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S.B. 288






Chief Sponsor: Michael G. Waddoups

House Sponsor: Gage Froerer

             8      LONG TITLE
             9      General Description:
             10          This bill addresses the organization of an association of unit owners in a condominium
             11      project into a nonprofit corporation or other entity.
             12      Highlighted Provisions:
             13          This bill:
             14          .    defines terms;
             15          .    allows an association of unit owners to organize as a nonprofit corporation or other
             16      entity;
             17          .    addresses the priority of any conflicting governing provisions in Title 57, Chapter 8,
             18      Condominium Ownership Act, Title 16, Chapter 6a, Utah Revised Nonprofit
             19      Corporation Act, other law, and other documents, bylaws, and rules;
             20          .    addresses the application of provisions concerning organization as a nonprofit
             21      corporation to a previously organized entity; and
             22          .    makes technical changes.
             23      Monies Appropriated in this Bill:
             24          None
             25      Other Special Clauses:
             26          None
             27      Utah Code Sections Affected:

             28      AMENDS:
             29          57-8-3, as last amended by Laws of Utah 2003, Chapter 265
             30      ENACTS:
             31          57-8-40, Utah Code Annotated 1953
             33      Be it enacted by the Legislature of the state of Utah:
             34          Section 1. Section 57-8-3 is amended to read:
             35           57-8-3. Definitions.
             36          As used in this chapter:
             37          (1) "Assessment" means any charge imposed by the association, including common
             38      expenses on or against a unit owner pursuant to the provisions of the declaration, bylaws, or
             39      this chapter.
             40          (2) "Association of unit owners" means all of the unit owners:
             41          (a) acting as a group in accordance with the declaration and bylaws[.]; or
             42          (b) organized as a legal entity in accordance with the declaration.
             43          (3) "Building" means a building, containing units, and comprising a part of the
             44      property.
             45          (4) "Common areas and facilities" unless otherwise provided in the declaration or
             46      lawful amendments to the declaration means:
             47          (a) the land included within the condominium project, whether leasehold or in fee
             48      simple;
             49          (b) the foundations, columns, girders, beams, supports, main walls, roofs, halls,
             50      corridors, lobbies, stairs, stairways, fire escapes, entrances, and exits of the building;
             51          (c) the basements, yards, gardens, parking areas, and storage spaces;
             52          (d) the premises for lodging of janitors or persons in charge of the property;
             53          (e) installations of central services such as power, light, gas, hot and cold water,
             54      heating, refrigeration, air conditioning, and incinerating;
             55          (f) the elevators, tanks, pumps, motors, fans, compressors, ducts, and in general all
             56      apparatus and installations existing for common use;
             57          (g) such community and commercial facilities as may be provided for in the
             58      declaration; and

             59          (h) all other parts of the property necessary or convenient to its existence, maintenance,
             60      and safety, or normally in common use.
             61          (5) "Common expenses" means:
             62          (a) all sums lawfully assessed against the unit owners;
             63          (b) expenses of administration, maintenance, repair, or replacement of the common
             64      areas and facilities;
             65          (c) expenses agreed upon as common expenses by the association of unit owners; and
             66          (d) expenses declared common expenses by this chapter, or by the declaration or the
             67      bylaws.
             68          (6) "Common profits," unless otherwise provided in the declaration or lawful
             69      amendments to the declaration, means the balance of all income, rents, profits, and revenues
             70      from the common areas and facilities remaining after the deduction of the common expenses.
             71          (7) "Condominium" means the ownership of a single unit in a multiunit project
             72      together with an undivided interest in common in the common areas and facilities of the
             73      property.
             74          (8) "Condominium plat" means a plat or plats of survey of land and units prepared in
             75      accordance with Section 57-8-13 .
             76          (9) "Condominium project" means a real estate condominium project; a plan or project
             77      whereby two or more units, whether contained in existing or proposed apartments, commercial
             78      or industrial buildings or structures, or otherwise, are separately offered or proposed to be
             79      offered for sale. Condominium project also means the property when the context so requires.
             80          (10) "Condominium unit" means a unit together with the undivided interest in the
             81      common areas and facilities appertaining to that unit. Any reference in this chapter to a
             82      condominium unit includes both a physical unit together with its appurtenant undivided interest
             83      in the common areas and facilities and a time period unit together with its appurtenant
             84      undivided interest, unless the reference is specifically limited to a time period unit.
             85          (11) "Contractible condominium" means a condominium project from which one or
             86      more portions of the land within the project may be withdrawn in accordance with provisions
             87      of the declaration and of this chapter. If the withdrawal can occur only by the expiration or
             88      termination of one or more leases, then the condominium project is not a contractible
             89      condominium within the meaning of this chapter.

             90          (12) "Convertible land" means a building site which is a portion of the common areas
             91      and facilities, described by metes and bounds, within which additional units or limited common
             92      areas and facilities may be created in accordance with this chapter.
             93          (13) "Convertible space" means a portion of the structure within the condominium
             94      project, which portion may be converted into one or more units or common areas and facilities,
             95      including limited common areas and facilities in accordance with this chapter.
             96          (14) "Declarant" means all persons who execute the declaration or on whose behalf the
             97      declaration is executed. From the time of the recordation of any amendment to the declaration
             98      expanding an expandable condominium, all persons who execute that amendment or on whose
             99      behalf that amendment is executed shall also come within this definition. Any successors of
             100      the persons referred to in this subsection who come to stand in the same relation to the
             101      condominium project as their predecessors also come within this definition.
             102          (15) "Declaration" means the instrument by which the property is submitted to the
             103      provisions of this act, as it from time to time may be lawfully amended.
             104          (16) "Expandable condominium" means a condominium project to which additional
             105      land or an interest in it may be added in accordance with the declaration and this chapter.
             106          (17) "Leasehold condominium" means a condominium project in all or any portion of
             107      which each unit owner owns an estate for years in his unit, or in the land upon which that unit
             108      is situated, or both, with all those leasehold interests to expire naturally at the same time. A
             109      condominium project including leased land, or an interest in the land, upon which no units are
             110      situated or to be situated is not a leasehold condominium within the meaning of this chapter.
             111          (18) "Limited common areas and facilities" means those common areas and facilities
             112      designated in the declaration as reserved for use of a certain unit or units to the exclusion of the
             113      other units.
             114          (19) "Majority" or "majority of the unit owners," unless otherwise provided in the
             115      declaration or lawful amendments to the declaration, means the owners of more than 50% in
             116      the aggregate in interest of the undivided ownership of the common areas and facilities.
             117          (20) "Management committee" means the committee as provided in the declaration
             118      charged with and having the responsibility and authority to make and to enforce all of the
             119      reasonable rules covering the operation and maintenance of the property.
             120          (21) "Par value" means a number of dollars or points assigned to each unit by the

             121      declaration. Substantially identical units shall be assigned the same par value, but units located
             122      at substantially different heights above the ground, or having substantially different views, or
             123      having substantially different amenities or other characteristics that might result in differences
             124      in market value, may be considered substantially identical within the meaning of this
             125      subsection. If par value is stated in terms of dollars, that statement may not be considered to
             126      reflect or control the sales price or fair market value of any unit, and no opinion, appraisal, or
             127      fair market transaction at a different figure may affect the par value of any unit, or any
             128      undivided interest in the common areas and facilities, voting rights in the unit owners'
             129      association, liability for common expenses, or right to common profits, assigned on the basis
             130      thereof.
             131          (22) "Person" means an individual, corporation, partnership, association, trustee, or
             132      other legal entity.
             133          (23) "Property" means the land, whether leasehold or in fee simple, the building, if any,
             134      all improvements and structures thereon, all easements, rights, and appurtenances belonging
             135      thereto, and all articles of personal property intended for use in connection therewith.
             136          (24) "Record," "recording," "recorded," and "recorder" have the meaning stated in Title
             137      57, Chapter 3, Recording of Documents.
             138          (25) "Size" means the number of cubic feet, or the number of square feet of ground or
             139      floor space, within each unit as computed by reference to the record of survey map and rounded
             140      off to a whole number. Certain spaces within the units including attic, basement, or garage
             141      space may be omitted from the calculation or be partially discounted by the use of a ratio, if the
             142      same basis of calculation is employed for all units in the condominium project and if that basis
             143      is described in the declaration.
             144          (26) "Time period unit" means an annually recurring part or parts of a year specified in
             145      the declaration as a period for which a unit is separately owned and includes a timeshare estate
             146      as defined in Subsection 57-19-2 (17).
             147          (27) "Unit" means either a separate physical part of the property intended for any type
             148      of independent use, including one or more rooms or spaces located in one or more floors or
             149      part or parts of floors in a building or a time period unit, as the context may require. A
             150      convertible space shall be treated as a unit in accordance with Subsection 57-8-13.4 (3). A
             151      proposed condominium unit under an expandable condominium project, not constructed, is a

             152      unit two years after the date the recording requirements of Section 57-8-13.6 are met.
             153          (28) "Unit number" means the number, letter, or combination of numbers and letters
             154      designating the unit in the declaration and in the record of survey map.
             155          (29) "Unit owner" means the person or persons owning a unit in fee simple and an
             156      undivided interest in the fee simple estate of the common areas and facilities in the percentage
             157      specified and established in the declaration or, in the case of a leasehold condominium project,
             158      the person or persons whose leasehold interest or interests in the condominium unit extend for
             159      the entire balance of the unexpired term or terms.
             160          Section 2. Section 57-8-40 is enacted to read:
             161          57-8-40. Organization of an association of unit owners under other law -- Priority
             162      -- Reorganization.
             163          (1) As used in this section, "organizational documents" means the documents related to
             164      the formation or operation of a legal entity formed by the management committee or the
             165      declarant.
             166          (2) If permitted, required, or acknowledged by the declaration, the management
             167      committee may organize an association of unit owners into a nonprofit corporation in
             168      accordance with Title 16, Chapter 6a, Utah Revised Nonprofit Corporation Act, or other entity
             169      organized under other law.
             170          (3) Organizational documents for a nonprofit corporation or other entity formed in
             171      accordance with Subsection (2) shall, to the extent possible, not conflict with the rights and
             172      obligations found in the declaration and any of the association's bylaws recorded at the time of
             173      the formation of a nonprofit corporation or other entity under Subsection (2).
             174          (4) Notwithstanding any conflict with the declaration or any recorded bylaws, the
             175      organizational documents of an entity formed in accordance with Subsection (2) may include
             176      any additional indemnification and liability limitation provision for the management committee
             177      members and officers of the association that is permitted by the chapter under which the
             178      association is organized for board members, directors, and officers, or similar persons in a
             179      position of control.
             180          (5) In the event of a conflict between this chapter's provisions, a statute under which
             181      the association of unit owners is organized, documents concerning the organization of the
             182      association of unit owners as a nonprofit corporation or other entity, the declaration, the

             183      bylaws, and association rules, the following order prevails:
             184          (a) this chapter controls over a conflicting provision found in any of the sources listed
             185      in Subsections (5)(b) through (f);
             186          (b) Title 16, Chapter 6a, Utah Revised Nonprofit Corporation Act, or any other law
             187      under which an entity is organized controls over a conflicting provision in any of the sources
             188      listed in Subsections (5)(c) through (f);
             189          (c) an organizational document filed in accordance with Title 16, Chapter 6a, Utah
             190      Revised Nonprofit Corporation Act, or any other law under which an entity is organized
             191      controls over a conflicting provision in any of the sources listed in Subsections (5)(d) through
             192      (f);
             193          (d) the declaration controls over a conflicting provision in any of the sources listed in
             194      Subsections (5)(e) or (f);
             195          (e) the bylaws control over a conflicting provision in association rules; and
             196          (f) the association rules yield to a conflicting provision in any of the sources listed in
             197      Subsection (5)(a) through (e).
             198          (6) Immediately upon the legal formation of an entity in compliance with this section,
             199      the association and unit owners are subject to any right, obligation, procedure, and remedy
             200      applicable to that entity.
             201          (7) (a) A form "articles of incorporation" or similar organizational document attached
             202      to a declaration may be modified by the management committee for filing or re-filing if the
             203      modified version is otherwise consistent with this section's provisions.
             204          (b) An organizational document attached to a declaration that is filed and concerns the
             205      organization of an entity may be amended in accordance with its own terms or any applicable
             206      law, notwithstanding the fact that the organizational document might be recorded.
             207          (c) Except for amended bylaws, an initial or amended organizational document
             208      properly filed with the state does not need to be recorded.
             209          (8) This section applies to the reorganization of an association of unit owners
             210      previously organized if the entity's status is terminated or dissolved without the possibility of
             211      reinstatement.
             212          (9) (a) This section applies to all condominium projects, whether established before or
             213      after May 5, 2008.

             214          (b) This section does not validate or invalidate the organization of an association that
             215      occurred before May 5, 2008, whether or not the association was otherwise in compliance with
             216      this section.

Legislative Review Note
    as of 2-21-08 10:40 AM

Office of Legislative Research and General Counsel

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