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