By Curtis G. Kimble
It’s that time of the year for many associations – annual meeting season – which means every board will need to remember the new Utah laws and how to comply with them as they prepare for their association’s annual meeting.
Here are some of the key points to remember:
1. The association’s reserve analysis or reserve study has to be presented to the members at the annual meeting each year. The members at the meeting vote on 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 of the meeting.
Utah law requires that 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 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. For associations who haven’t conducted a reserve analysis since March 1, 2008 (or ever), the law requires them to do one by July 1, 2012.
2. Update your association’s registration info with Utah’s Homeowners Association Registry within 90 days of any change. Be sure to update the information with the Registry if new directors or officers are elected, as appropriate.
The consequence for not registering an HOA and keeping the registration information current is that the HOA will not be able to enforce its liens against delinquent homeowners. It’s imperative that every HOA register and keep their info current with the state or they will lose their lien rights when collecting past-due assessments, which could have drastic effects on the HOA’s operations and finances.
3. For non-condominium homeowners associations (single family homes, PUDs, townhomes, etc.), every homeowner-elected board is required to adopt a budget annually and to then present that budget to the homeowners at a meeting. Since the budget will have already been adopted by the board, there is no requirement that the homeowners vote to approve the budget at the meeting. The homeowners can, however, call a special meeting within 45 days of the first meeting and vote to disapprove the budget. The budget will be disapproved if 51% of the total votes in the association vote to disapprove it “at a special meeting specifically called for that purpose by the lot owners.”
While that budget law doesn’t apply to condominium associations, the bylaws may contain certain requirements regarding adopting a budget. Do you know what your bylaws say regarding budgets?
4. Don’t forget requirements in the bylaws or other governing documents. For instance, do you know if your bylaws require the annual meeting to be on a certain date and at a certain time? Or if a certain notice timeframe is required? The overarching requirement applicable to all associations is that notice of the meeting must be given and the notice must be given in a fair and reasonable manner (mailing out notices the night before the meeting won’t cut it).
5. Don’t forget the requirements of the Utah Nonprofit Corporation Act. For incorporated associations, the notice of an annual meeting must include a description of any matter that must be approved by the members. Also, unless otherwise provided by the bylaws, if a meeting of members is adjourned to a different date, notice does not have to be given of the new date, if the new date is announced at the meeting before adjournment.
What about when a home is in the middle of being sold, do you know who is entitled to notice and who is entitled to vote (the buyer or seller)? The bylaws may fix a date as the record date for determining the members entitled to vote at, and to notice of, a members’ meeting. If the bylaws do not provide for fixing a record date, the board of directors may fix a future date as the record date. If a record date is not fixed by either of those methods, members entitled to notice of the meeting are the members at the close of business on the business day preceding the day on which notice is given and members entitled to vote at the meeting are the members on the date of the meeting and who are otherwise eligible to vote.
Contact us if you have questions about interpreting or complying with your governing documents or the law this annual meeting season.