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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</