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First Substitute S.B. 64

Senator Stephen H. Urquhart proposes the following substitute bill:


             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          .    specifies the required contents of a reserve analysis;
             17          .    requires an association or an association of unit owners to provide each year:
             18              .    a summary of the most recent reserve analysis to its members; and
             19              .    a complete copy of the most recent reserve analysis, upon request;
             20          .    requires an association or an association of unit owners to include a reserve fund
             21      line item in its annual budget;
             22          .    requires the management committee of an association or an association of unit
             23      owners to determine the amount of the reserve fund line item;
             24          .    provides procedures for the members of an association or an association of unit
             25      owners to veto the management committee's reserve fund line item;


             26          .    provides enforcement procedures; and
             27          .    makes technical changes.
             28      Money Appropriated in this Bill:
             29          None
             30      Other Special Clauses:
             31          None
             32      Utah Code Sections Affected:
             33      AMENDS:
             34          57-8-7.5, as last amended by Laws of Utah 2012, Chapters 83 and 369
             35          57-8a-211, as last amended by Laws of Utah 2012, Chapters 83 and 369
             36     
             37      Be it enacted by the Legislature of the state of Utah:
             38          Section 1. Section 57-8-7.5 is amended to read:
             39           57-8-7.5. Reserve analysis -- Reserve fund.
             40          (1) As used in this section[, "reserve]:
             41          (a) "Reserve analysis" means an analysis to determine:
             42          [(a)] (i) the need for a reserve fund to accumulate money to cover the cost of repairing,
             43      replacing, [and] or restoring common areas and facilities that have a useful life of no fewer
             44      than three years [or more] but less than 30 years, [but excluding any] when the cost [that can]
             45      cannot reasonably be funded from the general budget or other funds of the association of unit
             46      owners; and
             47          [(b)] (ii) the appropriate amount of any reserve fund.
             48          (b) "Reserve fund line item" means a line item in the annual budget of an association of
             49      unit owners that identifies the amount to be placed into a reserve fund.
             50          (2) Except as otherwise provided in the declaration, a management committee shall:
             51          (a) (i) subject to Subsection (2)(a)(ii), cause a reserve analysis to be conducted no less
             52      frequently than every six years; and
             53          (ii) if no reserve analysis has been conducted since March 1, 2008, cause a reserve
             54      analysis to be conducted before July 1, 2012; and
             55          (b) review and, if necessary, update a previously conducted reserve analysis no less
             56      frequently than every three years.


             57          (3) The management committee may conduct a reserve analysis itself or may engage a
             58      reliable person or organization, as determined by the management committee, to conduct the
             59      reserve analysis.
             60          (4) A reserve analysis shall include:
             61          (a) a list of the components identified in the reserve analysis that will reasonably
             62      require reserve funds;
             63          (b) a statement of the probable remaining useful life, as of the date of the reserve
             64      analysis, of each component identified in the reserve analysis;
             65          (c) an estimate of the cost to repair, replace, restore, or maintain each component
             66      identified in the reserve analysis;
             67          (d) an estimate of the total annual contribution to a reserve fund necessary to meet the
             68      cost to repair, replace, restore, or maintain each component identified in the reserve analysis
             69      during the component's useful life and at the end of the component's useful life; and
             70          (e) a reserve funding plan that recommends how the association of unit owners may
             71      fund the annual contribution described in Subsection (4)(d).
             72          (5) Each year, an association of unit owners shall provide:
             73          (a) a summary of the most recent reserve analysis, including any updates, to each unit
             74      owner; and
             75          (b) a complete copy of the most recent reserve analysis, including any updates, to a unit
             76      owner upon request.
             77          (6) (a) An association of unit owners shall include a reserve fund line item in its annual
             78      budget.
             79          (b) The amount of the reserve fund line item shall be determined by:
             80          (i) the management committee, based on the reserve analysis and the amount that the
             81      management committees determines is prudent under the circumstances; or
             82          (ii) the declaration, if the declaration requires an amount greater than the amount
             83      determined under Subsection (6)(b)(i).
             84          (c) Within 45 days after the day on which an association of unit owners adopts its
             85      annual budget, the unit owners may veto the reserve fund line item by a 51% vote of the
             86      allocated voting interests in the association of unit owners at a special meeting called by the
             87      unit owners for the purpose of voting whether to veto a reserve fund line item.


             88          (d) If the unit owners veto a reserve fund line item under Subsection (6)(c) and a
             89      reserve fund line item exists in a previously approved annual budget of the association of unit
             90      owners that was not vetoed, the association of unit owners shall fund the reserve account in
             91      accordance with that prior reserve fund line item.
             92          (7) (a) Subject to Subsection (7)(b), if an association of unit owners does not comply
             93      with the requirements described in Subsection (5) or (6) and fails to remedy the noncompliance
             94      within the time specified in Subsection (7)(c), a unit owner may file an action in state court for:
             95          (i) injunctive relief requiring the association of unit owners to comply with the
             96      requirements of Subsection (5) or (6);
             97          (ii) $500 or actual damages, whichever is greater;
             98          (iii) any other remedy provided by law; and
             99          (iv) reasonable costs and attorney fees.
             100          (b) No fewer than 90 days before the day on which a unit owner files a complaint under
             101      Subsection (7)(a), the unit owner shall deliver written notice described in Subsection (7)(c) to
             102      the association of unit owners.
             103          (c) A notice described in Subsection (7)(b) shall state:
             104          (i) the requirement in Subsection (5) or (6) with which the association of unit owners
             105      has failed to comply;
             106          (ii) a demand that the association of unit owners come into compliance with the
             107      requirements; and
             108          (iii) a date, no fewer than 90 days after the day on which the unit owner delivers the
             109      notice, by which the association of unit owners shall remedy its noncompliance.
             110          (d) In a case filed under Subsection (7)(a), a court may order an association of unit
             111      owners to produce the summary of the reserve analysis or the complete reserve analysis on an
             112      expedited basis and at the association of unit owners' expense.
             113          [(4)] (8) (a) A management committee may not use money in a reserve fund:
             114          (i) for daily maintenance expenses, unless a majority of the members of the association
             115      of unit owners vote to approve the use of reserve fund money for that purpose; or
             116          (ii) for any purpose other than the purpose for which the reserve fund was established.
             117          (b) A management committee shall maintain a reserve fund separate from other funds
             118      of the association of unit owners.


             119          (c) This Subsection (4) may not be construed to limit a management committee from
             120      prudently investing money in a reserve fund, subject to any investment constraints imposed by
             121      the declaration.
             122          [(5)] (9) Subsections (2), (3), (4), and (6) do not apply to an association of unit owners
             123      during the period of declarant management.
             124          [(6) An association of unit owners shall:]
             125          [(a) annually, at the annual meeting of unit owners or at a special meeting of unit
             126      owners:]
             127          [(i) present the reserve study; and]
             128          [(ii) provide an opportunity for unit owners to discuss reserves and to vote on whether
             129      to fund a reserve fund and, if so, how to fund it and in what amount; and]
             130          [(b) prepare and keep minutes of each meeting held under Subsection (6)(a) and
             131      indicate in the minutes any decision relating to funding a reserve fund.]
             132          [(7)] (10) This section applies to each association of unit owners, regardless of when
             133      the association of unit owners was created.
             134          Section 2. Section 57-8a-211 is amended to read:
             135           57-8a-211. Reserve analysis -- Reserve fund.
             136          (1) As used in this section[, "reserve]:
             137          (a) "Reserve analysis" means an analysis to determine:
             138          [(a)] (i) the need for a reserve fund to accumulate money to cover the cost of repairing,
             139      replacing, [and] or restoring common areas that have a useful life of no fewer than three years
             140      [or more] but less than 30 years, [but excluding any] when the cost [that can] cannot reasonably
             141      be funded from the association's general budget or from other association funds; and
             142          [(b)] (ii) the appropriate amount of any reserve fund.
             143          (b) "Reserve fund line item" means a line item in the annual budget of an association
             144      that identifies the amount to be placed into a reserve fund.
             145          (2) Except as otherwise provided in the governing documents, a board shall:
             146          (a) (i) subject to Subsection (2)(a)(ii), cause a reserve analysis to be conducted no less
             147      frequently than every six years; and
             148          (ii) if no reserve analysis has been conducted since March 1, 2008, cause a reserve
             149      analysis to be conducted before July 1, 2012; and


             150          (b) review and, if necessary, update a previously conducted reserve analysis no less
             151      frequently than every three years.
             152          (3) The board may conduct a reserve analysis itself or may engage a reliable person or
             153      organization, as determined by the board, to conduct the reserve analysis.
             154          (4) A reserve analysis shall include:
             155          (a) a list of the components identified in the reserve analysis that will reasonably
             156      require reserve funds;
             157          (b) a statement of the probable remaining useful life, as of the date of the reserve
             158      analysis, of each component identified in the reserve analysis;
             159          (c) an estimate of the cost to repair, replace, restore, or maintain each component
             160      identified in the reserve analysis;
             161          (d) an estimate of the total annual contribution to a reserve fund necessary to meet the
             162      cost to repair, replace, restore, or maintain each component identified in the reserve analysis
             163      during the component's useful life and at the end of the component's useful life; and
             164          (e) a reserve funding plan that recommends how the association may fund the annual
             165      contribution described in Subsection (4)(d).
             166          (5) Each year, an association shall provide:
             167          (a) a summary of the most recent reserve analysis, including any updates, to each lot
             168      owner; and
             169          (b) a complete copy of the most recent reserve analysis, including any updates, to a lot
             170      owner upon request.
             171          (6) (a) An association shall include a reserve fund line item in its annual budget.
             172          (b) The amount of the reserve fund line item shall be determined by:
             173          (i) the board, based on the reserve analysis and the amount that the board determines is
             174      prudent under the circumstances; or
             175          (ii) the governing documents, if the governing documents require an amount greater
             176      than the amount determined under Subsection (6)(b)(i).
             177          (c) Within 45 days after the day on which an association adopts its annual budget, the
             178      lot owners may veto the reserve fund line item by a 51% vote of the allocated voting interests
             179      in the association at a special meeting called by the lot owners for the purpose of voting
             180      whether to veto a reserve fund line item.


             181          (d) If the lot owners veto a reserve fund line item under Subsection (6)(c) and a reserve
             182      fund line item exists in a previously approved annual budget of the association that was not
             183      vetoed, the association shall fund the reserve account in accordance with that prior reserve fund
             184      line item.
             185          (7) (a) Subject to Subsection (7)(b), if an association does not comply with the
             186      requirements described in Subsection (5) or (6) and fails to remedy the noncompliance within
             187      the time specified in Subsection (7)(c), a lot owner may file an action in state court for:
             188          (i) injunctive relief requiring the association to comply with the requirements of
             189      Subsection (5) or (6);
             190          (ii) $500 or the lot owner's actual damages, whichever is greater;
             191          (iii) any other remedy provided by law; and
             192          (iv) reasonable costs and attorney fees.
             193          (b) No fewer than 90 days before the day on which a lot owner files a complaint under
             194      Subsection (7)(a), the lot owner shall deliver written notice described in Subsection (7)(c) to
             195      the association.
             196          (c) A notice described in Subsection (7)(b) shall state:
             197          (i) the requirement in Subsection (5) or (6) with which the association has failed to
             198      comply;
             199          (ii) a demand that the association of unit owners come into compliance with the
             200      requirements; and
             201          (iii) a date, no fewer than 90 days after the day on which a lot owner delivers the
             202      notice, by which the association shall remedy its noncompliance.
             203          (d) In a case filed under Subsection (7)(a), a court may summarily order an association
             204      to produce the summary of the reserve analysis or the complete reserve analysis on an
             205      expedited basis and at the association's expense.
             206          [(4)] (8) (a) A board may not use money in a reserve fund:
             207          (i) for daily maintenance expenses, unless a majority of association members vote to
             208      approve the use of reserve fund money for that purpose; or
             209          (ii) for any purpose other than the purpose for which the reserve fund was established.
             210          (b) A board shall maintain a reserve fund separate from other association funds.
             211          (c) This Subsection (4) may not be construed to limit a board from prudently investing


             212      money in a reserve fund, subject to any investment constraints imposed by the governing
             213      documents.
             214          [(5)] (9) Subsections (2), (3), (4), and (6) do not apply to an association during the
             215      period of administrative control.
             216          [(6) An association shall:]
             217          [(a) annually, at the annual meeting of lot owners or at a special meeting of lot
             218      owners:]
             219          [(i) present the reserve study; and]
             220          [(ii) provide an opportunity for lot owners to discuss reserves and to vote on whether to
             221      fund a reserve fund and, if so, how to fund it and in what amount; and]
             222          [(b) prepare and keep minutes of each meeting held under Subsection (6)(a) and
             223      indicate in the minutes any decision relating to funding a reserve fund.]
             224          [(7)] (10) This section applies to each association, regardless of when the association
             225      was created.


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