CHAPTER 828
COMMON INTEREST OWNERSHIP ACT

Table of Contents

Sec. 47-239. Master associations.
Sec. 47-245. Executive board members and officers. Duties. Period of declarant control: Delivery of property and documents by declarant; current financial statement. Prohibitions re elections of executive board members.
Sec. 47-255. Insurance.
Sec. 47-278. Cause of action to enforce chapter, declaration or bylaws. Attorney's fees and costs. Alternative dispute resolution. Hearings before executive board.

PART II
CREATION, ALTERATION AND TERMINATION
OF COMMON INTEREST COMMUNITIES

      Sec. 47-239. Master associations. (a) If the declaration provides that any of the powers described in section 47-244 are to be exercised by, or may be delegated to, a profit or nonprofit corporation or unincorporated association that exercises those or other powers on behalf of one or more common interest communities or for the benefit of the unit owners of one or more common interest communities, all provisions of this chapter applicable to unit owners' associations apply to any such corporation or unincorporated association, except as modified by this section.

      (b) Unless it is acting in the capacity of an association described in section 47-243, a master association may exercise the powers set forth in subdivision (2) of subsection (a) of section 47-244 only to the extent expressly permitted in the declarations of common interest communities which are part of the master association or expressly described in the delegations of power from those common interest communities to the master association.

      (c) If the declaration of any common interest community provides that the executive board may delegate certain powers to a master association, the members of the executive board have no liability for the acts or omissions of the master association with respect to those powers following delegation.

      (d) The rights and responsibilities of unit owners with respect to the unit owners' association set forth in sections 47-245, 47-250, 47-251, 47-252 and 47-254 apply in the conduct of the affairs of a master association only to persons who elect the board of a master association, whether or not those persons are otherwise unit owners within the meaning of this chapter.

      (e) Even if a master association is also an association described in section 47-243, the certificate of incorporation or other instrument creating the master association and the declaration of each common interest community the powers of which are assigned by the declaration or delegated to the master association, may provide that the executive board of the master association shall be elected after the period of declarant control in any of the following ways:

      (1) All unit owners of all common interest communities subject to the master association may elect all members of the master association's executive board.

      (2) All members of the executive boards of all common interest communities subject to the master association may elect all members of the master association's executive board.

      (3) All unit owners of each common interest community subject to the master association may elect specified members of the master association's executive board.

      (4) All members of the executive board of each common interest community subject to the master association may elect specified members of the master association's executive board.

      (f) No person shall provide or offer to any member of the master association's executive board or a person seeking election as a member of the master association's executive board, and no member of the master association's executive board or a person seeking election as a member of the master association's executive board shall accept, any item of value based on any understanding that the vote, official action or judgment of such member or person seeking election would be or has been influenced thereby.

      (P.A. 83-474, S. 40, 96; P.A. 11-195, S. 2.)

      History: P.A. 11-195 added Subsec. (f) re prohibition on providing or offering item of value to member of master association's executive board or person seeking election as a member of such board, and on accepting such item.

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PART III
MANAGEMENT OF COMMON INTEREST COMMUNITIES

      Sec. 47-245. Executive board members and officers. Duties. Period of declarant control: Delivery of property and documents by declarant; current financial statement. Prohibitions re elections of executive board members. (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 to the association 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 to the association required of an officer or director of a corporation organized under chapter 602, and are subject to the conflict of interest rules governing directors and officers under chapter 602. The standards of care and loyalty described in this section apply regardless of the form in which the association is organized.

      (b) The executive board may not:

      (1) Amend the declaration, except as provided in section 47-236;

      (2) Terminate the common interest community;

      (3) Elect members of the executive board, except that the executive board may fill vacancies in its membership for the unexpired portion of any term or, if earlier, until the next regularly scheduled election of executive board members; or

      (4) Determine the qualifications, powers and duties, or terms of office of executive board members.

      (c) The executive board shall adopt budgets as provided in section 47-261e.

      (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 the declarant, may appoint and remove the officers and members of the executive board. A declarant may voluntarily surrender the right to appoint and remove officers and members of the executive board before the period ends. In that event, the declarant may require, during the remainder of the period, 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. 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 notice in a record to unit owners, records an instrument voluntarily surrendering all rights to control activities of the association.

      (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. Unless the declaration or bylaws provides for the election of officers by the unit owners, the executive board shall elect the officers. The executive board members and officers shall take office upon election.

      (g) A declaration may provide for the appointment of specified positions on the executive board by either a governmental subdivision or agency or a nonstock corporation exempt from taxation under 26 USC 501(c)(3) and 26 USC 4940(d)(2), as from time to time amended, during or after the period of declarant control. A declaration may also provide a method for filling vacancies in those specified positions, other than by election by the unit owners, except that, after the period of declarant control, appointed members (1) may not comprise more than one-third of the board, and (2) have no greater authority than any other member of the board.

      (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.

      (j) No person shall provide or offer to any executive board member or a person seeking election as an executive board member, and no executive board member or person seeking election as an executive board member shall accept, any item of value based on any understanding that the vote, official action or judgment of such member or person seeking election would be or has been influenced thereby.

      (k) No managing agent of an association or person providing association management services to such association shall campaign for any person seeking election as an executive board member.

      (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; P.A. 09-225, S. 22; P.A. 10-186, S. 8; P.A. 11-195, S. 1.)

      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; P.A. 09-225 amended Subsec. (a) to insert "to the association" re loyalty and reference conflict of interest rules in Ch. 602 and standards of care and loyalty described in section, reorganized and rewrote Subsec. (b), inserted Subdiv. designators (1) to (4) therein, inserted exception re Sec. 47-236 in Subsec. (b)(1) and rewrote provisions re filling vacancies in Subsec. (b)(3), replaced former provisions of Subsec. (c) re ratification of proposed budget with requirement that executive board adopt budget as provided in Sec. 47-261e, reorganized Subsec. (d) and substituted "notice in a record" for "written notice", amended Subsec. (f) to add provision re declaration or bylaws providing for election of officers by unit owners, deleted former Subsec. (g) re removal of members, added new Subsec. (g) re appointment of specified positions and method for filling vacancies, and made technical changes, effective July 1, 2010; P.A. 10-186 amended Subsec. (g) to substitute "exempt from taxation" for "exempt from taxation as a public charity", effective July 1, 2010; P.A. 11-195 added new Subsecs. (j) and (k) re prohibition on providing, offering or accepting item of value from, or campaigning by, managing agent of an association or person providing association management services re elections of executive board members.

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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 and subject to reasonable deductibles: (1) Property insurance on the common elements and, in a planned community, also on property that must become common elements, insuring against those risks of direct physical loss commonly insured against, which 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; (3) commercial general 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 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; and (4) fidelity insurance.

      (b) (1) In the case of a building that contains units divided by horizontal boundaries described in the declaration, or by vertical boundaries that comprise or are located within common walls between units, the insurance maintained under subdivision (1) of subsection (a) of this section, to the extent reasonably available, shall include the units, and all improvements and betterments installed by unit owners, unless the declaration limits the association's authority to insure all improvements and betterments or the executive board decides, after giving notice and an opportunity for unit owners to comment, not to insure such improvements and betterments. In the case of common interest communities containing more than twelve units, unless the association insures all improvements and betterments, the association shall:

      (A) Prepare and maintain a schedule of the standard fixtures, improvements and betterments in the units, including any standard wall, floor and ceiling coverings covered by the association's insurance policy;

      (B) Provide such schedule at least annually to the unit owners in order to enable unit owners to coordinate their homeowners insurance coverage with the coverage afforded by the association's insurance policy; and

      (C) Include such schedule in any resale certificate prepared pursuant to section 47-270.

      (2) The provisions of this subsection shall not apply to a building in a common interest community that has not more than two units divided by a single horizontal or vertical boundary unless such common interest community voluntarily chooses to comply with this subsection.

      (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 given to all unit owners pursuant to section 47-261c. The declaration may require the association to carry any other insurance, and the association 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 replacement 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 replaced, 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 request made in a record, 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 of the unit owners or lien holders, as their interests may appear, in proportion to the common expense liabilities of all of 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 acquired by eminent domain 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; P.A. 09-225, S. 29; P.A. 10-186, S. 12; P.A. 11-195, S. 5.)

      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; P.A. 09-225 amended Subsec. (a) to insert "and subject to reasonable deductibles" re required insurance coverage, delete reference to coverage for conversion buildings and substitute "against those risks" for "against all risks" in Subdiv. (1), insert "commercial general" and delete death re occurrences commonly insured against in Subdiv. (3), and add Subdiv. (4) re fidelity insurance, amended Subsec. (b) to delete "that is part of a cooperative", substitute "divided by" for "having" re horizontal boundaries and "all improvements" for "but need not include improvements" re insurance maintained, add provision re vertical boundaries, add exceptions re limits in declaration and executive board decision not to insure, and add provisions re association duties to communities containing more than 12 units, amended Subsec. (c) to substitute "given" for "hand-delivered or sent prepaid by United States mail" re notice, reference Sec. 47-261c and delete "in any event", amended Subsec. (e) to substitute "replacement" and "replaced" for "restoration" and "restored" and amended Subsec. (g) to substitute "request made in a record" for "written request", effective July 1, 2010; P.A. 10-186 amended Subsec. (h) to make technical changes in Subdiv. (2)(B)(ii) and change "condemned" to "acquired by eminent domain" in Subdiv. (3), effective July 1, 2010; P.A. 11-195 amended Subsec. (b) to designate existing provisions as new Subdiv. (1), make conforming changes therein and add new Subdiv. (2) re exemption for buildings with not more than 2 units divided by a single horizontal or vertical boundary.

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PART IV
PROTECTION OF PURCHASERS

      Sec. 47-278. Cause of action to enforce chapter, declaration or bylaws. Attorney's fees and costs. Alternative dispute resolution. Hearings before executive board. (a) A declarant, association, unit owner or any other person subject to this chapter may bring an action to enforce a right granted or obligation imposed by this chapter, the declaration or the bylaws. The court may award reasonable attorney's fees and costs.

      (b) Parties to a dispute arising under this chapter, the declaration or the bylaws may agree to resolve the dispute by any form of binding or nonbinding alternative dispute resolution, provided: (1) A declarant may agree with the association to do so only after the period of declarant control has expired; and (2) an agreement to submit to any form of binding alternative dispute resolution must be in a record authenticated by the parties.

      (c) (1) (A) Except as otherwise provided under subdivision (2) of this subsection, before an association brings an action or institutes a proceeding against a unit owner other than a declarant, the association shall schedule a hearing to be held during a regular or special meeting of the executive board and shall send a written notice by certified mail, return receipt requested, and by regular mail, to the unit owner at least ten business days prior to the date of such hearing. Such notice shall include a statement of the nature of the claim against the unit owner and the date, time and place of the hearing.

      (B) The unit owner shall have the right to give testimony orally or in writing at the hearing, either personally or through a representative, and the executive board shall consider such testimony in making a decision whether to bring an action or institute a proceeding against such unit owner.

      (C) The executive board shall make such decision and the association shall send such decision in writing by certified mail, return receipt requested, and by regular mail, to the unit owner, not later than thirty days after the hearing.

      (2) The provisions of subdivision (1) of this subsection shall not apply to an action brought by an association against a unit owner (A) to prevent immediate and irreparable harm, or (B) to foreclose a lien for an assessment attributable to a unit or fines imposed against a unit owner pursuant to section 47-258.

      (d) (1) Any unit owner other than a declarant, seeking to enforce a right granted or obligation imposed by this chapter, the declaration or the bylaws against the association or another unit owner other than a declarant, may submit a written request to the association for a hearing before the executive board. Such request shall include a statement of the nature of the claim against the association or another unit owner.

      (2) Not later than thirty days after the association receives such request, the association shall schedule a hearing to be held during a regular or special meeting of the executive board and shall send written notice by certified mail, return receipt requested, and by regular mail, to the unit owner at least ten business days prior to the date of such hearing. Such notice shall include the date, time and place of the hearing. Such hearing shall be held not later than forty-five days after the association receives such request.

      (3) The executive board shall make a decision on the unit owner's claim and the association shall send such decision in writing by certified mail, return receipt requested, and by regular mail, to the unit owner, not later than thirty days after the hearing.

      (4) The failure of the association to comply with the provisions of this subsection shall not affect a unit owner's right to bring an action pursuant to subsection (a) of this section.

      (P.A. 83-474, S. 79, 96; P.A. 95-187, S. 26; P.A. 09-225, S. 43; P.A. 11-195, S. 4.)

      History: P.A. 95-187 designated existing provisions as Subsec. (a) and amended said Subsec. to authorize court to award court costs and delete provision that authorized award of reasonable attorney's fees "in an appropriate case" and added Subsec. (b) to authorize parties to resolve a dispute by any form of binding or nonbinding alternative dispute resolution, subject to certain conditions; P.A. 09-225 amended Subsec. (a) to replace provisions re claim for failure to comply and punitive damages with provisions re action to enforce right or obligation under chapter, declaration or bylaws and substitute "costs" for "court costs", and amended Subsec. (b) to substitute "has expired" for "passes" and "record authenticated" for "writing signed", effective July 1, 2010; P.A. 11-195 added Subsecs. (c) and (d) re required and requested hearings before the executive board.

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