OLR Bill Analysis

sHB 6672

AN ACT CONCERNING THE 2008 AMENDMENTS TO THE UNIFORM COMMON INTEREST OWNERSHIP ACT.

SUMMARY:

This bill makes numerous unrelated changes and additions to the Connecticut Common Interest Ownership Act (CIOA).

The bill establishes definitions for several terms used in CIOA and amends several other definitions. It specifies that certain cost-sharing arrangements and certain shared-use arrangements do not create a common interest community. Also, it expands the definition of “special declarant rights.

It makes several portions of CIOA apply to common interest communities created before January 1, 1984, including definitions, unit boundaries, court challenges to amendments of the declaration and amendments requiring security holder consent, and the powers and duties of the executive board. It also applies two new provisions to these older common interest communities-termination after a catastrophe and legal proceedings involving construction defects.

Several provisions deal with the creation, alteration, and termination of a common interest community. For example, the bill (1) requires the declaration to authorize a process for association administration of any intended design criteria, construction approval process, or enforcement of aesthetic standards ( 11); (2) allows a declaration to be amended by any larger or smaller percentage than 67% of the unit owners with no specified minimum number or percentage of unit owners and allows the declaration to specify that no amendments are valid without the approval of a specified person ( 15); and (4) allows for judicial termination in the case of an actual disaster ( 16 and 17).

The bill makes several changes concerning the powers and duties of unit owners' associations. For example, it:

1. specifies that associations may invest association funds;

2. establishes the presumption that associations may borrow funds by assigning their future common charges;

3. specifies the right of the association to suspend a unit owner's privileges if that owner fails to pay common charges;

4. gives discretion to the executive board to enforce, decline to enforce, or compromise any claim involving a violation of the association's bylaws or rules ( 19);

5. allows the declaration to provide for the direct election of association's officers by the unit owners ( 20);

6. limits the association's right to cancel contracts between the association and the declarant to a two-year period that begins when the unit owners assume control of the association and makes additional types of contracts subject to cancellation ( 21);

7. makes clear that only unit owners may amend the bylaws and enables the bylaws to address matters that might otherwise be addressed as rules ( 22);

8. specifies several means by which the association may deliver notice to unit owners ( 32);

9. creates a set of rules by which unit owners may vote to remove an officer or director of the executive board ( 33); and

10. provides detailed guidelines regarding the kinds of records that the association must retain and make available to unit owners, and which records may be exempt from disclosure ( 30).

The bill significantly changes current law regarding meetings of unit owners and of the executive board. It creates new open meeting requirements for all executive board meetings, other than executive sessions, and meetings of any committees that have decision-making authority. It gives unit owners the right to participate in board meetings, to access the same material distributed to executive board members, and to have notice of board meetings. It allows the board to meet by telephonic or video conferencing means as long as a unit owner's right of notice and participation continues ( 23). It allows absentee ballots to be included when calculating the presence of a quorum. It requires that a quorum be present at the time of each executive board vote rather than only at the beginning of the board meeting ( 24). It establishes a default rule that unit owners may vote by absentee ballot and by written or electronic ballot, unless the declaration or bylaws provide otherwise. Thus, it allows votes to be taken without a physical meeting of unit owners ( 26).

It makes several changes regarding insurance. For example, it requires the association to carry fidelity insurance. It specifies that the association may choose to proceed directly against the unit owner and not file an insurance claim in cases of willful misconduct or gross negligence by the unit owner or the owner's guest or invitee( 28).

It extends the association's priority lien over first and second mortgages to the extent of six months' common charges to include the amount of the association's reasonable attorney's fees and its court costs. It establish new limitations on the right of the association to proceed in foreclosure against a unit owner, including prohibiting a foreclosure action until a unit owner owes at least three months' common charges, the unit owner has rejected a payment plan, and the board has expressly authorized initiation of the foreclosure ( 29).

It creates procedures for the executive board to adopt rules. It authorizes (1) subject to association rules as to time, place, and manner, the display of the American and state flags as well as political signs, and (2) peaceful assembly of unit owners on the common elements. It requires that each rule be reasonable ( 31).

It empowers the executive board to adopt special assessments and provides for a streamlined procedure to adopt emergency assessments ( 34).

Regarding declarants, the bill (1) provides a procedure under which a declarant may offer the association a payment plan that the association must at least consider before initiating litigation against the declarant regarding construction defects ( 35); (2) expands the liability of the declarant for false or misleading statements that appear in a public offering statement ( 36); and (3) requires disclosures of certain financial information in public offering statements ( 37).

EFFECTIVE DATE: October 1, 2009

1 — DEFINITIONS

The bill defines the terms “assessment,” “bylaws,” “record,” and “rule. ” It amends the definitions of “common interest community,” and “special declarant rights.

Assessment

“Assessment” means the sum the association of unit owners attributes to each unit for common expenses and due to the association.

Bylaws

“Bylaws” means the instruments, however named, that contain the procedures for conducting the association's affairs regardless of the form in which the association is organized, including any amendments to the instruments.

Record

“Record,” used as a noun, means information inscribed on a tangible medium or stored in an electronic or other medium and retrievable in perceivable form.

Rule

“Rule” means an association policy, guideline, restriction, procedure, or regulation, however denominated, which (1) is not set forth in the declaration or bylaws and (2) governs the conduct of persons or the use or appearance of property.

Common Interest Community

The bill amends the definition of “common interest community,” to specify that an arrangement by

Under current law, this term is defined as real property described in a declaration with respect to which a person, by virtue of his or her ownership of a unit, is obligated to pay for (1) real property taxes on, (2) insurance premiums on, (3) maintenance of, or (4) improvement of any other real property other than that unit described in the declaration. The bill specifies that such an arrangement is also a common interest community if the obligation is to pay for a share of services and expenses related to the common elements or any other property other than the unit.

The bill also specifies that a common interest community does not include:

1. an arrangement between the associations for two or more common interest communities to share the costs;

2. an arrangement between an association and a real estate owner that is not part of a common interest community to share the cost; or

3. a covenant that requires the owners of separately owned real estate parcels to share costs or other obligations associated with a party wall, driveway, well, or other similar use.

Special Declarant Rights

The bill expands the definition by including the right to (1) control any construction, design review, or aesthetic standards committee or process; (2) attend meetings of the unit owners and, except during an executive session, the executive board; or (3) have access to the records of the association to the same extent as a unit owner.

2 — ELECTRONIC SIGNATURES

The bill specifies that CIOA and the provisions of the bill establishing new provisions in CIOA modify, limit, and supersede the federal Electronic Signatures in Global and National Commerce Act, (15 USC 7001, et seq. ). The bill specifies that neither CIOA nor these new provisions:

1. modify, limit, or supersede Section 101(c) of that act (15 USC 7001(c)) or

2. authorize electronic delivery of any of the notices described in Section 103(b) of that act (15 USC 7003(b)) (see BACKGROUND).

3 — SCOPE OF CIOA

Generally, the law specifies that CIOA and all amendments to it apply to common interest communities created on or after January 1, 1984 and to any other common interest community subjected to it. The bill specifies that these common interest communities created before January 1, 1984 can subject themselves to amendments to CIOA by amending their declarations.

4 — COMMON INTEREST COMMUNITIES RESTRICTED TO NONRESIDENTIAL USE

By law, a common interest community restricted to nonresidential use is not subject to CIOA unless its declaration provides otherwise. Current law specifies that the declaration of such a common interest community may provide that all of CIOA applies or that only the provisions (1) dealing with separate title and taxation (CGS 47-204); (2) prohibiting zoning and other land use laws from preventing conversion of a building to the common interest ownership form of ownership (CGS 47-205), and (3) establishing certain rules in the case of eminent domain (CGS 47-206).

The bill creates a third option by allowing the declaration to provide that only Part I and Part II of CIOA apply. Part I contains general provisions and applicability provisions (CGS 47-200 to 47-219) and Part II contains provisions dealing with the creation, alteration, and termination of common interest communities.

5 — APPLICABILITY TO PRE-EXISTING COMMON INTEREST COMMUNITIES

Certain CIOA provisions automatically apply to condominiums created in Connecticut before January 1, 1984, but only with respect to events and circumstances that occur after December 31, 1983 (CGS 47-216). The bill makes the following additional provisions in CIOA and in the bill also automatically apply to these older common interest communities:

1. certain determinations regarding unit boundaries unless the declaration provides otherwise;

2. the requirement that court challenges to the validity of an amendment the association adopts must be brought within one year after the amendment is recorded;

3. the requirement specifying that if any provision in a common interest community declaration requires the consent of a security interest holder in a unit as a condition of amending the declaration, the holder is deemed to have consented if the association does not receive a written refusal to consent within 45 days after it delivers notice of the proposed amendment or mails it by certified mail with return receipt;

4. the bill's provisions concerning legal proceedings to terminate the common interest community if substantially all of the units have been destroyed or are uninhabitable ( 17);

5. the powers and duties of executive board members including the budget making process, the period of declarant control, and the delcarant's duty to provide current financial information to unit owners; and

6. the association's authority to institute a legal proceeding alleging a construction defect whether by litigation, mediation, arbitration, or administratively, against a declarant or an employee, independent contractor, or other person providing labor or material to a declarant.

8 — ARRANGEMENTS BETWEEN ASSOCIATIONS

The bill specifies that an arrangement between the associations for two or more common interest communities to share the costs of real estate taxes, insurance premiums, services, maintenance, or improvements of real estate, or other activities does not create a separate common interest community.

It also specifies that such an arrangement between an association and the owner of real estate that is not part of a common interest community also does not create a separate common interest community. But it requires that (1) assessments against the units in the common interest community required by the arrangement must be included in the common interest community's periodic budget, and (2) the arrangement must be disclosed in all public offering statements and resale certificates required by the common interest ownership act and the bill.

9 — COVENANT TO SHARE COSTS OR OTHER OBLIGATIONS

The bill specifies that a covenant that requires the owners of separately owned real estate parcels to share costs or other obligations associated with a party wall, driveway, well, or other similar use does not create a common interest community unless the owners otherwise agree.

10 — RULE AGAINST PERPETUITIES

Under current law, the rule against perpetuities does not apply to defeat any provision of the declaration, bylaws, rules, or regulations the association adopts. The bill eliminates regulations from this list. A subsequent provision of this bill eliminates the association's authority to adopt regulations.

11 — DECLARATION –CONSTRUCTION, DESIGN, AND AESTHETIC

The bill requires the declaration to contain any authority the association has to establish and enforce construction and design criteria and aesthetic standards.

12 — SUBDIVISION OF A UNIT-METHOD OF REALLOCATING INTERESTS

By law, if the declaration explicitly allows it, a unit may be subdivided into two or more units and the association must prepare and record an amendment reflecting this change. Under current law, the amendment must reallocate the allocated interests formerly allocated to the subdivided unit to the new units in any reasonable manner prescribed by the owner of the subdivided unit. Under the bill, it may also be reallocated on any other basis the declaration requires.

13 — EASEMENT FOR ENCROACHMENT

Under the bill, if any unit or common element encroaches on any other unit or common element, a valid easement for the encroachment exists. The easement does not relieve a unit owner of liability for the unit owner's willful misconduct or relieve a declarant or any other person of liability for failure to adhere to any plats and plans or, in a cooperative, to any representation in the public offering statement.

14 — EASEMENT FOR USE OF COMMON ELEMENTS

Under current law, in a planned community, subject to certain limitations, the unit owners have an easement (1) in the common elements to access their units and (2) to use the common elements and all real property that must become common elements for all other purposes.

The bill makes the easement to use the common elements for any other purpose than to access their unit, subject to the planned community's declaration and rules. It also restricts the right to any purpose for which the common elements were intended, and limits it to common elements that are not limited common elements.

Also, it expands the easement to use the common elements to unit owners in condominiums and cooperatives (see BACKGROUND).

15 — AMENDMENTS TO DECLARATION

Under current law, the declaration, including any surveys and plans, (1) may be amended, with certain exceptions, only by vote or agreement of unit owners of units to which at least 67% of the votes in the association are allocated and (2) to require any larger majority. Current law allows a declaration of a condominium that has no residential units to allow a smaller percentage of the votes to approve amendments. The bill expands the scope of this authority by also allowing condominiums containing at least one residential unit to specify a smaller percentage. The bill specifies that the authority to require a greater or lesser percentage of the votes than 67% to amend the declaration can be for all amendments or for specific subjects of amendment. The bill specifies that an amendment is not valid until it is approved by any other person the declaration requires as a condition of its effectiveness.

By law, an amendment to the declaration may prohibit or materially restrict the permitted uses or occupancy of a unit or the number or other qualifications of persons who may occupy units by vote or agreement of unit owners of units to which at least 80% of the votes in the association are allocated, or any larger percentage specified in the declaration. The bill also allows an amendment to do so if approved by a vote of unit owners with at least 80% of the votes of a specified group of units that the amendment would affect. By law, unchanged by the bill, an amendment must provide reasonable protection for a use or occupancy permitted at the time it was adopted.

Amendments Affecting the Priority of a Security Holder's Interest

Under current law, if CIOA or the declaration of any common interest community requires the consent of a person holding a security interest in a unit as a condition to the effectiveness of any amendment to the declaration, that consent is deemed granted if no written refusal to consent is received by the association within 45 days after the association (1) delivers notice of the proposed amendment to the interest holder or (2) mails the notice to the holder by certified mail, return receipt requested. The bill creates an exception to this provision by requiring actual consent in a record for an amendment that affects the priority of a holder's security interest or the ability of that holder to foreclose its security interest if the declaration requires that consent as a condition to the amendment's effectiveness.

Procedure to Deem Approval

By law, if the declaration of a common interest community, whether created before or after January 1, 1984, contains a provision requiring that amendments relating to the use of units, the relocation of boundaries between units and common elements, or the extension or creation of development rights be adopted only by the vote or agreement of unit owners of units to which more than 80% of the votes in the association are allocated, such a proposed amendment shall be deemed approved under certain circumstances. The bill expands this to include any amendment not just those specified above.

As under current law, an amendment is deemed approved if:

1. unit owners of units to which more than 80% of the votes in the association vote for or agree to the proposed amendment; (b) no unit owner votes against the proposed amendment; and (c) notice of the proposed amendment is delivered to the unit owners holding the votes in the association that have not voted or agreed to the proposed amendment and no written objection of the proposed amendment is received by the association within 30 days after the association delivers notice; or

2. unit owners of units to which more than 80% of the votes in the association are allocated vote for or agree to the proposed amendment but at least one unit owner objects and, pursuant to an action brought by the association in the Superior Court against all objecting unit owners, the court finds that the objecting unit owner or owners do not have a unique minority interest, different in kind from the interests of the other unit owners, that the voting requirement of the declaration was intended to protect.

16 & 17 — TERMINATION OF COMMON INTEREST COMMUNITY

Under current law, other than eminent domain or foreclosure of an entire cooperative by a security instrument that has priority over the declaration, a common interest community may be terminated by the unit owners having at least 80% of the votes or any larger percentage the declaration specifies. The bill also requires any other approvals the declaration requires.

The bill creates an additional exception. Under the bill, if substantially all the units in a common interest community have been destroyed or are uninhabitable and the available methods for giving notice under the bill ( 32) of a meeting of unit owners to consider termination as provided by law will not likely result in receipt of the notice, the executive board or any other interested person may start an action in the Superior Court seeking to terminate it. The bill authorizes the court, in such an action, to issue whatever orders it considers appropriate, including appointment of a receiver. After a hearing, the court may terminate the common interest community or reduce its size and may issue any other order it considers to be in the best interest of the unit owners and persons holding an interest in the common interest community.

18 — ORGANIZATION OF UNIT OWNERS ASSOCIATION

The law requires that a unit owners' association be organized no later than the date the first unit in the common interest community is conveyed. The bill requires the association to have an executive board. Under current law, the association must be organized as a profit or nonprofit corporation, trust, partnership or unincorporated association. The bill adds the options of a limited liability company or any other form of organization authorized by law.

19 — POWERS AND DUTIES OF ASSOCIATION

The bill requires, instead of allows, the unit owners' association to adopt and amend bylaws, and to adopt and amend budgets. It eliminates their power to adopt regulations. It authorizes them to invest association funds and to institute, defend, or intervene in arbitration, or mediation.

Current law allows an association to assign its rights to future income, including the right to receive common expense assessments, to the extent the declaration explicitly authorizes them to do so. The bill instead gives the association this authority except to the extent the declaration limits this right. Thus under current law, if the declaration is silent, the association may not do so; under the bill, the association would be able to do so since the declaration contains no limitation.

The bill also authorizes associations to suspend any right or privilege of a unit owner that fails to pay an assessment. But the bill specifies that associations may not:

1. deny a unit owner or other occupant access to the owner's unit;

2. suspend a unit owner's right to vote;

3. prevent a unit owner from seeking election as a director or officer of the association; or

4. withhold services provided to a unit or a unit owner by the association if the effect of withholding the service would be to endanger anyone's health, safety, or property.

The bill specifies that the declaration may not limit the power of the association to institute litigation, arbitration, mediation, or administrative proceedings against any person, except:

1. the association must comply with the bill's notice requirements, if applicable, before instituting any lawsuit or other proceeding in connection with construction defects; and

2. the executive board must promptly provide notice to the unit owners of any legal proceeding in which the association is a party other than proceedings involving enforcement of rules or to recover unpaid assessments or other sums due the association.

19 (F) — EXECUTIVE BOARD POWERS AND DUTIES

The bill authorizes the association's executive board to determine whether to take enforcement action by exercising the association's power to impose sanctions or beginning an action for a violation of the declaration, bylaws, and rules, including whether to compromise any claim for unpaid assessments or other claim made by or against it. But the bill specifies that the executive board does not have a duty to take enforcement action if it determines that, under the facts and circumstances:

1. the association's legal position does not justify taking any or further enforcement action;

2. the covenant, restriction, or rule being enforced is, or is likely to be construed as, inconsistent with law;

3. although a violation may exist or may have occurred, it is not so material as to be objectionable to a reasonable person or to justify expending the association's resources; or

4. it is not in the association's best interests to pursue an enforcement action.

The bill specifies that the executive board's decision not to pursue enforcement under one set of circumstances does not prevent it from taking enforcement action under another set of circumstances, except that the executive board may not be arbitrary or capricious in taking enforcement action.

The bill requires the executive board to establish a reasonable method for unit owners to communicate among themselves and with the executive board on association matters.

20 — DUTIES AND POWERS OF EXECUTIVE BOARD MEMBERS

The bill specifies that executive board directors are subject to the prohibitions against conflicts of interests governing directors of corporations. By law, association officers and executive board members must exercise the degree of care and loyalty required by a trustee. The bill specifies that this duty applies regardless of the form in which the association is organized, and specifies that they owe this duty to the association.

The bill specifies that the executive board may not amend the bylaws. By law, the board may fill vacancies in its membership for the unexpired portion of any term. The bill instead authorizes the board to do so until the unexpired portion of the term or, if earlier, until the next regularly scheduled election of executive board members.

Budget Adoption by Board

The bill requires the executive board to adopt budgets as specified in the bill ( 34).

Election of Board Officers

Under current law, the executive board elects board officers. The bill instead requires this unless the declaration provides for the election of officers by unit owners.

Removal of Board Members

The bill eliminates the authority of 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, to remove any member of the executive board with or without cause, other than a member the declarant appointed.

Appointment of Specified Positions on Executive Board

The bill authorizes a declaration to:

1. provide for the appointment of specified positions on the executive board by persons other than the declarant during or after the period of declarant control and

2. provide a method for filling vacancies in such specified positions, other than by election by the unit owners.

But after the period of declarant control, the bill specifies that appointed members (1) may not comprise more than one-third of the board and (2) have no greater authority than any other board member.

21 — TERMINATION OF CONTRACTS AND LEASES

Under current law, the unit owners' association, after the period of declarant control ends, may cancel a variety of contracts between the association and the declarant or other persons without penalty, and there is no time limit on this right to cancel. The bill limits the association's cancellation right to the two-year period beginning when the unit owners assume control of the association. Thus, contracts not canceled during that two-year period would become non-cancelable and presumably enforceable in accordance with their terms. The bill extends the authority to cancel to non-residential condominiums. The bill adds to the types of contracts that are subject to cancellation to include maintenance and operations contracts.

22 — BYLAWS

The bill makes it clear that only unit owners can amend bylaws. It also requires that the bylaws:

1. contain any provision necessary to satisfy requirements in CIOA or the declaration concerning meetings, voting, quorums, and other activities of the association and

2. provide for any matter required by the law other than CIOA to appear in the bylaws of organizations of the same type as the association.

Under current law, subject to the provisions of the declaration, the bylaws may provide for any other matters the association deems necessary and appropriate. The bill specifies that this can include matters that could be adopted as rules. Also it makes this authority to adopt bylaws subject to the provisions of CIOA.

23 — MEETINGS

Association Meetings

By law a meeting of the association must be held at least once a year. The bill requires that an association hold an annual meeting at a time, date, and place specified in the bylaws.

Under current law, an association may hold a special meeting at the request of the president, a majority of the board, or unit owners having at least 20% of the association's vote or any lower percentage the bylaws specify. The bill instead requires an association to hold a special meeting of unit owners to address any matter affecting the common interest community or the association if its president, a majority of the executive board, or unit owners having at least 20%, or any lower percentage specified in the bylaws, of the votes in the association request that the secretary call the meeting.

Under the bill, if the association does not notify unit owners of a special meeting within 30 days after the requisite number or percentage of unit owners request the secretary to do so, the requesting members may directly notify all the unit owners of the meeting.

Only matters described in the meeting notice may be considered at a special meeting.

The bill requires an association to notify unit owners of the time, date, and place of each annual and special unit owners meeting. As under current law, the notice must be given between 10 and 60 days before the meeting date.

The bill allows the notice period to be reduced or waived for a meeting to deal with an emergency.

Requirements for Board and Committee Meetings

The bill requires unit owners be given a reasonable opportunity at any meeting to comment on any matter affecting the common interest community or the association. It permits the declaration or bylaws to allow for meetings of unit owners to be conducted by telephonic, video, or other conferencing process if the alternative process satisfies the bill's requirements on such types of meetings (see below).

The bill imposes the following requirements to meetings of the executive board and association committees authorized to act for the association:

1. meetings must be open to the unit owners except during executive sessions;

2. the executive board and committees may hold an executive session only during a regular or special meeting of the board or a committee;

3. no final vote or action may be taken during an executive session;

4. an executive session may be held only to:

● consult with the association's attorney on legal matters;

● discuss existing or potential litigation, mediation, arbitration, or administrative proceedings;

● discuss labor or personnel matters;

● discuss contracts, leases, and other commercial transactions to purchase or provide goods or services currently being negotiated, including the review of bids or proposals, if premature general knowledge of those matters would place the association at a disadvantage; or

● prevent public knowledge of the matter to be discussed if the executive board or committee determines that public knowledge would violate the privacy of any person;

5. a gathering of board members at which the board members do not conduct association business is not an executive board meeting;

6. the board and its members may not use incidental or social gatherings of board members or any other method to evade the bill's open meeting requirements;

7. during the period of declarant control, the board must meet at least four times a year, and at least one of those meetings must be held at the common interest community or at a place convenient to the community;

8. after termination of the period of declarant control, all executive board meetings must be at the common interest community or at a place convenient to the community unless the unit owners amend the bylaws to vary the location of those meetings;

9. at each executive board meeting, the executive board must provide a reasonable opportunity for unit owners to comment on any matter affecting the common interest community and the association;

10. unless the meeting is included in a schedule given to the unit owners or the meeting is called to deal with an emergency, the secretary or other officer specified in the bylaws must give notice of each executive board meeting to each board member and to the unit owners, and the notice must be at least 10 days before the meeting and state the time, date, place, and agenda;

11. if any material distributed to the executive board before the meeting, the board at the same time must make copies of the material reasonably available to unit owners, except it need not make available copies of unapproved minutes or material to be considered in executive session;

12. unless the declaration or bylaws otherwise provide, the executive board may meet by telephonic, video, or other conferencing process if (a) the meeting notice states the conferencing process to be used and explains how unit owners may participate in the conference directly or by meeting at a central location or conference connection and (b) the process provides all unit owners the opportunity to hear or perceive the discussion and offer comments;

13. after termination of the period of declarant control, unit owners may amend the bylaws to vary the procedures for telephonic, video, or conferencing meetings;

14. instead of meeting, the executive board may act by unanimous consent as documented in a record authenticated by all its members, and the secretary must promptly give notice to all unit owners of any action taken by unanimous consent; and

15. after termination of the period of declarant control, the 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.

The bill specifies that even if an action by the executive board does not comply with these requirements, it is valid unless a court sets it aside. The bill allows a challenge to the validity of an action of the executive board for non-compliance to be brought within 60 days after the minutes of the executive board meeting at which the action was taken are approved or the record of that action is distributed to unit owners, whichever is later.

24 — ASSOCIATION MEETINGS

Under current law, unless the bylaws provide otherwise, a quorum is present throughout any association meeting if persons entitled to cast 20% of the votes that may be cast for election of the executive board are present in person or by proxy at the beginning of the meeting. Under the bill, unless the bylaws provide otherwise, a quorum is present throughout any meeting of unit owners if persons entitled to cast 20% of the votes in the association:

1. are present in person or by proxy at the beginning of the meeting;

2. have cast absentee ballots solicited in accordance with the bill's requirements, which have been delivered to the secretary in a timely manner; or

3. are present by any combination of the two.

Executive Board Meetings

Under current law, unless the bylaws specify a larger percentage, a quorum is deemed present throughout any meeting of the executive board if persons entitled to cast 50% of the votes on that board are present at the beginning of the meeting. Under the bill, unless the bylaws specify a larger number, a quorum of the executive board is present for purposes of determining the validity of any action taken at a meeting of the executive board only if a majority of the votes on that board are present at the time a vote on that action is taken. If a quorum is present when a vote is taken, the affirmative vote of a majority of the board members present is the act of the executive board unless the declaration or bylaws require a greater vote.

The bill requires that association meetings be conducted in accordance with the most recent edition of Roberts' Rules of Order Newly Revised, unless the bylaws provide otherwise.

25 — VOTING, PROXIES, AND BALLOTS

The bill authorizes unit owners, unless prohibited or limited by the declaration or bylaws, to vote at a meeting in person, by absentee ballot, a proxy, or, when a vote is conducted without a meeting, by electronic or paper ballot.

Voting at Unit Owner's Meetings

The bill imposes the following additional requirements at a meeting of unit owners:

1. unit owners who are present in person may vote by voice vote, show of hands, standing, or any other method for determining the votes of unit owners, as designated by the person presiding at the meeting;

2. unless a greater number or fraction of the votes in the association is required by CIOA or the declaration, a majority of the votes cast determines the outcome of any action of the association;

3. a unit owner may vote by absentee ballot without being present at the meeting;

4. when a unit owner votes by absentee ballot, the association must be able to verify that the ballot is cast by the unit owner having the right to do so;

5. the association must promptly deliver an absentee ballot to an owner that requests it if the request is made at least three days before the scheduled meeting;

6. votes cast by absentee ballot must be included in the tally of a vote taken at that meeting; and

7. a person may not cast provisions representing more than 15% of the association's vote.

Voting without a Meeting

The bill allows an association to conduct a vote without a meeting, unless prohibited or limited by the declaration or bylaws. For voting without a meeting, the bill requires:

1. the association to notify the unit owners that the vote will be taken by ballot,

2. the association to deliver a paper or electronic ballot to every unit owner entitled to vote, and

3. the ballot to set forth each proposed action and provide an opportunity to vote for or against the action.

The bill requires that when the association delivers the ballots, it must also:

1. indicate the number of responses needed to meet the quorum requirements;

2. state the percentage of votes necessary to approve each matter other than election of directors;

3. specify the time and date by which a ballot must be delivered to the association to be counted, which time and date may not be fewer than three days after the date the association delivers the ballot; and

4. describe the time, date, and manner by which unit owners wishing to deliver information to all unit owners on the subject of the vote may do so.

The specifics that a ballot is not revoked after delivery to the association by death or disability or attempted revocation by the person that cast that vote, unless the declaration or bylaws provide otherwise.

Under the bill approval by ballot is valid only if the number of votes cast by ballot equals or exceeds the quorum required to be present at a meeting authorizing the action.

Under current law, no votes allocated to a unit owned by the association may be cast. The bill instead requires that votes allocated to a unit owned by the association must be cast in any vote of the unit owners in the same proportion as the votes cast on the matter by unit owners other than the association.

26 — INSURANCE

The bill requires the association to carry fidelity insurance. This type of insurance protects the association from loss of money, securities, or inventories resulting from crime. Common fidelity insurance claims allege employee dishonesty, embezzlement, forgery, robbery, safe burglary, computer fraud, wire transfer fraud, counterfeiting, and other similar criminal acts.

Current law requires the association to ensure units, as well as the common elements, only in the case of so-called “stacked” units in a high-rise building. The bill requires unit insurance coverage also in the case of common interest communities with units that have party walls, to the extent reasonably available. But it need not include improvements and betterments installed by unit owners.

The bill specifies that the insurance the association must maintain may be subject to reasonable deductibles.

27 — SURPLUS FUNDS

By law, unless otherwise provided in the declaration, any surplus funds of the association remaining after payment of or provision for common expenses and any prepayment of reserves must be paid to the unit owners in proportion to their common expense liabilities or credited to them to reduce their future common expense assessments. The bill specifies that it must be paid annually.

28 — ASSESSMENTS

Under current law, if any common expense is caused by the misconduct of any unit owner the association may, after notice and hearing, assess that expense exclusively against the unit. The bill makes it clear the association may do so even if it has insurance that covers that damage or common expense. Thus, an association could seek redress against the unit owner instead of fling a claim with its insurer and risk cancellation or increased premiums. The bill also expands this right to include damage caused by the unit owner's gross negligence and the willful misconduct and gross negligence of the unit owner's guest or invitee. It specifies that this applies to damage to a unit or other portions of the common interest community.

29 — LIENS FOR ASSESSMENTS

By law, the association has a priority lien on a unit for any assessment on that unit or fines imposed over first and second mortgages to the extent of six months of common charges. The bill expands this to include reasonable attorneys' fees and costs and any other sum due the association under the declaration, CIOA, or as a result of an administrative, arbitration, mediation, or judicial decision.

The bill makes a lien for unpaid assessments extinguished unless proceedings to enforce it are instituted within three, instead of two, years after the full amount of the assessments becomes due.

Limitations on Foreclosure by an Association

The bill prohibits an association from starting a foreclosure action on a lien on a unit unless:

1. the unit owner, at the time the action is commenced, owes at least an amount equal to three months of common expense assessments based on the periodic budget last adopted by the association and the unit owner has failed to accept or comply with a payment plan offered by the association; and

2. the executive board votes to commence a foreclosure action specifically against that unit.

Unless the parties otherwise agree, the bill requires an association to apply any sums paid by unit owners that are delinquent in paying assessments in the following order:

1. unpaid assessments;

2. late charges;

3. reasonable attorney's fees and costs and other reasonable collection charges; and

4. all other unpaid fees, charges, fines, penalties, interest and late charges.

If the only sums due with respect to a unit are fines and related sums imposed against the unit, a foreclosure action may not be commenced against the unit unless the association has a judgment against the unit owner for the fines and related sums and has perfected a judgment lien against the unit.

The bill requires that every aspect of a foreclosure, sale, or other disposition, including the method, advertising, time, date, place, and terms be commercially reasonable.

30 — ASSOCIATION RECORDS

The bill establishes more detailed requirements for retaining and sharing association records with unit owners.

Required Records

The bill requires an association to keep:

1. detailed records of receipts and expenditures affecting the association's operation and administration and other appropriate accounting records;

2. minutes of all meetings of its unit owners and executive board other than executive sessions, a record of all actions taken by the unit owners or executive board without a meeting, and a record of all actions a committee takes in place of the executive board on the association's behalf;

3. the names of unit owners in a form that permits preparation of a list of the names of all owners and the addresses at which the association communicates with them, in alphabetical order showing the number of votes each owner is entitled to cast;

4. its original or restated organizational documents, if required by law other than CIOA, bylaws and all amendments to them, and all rules currently in effect;

5. all financial statements and tax returns of the association for the past three years;

6. the names and addresses of its current executive board members and officers;

7. is most recent annual report delivered to the secretary of the state, if any;

8. financial and other records sufficiently detailed to enable the association to comply with CIOA's resale disclosure requirements;

9. copies of current contracts to which it is a party;

10. records of executive board or committee actions to approve or deny any requests for design or architectural approval from unit owners; and

11. ballots, proxies, and other records related to voting by unit owners for one year after the election, action, or vote they relate to.

Examination and Copying

Subject to the exceptions specified below, the bill makes all records an association retains available for examination and copying by unit owners or their authorized agents (1) during reasonable business hours or at a mutually convenient time and location and (2) upon five days' notice in a record reasonably identifying the specific records requested.

Protected Records

The bill allows records to be withheld from inspection and copying to the extent that they concern:

1. personnel, salary, and medical records relating to specific individuals;

2. contracts, leases, and other commercial transactions to purchase or provide goods or services, currently being negotiated;

3. existing or potential litigation, mediation, arbitration, or administrative proceedings;

4. existing or potential matters involving federal, state, or local administrative or other formal proceedings before a government tribunal for enforcement of the declaration, bylaws, or rules;

5. communications with the association's attorney that are otherwise protected by the attorney-client privilege or the attorney work-product doctrine;

6. information, which if disclosed, would violate law other than CIOA;

7. records of an executive session of the executive board; or

8. individual unit files other than those of the requesting owner.

Unit owners also have the right to receive copies by photocopying or other means, including copies through an electronic transmission if available upon request. But an association does not have to compile or synthesize information.

Information the association provides may not be used for commercial purposes.

Fees

The bill allows an association to charge a reasonable fee for providing copies of any records and supervising the unit owner's inspection.

31 — RULES

Before adopting, amending, or repealing any rule, the bill requires the executive board to give all unit owners notice of:

1. its intention to adopt, amend, or repeal a rule and provide the text of the rule or the proposed change and

2. a date on which the executive board will act on the proposed rule or amendment after considering comments from unit owners.

Following adoption, amendment, or repeal of a rule, the bill requires the association to notify the unit owners of its action and provide a copy of any new or revised rule.

The bill specifies that an association's internal business operating procedures need not be adopted as rules, but requires that every rule be reasonable.

The bill authorizes an association to adopt rules to establish and enforce construction and design criteria and aesthetic standards if the declaration allows it. If the declaration provides it, the association must adopt procedures to enforce those standards and approve construction applications, including (1) a reasonable time within which the association must act after an application is submitted and (2) the consequences of its failure to act.

Flag Display

The bill requires a rule regulating display of the U. S. flag to be consistent with federal law. The rule cannot prohibit display on a unit or on a limited common element adjoining a unit of the Connecticut flag, or signs regarding candidates for public or association office or ballot questions. The bill allows the association to adopt rules governing the time, place, size, number, and manner of those displays.

Assembly

The bill gives unit owners the right to assemble peacefully on the common elements to consider matters related to the common interest community, but authorizes the association to adopt rules governing the time, place, and manner of those assemblies.

Behavior in Units

The bill authorizes an association to adopt rules that affect the use of or behavior in units that may be used for residential purposes, only to:

1. implement a provision of the declaration;

2. regulate any behavior in or occupancy of a unit that violates the declaration or adversely affects the use and enjoyment of other units or the common elements by other unit owners; or

3. restrict the leasing of residential units, if the restrictions are reasonably designed to meet underwriting requirements of institutional lenders that regularly make first mortgages on units or purchase such mortgages.

32 — NOTICE TO UNIT OWNERS

The bill requires an association to deliver any notice CIOA or the bill requires to any mailing or electronic mail address a unit owner designates. Otherwise, the bill allows the association to deliver notices by:

1. hand delivery to each unit owner;

2. hand delivery, U. S. mail postage paid, or commercially reasonable delivery service to the mailing address of each unit;

3. electronic means, if the unit owner has given the association an electronic address; or

4. any other method reasonably calculated to provide notice to the unit owner.

The bill specifies that ineffectiveness of a good faith effort to deliver notice by an authorized means does not invalidate action taken at or without a meeting.

33 — REMOVAL OF OFFICERS AND DIRECTORS

The bill authorizes unit owners present in person, by proxy, or by absentee ballot at any meeting of the unit owners at which a quorum is present, to remove any executive board member and any officer elected by the unit owners, with or without cause, by majority vote. However, the bill specifies that:

1. a member appointed by the declarant may not be removed by a unit owner vote during the period of declarant control;

2. a member appointed by persons other than the declarant during or after the period of declarant control may be removed only by the person that appointed that member; and

3. the unit owners may not consider whether to remove a board member or an officer elected by the unit owners at a meeting of the unit owners unless that subject was listed in the meeting's notice.

The bill gives any member or officer considered for removal a reasonable opportunity to speak before the vote is taken.

20, 34 — EXECUTIVE BOARD AND ASSOCIATION BUDGETS

The bill requires the executive board, at least annually, to adopt a proposed budget for the common interest community for consideration by the unit owners. By law, within 30 days after adoption of a proposed budget, the executive board must provide to all the unit owners a summary of the budget. The bill requires that this summary include any reserves, and a statement of the basis on which any reserves are calculated and funded. Under current law, the board must set a date for a unit owner's meeting to consider ratification within 14 to 30 days after hand delivering or mailing the summary. The bill instead requires the board to simultaneously set a unit owner's meeting date within 10 to 60 days after providing the summary to the unit owners.

By law, unless at that meeting a majority of all unit owners or any larger number specified in the declaration reject the budget, the budget is ratified, whether or not a quorum is present. If a proposed budget is rejected, the budget last ratified by the unit owners continues until unit owners ratify a subsequent budget.

Special Assessment

The bill authorizes the executive board to propose a special assessment at any time. The assessment is effective only if the executive board follows the budget ratification procedures the bill requires and the unit owners do not reject the proposed assessment.

The bill allows a special assessment to become immediately effective if the executive board determines by a two-thirds vote that a special assessment is necessary to respond to an emergency if:

1. the board vote specifies that the special assessment becomes effective immediately and

2. notice of the emergency assessment is provided promptly to all unit owners.

The bill requires that the board only spend the funds paid on account of the emergency assessment for the purposes described in the vote.

35 — LITIGATION INVOLVING THE DECLARANT

The bill applies the following requirements to an association's authority to institute and maintain a proceeding alleging a construction defect against a declarant or an employee, independent contractor or other person directly or indirectly providing labor or materials to a declarant. These apply whether the proceeding involves litigation, mediation, arbitration, or administrative action.

Under the first requirement, before the association institutes a proceeding, it must provide notice in a record of its claims to the declarant and those persons that the association seeks to hold liable for the claimed defects. The text of the notice may be in any form reasonably calculated to give notice of the general nature of the association's claims, including a list of the claimed defects. The bill allows the notice to be delivered by any method of service and may be addressed to any person if the method of service used provides actual notice or would be sufficient to give notice.

Under the second requirement, the association may not institute a proceeding against a person for at least 45 days after it sends notice of its claim. During this 45-day period, the declarant and any other person to which the association gave notice may present to the association a plan to repair or otherwise remedy the construction defects described in the notice. The association may institute a proceeding only if it does not receive a timely remediation plan, or does not accept the terms of any submitted plan.

If the association receives one or more timely remediation plans, the executive board must consider promptly those plans and notify the persons to which it directed notice whether the plan is acceptable as presented, acceptable with stated conditions, or not accepted.

If the association accepts a remediation plan, or if a person agrees to stated conditions to an otherwise acceptable plan, the parties must agree on a period for implementing the plan. The association may not institute a proceeding during the time the plan is being diligently implemented.

Any statute of limitation affecting the association's right of action against a declarant or other person is tolled during the initial 45-day period and during any extension of that time because a person to whom notice was directed has commenced and is diligently pursuing the remediation plan.

The bill authorizes, after the 45-day period expires, whether or not the association agrees to any remediation plan, the association to institute a proceeding against a person to whom notice was directed who fails to submit a timely remediation plan, submits an unacceptable plan, or which fails to pursue diligent implementation of a plan. It also allows a unit owner to institute such a proceeding with respect to the owner's unit and any limited common elements assigned to that unit, regardless of any association action.

The bill specifies that it does not preclude the association from making repairs necessary to mitigate damages or to correct any defect that poses a significant and immediate health or safety risk.

The bill authorizes the executive board to make the determination of whether and when the association may institute a proceeding. The bill prohibits a declaration from requiring a vote by any number or per cent of unit owners as a condition of instituting a proceeding.

The bill specifies that it does not prevent an association from seeking equitable relief at any time without giving the notice the bill requires or waiting 45 days after a notice was given.

36 — DUTY OF A DEALER TO DELIVER A PUBLIC OFFERING STATEMENT

The law generally requires a declarant, before offering any interest in a unit to the public, to prepare a public offering statement (POS) conforming to the requirements of law. A declarant may transfer responsibility for preparation of all or part of the public offering statement to a successor declarant. In the event of any such transfer, the transferor must provide the transferee with any information necessary to enable the transferee to prepare the POS.

The law requires a declarant or successor declarant who offers a unit to a purchaser to deliver a POS. The law imposes this same requirement on a dealer who delivers a POS. The bill defines a “dealer” as someone who owns either six or more units, or 50% or more of all the units, in a common interest community.

Current law makes a declarant or successor declarant who prepared all or part of a POS liable to all persons claiming an interest in the common interest community for failing to deliver the POS, for any false or misleading statement in it, or for any omission of a material fact with respect to that portion of the public offering statement which he or she prepared. But under current law, a declarant is shielded from liability for false and misleading statements or omissions if he or she did not prepare any part of the POS that he or she delivers unless he or she had actual knowledge of the statement or omission or, in the exercise of reasonable care, should have known of the statement or omission. This bill eliminates this shield and makes the declarant liable for all false misleading statements and omissions.

37 — PUBLIC OFFERING STATEMENT –GENERAL PROVISIONS AND REQUIREMENTS

The bill requires that a POS contain a description of any cost sharing arrangement described in the bill.

38 —EXPRESS WARRANTIES OF QUALITY

Under current law, any model or description of the physical characteristics of the common interest community, including plans and specifications of or for improvements, creates an express warranty that the common interest community will substantially conform to the model or description. The bill creates an exception if the model or description clearly discloses that it is only proposed or is subject to change.

39 — CAUSE OF ACTION FOR VIOLATING CIOA

Under current law, if a declarant or any other person subject to CIOA fails to comply with any of its provisions or any provision of the declaration or bylaws, any person or class of persons adversely affected may sue for appropriate relief, and punitive damages may be awarded for a willful failure to comply with CIOA.

The bill eliminates the court's authority to award punitive damages and specifies that a declarant can sue to enforce a right granted by CIOA, or the declaration or bylaws.

By law, parties to a dispute arising under CIOA, the declaration, or the bylaws may agree to resolve the dispute by any form of binding or nonbinding alternative dispute resolution. Current law requires that the agreement in writing and signed. The bill instead requires that the agreement be in a record authenticated by the parties.

BACKGROUND

Condominium

“Condominium” means a common interest community in which portions of the real property are designated for separate ownership and the remainder of the real property is designated for common ownership solely by the owners of those portions. A common interest community is not a condominium unless the undivided interests in the common elements are vested in the unit owners.

Cooperative

Cooperative” means a common interest community in which the real property is owned by an association, each of whose members is entitled by virtue of his or her ownership interest in the association to exclusive possession of a unit.

Planned Community

A “planned community” is a common interest community that is not a condominium or a cooperative. A condominium or cooperative may be part of a planned community.

Common Elements

“Common elements” means (1) in the case of a condominium or cooperative, all portions of the common interest community other than the units and (2) in a planned community, any real property within it owned or leased by the association, other than a unit. It also means in all common interest communities, any other interests in real property for the benefit of unit owners which are subject to the declaration.

Federal Electronic Signatures in Global and National Commerce Act, 15 USC 7001, et seq.

On June 30, 2000, Congress enacted the Electronic Signatures in Global and National Commerce Act to facilitate the use of electronic records and signatures in interstate and foreign commerce by ensuring the validity and legal effect of contracts entered into electronically.

The act (15 USC 7002), allows a state statute, regulation, or other rule of law to modify, limit, or supersede the provisions of 7001 only if it satisfies certain requirements and makes specific reference to the federal act.

The law provides that if state law requires that information relating to a transaction in or affecting interstate or foreign commerce be provided or made available to a consumer in writing the use of an electronic record to provide or make available such information satisfies the requirement that information be in writing if:

1. the consumer has affirmatively consented to this and has not withdrawn his or her consent;

2. the consumer before consenting is provided with a clear and conspicuous statement informing him or her of rights and options, including the right to withdraw consent;

3. before consenting, the consumer's provide it with a statement of the hardware and software requirements for accessing and retaining electronic records and consents electronically or confirms his or her consent electronically in a way that reasonably demonstrates the consumer can access information in electronic form; and

4. after consenting, if changes in hardware or software requirements needed to access or retain electronic records creates a material risk that the consumer will not be able to access or retain the record, the consumer is provided with a statement of the revised hardware and software requirements and the right to withdraw consent without the imposition of any conditions or consequences (15 USC 7001 (c)).

The following notices are described in 15 USC 7003(b):

1. court orders or notices, or official court documents required to be executed in connection with court proceedings;

2. any document required to accompany any transportation or handling of hazardous material, pesticides, or other toxic or dangerous material; or

3. any notice of:

● cancellation or termination of utility services,

● default, repossession, foreclosure, or eviction, or, the right to cure under a credit agreement secured by, or a rental agreement for, a primary residence;

● cancellation or termination of health insurance or benefits or life insurance benefits; or

● recall of a product, or material failure of a product, that risks endangering health or safety.  

COMMITTEE ACTION

Judiciary Committee

Joint Favorable

Yea

42

Nay

0

(04/03/2009)