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S.B. 161 Enrolled
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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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