This new app will undoubtedly be a big hit with Utah Condominiums and HOAs; particularly Park City Condominiums and HOAs.
This is the third installment in our series about Utah Condominium and Community Association Statutes Boards and Managers Should Be Aware Of. For an explanation of why we think these statutes are important, please see Part 1.
Open Meetings: Utah Code §§ 57-8-57 (Condominium Ownership Act) & 57-8a-226 (Community Association Act)
These statutes require an association to give written notice of management committee or board of directors meetings via email to each owner who requests such notice. The notice must be given at least 48 hours before the meeting, and must include the time, date and location of the meeting. If management committee/board members can participate in the meeting remotely, the association must provide information to allow owners to participate the same way.
These statutes also require that management committee/board meetings be open to all unit owners or their representatives, if the representative is designated in writing. Meetings can be closed for several reasons, including: to consult with an attorney to obtain legal advice; to discuss ongoing or potential legal proceedings; to discuss a personnel matter; to discuss a matter relating to contract negotiations; to discuss a matter involving an individual that is likely to cause that individual undue embarrassment or violate the individual’s privacy; or to discuss a delinquent assessment or fine.
At each meeting, the management committee/board must allow each unit owner a reasonable opportunity to offer comments, but the committee may limit the comments to one specific time period during the meeting.
If the association does not comply with these requirements and fails to remedy the noncompliance within the time specified in an owner’s demand, which must be at least 90 days, the owner may file an action against the association in state court and may be awarded the remedies discussed in Part 1 of this series.
The above requirements do not apply to an association during the period of administrative control.
This is the second installment in our series about Utah Condominium and Community Association Statutes Boards and Managers Should Be Aware Of. For an explanation of why we think these statutes are important, please see Part 1.
Records: Utah Code §§ 57-8-17 (Condominium Ownership Act) & 57-8a-227 (Community Association Act)
These statutes require an association to keep and make documents available to owners in accordance with the association’s governing documents and with Sections 16-6a-1601 to -1603, -1605, -1606, and -1610 of the Utah Revised Nonprofit Corporation Act, regardless of whether the association is incorporated. The association can redact the following information from documents before producing them for inspection or copying: social security numbers, bank account numbers, and any communications subject to the attorney-client privilege. The association must comply with requests by owners to inspect or copy documents. An owner may request to inspect or copy documents, request that the association make copies or electronic scans of the requested documents, or request that a third party service make the copies or scans. If the association or a third party service makes the copies or scans, the requesting owner shall pay the associated costs.
If the association does not comply with these requirements and fails to remedy the noncompliance within the time specified in an owner’s demand, which must be at least 10 days, the owner may file an action against the association in state court and may be awarded the remedies discussed in Part 1 of this series.
If an owner files an action against the association, the court may take expedited action. If the owner files a motion, gives notice to the association, and a hearing is held in which the court finds a likelihood that the association failed to comply with this statute, the court will order the association to immediately comply. This hearing must be held within 30 days after the owner files his or her motion.
We’ll be sharing a series of posts over the next several days about statutes condominium and community association board members and managers need to be aware of.
In 2015, the legislature added enforcement mechanisms to several statutes governing condominium and community associations that allow a unit owner to sue the association to require it to comply with the statute. These statutes also allow the unit owner to sue for damages. An owner who successfully sues to enforce any of these statutes can be awarded at least $500, or the actual amount of his or her damages, whichever is greater, as well as attorney fees and costs.
All of these statutes require an owner to deliver written notice of his or her claim to the association before filing a lawsuit, and give the association a set period of time to correct its deficiency. The owner’s notice to the association must include: the association’s alleged failures, a demand that the association come into compliance with the statute, and a date by which the association must remedy its noncompliance. Each statute sets forth the amount of time the association has to correct its noncompliance before a lawsuit may be filed.
Reserve Analysis: Utah Code §§ 57-8-7.5 (Condominium Ownership Act) & 57-8a-211 (Community Association Act)
These statutes require an association board to have a reserve study conducted at least every six years and to review and, if necessary, update the reserve analysis at least every three years. The association must provide a summary of the most recent reserve analysis or update to owners every year, and must provide a copy of the complete analysis or update to an owner who requests a copy. The association must also include a reserve fund line item in its budget each year in either an amount determined by the board to be prudent, based on the reserve analysis, or an amount required by the governing documents, whichever amount is higher.
The owners may veto the reserve fund line item if, within 45 days after the association adopts its annual budget, the owners call a special meeting for the purpose of voting whether to veto the reserve fund line item, and 51% of the allocated voting interests are voted in favor of vetoing the line item. If the lot owners veto the reserve fund line item and a reserve fund line item exists in a previously approved annual budget that was not vetoed, the association shall fund the reserve account in accordance with that prior reserve fund line item.
If the association does not comply with these requirements and fails to remedy the noncompliance within the time specified in an owner’s demand, which must be at least 90 days, the owner may file an action against the association in state court.
The above requirements do not apply to an association during the period of administrative control.
In a case released yesterday, Fort Pierce Indus. Park v. Shakespeare, 2016 UT 28, the Utah Supreme Court has clarified the standard of review to be applied in the interpretation of community association declarations. The case clarifies previously conflicting precedent by confirming that association declarations should be “neutrally construed,” as are other contracts, rather than “strictly construed.”
Whether a document is “strictly construed,” “neutrally construed,” or “liberally construed” can have a significant impact on the outcome of cases arising under the document. While these distinctions are familiar to most lawyers, they’re far from intuitive, and some explanation is in order. I’ll attempt to clarify.
The Factual Dispute and Trial Court Decision
This case arose following the installation of a cell phone tower in a St. George, Utah industrial park. The owners of a lot in that association sought to install a cell phone tower on their lot; the association’s board denied the request, but the owners installed it nonetheless. As would be expected, litigation ensued.
At the trial court level, the lot and cell tower owners prevailed. Their victory at the trial court level was aided by the trial court’s reliance upon an earlier Utah case from 1991, which had asserted that “restrictive covenants are not favored in the law and are strictly construed in favor of the free and unrestricted use of property.” The court cited several subsequent cases to the contrary, and asserted the quoted language to be “dicta.”
(Referencing precedent in an earlier case as “dicta” is almost akin, to a lawyer, as admitting to an earlier mistake. There’s more to it than that, but most readers won’t care about the distinction.)
The Court’s opinion states, quite clearly and without equivocation:
We continue to reject strict construction of restrictive covenants and make it clear that restrictive covenants are to be interpreted using the same rules of construction that are used to interpret contracts.
By construing the contract “neutrally,” rather than “strictly,” the Court appropriately referenced and gave significance to numerous provisions in the association’s declaration which gave the board “the right to refuse to approve any [submitted] plans and specifications.” Considerations that the board could make in reviewing plans included “the suitability of the proposed structure, the materials of which it is to be built, the site upon which it is proposed to be erected, the harmony thereof with the surroundings, and the effect of said building, or other planned structure, on the outlook from adjacent or neighboring property.” Further direction to the board included that permitted uses were required to be “aesthetically attractive and harmonious structures.”
The district court had acknowledged, as was obvious, that the construction of the tower following the board’s rejection thereof “constituted a breach of the CC&Rs.” The district court further found that the board had acted in good faith in denying the application. However the district court reversed the association’s decision, concluding the denial was improper. The association appealed; the lot and tower owners cross appealed on issues related to the timeliness of the association’s denial and the limitation of fees awarded to them. The Supreme Court reversed the district court’s decision regarding the board’s decision, upheld the timeliness of the association’s denial, reversed the award of attorney fees to the lot owners, and sent the case back to the district court, to determine the fees to which the association is entitled.
The association’s declaration actually provided, as do many if not most association declarations, that it was to be interpreted “liberally.” The Court determined it didn’t need to interpret the declaration liberally in order to uphold the board’s decision; they were clearly within the bounds of their discretion in denying installation of the cell towers.
The Significant Aspects of the Decision
Setting aside a number of procedural appeals issues that would be of interest to only some lawyers, the Supreme Court made several significant statements which will impact future community association disputes in Utah. These include:
The Court clearly dismissed an earlier case suggesting that declarations should be strictly construed. The court noted that “servitudes are widely used in modern land development and ordinarily play a valuable role in utilization of land resources.”
The Court acknowledged, while declining to define, the fact that the “business judgment rule” applies to an association board’s decisions arising under the association’s governing documents. The court affirmed that “In applying the business judgment rule, courts generally apply a presumption of reasonableness.” Even under the standard of the business judgment rule as applied by the lot and tower owners, the board’s decision was upheld, because it was “reasonable and made in good faith and [was] not arbitrary or capricious.”
We’ve scheduled and are planning the content for upcoming courses in Salt Lake City and Park City, Utah on May 13 and 14, 2016. The courses will cover trends in community association legal and management issues, and will be of interest to managers and board members.
The Salt Lake City course will be held at the Salt Lake City Marriott Hotel at 220 South State Street; our Park City Course will be held at the Newpark Resort, 1456 Newpark Boulevard. Both courses will run from 11 -2, with lunch to be provided.
The Best of the Best of Association Attorneys
Among the thousands of attorneys who practice community association law, fewer than 150 have been granted fellowship in CAI’s prestigious College of Community Association Lawyers (CCAL). If you’re an attorney who meets the following criteria, CCAL is for you:
You’ve been licensed for at least seven years
Your practice has concentrated on community association law for at least five years
Association law is 50 percent of your practice
You are active in the common-interest community industry
You write about and teach association law
Sept. 30 is the deadline for winter 2015 applications—apply now.