Text: HF02576                           Text: HF02578
Text: HF02500 - HF02599                 Text: HF Index
Bills and Amendments: General Index     Bill History: General Index

House File 2577

Partial Bill History

Bill Text

  1  1    Section 1.  Section 499B.2, subsection 4, Code 2001, is
  1  2 amended to read as follows:
  1  3    4.  "Council of co-owners" or "council" means all the co-
  1  4 owners of the building.  The business and affairs of the
  1  5 council of co-owners may be conducted by organizing a
  1  6 corporation not for pecuniary profit of which the co-owners
  1  7 are members.
  1  8    Sec. 2.  Section 499B.8, Code 2001, is amended by adding
  1  9 the following new subsection:
  1 10    NEW SUBSECTION.  3.  If the instrument to remove property
  1 11 from the provisions of this chapter provides that the property
  1 12 is to be sold following removal, title to the property upon
  1 13 removal vests in the council of co-owners as trustee for the
  1 14 holders of all interest in the apartments.  The council as
  1 15 trustee thereafter has all powers necessary and appropriate to
  1 16 effect the sale.  Until the sale has been concluded and the
  1 17 proceeds distributed, the council continues in existence with
  1 18 all powers and responsibilities it had before termination
  1 19 whether under the declaration or otherwise.  Unless the
  1 20 instrument for the removal of the property from the provisions
  1 21 of this chapter otherwise provides, proceeds of the sale shall
  1 22 be paid to the council as trustee and shall be distributed to
  1 23 the co-owners and holders of an interest as security for an
  1 24 obligation as their interests may appear and according to the
  1 25 priority enjoyed prior to removal from the provisions of this
  1 26 chapter in proportion to the respective interests of co-
  1 27 owners.  Any interest as security for an obligation formerly
  1 28 affecting an apartment shall constitute a claim against the
  1 29 proceeds in the amount existing at the time of removal from
  1 30 the provisions of this chapter plus interest and other amounts
  1 31 accrued until distribution.  Except as otherwise specified in
  1 32 the removal instrument, as long as the council as trustee
  1 33 holds title to the real estate, each co-owner and successors
  1 34 in interest have the right to use the real estate that
  1 35 formerly constituted the common elements and have an exclusive
  2  1 right to occupancy of the portion of the real estate that
  2  2 formerly constituted the apartment and limited common
  2  3 elements.  During the period of such occupancy, each co-owner
  2  4 and successors in interest remain liable for all assessments
  2  5 and other obligations imposed on co-owners by this chapter,
  2  6 the declaration, or the agreement to remove the property from
  2  7 the provisions of this chapter.
  2  8    Sec. 3.  NEW SECTION.  499B.24  APPLICABILITY.
  2  9    1.  Sections 499B.25 through 499B.38 apply to all
  2 10 horizontal property regimes created on or after July 1, 2002,
  2 11 and are in lieu of sections 499B.14 through 499B.19.
  2 12    2.  Notwithstanding any provisions to the contrary, section
  2 13 499B.26, subsection 1, paragraphs "a" through "i", and
  2 14 sections 499B.32, 499B.33, 499B.36, and 499B.37 apply to
  2 15 horizontal property regimes created prior to July 1, 2002.
  2 16 However, these provisions apply only with respect to events
  2 17 and circumstances occurring on or after July 1, 2002.
  2 19 COUNCIL.
  2 20    A council of co-owners shall be organized no later than the
  2 21 date the horizontal property regime is created.  The
  2 22 membership of the council at all times shall consist
  2 23 exclusively of all the co-owners or, following removal of the
  2 24 property from the provisions of this chapter, of all former
  2 25 co-owners entitled to distributions of proceeds under section
  2 26 499B.8, subsection 3, or their heirs, successors, or assigns.
  2 27 The council shall be organized as a profit or nonprofit
  2 28 corporation.
  2 29    Sec. 5.  NEW SECTION.  499B.26  POWERS OF COUNCIL.
  2 30    1.  Unless limited by the provisions of the declaration,
  2 31 the council may do all of the following:
  2 32    a.  Adopt and amend rules and regulations.
  2 33    b.  Adopt and amend budgets for revenues, expenditures, and
  2 34 reserves and collect assessments for common expenses from co-
  2 35 owners.
  3  1    c.  Hire and terminate managing agents and other employees,
  3  2 agents, and independent contractors.
  3  3    d.  Institute, defend, or intervene in litigation or
  3  4 administrative proceedings in its own name on behalf of itself
  3  5 or two or more co-owners on matters affecting the horizontal
  3  6 property regime.
  3  7    e.  Regulate the use, maintenance, repair, replacement, and
  3  8 modification of common elements.
  3  9    f.  Impose reasonable charges including reasonable costs
  3 10 and attorney fees, for the evaluation, preparation, and
  3 11 recordation of amendments to the declaration or statements of
  3 12 unpaid assessments.
  3 13    g.  Provide for the indemnification of its officers and
  3 14 board and maintain directors' and officers' liability
  3 15 insurance.
  3 16    h.  Impose charges for late payment of assessments and,
  3 17 after notice and an opportunity to be heard, levy reasonable
  3 18 fines for violations of the declaration, bylaws, and rules and
  3 19 regulations of the council.
  3 20    i.  Exercise any other powers conferred by state law, the
  3 21 declaration, or bylaws.
  3 22    j.  Cause improvements to be made as a part of the common
  3 23 elements.
  3 24    k.  Grant leases, licenses, and concessions not to exceed
  3 25 one year and utility easements through or over the common
  3 26 elements.  However, after conveyance to owners other than the
  3 27 declarant or affiliate of a declarant of apartments to which
  3 28 more than fifty percent of the voting power is allocated, the
  3 29 council may by resolution of a meeting of the members duly
  3 30 called grant leases, licenses, and concessions in excess of
  3 31 one year and easements through or over the common elements.
  3 32    l.  Impose and receive any payments, fees, or charges for
  3 33 the use, rental, or operation of the general common elements.
  3 34    2.  Notwithstanding subsection 1, the declaration shall not
  3 35 impose limitations on the power of the council to deal with
  4  1 the declarant that are more restrictive than the limitations
  4  2 imposed on the power of the council to deal with other
  4  3 persons.
  4  4    Sec. 6.  NEW SECTION.  499B.27  BOARD OF DIRECTORS –
  4  6    1.  The declaration may provide for a period of declarant
  4  7 control of the council, during which period a declarant, or
  4  8 persons designated by the declarant, may elect the members of
  4  9 the board of directors.  Any period of declarant control
  4 10 extends from the date of the first conveyance of an apartment
  4 11 to a co-owner other than a declarant for a period not
  4 12 exceeding three years.  Regardless of the period provided in
  4 13 the declaration, a period of declarant control terminates upon
  4 14 surrender of control by the declarant or no later than sixty
  4 15 days after conveyance of seventy-five percent of the
  4 16 apartments to co-owners other than a declarant.
  4 17    2.  Not later than sixty days after conveyance of fifty
  4 18 percent of the apartments to co-owners other than a declarant,
  4 19 not less than one-third of all of the members of the board of
  4 20 directors shall be elected by co-owners other than the
  4 21 declarant.
  4 22    3.  Not later than the termination of the period of
  4 23 declarant control, and thereafter, the co-owners shall elect a
  4 24 board of directors of at least three members, at least a
  4 25 majority of whom shall be co-owners or the individual nominees
  4 26 of the co-owners other than individuals.  The board of
  4 27 directors shall elect the officers.  The persons elected shall
  4 28 take office upon election.
  4 29    4.  In determining whether the period of declarant control
  4 30 has terminated under subsection 1, or whether co-owners other
  4 31 than a declarant are entitled to elect members of the board of
  4 32 directors under subsection 2, the percentage of the apartments
  4 33 which has been conveyed is presumed to be that percentage
  4 34 which would have been conveyed if all the apartments which the
  4 35 declarant has built or reserved the right to build in the
  5  1 declaration were included in the horizontal property regime.
  5  2    Sec. 7.  NEW SECTION.  499B.28  TRANSFER OF SPECIAL
  5  4    1.  For purposes of this section, "special declarant
  5  5 rights" means rights reserved for the benefit of a declarant
  5  6 to complete improvements indicated on the horizontal property
  5  7 regime plat; to add additional real estate to a horizontal
  5  8 property regime; to subdivide or convert an apartment; to
  5  9 maintain sales offices, management offices, signs advertising
  5 10 the horizontal property regime, and models; to use easements
  5 11 through the common elements for the purpose of making
  5 12 improvements within the horizontal property regime or any
  5 13 additional real estate; or to appoint or remove any board
  5 14 member during any period of declarant control as provided in
  5 15 section 499B.27, subsection 1.
  5 16    2.  Special declarant rights created or reserved under this
  5 17 chapter shall not be transferred except by an instrument
  5 18 evidencing the transfer recorded in every county where any
  5 19 portion of the horizontal property regime is located.  The
  5 20 instrument shall be recordable and is not effective unless
  5 21 executed by the transferor and transferee.  If additional real
  5 22 estate is transferred by the declarant, the transferee shall
  5 23 be deemed to receive all special declarant rights with respect
  5 24 to the additional real estate and shall be subject to any
  5 25 obligations imposed by the declaration respecting the
  5 26 additional real estate.  For purposes of this section, the
  5 27 transferee shall also be considered a declarant.
  5 28    3.  Upon transfer of any special declarant right, the
  5 29 liability of a transferor declarant involves all of the
  5 30 following:
  5 31    a.  A transferor is not relieved of any obligation or
  5 32 liability which arose before the transfer, and remains liable
  5 33 for warranty obligations imposed by this chapter.  Lack of
  5 34 privity does not deprive any co-owner of standing to bring an
  5 35 action to enforce any obligation of the transferor.
  6  1    b.  If a transferor retains any special declarant right, or
  6  2 if a successor to any special declarant right is an affiliate
  6  3 of a declarant, the transferor is subject to liability for all
  6  4 obligations and liabilities imposed on a declarant by this
  6  5 chapter or by the declaration arising after the transfer and
  6  6 is jointly and severally liable with the successor for the
  6  7 liabilities and obligations of the successor which relate to
  6  8 the horizontal property regime.
  6  9    c.  A transferor who retains no special declarant right has
  6 10 no liability for any act or omission or any breach of a
  6 11 contractual or warranty obligation arising from the exercise
  6 12 of a special declarant right by a successor declarant who is
  6 13 not an affiliate of the transferor.
  6 14    4.  In case of foreclosure of a mortgage or cancellation of
  6 15 a contract for deed or sale under the federal bankruptcy law
  6 16 or receivership proceeding or the foreclosure of any other
  6 17 lien against any apartment owned by a declarant in the
  6 18 horizontal property regime, a person first acquiring title to
  6 19 all the apartments being canceled, foreclosed, or sold,
  6 20 succeeds to all then-existing special declarant rights except
  6 21 the special declarant rights with respect to additional real
  6 22 estate, unless the mortgage or other instrument or proceeding
  6 23 also covers additional real estate.
  6 24    5.  The liabilities and obligations of persons who succeed
  6 25 to special declarant rights are all of the following:
  6 26    a.  A successor to any special declarant right who is an
  6 27 affiliate of a declarant is subject to all the obligations and
  6 28 liabilities imposed on any declarant by this chapter or by the
  6 29 declaration.
  6 30    b.  A successor to any special declarant right, other than
  6 31 a successor described in paragraph "c" or "d", who is not an
  6 32 affiliate of a declarant, is subject or all obligations and
  6 33 liabilities imposed on a declarant by this chapter or the
  6 34 declaration, except that the successor is not subject to
  6 35 liability for misrepresentations or warranty obligations on
  7  1 improvements made by any previous declarant, or made before
  7  2 the horizontal property regime was created, or for a breach of
  7  3 fiduciary obligation by any previous declarant.
  7  4    c.  A successor to only a right reserved in the declaration
  7  5 to maintain models, sales offices, and signs, if the successor
  7  6 is not an affiliate of a declarant, shall not exercise any
  7  7 other special declarant right, and is not subject to any
  7  8 liability or obligation as a declarant, except the obligation
  7  9 to provide a disclosure statement and any liability arising as
  7 10 a result of that obligation.
  7 11    d.  A successor to all special declarant rights, who is not
  7 12 an affiliate of a declarant and who succeeded to those rights
  7 13 pursuant to a deed in lieu of foreclosure or by reason of
  7 14 subsection 4, may declare an intention in a recorded
  7 15 instrument to hold those rights solely for transfer to another
  7 16 person.  Thereafter, until transferring all special declarant
  7 17 rights to any person acquiring title to any apartment owned by
  7 18 the successor, or until recording an instrument permitting
  7 19 exercise of all those rights, that successor shall not
  7 20 exercise any of those rights other than the right to control
  7 21 the board of directors in accordance with the provisions of
  7 22 section 499B.27 for the duration of any period of declarant
  7 23 control, and any attempted exercise of those rights is void.
  7 24 So long as any successor declarant is not entitled to exercise
  7 25 special declarant rights under this subsection, the successor
  7 26 declarant is not subject to any liability or obligation as a
  7 27 declarant other than liability for acts and omissions under
  7 28 section 499B.27.
  7 29    6.  This section does not subject any successor to a
  7 30 special declarant right to any claims against or other
  7 31 obligations of a transferor declarant, other than claims and
  7 32 obligations arising under this chapter or the declaration.
  7 35    If entered into prior to expiration of the period of
  8  1 declarant control pursuant to section 499B.27, any management
  8  2 contract, employment contract, or lease of recreational or
  8  3 parking areas or facilities; any other contract or lease
  8  4 binding the council or any co-owner other than the declarant
  8  5 or an affiliate of the declarant to which a declarant or an
  8  6 affiliate of a declarant is a party; or any contract or lease
  8  7 binding the council or any co-owner other than the declarant
  8  8 or an affiliate of the declarant which is not bona fide or
  8  9 which was unconscionable to the co-owners at the time entered
  8 10 into under the circumstances then prevailing may be terminated
  8 11 without penalty by the council at any time after the
  8 12 expiration of declarant control upon not less than ninety
  8 13 days' notice to the other party.  This section does not apply
  8 14 to any lease the termination of which would remove the
  8 15 property from the provisions of this chapter.
  8 16    Sec. 9.  NEW SECTION.  499B.30  BYLAWS.
  8 17    The bylaws and any amendments to the bylaws shall be
  8 18 recorded to be effective and shall provide all of the
  8 19 following:
  8 20    1.  The meeting of the members shall be held at least once
  8 21 each year and shall specify an officer who shall, at least
  8 22 twenty-one days in advance of any annual or regularly
  8 23 scheduled meeting and at least seven days in advance of any
  8 24 other meeting, send to each co-owner notice of the time,
  8 25 place, and complete agenda of the meeting.  The notice shall
  8 26 be delivered in person or sent by United States mail to all
  8 27 co-owners of record at the address of the respective
  8 28 apartments and to other addresses as any of them may have
  8 29 designated to the officer.
  8 30    2.  A vote in the council shall not inure to any apartment
  8 31 during the time when the co-owner is the council.
  8 32    3.  For a mechanism to resolve disputes regarding voting
  8 33 among more than one co-owner of an apartment in such a way
  8 34 that the vote allocated to the apartment is not split or
  8 35 otherwise cast separately by the several co-owners.
  9  1    4.  An annual report to be prepared by the council and a
  9  2 copy of the report to be provided to each co-owner with the
  9  3 report to contain a minimum of all of the following:
  9  4    a.  A statement of any capital expenditures in excess of
  9  5 two percent of the current budget or five thousand dollars,
  9  6 whichever is the greater, anticipated by the council during
  9  7 the current year or succeeding two fiscal years.
  9  8    b.  A statement of the status and amount of any reserve or
  9  9 replacement fund and portion of the fund designated for any
  9 10 specified project by the board of directors.
  9 11    c.  A copy of the statement of financial condition for the
  9 12 council for the last fiscal year.
  9 13    d.  A statement of the status of any pending suits or
  9 14 judgments to which the council is a party.
  9 15    e.  A statement of the insurance coverage provided by the
  9 16 council.
  9 17    f.  A statement of any unpaid assessments by the council on
  9 18 individual apartments identifying the apartment number and the
  9 19 amount of the unpaid assessment.
  9 20    Sec. 10.  NEW SECTION.  499B.31  UPKEEP OF THE PROPERTY.
  9 21    Except to the extent otherwise provided by the declaration
  9 22 or section 499B.33, subsection 4, the council is responsible
  9 23 for maintenance, repair, and replacement of the common
  9 24 elements and each co-owner is responsible for maintenance,
  9 25 repair, and replacement of the co-owner's apartment.  Each co-
  9 26 owner shall afford to the council and the other co-owners, and
  9 27 to their agents or employees, access through the apartment
  9 28 reasonably necessary for those purposes.
  9 29    If damage is inflicted on the common elements or any
  9 30 apartment through which access is taken, the co-owner
  9 31 responsible for the damage, or the council if the council is
  9 32 responsible, is liable for the prompt repair of the damage.
  9 33    Sec. 11.  NEW SECTION.  499B.32  TORT AND CONTRACT
  9 35    1.  If a tort or breach of contract occurred during any
 10  1 period of declarant control, the declarant shall indemnify the
 10  2 council for all liability incurred by the council as a result
 10  3 of that tort or breach of contract, including legal fees.  Any
 10  4 statute of limitation affecting the council's right of action
 10  5 under this section is tolled until the period of declarant
 10  6 control terminates.
 10  7    2.  A co-owner shall not have tort liability arising out of
 10  8 ownership of the common elements provided that the council has
 10  9 liability insurance coverage on the occurrence in an amount
 10 10 not less than one million dollars.
 10 11    Sec. 12.  NEW SECTION.  499B.33  INSURANCE.
 10 12    1.  Commencing not later than the time of the first
 10 13 conveyance of an apartment to a co-owner other than a
 10 14 declarant, the council shall maintain, to the extent
 10 15 reasonably available, all of the following:
 10 16    a.  Property insurance on the common elements and
 10 17 apartments, exclusive of land, excavations, foundations, and
 10 18 other items normally excluded from property policies, insuring
 10 19 against all risks of direct physical loss.  The total amount
 10 20 of insurance after application of any deductibles shall be not
 10 21 less than eighty percent of the full insurable replacement
 10 22 cost of the insured property.  The council or its authorized
 10 23 agent may enter an apartment at reasonable times upon
 10 24 reasonable notice for the purpose of making appraisals for
 10 25 insurance purposes.
 10 26    b.  Comprehensive general liability insurance, in an amount
 10 27 determined by the board of directors but not less than any
 10 28 amount specified in the declaration, covering all occurrences
 10 29 commonly insured against for death, bodily injury, and
 10 30 property damage arising out of or in connection with the use,
 10 31 ownership, or maintenance of the common elements.
 10 32    2.  If the insurance described in subsection 1 is not
 10 33 maintained, the council shall immediately cause notice of that
 10 34 fact to be sent postage prepaid by United States mail to all
 10 35 co-owners at their respective apartments and other addresses
 11  1 provided to the council.  The declaration may require the
 11  2 council to carry any other insurance, and the council in any
 11  3 event may carry any other insurance it deems appropriate to
 11  4 protect the council or the co-owners.
 11  5    3.  Insurance policies carried pursuant to subsection 1
 11  6 shall provide all of the following:
 11  7    a.  Each co-owner and holder of a vendor's interest in a
 11  8 contract for deed is an insured person under the policy with
 11  9 respect to liability arising out of ownership of an undivided
 11 10 interest in the common elements.
 11 11    b.  The insurer waives its right to subrogation under the
 11 12 policy against any co-owner of the horizontal property regime
 11 13 or members of the co-owner's household and against the council
 11 14 and members of the board of directors.
 11 15    c.  An act or omission by any co-owner or holder of an
 11 16 interest as security for an obligation, unless acting within
 11 17 the scope of authority on behalf of the council, shall not
 11 18 void the policy or be a condition to recovery under the
 11 19 policy.
 11 20    d.  If, at the time of a loss under the policy, other
 11 21 insurance is in force in the name of a co-owner covering the
 11 22 same property covered by the policy, the policy is primary
 11 23 insurance not contributing with the other insurance.
 11 24    4.  Any loss covered by the property policy under
 11 25 subsection 1, paragraph "a", shall be adjusted with the
 11 26 council, but the insurance proceeds for that loss shall be
 11 27 payable to any insurance trustee designated for that purpose,
 11 28 or otherwise to the council.  The insurance trustee or the
 11 29 council shall hold any insurance proceeds in trust for co-
 11 30 owners and holders of an interest as security for an
 11 31 obligation as their interests may appear.  The proceeds shall
 11 32 be disbursed first for the repair or restoration of the
 11 33 damaged common elements and apartments, and co-owners and
 11 34 holders of an interest as security for an obligation are not
 11 35 entitled to receive payment of any portion of the proceeds
 12  1 unless there is a surplus of proceeds after the common
 12  2 elements and apartments have been completely repaired or
 12  3 restored, or the property is removed from the provisions of
 12  4 this chapter.
 12  5    5.  An insurance policy issued to the council does not
 12  6 prevent an apartment owner from obtaining insurance for
 12  7 personal benefit.
 12  8    6.  An insurer that has issued an insurance policy under
 12  9 this section shall issue certificates or memoranda of
 12 10 insurance, upon request, to any co-owner, or holder of an
 12 11 interest as security for an obligation.  The insurance shall
 12 12 not be cancelled until thirty days after notice of the
 12 13 proposed cancellation has been mailed to the council and to
 12 14 each co-owner and holder of an interest as security for an
 12 15 obligation to whom certificates of insurance have been issued.
 12 16    7.  Any portion of the horizontal property regime damaged
 12 17 or destroyed shall be promptly repaired or replaced by the
 12 18 council unless the property is removed from the provisions of
 12 19 this chapter and the council votes not to repair or replace
 12 20 all or part thereof; repair or replacement would be illegal
 12 21 under any state or local health or safety statute or
 12 22 ordinance; or eighty percent of the co-owners, including every
 12 23 co-owner and first mortgagee of an apartment or assigned
 12 24 limited common element which will not be rebuilt, vote not to
 12 25 rebuild.  The cost of repair or replacement of an apartment or
 12 26 the common elements in excess of insurance proceeds and
 12 27 reserves shall be a common expense.  If less than the entire
 12 28 horizontal property regime is repaired or replaced, all of the
 12 29 following apply:
 12 30    a.  The insurance proceeds attributable to the damaged
 12 31 common elements shall be used to restore the damaged common
 12 32 elements to a condition compatible with the remainder of the
 12 33 horizontal property regime.
 12 34    b.  The insurance proceeds attributable to apartments and
 12 35 limited common elements which are not rebuilt shall be
 13  1 distributed to the co-owners of those apartments, and the
 13  2 holders of an interest as security for an obligation of those
 13  3 apartments, and the owners and holders of an interest as
 13  4 security for an obligation of the apartments to which those
 13  5 limited common elements were assigned, as their interests may
 13  6 appear.
 13  7    c.  The remainder of the proceeds shall be distributed to
 13  8 all the co-owners and holders of an interest as security for
 13  9 an obligation as their interests may appear in proportion to
 13 10 their common element interest.  If the co-owners vote not to
 13 11 rebuild an apartment, that apartment's entire common element
 13 12 interest, votes in the council, and common expense liability
 13 13 are automatically reallocated upon the vote as if the
 13 14 apartment has been condemned under eminent domain, and the
 13 15 council shall promptly prepare, execute, and record an
 13 16 amendment to the declaration reflecting the reallocations.
 13 17 Notwithstanding the provisions of this subsection, if the
 13 18 horizontal property regime is removed from the provisions of
 13 19 this chapter, insurance proceeds not used for repair or
 13 20 replacement shall be distributed in the same manner as sales
 13 21 proceeds pursuant to section 499B.8, subsection 3.
 13 22    8.  The provisions of this section may be varied or waived
 13 23 in the case of a horizontal property regime where all of the
 13 24 apartments are restricted to nonresidential use.
 13 25    Sec. 13.  NEW SECTION.  499B.34  SURPLUS FUNDS.
 13 26    Unless otherwise provided in the declaration, any surplus
 13 27 funds of the council remaining after payment of or provision
 13 28 for common expenses and any prepayment of reserves shall be
 13 29 credited to the co-owners to reduce their future common
 13 30 expense assessments.
 13 31    Sec. 14.  NEW SECTION.  499B.35  ASSESSMENTS FOR COMMON
 13 32 EXPENSES.
 13 33    1.  Until the council levies a common expense assessment,
 13 34 the declarant shall pay all accrued expenses of the horizontal
 13 35 property regime.  After any assessment has been levied by the
 14  1 council, assessments shall be levied at least annually and
 14  2 shall be based on a budget adopted at least annually by the
 14  3 council.
 14  4    2.  Except for assessments under subsections 3 and 4,
 14  5 common expenses shall be assessed against all the apartments
 14  6 in accordance with the common expense liability allocated to
 14  7 each apartment.  Any past due assessment or installment of an
 14  8 assessment shall bear interest at the rate established by the
 14  9 council.
 14 10    3.  Except as provided by the declaration, any common
 14 11 expense associated with the maintenance, repair, or
 14 12 replacement of a limited common element shall be assessed
 14 13 against the apartment, or in equal shares against the
 14 14 apartments to which that limited common element was assigned
 14 15 at the time the expense was incurred.
 14 16    4.  If the declaration so provides, the council may assess
 14 17 any common expense benefiting less than all of the apartments
 14 18 against the apartments benefited.  In that case, the common
 14 19 expense shall be allocated among apartments benefited in
 14 20 proportion to their common expense liability.
 14 21    Sec. 15.  NEW SECTION.  499B.36  LIEN FOR ASSESSMENTS.
 14 22    1.  The council has a lien on an apartment for any
 14 23 assessment levied against that apartment from the time the
 14 24 assessment becomes payable.  The council's lien may be
 14 25 foreclosed as provided by the laws of this state as if it were
 14 26 a lien under a mortgage containing a power of sale but the
 14 27 council shall give reasonable notice of its action to all
 14 28 lienholders of the apartment whose interest would be affected.
 14 29 The rights of the parties shall be the same as those provided
 14 30 by law except that the period of redemption for co-owners
 14 31 shall be six months from the date of sale.  Unless the
 14 32 declaration otherwise provides, fees, charges, late charges,
 14 33 and interest charges pursuant to section 499B.26, subsection
 14 34 1, paragraphs "f", "h", and "l", are enforceable as
 14 35 assessments under this section.
 15  1    2.  A lien under this section has priority over all other
 15  2 liens and encumbrances on an apartment except liens and
 15  3 encumbrances recorded before the recordation of the
 15  4 declaration, any recorded mortgage on the apartment securing a
 15  5 first mortgage holder, and liens for real estate taxes and
 15  6 other governmental assessments or charges against the
 15  7 apartment.  This subsection does not affect the priority of
 15  8 mechanic's or material supplier's liens.
 15  9    3.  Recording of the declaration constitutes record notice
 15 10 and perfection of the lien, and no further recordation of any
 15 11 claim of lien for assessment under this section is required.
 15 12    4.  Proceedings to enforce an assessment must be instituted
 15 13 within three years after the last installment of the
 15 14 assessment becomes payable.
 15 15    5.  Co-owners at the time an assessment is payable are
 15 16 personally liable to the council for payment of the
 15 17 assessment.
 15 18    6.  A foreclosure sale, judgment, or decree in any action,
 15 19 proceeding, or suit brought under this section shall include
 15 20 costs and reasonable attorney fees for the prevailing party.
 15 21    7.  The council shall furnish to a co-owner or the co-
 15 22 owner's authorized agent upon written request of the co-owner
 15 23 or the authorized agent a recordable statement setting forth
 15 24 the amount of unpaid assessments currently levied against the
 15 25 co-owner's apartment.  The statement shall be furnished within
 15 26 ten business days after receipt of the request and is binding
 15 27 on the council and every co-owner.
 15 28    Sec. 16.  NEW SECTION.  499B.37  RESALE OF APARTMENTS –
 15 30    1.  In the event of a resale of an apartment by a co-owner
 15 31 other than a declarant, the co-owner shall furnish to a
 15 32 purchaser before execution of any purchase agreement for an
 15 33 apartment, or otherwise before conveyance, a copy of the
 15 34 declaration, other than the horizontal property regime plat,
 15 35 the bylaws, the rules and regulations of the council, and any
 16  1 amendments thereto, and a certificate dated not more than
 16  2 ninety days prior to the date of the purchase agreement or
 16  3 otherwise before conveyance, containing all of the following:
 16  4    a.  A statement disclosing any right of first refusal or
 16  5 other restraint on the free alienability of the apartment
 16  6 contained in the declaration, bylaws, rules and regulations,
 16  7 or any amendment thereof.
 16  8    b.  A statement setting forth the amount of periodic
 16  9 installments of common expense assessments and special
 16 10 assessments and any unpaid common expense or special
 16 11 assessment currently payable.
 16 12    c.  A statement of any other fees payable by co-owners.
 16 13    d.  A statement of any capital expenditures approved by the
 16 14 council for the current and next succeeding two fiscal years.
 16 15    e.  A statement that a copy of the horizontal property
 16 16 regime plat and any amendments thereof are available in the
 16 17 office of the council for inspection.
 16 18    f.  A statement of the amount of any reserves for capital
 16 19 expenditures and of any portions of those reserves designated
 16 20 by the council for any specified projects.
 16 21    g.  The most recent regularly prepared balance sheet and
 16 22 income and expense statement, if any, of the council.
 16 23    h.  The current budget of the council.
 16 24    i.  A statement of any judgments against the council and
 16 25 the status of any pending suits to which the council is a
 16 26 party.
 16 27    j.  A statement describing any insurance coverage provided
 16 28 for the benefit of co-owners.
 16 29    2.  The council shall, within seven days after a request by
 16 30 a co-owner or the co-owner's authorized agent, furnish a
 16 31 certificate containing the information necessary to enable the
 16 32 co-owner to comply with this section.  A co-owner without
 16 33 actual knowledge providing a certificate pursuant to
 16 34 subsection 1 shall have no liability to the purchaser for any
 16 35 erroneous information provided by the council and included in
 17  1 the certificate.
 17  2    3.  A purchaser is not liable for any unpaid assessment or
 17  3 fee existing as of the date of the certificate greater than
 17  4 the amount set forth in the certificate prepared by the
 17  5 council.  A co-owner is not responsible to a purchaser for the
 17  6 failure or delay of the council to provide the certificate in
 17  7 a timely manner.
 17  8    4.  The council shall keep financial records sufficiently
 17  9 detailed to enable the council to comply with this section.
 17 10 All financial records shall be made reasonably available for
 17 11 examination by any co-owner and the co-owner's authorized
 17 12 agents.
 17 13    Sec. 17.  NEW SECTION.  499B.38  COUNCIL AS TRUSTEE.
 17 14    With respect to a third person dealing with the council in
 17 15 the council's capacity as a trustee, the existence of trust
 17 16 powers and their proper exercise by the council may be assumed
 17 17 without inquiry.  A third person is not bound to inquire
 17 18 whether the council has power to act as trustee or is properly
 17 19 exercising trust powers and a third person, without actual
 17 20 knowledge that the council is exceeding its trust powers or
 17 21 improperly exercising its trust powers, is fully protected in
 17 22 dealing with the council as if the council possessed and
 17 23 properly exercised the trust powers the council purports to
 17 24 exercise.  A third person is not bound to ensure the proper
 17 25 application of trust assets paid or delivered to the council
 17 26 in its capacity as trustee.  
 17 27                           EXPLANATION
 17 28    This bill deals with the council of co-owners (owners
 17 29 association) of horizontal property regimes (condominiums).
 17 30 The bill is applicable to condominiums created on or after
 17 31 July 1, 2002, although a number of provisions apply to
 17 32 existing condominiums but only with respect to events and
 17 33 circumstances that occur on or after July 1, 2002.
 17 34    The bill provides the following:
 17 35    That if the owners elect to remove the property from the
 18  1 status of being condominiums with sale to occur following such
 18  2 removal, the council of co-owners shall take title of the
 18  3 property in trust for the co-owners who may continue using the
 18  4 property until the sale.  This provision applies to existing
 18  5 as well as newly created condominium complexes.
 18  6    That the council of co-owners shall be organized no later
 18  7 than the date the condominium complex is created and shall
 18  8 consist exclusively of all co-owners.  The council is to be
 18  9 organized as a corporation.  The corporation is run by a board
 18 10 of directors.  The powers of the council are broad in nature
 18 11 unless restricted by the declaration creating the condominium
 18 12 complex.  The powers include adopting and amending budgets for
 18 13 revenues, expenditures, and reserves; collection of
 18 14 assessments for common expenses; regulation of use, repair,
 18 15 placement, and modification of common elements; imposition of
 18 16 reasonable charges; and granting leases, licenses,
 18 17 concessions, and utility easements through common elements.
 18 18    That the person who creates the condominium complex
 18 19 (declarant) has the right to elect the members of the board of
 18 20 directors until such time as 75 percent of the condominium
 18 21 apartments are owned by others other than the declarant.
 18 22 After 50 percent of the apartments are owned by others, the
 18 23 co-owners other than the declarant may elect one-third of the
 18 24 members of the board.
 18 25    That the transfer of special declarant rights must be
 18 26 recorded and the transferee is treated as the original
 18 27 declarant in regard to rights, liabilities, and obligations
 18 28 that the original declarant had in regard to the condominium
 18 29 complex and the co-owners, except for the misrepresentations
 18 30 and warranty obligations on improvements.  "Special declarant
 18 31 rights" are the rights reserved to the declarant to complete
 18 32 improvements at the complex; to add additional property to the
 18 33 complex; to subdivide or convert an apartment; to maintain
 18 34 sales offices and models; to use easements through common
 18 35 elements; and to appoint board members.  The transferor
 19  1 declarant who retains any interest in a special declarant
 19  2 right or is affiliated with the transferee is not relieved of
 19  3 liability or obligations related to that right.
 19  4    That any contract or lease of a declarant which was entered
 19  5 into while the declarant has control of the board of directors
 19  6 and which is not bona fide or was unconscionable to the other
 19  7 co-owners when entered into may be terminated without penalty
 19  8 by the council of owners after expiration of declarant control
 19  9 of the complex.
 19 10    That bylaws be recorded in order to be effective and shall
 19 11 provide for:  individual notice before each meeting which must
 19 12 be at least once a year; mechanism to resolve disputes
 19 13 regarding co-owners of an apartment; and an annual report
 19 14 which contains expenditures for capital projects, status of
 19 15 reserve and replacement funds, statement of financial
 19 16 condition, listing of insurance coverage, and listing of
 19 17 unpaid assessments.
 19 18    That the council is responsible for maintenance, repair,
 19 19 and replacement of the common elements and each co-owner is
 19 20 responsible for maintenance, repair, and replacement of the
 19 21 co-owner's apartment.
 19 22    That the declarant shall indemnify the council for all
 19 23 liability incurred by the council as a result of a tort or
 19 24 breach of contract which occurred during the period of
 19 25 declarant control.  A co-owner does not have tort liability
 19 26 arising out of ownership of the common elements if the council
 19 27 has insurance coverage of at least $1 million.
 19 28    That insurance on common elements and apartments of at
 19 29 least 80 percent of the replacement cost of the property be
 19 30 maintained.  In addition, general liability insurance in the
 19 31 amount determined by the board is to be in force to cover all
 19 32 damages arising out of or in connection with the use,
 19 33 maintenance, and ownership of the common elements.  Upon
 19 34 receipt of insurance proceeds, the damaged area is to be
 19 35 immediately repaired except where the council or owners vote
 20  1 not to rebuild.  If the proceeds and reserve funds do not
 20  2 cover the cost of the total damage of the apartments and
 20  3 common elements which were damaged, the excess costs shall be
 20  4 a common expense.  If the proceeds are not to be used to
 20  5 rebuild, the proceeds are distributed to the co-owners who
 20  6 have an interest in the property damaged.
 20  7    That assessments for common expenses be levied on all
 20  8 apartments based upon the budget adopted at least annually by
 20  9 the council.  A lien on an apartment for the payment of the
 20 10 assessment attaches at the time the assessment becomes
 20 11 payable.
 20 12    That upon resale of an apartment the co-owner other than a
 20 13 declarant must provide the purchaser with a copy of the
 20 14 declaration, bylaws, rules of the council, and a certificate
 20 15 that contains the following:  a statement disclosing any right
 20 16 of first refusal or other restraint on free alienability of
 20 17 the apartment, the amount of assessments, capital expenditures
 20 18 for the current and next fiscal years, amount of reserves for
 20 19 capital expenditures, most recent balance sheet, the current
 20 20 budget of the council, and the insurance coverage provided for
 20 21 the benefit of the co-owners.  
 20 22 LSB 5055YH 79
 20 23 mg/cf/24

Text: HF02576                           Text: HF02578
Text: HF02500 - HF02599                 Text: HF Index
Bills and Amendments: General Index     Bill History: General Index

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