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First Substitute S.B. 167

This document includes Senate 3rd Reading Floor Amendments incorporated into the bill on Tue, Mar 8, 2011 at 9:47 AM by rday. --> This document includes House Floor Amendments incorporated into the bill on Wed, Mar 9, 2011 at 5:43 PM by jeyring. -->

Senator Wayne L. Niederhauser proposes the following substitute bill:


             1     
CONDOMINIUM AND COMMUNITY ASSOCIATION

             2     
REVISIONS

             3     
2011 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Wayne L. Niederhauser

             6     
House Sponsor: Gage Froerer

             7     

             8      LONG TITLE
             9      General Description:
             10          This bill modifies, enacts, and repeals provisions relating to condominium associations
             11      and community associations.
             12      Highlighted Provisions:
             13          This bill:
             14          .    modifies, repeals, and enacts provisions relating to the Condominium Ownership
             15      Act and the Community Association Act;
             16          .    provides what constitutes fair and reasonable notice;
             17          .    modifies provisions relating to liens for assessments and related charges and the
             18      process to collect assessments and enforce the liens;
             19          .    modifies provisions relating to insurance;
             20          .    enacts Community Association Act provisions, including provisions relating to:
             21              .    declaration content;
             22              .    the exercise of development rights;
             23              .    association bylaws, rules, and budget;
             24              .    creditor approval of specified actions;
             25              .    the collection of assessments and related charges; and



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             26
             .    insurance;
             27          .    repeals redundant or obsolete provisions; and
             28          .    makes technical changes.
             29      Money Appropriated in this Bill:
             30          None
             31      Other Special Clauses:
             32          None
             33      Utah Code Sections Affected:
             34      AMENDS:
             35          57-8-3, as last amended by Laws of Utah 2008, Chapter 291
             36          57-8-10, as last amended by Laws of Utah 2009, Chapter 178
             37          57-8a-102, as enacted by Laws of Utah 2004, Chapter 153
             38      ENACTS:
             39          57-8-42, Utah Code Annotated 1953
             40          57-8-43, Utah Code Annotated 1953
             41          57-8-44, Utah Code Annotated 1953
             42          57-8-45, Utah Code Annotated 1953
             43          57-8-46, Utah Code Annotated 1953
             44          57-8-47, Utah Code Annotated 1953
             45          57-8-48, Utah Code Annotated 1953
             46          57-8-49, Utah Code Annotated 1953
             47          57-8-50, Utah Code Annotated 1953
             48          57-8-51, Utah Code Annotated 1953
             49          57-8-52, Utah Code Annotated 1953
             50          57-8-53, Utah Code Annotated 1953
             51          57-8-54, Utah Code Annotated 1953
             52          57-8a-212, Utah Code Annotated 1953
             53          57-8a-213, Utah Code Annotated 1953
             54          57-8a-214, Utah Code Annotated 1953
             55          57-8a-215, Utah Code Annotated 1953
             56          57-8a-216, Utah Code Annotated 1953



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             57
         57-8a-217, Utah Code Annotated 1953
             58          57-8a-218, Utah Code Annotated 1953
             59          57-8a-219, Utah Code Annotated 1953
             60          57-8a-220, Utah Code Annotated 1953
             61          57-8a-221, Utah Code Annotated 1953
             62          57-8a-301, Utah Code Annotated 1953
             63          57-8a-302, Utah Code Annotated 1953
             64          57-8a-303, Utah Code Annotated 1953
             65          57-8a-304, Utah Code Annotated 1953
             66          57-8a-305, Utah Code Annotated 1953
             67          57-8a-306, Utah Code Annotated 1953
             68          57-8a-307, Utah Code Annotated 1953
             69          57-8a-308, Utah Code Annotated 1953
             70          57-8a-309, Utah Code Annotated 1953
             71          57-8a-310, Utah Code Annotated 1953
             72          57-8a-311, Utah Code Annotated 1953
             73          57-8a-401, Utah Code Annotated 1953
             74          57-8a-402, Utah Code Annotated 1953
             75          57-8a-403, Utah Code Annotated 1953
             76          57-8a-404, Utah Code Annotated 1953
             77          57-8a-405, Utah Code Annotated 1953
             78          57-8a-406, Utah Code Annotated 1953
             79          57-8a-407, Utah Code Annotated 1953
             80      REPEALS:
             81          57-8-20, as last amended by Laws of Utah 2010, Chapter 309
             82          57-8-29, as last amended by Laws of Utah 2000, Chapter 99
             83          57-8a-202, as enacted by Laws of Utah 2004, Chapter 153
             84          57-8a-203, as enacted by Laws of Utah 2004, Chapter 153
             85          57-8a-204, as enacted by Laws of Utah 2004, Chapter 153
             86          57-8a-205, as enacted by Laws of Utah 2004, Chapter 153
             87          57-8a-207, as enacted by Laws of Utah 2004, Chapter 153



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             88
    

             89      Be it enacted by the Legislature of the state of Utah:
             90          Section 1. Section 57-8-3 is amended to read:
             91           57-8-3. Definitions.
             92          As used in this chapter:
             93          (1) "Assessment" means any charge imposed by the association, including:
             94          (a) common expenses on or against a unit owner pursuant to the provisions of the
             95      declaration, bylaws, or this chapter[.]; and
             96          (b) an amount that an association of unit owners assesses to a unit owner under
             97      Subsection 57-8-43 (9)(h).
             98          (2) "Association of unit owners" means all of the unit owners:
             99          (a) acting as a group in accordance with the declaration and bylaws; or
             100          (b) organized as a legal entity in accordance with the declaration.
             101          (3) "Building" means a building, containing units, and comprising a part of the
             102      property.
             103          (4) "Common areas and facilities" unless otherwise provided in the declaration or
             104      lawful amendments to the declaration means:
             105          (a) the land included within the condominium project, whether leasehold or in fee
             106      simple;
             107          (b) the foundations, columns, girders, beams, supports, main walls, roofs, halls,
             108      corridors, lobbies, stairs, stairways, fire escapes, entrances, and exits of the building;
             109          (c) the basements, yards, gardens, parking areas, and storage spaces;
             110          (d) the premises for lodging of janitors or persons in charge of the property;
             111          (e) installations of central services such as power, light, gas, hot and cold water,
             112      heating, refrigeration, air conditioning, and incinerating;
             113          (f) the elevators, tanks, pumps, motors, fans, compressors, ducts, and in general all
             114      apparatus and installations existing for common use;
             115          (g) such community and commercial facilities as may be provided for in the
             116      declaration; and
             117          (h) all other parts of the property necessary or convenient to its existence, maintenance,
             118      and safety, or normally in common use.



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             119
         (5) "Common expenses" means:
             120          (a) all sums lawfully assessed against the unit owners;
             121          (b) expenses of administration, maintenance, repair, or replacement of the common
             122      areas and facilities;
             123          (c) expenses agreed upon as common expenses by the association of unit owners; and
             124          (d) expenses declared common expenses by this chapter, or by the declaration or the
             125      bylaws.
             126          (6) "Common profits," unless otherwise provided in the declaration or lawful
             127      amendments to the declaration, means the balance of all income, rents, profits, and revenues
             128      from the common areas and facilities remaining after the deduction of the common expenses.
             129          (7) "Condominium" means the ownership of a single unit in a multiunit project
             130      together with an undivided interest in common in the common areas and facilities of the
             131      property.
             132          (8) "Condominium plat" means a plat or plats of survey of land and units prepared in
             133      accordance with Section 57-8-13 .
             134          (9) "Condominium project" means a real estate condominium project; a plan or project
             135      whereby two or more units, whether contained in existing or proposed apartments, commercial
             136      or industrial buildings or structures, or otherwise, are separately offered or proposed to be
             137      offered for sale. Condominium project also means the property when the context so requires.
             138          (10) "Condominium unit" means a unit together with the undivided interest in the
             139      common areas and facilities appertaining to that unit. Any reference in this chapter to a
             140      condominium unit includes both a physical unit together with its appurtenant undivided interest
             141      in the common areas and facilities and a time period unit together with its appurtenant
             142      undivided interest, unless the reference is specifically limited to a time period unit.
             143          (11) "Contractible condominium" means a condominium project from which one or
             144      more portions of the land within the project may be withdrawn in accordance with provisions
             145      of the declaration and of this chapter. If the withdrawal can occur only by the expiration or
             146      termination of one or more leases, then the condominium project is not a contractible
             147      condominium within the meaning of this chapter.
             148          (12) "Convertible land" means a building site which is a portion of the common areas
             149      and facilities, described by metes and bounds, within which additional units or limited common



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             150
     areas and facilities may be created in accordance with this chapter.
             151          (13) "Convertible space" means a portion of the structure within the condominium
             152      project, which portion may be converted into one or more units or common areas and facilities,
             153      including limited common areas and facilities in accordance with this chapter.
             154          (14) "Declarant" means all persons who execute the declaration or on whose behalf the
             155      declaration is executed. From the time of the recordation of any amendment to the declaration
             156      expanding an expandable condominium, all persons who execute that amendment or on whose
             157      behalf that amendment is executed shall also come within this definition. Any successors of
             158      the persons referred to in this subsection who come to stand in the same relation to the
             159      condominium project as their predecessors also come within this definition.
             160          (15) "Declaration" means the instrument by which the property is submitted to the
             161      provisions of this act, as it from time to time may be lawfully amended.
             162          (16) "Expandable condominium" means a condominium project to which additional
             163      land or an interest in it may be added in accordance with the declaration and this chapter.
             164          (17) "Leasehold condominium" means a condominium project in all or any portion of
             165      which each unit owner owns an estate for years in his unit, or in the land upon which that unit
             166      is situated, or both, with all those leasehold interests to expire naturally at the same time. A
             167      condominium project including leased land, or an interest in the land, upon which no units are
             168      situated or to be situated is not a leasehold condominium within the meaning of this chapter.
             169          (18) "Limited common areas and facilities" means those common areas and facilities
             170      designated in the declaration as reserved for use of a certain unit or units to the exclusion of the
             171      other units.
             172          (19) "Majority" or "majority of the unit owners," unless otherwise provided in the
             173      declaration or lawful amendments to the declaration, means the owners of more than 50% in
             174      the aggregate in interest of the undivided ownership of the common areas and facilities.
             175          (20) "Management committee" means the committee as provided in the declaration
             176      charged with and having the responsibility and authority to make and to enforce all of the
             177      reasonable rules covering the operation and maintenance of the property.
             178          (21) "Par value" means a number of dollars or points assigned to each unit by the
             179      declaration. Substantially identical units shall be assigned the same par value, but units located
             180      at substantially different heights above the ground, or having substantially different views, or



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     having substantially different amenities or other characteristics that might result in differences
             182      in market value, may be considered substantially identical within the meaning of this
             183      subsection. If par value is stated in terms of dollars, that statement may not be considered to
             184      reflect or control the sales price or fair market value of any unit, and no opinion, appraisal, or
             185      fair market transaction at a different figure may affect the par value of any unit, or any
             186      undivided interest in the common areas and facilities, voting rights in the unit owners'
             187      association, liability for common expenses, or right to common profits, assigned on the basis
             188      thereof.
             189          (22) "Person" means an individual, corporation, partnership, association, trustee, or
             190      other legal entity.
             191          (23) "Property" means the land, whether leasehold or in fee simple, the building, if any,
             192      all improvements and structures thereon, all easements, rights, and appurtenances belonging
             193      thereto, and all articles of personal property intended for use in connection therewith.
             194          (24) "Record," "recording," "recorded," and "recorder" have the meaning stated in Title
             195      57, Chapter 3, Recording of Documents.
             196          (25) "Size" means the number of cubic feet, or the number of square feet of ground or
             197      floor space, within each unit as computed by reference to the record of survey map and rounded
             198      off to a whole number. Certain spaces within the units including attic, basement, or garage
             199      space may be omitted from the calculation or be partially discounted by the use of a ratio, if the
             200      same basis of calculation is employed for all units in the condominium project and if that basis
             201      is described in the declaration.
             202          (26) "Time period unit" means an annually recurring part or parts of a year specified in
             203      the declaration as a period for which a unit is separately owned and includes a timeshare estate
             204      as defined in Subsection 57-19-2 (17).
             205          (27) "Unit" means either a separate physical part of the property intended for any type
             206      of independent use, including one or more rooms or spaces located in one or more floors or
             207      part or parts of floors in a building or a time period unit, as the context may require. A
             208      convertible space shall be treated as a unit in accordance with Subsection 57-8-13.4 (3). A
             209      proposed condominium unit under an expandable condominium project, not constructed, is a
             210      unit two years after the date the recording requirements of Section 57-8-13.6 are met.
             211          (28) "Unit number" means the number, letter, or combination of numbers and letters



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             212
     designating the unit in the declaration and in the record of survey map.
             213          (29) "Unit owner" means the person or persons owning a unit in fee simple and an
             214      undivided interest in the fee simple estate of the common areas and facilities in the percentage
             215      specified and established in the declaration or, in the case of a leasehold condominium project,
             216      the person or persons whose leasehold interest or interests in the condominium unit extend for
             217      the entire balance of the unexpired term or terms.
             218          Section 2. Section 57-8-10 is amended to read:
             219           57-8-10. Contents of declaration.
             220          (1) Prior to the conveyance of any unit in a condominium project, a declaration shall be
             221      recorded that contains the covenants, conditions, and restrictions relating to the project that
             222      shall be enforceable equitable servitudes, where reasonable, and which shall run with the land.
             223      Unless otherwise provided, these servitudes may be enforced by any unit owner and his
             224      successors in interest.
             225          (2) (a) For every condominium project:
             226          (i) The declaration shall include a description of the land or interests in real property
             227      included within the project.
             228          (ii) The declaration shall contain a description of any buildings, which states the
             229      number of storeys and basements, the number of units, the principal materials of which the
             230      building is or is to be constructed, and a description of all other significant improvements
             231      contained or to be contained in the project.
             232          (iii) The declaration shall contain the unit number of each unit, the square footage of
             233      each unit, and any other description or information necessary to properly identify each unit.
             234          (iv) The declaration shall describe the common areas and facilities of the project.
             235          (v) The declaration shall describe any limited common areas and facilities and shall
             236      state to which units the use of the common areas and facilities is reserved.
             237          (b) Any shutters, awnings, window boxes, doorsteps, porches, balconies, patios, or
             238      other apparatus intended to serve a single unit, but located outside the boundaries of the unit,
             239      shall constitute a limited common area and facility appertaining to that unit exclusively,
             240      whether or not the declaration makes such a provision.
             241          (c) The condominium plat recorded with the declaration may provide or supplement
             242      the information required under Subsections (2)(a) and (b).



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             243
         (d) (i) The declaration shall include the percentage or fraction of undivided interest in
             244      the common areas and facilities appurtenant to each unit and its owner for all purposes,
             245      including voting, derived and allocated in accordance with Subsection 57-8-7 (2).
             246          (ii) If any use restrictions are to apply, the declaration shall state the purposes for which
             247      the units are intended and restricted as to use.
             248          (iii) (A) The declaration shall include the name of a person to receive service of
             249      process on behalf of the project, in the cases provided by this chapter, together with the
             250      residence or place of business of that person.
             251          (B) The person described in Subsection (2)(d)(iii)(A) shall be a resident of, or shall
             252      maintain a place of business within, this state.
             253          (iv) The declaration shall describe the method by which it may be amended consistent
             254      with this chapter.
             255          (v) Any further matters in connection with the property may be included in the
             256      declaration, which the person or persons executing the declaration may consider desirable
             257      consistent with this chapter.
             258          (vi) The declaration shall contain a statement of intention that this chapter applies to
             259      the property.
             260          (e) The initial recorded declaration shall include:
             261          (i) an appointment of a trustee who qualifies under Subsection 57-1-21 (1)(a)(i) or (iv);
             262      and
             263          (ii) the following statement: "The declarant hereby conveys and warrants pursuant to
             264      U.C.A. Sections 57-1-20 and 57-8-45 to (name of trustee), with power of sale, the unit and all
             265      improvements to the unit for the purpose of securing payment of assessments under the terms
             266      of the declaration."
             267          (3) (a) If the condominium project contains any convertible land:
             268          (i) The declaration shall contain a legal description by metes and bounds of each area
             269      of convertible land within the condominium project.
             270          (ii) The declaration shall state the maximum number of units that may be created
             271      within each area of convertible land.
             272          (iii) (A) The declaration shall state, with respect to each area of convertible land, the
             273      maximum percentage of the aggregate land and floor area of all units that may be created and



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     the use of which will not or may not be restricted exclusively to residential purposes.
             275          (B) The statements described in Subsection (3)(a)(iii)(A) need not be supplied if none
             276      of the units on other portions of the land within the project are restricted exclusively to
             277      residential use.
             278          (iv) The declaration shall state the extent to which any structure erected on any
             279      convertible land will be compatible with structures on other portions of the land within the
             280      condominium project in terms of quality of construction, the principal materials to be used, and
             281      architectural style.
             282          (v) The declaration shall describe all other improvements that may be made on each
             283      area of convertible land within the condominium project.
             284          (vi) The declaration shall state that any units created within each area of convertible
             285      land will be substantially identical to the units on other portions of the land within the project
             286      or it shall describe in detail what other type of units may be created.
             287          (vii) The declaration shall describe the declarant's reserved right, if any, to create
             288      limited common areas and facilities within any convertible land in terms of the types, sizes, and
             289      maximum number of the limited common areas within each convertible land.
             290          (b) The condominium plat recorded with the declaration may provide or supplement
             291      the information required under Subsection (3)(a).
             292          (4) If the condominium is an expandable condominium project:
             293          (a) (i) (A) The declaration shall contain an explicit reservation of an option to expand
             294      the project.
             295          (B) The declaration shall include a statement of any limitations on the option to
             296      expand, including a statement as to whether the consent of any unit owners shall be required
             297      and, a statement as to the method by which consent shall be ascertained, or a statement that
             298      there are no such limitations.
             299          (ii) The declaration shall include a time limit, not exceeding seven years from the date
             300      of the recording of the declaration, upon which the option to expand the condominium project
             301      shall expire, together with a statement of any circumstances which will terminate the option
             302      prior to expiration of the specified time limits.
             303          (iii) The declaration shall contain a legal description by metes and bounds of all land
             304      that may be added to the condominium project, which is known as additional land.



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         (iv) The declaration shall state:
             306          (A) if any of the additional land is added to the condominium project, whether all of it
             307      or any particular portion of it must be added;
             308          (B) any limitations as to what portions may be added; or
             309          (C) a statement that there are no such limitations.
             310          (v) The declaration shall include a statement as to whether portions of the additional
             311      land may be added to the condominium project at different times, together with any limitations
             312      fixing the boundaries of those portions by legal descriptions setting forth the metes and bounds
             313      of these lands and regulating the order in which they may be added to the condominium
             314      project.
             315          (vi) The declaration shall include a statement of any limitations as to the locations of
             316      any improvements that may be made on any portions of the additional land added to the
             317      condominium project, or a statement that no assurances are made in that regard.
             318          (vii) The declaration shall state the maximum number of units that may be created on
             319      the additional land. If portions of the additional land may be added to the condominium project
             320      and the boundaries of those portions are fixed in accordance with Subsection (4)(a)(v), the
             321      declaration shall also state the maximum number of units that may be created on each portion
             322      added to the condominium project. If portions of the additional land may be added to the
             323      condominium project and the boundaries of those portions are not fixed in accordance with
             324      Subsection (4)(a)(v), then the declaration shall also state the maximum number of units per
             325      acre that may be created on any portion added to the condominium project.
             326          (viii) With respect to the additional land and to any portion of it that may be added to
             327      the condominium project, the declaration shall state the maximum percentage of the aggregate
             328      land and floor area of all units that may be created on it, the use of which will not or may not
             329      be restricted exclusively to residential purposes. However, these statements need not be
             330      supplied if none of the units on the land originally within the project are restricted exclusively
             331      to residential use.
             332          (ix) The declaration shall state the extent to which any structures erected on any
             333      portion of the additional land added to the condominium project will be compatible with
             334      structures on the land originally within the project in terms of quality of construction, the
             335      principal materials to be used, and architectural style. The declaration may also state that no



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     assurances are made in those regards.
             337          (x) The declaration shall describe all other improvements that will be made on any
             338      portion of the additional land added to the condominium project, or it shall contain a statement
             339      of any limitations as to what other improvements may be made on it. The declaration may also
             340      state that no assurances are made in that regard.
             341          (xi) The declaration shall contain a statement that any units created on any portion of
             342      the additional land added to the condominium project will be substantially identical to the units
             343      on the land originally within the project, or a statement of any limitations as to what types of
             344      units may be created on it. The declaration may also contain a statement that no assurances are
             345      made in that regard.
             346          (xii) The declaration shall describe the declarant's reserved right, if any, to create
             347      limited common areas and facilities within any portion of the additional land added to the
             348      condominium project, in terms of the types, sizes, and maximum number of limited common
             349      areas within each portion. The declaration may also state that no assurances are made in those
             350      regards.
             351          (b) The condominium plat recorded with the declaration may provide or supplement
             352      the information required under Subsections (4)(a)(iii) through (a)(vi) and (a)(ix) through
             353      (a)(xii).
             354          (5) If the condominium project is a contractible condominium:
             355          (a) (i) The declaration shall contain an explicit reservation of an option to contract the
             356      condominium project.
             357          (ii) The declaration shall contain a statement of any limitations on the option to
             358      contract, including a statement as to whether the consent of any unit owners shall be required,
             359      and if so, a statement as to the method by which this consent shall be ascertained. The
             360      declaration may also contain a statement that there are no such limitations.
             361          (iii) The declaration shall state the time limit, not exceeding seven years from the
             362      recording of the declaration, upon which the option to contract the condominium project shall
             363      expire, together with a statement of any circumstances which will terminate this option prior to
             364      expiration of the specified time limit.
             365          (b) (i) The declaration shall include a legal description by metes and bounds of all land
             366      that may be withdrawn from the condominium project, which is known as withdrawable land.



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             367
         (ii) The declaration shall include a statement as to whether portions of the
             368      withdrawable land may be withdrawn from the condominium project at different times,
             369      together with any limitations fixing the boundaries of those portions by legal descriptions
             370      setting forth the metes and bounds and regulating the order in which they may be withdrawn
             371      from the condominium project.
             372          (iii) The declaration shall include a legal description by metes and bounds of all of the
             373      land within the condominium project to which the option to contract the project does not
             374      extend.
             375          (c) The condominium plat recorded with the declaration may provide or supplement
             376      the information required under Subsection (5)(b).
             377          (6) (a) If the condominium project is a leasehold condominium, then with respect to
             378      any ground lease or other leases the expiration or termination of which will or may terminate or
             379      contract the condominium project:
             380          (i) The declaration shall include recording information enabling the location of each
             381      lease in the official records of the county recorder.
             382          (ii) The declaration shall include the date upon which each lease is due to expire.
             383          (iii) The declaration shall state whether any land or improvements will be owned by the
             384      unit owners in fee simple. If there is to be fee simple ownership, the declaration shall include:
             385          (A) a description of the land or improvements, including without limitation, a legal
             386      description by metes and bounds of the land; or
             387          (B) a statement of any rights the unit owners have to remove these improvements
             388      within a reasonable time after the expiration or termination of the lease or leases involved, or a
             389      statement that they shall have no such rights.
             390          (iv) The declaration shall include a statement of the rights the unit owners have to
             391      extend or renew any of the leases or to redeem or purchase any of the reversions, or a statement
             392      that they have no such rights.
             393          (b) After the recording of the declaration, no lessor who executed the declaration, and
             394      no successor in interest to this lessor, has any right or power to terminate any part of the
             395      leasehold interest of any unit owner who:
             396          (i) makes timely payment of his share of the rent to the persons designated in the
             397      declaration for the receipt of the rent; and



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             398
         (ii) otherwise complies with all covenants which would entitle the lessor to terminate
             399      the lease if they were violated.
             400          (7) (a) If the condominium project contains time period units, the declaration shall also
             401      contain the location of each condominium unit in the calendar year. This information shall be
             402      set out in a fourth column of the exhibit or schedule referred to in Subsection 57-8-7 (2), if the
             403      exhibit or schedule accompanies the declaration.
             404          (b) The declaration shall also put timeshare owners on notice that tax notices will be
             405      sent to the management committee, not each timeshare owner.
             406          (c) The time period units created with respect to any given physical unit shall be such
             407      that the aggregate of the durations involved constitute a full calendar year.
             408          (8) (a) The declaration, bylaws, and condominium plat shall be duly executed and
             409      acknowledged by all of the owners and any lessees of the land which is made subject to this
             410      chapter.
             411          (b) As used in Subsection (8)(a), "owners and lessees" does not include, in their
             412      respective capacities, any mortgagee, any trustee or beneficiary under a deed of trust, any other
             413      lien holder, any person having an equitable interest under any contract for the sale or lease of a
             414      condominium unit, or any lessee whose leasehold interest does not extend to any portion of the
             415      common areas and facilities.
             416          (9) (a) As used in this section, "rentals" or "rental unit" means:
             417          (i) a unit owned by an individual not described in Subsection (9)(a)(ii) that is occupied
             418      by someone while no unit owner occupies the unit as the unit owner's primary residence; and
             419          (ii) a unit owned by an entity or trust, regardless of who occupies the unit.
             420          (b) (i) Subject to Subsections (9)(c), (f), and (g), an association of unit owners may:
             421          (A) create restrictions on the number and term of rentals in a condominium project; or
             422          (B) prohibit rentals in the condominium project.
             423          (ii) An association of unit owners that creates a rental restriction or prohibition in
             424      accordance with Subsection (9)(b)(i) shall create the rental restriction or prohibition in a
             425      declaration or by amending the declaration.
             426          (c) If an association of unit owners prohibits or imposes restrictions on the number and
             427      term of rentals, the restrictions shall include:
             428          (i) a provision that requires a condominium project to exempt from the rental



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             429
     restrictions the following unit owner and the unit owner's unit:
             430          (A) a unit owner in the military for the period of the unit owner's deployment;
             431          (B) a unit occupied by a unit owner's parent, child, or sibling;
             432          (C) a unit owner whose employer has relocated the unit owner for no less than two
             433      years; or
             434          (D) a unit owned by a trust or other entity created for estate planning purposes if the
             435      trust or other estate planning entity was created for the estate of:
             436          (I) a current resident of the unit; or
             437          (II) the parent, child, or sibling of the current resident of the unit;
             438          (ii) a provision allowing a unit owner who has a rental in the condominium project
             439      before the time the rental restriction described in Subsection (9)(b)(i) is recorded with the
             440      county recorder of the county in which the condominium project is located to continue renting
             441      until:
             442          (A) the unit owner occupies the unit; or
             443          (B) an officer, owner, member, trustee, beneficiary, director, or person holding a
             444      similar position of ownership or control of an entity or trust that holds an ownership interest in
             445      the unit, occupies the unit; and
             446          (iii) a requirement that the association of unit owners create, by rule or resolution,
             447      procedures to:
             448          (A) determine and track the number of rentals and units in the condominium project
             449      subject to the provisions described in Subsections (9)(c)(i) and (ii); and
             450          (B) ensure consistent administration and enforcement of the rental restrictions.
             451          (d) For purposes of Subsection (9)(c)(ii), a transfer occurs when one or more of the
             452      following occur:
             453          (i) the conveyance, sale, or other transfer of a unit by deed;
             454          (ii) the granting of a life estate in the unit; or
             455          (iii) if the unit is owned by a limited liability company, corporation, partnership, or
             456      other business entity, the sale or transfer of more than 75% of the business entity's share, stock,
             457      membership interests, or partnership interests in a 12-month period.
             458          (e) This section does not limit or affect residency age requirements for an association
             459      of unit owners that complies with the requirements of the Housing for Older Persons Act, 42



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             460
     U.S.C. Sec. 3607.
             461          (f) A declaration or amendment to a declaration recorded prior to transfer of the first
             462      unit from the initial declarant may prohibit or restrict rentals without providing for the
             463      exceptions, provisions, and procedures required under Subsection (9)(c).
             464          (g) This section does not apply to:
             465          (i) a condominium project containing a time period unit as defined in Section 57-8-3 ;
             466          (ii) any other form of timeshare interest as defined in Section 57-19-2 ; or
             467          (iii) a condominium project in which the initial declaration is recorded before May 12,
             468      2009.
             469          (h) Notwithstanding this section, an association of unit owners may, upon unanimous
             470      approval by all unit owners, restrict or prohibit rentals without an exception described in
             471      Subsection (9)(c).
             472          Section 3. Section 57-8-42 is enacted to read:
             473          57-8-42. Fair and reasonable notice.
             474          (1) Notice that an association of unit owners provides by a method allowed under Title
             475      16, Chapter 6a, Utah Revised Nonprofit Corporation Act, constitutes fair and reasonable
             476      notice, whether or not the association of unit owners is a nonprofit corporation.
             477          (2) Notice that an association of unit owners provides by a method not referred to in
             478      Subsection (1), including a method described in Subsection (3), constitutes fair and reasonable
             479      notice if:
             480          (a) the method is authorized in the declaration, articles, bylaws, or rules; and
             481          (b) considering all the circumstances, the notice is fair and reasonable.
             482          (3) (a) If provided in the declaration, articles, bylaws, or rules, an association of unit
             483      owners may provide notice by electronic means, including text message, email, or the website
             484      of the association of unit owners.
             485          (b) Notwithstanding Subsection (3)(a), a unit owner may, by written demand, require
             486      an association of unit owners to provide notice to the unit owner by mail.
             487          Section 4. Section 57-8-43 is enacted to read:
             488          57-8-43. Insurance.
             489          (1) As used in this section, "reasonably available" means available using typical
             490      insurance carriers and markets, irrespective of the ability of the association of unit owners to



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             491
     pay.
             492          (2) This section applies to an insurance policy or combination of insurance policies:
             493          (a) issued or renewed on or after July 1, 2011; and
             494          (b) issued to or renewed by:
             495          (i) a unit owner; or
             496          (ii) an association of unit owners, regardless of when the association of unit owners is
             497      formed.
             498          (3) Beginning not later than the day on which the first unit is conveyed to a person
             499      other than a declarant, an association of unit owners shall maintain, to the extent reasonably
             500      available:
             501          (a) subject to Subsection (9), property insurance on the physical structures in the
             502      condominium project, including common areas and facilities, limited common areas and
             503      facilities, and units, insuring against all risks of direct physical loss commonly insured against,
             504      including fire and extended coverage perils; and
             505          (b) subject to Subsection (10), liability insurance, including medical payments
             506      insurance covering all occurrences commonly insured against for death, bodily injury, and
             507      property damage arising out of or in connection with the use, ownership, or maintenance of the
             508      common areas and facilities.
             509          (4) If an association of unit owners becomes aware that property insurance under
             510      Subsection (3)(a) or liability insurance under Subsection (3)(b) is not reasonably available, the
             511      association of unit owners shall, within seven calendar days after becoming aware, give all unit
             512      owners notice, as provided in Section 57-8-42 , that the insurance is not reasonably available.
             513          (5) (a) The declaration or bylaws may require the association of unit owners to carry
             514      other types of insurance in addition to those described in Subsection (3).
             515          (b) In addition to any type of insurance coverage or limit of coverage provided in the
             516      declaration or bylaws and subject to the requirements of this section, an association of unit
             517      owners may, as the management committee considers appropriate, obtain:
             518          (i) an additional type of insurance than otherwise required; or
             519          (ii) a policy with greater coverage than otherwise required.
             520          (6) Unless a unit owner is acting within the scope of the unit owner's authority on
             521      behalf of an association of unit owners, a unit owner's act or omission may not:



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             522
         (a) void a property insurance policy under Subsection (3)(a) or a liability insurance
             523      policy under Subsection (3)(b); or
             524          (b) be a condition to recovery under a policy.
             525          (7) An insurer under a property insurance policy or liability insurance policy obtained
             526      under this section waives the insurer's right to subrogation under the policy against any unit
             527      owner or member of the unit owner's household.
             528          (8) (a) An insurance policy issued to an association of unit owners may not be
             529      inconsistent with any provision of this section.
             530          (b) A provision of a declaration, bylaw, rule, or other document governing the
             531      association of unit owners that is contrary to a provision of this section has no effect.
             532          (c) A property insurance or liability insurance policy issued to an association of unit
             533      owners may not prevent a unit owner from obtaining insurance for the unit owner's own
             534      benefit.
             535          (9) (a) This Subsection (9) applies to property insurance required under Subsection
             536      (3)(a).
             537          (b) The property covered by property insurance shall include any property that, under
             538      the declaration, is required to become common areas and facilities.
             539          (c) The total amount of coverage provided by blanket property insurance may not be
             540      less than 100% of the full replacement cost of the insured property at the time the insurance is
             541      purchased and at each renewal date, excluding items normally excluded from property
             542      insurance policies.
             543          (d) Property insurance shall include coverage for any fixture, improvement, or
             544      betterment installed by a unit owner to a unit or to a limited common area, including a floor
             545      covering, cabinet, light fixture, electrical fixture, heating or plumbing fixture, paint, wall
             546      covering, window, and any other item permanently part of or affixed to a unit or to a limited
             547      common element.
             548          (e) Notwithstanding anything in this section and unless otherwise provided in the
             549      declaration, an association of unit owners is not required to obtain property insurance for a loss
             550      to a unit that is not physically attached to:
             551          (i) another unit; or
             552          (ii) an above-ground structure that is part of a common area or facility.



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             553
         (f) Each unit owner is an insured person under a property insurance policy.
             554          (g) If a loss occurs that is covered by a property insurance policy in the name of an
             555      association of unit owners and another property insurance policy in the name of a unit owner:
             556          (i) the association's policy provides primary insurance coverage; and
             557          (ii) notwithstanding Subsection (9)(g)(i), the unit owner's policy applies to that portion
             558      of the loss attributable to the policy deductible of the association of unit owners.
             559          (h) (i) As used in this Subsection (9)(h):
             560          (A) "Covered loss" means a loss, resulting from a single event or occurrence, that is
             561      covered by a property insurance policy of an association of unit owners.
             562          (B) "Unit damage" means damage to a unit or to a limited common area or facility
             563      applicable to that unit, or both.
             564          (C) "Unit damage percentage" means the percentage of total damage resulting in a
             565      covered loss that is attributable to unit damage.
             566          (ii) A unit owner who owns a unit that has suffered unit damage as part of a covered
             567      loss is responsible for an amount calculated by applying the unit damage percentage for that
             568      unit to the amount of the deductible under the property insurance policy of the association of
             569      unit owners.
             570          (iii) If a unit owner does not pay the amount required under Subsection (9)(h)(ii) within
             571      30 days after substantial completion of the repairs to the unit, an association of unit owners
             572      may levy an assessment against the unit owner for that amount.
             573          (i) An association of unit owners shall set aside an amount equal to the amount of the
             574      association's property insurance policy deductible or $10,000, whichever is less.
             575          (j) (i) An association of unit owners shall provide notice in accordance with Section
             576      57-8-42 to each unit owner of the unit owner's obligation under Subsection (9)(h) for the
             577      association's policy deductible and of any change in the amount of the deductible.
             578          (ii) An association of unit owners that fails to provide notice as provided in Subsection
             579      (9)(j)(i) is responsible for the amount of the deductible increase that the association of unit
             580      owners could have assessed to a unit owner under Subsection (9)(h).
             581          (iii) The failure of an association of unit owners to provide notice as provided in
             582      Subsection (9)(j)(i) may not be construed to invalidate any other provision of this section.
             583          (k) If, in the exercise of the business judgment rule, the management committee



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             584
     determines that a claim is likely not to exceed the property insurance policy deductible of the
             585      association of unit owners:
             586          (i) the unit owner's policy is considered the policy for primary coverage to the amount
             587      of the policy deductible of the association of unit owners;
             588          (ii) a unit owner who does not have a policy to cover the property insurance policy
             589      deductible of the association of unit owners is responsible for the loss to the amount of the
             590      policy deductible of the association of unit owners, as provided in Subsection (9)(h); and
             591          (iii) the association of unit owners need not tender the claim to the association's
             592      insurer.
             593          (l) (i) An insurer under a property insurance policy issued to an association of unit
             594      owners shall adjust with the association of unit owners a loss covered under the association's
             595      policy.
             596          (ii) Notwithstanding Subsection (9)(l)(i), the insurance proceeds for a loss under a
             597      property insurance policy of an association of unit owners:
             598          (A) are payable to an insurance trustee that the association of unit owners designates
             599      or, if no trustee is designated, to the association of unit owners; and
             600          (B) may not be payable to a holder of a security interest.
             601          (iii) An insurance trustee or an association of unit owners shall hold any insurance
             602      proceeds in trust for the association of unit owners, unit owners, and lien holders.
             603          (iv) (A) Insurance proceeds shall be disbursed first for the repair or restoration of the
             604      damaged property.
             605          (B) After the disbursements described in Subsection (9)(l)(iv)(A) are made and the
             606      damaged property has been completely repaired or restored or the project terminated, any
             607      surplus proceeds are payable to the association of unit owners, unit owners, and lien holders.
             608          (m) An insurer that issues a property insurance policy under this section, or the
             609      insurer's authorized agent, shall issue a certificate or memorandum of insurance to:
             610          (i) the association of unit owners;
             611          (ii) a unit owner, upon the unit owner's written request; and
             612          (iii) a holder of a security interest, upon the holder's written request.
             613          (n) A cancellation or nonrenewal of a property insurance policy under this section is
             614      subject to the procedures stated in Section 31A-21-303 .



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             615
         (o) A management committee that acquires from an insurer the property insurance
             616      required in this section is not liable to unit owners if the insurance proceeds are not sufficient
             617      to cover 100% of the full replacement cost of the insured property at the time of the loss.
             618          (10) (a) This Subsection (10) applies to a liability insurance policy required under
             619      Subsection (3)(b).
             620          (b) A liability insurance policy shall be in an amount determined by the management
             621      committee but not less than an amount specified in the declaration or bylaws.
             622          (c) Each unit owner is an insured person under a liability insurance policy that an
             623      association of unit owners obtains that insures against liability arising from the unit owner's
             624      interest in the common areas and facilities or from membership in the association of unit
             625      owners.
             626          Section 5. Section 57-8-44 is enacted to read:
             627          57-8-44. Lien in favor of association of unit owners for assessments and costs of
             628      collection.
             629          (1) (a) An association of unit owners has a lien on a unit for:
             630          (i) an assessment;
             631          (ii) except as provided in the declaration, fees, charges, and costs associated with
             632      collecting an unpaid assessment, including:
             633          (A) court costs and reasonable attorney fees;
             634          (B) late charges;
             635          (C) interest; and
             636          (D) any other amount that the association of unit owners is entitled to recover under the
             637      declaration, this chapter, or an administrative or judicial decision; and
             638          (iii) a fine that the association of unit owners imposes against the owner of the unit.
             639          (b) The recording of a declaration constitutes record notice and perfection of a lien
             640      described in Subsection (1)(a).
             641          (2) If an assessment is payable in installments, a lien described in Subsection (1)(a)(i)
             642      is for the full amount of the assessment from the time the first installment is due, unless the
             643      association of unit owners otherwise provides in a notice of assessment.
             644          (3) An unpaid assessment or fine accrues interest at the rate provided:
             645          (a) in Subsection 15-1-1 (2); or



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Senate 3rd Reading Amendments 3-8-2011 rd/rhr
             646
         (b) in the governing documents, if the governing documents provide for a different
             647      interest rate.
             648          (4) A lien under this section has priority over each other lien and encumbrance on a
             649      unit except:
             650          (a) a lien or encumbrance recorded before the declaration is recorded;
             651          (b) a first S. or second .S security interest on the unit S. secured by a mortgage or
             651a      deed of trust that is .S recorded before a recorded notice of lien by or on
             652      behalf of the association of unit owners; or
             653          (c) a lien for real estate taxes or other governmental assessments or charges against the
             654      unit.
             655          (5) A lien under this section is not subject to Title 78B, Chapter 5, Part 5, Utah
             656      Exemptions Act.
             657          (6) Unless the declaration provides otherwise, if two or more associations of unit
             658      owners have liens for assessments on the same unit, the liens have equal priority, regardless of
             659      when the liens are created.
             660          Section 6. Section 57-8-45 is enacted to read:
             661          57-8-45. Enforcement of a lien.
             662          (1) (a) To enforce a lien established under Section 57-8-44 , an association of unit
             663      owners may:
             664          (i) cause a unit to be sold through nonjudicial foreclosure as though the lien were a
             665      deed of trust, in the manner provided by:
             666          (A) Sections 57-1-24 , 57-1-25 , 57-1-26 , and 57-1-27 ; and
             667          (B) this chapter; or
             668          (ii) foreclose the lien through a judicial foreclosure in the manner provided by:
             669          (A) law for the foreclosure of a mortgage; and
             670          (B) this chapter.
             671          (b) For purposes of a nonjudicial or judicial foreclosure as provided in Subsection
             672      (1)(a):
             673          (i) the association of unit owners is considered to be the beneficiary under a trust deed;
             674      and
             675          (ii) the unit owner is considered to be the trustor under a trust deed.
             676          (2) A unit owner's acceptance of the owner's interest in a unit constitutes a



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             677
     simultaneous conveyance of the unit in trust, with power of sale, to the trustee designated as
             678      provided in this section for the purpose of securing payment of all amounts due under the
             679      declaration and this chapter.
             680          (3) (a) A power of sale and other powers of a trustee under this part and under Sections
             681      57-1-19 through 57-1-34 may not be exercised unless the association of unit owners appoints a
             682      qualified trustee.
             683          (b) An association of unit owners' execution of a substitution of trustee form
             684      authorized in Section 57-1-22 is sufficient for appointment of a trustee under Subsection (3)(a).
             685          (c) A person may not be a trustee under this part unless the person qualifies as a trustee
             686      under Subsection 57-1-21 (1)(a)(i) or (iv).
             687          (d) A trustee under this part is subject to all duties imposed on a trustee under Sections
             688      57-1-19 through 57-1-34 .
             689          (4) This chapter does not prohibit an association of unit owners from bringing an
             690      action against a unit owner to recover an amount for which a lien is created under Section
             691      57-8-44 or from taking a deed in lieu of foreclosure, if the action is brought or deed taken
             692      before the sale or foreclosure of the unit owner's unit under this chapter.
             693          Section 7. Section 57-8-46 is enacted to read:
             694          57-8-46. Notice of nonjudicial foreclosure -- Nonjudicial foreclosure prohibited if
             695      unit owner demands judicial foreclosure.
             696          (1) At least 30 calendar days before initiating a nonjudicial foreclosure, an association
             697      of unit owners shall provide notice to the owner of the unit that is the intended subject of the
             698      nonjudicial foreclosure.
             699          (2) The notice under Subsection (1):
             700          (a) shall:
             701          (i) notify the unit owner that the association of unit owners intends to pursue
             702      nonjudicial foreclosure with respect to the owner's unit to enforce the association of unit
             703      owners' lien for an unpaid assessment;
             704          (ii) notify the unit owner of the owner's right to demand judicial foreclosure in the
             705      place of nonjudicial foreclosure;
             706          (iii) be in substantially the following form:
             707          "NOTICE OF NONJUDICIAL FORECLOSURE AND RIGHT TO DEMAND



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             708
     JUDICIAL FORECLOSURE
             709          The (insert the name of the association of unit owners), the association for the project in
             710      which your unit is located, intends to foreclose upon your unit and allocated interest in the
             711      common areas and facilities using a procedure that will not require it to file a lawsuit or
             712      involve a court. This procedure is being followed in order to enforce the association's lien
             713      against your unit and to collect the amount of an unpaid assessment against your unit, together
             714      with any applicable late fees and the costs, including attorney fees, associated with the
             715      foreclosure proceeding. Alternatively, you have the right to demand that a foreclosure of your
             716      property be conducted in a lawsuit with the oversight of a judge. If you make this demand and
             717      the association prevails in the lawsuit, the costs and attorney fees associated with the lawsuit
             718      will likely be significantly higher than if a lawsuit were not required, and you may be
             719      responsible for paying those costs and attorney fees. If you want to make this demand, you
             720      must state in writing that 'I demand a judicial foreclosure proceeding upon my unit', or words
             721      substantially to that effect. You must send this written demand by first class and certified U.S.
             722      mail, return receipt requested, within 15 days after the date of the postmark on the envelope in
             723      which this notice was mailed to you. The address to which you must mail your demand is
             724      (insert the address of the association of unit owners for receipt of a demand)."; and
             725          (iv) be sent to the unit owner by certified mail, return receipt requested; and
             726          (b) may be included with other association correspondence to the unit owner.
             727          (3) An association of unit owners may not use a nonjudicial foreclosure to enforce a
             728      lien if the unit owner mails the association of unit owners a written demand for judicial
             729      foreclosure:
             730          (a) by U.S. mail, certified with a return receipt requested;
             731          (b) to the address stated in the association of unit owners' notice under Subsection (1);
             732      and
             733          (c) within 15 days after the date of the postmark on the envelope of the association of
             734      unit owners' notice under Subsection (1).
             735          Section 8. Section 57-8-47 is enacted to read:
             736          57-8-47. Provisions applicable to nonjudicial foreclosure.
             737          (1) An association of unit owners' nonjudicial foreclosure of a unit is governed by:
             738          (a) Sections 57-1-19 through 57-1-34 , to the same extent as though the association of



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             739
     unit owners' lien were a trust deed; and
             740          (b) this chapter.
             741          (2) If there is a conflict between a provision of this chapter and a provision of Sections
             742      57-1-19 through 57-1-34 with respect to an association of unit owners' nonjudicial foreclosure
             743      of a unit, the provision of this chapter controls.
             744          Section 9. Section 57-8-48 is enacted to read:
             745          57-8-48. One-action rule not applicable -- Abandonment of enforcement
             746      proceedings.
             747          (1) Subsection 78B-6-901 (1) does not apply to an association of unit owners' judicial
             748      or nonjudicial foreclosure of a unit under this part.
             749          (2) An association of unit owners may abandon a judicial foreclosure, nonjudicial
             750      foreclosure, or sheriff's sale and initiate a separate action or another judicial foreclosure,
             751      nonjudicial foreclosure, or sheriff's sale if the initial judicial foreclosure, nonjudicial
             752      foreclosure, or sheriff's sale is not complete.
             753          Section 10. Section 57-8-49 is enacted to read:
             754          57-8-49. Costs and attorney fees in lien enforcement action.
             755          (1) A court entering a judgment or decree in a judicial action brought under Sections
             756      57-8-44 through 57-8-53 shall award the prevailing party its costs and reasonable attorney fees
             757      incurred before the judgment or decree and, if the association of unit owners is the prevailing
             758      party, any costs and reasonable attorney fees that the association of unit owners incurs
             759      collecting the judgment.
             760          (2) In a nonjudicial foreclosure, an association of unit owners may include in the
             761      amount due, and may collect, all costs and reasonable attorney fees incurred in collecting the
             762      amount due, including the costs of preparing, recording, and foreclosing a lien.
             763          Section 11. Section 57-8-50 is enacted to read:
             764          57-8-50. Action to recover unpaid assessment.
             765          An association of unit owners need not pursue a judicial foreclosure or nonjudicial
             766      foreclosure to collect an unpaid assessment but may file an action to recover a money judgment
             767      for the unpaid assessment without waiving the lien under Section 57-8-44 .
             768          Section 12. Section 57-8-51 is enacted to read:
             769          57-8-51. Appointment of receiver.



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             770
         In an action by an association of unit owners to collect an assessment or to foreclose a
             771      lien for an unpaid assessment, a court may:
             772          (1) appoint a receiver, in accordance with Section 7-2-9 , to collect and hold money
             773      alleged to be due and owing to a unit owner:
             774          (a) before commencement of the action; or
             775          (b) during the pendency of the action; and
             776          (2) order the receiver to pay the association of unit owners, to the extent of the
             777      association's common expense assessment, money the receiver holds under Subsection (1).
             778          Section 13. Section 57-8-52 is enacted to read:
             779          57-8-52. Termination of a delinquent owner's rights -- Notice -- Informal hearing.
             780          (1) As used in this section, "delinquent unit owner" means a unit owner who fails to
             781      pay an assessment when due.
             782          (2) A management committee may, if authorized in the declaration, bylaws, or rules
             783      and as provided in this section, terminate a delinquent unit owner's right:
             784          (a) to receive a utility service for which the unit owner pays as a common expense; or
             785          (b) of access to and use of recreational facilities.
             786          (3) (a) Before terminating a utility service or right of access to and use of recreational
             787      facilities under Subsection (2), the manager or management committee shall give the
             788      delinquent unit owner notice in a manner provided in the declaration, bylaws, or association of
             789      unit owners rules.
             790          (b) (i) A notice under Subsection (3)(a) shall state:
             791          (A) that the association of unit owners will terminate the unit owner's utility service or
             792      right of access to and use of recreational facilities, or both, if the association of unit owners
             793      does not receive payment of the assessment within the time provided in the declaration, bylaws,
             794      or association of unit owners rules, subject to Subsection (3)(b)(ii);
             795          (B) the amount of the assessment due, including any interest or late payment fee; and
             796          (C) the unit owner's right to request a hearing under Subsection (4).
             797          (ii) The time provided under Subsection (3)(b)(i)(A) may not be less than 14 days.
             798          (iii) A notice under Subsection (3)(a) may include the estimated cost to reinstate a
             799      utility service if service is terminated.
             800          (4) (a) A delinquent unit owner may submit a written request to the management



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             801
     committee for an informal hearing to dispute the assessment.
             802          (b) A request under Subsection (4)(a) shall be submitted within 14 days after the date
             803      the delinquent unit owner receives the notice under Subsection (3).
             804          (5) A management committee shall conduct an informal hearing requested under
             805      Subsection (4) in accordance with the standards provided in the declaration, bylaws, or
             806      association of unit owners rules.
             807          (6) If a delinquent unit owner requests a hearing, the association of unit owners may
             808      not terminate a utility service or right of access to and use of recreational facilities until after
             809      the management committee:
             810          (a) conducts the hearing; and
             811          (b) enters a final decision.
             812          (7) If an association of unit owners terminates a utility service or a right of access to
             813      and use of recreational facilities, the association of unit owners shall take immediate action to
             814      reinstate the service or right following the unit owner's payment of the assessment, including
             815      any interest and late payment fee.
             816          (8) An association of unit owners may:
             817          (a) assess a unit owner for the cost associated with reinstating a utility service that the
             818      association of unit owners terminates as provided in this section; and
             819          (b) demand that the estimated cost to reinstate the utility service be paid before the
             820      service is reinstated, if the estimated cost is included in a notice under Subsection (3).
             821          Section 14. Section 57-8-53 is enacted to read:
             822          57-8-53. Requiring tenant in residential condominium unit to pay rent to
             823      association of unit owners if owner fails to pay assessment.
             824          (1) As used in this section:
             825          (a) "Amount owing" means the total of:
             826          (i) any assessment or obligation under Subsection 57-8-44 (1)(a) that is due and owing;
             827      and
             828          (ii) any applicable interest, late fee, and cost of collection that accrues after an
             829      association of unit owners gives notice under Subsection (3).
             830          (b) "Lease" means an arrangement under which a tenant occupies a unit owner's
             831      residential condominium unit in exchange for the unit owner receiving a consideration or



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             832
     benefit, including a fee, service, gratuity, or emolument.
             833          (c) "Tenant" means a person, other than the unit owner, who has regular, exclusive
             834      occupancy of the unit owner's residential condominium unit.
             835          (2) Subject to Subsections (3) and (4), the management committee may require a tenant
             836      under a lease with a unit owner to pay the association of unit owners all future lease payments
             837      due to the unit owner:
             838          (a) if:
             839          (i) the unit owner fails to pay an assessment for a period of more than 60 days after the
             840      assessment is due and payable; and
             841          (ii) authorized in the declaration, bylaws, or rules;
             842          (b) beginning with the next monthly or periodic payment due from the tenant; and
             843          (c) until the association of unit owners is paid the amount owing.
             844          (3) (a) Before requiring a tenant to pay lease payments to the association of unit owners
             845      under Subsection (2), the manager or management committee shall give the unit owner notice,
             846      in accordance with the declaration, bylaws, or association rules.
             847          (b) The notice required under Subsection (3)(a) shall state:
             848          (i) the amount of the assessment due, including any interest, late fee, collection cost,
             849      and attorney fees;
             850          (ii) that any costs of collection, including attorney fees, and other assessments that
             851      become due may be added to the total amount due and to be paid through the collection of
             852      lease payments; and
             853          (iii) that the association intends to demand payment of future lease payments from the
             854      unit owner's tenant if the unit owner does not pay the amount owing within 15 days.
             855          (4) (a) If a unit owner fails to pay the amount owing within 15 days after the manager
             856      or management committee gives the unit owner notice under Subsection (3), the manager or
             857      management committee may exercise the rights of the association of unit owners under
             858      Subsection (2) by delivering a written notice to the tenant.
             859          (b) A notice under Subsection (4)(a) shall state that:
             860          (i) due to the unit owner's failure to pay an assessment within the required time, the
             861      manager or management committee has notified the unit owner of the manager or management
             862      committee's intent to collect all lease payments until the amount owing is paid;



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             863
         (ii) the law requires the tenant to make all future lease payments, beginning with the
             864      next monthly or other periodic payment, to the association of unit owners, until the amount
             865      owing is paid; and
             866          (iii) the tenant's payment of lease payments to the association of unit owners does not
             867      constitute a default under the terms of the lease with the unit owner.
             868          (c) The manager or management committee shall mail a copy of the notice to the unit
             869      owner.
             870          (5) (a) A tenant to whom notice under Subsection (4) is given shall pay to the
             871      association of unit owners all future lease payments as they become due and owing to the unit
             872      owner:
             873          (i) beginning with the next monthly or other periodic payment after the notice under
             874      Subsection (4) is delivered to the tenant; and
             875          (ii) until the association of unit owners notifies the tenant under Subsection (6) that the
             876      amount owing is paid.
             877          (b) A unit owner:
             878          (i) shall credit each payment that the tenant makes to the association of unit owners
             879      under this section against any obligation that the tenant owes to the owner as though the tenant
             880      made the payment to the owner; and
             881          (ii) may not initiate a suit or other action against a tenant for failure to make a lease
             882      payment that the tenant pays to an association of unit owners as required under this section.
             883          (6) (a) Within five business days after the amount owing is paid, the manager or
             884      management committee shall notify the tenant in writing that the tenant is no longer required to
             885      pay future lease payments to the association of unit owners.
             886          (b) The manager or management committee shall mail a copy of the notification
             887      described in Subsection (6)(a) to the unit owner.
             888          (7) (a) An association of unit owners shall deposit money paid to the association of unit
             889      owners under this section in a separate account and disburse that money to the association of
             890      unit owners until:
             891          (i) the amount owing is paid; and
             892          (ii) any cost of administration, not to exceed $25, is paid.
             893          (b) The association of unit owners shall, within five business days after the amount



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             894
     owing is paid, pay to the unit owner any remaining balance.
             895          Section 15. Section 57-8-54 is enacted to read:
             896          57-8-54. Statement from manager or management committee of unpaid
             897      assessment.
             898          (1) A manager or management committee shall issue a written statement indicating any
             899      unpaid assessment with respect to a unit owner's unit upon:
             900          (a) a written request by the unit owner; and
             901          (b) payment of a reasonable fee not to exceed $25.
             902          (2) A written statement under Subsection (1) is conclusive in favor of a person who
             903      relies on the written statement in good faith.
             904          Section 16. Section 57-8a-102 is amended to read:
             905           57-8a-102. Definitions.
             906          As used in this chapter:
             907          (1) (a) "Assessment" means a charge imposed or levied:
             908          (i) by the association;
             909          (ii) on or against a lot or a lot owner; and
             910          (iii) pursuant to a governing document recorded with the county recorder.
             911          (b) "Assessment" includes:
             912          (i) a common expense[.]; and
             913          (ii) an amount assessed against a lot owner under Subsection 57-8a-405 (8).
             914          (2) (a) Except as provided in Subsection (2)(b), "association" means a corporation or
             915      other legal entity, each member of which:
             916          (i) is an owner of a residential lot located within the jurisdiction of the association, as
             917      described in the governing documents; and
             918          (ii) by virtue of membership or ownership of a residential lot is obligated to pay:
             919          (A) real property taxes;
             920          (B) insurance premiums;
             921          (C) maintenance costs; or
             922          (D) for improvement of real property not owned by the member.
             923          (b) "Association" or "homeowner association" does not include an association created
             924      under Title 57, Chapter 8, Condominium Ownership Act.



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             925
         (3) "Board of directors" or "board" means the entity, regardless of name, with primary
             926      authority to manage the affairs of the association.
             927          (4) "Common areas" means property that the association:
             928          (a) owns;
             929          (b) maintains;
             930          (c) repairs; or
             931          (d) administers.
             932          (5) "Common expense" means costs incurred by the association to exercise any of the
             933      powers provided for in the association's governing documents.
             934          (6) "Declarant":
             935          (a) means the person who executes a declaration and submits it for recording in the
             936      office of the recorder of the county in which the property described in the declaration is
             937      located; and
             938          (b) includes the person's successor and assign.
             939          [(6)] (7) (a) "Governing documents" means a written instrument by which the
             940      association may:
             941          (i) exercise powers; or
             942          (ii) manage, maintain, or otherwise affect the property under the jurisdiction of the
             943      association.
             944          (b) "Governing documents" includes:
             945          (i) articles of incorporation;
             946          (ii) bylaws;
             947          (iii) a plat;
             948          (iv) a declaration of covenants, conditions, and restrictions; and
             949          (v) rules of the association.
             950          (8) "Judicial foreclosure" means a foreclosure of a lot:
             951          (a) for the nonpayment of an assessment; and
             952          (b) (i) in the manner provided by law for the foreclosure of a mortgage on real
             953      property; and
             954          (ii) as provided in Part 3, Collection of Assessments.
             955          [(7)] (9) "Lease" or "leasing" means regular, exclusive occupancy of a lot:



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             956
         (a) by a person or persons other than the owner; and
             957          (b) for which the owner receives a consideration or benefit, including a fee, service,
             958      gratuity, or emolument.
             959          (10) "Limited common areas" means common areas described in the declaration and
             960      allocated for the exclusive use of one or more lot owners.
             961          [(8)] (11) "Lot" means:
             962          (a) a lot, parcel, plot, or other division of land:
             963          (i) designated for separate ownership or occupancy; and
             964          (ii) (A) shown on a recorded subdivision plat; or
             965          (B) the boundaries of which are described in a recorded governing document; or
             966          (b) (i) a unit in a condominium association if the condominium association is a part of
             967      a development; or
             968          (ii) a unit in a real estate cooperative if the real estate cooperative is part of a
             969      development.
             970          (12) "Nonjudicial foreclosure" means the sale of a lot:
             971          (a) for the nonpayment of an assessment; and
             972          (b) (i) in the same manner as the sale of trust property under Sections 57-1-19 through
             973      57-1-34 ; and
             974          (ii) as provided in Part 3, Collection of Assessments.
             975          [(9)] (13) "Residential lot" means a lot, the use of which is limited by law, covenant, or
             976      otherwise to primarily residential or recreational purposes.
             977          Section 17. Section 57-8a-212 is enacted to read:
             978          57-8a-212. Content of a declaration.
             979          (1) An initial declaration recorded on or after May 10, 2011 shall contain:
             980          (a) the name of the project;
             981          (b) the name of the association;
             982          (c) a statement that the project is not a cooperative;
             983          (d) a statement indicating any portions of the project that contain condominiums
             984      governed by Chapter 8, Condominium Ownership Act;
             985          (e) if the declarant desires to reserve the option to expand the project, a statement
             986      reserving the option to expand the project;



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             987
         (f) the name of each county in which any part of the project is located;
             988          (g) a legally sufficient description of the real estate included in the project;
             989          (h) a description of any limited common areas and any real estate that is or is required
             990      to become common areas;
             991          (i) any restriction on the alienation of a lot, including a restriction on leasing; and
             992          (j) (i) an appointment of a trustee who qualifies under Subsection 57-1-21 (1)(a)(i) or
             993      (iv); and
             994          (ii) the following statement: "The declarant hereby conveys and warrants pursuant to
             995      U.C.A. Sections 57-1-20 and 57-8a-402 to (name of trustee), with power of sale, the lot and all
             996      improvements to the lot for the purpose of securing payment of assessments under the terms of
             997      the declaration."
             998          (2) A declaration may contain any other information the declarant considers
             999      appropriate, including any restriction on the use of a lot, the number of persons who may
             1000      occupy a lot, or other qualifications of a person who may occupy a lot.
             1001          (3) The location of a limited common area or real estate described in Subsection (1)(g)
             1002      may be shown on a subdivision plat.
             1003          Section 18. Section 57-8a-213 is enacted to read:
             1004          57-8a-213. Board action to enforce governing documents -- Parameters.
             1005          (1) (a) The board shall use its reasonable judgment to determine whether to exercise
             1006      the association's powers to impose sanctions or pursue legal action for a violation of the
             1007      governing documents, including:
             1008          (i) whether to compromise a claim made by or against the board or the association; and
             1009          (ii) whether to pursue a claim for an unpaid assessment.
             1010          (b) The association may not be required to take enforcement action if the board
             1011      determines, after fair review and acting in good faith and without conflict of interest, that under
             1012      the particular circumstances:
             1013          (i) the association's legal position does not justify taking any or further enforcement
             1014      action;
             1015          (ii) the covenant, restriction, or rule in the governing documents is likely to be
             1016      construed as inconsistent with current law;
             1017          (iii) (A) a technical violation has or may have occurred; and



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             1018
         (B) the violation is not material as to a reasonable person or does not justify expending
             1019      the association's resources; or
             1020          (iv) it is not in the association's best interests to pursue an enforcement action, based
             1021      upon hardship, expense, or other reasonable criteria.
             1022          (2) Subject to Subsection (3), if the board decides under Subsection (1)(b) to forego
             1023      enforcement, the association is not prevented from later taking enforcement action.
             1024          (3) The board may not be arbitrary, capricious, or against public policy in taking or not
             1025      taking enforcement action.
             1026          (4) This section does not govern whether the association's action in enforcing a
             1027      provision of the governing documents constitutes a waiver or modification of that provision.
             1028          Section 19. Section 57-8a-214 is enacted to read:
             1029          57-8a-214. Fair and reasonable notice.
             1030          (1) Notice that an association provides by a method allowed under Title 16, Chapter 6a,
             1031      Utah Revised Nonprofit Corporation Act, constitutes fair and reasonable notice, regardless of
             1032      whether or not the association is a nonprofit corporation.
             1033          (2) Notice that an association provides by a method not referred to in Subsection (1)
             1034      constitutes fair and reasonable notice if:
             1035          (a) the method is authorized in the declaration, articles, bylaws, or rules; and
             1036          (b) considering all the circumstances, the notice is fair and reasonable.
             1037          (3) (a) If provided in the declaration, articles, bylaws, or rules, an association may
             1038      provide notice by electronic means, including text message, email, or the association's website.
             1039          (b) Notwithstanding Subsection (3)(a), a lot owner may, by written demand, require an
             1040      association to provide notice to the lot owner by mail.
             1041          Section 20. Section 57-8a-215 is enacted to read:
             1042          57-8a-215. Budget.
             1043          (1) At least annually the board shall prepare and adopt a budget for the association.
             1044          (2) The board shall present the adopted budget to association members at a meeting of
             1045      the members.
             1046          (3) A budget is disapproved if within 45 days after the date of the meeting under
             1047      Subsection (2) at which the board presents the adopted budget:
             1048          (a) there is a vote of disapproval by at least 51% of all the allocated voting interests of



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             1049
     the lot owners in the association; and
             1050          (b) the vote is taken at a special meeting called for that purpose by lot owners under the
             1051      declaration, articles, or bylaws.
             1052          (4) If a budget is disapproved under Subsection (3), the budget that the board last
             1053      adopted that was not disapproved by members continues as the budget until and unless the
             1054      board presents another budget to members and that budget is not disapproved.
             1055          (5) During the period of administrative control, association members may not
             1056      disapprove a budget.
             1057          Section 21. Section 57-8a-216 is enacted to read:
             1058          57-8a-216. Association bylaws -- Recording required -- Bylaw requirements.
             1059          (1) (a) No later than the date of the first lot sale, an association shall file its bylaws for
             1060      recording in the office of the recorder of each county in which any part of the real estate
             1061      included within the association is located.
             1062          (b) If an association fails to file bylaws for recording within the time specified in
             1063      Subsection (1)(a), the board may file the bylaws for recording as provided in Subsection (1)(a).
             1064          (2) Unless otherwise provided in the declaration, an association's bylaws shall state:
             1065          (a) the number of board members;
             1066          (b) the title of each of the association's officers;
             1067          (c) the manner and method of officer election by the board or, if the declaration
             1068      requires, by the lot owners;
             1069          (d) (i) the board member and officer:
             1070          (A) qualifications;
             1071          (B) powers and duties; and
             1072          (C) terms of office;
             1073          (ii) the method for removing a board member or officer; and
             1074          (iii) the method for filling a board member or officer vacancy;
             1075          (e) the powers that the board or officers may delegate to other persons or to a managing
             1076      agent;
             1077          (f) the officers who may prepare, execute, certify, and record amendments to the
             1078      declaration on behalf of the association;
             1079          (g) a method for the board or lot owners to amend the bylaws, consistent with Section



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             1080
     16-6a-1010 ; and
             1081          (h) subject to the provisions of the declaration and unless the declaration or this chapter
             1082      requires that a provision appear in a declaration, any other matter that is necessary or
             1083      appropriate for conducting the affairs of the association, including:
             1084          (i) meetings;
             1085          (ii) voting requirements; and
             1086          (iii) quorum requirements.
             1087          (3) An association shall file any amended bylaws for recording in the same manner as
             1088      the association is required to file the initial bylaws for recording under Subsection (1).
             1089          Section 22. Section 57-8a-217 is enacted to read:
             1090          57-8a-217. Association rules, including design criteria -- Requirements and
             1091      limitations relating to board's action on rules and design criteria -- Vote of disapproval.
             1092          (1) (a) Subject to Subsection (1)(b), a board may adopt, amend, modify, cancel, limit,
             1093      create exceptions to, expand, or enforce the rules and design criteria of the association.
             1094          (b) A board's action under Subsection (1)(a) is subject to:
             1095          (i) this section;
             1096          (ii) any limitation that the declaration imposes on the authority stated in Subsection
             1097      (1)(a);
             1098          (iii) the limitation on rules in Sections 57-8a-218 and 57-8a-219 ;
             1099          (iv) the board's duty to exercise business judgment on behalf of:
             1100          (A) the association; and
             1101          (B) the lot owners in the association; and
             1102          (v) the right of the lot owners or declarant to disapprove the action under Subsection
             1103      (4).
             1104          (2) Except as provided in Subsection (3), before adopting, amending, modifying,
             1105      canceling, limiting, creating exceptions to, or expanding the rules and design criteria of the
             1106      association, the board shall:
             1107          (a) at least 15 days before the board will meet to consider a change to a rule or design
             1108      criterion, deliver notice to lot owners, as provided in Section 57-8a-214 , that the board is
             1109      considering a change to a rule or design criterion;
             1110          (b) provide an open forum at the board meeting giving lot owners an opportunity to be



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             1111
     heard at the board meeting before the board takes action under Subsection (1)(a); and
             1112          (c) deliver a copy of the change in the rules or design criteria approved by the board to
             1113      the lot owners as provided in Section 57-8a-214 within 15 days after the date of the board
             1114      meeting.
             1115          (3) (a) Subject to Subsection (3)(b), a board may adopt a rule without first giving
             1116      notice to the lot owners under Subsection (2) if there is an imminent risk of harm to a common
             1117      area, a limited common area, a lot owner, an occupant of a lot, a lot, or a dwelling.
             1118          (b) The board shall provide notice under Subsection (2) to the lot owners of a rule
             1119      adopted under Subsection (3)(a).
             1120          (4) A board action in accordance with Subsections (1), (2), and (3) is disapproved if
             1121      within 60 days after the date of the board meeting where the action was taken:
             1122          (a) (i) there is a vote of disapproval by at least 51% of all the allocated voting interests
             1123      of the lot owners in the association; and
             1124          (ii) the vote is taken at a special meeting called for that purpose by the lot owners
             1125      under the declaration, articles, or bylaws; or
             1126          (b) (i) the declarant delivers to the board a writing of disapproval; and
             1127          (ii) (A) the declarant is within the period of declarant control; or
             1128          (B) for an expandable project, the declarant has the right to add real estate to the
             1129      project.
             1130          (5) (a) The board has no obligation to call a meeting of the lot owners to consider
             1131      disapproval, unless lot owners submit a petition, in the same manner as the declaration,
             1132      articles, or bylaws provide for a special meeting, for the meeting to be held.
             1133          (b) Upon the board receiving a petition under Subsection (5)(a), the effect of the
             1134      board's action is:
             1135          (i) stayed until after the meeting is held; and
             1136          (ii) subject to the outcome of the meeting.
             1137          (6) During the period of administrative control, a declarant may exempt the declarant
             1138      from association rules and the rulemaking procedure under this section if the declaration
             1139      reserves to the declarant the right to exempt the declarant.
             1140          Section 23. Section 57-8a-218 is enacted to read:
             1141          57-8a-218. Equal treatment by rules required -- Limits on association rules and



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             1142
     design criteria.
             1143          (1) (a) Except as provided in Subsection (1)(b), a rule shall treat similarly situated lot
             1144      owners similarly.
             1145          (b) Notwithstanding Subsection (1)(a), a rule may:
             1146          (i) vary according to the level and type of service that the association provides to lot
             1147      owners; and
             1148          (ii) differ between residential and nonresidential uses.
             1149          (2) (a) A rule criterion may not abridge the rights of a lot owner to display religious
             1150      and holiday signs, symbols, and decorations inside a dwelling on a lot.
             1151          (b) Notwithstanding Subsection (2)(a), the association may adopt time, place, and
             1152      manner restrictions with respect to displays visible from outside the dwelling or lot.
             1153          (3) (a) A rule may not regulate the content of political signs.
             1154          (b) Notwithstanding Subsection (3)(a):
             1155          (i) a rule may regulate the time, place, and manner of posting a political sign; and
             1156          (ii) an association design provision may establish design criteria for political signs.
             1157          (4) (a) A rule may not interfere with the freedom of a lot owner to determine the
             1158      composition of the lot owner's household.
             1159          (b) Notwithstanding Subsection (4)(a), an association may:
             1160          (i) require that all occupants of a dwelling be members of a single housekeeping unit;
             1161      and
             1162          (ii) limit the total number of occupants permitted in each residential dwelling on the
             1163      basis of the residential dwelling's:
             1164          (A) size and facilities; and
             1165          (B) fair use of the common areas.
             1166          (5) (a) A rule may not interfere with an activity of a lot owner within the confines of a
             1167      dwelling or lot, to the extent that the activity is in compliance with local laws and ordinances.
             1168          (b) Notwithstanding Subsection (5)(a), a rule may prohibit an activity within a dwelling
             1169      on an owner's lot if the activity:
             1170          (i) is not normally associated with a project restricted to residential use; or
             1171          (ii) (A) creates monetary costs for the association or other lot owners;
             1172          (B) creates a danger to the health or safety of occupants of other lots;



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             1173
         (C) generates excessive noise or traffic;
             1174          (D) creates unsightly conditions visible from outside the dwelling;
             1175          (E) creates an unreasonable source of annoyance to persons outside the lot; or
             1176          (F) if there are attached dwellings, creates the potential for smoke to enter another lot
             1177      owner's dwelling, the common areas, or limited common areas.
             1178          (c) If permitted by law, an association may adopt rules described in Subsection (5)(b)
             1179      that affect the use of or behavior inside the dwelling.
             1180          (6) (a) A rule may not, to the detriment of a lot owner and over the lot owner's written
             1181      objection to the board, alter the allocation of financial burdens among the various lots.
             1182          (b) Notwithstanding Subsection (6)(a), an association may:
             1183          (i) change the common areas available to a lot owner;
             1184          (ii) adopt generally applicable rules for the use of common areas; or
             1185          (iii) deny use privileges to a lot owner who:
             1186          (A) is delinquent in paying assessments;
             1187          (B) abuses the common areas; or
             1188          (C) violates the governing documents.
             1189          (c) This Subsection (6) does not permit a rule that:
             1190          (i) alters the method of levying assessments; or
             1191          (ii) increases the amount of assessments as provided in the declaration.
             1192          (7) (a) Subject to Subsection (7)(b), a rule may not:
             1193          (i) prohibit the transfer of a lot; or
             1194          (ii) require the consent of the association or board to transfer a lot.
             1195          (b) Unless contrary to a declaration, a rule may require a minimum lease term.
             1196          (8) (a) A rule may not require a lot owner to dispose of personal property that was in or
             1197      on a lot before the adoption of the rule or design criteria if the personal property was in
             1198      compliance with all rules and other governing documents previously in force.
             1199          (b) The exemption in Subsection (8)(a):
             1200          (i) applies during the period of the lot owner's ownership of the lot; and
             1201          (ii) does not apply to a subsequent lot owner who takes title to the lot after adoption of
             1202      the rule described in Subsection (8)(a).
             1203          (9) A rule or action by the association or action by the board may not unreasonably



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House Floor Amendments 3-9-2011 je/rhr
             1204
     impede a declarant's H. ability to satisfy existing development financing for community
             1204a      improvements and .H right to develop:
             1205          (a) the project; or
             1206          (b) other properties in the vicinity of the project.
             1207          (10) A rule or association or board action may not interfere with:
             1208          (a) the use or operation of an amenity that the association does not own or control; or
             1209          (b) the exercise of a right associated with an easement.
             1210          (11) A rule may not divest a lot owner of the right to proceed in accordance with a
             1211      completed application for design review, or to proceed in accordance with another approval
             1212      process, under the terms of the governing documents in existence at the time the completed
             1213      application was submitted by the owner for review.
             1214          (12) Unless otherwise provided in the declaration, an association may by rule:
             1215          (a) regulate the use, maintenance, repair, replacement, and modification of common
             1216      areas;
             1217          (b) impose and receive any payment, fee, or charge for:
             1218          (i) the use, rental, or operation of the common areas, except limited common areas; and
             1219          (ii) a service provided to a lot owner;
             1220          (c) impose a charge for a late payment of an assessment; or
             1221          (d) provide for the indemnification of its officers and board consistent with Title 16,
             1222      Chapter 6a, Utah Revised Nonprofit Corporation Act.
             1223          (13) A rule shall be reasonable.
             1224          (14) A declaration, or an amendment to a declaration, may vary any of the
             1225      requirements of Subsections (1) through (12), except Subsection (1)(b)(ii).
             1226          (15) A rule may not be inconsistent with a provision of a declaration.
             1227          Section 24. Section 57-8a-219 is enacted to read:
             1228          57-8a-219. Display of the flag.
             1229          (1) An association may not prohibit a lot owner from displaying a United States flag
             1230      inside a dwelling or limited common area or on a lot, if the display complies with United States
             1231      Code, Title 4, Chapter 1, The Flag H. [ , or with a rule or custom pertaining to the proper display of
             1232      the flag
] .H
.
             1233           H. [ (2) (a) Notwithstanding Subsection (1), an association may establish reasonable
             1234      restrictions on the size of a flag and on the place, duration, and manner of placement or display



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House Floor Amendments 3-9-2011 je/rhr
             1235
     of a flag if the restrictions are necessary to protect a substantial interest of the association.
             1236          (b) In an action that an association brings for a violation of a restriction under
             1237      Subsection (2)(a), the association bears the burden of proof that the restriction is necessary to
             1238      protect a substantial interest of the association.]
             1239          [(3)
] (2) .H
An association may restrict the display of a flag on the common areas.
             1240          Section 25. Section 57-8a-220 is enacted to read:
             1241          57-8a-220. Creditor approval may be required for lot owner or association action
             1242      under declaration -- Creditor approval presumed in certain circumstances -- Notice to
             1243      creditor or creditor's successor.
             1244          (1) (a) Subject to Subsection (1)(b), a declaration may:
             1245          (i) condition the effectiveness of lot owners' actions specified in the declaration on the
             1246      approval of a specified number or percentage of lenders holding a security interest in the lots;
             1247      or
             1248          (ii) condition the effectiveness of association actions specified in the declaration on the
             1249      approval of a specified number or percentage of lenders that have extended credit to the
             1250      association.
             1251          (b) A condition under Subsection (1)(a) may not:
             1252          (i) deny or delegate the lot owners' or board's control over the association's general
             1253      administrative affairs;
             1254          (ii) prevent the association or board from commencing, intervening in, or settling any
             1255      litigation or proceeding; or
             1256          (iii) prevent an insurance trustee or the association from receiving or distributing
             1257      insurance proceeds under Subsection 57-8a-405 (12).
             1258          (c) A condition under Subsection (1)(a) does not violate a prohibition under Subsection
             1259      (1)(b) by:
             1260          (i) requiring the association to deposit the association's assessments before default with
             1261      the lender assigned the income; or
             1262          (ii) requiring the association to increase an assessment at the lender's direction by an
             1263      amount reasonably necessary to pay the loan in accordance with the loan terms.
             1264          (d) This Subsection (1) applies to:
             1265          (i) an association formed before, on, or after May 10, 2011; and



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             1266
         (ii) documents created and recorded before, on, or after May 10, 2011.
             1267          (2) Subject to this chapter and applicable law, a lender who has extended credit to an
             1268      association secured by an assignment of income or an encumbrance of the common areas may
             1269      enforce the lender's security agreement as provided in the agreement.
             1270          (3) (a) Subject to Subsection (4), a security holder's consent that is required under
             1271      Subsection (1) to amend a declaration or bylaw or for another association action is presumed if:
             1272          (i) the association sends written notice of the proposed amendment or action by
             1273      certified or registered mail to the security holder's address stated in a recorded document
             1274      evidencing the security interest; and
             1275          (ii) the person designated in a notice under Subsection (3)(a)(i) to receive the security
             1276      holder's response does not receive a response within 60 days after the association sends notice
             1277      under Subsection (3)(a)(i).
             1278          (b) If a security holder's address for receiving notice is not stated in a recorded
             1279      document evidencing the security interest, an association:
             1280          (i) shall use reasonable efforts to find a mailing address for the security holder; and
             1281          (ii) may send the notice to any address obtained under Subsection (3)(b)(i).
             1282          (4) If a security holder responds in writing within 60 days after the association sends
             1283      notice under Subsection (3)(a)(i) that the security interest has been assigned or conveyed to
             1284      another person, the association:
             1285          (a) shall:
             1286          (i) send a notice under Subsection (3)(a)(i) to the person assigned or conveyed the
             1287      security interest at the address provided by the security holder in the security holder's response;
             1288      or
             1289          (ii) if no address is provided:
             1290          (A) use reasonable efforts to find a mailing address for the person assigned or
             1291      conveyed the security interest; and
             1292          (B) send notice by certified or registered mail to the person at the address that the
             1293      association finds under Subsection (4)(a)(ii)(A); and
             1294          (b) may not presume the security holder's consent under Subsection (3)(a) unless the
             1295      person designated in a notice under Subsection (4)(a) to receive the response from the person
             1296      assigned or conveyed the security interest does not receive a response within 60 days after the



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             1297
     association sends the notice.
             1298          Section 26. Section 57-8a-221 is enacted to read:
             1299          57-8a-221. Reincorporation of terminated or dissolved association.
             1300          (1) An association that is terminated or dissolved without possibility of reinstatement
             1301      under Title 16, Chapter 6a, Utah Revised Nonprofit Corporation Act, may be reincorporated by
             1302      the acting directors of the association refiling articles of incorporation that are substantially
             1303      similar to the articles of incorporation, as amended, in existence at the time of termination or
             1304      dissolution.
             1305          (2) Upon the association's reincorporation under Subsection (1):
             1306          (a) the board of directors shall readopt bylaws for the association that are the same as
             1307      the bylaws that were in existence at the time of termination or dissolution; and
             1308          (b) all lot owners within the project are members of the reincorporated association.
             1309          Section 27. Section 57-8a-301 is enacted to read:
             1310     
Part 3. Collection of Assessments

             1311          57-8a-301. Lien in favor of association for assessments and costs of collection.
             1312          (1) (a) An association has a lien on a lot for:
             1313          (i) an assessment;
             1314          (ii) except as provided in the declaration, fees, charges, and costs associated with
             1315      collecting an unpaid assessment, including:
             1316          (A) court costs and reasonable attorney fees;
             1317          (B) late charges;
             1318          (C) interest; and
             1319          (D) any other amount that the association is entitled to recover under the declaration,
             1320      this chapter, or an administrative or judicial decision; and
             1321          (iii) a fine that the association imposes against the owner of the lot.
             1322          (b) The recording of a declaration constitutes record notice and perfection of a lien
             1323      described in Subsection (1)(a).
             1324          (2) If an assessment is payable in installments, a lien described in Subsection (1)(a)(i)
             1325      is for the full amount of the assessment from the time the first installment is due, unless the
             1326      association otherwise provides in a notice of assessment.
             1327          (3) An unpaid assessment or fine accrues interest at the rate provided:



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             1328
         (a) in Subsection 15-1-1 (2); or
             1329          (b) in the declaration, if the declaration provides for a different interest rate.
             1330          (4) A lien under this section has priority over each other lien and encumbrance on a lot
             1331      except:
             1332          (a) a lien or encumbrance recorded before the declaration is recorded;
             1333          (b) a first S. or second .S security interest on the lot S. secured by a mortgage or
             1333a      trust deed that is .S recorded before a recorded notice of lien by or on
             1334      behalf of the association; or
             1335          (c) a lien for real estate taxes or other governmental assessments or charges against the
             1336      lot.
             1337          (5) A lien under this section is not subject to Title 78B, Chapter 5, Part 5, Utah
             1338      Exemptions Act.
             1339          (6) Unless the declaration provides otherwise, if two or more associations have liens
             1340      for assessments on the same lot, the liens have equal priority, regardless of when the liens are
             1341      created.
             1342          Section 28. Section 57-8a-302 is enacted to read:
             1343          57-8a-302. Enforcement of a lien.
             1344          (1) (a) To enforce a lien established under Section 57-8a-301 , an association may:
             1345          (i) cause a lot to be sold through nonjudicial foreclosure as though the lien were a deed
             1346      of trust, in the manner provided by:
             1347          (A) Sections 57-1-24 , 57-1-25 , 57-1-26 , and 57-1-27 ; and
             1348          (B) this part; or
             1349          (ii) foreclose the lien through a judicial foreclosure in the manner provided by:
             1350          (A) law for the foreclosure of a mortgage; and
             1351          (B) this part.
             1352          (b) For purposes of a nonjudicial or judicial foreclosure as provided in Subsection
             1353      (1)(a):
             1354          (i) the association is considered to be the beneficiary under a trust deed; and
             1355          (ii) the lot owner is considered to be the trustor under a trust deed.
             1356          (2) A lot owner's acceptance of the owner's interest in a lot constitutes a simultaneous
             1357      conveyance of the lot in trust, with power of sale, to the trustee designated as provided in this
             1358      section for the purpose of securing payment of all amounts due under the declaration and this



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             1359
     chapter.
             1360          (3) (a) A power of sale and other powers of a trustee under this part and under Sections
             1361      57-1-19 through 57-1-34 may not be exercised unless the association appoints a qualified
             1362      trustee.
             1363          (b) An association's execution of a substitution of trustee form authorized in Section
             1364      57-1-22 is sufficient for appointment of a trustee under Subsection (3)(a).
             1365          (c) A person may not be a trustee under this part unless the person qualifies as a trustee
             1366      under Subsection 57-1-21 (1)(a)(i) or (iv).
             1367          (d) A trustee under this part is subject to all duties imposed on a trustee under Sections
             1368      57-1-19 through 57-1-34 .
             1369          (4) This part does not prohibit an association from bringing an action against a lot
             1370      owner to recover an amount for which a lien is created under Section 57-8a-301 or from taking
             1371      a deed in lieu of foreclosure, if the action is brought or deed taken before the sale or foreclosure
             1372      of the lot owner's lot under this part.
             1373          Section 29. Section 57-8a-303 is enacted to read:
             1374          57-8a-303. Notice of nonjudicial foreclosure -- Nonjudicial foreclosure prohibited
             1375      if unit owner demands judicial foreclosure.
             1376          (1) At least 30 calendar days before initiating a nonjudicial foreclosure, an association
             1377      shall provide notice to the owner of the lot that is the intended subject of the nonjudicial
             1378      foreclosure.
             1379          (2) The notice under Subsection (1):
             1380          (a) shall:
             1381          (i) notify the lot owner that the association intends to pursue nonjudicial foreclosure
             1382      with respect to the owner's lot to enforce the association's lien for an unpaid assessment;
             1383          (ii) notify the lot owner of the owner's right to demand judicial foreclosure in the place
             1384      of nonjudicial foreclosure;
             1385          (iii) be in substantially the following form:
             1386          "NOTICE OF NONJUDICIAL FORECLOSURE AND RIGHT TO DEMAND
             1387      JUDICIAL FORECLOSURE
             1388          The (insert the name of the association), the association for the project in which your lot
             1389      is located, intends to foreclose upon your lot and allocated interest in the common areas using a



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             1390
     procedure that will not require it to file a lawsuit or involve a court. This procedure is being
             1391      followed in order to enforce the association's lien against your lot and to collect the amount of
             1392      an unpaid assessment against your lot, together with any applicable late fees and the costs,
             1393      including attorney fees, associated with the foreclosure proceeding. Alternatively, you have the
             1394      right to demand that a foreclosure of your property be conducted in a lawsuit with the oversight
             1395      of a judge. If you make this demand and the association prevails in the lawsuit, the costs and
             1396      attorney fees associated with the lawsuit will likely be significantly higher than if a lawsuit
             1397      were not required, and you may be responsible for paying those costs and attorney fees. If you
             1398      want to make this demand, you must state in writing that 'I demand a judicial foreclosure
             1399      proceeding upon my lot', or words substantially to that effect. You must send this written
             1400      demand by first class and certified U.S. mail, return receipt requested, within 15 days after the
             1401      date of the postmark on the envelope in which this notice was mailed to you. The address to
             1402      which you must mail your demand is (insert the association's address for receipt of a
             1403      demand)."; and
             1404          (iv) be sent to the lot owner by certified mail, return receipt requested; and
             1405          (b) may be included with other association correspondence to the lot owner.
             1406          (3) An association may not use a nonjudicial foreclosure to enforce a lien if the lot
             1407      owner mails the association a written demand for judicial foreclosure:
             1408          (a) by U.S. mail, certified with a return receipt requested;
             1409          (b) to the address stated in the association's notice under Subsection (1); and
             1410          (c) within 15 days after the date of the postmark on the envelope of the association's
             1411      notice under Subsection (1).
             1412          Section 30. Section 57-8a-304 is enacted to read:
             1413          57-8a-304. Provisions applicable to nonjudicial foreclosure.
             1414          (1) An association's nonjudicial foreclosure of a lot is governed by:
             1415          (a) Sections 57-1-19 through 57-1-34 , to the same extent as though the association's
             1416      lien were a trust deed; and
             1417          (b) this part.
             1418          (2) If there is a conflict between a provision of this part and a provision of Sections
             1419      57-1-19 through 57-1-34 with respect to an association's nonjudicial foreclosure of a lot, the
             1420      provision of this part controls.



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             1421
         Section 31. Section 57-8a-305 is enacted to read:
             1422          57-8a-305. One-action rule not applicable -- Abandonment of enforcement
             1423      proceeding.
             1424          (1) Subsection 78B-6-901 (1) does not apply to an association's judicial or nonjudicial
             1425      foreclosure of a lot under this part.
             1426          (2) An association may abandon a judicial foreclosure, nonjudicial foreclosure, or
             1427      sheriff's sale and initiate a separate action or another judicial foreclosure, nonjudicial
             1428      foreclosure, or sheriff's sale if the initial judicial foreclosure, nonjudicial foreclosure, or
             1429      sheriff's sale is not complete.
             1430          Section 32. Section 57-8a-306 is enacted to read:
             1431          57-8a-306. Costs and attorney fees in lien enforcement action.
             1432          (1) A court entering a judgment or decree in a judicial action brought under this part
             1433      shall award the prevailing party its costs and reasonable attorney fees incurred before the
             1434      judgment or decree and, if the association is the prevailing party, any costs and reasonable
             1435      attorney fees that the association incurs collecting the judgment.
             1436          (2) In a nonjudicial foreclosure, an association may include in the amount due, and may
             1437      collect, all costs and reasonable attorney fees incurred in collecting the amount due, including
             1438      the costs of preparing, recording, and foreclosing a lien.
             1439          Section 33. Section 57-8a-307 is enacted to read:
             1440          57-8a-307. Action to recover unpaid assessment.
             1441          An association need not pursue a judicial foreclosure or nonjudicial foreclosure to
             1442      collect an unpaid assessment but may file an action to recover a money judgment for the unpaid
             1443      assessment without waiving the lien under Section 57-8a-301 .
             1444          Section 34. Section 57-8a-308 is enacted to read:
             1445          57-8a-308. Appointment of receiver.
             1446          In an action by an association to collect an assessment or to foreclose a lien for an
             1447      unpaid assessment, a court may:
             1448          (1) appoint a receiver, in accordance with Section 7-2-9 , to collect and hold money
             1449      alleged to be due and owing to a lot owner:
             1450          (a) before commencement of the action; or
             1451          (b) during the pendency of the action; and



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             1452
         (2) order the receiver to pay the association, to the extent of the association's common
             1453      expense assessment, money the receiver holds under Subsection (1).
             1454          Section 35. Section 57-8a-309 is enacted to read:
             1455          57-8a-309. Termination of a delinquent owner's rights -- Notice -- Informal
             1456      hearing.
             1457          (1) As used in this section, "delinquent lot owner" means a lot owner who fails to pay
             1458      an assessment when due.
             1459          (2) A board may, if authorized in the declaration, bylaws, or rules and as provided in
             1460      this section, terminate a delinquent lot owner's right:
             1461          (a) to receive a utility service for which the lot owner pays as a common expense; or
             1462          (b) of access to and use of recreational facilities.
             1463          (3) (a) Before terminating a utility service or right of access to and use of recreational
             1464      facilities under Subsection (2), the manager or board shall give the delinquent lot owner notice
             1465      in a manner provided in the declaration, bylaws, or association rules.
             1466          (b) (i) A notice under Subsection (3)(a) shall state:
             1467          (A) that the association will terminate the lot owner's utility service or right of access
             1468      to and use of recreational facilities, or both, if the association does not receive payment of the
             1469      assessment within the time provided in the declaration, bylaws, or association rules, subject to
             1470      Subsection (3)(b)(ii);
             1471          (B) the amount of the assessment due, including any interest or late payment fee; and
             1472          (C) the lot owner's right to request a hearing under Subsection (4).
             1473          (ii) The time provided under Subsection (3)(b)(i)(A) may not be less than 14 days.
             1474          (iii) A notice under Subsection (3)(a) may include the estimated cost to reinstate a
             1475      utility service if service is terminated.
             1476          (4) (a) A delinquent lot owner may submit a written request to the board for an
             1477      informal hearing to dispute the assessment.
             1478          (b) A request under Subsection (4)(a) shall be submitted within 14 days after the date
             1479      the delinquent lot owner receives the notice under Subsection (3).
             1480          (5) A board shall conduct an informal hearing requested under Subsection (4) in
             1481      accordance with the standards provided in the declaration, bylaws, or association rules.
             1482          (6) If a delinquent lot owner requests a hearing, the association may not terminate a



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             1483
     utility service or right of access to and use of recreational facilities until after the board:
             1484          (a) conducts the hearing; and
             1485          (b) enters a final decision.
             1486          (7) If an association terminates a utility service or a right of access to and use of
             1487      recreational facilities, the association shall take immediate action to reinstate the service or
             1488      right following the lot owner's payment of the assessment, including any interest and late
             1489      payment fee.
             1490          (8) An association may:
             1491          (a) assess a lot owner for the cost associated with reinstating a utility service that the
             1492      association terminates as provided in this section; and
             1493          (b) demand that the estimated cost to reinstate the utility service be paid before the
             1494      service is reinstated, if the estimated cost is included in a notice under Subsection (3).
             1495          Section 36. Section 57-8a-310 is enacted to read:
             1496          57-8a-310. Requiring tenant in residential condominium lot to pay rent to
             1497      association if owner fails to pay assessment.
             1498          (1) As used in this section:
             1499          (a) "Amount owing" means the total of:
             1500          (i) any assessment or obligation under Section 57-8a-301 that is due and owing; and
             1501          (ii) any applicable interest, late fee, and cost of collection.
             1502          (b) "Lease" means an arrangement under which a tenant occupies a lot owner's lot in
             1503      exchange for the lot owner receiving a consideration or benefit, including a fee, service,
             1504      gratuity, or emolument.
             1505          (c) "Tenant" means a person, other than the lot owner, who has regular, exclusive
             1506      occupancy of the lot owner's lot.
             1507          (2) Subject to Subsections (3) and (4), the board may require a tenant under a lease
             1508      with a lot owner to pay the association all future lease payments due to the lot owner:
             1509          (a) if:
             1510          (i) the lot owner fails to pay an assessment for a period of more than 60 days after the
             1511      assessment is due and payable; and
             1512          (ii) authorized in the declaration, bylaws, or rules;
             1513          (b) beginning with the next monthly or periodic payment due from the tenant; and



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             1514
         (c) until the association is paid the amount owing.
             1515          (3) (a) Before requiring a tenant to pay lease payments to the association under
             1516      Subsection (2), the association's manager or board shall give the lot owner notice, in
             1517      accordance with the declaration, bylaws, or association rules.
             1518          (b) The notice required under Subsection (3)(a) shall state:
             1519          (i) the amount of the assessment due, including any interest, late fee, collection cost,
             1520      and attorney fees;
             1521          (ii) that any costs of collection, including attorney fees, and other assessments that
             1522      become due may be added to the total amount due and be paid through the collection of lease
             1523      payments; and
             1524          (iii) that the association intends to demand payment of future lease payments from the
             1525      lot owner's tenant if the lot owner does not pay the amount owing within 15 days.
             1526          (4) (a) If a lot owner fails to pay the amount owing within 15 days after the
             1527      association's manager or board gives the lot owner notice under Subsection (3), the
             1528      association's manager or board may exercise the association's rights under Subsection (2) by
             1529      delivering a written notice to the tenant.
             1530          (b) A notice under Subsection (4)(a) shall state that:
             1531          (i) due to the lot owner's failure to pay an assessment within the required time, the
             1532      board has notified the lot owner of the board's intent to collect all lease payments until the
             1533      amount owing is paid;
             1534          (ii) the law requires the tenant to make all future lease payments, beginning with the
             1535      next monthly or other periodic payment, to the association, until the amount owing is paid; and
             1536          (iii) the tenant's payment of lease payments to the association does not constitute a
             1537      default under the terms of the lease with the lot owner.
             1538          (c) The manager or board shall mail a copy of the notice to the lot owner.
             1539          (5) (a) A tenant to whom notice under Subsection (4) is given shall pay to the
             1540      association all future lease payments as they become due and owing to the lot owner:
             1541          (i) beginning with the next monthly or other periodic payment after the notice under
             1542      Subsection (4) is delivered to the tenant; and
             1543          (ii) until the association notifies the tenant under Subsection (6) that the amount owing
             1544      is paid.



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             1545
         (b) A lot owner:
             1546          (i) shall credit each payment that the tenant makes to the association under this section
             1547      against any obligation that the tenant owes to the owner as though the tenant made the payment
             1548      to the owner; and
             1549          (ii) may not initiate a suit or other action against a tenant for failure to make a lease
             1550      payment that the tenant pays to an association as required under this section.
             1551          (6) (a) Within five business days after the amount owing is paid, the association's
             1552      manager or board shall notify the tenant in writing that the tenant is no longer required to pay
             1553      future lease payments to the association.
             1554          (b) The manager or board shall mail a copy of the notification described in Subsection
             1555      (6)(a) to the lot owner.
             1556          (7) (a) An association shall deposit money paid to the association under this section in
             1557      a separate account and disburse that money to the association until:
             1558          (i) the amount owing is paid; and
             1559          (ii) any cost of administration, not to exceed $25, is paid.
             1560          (b) The association shall, within five business days after the amount owing is paid, pay
             1561      to the lot owner any remaining balance.
             1562          Section 37. Section 57-8a-311 is enacted to read:
             1563          57-8a-311. Statement from association's manager or board of unpaid assessment.
             1564          (1) An association's manager or board shall issue a written statement indicating any
             1565      unpaid assessment with respect to a lot owner's lot upon:
             1566          (a) a written request by the lot owner; and
             1567          (b) payment of a reasonable fee not to exceed $25.
             1568          (2) A written statement under Subsection (1) is conclusive in favor of a person who
             1569      relies on the written statement in good faith.
             1570          Section 38. Section 57-8a-401 is enacted to read:
             1571     
Part 4. Insurance

             1572          57-8a-401. Definition.
             1573          As used in this part, "reasonably available" means available using typical insurance
             1574      carriers and markets, irrespective of the ability of the association to pay.
             1575          Section 39. Section 57-8a-402 is enacted to read:



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             1576
         57-8a-402. Applicability of part.
             1577          (1) This part applies to an insurance policy or combination of insurance policies:
             1578          (a) issued or renewed on or after July 1, 2011; and
             1579          (b) issued to or renewed by:
             1580          (i) a lot owner; or
             1581          (ii) an association, regardless of when the association is formed.
             1582          (2) This part does not apply to a project if all of the project's lots are restricted to
             1583      entirely nonresidential use.
             1584          (3) Subject to Subsection (4), this part does not apply to a project if:
             1585          (a) the initial declaration for the project is recorded before January 1, 2012;
             1586          (b) the project includes attached dwellings; and
             1587          (c) the declaration requires each lot owner to insure the lot owner's dwelling.
             1588          (4) (a) An association that is subject to a declaration recorded before January 1, 2012
             1589      may amend the declaration, as provided in the declaration, to subject the association to this
             1590      part.
             1591          (b) During the period of administrative control, an amendment under Subsection (4)(a)
             1592      requires the consent of the declarant.
             1593          Section 40. Section 57-8a-403 is enacted to read:
             1594          57-8a-403. Property and liability insurance required -- Notice if insurance not
             1595      reasonably available.
             1596          (1) Beginning not later than the day on which the first lot is conveyed to a person other
             1597      than a declarant, an association shall maintain, to the extent reasonably available:
             1598          (a) subject to Section 57-8a-405 , property insurance on the physical structure of all
             1599      attached dwellings, limited common areas appurtenant to a dwelling on a lot, and common
             1600      areas in the project, insuring against all risks of direct physical loss commonly insured against,
             1601      including fire and extended coverage perils; and
             1602          (b) subject to Section 57-8a-406 , liability insurance, including medical payments
             1603      insurance covering all occurrences commonly insured against for death, bodily injury, and
             1604      property damage arising out of or in connection with the use, ownership, or maintenance of the
             1605      common areas.
             1606          (2) If an association becomes aware that property insurance under Subsection (1)(a) or



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             1607
     liability insurance under Subsection (1)(b) is not reasonably available, the association shall,
             1608      within seven calendar days after becoming aware, give all lot owners notice, as provided in
             1609      Section 57-8a-215 , that the insurance is not reasonably available.
             1610          Section 41. Section 57-8a-404 is enacted to read:
             1611          57-8a-404. Other and additional insurance -- Limit on effect of lot owner act or
             1612      omission -- Insurer's subrogation waiver -- Inconsistent provisions.
             1613          (1) (a) The declaration or bylaws may require the association to carry other types of
             1614      insurance in addition to those described in Section 57-8a-403 .
             1615          (b) In addition to any type of insurance coverage or limit of coverage provided in the
             1616      declaration or bylaws and subject to the requirements of this part, an association may, as the
             1617      board considers appropriate, obtain:
             1618          (i) an additional type of insurance than otherwise required; or
             1619          (ii) a policy with greater coverage than otherwise required.
             1620          (2) Unless a lot owner is acting within the scope of the lot owner's authority on behalf
             1621      of an association, a lot owner's act or omission may not:
             1622          (a) void a property insurance policy under Subsection 57-8a-403 (1)(a) or a liability
             1623      insurance policy under Subsection 57-8a-403 (1)(b); or
             1624          (b) be a condition to recovery under a policy.
             1625          (3) An insurer under a property insurance policy or liability insurance policy obtained
             1626      under this part waives its right to subrogation under the policy against any lot owner or member
             1627      of the lot owner's household.
             1628          (4) (a) An insurance policy issued to an association may not be inconsistent with any
             1629      provision of this part.
             1630          (b) A provision of a governing document that is contrary to a provision of this part has
             1631      no effect.
             1632          (c) A property insurance or liability insurance policy issued to an association may not
             1633      prevent a lot owner from obtaining insurance for the lot owner's own benefit.
             1634          Section 42. Section 57-8a-405 is enacted to read:
             1635          57-8a-405. Property insurance.
             1636          (1) This section applies to property insurance required under Subsection
             1637      57-8a-403 (1)(a).



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             1638
         (2) The property covered by property insurance shall include any property that, under
             1639      the declaration, is required to become common areas.
             1640          (3) The total amount of coverage provided by blanket property insurance may not be
             1641      less than 100% of the full replacement cost of the insured property at the time the insurance is
             1642      purchased and at each renewal date, excluding items normally excluded from property
             1643      insurance policies.
             1644          (4) Property insurance shall include coverage for any fixture, improvement, or
             1645      betterment installed by a lot owner to an attached dwelling or to a limited common area
             1646      appurtenant to a dwelling on a lot, including a floor covering, cabinet, light fixture, electrical
             1647      fixture, heating or plumbing fixture, paint, wall covering, window, and any other item
             1648      permanently part of or affixed to an attached dwelling or to a limited common area.
             1649          (5) Notwithstanding anything in this part and unless otherwise provided in the
             1650      declaration, an association is not required to obtain property insurance for a loss to a dwelling
             1651      that is not physically attached to another dwelling or to a common area structure.
             1652          (6) Each lot owner is an insured person under a property insurance policy.
             1653          (7) If a loss occurs that is covered by a property insurance policy in the name of an
             1654      association and another property insurance policy in the name of a lot owner:
             1655          (a) the association's policy provides primary insurance coverage; and
             1656          (b) notwithstanding Subsection (7)(a) and subject to Subsection (8):
             1657          (i) a lot owner is responsible for the association's policy deductible; and
             1658          (ii) the lot owner's policy applies to that portion of the loss attributable to the
             1659      association's policy deductible.
             1660          (8) (a) As used in this Subsection (8):
             1661          (i) "Covered loss" means a loss, resulting from a single event or occurrence, that is
             1662      covered by an association's property insurance policy.
             1663          (ii) "Lot damage" means damage to any combination of a lot, a dwelling on a lot, or a
             1664      limited common area appurtenant to a lot or appurtenant to a dwelling on a lot.
             1665          (iii) "Lot damage percentage" means the percentage of total damage resulting in a
             1666      covered loss that is attributable to lot damage.
             1667          (b) A lot owner who owns a lot that has suffered lot damage as part of a covered loss is
             1668      responsible for an amount calculated by applying the lot damage percentage for that lot to the



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             1669
     amount of the deductible under the association's property insurance policy.
             1670          (c) If a lot owner does not pay the amount required under Subsection (8)(b) within 30
             1671      days after substantial completion of the repairs to, as applicable, the lot, a dwelling on the lot,
             1672      or the limited common area appurtenant to the lot, an association may levy an assessment
             1673      against a lot owner for that amount.
             1674          (9) An association shall set aside an amount equal to the amount of the association's
             1675      property insurance policy deductible or $10,000, whichever is less.
             1676          (10) (a) An association shall provide notice in accordance with Section 57-8a-215 to
             1677      each lot owner of the lot owner's obligation under Subsection (8) for the association's policy
             1678      deductible and of any change in the amount of the deductible.
             1679          (b) An association that fails to provide notice as provided in Subsection (10)(a) is
             1680      responsible for the amount of the deductible increase that the association could have assessed
             1681      to a lot owner under Subsection (8).
             1682          (c) An association's failure to provide notice as provided in Subsection (10)(a) may not
             1683      be construed to invalidate any other provision of this part.
             1684          (11) If, in the exercise of the business judgment rule, the board determines that a claim
             1685      is likely not to exceed the association's property insurance policy deductible:
             1686          (a) the lot owner's policy is considered the policy for primary coverage to the amount
             1687      of the association's policy deductible;
             1688          (b) a lot owner who does not have a policy to cover the association's property insurance
             1689      policy deductible is responsible for the loss to the amount of the association's policy deductible,
             1690      as provided in Subsection (8); and
             1691          (c) the association need not tender the claim to the association's insurer.
             1692          (12) (a) An insurer under a property insurance policy issued to an association shall
             1693      adjust with the association a loss covered under the association's policy.
             1694          (b) Notwithstanding Subsection (12)(a), the insurance proceeds for a loss under an
             1695      association's property insurance policy:
             1696          (i) are payable to an insurance trustee that the association designates or, if no trustee is
             1697      designated, to the association; and
             1698          (ii) may not be payable to a holder of a security interest.
             1699          (c) An insurance trustee or an association shall hold any insurance proceeds in trust for



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             1700
     the association, lot owners, and lien holders.
             1701          (d) (i) Insurance proceeds shall be disbursed first for the repair or restoration of the
             1702      damaged property.
             1703          (ii) After the disbursements described in Subsection (12)(d)(i) are made and the
             1704      damaged property has been completely repaired or restored or the project terminated, any
             1705      surplus proceeds are payable to the association, lot owners, and lien holders.
             1706          (13) An insurer that issues a property insurance policy under this part, or the insurer's
             1707      authorized agent, shall issue a certificate or memorandum of insurance to:
             1708          (a) the association;
             1709          (b) a lot owner, upon the lot owner's written request; and
             1710          (c) a holder of a security interest, upon the holder's written request.
             1711          (14) A cancellation or nonrenewal of a property insurance policy under this section is
             1712      subject to the procedures stated in Section 31A-21-303 .
             1713          (15) A board that acquires from an insurer the property insurance required in this
             1714      section is not liable to lot owners if the insurance proceeds are not sufficient to cover 100% of
             1715      the full replacement cost of the insured property at the time of the loss.
             1716          Section 43. Section 57-8a-406 is enacted to read:
             1717          57-8a-406. Liability insurance.
             1718          (1) This section applies to a liability insurance policy required under Subsection
             1719      57-8a-403 (1)(b).
             1720          (2) A liability insurance policy shall be in an amount determined by the board but not
             1721      less than an amount specified in the declaration or bylaws.
             1722          (3) Each lot owner is an insured person under a liability insurance policy that an
             1723      association obtains that insures against liability arising from the lot owner's interest in the
             1724      common areas or from membership in the association.
             1725          Section 44. Section 57-8a-407 is enacted to read:
             1726          57-8a-407. Damage to a portion of project -- Insurance proceeds.
             1727          (1) (a) If a portion of the project for which insurance is required under this part is
             1728      damaged or destroyed, the association shall repair or replace the portion within a reasonable
             1729      amount of time unless:
             1730          (i) the project is terminated;



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         (ii) repair or replacement would be illegal under a state statute or local ordinance
             1732      governing health or safety; or
             1733          (iii) (A) at least 75% of the allocated voting interests of the lot owners in the
             1734      association vote not to rebuild; and
             1735          (B) each owner of a dwelling on a lot and the limited common area appurtenant to that
             1736      lot that will not be rebuilt votes not to rebuild.
             1737          (b) If a portion of a project is not repaired or replaced because the project is terminated,
             1738      the termination provisions of applicable law and the governing documents apply.
             1739          (2) The cost of repair or replacement in excess of insurance proceeds and reserves is a
             1740      common expense.
             1741          (3) If the entire project is damaged or destroyed and not repaired or replaced:
             1742          (a) the association shall use the insurance proceeds attributable to the damaged
             1743      common areas to restore the damaged area to a condition compatible with the remainder of the
             1744      project;
             1745          (b) the association shall distribute the insurance proceeds attributable to lots and
             1746      common areas that are not rebuilt to:
             1747          (i) the lot owners of the lots that are not rebuilt;
             1748          (ii) the lot owners of the lots to which those common areas that are not rebuilt were
             1749      allocated; or
             1750          (iii) lien holders; and
             1751          (c) the association shall distribute the remainder of the proceeds to all the lot owners or
             1752      lien holders in proportion to the common expense liabilities of all the lots.
             1753          (4) If the lot owners vote not to rebuild a lot:
             1754          (a) the lot's allocated interests are automatically reallocated upon the lot owner's vote
             1755      as if the lot had been condemned; and
             1756          (b) the association shall prepare, execute, and submit for recording an amendment to
             1757      the declaration reflecting the reallocations described in Subsection (4)(a).
             1758          Section 45. Repealer.
             1759          This bill repeals:
             1760          Section 57-8-20, Lien for nonpayment of common expenses.
             1761          Section 57-8-29, Insurance.



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         Section 57-8a-202, Unpaid assessment -- Costs and attorney fees.
             1763          Section 57-8a-203, Unpaid assessment -- Lien -- Foreclosure.
             1764          Section 57-8a-204, Unpaid assessment -- Utility service -- Right of access and use.
             1765          Section 57-8a-205, Unpaid assessment -- Future lease payments.
             1766          Section 57-8a-207, Payment of unpaid assessment by encumbrancer.


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