Your Association: Like America, it’s a Republic, Not a Democracy

As many of you may have heard, the Utah State Legislature passed a bill several weeks ago, requiring that Utah’s school children be taught that America is a “Compound Constitutional Republic,” and not a Democracy.   In a true Democracy, citizens vote on all matters, and the majority rules.  By contrast, in a Republic, officials are elected to represent their constituents, and the elected representatives make most governance decisions.  Your association is governed in the same way.

Pursuant to both the Utah Condominium Ownership Act and almost all associations’ governing documents, the general governance of all aspects of the common areas of associations, and the establishment of associations’ budgets (including both operating and reserve budgets) are vested in the associations’ Boards of Trustees.  Only a few areas of association governance require unit owner approval; these areas are limited to significant transfers of property, and alterations of rights.

Numerous sections of the Utah Code and most associations’ governing documents establish the breadth of the Board’s control, these sections include:

From the Utah Revised Nonprofit Corporation Act:

Utah Code Ann. 16-6a-801(2)(a)  Except as provided in this chapter or Subsection (2)(b), all corporate powers shall be exercised by or under the authority of, and the business and affairs of the nonprofit corporation managed under the direction of, the board of directors.

From the Utah Condominium Ownership Act:

Utah Code Ann. 57-8-3(20) defines the “Management Committee” as the “committee as provided in the declaration charged with having the responsibility and authority to make and enforce all of the reasonable rules covering the operation and maintenance of the property.”

Utah Code Ann. 57-8-20(1) provides that “Every unit owner shall pay his proportionate share of the common expenses.  Payment shall be in the amounts and at the times determined by the management committee in accordance with the terms of the declaration or the bylaws.”

Utah Code Ann. 57-8-7.5 provides that “… a management committee shall: []cause a reserve analysis to be conducted no less frequently than every five years…”  A 2011 amendment to this act in S.B. 89 (not yet effective) provides that this reserve study is to be presented to the membership annually, and that the management committee is to “provide an opportunity for unit owners to discuss reserves and to vote on whether to fund a reserve fund, and, if so, how to fund it and in what amount.”

From a Typical Declaration:

Section 12.03   At the annual meeting, comprehensive reports of the affairs, finances and budget projections of the association shall be made to the Unit Owners.

Section 12.07  The business, property and affairs of the Project shall be managed, operated and maintained by the Board of Trustees of the association on behalf of the unit Owners. The association shall, in connection with its exercise of any of the powers delineated in paragraphs (a) through (g) below, constitute a legal entity capable of dealing in its own name. The Board of Trustees of the association shall have, and is hereby granted, the following authority and powers:

(a) the authority, without the vote or consent of the Unit Owners or of any other person(s), to grant or create, on such terms as it deems advisable, utility and similar easements over, under, across and through the Common Areas and Facilities;

(b) the authority to execute and record, on behalf of all Unit Owners, any amendment to the Declaration or Map which has been approved by the vote or consent necessary to authorize such amendment;

(c) the power to sue and be sued;

(d) the authority to enter into contracts which in anyway concern the Project, so long as any vote or consent of the Unit Owners necessitated by the subject matter of the agreement has been obtained;

(e) the power and authority to conveyor transfer any interest in real property, so long as any vote or consent necessary under the circumstances has been obtained;

(f) the authority to promulgate such reasonable rules, regulations, and procedures as may be necessary or desirable to aid the association in carrying out any of its functions or to insure that the Project is maintained and used in a manner consistent with the interests of the unit Owners; and

(g) the power and authority to perform any other acts and to enter into any other transactions which may be reasonably necessary for the association to perform its functions as agent for the Unit Owners, including without limitation, the power and authority to perform any act as granted by the Act to the “management committee”

Section 15.01 reads in part:  “Each Unit Owner shall be responsible … to pay … all sums … assessed by the association …. which assessments are to be fixed, established and collected from time to time by the Board of Trustees …. in accordance with this Declaration and the By-Laws …”

Section 19.04 reads in part:  “The Board of Trustees …. shall have discretionary powers to prescribe the manner of maintaining and operating the Condominium Project and to determine the cash requirements of the project to be paid …. by the Owners under this Declaration.  Every such reasonable determination by the Board of Trustees …. shall be final and conclusive as to the Owners …. and any expenditures made by the association …. shall as against the Owner be deemed necessary and properly made for such purpose.”

From the Bylaws:

Section 3.1 of the Bylaws provides a very general and broad grant of authority to the Board, establishing that “The business and property of the association shall be managed by its Board of Trustees (herein designated and referred to as the “Board of Trustees”)

All of the foregoing makes it clear that almost all decisions respecting the governance of almost all community and homeowner associations, including the financial decisions respecting associations, are to be made by the associations’ governing body.

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