HB 2442 — homeowners' associations; budget ratification; requirements

IFBEFORE THEIMPLEMENTATION BOARD-APPROVED ANNUAL OPERATING BUDGET AND ANYASSESSMENT SUPPLEMENTALOF AMENDMENTTHE TOBOARD-APPROVED THAT BUDGET, EXCLUDINGTHE CONSIDERATIONBOARD OF LOANDIRECTORS INSTALLMENTSHALL PAYMENTSCALL PREVIOUSLYAND APPROVEDNOTICE ASSEVENTY-TWO AHOURS SPECIALIN ASSESSMENTADVANCE ORAN FINANCINGINFORMAL PURSUANTSPECIAL TOMEETING SUBSECTION H OF THIS SECTION, WOULD RESULT IN AN ANNUALIZED ASSESSMENT INCREASE FROM THE PREVIOUSUNIT YEAR'SOWNERS INITIALTO ANNUALEXPLAIN ASSESSMENT THAT IS GREATER THAN THE PERCENTAGEAPPROVED CHANGEBUDGET INTO THE CONSUMERUNIT PRICEOWNERS INDEXAND FORTO THEANSWER TWELVEAND MONTHSADDRESS PRECEDINGANY INITIALQUESTIONS BUDGETOR APPROVAL,CONCERNS THERAISED BUDGET MUST BE RATIFIED BY THE UNIT OWNERSOWNERS. BEFORE IMPLEMENTATION AND ASSESSMENT AS FOLLOWS:

1.THE BOARD OF DIRECTORS SHALL AMEND THE BUDGET AS APPROPRIATE BEFORE IMPLEMENTATION.

WithinIF thirtyTHE daysBOARD afterOF adoptionDIRECTORS ofREFUSES anyTO proposedCORRECT budgetOR forADEQUATELY theADDRESS condominium,THE theEXPRESSED boardCONCERNS ofOF directorsTHE shallCONSENSUS provideOF aUNIT summaryOWNERS PRESENT, ALL OR ANY OF THE BOARD OF DIRECTORS MAY BE SUBJECT TO A RECALL PETITION AND JUSTIFICATIONVOTE ofPURSUANT theTO budgetSECTION to33-1243 allWITHOUT theREGARD unitTO owners.ANY PRIOR FAILED RECALL EFFORT.

UnlessF. the board of directors is expressly authorized in the declaration to adopt and amend budgets from time to time, any budget or amendment shall be ratified by the unit owners in accordance with the procedures set forth in this subsection.

IfIF ratificationAUTHORIZED isIN required,THE TheDECLARATION, boardTHE ofASSOCIATION directorsMAY shallESTABLISH setAND aFUND dateRESERVE ANDACCOUNTS, PROVIDEHOWEVER NOTICEDENOMINATED, PURSUANTAS NECESSARY TO SECTIONADDRESS 33-1248ANTICIPATED forLONG-TERM aOR meetingMAJOR ofMAINTENANCE theAND unitUPGRADE ownersOF toTHE considerCOMMON ratificationELEMENTS ofOR theFOR budget.ANY OTHER PURPOSE AUTHORIZED IN THE DECLARATION.

notEXCEPT fewerFOR thanTEMPORARY fourteenCASH orFLOW moreCONSIDERATIONS thanFOR thirtyBUDGETED daysEXPENSES, afterTHE mailingBOARD ofOF theDIRECTORS summary.OR THE BOARD OF DIRECTORS' MANAGING AGENT SHALL NOT SPEND OR TRANSFER ANY MONIES FROM THE ASSOCIATION'S RESERVE ACCOUNTS FOR ANY PURPOSE THAT IS NOT INCLUDED IN THE DECLARATION'S AUTHORIZED USE OF THAT RESERVE ACCOUNT WITHOUT THE PRIOR AUTHORIZATION OF THE UNIT OWNERS.

Unless at that meeting a majority of all the unit owners or any larger vote specified in the declaration rejects the budget, the budget is ratified, THE PROPOSED BUDGET IS RATIFIED IF A MAJORITY OF UNIT OWNERS VOTING IN PERSON AND BY ABSENTEE BALLOT, OR AS OTHERWISE PROVIDED BY SECTION 33-1250, VOTE TO APPROVE THE BUDGET AS PRESENTED whether or not a THE quorum REQUIREMENT is present MET.

2.

If the proposed budget is rejected, the periodic budget last ratified by the unit owners shall be continued THE BOARD OF DIRECTORS MAY EITHER RETAIN THE EXISTING BUDGET AND ASSESSMENT OR DEVELOP AND APPROVE A BUDGET THAT DOES NOT REQUIRE RATIFICATION, until such time as the unit owners ratify a subsequent budget proposed by the board of directors.

[3.

IF THE BOARD OF DIRECTORS BELIEVES THAT THE UNIT OWNERS UNREASONABLY WITHHELD RATIFICATION OF THE APPROVED BUDGET, PREVENTING THE BOARD OF DIRECTORS FROM FULFILLING THEIR OBLIGATION UNDER THE DECLARATION TO MAINTAIN THE COMMON ELEMENTS, THE BOARD OF DIRECTORS MAY INITIATE A SUIT FOR INJUNCTIVE RELIEF IN A COURT OF COMPETENT JURISDICTION REQUESTING THE COURT TO OVERRIDE THE RATIFICATION VOTE AND IMPLEMENT THE BUDGET AS ADOPTED BY THE BOARD OF DIRECTORS.

THE BOARD OF DIRECTORS BEARS THE BURDEN OF PROOF THAT THE APPROVED BUDGET SATISFIES THE BOARD'S OBLIGATION TO THE COMMUNITY DESCRIBED IN SUBSECTION A OF THIS SECTION AND THAT THE UNIT OWNER’S RATIFICATION WAS UNREASONABLE WITHHELD.

ANY LITIGATION COSTS -6- House Amendments to H.B.

2442 SHALL NOT BE TAKEN FROM ASSOCIATION MONIES IF THE BOARD OF DIRECTORS FAILS TO PREVAIL IN THIS LAWSUIT.] F.

IF AUTHORIZED IN THE DECLARATION, THE ASSOCIATION MAY ESTABLISH AND FUND RESERVE ACCOUNTS HOWEVER DENOMINATED AS NECESSARY TO ADDRESS ANTICIPATED LONG-TERM OR MAJOR MAINTENANCE AND UPGRADE OF THE COMMON ELEMENTS OR FOR ANY OTHER PURPOSE AUTHORIZED IN THE DECLARATION.

EXCEPT FOR TEMPORARY CASH FLOW CONSIDERATIONS FOR BUDGETED EXPENSES, THE BOARD OF DIRECTORS OR THE BOARD'S MANAGING AGENT SHALL NOT SPEND OR TRANSFER ANY MONIES FROM THE ASSOCIATION'S RESERVE ACCOUNTS FOR ANY PURPOSE THAT IS NOT INCLUDED IN THE DECLARATION'S AUTHORIZED USE OF THAT RESERVE ACCOUNT WITHOUT THE PRIOR AUTHORIZATION OF THE UNIT OWNERS.

IF UNANTICIPATED AND UNBUDGETED OPERATING EXPENSES BECOME NECESSARY, THE ASSOCIATION SHALL DEVELOP,DEVELOP APPROVEAND AND,APPROVE IF NECESSARY, RATIFY A SUPPLEMENTAL AMENDMENT TO THE ANNUAL BUDGET PURSUANT TO SUBSECTIONS D AND E OF THIS SECTION BEFORE INCURRING THE EXPENSES.

H.- 6 - H.B.

2442 H.

I.

IF THE ASSOCIATION DOES NOT COMPLY WITH SUBSECTIONS D THROUGH H OF THIS SECTION, ANY RESULTING ACTION OR ASSESSMENT IS INVALID AND UNENFORCEABLE.

J.I.

K.J.

A declarant may voluntarily surrender the right to appoint and remove officers and members of the board of directors before termination of the period prescribed in subsection E JI of this section, but in that event the declarant may require, for the duration of the period of declarant control, that specified actions of the association or board of directors, as described in a recorded instrument executed by the declarant, be approved by the declarant before they become effective.

L.K.

The board of -7-directors Houseshall Amendmentselect tothe H.B.officers.

2442 directors shall elect the officers.

M.L.

(a) In an association with one thousand or fewer members, on receipt of a petition that calls for removal of a member of the board of directors- and7 that- isH.B. signed by the number of persons who are eligible to vote in the association at the time the person signs the petition equal to at least twenty-five percent of the votes in the association or by the number of persons who are eligible to vote in the association at the time the person signs the petition equal to at least one hundred votes in the association, whichever is less, the board shall call and provide written notice of a special meeting of the association as prescribed by section 33-1248, subsection B.

2442 directors and that is signed by the number of persons who are eligible to vote in the association at the time the person signs the petition equal to at least twenty-five percent of the votes in the association or by the number of persons who are eligible to vote in the association at the time the person signs the petition equal to at least one hundred votes in the association, whichever is less, the board shall call and provide written notice of a special meeting of the association as prescribed by section 33-1248, subsection B.

-8-(e) HouseFor Amendmentspurposes of a special meeting called pursuant to H.B.this subsection, a quorum is present if the number of owners who are eligible to vote in the association at the time the person attends the meeting equal to at least twenty percent of the votes of the association or the number of persons who are eligible to vote in the association at the time the person attends the meeting equal to at least one thousand votes, whichever is less, is present at the meeting in person or as otherwise allowed by law.

2442 (e) For purposes of a special meeting called pursuant to this subsection, a quorum is present if the number of owners who are eligible to vote in the association at the time the person attends the meeting equal to at least twenty percent of the votes of the association or the number of persons who are eligible to vote in the association at the time the person attends the meeting equal to at least one thousand votes, whichever is less, is present at the meeting in person or as otherwise allowed by law.

(h)- A8 petition- thatH.B. calls for the removal of the same member of the board of directors shall not be submitted more than once during each term of office for that member.

2442 (h) A petition that calls for the removal of the same member of the board of directors shall not be submitted more than once during each term of office for that member.

N.M.

O.N.

The audit, review or compilation shall be completed no later than one hundred eighty days after the end of the association's fiscal -9-year Houseand Amendmentsshall be made available on request to H.B.the unit owners within thirty days after its completion.

2442 year and shall be made available on request to the unit owners within thirty days after its completion.

P.O.

Q.

FOR THE PURPOSES OF THIS SECTION, "CONSUMER PRICE INDEX" MEANS THE UNITED STATES DEPARTMENT OF LABOR, BUREAU OF LABOR STATISTICS, INDEX FOR URBAN WAGE EARNERS AND CLERICAL WORKERS THAT IS DESIGNATED AS "CPI-W".

A contract for any of the following, if entered into before the board of directors elected by the unit owners pursuant to section 33-1243, subsection G LK takes office, shall contain a provision in the contract that the contract may be terminated without penalty by the association at any time after the board of directors elected by the unit owners takes office:

1.- 9 - H.B.

2442 1.

(a) Means a nonprofit corporation or unincorporated association of owners that is created pursuant to a declaration to own and operate portions of a planned community and that has the power under the declaration to assess association members to pay the costs and expenses -10-incurred Housein Amendmentsthe toperformance H.B.of the association's obligations under the declaration.

2442 incurred in the performance of the association's obligations under the declaration.

"Common expense lien" means the lien for assessments, charges for late payment of assessments if authorized in the declaration, reasonable collection fees and costs incurred or applied by the association and reasonable attorney fees and costs that are incurred with respect- to10 those- assessments,H.B. if the attorney fees and costs are awarded by a court.

2442 respect to those assessments, if the attorney fees and costs are awarded by a court.

-11-33-1803. House Amendments to H.B.

2442 33-1803.

notice to member of violation;violation A.

definition A.

NOTWITHSTANDING ANY PROVISION IN THE COMMUNITY DOCUMENTS, AFTER THE TERMINATION OF THE PERIOD OF DECLARANT CONTROL, THE ASSOCIATION'S BOARD OF DIRECTORS HAS A DUTY TO DEVELOP AN ANNUAL OPERATING BUDGET FOR THE FISCAL YEAR BASED ON A REASONABLY PRUDENT AND GOOD FAITH ESTIMATE OF THE COMMON EXPENSES NECESSARY TO SATISFY THE BOARD OF DIRECTORS' OBLIGATIONS TO THE MEMBERS TO MANAGE COSTS AND TO PROVIDE FOR THE ANNUAL MAINTENANCE AND OPERATION OF THE COMMON PROPERTY AND THE ADMINISTRATIVE- AND11 OPERATING- EXPENSESH.B. OF THE ASSOCIATION, ALONG WITH ANY ALLOCATIONS TO RESERVE ACCOUNTS.

2442 ADMINISTRATIVE AND OPERATING EXPENSES OF THE ASSOCIATION, ALONG WITH ANY ALLOCATIONS TO RESERVE ACCOUNTS.

IFBEFORE THEIMPLEMENTATION BOARD-APPROVED ANNUAL OPERATING BUDGET AND ANYASSESSMENT SUPPLEMENTALOF AMENDMENTTHE TOBOARD-APPROVED THAT BUDGET, EXCLUDINGTHE CONSIDERATIONBOARD OF LOANDIRECTORS INSTALLMENTSHALL PAYMENTSCALL PREVIOUSLYAND APPROVEDNOTICE ASSEVENTY-TWO AHOURS SPECIALIN ASSESSMENTADVANCE ORAN FINANCINGINFORMAL PURSUANTSPECIAL TOMEETING SUBSECTION F OF THIS SECTION, WOULD RESULT IN AN ANNUALIZED ASSESSMENT INCREASE FROM THE PREVIOUSMEMBERS YEAR'STO INITIALEXPLAIN ANNUAL ASSESSMENT THAT IS GREATER THAN THE PERCENTAGEAPPROVED CHANGEBUDGET INTO THE CONSUMERMEMBERS PRICEAND INDEXTO FORANSWER THEAND TWELVEADDRESS MONTHSANY PRECEDINGQUESTIONS INITIALOR BUDGETCONCERNS APPROVAL,RAISED THE BUDGET MUST BE RATIFIED BY THE MEMBERSMEMBERS. BEFORE IMPLEMENTATION AND ASSESSMENT AS FOLLOWS:

1.THE BOARD OF DIRECTORS SHALL AMEND THE BUDGET AS APPROPRIATE BEFORE IMPLEMENTATION.

WITHINIF THIRTYTHE DAYSBOARD AFTEROF ADOPTIONDIRECTORS OFREFUSES ANYTO PROPOSEDCORRECT BUDGETOR FORADEQUATELY ADDRESS THE PLANNEDEXPRESSED COMMUNITY,CONCERNS OF THE CONSENSUS OF MEMBERS PRESENT, ALL OR ANY OF THE BOARD OF DIRECTORS SHALLMAY PROVIDEBE SUBJECT TO A SUMMARYRECALL PETITION AND JUSTIFICATIONVOTE OFPURSUANT THETO BUDGETSECTION 33-1813 WITHOUT REGARD TO ALLANY THEPRIOR MEMBERS.FAILED RECALL EFFORT.

[THEC. BOARD OF DIRECTORS SHALL SET A DATE AND PROVIDE NOTICE PURSUANT TO SECTION 33-1804 FOR A MEETING OF THE MEMBERS TO CONSIDER THE RATIFICATION OF THE BUDGET.

THEPURSUANT PROPOSEDTO BUDGETTHE ISDECLARATION, RATIFIEDTHE IFASSOCIATION AMAY MAJORITYESTABLISH OFAND MEMBERSFUND VOTINGRESERVE INACCOUNTS, PERSONHOWEVER ANDDENOMINATED, BYAS ABSENTEENECESSARY BALLOTTO OR,ADDRESS ASANTICIPATED OTHERWISELONG-TERM PROVIDEDOR BYMAJOR SECTIONMAINTENANCE 33-1812,AND APPROVEUPGRADE OF THE BUDGETCOMMON ASPROPERTY PRESENTEDOR WHETHERFOR ORANY NOTOTHER APURPOSE QUORUMAUTHORIZED ISIN ACHIEVED.]THE 2.DECLARATION.

IF THE PROPOSED BUDGET IS REJECTED, THE BOARD OF DIRECTORS MAY EITHER RETAIN THE EXISTING BUDGET AND ASSESSMENT OR DEVELOP AND APPROVE A BUDGET THAT DOES NOT REQUIRE RATIFICATION, UNTIL SUCH TIME AS THE MEMBERS RATIFY A SUBSEQUENT BUDGET PROPOSED BY THE BOARD OF DIRECTORS.

[3.

IF THE BOARD OF DIRECTORS BELIEVES THAT THE MEMBERS UNREASONABLY WITHHELD RATIFICATION OF THE APPROVED BUDGET, PREVENTING THE BOARD OF DIRECTORS FROM FULFILLING THE BOARD'S OBLIGATION UNDER THE DECLARATION TO MAINTAIN THE COMMON PROPERTY, THE BOARD OF DIRECTORS MAY INITIATE A SUIT FOR INJUNCTIVE RELIEF IN A COURT OF COMPETENT JURISDICTION REQUESTING THE COURT TO OVERRIDE THE RATIFICATION VOTE AND IMPLEMENT THE BUDGET AS ADOPTED BY THE BOARD OF DIRECTORS.

THE BOARD OF DIRECTORS BEARS -12- House Amendments to H.B.

2442 THE BURDEN OF PROOF THAT THE APPROVED BUDGET SATISFIES THE BOARD'S OBLIGATION TO THE COMMUNITY DESCRIBED IN SUBSECTION A OF THIS SECTION AND THAT THE MEMBER'S RATIFICATION WAS UNREASONABLE WITHHELD.

ANY LITIGATION COSTS SHALL NOT BE TAKEN FROM ASSOCIATION MONIES IF THE BOARD OF DIRECTORS FAILS TO PREVAIL IN THIS LAWSUIT.] C.

PURSUANT TO THE DECLARATION, THE ASSOCIATION MAY ESTABLISH AND FUND RESERVE ACCOUNTS HOWEVER DENOMINATED AS NECESSARY TO ADDRESS ANTICIPATED LONG-TERM OR MAJOR MAINTENANCE AND UPGRADE OF THE COMMON PROPERTY OR FOR ANY OTHER PURPOSE AUTHORIZED IN THE DECLARATION.

IF UNANTICIPATED AND UNBUDGETED OPERATING EXPENSES BECOME NECESSARY, THE ASSOCIATION SHALL DEVELOP,DEVELOP APPROVEAND AND,APPROVE IF NECESSARY, RATIFY A SUPPLEMENTAL AMENDMENT TO THE ANNUAL BUDGET PURSUANT TO SUBSECTIONS A AND B OF THIS SECTION BEFORE INCURRING THE EXPENSES.

IF THE ASSOCIATION OWNS AND OPERATES A COMMERCIAL FACILITY THAT IS OPEN TO THE GENERAL PUBLIC,PUBLIC THAT FAILS OR HAS FAILED TO GENERATE A PROFIT FOR THREE SUCCESSIVE FISCAL YEARS AND THAT CREATES A BURDEN ON THE MEMBERS TO SUBSIDIZE THE EXPENSES OF THAT COMMERCIAL FACILITY, THE ASSOCIATION SHALL SEND THE QUESTION OF THE CONTINUED OPERATION OF THAT FACILITY TO A VOTE OF THE MEMBERS.

G.- 12 - H.B.

IF2442 THEG. ASSOCIATION DOES NOT COMPLY WITH SUBSECTIONS A THROUGH F OF THIS SECTION, ANY RESULTING ACTION OR ASSESSMENT IS INVALID AND UNENFORCEABLE.

UNLESS LIMITATIONS IN THE COMMUNITY DOCUMENTS WOULD RESULT IN A LOWER LIMIT FOR ASSESSMENTS, THE ASSOCIATION SHALL NOT IMPOSE A REGULAR ASSESSMENT THAT IS MORE THAN TEN PERCENT GREATER THAN THE IMMEDIATELY PRECEDING FISCAL YEAR'S ASSESSMENT WITHOUT THE PRIOR APPROVAL OF THE MAJORITY OF THE MEMBERS VOTING ON THE ISSUE AT A MEETING OF THE MEMBERS CALLED FOR THAT PURPOSE.

Any monies paid by the member for an unpaid -13-assessment Houseshall Amendmentsbe applied first to H.B.the principal amount unpaid and then to the interest accrued AS PRESCRIBED BY SECTION 33-1807.

2442 assessment shall be applied first to the principal amount unpaid and then to the interest accrued AS PRESCRIBED BY SECTION 33-1807.

2.- 13 - H.B.

2442 2.

-14-- House14 Amendments- to H.B.

2442 M.

FOR THE PURPOSES OF THIS SECTION, "CONSUMER PRICE INDEX" MEANS THE UNITED STATES DEPARTMENT OF LABOR, BUREAU OF LABOR STATISTICS, INDEX FOR URBAN WAGE EARNERS AND CLERICAL WORKERS THAT IS DESIGNATED AS "CPI-W".

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