This document includes Senate 3rd Reading Floor Amendments incorporated into the bill on Wed, Feb 3, 2021 at 11:52 AM by lpoole.
Senator Lincoln Fillmore proposes the following substitute bill:


1     
COMMUNITY ASSOCIATION FUND AMENDMENTS

2     
2021 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Lincoln Fillmore

5     
House Sponsor: Jordan D. Teuscher

6     

7     LONG TITLE
8     General Description:
9          This bill amends the Condominium Ownership Act and the Community Association
10     Act regarding reserve funds.
11     Highlighted Provisions:
12          This bill:
13          ▸     amends the definition of reserve funds to permit the use of reserve funds to cover a
14     budget shortfall during a declared emergency under certain conditions;
15          ▸     amends the contents of a reserve fund analysis;
16          ▸     permits the use of reserve funds to pay for daily maintenance expenses without a
17     majority member vote under certain conditions; and
18          ▸     makes technical and conforming changes.
19     Money Appropriated in this Bill:
20          None
21     Other Special Clauses:
22          None
23     Utah Code Sections Affected:
24     AMENDS:
25          57-8-7.5, as last amended by Laws of Utah 2018, Chapter 395
26          57-8a-211, as last amended by Laws of Utah 2018, Chapter 395
27     

28     Be it enacted by the Legislature of the state of Utah:
29          Section 1. Section 57-8-7.5 is amended to read:
30          57-8-7.5. Reserve analysis -- Reserve fund.
31          (1) As used in this section:
32          (a) "Reserve analysis" means an analysis to determine:
33          (i) the need for a reserve fund to accumulate reserve funds; and
34          (ii) the appropriate amount of any reserve fund.
35          (b) "Reserve fund line item" means the line item in an association of unit owners'
36     annual budget that identifies the amount to be placed into a reserve fund.
37          (c) "Reserve funds" means money to cover:
38          (i) the cost of repairing, replacing, or restoring common areas and facilities that have a
39     useful life of three years or more and a remaining useful life of less than 30 years, if the cost
40     cannot reasonably be funded from the general budget or other funds of the association of unit
41     owners[.]; or
42          (ii) a shortfall in the general budget, if:
43          (A) the shortfall occurs while a state of emergency declared in accordance with Section
44     53-2a-206 is in effect;
45          (B) the geographic area for which the state of emergency described in Subsection
46     (1)(c)(ii)(A) is declared extends to the entire state; and
47          (C) at the time the money is spent, more than 10% of unit owners Ŝ→ that are not
47a     members of the management committee ←Ŝ in the association are
48     delinquent in the payment of assessments as a result of events giving rise to the state of
49     emergency described in Subsection (1)(c)(ii)(A).
50          (2) Except as otherwise provided in the declaration, a management committee shall:
51          (a) cause a reserve analysis to be conducted no less frequently than every six years; and
52          (b) review and, if necessary, update a previously conducted reserve analysis no less
53     frequently than every three years.
54          (3) The management committee may conduct a reserve analysis itself or may engage a
55     reliable person or organization, as determined by the management committee, to conduct the
56     reserve analysis.
57          (4) A reserve fund analysis shall include:
58          (a) a list of the components identified in the reserve analysis that will reasonably
59     require reserve funds;
60          (b) a statement of the probable remaining useful life, as of the date of the reserve
61     analysis, of each component identified in the reserve analysis;
62          (c) an estimate of the cost to repair, replace, or restore each component identified in the
63     reserve analysis;
64          (d) an estimate of the total annual contribution to a reserve fund necessary:
65          (i) to meet the cost to repair, replace, or restore each component identified in the
66     reserve analysis during the component's useful life and at the end of the component's useful
67     life; and
68          (ii) to prepare for a shortfall in the general budget that the association or management
69     committee may use reserve funds to cover; 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) An association of unit owners shall:
73          (a) annually provide unit owners a summary of the most recent reserve analysis or
74     update; and
75          (b) provide a copy of the complete reserve analysis or update to a unit owner who
76     requests a copy.
77          (6) In formulating the association of unit owners' budget each year, an association of
78     unit owners shall include a reserve fund line item in:
79          (a) an amount the management committee determines, based on the reserve analysis, to
80     be prudent; or
81          (b) an amount required by the declaration, if the declaration requires an amount higher
82     than the amount determined under Subsection (6)(a).
83          (7) (a) Within 45 days after the day on which an association of unit owners adopts the
84     association of unit owners' annual budget, the unit owners may veto the reserve fund line item
85     by a 51% vote of the allocated voting interests in the association of unit owners at a special
86     meeting called by the unit owners for the purpose of voting whether to veto a reserve fund line
87     item.
88          (b) If the unit owners veto a reserve fund line item under Subsection (7)(a) 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          (8) (a) Subject to Subsection (8)(b), if an association of unit owners does not comply
93     with the requirements of Subsection (5), (6), or (7) and fails to remedy the noncompliance
94     within the time specified in Subsection (8)(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), (6), or (7);
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 (8)(a), the unit owner shall deliver written notice described in Subsection (8)(c) to
102     the association of unit owners.
103          (c) A notice under Subsection (8)(b) shall state:
104          (i) the requirement in Subsection (5), (6), or (7) with which the association of unit
105     owners 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 (8)(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          (9) (a) [Unless a majority of the members of the association of unit owners vote to
114     approve the use of reserve fund money for that purpose, a] A management committee may not
115     use money in a reserve fund[: (i) for daily maintenance expenses; or (ii)] for any purpose other
116     than the purpose for which the reserve fund was established, unless a majority of the members
117     of the association of unit owners vote to approve the use of reserve fund money for that
118     purpose.
119          (b) (i) A management committee may not use money in a reserve fund for daily
120     maintenance expenses, unless:
121          (A) a majority of the members of the association of unit owners vote to approve the use
122     of reserve fund money for daily maintenance expenses; or
123          (B) there exists in the general budget a shortfall that the management committee may
124     use reserve funds to cover.
125          (ii) Members of the association of unit owners may prohibit the use of reserve fund
126     money for daily maintenance expenses under the circumstances described in Subsection
127     (9)(b)(i)(B) by a 51% vote of the allocated voting interest in the association of unit owners at a
128     special meeting Ŝ→ :
128a     (A)     for which each unit owner receives at least 48 hours notice; and
128b     (B) ←Ŝ the unit owners call for the purpose of voting whether to prohibit the use of
129     reserve fund money for daily maintenance expenses under the circumstances described in
130     Subsection (9)(b)(i)(B).
131          [(b)] (c) A management committee shall maintain a reserve fund separate from other
132     funds of the association of unit owners.
133          [(c)] (d) This Subsection (9) may not be construed to:
134          (i) limit a management committee from prudently investing money in a reserve fund,
135     subject to any investment constraints imposed by the declaration[.];
136          (ii) excuse an association from the requirements described in Section 57-8-58; or
137          (iii) permit the use of money in a reserve fund for a legal action described in Section
138     57-8-58.
139          (10) Subsections (2) through (9) do not apply to an association of unit owners during
140     the period of administrative control.
141          (11) For a condominium project whose initial declaration is recorded on or after May
142     12, 2015, during the period of administrative control, for any property that the declarant sells to
143     a third party, the declarant shall give the third party:
144          (a) a copy of the association of unit owners' governing documents; and
145          (b) a copy of the association of unit owners' most recent financial statement that
146     includes any reserve funds held by the association of unit owners or by a subsidiary of the
147     association of unit owners.
148          (12) Except as otherwise provided in this section, this section applies to each
149     association of unit owners, regardless of when the association of unit owners was created.
150          Section 2. Section 57-8a-211 is amended to read:
151          57-8a-211. Reserve analysis -- Reserve fund.
152          (1) As used in this section:
153          (a) "Reserve analysis" means an analysis to determine:
154          (i) the need for a reserve fund to accumulate reserve funds; and
155          (ii) the appropriate amount of any reserve fund.
156          (b) "Reserve fund line item" means the line item in an association's annual budget that
157     identifies the amount to be placed into a reserve fund.
158          (c) "Reserve funds" means money to cover:
159          (i) the cost of repairing, replacing, or restoring common areas and facilities that have a
160     useful life of three years or more and a remaining useful life of less than 30 years, if the cost
161     cannot reasonably be funded from the general budget or other funds of the association[.]; or
162          (ii) a shortfall in the general budget, if:
163          (A) the shortfall occurs while a state of emergency declared in accordance with Section
164     53-2a-206 is in effect;
165          (B) the geographic area for which the state of emergency described in Subsection
166     (1)(c)(ii)(A) is declared extends to the entire state; and
167          (C) at the time the money is spent, more than 10% of lot owners Ŝ→ that are not board
167a     members ←Ŝ in the association are
168     delinquent in the payment of assessments as a result of events giving rise to the state of
169     emergency described in Subsection (1)(c)(ii)(A).
170          (2) Except as otherwise provided in the governing documents, a board shall:
171          (a) cause a reserve analysis to be conducted no less frequently than every six years; and
172          (b) review and, if necessary, update a previously conducted reserve analysis no less
173     frequently than every three years.
174          (3) The board may conduct a reserve analysis itself or may engage a reliable person or
175     organization, as determined by the board, to conduct the reserve analysis.
176          (4) A reserve fund analysis shall include:
177          (a) a list of the components identified in the reserve analysis that will reasonably
178     require reserve funds;
179          (b) a statement of the probable remaining useful life, as of the date of the reserve
180     analysis, of each component identified in the reserve analysis;
181          (c) an estimate of the cost to repair, replace, or restore each component identified in the
182     reserve analysis;
183          (d) an estimate of the total annual contribution to a reserve fund necessary:
184          (i) to meet the cost to repair, replace, or restore each component identified in the
185     reserve analysis during the component's useful life and at the end of the component's useful
186     life; and
187          (ii) to prepare for a shortfall in the general budget that the association or board may use
188     reserve funds to cover; and
189          (e) a reserve funding plan that recommends how the association may fund the annual
190     contribution described in Subsection (4)(d).
191          (5) An association shall:
192          (a) annually provide lot owners a summary of the most recent reserve analysis or
193     update; and
194          (b) provide a copy of the complete reserve analysis or update to a lot owner who
195     requests a copy.
196          (6) In formulating the association's budget each year, an association shall include a
197     reserve fund line item in:
198          (a) an amount the board determines, based on the reserve analysis, to be prudent; or
199          (b) an amount required by the governing documents, if the governing documents
200     require an amount higher than the amount determined under Subsection (6)(a).
201          (7) (a) Within 45 days after the day on which an association adopts the association's
202     annual budget, the lot owners may veto the reserve fund line item by a 51% vote of the
203     allocated voting interests in the association at a special meeting called by the lot owners for the
204     purpose of voting whether to veto a reserve fund line item.
205          (b) If the lot owners veto a reserve fund line item under Subsection (7)(a) and a reserve
206     fund line item exists in a previously approved annual budget of the association that was not
207     vetoed, the association shall fund the reserve account in accordance with that prior reserve fund
208     line item.
209          (8) (a) Subject to Subsection (8)(b), if an association does not comply with the
210     requirements described in Subsection (5), (6), or (7) and fails to remedy the noncompliance
211     within the time specified in Subsection (8)(c), a lot owner may file an action in state court for:
212          (i) injunctive relief requiring the association to comply with the requirements of
213     Subsection (5), (6), or (7);
214          (ii) $500 or the lot owner's actual damages, whichever is greater;
215          (iii) any other remedy provided by law; and
216          (iv) reasonable costs and attorney fees.
217          (b) No fewer than 90 days before the day on which a lot owner files a complaint under
218     Subsection (8)(a), the lot owner shall deliver written notice described in Subsection (8)(c) to
219     the association.
220          (c) A notice under Subsection (8)(b) shall state:
221          (i) the requirement in Subsection (5), (6), or (7) with which the association has failed to
222     comply;
223          (ii) a demand that the association come into compliance with the requirements; and
224          (iii) a date, no fewer than 90 days after the day on which the lot owner delivers the
225     notice, by which the association shall remedy its noncompliance.
226          (d) In a case filed under Subsection (8)(a), a court may order an association to produce
227     the summary of the reserve analysis or the complete reserve analysis on an expedited basis and
228     at the association's expense.
229          (9) (a) [Unless a majority of association members vote to approve the use of reserve
230     fund money for that purpose, a] A board may not use money in a reserve fund[: (i) for daily
231     maintenance expenses; or (ii)] for any purpose other than the purpose for which the reserve
232     fund was established, unless a majority of association members vote to approve the use of
233     reserve fund money for that purpose.
234          (b) (i) A board may not use money in a reserve fund for daily maintenance expenses,
235     unless:
236          (A) a majority of association members vote to approve the use of reserve fund money
237     for daily maintenance expenses; or
238          (B) there exists in the general budget a shortfall that the board may use reserve funds to
239     cover.
240          (ii) Association members may prohibit the use of reserve fund money for daily
241     maintenance expenses under the circumstances described in Subsection (9)(b)(i)(B) by a 51%
242     vote of the allocated voting interest in the association at a special meeting Ŝ→ :
242a     (A) for which each lot owner receives at least 48 hours notice; and
242b     (B) ←Ŝ the lot owners call
243     for the purpose of voting whether to prohibit the use of reserve fund money for daily
244     maintenance expenses under the circumstances described in Subsection (9)(b)(i)(B).
245          [(b)] (c) A board shall maintain a reserve fund separate from other association funds.
246          [(c)] (d) This Subsection (9) may not be construed to:
247          (i) limit a board from prudently investing money in a reserve fund, subject to any
248     investment constraints imposed by the governing documents[.];
249          (ii) excuse an association from the requirements described in Section 57-8a-229; or
250          (iii) permit the use of money in a reserve fund for a legal action described in Section
251     57-8a-229.
252          (10) Subsections (2) through (9) do not apply to an association during the period of
253     administrative control.
254          (11) For a project whose initial declaration of covenants, conditions, and restrictions is
255     recorded on or after May 12, 2015, during the period of administrative control, for any property
256     that the declarant sells to a third party, the declarant shall give the third party:
257          (a) a copy of the association's governing documents; and
258          (b) a copy of the association's most recent financial statement that includes any reserve
259     funds held by the association or by a subsidiary of the association.
260          (12) Except as otherwise provided in this section, this section applies to each
261     association, regardless of when the association was created.