CHAPTER 828*
COMMON INTEREST OWNERSHIP ACT

      *Trial court properly found that plaintiff condominium association's executive board was constituted properly to adopt certain budgets and charge defendant common fees pursuant to those budgets and to initiate foreclosure action against him for nonpayment. 102 CA 245. Trial court properly determined that condominium association's bylaws and Common Interest Ownership Act did not require each executive board member to be a unit owner. Id.

Table of Contents

Sec. 47-215. Applicability to nonresidential, mixed use and small common interest communities, limited expense liability planned communities and common interest communities with a conversion building.
Sec. 47-220. Creation of common interest community.
Sec. 47-240. Merger or consolidation of common interest communities.
Sec. 47-243. Organization of unit owners' association.
Sec. 47-245. Executive board members and officers. Duties. Ratification of budget. Period of declarant control. Delivery of property and documents by declarant. Current financial statement.
Sec. 47-255. Insurance.
Sec. 47-260. Association records. Availability. Loan disclosure and comments.
Sec. 47-265. Requirements for public offering statement when community is subject to development rights.

PART I
GENERAL PROVISIONS AND APPLICABILITY

      Sec. 47-215. Applicability to nonresidential, mixed use and small common interest communities, limited expense liability planned communities and common interest communities with a conversion building. (a) Except as provided in subsection (b) of this section with respect to a common interest community containing a conversion building:

      (1) If a common interest community contains only units restricted to nonresidential use:

      (A) The common interest community is not subject to this chapter unless the declaration otherwise provides;

      (B) The declaration of such a common interest community may provide that this entire chapter applies to the community or that only sections 47-204, 47-205 and 47-206 apply;

      (C) If the declaration provides that this entire chapter applies to such a common interest community, the declaration may also require, subject to section 47-210, that: (i) Notwithstanding section 47-247, any management contract, employment contract, lease of recreational or parking areas or facilities and any other contract or lease between the association and a declarant or an affiliate of a declarant remains effective after the declarant turns over control of the association; and (ii) notwithstanding section 47-203, purchasers of units must execute proxies, powers of attorney or similar devices in favor of the declarant regarding particular matters enumerated in those instruments.

      (2) If a common interest community contains units restricted exclusively to nonresidential purposes and other units that may be used for residential purposes, that common interest community is not subject to this chapter unless the units that may be used for residential purposes would comprise a common interest community in the absence of the nonresidential units or the declaration provides that this chapter applies as provided in subparagraph (B) or (C) of subdivision (1) of this subsection.

      (3) If the declaration of a planned community that is not subject to any development right provides that the annual average common expense liability of all units restricted to residential purposes, exclusive of optional user fees and any insurance premiums paid by the association, may not exceed three hundred dollars, as adjusted pursuant to section 47-213, the planned community is subject only to sections 47-204, 47-205 and 47-206 unless the declaration provides that this entire chapter is applicable. However, this exemption applies only if:

      (A) The declarant reasonably believes in good faith that the maximum annual common expense liability assessed against the units will be sufficient to pay the expenses of the planned community; and

      (B) The declaration provides that the annual common expense liability may not be increased during the period of declarant control without the consent of persons entitled to cast at least eighty per cent of the votes in the association, including eighty per cent of the votes allocated to units not owned by a declarant or an affiliate of a declarant.

      (b) In the case of a common interest community containing a conversion building, sections 47-282 to 47-292, inclusive, apply whether or not the common interest community is exempt from other provisions of this chapter pursuant to subsection (a) of this section. The provisions of sections 47-282 to 47-292, inclusive, apply to a common interest community containing a conversion building created on or after July 8, 1983. The provisions of sections 47-88b to 47-88g, inclusive, do not apply to a condominium containing a conversion building created on or after July 8, 1983.

      (c) If a common interest community contains no more than twelve units and (1) is not subject to any development rights and (2) does not utilize a master association, the declarant is not required to deliver a public offering statement pursuant to section 47-263 or 47-264; resale certificates are not required, as provided in section 47-270, and the association is not required to maintain records necessary to comply with section 47-270. A declarant shall not divide real property into two or more common interest communities to avoid the public offering statement requirements of sections 47-263 and 47-264.

      (P.A. 83-474, S. 16, 96; P.A. 84-472, S. 4, 5, 23; P.A. 95-187, S. 5; P.A. 07-217, S. 179.)

      History: P.A. 84-472 amended Subsec. (b) to make a technical clarification and amended Subsec. (c) to exclude certain common interest communities which do "not utilize a master association" from certain requirements and to add a provision prohibiting a declarant dividing real property into two or more common interest communities to avoid the public offering statement requirements of Secs. 47-263 and 47-264; P.A. 95-187 amended Subsec. (a) to revise Subdiv. (1) re applicability of chapter to nonresidential communities by deleting the provision that a nonresidential community "is subject only to sections 47-204, 47-205 and 47-206 unless the declaration provides that this entire chapter is applicable" and adding Subparas. (A), (B) and (C), add a new Subdiv. (2) re applicability of chapter to a community that contains both nonresidential and residential units, renumbering former Subdiv. (2) as Subdiv. (3), and revise renumbered Subdiv. (3) by restricting the exemption to a planned community "that is not subject to any development right", increasing the maximum annual average common expense liability for the exemption to apply from $100 to $300 and adding Subparas. (A) and (B) limiting when the exemption applies; P.A. 07-217 made a technical change in Subsec. (b), effective July 12, 2007.

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PART II
CREATION, ALTERATION AND TERMINATION
OF COMMON INTEREST COMMUNITIES

      Sec. 47-220. Creation of common interest community.

      Subsec. (b):

      Common Interest Ownership Act allows for creation of common interest communities consisting entirely of airspace units. With such a community, requirement of substantial completion is inapplicable and the declaration may be filed prior to any anticipated construction of buildings within the unit. 282 C. 393.


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      Sec. 47-240. Merger or consolidation of common interest communities. (a) Any two or more common interest communities of the same form of ownership, by agreement of the unit owners as provided in subsection (b) of this section, may be merged or consolidated into a single common interest community. In the event of a merger or consolidation, unless the agreement otherwise provides, the resultant common interest community is the legal successor, for all purposes, of all of the preexisting common interest communities, and the operations and activities of all associations of the preexisting common interest communities are merged or consolidated into a single association that holds all powers, rights, obligations, assets and liabilities of all preexisting associations.

      (b) An agreement of two or more common interest communities to merge or consolidate pursuant to subsection (a) of this section shall be evidenced by an agreement prepared, executed, recorded and certified by the president of the association of each of the preexisting common interest communities following approval by owners of units to which are allocated the percentage of votes in each common interest community required to terminate that common interest community. The agreement shall be recorded in every town in which a portion of the common interest community is located and is not effective until recorded.

      (c) Every merger or consolidation agreement shall provide for the reallocation of the allocated interests in the new association among the units of the resultant common interest community either by stating (1) the reallocations or (2) the formulas on which they are based.

      (P.A. 83-474, S. 41, 96; P.A. 07-217, S. 180.)

      History: P.A. 07-217 made a technical change in Subsec. (b), effective July 12, 2007.

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PART III
MANAGEMENT OF COMMON INTEREST COMMUNITIES

      Sec. 47-243. Organization of unit owners' association.

      Trial court found that executive board of condominium association was constituted properly. 102 CA 245.

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      Sec. 47-245. Executive board members and officers. Duties. Ratification of budget. Period of declarant control. Delivery of property and documents by declarant. Current financial statement. (a) Except as provided in the declaration, the bylaws, subsection (b) of this section, or other provisions of this chapter, the executive board may act in all instances on behalf of the association. In the performance of their duties, officers and members of the executive board appointed by the declarant shall exercise the degree of care and loyalty required of a trustee and officers and members of the executive board not appointed by a declarant shall exercise the degree of care and loyalty required of an officer or director of a corporation organized under chapter 602.

      (b) The executive board may not act on behalf of the association to amend the declaration, to terminate the common interest community or to elect members of the executive board or determine the qualifications, powers and duties, or terms of office of executive board members, but the executive board may fill vacancies in its membership for the unexpired portion of any term.

      (c) Notwithstanding any provision of the declaration or bylaws to the contrary, within thirty days after adoption of any proposed budget for the common interest community, the executive board shall provide a summary of the proposed budget to all the unit owners and shall set a date for a meeting of the unit owners to consider ratification of the proposed budget not less than fourteen or more than thirty days after hand-delivery or mailing of the summary. At such meeting, or on a day prior to such meeting, the executive board shall provide a reasonable opportunity for all unit owners to express their views concerning the proposed budget before its ratification. At least one copy of the proposed budget shall be available for inspection at such meeting. Unless at such meeting a majority of all unit owners, or any larger vote specified in the declaration, reject the proposed budget, the budget is ratified, whether or not a quorum is present. In the event the proposed budget is rejected, the periodic budget last ratified by the unit owners shall be continued until such time as the unit owners ratify a subsequent budget proposed by the executive board as provided in this subsection.

      (d) Subject to the provisions of subsection (e) of this section, the declaration may provide for a period of declarant control of the association, during which a declarant, or persons designated by him, may appoint and remove the officers and members of the executive board. Regardless of the period provided in the declaration, a period of declarant control terminates no later than the earlier of: (1) Sixty days after conveyance of sixty per cent of the units that may be created to unit owners other than a declarant, except that in the case of a master planned community, control terminates no later than sixty days after conveyance to unit owners other than the declarant of sixty per cent of the maximum number of units that may be built, if that number is specified, or, if no such number is specified, after conveyance to unit owners other than the declarant of three hundred units; (2) two years after all declarants have ceased to offer units for sale in the ordinary course of business; (3) two years after any right to add new units was last exercised; or (4) the date the declarant, after giving written notice to unit owners, records an instrument voluntarily surrendering all rights to control activities of the association. A declarant may voluntarily surrender the right to appoint and remove officers and members of the executive board before termination of that period, but in that event the declarant may require, for the duration of the period of declarant control, that specified actions of the association or executive board, as described in a recorded instrument executed by the declarant, be approved by the declarant before they become effective.

      (e) Not later than sixty days after conveyance of one-third of the units that may be created to unit owners other than a declarant, at least one member and not less than one-third of the members of the executive board shall be elected by unit owners other than the declarant.

      (f) Except as otherwise provided in subsection (e) of section 47-239, not later than the termination of any period of declarant control, the unit owners shall elect an executive board of at least three members, at least a majority of whom shall be unit owners. The executive board shall elect the officers. The executive board members and officers shall take office upon election.

      (g) Notwithstanding any provision of the declaration or bylaws to the contrary, the unit owners, by a two-thirds vote of all persons present and entitled to vote at any meeting of the unit owners at which a quorum is present, may remove any member of the executive board with or without cause, other than a member appointed by the declarant.

      (h) Within thirty days after unit owners other than the declarant elect a majority of the members of the executive board, the declarant shall deliver to the association all property of the unit owners and of the association held by or controlled by the declarant, including without limitation the following items: (1) The original or a certified copy of the recorded declaration as amended; the association articles of incorporation, if the association is incorporated; bylaws; minute books and other books and records of the association; and any rules and regulations which may have been promulgated; (2) an accounting for association funds and financial statements, from the date the association received funds and ending on the date the period of declarant control ends. The financial statements shall be audited by an independent certified public accountant and shall be accompanied by the accountant's letter, expressing either (A) the opinion that the financial statements present fairly the financial position of the association in conformity with generally accepted accounting principles or (B) a disclaimer of the accountant's ability to attest to the fairness of the presentation of the financial information in conformity with generally accepted accounting principles, and the reasons therefor. The expense of the audit shall not be paid for or charged to the association; (3) association funds or control thereof; (4) all of declarant's tangible personal property that has been represented by the declarant to be the property of the association or, unless the declarant has disclosed in the public offering statement that all such personal property used in the common interest community will remain the declarant's property, all of the declarant's tangible personal property that is necessary for, and has been used exclusively in, the operation and enjoyment of the common elements, and inventories of these properties; (5) a copy of any plans and specifications used in the construction of the improvements in the common interest community which were completed within two years before the declaration was recorded; (6) all insurance policies then in force, in which the unit owners, the association or its directors and officers are named as insured persons; (7) copies of any certificates of occupancy that may have been issued with respect to any improvements comprising the common interest community; (8) any other permits issued by governmental bodies applicable to the common interest community and which are currently in force or which were issued within one year prior to the date on which unit owners other than the declarant took control of the association; (9) written warranties of the contractor, subcontractors, suppliers and manufacturers that are still effective; (10) a roster of unit owners and mortgagees and their addresses and telephone numbers, if known, as shown on the declarant's records; (11) employment contracts in which the association is a contracting party; and (12) any service contract in which the association is a contracting party or in which the association or the unit owners have any obligation to pay a fee to the persons performing the services.

      (i) During the period of declarant control, the declarant shall, at least every six months, provide the unit owners with a current financial statement of the association. The statement shall be on a cash basis and need not be audited by an independent accountant. It shall include, without limitation, (1) all income and expenses for the calendar year to date; (2) all accounts payable and receivable, including the ages of those accounts and showing all sums due to and from the declarant and affiliates of the declarant; (3) the amount of any funded replacement reserves; and (4) the balance of any other funds of the association.

      (P.A. 83-474, S. 46, 96; P.A. 84-472, S. 12, 23; P.A. 95-187, S. 17; P.A. 96-180, S. 126, 166; 96-256, S. 204, 209; P.A. 05-288, S. 167; P.A. 07-243, S. 6.)

      History: P.A. 84-472 added Subsec. (h) requiring the declarant to deliver to the association all property of unit owners and of the association held by or controlled by the declarant within 30 days after unit owners other than the declarant elect a majority of the members of the executive board and added Subsec. (i) requiring the declarant to provide the unit owners with a current financial statement of the association at least every six months during the period of declarant control; P.A. 95-187 amended Subsec. (a) to revise and heighten the standard of care required of officers and members of the executive board and amended Subsec. (d) to add exception re a master planned community in Subdiv. (1) and add Subdiv. (4) re the date the declarant records an instrument voluntarily surrendering control; P.A. 96-180 made technical change in Subsec. (a), effective June 3, 1996; P.A. 96-256 amended Subsec. (a) to replace reference to chapter 600 with chapter 602, effective January 1, 1997; P.A. 05-288 made technical changes in Subsec. (d), effective July 13, 2005; P.A. 07-243 amended Subsec. (c) by adding provisions re notwithstanding declaration or bylaws, re hand-delivery of summary, re opportunity for unit owners to express views concerning proposed budget and re copy of budget available at meeting and by making technical changes.

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      Sec. 47-255. Insurance. (a) Commencing not later than the time of the first conveyance of a unit to a person other than a declarant, the association shall maintain, to the extent reasonably available: (1) Property insurance on the common elements and, in a planned community, also on property that must become common elements, insuring against all risks of direct physical loss commonly insured against or, in the case of a conversion building, against fire and extended coverage perils. The total amount of insurance after application of any deductibles shall be not less than eighty per cent of the actual cash value of the insured property at the time the insurance is purchased and at each renewal date, exclusive of land, excavations, foundations and other items normally excluded from property policies; (2) flood insurance in the event the condominium is located in a flood hazard area, as defined and determined by the National Flood Insurance Act, as amended, USC 42 Section 4101, P.L. 93-234, and the unit owners by vote direct; and (3) liability insurance, including medical payments insurance, in an amount determined by the executive board but not less than any amount specified in the declaration, covering all occurrences commonly insured against for death, bodily injury and property damage arising out of or in connection with the use, ownership or maintenance of the common elements and, in cooperatives, also of all units.

      (b) In the case of a building that is part of a cooperative or that contains units having horizontal boundaries described in the declaration, the insurance maintained under subdivision (1) of subsection (a) of this section, to the extent reasonably available, shall include the units, but need not include improvements and betterments installed by unit owners.

      (c) If the insurance described in subsections (a) and (b) of this section is not reasonably available, the association promptly shall cause notice of that fact to be hand-delivered or sent prepaid by United States mail to all unit owners. The declaration may require the association to carry any other insurance, and the association in any event may carry any other insurance it considers appropriate to protect the association or the unit owners.

      (d) Insurance policies carried pursuant to subsections (a) and (b) of this section shall provide that: (1) Each unit owner is an insured person under the policy with respect to liability arising out of his interest in the common elements or membership in the association; (2) the insurer waives its right to subrogation under the policy against any unit owner or member of his household; (3) no act or omission by any unit owner, unless acting within the scope of his authority on behalf of the association, will void the policy or be a condition to recovery under the policy; and (4) if, at the time of a loss under the policy, there is other insurance in the name of a unit owner covering the same risk covered by the policy, the association's policy provides primary insurance.

      (e) Any loss covered by the property policy under subdivision (1) of subsection (a) and subsection (b) of this section shall be adjusted with the association, but the insurance proceeds for that loss are payable to any insurance trustee designated for that purpose, or otherwise to the association, and not to any holder of a security interest. The insurance trustee or the association shall hold any insurance proceeds in trust for the association, unit owners and lien holders as their interests may appear. Subject to the provisions of subsection (h) of this section, the proceeds shall be disbursed first for the repair or restoration of the damaged property, and the association, unit owners and lien holders are not entitled to receive payment of any portion of the proceeds unless there is a surplus of proceeds after the property has been completely repaired or restored, or the common interest community is terminated.

      (f) An insurance policy issued to the association does not prevent a unit owner from obtaining insurance for his own benefit.

      (g) An insurer that has issued an insurance policy under this section shall issue certificates or memoranda of insurance to the association and, on written request, to any unit owner or holder of a security interest. The insurer issuing the policy may not cancel or refuse to renew it until sixty days after notice of the proposed cancellation or nonrenewal has been mailed to the association, each unit owner and each holder of a security interest to whom a certificate or memorandum of insurance has been issued at their respective last known addresses.

      (h) (1) Any portion of the common interest community for which insurance is required under this section which is damaged or destroyed shall be repaired or replaced promptly by the association unless (A) the common interest community is terminated, in which case section 47-237 applies, (B) repair or replacement would be illegal under any state or local statute or ordinance governing health or safety, or (C) eighty per cent of the unit owners, including every owner of a unit or assigned limited common element that will not be rebuilt, vote not to rebuild. The cost of repair or replacement in excess of insurance proceeds and reserves, regardless of whether such excess is the result of the application of a deductible under insurance coverage, is a common expense. (2) If the entire common interest community is not repaired or replaced, (A) the insurance proceeds attributable to the damaged common elements shall be used to restore the damaged area to a condition compatible with the remainder of the common interest community, and (B) except to the extent that other persons will be distributees, (i) the insurance proceeds attributable to units and limited common elements that are not rebuilt shall be distributed to the owners of those units and the owners of the units to which those limited common elements were allocated, or to lien holders, as their interests may appear, and (ii) the remainder of the proceeds shall be distributed to all the unit owners or lien holders, as their interests may appear, in proportion to the common expense liabilities of all the units. (3) If the unit owners vote not to rebuild any unit, that unit's allocated interests are automatically reallocated on the vote as if the unit had been condemned under subsection (a) of section 47-206, and the association promptly shall prepare, execute and record an amendment to the declaration reflecting the reallocations.

      (i) The provisions of this section may be varied or waived in the case of a common interest community all of whose units are restricted to nonresidential use.

      (P.A. 83-474, S. 56, 96; P.A. 93-239, S. 11; P.A. 07-68, S. 3.)

      History: P.A. 93-239 amended Subsec. (g) to require 60, rather than 30, days' notice of cancellation or renewal for insurers issuing policies for condominium associations; P.A. 07-68 amended Subsec. (a) to insert new Subdiv. (2) requiring association to maintain flood insurance in the event condominium is located in flood hazard area, as defined and determined by National Flood Insurance Act and unit owners by vote direct, and redesignate existing Subdiv. (2) as Subdiv. (3), and amended Subsec. (h)(1) to specify that common expenses include any excess resulting from applicable insurance deductible.

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      Sec. 47-260. Association records. Availability. Loan disclosure and comments. (a) The association shall keep financial records sufficiently detailed to enable the association to comply with section 47-270. All accounting, financial and other books and records of the association, including, but not limited to, minutes of meetings and voting records of the executive board, shall be made reasonably available by the executive board or a managing agent of the association for examination and copying by any unit owner, or the unit owner's authorized agent, upon the request of such unit owner or agent.

      (b) Notwithstanding any provision of the declaration or bylaws to the contrary, at least fourteen days prior to entering into any loan agreement on behalf of the association, the executive board shall (1) disclose in writing to all unit owners the amount and terms of the loan and the estimated effect of such loan on any common expense assessment, and (2) afford the unit owners a reasonable opportunity to submit written comments to the executive board with respect to such loan.

      (P.A. 83-474, S. 61, 96; P.A. 07-243, S. 7.)

      History: P.A. 07-243 designated existing provisions as Subsec. (a) and amended same by adding provisions re accounting records, books and minutes of meetings and voting records of the executive board, re records to be made available by the board or a managing agent, re copying and re request of unit owner or agent and by making technical changes, and added Subsec. (b) re loan disclosure and comments.

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PART IV
PROTECTION OF PURCHASERS

      Sec. 47-265. Requirements for public offering statement when community is subject to development rights. If the declaration provides that a common interest community is subject to any development rights, the public offering statement shall disclose, in addition to the information required by section 47-264:

      (1) The maximum number of units, and the maximum number of units per acre, that may be created;

      (2) A statement of how many or what percentage of the units that may be created will be restricted exclusively to residential use, or a statement that no representations are made regarding use restrictions;

      (3) If any of the units that may be built within real property subject to development rights are not to be restricted exclusively to residential use, a statement, with respect to each portion of that real property, of the maximum percentage of the real property areas, and the maximum percentage of the floor areas of all units that may be created therein, that are not restricted exclusively to residential use;

      (4) A brief narrative description of any development rights reserved by a declarant and of any conditions relating to or limitations on the exercise of development rights;

      (5) A statement of the maximum extent to which each unit's allocated interests may be changed by the exercise of any development right described in subdivision (3) of this section;

      (6) A statement of the extent to which any buildings or other improvements that may be erected pursuant to any development right in any part of the common interest community will be compatible with existing buildings and improvements in the common interest community in terms of architectural style, quality of construction and size, or a statement that no assurances are made in those regards;

      (7) General descriptions of all other improvements that may be made and limited common elements that may be created within any part of the common interest community pursuant to any development right reserved by the declarant, or a statement that no assurances are made in that regard;

      (8) A statement of any limitations as to the locations of any building or other improvement that may be made within any part of the common interest community pursuant to any development right reserved by the declarant, or a statement that no assurances are made in that regard;

      (9) A statement that any limited common elements created pursuant to any development right reserved by the declarant will be of the same general types and sizes as the limited common elements within other parts of the common interest community, or a statement of the types and sizes planned, or a statement that no assurances are made in that regard;

      (10) A statement that the proportion of limited common elements to units created pursuant to any development right reserved by the declarant will be approximately equal to the proportion existing within other parts of the common interest community, or a statement of any other assurances in that regard, or a statement that no assurances are made in that regard;

      (11) A statement that all restrictions in the declaration affecting use, occupancy, and alienation of units will apply to any units created pursuant to any development right reserved by the declarant, or a statement of any differentiations that may be made as to those units, or a statement that no assurances are made in that regard; and

      (12) A statement of the extent to which any assurances made pursuant to this section apply or do not apply in the event that any development right is not exercised by the declarant.

      (P.A. 83-474, S. 66, 96; P.A. 07-217, S. 181.)

      History: P.A. 07-217 made a technical change in Subdiv. (5), effective July 12, 2007.

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