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S.B. 161 Enrolled

             1     

REAL PROPERTY TRANSFER FEE AMENDMENTS

             2     
2010 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Mark B. Madsen

             5     
House Sponsor: Rebecca D. Lockhart

             6      Cosponsors:
             7      J. Stuart Adams
             8      Curtis S. Bramble
             9      D. Chris Buttars
             10      Gene Davis
             11      Brent H. Goodfellow
             12      Jon J. Greiner
             13      Scott K. JenkinsPatricia W. Jones
Peter C. Knudson
Karen Mayne
Benjamin M. McAdams
Wayne L. Niederhauser
Ralph Okerlund
Luz RoblesRoss I. Romero
Howard A. Stephenson
Jerry W. Stevenson
Dennis E. Stowell
John L. Valentine
Kevin T. Van Tassell
Michael G. Waddoups              14     
             15      LONG TITLE
             16      General Description:
             17          This bill enacts a provision relating to fees associated with the transfer of real property.
             18      Highlighted Provisions:
             19          This bill:
             20          .    declares certain covenants, restrictions, agreements, and other instruments and
             21      documents that obligate a future buyer or seller to make a payment upon the
             22      transfer of real property to be void and unenforceable;
             23          .    provides for reinvestment fee covenants by common interest associations;
             24          .    requires a notice to be filed for a prior transfer fee covenant and for reinvestment
             25      fee covenants; and
             26          .    provides limits on the enforcement of a reinvestment fee covenant.
             27      Monies Appropriated in this Bill:
             28          None
             29      Other Special Clauses:
             30          This bill provides an immediate effective date.
             31          This bill provides revisor instructions.


             32      Utah Code Sections Affected:
             33      ENACTS:
             34          57-1-46, Utah Code Annotated 1953
             35     
             36      Be it enacted by the Legislature of the state of Utah:
             37          Section 1. Section 57-1-46 is enacted to read:
             38          57-1-46. Transfer fee and reinvestment fee covenants.
             39          (1) As used in this section:
             40          (a) "Association expenses" means expenses incurred by a common interest association
             41      for:
             42          (i) the administration of the common interest association;
             43          (ii) the purchase, ownership, leasing, construction, operation, use, administration,
             44      maintenance, improvement, repair, or replacement of association facilities, including expenses
             45      for taxes, insurance, operating reserves, capital reserves, and emergency funds;
             46          (iii) providing, establishing, creating, or managing a facility, activity, service, or
             47      program for the benefit of property owners, tenants, common areas, the burdened property, or
             48      property governed by the common interest association; or
             49          (iv) other facilities, activities, services, or programs that are required or permitted
             50      under the common interest association's organizational documents.
             51          (b) "Association facilities" means any real property, improvements on real property, or
             52      personal property owned, leased, constructed, developed, managed, or used by a common
             53      interest association, including common areas.
             54          (c) "Burdened property" means the real property that is subject to a reinvestment fee
             55      covenant or transfer fee covenant.
             56          (d) "Common areas" means areas described within:
             57          (i) the definition of "common areas and facilities" under Section 57-8-3 ; and
             58          (ii) the definition of "common areas" under Section 57-8a-102 .
             59          (e) "Common interest association":


             60          (i) means:
             61          (A) an association, as defined in Section 57-8a-102 ;
             62          (B) an association of unit owners, as defined in Section 57-8-3 ; or
             63          (C) a nonprofit association; and
             64          (ii) includes a person authorized by an association, association of unit owners, or
             65      nonprofit association, as the case may be.
             66          (f) "Large master planned development" means an approved development:
             67          (i) of at least 500 acres or 500 units; and
             68          (ii) that includes a commitment to fund, construct, develop, or maintain:
             69          (A) common infrastructure;
             70          (B) association facilities;
             71          (C) community programming;
             72          (D) resort facilities;
             73          (E) open space; or
             74          (F) recreation amenities.
             75          (g) "Nonprofit association" means a nonprofit corporation organized under Title 16,
             76      Chapter 6a, Utah Revised Nonprofit Corporation Act, to benefit, enhance, preserve, govern,
             77      manage, or maintain burdened property.
             78          (h) "Organizational documents":
             79          (i) for an association, as defined in Section 57-8a-102 , means governing documents as
             80      defined in Section 57-8a-102 ;
             81          (ii) for an association of unit owners, as defined in Section 57-8-3 , means a
             82      declaration as defined in Section 57-8-3 ; and
             83          (iii) for a nonprofit association:
             84          (A) means a written instrument by which the nonprofit association exercises powers or
             85      manages, maintains, or otherwise affects the property under the jurisdiction of the nonprofit
             86      association; and
             87          (B) includes articles of incorporation, bylaws, plats, charters, the nonprofit


             88      association's rules, and declarations of covenants, conditions, and restrictions.
             89          (i) "Reinvestment fee covenant" means a covenant, restriction, or agreement that:
             90          (i) affects real property; and
             91          (ii) obligates a future buyer or seller of the real property to pay to a common interest
             92      association, upon and as a result of a transfer of the real property, a fee that is dedicated to
             93      benefitting the burdened property, including payment for:
             94          (A) common planning, facilities, and infrastructure;
             95          (B) obligations arising from an environmental covenant;
             96          (C) community programming;
             97          (D) resort facilities;
             98          (E) open space;
             99          (F) recreation amenities;
             100          (G) charitable purposes; or
             101          (H) association expenses.
             102          (j) "Transfer fee covenant":
             103          (i) means an obligation, however denominated, expressed in a covenant, restriction,
             104      agreement, or other instrument or document:
             105          (A) that affects real property;
             106          (B) that is imposed on a future buyer or seller of real property, other than a person who
             107      is a party to the covenant, restriction, agreement, or other instrument or document; and
             108          (C) to pay a fee upon and as a result of a transfer of the real property; and
             109          (ii) does not include:
             110          (A) an obligation imposed by a court judgment, order, or decree;
             111          (B) an obligation imposed by the federal government or a state or local government
             112      entity; or
             113          (C) a reinvestment fee covenant.
             114          (2) A transfer fee covenant recorded on or after the effective date of this section is
             115      void and unenforceable.


             116          (3) (a) Except as provided in Subsection (3)(b), a reinvestment fee covenant may not
             117      be sold, assigned, or conveyed unless the sale, assignment, or conveyance is to a common
             118      interest association that was formed to benefit the burdened property.
             119          (b) A common interest association may assign or pledge to a lender the right to receive
             120      payment under a reinvestment fee covenant if:
             121          (i) the assignment or pledge is as collateral for a credit facility; and
             122          (ii) the lender releases the collateral interest upon payment in full of all amounts that
             123      the common interest association owes to the lender under the credit facility.
             124          (4) A reinvestment fee covenant recorded on or after the effective date of this section
             125      is not enforceable if the reinvestment fee covenant is intended to affect property that is the
             126      subject of a previously recorded transfer fee covenant or reinvestment fee covenant.
             127          (5) A reinvestment fee covenant recorded on or after the effective date of this section
             128      may not obligate the payment of a fee that exceeds .5% of the value of the burdened property,
             129      unless the burdened property is part of a large master planned development.
             130          (6) (a) A reinvestment fee covenant recorded on or after the effective date of this
             131      section is void and unenforceable unless a notice of reinvestment fee covenant, separate from
             132      the reinvestment fee covenant, is recorded in the office of the recorder of each county in which
             133      any of the burdened property is located.
             134          (b) A notice under Subsection (6)(a) shall:
             135          (i) state the name and address of the common interest association to which the fee
             136      under the reinvestment fee covenant is required to be paid;
             137          (ii) include the notarized signature of the common interest association's authorized
             138      representative;
             139          (iii) state that the burden of the reinvestment fee covenant is intended to run with the
             140      land and to bind successors in interest and assigns;
             141          (iv) state that the existence of the reinvestment fee covenant precludes the imposition
             142      of an additional reinvestment fee covenant on the burdened property;
             143          (v) state the duration of the reinvestment fee covenant;


             144          (vi) state the purpose of the fee required to be paid under the reinvestment fee
             145      covenant; and
             146          (vii) state that the fee required to be paid under the reinvestment fee covenant is
             147      required to benefit the burdened property.
             148          (c) A recorded notice of reinvestment fee covenant that substantially complies with the
             149      requirements of Subsection (6)(b) is valid and effective.
             150          (7) (a) A reinvestment fee covenant or transfer fee covenant recorded before the
             151      effective date of this section is not enforceable after May 31, 2010, unless:
             152          (i) a notice that is consistent with the notice described in Subsection (6) is recorded in
             153      the office of the recorder of each county in which any of the burdened property is located; or
             154          (ii) a notice of reinvestment fee covenant or transfer fee covenant, as described in
             155      Subsection (7)(b), is recorded in the office of the recorder of each county in which any of the
             156      burdened property is located.
             157          (b) A notice under Subsection (7)(a)(ii) shall:
             158          (i) include the notarized signature of the beneficiary of the reinvestment fee covenant
             159      or transfer fee covenant, or the beneficiary's authorized representative;
             160          (ii) state the name and current address of the beneficiary under the reinvestment fee
             161      covenant or transfer fee covenant;
             162          (iii) state that the burden of the reinvestment fee covenant or transfer fee covenant is
             163      intended to run with the land and to bind successors in interest and assigns; and
             164          (iv) state the duration of the reinvestment fee covenant or transfer fee covenant.
             165          (c) A recorded notice of reinvestment fee covenant or transfer fee covenant that
             166      substantially complies with the requirements of Subsection (7)(b) is valid and effective.
             167          (8) A reinvestment fee covenant recorded on or after the effective date of this section
             168      may not be enforced upon:
             169          (a) an involuntary transfer;
             170          (b) a transfer that results from a court order;
             171          (c) a bona fide transfer to a family member of the seller within three degrees of


             172      consanguinity who, before the transfer, provides adequate proof of consanguinity;
             173          (d) a transfer or change of interest due to death, whether provided in a will, trust, or
             174      decree of distribution; or
             175          (e) the transfer of burdened property by a financial institution, except to the extent that
             176      the reinvestment fee covenant requires the payment of a common interest association's costs
             177      directly related to the transfer of the burdened property, not to exceed $250.
             178          Section 2. Effective date.
             179          If approved by two-thirds of all the members elected to each house, this bill takes effect
             180      upon approval by the governor, or the day following the constitutional time limit of Utah
             181      Constitution Article VII, Section 8, without the governor's signature, or in the case of a veto,
             182      the date of veto override.
             183          Section 3. Revisor instructions.
             184          It is the intent of the Legislature that the Office of Legislative Research and General
             185      Counsel, in preparing the Utah Code database for publication, replace the language "the
             186      effective date of this section" where it appears in Section 57-1-46 , as enacted in this bill, with
             187      the actual effective date of this bill.


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