New Laws on Rule-Making Procedures & Authority

Two new laws that go into effect on May 10, 2011, deal with rule-making authority and procedures in non-condo HOA’s.  These two new laws will become part of the Utah Community Association Act (but not part of the Utah Condo Act, so you condominiums can ignore them).

Utah Code § 57-8a-217.  From now on, before a board can adopt or change a rule (including architectural guidelines or design criteria), they have to provide an open forum at a board meeting giving lot owners an opportunity to be heard.  The board has to send out notice at least 15 days before that board meeting to every owner stating that the board is considering a change to a rule.  The board also has to send out notice within 15 days after a new rule is adopted.

This means a board has to listen to homeowner concerns before it makes a final decision.  The board does not need to conduct a vote of the homeowners to adopt a rule.  The decision to initially adopt a new rule is still entirely up to the board.

However,  the homeowners can disapprove a new rule by calling a special meeting within 60 days from the date it was adopted.  If 51% of the total votes in the association vote to disapprove the rule at the special meeting, then the rule will be nullified.  The procedure for lot owners to call a special meeting is usually set forth in the bylaws or CC&Rs.  The board has no obligation to call a meeting of the lot owners to consider disapproval unless lot owners submit a petition in accordance with the procedures in the bylaws or CC&Rs.

This is a big change, and an unfortunate one at that.  While it has value as a “checks and balances” type recourse for homeowners faced with unfair or inappropriate rules, it simply goes too far and is much too burdensome, especially for larger HOAs.  The law doesn’t go into effect until May 10, so it doesn’t apply to any rules a board adopts before then (so you’ve still got a few days to adopt that rule you’ve been putting off adopting without having to go through these new steps).

Utah Code § 57-8a-218.  This law mostly just restates common sense and common law principles regarding rules that I and other HOA attorneys have long been preaching (e.g., a rule must be reasonable, an association can adopt generally applicable rules for the use of common areas, and a rule can’t be contrary to the CC&Rs).

However, a couple of new things do come out of it.  For one, it states that an association may require a minimum lease term by rule alone (as long as it wouldn’t be contrary to the CC&Rs).  So, if you don’t have such a rental restriction in your CC&Rs already, the board can simply adopt a rule prohibiting rentals of less than X amount of time (e.g., 30 days, 6 months, 1 year).

Another thing that’s helpful in this law is that, even if not authorized in the CC&Rs, now an association may by rule:

  • impose a fee or charge 1. for the use, rental, or operation of the common areas, and 2. for a service provided to a lot owner, or
  • impose a late fee for late payments.

Finally, the law states that a rule may prohibit smoking inside attached dwellings (e.g., townhomes) if such smoking “creates the potential for smoke to enter a neighboring unit, the common areas, or limited common areas.”  So, for instance, without amending the CC&Rs, an association could adopt a policy stating that smoking is prohibited anywhere, including inside a unit, if it is possible that smoke will drift into another unit or into the common area or limited common area.

This new law parallels the existing law in the Utah Condo Act and it underscores the Utah Legislature’s position that smoking is a health and safety issue first and foremost.  Smoking is not a right, but rather it is every homeowner’s right to enjoy their dwelling free from the carcinogens and health hazards forced upon them at the whim of their smoking neighbors.  That is why the law provides that this is not an issue that needs to be voted on by the homeowners, a board can simply adopt a rule protecting the health of the residents and the livability of the units.

Curtis G. Kimble

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3 Responses to New Laws on Rule-Making Procedures & Authority

  1. Shane McGarvey says:

    I have a question and some comments about these new laws. What if a Board passes new rules without giving 15 day notices and having a open meeting specifically about the new rule changes? All they do is say they are having a Board meeting with out declaring a new rule change and of course no one other than Board members really shows up. Do the new rules have to be followed if they are not put into place correctly?

    Would you classify a 40 spot RV Parking lot as a “Limited Common Area” in a PUD that has 196 homes in it? The Board is wanting to charge a fee only to the 40 homeowners that use the RV Parking. I’m one of those homeowners and do not want to pay anymore than I already pay. It was part of my dues when I bought the property and now because of this law they are saying that the Board can just pass a new rule and charge for the RV Parking on top of my dues. To me this is unreasonable and the law states that a rule “must be reasonable”. How and who should determine what is reasonable and not reasonable? They are stating they can charge a fee because it is a “restricted” or “exclusive” common area and not everyone can use it.
    I want to know about the “Limited Common Area” because under Code: 57-8a-218 (12) (b) (i): impose and receive any payment, fee, or charge for; the use , rental, or operation of the common areas, EXCEPT limited common areas.
    So if the RV Parking is classified as a limited common area than to me they couldn’t charge an additional fee, correct?

    I also looked up Tax code and if they start to charge a fee for the RV Parking than the HOA being a Non Profit and also not having to pay property tax on the property, would then have to pay tax on the fees collected and could lose there exempt status on the property taxes if they choose to start running the RV Parking as a business. This could ultimately cost the HOA a lot more than what they would collect in extra fees. I would love to receive your opinion on both of these matters?

    Right now we have a Management company that the Board hired and they are both out of control. With these new laws they feel they can pass what ever rule or regulation that they want and the law needs to be better written limiting what powers the Board can and can’t do. By letting a Board just write new Rules without having to actually pass an amendment to the CC&R’s and get the necessary votes of 2/3 of the members it makes for chaos. Every year a new Board or President can come in and pass new Rules and then the next year a entire new Board can change the old Rules and pass new ones. How is a homeowner supposed to follow all these new rules and regulations that keep changing? If I could I would move out and never buy in a HOA again. The problem is that most subdivisions being built right now are set up as a PUD or Condo HOA so the builder can fit more homes on the property and make more money. Once they sell all the homes they just wash their hands of the HOA and leave it to be run by NON professionals that do not know what they are doing. It leaves them open to prosecution and it makes enemies out of neighbors making the neighborhood a place no one wants to live in. The past two Presidents have moved because of this. HOA’s need to be overhauled and not allowed to be built anymore.

    Thanks
    Shane

  2. Alexandra Cortez says:

    I have a question regarding Utah law and who has the authority to review, Accept/reject house plans in a neighborhood where there are CC&Rs but no formal HOA. The CC&Rs say all plans must be reviewed by an Architectural Design Committee before being submitted to the City for review. Can Someone self appoint themselves to this position and have the authority to accept and reject.

    • Curtis G. Kimble says:

      Utah law does not specify who has the authority to review plans in such a situation. The CC&Rs will be what controls (so, it’s the CC&Rs that matter). The CC&Rs should have a process for electing the architectural committee members once the developer is no longer in the picture. Initially, the developer often has the right to appoint someone to the position, but after the developer is gone, generally, no, a person would not have the right to appoint himself or herself to the position.

      However, again, there is no relevant law that governs the situation, so it depends completely on what the CC&Rs say.

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