Test Your Knowledge of the New Utah HOA Laws (for a Prize!)

August 17, 2011

2011 was a significant year for HOAs in Utah and the laws that govern them.  Many new laws and changes were enacted.  How does your knowledge of these changes stack up?  Take this short quiz and find out!  (Note that the quiz is best taken and submitted on our blog itself, for those that receive this post by email).

A $25 Amazon gift card will be awarded to the person scoring the highest and submitting it the quickest after this post is published.  In a few days, I’ll post the answers, as well as the names of those that scored the highest so they can brag about their expertise to other board members, homeowners, or clients.  To submit your answers, fill in your name, email and association or management company and hit submit below.

1. Each board has to present the issue of reserve funding to the association members for discussion and a vote:
 every year.

 every two years.

 never because the board decides reserve funding issues.

 never because the law has reserve funding requirements.

2. A board is required to conduct or have conducted a reserve study every _____ years and review and if necessary update it every ______ year(s).
 3 … 1

 5 … 2

 7 … 3

 It depends on the outcome of a vote of the members.

3. Every HOA is now required by law to register both as an HOA and as a nonprofit corporation.

 True

 False

4. For claims on the association master insurance policy associated with a particular unit or lot, the association can require that unit owner to pay the deductible if:

 the association has set aside an amount equal to the deductible.

 it is authorized by a governing document of the association.

 the owner is at fault (caused the incident or was negligent).

 all owners had been notified of the deductible responsibility.

5. Every HOA in the state has to update their HOA registration information with the Department of Commerce:

 annually.

 within 30 days of a change in the information.

 within 90 days of a change in the information.

 never because only an initial one-time registration is required.

6. A board can use reserves funds in an emergency for daily maintenance expenses:

 only once in a 2 year period.

 if authorized by the association governing documents.

 after receiving approval from a majority of the members.

 Never.

7. During any period that an HOA fails to be properly registered with the state, the HOA:

 cannot file a lien against any unit or lot.

 cannot enforce a previous lien against a unit or lot.

 can seek a judgment against an owner for past due amounts.

 all of the above.

Update: The quiz is closed, but check out the answers to the quiz by clicking here.   Thanks for playing!

Curtis G. Kimble


Utah HOA Registry Now Operational

June 16, 2011

The Utah HOA Registry required by a new Utah law is now up and operational on the website of the Utah Department of Commerce.  As discussed in our blog entry (click here to read it), all HOAs must register with the Department of Commerce by July 1st.   Here’s a link to the registry (note that you do have to create an account to view or register an HOA, but creating an account is free): secure.utah.gov/hoa

It is crucial that you register using the exact same name as the corporate entity of the  HOA, as it is stated in the articles of incorporation and as it is registered with the Division of Corporations & Commercial Code.  For example, if an HOA is a nonprofit corporation with the name “Whiteacre Homeowners Association,” do not register the association in the HOA registry as “White Acre Homeowners Association.”  This is very important because a search on the HOA Registry for White Acre will not bring up Whiteacre.

This concept applies to all business dealings for an HOA.  It must conduct business using its proper corporate name, not the name of the subdivision itself or some other name or variation of the name that isn’t registered as a Utah business entity.  Click here to look up an incorporated HOA to see exactly how it is listed as a corporation:  https://secure.utah.gov/bes/action/index

Curtis G. Kimble


How the New Laws Affect You: Condos

May 31, 2011

So, here’s a summary of how the new Utah HOA laws that went into effect on May 10, 2011, affect you most, as well as some recommended “action items.”  Contact us for help with any action item.  Also, see the other posts on this blog for more detail on the new laws.  This blog does not contain a comprehensive list of the new laws, just those that affect your daily operations the most.

If you’re a condo:

1.  Register or No Lien.  Register as an HOA (separate and apart from registering as a nonprofit corporation) with the State of Utah and keep it updated when directors change, or else you can’t enforce any liens against delinquent owners.  *Action item:  subscribe to this blog (on the right side of this page under “Email Subscription”) and we’ll post the info on how to register as soon as we know about it.

2.  Insurance.  A condominium association’s insurance policy that is renewed or issued after July 1, 2011, is required to have liability coverage and 100% replacement cost coverage for all permanent improvements, including fixtures and betterments to a unit made by a unit owner.  The association must set aside an amount equal to the amount of the deductible (or $10,000, whichever is less).  The master policy must be primary, even for unit related losses.  However, the law gives the HOA a method to allocate or transfer some risk and responsibility to the unit owner (or unit owner’s policy) for unit related issues.  For claims against the association’s master policy which are associated with a particular unit, the association can require the owner of that unit to pay the deductible if a notice had already been sent to all unit owners stating they will be responsible for the deductible on the association’s master policy.  *Action item: send notice to all owners regarding payment of the deductible, and make sure your deductible is somewhere in the $2,500 to $10,000 range to reduce minor or frivolous claims against the master policy by unit owners that drive up the premiums.

3.  Payoff Info.  An association is now prohibited from charging a fee for providing payoff information needed for closing on a unit, unless the fee is authorized by the CC&Rs, bylaws or rules, and, no matter what, the fee can’t exceed $50.  Payoff information must be provided by the HOA within five business days from when a closing agent makes a proper request for it (has to be in writing, signed and dated by the owner, etc.), or the lien is not enforceable at closing.

When a unit owner is closing on a unit and the owner needs payoff information because he or she has not been paying their share of the common expenses, providing that payoff information is an administrative burden on the HOA that is appropriately paid for by the offending/delinquent owner, not by the other paying owners.   *Action item:  adopt a rule authorizing a fee for providing payoff information.

4.  Reserves.  Every five years, a homeowner-elected board must perform, or hire someone to perform, a reserve analysis by (1) determining which improvements have a useful life of 3 years or more, then (2) determining what the cost is for maintaining those improvements over the next several years, and (3) then determining what they think the appropriate amount of the reserve fund should be.

The reserve analysis has to be reviewed and, if needed, updated every two years.  The reserve analysis has to be presented to the homeowners at the annual meeting each year where the homeowners at the meeting vote to determine whether to fund a reserve account and,  if so, how to fund it and in what amount.  The results of that vote have to be reflected in the minutes.

The money in the reserve fund has to be kept separate from other funds and may not be used for daily maintenance expenses, unless approved by the owners, or for any other purpose other than the purpose for which the reserve fund was established.  *Action Item: for those who haven’t conducted a reserve analysis since March 1, 2008,  the law requires you to do one by July 1, 2012.

5.  Electronic Notice.  A new law states that you can provide notice to homeowners solely by electronic means (e.g., email, website) if authorized by your CC&Rs, bylaws, or rules (unless a homeowner opts out in writing).  *Action Item: adopt a rule authorizing electronic notice instead of notice by mail, at least for certain things.

In the next day or two, I’ll post a summary of how the new laws affect non-condo HOAs (all other HOAs).

Curtis G. Kimble


Important Follow Up – Electronic Notice Law

May 4, 2011

As a quick follow up to my post below, I want to point out that another law goes into effect on May 10 allowing both condo and non-condo HOAs to stop mailing out notices to homeowners and to instead provide notice by electronic means, such as by email or by posting on the association’s website (or even by text message), if it’s authorized by the CC&Rs, bylaws or rules, and if, considering all the circumstances, the notice is fair and reasonable.  The new law will be in the Condo Act at § 57-8-42, and in the Community Association Act at § 57-8a-214.

The reason I’m mentioning this as a follow up to my post below is that, because of the new requirements for adopting new rules in non-condo HOAs which I explain below and that go into effect on May 10, a board may want to quickly meet (or take action by written consent without a meeting) before then and adopt a rule authorizing notice by electronic means.  Even if it’s too late for that, every board should definitely consider this important tool, at the very least for certain types of notice.

Curtis G. Kimble


New Utah Law Requires Registration by HOA’s

April 28, 2011

A new Utah law for HOA’s  goes into effect shortly that requires both condo and non-condo  homeowners associations to register as an HOA with the State of Utah by July 1st, 2011, and to keep info updated when directors change over time.  This is completely separate from registering as a nonprofit corporation with the Division of Corporations. Now HOAs that are nonprofit corporations will need to do both (the law doesn’t require an HOA to be a nonprofit corporation, but it is recommended and is typical).

The consequence for not registering an HOA and keeping the information updated is that the HOA will not be able to enforce its liens against delinquent homeowners.  This is a huge (and harsh) consequence, obviously.  So, it is imperative that HOA’s register and keep their info current with the state, or they will lose their lien rights when collecting past-due assessments.

Along with a registration fee not to exceed $37.00, each HOA has to provide the following to the state and kept it updated whenever the information changes :

  • The name and address of the homeowner association
  • The name, address, and telephone number and, if applicable, email address of the president of the association
  • The name and address of each management committee member and contact information for the manager, if applicable
  • The name, address, telephone number, and, if the contact wishes to use email or fax for communicating information, the email address or fax number of a primary contact person who has the lien payoff information a closing agent needs in connection with the closing of the sale or refinance of a lot/unit

Another new law states that lien payoff information must be provided by the HOA within five (5) business days from when a closing agent makes a proper request for it (has to be in writing, be accompanied by a written consent for the release of the payoff information signed and dated by the owner, etc.), or the lien is not enforceable at closing.  Also, the association is now prohibited from charging a fee for providing payoff information needed for closing on a unit, unless the fee is specifically authorized by the CC&Rs, bylaws or rules, and the fee can’t exceed $50.  Ascertaining payoff information for a delinquent owner is an administrative burden on the HOA that is appropriately paid for by the offending owner, not shared by the other innocent, paying owners.  So, the board should adopt a rule right away authorizing a fee for providing payoff information.

It’s important to note that assessments are both a lien on a unit and a personal debt of the owner.  So, while the lien may become unenforceable by failing to adhere to this new law, the past-due assessments will still remain the personal debt of that owner, even after they sell their unit and move on.  So, an action in court could still be pursued by the HOA.

The state has not set up a way to register yet, but we’ll provide updates on this issue and more information on how to register as it becomes available.

UPDATE: The registry is up and running. Read about it in this post.

Curtis G. Kimble


April 2011 HOA University – New Insurance Requirements

April 20, 2011

We had a great discussion at our HOA University in April.  We discussed the new Utah laws governing insurance requirements and reserves.  The new laws are summarized in the handout here:  HOA University – April 2011 Handout, but the highlights of our discussion were:

1. condominium owners associations are required by a new law to insure all permanent improvements, including those that are within a unit,

2.  for claims against the association’s master policy which are associated with a particular unit, the association can require that unit owner to pay the deductible if a notice is first sent to all unit owners stating they will be responsible for the deductible on the association’s master policy.  Note that the unit owner can generally obtain insurance which will pay the association’s master policy deductible.

3. Utah now requires all homeowners associations to have property and liability insurance coverage for their common areas, (this was not required before in non-condominium HOAs, like single family home PUDs, or non-condo townhomes, but is now by this law),

4. all HOAs with attached housing (usually called townhomes) have the same requirements for insurance as condominiums (as mentioned above), unless the HOA was established before January 1, 2012, and the CC&Rs already require each lot owner to insure their own dwelling unit.

Curtis G. Kimble


New Utah Law Versus Fiduciary Duty

March 28, 2011

Because association reserves perhaps play a more important role than any other issue, with the exception of insurance, in the long term viability of a homeowners association, I’m hard pressed to find an issue that triggers the concept of fiduciary duty more than the decision of whether or not to fund an association reserve account and in what amount to fund it.

Every board member is legally bound by a fiduciary duty to his or her association.  It is the duty to act in good faith and in the best interests of the association.  This means a board member cannot put his or her own interests before those of the association.  This duty imposed by law is a very powerful tool.  It is not taken lightly by the courts and breaching this duty subjects a board member to personal liability.

A new law was passed in Utah that is a little disconcerting to me.  It completely circumvents the tool and safeguard of fiduciary duty when it comes to association reserves.  It requires the board to present a reserve study to the homeowners at the annual meeting each year and that a simple majority of those homeowners that show up at the meeting will determine whether to fund a reserve account and the amount of the reserve account, thereby taking the decision completely out of the hands of the board.

If there’s one thing I’ve learned in my years of practice in HOA law, it’s that the individual owners don’t always have the best interests of the association in mind. It’s usually the other way around, they are concerned with their own best interests.  There’s nothing wrong with that, it’s human nature – something the folks on Capitol Hill don’t get, apparently.

As an owner of a home within an HOA myself, I personally have no interest in what the other homeowners in my HOA think about whether to fund a reserve account and in what amount to fund it.  The only individuals who are legally obligated to put the association’s best interests before their own are the members of the board.  The individual homeowners are free to put their own interests first, to be selfish and short sighted, to take the attitude that they may not live here in a few years, so why should they fund expenses ten or fifteen years down the road.  Board members are not.  They are bound by fiduciary duties to the association as a whole.  If board members breach this duty, that’s a different issue and there are remedies for that.  But, as a homeowner, I want that duty to be attached to decisions regarding funding of reserves.

As an attorney who has had to repeatedly deal with the fallout and consequences of inadequate or nonexistent reserve accounts, I hope the collective wisdom of a majority of homeowners at a meeting will allay my above concerns as this new law goes into effect.

Curtis G. Kimble


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