Third Substitute H.B. 243

Senator Stephen H. Urquhart proposes the following substitute bill:

1 RENTAL RESTRICTIONS ON CONDOMINIUMS
2 AND COMMON INTEREST COMMUNITIES
3 2009 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Gage Froerer
6 Senate Sponsor: Stephen H. Urquhart
7
8 LONG TITLE
9 General Description:
10 This bill modifies the powers of an association of unit owners or association to create
11 rental restrictions.
12 Highlighted Provisions:
13 This bill:
14 . modifies the powers an association of unit owners or association to:
15 . create reasonable restrictions on the number and terms of rental units or lots;
16 . include rental restrictions in the association of unit owners' recorded declaration
17 or association's recorded governing documents;
18 . include a hardship exemption in the rental restrictions;
19 . include a grandfather clause for existing rental units or lots; and
20 . create procedures to track the number of rental units or lots;
21 . creates notification procedures to lenders if a declaration is amended; and
22 . makes technical corrections.
23 Monies Appropriated in this Bill:
24 None
25 Other Special Clauses:

26 None
27 Utah Code Sections Affected:
28 AMENDS:
29 57-8-10, as last amended by Laws of Utah 2003, Chapter 265
30 ENACTS:
31 57-8-41, Utah Code Annotated 1953
32 57-8a-209, Utah Code Annotated 1953
33 57-8a-210, Utah Code Annotated 1953
34
35 Be it enacted by the Legislature of the state of Utah:
36 Section 1. Section 57-8-10 is amended to read:
37 57-8-10. Contents of declaration.
38 (1) Prior to the conveyance of any unit in a condominium project, a declaration shall be
39 recorded that contains the covenants, conditions, and restrictions relating to the project that
40 shall be enforceable equitable servitudes, where reasonable, and which shall run with the land.
41 Unless otherwise provided, these servitudes may be enforced by any unit owner and his
42 successors in interest.
43 (2) (a) For every condominium project:
44 (i) The declaration shall include a description of the land or interests in real property
45 included within the project.
46 (ii) The declaration shall contain a description of any buildings, which states the
47 number of storeys and basements, the number of units, the principal materials of which the
48 building is or is to be constructed, and a description of all other significant improvements
49 contained or to be contained in the project.
50 (iii) The declaration shall contain the unit number of each unit, the square footage of
51 each unit, and any other description or information necessary to properly identify each unit.
52 (iv) The declaration shall describe the common areas and facilities of the project.
53 (v) The declaration shall describe any limited common areas and facilities and shall
54 state to which units the use of the common areas and facilities is reserved.
55 (b) Any shutters, awnings, window boxes, doorsteps, porches, balconies, patios, or
56 other apparatus intended to serve a single unit, but located outside the boundaries of the unit,

57 shall constitute a limited common area and facility appertaining to that unit exclusively,
58 whether or not the declaration makes such a provision.
59 (c) The condominium plat recorded with the declaration may provide or supplement
60 the information required under Subsections (2)(a) and (b).
61 (d) (i) The declaration shall include the percentage or fraction of undivided interest in
62 the common areas and facilities appurtenant to each unit and its owner for all purposes,
63 including voting, derived and allocated in accordance with Subsection 57-8-7 (2).
64 (ii) If any use restrictions are to apply, the declaration shall state the purposes for which
65 the units are intended and restricted as to use.
66 (iii) (A) The declaration shall include the name of a person to receive service of
67 process on behalf of the project, in the cases provided by this chapter, together with the
68 residence or place of business of that person.
69 (B) The person described in Subsection (2)(d)(iii)(A) shall be a resident of, or shall
70 maintain a place of business within, this state.
71 (iv) The declaration shall describe the method by which it may be amended consistent
72 with this chapter.
73 (v) Any further matters in connection with the property may be included in the
74 declaration, which the person or persons executing the declaration may consider desirable
75 consistent with this chapter.
76 (vi) The declaration shall contain a statement of intention that this chapter applies to
77 the property.
78 (3) (a) If the condominium project contains any convertible land:
79 (i) The declaration shall contain a legal description by metes and bounds of each area
80 of convertible land within the condominium project.
81 (ii) The declaration shall state the maximum number of units that may be created
82 within each area of convertible land.
83 (iii) (A) The declaration shall state, with respect to each area of convertible land, the
84 maximum percentage of the aggregate land and floor area of all units that may be created and
85 the use of which will not or may not be restricted exclusively to residential purposes.
86 (B) The statements described in Subsection (3)(a)(iii)(A) need not be supplied if none
87 of the units on other portions of the land within the project are restricted exclusively to

88 residential use.
89 (iv) The declaration shall state the extent to which any structure erected on any
90 convertible land will be compatible with structures on other portions of the land within the
91 condominium project in terms of quality of construction, the principal materials to be used, and
92 architectural style.
93 (v) The declaration shall describe all other improvements that may be made on each
94 area of convertible land within the condominium project.
95 (vi) The declaration shall state that any units created within each area of convertible
96 land will be substantially identical to the units on other portions of the land within the project
97 or it shall describe in detail what other type of units may be created.
98 (vii) The declaration shall describe the declarant's reserved right, if any, to create
99 limited common areas and facilities within any convertible land in terms of the types, sizes, and
100 maximum number of the limited common areas within each convertible land.
101 (b) The condominium plat recorded with the declaration may provide or supplement
102 the information required under Subsection (3)(a).
103 (4) If the condominium is an expandable condominium project:
104 (a) (i) (A) The declaration shall contain an explicit reservation of an option to expand
105 the project.
106 (B) The declaration shall include a statement of any limitations on the option to
107 expand, including a statement as to whether the consent of any unit owners shall be required
108 and, a statement as to the method by which consent shall be ascertained, or a statement that
109 there are no such limitations.
110 (ii) The declaration shall include a time limit, not exceeding seven years from the date
111 of the recording of the declaration, upon which the option to expand the condominium project
112 shall expire, together with a statement of any circumstances which will terminate the option
113 prior to expiration of the specified time limits.
114 (iii) The declaration shall contain a legal description by metes and bounds of all land
115 that may be added to the condominium project, which is known as additional land.
116 (iv) The declaration shall state:
117 (A) if any of the additional land is added to the condominium project, whether all of it
118 or any particular portion of it must be added;

119 (B) any limitations as to what portions may be added; or
120 (C) a statement that there are no such limitations.
121 (v) The declaration shall include a statement as to whether portions of the additional
122 land may be added to the condominium project at different times, together with any limitations
123 fixing the boundaries of those portions by legal descriptions setting forth the metes and bounds
124 of these lands and regulating the order in which they may be added to the condominium
125 project.
126 (vi) The declaration shall include a statement of any limitations as to the locations of
127 any improvements that may be made on any portions of the additional land added to the
128 condominium project, or a statement that no assurances are made in that regard.
129 (vii) The declaration shall state the maximum number of units that may be created on
130 the additional land. If portions of the additional land may be added to the condominium project
131 and the boundaries of those portions are fixed in accordance with Subsection (4)(a)(v), the
132 declaration shall also state the maximum number of units that may be created on each portion
133 added to the condominium project. If portions of the additional land may be added to the
134 condominium project and the boundaries of those portions are not fixed in accordance with
135 Subsection (4)(a)(v), then the declaration shall also state the maximum number of units per
136 acre that may be created on any portion added to the condominium project.
137 (viii) With respect to the additional land and to any portion of it that may be added to
138 the condominium project, the declaration shall state the maximum percentage of the aggregate
139 land and floor area of all units that may be created on it, the use of which will not or may not
140 be restricted exclusively to residential purposes. However, these statements need not be
141 supplied if none of the units on the land originally within the project are restricted exclusively
142 to residential use.
143 (ix) The declaration shall state the extent to which any structures erected on any
144 portion of the additional land added to the condominium project will be compatible with
145 structures on the land originally within the project in terms of quality of construction, the
146 principal materials to be used, and architectural style. The declaration may also state that no
147 assurances are made in those regards.
148 (x) The declaration shall describe all other improvements that will be made on any
149 portion of the additional land added to the condominium project, or it shall contain a statement

150 of any limitations as to what other improvements may be made on it. The declaration may also
151 state that no assurances are made in that regard.
152 (xi) The declaration shall contain a statement that any units created on any portion of
153 the additional land added to the condominium project will be substantially identical to the units
154 on the land originally within the project, or a statement of any limitations as to what types of
155 units may be created on it. The declaration may also contain a statement that no assurances are
156 made in that regard.
157 (xii) The declaration shall describe the declarant's reserved right, if any, to create
158 limited common areas and facilities within any portion of the additional land added to the
159 condominium project, in terms of the types, sizes, and maximum number of limited common
160 areas within each portion. The declaration may also state that no assurances are made in those
161 regards.
162 (b) The condominium plat recorded with the declaration may provide or supplement
163 the information required under Subsections (4)(a)(iii) through (a)(vi) and (a)(ix) through
164 (a)(xii).
165 (5) If the condominium project is a contractible condominium:
166 (a) (i) The declaration shall contain an explicit reservation of an option to contract the
167 condominium project.
168 (ii) The declaration shall contain a statement of any limitations on the option to
169 contract, including a statement as to whether the consent of any unit owners shall be required,
170 and if so, a statement as to the method by which this consent shall be ascertained. The
171 declaration may also contain a statement that there are no such limitations.
172 (iii) The declaration shall state the time limit, not exceeding seven years from the
173 recording of the declaration, upon which the option to contract the condominium project shall
174 expire, together with a statement of any circumstances which will terminate this option prior to
175 expiration of the specified time limit.
176 (b) (i) The declaration shall include a legal description by metes and bounds of all land
177 that may be withdrawn from the condominium project, which is known as withdrawable land.
178 (ii) The declaration shall include a statement as to whether portions of the
179 withdrawable land may be withdrawn from the condominium project at different times,
180 together with any limitations fixing the boundaries of those portions by legal descriptions

181 setting forth the metes and bounds and regulating the order in which they may be withdrawn
182 from the condominium project.
183 (iii) The declaration shall include a legal description by metes and bounds of all of the
184 land within the condominium project to which the option to contract the project does not
185 extend.
186 (c) The condominium plat recorded with the declaration may provide or supplement
187 the information required under Subsection (5)(b).
188 (6) (a) If the condominium project is a leasehold condominium, then with respect to
189 any ground lease or other leases the expiration or termination of which will or may terminate or
190 contract the condominium project:
191 (i) The declaration shall include recording information enabling the location of each
192 lease in the official records of the county recorder.
193 (ii) The declaration shall include the date upon which each lease is due to expire.
194 (iii) The declaration shall state whether any land or improvements will be owned by the
195 unit owners in fee simple. If there is to be fee simple ownership, the declaration shall include:
196 (A) a description of the land or improvements, including without limitation, a legal
197 description by metes and bounds of the land; or
198 (B) a statement of any rights the unit owners have to remove these improvements
199 within a reasonable time after the expiration or termination of the lease or leases involved, or a
200 statement that they shall have no such rights.
201 (iv) The declaration shall include a statement of the rights the unit owners have to
202 extend or renew any of the leases or to redeem or purchase any of the reversions, or a statement
203 that they have no such rights.
204 (b) After the recording of the declaration, no lessor who executed the declaration, and
205 no successor in interest to this lessor, has any right or power to terminate any part of the
206 leasehold interest of any unit owner who:
207 (i) makes timely payment of his share of the rent to the persons designated in the
208 declaration for the receipt of the rent; and
209 (ii) otherwise complies with all covenants which would entitle the lessor to terminate
210 the lease if they were violated.
211 (7) (a) If the condominium project contains time period units, the declaration shall also

212 contain the location of each condominium unit in the calendar year. This information shall be
213 set out in a fourth column of the exhibit or schedule referred to in Subsection 57-8-7 (2), if the
214 exhibit or schedule accompanies the declaration.
215 (b) The declaration shall also put timeshare owners on notice that tax notices will be
216 sent to the management committee, not each timeshare owner.
217 (c) The time period units created with respect to any given physical unit shall be such
218 that the aggregate of the durations involved constitute a full calendar year.
219 (8) (a) The declaration, bylaws, and condominium plat shall be duly executed and
220 acknowledged by all of the owners and any lessees of the land which is made subject to this
221 chapter.
222 (b) As used in Subsection (8)(a), "owners and lessees" does not include, in their
223 respective capacities, any mortgagee, any trustee or beneficiary under a deed of trust, any other
224 lien holder, any person having an equitable interest under any contract for the sale or lease of a
225 condominium unit, or any lessee whose leasehold interest does not extend to any portion of the
226 common areas and facilities.
227 (9) (a) As used in this section, "rentals" or "rental unit" means:
228 (i) a unit owned by an individual not described in Subsection (9)(a)(ii) that is occupied
229 by someone while no unit owner occupies the unit as the unit owner's primary residence; and
230 (ii) a unit owned by an entity or trust, regardless of who occupies the unit.
231 (b) (i) Subject to Subsections (9)(c), (f), and (g), an association of unit owners may:
232 (A) create restrictions on the number and term of rentals in a condominium project; or
233 (B) prohibit rentals in the condominium project.
234 (ii) An association of unit owners that creates a rental restriction or prohibition in
235 accordance with Subsection (9)(b)(i) shall create the rental restriction or prohibition in a
236 declaration or by amending the declaration.
237 (c) If an association of unit owners prohibits or imposes restrictions on the number and
238 term of rentals, the restrictions shall include:
239 (i) a provision that requires a condominium project to exempt from the rental
240 restrictions the following unit owner and the unit owner's unit:
241 (A) a unit owner in the military for the period of the unit owner's deployment;
242 (B) a unit occupied by a unit owner's parent, child, or sibling;

243 (C) a unit owner whose employer has relocated the unit owner for no less than two
244 years; or
245 (D) a unit owned by a trust or other entity created for estate planning purposes if the
246 trust or other estate planning entity was created for the estate of:
247 (I) a current resident of the unit; or
248 (II) the parent, child, or sibling of the current resident of the unit;
249 (ii) a provision allowing a unit owner who has a rental in the condominium project
250 before the time the rental restriction described in Subsection (9)(b)(i) is recorded with the
251 county recorder of the county in which the condominium project is located to continue renting
252 until:
253 (A) the unit owner occupies the unit; or
254 (B) an officer, owner, member, trustee, beneficiary, director, or person holding a
255 similar position of ownership or control of an entity or trust that holds an ownership interest in
256 the unit, occupies the unit; and
257 (iii) a requirement that the association of unit owners create, by rule or resolution,
258 procedures to:
259 (A) determine and track the number of rentals and units in the condominium project
260 subject to the provisions described in Subsections (9)(c)(i) and (ii); and
261 (B) ensure consistent administration and enforcement of the rental restrictions.
262 (d) For purposes of Subsection (9)(c)(ii), a transfer occurs when one or more of the
263 following occur:
264 (i) the conveyance, sale, or other transfer of a unit by deed;
265 (ii) the granting of a life estate in the unit; or
266 (iii) if the unit is owned by a limited liability company, corporation, partnership, or
267 other business entity, the sale or transfer of more than 75% of the business entity's share, stock,
268 membership interests, or partnership interests in a 12-month period.
269 (e) This section does not limit or affect residency age requirements for an association
270 of unit owners that complies with the requirements of the Housing for Older Persons Act, 42
271 U.S.C. Sec. 3607.
272 (f) A declaration or amendment to a declaration recorded prior to transfer of the first
273 unit from the initial declarant may prohibit or restrict rentals without providing for the

274 exceptions, provisions, and procedures required under Subsection (9)(c).
275 (g) This section does not apply to:
276 (i) a condominium project containing a time period unit as defined in Section 57-8-3 ;
277 (ii) any other form of timeshare interest as defined in Section 57-19-2 ; or
278 (iii) a condominium project in which the initial declaration is recorded before May 12,
279 2009.
280 (h) Notwithstanding this section, an association of unit owners may, upon unanimous
281 approval by all unit owners, restrict or prohibit rentals without an exception described in
282 Subsection (9)(c).
283 Section 2. Section 57-8-41 is enacted to read:
284 57-8-41. Lender approval -- Declaration amendments and association action.
285 (1) If a security holder's consent is a condition for amending a declaration or bylaw, or
286 for an action of the association of unit owners or management committee, then, subject to
287 Subsection (4), the security holder's consent is presumed if:
288 (a) written notice of the proposed amendment or action is sent by certified or registered
289 mail to the security holder's address listed for receiving notice in the recorded trust deed or
290 other recorded document evidencing the security interest;
291 (b) 60 days have passed after the day on which notice was mailed; and
292 (c) the person designated for receipt of the response in the notice has not received a
293 written response from the security holder either consenting to or refusing to accept the
294 amendment or action.
295 (2) The provisions of Subsection (1) shall apply to:
296 (a) an association of unit owners formed before and after May 12, 2009; and
297 (b) documents created and recorded before and after May 12, 2009.
298 (3) If, under Subsection (1), a security holder's address for receiving notice is not
299 provided in the recorded documents evidencing the security interest, the association of unit
300 owners:
301 (a) shall use reasonable efforts to find a mailing address for the security holder; and
302 (b) may send the notice to any address obtained under Subsection (3)(a).
303 (4) If a security holder responds in writing within 60 days after the day on which the
304 notice is mailed under Subsection (1), indicating that the security interest has been assigned or

305 conveyed to another person, without any recorded document evidencing such a conveyance, the
306 association of unit owners:
307 (a) may not presume the security holder's consent under Subsection (1); and
308 (b) shall send a notice in accordance with Subsection (1) to the person assigned or
309 conveyed the security interest.
310 (5) The association of unit owners shall:
311 (a) send a notice as described in Subsection (4)(b) to the person assigned or conveyed
312 the interest at an address provided by the security holder under Subsection (4); or
313 (b) if no address is provided, shall use reasonable efforts to find a mailing address for,
314 and send notice to, the person assigned or conveyed the interest.
315 Section 3. Section 57-8a-209 is enacted to read:
316 57-8a-209. Rental Restrictions.
317 (1) As used in this section, "rentals" or "rental lot" means:
318 (a) a lot owned by an individual not described in Subsection (1)(b) that is occupied by
319 someone while no lot owner occupies the lot as the lot owner's primary residence; and
320 (b) a lot owned by an entity or trust, regardless of who occupies the lot.
321 (2) (a) Subject to Subsections (2)(b), (6), and (7), an association may:
322 (i) create restrictions on the number and term of rentals in an association; or
323 (ii) prohibit rentals in the association.
324 (b) An association that creates a rental restriction or prohibition in accordance with
325 Subsection (1)(a)(i) shall create the rental restriction or prohibition in a recorded declaration of
326 covenants, conditions, and restrictions, or by amending the recorded declaration of covenants,
327 conditions, and restrictions.
328 (3) If an association prohibits or imposes restrictions on the number and term of
329 rentals, the restrictions shall include:
330 (a) a provision that requires the association to exempt from the rental restrictions the
331 following lot owner and the lot owner's lot:
332 (i) a lot owner in the military for the period of the lot owner's deployment;
333 (ii) a lot occupied by a lot owner's parent, child, or sibling;
334 (iii) a lot owner whose employer has relocated the lot owner for no less than two years;
335 or

336 (iv) a lot owned by a trust or other entity created for estate planning purposes if the
337 trust or other estate planning entity was created for:
338 (A) the estate of a current resident of the lot; or
339 (B) the parent, child, or sibling of the current resident of the lot;
340 (b) a provision allowing a lot owner who has a rental in the association before the time
341 the rental restriction described in Subsection (2)(a) is recorded with the county recorder of the
342 county in which the association is located to continue renting until:
343 (i) the lot owner occupies the lot; or
344 (ii) an officer, owner, member, trustee, beneficiary, director, or person holding a
345 similar position of ownership or control of an entity or trust that holds an ownership interest in
346 the lot, occupies the lot; and
347 (c) a requirement that the association create, by rule or resolution, procedures to:
348 (i) determine and track the number of rentals and lots in the association subject to the
349 provisions described in Subsections (3)(a) and (b); and
350 (ii) ensure consistent administration and enforcement of the rental restrictions.
351 (4) For purposes of Subsection (3)(b), a transfer occurs when one or more of the
352 following occur:
353 (a) the conveyance, sale, or other transfer of a lot by deed;
354 (b) the granting of a life estate in the lot; or
355 (c) if the lot is owned by a limited liability company, corporation, partnership, or other
356 business entity, the sale or transfer of more than 75% of the business entity's share, stock,
357 membership interests, or partnership interests in a 12-month period.
358 (5) This section does not limit or affect residency age requirements for an association
359 that complies with the requirements of the Housing for Older Persons Act, 42 U.S.C. Sec.
360 3607.
361 (6) The declaration of covenants, conditions, and restrictions or amendments to the
362 declaration of covenants, conditions, and restrictions recorded prior to the transfer of the first
363 lot from the initial declarant may prohibit or restrict rentals without providing for the
364 exceptions, provisions, and procedures required under Subsection (3)(a).
365 (7) This section does not apply to:
366 (a) an association containing a time period unit as defined in Section 57-8-3 ;

367 (b) any other form of timeshare interest as defined in Section 57-19-2 ; or
368 (c) an association in which the initial declaration of covenants, conditions, and
369 restrictions is recorded before May 12, 2009.
370 (8) Notwithstanding this section, an association may, upon unanimous approval by all
371 lot owners, restrict or prohibit rentals without an exception described in Subsection (3).
372 Section 4. Section 57-8a-210 is enacted to read:
373 57-8a-210. Lender approval -- Declaration amendments and association action.
374 (1) If a security holder's consent is a condition for amending a declaration or bylaw, or
375 for an action of the association, then, subject to Subsection (4), the security holder's consent is
376 presumed if:
377 (a) written notice of the proposed amendment or action is sent by certified or registered
378 mail to the security holder's address listed for receiving notice in the recorded trust deed or
379 other recorded document evidencing the security interest;
380 (b) 60 days have passed after the day on which notice was mailed; and
381 (c) the person designated for receipt of the response in the notice has not received a
382 written response from the security holder either consenting to or refusing to accept the
383 amendment or action.
384 (2) The provisions of Subsection (1) shall apply to:
385 (a) an association formed before and after May 12, 2009; and
386 (b) documents created and recorded before and after May 12, 2009.
387 (3) If, under Subsection (1), a security holder's address for receiving notice is not
388 provided in the recorded documents evidencing the security interest, the association:
389 (a) shall use reasonable efforts to find a mailing address for the security holder; and
390 (b) may send the notice to any address obtained under Subsection (3)(a).
391 (4) If a security holder responds in writing within 60 days after the day on which a
392 notice is mailed under Subsection (1), indicating that the security interest has been assigned or
393 conveyed to another person, without any recorded document evidencing such a conveyance, the
394 association:
395 (a) may not presume the security holder's consent under Subsection (1); and
396 (b) shall send a notice in accordance with Subsection (1) to the person assigned or
397 conveyed the security interest.

398 (5) The association shall:
399 (a) send a notice as described in Subsection (4)(b) to the person assigned or conveyed
400 the interest at an address provided by the security holder under Subsection (4); or
401 (b) if no address is provided, shall use reasonable efforts to find a mailing address for,
402 and send notice to, the person assigned or conveyed the interest.