A Tip for Free Association Governance Resources

July 13, 2012

By Curtis G. Kimble.

For those that might not be aware, Community Associations Institute (CAI) is a national organization that provides information and education to community associations and the professionals who support them.  Their mission is “to inspire professionalism, effective leadership and responsible citizenship.”  CAI offers a variety of resources to HOAs, including boards, property managers, and people who own, rent or are considering a home in a community association.

CAI has recently published a document called From Good to Great.  It includes the full text from three CAI initiatives—Rights and Responsibilities for Better Communities, Community Association Governance Guidelines and the Model Code of Ethics for Community Association Board Members.   Those who want to see industry standards on homeowner rights and responsibilities, community association governance principles and ethics for association board members can now find it all in this free brochure called From Good to Great.  Click here to see it.

Also, visit this link  for information that can help you better understand the nature, benefits and obligations of living in an association and for additional links to free information and resources from government agencies and nonprofit organizations.  There’s a particularly helpful tip sheet on “Preventing Fraud and Embezzlement” in an association available at that site, as well.


Can an HOA Board Draft their Own CC&Rs?

June 1, 2012

By Curtis G. Kimble.

I am routinely asked if I will review amended governing documents (CC&Rs, bylaws, etc.) which the board, their manager or another person has drafted in order to save money over having an HOA attorney draft them.

While this method can sometimes save some money if the association is just looking for a legal review to determine if any of the provisions are contrary to the law or fatally ambiguous or deficient, unfortunately, the new documents typically just exchange an old set of problems for a new set of problems and can even leave the association with worse documents than the original ones.

What about if a board drafts the documents and a qualified attorney reviews and revises them as necessary?  Unfortunately, that doesn’t work well either for several reasons.

1.  This approach is almost never more cost-effective.  It usually takes more work than if the attorney simply drafted the documents from scratch.   All of the drafting done by the board (or other person), down to even the individual words and punctuation (because certain punctuation can have a big effect on the meaning of a provision), not only has to be carefully and painstakingly reviewed to determine if the language would be interpreted in court in the way intended, to ensure that it complies with applicable laws and regulations, and adequately establishes the legal foundation of the development and the association, but also has to be analyzed together with the rest of the document and the other governing documents to ensure they are all consistent.  Then, revisions, comments and explanations have to be drafted and then conveyed to the board.  All of that is extraordinarily time consuming, and that’s often just the beginning of the revision process.

2.  This approach is never more efficient.  It results in the attorney spending the vast majority of time analyzing language written by someone else to determine what its effects will be in different circumstances, how it will be interpreted by a court, and whether it adequately accomplishes its goal.  One of the biggest problems with that is the attorney does not necessarily know what the underlying goal or intent is.  If the language is unclear at all, the attorney either must seek clarification from the board or must guess from the language itself, and then revise it to more clearly state what the attorney thinks was intended.

This would not be a big deal with a one page document.  But an association’s CC&Rs and bylaws are long, complex documents – and necessarily so.  If there is one thing I’ve learned, it’s that it is better to address potential questions and issues in the documents now and have those documents be a few pages longer, than for the association to be dragged into a long, drawn-out lawsuit over an issue that could have been addressed in the documents but wasn’t.

3.  Things get left out.  Because of the inefficiencies and constraints of this process, important remedies, clarifications, standards, and other language will inevitably be left out that may have otherwise been included if the attorney drafted the documents.  If the board drafts the documents, the attorney assumes the board knew what it wanted and what it didn’t want, and therefore that the documents include things and don’t include things on purpose.

4.  I can say with certainty that the inevitable result with this approach is that much of the language is left by the attorney “as is,” or is revised just enough to be satisfactory, rather than improved to an ideal level, because the budget of the association simply doesn’t allow for the attorney to revise every word and comma necessary in the 50 to 80 page document, or because of the other inefficiencies and constraints of this process.

As a side note, the CC&Rs and bylaws are together a 50 to 80 page document regardless of whether or not they are actually 50 to 80 pages (if they are shorter, they may be inadequate).  In other words, 50 to 80 pages are necessary in virtually any HOA to properly institute all of the provisions (rights, obligations, remedies, procedures, etc.) that should be in an association’s governing documents in order to adequately establish necessary obligations and rights, address common issues of dispute, include policy and procedures that help the association comply with current laws and regulations (both state and federal), and make clear the association’s ability and authority to operate and govern balanced against the rights of its members, all based on current case law, statutes, and local and national best practices.

As if board members and managers don’t have enough liability to worry about, the unauthorized practice of law also exposes them to potential liability.  Drafting a complex legal document defining, granting and restricting the legal rights and obligations of people other than the person drafting it, and which is recorded against the real property of people other than the person drafting it, constitutes the practice of law. As all states do, Utah specifically prohibits the practice of law without a license.

“To leave these issues up to laypersons that aren’t aware of or up to date on the many sources and intricacies of these issues should be unthinkable to any conscientious board.”

But not only that, CC&Rs are the source of broad, complicated contractual rights and obligations that involve property rights and obligations that are tied to the land directly and can affect the ability of owners to sell and finance the purchase of the properties within the association. To leave these issues up to laypersons that aren’t aware of or up to date on the many sources and intricacies of these issues should be unthinkable to any conscientious board. The first goal of drafting any legal document is to avoid expensive court battles over the interpretation and meaning of the terms of the document. Someone who has defended and enforced governing documents in court is able to draft documents effectively by knowing how that document will be interpreted and enforced by the courts.

In an illustration of how intricate and complex contract interpretation can be, the Iowa Supreme Court examined whether a $200,000 special assessment for garage repairs was void because the board failed to obtain preapproval of the repairs from two-thirds of the members in Oberbillig v. West Grand Towers Condominium Association.  The following phrase was in the association’s CC&Rs: “The board shall not approve any expenditure in excess of $25,000, unless required for emergency repair, protection or operation of the Common Elements without the prior approval of two-thirds of the total ownership of the Common Elements.”

Does the word “emergency” refer to all three words “repair, protection or operation” or does it just refer to and modify the word “repair”?  In other words, does an expenditure in excess of $25,000 for the protection or operation (in a non-emergency) of the Common Elements require a two-thirds vote of the members?  The court applied a legal doctrine of interpretation called the doctrine of the last preceding antecedent to rule that no vote of the members was necessary to levy a $200,000 special assessment for the protection or operation of common elements in a non-emergency.

I’ll spare you the boredom of an explanation of the doctrine of the last preceding antecedent.  Suffice it to say, legal documents, especially documents that govern the rights and obligations of dozens or hundreds of homeowners now and for years into the future, should not be drafted by a layperson that is unaware of how seemingly insignificant words and punctuation will affect a court’s interpretation of the document.

Additionally, an HOA attorney who routinely assists boards and property managers with the many issues that face associations on a daily basis knows what problems can and should be addressed in governing documents and how best to address them to minimize problems in the future.  Importantly, they’ll also know whether something properly belongs in the CC&Rs rather than in the rules and vice versa.  They know what works in other associations and what doesn’t.  They know what can lead to hate and discontent and they know what helps promote balance and harmony.

This isn’t to say documents shouldn’t be carefully tailored to an individual community. They definitely should be.  That is why form documents or documents taken straight from another community are never acceptable.

Every board should be careful to recognize the importance of their governing documents.  They should work closely with their attorney to ensure the documents match the needs and desires of the membership.  The attorney will need the input and direction of the board, but the board and manager should stay away from the drafting.


Answers to the Quiz and Announcement of Experts

August 19, 2011

The results are in.  I purposely designed this quiz to be difficult with subtleties that almost amounted to trick questions, and sure enough, it was a difficult quiz.  But, a few experts emerged from the results (if you haven’t taken the quiz yet, go here (link), and take the quiz and then come back and review the answers below).

Congratulations to the following high scorers who have proven that they are not mere layman in the HOA realm:

  • Michael Johnson, FCS Community Management
  • Vernon Rice, Northpoint Homeowners Association
  • Harold Alston, The Cottonwoods Condominium Homes
The fastest submittal with the highest score and the winner of the grand prize $25 Amazon gift card is Michael Johnson (you should receive the gift card emailed to you shortly, contact me if you don’t).

DO NOT READ FURTHER if you haven’t taken the quiz yet!

Here are the answers (in bold):

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.

UPDATE:  As of May, 2012, a board is required to conduct or have conducted a reserve study every 6 years and review and if necessary update it every 3 years

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

  •  True
  •   √ False  (it is not required by law that an HOA be a nonprofit corporation)

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.  (The HOA can still pursue a personal judgment against a delinquent owner or past owner, even if it can’t enforce a lien.  Remember, assessments are both a personal obligation of an owner (meaning the HOA can pursue the personal assets of the owner for payment) and a lien on the property (meaning the HOA can pursue the property itself, by foreclosure or by effectively preventing its sale because of a recorded notice of lien)).

Thanks for playing!

Curtis G. Kimble


A Follow Up on Fidelity

August 2, 2011

As a quick follow up to my post on June 28, 2011, regarding embezzlement and fidelity insurance, this complaint underscores the importance of fidelity coverage even more.  Even if you never have an issue with misuse of funds or embezzlement, a lack of fidelity coverage could affect the ability of owners to buy and sell units within your association.

FHA, Fannie Mae and Freddie Mac all require that condominium associations carry some level of fidelity insurance, even if the association has professional management which handles the day to day aspects of collecting assessments.   Even a conventional loan with 20% down is likely to be sold by an initial lender on the secondary lending market and thus the loan must meet Fannie Mae and Freddie Mac standards.

While Wells Fargo didn’t exhibit best practices in the situation described in the link above, it’s always the best practice for an HOA to carry fidelity insurance coverage.

Curtis G. Kimble


Don’t be a Hater! Or Your Peeps Will Accuse the Board of Selective Enforcement

July 22, 2011

As illustrated in this comical but true story: “Chris Brown on Condo Complaints: I’m Being Setup by Haters!” it’s vitally important that an association’s governing documents are in order and that they clearly outline the rights of each owner, including rights to parking spaces.  If parking spaces must be used as handicap spaces at some point due to a Fair Housing request, ensure that the whole process is done legally and properly under the governing documents and the law.  Consult professionals as needed, especially an attorney in the case of a Fair Housing request for reasonable accommodation.

The story in that link above also brings to mind the importance of clear and specific enforcement provisions in the governing documents.  If someone scratches their initials in the elevator, can you fine them?  What about excessive noise or other vandalism?

Perhaps most importantly, this story shows the importance of treating members equally and fairly.  In HOAs, the stakes are high.  Financially, the home is a major investment.  Psychologically, it may be even more important as a safe haven and source of security.  On the other hand, living in an HOA requires some sacrifices of individual freedom for the communal good.  The sacrifices must be fairly shared, however.  Unequal treatment of members who are similarly situated will lead to issues more serious than being called a hater.  The number one problem we see is when personality issues are the impetus behind an enforcement issue, rather than the goal of equal, consistent and uniform enforcement.  Contact us for guidance in any enforcement situation where determining what is fair is causing or may cause difficulty.

Curtis G. Kimble


Are Automatically Renewing Service Contracts Valid in Utah?

July 12, 2011

This entry deals with contracts within your HOA that “automatically renew” for periods of time beyond that which was originally contracted for.  Many contracts that an HOA Board signs with a  vendor such as a landscaper, pool company, property manager, etc., are intended to “renew” after the inital period expires, unless you, the HOA, give notice of cancellation.  Strictly speaking, there is nothing wrong which such renewal provisions but both your vendors and the HOA needs to know what must, by statute, be contained in such a contract in order for the auto-renewal provision to be valid.  If the statutory language is NOT contained in the contract, then the auto-rewnewal provision is null and void per public policy.    For purposes of this blog entry, I am referring to Utah Code 15-10-101 et seq.

Here are the basics.  As always, before your HOA takes drastic measures to terminate a contract for failure to comply with the Act, please contact us to make sure your actions are proper.   Otherwise you could be alleged to have breache your contract with a particular vendor.  This blog entry is for information purposes only.  Note that the discussion below is for contracts entered into after July 1, 2011, the effective date of the amendments to the existing Act.  However, if you have a contract that was signed before July 1, 2011 and it contains an auto-renewal clause, the prior version of the Act applies.  Again, please contact us if you want to discuss an existing contract.

First, both condominium and PUD association’s are deemed “consumers” under the Act.  “Seller” means any person or entity providing service, maintenance or repair under a service contract.  “Service Contract” means a contract for service, maintenance or repair in connection with real property; or that provide a benefit to the real property.

So, a HOA contract with an accountant probably does not fall under this Act but one with a landscaper will  (Tip:  a lot of HOA’s find themselves in contracts that just are not workable, affordable or beneficial over time.  This Act may provide a way out of such situations but be very careful and  please contact us first).

Second, there are strict notice requirements that must be in the contract in order to make the auto-renewal provision valid.  In other words, auto-renewal clauses are permissble but only if the proper notice is contained in the original contract.

Third, keep in mind that the notice requirements for a service contract entered into after July 1, 2011 and which automatically renew after the expiration of the original term, fall into 2 categories:

(a)  Contracts that renew for periods less than 12 months:   The requirements of “b” below all apply except for the provision requiring that “notice be displayed prominently on the first page.”

(b)  Contracts that renew for periods greater than 12 months  (for example, renews for a 24 month period):  The “Seller” must provide written notice of the automatic renewal provision prominently on the first page of the service contract.  In addition, the seller must provide written notice to the HOA (1) personally, (2) by certified mail; or (3) by prominently displaying the notice of the renewal on the first page of a monthly statement.  The Seller must provide the notice (described above) no later than 30 days (but not sooner than 90 days) before the last day on which the HOA may give notice of the HOA’s intention to terminate the contract.

Fourth, the wirtten notice must be in clear and understandable language and printed in an “easy to read” type size and style.

Fifth, if the above requirements are not complied with the automatic renewal provision is void and unconscionable as a matter of public policy and the contract renews on a “month to month” basis.

Obviously, I am not suggesting that you can or should try to “break” every contract that automatically renews.  I do feel, however, that this statute is an important tool for an HOA to understand in order to help you avoid contracts that truly are not in your best interest.

Once again, thanks for reading this entry.  We have a lot more to come!  Best regards, John Richards


Embezzlement in an HOA?

June 28, 2011

If there’s one thing you do as a board member (and I mean if it’s literally the only thing you do as a board member because you’re too busy to be involved, or because the president or the property manager does everything), you need to make sure there is current fidelity insurance coverage for the association (protecting against loss of money from  dishonesty, embezzlement, forgery, etc.).

Recently, I’ve had involvement with an association where two of the three board members were simply not involved at all in the operation of the association and the third board member embezzled funds, failed to pay bills, and let the insurance lapse.  Finally, one of the lawsuits that had started to come in because of unpaid bills got served on one of the other board members and that clued him into the fact that something was amiss.   Of course, the embezzling board member had let the insurance coverage lapse long ago so there was no coverage and the association had to levy a large special assessment just to pay the outstanding bills.

Embezzlement, forgery, and other similar things may sound like exotic, foreign things that only happen in big corporations or in the movies, but it happens wherever you are and in HOAs of all sizes.  The HOA I mentioned above had less than 20 members.  No one is immune.  Besides the situation above involving a board member, I’ve had experience with an HOA where an employee of the property management company siphoned HOA funds for his personal use.

Even if you are actively and directly involved as a board member and you even look at monthly bank statements for your HOA, make sure they are the original bank statements, not something generated by a personal computer.  In the HOA in this story:  Police say woman stole from condo group, the treasurer used a computer to generate statements that made it appear that she was spending money on maintenance work that was never done. 

Curtis G. Kimble 


Register Now for Our Seminar on New HOA Laws

June 8, 2011

What is it?  Major changes were made this year to the laws that affect all community associations (HOAs).  We have had numerous requests to present this information to our clients and to property managers in a concise yet detailed manner. We will be providing an informative and educational 2 hour seminar that you must not miss in order to make sure that your actions as a board member comply with Utah law.

When?  Saturday, June 18, 2011, starting promptly at 9:00 am until 11:00 am.

Where?  Our Salt Lake office, 2040 E. Murray Holladay Rd, Suite 106, Holladay, UT 84117 (about 4800 south, just behind the Holladay Bank and Trust). Phone: 801-274-6800.

Cost?  No charge as part of our educational commitment to our clientele.

RSVP Required?  Yes.  Seating is limited to the first 50 people that RSVP.  We kindly ask that no more than 2 people per association attend in order to ensure seating for everyone.  Please RSVP by June 16, 2011, by calling 801-274-6800 or by submitting the following form:


How the New Laws Affect You: Non-Condos

June 2, 2011

For non-condo HOAs (all HOAs except condominiums), 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.

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.  All HOAs in Utah must have property and liability insurance coverage for their common areas (this was not required before in non-condominium HOAs).

Unless the CC&Rs require each homeowner to insure the homeowner’s dwelling, all HOAs with attached housing (such as townhomes) are required to have 100% replacement cost coverage for all permanent improvements, including fixtures and betterments to an attached dwelling made by a homeowner.  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 risk to the homeowner or homeowner’s policy.  For claims against the association’s master policy which are associated with a particular home, the association can require that homeowner to pay the deductible if a notice had already been sent to all homeowners 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 homeowners that drive up the premiums.

3.  Rules.  As of May 10th, rules can no longer be changed or adopted without giving notice to all homeowners 15 days in advance of the board meeting where the rule change will be considered and allowing homeowners an opportunity to be heard at that meeting.  The new or changed rule must then be sent out to all homeowners within 15 days of being adopted.  The homeowners can call a special meeting and disapprove a new rule within 60 days from the date it was adopted, if 51% of the total votes in the association vote to disapprove at the special meeting.

4.  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.

5.  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 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.

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.

6.  Budgets.  A new law requires a homeowner-elected board 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.”

7.  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.

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


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


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