SF 2012 (LSB 5063XS (3) 86)

SENATE FILE 2012

BY  HART

A BILL FOR

An Act relating to the revival of lapsed use restrictions by a common interest community.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  564B.1  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 homeowners’ association or the executive board regardless of the form in which the homeowners’ association is organized, including any amendments to such instruments.
   2.  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 parcel, 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 parcels, 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 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.
   3.  “Declaration” means a recorded written instrument in the nature of covenants running with the land that subject the land comprising the common interest community to the jurisdiction and control of a homeowners’ association in which the owners of the parcels are required to be members.
   4.  “Executive board” means the body, regardless of name, designated in the declaration, formation document, or bylaws to act on behalf of the homeowners’ association.
   5.  “Formation document” means the document filed with the secretary of state that creates a business entity, including but not limited to articles of incorporation, articles of organization, and a certificate of organization.
   6.  “Homeowners’ association” means an entity responsible for the operation of a common interest community in which the voting membership is made up of parcel owners and in which membership is a mandatory condition of parcel ownership, and which is authorized to impose assessments that, if unpaid, may become a lien on the parcel.
   7.  “Parcel” 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.
   8.  “Parcel owner” means the record owner of legal title to a parcel or, if the parcel is subject to a contract for deed, the vendee of the real estate contract. “Parcel owner” does not include a person having an interest in a parcel solely as security for an obligation.
   9.  “Use restrictions” means the same as defined in section 614.24, subsection 5.
    Sec. 2.  NEW SECTION.  564B.2  Revival of use restrictions.

   Parcel owners in a common interest community may revive use restrictions in a declaration that have become unenforceable by operation of section 614.24 if all of the following requirements are met:

   1.  All parcels which will be subject to the revived use restrictions were previously subject to the use restrictions.
   2.  The affected parcel owners approve the revived use restrictions in the manner provided in this chapter.
    Sec. 3.  NEW SECTION.  564B.3  Procedure to revive use restrictions.
   1.  The proposal to revive use restrictions may contain less than all of the use restrictions which have become unenforceable by operation of section 614.24, but shall not modify any use restriction sought to be revived.
   2.  The proposal to revive use restrictions in a declaration under the terms of this chapter may be initiated by either of the following:
   a.  The executive board.
   b.  The parcel owners, if a petition is signed by parcel owners who own at least ten percent of the parcels. Such petition shall include the language of the use restrictions proposed to be revived.
   3.  If a proposal is initiated under subsection 2, the executive board shall prepare or cause to be prepared the complete text of the proposed use restrictions to be submitted to the affected parcel owners for approval.
   4.  a.  The executive board shall present or cause to be presented to all of the affected parcel owners, by mail or hand delivery, all of the following:
   (1)  A notice containing either the place, date, and time of the meeting at which the revival of the use restrictions will be considered and voted upon or instructions for an action by written ballot, including the last date that a written ballot will be accepted.
   (2)  A copy of the complete text of the use restrictions proposed to be revived.
   (3)  The existing declaration, formation document, and bylaws of the homeowners’ association.
   (4)  A graphic depiction of the property and the parcels to be governed by the revived use restrictions.
   (5)  A statement that the use restrictions will be revived if parcel owners who own a majority of the affected parcels approve revival.
   b.  The parcel owners entitled to receive notice and the materials described in paragraph “a” are the owners of affected parcels as of the close of business on the business day preceding the day on which notice is given.
   5.  The use restrictions contained in the proposal shall be revived if the owners of a majority of the affected parcels approve the revived use restrictions by a vote at a meeting of the affected parcel owners conducted in the manner described in section 564B.4 or in an action by written ballot as described in section 564B.5, and shall be effective in accordance with section 564B.7.
    Sec. 4.  NEW SECTION.  564B.4  Meetings to revive use restrictions.
   1.  A vote to revive use restrictions shall not be held unless the parcel owners described in section 564B.3, subsection 4, paragraph “b”, received the notice and documents specified in section 564B.3, subsection 4, not less than fourteen days or more than sixty days before such a vote.
   2.  A quorum shall be met if parcel owners who own a majority of the affected parcels are present at the meeting, either in person or by proxy.
   3.  The parcel owners entitled to vote at the meeting are the owners of affected parcels as of the date of the meeting.
   4.  At the meeting, there shall be one vote per parcel, regardless of the number of parcel owners who own such parcel.
   5.  a.  The parcel owners have the right to vote in person or by proxy.
   b.  To be valid, a proxy must be dated, shall state the date, time, and place of the meeting for which the proxy was given, and shall be signed by the parcel owner. If a parcel is owned by more than one person, each owner of the parcel shall sign the proxy for such proxy to be valid.
   c.  A proxy is effective only for the specific meeting for which the proxy was originally given.
   d.  A proxy is revocable at any time at the discretion of a parcel owner who executed the proxy.
   e.  If the proxy form expressly so provides, any proxy holder may appoint, in writing, a substitute to act in the proxy holder’s place.
    Sec. 5.  NEW SECTION.  564B.5  Action by written ballot.
   1.  A vote to revive use restrictions may be taken without a meeting if the executive board delivers a written ballot with the notice and other documents required to be delivered under section 564B.3, subsection 4, to the owners of every affected parcel.
   2.  A written ballot shall set forth the use restrictions proposed to be revived and provide an opportunity to vote for or against revival.
   3.  One written ballot shall be provided for each parcel, regardless of the number of parcel owners who own such parcel.
   4.  The deadline for the written ballot to be received to be counted shall be at least fourteen days, but not more than sixty days, after the written ballot was delivered.
   5.  A written ballot that has been cast shall not be revoked.
    Sec. 6.  NEW SECTION.  564B.6  Recording and notice of recording.
   1.  No later than thirty days after the parcel owners have approved the revival of the use restrictions, the executive board shall file the revived use restrictions with the recorder of each county in which the land comprising the common interest community is located.
   2.  Immediately after recording the revived use restrictions, the executive board shall mail or deliver, or shall cause to be mailed or delivered, a complete copy of the revived use restrictions to each parcel owner.
    Sec. 7.  NEW SECTION.  564B.7  Effect of revived use restrictions.
   1.  The revived use restrictions shall be effective upon recordation with respect to each affected parcel, regardless of whether an owner of an affected parcel approved the revived use restrictions.
   2.  The revived use restrictions shall not be given retroactive effect with respect to any affected parcel.
   3.  A use restriction revived under this chapter shall not be enforced against a parcel if each of the following are true:
   a.  A parcel owner made a good-faith investment that would be impaired by such enforcement.
   b.  The good-faith investment described in paragraph “a” was made after the use restriction was unenforceable under section 614.24 and before the use restriction was revived pursuant to this chapter.
    Sec. 8.  Section 614.24, Code 2016, is amended by adding the following new subsection:
   NEW SUBSECTION.  4A.  If use restrictions are revived pursuant to chapter 564B, the recording date for purposes of the twenty-one year limitation in subsection 1 shall be the date the revived use restrictions are recorded under section 564B.6, subsection 1.
    Sec. 9.  APPLICABILITY.  This Act applies to common interest communities created prior to, and still in existence on, July 1, 2016, and created on or after July 1, 2016.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill relates to the ability of a common interest community to revive lapsed use restrictions.
   The bill defines “common interest community” as real estate described in a declaration with respect to which a person, by virtue of the person’s ownership of a parcel, 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 parcels, or other real estate described in the declaration. “Common interest community” includes a cooperative under Code chapter 499A and a horizontal property regime under Code chapter 499B.
   The bill references the definition of “use restriction” in Code section 614.24, which is a limitation or prohibition on the rights of a landowner to make use of the landowner’s real estate, including limitations or prohibitions on commercial uses, rental use, parking and storage of recreational vehicles and their attachments, ownership of pets, outdoor domestic uses, construction and use of accessory structures, building dimensions and colors, building construction materials, and landscaping. “Use restriction” does not include an easement granting a person an affirmative right to use land in the possession of another person, including but not limited to an easement for pedestrian or vehicular access, reasonable ingress and egress, solar access, utilities, supporting utilities, parking areas, bicycle paths, and water flow, an agreement between two or more parcel owners providing for the sharing of costs and other obligations for real estate taxes, insurance premiums, and for maintenance, repair, improvements, services, or other costs related to two or more parcels of real estate regardless of whether the parties to the agreement are owners of individual lots or incorporated or unincorporated lots or have ownership interests in common areas in a horizontal property regime or residential housing development, or an agreement between two or more parcel owners for the joint use and maintenance of driveways, party walls, landscaping, fences, wells, roads, common areas, waterways, or bodies of water.
   Under Code section 614.24, an action arising or existing by reason of the provisions of any contract providing for use restrictions in and to real estate may not be maintained after 21 years from the recording of the contract unless a claimant has filed a verified claim with the county recorder within the 21-year period. Therefore, if a homeowners’ association or other claimant does not file a verified claim regarding a common interest community’s declaration before the expiration of the 21-year period, the use restrictions in the declaration become unenforceable. 
   The bill enacts new Code chapter 564B to provide a mechanism for common interest communities to revive use restrictions which have become barred by operation of Code section 614.24. A proposal to revive use restrictions may be brought by the executive board of the homeowners’ association or by petition of parcel owners who own at least 10 percent of the affected parcels.
   The bill specifies the form of the notice the executive board shall provide to parcel owners regarding a proposal for the revival of use restrictions. The proposal may be voted upon at a meeting which shall be held no less than 14 days and no more than 60 days after notice was provided to the parcel owners. The proposal may also be voted on by written ballot. If the vote is by written ballot, the notice must specify when ballots are due, which must be no earlier than 14 days and no later than 60 days after the written ballots were delivered.
   Upon proper notice, if the owners of a majority of the affected parcels in the common interest community approve the revival of lapsed use restrictions, the lapsed use restrictions are revived as to all parcels in the common interest community.
   The revived use restrictions become effective upon recordation. The revived use restrictions are not given retroactive applicability. Revived use restrictions may not be enforced against a parcel if a parcel owner made a good-faith investment that would be impaired by such enforcement and such investment was made while the use restriction was unenforceable under Code section 614.24 and before the use restriction was revived under new Code chapter 564B.
   The bill provides that if use restrictions are revived under new Code chapter 564B, the 21-year limitation period under Code chapter 614.24 begins as of the recordation date of the revived use restrictions.
   The bill applies to common interest communities created prior to, and still in existence on, July 1, 2016, and created on or after July 1, 2016.