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First Substitute H.B. 280

Representative Rebecca D. Lockhart proposes the following substitute bill:


             1     
REAL PROPERTY - TRANSFER FEES

             2     
2010 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Rebecca D. Lockhart

             5     
Senate Sponsor: Mark B. Madsen

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill enacts a provision relating to fees associated with the transfer of real property.
             10      Highlighted Provisions:
             11          This bill:
             12          .    declares certain covenants, restrictions, agreements, and other instruments and
             13      documents that obligate a future buyer or seller to make a payment upon the transfer
             14      of real property to be void and unenforceable;
             15          .    provides for reinvestment fee covenants by common interest associations;
             16          .    requires a notice to be filed for a prior transfer fee covenant and for reinvestment fee
             17      covenants; and
             18          .    provides limits on the enforcement of a reinvestment fee covenant.
             19      Monies Appropriated in this Bill:
             20          None
             21      Other Special Clauses:
             22          This bill provides an immediate effective date.
             23          This bill provides revisor instructions.
             24      Utah Code Sections Affected:
             25      ENACTS:


             26          57-1-46, Utah Code Annotated 1953
             27     
             28      Be it enacted by the Legislature of the state of Utah:
             29          Section 1. Section 57-1-46 is enacted to read:
             30          57-1-46. Transfer fee and reinvestment fee covenants.
             31          (1) As used in this section:
             32          (a) "Association expenses" means expenses incurred by a common interest association
             33      for:
             34          (i) the administration of the common interest association;
             35          (ii) the purchase, ownership, leasing, construction, operation, use, administration,
             36      maintenance, improvement, repair, or replacement of association facilities, including expenses
             37      for taxes, insurance, operating reserves, capital reserves, and emergency funds;
             38          (iii) providing, establishing, creating, or managing a facility, activity, service, or
             39      program for the benefit of property owners, tenants, common areas, the burdened property, or
             40      property governed by the common interest association; or
             41          (iv) other facilities, activities, services, or programs that are required or permitted
             42      under the common interest association's organizational documents.
             43          (b) "Association facilities" means any real property, improvements on real property, or
             44      personal property owned, leased, constructed, developed, managed, or used by a common
             45      interest association, including common areas.
             46          (c) "Burdened property" means the real property that is subject to a reinvestment fee
             47      covenant or transfer fee covenant.
             48          (d) "Common areas" means areas described within:
             49          (i) the definition of "common areas and facilities" under Section 57-8-3 ; and
             50          (ii) the definition of "common areas" under Section 57-8a-102 .
             51          (e) "Common interest association":
             52          (i) means:
             53          (A) an association, as defined in Section 57-8a-102 ;
             54          (B) an association of unit owners, as defined in Section 57-8-3 ; or
             55          (C) a nonprofit association; and
             56          (ii) includes a person authorized by an association, association of unit owners, or


             57      nonprofit association, as the case may be.
             58          (f) "Large master planned development" means an approved development:
             59          (i) of at least 500 acres or 500 units; and
             60          (ii) that includes a commitment to fund, construct, develop, or maintain:
             61          (A) common infrastructure;
             62          (B) association facilities;
             63          (C) community programming;
             64          (D) resort facilities;
             65          (E) open space; or
             66          (F) recreation amenities.
             67          (g) "Nonprofit association" means a nonprofit corporation organized under Title 16,
             68      Chapter 6a, Utah Revised Nonprofit Corporation Act, to benefit, enhance, preserve, govern,
             69      manage, or maintain burdened property.
             70          (h) "Organizational documents":
             71          (i) for an association, as defined in Section 57-8a-102 , means governing documents as
             72      defined in Section 57-8a-102 ;
             73          (ii) for an association of unit owners, as defined in Section 57-8-3 , means a declaration
             74      as defined in Section 57-8-3 ; and
             75          (iii) for a nonprofit association:
             76          (A) means a written instrument by which the nonprofit association exercises powers or
             77      manages, maintains, or otherwise affects the property under the jurisdiction of the nonprofit
             78      association; and
             79          (B) includes articles of incorporation, bylaws, plats, charters, the nonprofit
             80      association's rules, and declarations of covenants, conditions, and restrictions.
             81          (i) "Reinvestment fee covenant" means a covenant, restriction, or agreement that:
             82          (i) affects real property; and
             83          (ii) upon and as a result of a transfer of the real property, obligates a future buyer or
             84      seller of the real property to pay to a common interest association a fee that is dedicated to
             85      benefitting the burdened property, including payment for:
             86          (A) common planning, facilities, and infrastructure;
             87          (B) obligations arising from an environmental covenant;


             88          (C) community programming;
             89          (D) resort facilities;
             90          (E) open space;
             91          (F) recreation amenities;
             92          (G) charitable purposes; or
             93          (H) association expenses.
             94          (j) "Transfer fee covenant":
             95          (i) means an obligation, however denominated, expressed in a covenant, restriction,
             96      agreement, or other instrument or document:
             97          (A) that affects real property;
             98          (B) that is imposed on a future buyer or seller of real property, other than a person who
             99      is a party to the covenant, restriction, agreement, or other instrument or document; and
             100          (C) to pay a fee upon and as a result of a transfer of the real property; and
             101          (ii) does not include:
             102          (A) an obligation imposed by a court judgment, order, or decree;
             103          (B) an obligation imposed by the federal government or a state or local government
             104      entity; or
             105          (C) a reinvestment fee covenant.
             106          (2) A transfer fee covenant recorded on or after the effective date of this section is void
             107      and unenforceable.
             108          (3) (a) Except as provided in Subsection (3)(b), a reinvestment fee covenant may not
             109      be sold, assigned, or conveyed unless the sale, assignment, or conveyance is to a common
             110      interest association that was formed to benefit the burdened property.
             111          (b) A common interest association may assign or pledge to a lender the right to receive
             112      payment under a reinvestment fee covenant if:
             113          (i) the assignment or pledge is as collateral for a credit facility; and
             114          (ii) the lender releases the collateral interest upon payment in full of all amounts that
             115      the common interest association owes to the lender under the credit facility.
             116          (4) A reinvestment fee covenant recorded on or after the effective date of this section is
             117      not enforceable if the reinvestment fee covenant is intended to affect property that is the subject
             118      of a previously recorded transfer fee covenant or reinvestment fee covenant.


             119          (5) A reinvestment fee covenant recorded on or after the effective date of this section
             120      may not obligate the payment of a fee that exceeds .5% of the value of the burdened property,
             121      unless the burdened property is part of a large master planned development.
             122          (6) (a) A reinvestment fee covenant recorded on or after the effective date of this
             123      section is void and unenforceable unless a notice of reinvestment fee covenant, separate from
             124      the reinvestment fee covenant, is recorded in the office of the recorder of each county in which
             125      any of the burdened property is located.
             126          (b) A notice under Subsection (6)(a) shall:
             127          (i) state the name and address of the common interest association to which the fee
             128      under the reinvestment fee covenant is required to be paid;
             129          (ii) include the notarized signature of the common interest association's authorized
             130      representative;
             131          (iii) state that the burden of the reinvestment fee covenant is intended to run with the
             132      land and to bind successors in interest and assigns;
             133          (iv) state that the existence of the reinvestment fee covenant precludes the imposition
             134      of an additional reinvestment fee covenant on the burdened property;
             135          (v) state the duration of the reinvestment fee covenant;
             136          (vi) state the purpose of the fee required to be paid under the reinvestment fee
             137      covenant; and
             138          (vii) state that the fee required to be paid under the reinvestment fee covenant is
             139      required to benefit the burdened property.
             140          (c) A recorded notice of reinvestment fee covenant that substantially complies with the
             141      requirements of Subsection (6)(b) is valid and effective.
             142          (7) (a) A reinvestment fee covenant or transfer fee covenant recorded before the
             143      effective date of this section is not enforceable unless:
             144          (i) a notice that is consistent with the notice described in Subsection (6) is recorded in
             145      the office of the recorder of each county in which any of the burdened property is located; or
             146          (ii) a notice of reinvestment fee covenant or transfer fee covenant, as described in
             147      Subsection (7)(b), is recorded in the office of the recorder of each county in which any of the
             148      burdened property is located.
             149          (b) A notice under Subsection (7)(a)(ii) shall:


             150          (i) include the notarized signature of the beneficiary of the reinvestment fee covenant
             151      or transfer fee covenant, or the beneficiary's authorized representative;
             152          (ii) state the name and current address of the beneficiary under the reinvestment fee
             153      covenant or transfer fee covenant;
             154          (iii) state that the burden of the reinvestment fee covenant or transfer fee covenant is
             155      intended to run with the land and to bind successors in interest and assigns; and
             156          (iv) state the duration of the reinvestment fee covenant or transfer fee covenant.
             157          (c) A recorded notice of reinvestment fee covenant or transfer fee covenant that
             158      substantially complies with the requirements of Subsection (7)(b) is valid and effective.
             159          (8) A reinvestment fee covenant recorded on or after the effective date of this section
             160      may not be enforced upon:
             161          (a) an involuntary transfer;
             162          (b) a transfer that results from a court order;
             163          (c) a bona fide transfer to a family member of the seller within three degrees of
             164      consanguinity who, before the transfer, provides adequate proof of consanguinity;
             165          (d) a transfer or change of interest due to death, whether provided in a will, trust, or
             166      decree of distribution; or
             167          (e) the transfer of burdened property by a financial institution.
             168          Section 2. Effective date.
             169          If approved by two-thirds of all the members elected to each house, this bill takes effect
             170      upon approval by the governor, or the day following the constitutional time limit of Utah
             171      Constitution Article VII, Section 8, without the governor's signature, or in the case of a veto,
             172      the date of veto override.
             173          Section 3. Revisor instructions.
             174          It is the intent of the Legislature that the Office of Legislative Research and General
             175      Counsel, in preparing the Utah Code database for publication, replace the language "the
             176      effective date of this section" where it appears in Section 57-1-46 , as enacted in this bill, with
             177      the actual effective date of this bill.


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