HF 411 (LSB 2109YH (3) 86)

HOUSE FILE 411

BY  HIGHFILL

A BILL FOR

An Act relating to the operations of certain common interest communities.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  499A.201  Applicability.

   This chapter shall apply to cooperatives established under this chapter unless otherwise provided in chapter 499C.
    Sec. 2.  NEW SECTION.  499B.1A  Applicability.

   This chapter shall apply to horizontal property regimes established under this chapter unless otherwise provided in chapter 499C.
    Sec. 3.  Section 499B.15, subsection 2, Code 2015, is amended by striking the subsection.
    Sec. 4.  NEW SECTION.  499B.22  Board of administration —— meetings and records.
   1.  For horizontal property regimes with eight or more apartments, if the form of administration is a board of administration, the board of administration shall comply with the requirements of chapter 499C.
   2.  For horizontal property regimes with seven or less apartments, if the form of administration is a board of administration, the board of administration shall comply with the requirements of section 499C.401, subsection 2, and sections 499C.402 and 499C.403.
    Sec. 5.  NEW SECTION.  499C.101  Title.

   This chapter shall be known and cited as the “Iowa Common Interest Ownership Act”.
    Sec. 6.  NEW SECTION.  499C.102  Public policy.

   The general assembly declares that it is the public policy of the state that the management and affairs of common interest communities be conducted openly, and this chapter shall be construed to provide open access to the management of the common interest community for the unit owners.
    Sec. 7.  NEW SECTION.  499C.103  Definitions.

   As used in this chapter, unless the context otherwise requires:

   1.  “Bylaws” means the instruments, however denominated, that contain the procedures for conducting the affairs of the unit owners association or the executive board regardless of the form in which the association is organized, including any amendments to such instruments.
   2.  “Common element” means:
   a.  For a cooperative under chapter 499A or a horizontal property regime under chapter 499B, all portions of the common interest community other than the units.
   b.  For a planned community, any real estate within the planned community which is owned or leased by the unit owners association, other than a unit.
   c.  For all common interest communities, any other interests in real estate identified in the declaration for the benefit of unit owners.
   3.  a.  “Common interest community” means real estate described in a declaration with respect to which a person, by virtue of the person’s ownership of a unit, is obligated to pay for a share of real estate taxes, insurance premiums, maintenance, or improvement of, or services or other expenses related to, common elements, other units, or other real estate described in the declaration. “Common interest community” includes a cooperative under chapter 499A and a horizontal property regime under chapter 499B.
   b.  Common interest community does not include:
   (1)  A covenant that requires the owners of separate parcels of real estate to share costs or other obligations related to a wall, driveway, well, or other similar structure, unless all such owners consent in writing to the creation of a common interest community.
   (2)  Real estate described in paragraph “a” if all units are owned by a single owner.
   4.  “Declarant” means a person or group of persons who, as the record title owner of real estate, by a declaration, creates a common interest community.
   5.  “Declaration” means the instrument, however denominated, that creates a common interest community, including any amendments to the instrument.
   6.  “Executive board” means the body, regardless of name, designated in the declaration or bylaws to act on behalf of the unit owners association.
   7.  “Planned community” means a common interest community that is not solely a cooperative under chapter 499A or solely a horizontal property regime under chapter 499B, and includes property owner or homeowner associations. However, a cooperative under chapter 499A or a horizontal property regime under chapter 499B may be part of a planned community.
   8.  “Rule” means a policy, guideline, restriction, procedure, or regulation, however denominated, which is not set forth in the declaration or bylaws.
   9.  “Unit” means a physical portion of the common interest community designated for separate ownership or occupancy or as otherwise defined in the statute under which the common interest community is organized.
   10.  “Unit owner” means a declarant or other person that owns a unit, but does not include a person having an interest in a unit solely as security for an obligation. In a horizontal property regime under chapter 499B or a planned community, the declarant is the owner of a unit. In a cooperative under chapter 499A, the declarant is the owner of a unit to which an interest has been allocated until that unit has been conveyed to another person.
   11.  “Unit owners association” means an association, regardless of name, organized as a for-profit or nonprofit corporation, trust, limited liability company, partnership, unincorporated association, or any other form of organization authorized by the laws of this state, the membership of which consists solely of unit owners except following termination of the common interest community, at which time the association shall consist of all former unit owners entitled to distributions of proceeds or their heirs, successors, or assigns.
    Sec. 8.  NEW SECTION.  499C.104  Variation by agreement.

   Except as expressly provided in this chapter, the provisions of this chapter may not be varied by agreement, and rights conferred by it may not be waived.
    Sec. 9.  NEW SECTION.  499C.105  Applicability.

   Unless otherwise provided by law:

   1.  This chapter applies to common interest communities within this state having eight or more units.
   2.  Any portion of a declaration, bylaws, covenant, or other contractual provision existing prior to July 1, 2015, that violates or is inconsistent with this chapter is not enforceable. However, nothing in this chapter shall be construed to invalidate other provisions of the declaration, bylaws, covenant, or contractual provision of those common interest communities established before July 1, 2015.
   3.  The provisions of this chapter shall prevail over any conflicting provision of law under which a common interest community or unit owners association is organized.
    Sec. 10.  NEW SECTION.  499C.201  Unit owners association —— executive board.
   1.  A unit owners association shall have an executive board.
   2.  Except as otherwise provided in the declaration, the bylaws, subsection 3 of this section, or provisions of the statute under which the common interest community is organized, an executive board acts on behalf of the unit owners association.
   3.  An executive board shall not act on behalf of the unit owners association to amend the declaration, to terminate the common interest community, to elect members of the executive board, or determine the qualifications, powers and duties, or terms of office of executive board members. An executive board may fill vacancies in its membership for the unexpired portion of any term.
   4.  A declaration may provide for a period of declarant control of the unit owners association, during which a declarant, or persons designated by the declarant, may appoint and remove the officers and members of the executive board. For declarations filed on or after July 1, 2015, a period of declarant control shall be clearly defined in the declaration.
    Sec. 11.  NEW SECTION.  499C.401  Meetings.
   1.  Meetings of a unit owners association shall comply with all of the following:
   a.  A unit owners association shall hold a meeting of unit owners annually at a time, date, and place stated in or determined in accordance with the declaration or bylaws.
   b.  A unit owners association shall hold a special meeting of unit owners to address any matter affecting the unit owners association if the association’s president, a majority of the executive board, or a number of unit owners comprising at least forty percent of all votes in the association, unless a different percentage is specified in the bylaws, request that the secretary call the meeting. If the unit owners association does not notify unit owners of a special meeting within thirty days after the required number of unit owners has requested the secretary to call a special meeting, the requesting members may directly notify all unit owners of the meeting. Only matters described in the meeting notice may be considered at a special meeting.
   c.  A unit owners association shall notify each unit owner of the time, date, and place of each annual and special unit owners meeting not less than ten days and not more than sixty days before the meeting date. Each meeting notice shall state the time, date, and place of the meeting and the items on the agenda in a manner reasonably calculated to apprise the unit owners of that information, including but not limited to:
   (1)  A statement of the general nature of any proposed amendment to the declaration or bylaws.
   (2)  A statement describing any budget changes.
   (3)  Any proposal to remove an officer or member of the executive board.
   d.  The requirements relating to the timing of meeting notices under paragraph “c” may be reduced or waived for a meeting called to address an emergency. A meeting called to address an emergency shall be limited to matters arising out of the emergency. 
   e.  Each unit owner shall be given a reasonable opportunity at any meeting to comment on any matter affecting the common interest community or the unit owners association.
   f.  The declaration or bylaws may allow for meetings of unit owners to be conducted by telephonic, video, or other conferencing methods if such methods are consistent with subsection 2, paragraph “g”.
   2.  Meetings of the executive board and meetings of committees of the unit owners association authorized to act for the association shall comply with all of the following:
   a.  Meetings shall be open to the unit owners except during executive sessions. The executive board and committees of the unit owners association authorized to act for the association may hold an executive session only during a regular or special meeting of the board or the committee. No final vote or final action may be taken during an executive session. An executive session may only be held for the following reasons:
   (1)  To consult with the unit owners association’s attorney concerning legal matters governed by attorney-client privilege.
   (2)  To discuss existing or potential litigation or mediation, arbitration, or governmental administrative proceedings.
   (3)  To discuss matters relating to the job performance, compensation, or health records of an individual employee or specific complaints against an individual employee of the unit owners association or against an independent contractor retained by the unit owners association.
   (4)  To discuss contracts, leases, and other commercial transactions for goods or services that are under negotiation, including the review of bids or proposals, if public disclosure of such matters would place the unit owners association at a disadvantage.
   (5)  To discuss personal, health, or financial information relating to a unit owner, a specific employee of the unit owners association, or a specific employee of an independent contractor retained by the unit owners association, including any records of the unit owners association relating to such information.
   b.  For purposes of this section, a gathering of board members at which the board members do not conduct unit owners association business is not a meeting of the executive board. Executive board members shall not use incidental or social gatherings of board members or any other method to evade the meeting and notice requirements of this section.
   c.  During a period of declarant control, the executive board shall meet at least one time each year. At least one of the meetings shall be held at the common interest community or at a place convenient to the unit owners of the common interest community. After termination of the period of declarant control, all executive board meetings shall be held at the common interest community or at a place convenient to the unit owners of the common interest community unless the unit owners amend the bylaws to vary the location of such meetings.
   d.  At each executive board meeting, the executive board shall provide a reasonable opportunity for unit owners to comment on any matter affecting the common interest community and the unit owners association.
   e.  Unless the meeting is included in a schedule given to the unit owners or the meeting is called to address an emergency, the secretary or other officer specified in the bylaws shall give notice of each executive board meeting to each executive board member and to each unit owner. Such notice shall be given at least ten days before the meeting and shall state the time, date, place, and agenda of the meeting.
   f.  If any materials are distributed to the executive board before a meeting, the executive board, upon receipt of the materials, shall make copies reasonably available to unit owners, except that the executive board is not required to make available copies of unapproved minutes or materials that are to be considered during an executive session.
   g.  Unless otherwise provided in the declaration or bylaws, the executive board may conduct a meeting by telephonic, video, or other conferencing method if all of the following conditions are met:
   (1)  The meeting notice states the conferencing method to be used and provides information explaining how unit owners may participate in the conference directly or by meeting at a central location or conference connection.
   (2)  The process provides all unit owners the opportunity to hear or perceive the discussion and to comment on matters before the executive board.
   h.  Following termination of the period of declarant control, unit owners may amend the bylaws to vary the procedures for meetings described in paragraph “g”.
   i.  In lieu of a meeting, the executive board may act by unanimous consent if such action is documented in a record authenticated by all executive board members. The secretary shall give prompt notice to all unit owners of any action taken by unanimous consent. After termination of the period of declarant control, an executive board may act by unanimous consent only to undertake ministerial actions or to implement actions previously taken at a meeting of the executive board. 
   j.  Unless otherwise restricted by this chapter or the common interest community’s bylaws, an executive board may determine rules of procedure for the executive board.
   k.  An executive board may remove any person from a meeting of the executive board upon a finding by a majority of the board members that the person is being disruptive to the meeting. An executive board may bar any person from meetings of the executive board or other meetings of the common interest community for a period of up to one year if the person has been twice removed from a meeting within the preceding twelve months.
   l.  An action by an executive board that is not in compliance with this section is valid unless invalidated by a court. A challenge to the validity of an action of the executive board for failure to comply with this section shall not be brought more than sixty days after the minutes of the executive board of the meeting at which the action was taken are approved or the record of that action is distributed to unit owners, whichever is later.
    Sec. 12.  NEW SECTION.  499C.402  Association records.
   1.  A unit owners association shall retain all of the following:
   a.  Detailed records of receipts and expenditures relating to the operation and administration of the unit owners association and other appropriate accounting records.
   b.  Minutes of all unit owners meetings and executive board meetings, a record of all actions taken by the unit owners or the executive board without a meeting, and a record of all actions taken by a committee in place of the executive board on behalf of the unit owners association. The minutes retained by the unit owners association shall indicate the date, time, and place of the meeting, the names of all persons present at the meeting, and each action taken at the meeting. The minutes shall also include the results of each vote taken at the meeting, including information indicating the vote of each executive board member present at the meeting. The vote of each executive board member present shall be made public at the open session.
   c.  The names of all unit owners in a form that permits preparation of a list of the names of all owners and the regular mail or electronic mail address at which the unit owners association communicates with them, and the number of votes each unit owner is entitled to cast.
   d.  The unit owners association’s original and amended organizational documents, bylaws, including all amendments to the bylaws, and all rules of the common interest community currently in effect.
   e.  All financial statements and tax returns of the unit owners association for the past three years. 
   f.  A list of the names and addresses of the current executive board members and officers.
   g.  The unit owners association’s most recent annual report delivered to the secretary of state, if applicable.
   h.  Copies of each contract to which the unit owners association is currently a party.
   i.  Records of executive board or committee actions relating to requests for design or architectural approval from unit owners.
   j.  Ballots, proxies, and other records related to voting by unit owners for one year after the election, action, or vote.
   2.  Except as provided under subsections 3 and 4, all records retained by a unit owners association must be available for examination and copying by a unit owner or the unit owner’s authorized agent during reasonable business hours or at a mutually convenient time and location upon providing a five days’ notice that reasonably identifies the specific records that are being requested.
   3.  Records retained by a unit owners association may be withheld from inspection and copying to the extent that they concern:
   a.  Personally identifiable information, salary, and medical records relating to specific individuals.
   b.  Information relating to contracts, leases, and other commercial transactions to purchase or provide goods or services, that are currently under negotiation.
   c.  Information relating to existing or potential litigation, mediation, arbitration, or governmental administrative proceedings. 
   d.  Information relating to existing or potential matters involving governmental administrative proceedings or other proceedings before a government tribunal for enforcement of the declaration, bylaws, or rules. 
   e.  Communications with the unit owners association attorney which are otherwise protected by the attorney-client privilege or the attorney work-product doctrine. 
   f.  Information that if disclosed would violate another provision of law. 
   g.  Records of an executive session of the executive board. However, upon the completion of a matter that is the subject of an executive session held under section 499C.401, subsection 2, paragraph “a”, subparagraphs (1) through (4), such records of the executive session shall be available for inspection as provided in this section.
   h.  Records directly related to the personal, health, or financial information of a unit owner, if the person requesting the records is not the unit owner that is the subject of the records.
   4.  A unit owners association may charge a reasonable fee for providing copies of any records under this section and for supervising the inspection of such records.
   5.  The right to inspect records under this section includes the right to copy records by photocopying or other means and includes the right to receive copies through an electronic transmission, if available, upon request of the requester.
   6.  A unit owners association is not obligated to compile or synthesize information or records under this section.
   7.  Information or records obtained under this section shall not be used for commercial purposes.
    Sec. 13.  NEW SECTION.  499C.403  Notice to unit owners.
   1.  A unit owners association or an executive board, as applicable, shall deliver each notice required to be given by the association or board under this chapter to the regular mail address or electronic mail address provided by each unit owner. If a regular mail address or electronic mail address is not provided by the unit owner, the notice may be delivered using any of the following methods:
   a.  Hand delivery to the unit owner.
   b.  Mailing by regular mail or certified mail as defined in section 618.15 to the address of the unit.
   c.  Any other method reasonably calculated to provide notice to the unit owner.
   2.  The ineffectiveness of a good-faith effort to deliver notice under subsection 1 does not invalidate an action taken at a meeting or an action taken by other means.
    Sec. 14.  NEW SECTION.  499C.501  Cause of action —— attorney fees.

   A declarant, unit owners association, unit owner, or any other person subject to this chapter may bring an action to enforce a right granted or obligation imposed by this chapter, the declaration, or the bylaws. In any action brought under this chapter, the court may award reasonable attorney fees to the prevailing party.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill creates the “Iowa Common Interest Ownership Act,” new Code chapter 499C. The bill provides that it is the public policy of the state that the management and affairs of common interest communities be conducted openly and that the new Code chapter is to be construed to provide open access to the management of the common interest community for the unit owners.
   New Code chapter 499C defines “common interest community” to mean real estate described in a declaration with respect to which a person, by virtue of the person’s ownership of a unit, is obligated to pay for a share of real estate taxes, insurance premiums, maintenance, or improvement of, or services or other expenses related to, common elements, other units, or other real estate described in the declaration. The bill specifies that a common interest community does not include a covenant that requires the owners of separate parcels of real estate to share certain costs or other obligations, unless all such owners consent in writing to the creation of a common interest community, and does not include community where all units are owned by a single owner.
   The bill defines cooperatives under Code chapter 499A and horizontal property regimes under Code chapter 499B to be common interest communities. The bill specifies that unless otherwise provided by law new Code chapter 499C applies to all common interest communities established within this state having eight or more units. However, the bill provides that for horizontal property regimes with seven or less apartments, if the form of administration is a board of administration, the board of administration must comply with the requirements of new Code section 499C.401(2), regarding meeting requirements, and new Code sections 499C.402 and 499C.403, relating to records and notice.
   The bill does not, except as specifically provided, allow for the provisions of new Code chapter 499C to be varied by agreement, and rights conferred by new Code chapter 499C may not be waived.
   The bill also provides that any portion of a declaration, bylaws, covenant, or other contractual provision existing prior to July 1, 2015, that violates or is inconsistent with new Code chapter 499C is not enforceable. However, nothing in new Code chapter 499C shall be construed to invalidate other provisions of the declaration, bylaws, covenant, or contractual provisions of those common interest communities established before July 1, 2015. The bill specifies that the provisions of new Code chapter 499C shall prevail over any conflicting provision of law under which a common interest community or unit owners association is organized.
   The bill requires each unit owners association, as defined in the bill, to have an executive board. The bill defines an executive board as the body, regardless of name, designated in the declaration or bylaws to act on behalf of the unit owners association. However, the bill provides that an executive board shall not act on behalf of the unit owners association to amend the declaration, to terminate the common interest community, to elect members of the executive board, or determine the qualifications, powers and duties, or terms of office of executive board members. The bill provides, however, that an executive board may fill vacancies in its membership for the unexpired portion of any term.
   The bill provides that a declaration (the instrument that creates the common interest community) may provide for a period of declarant control of the unit owners association, during which a declarant (the person or group of persons who creates the common interest community), or persons designated by the declarant, may appoint and remove the officers and members of the executive board. The bill specifies that for declarations filed on or after July 1, 2015, a period of declarant control shall be clearly defined in the declaration.
   The bill establishes requirements relating to meetings of unit owners associations, executive boards, and committees of such entities including requirements for the contents of meeting notices, allowable actions during meetings, requirements relating to unit owner comments, and the manner in which meetings may be conducted. The bill also specifies the manner and the reasons for which certain meetings may be called.
   The bill enacts requirements relating to the retention of records by unit owners associations and specifies the records retained by a unit owners association that may be withheld from inspection and copying.
   The bill requires a unit owners association or executive board, as applicable, to deliver each notice required to be given by the association under new Code chapter 499C to the regular mail address or electronic mail address provided by each unit owner. If a regular mail or electronic mail address is not provided by the unit owner, the unit owners association may deliver the notice by a different method specified in the bill. The bill provides that the ineffectiveness of a good-faith effort to deliver notice does not invalidate an action taken at a meeting or an action taken by other means.
   The bill provides that a declarant, unit owners association, unit owner, or any other person subject to new Code chapter 499C may bring an action to enforce a right granted or obligation imposed by the Code chapter, the declaration, or the bylaws. In any such action, the court may award reasonable attorney fees to the prevailing party.