The Vermont Statutes Online

Title 27A : Uniform Common Interest Ownership Act (1994)

Article 003 : Management of the Common Interest Community

• § 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.)

• § 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. 55 (Adj. Sess.), § 25, eff. Jan. 1, 2012; 2013, No. 102 (Adj. Sess.), § 1.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)

• § 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.)