2018 Utah Legislative Session

May 8, 2018

Happy Laws Go Into Effect Day! (okay, I’m sure there’s a better name for that).  Today, May 8, the HOA laws that were enacted this year go into effect.  Specifically, those laws:

  • include an amendment to the law regarding HOA records,
  • include an amendment to the law regarding HOA reserve fund money,
  • regulate how HOAs keep association funds,
  • clean up a couple of the required exceptions to certain rental restrictions,
  • codify that a management committee acts for an association, and
  • enacts provisions regarding a management committee that imposes sanctions or pursues legal action.

HOA Records

A change to the law this year requires an HOA to make certain documents available to homeowners free of charge, via the association’s website or at the association’s address, requires a homeowner to include certain information in a written request for records, establishes a penalty for the failure of an association to fulfill a request,  and provides that an association is not liable for erroneous documents identified or produced in good faith.

The law already required associations to keep certain records and make them available to homeowners who request them.  Now, the law also requires all associations to keep and make available to homeowners a copy of the association’s: (1) declaration and bylaws, (2) most recent approved minutes, and (3) most recent budget and financial statement.  Associations are required to make those documents available to owners, free of charge, through the association website, or, if the association does not have an active website, it must make physical copies of the documents available to owners during regular business hours at the association’s address registered with the Department of Commerce’s Utah HOA Registry.

If a homeowner wishes to view or copy other association records, then in a written request to the association, the homeowner must include certain information, including how the owner wishes to inspect or to copy the documents.  The owner may elect: (1) that the association or a third party duplicating service make the copies or electronic scans of the requested documents, or (2) that the owner be allowed to bring any necessary imaging equipment to the place of inspection and make copies or electronic scans of the documents while inspecting the documents, or (3) that the association email the requested documents to an email address provided in the request.

If an association produces the copies or electronic scans, the owner must pay the association the reasonable cost of the copies or electronic scans and for time spent meeting with the owner, which may not exceed the actual cost that the association paid to a recognized third party duplicating service to make the copies or electronic scans, or 10 cents per page and $15 per hour for the association employee’s, manager’s, or other agent’s time.

In addition to the penalties already in place for failure by an association to comply with this law, the new law imposes the additional penalty that an association must pay $25 per day for as long as the owner’s records request continues unfulfilled, beginning on the sixth day after a proper written request was made.

Finally, the new law states that an association is not liable for identifying or providing a document in error, if the association identified or provided the erroneous document in good faith.

See Utah Code Section 57-8-17 (condominiums) and Utah Code Section 57-8a-227 (non-condo HOAs).

Reserve Fund Money

A change goes into effect today to the law that prohibited an association from using money in a reserve fund for a purpose other than the purpose for which the reserve fund was established.  Effective today, an association may use money in a reserve fund for a purpose other than the purpose for which the reserve fund was established if a majority of association members vote to approve the use of reserve fund money for that purpose.

See Utah Code Section 57-8-60 (condominiums) and Utah Code Section 57-8a-211 (non-condo HOAs).

Association Funds

Starting today, associations are required to keep all of the association’s funds in an account in the name of the association, and an association may not commingle the association’s funds with the funds of any other person or entity.

See Utah Code Section 57-8-7.5 (condominiums) and Utah Code Section 57-8a-230 (non-condo HOAs).

Exceptions to Certain Rental Restrictions

Utah law requires certain exceptions when an association prohibits rentals or restricts the number and term of rentals in the association.  See Utah Code Section 57-8-10.1 (condominiums) and Utah Code Section 57-8a-209 (non-condo HOAs).

A couple of those exceptions were clarified this year.  The law use to say an owner “whose employer has relocated the owner for no less than two years” is exempt from the prohibition or restriction on the number and term of rentals.  This made little sense as a hardship-type exception.  A temporary, short-term job relocation is more likely to cause a hardship.  Long-term relocations are less in need of a hardship-exception because it’s less of a hardship to have to sell a home for a long-term relocation than a short-term relocation.  So, the statute now states an owner “whose employer has relocated the lot owner for two years or less” is exempt from the prohibition or restriction on the number and term of rentals.

Additionally, the new law clarifies that the exemption for owners who have a rental before a prohibition or restriction on the number and term of rentals is adopted terminates when the home is sold or otherwise conveyed (and defines what constitutes such a conveyance).

Miscellaneous

A couple of minor changes were passed that simply codify what was basically already true, at common law or otherwise.  Utah Code Section 57-8-59 states that a management committee acts in all instances on behalf of the association (except as otherwise stated in the association’s governing documents).  And Utah Code Section 57-8-10.7, in the Condo Act, was adopted to match a parallel section in the Community Association Act.  It states that a management committee must use its reasonable judgment to determine whether to exercise the association’s powers to impose sanctions or pursue legal action for a violation of the governing documents, and it specifies certain circumstances under which an association may not be required to take enforcement action.  And, finally, Utah Code Section 57-8a-212.5, in the Community Association Act, was adopted to match a parallel section in the Condo Act.  It states that owners must comply with the governing documents and enforcement may be sought by an association or an aggrieved owner through an action to recover money for damages, or injunctive relief, or both.

Contact Kimble Law for assistance with any of the issues addressed in these new laws, or for any association issues.

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2 Comments | Enforcement, HOA Finances, New Condo Laws, New HOA Laws, New Non-Condo HOA Laws, Reserves | Tagged: , , | Permalink
Posted by Curtis G. Kimble

Exposing Common Myths in HOA Operations

October 25, 2012

By Curtis G. Kimble.

We frequently hear about and see associations acting on myths that seem to persist despite being clearly incorrect. Here are some of those myths and misunderstandings and the truth behind them:

1. An association can deny a request of a members to view the records of the association.

False.  An association member is generally entitled to view and inspect the records of the association upon making a proper request (with limited exceptions, such as for confidential or privileged records).  An association must either maintain its records in written form or in another form capable of conversion into written form within a reasonable time.  Every association should have a records retention policy to ensure the association keeps records for the proper period of time, to provide for the proper disposal of records, and to assist in making and complying with records requests.

2.  An association can require pre-approval for, or prohibit, small satellite dishes installed on owners’ porches, balconies and patios.

False, except  an owner (or installer) cannot drill through an exterior wall to install the dish.

The FCC has adopted a rule applicable to “Over-the-Air-Reception Devices” (“OTARD”).  OTARD prohibits HOA restrictions that impair the installation, maintenance or use of small satellite dishes in areas that are within the exclusive use or control of the dish user (such as limited common area).

The rule prohibits restrictions as to such areas that:  (1) unreasonably delay or prevent installation, maintenance or use;  (2) unreasonably increase the cost of installation, maintenance or use; or (3) preclude reception of an acceptable quality signal.

The rule does not apply to common areas (such as the roofs and exterior walls of a condominium building).  It only applies to areas within the exclusive use or control of the dish user.  So, an association can certainly restrict or prohibit satellite dishes from being installed on common area roofs and walls.  Additionally, the association can regulate dishes on limited common area to some degree.

Contact us for assistance adopting a satellite dish and antenna installation policy if you don’t already have one in place.

3. A director must abstain from voting on matters that the director has a conflict of interest in.

False.  As long as the underlying transaction being voted on is fair to the association, a director can have a conflict and still vote.  (Utah Code Sec. 16-6a-825).  However, it is highly discouraged that the director vote for several reasons, not the least of which is the difficulty in establishing that a transaction is fair and defining exactly what fair is.  If the conflicted director simply abstains from voting after fully disclosing to the board the material facts as to the conflicting interest transaction, then most conflict of interest problems will be cured.

4.  The association president has authority to make decisions and take actions on behalf of the association.

False, except to the extent the president is authorized by the board or by the bylaws to make decisions and take actions.  All powers of an association must be exercised by or under the authority of the the board and the business and affairs of the association must be managed under the direction of the board.  (Utah Code Sec. 16-6a-801).  The president has no independent authority to exercise the powers of the association or manage the business and affairs of the association.

The bylaws may authorize a person to exercise some or all of the powers that would otherwise be exercised by the board.  (Utah Code Sec. 16-6a-801).  And, the board can delegate certain authority of the board to a person (including the president).  (Utah Code Sec. 16-6a-819).  But, otherwise, the president and any other officer have no more authority than any member of the association.  It’s very important a board clearly authorize a president to perform the actions and make the decisions they expect him or her to carry out.  This authorization should be in a board resolution or reflected in the minutes of a board meeting.

5.  A board can adopt a rule about any issue they deem necessary.

False.  The board must have authority to restrict or regulate the specific subject of the rule.  This authority usually comes from the law or from the CC&Rs.  A general provision in the CC&Rs granting the right to adopt rules does not give a board the unfettered authority to restrict rights of individual owners, especially as to units or lots.  On the other hand, a board will usually have authority to adopt reasonable rules to govern use of the common property, to govern the use of individually owned property to protect the common property, and to protect the members’ use and enjoyment of their own property and the common property from interference caused by use of other individually owned lots or units.

An association should have a qualified attorney review a proposed rule before it is adopted, and have the attorney review existing rules periodically to ensure the rules are authorized under the governing documents and the law and that they don’t open the association to discrimination claims or present other problems.

6. The law regarding rental restrictions in the Condo Act applies to all condo projects, or the  law regarding rental restrictions in the Community Association Act applies to all community associations.

False.   Those laws don’t apply to the vast majority of associations out there.  Each of those laws only apply to associations where the original declaration is recorded after May 12, 2009.  So, if the community is older than 2009 (if the original CC&Rs were recorded before May 12, 2009), the rental restriction requirements in those two statutes do not apply to that association.

UPDATE 2015:  The two referenced laws (Utah Code 57-8-10.1 for condos, and 57-8a-209 for non-condos) apply to all HOAs who, on or after May 12, 2015, (1) adopt a rental restriction or prohibition, or (2) amend an existing rental restriction or prohibition.

7. The Utah reserve analysis law requires an association to have reserves.

False.  There is no state or federal law requiring a Utah homeowners association to have a reserve fund.  In fact, the law specifically requires an association to provide an opportunity for homeowners to vote on whether to fund a reserve fund.  Of course, many lenders, as well as FHA, require reserves.

1 Comment | Governance, Reserves | Tagged: , , , , | Permalink
Posted by Curtis G. Kimble

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