Utah Legislature SB0064

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S.B. 64

This document includes Senate Committee Amendments incorporated into the bill on Tue, Feb 19, 2013 at 9:02 AM by lpoole. -->              1     

HOMEOWNER ASSOCIATION RESERVE ACCOUNT

             2     
AMENDMENTS

             3     
2013 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Stephen H. Urquhart

             6     
House Sponsor: Bradley G. Last

             7     

             8      LONG TITLE
             9      General Description:
             10          This bill makes amendments to the reserve account requirements described in Title 57,
             11      Chapter 8, Condominium Ownership Act, and Title 57, Chapter 8a, Community
             12      Association Act.
             13      Highlighted Provisions:
             14          This bill:
             15          .    defines terms;
             16          .    requires an association and an association of unit owners to:
             17              .    vote annually whether to fund, and if so, how to fund, a reserve fund;
             18              .    within 90 days after the day on which the vote to fund a reserve account occurs,
             19      begin funding the reserve fund in the manner and amount determined by the
             20      vote of the unit owners or lot owners; and
             21              .    within 30 days after the day on which the association or association of unit
             22      owners begins funding a reserve fund, file a certificate of compliance with the
             23      Department of Commerce;
             24          .    states that if an association or an association of unit owners does not file a
             25      certificate of compliance within the required 30 days, the association or association
             26      of unit owners may not levy a special assessment until it files a certificate of
             27      compliance; and



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             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 2012, Chapter 166
             36          57-8-7.5, as last amended by Laws of Utah 2012, Chapters 83 and 369
             37          57-8a-102, as last amended by Laws of Utah 2011, Chapter 355
             38          57-8a-211, as last amended by Laws of Utah 2012, Chapters 83 and 369
             39     

             40      Be it enacted by the Legislature of the state of Utah:
             41          Section 1. Section 57-8-3 is amended to read:
             42           57-8-3. Definitions.
             43          As used in this chapter:
             44          (1) "Assessment" means any charge imposed by the association, including:
             45          (a) common expenses on or against a unit owner pursuant to the provisions of the
             46      declaration, bylaws, or this chapter; and
             47          (b) an amount that an association of unit owners assesses to a unit owner under
             48      Subsection 57-8-43 (9)(h).
             49          (2) "Association of unit owners" means all of the unit owners:
             50          (a) acting as a group in accordance with the declaration and bylaws; or
             51          (b) organized as a legal entity in accordance with the declaration.
             52          (3) "Building" means a building, containing units, and comprising a part of the
             53      property.
             54          (4) "Common areas and facilities" unless otherwise provided in the declaration or
             55      lawful amendments to the declaration means:
             56          (a) the land included within the condominium project, whether leasehold or in fee
             57      simple;
             58          (b) the foundations, columns, girders, beams, supports, main walls, roofs, halls,



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             59
     corridors, lobbies, stairs, stairways, fire escapes, entrances, and exits of the building;
             60          (c) the basements, yards, gardens, parking areas, and storage spaces;
             61          (d) the premises for lodging of janitors or persons in charge of the property;
             62          (e) installations of central services such as power, light, gas, hot and cold water,
             63      heating, refrigeration, air conditioning, and incinerating;
             64          (f) the elevators, tanks, pumps, motors, fans, compressors, ducts, and in general all
             65      apparatus and installations existing for common use;
             66          (g) such community and commercial facilities as may be provided for in the
             67      declaration; and
             68          (h) all other parts of the property necessary or convenient to its existence, maintenance,
             69      and safety, or normally in common use.
             70          (5) "Common expenses" means:
             71          (a) all sums lawfully assessed against the unit owners;
             72          (b) expenses of administration, maintenance, repair, or replacement of the common
             73      areas and facilities;
             74          (c) expenses agreed upon as common expenses by the association of unit owners; and
             75          (d) expenses declared common expenses by this chapter, or by the declaration or the
             76      bylaws.
             77          (6) "Common profits," unless otherwise provided in the declaration or lawful
             78      amendments to the declaration, means the balance of all income, rents, profits, and revenues
             79      from the common areas and facilities remaining after the deduction of the common expenses.
             80          (7) "Condominium" means the ownership of a single unit in a multiunit project
             81      together with an undivided interest in common in the common areas and facilities of the
             82      property.
             83          (8) "Condominium plat" means a plat or plats of survey of land and units prepared in
             84      accordance with Section 57-8-13 .
             85          (9) "Condominium project" means a real estate condominium project; a plan or project
             86      whereby two or more units, whether contained in existing or proposed apartments, commercial
             87      or industrial buildings or structures, or otherwise, are separately offered or proposed to be
             88      offered for sale. Condominium project also means the property when the context so requires.
             89          (10) "Condominium unit" means a unit together with the undivided interest in the



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             90
     common areas and facilities appertaining to that unit. Any reference in this chapter to a
             91      condominium unit includes both a physical unit together with its appurtenant undivided interest
             92      in the common areas and facilities and a time period unit together with its appurtenant
             93      undivided interest, unless the reference is specifically limited to a time period unit.
             94          (11) "Contractible condominium" means a condominium project from which one or
             95      more portions of the land within the project may be withdrawn in accordance with provisions
             96      of the declaration and of this chapter. If the withdrawal can occur only by the expiration or
             97      termination of one or more leases, then the condominium project is not a contractible
             98      condominium within the meaning of this chapter.
             99          (12) "Convertible land" means a building site which is a portion of the common areas
             100      and facilities, described by metes and bounds, within which additional units or limited common
             101      areas and facilities may be created in accordance with this chapter.
             102          (13) "Convertible space" means a portion of the structure within the condominium
             103      project, which portion may be converted into one or more units or common areas and facilities,
             104      including limited common areas and facilities in accordance with this chapter.
             105          (14) "Declarant" means all persons who execute the declaration or on whose behalf the
             106      declaration is executed. From the time of the recordation of any amendment to the declaration
             107      expanding an expandable condominium, all persons who execute that amendment or on whose
             108      behalf that amendment is executed shall also come within this definition. Any successors of
             109      the persons referred to in this subsection who come to stand in the same relation to the
             110      condominium project as their predecessors also come within this definition.
             111          (15) "Declaration" means the instrument by which the property is submitted to the
             112      provisions of this act, as it from time to time may be lawfully amended.
             113          (16) "Expandable condominium" means a condominium project to which additional
             114      land or an interest in it may be added in accordance with the declaration and this chapter.
             115          (17) "Leasehold condominium" means a condominium project in all or any portion of
             116      which each unit owner owns an estate for years in his unit, or in the land upon which that unit
             117      is situated, or both, with all those leasehold interests to expire naturally at the same time. A
             118      condominium project including leased land, or an interest in the land, upon which no units are
             119      situated or to be situated is not a leasehold condominium within the meaning of this chapter.
             120          (18) "Limited common areas and facilities" means those common areas and facilities



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             121
     designated in the declaration as reserved for use of a certain unit or units to the exclusion of the
             122      other units.
             123          (19) "Majority" or "majority of the unit owners," unless otherwise provided in the
             124      declaration or lawful amendments to the declaration, means the owners of more than 50% in
             125      the aggregate in interest of the undivided ownership of the common areas and facilities.
             126          (20) "Management committee" means the committee as provided in the declaration
             127      charged with and having the responsibility and authority to make and to enforce all of the
             128      reasonable rules covering the operation and maintenance of the property.
             129          (21) "Par value" means a number of dollars or points assigned to each unit by the
             130      declaration. Substantially identical units shall be assigned the same par value, but units located
             131      at substantially different heights above the ground, or having substantially different views, or
             132      having substantially different amenities or other characteristics that might result in differences
             133      in market value, may be considered substantially identical within the meaning of this
             134      subsection. If par value is stated in terms of dollars, that statement may not be considered to
             135      reflect or control the sales price or fair market value of any unit, and no opinion, appraisal, or
             136      fair market transaction at a different figure may affect the par value of any unit, or any
             137      undivided interest in the common areas and facilities, voting rights in the unit owners'
             138      association, liability for common expenses, or right to common profits, assigned on the basis
             139      thereof.
             140          (22) "Person" means an individual, corporation, partnership, association, trustee, or
             141      other legal entity.
             142          (23) "Property" means the land, whether leasehold or in fee simple, the building, if any,
             143      all improvements and structures thereon, all easements, rights, and appurtenances belonging
             144      thereto, and all articles of personal property intended for use in connection therewith.
             145          (24) "Record," "recording," "recorded," and "recorder" have the meaning stated in Title
             146      57, Chapter 3, Recording of Documents.
             147          (25) "Size" means the number of cubic feet, or the number of square feet of ground or
             148      floor space, within each unit as computed by reference to the record of survey map and rounded
             149      off to a whole number. Certain spaces within the units including attic, basement, or garage
             150      space may be omitted from the calculation or be partially discounted by the use of a ratio, if the
             151      same basis of calculation is employed for all units in the condominium project and if that basis



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             152
     is described in the declaration.
             153          (26) "Special assessment" means an assessment levied by an association of unit owners
             154      that is intended to pay for unexpected, nonrecurring common expenses that are not included in
             155      the association of unit owners' annual budget.
             156          [(26)] (27) "Time period unit" means an annually recurring part or parts of a year
             157      specified in the declaration as a period for which a unit is separately owned and includes a
             158      timeshare estate as defined in Subsection 57-19-2 (19).
             159          [(27)] (28) "Unit" means either a separate physical part of the property intended for any
             160      type of independent use, including one or more rooms or spaces located in one or more floors
             161      or part or parts of floors in a building or a time period unit, as the context may require. A
             162      convertible space shall be treated as a unit in accordance with Subsection 57-8-13.4 (3). A
             163      proposed condominium unit under an expandable condominium project, not constructed, is a
             164      unit two years after the date the recording requirements of Section 57-8-13.6 are met.
             165          [(28)] (29) "Unit number" means the number, letter, or combination of numbers and
             166      letters designating the unit in the declaration and in the record of survey map.
             167          [(29)] (30) "Unit owner" means the person or persons owning a unit in fee simple and
             168      an undivided interest in the fee simple estate of the common areas and facilities in the
             169      percentage specified and established in the declaration or, in the case of a leasehold
             170      condominium project, the person or persons whose leasehold interest or interests in the
             171      condominium unit extend for the entire balance of the unexpired term or terms.
             172          Section 2. Section 57-8-7.5 is amended to read:
             173           57-8-7.5. Reserve analysis -- Reserve fund.
             174          (1) As used in this section, "reserve analysis" means an analysis to determine:
             175          (a) the need for a reserve fund to accumulate money to cover the cost of repairing,
             176      replacing, and restoring common areas and facilities that have a useful life of three years or
             177      more, but excluding any cost that can reasonably be funded from the general budget or other
             178      funds of the association of unit owners; and
             179          (b) the appropriate amount of any reserve fund.
             180          (2) Except as otherwise provided in the declaration, a management committee shall:
             181          (a) [(i) subject to Subsection (2)(a)(ii),] cause a reserve analysis to be conducted no
             182      less frequently than every six years; and



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         [(ii) if no reserve analysis has been conducted since March 1, 2008, cause a reserve
             184      analysis to be conducted before July 1, 2012; and]
             185          (b) review and, if necessary, update a previously conducted reserve analysis no less
             186      frequently than every three years.
             187          (3) The management committee may conduct a reserve analysis itself or may engage a
             188      reliable person or organization, as determined by the management committee, to conduct the
             189      reserve analysis.
             190          (4) (a) A management committee may not use money in a reserve fund:
             191          (i) for daily maintenance expenses, unless a majority of the members of the association
             192      of unit owners vote to approve the use of reserve fund money for that purpose; or
             193          (ii) for any purpose other than the purpose for which the reserve fund was established.
             194          (b) A management committee shall maintain a reserve fund separate from other funds
             195      of the association of unit owners.
             196          (c) This Subsection (4) may not be construed to limit a management committee from
             197      prudently investing money in a reserve fund, subject to any investment constraints imposed by
             198      the declaration.
             199          (5) Subsections (2), (3), (4), and (6) do not apply to an association of unit owners
             200      during the period of declarant management.
             201          (6) S. [ An ] Each year that a new or updated reserve analysis is completed, an .S
             201a      association of unit owners shall:
             202          (a) S. [ annually, ] .S at the annual meeting of unit owners or at a special meeting of unit
             203      owners:
             204          (i) present the reserve [study] analysis; [and]
             205          (ii) [provide an opportunity for unit owners to] discuss reserves and [to] the reserve
             206      analysis; and
             207          (iii) vote [on], by a majority of unit owners S. present at the annual meeting of unit
             207a      owners .S , whether to fund a reserve fund [and, if so,
             208      how to fund it and in what amount] in the manner and amount suggested in the reserve analysis
             209      or in some other manner and amount; and
             210          (b) prepare and keep minutes of each meeting held under Subsection (6)(a) and
             211      indicate in the minutes any decision relating to funding a reserve fund.
             212          (7) Within 90 days after the day on which a majority of unit owners vote to fund a
             213      reserve fund under Subsection (6)(a), the association of unit owners shall begin funding the



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             214
     reserve account in accordance with the manner and amount approved by a majority of unit
             215      owners.
             216          (8) Within 30 days after the day on which an association of unit owners complies with
             217      the requirements described in Subsection (7) the association of unit owners shall file a
             218      certificate of compliance with the Department of Commerce that is signed by an officer of the
             219      association of unit owners and states that the association of unit owners has implemented the
             220      manner and amount of funding approved by a majority of unit owners.
             221          (9) An association of unit owners that does not file a certificate of compliance
             222      described in Subsection (8) within 30 days after the day on which the association of unit
             223      owners complies with the requirements of Subsection (7) may not levy a special assessment
             224      until the day on which the association of unit owners files a certificate of compliance described
             225      in Subsection (8).
             226          [(7)] (10) This section applies to each association of unit owners, regardless of when
             227      the association of unit owners was created.
             228          Section 3. Section 57-8a-102 is amended to read:
             229           57-8a-102. Definitions.
             230          As used in this chapter:
             231          (1) (a) "Assessment" means a charge imposed or levied:
             232          (i) by the association;
             233          (ii) on or against a lot or a lot owner; and
             234          (iii) pursuant to a governing document recorded with the county recorder.
             235          (b) "Assessment" includes:
             236          (i) a common expense; and
             237          (ii) an amount assessed against a lot owner under Subsection 57-8a-405 (8).
             238          (2) (a) Except as provided in Subsection (2)(b), "association" means a corporation or
             239      other legal entity, each member of which:
             240          (i) is an owner of a residential lot located within the jurisdiction of the association, as
             241      described in the governing documents; and
             242          (ii) by virtue of membership or ownership of a residential lot is obligated to pay:
             243          (A) real property taxes;
             244          (B) insurance premiums;



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             245
         (C) maintenance costs; or
             246          (D) for improvement of real property not owned by the member.
             247          (b) "Association" or "homeowner association" does not include an association created
             248      under Title 57, Chapter 8, Condominium Ownership Act.
             249          (3) "Board of directors" or "board" means the entity, regardless of name, with primary
             250      authority to manage the affairs of the association.
             251          (4) "Common areas" means property that the association:
             252          (a) owns;
             253          (b) maintains;
             254          (c) repairs; or
             255          (d) administers.
             256          (5) "Common expense" means costs incurred by the association to exercise any of the
             257      powers provided for in the association's governing documents.
             258          (6) "Declarant":
             259          (a) means the person who executes a declaration and submits it for recording in the
             260      office of the recorder of the county in which the property described in the declaration is
             261      located; and
             262          (b) includes the person's successor and assign.
             263          (7) (a) "Governing documents" means a written instrument by which the association
             264      may:
             265          (i) exercise powers; or
             266          (ii) manage, maintain, or otherwise affect the property under the jurisdiction of the
             267      association.
             268          (b) "Governing documents" includes:
             269          (i) articles of incorporation;
             270          (ii) bylaws;
             271          (iii) a plat;
             272          (iv) a declaration of covenants, conditions, and restrictions; and
             273          (v) rules of the association.
             274          (8) "Judicial foreclosure" means a foreclosure of a lot:
             275          (a) for the nonpayment of an assessment; and



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         (b) (i) in the manner provided by law for the foreclosure of a mortgage on real
             277      property; and
             278          (ii) as provided in Part 3, Collection of Assessments.
             279          (9) "Lease" or "leasing" means regular, exclusive occupancy of a lot:
             280          (a) by a person or persons other than the owner; and
             281          (b) for which the owner receives a consideration or benefit, including a fee, service,
             282      gratuity, or emolument.
             283          (10) "Limited common areas" means common areas described in the declaration and
             284      allocated for the exclusive use of one or more lot owners.
             285          (11) "Lot" means:
             286          (a) a lot, parcel, plot, or other division of land:
             287          (i) designated for separate ownership or occupancy; and
             288          (ii) (A) shown on a recorded subdivision plat; or
             289          (B) the boundaries of which are described in a recorded governing document; or
             290          (b) (i) a unit in a condominium association if the condominium association is a part of
             291      a development; or
             292          (ii) a unit in a real estate cooperative if the real estate cooperative is part of a
             293      development.
             294          (12) "Nonjudicial foreclosure" means the sale of a lot:
             295          (a) for the nonpayment of an assessment; and
             296          (b) (i) in the same manner as the sale of trust property under Sections 57-1-19 through
             297      57-1-34 ; and
             298          (ii) as provided in Part 3, Collection of Assessments.
             299          (13) "Residential lot" means a lot, the use of which is limited by law, covenant, or
             300      otherwise to primarily residential or recreational purposes.
             301          (14) "Special assessment" means an assessment levied by an association that is
             302      intended to pay for unexpected, nonrecurring common expenses that are not included in the
             303      association's annual budget.
             304          Section 4. Section 57-8a-211 is amended to read:
             305           57-8a-211. Reserve analysis -- Reserve fund.
             306          (1) As used in this section, "reserve analysis" means an analysis to determine:



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             307
         (a) the need for a reserve fund to accumulate money to cover the cost of repairing,
             308      replacing, and restoring common areas that have a useful life of three years or more, but
             309      excluding any cost that can reasonably be funded from the association's general budget or from
             310      other association funds; and
             311          (b) the appropriate amount of any reserve fund.
             312          (2) Except as otherwise provided in the governing documents, a board shall:
             313          (a) [(i) subject to Subsection (2)(a)(ii),] cause a reserve analysis to be conducted no
             314      less frequently than every six years; and
             315          [(ii) if no reserve analysis has been conducted since March 1, 2008, cause a reserve
             316      analysis to be conducted before July 1, 2012; and]
             317          (b) review and, if necessary, update a previously conducted reserve analysis no less
             318      frequently than every three years.
             319          (3) The board may conduct a reserve analysis itself or may engage a reliable person or
             320      organization, as determined by the board, to conduct the reserve analysis.
             321          (4) (a) A board may not use money in a reserve fund:
             322          (i) for daily maintenance expenses, unless a majority of association members vote to
             323      approve the use of reserve fund money for that purpose; or
             324          (ii) for any purpose other than the purpose for which the reserve fund was established.
             325          (b) A board shall maintain a reserve fund separate from other association funds.
             326          (c) This Subsection (4) may not be construed to limit a board from prudently investing
             327      money in a reserve fund, subject to any investment constraints imposed by the governing
             328      documents.
             329          (5) Subsections (2), (3), (4), and (6) do not apply to an association during the period of
             330      administrative control.
             331          (6) S. [ An ] Each year that a new or updated reserve analysis is completed, an .S
             331a      association shall:
             332          (a) S. [ annually, ] .S at the annual meeting of lot owners or at a special meeting of lot
             332a      owners:
             333          (i) present the reserve [study] analysis; [and]
             334          (ii) [provide an opportunity for lot owners to] discuss reserves and [to] the reserve
             335      analysis; and
             336          (iii) vote [on], by a majority of lot owners S. present at the annual meeting of lot
             336a      owners .S , whether to fund a reserve fund [and, if so,
             337      how to fund it and in what amount] in the manner and amount suggested in the reserve analysis



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     or in some other manner and amount; and
             339          (b) prepare and keep minutes of each meeting held under Subsection (6)(a) and
             340      indicate in the minutes any decision relating to funding a reserve fund.
             341          (7) Within 90 days after the day on which a majority of lot owners vote to fund a
             342      reserve fund under Subsection (6)(a), the association shall begin funding the reserve account in
             343      accordance with the manner and amount approved by a majority of lot owners.
             344          (8) Within 30 days after the day on which an association complies with the
             345      requirements described in Subsection (7), the association shall file a certificate of compliance
             346      with the Department of Commerce that is signed by an officer of the association and states that
             347      the association has implemented the manner and amount of funding approved by a majority of
             348      lot owners.
             349          (9) An association that does not file a certificate of compliance described in Subsection
             350      (8) within 30 days after the day on which the association complies with the requirements of
             351      Subsection (7) may not levy a special assessment until the day on which the association files a
             352      certificate of compliance described in Subsection (8).
             353          [(7)] (10) This section applies to each association, regardless of when the association
             354      was created.





Legislative Review Note
    as of 2-5-13 10:36 AM


Office of Legislative Research and General Counsel


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