HOA Legi-Slate

Yesterday afternoon, the House Local Government heard SB 89. At the committee hearing, Representative Carroll introduced a strike below amendment for the Committee's consideration. (Instead of introducing amendments one by one, a strike below amendment strikes everything below the enacting clause, replacing it with the language of the strike below amendment.)

The strike below incorporates much of the reengrossed version of SB 89. Here is a break down on the pertinent provisions contained in the strike below (I have italicized the portions of the amendment that differ from the reengrossed version):

Section 1 - Flags, Political Signs, Emergency Vehicle Parking, and Fire Mitigation:

• Clarifies that an occupant, as well as a unit owner, has the right to display an American or military service flag.


• Allows associations to limit political signs to the lesser of 1) the maximum size allowed by any applicable local ordinance or 2) 36 inches by 48 inches.


• Clarifies that an occupant, as well as a unit owner, has the right to park an emergency vehicle within the common interest community if all the necessary conditions are met.


• Clarifies that the parking of the emergency vehicle must not interfere with the reasonable needs of other owners to use guest parking spaces, as well as streets and driveways.


• Prohibits the association from requiring the use of cedar shakes or other flammable roofing materials.

Section 4 - Alternative Dispute Resolution

• Requires associations to adopt a written policy addressing its procedure for handling disputes arising between the association and unit owners.

Section 5 - Annual Association Disclosures

• Instead of having to disclose the following annually, the association must make the following information available with 90 days of assuming control from the declarant upon reasonable notice: 1) association name; 2) name of association's designated agent or management company, if any; 3) the association's physical address and the management company's physical address, if any; 4) the name of the common interest community; 5) the initial date of the recording of the declaration; and 6) the reception number or book and page for the main document that constitutes the declaration.


• Removes the requirement that associations disclose the results of any financial audit or review for the fiscal year preceding the current annual disclosure and replaces it with the requirement that association disclose the results of the most recent available financial audit.

Section 6 - Responsible Governance Policies

• Removes the requirement for associations to keep their accounting records using generally accepted accounting principles, allowing associations to keep their records "on an accrual, cash, or modified accrual basis of accounting."


• Adds the alternative dispute resolution policy required by section 4 to the list of responsible governance policies.

Section 7 - Amendment of Declaration

• Removes the exemption from the supermajority cap for declarant controlled communities, phased communities, and mixed-use communities.


• Clarifies that common interest communities whose declaration provides for an initial term of applicability followed by automatic extension periods for a designated number of years may amend their declaration during any of these specified periods. (This amendment legislatively overturns this case.
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• Clarifies that the mortgagee notification provision is not mandatory.


• Exempts common interest communities in which one owner is allocated more than sixty-seven percent of the votes in the association from the supermajority cap.

Section 8 - Standards for Investing Association Reserve Funds

• Replaces the requirement for boards to follow the common law "business judgment rule" when investing association reserve fund with the standards set forth in section 7-128-401 of the Nonprofit Code.

Section 9 - Owner Participation at Meetings

• Removes the requirement that an association have an audit or review once every two years, replacing it with an audit or review at the discretion of the board. Provides for a required review at the request of 1/3 of the owners. (SB 100's requirement for an audit when the association has annual revenues or expenditures of at least $250,000 and 1/3 of the owners request one remains.)

Section 10 - Secret Ballots and Counting Votes

• Clarifies when owners may speak at board meetings, but does not change the right of owners to speak before the board takes formal action.


• Removes the requirement for secret ballots in uncontested elections.


• Provides that associations whose governing documents provide for board elections by delegates are exempt from the requirement to use a secret ballot in contested elections.


• States that an association may use a secret ballot for other owner votes at the discretion of the board and must use a secret ballot at the request of twenty percent of the owners present at the meeting or represent by proxy.


• Provides that ballots must be counted by a neutral third party or by a committee of volunteers. These volunteers must be owners selected or appointed at an open meeting, in a fair manner, by the board chair or individual presiding at the meeting. Volunteers may not be board members or candidates, in the case of a contested election.

Section 11 - Board Member Conflicts of Interest

• Replaces the conflict of interest provision added to CCIOA by SB 100 with a cross-reference to the conflict of interest provision in section 7-128-501 of the Nonprofit Code.

Section 12 - Association Records

• Provides that membership lists may not be obtained or used by any person for a purpose unrelated to an owner's interest as an owner without the consent of the board. States that membership lists may not be used without the consent of the board 1) to solicit money or property (unless such money or property will be used solely to solicit owner votes in an association election); 2) for any commercial purposes; or 3) sold to or purchased by any person.


• Allows associations to collect coping costs in advance.


• Adds to the definition of "reasonably available" (the time by which the association must produce in response to an owner's request), allowing associations to produce the requested records at the next regularly scheduled meeting if the meeting will occur with thirty days after the request.

Section 13 - Seller Disclosures

• Repeals this section, which required a seller of property in a common interest community to disclose certain association documents to a potential buyer.

Section 14 - Common Interest Community Disclose Statement

• Replaces SB 100's disclosure statement with a statement patterned after the special district disclosure statement.


• Limits the damages available to a buyer in the case of a seller who failed to provide the disclosure statement to the actual damages directly and proximately caused by this failure, plus court costs.


• Provides that on request, the seller shall provide to the buyer or authorize the association to provide to the buyer a copy of the association's governing and financial documents as listed in the most recent available version of the buy/sell contract promulgated by the real estate commission as of the date of the contract.


• States that associations may charge their usual fee per 38-33.3-317(3) [the section that states that associations may charge their actual costs for copying association documents.]

Section 15 - Owner Initiated Insurance Claims

• Allows an owner to file a claim against an association policy if 1) the owner has contacted the executive board or the manager in writing, and in accordance with any applicable association policies or procedures for owner-initiated claims, regarding the subject matter of the claim; 2) the owner has given the association at least fifteen days to respond in writing, and, if so requested, has given the association's agent a reasonable opportunity to inspect the damage; and 3) the subject matter of the claim falls within the association's insurance responsibilities as defined by the declaration or in an insurance policy listed per section 209.4 (association annual disclosures).

In addition to the strike below discussed above, amendment L.027 was passed. This amendment was introduced by Representative Stengel at the request of the proponents of SB 185 (discussed in this post.) Amendment L.027 was introduced as a substitution for SB 185 and will be discussed in a separate post.

Amended SB 89 was then passed out of the Committee with a favorable recommendation to the Committee of the Whole with a 9-2 vote, with Representative Decker and Representative Massey voting against the bill.

Removal of cost limitation in replacement roofing paragraph is not in the interest of unit owners. HOAs can specify roofing materials that are over two times more expensive than replacement wooden cedar shakes. For example, a replacement wooden cedar shake roof for my house is $17,000; replacement with stone coated steel or aluminum is well over $30,000! Do not let this happen.