H. B. 2836
(By Delegate Doyle)
[Introduced March 12, 2001; referred to the
Committee on the Judiciary.]
A BILL to amend and reenact chapter thirty-six-b of the code of
West Virginia, one thousand nine hundred thirty-one, as
amended, relating to the uniform common interest ownership act
of two thousand one; general provisions; short title;
applicability; definitions; variation of provisions; taxation
of cooperatives, condominiums or planned communities;
applicability of local ordinances, regulations and building
codes; eminent domain; applicability of general law;
construction; uniformity of application and construction;
severability; unconscionable contract; obligation of good
faith; liberal construction of remedies; adjustment of dollar
amounts; applicability to new common interest communities; exceptions for small cooperatives and for small and limited
expense liability planned communities; applicability to
preexisting common interest communities; exception for small
preexisting cooperatives and planned communities; amendments
to governing instruments; applicability to nonresidential and
mixed-use common interest communities and to out-of-state
common interest communities; creation, alteration and
termination of common interest communities; unit boundaries;
construction of declaration and bylaws; unit descriptions;
contents of declaration; leasehold common interest
communities; allocation of interests; limited common elements;
plats and plans; exercise of development rights; alteration of
units; relocation of unit boundaries; subdivision of units;
legal boundaries; use for sales purposes; easement rights;
amendment of declaration; termination of common interest
community; rights of secured lenders; powers of master
associations; merger or consolidation of common interest
communities; addition of real estate; master planned
communities; management of the common interest community;
organization of unit owners' association; powers of such
association; executive board; transfer of special declarant rights; termination of contracts and leases of declarant;
association bylaws; upkeep of common interest community;
meetings; quorum; voting and proxies; tort and contract
liability of unit owners and association; tolling of statute
of limitations; conveyance or encumbrance of common elements;
association insurance; surplus funds of association; common
expense assessments; lien for assessments; other liens;
association records; association as trustee; protection of
purchasers; applicability and waiver of provisions; liability
for public offering statement; provisions of public offering
statement; disclosure of development rights, time shares,
conversion buildings and registration with securities and
exchange commission; purchaser's right to cancel required;
resales of units; deposits to be escrowed; release of liens;
conversion buildings; express and implied warranties of
quality; exclusion or modification of implied warranties of
quality; statute of limitations for warranties; rights of
action; attorney's fees; labeling of promotional material;
declarant's obligation to complete and restore; and
conveyances subject to substantial completion of units.
Be it enacted by the Legislature of West Virginia:
That chapter thirty-six-b of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and
reenacted to read as follows:
ARTICLE 1. GENERAL PROVISIONS.
PART I. DEFINITIONS AND OTHER GENERAL PROVISIONS.
§36B-1-101. Short title.
This chapter may be cited as the "Uniform Common Interest
Ownership Act."
§36B-1-102. Applicability.
Applicability of this chapter is governed by Part II of this
article.
§36B-1-103. Definitions.
In the declaration and bylaws (section 3-106), unless
specifically provided otherwise or the context otherwise requires,
and in this chapter:
(1) "Affiliate of a declarant" means any person who controls,
is controlled by, or is under common control with a declarant. A
person "controls" a declarant if the person: (i) Is a general
partner, officer, director or employer of the declarant; (ii)
directly or indirectly or acting in concert with one or more other
persons, or through one or more subsidiaries, owns, controls, holds
with power to vote, or holds proxies representing, more than twenty
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 twenty percent of the
capital of the declarant. A person "is controlled by" a declarant
if the declarant: (i) Is a general partner, officer, director or
employer of the person; (ii) directly or indirectly or acting in
concert with one or more other persons, or through one or more
subsidiaries, owns, controls, holds with power to vote or holds
proxies representing, more than twenty percent of the voting
interest in the person; (iii) controls in any manner the election
of a majority of the directors of the persons; or (iv) has
contributed more than twenty percent of the capital of the person.
Control does not exist if the powers described in this paragraph
are held solely as security for an obligation and are not
exercised.
(2) "Allocated interests" means the following interests
allocated to each unit: (i) In a condominium, the undivided
interest in the common elements, the common expense liability and
votes in the association; (ii) in a planned community, the common
expense liability and votes in the association.
(3) "Association" or "unit owners' association" means the unit
owners' association organized under section 3-101.
(4) "Common elements" means: (i) In the case of: (A) A
condominium or cooperative, all portions of the common interest
community other than the units; and (B) a planned community, and
real estate within a planned community which is owned or leased by
the association, other than a unit; and (ii) in all common interest
communities, any other interests in real estate for the benefit of
unit owners which are subject to the declaration.
(5) "Common expenses" means expenditures made by, or financial
liabilities of, the association, together with any allocations to
reserves.
(6) "Common expense liability" means the liability for common
expenses allocated to each unit pursuant to section 2-107.
(7) "Common interest community" means real estate with respect
to which a person, by virtue of his or her ownership of a unit, is
obligated to pay for real estate taxes, insurance premiums,
maintenance or improvement of other real estate described in a
declaration. "Ownership of a unit" does not include holding a
leasehold interest of less than twenty years in a unit, including
renewal options.
(8) "Condominium" means a common interest community in which
portions of the real estate are designated for separate ownership and the remainder of the real estate is designated for common
ownership solely by the owners of those portions. A common
interest community is not a condominium unless the undivided
interests in the common elements are vested in the unit owners.
(9) "Conversion building" means a building that at any time
before creation of the common interest community was occupied
wholly or partially by persons other than purchasers and persons
who occupy with the consent of purchasers.
(10) "Cooperative" means a common interest community in which
the real estate is owned by an association, each of whose members
is entitled by virtue of his or her ownership interest in the
association to exclusive possession of a unit.
(11) "Dealer" means a person in the business of selling units
for his or her own account.
(12) "Declarant" means any person or group of persons acting
in concert who: (i) As part of a common promotional plan, offers
to dispose of his or her or its interest in a unit not previously
disposed of; or (ii) reserves or succeeds to any special declarant
right.
(13) "Declaration" means any instruments, however denominated,
that create a common interest community, including any amendments to these instruments.
(14) "Development rights" means any right or combination of
rights reserved by a declarant in the declaration to: (i) Add real
estate to a common interest community; (ii) create units, common
elements or limited common elements within a common interest
community; (iii) subdivide units or convert units into common
elements; or (iv) withdraw real estate from a common interest
community.
(15) "Dispose" or "disposition" means a voluntary transfer to
a purchaser of any legal or equitable interest in a unit, but the
term does not include the transfer or release of a security
interest.
(16) "Executive board" means the body, regardless of name,
designated in the declaration to act on behalf of the association.
(17) "Identifying number" means a symbol or address that
identifies only one unit in a common interest community.
(18) "Leasehold common interest community" means a common
interest community in which all or a portion of the real estate is
subject to a lease the expiration or termination of which will
terminate the common interest community or reduce its size.
(19) "Limited common element" means a portion of the common elements allocated by the declaration or by operation of section
2-102(2) or (4) for the exclusive use of one or more but fewer than
all of the units.
(20) "Master association" means an organization described in
section 2-120, whether or not it is also an association described
in section 3-101.
(21) "Offering" means any advertisement, inducement,
solicitation or attempt to encourage any person to acquire any
interest in a unit, other than as security for an obligation. An
advertisement in a newspaper or other periodical of general
circulation, or in any broadcast medium to the general public, of
a common interest community not located in this state, is not an
offering if the advertisement states that an offering may be made
only in compliance with the law of the jurisdiction in which the
common interest community is located.
(22) "Person" means an individual, corporation, business
trust, estate, trust, partnership, association, joint venture,
government, governmental subdivision or agency or other legal or
commercial entity. (In the case of a land trust, however, "person"
means the beneficiary of the trust rather than the trust or the
trustee.)
(23) "Planned community" means a common interest community
that is not a condominium or a cooperative. A condominium or
cooperative may be part of a planned community.
(24) "Proprietary lease" means an agreement with the
association pursuant to which a member is entitled to exclusive
possession of a unit in a cooperative.
(25) "Purchaser" means a person, other than a declarant or a
dealer, who by means of a voluntary transfer acquires a legal or
equitable interest in a unit other than: (i) A leasehold interest
(including renewal options) of less than twenty years; or (ii) as
security for an obligation.
(26) "Real estate" means any leasehold or other estate or
interest in, over or under land, including structures, fixtures and
other improvements and interests that by custom, usage or law pass
with a conveyance of land though not described in the contract of
sale or instrument of conveyance. "Real estate" includes parcels
with or without upper or lower boundaries, and spaces that may be
filled with air or water.
(27) "Residential purposes" means use for dwelling or
recreational purposes, or both.
(28) "Security interest" means an interest in real estate or personal property, created by contract or conveyance, which secures
payment or performance of an obligation. The term includes a lien
created by a mortgage, deed of trust, trust deed, security deed,
contract for deed, land sales contract, lease intended as security,
assignment of lease or rents intended as security, pledge of an
ownership interest in an association and any other consensual lien
or title retention contract intended as security for an obligation.
(29) "Special declarant rights" means rights reserved for the
benefit of a declarant to: (i) Complete improvements indicated on
plats and plans filed with the declaration (section 2-109) or, in
a cooperative, to complete improvements described in the public
offering statement pursuant to section 4-103(a)(2); (ii) exercise
any development right (section 2-110); (iii) maintain sales
offices, management offices, signs advertising the common interest
community and models (section 2-115); (iv) use easements through
the common elements for the purpose of making improvements within
the common interest community or within real estate which may be
added to the common interest community (section 2-116); (v) make
the common interest community subject to a master association
(section 2-120); (vi) merge or consolidate a common interest
community with another common interest community of the same form of ownership (section 2-121); or (vii) appoint or remove any
officer of the association or any master association or any
executive board member during any period of declarant control
(section 3-103(d)).
(30) "Time share" means a right to occupy a unit or any of
several units during five or more separated time periods over a
period of at least five years, including renewal options, whether
or not coupled with an estate or interest in a common interest
community or a specified portion thereof.
(31) "Unit" means a physical portion of the common interest
community designated for separate ownership or occupancy, the
boundaries of which are described pursuant to section 2-105(a)(5).
If a unit in a cooperative is owned by a unit owner or is sold,
conveyed, voluntarily or involuntarily encumbered or otherwise
transferred by a unit owner, the interest in that unit which is
owned, sold, conveyed, encumbered or otherwise transferred is the
right to possession of that unit under a proprietary lease, coupled
with the allocated interests of that unit, and the association's
interest in that unit is not thereby affected.
(32) "Unit owner" means a declarant or other person who owns
a unit, or a lessee of a unit in a leasehold common interest community whose lease expires simultaneously with any lease the
expiration or termination of which will remove the unit from the
common interest community, but does not include a person having an
interest in a unit solely as security for an obligation. In a
condominium or planned community, the declarant is the owner of any
unit created by the declaration. In a cooperative, the declarant
is treated as the owner of any unit to which allocated interests
have been allocated (section 2-107) until that unit has been
conveyed to another person.
§36B-1-104. Variation by agreement.
Except as expressly provided in this chapter, 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 chapter or the
declaration.
§36B-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 purpose, that interest is personal property. That
interest is subject to the provisions of article six-b, chapter eleven of this code.
(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.
§36B-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) of this
section, the provisions of this chapter do not invalidate or modify
any provision of any building code, zoning, subdivision or other
real estate use law, ordinance or rule governing the use of real
estate.
§36B-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) of this section, 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.
§36B-1-108. Supplemental general principals of law applicable.
The principles of law and equity, including the law of
corporations and unincorporated associations, the law of real
property and the law relative to capacity to contract, principal
and agent, eminent domain, estoppel, fraud, misrepresentation,
duress, coercion, mistake, receivership, substantial performance or
other validating or invalidating cause supplement the provisions of
this chapter, except to the extent inconsistent with this chapter.
§36B-1-109. Construction against implicit repeal.
This chapter being a general act intended as a unified
coverage of its subject matter, no part of it may be construed to
be impliedly repealed by subsequent legislation if that
construction can reasonably be avoided.
§36B-1-110. Uniformity of application and construction.
This chapter shall be applied and construed so as to
effectuate its general purpose to make uniform the law with respect
to the subject of this chapter among states enacting it.
§36B-1-111. Severability.
If any provision of this chapter or the application thereof to
any person or circumstances is held invalid, the invalidity does
not affect other provisions or applications of this chapter which
can be given effect without the invalid provisions or applications,
and to this end the provisions of this chapter are severable.
§36B-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 or her
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.
§36B-1-113. Obligation of good faith.
Every contract or duty governed by this chapter imposes an
obligation of good faith in its performance or enforcement.
§36B-1-114. Remedies to be liberally administered.
(a) The remedies provided by this chapter 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 chapter or by other rule of
law.
(b) Any right or obligation declared by this chapter is
enforceable by judicial proceeding.
§36B-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) of this
section, 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 one thousand nine hundred sixty-seven = one
hundred, compiled by the bureau of labor statistics, United States
department of labor, (the "index"). The index for December, one
thousand nine hundred seventy-nine, which was two hundred thirty,
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 the first day of July 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 ten percent or more; but
(i) The portion of the percentage change in the index in
excess of a multiple of ten percent must be disregarded and the
dollar amount shall change only in multiples of ten percent of the
amount appearing in this chapter on the date of enactment;
(ii) The dollar amount must not change if the amounts required
by this section is that currently in effect pursuant to this
chapter 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 chapter on the date of enactment.
(c) If the index is revised after December, one thousand nine
hundred seventy-nine, 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 II. APPLICABILITY.
§36B-1-201. Applicability to new common interest communities.
Except as provided in sections 1-202 and 1-203, this chapter
applies to all common interest communities created within this
state after the effective date of the reenactment of this chapter
in the year two thousand one. The former provisions of this
chapter do not apply to common interest communities created after
the effective date of the reenactment of this chapter in the year
two thousand one. Amendments to this chapter apply to all common
interest communities created after the effective date of the
reenactment of this chapter or subjected to this chapter,
regardless of when the amendment is adopted in this state.
§36B-1-202. Exception for small cooperatives.
If a cooperative contains no more than twelve units and is not
subject to any development rights, it is subject only to sections
1-106 (applicability of local ordinances and building codes) and
1-107 (eminent domain) of this chapter unless the declaration
provides that the entire chapter is applicable.
§36B-1-203. Exception for small and limited expense liability
planned communities.
(a) If a planned community:
(1) Contains no more than twelve units and is not subject to
any development right; 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 three hundred
dollars 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 and building
codes) and 1-107 (eminent domain) unless the declaration provides
that this entire chapter is applicable.
(b) The exemption provided in subsection (a)(2) of this
section 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 during the period of declarant control without the
consent of all unit owners.
§36B-1-204. Applicability to preexisting common interest
communities.
Except as provided in section 1-205 (same; exception for small preexisting cooperatives and planned communities), sections 1-105
(separate titles and taxation), 1-106 (applicability of local
ordinances and building codes), 1-107 (eminent domain), 2-103
(construction and validity of declaration and consolidation of
common interest communities), 2-104 (description of units), 2-121
(merger or consolidation of common interest communities),
3-102(a)(1) through (6) and (11) through (16) (powers of unit
owners' association), 3-111 (tort and contract liability), 3-116
(lien for assessments), 3-118 (association records), 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 construing any of those sections, apply to all common
interest communities created in this state before the effective
date of the reenactment of this chapter in the year two thousand
one; but those sections apply only with respect to events and
circumstances occurring after the effective date of this chapter
and do not invalidate existing provisions of the declaration,
bylaws, or plats or plans of those common interest communities.
§36B-1-205. Same; exception for small preexisting cooperatives
and planned communities.
If a cooperative or planned community created within this
state before the effective date of this chapter contains no more than twelve units and is not subject to any development rights, it
is subject only to sections 1-105 (separate titles and taxation),
1-106 (applicability of local ordinances 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 1-106, in which case all the sections enumerated in
section 1-204 apply to that cooperative or planned community.
§36B-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 the
reenactment of this chapter in the year two thousand one, may be
amended to achieve any result permitted by this chapter, regardless
of what applicable law provided before this chapter was adopted.
(b) 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 chapter. If an amendment grants to
any person any rights, powers or privileges permitted by this
chapter, all correlative obligations, liabilities and restrictions in this chapter also apply to that person.
§36B-1-207. Applicability to nonresidential and mixed-use common
interest communities.
(a) "Nonresidential common interest community" means a common
interest community in which all units are restricted exclusively to
nonresidential purposes. Except as provided in subsection (e) of
this section, this section applies only to nonresidential common
interest communities.
(b) A nonresidential common interest community is not subject
to this chapter unless the declaration otherwise provides.
(c) The declaration of a nonresidential common interest
community may provide that the entire chapter applies to the
community or that only sections 1-105 (separate titles and
taxation), 1-106 (applicability of local ordinances and building
codes) and 1-107 (eminent domain) apply.
(d) If the entire chapter 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, 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) 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 chapter unless
the units that may be used for residential purposes would comprise
a common interest community in the absence of the nonresidential
units or the declaration provides that this chapter applies as
provided in subsection (c) or (d) of this section.
§36B-1-208. Applicability to out-of-state common interest
communities.
This chapter does not apply to common interest communities or
units located outside this state, but the public offering statement
provisions (sections 4-102 through 4-108) apply to all contracts
for the disposition thereof signed in this state by any party
unless exempt under section 4-101(b).
ARTICLE 2. CREATION, ALTERATION AND TERMINATION OF COMMON
INTEREST COMMUNITIES.
§36B-2-101. Creation of common interest communities.
(a) A common interest community may be created pursuant to
this chapter 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 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.
§36B-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) of this section, 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.
§36B-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, rules or regulations adopted
pursuant to section 3-102(a)(1).
(c) In the event of a conflict between the provisions of the
declaration and the bylaws, the declaration prevails except to the
extent the declaration is inconsistent with this chapter.
(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 chapter. Whether a
substantial failure impairs marketability is not affected by this
chapter.
§36B-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.
§36B-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 (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) 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) 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) of this subsection 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 restriction: (i) On alienation of the units,
including any restriction on leasing which exceed the restrictions
on leasing units which executive boards may impose pursuant to
section 3-102(c)(2); 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) 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.
§36B-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 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 of remainder are
acquired.
(d) If the expiration or termination or 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.
§36B-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 formulae 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 formulae 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 use cumulative or class voting for the purpose of evading
any limitation imposed on declarants by the chapter 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 units must each equal one if stated as a fraction or
one hundred 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.
§36B-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 allocation 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.
§36B-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 chapter 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 right, labeled to identify the rights
applicable to each parcel;
(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) of this section, the
approximate location and dimensions of any vertical unit boundaries
not shown or projected on plans recorded pursuant to subsection (d)
of this section and that unit's identifying number;
(7) Except as provided in subsection (h) of this section, 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) of this section 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
"leasehold real estate";
(9) The distance between noncontiguous 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, other limited common elements; and
(11) In the case of 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 "MUST BE BUILT" or "NEED NOT BE BUILT."
(d) Except as provided in subsection (h) of this section, 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) of this section, 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.
§36B-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) of this section, 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.
§36B-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 or her
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 or
partitions or creation of apertures under this paragraph is not an
alteration of boundaries.
§36B-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 thirty 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 sixty-seven percent of
the votes in the association, including sixty-seven 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.
§36B-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, 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.
§36B-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 or her 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.
§36B-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 or she 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.
§36B-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 chapter 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) In the common elements for purposes of access to their units;
and (ii) to use the common elements and all real estate that must
become common elements (section 2-105(a)(6)) for all other
purposes.
§36B-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 (d) of this section,
the declaration, including any plats and plans, may be amended only
by vote or agreement of unit owners of units to which at least
sixty-seven percent of the votes in the association are allocated,
or any larger majority the declaration specifies. The declaration
may specify a smaller number only if all of the units are
restricted exclusively to nonresidential use.
(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 chapter, no amendment may create or increase special declarant rights, increase the number of units,
change the boundaries of any unit or the allocated interests of a
unit, in the absence of unanimous consent of the unit owners.
(e) Amendments to the declaration required by the chapter 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 eighty percent of the votes in the association are allocated,
or any larger percentage specified in the declaration, 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. The amendment 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 eighty percent of the votes in the association, including eighty percent of the votes allocated to units not owned
by the declarant, agree to that action. The agreement is effective
thirty 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 thirty-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.
§36B-2-118. Termination of common interest community.
(a) Except in the case of 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, a common interest community may be terminated only
by agreement of unit owners of units to which at least eighty
percent of the votes in the association are allocated, or any
larger percentage the declaration specifies. 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) of this section. 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) of this
section. 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 chapter 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) of this section,
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 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 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 of the
cooperative which were recorded 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 or she 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) of this subsection against each of the unit owner's 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) of this section are as
follows:
(1) Except as provided in paragraph (2) of this subsection,
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
decisions of the independent appraisers must be distributed to the
unit owners and becomes final unless disapproved within thirty days after distribution by unit owners of units to which twenty-five
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) In a condominium, their respective common element
interests immediately before the termination; (ii) in a
cooperative, their respective ownership interests immediately
before the termination; and (iii) 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) of this section, 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.
§36B-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 3-112) may enforce its security
agreement in accordance with its terms, subject to the requirements
of this chapter 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) of this section.
§36B-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 chapter 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 chapter.
(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.
§36B-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) of this section, 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 preexisting common interest communities,
and the operations and activities of all associations of the
preexisting common interest communities are merged or consolidated
into a single association that holds all powers, rights,
obligations, assets and liabilities of all preexisting
associations.
(b) An agreement of two or more common interest communities to
merge or consolidate pursuant to subsection (a) of this section
must be evidenced by an agreement prepared, executed, recorded, and
certified by the president of the association of each of the preexisting 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 formulae 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 preexisting common
interest communities, and providing that the portion of the
percentages allocated to each unit formerly comprising a part of
the preexisting common interest community must be equal to the
percentages of allocated interests allocated to that unit by the
declaration of the preexisting common interest community.
§36B-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 ten 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).
§36B-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 five hundred units that
may be used for residential purposes, and at the time of the
reservation that declarant owns or controls more than five hundred
acres on which the units may be built.
(b) If the requirements of subsection (a) of this section 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) of this section.
(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 chapter is units that have been declared or
which are being offered for sale and any other real estate
described pursuant to subsection (c) of this section. 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 four 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) of this section.
(f) Limitations in this chapter 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.
ARTICLE 3. MANAGEMENT OF THE COMMON INTEREST COMMUNITY.
§36B-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 be organized as a profit or nonprofit
corporation, trust, partnership or as an unincorporated
association.
§36B-3-102. Powers of unit owners' association.
(a) Except as provided in subsection (b) of this section, and
subject to the provisions of the declaration, the association even
if unincorporated, may:
(1) Adopt and amend bylaws and rules;
(2) Adopt and amend budgets for revenues, expenditures and
reserves and collect assessments for common expenses from unit
owners;
(3) Hire and discharge managing agents and other employees,
agents and independent contractors;
(4) Institute, defend or intervene in litigation or
administrative proceedings in its own name on behalf of itself or
two or more unit owners on matters affecting the common interest
community;
(5) Make contracts and incur liabilities;
(6) Regulate the use, maintenance, repair, replacement and
modification of common elements;
(7) Cause additional improvements to be made as a part of the
common elements;
(8) Acquire, hold, encumber and convey in its own name any
right, title or interest to real estate or personal property, but:
(i) 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) 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) Grant easements, leases, licenses and concessions through
or over the common elements;
(10) Impose and receive any payments, fees or charges for the
use, rental or operation of the common elements, other than limited
common elements described in sections 2-102(2) and (4), and for
services provided to unit owners;
(11) Impose charges for late payment of assessments and, after
notice and an opportunity to be heard, levy reasonable fines for
violations of the declaration, bylaws and rules of the association;
(12) 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) Provide for the indemnification of its officers and
executive board and maintain directors' and officers' liability
insurance;
(14) Assign its right to future income, including the right to
receive common expense assessments, but only to the extent the
declaration expressly so provides;
(15) Exercise any other powers conferred by the declaration or
bylaws;
(16) Exercise all other powers that may be exercised in this
state by legal entities of the same type as the association;
(17) Exercise any other powers necessary and proper for the
governance and operation of the association; and
(18) By regulation, require that disputes between the
executive board 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.
(b) The declaration may not impose limitations on the power of
the association to deal with the declarant which are more
restrictive than the limitations imposed on the power of the
association to deal with other persons.
(c) Unless otherwise permitted by the declaration or this
chapter, an association may adopt rules 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 or behavior in units.
(d) If a tenant of a unit owner violates the declaration,
bylaws, or rules 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) of this section;
(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) The rights granted under subsection (d)(3) of this section
may only be exercised if the tenant or unit owner fails to cure the violation within ten days after the association notifies the tenant
and unit owner of that violation.
(f) 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.
§36B-3-103. Executive board members and officers.
(a) Except as provided in the declaration, the bylaws,
subsection (b) of this section or other provisions of this chapter,
the executive board may act in all instances 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 required of a trustee.
Officers and members of the executive board not appointed by the
declarant shall exercise the degree of care and loyalty required of
an officer or director of a corporation organized under the laws of
this state that govern nonprofit corporations.
(b) The executive board may not act on behalf of the
association to amend the declaration (section 2-117), to terminate the common interest community (section 2-118), or to elect members
of the executive board or 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) Within thirty 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 fourteen nor more than
thirty 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) Subject to subsection (e) of this section, the declaration
may provide for a period of declarant control of the association,
during which a declarant, or persons designated by him or her, may
appoint and remove the officers and members of the executive board. 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
of: (i) Sixty days after conveyance of seventy-five percent of the
units that may be created to unit owners other than a declarant;
(ii) two years after all declarants have ceased to offer units for
sale in the ordinary course of business; (iii) two years after any
right to add new units was last exercised; or (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) Not later than sixty days after conveyance of twenty-five
percent of the units that may be created to unit owners other than
a declarant, at least one member and not less than twenty-five percent of the members of the executive board must be elected by
unit owners other than the declarant. Not later than sixty days
after conveyance of fifty percent of the units that may be created
to unit owners other than a declarant, not less than thirty-three
and one-third percent of the members of the executive board must be
elected by unit owners other than the declarant.
(f) Except as otherwise provided in section 2-120(e), 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
executive board shall elect the officers. The executive board
members and officers shall take office upon election.
(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.
§36B-3-104. Transfer of special declarant rights.
(a) A special declarant right (section 1-103(29)) created or
reserved under this chapter 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 or her by this chapter. 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 chapter
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, or 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 or
her 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 chapter or by the
declaration.
(2) A successor to any special declarant right, other than a
successor who is an affiliate of a declarant, is subject to the
obligations and liabilities imposed by this chapter or the
declaration:
(i) On a declarant which relate to the successor's exercise or
nonexercise of special declarant rights; or
(ii) On his or her 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 or her 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.
(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) of this section,
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 this 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 or her 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 chapter or the declaration.
§36B-3-105. Termination of contracts and leases of declarant.
Except as provided in section 1-207, if entered into before
the executive board elected by the unit owners pursuant to section
3-103(f) takes office: (i) Any management contract, employment
contract, or lease of recreational or parking areas of facilities;
(ii) any other contract or lease between the association and a
declarant or an affiliate of a declarant; or (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 ninety
days' notice to the other party. This section does not apply to:
(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 (ii) a proprietary lease.
§36B-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) Election by the executive board 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
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.
(b) Subject to the provisions of the declaration, the bylaws
may provide for any other matters the association deems necessary
and appropriate.
§36B-3-107. Upkeep of common interest community.
(a) Except to the extent provided by the declaration,
subsection (b) of this section, 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 or her unit. Each unit
owner shall afford to the association and the other unit owners,
and to their agents or employees, access through his or her 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 chapter, 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.
§36B-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 majority of the executive board or by unit owners
having twenty percent, or any lower percentage specified in the
bylaws, of the votes in the association. Not less than ten nor
more than sixty 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 by United States mail to the mailing address of each unit or to any other mailing address designated in
writing by the unit owner. The notice of any meeting must state
the time and place of the meeting and the items on the agenda,
including the general nature of any proposed amendment to the
declaration or bylaws, any budget changes and proposal to remove an
officer or member of the executive board.
§36B-3-109. Quorums.
(a) Unless the bylaws provide otherwise, a quorum is present
throughout any meeting of the association if persons entitled to
cast twenty percent of the votes that may be cast for election of
the executive board are present in person or by proxy at the
beginning of the meeting.
(b) Unless the bylaws specify a larger percentage, a quorum is
considered present throughout any meeting of the executive board if
persons entitled to cast fifty percent of the votes on that board
are present at the beginning of the meeting.
§36B-3-110. Voting; proxies.
(a) 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 unit without protest being made promptly to the
person presiding over the meeting by any of the other owners of the
unit.
(b) Votes allocated to a unit may be cast pursuant to a proxy
duly executed by a unit owner. 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. A unit owner may revoke a proxy given pursuant to
this section only by actual notice or revocation to the person
presiding over a meeting of the association. A proxy is void if it
is not dated or purports to be revocable without notice. A proxy
terminates one year after its date, unless it specifies a shorter
term.
(c) 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) The provisions of
subsections (a) and (b) of this section apply to lessees as if they
were unit owners; (ii) unit owners who have leased their units to
other persons may not cast votes on those specified matters; and (iii) lessees are entitled to notice of meetings, access to records
and other rights respecting those matters as if they were unit
owners. 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) No votes allocated to a unit owned by the association may
be cast.
§36B-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
chapter 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 or she 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).
§36B-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 eighty percent of the votes in the association, including eighty 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 nonresidential 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 eighty percent of
the votes in the association, including eighty 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 ratification 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
ratification 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) of this section, but the contract is not
enforceable against the association until approved pursuant to subsections (a), (b) and (c) of this section. 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 eighty percent of the units that are
subject to security interests on the day the unit owners' agreement
under subsection (c) of this section 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) of this section, 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) of this section becomes
void. Consents of 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.
§36B-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:
(1) Property insurance on the common elements and, in a
planned community, also on property that must become common
elements, insuring against all risk 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
insurance after application of any deductibles must be not less
than eighty 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) 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.
(b) In the case of a building that is part of a cooperative or
that contains units having horizontal boundaries described in the declaration, the insurance maintained under subsection (a)(1) of
this section, to the extent reasonably available, must include the
units, but need not include improvements and betterment installed
by unit owners.
(c) If the insurance described in subsections (a) and (b) of
this section 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) of this section must provide that:
(1) Each unit owner is an insured person under the policy with
respect to liability arising out of his or her 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 or her household;
(3) No act or omission by any unit owner, unless acting within
the scope of his or her authority on behalf of the association,
will void the policy or be 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) of this section 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) of this section, 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 or her 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 thirty days after notice of the
proposed cancellation or nonrenewal 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) The common interest community is terminated, in which
case section 2-118 applies; (ii) repair or replacement would be
illegal under any state or local statute or ordinance governing
health or safety; or (iii) eighty 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. The cost of repair
or replacement in excess of insurance proceeds and reserves is a
common expense. If the entire common interest community is not repaired or replaced: (i) 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) 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) In a condominium, in
proportion to the common element interests of all the units; and
(2) in a cooperative or planned community, in proportion to the
common expense liabilities of all the units. 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) The provisions of this section may be varied or waived in the case of a common interest community all of whose units are
restricted to nonresidential use.
§36B-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 to
the unit owners in proportion to their common expense liabilities
or credited to them to reduce their future common expense
assessments.
§36B-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)
of this section, 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). Any past due
common expense assessment or installment thereof bears interest at
the rate established by the association not exceeding eighteen
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 common expense or portion thereof benefiting fewer
than all of the units must be assessed exclusively against the
units 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 any common expense is caused by the misconduct of any
unit owner, the association may assess that expense exclusively
against his or her unit.
(f) If common expense liabilities are reallocated, common
expense assessments and any installment thereof not yet due must be
recalculated in accordance with the reallocated common expense liabilities.
§36B-3-116. Lien for assessments.
(a) The association has a statutory lien on a unit for any
assessment levied against that unit or fines imposed against its
unit owner. Unless the declaration otherwise provides, fees,
charges, late charges, fines and interest charged pursuant to
section 3-102(a)(10), (11) and (12) are enforceable as 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.
(b) A lien under this section is prior to all other liens and
encumbrances on a unit except: (i) Liens and encumbrances recorded
before the recordation of the declaration and; in a cooperative,
liens and encumbrances which the association creates, assumes or
takes subject to; (ii) 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) liens for real estate taxes
and other governmental assessments or charges against the unit or cooperative. The lien is also prior to all security interests
described in clause (ii) above to the extent of 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. This subsection does
not affect the priority of mechanics' or materialmen's liens, or
the priority of liens for other assessments made by the
association. The lien under this section is not subject to the
provisions of article six-b, chapter eleven, article two, chapter
forty-three or other exemptions provided in this code.
(c) 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) 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) A lien for unpaid assessments is extinguished unless
proceedings to enforce the lien are instituted within three years
after the full amount of the assessments becomes due.
(f) This section does not prohibit actions to recover sums for which subsection (a) of this section creates a lien or prohibit an
association from taking a deed in lieu of foreclosure.
(g) A judgment or decree in any action brought under this
section must include costs and reasonable attorney's fees for the
prevailing party.
(h) 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 ten business days after receipt of the
request and is binding on the association, the executive board and
every unit owner.
(i) 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) The association's lien may be foreclosed as provided in
this subsection:
(1) 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.
(2) 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 state or by power of sale under subsection (k) of
this section; or
(3) 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 article
nine, chapter forty-six.
(4) In the case of foreclosure under power of sale, the
association shall give reasonable notice of its action to all lien
holders of the unit whose interest would be affected.
(k) In a cooperative, if the unit owner's interest in a unit
is real estate (section 1-105):
(1) The association, upon nonpayment 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, 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 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. 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 is liable for any
deficiency in a foreclosure sale.
(3) The proceeds of a foreclosure sale must be applied in the
following order:
(i) The reasonable expenses of sale;
(ii) The reasonable expenses of securing possession before
sale; holding, maintaining and preparing the unit for sale,
including payment of taxes and other governmental charges, 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 and other legal expenses incurred by the
association;
(iii) Satisfaction of the association's lien;
(iv) Satisfaction in the order of priority of any subordinate
claim of record; and
(v) 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 or her after a foreclosure of the association's lien by power
of sale and that he or she 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 nonpayment of
the assessment and of the giving of the notices required by this
subsection are sufficient proof of the facts recited and of his or her 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 of the creditor.
(l) In an action by an association to collect assessments or
to foreclose a lien for unpaid assessments, 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 this state's 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.
§36B-3-117. Other liens.
(a) In a condominium or planned community:
(1) Except as provided in paragraph (2) of this subsection, a
judgment for money against the association, if recorded, is not a
lien on the common elements, but is a lien in favor of the judgment
lien holder against 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 or her 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 unit owner's common expense
liability bears to the common expense liabilities of all unit
owners whose units 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 a unit owner's unit is subject to the
claims of the association's creditors, no other property of a unit
owner is subject to those claims.
§36B-3-118. Association records.
The association shall keep financial records sufficiently
detailed to enable the association to comply with section 4-109.
All financial and other records must be made reasonably available
for examination by any unit owner and his or her authorized agents.
§36B-3-119. Association as trustee.
With respect to a third person dealing with the association in
the association's capacity as a trustee, the existence of trust
powers and their proper exercise by the association may be assumed
without inquiry. A third person is not bound to inquire whether
the association has power to act as trustee or is properly
exercising trust powers. A third person, without actual knowledge
that the association is exceeding or improperly exercising its
powers, is fully protected in dealing with the association as if it
possessed and properly exercised the powers it purports to
exercise. A third person is not bound to assure the proper
application of trust assets paid or delivered to the association in
its capacity as trustee.
ARTICLE 4. PROTECTION OF PURCHASERS.
§36B-4-101. Applicability; waiver.
(a) This article applies to all units subject to this chapter,
except as provided in subsection (b) of this section or as modified or waived by agreement of purchasers of units in a common interest
community in which all units are restricted to nonresidential use.
(b) Neither a public offering statement nor a resale
certificate need be prepared or delivered in the case of:
(1) A gratuitous disposition of a unit;
(2) A disposition pursuant to court order;
(3) A disposition by a government or governmental agency;
(4) A disposition by foreclosure or deed in lieu of
foreclosure;
(5) A disposition to a dealer;
(6) A disposition that may be canceled at any time and for any
reason by the purchaser without penalty;
(7) A disposition of a unit restricted to nonresidential
purposes; or
(8) A disposition of a unit in a planned community in which
the declaration limits the maximum annual assessment of any unit to
not more than five hundred dollars, as adjusted pursuant to section
1-115 (adjustment of dollar amounts) if:
(i) The declarant has a reasonable and good faith belief that
the maximum stated assessment will be sufficient to pay the
expenses of the planned community;
(ii) The declaration cannot be amended to increase the
assessment during the period of declarant's or declarant's family
control without the consent of a majority of unit owners other than
the declarant; and
(iii) The planned community is not subject to any development
rights.
§36B-4-102. Liability for public offering statement requirements.
(a) Except as provided in subsection (b) of this section, a
declarant, before offering any interest in a unit to the public,
shall prepare a public offering statement conforming to the
requirements of sections 4-103, 4-104, 4-105 and 4-106.
(b) A declarant may transfer responsibility for preparation of
all or a part of the public offering statement to a successor
declarant (section 3-104) or to a dealer who intends to offer units
in the common interest community. In the event of any such
transfer, the transferor shall provide the transferee with any
information necessary to enable the transferee to fulfill the
requirements of subsection (a) of this section.
(c) Any declarant or dealer who offers a unit to a purchaser
shall deliver a public offering statement in the manner prescribed
in subsection 4-108(a). The person who prepared all or a part of the public offering statement is liable under sections 4-108,
4-117, 5-105 and 5-106 for any false or misleading statement set
forth therein or for any omission of a material fact therefrom with
respect to that portion of the public offering statement which he
or she prepared. If a declarant did not prepare any part of a
public offering statement that he or she delivers, he or she is not
liable for any false or misleading statement set forth therein or
for any omission of a material fact therefrom unless he or she had
actual knowledge of the statement or omission or, in the exercise
of reasonable care, should have known of the statement or omission.
(d) If a unit is part of a common interest community and is
part of any other real estate regime in connection with the sale of
which the delivery of a public offering statement is required under
the laws of this state, a single public offering statement
conforming to the requirements of sections 4-103, 4-104, 4-105 and
4-106 as those requirements relate to each regime in which the unit
is located, and to any other requirements imposed under the laws of
this state, may be prepared and delivered in lieu of providing two
or more public offering statements.
§36B-4-103. Public offering statement; general provisions.
(a) Except as provided in subsection (b) of this section, a public offering statement must contain or fully and accurately
disclose:
(1) The name and principal address of the declarant and of the
common interest community, and a statement that the common interest
community is either a condominium, cooperative or planned
community;
(2) A general description of the common interest community,
including to the extent possible, the types, number and declarant's
schedule of commencement and completion of construction of
buildings and amenities that the declarant anticipates including in
the common interest community;
(3) The number of units in the common interest community;
(4) Copies and a brief narrative description of the
significant features of the declaration, other than any plats and
plans, and any other recorded covenants, conditions, restrictions
and reservations affecting the common interest community; the
bylaws, and any rules or regulations of the association; copies of
any contracts and leases to be signed by purchasers at closing, and
a brief narrative description of any contracts or leases that will
or may be subject to cancellation by the association under section
3-105;
(5) Any current balance sheet and a projected budget for the
association, either within or as an exhibit to the public offering
statement, for one year after the date of the first conveyance to
a purchaser, and thereafter the current budget of the association,
a statement of who prepared the budget, and a statement of the
budget's assumptions concerning occupancy and inflation factors.
The budget must include, without limitation:
(i) A statement of the amount, or a statement that there is no
amount, included in the budget as a reserve for repairs and
replacement;
(ii) A statement of any other reserves;
(iii) The projected common expense assessment by category of
expenditures for the association; and
(iv) The projected monthly common expense assessment for each
type of unit;
(6) Any services not reflected in the budget that the
declarant provides, or expenses that he or she pays and which he or
she expects may become at any subsequent time a common expense of
the association and the projected common expense assessment
attributable to each of those services or expenses for the
association and for each type of unit;
(7) Any initial or special fee due from the purchaser at
closing, together with a description of the purpose and method of
calculating the fee;
(8) A description of any liens, defects, or encumbrances on or
affecting the title to the common interest community;
(9) A description of any financing offered or arranged by the
declarant;
(10) The terms and significant limitations of any warranties
provided by the declarant, including statutory warranties and
limitations on the enforcement thereof or on damages;
(11) A statement that:
(i) Within fifteen days after receipt of a public offering
statement a purchaser, before conveyance, may cancel any contract
for purchase of a unit from a declarant;
(ii) If a declarant fails to provide a public offering
statement to a purchaser before conveying a unit, that purchaser
may recover from the declarant ten percent of the sales price of
the unit plus ten percent of the share, proportionate to his or her
common expense liability, of any indebtedness of the association
secured by security interests encumbering the common interest
community: Provided, That the purchaser is required to show that he or she has actually been damaged as a result of the failure to
provide such offering statement and that his or her action to
recover such damage and the penalty provided in this paragraph is
instituted within three years from the date on which purchaser's
right of action shall have accrued; and
(iii) If a purchaser receives the public offering statement
more than fifteen days before signing a contract, he or she cannot
cancel the contract;
(12) A statement of any unsatisfied judgments or pending suits
against the association, and the status of any pending suits
material to the common interest community of which a declarant has
actual knowledge;
(13) A statement that any deposit made in connection with the
purchase of a unit will be held in an escrow account until closing
and will be returned to the purchaser if the purchaser cancels the
contract pursuant to section 4-108, together with the name and
address of the escrow agent;
(14) Any restraints on alienation of any portion of the common
interest community and any restrictions: (i) On use, occupancy,
and alienation of the units; 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;
(15) A description of the insurance coverage provided for the
benefit of unit owners;
(16) Any current or expected fees or charges to be paid by
unit owners for the use of the common elements and other facilities
related to the common interest community;
(17) The extent to which financial arrangements have been
provided for completion of all improvements that the declarant is
obligated to build pursuant to section 4-119 (declarant's
obligation to complete and restore);
(18) A brief narrative description of any zoning and other
land use requirements affecting the common interest community;
(19) All unusual and material circumstances, features and
characteristics of the common interest community and the units; and
(20) In a cooperative: (i) Whether the unit owners will be
entitled, for federal, state and local income tax purposes, to a
pass-through of deductions for payments made by the association for
real estate taxes and interest paid the holder of a security
interest encumbering the cooperative; and (ii) a statement as to the effect on every unit owner if the association fails to pay real
estate taxes or payments due the holder of a security interest
encumbering the cooperative.
(b) If a common interest community composed of not more than
twelve units is not subject to any development rights and no power
is reserved to a declarant to make the common interest community
part of a larger common interest community, group of common
interest communities, or other real estate, a public offering
statement may but need not include the information otherwise
required by paragraphs (9), (10), (15), (16), (17), (18) and (19)
of subsection (a) of this section and the narrative descriptions of
documents required by subsection (a)(4)of this section.
(c) A declarant promptly shall amend the public offering
statement to report any material change in the information required
by this section.
§36B-4-104. Same; common interest communities subject to
development rights.
If the declaration provides that a common interest community
is subject to any development rights, the public offering statement
must disclose, in addition to the information required by section
4-103:
(1) The maximum number of units, and the maximum number of units per acre, that may be created;
(2) A statement of how many or what percentage of the units
that may be created will be restricted exclusively to residential
use, or a statement that no representations are made regarding use
restrictions;
(3) If any of the units that may be built within real estate
subject to development rights are not to be restricted exclusively
to residential use, a statement, with respect to each portion of
that real estate, of the maximum percentage of the real estate
areas, and the maximum percentage of the floor areas of all units
that may be created therein, that are not restricted exclusively to
residential use;
(4) A brief narrative description of any development rights
reserved by a declarant and of any conditions relating to or
limitations upon the exercise of development rights;
(5) A statement of the maximum extent to which each unit's
allocated interests may be changed by the exercise of any
development right described in paragraph (3) of this section;
(6) A statement of the extent to which any buildings or other
improvements that may be erected pursuant to any development right
in any part of the common interest community will be compatible with existing buildings and improvements in the common interest
community in terms of architectural style, quality of construction,
and size, or a statement that no assurances are made in those
regards;
(7) General descriptions of all other improvements that may be
made and limited common elements that may be created within any
part of the common interest community pursuant to any development
right reserved by the declarant, or a statement that no assurances
are made in that regard;
(8) A statement of any limitations as to the locations of any
building or other improvement that may be made within any part of
the common interest community pursuant to any development right
reserved by the declarant, or a statement that no assurances are
made in that regard;
(9) A statement that any limited common elements created
pursuant to any development right reserved by the declarant will be
of the same general types and sizes as the limited common elements
within other parts of the common interest community, or a statement
of the types and sizes planned, or a statement that no assurances
are made in that regard;
(10) A statement that the proportion of limited common elements to units created pursuant to any development right
reserved by the declarant will be approximately equal to the
proportion existing within other parts of the common interest
community, or a statement of any other assurances in that regard,
or a statement that no assurances are made in that regard;
(11) A statement that all restrictions in the declaration
affecting use, occupancy, and alienation of units will apply to any
units created pursuant to any development right reserved by the
declarant, or a statement of any differentiations that may be made
as to those units, or a statement that no assurances are made in
that regard; and
(12) A statement of the extent to which any assurances made
pursuant to this section apply or do not apply in the event that
any development right is not exercised by the declarant.
§36B-4-105. Same; time shares.
If the declaration provides that ownership or occupancy of any
units is or may be in time shares, the public offering statement
shall disclose, in addition to the information required by section
4-103:
(1) The number and identity of units in which time shares may
be created;
(2) The total number of time shares that may be created;
(3) The minimum duration of any time shares that may be
created; and
(4) The extent to which the creation of time shares will or
may affect the enforceability of the association's lien for
assessments provided in section 3-116.
§36B-4-106. Same; common interest communities containing
conversion buildings.
(a) The public offering statement of a common interest
community containing any conversion building must contain, in
addition to the information required by section 4-103:
(1) A statement by the declarant, based on a report prepared
by an independent registered architect or engineer, describing the
present condition of all structural components and mechanical and
electrical installations material to the use and enjoyment of the
building;
(2) A statement by the declarant of the expected useful life
of each item reported on in paragraph (1) of this subsection or a
statement that no representations are made in that regard; and
(3) A list of any outstanding notices of uncured violations of
building codes or other municipal regulations, together with the
estimated cost of curing those violations.
(b) This section applies only to buildings containing units
that may be occupied for residential use.
§36B-4-107. Same; common interest community securities.
If an interest in a common interest community is currently
registered with the securities and exchange commission of the
United States, a declarant satisfies all requirements relating to
the preparation of a public offering statement of this article if
he or she delivers to the purchaser a copy of the public offering
statement filed with the securities and exchange commission. An
interest in a common interest community is not a security under the
provisions of chapter thirty-two of this code.
§36B-4-108. Purchaser's right to cancel.
(a) A person required to deliver a public offering statement
pursuant to section 4-102(c) shall provide a purchaser with a copy
of the public offering statement and all amendments thereto before
conveyance of the unit, and not later that the date of any contract
of sale. Unless a purchaser is given the public offering statement
more than fifteen days before execution of a contract for the
purchase of a unit, the purchaser, before conveyance, may cancel
the contract within fifteen days after first receiving the public
offering statement.
(b) If a purchaser elects to cancel a contract pursuant to subsection (a) of this section, he or she may do so by hand
delivering notice thereof to the offeror or by mailing notice
thereof by prepaid United States mail to the offeror or to his or
her agent for service of process. Cancellation is without penalty,
and all payments made by the purchaser before cancellation must be
refunded promptly.
(c) If a person required to deliver a public offering
statement pursuant to section 4-102(c) fails to provide a purchaser
to whom a unit is conveyed with that public offering statement and
all amendments thereto as required by subsection (a) of this
section, the purchaser, in addition to any rights to damages or
other relief, is entitled to receive from that person an amount
equal to ten percent of the sale price of the unit, plus ten
percent of the share, proportionate to his or her common expense
liability, of any indebtedness of the association secured by
security interests encumbering the common interest community:
Provided, That the purchaser must show that he or she has actually
been damaged as a result of the failure to provide such offering
statement and that his or her action to recover such damage and the
penalty provided in this subsection is instituted within three
years from the date on which purchaser's right of action shall have accrued.
§36B-4-109. Resales of units.
(a) Except in the case of a sale in which delivery of a public
offering statement is required, or unless exempt under section
4-101(b), a unit owner shall furnish to a purchaser before the
earlier of conveyance or transfer of the right to possession of a
unit, a copy of the declaration (other than any plats and plans),
the bylaws, the rules or regulations of the association and a
certificate containing:
(1) A statement disclosing the effect on the proposed
disposition of any right of first refusal or other restraint on the
free alienability of the unit held by the association;
(2) A statement setting forth the amount of the periodic
common expense assessment and any unpaid common expense or special
assessment currently due and payable from the selling unit owner;
(3) A statement of any other fees payable by the owner of the
unit being sold;
(4) A statement of any capital expenditures approved by the
association for the current and succeeding fiscal years;
(5) A statement of the amount of any reserves for capital
expenditures and of any portions of those reserves designated by the association for any specified projects;
(6) The most recent regularly prepared balance sheet and
income and expense statement, if any, of the association;
(7) The current operating budget of the association;
(8) A statement of any unsatisfied judgments against the
association and the status of any pending suits in which the
association is a defendant;
(9) A statement describing any insurance coverage provided for
the benefit of unit owners;
(10) A statement as to whether the executive board has given
or received written notice that any existing uses, occupancies,
alterations or improvements in or to the unit or to the limited
common elements assigned thereto violate any provision of the
declaration;
(11) A statement as to whether the executive board has
received written notice from a governmental agency of any violation
of environmental, health or building codes with respect to the
unit, the limited common elements assigned thereto, or any other
portion of the common interest community which has not been cured;
(12) A statement of the remaining term of any leasehold estate
affecting the common interest community and the provisions governing any extension or renewal thereof;
(13) A statement of any restrictions in the declaration
affecting the amount that may be received by a unit owner upon
sale, condemnation, casualty loss to the unit or the common
interest community or termination of the common interest community;
(14) In a cooperative, an accountant's statement, if any was
prepared, as to the deductibility for federal income tax purposes
by the unit owner of real estate taxes and interest paid by the
association;
(15) A statement describing any pending sale or encumbrance of
common elements; and
(16) A statement disclosing the effect on the unit to be
conveyed of any restrictions on the owner's right to use or occupy
the unit or to lease the unit to another person.
(b) The association, within ten days after a request by a unit
owner, shall furnish a certificate containing the information
necessary to enable the unit owner to comply with this section. A
unit owner providing a certificate pursuant to subsection (a) of
this section is not liable to the purchaser for any erroneous
information provided by the association and included in the
certificate.
(c) A purchaser is not liable for any unpaid assessment or fee
greater than the amount set forth in the certificate prepared by
the association. A unit owner is not liable to a purchaser for the
failure or delay of the association to provide the certificate in
a timely manner, but the purchase contract is voidable by the
purchaser until the certificate has been provided and for five days
thereafter or until conveyance, whichever first occurs.
§36B-4-110. Escrow of deposits.
Any deposit made in connection with the purchase or
reservation of a unit from a person required to deliver a public
offering statement pursuant to section 4-102(c) must be placed in
escrow and held either in this state or in the state where the unit
is located in an amount designated solely for that purpose by a
licensed title insurance company, an attorney, a licensed real
estate broker, an independent bonded escrow company or an
institution whose accounts are insured by a governmental agency or
instrumentality until: (i) Delivered to the declarant at closing;
(ii) delivered to the declarant because of the purchaser's default
under a contract to purchase the unit; or (iii) refunded to the
purchaser.
§36B-4-111. Release of liens.
(a) In the case of a sale of a unit where delivery of a public offering statement is required pursuant to section 4-102(c), a
seller:
(1) Before conveying a unit, shall record or furnish to the
purchaser releases of all liens, except liens on real estate that
a declarant has the right to withdraw from the common interest
community, that the purchaser does not expressly agree to take
subject to or assume and that encumber:
(i) In a condominium, that unit and its common element
interest; and
(ii) In a cooperative or planned community, that unit and any
limited common elements assigned thereto; or
(2) Shall provide a surety bond or substitute collateral for
or insurance against the lien as provided for liens on real estate.
(b) Before conveying real estate to the association, the
declarant shall have that real estate released from: (1) All liens
the foreclosure of which would deprive unit owners of any right of
access to or easement of support of their units; and (2) all other
liens on that real estate unless the public offering statement
describes certain real estate that may be conveyed subject to liens
in specified amounts.
§36B-4-112. Conversion buildings.
(a) A declarant of a common interest community containing
conversion buildings, and any dealer who intends to offer units in
such a common interest community, shall give each of the
residential tenants and any residential subtenant in possession of
a portion of a conversion building notice of the conversion and
provide those persons with the public offering statement no later
that one hundred twenty days before the tenants and any subtenant
in possession are required to vacate. The notice must set forth
generally the rights of tenants and subtenants under this section
and must be hand delivered to the unit or mailed by prepaid United
States mail to the tenant and subtenant at the address of the unit
or any other mailing address provided by a tenant. No tenant or
subtenant may be required to vacate upon less than one hundred
twenty days' notice, except by reason of nonpayment of rent, waste
or conduct that disturbs other tenants' peaceful enjoyment of the
premises, and the terms of the tenancy may not be altered during
that period. Failure to give notice as required by this section is
a defense to an action for possession.
(b) For sixty days after delivery or mailing of the notice
described in subsection (a) of this section, the person required to
give the notice shall offer to convey each unit or proposed unit occupied for residential use to the tenant who leases that unit.
If a tenant fails to purchase the unit during that sixty-day
period, the offeror may not offer to dispose of an interest in that
unit during the following one hundred eighty days at a price or on
terms more favorable to the offeree than the price or terms offered
to the tenant. This subsection does not apply to any unit in a
conversion building if that unit will be restricted exclusively to
nonresidential use or the boundaries of the converted unit do not
substantially conform to the dimensions of the residential unit
before conversion.
(c) If a seller, in violation of subsection (b) of this
section, conveys a unit to a purchaser for value who has no
knowledge of the violation, the recordation of the deed conveying
the unit or, in a cooperative, the conveyance of the unit,
extinguishes any right a tenant may have under subsection (b) of
this section to purchase that unit if the deed states that the
seller has compiled with subsection (b) of this section, but the
conveyance does not affect the right of a tenant to recover damages
from the seller for a violation of subsection (b) of this section.
(d) If a notice of conversion specifies a date by which a unit
or proposed unit must be vacated and otherwise complies with state law governing summary process, the notice also constitutes a notice
to vacate specified by that statute.
(e) Nothing in this section permits termination of a lease by
a declarant in violation of its terms.
§36B-4-113. Express warranties of quality.
(a) Express warranties made by any seller to a purchaser of a
unit, if relied upon by the purchaser, are created as follows:
(1) Any affirmation of fact or promise which relates to the
unit, its use, or rights appurtenant thereto, area improvements to
the common interest community that would directly benefit the unit,
or the right to use or have the benefit of facilities not located
in the common interest community, creates an express warranty that
the unit and related rights and uses will conform to the
affirmation or promise;
(2) Any model or description of the physical characteristics
of the common interest community, including plans and
specifications of or for improvements, creates an express warranty
that the common interest community will conform to the model or
description;
(3) Any description of the quantity or extent of the real
estate comprising the common interest community, including plats or surveys, creates an express warranty that the common interest
community will conform to the description, subject to customary
tolerances; and
(4) A provision that a purchaser may put a unit only to a
specified use is an express warranty that the specified use is
lawful.
(b) Neither formal words, such as "warranty" or "guarantee"
nor a specific intention to make a warranty, are necessary to
create an express warranty of quality, but a statement purporting
to be merely an opinion or commendation of the real estate or its
value does not create a warranty.
(c) Any conveyance of a unit transfers to the purchaser all
express warranties of quality made by previous sellers.
§36B-4-114. Implied warranties of quality.
(a) A declarant and any dealer warrants that a unit will be in
at least as good condition at the earlier of the time of the
conveyance or delivery of possession as it was at the time of
contracting, reasonable wear and tear excepted.
(b) A declarant and any dealer impliedly warrants that a unit
and the common elements in the common interest community are
suitable for the ordinary uses of real estate of its type and that any improvements made or contracted for by him or her, or made by
any person before the creation of the common interest community,
will be:
(1) Free from defective materials; and
(2) Constructed in accordance with applicable law, according
to sound engineering and construction standards, and in a
workmanlike manner.
(c) In addition, a declarant and any dealer warrants to a
purchaser of a unit that may be used for residential use that an
existing use, continuation of which is contemplated by the parties,
does not violate applicable law at the earlier of the time of
conveyance or delivery of possession.
(d) Warranties imposed by this section may be excluded or
modified as specified in section 4-115.
(e) For purposes of this section, improvements made or
contracted for by an affiliate of a declarant (section 1-103(1))
are made or contracted for by the declarant.
(f) Any conveyance of a unit transfers to the purchaser all of
the declarant's implied warranties of quality.
§36B-4-115. Exclusion or modification of implied warranties of
quality.
(a) Except as limited by subsection (b) of this section with respect to a purchaser of a unit that may be used for residential
use, implied warranties of quality:
(1) May be excluded or modified by agreement of the parties;
and
(2) Are excluded by expression of disclaimer, such as "as is,"
"with all faults," or other language that in common understanding
calls the purchaser's attention to the exclusion of warranties.
(b) With respect to a purchaser of a unit that may be occupied
for residential use, no general disclaimer of implied warranties of
quality is effective, but a declarant and any dealer may disclaim
liability in an instrument signed by the purchaser for a specified
defect or specified failure to comply with applicable law, if the
defect or failure entered into and became a part of the basis of
the bargain.
§36B-4-116. Statute of limitations for warranties.
(a) Unless a period of limitation is tolled under section
3-111 or affected by subsection (d) of this section, a judicial
proceeding for breach of any obligation arising under section
4-113 or section 4-114 must be commenced within six years after the
cause of action accrues, but the parties may agree to reduce the
period of limitation to not less than two years. With respect to a unit that may be occupied for residential use, an agreement to
reduce the period of limitation must be evidenced by a separate
instrument executed by the purchaser.
(b) Subject to subsection (c) of this section, a cause of
action for breach of warranty of quality, regardless of the
purchaser's lack of knowledge of the breach, accrues:
(1) As to a unit, at the time the purchaser to whom the
warranty is first made enters into possession if a possessory
interest was conveyed or at the time of acceptance of the
instrument of conveyance if a nonpossessory interest was conveyed;
and
(2) As to each common element, at the time the common element
is completed or, if later, as to: (i) A common element that is
added to the common interest community by exercise of development
rights, at the time the first unit which was added to the
condominium by the same exercise of development rights is conveyed
to a bona fide purchaser; or (ii) a common element within any other
portion of the common interest community, at the time the first
unit is conveyed to a bona fide purchaser.
(c) If a warranty of quality explicitly extends to future
performance or duration of any improvement or component of the common interest community, the cause of action accrues at the time
the breach is discovered or at the end of the period for which the
warranty explicitly extends, whichever is earlier.
(d) During the period of declarant control, the association
may authorize an independent committee of the executive board to
evaluate and enforce by any lawful means warranty claims involving
the common elements, and to compromise those claims. Only members
of the executive board elected by unit owners other than the
declarant and other persons appointed by those independent members
may serve on the committee, and the committee's decision must be
free of any control by the declarant or any member of the executive
board of officers appointed by the declarant. All costs reasonably
incurred by the committee, including attorney's fees, are common
expenses, and must be added to the budget annually adopted by the
association under section 3-115. If the committee is so created,
the period of limitation for claims for these warranties begins to
run from the date of the first meeting of the committee, regardless
of when the period of declarant control terminates.
§36B-4-117. Effect of violations on rights of action; attorney's
fees.
(a) If a declarant or any other person subject to this article
fails to comply with any of its provisions or any provision of the declaration or bylaws, any person or class of persons adversely
affected by the failure to comply has a claim for appropriate
relief. Punitive damages may be awarded for a willful failure to
comply with this article. The court, in an appropriate case, may
award court costs and reasonable attorney's fees.
(b) Parties to a dispute arising under this article, the
declaration or the bylaws may agree to resolve the dispute by any
form of binding or nonbinding alternative dispute resolution, but:
(1) A declarant may agree with the association to do so only
after the period of declarant control passes unless the agreement
is made with an independent committee of the executive board
elected pursuant to section 4-116(d); and
(2) An agreement to submit to any form of binding alternative
dispute resolution must be in a writing signed by the parties.
§36B-4-118. Labeling of promotional material.
No promotional material may be displayed or delivered to
prospective purchasers which describes or portrays an improvement
that is not in existence unless the description or portrayal of the
improvement in the promotional material is conspicuously labeled or
identified either as "MUST BE BUILT" or as "NEED NOT BE BUILT."
§36B-4-119. Declarant's obligation to complete and restore.
(a) Except for improvements labeled "NEED NOT BE BUILT," the declarant shall complete all improvements depicted on any site plan
or other graphic representation, including any plats or plans
prepared pursuant to section 2-109, whether or not that site plan
or other graphic representation is contained in the public offering
statement or in any promotional material distributed by or for the
declarant.
(b) The declarant is subject to liability for the prompt
repair and restoration, to a condition compatible with the
remainder of the common interest community, of any portion of the
common interest community affected by the exercise of rights
reserved pursuant to or created by section 2-110, 2-111, 2-112,
2-113, 2-115 or 2-116.
§36B-4-120. Substantial completion of units.
In the case of a sale of a unit in which delivery of a public
offering statement is required, a contract of sale may be executed,
but no interest in that unit may be conveyed, until the declaration
is recorded and the unit is substantially completed, as evidenced
by a recorded certificate of substantial completion executed by an
independent registered architect, surveyor or engineer, or by
issuance of a certificate of occupancy authorized by law.
NOTE: This chapter is rewritten and replaces the present law
governing common interest communities; therefore, strike-throughs
and underscoring have been omitted.
This bill has been recommended for introduction by the
Commission on Interstate Cooperation.