manner described in
Section 2‑107;
(12) any
restrictions (i) on alienation of the units, including any restrictions
on leasing which exceed the restrictions on leasing units which executive
boards may impose pursuant to Section 3‑102(c)(2) 3-120(d),
and (ii) on the amount for which a unit may be sold or on the amount
that may be received by a unit owner on sale, condemnation, or casualty loss to
the unit or to the common interest community, or on termination of the common
interest community;
(13) the
[recording data] for recorded easements and licenses appurtenant to or included
in the common interest community or to which any portion of the common interest
community is or may become subject by virtue of a reservation in the
declaration; and
(14) any
authorization pursuant to which the association may establish and enforce
construction and design criteria and aesthetic standards in the manner provided
in Sections 3-106 and 3-120; and
(15) all matters required by Sections 2‑106,
2‑107, 2‑108, 2‑109, 2‑115, 2‑116, and 3‑103(d).
(b) The
declaration may contain any other matters the declarant considers appropriate,
including any restrictions on the uses of a unit or the number or other
qualifications of persons who may occupy units.
SECTION 2‑106.
LEASEHOLD COMMON INTEREST COMMUNITIES.
(a) Any lease
the expiration or termination of which may terminate the common interest
community or reduce its size [, or a memorandum thereof,] must be
recorded. Every lessor of those leases
in a condominium or planned community shall sign the declaration. The declaration must state:
(1) the
[recording data] for the lease [or a statement of where the complete lease may
be inspected];
(2) the date
on which the lease is scheduled to expire;
(3) a legally
sufficient description of the real estate subject to the lease;
(4) any right
of the unit owners to redeem the reversion and the manner whereby those rights
may be exercised, or a statement that they do not have those rights;
(5) any right
of the unit owners to remove any improvements within a reasonable time after
the expiration or termination of the lease, or a statement that they do not
have those rights; and
(6) any
rights of the unit owners to renew the lease and the conditions of any renewal,
or a statement that they do not have those rights.
(b) After the
declaration for a leasehold condominium or leasehold planned community is
recorded, neither the lessor nor the lessor's successor in interest may
terminate the leasehold interest of a unit owner who makes timely payment of a
unit owner's share of the rent and otherwise complies with all covenants which,
if violated, would entitle the lessor to terminate the lease. A unit owner's leasehold interest in a
condominium or planned community is not affected by failure of any other person
to pay rent or fulfill any other covenant.
(c)
Acquisition of the leasehold interest of any unit owner by the owner of
the reversion or remainder does not merge the leasehold and fee simple
interests unless the leasehold interests of all unit owners subject to that
reversion or remainder are acquired.
(d) If the
expiration or termination of a lease decreases the number of units in a common
interest community, the allocated interests must be reallocated in accordance
with Section 1‑107(a) as if those units had been taken by eminent
domain. Reallocations must be confirmed
by an amendment to the declaration prepared, executed, and recorded by the
association.
SECTION 2‑107.
ALLOCATION OF ALLOCATED INTERESTS.
(a) The
declaration must allocate to each unit:
(i) in a condominium,
a fraction or percentage of undivided interests in the common elements and in
the common expenses of the association (Section 3‑115(a)), and a
portion of the votes in the association;
(ii) in a
cooperative, an ownership interest in the association, a fraction or percentage
of the common expenses of the association (Section 3‑115(a)), and
a portion of the votes in the association; and
(iii) in a
planned community, a fraction or percentage of the common expenses of the
association (Section 3‑115(a)), and a portion of the votes in the
association.
(b) The
declaration must state the formulas used to establish allocations of
interests. Those allocations may not
discriminate in favor of units owned by the declarant or an affiliate of the
declarant.
(c) If units
may be added to or withdrawn from the common interest community, the
declaration must state the formulas to be used to reallocate the allocated
interests among all units included in the common interest community after the
addition or withdrawal.
(d) The
declaration may provide: (i) that different allocations of votes shall be made
to the units on particular matters specified in the declaration; (ii) for
cumulative voting only for the purpose of electing members of the executive
board; and (iii) for class voting on specified issues affecting the class if
necessary to protect valid interests of the class. A declarant may not utilize cumulative or
class voting for the purpose of evading any limitation imposed on declarants by
this [act] nor may units constitute a class because they are owned by a
declarant.
(e) Except
for minor variations due to rounding, the sum of the common expense liabilities
and, in a condominium, the sum of the undivided interests in the common
elements allocated at any time to all the units must each equal one if stated
as a fraction or 100 percent if stated as a percentage. In the event of discrepancy between an
allocated interest and the result derived from application of the pertinent
formula, the allocated interest prevails.
(f) In a
condominium, the common elements are not subject to partition, and any
purported conveyance, encumbrance, judicial sale, or other voluntary or
involuntary transfer of an undivided interest in the common elements made
without the unit to which that interest is allocated is void.
(g) In a
cooperative, any purported conveyance, encumbrance, judicial sale, or other
voluntary or involuntary transfer of an ownership interest in the association
made without the possessory interest in the unit to which that interest is
related is void.
SECTION 2‑108.
LIMITED COMMON ELEMENTS.
(a) Except
for the limited common elements described in Section 2‑102(2) and (4),
the declaration must specify to which unit or units each limited common element
is allocated. An allocation may not be
altered without the consent of the unit owners whose units are affected.
(b) Except as
the declaration otherwise provides, a limited common element may be reallocated
by an amendment to the declaration executed by the unit owners between or among
whose units the reallocation is made.
The persons executing the amendment shall provide a copy thereof to the
association, which shall record it. The
amendment must be recorded in the names of the parties and the common interest
community.
(c) A common
element not previously allocated as a limited common element may be so
allocated only pursuant to provisions in the declaration made in accordance
with Section 2‑105(a)(7). The
allocations must be made by amendments to the declaration.
SECTION 2‑109.
PLATS AND PLANS.
(a) Plats and
plans are a part of the declaration, and are required for all common interest
communities except cooperatives. Separate
plats and plans are not required by this [act] if all the information required
by this section is contained in either a plat or plan. Each plat and plan must be clear and legible
and contain a certification that the plat or plan contains all information
required by this section.
(b) Each plat
must show or project:
(1) the name
and a survey or general schematic map of the entire common interest community;
(2) the
location and dimensions of all real estate not subject to development rights,
or subject only to the development right to withdraw, and the location and
dimensions of all existing improvements within that real estate;
(3) a legally
sufficient description of any real estate subject to development rights,
labeled to identify the rights applicable to each parcel but plats and plans
need not designate or label which development rights are applicable to each
parcel if that information is clearly delineated in the declaration;
(4) the
extent of any encroachments by or upon any portion of the common interest
community;
(5) to the
extent feasible, a legally sufficient description of all easements serving or
burdening any portion of the common interest community;
(6) except as
provided in subsection (h), the approximate location and dimensions of any
vertical unit boundaries not shown or projected on plans recorded pursuant to
subsection (d) and that unit's identifying number;
(7) except as
provided in subsection (h), the approximate location with reference to an
established datum of any horizontal unit boundaries not shown or projected on
plans recorded pursuant to subsection (d) and that unit's identifying number;
(8) a legally
sufficient description of any real estate in which the unit owners will own
only an estate for years, labeled as Aleasehold real estate;@
(9) the
distance between non-contiguous parcels of real estate comprising the common
interest community;
(10) the
approximate location and dimensions of any porches, decks, balconies, garages,
or patios allocated as limited common elements, and show or contain a narrative
description of any other limited common elements; and
(11) in
the case of for real estate not subject to development rights, all
other matters customarily shown on land surveys.
(c) A plat
may also show the intended location and dimensions of any contemplated
improvement to be constructed anywhere within the common interest
community. Any contemplated improvement
shown must be labeled either AMUST BE BUILT@
or ANEED NOT BE BUILT.@
(d) Except as
provided in subsection (h), to the extent not shown or projected on the plats,
plans of the units must show or project:
(1) the
approximate location and dimensions of the vertical boundaries of each unit,
and that unit's identifying number;
(2) the
approximate location of any horizontal unit boundaries, with reference to an
established datum, and that unit's identifying number; and
(3) the
approximate location of any units in which the declarant has reserved the right
to create additional units or common elements (Section 2‑110(c)),
identified appropriately.
(e) Unless
the declaration provides otherwise, the horizontal boundaries of part of a unit
located outside a building have the same elevation as the horizontal boundaries
of the inside part and need not be depicted on the plats and plans.
(f) Upon
exercising any development right, the declarant shall record either new plats
and plans necessary to conform to the requirements of subsections (a), (b), and
(d), or new certifications of plats and plans previously recorded if those
plats and plans otherwise conform to the requirements of those subsections.
(g) Any
certification of a plat or plan required by this section or Section 2‑101(b)
must be made by an independent [registered] surveyor, architect, or engineer.
(h) Plats and
plans need not show the location and dimensions of the units' boundaries or
their limited common elements if:
(1) the plat
shows the location and dimensions of all buildings containing or comprising the
units; and
(2) the
declaration includes other information that shows or contains a narrative
description of the general layout of the units in those buildings and the
limited common elements allocated to those units.
SECTION 2‑110.
EXERCISE OF DEVELOPMENT RIGHTS.
(a) To
exercise any development right reserved under Section 2‑105(a)(8), the
declarant shall prepare, execute, and record an amendment to the declaration (Section
2‑117) and in a condominium or planned community comply with Section
2‑109. The declarant is the unit
owner of any units thereby created. The
amendment to the declaration must assign an identifying number to each new unit
created, and, except in the case of subdivision or conversion of units
described in subsection (b), reallocate the allocated interests among all
units. The amendment must describe any
common elements and any limited common elements thereby created and, in the
case of limited common elements, designate the unit to which each is allocated
to the extent required by Section 2‑108 (Limited Common Elements).
(b)
Development rights may be reserved within any real estate added to the
common interest community if the amendment adding that real estate includes all
matters required by Section 2‑105 or 2‑106, as the case may be,
and, in a condominium or planned community, the plats and plans include all
matters required by Section 2‑109.
This provision does not extend the time limit on the exercise of
development rights imposed by the declaration pursuant to Section 2‑105(a)(8).
(c) Whenever
a declarant exercises a development right to subdivide or convert a unit
previously created into additional units, common elements, or both:
(1) if the
declarant converts the unit entirely to common elements, the amendment to the
declaration must reallocate all the allocated interests of that unit among the
other units as if that unit had been taken by eminent domain (Section 1‑107);
and
(2) if the
declarant subdivides the unit into two or more units, whether or not any part
of the unit is converted into common elements, the amendment to the declaration
must reallocate all the allocated interests of the unit among the units created
by the subdivision in any reasonable manner prescribed by the declarant.
(d) If the
declaration provides, pursuant to Section 2‑105(a)(8), that all or a
portion of the real estate is subject to a right of withdrawal:
(1) if all
the real estate is subject to withdrawal, and the declaration does not describe
separate portions of real estate subject to that right, none of the real estate
may be withdrawn after a unit has been conveyed to a purchaser; and
(2) if any
portion is subject to withdrawal, it may not be withdrawn after a unit in that
portion has been conveyed to a purchaser.
SECTION 2‑111. ALTERATIONS OF UNITS. Subject to the provisions of the declaration
and other provisions of law, a unit owner:
(1) may make
any improvements or alterations to his unit that do not impair the structural
integrity or mechanical systems or lessen the support of any portion of the
common interest community;
(2) may not
change the appearance of the common elements, or the exterior appearance of a
unit or any other portion of the common interest community, without permission
of the association;
(3) after
acquiring an adjoining unit or an adjoining part of an adjoining unit, may
remove or alter any intervening partition or create apertures therein, even if
the partition in whole or in part is a common element, if those acts do not
impair the structural integrity or mechanical systems or lessen the support of
any portion of the common interest community.
Removal of partitions or creation of apertures under this paragraph is
not an alteration of boundaries.
SECTION 2‑112.
RELOCATION OF UNIT BOUNDARIES.
(a) Subject
to the provisions of the declaration and other provisions of law, the
boundaries between adjoining units may be relocated by an amendment to the
declaration upon application to the association by the owners of those
units. If the owners of the adjoining
units have specified a reallocation between their units of their allocated
interests, the application must state the proposed reallocations. Unless the executive board determines, within
30 days, that the reallocations are unreasonable, the association shall prepare
an amendment that identifies the units involved and states the
reallocations. The amendment must be
executed by those unit owners, contain words of conveyance between them, and,
on recordation, be indexed in the name of the grantor and the grantee, and [in
the grantee=s index] in the name of the association.
(b) Subject
to the provisions of the declaration and other provisions of law, boundaries
between units and common elements may be relocated to incorporate common
elements within a unit by an amendment to the declaration upon application to
the association by the owner of the unit who proposes to relocate a boundary. Unless the declaration provides otherwise,
the amendment may be approved only if persons entitled to cast at least [67]
percent of the votes in the association, including [67] percent of the votes
allocated to units not owned by the declarant, agree to the action. The amendment may describe any fees or
charges payable by the owner of the affected unit in connection with the
boundary relocation and the fees and charges are assets of the
association. The amendment must be
executed by the unit owner of the unit whose boundary is being relocated and by
the association, contain words of conveyance between them, and on recordation
be indexed in the name of the unit owner and the association as grantor or
grantee, as appropriate.
(c) The
association (i) in a condominium or planned community shall prepare and record
plats or plans necessary to show the altered boundaries of affected units, and
their dimensions and identifying numbers, and (ii) in a cooperative shall
prepare and record amendments to the declaration, including any plans,
necessary to show or describe the altered boundaries of affected units, and
their dimensions and identifying numbers.
SECTION 2‑113.
SUBDIVISION OF UNITS.
(a) If the
declaration expressly so permits, a unit may be subdivided into two or
more units. Subject to the provisions
of the declaration and other provisions of law other than this
[act], upon application of a unit owner to subdivide a unit, the
association shall prepare, execute, and record an amendment to the declaration,
including, in a condominium or planned community, the plats and
plans, subdividing that unit.
(b) The
amendment to the declaration must be executed by the owner of the unit to be
subdivided, assign an identifying number to each unit created, and reallocate
the allocated interests formerly allocated to the subdivided unit to the new
units in any reasonable manner prescribed by the owner of the subdivided unit or
on any other basis the declaration requires.
Alternative A
[SECTION 2‑114. EASEMENT FOR ENCROACHMENTS. To the extent that any unit or common element
encroaches on any other unit or common element, a valid easement for the
encroachment exists. The easement does
not relieve a unit owner of liability in case of his willful misconduct nor
relieve a declarant or any other person of liability for failure to adhere to
any plats and plans or, in a cooperative, to any representation in the public
offering statement.]
Alternative B
[SECTION 2‑114. MONUMENTS AS BOUNDARIES. The existing physical boundaries of a unit or
the physical boundaries of a unit reconstructed in substantial accordance with
the description contained in the original declaration are its legal boundaries,
rather than the boundaries derived from the description contained in the
original declaration, regardless of vertical or lateral movement of the
building or minor variance between those boundaries and the boundaries derived
from the description contained in the original declaration. This section does not relieve a unit owner of
liability in case of his willful misconduct or relieve a declarant or any other
person of liability for failure to adhere to any plats and plans or, in a
cooperative, to any representation in the public offering statement.]
SECTION 2‑115.
USE FOR SALES PURPOSES. A declarant may maintain sales offices,
management offices, and models in units or on common elements in the common
interest community only if the declaration so provides and specifies the rights
of a declarant with regard to the number, size, location, and relocation
thereof. In a cooperative or
condominium, any sales office, management office, or model not designated a
unit by the declaration is a common element.
If a declarant ceases to be a unit owner, he ceases to have any rights
with regard thereto unless it is removed promptly from the common interest
community in accordance with a right to remove reserved in the
declaration. Subject to any limitations
in the declaration, a declarant may maintain signs on the common elements
advertising the common interest community.
This section is subject to the provisions of other state law and to
local ordinances.
SECTION 2‑116.
EASEMENT RIGHTS.
(a) Subject
to the provisions of the declaration, a declarant has an easement
through the common elements as may be reasonably necessary for the purpose of
discharging the declarant's obligations or exercising special declarant rights,
whether arising under this [act] or reserved in the declaration.
(b) In a
planned community, subject to the provisions of Sections 3‑102(a)(6)
and 3‑112, the unit owners have an easement:
(i)(1) in the
common elements for purposes of access to their units; and
(ii) (2)
subject to the declaration, to
use the common elements that are not limited common elements and all
real estate that must become common elements (Section 2‑105(a)(6))
for all other the purposes for which they were intended.
SECTION 2‑117.
AMENDMENT OF DECLARATION.
(a) Except in
cases of amendments that may be executed by a declarant under Section 2‑109(f)
or 2‑110, or by the association under Section 1‑107, 2‑106(d),
2‑108(c), 2‑112(a), or 2‑113, or by certain unit
owners under Section 2‑108(b), 2‑112(a), 2‑113(b), or 2‑118(b),
and except as limited by subsection subsections (d), (f), (g),
and h, the declaration, including any plats and plans, may be amended only
by vote or agreement of unit owners of units to which at least [67] percent of
the votes in the association are allocated, or any larger majority unless the
declaration specifies. a different percentage for all amendments or
specified subjects of amendment. If the declaration requires the approval of
another person as a condition of its effectiveness, the amendment is not valid
without the approval. The
declaration may specify a smaller number only if all of the units are
restricted exclusively to nonresidential.
(b) No action
to challenge the validity of an amendment adopted by the association pursuant
to this section may be brought more than one year after the amendment is
recorded.
(c) Every
amendment to the declaration must be recorded in every [county] in which any
portion of the common interest community is located and is effective only upon
recordation. An amendment, except an
amendment pursuant to Section 2‑112(a), must be indexed [in the grantee's
index] in the name of the common interest community and the association and [in
the grantor's index] in the name of the parties executing the amendment.
(d) Except to
the extent expressly permitted or required by other provisions of this [act],
no amendment may create or increase special declarant rights, increase the
number of units, change the boundaries of any unit, or change the
allocated interests of a unit, in the absence of unanimous consent of the unit
owners.
(e)
Amendments to the declaration required by the this [act]
to be recorded by the association must be prepared, executed, recorded, and
certified on behalf of the association by any officer of the association
designated for that purpose or, in the absence of designation, by the president
of the association.
(f) By
vote or agreement of unit owners of units to which at least 80 percent of the
votes in the association are allocated, or any larger percentage specified in
the declaration, an An amendment to the declaration may prohibit or
materially restrict the permitted uses of or behavior in a unit or the number
or other qualifications of persons who may occupy units only by vote or
agreement of unit owners of units to which at least 80 percent of the votes in
the association are allocated, unless the declaration specifies that a larger
percentage of unit owners must vote or agree to that amendment or such an
amendment may be approved by unit owners of units having at least 80 percent of
the votes of a specified group of units that would be affected by the amendment
. The An amendment approved
under this subsection must provide reasonable protection for a use or
occupancy permitted at the time the amendment was adopted.
(g) The time
limits specified in the declaration pursuant to Section 2‑105(a)(8) (Contents
of the Declaration) within which reserved development rights must be
exercised may be extended, and additional development rights may be created, if
persons entitled to cast at least 80 percent of the votes in the association,
including 80 percent of the votes allocated to units not owned by the
declarant, agree to that action. The
agreement is effective 30 days after an amendment to the declaration reflecting
the terms of the agreement is recorded unless all the persons holding the
affected special declarant rights, or security interests in those rights,
record a written objection within the 30‑day period, in which case the
amendment is void, or consent in writing at the time the amendment is recorded,
in which case the amendment is effective when recorded.
(h) A
provision in the declaration creating special declarant rights that have not
expired may not be amended without the consent of the declarant.
(i) If any
provision of this [act] or of the declaration requires the consent of a holder
of a security interest in a unit as a condition to the effectiveness of an
amendment to the declaration, that consent is granted if no written refusal to
consent is received by the association within 60 days after the association
delivers notice of the proposed amendment to the holder or mails the notice to
the holder by certified mail, return receipt requested. Unless the holder has
provided to the association an address for notice, the association may provide
notice to the address in the security interest of record.
(j) If the declaration contains a provision
requiring that amendments to the declaration may be adopted only by the vote or
agreement of unit owners of units to which more than 80 percent of the votes in
the association are allocated, such a proposed amendment is approved:
(1) if
(A) unit
owners of units to which at least 80 percent of the votes in the association
are allocated vote for or agree to the proposed amendment;
(B) no unit
owner votes against the proposed amendment; and
(C) notice of
the proposed amendment is delivered to the unit owners holding the votes in the
association which have not voted or agreed to the proposed amendment and no
written objection to the proposed amendment is received by the association
within 60 days after the association delivers notice; or
(2) if unit
owners of units to which at least 80 per cent of the votes in the association
are allocated vote for or agree to the proposed amendment but at least one unit
owner objects to the proposed amendment and, pursuant to an action brought by
the association in the [insert appropriate court] against all objecting unit
owners, the court finds that the objecting unit owners do not have a unique
minority interest, different in kind from the interests of the other unit
owners, that the voting requirement of the declaration was intended to protect.
REVISED REPORTER NOTE OF 02/29/08
The
Reporter will detail the Drafting committee=s consideration of the need for more flexibility in
subsection (a) in tailoring the amendment provisions of declarations for
particular projects in light of the special requirements of those projects as
well as the enhanced flexibility for decision-making authorized by this act.
REPORTER=S NOTE B TO BE DRAFTED: Regarding rationale for changes in '2-117.
SECTION 2‑118.
TERMINATION OF COMMON INTEREST COMMUNITY. (a) Except in the case of for a taking of all the units by
eminent domain, (Section 1‑107) or in the case of
foreclosure against an entire cooperative of a security interest that has
priority over the declaration, or in the circumstances described in Section
2-124, a common interest community may be terminated only by agreement of
unit owners of units to which at least 80 percent of the votes in the
association are allocated, or any larger percentage the declaration specifies,
and with any other approvals required by the declaration. The declaration may specify a smaller
percentage only if all of the units are restricted exclusively to
nonresidential uses.
(b) An
agreement to terminate must be evidenced by the execution of a termination
agreement, or ratifications thereof, in the same manner as a deed, by the
requisite number of unit owners. The
termination agreement must specify a date after which the agreement will be
void unless it is recorded before that date.
A termination agreement and all ratifications thereof must be recorded
in every [county] in which a portion of the common interest community is situated
and is effective only upon recordation.
(c) In the
case of a condominium or planned community containing only units having
horizontal boundaries described in the declaration, a termination agreement may
provide that all of the common elements and units of the common interest
community must be sold following termination.
If, pursuant to the agreement, any real estate in the common interest
community is to be sold following termination, the termination agreement must
set forth the minimum terms of the sale.
(d) In the
case of a condominium or planned community containing any units not having
horizontal boundaries described in the declaration, a termination agreement may
provide for sale of the common elements, but it may not require that the units be
sold following termination, unless the declaration as originally recorded
provided otherwise or all the unit owners consent to the sale.
(e) The
association, on behalf of the unit owners, may contract for the sale of real
estate in a common interest community, but the contract is not binding on the
unit owners until approved pursuant to subsections (a) and (b). If any real estate is to be sold following
termination, title to that real estate, upon termination, vests in the
association as trustee for the holders of all interests in the units. Thereafter, the association has all powers
necessary and appropriate to effect the sale.
Until the sale has been concluded and the proceeds thereof distributed,
the association continues in existence with all powers it had before
termination. Proceeds of the sale must
be distributed to unit owners and lien holders as their interests may appear,
in accordance with subsections (h), (i), and (j). Unless otherwise specified in the termination
agreement, as long as the association holds title to the real estate, each unit
owner and the unit owner's successors in interest have an exclusive right to
occupancy of the portion of the real estate that formerly constituted the
unit. During the period of that
occupancy, each unit owner and the unit owner's successors in interest remain
liable for all assessments and other obligations imposed on unit owners by this
[act] or the declaration.
(f) In a
condominium or planned community, if the real estate constituting the common interest
community is not to be sold following termination, title to the common elements
and, in a common interest community containing only units having horizontal
boundaries described in the declaration, title to all the real estate in the
common interest community, vests in the unit owners upon termination as tenants
in common in proportion to their respective interests as provided in subsection
(j), and liens on the units shift accordingly.
While the tenancy in common exists, each unit owner and the unit owner's
successors in interest have an exclusive right to occupancy of the portion of
the real estate that formerly constituted the unit.
(g) Following
termination of the common interest community, the proceeds of any a
sale of real estate, together with the assets of the association, are held by
the association as trustee for unit owners and holders of liens on the units as
their interests may appear.
(h) Following
termination of a condominium or planned community, creditors of the association
holding liens on the units, which were [recorded] [docketed] [insert other
procedures required under state law to perfect a lien on real estate as a
result of a judgment] before termination, may enforce those liens in the same
manner as any lien holder. All other
creditors of the association are to be treated as if they had perfected liens
on the units immediately before termination.
(i) In a
cooperative, the declaration may provide that all creditors of the association
have priority over any interests of unit owners and creditors of unit
owners. In that event, following
termination, creditors of the association holding liens on the cooperative
which were [recorded] [docketed] [insert other procedures required under state law
to perfect a lien on real estate as a result of a judgment] before termination
may enforce their liens in the same manner as any lien holder, and any other
creditor of the association is to be treated as if he had perfected a lien
against the cooperative immediately before termination. Unless the declaration provides that all
creditors of the association have that priority:
(1) the lien
of each creditor of the association which was perfected against the association
before termination becomes, upon termination, a lien against each unit owner's
interest in the unit as of the date the lien was perfected;
(2) any other
creditor of the association is to be treated upon termination as if the
creditor had perfected a lien against each unit owner's interest immediately
before termination; (3) the amount of the lien of an association's
creditor described in paragraphs (1) and (2) against each of the unit owners'
interest must be proportionate to the ratio which each unit's common expense
liability bears to the common expense liability of all of the units; (4) the lien of each creditor of each unit owner
which was perfected before termination continues as a lien against that unit
owner's unit as of the date the lien was perfected; and
(5) the
assets of the association must be distributed to all unit owners and all lien
holders as their interests may appear in the order described above. Creditors of the association are not entitled
to payment from any unit owner in excess of the amount of the creditor's lien
against that unit owner's interest.
(j) The
respective interests of unit owners referred to in subsections (e), (f), (g),
(h), and (i) are as follows:
(1) Except as
provided in paragraph (2), the respective interests of unit owners are the fair
market values of their units, allocated interests, and any limited common
elements immediately before the termination, as determined by one or more
independent appraisers selected by the association. The decision of the independent appraisers
must be distributed to the unit owners and becomes final unless disapproved
within 30 days after distribution by unit owners of units to which 25 percent
of the votes in the association are allocated.
The proportion of any unit owner's interest to that of all unit owners
is determined by dividing the fair market value of that unit owner's unit and
its allocated interests by the total fair market values of all the units and
their allocated interests.
(2) If any
unit or any limited common element is destroyed to the extent that an appraisal
of the fair market value thereof before destruction cannot be made, the
interests of all unit owners are:
(i)(A) in
a condominium, their respective common element interests immediately before the
termination,;
(ii)(B)
in a cooperative, their respective ownership
interests immediately before the termination,; and
(iii)(C)
in a planned community, their respective
common expense liabilities immediately before the termination.
(k) In a
condominium or planned community, except as provided in subsection (l),
foreclosure or enforcement of a lien or encumbrance against the entire common
interest community does not terminate, of itself, the common interest
community, and foreclosure or enforcement of a lien or encumbrance against a
portion of the common interest community, other than withdrawable real estate,
does not withdraw that portion from the common interest community. Foreclosure or enforcement of a lien or
encumbrance against withdrawable real estate, or against common elements that
have been subjected to a security interest by the association under Section 3‑112,
does not withdraw, of itself, that real estate from the common interest
community, but the person taking title thereto may require from the
association, upon request, an amendment excluding the real estate from the
common interest community.
(l) In a
condominium or planned community, if a lien or encumbrance against a portion of
the real estate comprising the common interest community has priority over the
declaration and the lien or encumbrance has not been partially released, the
parties foreclosing the lien or encumbrance, upon foreclosure, may record an
instrument excluding the real estate subject to that lien or encumbrance from
the common interest community.
SECTION 2‑119.
RIGHTS OF SECURED LENDERS.
(a) The
declaration may require that all or a specified number or percentage of the
lenders who hold security interests encumbering the units or who have extended
credit to the association approve specified actions of the unit owners or the
association as a condition to the effectiveness of those actions, but no
requirement for approval may operate to (i) deny or delegate control over the
general administrative affairs of the association by the unit owners or the
executive board, or (ii) prevent the association or the executive board from
commencing, intervening in, or settling any litigation or proceeding, or (iii)
prevent any insurance trustee or the association from receiving and
distributing any insurance proceeds except pursuant to Section 3‑113.
(b) A lender
who has extended credit to an association secured by an assignment of income (Section
3‑102(14)) or an encumbrance on the common elements (Section 3‑112)
may enforce its security agreement in accordance with its terms, subject to the
requirements of this [act] and other law.
Requirements that the association must deposit its periodic common
charges before default with the lender to which the association's income has
been assigned, or increase its common charges at the lender's direction by
amounts reasonably necessary to amortize the loan in accordance with its terms,
do not violate the prohibitions on lender approval contained in subsection (a).
SECTION 2‑120.
MASTER ASSOCIATIONS.
(a) If the
declaration provides that any of the powers described in Section 3‑102
are to be exercised by or may be delegated to a profit or nonprofit corporation
[or unincorporated association] that exercises those or other powers on behalf
of one or more common interest communities or for the benefit of the unit
owners of one or more common interest communities, all provisions of this [act]
applicable to unit owners= associations apply to any such corporation [or
unincorporated association], except as modified by this section.
(b) Unless it
is acting in the capacity of an association described in Section 3‑101, a
master association may exercise the powers set forth in Section 3‑102(a)(2)
only to the extent expressly permitted in the declarations of common interest
communities which are part of the master association or expressly described in
the delegations of power from those common interest communities to the master
association.
(c) If the
declaration of any common interest community provides that the executive board
may delegate certain powers to a master association, the members of the
executive board have no liability for the acts or omissions of the master
association with respect to those powers following delegation.
(d) The
rights and responsibilities of unit owners with respect to the unit owners'
association set forth in Sections 3‑103, 3‑108, 3‑109, 3‑110,
and 3‑112 apply in the conduct of the affairs of a master association
only to persons who elect the board of a master association, whether or not
those persons are otherwise unit owners within the meaning of this [act].
(e) Even if a
master association is also an association described in Section 3‑101, the
certificate of incorporation or other instrument creating the master
association and the declaration of each common interest community, the powers
of which are assigned by the declaration or delegated to the master
association, may provide that the executive board of the master association
must be elected after the period of declarant control in any of the following
ways:
(1) All unit
owners of all common interest communities subject to the master association may
elect all members of the master association=s
executive board.
(2) All
members of the executive boards of all common interest communities subject to
the master association may elect all members of the master association's
executive board.
(3) All unit
owners of each common interest community subject to the master association may
elect specified members of the master association's executive board.
(4) All
members of the executive board of each common interest community subject to the
master association may elect specified members of the master association's
executive board.
SECTION 2‑121.
MERGER OR CONSOLIDATION OF COMMON INTEREST COMMUNITIES.
(a) Any two
or more common interest communities of the same form of ownership, by agreement
of the unit owners as provided in subsection (b), may be merged or consolidated
into a single common interest community.
In the event of a merger or consolidation, unless the agreement
otherwise provides, the resultant common interest community is the legal
successor, for all purposes, of all of the pre-existing common interest
communities, and the operations and activities of all associations of the
pre-existing common interest communities are merged or consolidated into a
single association that holds all powers, rights, obligations, assets, and
liabilities of all pre-existing associations.
(b) An
agreement of two or more common interest communities to merge or consolidate
pursuant to subsection (a) must be evidenced by an agreement prepared,
executed, recorded, and certified by the president of the association of each
of the pre-existing common interest communities following approval by owners of
units to which are allocated the percentage of votes in each common interest
community required to terminate that common interest community. The agreement must be recorded in every
[county] in which a portion of the common interest community is located and is
not effective until recorded.
(c) Every
merger or consolidation agreement must provide for the reallocation of the
allocated interests in the new association among the units of the resultant
common interest community either (i) by stating the reallocations or the
formulas upon which they are based or (ii) by stating the percentage of overall
allocated interests of the new common interest community which are allocated to
all of the units comprising each of the pre-existing common interest
communities, and providing that the portion of the percentages allocated to
each unit formerly comprising a part of the pre-existing common interest
community must be equal to the percentages of allocated interests allocated to
that unit by the declaration of the pre-existing common interest community.
SECTION 2‑122.
ADDITION OF UNSPECIFIED REAL ESTATE. In a planned community, if the right is
originally reserved in the declaration, the declarant in addition to any other
development right, may amend the declaration at any time during as many years
as are specified in the declaration for adding additional real estate to the
planned community without describing the location of that real estate in the
original declaration; but, the amount of real estate added to the planned
community pursuant to this section may not exceed 10 percent of the real estate
described in Section 2‑105(a)(3) and the declarant may not in any event
increase the number of units in the planned community beyond the number stated
in the original declaration pursuant to Section 2‑105(a)(5).
SECTION 2‑123.
MASTER PLANNED COMMUNITIES.
(a) The
declaration for a common interest community may state that it is a master
planned community if the declarant has reserved the development right to create
at least [500] units that may be used for residential purposes, and at the time
of the reservation that declarant owns or controls more than [500] acres on
which the units may be built.
(b) If the
requirements of subsection (a) are satisfied, the declaration for the master
planned community need not state a maximum number of units and need not contain
any of the information required by Section 2‑105(a)(3) through (14) until
the declaration is amended under subsection (c).
(c) When each
unit in a master planned community is conveyed to a purchaser, the declaration
must contain (i) a sufficient legal description of the unit and all portions of
the master planned community in which any other units have been conveyed to a
purchaser; and (ii) all the information required by Section 2‑105(a)(3)
through (14) with respect to that real estate.
(d) The only
real estate in a master planned community which is subject to this [act] is
units that have been declared or which are being offered for sale and any other
real estate described pursuant to subsection (c). Other real estate that is or may become part
of the master planned community is only subject to other law and to any other
restrictions and limitations that appear of record.
(e) If the
public offering statement conspicuously identifies the fact that the community
is a master planned community, the disclosure requirements contained in
[Article] 4 apply only with respect to units that have been declared or are
being offered for sale in connection with the public offering statement and to
the real estate described pursuant to subsection (c).
(f)
Limitations in this [act] on the addition of unspecified real estate
(Section 2‑122) do not apply to a master planned community.
(g) The
period of declarant control of the association for a master planned community
terminates in accordance with any conditions specified in the declaration or
otherwise at the time the declarant, in a recorded instrument and after giving
written notice to all the unit owners, voluntarily surrenders all rights to
control the activities of the association.
SECTION 2-124.
TERMINATION FOLLOWING CATASTROPHE. If
substantially all the units in a common interest community have been destroyed
or are uninhabitable and the available methods for giving notice of a meeting
of unit owners to consider termination under Section 2-118 will not likely
result in receipt of the notice, the executive board or any other interested
person may commence an action in the [insert appropriate court] seeking to
terminate the common interest community. During the pendency of the action, the
court may enter whatever orders it considers appropriate, including appointment
of a receiver. After a hearing, the court may terminate the common interest
community or reduce its size and may enter any other order the court considers
to be in the best interests of the unit owners and persons holding interest in
the common interest community.
[ARTICLE] 3
MANAGEMENT OF THE COMMON INTEREST COMMUNITY
SECTION 3‑101.
ORGANIZATION OF UNIT OWNERS ASSOCIATION. A unit owners association must be organized
no later than the date the first unit in the common interest community is
conveyed. The membership of the
association at all times consists exclusively of all unit owners or, following
termination of the common interest community, of all former unit owners entitled
to distributions of proceeds under Section 2‑118 or their heirs,
successors, or assigns. The
association must have an executive board. The association must be organized
as a profit or nonprofit corporation, trust, [or] limited liability
company, partnership, [, or as an unincorporated association],]
or any other form of organization authorized by the laws of this state.
NEW DRAFT
COMMENT TO SECTION 3-101.
This section allows the document drafter to select
any form of legal organization permitted under state law for the Unit Owners
Association; this Act then supplements the requirements of those >entity= statutes by a number of requirements unique to unit
owner associations. Notwithstanding this
permitted flexibility, experience under both this Act, most non-UCIOA
condominium statutes and most planned communities created at common law
indicates that nearly all unit owner associations are organized as non-stock
corporations under the States= non-stock corporation acts.
In the rare case where the association may be
organized as another form of legal entity, such as a limited liability company,
the drafter will be required to address the differences between this Act and
the requirements of the State=s LLC statute.
In the limited liability company context, it may well be that the >bylaws= mandated by this Act will in fact be part either of
the declaration or the management agreement required by the LLC statute. So long as the mandated content in Section
3-106 appears in whatever document the drafter chooses, the requirements of
this Act will have been satisfied.
SECTION 3‑102.
POWERS AND DUTIES OF UNIT OWNERS ASSOCIATION.
(a) Except as
otherwise provided in subsection (b), and subject to the other
provisions of the declaration this [act], the association [,
even if unincorporated,] may:
(1) shall adopt and may amend bylaws
and may adopt and amend rules and regulations;
(2) shall
adopt and may amend budgets for
revenues, expenditures, and reserves
pursuant to Section 3-123, may and collect assessments for common
expenses from unit owners and may invest any funds of the association;
(3) may
hire and discharge managing agents and other employees, agents, and independent
contractors;
(4) may
institute, defend, or intervene in litigation, arbitration, mediation, or
administrative proceedings in its own name on behalf of itself or two or more
unit owners on matters affecting the common interest community subject to,
in proceedings involving the declarant, Section 3-121 3-124;
(5) may
make contracts and incur liabilities;
(6) may
regulate the use, maintenance, repair, replacement, and modification of common
elements;
(7) may
cause additional improvements to be made as a part of the common elements;
(8) may
acquire, hold, encumber, and convey in its own name any right, title, or
interest to real estate or personal property, but:
(i)(A) common
elements in a condominium or planned community may be conveyed or subjected to
a security interest only pursuant to Section 3‑112; and
(ii)(B)
part of a cooperative may be conveyed, or all
or part of a cooperative may be subjected to a security interest, only pursuant
to Section 3‑112.;
(9) may
grant easements, leases, licenses, and concessions through or over the common
elements;
(10) may
impose and receive any payments, fees, or charges for:
(A) the use, rental, or operation of the common
elements, other than limited common elements described in Section 2‑102(2)
and (4),; and
(B) for
services provided to unit owners;
(11) may
impose charges for late payment of assessments; and, after notice and an
opportunity to be heard, may levy impose reasonable fines
for violations of the declaration, bylaws, and rules, and regulations
of the association;
(12) may
impose reasonable charges for the preparation and recordation of amendments to
the declaration, resale certificates required by Section 4‑109, or
statements of unpaid assessments;
(13) may
provide for the indemnification of its officers and executive board and
maintain directors= directors and officers= officers liability insurance;
(14) except
to the extent limited by the declaration, may assign its right to future
income, including the right to receive assessments; but only to the
extent the declaration expressly so decides;
(15) may
exercise any other powers conferred by the declaration or bylaws;
(16) may
exercise all other powers that may be exercised in this state by legal
entities organizations of the same type as the association;
(17) may
exercise any other powers necessary and proper for the governance and operation
of the association; and
(18) by
regulation, may require that disputes between the executive board
association and unit owners or between two or more unit owners regarding
the common interest community must be submitted to nonbinding
alternative dispute resolution in the manner described in the regulation as
a prerequisite to commencement of a judicial proceeding.; and
(19) may
suspend any right or privilege of a unit owner who fails to pay an assessment,
but may not:
(A) deny an owner or other occupant access to the
owner=s unit;
(B) suspend the unit owner=s right to vote;
(C) prevent a unit owner from seeking election as a
director or officer of the association; or
(D) withhold services provided to the unit or the
unit owners by the association if the effect of withholding the service would
be to endanger the health or safety or property of any person.
(b) The
declaration may not impose limitations on limit the power of the
association beyond the limits authorized in subsection (a)(18) to:
(1) deal with the declarant which are if
the limit is more restrictive than the limitations limits
imposed on the power of the association to deal with other persons.;
or
(2) commence
litigation, arbitration, mediation, or administrative proceeding against any
person, subject to the following:
(A) the
association shall comply with Section 3-124, if applicable, before commencing
any action against any person in connection with construction defects; and
(B) the
executive board promptly shall provide notice to the unit owners of any legal
proceeding in which the association is a party other than proceedings involving
enforcement of rules or to recover unpaid assessments or other sums due the
association.
(c) Unless
otherwise permitted by the declaration or this [act], an association may adopt
rules and regulations that affect the use of or behavior in units that may be
used for residential purposes only to:
(1) prevent any use of a unit which violates the
declaration;
(2) regulate any behavior in or occupancy of a unit
which violates the declaration or adversely affects the use and enjoyment of
other units or the common elements by other unit owners; or
(3) restrict the leasing of residential units to the
extent those rules are reasonably designed to meet underwriting requirements of
institutional lenders who regularly lend money secured by first mortgages on
units in common interest communities or regularly purchase those mortgages.
Otherwise,
the association may not regulate any use of or behavior in units.
(c) If a tenant of a unit owner violates the
declaration, bylaws, or rules and regulations of the association, in
addition to exercising any of its powers against the unit owner, the
association may:
(1) exercise
directly against the tenant the powers described in subsection (a)(11);
(2) after
giving notice to the tenant and the unit owner and an opportunity to be heard,
levy reasonable fines against the tenant for the violation; and
(3) enforce
any other rights against the tenant for the violation which the unit owner as
landlord could lawfully have exercised under the lease or which the association
could lawfully have exercised directly against the unit owner, or both.
(e)(d) The rights granted
under referred to in subsection (d)(c)(3) may only
be exercised only if the tenant or unit owner fails to cure the
violation within 10 days after the association notifies the tenant and unit
owner of that violation.
(f)(e) Unless a
lease otherwise provides, this section does not:
(1) affect
rights that the unit owner has to enforce the lease or that the association has
under other law; or
(2) permit
the association to enforce a lease to which it is not a party in the absence of
a violation of the declaration, bylaws, or rules. and
regulations.
(f) The
executive board may determine whether to exercise the association's power to
impose sanctions and pursue legal action for violations of the declaration,
bylaws, and rules, including whether to compromise any claim for unpaid
assessments or other claim made by or against it. The executive board does not
have a duty to take enforcement action if, acting in good faith and without a
conflict of interest, it determines that, under the facts and circumstances
presented:
(1) the association=s legal position does not justify taking any or
further enforcement action;
(2) the covenant, restriction, or rule being
enforced is, or is likely to be construed as, inconsistent with current law;
(3) although a violation may exist or may have
occurred, it is not of such a material nature as to be objectionable to a
reasonable person or to justify expending the association's resources; or
(4) it is not in the association=s best interests to pursue an enforcement action.
(g) The
executive board=s decision under subsection (f) not to pursue
enforcement under one set of circumstances does not prevent the association
from taking enforcement action under another set of circumstances, except the
executive board may not be arbitrary or capricious in taking enforcement
action. Whether the association=s course of performance with respect to enforcing of
any provision of the declaration, bylaws, and rules is a waiver or modification
of that provision is determined by other law.
(h) The
executive board shall establish a reasonable method for unit owners to
communicate among themselves and with the executive board concerning the
association.
SECTION
3‑103. EXECUTIVE BOARD MEMBERS AND
OFFICERS.
(a) Except as provided in the declaration, the
bylaws, subsection (b), or other provisions of this [act], the executive board may
act in all instances acts on behalf of the association. In the performance of their duties, officers
and members of the executive board appointed by the declarant shall exercise
the degree of care and loyalty to the association required of a trustee. Officers and members of the executive board
not appointed by the declarant shall exercise the degree of care and loyalty to
the association required of an officer or director of a corporation
organized, under [insert reference to state non-profit corporation
law]. and are subject to the conflict of interest rules governing
officers and directors and officers under that law [insert
reference to state non-profit corporation law]. The standards of care and loyalty described
in this section apply regardless of the form of legal entity in which
the association is organized.
(b) The
executive board may not act on behalf of the association to:
(1) amend the declaration except as provided in
Section 2-117; (Section 2‑117)
(2) amend the
bylaws;
(3) to
terminate the common interest community (Section 2‑118),;
(4) or to elect
members of the executive board but may fill vacancies in its membership for
the unexpired portion of any term; or
(5) determine the qualifications, powers, and
duties, or terms of office of executive board members (Section 3‑103(f)),
but the executive board may fill vacancies in its membership for the unexpired
portion of any term.
(c) The executive board shall adopt budgets as
provided in Section 3-123. Within [30] days after adoption of any
proposed budget for the common interest community, the executive board shall
provide a summary of the budget to all the unit owners, and shall set a date
for a meeting of the unit owners to consider ratification of the budget not
less than 14 nor more than 30 days after mailing of the summary. Unless at that meeting a majority of all unit
owners or any larger vote specified in the declaration reject the budget, the
budget is ratified, whether or not a quorum is present. In the event the proposed budget is rejected,
the periodic budget last ratified by the unit owners must be continued until
such time as the unit owners ratify a subsequent budget proposed by the
executive board.
(d)(c) Subject to
subsection (e)(d), the declaration may provide for a period of
declarant control of the association, during which a declarant, or persons
designated by him the declarant, may appoint and remove the
officers and members of the executive board.
A declarant may voluntarily surrender the right to appoint and remove
officers and members of the executive board before termination of that period,
and in that event the declarant may require, for the duration of the period of
declarant control, that specified actions of the association or executive
board, as described in a recorded instrument executed by the declarant, be
approved by the declarant before they become effective. Regardless of the
period provided in the declaration, and except as provided in Section 2‑123(g)
(Master Planned Communities), a period of declarant control terminates no
later than the earlier earliest of:
(1) (i) [60] days after conveyance of [75] percent of the
units that may be created to unit owners other than a declarant;
(2) (ii) [2] years after all declarants have ceased to offer
units for sale in the ordinary course of business;
(3) (iii) [2] years after any right to add new units was last
exercised; or
(4) (iv) the day the declarant, after giving written notice
to unit owners, records an instrument voluntarily surrendering all rights to
control activities of the association. A declarant may voluntarily surrender
the right to appoint and remove officers and members of the executive board
before termination of that period, but in that event the declarant may require,
for the duration of the period of declarant control, that specified actions of
the association or executive board, as described in a recorded instrument
executed by the declarant, be approved by the declarant before they become
effective.
(e)(d) Not later
than [60] days after conveyance of [25] percent [one-fourth]
of the units that may be created to unit owners other than a declarant, at
least one member and not less than [25] percent of the members of
the executive board must be elected by unit owners other than the
declarant. Not later than [60]
days after conveyance of [50] percent of the units that may be
created to unit owners other than a declarant, not less than [33‑1/3]
percent one-third of the members of the executive board must be
elected by unit owners other than the declarant.
(f)(e) Except as
otherwise provided in Section 2‑120(e) and (f), not later than the termination
of any period of declarant control, the unit owners shall elect an executive
board of at least three members, at least a majority of whom must be unit
owners. The Unless the
declaration provides for the election of officers by the unit owners, the
executive board shall elect the officers.
The executive board members and officers shall take office upon election
or appointment.
(g)
Notwithstanding any provision of the declaration or bylaws to the
contrary, the unit owners, by a two-thirds vote of all persons present and
entitled to vote at any meeting of the unit owners at which a quorum is
present, may remove any member of the executive board with or without cause,
other than a member appointed by the declarant.
(g) A declaration may provide for the appointment of
specified positions on the executive board by persons other than the declarant
during or after the period of declarant control. It also may provide a method
for filling vacancies in those positions, other than by election by the unit
owners. However, after the period of
declarant control, appointed members:
(1) may not
comprise more than [one- third] of the entire board; and
(2) have no
greater authority than any other member of the executive board.
SECTION 3-104.
TRANSFER OF SPECIAL DECLARANT RIGHTS.
(a) A special
declarant right (Section 1‑103(29)) created or reserved under this
[act] may be transferred only by an instrument evidencing the transfer recorded
in every [county] in which any portion of the common interest community is
located. The instrument is not effective
unless executed by the transferee.
(b) Upon
transfer of any special declarant right, the liability of a transferor
declarant is as follows:
(1) A
transferor is not relieved of any obligation or liability arising before the
transfer and remains liable for warranty obligations imposed upon him by this
[act]. Lack of privity does not deprive
any unit owner of standing to maintain an action to enforce any obligation of
the transferor.
(2) If a
successor to any special declarant right is an affiliate of a declarant
(Section 1‑103(1)), the transferor is jointly and severally liable
with the successor for any obligations or liabilities of the successor relating
to the common interest community.
(3) If a
transferor retains any special declarant rights, but transfers other special
declarant rights to a successor who is not an affiliate of the declarant, the
transferor is liable for any obligations or liabilities imposed on a declarant
by this [act] or by the declaration relating to the retained special declarant
rights and arising after the transfer.
(4) A
transferor has no liability for any act or omission or any breach of a
contractual or warranty obligation arising from the exercise of a special
declarant right by a successor declarant who is not an affiliate of the
transferor.
(c) Unless
otherwise provided in a mortgage instrument, deed of trust, or other agreement
creating a security interest, in case of foreclosure of a security interest,
sale by a trustee under an agreement creating a security interest, tax sale,
judicial sale, or sale under Bankruptcy Code or receivership proceedings, of
any units owned by a declarant or real estate in a common interest community
subject to development rights, a person acquiring title to all the property
being foreclosed or sold, but only upon his request, succeeds to all special
declarant rights related to that property held by that declarant, or only to
any rights reserved in the declaration pursuant to Section 2‑115 and held
by that declarant to maintain models, sales offices, and signs. The judgment or instrument conveying title
must provide for transfer of only the special declarant rights requested.
(d) Upon
foreclosure of a security interest, sale by a trustee under an agreement
creating a security interest, tax sale, judicial sale, or sale under Bankruptcy
Code or receivership proceedings, of all interests in a common interest
community owned by a declarant:
(1) the
declarant ceases to have any special declarant rights, and
(2) the
period of declarant control (Section 3‑103(d)) terminates unless
the judgment or instrument conveying title provides for transfer of all special
declarant rights held by that declarant to a successor declarant.
(e) The
liabilities and obligations of a person who succeeds to special declarant
rights are as follows:
(1) A
successor to any special declarant right who is an affiliate of a declarant is
subject to all obligations and liabilities imposed on the transferor by this
[act] or by the declaration.
(2) A
successor to any special declarant right, other than a successor described in
paragraph (3) or (4) or a successor who is an affiliate of a declarant, is
subject to the obligations and liabilities imposed by this [act] or the
declaration:
(i) on a
declarant which relate to the successor's exercise or nonexercise of special
declarant rights; or
(ii) on his
the successor=s
transferor, other than:
(A)
misrepresentations by any previous declarant;
(B) warranty
obligations on improvements made by any previous declarant, or made before the
common interest community was created;
(C) breach of
any fiduciary obligation by any previous declarant or his appointees to the
executive board; or
(D) any
liability or obligation imposed on the transferor as a result of the
transferor's acts or omissions after the transfer.
(3) A
successor to only a right reserved in the declaration to maintain models, sales
offices, and signs (Section 2‑115), may not exercise any other
special declarant right, and is not subject to any liability or obligation as a
declarant, except the obligation to provide a public offering statement [,] and
any liability arising as a result thereof [, an and obligations
under [Article] 5].
(4) A successor
to all special declarant rights held by a transferor who succeeded to those
rights pursuant to a deed or other instrument of conveyance in lieu of
foreclosure or a judgment or instrument conveying title under subsection (c),
may declare in a recorded instrument the intention to hold those rights solely
for transfer to another person.
Thereafter, until transferring all special declarant rights to any
person acquiring title to any unit or real estate subject to development rights
owned by the successor, or until recording an instrument permitting exercise of
all those rights, that successor may not exercise any of those rights other
than any right held by his the declarant=s
transferor to control the executive board in accordance with Section 3‑103(d)
for the duration of any period of declarant control, and any attempted exercise
of those rights is void. So long as a
successor declarant may not exercise special declarant rights under this
subsection, the successor declarant is not subject to any liability or
obligation as a declarant other than liability for his the declarant=s acts
and omissions under Section 3‑103(d).
(f) Nothing
in this section subjects any successor to a special declarant right to any
claims against or other obligations of a transferor declarant, other than
claims and obligations arising under this [act] or the declaration.
SECTION 3‑105.
TERMINATION OF CONTRACTS AND LEASES OF DECLARANT.
(a) Except as provided in Section 1‑207, if
entered into before Within two
years after the unit owners elect the
executive board elected by the unit owners pursuant to Section 3‑103(f)
takes office, the association may be terminated terminate
without penalty, by the association at any time after the
executive board elected by the unit owners pursuant to Section 3‑103(f)
takes office upon not less than [90] days' notice to the other party,
any of the following if they were entered into before that executive board was
elected:
(1) (i) any management, maintenance, operations, or contract, employment contract, or lease of
recreational or parking areas or facilities,;
(2) (ii) any other contract or lease between the association
and a declarant or an affiliate of a declarant,; or
(3) (iii) any contract or lease that is not bona fide or was
unconscionable to the unit owners at the time entered into under the
circumstances then prevailing., may be terminated without penalty by
the association at any time after the executive board elected by the unit
owners pursuant to Section 3‑103(f) takes office upon not less than [90]
days' notice to the other party.
(b) This section does not apply to:
(1) (i) any lease the termination of which would terminate
the common interest community or reduce its size, unless the real estate
subject to that lease was included in the common interest community for the
purpose of avoiding the right of the association to terminate a lease under
this section,; or
(2) (ii) a proprietary lease.
SECTION 3‑106.
BYLAWS.
(a) The
bylaws of the association must provide:
(1) the
number of members of the executive board and the titles of the officers of the
association;
(2) for election by the executive board or,
if the declaration so requires, by the unit owners, of a president,
treasurer, secretary, and any other officers of the association the bylaws
specify;
(3) the
qualifications, powers and duties, terms of office, and manner of electing and
removing executive board members and offices officers and filling
vacancies;
(4) which,
if any, of its powers the executive board or officers may delegate to other
persons or to a managing agent;
(5) which of
its officers may prepare, execute, certify, and record amendments to the
declaration on behalf of the association; and
(6) a method
for amending the bylaws, by the unit owners;
(7) any
provisions that may be necessary to satisfy requirements in this [act] or the
declaration concerning meetings, voting, quorums, and other matters concerning
the activities of the association; and
(8) any
matter required by law of this state other than this [act] to appear in the
bylaws of organizations of the same type
as the association.
(b) Subject
to the provisions of the declaration, the bylaws may provide for any other necessary
or appropriate matters the association deems necessary and appropriate,
including matters that could be adopted as rules, unless the declaration or
this [act] requires that those provisions appear in the declaration.
SECTION 3‑107.
UPKEEP OF COMMON INTEREST COMMUNITY.
(a) Except to
the extent provided by the declaration, subsection (b), or Section 3‑113(h),
the association is responsible for maintenance, repair, and replacement of the
common elements, and each unit owner is responsible for maintenance, repair,
and replacement of his unit. Each unit
owner shall afford to the association and the other unit owners, and to their
agents or employees, access through his unit reasonably necessary for those
purposes. If damage is inflicted on the
common elements or on any unit through which access is taken, the unit owner
responsible for the damage, or the association if it is responsible, is liable
for the prompt repair thereof.
(b) In
addition to the liability that a declarant as a unit owner has under this
[act], the declarant alone is liable for all expenses in connection with real
estate subject to development rights. No
other unit owner and no other portion of the common interest community is
subject to a claim for payment of those expenses. Unless the declaration provides otherwise,
any income or proceeds from real estate subject to development rights inures to
the declarant.
(c) In a
planned community, if all development rights have expired with respect to any
real estate, the declarant remains liable for all expenses of that real estate
unless, upon expiration, the declaration provides that the real estate becomes
common elements or units.
SECTION 3‑108. MEETINGS. A meeting of the association must be held at
least once each year. Special meetings
of the association may be called by the president,
(a) The
following apply to unit owner meetings:
(1) An association shall hold a meeting of unit
owners annually at a time and place stated or fixed in accordance with the
bylaws.
(2) An association shall hold a special meeting of
unit owners to address any matter affecting the common interest community or
the association when its president, a
majority of the executive board, or by unit owners having at least
20 percent, or any lower percentage specified in the bylaws, of the votes in
the association request that the secretary call such a meeting. Not less than [10] nor more than [60] days in
advance of any meeting, the secretary or other officer specified in the bylaws
shall cause notice to be hand-delivered or sent prepaid If the
association does not notify unit owners of a special meeting within 30 days
after the requisite number or percentage of unit owners requested the secretary
to do so, the requesting members may directly notify all the unit owners of
that meeting. Only matters described in the meeting notice required by
paragraph (3) may be considered at a special meeting.
(3) An association shall notify unit owners of the
time and place of each annual and special unit owners meeting not less than 10
or more than 60 days before the meeting date. Notice may be by hand delivery to
the unit owners, by any means described in Section 3-121 or sent postage paid by United States mail to the any
mailing address of each unit or to any other mailing address designated in
writing by the unit owner designates in a record. The notice of any
meeting must state the time and place of the meeting and the items on the
agenda, including:
(i)(A) a statement of the general nature of any proposed amendment to the
declaration or bylaws,;
(ii)(B) any budget
changes,; and
(iii)(C) any proposal to remove an officer or member
of the executive board.
(4) The
minimum time to give notice required by Paragraph (3) may be reduced or waived
for a meeting called to deal with an emergency.
(5) Unit owners must be given a reasonable
opportunity at any meeting to comment regarding any matter affecting the common
interest community or the association.
(b) The
following rules apply to meetings of the executive board and committees of the
association authorized to act for the association:
(1) Every
meeting must be open to the unit owners except during executive sessions. The
executive board and those committees may hold an executive session only during
a regular or special meeting of the executive board and no vote or action may
be taken during an executive session. An executive session may be held only to:
(A) consult with the association=s attorney concerning legal matters;
(B) discuss existing or potential litigation,
mediation, arbitration, or administrative proceedings;
(C) discuss labor
or personnel matters;
(D) discuss matters relating to contract
negotiations, including the review of bids or proposals, if premature general
knowledge of those matters would place the association at a disadvantage; or
(E) prevent public knowledge of the matter to be
discussed if the executive board or committee determines that public knowledge
would violate the privacy of any person.
(2) For purposes of this section, a gathering of
board members at which the board members do not conduct association business is
not a meeting of the executive board. The executive board and its members may
not use incidental or social gatherings of board members or any other method to
evade the open meeting requirements of this section.
(3) During the period of declarant control, the
executive board shall meet at least four times per year. At least one of those
meetings must be held at the common interest community or at a place convenient
to the community. After termination of the period of declarant control, all
executive board meetings shall be at the common interest community or at a
place convenient to the community unless the unit owners amend the bylaws to
vary the location of those meetings.
(4) At each executive board meeting, the executive
board shall provide a reasonable opportunity for unit owners to comment
regarding any matter affecting the common interest community and the
association.
(5) Unless the meeting has been included in a
schedule given to the unit owners or the meeting has been called to deal with
an emergency, the secretary or other officer specified in the bylaws shall
cause notice of each executive board meeting to be given to each board member
and to the unit owners. The notice must be given at least 10 days before the
meeting and must state the time, place, and agenda of the meeting.
(6) If any materials are distributed to the
executive board before the meeting, the executive board at the same time shall
make copies of those materials reasonably available to unit owners, except that
the board need not make available copies of unapproved minutes or materials that
are to be considered in executive session.
(7) Unless the declaration or bylaws otherwise
provide, the executive board may meet by telephonic, video, or other
conferencing process if:
(A) the meeting notice states the conferencing
process to be used and provides information explaining how unit owners may
participate in the conference directly or by meeting at a central location or
conference connection; and
(B) the process provides all unit owners the
opportunity to hear or perceive the
discussion and offer comments to comment as provided in paragraph
(4) subsection (4)(d).
(8) After termination of the period of declarant
control, unit owners may amend the bylaws to vary the procedures for meetings
conference calls described in this subsection paragraph 7(ii).
(9) Instead of meeting, the executive board may act
by unanimous consent as documented in a recordauthenticated by all its
members. The secretary promptly shall give notice to all unit owners
of any action taken by unanimous consent. After termination of the period of
declarant control, the executive board may act by unanimous consent only to
undertake ministerial actions or to implement actions previously taken at a
meeting of the executive board.
(10)
Notwithstanding noncompliance with this section, an action by the
executive board is valid unless set aside by a court in an action brought
pursuant to Section 4-117. A challenge to the validity of an action of the
executive board for failure to comply
with this section may not be brought more than [60] days after the minutes of
the executive board of the meeting at which the action was taken are approved
or after the record of that action is distributed to unit owners.
NEW COMMENT
The
association is bound by a contract with a third party that has detrimentally
relied on an action of the executive board and that had no knowledge that the action was contrary
to this section.
1. Subsection (a)(2): While petitioning unit
owners may call a meeting in circumstances described in (b), the meeting itself
would be conducted by the persons who regularly conduct the association=s meetings.
2. The right of unit owners to speak during unit
owner meetings is a statutory right and exists whether or not the meeting
agenda provides for that opportunity.
Subsection
(7) recognizes that individuals increasingly conduct their business through a
variety of mediums besides in person, face to face meetings. Today, the most common alternatives to in
person meetings are telephone conference calls and video conference calls, but
it is likely that the future will find other forms of interactive electronic
conferencing processes, such as variants on group internet conferencing. The subsection does not wish to discourage
use of those alternatives; at the same time, it seeks to insure that the rights
of unit owners to participate in those meetings is not curtailed.
SECTION 3-109.
QUORUMS QUORUM.
(a) Unless
the bylaws otherwise provide otherwise, a quorum is present
throughout any meeting of the association unit owners if persons
entitled to cast [20] percent of the votes that may be cast for election of
the executive board are in the association are:
(1) present in person,;
(2) present by proxy at the beginning of the meeting;
(3) have cast absentee ballots solicited in
accordance with Section 3-110 (c)(4) which have been delivered to the secretary
in a timely manner; or
(4) by any
combination of (1), (2) or (3).
(b) Unless
the bylaws specify a larger percentage number, a quorum of the
executive board is deemed present for purposes of determining the
validity of any action throughout any meeting of the executive board only
if individuals persons entitled to cast [50] percent a
majority of the votes on that board are present at the time a vote
regarding that action is taken. at the beginning of the meeting. If
a quorum is present when a vote is taken, the affirmative vote of a majority of
the board members present is the act of the executive board unless a greater
vote is required by the declaration or bylaws.
(c) Except as
otherwise provided in the bylaws, meetings of the association must be conducted
in accordance with the most recent edition of Roberts= Rules of Order Newly Revised.
SECTION 3‑110.
VOTING; PROXIES; BALLOTS.
(a) Unless
prohibited or limited by the declaration or bylaws, unit owners may vote at a
meeting in person, by absentee ballot pursuant to subsection (b)(4), or by a
proxy pursuant to subsection (c), or without a meeting by electronic or paper
ballot pursuant to subsection (d).
(b) At a
meeting of unit owners:
(1) Unit owners may vote by proxy, or by voice vote,
show of hands, standing, or any other method for determining the votes of unit
owners, as designated by the person presiding at the meeting.
(a)(2)
If only one of several owners of a unit is
present at a meeting of the association, that owner is entitled to cast
all the votes allocated to that unit. If
more than one of the owners are present, the votes allocated to that unit may
be cast only in accordance with the agreement of a majority in interest of the
owners, unless the declaration expressly provides otherwise. There is majority agreement if any one of the
owners casts the votes allocated to that the unit without protest
being made promptly to the person presiding over the meeting by any of the
other owners of the unit.
(3) Unless a
greater number or fraction of the votes in the association is required by this
[act] or the declaration, a majority of the votes cast determines the outcome
of any action of the association.
(4) A unit owner may vote by absentee ballot
without being present at the meeting. The association promptly shall deliver an
absentee ballot to an owner that requests it if the request is made at least
[three] days before the scheduled meeting.
Votes cast by absentee ballot must be included in the tally of a vote
taken at that meeting.
(5) When a
unit owner votes by absentee ballot, the association must be able to verify that
the ballot is cast by the unit owner having the right to do so.
(b)(c)
Except as otherwise provided in the declaration or bylaws the following rules
apply:
(1)
Votes allocated to a unit may be cast pursuant to a directed or undirected proxy
duly executed by a unit owner.
(2) If a unit is owned by more than one person, each
owner of the unit may vote or register protest to the casting of votes by the
other owners of the unit through a duly executed proxy.
(3) A unit owner may revoke a proxy given pursuant to
this section only by actual notice of revocation to the person presiding over a
meeting of the association.
(4) A proxy is void if it is not dated or purports to be
revocable without notice.
(5) A proxy terminates one year after its date, unless
it specifies a shorter term is valid only for the meeting at which it is
cast and any recessed session of that meeting.
(6) No person
may cast undirected proxies representing more than [ ] percent of the votes in
the association.
(d) Unless prohibited or limited by the declaration
or bylaws, an association may conduct a vote without a meeting. In that event:
(1) The
association shall notify the unit owners that the vote will be taken by ballot.
(2) The
association shall deliver a paper or electronic ballot to every unit owner
entitled to vote on the matter.
(3) The
ballot must set forth each proposed action and provide an opportunity to vote
for or against the action.
(4) When the
association delivers the ballots, it shall also:
(A) indicate
the number of responses needed to meet the quorum requirements;
(B) state the
percent of votes necessary to approve each matter other than election of
directors;
(C) specify
the time by which a ballot must be delivered to the association to be counted,
which time may not be fewer than [three] days after the date the association
delivers the ballot; and
(D) describe
the time and manner by which unit owners wishing to deliver information to all
unit owners regarding the subject of the vote may do so.
(5) Except as
otherwise provided in the declaration or bylaws, a ballot is not revoked after
delivery to the association by death or disability or attempted revocation by
the person that cast that vote.
(6) Approval
by ballot pursuant to this subsection is valid only if the number of votes cast
by ballot equals or exceeds the quorum required to be present at a meeting
authorizing the action.
(c)(e) If the declaration requires that votes on specified
matters affecting the common interest community be cast by lessees rather than
unit owners of leased units:
(i)(1)
the provisions of subsections (a) and (b)
apply this section applies to lessees as if they were unit owners;
(ii)(2)
unit owners who that have leased their
units to other persons may not cast votes on those specified matters; and
(iii)(3)
lessees are entitled to notice of meetings,
access to records, and other rights respecting those matters as if they were
unit owners.
(f) Unit
owners must also be given notice, in the manner provided in Section 3-108, of
all meetings at which lessees are entitled to vote.
(d)(g)
No votes Votes allocated
to a unit owned by the association may must be cast in any
vote of the unit owners in the same proportion as the votes cast on the matter
by unit owners other than the association.
NEW COMMENT
In
the case of absentee ballots, the ballot must either be cast anonymously or,
when that is not reasonably practicable, the identity of the unit owner and the
selections indicated on the ballot shall be known only to the persons appointed
to count ballots who shall be obliged not to disclose the identities of the
voters.
SECTION 3-111.
TORT AND CONTRACT LIABILITY; TOLLING OF LIMITATION PERIOD.
(a) A unit
owner is not liable, solely by reason of being a unit owner, for an injury or
damage arising out of the condition or use of the common elements. Neither the association nor any unit owner
except the declarant is liable for that declarant's torts in connection with
any part of the common interest community which that declarant has the
responsibility to maintain.
(b) An action
alleging a wrong done by the association, including an action arising out of
the condition or use of the common elements, may be maintained only against the
association and not against any unit owner.
If the wrong occurred during any period of declarant control and the
association gives the declarant reasonable notice of and an opportunity to
defend against the action, the declarant who then controlled the association is
liable to the association or to any unit owner for (i) all tort losses
not covered by insurance suffered by the association or that unit owner, and
(ii) all costs that the association would not have incurred but for a
breach of contract or other wrongful act or omission. Whenever the declarant is liable to the
association under this section, the declarant is also liable for all expenses
of litigation, including reasonable attorney's fees, incurred by the association.
(c) Except as
provided in Section 4‑116(d) with respect to warranty claims, any statute
of limitation affecting the association's right of action against a declarant
under this [act] is tolled until the period of declarant control
terminates. A unit owner is not
precluded from maintaining an action contemplated by this section because he is
a unit owner or a member or officer of the association. Liens resulting from judgments against the
association are governed by Section 3‑117 (Other Liens).
SECTION 3‑112.
CONVEYANCE OR ENCUMBRANCE OF COMMON ELEMENTS.
(a) In a
condominium or planned community, portions of the common elements may be
conveyed or subjected to a security interest by the association if persons
entitled to cast at least [80] percent of the votes in the association,
including [80] percent of the votes allocated to units not owned by a
declarant, or any larger percentage the declaration specifies, agree to that action;
but all owners of units to which any limited common element is allocated must
agree in order to convey that limited common element or subject it to a
security interest. The declaration may
specify a smaller percentage only if all of the units are restricted
exclusively to non-residential uses.
Proceeds of the sale are an asset of the association, but the proceeds
of the sale of limited common elements must be distributed equitably among the
owners of units to which the limited common elements were allocated.
(b) Part of a
cooperative may be conveyed and all or part of a cooperative may be subjected
to a security interest by the association if persons entitled to cast at least
[80] percent of the votes in the association, including [80] percent of the
votes allocated to units not owned by a declarant, or any larger percentage the
declaration specifies, agree to that action; but, if fewer than all of the
units or limited common elements are to be conveyed or subjected to a security
interest, then all unit owners of those units, or the units to which those
limited common elements are allocated, must agree in order to convey those
units or limited common elements or subject them to a security interest. The declaration may specify a smaller
percentage only if all of the units are restricted exclusively to
nonresidential uses. Proceeds of the
sale are an asset of the association.
Any purported conveyance or other voluntary transfer of an entire
cooperative, unless made pursuant to Section 2‑118, is void.
(c) An
agreement to convey common elements in a condominium or planned community, or
to subject them to a security interest, or in a cooperative, an agreement to
convey any part of a cooperative or subject it to a security interest, must be
evidenced by the execution of an agreement, or ratifications thereof, in the
same manner as a deed, by the requisite number of unit owners. The agreement must specify a date after which
the agreement will be void unless recorded before that date. The agreement and all ratifications thereof
must be recorded in every [county] in which a portion of the common interest
community is situated, and is effective only upon recordation.
(d) The
association, on behalf of the unit owners, may contract to convey an interest
in a common interest community pursuant to subsection (a), but the contract is
not enforceable against the association until approved pursuant to subsections
(a), (b), and (c). Thereafter, the
association has all powers necessary and appropriate to effect the conveyance
or encumbrance, including the power to execute deeds or other instruments.
(e) Unless
made pursuant to this section, any purported conveyance, encumbrance, judicial
sale, or other voluntary transfer of common elements or of any other part of a
cooperative is void.
(f) A
conveyance or encumbrance of common elements or of a cooperative pursuant to
this section does not deprive any unit of its rights of access and support.
(g) Unless
the declaration otherwise provides, if the holders of first security interests
on 80 percent of the units that are subject to security interests on the day
the unit owners' agreement under subsection (c) is recorded consent in writing:
(1) a
conveyance of common elements pursuant to this section terminates both the undivided
interests in those common elements allocated to the units and the security
interests in those undivided interests held by all persons holding security
interests in the units; and
(2) an
encumbrance of common elements pursuant to this section has priority over all
preexisting encumbrances on the undivided interests in those common elements
held by all persons holding security interests in the units.
(h) The
consents by holders of first security interests on units described in
subsection (g), or a certificate of the secretary affirming that those consents
have been received by the association, may be recorded at any time before the
date on which the agreement under subsection (c) becomes void. Consents or certificates so recorded are
valid from the date they are recorded for purposes of calculating the
percentage of consenting first security interest holders, regardless of later
sales or encumbrances on those units.
Even if the required percentage of first security interest holders so
consent, a conveyance or encumbrance of common elements does not affect
interests having priority over the declaration, or created by the association
after the declaration was recorded.
(i) In a
cooperative, the association may acquire, hold, encumber, or convey a proprietary
lease without complying with this section.
SECTION 3-113.
INSURANCE.
(a)
Commencing not later than the time of the first conveyance of a unit to
a person other than a declarant, the association shall maintain, to the extent
reasonably available and subject to reasonable deductibles:
(1) property
insurance on the common elements and, in a planned community, also on property
that must become common elements, insuring against all risks of direct
physical loss commonly insured against, or, in the case of a
conversion building, against fire and extended coverage perils. The total amount of which
insurance, after application of any deductibles, must be not less
than 80 percent of the actual cash value of the insured property at the time
the insurance is purchased and at each renewal date, exclusive of land,
excavations, foundations, and other items normally excluded from property
policies; and
(2) commercial general liability insurance,
including medical payments insurance, in an amount determined by the executive
board but not less than any amount specified in the declaration, covering all
occurrences commonly insured against for death, bodily injury,
and property damage arising out of or in connection with the use, ownership, or
maintenance of the common elements and, in cooperatives, also of all units.;
and
(3) fidelity
insurance.
(b) In the
case of a building that is part of a cooperative or that contains units having
divided by horizontal boundaries described in the declaration, or
vertical boundaries that comprise common walls between units, the insurance
maintained under subsection (a)(1), to the extent reasonably available, must
include the units, but need not include improvements and betterments installed
by unit owners.
(c) If the
insurance described in subsections (a) and (b) is not reasonably available, the
association promptly shall cause notice of that fact to be hand-delivered or
sent prepaid by United States mail to all unit owners. The declaration may require the association
to carry any other insurance, and the association in any event may carry
any other insurance it considers appropriate to protect the association or the
unit owners.
(d) Insurance
policies carried pursuant to subsections (a) and (b) must provide that:
(1) each unit
owner is an insured person under the policy with respect to liability arising
out of his the owner=s interest
in the common elements or membership in the association;
(2) the
insurer waives its right to subrogation under the policy against any unit owner
or member of his the owner=s
household;
(3) no act or
omission by any a unit owner, unless acting within the owner=s scope
of his authority on behalf of the association, will voids
the policy or be is a condition to recovery under the policy; and
(4) if, at
the time of a loss under the policy, there is other insurance in the name of a
unit owner covering the same risk covered by the policy, the association=s policy provides primary insurance.
(e) Any loss
covered by the property policy under subsections (a)(1) and (b) must be
adjusted with the association, but the insurance proceeds for that loss are
payable to any insurance trustee designated for that purpose, or otherwise to
the association, and not to any holder of a security interest. The insurance trustee or the association
shall hold any insurance proceeds in trust for the association, unit owners,
and lien holders as their interests may appear.
Subject to the provisions of subsection (h), the proceeds must be
disbursed first for the repair or restoration of the damaged property, and the
association, unit owners, and lien holders are not entitled to receive payment
of any portion of the proceeds unless there is a surplus of proceeds after the
property has been completely repaired or restored, or the common interest
community is terminated.
(f) An
insurance policy issued to the association does not prevent a unit owner from
obtaining insurance for his the owner=s own benefit.
(g) An
insurer that has issued an insurance policy under this section shall issue
certificates or memoranda of insurance to the association and, upon written
request, to any unit owner or holder of a security interest. The insurer issuing the policy may not cancel
or refuse to renew it until [30] days after notice of the proposed cancellation
or non-renewal non renewal has been mailed to the association,
each unit owner, and each holder of a security interest to whom a
certificate or memorandum of insurance has been issued at their respective last
known addresses.
(h) Any
portion of the common interest community for which insurance is required under
this section which is damaged or destroyed must be repaired or replaced
promptly by the association unless:
(i)(1) the common interest community is terminated,
in which case Section 2‑118 applies;
(ii)(2) repair or
replacement would be illegal under any state or local statute or ordinance
governing health or safety,; or
(iii)(3) [80] percent
of the unit owners, including every owner of a unit or assigned limited common
element that will not be rebuilt, vote not to rebuild.
(i) The cost of repair or replacement in excess
of insurance proceeds, deductibles, and reserves is a common
expense. If the entire common interest
community is not repaired or replaced,:
(i)(1) the
insurance proceeds attributable to the damaged common elements must be used to
restore the damaged area to a condition compatible with the remainder of the
common interest community,; and
(ii)(2) except to
the extent that other persons will be distributees (Section 2‑105(a)(12)(ii)),
:
(A) the
insurance proceeds attributable to units and limited common elements that are
not rebuilt must be distributed to the owners of those units and the owners of
the units to which those limited common elements were allocated, or to lien
holders, as their interests may appear,; and
(B) the
remainder of the proceeds must be distributed to all the unit owners or lien
holders, as their interests may appear, as follows:
(1)(i) in a
condominium, in proportion to the common element interests of all the units;
and
(2)(ii) in a
cooperative or planned community, in proportion to the common expense
liabilities of all the units.
(j) If the unit owners vote not to rebuild any
unit, that unit's allocated interests are automatically reallocated upon the
vote as if the unit had been condemned under Section 1‑107(a), and the
association promptly shall prepare, execute, and record an amendment to the
declaration reflecting the reallocations.
(i)(k) The
provisions of this This section may be varied or waived in the case
of a common interest community all of whose units are restricted to non-residential
non residential use.
REPORTER=S NOTES FOR THE HARTFORD MEETING RE INSURANCE
And the related issues of 3-115 (e)
1. Require disclosure of the consequences of
deductibles, and note that the assn cannot pass on the cost
2. If the association insures a unit but does
fail to file a claim, the rule is that the assn has to pay for the repairs to
the unit that the policy would have paid for B and that cost is a common expense.
3. It is certainly the case that the association
is always going to be on the hook for common element repairs, whether or not
insured; and the association is also going to be required to repair those
common elements, even if there is no insurance.
The only issue then is the extent to which the association can then file
a claim against a unit owner whose negligence may have caused the loss.
4. The association=s possible answer to frequent claims is to require a
regular inspection and replacement program.
SECTION 3‑114.
SURPLUS FUNDS. Unless otherwise provided in the declaration,
any surplus funds of the association remaining after payment of or provision
for common expenses and any prepayment of reserves must be paid annually
to the unit owners in proportion to their common expense liabilities or
credited to them to reduce their future common expense assessments.
SECTION 3‑115.
ASSESSMENTS FOR COMMON EXPENSES.
(a) Until the
association makes a common expense assessment, the declarant shall pay all
common expenses. After an assessment has
been made by the association, assessments must be made at least annually, based
on a budget adopted at least annually by the association.
(b) Except
for assessments under subsections (c), (d), and (e) or as otherwise provided
in this [act], all common expenses must be assessed against all the units
in accordance with the allocations set forth in the declaration pursuant to
Section 2‑107(a) and (b). The
association may charge interest on any Any past due common
expense assessment or portion installment thereof bears
interest at the rate established by the association not exceeding [18]
percent per year.
(c) To the
extent required by the declaration:
(1) any
common expense associated with the maintenance, repair, or replacement of a
limited common element must be assessed against the units to which that limited
common element is assigned, equally, or in any other proportion the declaration
provides;
(2) any
a common expense or portion thereof benefitting fewer than all of
the units or their owners must may be assessed exclusively
against the units or unit owners benefitted; and
(3) the costs
of insurance must be assessed in proportion to risk, and the costs of
utilities must be assessed in proportion to usage.
(d)
Assessments to pay a judgment against the association (Section 3‑117(a))
may be made only against the units in the common interest community at the time
the judgment was entered, in proportion to their common expense liabilities.
(e) If damage
to a unit or other part of the common interest community any or
other common expense is caused by the willful misconduct or gross
negligence of any unit owner or a guest or invitee of a unit owner,
the association may assess that expense exclusively against his unit.
that owner=s unit, whether the association maintains insurance
with respect to that damage.
(f) If common
expense liabilities are reallocated, common expense assessments and any
instalment thereof not yet due must be recalculated in accordance with the
reallocated common expense liabilities.
NEW COMMENT
Any
charge which is not a common expense and which is voluntarily contracted for by
unit owners, including any fees for services provided by the association to
occupants of individual units, will commonly be charged exclusively to the
persons benefitted based on their use and consumption of services or on any
other basis to which the parties agree. This is consistent with '3-102(a)(10)(b).
SECTION 3‑116.
LIEN FOR ASSESSMENTS; SUMS DUE THE ASSOCIATION; ENFORCEMENT.
(a) The
association has a statutory lien on a unit for any assessment levied against
attributable to that unit or fines imposed against its unit owner. Unless the declaration otherwise provides, reasonable
attorney=s fees and costs, other fees, charges, late charges, fines, and interest
charged pursuant to Section 3‑102(a)(10), (11), and (12), and any
other sums due to the association under the declaration, this [act], or as a
result of an administrative, arbitration, or judicial decision are enforceable
in the same manner as unpaid assessments under this section. If an assessment is payable in installments,
the lien is for the full amount of the assessment from the time the first
installment thereof becomes due.
WRB TO DRAFTB Comment - the lien under this section includes
voluntary charges
(b) A lien
under this section is prior to all other liens and encumbrances on a unit
except:
(i)(1) liens and
encumbrances recorded before the recordation of the declaration and, in a
cooperative, liens and encumbrances which that the association
creates, assumes, or takes subject to, ;
(ii)(2) except as otherwise provided in subsection
(c), a first security interest on
the unit recorded before the date on which the assessment sought to be enforced
became delinquent, or, in a cooperative, the first security interest
encumbering only the unit owner's interest and perfected before the date on
which the assessment sought to be enforced became delinquent,; and
(iii)(3) liens for
real estate taxes and other governmental assessments or charges against the
unit or cooperative.
(c) A The lien under this section is also
prior to all security interests described in subsection (b)(2) clause
(ii) above to the extent of both the common expense assessments
based on the periodic budget adopted by the association pursuant to Section 3‑115(a)
which would have become due in the absence of acceleration during the six
months immediately preceding institution of an action to enforce the lien
and reasonable attorney=s fees and costs incurred by the association in
foreclosing the association=s lien. This subsection Subsection (b)
and this subsection does do not affect the priority of
mechanics= or materialmen=s liens, or the priority of liens for other
assessments made by the association. [The
A lien under this section is not subject to the provisions of [insert
appropriate reference to state homestead, dower and curtesy, or other
exemptions].]
(c)(d) Unless the
declaration otherwise provides, if two or more associations have liens for
assessments created at any time on the same property, those liens have equal
priority.
(d)(e) Recording of
the declaration constitutes record notice and perfection of the lien. No further recordation of any claim of lien
for assessment under this section is required.
(e)(f) A lien for
unpaid assessments is extinguished unless proceedings to enforce the lien are
instituted within [3] years after the full amount of the assessments becomes
due.
(f)(g) This section
does not prohibit actions against unit owners to recover sums for which
subsection (a) creates a lien or prohibit an association from taking a deed in
lieu of foreclosure.
(g)(h) A judgment
or decree in any action brought under this section must include costs and
reasonable attorney's fees for the prevailing party.
(h)(i) The
association upon written request shall furnish to a unit owner a statement
setting forth the amount of unpaid assessments against the unit. If the unit owner's interest is real estate,
the statement must be in recordable form.
The statement must be furnished within [10] business days after receipt
of the request and is binding on the association, the executive board, and
every unit owner.
(i)(j) In a
cooperative, upon nonpayment of an assessment on a unit, the unit owner may be
evicted in the same manner as provided by law in the case of an unlawful
holdover by a commercial tenant, and the lien may be foreclosed as provided by
this section.
(j)(k) The
association's lien may be foreclosed as provided in this subsection and
subsection (p):
(1) In
in a condominium or planned community, the association's lien must be
foreclosed in like manner as a mortgage on real estate [or by power of sale
under [insert appropriate state statute]];
(2) In
in a cooperative whose unit owners' interests in the units are real
estate (Section 1‑105), the association's lien must be foreclosed
in like manner as a mortgage on real estate [or by power of sale under [insert
appropriate state statute]] [or by power of sale under subsection (k)(l)];
[or and]
(3) In
in a cooperative whose unit owners' interests in the units are personal
property (Section 1‑105), the association's lien must be
foreclosed in like manner as a security interest under [insert reference to
Article 9, Uniform Commercial Code]; [and]
[(4) In
the case of in a foreclosure under [insert reference to state power
of sale statute], the association shall give the notice required by statute
or, if there is no such requirement, reasonable notice of its action to all
lien holders of the unit whose interest would be affected].]
(l)[(k) [In a cooperative, if the unit
owner's interest in a unit is real estate, the following rules apply (Section
1‑105):
(1) The
association, upon non-payment non payment of assessments and
compliance with this subsection, may sell that unit at a public sale or by
private negotiation, and at any time and place.
Every aspect of the sale, including the method, advertising, time,
place, and terms must be reasonable. The
association shall give to the unit owner and any lessees of the unit owner
reasonable written notice of the time and place of any public sale or, if a
private sale is intended, or of the intention of entering into a
contract to sell and of the time after which a private disposition may be made. The same notice must also be sent to any
other person who that has a recorded interest in the unit which
would be cut off by the sale, but only if the recorded interest was on record
seven weeks before the date specified in the notice as the date of any public
sale or seven weeks before the date specified in the notice as the date after
which a private sale may be made. The
notices required by this subsection may be sent to any address reasonable in
the circumstances. A sale Sale
may not be held until five weeks after the sending of the notice. The association may buy at any public sale
and, if the sale is conducted by a fiduciary or other person not related to the
association, at a private sale.
(2) Unless
otherwise agreed, the debtor unit owner is liable for any
deficiency in a foreclosure sale.
(3) The
proceeds of a foreclosure sale must be applied in the following order:
(i)(A) the
reasonable expenses of sale;
(ii)(B) the
reasonable expenses of securing possession before sale; the reasonable expenses
of holding, maintaining, and preparing the unit for sale, including
payment of taxes and other governmental charges, and premiums on hazard
and liability insurance,; and, to the extent provided for by
agreement between the association and the unit owner, reasonable attorney's
fees, costs, and other legal expenses incurred by the association;
(iii)(C) satisfaction
of the association's lien;
(iv)(D) satisfaction
in the order of priority of any subordinate claim of record; and
(v)(E) remittance
of any excess to the unit owner.
(4) A good
faith purchaser for value acquires the unit free of the association's debt that
gave rise to the lien under which the foreclosure sale occurred and any
subordinate interest, even though the association or other person conducting
the sale failed to comply with the requirements of this section. The person conducting the sale shall execute
a conveyance to the purchaser sufficient to convey the unit and stating that it
is executed by him the person after a foreclosure of the
association's lien by power of sale and that he the person was
empowered to make the sale. Signature
and title or authority of the person signing the conveyance as grantor and a
recital of the facts of non-payment of the assessment and of the giving of the
notices required by this subsection are sufficient proof of the facts recited
and of his the authority to sign.
Further proof of authority is not required even though the association
is named as grantee in the conveyance.
(5) At any
time before the association has disposed of a unit in a cooperative or entered
into a contract for its disposition under the power of sale, the unit owners or
the holder of any subordinate security interest may cure the unit owner=s default and prevent sale or other disposition by
tendering the performance due under the security agreement, including any
amounts due because of exercise of a right to accelerate, plus the reasonable
expenses of proceeding to foreclosure incurred to the time of tender, including
reasonable attorney=s fees and costs of the creditor.]
[(l)(m) In an action by an association to collect
assessments or to foreclose a lien for unpaid assessments on a unit
under this section, the court may appoint a receiver to collect all sums
alleged to be due and owing to a unit owner before commencement or during
pendency of the action. The receivership
is governed by [insert state law generally applicable to receiverships]. The court may order the receiver to pay any
sums held by the receiver to the association during pendency of the action to
the extent of the association's common expense assessments based on a periodic
budget adopted by the association pursuant to Section 3-115.]
[(m)(n) An association may not commence an action to
foreclose a lien on a unit under this section unless:
(1) the unit
owner, at the time the action is commenced, owes a sum equal to at least
(3) months of common expense assessments
based on the periodic budget last adopted by the association pursuant to
Section 3-115(a) and the unit owner has failed to accept or comply with a
payment plan offered by the association; and
(2) the
executive board expressly votes to commence a
foreclosure action against the unit.
(o) Unless the parties otherwise agree, the
association shall apply any sums paid by unit owners who are delinquent in
paying assessments in the following order:
(1) unpaid
assessments;
(2) late
charges;
(3) reasonable attorney=s fees and costs and other reasonable collection
charges; and
(4) all other unpaid fees, charges, fines,
penalties, interest, and late charges.
(p) If the only sums due with respect to a unit
consist of fines and related sums imposed against the unit, a foreclosure
action may not be commenced against the unit unless the association has a judgment
against the unit owner for the fines and related sums and has perfected a
judgment lien against the unit under [insert reference to state statute on
perfection of judgments].
(q) Any sale or other disposition conducted in
connection with a foreclosure action under this section shall be commercially
reasonable.
SECTION 3-117.
OTHER LIENS.
(a) In a
condominium or planned community:
(1) Except as
otherwise provided in paragraph (2), a judgment for money against the association
[if recorded] [if docketed] [if [insert other procedures required under state
law to perfect a lien on real estate as a result of a judgment] ], is not a
lien on the common elements, but is a lien in favor of the judgment lien holder
against all of the other real property of the association and all of the
units in the common interest community at the time the judgment was
entered. No other property of a unit
owner is subject to the claims of creditors of the association.
(2) If the
association has granted a security interest in the common elements to a
creditor of the association pursuant to Section 3‑112, the holder of that
security interest shall exercise its right against the common elements before
its judgment lien on any unit may be enforced.
(3) Whether
perfected before or after the creation of the common interest community, if a
lien, other than a deed of trust or mortgage (, including a judgment
lien or lien attributable to work performed or materials supplied before
creation of the common interest community), becomes effective against
two or more units, the unit owner of an affected unit may pay to the lien
holder the amount of the lien attributable to his the unit, and
the lien holder, upon receipt of payment, promptly shall deliver a release of
the lien covering that unit. The amount
of the payment must be proportionate to the ratio which that the
unit owner's common expense liability bears to the common expense liabilities
of all unit owners whose the units of which are subject to
the lien. After payment, the association
may not assess or have a lien against that unit owner's unit for any portion of
the common expenses incurred in connection with that lien.
(4) A
judgment against the association must be indexed in the name of the common
interest community and the association and, when so indexed, is notice of the
lien against the units.
(b) In a
cooperative:
(1) If the
association receives notice of an impending foreclosure on all or any portion
of the association's real estate, the association shall promptly transmit a
copy of that notice to each unit owner of a unit located within the real estate
to be foreclosed. Failure of the
association to transmit the notice does not affect the validity of the
foreclosure.
(2) Whether or
not</
