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§ 3-101. Organization of unit owners’ association
A unit owners’ association shall be organized no later than the date the first unit
in the common interest community is conveyed. The membership of the association at
all times shall consist exclusively of all unit owners or, following termination of
the common interest community, of all former unit owners entitled to distributions
of proceeds, or their heirs, successors, or assigns. The association must have an
executive board. The association shall be organized as a profit or nonprofit corporation,
trust, limited liability company, partnership, unincorporated association, or any
other form of organization authorized by the law of this State. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2009, No. 155 (Adj. Sess.), § 24, eff. Jan. 1, 2012.)
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§ 3-102. Powers of unit owners’ association
(a) Except as otherwise provided in subsection (b) of this section and other provisions
of this title, the association:
(1) shall adopt and may amend bylaws and may adopt and amend rules;
(2) shall adopt and may amend budgets for revenues, expenditures, and reserves under section 3-123 of this title, may collect assessments for common expenses from unit owners, and may invest funds
of the association;
(3) may hire and discharge managing agents and other employees, agents, and independent
contractors;
(4) may initiate, defend, or intervene in litigation, arbitration, mediation, or administrative
proceedings in its name on behalf of itself or two or more unit owners on matters
affecting the common interest community, subject to section 3-124 of this title;
(5) may make contracts and incur liabilities;
(6) may regulate the use, maintenance, repair, replacement, and modification of common
elements;
(7) may make additional improvements to the common elements;
(8) may acquire, hold, encumber, and convey in its name any right, title, or interest
to real estate or personal property, except as provided by section 3-112 of this title;
(9) may grant easements, leases, licenses, and concessions through or over the common
elements;
(10) may impose and receive payments, fees, or charges:
(A) for the use, rental, or operation of the common elements, other than limited common
elements described in subdivisions 2-102(2) and (4) of this title; and
(B) for services provided to unit owners;
(11) may impose charges for late payment of assessments and, after notice and a hearing,
may impose reasonable fines for violations of the declaration, bylaws, and rules of
the association;
(12) may impose reasonable charges for the preparation and recordation of amendments to
the declaration, resale certificates required by section 4-109 of this title, or statements of unpaid assessments;
(13) may provide indemnification for its officers and executive board and maintain directors’
and officers’ liability insurance;
(14) except to the extent limited by the declaration, may assign its right to future income,
including the right to receive assessments;
(15) may exercise any other power conferred by the declaration or bylaws or that is legally
provided for similar entities or that is necessary and proper to govern and operate
the association;
(16) may require that disputes between the executive board and unit owners or between two
or more unit owners regarding the common interest community must be submitted to nonbinding
alternative dispute resolution as a prerequisite to commencement of a judicial proceeding;
(17) may exercise all other powers that may be exercised in this State by organizations
of the same type as the association; and
(18) may suspend any right or privilege of a unit owner that fails to pay an assessment,
but may not:
(A) except as otherwise provided in subsection 3-116(q) of this title, deny a unit owner or other occupant access to the owner’s unit;
(B) suspend a unit owner’s right to vote;
(C) prevent a unit owner from seeking election as a director or officer of the association;
or
(D) withhold services provided to a unit or a unit owner by the association if the effect
of withholding the service would be to endanger the health, safety, or property of
any person.
(b) The declaration may not limit the power of the association beyond the limit authorized
in subdivision (a)(18) of this section to:
(1) deal with the declarant if the limit is more restrictive than the limit imposed on
the power of the association to deal with other persons; or
(2) institute litigation or an arbitration, mediation, or administrative proceeding against
any person, subject to the following:
(A) the association shall comply with section 3-124 of this title, if applicable, before instituting any proceeding described in subsection 3-124(a) of this title in connection with construction defects; and
(B) the executive board promptly shall 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.
(c) [Repealed.]
(d) If a tenant of a unit owner violates the declaration, bylaws, or rules of the association,
in addition to exercising any of its powers against the unit owner, the association
may:
(1) exercise directly against the tenant the powers described in subdivision (a)(11) of
this section;
(2) after giving notice to the tenant and the unit owner and an opportunity to be heard,
levy reasonable fines against the tenant for the violation; and
(3) enforce any other rights against the tenant for the violation that the unit owner
as landlord could lawfully have exercised under the lease or that the association
could lawfully have exercised directly against the unit owner, or both.
(e) The rights referred to in subdivision (d)(3) of this section may be exercised only
if the tenant or unit owner fails to cure the violation within 10 days after the association
notifies the tenant and unit owner of that violation.
(f) Unless a lease otherwise provides, this section does not:
(1) affect rights that the unit owner has to enforce the lease or that the association
has under other law; or
(2) permit the association to enforce a lease to which it is not a party in the absence
of a violation of the declaration, bylaws, or rules.
(g) The executive board may determine whether to take enforcement action by exercising
the association’s power to impose sanctions or commencing 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. The executive board does
not have a duty to take enforcement action if it determines that, under the facts
and circumstances presented:
(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.
(h) The executive board’s decision under subsection (g) of this section not to pursue
enforcement under one set of circumstances does not prevent the executive board from
taking enforcement action under another set of circumstances, but the executive board
may not be arbitrary or capricious in taking enforcement action.
(i) The executive board shall establish a reasonable method for unit owners to communicate
among themselves and with the executive board on matters concerning the association. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2009, No. 155 (Adj. Sess.), § 25, eff. Jan. 1, 2012; 2013, No. 102 (Adj. Sess.), § 1.)
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§ 3-103. Executive board members and officers
(a) Except as otherwise provided in the declaration, bylaws, subsection (b) of this section,
or other provisions of this title, the executive board acts on behalf of the association.
In the performance of their duties, officers and members of the executive board appointed
by the declarant shall exercise the degree of care and loyalty required of a trustee.
Officers and members of the executive board not appointed by the declarant shall exercise
the degree of care and loyalty to the association required of an officer or director
of a corporation organized, and are subject to the conflict of interest rules governing
directors and officers, under Title 11B. 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 shall not:
(1) amend the declaration, except as provided in section 2-117 of this title;
(2) amend the bylaws;
(3) terminate the common interest community;
(4) elect members of the executive board, but 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
(5) determine the qualifications, powers, duties, or terms of office of executive board
members.
(c) The executive board shall adopt budgets as provided in section 3-123 of this title.
(d)(1) Subject to subsection (e) of this section, the declaration may provide for a period
of declarant control of the association during which a declarant or the declarant’s
designee 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, and except as provided in subsection 2-123(g) of this title, a period of declarant control shall terminate on the earliest of:
(A) 60 days after three-fourths of the created units is conveyed to unit owners other
than a declarant;
(B) two years after all declarants have ceased to offer units for sale in the ordinary
course of business;
(C) two years after any development right to add new units is last exercised; or
(D) the day the declarant, after giving notice in a record to unit owners, records an
instrument voluntarily surrendering all rights to control activities of the association.
(2) [Repealed.]
(e) At least one-fourth of the members of the executive board shall be elected by unit
owners who are not declarants within 60 days after one-fourth of the created units
is conveyed to owners other than a declarant. At least one-third of the executive
board shall be elected by unit owners who are not declarants within 60 days after
one-half of the created units is conveyed to unit owners other than declarants.
(f) Except in elections pursuant to subsection 2-120(e) of this title, before the termination of declarant control, the unit owners shall elect an executive
board of at least three members, of which a majority shall be unit owners. Unless
the declaration provides for the election of officers by the unit owners, the executive
board shall elect its officers who shall take office upon election or appointment.
(g) A declaration may 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. It also may provide a method for filling vacancies in those positions, other
than by election by the unit owners. However, after the period of declarant control,
appointed members:
(1) may not make up more than one-third of the board; and
(2) have no greater authority than any other member of the board. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2009, No. 155 (Adj. Sess.), § 26, eff. Jan. 1, 2012.)
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§ 3-104. Transfer of special declarant rights
(a) A special declarant right may be transferred only by an instrument executed by the
transferee and recorded in each municipality in which any portion of the common interest
community is located.
(b) Upon transfer of a special declarant right, the liabilities are as follows:
(1) A transferor remains liable for obligations and actions arising before the transfer
of special declarant rights and warranty obligations imposed by this title. Lack of
privity does not deprive any unit owner of standing to bring an action to enforce
any obligation of the transferor.
(2) If a successor to a special declarant right is an affiliate of a declarant, the transferor
is jointly and severally liable with the successor for any obligations or liabilities
of the successor relating to the common interest community.
(3) If a transferor retains special declarant rights, but transfers other special declarant
rights to a successor who is not an affiliate of the declarant, the transferor remains
liable in regard to the retained special declarant rights.
(4) A transferor has no liability for any act or omission or any breach of a contractual
or warranty obligation arising from the exercise of a special declarant right by a
successor declarant who is not an affiliate of the transferor.
(c) Unless otherwise provided in a mortgage instrument, deed of trust, or other agreement
creating a security interest, in case of foreclosure of a security interest, sale
by a trustee under an agreement creating a security interest, tax sale, judicial sale,
or sale under bankruptcy code or receivership proceedings, of any units owned by a
declarant or real estate in a common interest community subject to development rights,
a person acquiring title to all the property being foreclosed or sold, but only upon
his or her request, succeeds to all special declarant rights related to that property
held by that declarant, or only to any rights reserved in the declaration pursuant
to section 2-115 of this title and held by that declarant to maintain models, sales offices, and signs. The judgment
or instrument conveying title must provide for transfer of only the special declarant
rights requested.
(d) Upon foreclosure of a security interest, sale by a trustee under an agreement creating
a security interest, tax sale, judicial sale, or sale under bankruptcy code or receivership
proceedings, of all interest in a common interest community owned by a declarant:
(1) the declarant ceases to have any special declarant rights, and
(2) the period of declarant control (subsection 3-103(d) of this title) terminates unless the judgment or instrument conveying title provides for transfer
of all special declarant rights held by that declarant to a successor declarant.
(e) The liabilities and obligations of a person who succeeds to special declarant rights
are as follows:
(1) A successor to any special declarant right who is an affiliate of a declarant is subject
to all obligations and liabilities imposed on the transferor by this title or by the
declaration.
(2) A successor to any special declarant right, other than a successor described in subdivision
(3) or (4) of this subsection or a successor who is an affiliate of a declarant, is
subject to the obligations and liabilities imposed by this title or the declaration:
(A) on a declarant that relate to the successor’s exercise or nonexercise of special declarant
rights; or
(B) on his or her transferor, other than:
(i) misrepresentations by any previous declarant;
(ii) warranty obligations on improvements made by any previous declarant, or made before
the common interest community was created;
(iii) breach of any fiduciary obligation by any previous declarant or his or her appointees
to the executive board; or
(iv) any liability or obligation imposed on the transferor as a result of the transferor’s
acts or omissions after the transfer.
(3) A successor to only a right reserved in the declaration to maintain models, sales
offices, and signs (section 2-115 of this title), may not exercise any other special declarant right, and is not subject to any liability
or obligation as a declarant, except the obligation to provide a public offering statement
and any liability arising as a result thereof.
(4) A successor to all special declarant rights held by a transferor who succeeded to
those rights pursuant to a deed or other instrument of conveyance in lieu of foreclosure
or a judgment or instrument conveying title under subsection (c) of this section,
may declare in a recorded instrument the intention to hold those rights solely for
transfer to another person. Thereafter, until transferring all special declarant rights
to any person acquiring title to any unit or real estate subject to development rights
owned by the successor, or until recording an instrument permitting exercise of all
those rights, that successor may not exercise any of those rights other than any right
held by his or her transferor to control the executive board in accordance with subsection 3-103(d) of this title for the duration of any period of declarant control, and any attempted exercise of
those rights is void. So long as a successor declarant may not exercise special declarant
rights under this subsection, the successor declarant is not subject to any liability
or obligation as a declarant other than liability for his or her acts and omissions
under subsection 3-103(d) of this title.
(f) Nothing in this section subjects any successor to a special declarant right to any
claims against or other obligations of a transferor declarant, other than claims and
obligations arising under this title or the declaration. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999.)
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§ 3-105. Termination of contracts and leases of declarant
(a) Within two years after the executive board elected by the unit owners pursuant to
subsection 3-103(f) of this title takes office, the association may terminate without penalty, upon at least 90 days’
notice to the other party, any of the following if entered into before the executive
board was elected:
(1) any management, maintenance, operations, or employment contract, or lease of recreational
or parking areas or facilities; or
(2) any other contract or lease between the association and a declarant or an affiliate
of a declarant.
(b) At any time after the executive board elected by the unit owners pursuant to subsection 3-103(f) of this title takes office, the association may terminate without penalty, upon at least 90 days’
notice to the other party, any contract or lease that is not bona fide or was unconscionable
to the unit owners at the time the contract was entered into.
(c) This section does not apply to a lease that if terminated would terminate the common
interest community or reduce its size, unless the real estate subject to that lease
was included in the common interest community for the purpose of avoiding the right
of the association to terminate a lease under this section. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2009, No. 155 (Adj. Sess.), § 27, eff. Jan. 1, 2012.)
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§ 3-106. Bylaws
(a) The bylaws of the association shall:
(1) provide the number of members of the executive board and the titles of the officers
of the association;
(2) provide for election by the executive board or, if the declaration requires, by the
unit owners, of a president, treasurer, secretary, and any other officers the bylaws
specify;
(3) specify the qualifications, powers and duties, terms of office, and manner of electing
and removing executive board members and officers and filling vacancies;
(4) specify the powers that the executive board or officers may delegate to other persons
or to a managing agent;
(5) specify the officers who may prepare, execute, certify, and record amendments to the
declaration on behalf of the association;
(6) establish the frequency of association meetings, which in no case shall be less than
one per year;
(7) establish the number of voters constituting a quorum, which shall not be less than
20 percent of the persons entitled to vote for the executive board. Proxy votes may
be included for a quorum;
(8) specify a method for the unit owners to amend the bylaws;
(9) contain any other provisions necessary to satisfy requirements of this title or the
declaration concerning meetings, voting, quorums, and other activities of the association;
and
(10) provide for any matter required by the laws of this state other than this title that
is required to appear in the bylaws of organizations of the same type as the association.
(b) Subject to the declaration and this title, the bylaws may provide for any other necessary
or appropriate matters, including matters that could be adopted as rules. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2009, No. 155 (Adj. Sess.), § 28, eff. Jan. 1, 2012.)
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§ 3-107. Upkeep of common interest community
(a) Except to the extent provided by the declaration and subsections 3-113(b) and (h)
of this title, the association shall be responsible for maintenance, repair and replacement
of the common elements, and each unit owner shall be responsible for the maintenance,
repair and replacement of his or her unit. Each unit owner shall provide to the association
and the other unit owners, their agents or employees, access through his or her unit
reasonably necessary for those purposes. A unit owner or association is liable for
the prompt repair of any damages caused to the common elements or to any unit through
which access was taken.
(b) In addition to the liability that a declarant as a unit owner has under this title,
the declarant alone is liable for all expenses in connection with real estate subject
to development rights. No other unit owner and no other portion of the common interest
community is subject to a claim for payment of those expenses. Unless the declaration
provides otherwise, any income or proceeds from real estate subject to development
rights inures to the declarant.
(c) In a planned community, if all development rights have expired with respect to any
real estate, the declarant remains liable for all expenses of that real estate unless,
upon expiration, the declaration provides that the real estate becomes common elements
or units. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999.)
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§ 3-108. Meetings
(a) The following requirements apply to unit owner meetings:
(1) An association shall hold a meeting of unit owners annually at a time, date, and place
stated in or fixed in accordance with the bylaws.
(2) An association shall 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 percent, or any lower percentage
specified in the bylaws, of the votes in the association request that the secretary
call the meeting. 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 required by subdivision
(3) of this subsection may be considered at a special meeting.
(3) An association shall notify unit owners of the time, date, and place of each annual
and special unit owners meeting not less than 10 days or more than 60 days before
the meeting date. Notice may be by any means described in section 3-121 of this title. The notice of any meeting must state the time, date, and place of the meeting and
the items on the agenda, including:
(A) a statement of the general nature of any proposed amendment to the declaration or
bylaws;
(B) any budget changes; and
(C) any proposal to remove an officer or member of the executive board.
(4) The minimum time to give notice required by subdivision (3) of this subsection may
be reduced or waived for a meeting called to deal with an emergency.
(5) Unit owners shall be given a reasonable opportunity at any meeting to comment regarding
any matter affecting the common interest community or the association.
(6) The declaration or bylaws may allow for meetings of unit owners to be conducted by
telephonic, video, or other conferencing process, if the alternative process is consistent
with subdivision (b)(7) of this section.
(b) The following requirements apply to meetings of the executive board and committees
of the association authorized to act for the association:
(1) Meetings shall be open to the unit owners except during executive sessions. The executive
board and those committees may hold an executive session only during a regular or
special meeting of the board or a committee. No final vote or action may be taken
during an executive session. An executive session may be held only to:
(A) consult with the association’s attorney concerning legal matters;
(B) discuss existing or potential litigation or mediation, arbitration, or administrative
proceedings;
(C) discuss labor or personnel matters;
(D) 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
(E) 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.
(2) For purposes of this section, a gathering of board members at which the board members
do not conduct association business is not a meeting of the executive board. The executive
board and its members may not use incidental or social gatherings of board members
or any other method to evade the open meeting requirements of this section.
(3) During the period of declarant control, the executive board shall meet at least four
times a year. At least one of those meetings must be held at the common interest community
or at a place convenient to the community. After termination of the period of declarant
control, all executive board meetings shall 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.
(4) At each executive board meeting, the executive board shall provide a reasonable opportunity
for unit owners to comment regarding any matter affecting the common interest community
and the association.
(5) 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 shall give notice of each executive board meeting to each board member and
to the unit owners. The notice shall be given at least 10 days before the meeting
and shall state the time, date, place, and agenda of the meeting.
(6) If any materials are distributed to the executive board before the meeting, the executive
board at the same time shall make copies of those materials reasonably available to
unit owners, except:
(A) the board need not make available copies of unapproved minutes or materials that are
to be considered in executive session; and
(B) the board of an association composed exclusively of time-share unit owners shall be
required to make reasonably available to the unit owners only those materials concerning
matters on which action will be taken at the meeting.
(7) 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 provides information
explaining 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 to comment as provided in subdivision (4) of this subsection.
(8) After termination of the period of declarant control, unit owners may amend the bylaws
to vary the procedures for meetings described in subdivision (7) of this subsection.
(9) Instead of meeting, the executive board may act by unanimous consent as documented
in a record authenticated by all its members. The secretary promptly shall give notice
to all unit owners of any action taken by unanimous consent. 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.
(10) Even if an action by the executive board is not in compliance with this section, it
is valid unless set aside by a court. A challenge to the validity of an action of
the executive board for failure to comply with this section may not be brought more
than 60 days after the minutes of the executive board of the meeting at which the
action was taken are approved or the record of that action is distributed to unit
owners, whichever is later. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2009, No. 155 (Adj. Sess.), § 29, eff. Jan. 1, 2012; 2013, No. 102 (Adj. Sess.), § 2.)
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§ 3-109. Quorum
(a) Unless the bylaws provide otherwise, a quorum is present throughout any meeting of
the unit owners if persons entitled to cast 20 percent 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 subdivision 3-110(c)(4) of this title that have been delivered to the secretary in a timely manner; or
(3) are present by any combination of subdivisions (1) and (2) of this subsection.
(b) 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 individuals entitled to cast 50 percent of the votes on that board are
present at the time a vote regarding 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 a greater vote is required by the declaration
or bylaws.
(c) Except as otherwise provided in the bylaws, meetings of the association shall be conducted
in accordance with the most recent edition of Roberts’ Rules of Order Newly Revised. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2009, No. 155 (Adj. Sess.), § 30, eff. Jan. 1, 2012.)
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§ 3-110. Voting; proxies; ballots
(a) Unless prohibited or limited by the declaration or bylaws, unit owners may vote at
a meeting in person, by absentee ballot pursuant to subdivision (b)(4) of this section,
by a proxy pursuant to subsection (c) of this section or, when a vote is conducted
without a meeting, by electronic or paper ballot pursuant to subsection (d) of this
section.
(b) At a meeting of unit owners, the following requirements apply:
(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) If only one of multiple owners of a unit is present, that owner is entitled to cast
all the votes allocated to that unit. If more than one of the owners are present,
the votes allocated to that unit may be cast only in accordance with the agreement
of a majority in interest of the owners, unless the declaration expressly provides
otherwise. There is majority agreement if any one of the owners casts the votes allocated
to the unit without protest being made promptly to the person presiding over the meeting
by any of the other owners of the unit.
(3) Unless a greater number or fraction of the votes in the association is required by
this chapter or the declaration, a majority of the votes cast determines the outcome
of any action of the association.
(4) Subject to subsection (a) of this section, a unit owner may vote by absentee ballot
without being present at the meeting. The association promptly shall deliver an absentee
ballot to an owner that requests it if the request is made at least three days before
the scheduled meeting. Votes cast by absentee ballot must be included in the tally
of a vote taken at that meeting.
(5) 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.
(c) Except as otherwise provided in the declaration or bylaws, the following requirements
apply with respect to proxy voting:
(1) Votes allocated to a unit may be cast pursuant to a directed or undirected proxy duly
executed by a unit owner.
(2) If a unit is owned by more than one person, each owner of the unit may vote or register
protest to the casting of votes by the other owners of the unit through a duly executed
proxy.
(3) A unit owner may revoke a proxy given pursuant to this section only by actual notice
of revocation to the person presiding over a meeting of the association.
(4) A proxy is void if it is not dated or purports to be revocable without notice.
(5) A proxy is valid only for the meeting at which it is cast and any recessed session
of that meeting.
(6) A person may not cast undirected proxies representing more than 15 percent of the
votes in the association.
(d) Unless prohibited or limited by the declaration or bylaws, an association may conduct
a vote without a meeting. In that event, the following requirements apply:
(1) The association shall notify the unit owners that the vote will be taken by ballot.
(2) The association shall deliver a paper or electronic ballot to every unit owner entitled
to vote on the matter.
(3) The ballot must set forth each proposed action and provide an opportunity to vote
for or against the action.
(4) When the association delivers the ballots, it shall also:
(A) indicate the number of responses needed to meet the quorum requirements;
(B) state the percent of votes necessary to approve each matter other than election of
directors;
(C) 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
(D) describe the time, date, and manner by which a unit owner wishing to deliver information
to all unit owners regarding the subject of the vote may do so.
(5) Except as otherwise provided in the declaration or bylaws, a ballot is not revoked
after delivery to the association by death or disability or attempted revocation by
the person that cast that vote.
(6) Approval by ballot pursuant to this subsection 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.
(e) If the declaration requires that votes on specified matters affecting the common interest
community be cast by lessees rather than unit owners of leased units:
(1) this section applies to lessees as if they were unit owners;
(2) unit owners that have leased their units to other persons may not cast votes on those
specified matters; and
(3) lessees are entitled to notice of meetings, access to records, and other rights respecting
those matters as if they were unit owners.
(f) Unit owners must also be given notice of all meetings at which lessees are entitled
to vote.
(g) Votes allocated to a unit owned by the association shall 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. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2009, No. 155 (Adj. Sess.), § 31, eff. Jan. 1, 2012.)
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§ 3-111. Tort and contract liability
(a) A unit owner is not liable, solely by reason of being a unit owner, for any injury
or damage arising out of the condition or use of the common elements. Neither the
association nor any unit owner except the declarant is liable for that declarant’s
torts in connection with any part of the common interest community that the declarant
has the responsibility to maintain.
(b)(1) An action alleging a wrong done by the association, including an action arising out
of the condition or use of the common elements, must be brought only against the association
and not against any unit owner. If the wrong occurred during any period of declarant
control and the association gives the declarant reasonable notice of and an opportunity
to defend against the action, the declarant who then controlled the association is
liable to the association or to any unit owner for:
(A) all tort losses not covered by insurance, suffered by the association or that unit
owner; and
(B) all costs that the association would not have incurred but for a breach of contract
or other wrongful act or omission.
(2) Whenever the declarant is liable to the association under this title, the declarant
is also liable for all litigation expenses, including reasonable attorneys’ fees,
incurred by the association.
(c) Except as provided in section 4-116 of this title with respect to warranty claims, any statute of limitation affecting the association’s
right of action under this title does not begin to run until the period of declarant
control terminates. A unit owner is not precluded from bringing an action contemplated
by this section because he or she is a unit owner or a member or officer of the association.
Liens resulting from judgments against the association are governed by section 3-114 of this title. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999.)
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§ 3-112. Conveyance or encumbrance of common elements
(a) Portions of the common elements may be conveyed or subject to a security interest
by the association, if persons entitled to cast at least 80 percent of the votes in
the association, including 80 percent of the votes allocated to units not owned by
a declarant, or any larger percentage specified in the declaration, agree to that
action; but all owners of units to which any limited common element is allocated must
agree in order to convey that limited common element or be subjected to a security
interest. The declaration may specify a smaller percentage only if all the units are
restricted exclusively to nonresidential uses. Proceeds of the sale are an asset of
the association; but the proceeds of the sale of limited common elements shall be
distributed equitably among the owners of units to which the limited common elements
were allocated.
(b) An agreement to convey common elements or subject them to a security interest shall
be evidenced by an agreement executed or ratified in the same manner as a deed by
the requisite number of unit owners. The agreement shall specify a date after which
the agreement will be void unless recorded. The agreement and all ratifications shall
be recorded in every town in which a portion of the common interest community is situated
and is effective only upon recordation.
(c) The association, on behalf of the unit owners, may contract to convey an interest
in a common interest community pursuant to subsection (a) of this section, but the
contract is not enforceable against the association until approved pursuant to subsections
(a) and (b) of this section. Thereafter, the association has all powers necessary
and appropriate to effect the conveyance or encumbrance, including the power to execute
deeds or other instruments.
(d) Unless made pursuant to this section, any purported conveyance or encumbrance, judicial
sale or other voluntary transfer of common elements is void.
(e) Unless the declaration otherwise provides, if the holders of first security interests
on 80 percent of the units that are subject to security interests on the day the unit
owners’ agreement under subsection (c) of this section is recorded consent in writing:
(1) a conveyance of common elements pursuant to this section terminates both the undivided
interests in those common elements allocated to the units and the security interests
in those undivided interests held by all persons holding security interests in the
units; and
(2) an encumbrance of common elements pursuant to this section has priority over all preexisting
encumbrances on the undivided interests in those common elements held by all persons
holding security interests in the units.
(f) The consents by holders of first security interests on units described in subsection
(e) of this section, or a certificate of the secretary affirming that those consents
have been received by the association, may be recorded at any time before the date
on which the agreement under subsection (c) of this title becomes void. Consents or
certificates so recorded are valid from the date they are recorded for purposes of
calculating the percentage of consenting first security interest holders, regardless
of later sales or encumbrances on those units. Even if the required percentage of
first security interest holders so consents, a conveyance or encumbrance of common
elements does not affect interests having priority over the declaration, or created
by the association after the declaration was recorded. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999.)
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§ 3-113. Insurance
(a) After no later than the date of the first conveyance of a unit to a person other than
a declarant, to the extent reasonably available and subject to reasonable deductibles,
the association shall maintain the following insurance coverage:
(1) Property insurance on the common elements and, in a planned community, also on property
that will become common elements, to insure against risks of direct physical loss
commonly insured against, which insurance, after application of any deductibles, shall
be not less than 80 percent of the actual cash value of the insured property at the
time the insurance is purchased and at each renewal date, exclusive of items normally
excluded from property policies.
(2) 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
or property damage arising out of or in connection with the use, ownership, or maintenance
of the common elements.
(3) Fidelity insurance.
(b) In the case of a building that contains units divided by horizontal boundaries described
in the declaration, or vertical boundaries that comprise common walls between units,
to the extent reasonably available, the insurance maintained under subdivision (a)(1)
of this section shall include the units but need not include improvements and betterments
installed by unit owners.
(c) If insurance described in subsections (a) and (b) of this section is not reasonably
available, the association shall promptly so notify all unit owners by U.S. mail or
hand delivery. The declaration may require the association to carry any other insurance,
and the association may carry any other insurance it deems appropriate to protect
the association or the unit owners.
(d) Insurance policies carried pursuant to subsections (a) and (b) of this section shall
provide all the following:
(1) Liability coverage for each unit owner arising out of his or her interest in the common
elements or membership in the association.
(2) Waiver by the insurer of its right to subrogation under the policy against any unit
owner or member of the owner’s household.
(3) That no act or omission by any unit owner, unless acting within the scope of his or
her authority on behalf of the association, will void the policy or be a condition
to recovery under the policy.
(4) Primary coverage by the association policy in the event other insurance in the name
of the unit owner is in effect to cover the same risk.
(e) Any loss covered by the property policy under subdivision (a)(1) 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 a holder of a security interest. The insurance
trustee or the association shall hold insurance proceeds in trust for the association,
unit owners and lien holders as their interests may appear. Subject to the provisions
of subsection (g) of this section, the proceeds shall be spent first for the repair
or restoration of the damaged property. The association, unit owners, and lienholders
are not entitled to payment of any portion of the proceeds unless there is a surplus
after the property has been completely repaired or restored or the common interest
community is terminated.
(f) An insurance policy issued to the association does not prevent a unit owner from insuring
for his or her 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, upon written request, to any unit
owner or holder of a security interest. All insurance notices shall be 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 that 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 2-118 of this title shall apply;
(B) the repair or replacement is illegal under State or municipal law; or
(C) 80 percent or more of the unit owners, including the affected owners of units or units
allocated limited common elements vote not to rebuild. The cost of repair or replacement
in excess of insurance proceeds and reserves 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 must be distributed to the owners of those units and the owners of the
units to which those limited common elements were allocated, or to lienholders, as
their interests may appear in proportion to the common expense liabilities of all
the units; and
(ii) the remainder of the proceeds shall be distributed to all the unit owners or lienholders,
as their interests may appear, in proportion to the common expense liabilities of
those units.
(3) If the unit owners vote not to rebuild any unit, that unit’s allocated interests are
automatically reallocated upon the vote, 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 in which all units are restricted to nonresidential use. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2009, No. 155 (Adj. Sess.), § 32, eff. Jan. 1, 2012.)
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§ 3-114. Surplus funds
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 shall be paid annually to the unit owners in proportion to their common expense
liabilities or credited to them to reduce their future common expense assessments. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2009, No. 155 (Adj. Sess.), § 33, eff. Jan. 1, 2012.)
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§ 3-115. Assessments for common expenses
(a) Until the association makes a common expense assessment, the declarant shall pay all
common expenses. After any assessment has been made by the association, assessments
shall be made at least annually, based on a budget adopted at least annually by the
association.
(b) Except for assessments under subsections (c), (d), and (e) of this section, or as
otherwise provided in this title, all common expenses shall be assessed against all
the units in accordance with the allocations set forth in the declaration. The association
may charge interest on any past due assessment or portion thereof at a rate established
by the association, not exceeding the legal rate.
(c) To the extent required by the declaration:
(1) a common expense associated with the maintenance, repair, or replacement of a limited
common element shall be assessed against the units to which that limited common element
is assigned, equally or in any other proportion the declaration provides;
(2) a common expense benefiting fewer than all of the units or their owners may be assessed
exclusively against the units or unit owners benefited; and
(3) the cost of insurance shall be assessed in proportion to risk and the cost of utilities
shall be assessed in proportion to usage.
(d) Assessments to pay a judgment against the association may be assessed only against
the units in the common interest community at the time the judgment was entered, in
proportion to their common expense liabilities.
(e) If damage to a unit or other part of the common interest community, or if any other
common expense is caused by the willful misconduct or gross negligence of any unit
owner, guest, or invitee of a unit owner, the association may, after notice and hearing,
assess that expense exclusively against that owner’s unit, even if the association
maintains insurance with respect to that damage or common expense.
(f) If common expense liabilities are reallocated, common expense assessments and any
installment not yet due shall be recalculated in accordance with the reallocated common
expense liabilities. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2009, No. 155 (Adj. Sess.), § 34, eff. Jan. 1, 2012.)
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§ 3-116. Lien for sums due association; enforcement
(a) The association has a statutory lien on a unit for any assessment attributable to
that unit or fines imposed against its unit owner. Unless the declaration otherwise
provides, reasonable attorney’s fees and costs, other fees, charges, late charges,
fines, and interest charged pursuant to subdivisions 3-102(a)(10), (11), and (12)
of this title, and any other sums due to the association under the declaration, this
title, or as a result of an administrative, arbitration, mediation, or judicial decision,
are enforceable in the same manner as unpaid assessments under this section. If an
assessment is payable in installments, the full amount of the assessment is a lien
from the time the first installment becomes due.
(b) A lien under this section is prior to all other liens and encumbrances on a unit except:
(1) liens and encumbrances recorded before the recordation of the declaration; and
(2) except as otherwise provided in subsection (c) of this section, a first mortgage or
deed of trust on the unit recorded before the date on which the assessment to be enforced
became delinquent; and
(3) liens for real estate taxes and other governmental assessments or charges against
the unit.
(c) A lien under this section is also prior to all security interests described in subdivision
(b)(2) of this section to the extent of the common expense assessments based on the
periodic budget adopted by the association pursuant to subsection 3-115(a) of this title that would have become due in the absence of acceleration during the six months immediately
preceding institution of an action to enforce the lien. Subsections (b) and (c) of
this section do not affect the priority of mechanics’ or materialmen’s liens, or the
priority of liens for other assessments made by the association. A lien under this
section is not subject to the provisions of 27 V.S.A. chapter 3.
(d) Unless the declaration otherwise provides, if two or more associations have liens
for assessments created at any time on the same property, those liens have equal priority.
(e) Recording the declaration constitutes record notice and perfection of the lien. No
further recording of any claim or lien for assessment under this section is required.
(f) A lien for unpaid assessments is extinguished unless proceedings to enforce the lien
are instituted within three years after the full amount of the assessment becomes
due.
(g) This section does not prohibit an action against unit owners to recover sums for which
subsection (a) of this section creates a lien or an association from taking a deed
in lieu of foreclosure.
(h) A judgment or decree in any action brought under this section shall include an award
of costs and reasonable attorney’s fees to the prevailing party.
(i) The association, upon request made in a record, shall furnish to a unit owner a statement
of the amount of unpaid assessments against that unit. If the unit owner’s interest
is real estate, the statement shall be recordable. The statement shall be provided
within 10 business days after receipt of the request and is binding on the association,
the executive board, and every unit owner.
(j) The association’s lien may be foreclosed pursuant to 12 V.S.A. chapter 172 and subsection (o) of this section. The association shall give the notice required
by statute, or if there is no such requirement, reasonable notice of its action to
all lienholders of the unit whose interest would be affected.
(k) A unit owner is not exempt from liability for payment of common expenses by a waiver
of the use or enjoyment of any of the common elements or by abandonment of the unit.
(l) In an action by an association to collect assessments or to foreclose a lien on a
unit under this section, the court may appoint a receiver to collect all sums alleged
to be due and owing to a unit owner before commencement or during pendency of the
action. The court may order the receiver to pay any sums held by the receiver to the
association during pendency of the action to the extent of the association’s common
expense assessments based on a periodic budget adopted by the association pursuant
to section 3-115 of this title.
(m) An association may not commence an action to foreclose a lien on a unit under this
section unless:
(1) the unit owner, at the time the action is commenced, owes a sum equal to at least
three months of common expense assessments based on the periodic budget last adopted
by the association pursuant to subsection 3-115(a) of this title 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.
(n) Unless the parties otherwise agree, the association shall 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.
(o) Notwithstanding subsection (a) of this section, unless sums due the association include
an unpaid assessment, a foreclosure action may not be commenced against the unit unless
the association has a judgment against the unit owner for the sums due the association
and has perfected a judgment lien against the unit.
(p) Every aspect of a foreclosure, sale, or other disposition under this section, including
the method, advertising, time, date, place, and terms, must be commercially reasonable.
(q) Unless other procedures are provided in the declaration, bylaws, or rules, an association
of time-share unit owners may not deny an owner of a time-share access to the owner’s
time-share for failure to pay an assessment unless:
(1) the time-share owner is delinquent in payment of that owner’s common expense assessments
based on the periodic budget last adopted by the association pursuant to subsection 3-115(a) of this title; and
(2) the association provides written notice of the delinquency to the time-share owner
no less than 30 days after the date the assessment was due, but in no case later than
30 days before the date the time-share owner is entitled to occupy that owner’s time-share.
(3) The following provisions apply to the notice required in subdivision (2) of this subsection:
(A) The notice shall clearly state the total amount of any delinquency that then exists,
including any accrued interest and late charges permitted to be imposed under the
terms of the declaration or bylaws and including a per diem amount, if any, to account
for further accrual of interest and late charges between the stated effective date
of the notice and the first date of use.
(B) The notice shall clearly state that the time-share owner will not be permitted to
use his or her time-share interest, that the time-share owner will not be permitted
to make a reservation in the time-share property’s reservation system, or that any
confirmed reservation may be canceled, as applicable, until the total amount of such
delinquency is satisfied in full or until the time-share owner produces satisfactory
evidence that the delinquency does not exist.
(C) The notice shall be mailed to the time-share owner at his or her last known address
as recorded in the books and records of the time-share property, and the notice shall
be effective to bar the use of the time-share owner and those claiming use rights
under the time-share owner, including his or her guests, lessees, and the third parties
receiving use rights in the time-share in question through a nonaffiliated exchange
program, until such time as the unit owner is no longer delinquent.
(D) If the association elects to deny use of the owner’s time-share to any third party
receiving use rights through an affiliated exchange program, the association shall
at the same time provide similar written notice of the owner’s delinquency as required
in subdivision (2) of this subsection to any affiliated exchange program. Receipt
of the written notice by the affiliated exchange program is effective to bar the use
of all third parties claiming through the affiliated exchange program. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2001, No. 46, § 13; 2009, No. 155 (Adj. Sess.), § 35, eff. Jan. 1, 2012; 2013, No. 102 (Adj. Sess.), § 3.)
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§ 3-117. Other liens
(a) Except as otherwise provided in subsection (b) of this section, a judgment for money
against the association pursuant to 12 V.S.A. § 4531a, if recorded, is not a lien on the common elements, but is a lien in favor of the
judgment lienholder against all of the other real estate of the association and all
of the units in the common interest community at the time the judgment was entered.
No other property of a unit owner is subject to the claims of creditors of the association.
(b) If the association has granted a security interest in the common elements to a creditor
of the association pursuant to section 3-108 of this title, the holder of that security interest shall exercise its right against the common
elements before its judgment lien on any unit may be enforced.
(c) Whether perfected before or after the creation of the common interest community, if
a lien, other than a deed of trust or mortgage, becomes effective against two or more
units, the unit owner of an affected unit may pay to the lienholder the amount of
the lien attributable to that unit, and the lienholder, upon receipt of payment, shall
promptly deliver a release of the lien covering that unit. The amount of payment shall
be proportional to the ratio of that unit owner’s common expense liability to the
common expense liabilities of all unit owners whose units are subject to the lien.
After payment, the association shall not have a lien or assessment against that unit
owner’s unit for any portion of the common expenses incurred in connection with that
lien.
(d) A judgment against the association shall be indexed in the name of the common interest
community and the association and after it is indexed is notice of the lien against
the units. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2009, No. 155 (Adj. Sess.), § 36, eff. Jan. 1, 2012.)
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§ 3-118. Association records
(a) An association shall retain the following:
(1) detailed records of receipts and expenditures affecting the operation and administration
of the association 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 taken by a committee in place of the executive
board on behalf of the association;
(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 this
title, 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) a list of the names and addresses of its current executive board members and officers;
(7) its most recent annual report delivered to the secretary of state;
(8) financial and other records sufficiently detailed to enable the association to comply
with section 4-109 of this title;
(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 to which they relate.
(b) Subject to subsections (c) and (d) of this section, all records retained by an association
must be available for examination and copying by a unit owner or the owner’s authorized
agent:
(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 of
the association requested.
(c) Records retained by an association may 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 or mediation, arbitration, or administrative proceedings;
(4) existing or potential matters involving federal, State, or local administrative or
other formal proceedings before a governmental 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 the disclosure of which would violate law other than this title;
(7) records of an executive session of the executive board; or
(8) individual unit files other than those of the requesting owner.
(d) An association may charge a reasonable fee for providing copies of any records under
this section and for supervising the unit owner’s inspection.
(e) A right to copy records under this section includes the right to receive copies by
photocopying or other means, including copies through an electronic transmission if
available upon request by the unit owner.
(f) An association is not obligated to compile or synthesize information.
(g) Information provided pursuant to this section may not be used for commercial purposes. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 2009, No. 155 (Adj. Sess.), § 37, eff. Jan. 1, 2012.)
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§ 3-119. Association as trustee
A third person dealing with the association in the association’s capacity as a trustee
may assume without inquiry that the association has trust powers and will properly
exercise them. A third person, without actual knowledge that the association is exceeding
or improperly exercising its powers, is fully protected in dealing with the association
as if the association possessed and properly exercised the powers it purports to exercise.
A third person is not bound to assure the proper application of trust assets paid
or delivered to the association in its capacity as trustee. (Added 1997, No. 104 (Adj. Sess.), § 3, eff. Jan. 1, 1999.)
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§ 3-120. Rules
(a) Before adopting, amending, or repealing any rule, the executive board shall 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.
(b) Following adoption, amendment, or repeal of a rule, the association shall notify the
unit owners of its action and provide a copy of any new or revised rule.
(c) An association may adopt rules to establish and enforce construction and design criteria
and aesthetic standards if the declaration so provides. If the declaration so provides,
the association shall adopt procedures for enforcement of those standards and for
approval of construction applications, including a reasonable time within which the
association must act after an application is submitted and the consequences of its
failure to act.
(d) A rule regulating display of the flag of the United States must be consistent with
federal law. In addition, the association may not prohibit display on a unit or on
a limited common element adjoining a unit of the flag of this State, or signs regarding
candidates for public or association office or ballot questions, but the association
may adopt rules governing the time, place, size, number, and manner of those displays.
(e) Unit owners may peacefully assemble on the common elements to consider matters related
to the common interest community, but the association may adopt rules governing the
time, place, and manner of those assemblies.
(f) An association may 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 to the extent those rules are reasonably
designed to meet underwriting requirements of institutional lenders that regularly
make loans secured by first mortgages on units in common interest communities or regularly
purchase those mortgages.
(g) An association’s internal business operating procedures need not be adopted as rules.
(h) Every rule must be reasonable. (Added 2009, No. 155 (Adj. Sess.), § 38, eff. Jan. 1, 2012.)
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§ 3-121. Notice to unit owners
(a) An association shall deliver any notice required to be given by the association under
this title to any mailing or electronic mail address a unit owner designates. Otherwise,
the association may 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.
(b) The ineffectiveness of a good faith effort to deliver notice by an authorized means
does not invalidate action taken at or without a meeting. (Added 2009, No. 155 (Adj. Sess.), § 39, eff. Jan. 1, 2012.)
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§ 3-122. Removal of officers and directors
(a) Notwithstanding any provision of the declaration or bylaws to the contrary, unit owners
present in person, by proxy, or by absentee ballot at any meeting of the unit owners
at which a quorum is present may remove any member of the executive board and any
officer elected by the unit owners, with or without cause, if the number of votes
cast in favor of removal exceeds the number of votes cast in opposition to removal,
but:
(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 under subsection 3-103(g) of this title may be removed only by the person that appointed that member; and
(3) the unit owners may not consider whether to remove a member of the executive board
or an officer elected by the unit owners at a meeting of the unit owners unless that
subject was listed in the notice of the meeting.
(b) At any meeting at which a vote to remove a member of the executive board or an officer
is to be taken, the member or officer being considered for removal must have a reasonable
opportunity to speak before the vote. (Added 2009, No. 155 (Adj. Sess.), § 40, eff. Jan. 1, 2012.)
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§ 3-123. Adoption of budgets; special assessments
(a) The executive board, at least annually, shall adopt a proposed budget for the common
interest community for consideration by the unit owners. Not later than 30 days after
adoption of a proposed budget, the executive board shall provide to all the unit owners
a summary of the budget, including any reserves, and a statement of the basis on which
any reserves are calculated and funded. Simultaneously, the board shall set a date
not less than 10 days or more than 60 days after providing the summary for a meeting
of the unit owners to consider ratification of the budget. 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.
(b) The executive board, at any time, may propose a special assessment. Except as otherwise
provided in subsection (c) of this section, the assessment is effective only if the
executive board follows the procedures for ratification of a budget described in subsection
(a) and the unit owners do not reject the proposed assessment.
(c) If the executive board determines by a two-thirds vote that a special assessment is
necessary to respond to an emergency:
(1) the special assessment becomes effective immediately in accordance with the terms
of the vote;
(2) notice of the emergency assessment must be provided promptly to all unit owners; and
(3) the executive board may spend the funds paid on account of the emergency assessment
only for the purposes described in the vote. (Added 2009, No. 155 (Adj. Sess.), § 41, eff. Jan. 1, 2012.)
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§ 3-124. Litigation involving declarant
(a) The following requirements apply to an association’s authority under subdivision 3-102 (a)(4) of this title to institute and maintain a proceeding alleging a construction defect with respect
to the common interest community, whether by litigation, mediation, arbitration, or
administratively, against a declarant or an employee, independent contractor, or other
person directly or indirectly providing labor or materials to a declarant:
(1) Subject to subsection (e) of this section, before the association institutes a proceeding
described in this section, it shall 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 notice may be delivered by any method of service and may be addressed
to any person if the method of service used:
(A) provides actual notice to the person named in the claim; or
(B) would be sufficient to give notice to the person in connection with commencement of
an action by the association against the person.
(2) Subject to subsection (e) of this section, the association may not institute a proceeding
against a person until 45 days after the association sends notice of its claim to
that person.
(3) During the period described in subdivision (2) of this subsection, 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.
If the association does not receive a timely remediation plan from a person to which
it gave notice, or if the association does not accept the terms of any plan submitted,
the association may institute a proceeding against the person.
(4) If the association receives one or more timely remediation plans, the executive board
shall 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.
(5) If the association accepts a remediation plan from a person the association seeks
to hold liable for the claimed defect, or if a person agrees to stated conditions
to an otherwise acceptable plan, the parties shall agree on a period for implementation
of the plan. The association may not institute a proceeding against the person during
the time the plan is being diligently implemented.
(6) Except as otherwise provided in subsection 4-116(d) of this title for warranty claims, any statute of limitation affecting the association’s right
of action against a declarant or other person is tolled during the period described
in subdivision (2) of this section and during any extension of that time because a
person to which notice was directed has commenced and is diligently pursuing the remediation
plan.
(b) After the time described in subdivision (a)(2) of this section expires, whether or
not the association agrees to any remediation plan, a proceeding may be instituted
by:
(1) the association against a person to which notice was directed that fails to submit
a timely remediation plan, the plan of which is not acceptable, or that fails to pursue
diligent implementation of that plan; or
(2) a unit owner with respect to the owner’s unit and any limited common elements assigned
to that unit, regardless of any action of the association.
(c) This section 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.
(d) Subject to the other provisions of this section, the determination of whether and
when the association may institute a proceeding described in this section may be made
by the executive board. The declaration may not require a vote by any number or percent
of unit owners as a condition to institution of a proceeding.
(e) This section does not prevent an association from seeking equitable relief at any
time without complying with subdivision (a)(1) or (2) of this section. (Added 2009, No. 155 (Adj. Sess.), § 42, eff. Jan. 1, 2012.)