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NO. 104. AN ACT RELATING TO COMMON INTEREST OWNERSHIP.

(H.71)

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1. 27 V.S.A. § 1331(2) and (3) are amended to read:

(2) "Conversion" means a change in character of residential real property from a rental to an ownership basis. A *[condominium]* common interest community, stock cooperative or similar arrangement shall be deemed such a change in character of ownership.

(3) "Declarant" means any person who offers for transfer ownership interests in a *[residential condominium unit]* common interest community as part of an initial common promotional plan.

Sec. 2. 27 V.S.A. § 1333(c) is amended to read:

(c) The notice shall state that the building is to be converted to *[condominiums]* a common interest community. It shall set forth generally the rights of tenants under this subchapter, and shall be given by certified mail, return receipt requested, at the address of the unit or any other mailing address provided by the tenant. Failure to give notice as required by this section is a defense to an action for possession.

Sec. 3. 27A V.S.A. is added to read:

UNIFORM COMMON INTEREST OWNERSHIP ACT (1994)

TABLE OF CONTENTS

ARTICLE 1. GENERAL PROVISIONS

PART 1. DEFINITIONS AND OTHER GENERAL PROVISIONS

§ 1-101. Short Title

§ 1-102. Reserved

§ 1-103. Definitions

§ 1-104. Variation by Agreement

§ 1-105. Separate Titles and Taxation

§ 1-106. Local Ordinances, Regulations, and Building Codes

§ 1-107. Eminent Domain

§ 1-108. General Principles of Law Applicable

§ 1-109. Construction Against Implicit Repeal

§ 1-110. Uniformity of Application and Construction

§ 1-111. Severability

§ 1-112. Unconscionable Agreement or Term of Contract

§ 1-113. Good Faith

§ 1-114. Remedies to be Liberally Administered

§ 1-115. Adjustment of Dollar Amounts

PART 2. APPLICABILITY

§ 1-201. New Common Interest Communities

§ 1-202. Reserved

§ 1-203. Exception for Small Projects and Limited Expense Liability Planned

Communities

§ 1-204. Preexisting Common Interest Communities

§ 1-205. Reserved

§ 1-206. Amendments to Governing Instruments

§ 1-207. Applicability to Nonresidental and Mixed-Use Common Interest Communities

§ 1-208. Out-of-State Common Interest Communities

ARTICLE 2. CREATION, ALTERATION AND TERMINATION

OF COMMON INTEREST COMMUNITIES

§ 2-101. Creation of Common Interest Communities

§ 2-102. Unit Boundaries

§ 2-103. Construction and Validity of Declaration and Bylaws

§ 2-104. Description of Units

§ 2-105. Contents of Declaration for a Common Interest Community

§ 2-106. Leasehold Common Interest Communities

§ 2-107. Allocation of Allocated Interests

§ 2-108. Limited Common Elements

§ 2-109. Plats and Plans

§ 2-110. Exercise of Development Rights

§ 2-111. Alterations of Units

§ 2-112. Relocation of Boundaries Between Adjoining Units

§ 2-113. Subdivision of Units

§ 2-114. Easement for Encroachments

§ 2-115. Use for Sales Purposes

§ 2-116. Easement Rights

§ 2-117. Amendment of Declaration

§ 2-118. Termination of Common Interest Community

§ 2-119. Rights of Secured Lenders

§ 2-120. Master Associations

§ 2-121. Merger or Consolidation of Common Interest Communities

§ 2-122. Addition of Unspecified Real Estate

§ 2-123. Master Planned Communities

ARTICLE 3. MANAGEMENT OF THE COMMON INTEREST COMMUNITY

§ 3-101. Organization of Unit Owners' Association

§ 3-102. Powers of Unit Owners' Association

§ 3-103. Executive Board Members and Officers

§ 3-104. Transfer of Special Declarant Rights

§ 3-105. Termination of Contracts and Leases of Declarant

§ 3-106. Bylaws

§ 3-107. Upkeep of Common Interest Community

§ 3-108. Meetings

§ 3-109. Quorums

§ 3-110. Voting; Proxies

§ 3-111. Tort and Contract Liability

§ 3-112. Conveyance or Encumbrance of Common Elements

§ 3-113. Insurance

§ 3-114. Surplus Funds

§ 3-115. Assessments for Common Expenses

§ 3-116. Lien for Assessments

§ 3-117. Other Liens

§ 3-118. Association Records

§ 3-119. Association as Trustee

ARTICLE 4. PROTECTION OF PURCHASERS

§ 4-101. Waiver

§ 4-102. Liability for Public Offering Statement Requirements

§ 4-103. Public Offering Statement; General Provisions

§ 4-104. Common Interest Communities Subject to Development Rights

§ 4-105. Time Shares

§ 4-106. Conversion Buildings

§ 4-107. Common Interest Community Securities

§ 4-108. Reserved

§ 4-109. Resales of Units

§ 4-110. Escrow of Deposits

§ 4-111. Release of Liens

§ 4-112. Reserved

§ 4-113. Express Warranties of Quality

§ 4-114. Implied Warranties of Quality

§ 4-115. Exclusion or Modification of Implied Warranties of Quality

§ 4-116. Statute of Limitations for Warranties

§ 4-117. Effect of Violations on Rights of Action

§ 4-118. Labeling of Promotional Material

§ 4-119. Declarant's Obligation to Complete and Restore

§ 4-120. Substantial Completion of Units

UNIFORM COMMON INTEREST OWNERSHIP ACT (1994)

Article 1. General Provisions

Part 1. Definitions and Other General Provisions

§ 1-101. SHORT TITLE

This title shall be known and may be cited as the Vermont Common Interest Ownership Act.

§ 1-102. RESERVED

§ 1-103. DEFINITIONS

In the declaration and bylaws, unless specifically provided otherwise or the context otherwise requires, and in this title:

(1) "Affiliate of a declarant" means any person who controls, is controlled by or is under common control with a declarant.

(A) A person "controls" a declarant if the person

(i) is a general partner, officer, director or employer of the declarant,

(ii) directly or indirectly or acting in concert with one or more other persons,or through one or more subsidiaries, owns, controls, holds with power to vote or holds proxies representing, more than 20 percent of the voting interest in the declarant,

(iii) controls in any manner the election of a majority of the directors of the declarant, or

(iv) has contributed more than 20 percent of the capital of the declarant.

(B) A person "is controlled by" a declarant if the declarant

(i) is a general partner, officer, director, or employer of the person,

(ii) directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than 20 percent of the voting interest in the person,

(iii) controls in any manner the election of a majority of the directors of the person, or

(iv) has contributed more than 20 percent of the capital of the person.

(C) Control does not exist if the powers described in this subdivision are held solely as security for an obligation and are not exercised.

(2) "Allocated interests" mean the following interests allocated to each unit:

(A) In a condominium, the undivided interest in the common elements, the common expense liability, and votes in the association.

(B) In a planned community, the common expense liability and votes in the association.

(3) "Association" or "unit owners' association" means the unit owners' association organized under section 3-101 of this title.

(4) "Common elements" mean

(A) In a condominium, all portions of the common interest community other than the units.

(B) In a planned community, any real estate within a planned community owned or leased by the association, other than a unit.

(5) "Common expenses" mean expenditures made by or financial liabilities of the association and any allocations to reserves.

(6) "Common expense liability" means the liability for common expenses allocated to each unit pursuant to section 2-107 of this title.

(7) "Common interest community" means real estate described in a declaration with respect to which any person, by virtue of the person's ownership of a unit, is obligated to pay real estate taxes on; insurance premiums on; maintenance of; or improvement of any other real estate other than that unit described in the declaration. Ownership of a unit does not include holding a leasehold interest of less than five years in a unit, including renewal options.

(8) "Condominium" means a common interest community in which portions of the real estate are designated for separate ownership and the remainder of the real estate is designated for common ownership solely by the owners of those portions. A common interest community is not a condominium unless the undivided interests in the common elements are vested in the unit owners.

(9) "Conversion building" means a building that at any time before creation of the common interest community was occupied wholly or partially by persons other than purchasers and persons who occupy with the consent of purchasers.

(10) "Cooperative" means a regime created pursuant to chapter 14 of Title 11; a cooperative is not a common interest community for the purposes of this title.

(11) "Dealer" means a person in the business of selling units for his or her own account.

(12) "Declarant" means any person or group of persons acting in concert who

(A) as a part of a common promotional plan, offers to dispose of the declarant's interest in a unit not previously disposed of; or

(B) reserves or succeeds to any special declarant right.

(13) "Declaration" means any instruments, however denominated, that create a common interest community and any amendments to those instruments.

(14) "Development rights" mean any right or combination of rights reserved by a declarant in the declaration to:

(A) add real estate to a common interest community;

(B) create units, common elements or limited common elements within a common interest community;

(C) subdivide units or convert units into common elements; or

(D) withdraw real estate from a common interest community.

(15) "Dispose" or "disposition" means a voluntary transfer to a purchaser of any legal or equitable interest in a unit, but does not include the transfer or release of a security interest.

(16) "Executive board" means the body, regardless of name, designated in the declaration to act on behalf of the association.

(17) "Identifying number" means a symbol or address that identifies only one unit in a common interest community.

(18) "Leasehold common interest community" means a common interest community in which all or a portion of the real estate is subject to a lease the expiration or termination of which will terminate the common interest community or reduce its size.

(19) "Limited common element" means a portion of the common elements allocated by the declaration or by operation of subdivision 2-102(2) or (4) for the exclusive use of one or more but fewer than all of the units.

(20) "Master association" means an organization described in section 2-120 of this title, whether or not it is also an association described in section 3-101 of this title.

(21) "Offer" or "Offering" means any advertisement, inducement, solicitation, or attempt to encourage any person to acquire any interest in a unit, other than as security for an obligation. An advertisement in a newspaper or other periodical of general circulation or in any broadcast medium to the general public of a common interest community not located in this state is not an offering if the advertisement states that an offering may be made only in compliance with the law of the jurisdiction in which the common interest community is located.

(22) "Person" means an individual, corporation, limited liability company, limited liability partnership, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision or agency, or other legal or commercial entity. Inthe case of a land trust, "person" means the beneficiary of the trust rather than the trust or trustee.

(23) "Planned community" means a common interest community which is not a condominium or cooperative. A condominium or cooperative may be part of a planned community.

(24) "Purchaser" means any person, other than a declarant or a dealer, who by means of a voluntary transfer acquires a legal or equitable interest in a unit other than

(A) a leasehold interest, including renewal options, of less than 20 years; or

(B) as security for an obligation.

(25) "Real estate" means any leasehold or other estate or interest in, over or under land, including structures, fixtures, and other improvements and interests which by custom, usage, or law pass with a conveyance of land though not described in the contract of sale or instrument of conveyance. "Real estate" includes parcels with or without upper or lower boundaries, and spaces that may be filled with air or water.

(26) "Residential purposes" mean use for dwelling or recreational purposes, or both.

(27) "Security interest" means an interest in real estate or personal property, created by contract or conveyance, which secures payment or performance of an obligation. "Security interest" includes a lien created by a mortgage, deed of trust, trust deed, security deed, contract for deed, land sales contract, lease intended as security, assignment of lease or rents intended as security, pledge of an ownership interest in an association, and any other consensual lien or title retention contract intended as security for an obligation.

(28) "Special declarant rights" mean rights reserved for the benefit of a declarant to

(A) complete improvements indicated on plats and plans filed with the declaration as provided in section 2-109 of this title or to complete improvements described in the public offering statement pursuant to subdivision 4-103(a)(2) of this title;

(B) exercise any declarant right pursuant to section 2-110 of this title;

(C) maintain sales offices, management offices, signs advertising the commoninterest community, and models (section 2-115);

(D) use easements through the common elements for the purpose of making improvements within the common interest community or within real estate which may be added to the common interest community (section 2-116);

(E) make the common interest community subject to a master association (section 2-120);

(F) merge or consolidate a common interest community with another common interest community of the same form of ownership (section 2-121); or

(G) appoint or remove any officer of the association or any master association or any executive board member during any period of declarant control (section 3-103).

(29) "Time share" means a time share estate as defined by subsection 3619(a) of Title 32.

(30) "Unit" means a physical portion of the common interest community designated for separate ownership or occupancy, the boundaries of which are described pursuant to subdivision 2-105(a)(5) of this title.

(31) "Unit owner" means a declarant or other person who owns a unit, or a lessee of a unit in a leasehold common interest community whose lease expires simultaneously with any lease the expiration or termination of which will remove the unit from the common interest community, but does not include a person having an interest in a unit solely as security for an obligation. The declarant is the owner of any unit created by the declaration.

§ 1-104. VARIATION BY AGREEMENT

Except as expressly provided in this title, provisions of this title may not be varied by agreement, and rights conferred by this title may not be waived. A declarant may not act under a power of attorney or use any other device to evade the limitations or prohibitions of this title or the declaration.

§ 1-105. SEPARATE TITLES AND TAXATION

(a) In a condominium or planned community:

(1) if there is any unit owner other than a declarant, each unit that has been created,together with its interest in the common elements, constitutes for all purposes a separate parcel of real estate;

(2) if there is any unit owner other than a declarant, each unit shall be separately taxed and assessed, and no separate tax or assessment may be rendered against any common elements for which a declarant has reserved no development rights.

(b) Any portion of the common elements for which the declarant has reserved any development right shall be separately taxed and assessed against the declarant, and the declarant alone is liable for payment of those taxes.

(c) If there is no unit owner other than a declarant, the real estate comprising a common interest community may be taxed and assessed in any manner provided by law.

§ 1-106. LOCAL ORDINANCES, REGULATIONS, AND BUILDING

CODES

(a) A building code may not impose any requirement upon any structure in a common interest community which it would not impose upon a physically identical development under a different form of ownership.

(b) No zoning, building codes, subdivision ordinance or other real property use law, ordinance or regulation may prohibit the conversion of any building to the common interest community form of ownership.

(c) Except as provided in subsections (a) and (b) of this section, no provision of this title invalidates or modifies any provision of any zoning, subdivision, building code or other real estate use law, ordinance or regulation.

§ 1-107. EMINENT DOMAIN

(a) If a unit is acquired by eminent domain or if a part of a unit is acquired by eminent domain leaving the unit owner with a remnant that may not practically or lawfully be used for any purpose permitted by the declaration, the award shall include compensation to the unit owner for that unit and its allocated interests, whether or not any common elements are acquired. Upon acquisition, unless the decree provides otherwise, the allocated interests of that unit are automatically reallocated to the remaining units in proportion to the respective allocated interests of those units before the taking, and the association shallpromptly prepare, execute and record an amendment to the declaration reflecting the reallocations. Any remnant of a unit remaining after part of a unit is taken under this subsection is thereafter a common element.

(b) Except as provided in subsection (a) of this section, if part of a unit is acquired by eminent domain, the award shall compensate the unit owner for the reduction in value of the unit and its interest in the common elements, whether or not any common elements are acquired. Unless the decree provides otherwise, upon acquisition:

(1) the allocated interests of that unit shall be reduced in proportion to the reduction in the size of the unit or on any other basis specified in the declaration; and

(2) the portion of the allocated interests divested from the partially acquired unit shall be automatically reallocated to that unit and to the remaining units in proportion to the respective allocated interests of those units before the taking, with the partially acquired unit participating in the reallocation on the basis of its reduced allocated interests.

(c) If part of the common elements is acquired by eminent domain, the portion of the award attributable to the common elements taken shall be paid to the association. Unless the declaration provides otherwise, any portion of the award attributable to the acquisition of a limited common element shall be equally divided among the owners of the units to which that limited common element was allocated at the time of acquisition.

(d) The court decree shall be recorded in every municipality in which any portion of the common interest community is located.

§ 1-108. GENERAL PRINCIPLES OF LAW APPLICABLE

The principles of law and equity, including but not limited to the law of corporations and unincorporated associations, the law of real property and the law of contracts, principal and agent and eminent domain supplement the provisions of this title, except to the extent these principles are inconsistent with the title.

§ 1-109. CONSTRUCTION AGAINST IMPLICIT REPEAL

This chapter is a general act intended to create unified coverage of its subject matter, and no part of it shall be construed to be repealed by subsequent legislation if that construction can be reasonably avoided.

§ 1-110. UNIFORMITY OF APPLICATION AND CONSTRUCTION

This title shall be applied and construed to make uniform the law with respect to the subject of this title among states which enact it.

§ 1-111. SEVERABILITY

If any provision of this title or the application of it to any person or circumstances is held invalid, the invalidity shall not affect other provisions or applications of this title which can be given effect without the invalid provision or applications, the provisions of this title are severable.

§ 1-112. UNCONSCIONABLE AGREEMENT OR TERM OF CONTRACT

(a) The court, upon finding as a matter of law that a contract or contract clause was unconscionable at the time the contract was made, may refuse to enforce the contract, enforce the remainder of the contract without the unconscionable clause or limit the application of any unconscionable clause in order to avoid an unconscionable result.

(b) Whenever it is claimed or appears to the court that a contract or any clause of the contract is or may be unconscionable, the parties, in order to aid the court in making the determination shall be afforded a reasonable opportunity to present evidence regarding:

(1) the commercial setting of the negotiations;

(2) whether a party has knowingly taken advantage of the inability of the other party to reasonably protect his or her interests because of physical or mental infirmity, illiteracy, inability to understand the language of the agreement or similar factors;

(3) the effect and purpose of the contract or clause; and

(4) in the case of a sale, any gross disparity at the time of contracting between the amount charged for the property and the value of the property measured by the price at which similar property was readily obtainable in similar transactions. Such a disparity does not of itself render the contract unconscionable.

§ 1-113. GOOD FAITH

Every contract or duty governed by this title imposes an obligation of good faith on all parties in its performance or enforcement.

§ 1-114. REMEDIES TO BE LIBERALLY ADMINISTERED

(a) The remedies provided by this title shall be liberally administered so that the aggrieved party is placed in the position the aggrieved party would have been if the other party had fully performed. However, consequential, special or punitive damages shall not be awarded except as specifically provided in this title or pursuant to other laws.

(b) Any right or obligation provided by this title is enforceable by judicial proceedings.

§ 1-115. ADJUSTMENT OF DOLLAR AMOUNTS

(a) From time to time the dollar amounts specified in section 1-203 of this title shall change as provided in subsections (b) and (c) of this section according to and to the extent of changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers: U.S. City Average, All Items 1967=100, compiled by the Bureau of Labor Statistics, United States Department of Labor (the "Index"). The Index for December 1990, which was 401, is the Reference Base Index.

(b) The dollar amount specified in section 1-203 of this title and any amount stated in the declaration pursuant to that section shall change annually on July 1 if the percentage of change, calculated to the nearest whole percentage point, between the Index at the end of the preceding year and the Reference Base Index is ten percent or more, but

(1) the portion of the percentage change in the Index in excess of a multiple of ten percent shall be disregarded and the dollar amounts shall change only in multiples of ten percent of the amounts appearing in this title on January 1, 1999;

(2) the dollar amounts shall not change if the amounts required by this section are those currently in effect pursuant to this title as a result of earlier application of this section; and

(3) in no event shall the dollar amounts be reduced below the amounts appearing in this title on the date of enactment.

(c) If the Index is revised after December 1979, the percentage of change pursuant to this section shall be calculated on the basis of the revised Index. If the revision of the Index changes the Reference Base Index, a revised Reference Base Index shall be determined by multiplying the Reference Base Index then applicable by the rebasing factorfurnished by the Bureau of Labor Statistics. If the Index is superseded, the Index referred to in this section is the one represented by the Bureau of Labor Statistics as reflecting most accurately changes in the purchasing power of the dollar for consumers.

Part 2. Applicability

§ 1-201. NEW COMMON INTEREST COMMUNITIES

(a) Except as provided in subsection (b) of this section and sections 1-203 and 1-204 of this title, this title applies to all common interest communities created within this state after the effective date of this title. The provisions of subchapter 1 of chapter 15 of Title 27 shall not apply to common interest communities created after December 31, 1998.

(b) A mobile home park, as defined in chapter 153 of Title 10, existing before June 30, 1990, shall not be converted through the use of any device, directly or indirectly, into a common interest community pursuant to this title. Any person who offers for transfer ownership interests in a residential condominium unit in a mobile home park shall be subject to the provisions of subchapter 3 of chapter 15 of Title 27 and other applicable laws.

(c) Common interest communities created under this title shall be subject to subchapter 2 of chapter 15 of Title 27.

§ 1-202. RESERVED

§ 1-203. EXCEPTION FOR SMALL PROJECTS AND LIMITED EXPENSE

LIABILITY PLANNED COMMUNITIES

(a) If a planned community:

(1) contains no more than 24 units and is not subject to any development rights; or

(2) provides in its declaration that the annual average common expense liability of all units restricted to residential purposes, exclusive of optional user fees and any insurance premiums paid by the association may not exceed $300.00 as adjusted pursuant to section 1-115, it is subject only to sections 1-105, 1-106 and 1-107 of this title unless the declaration provides that this entire title is applicable.

(b) The exemption provided in subdivision (a)(2) of this section applies only if:

(1) the declarant reasonably believes in good faith that the maximum statedassessment will be sufficient to pay the expenses of the planned community; and

(2) the declarant provides that the assessment may not be increased during the period of declarant control without the consent of all unit owners.

§ 1-204. PREEXISTING COMMON INTEREST COMMUNITIES

(a) Unless excepted under section 1-203 of this title, all common interest communities existing in this state on the effective date of this law are subject to the following sections or subdivisions of this title: 1-103, 1-105, 1-106, 1-107, 2-103, 2-104, 2-121, 3-102(a)(1) through (6) and (11) through (16), 3-111, 3-116, 3-118, 4-109 and 4-117 to the extent necessary to construe the applicable sections. Those sections apply only with respect to events and circumstances occurring after the effective date of this law and do not invalidate existing provisions of the declaration, bylaws, plats or plans of those common interest communities.

(b) If a planned community created within this state before the effective date of this title contains no more than 24 units and is not subject to development rights, it is subject only to sections 1-105, 1-106 and 1-107 of this title unless the declaration is amended in conformity with applicable law and with the procedures and requirements of the declaration to take advantage of the provisions of section 1-206 of this title, in which case all the sections enumerated in subsection (a) of this section apply to that planned community.

§ 1-205. RESERVED

§ 1-206. AMENDMENTS TO GOVERNING INSTRUMENTS

(a) The declaration, bylaws or plat and plans of any common interest community created before the effective date of this title may be amended to achieve any result permitted by this title, regardless of what applicable law provided before this title was enacted.

(b) An amendment to the declaration, bylaws or plats and plans authorized by this section to be made under this title shall be adopted in conformity with any procedures and requirements specified in those instruments or, if there are none, in conformity with the amendment procedures of this title. If an amendment grants to any person any rights,powers or privileges permitted by this title, all correlative obligations, liabilities and restrictions in this title also apply to that person.

§ 1-207. APPLICABILITY TO NONRESIDENTIAL AND MIXED-USE

COMMON INTEREST COMMUNITIES

(a) "Nonresidential common interest community" means a common interest community in which all units are restricted exclusively to nonresidential purposes. Except as provided in subsection (e), this section applies only to nonresidential common interest communities.

(b) A nonresidential common interest community is not subject to this title unless the declaration otherwise provides.

(c) The declaration of a nonresidential common interest community may provide that the entire title applies to the community or that only sections 1-105, 1-106 and 1-107 apply.

(d) If this entire title applies to a nonresidential common interest community, the declaration may also require, subject to section 1-112, that:

(1) notwithstanding section 3-105, any management contract, employment contract, lease of recreational or parking areas or facilities, and any other contract or lease between the association and a declarant or an affiliate of a declarant continues in force after the declarant turns over control of the association; and

(2) notwithstanding section 1-104 of this title, purchasers of units must execute proxies, powers of attorney, or similar devices in favor of the declarant regarding particular matters enumerated in those instruments.

(e) A common interest community that contains units restricted exclusively to nonresidential purposes and other units that may be used for residential purposes is not subject to this title unless the units that may be used for residential purposes would comprise a common interest community in the absence of the nonresidential units or the declaration provides that this title applies as provided in subsection (c) or (d) of this section.

§ 1-208. OUT-OF-STATE COMMON INTEREST COMMUNITIES

This title does not apply to common interest communities or units located outside this state, but the public offering statement provisions, sections 4-102 through 4-107 of this title, apply to all contracts for the disposition of a common interest community signed in this state by any party unless exempt under subsection 4-101(b) of this title.

Article 2. Creation, Alteration and Termination

of Common Interest Communities

§ 2-101. CREATION OF COMMON INTEREST COMMUNITIES

(a) A common interest community may be created pursuant to this title only by recording a declaration executed in the same manner as a deed. The declaration shall be recorded in each town in which any portion of the common interest community is located and shall be indexed in the grantee's index in the name of the common interest community and the association and in the grantor's index in the name of each person executing the declaration.

(b) In a condominium, a declaration or an amendment to a declaration to add units may not be recorded unless all structural components and mechanical systems of all buildings containing or comprising any units created by the declaration are substantially completed in accordance with the plans as evidenced by a recorded certificate of completion executed by an independent professional engineer, surveyor or architect.

§ 2-102. UNIT BOUNDARIES

Except as provided by the declaration in a common interest community:

(1) if walls, floors, or ceilings are designated as boundaries of a unit, all wallboard, plasterboard, plaster, paneling, tiles, wallpaper, paint, finished flooring, and any other materials constituting any part of the finished surfaces of the unit are part of the unit, and all other portions of the walls, floors or ceilings are part of the common elements;

(2) if any chute, flue, duct, wire, conduit, bearing wall, bearing column or any other fixture lies partially within and partially outside the designated boundaries of a unit, any portion of it serving only that unit is a limited common element allocated solely to that unit, and any portion of it serving more than one unit or any portion of the commonelements is a part of the common elements;

(3) subject to the provisions of subdivision (2) of this section, all spaces, interior partitions and other fixtures and improvements within the boundaries of a unit are part of the unit;

(4) any shutters, awnings, window boxes, doorsteps, stoops, porches, balconies, patios, and all exterior doors and windows or other fixtures designed to serve a single unit but located outside the unit's boundaries are limited common elements allocated exclusively to that unit.

§ 2-103. CONSTRUCTION AND VALIDITY OF DECLARATION AND

BYLAWS

(a) All provisions of the declaration and bylaws are severable.

(b) The rule against perpetuities may not be applied to defeat any provision of the declaration, bylaws, rules, or regulations adopted pursuant to subdivision 3-102(a)(1) of this title.

(c) In the event of a conflict between the provisions of the declaration and the bylaws, the declaration prevails to the extent the declaration is inconsistent with this title.

(d) Title to a unit is not rendered unmarketable or otherwise affected by an insubstantial failure of the declaration to comply with this title. Whether a substantial failure impairs marketability is not affected by this title.

§ 2-104. DESCRIPTION OF UNITS

A description of a unit which sets forth the name of the common interest community, the volume and page in which the declaration is recorded, the town in which the common interest community is located, and the identifying number of the unit is a legally sufficient description of that unit and all rights, obligations and interests appurtenant to that unit which were created by the declaration or bylaws.

§ 2-105. CONTENTS OF DECLARATION FOR A COMMON INTEREST

COMMUNITY

(a) The declaration shall contain all the following:

(1) The names of the common interest community and the association and astatement that the common interest community is either a condominium or planned community.

(2) The name of each municipality in which any part of the common interest community is located.

(3) A legally sufficient description of the real estate included in the common interest community.

(4) A statement of the maximum number of units which the declarant reserves the right to create.

(5) A description of the boundaries of each unit created by the declaration, including the identifying number of the unit.

(6) A description of any limited common elements other than those specified in subdivisions 2-102(2) and (4) of this title as provided in subdivision 2-109(b)(10) of this title and, in a planned community, any real estate which is or will be common elements.

(7) A description of any real estate, except real estate subject to development rights, which may be subsequently allocated as limited common elements, other than those specified in subdivisions 2-102(2) and (4) of this title and a statement that they may be so allocated.

(8) A description of any declarant rights required by subdivision 1-103(14) of this title and other special declarant rights required by subdivision 1-103(29) of this title reserved by the declarant, and a legally sufficient description of the real estate to which each of those rights applies and a time limit within which each right shall be exercised.

(9) A statement of any development rights which may be exercised with respect to different parcels of real estate at different times, and

(A) either a statement fixing the boundaries of those portions and regulating the order in which those portions may be subjected to each development right or a statement that no assurances are made in that regard, and

(B) a statement as to whether, if any development right is exercised in any portion of the real estate subject to that development right, that development right must be exercised in all or in any other portion of that real estate.

(10) Any other conditions or limitations on the rights described in subdivision (8) of this subsection.

(11) An allocation to each unit of the allocated interests pursuant to section 2-107 of this title.

(12) Any restrictions

(A) on alienation of the units, including any restrictions on leasing which exceed the restrictions on leasing units which executive boards may impose pursuant to section 3-102(c)(2) of this title, and

(B) on the amount for which a unit may be sold or on the amount that may be received by a unit owner on sale, condemnation or casualty loss to the unit or to the common interest community, or on termination of the common interest community.

(13) The volume and page of recorded easements and licenses appurtenant to or included in the common interest community or to which any portion of the common interest community is or may be subject by a reservation in the declaration.

(14) All matters required by sections 2-106, 2-107, 2-108, 2-109, 2-110, 2-111, 2-112, 2-113, 2-114, 2-116 and 3-103(d) of this title.

(b) The declaration may contain any other matters which the declarant deems appropriate, including any restrictions on the uses of a unit or the number or other qualifications of persons who may occupy units.

§ 2-106. LEASEHOLD COMMON INTEREST COMMUNITIES

(a) Any lease the expiration or termination of which may terminate the common interest community or reduce its size shall be recorded. Every lessor of those leases in a condominium or planned community shall sign the declaration. The declaration shall state all the following:

(1) The volume and page in which the lease is recorded or a statement of where the complete lease may be inspected.

(2) The date on which the lease is scheduled to expire.

(3) A legally sufficient description of the real estate subject to the lease.

(4) Any right of the unit owners to redeem the reversion and the manner in whichthose rights may be exercised, or a statement that the owners do not have those rights.

(5) Any right of the unit owners to remove any improvements within a reasonable time after the expiration or termination of the lease, or a statement that the owners do not have those rights.

(6) Any rights of the unit owners to renew the lease and the conditions of any renewal, or a statement that the owners do not have those rights.

(b) After the declaration for a leasehold condominium or leasehold planned community is recorded, neither the lessor nor the lessor's successor in interest may terminate the leasehold interest of a unit owner who makes timely payment of his or her share of the rent and otherwise complies with all covenants which if violated would entitle the lessor to terminate the lease. A unit owner's leasehold interest in a condominium or planned community is not affected by failure of any other person to pay rent or fulfill any other covenant.

(c) Acquisition of the leasehold interest of any unit owner by the owner of the reversion or remainder does not merge the leasehold and reversionary or remainder interests unless the leasehold interests of all unit owners subject to that reversion or remainder are acquired.

(d) If the expiration or termination of a lease decreases the number of units in a common interest community, the allocated interests shall be reallocated proportionately in accordance with section 1-107 of this title. Reallocations shall be confirmed by an amendment to the declaration prepared, executed and recorded by the association.

§ 2-107. ALLOCATION OF ALLOCATED INTERESTS

(a) The declaration shall allocate to each unit:

(1) In a condominium, a fraction or percentage of undivided interests in the common elements and in the common expenses of the association pursuant to subsection 3-115(a) of this title and a portion of the votes in the association; and

(2) In a planned community, a fraction or percentage of the common expenses of the association pursuant to subsection 3-115(a) of this title and a portion of the votes in the association.

(b) The declaration shall state the formulas used to establish allocations of interests. Those allocations may not discriminate in favor of units owned by the declarant or an affiliate of the declarant.

(c) If units may be added to or withdrawn from the common interest community, the declaration shall state the formulas to be used to reallocate the allocated interests among all units included in the common interest community after the addition or withdrawal.

(d) The declaration may provide:

(1) different allocations of votes to the units on particular matters specified in the declaration;

(2) cumulative voting only for the purpose of electing members of the executive board; and

(3) class voting on specified issues affecting the class if necessary to protect valid interests of the class.

A declarant may not utilize cumulative or class voting for the purpose of evading any limitation imposed on declarants by this title nor may units constitute a class because they are owned by a declarant.

(e) Except for minor variations due to rounding, the sum of the common expense liabilities and, in a condominium, the sum of the undivided interests in the common elements allocated at any time to all the units shall each equal one if stated as a fraction or 100 percent if stated as a percentage. In the event of discrepancy between an allocated interest and the result derived from application of the pertinent formula, the allocated interest prevails.

(f) In a condominium, the common elements are not subject to partition, and any purported conveyance, encumbrance, judicial sale, or other voluntary or involuntary transfer of an undivided interest in the common elements made without the unit to which that interest is allocated, is void.

§ 2-108. LIMITED COMMON ELEMENTS

(a) Except for the limited common elements described in subdivisions 2-102(2) and (4) of this title and except to the extent that a right to allocate a limited common element isreserved pursuant to subsection (c) of this section, the declaration shall specify to which unit or units each limited common element is allocated. That allocation may not be altered without the consent of the unit owners whose units are affected.

(b) Except as the declaration otherwise provides, a limited common element may be reallocated by an amendment to the declaration executed by the unit owners between or among whose units the reallocation is made. The persons executing the amendment shall provide a copy thereof to the association, which shall record it. The amendment shall be recorded in the names of the parties and the common interest community.

(c) A common element not previously allocated as a limited common element may not be allocated only pursuant to the declaration made in accordance with subdivision 2-105(a)(7) of this title. The allocations shall be made by amendments to the declaration.

§ 2-109. PLATS AND PLANS

(a) Plats and plans are a part of the declaration, and required for condominiums and planned communities. Separate plats and plans are not required by this title if all the information required by this section is contained in either a plat or plan. Each plat and plan shall be clear and legible and contain a certification that the plat or plan contains all information required by this section.

(b) Each plat shall show or project:

(1) the name and a plat or general schematic map of the entire common interest community;

(2) the location and dimensions of all real estate not subject to development rights, or subject only to the development right to withdraw, and the location and dimensions of all existing improvements within that real estate;

(3) a legally sufficient description of any real estate subject to development rights, labeled to identify the rights applicable to each parcel;

(4) the extent of any encroachments by or on any portion of the common interest community;

(5) to the extent feasible, a legally sufficient description of all easements serving or burdening any portion of the common interest community;

(6) except as provided in subsection (h) of this section, the approximate location and dimensions of any vertical unit boundaries not shown or projected on plans recorded pursuant to subsection (d) of this section and that unit's identifying number;

(7) except as provided in subsection (h) of this section, the approximate location with reference to an established datum of any horizontal unit boundaries not shown or projected on plans recorded pursuant to subsection (d) of this section and that unit's identifying number;

(8) a legally sufficient description of any real estate in which the unit owners will own only an estate for years, labeled as "leasehold real estate";

(9) the distance between noncontiguous parcels of real estate comprising the common interest community;

(10) the approximate location and dimensions of porches, balconies and patios and excluding parking spaces allocated as limited common elements, and show or contain a narrative description of any other limited common elements; and

(11) in the case of real estate not subject to development rights, all other matters customarily shown on land plats.

(c) A plat may also show the intended location and dimensions of any contemplated improvement to be constructed anywhere within the common interest community. Any contemplated improvement shown shall be labeled either "must be built" or "need not be built".

(d) Except as provided in subsection (h) of this section, to the extent not shown or projected on the plats, plans of the units shall show or project:

(1) the approximate location and dimensions of the vertical boundaries of each unit and that unit's identifying number;

(2) the approximate location of any horizontal unit boundaries with reference to an established datum and that unit's identifying number; and

(3) the approximate location of any units in which the declarant has reserved the right to create additional units or common elements pursuant to subsection 2-111(c) of this title, identified appropriately.

(e) Unless the declaration provides otherwise, the horizontal boundaries of part of a unit located outside a building which have the same elevation as the horizontal boundaries of the inside part need not be depicted on the plats and plans.

(f) Upon exercising any development right, the declarant shall record either new plats and plans necessary to conform to the requirements of subsections (a), (b) and (d) of this section or new certifications of plats and plans previously recorded if those plats and plans otherwise conform to the requirements of those subsections.

(g) Any certification of a plat or plan required by this section shall be made by an independent professional surveyor, architect or engineer.

(h) Plats and plans need not show the location and dimensions of the units' boundaries or their limited common elements if:

(1) the plat shows the location and dimensions of all buildings containing or comprising the units; and

(2) the declaration includes other information that shows or contains a narrative description of the general layout of the units in those buildings and the limited common elements allocated to those units.

§ 2-110. EXERCISE OF DEVELOPMENT RIGHTS

(a) To exercise any development right reserved under subdivision 2-105(a)(8) of this title, the declarant shall prepare, execute and record an amendment to the declaration pursuant to section 2-117 of this title and in a condominium or planned community comply with section 2-109 of this title. The declarant is the unit owner of any units created. The amendment to the declaration shall assign an identifying number to each new unit created and, except in the case of subdivision or conversion of units described in subsection (b) of this section, reallocate the allocated interests among all units. The amendment shall include a description of any common elements and any limited common elements thereby created and, in the case of limited common elements, designate the unit to which each is allocated to the extent required by section 2-108 of this title.

(b) Development rights may be reserved within any real estate added to the common interest community if the amendment adding that real estate includes all matters requiredby section 2-105 or 2-106 of this title and the plats and plans include all matters required by section 2-109 of this title. This provision does not extend the time limit on the exercise of development rights imposed by the declaration pursuant to subdivision 2-105(a)(8) of this title.

(c) Whenever a declarant exercises a development right to subdivide or convert a unit previously created into additional units, common elements, or both:

(1) if the declarant converts the unit entirely to common elements, the amendment to the declaration shall reallocate all the allocated interests of that unit among the other units as if that unit had been taken by eminent domain; and

(2) if the declarant subdivides the unit into two or more units, whether or not any part of the unit is converted into common elements, the amendment to the declaration must reallocate all the allocated interests of the unit among the units created by the subdivision in any reasonable manner prescribed by the declarant.

(d) If the declaration provides, pursuant to subdivision 2-105(a)(8) of this title, that all or a portion of the real estate is subject to the development right of withdrawal:

(1) if all the real estate is subject to withdrawal, and the declaration does not describe separate portions of real estate subject to that right, none of the real estate may be withdrawn after a unit has been conveyed to a purchaser; and

(2) if a portion or portions are subject to withdrawal, no portion may be withdrawn after a unit in that portion has been conveyed to a purchaser.

§ 2-111. ALTERATIONS OF UNITS

Subject to the provisions of the declaration and other provisions of law, a unit owner:

(1) may make any improvements or alterations to his or her unit that do not impair the structural integrity or mechanical systems or lessen the support of any portion of the common interest community;

(2) may not change the appearance of the common elements or the exterior appearance of a unit or any other portion of the common interest community without permission of the association;

(3) after acquiring an adjoining unit or an adjoining part of an adjoining unit, mayremove or alter any intervening partition or create apertures in it even if the partition in whole or in part is a common element if those acts do not impair the structural integrity or mechanical systems or lessen the support of any portion of the common interest community. Removal of partitions or creation of apertures under this subdivision is not an alteration of boundaries.

§ 2-112. RELOCATION OF BOUNDARIES BETWEEN ADJOINING UNITS

(a) Subject to the provisions of the declaration and other provisions of law, the boundaries between adjoining units may be relocated by an amendment to the declaration upon application to the association by the owners of those units. If the owners of the adjoining units have specified a reallocation between their units of their allocated interests, the application must state the proposed reallocations. Unless the executive board determines, within 30 days after receipt of the application, that the reallocations are unreasonable, the association shall prepare an amendment that identifies the units involved and states the reallocations. The amendment shall be executed by those unit owners, shall contain words of conveyance between them, and, on recordation, shall be indexed in the name of the grantor and the grantee and in the grantee's index in the name of the association.

(b) Subject to the provisions of the declaration and other provisions of law, boundaries between units and common elements may be relocated to incorporate common elements within a unit by an amendment to the declaration upon application to the association by the owner of the unit who proposes to relocate a boundary. Unless the declaration provides otherwise, the amendment may be approved only if persons entitled to cast at least 67 percent of the votes in the association, including 67 percent of the votes allocated to units not owned by the declarant, agree to the action. The amendment may describe any fees or charges payable by the owner of the affected unit in connection with the boundary relocation and the fees and charges are assets of the association. The amendment must be executed by the unit owner of the unit whose boundary is being relocated and by the association, contain words of conveyance between them, and on recordation be indexed in the name of the unit owner and the association as grantor orgrantee, as appropriate.

(c) The association

(1) in a condominium or planned community shall prepare and record plats or plans necessary to show the altered boundaries of affected units, and their dimensions and identifying numbers, and

(2) in a cooperative shall prepare and record amendments to the declaration, including any plans, necessary to show or describe the altered boundaries of affected units, and their dimensions and identifying numbers.

§ 2-113. SUBDIVISION OF UNITS

(a) If the declaration expressly so permits, a unit may be subdivided into two or more units. Subject to the provisions of the declaration and other provisions of law, upon application to subdivide a unit, the association shall prepare, execute and record an amendment to the declaration, including the plats and plans, subdividing that unit.

(b) The amendment to the declaration shall be executed by the owner of the unit to be subdivided, shall assign an identifying number to each unit created, and reallocate the allocated interests formerly allocated to the subdivided unit to the new units in any reasonable manner prescribed by the owner of the subdivided unit.

§ 2-114. EASEMENT FOR ENCROACHMENTS

To the extent that any unit or common element in a common interest community encroaches on any other unit or common element, a valid easement for the encroachment exists. The easement does not relieve a unit owner of liability for the owner's willful misconduct nor relieve a declarant or any other person of liability for failure to adhere to any plats and plans.

§ 2-115. USE FOR SALES PURPOSES

A declarant may maintain sales offices, management offices and models in units or on common elements in the common interest community only if the declaration so provides and specifies the rights of a declarant with regard to the number, size, location and relocation of it. In a condominium, any sales office, management office or model not designated a unit by the declaration is a common element. If a declarant ceases to be aunit owner, that declarant ceases to have any rights with regard to the common element unless it is removed promptly in accordance with a right to remove reserved in the declaration. Subject to any limitations in the declaration, a declarant may maintain signs on the common elements advertising the common interest community. The provisions of this section are subject to local ordinances.

§ 2-116. EASEMENT RIGHTS

(a) Subject to the provisions of the declaration, a declarant has such easement through the common elements as may be reasonably necessary for the purpose of discharging a declarant's obligations or exercising special declarant rights, whether arising under this title or reserved in the declaration.

(b) In a planned community, subject to the provisions of subdivision 3-102(a)(6) and section 3-112 of this title, the unit owners have an easement

(1) in the common elements for purposes of access to their units; and

(2) to use the common elements and all real estate which must become common elements pursuant to subdivision 2-105(a)(6) of this title for all other purposes.

§ 2-117. AMENDMENT OF DECLARATION

(a) Except in cases of amendments that may be executed by a declarant under subsection 2-109(f) or section 2-110 of this title or by the association under subsections 2-106(d), 2-108(c), and 2-112(a) or section 2-113 of this title, or by certain unit owners under subsections 2-108(b), 2-112(a), 2-113(b) or 2-118(b) of this title, and except as limited by subsection (d) of this section, the declaration, including any plats and plans, may be amended only by vote or agreement of unit owners of units to which at least 67 percent of the votes in the association is allocated or any larger majority the declaration specifies. The declaration may specify a smaller number only if all the units are restricted exclusively to nonresidential use.

(b) No action to challenge the validity of an amendment adopted by the association pursuant to this section may be brought more than one year after the amendment is recorded.

(c) Every amendment to the declaration shall be recorded in every town in which anyportion of the common interest community is located, and is effective only upon recordation. An amendment, except an amendment pursuant to subsection 2-112(a) of this title, shall be indexed in the grantee's index in the name of the common interest community and the association, and in the grantor's index in the name of the parties executing the amendment.

(d) Except to the extent expressly permitted or required by other provisions of this title, no amendment may create or increase special declarant rights, increase the number of units, change the boundaries of any unit, the allocated interests of a unit, or the uses to which any unit is restricted, in the absence of unanimous consent of the unit owners.

(e) Amendments to the declaration required by this title to be recorded by the association shall be prepared, executed, recorded, and certified on behalf of the association by any officer of the association designated for that purpose or, in the absence of designation, by the president of the association.

(f) Provisions in the declaration creating special declarant rights may not be amended without the consent of the declarant.

(g) The time limits specified in the declaration pursuant to section 2-105(a)(8) of this title within which reserved development rights must be exercised may be extended, and additional development rights may be created, 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 the declarant, agree to that action. The agreement is effective 30 days after an amendment to the declaration reflecting the terms of the agreement is recorded unless all the persons holding the affected special declarant rights, or security interests in those rights, record a written objection within the 30-day period, in which case the amendment is void, or consent in writing at the time the amendment is recorded, in which case the amendment is effective when recorded.

§ 2-118. TERMINATION OF COMMON INTEREST COMMUNITY

(a) Except in the case of a taking of all the units by eminent domain, a common interest community may be terminated only by agreement of unit owners of units to which at least 80 percent of the votes in the association is allocated or any larger percentage thedeclaration specifies. The declaration may specify a smaller percentage only if all the units are restricted exclusively to nonresidential uses.

(b) An agreement to terminate shall be executed or ratified in the same manner as a deed by the requisite number of unit owners. The termination agreement shall specify a date after which the agreement is void unless it is recorded. A termination agreement and all ratifications of it shall be recorded in each town in which a portion of the common interest community is situated.

(c) In the case of a common interest community containing only units having horizontal boundaries described in the declaration, a termination agreement may provide that all the common elements and units of the common interest community shall be sold following termination. If, pursuant to the agreement, any real estate in the common interest community is to be sold following termination, the termination agreement shall set forth the minimum terms of the sale.

(d) In the case of a common interest community containing any units not having horizontal boundaries described in the declaration, a termination agreement may provide for sale of the common elements, but may not require that the units be sold following termination, unless the declaration as originally recorded provided otherwise or unless all the unit owners consent to the sale.

(e) The association on behalf of the unit owners may contract for the sale of real estate in a common interest community, but the contract is not binding on the unit owners until approved pursuant to subsections (a) and (b) of this section. If any real estate is to be sold following termination, title to that real estate upon termination vests in the association as trustee for the holders of all interests in the units. Thereafter, the association has all powers necessary and appropriate to effect the sale. Until the sale has been concluded and the proceeds distributed, the association continues in existence with all powers it had before termination. Proceeds of the sale shall be distributed to unit owners and lienholders as their interests appear, in accordance with subsections (h), (i), and (j) of this section. Unless otherwise specified in the termination agreement, while the association holds title to the real estate, each unit owner and the unit owner's successors in interest have anexclusive right to occupy the portion of the real estate that formerly constituted his or her unit. During the period of that occupancy, each unit owner and the unit owner's successors in interest remain liable for all assessments and other obligations imposed on unit owners by this title or the declaration.

(f) If the real estate constituting the common interest community is not to be sold following termination, title to the common elements and, in a common interest community containing only units having horizontal boundaries described in the declaration, title to all the real estate in the common interest community vests in the unit owners upon termination as tenants in common in proportion to their respective interests as provided in subsection (j) of this section and liens on the units shift accordingly. While the tenancy in common exists, each unit owner and the unit owner's successors in interest have an exclusive right to occupy the portion of the real estate that formerly constituted his or her unit.

(g) Following termination of the common interest community, the proceeds from the sale of real estate and assets of the association are held by the association as trustee for unit owners and holders of liens on the units as their interests may appear.

(h) Following termination of the common interest community, creditors of the association holding liens on the units which were recorded pursuant to section 2904 of Title 12 before termination may enforce those liens in the same manner as any lienholder. All other creditors of the association shall be treated as if they had perfected liens on the units immediately before termination.

(i) The respective interests of unit owners referred to in subsections (e), (f), (g) and (h) of this section are as follows:

(1) Except as provided in subdivision (2) of this subsection, the respective interests of unit owners are the fair market values of their units, allocated interests and any limited common elements immediately before the termination as determined by one or more independent appraisers selected by the association. The independent appraisals shall be distributed to the unit owners and become final unless the unit owners to whom 25 percent or more of the votes in the association are allocated disapprove the appraisal. A unitowner's interest is determined by dividing the fair market value of that unit owner's unit and its allocated interests by the total fair market value of all the units and their allocated interests.

(2) If any unit or any limited common element is destroyed to the extent that an appraisal of its fair market value before destruction cannot be made, the interests of all unit owners are:

(A) in a condominium, their respective common element interests immediately before the termination;

(B) in a planned community, their respective common expense liabilities immediately before the termination.

(j) Except as provided in subdivision (i)(l) of this section, foreclosure or enforcement of a lien or encumbrance against the entire common interest community does not terminate the common interest community, and foreclosure or enforcement of a lien or encumbrance against a portion of the common interest community, other than withdrawable real estate, does not withdraw that portion from the common interest community. Foreclosure or enforcement of a lien or encumbrance against withdrawable real estate does not, of itself, withdraw that real estate from the common interest community, but the person taking title to it has the right to request from the association an amendment excluding the real estate from the common interest community.

(k) If a lien or encumbrance against a portion of the real estate comprising the common interest community has priority over the declaration and the lien or encumbrance has not been partially released, the parties foreclosing the lien or encumbrance may, upon foreclosure, record an instrument excluding the real estate subject to that lien or encumbrance from the common interest community.

§ 2-119. RIGHTS OF SECURED LENDERS

(a) The declaration may require that all or a specified number or percentage of the lenders who hold security interests in the units or common elements approve specified actions of the unit owners or the association as a condition to the effectiveness of those actions, but lack of approval will not have the effect of:

(1) denying or delegating control over the general administrative affairs of the association by the unit owners or the executive board; or

(2) preventing the association or the executive board from participating in any litigation or proceeding; or

(3) preventing an insurance trustee or the association from receiving and distributing insurance proceeds except pursuant to section 1570 of this title.

(b) A lender who has extended credit to an association secured by an assignment of income (section 3-102(14) of this title) or an encumbrance on the common elements (section 3-112) may enforce its security agreement in accordance with its terms, subject to the requirements of this title and other law. Requirements that the association must deposit its periodic common charges before default with the lender to which the association's income has been assigned, or increase its common charges at the lender's direction by amounts reasonably necessary to amortize the loan in accordance with its terms, do not violate the prohibitions on lender approval contained in subsection (a) of this section.

§ 2-120. MASTER ASSOCIATIONS

(a) If the declaration provides that any of the powers described in section 3-102 of this title may be exercised by or may be delegated to a corporation or association on behalf of one or more common interest communities or for the benefit of the unit owners of one or more common interest communities, the provisions of this title applicable to unit owners' associations apply to that corporation or unincorporated association, except as modified by this section.

(b) Unless a master association is acting in the capacity of an association described in section 3-101 of this title, it may exercise the powers provided in subdivision 3-102(a)(2) of this title only to the extent permitted in the declaration or described in the delegations of power of those common interest communities to the master association.

(c) If the declaration provides that the executive board may delegate certain powers to a master association, the members of the executive board shall not be liable for acts or omissions of the master association with respect to those powers after the delegation.

(d) The rights and responsibilities of unit owners with respect to the unit owners' association as provided in sections 3-103, 3-106 and 3-109 of this title apply only to the conduct of the affairs of a master association in regard to those persons who elect the board of a master association, whether or not those persons are unit owners.

(e) Even if a master association is also an association under section 3-101 of this title, the instrument creating the master association and the declaration may provide that the executive board of the master association shall be elected after the period of declarant control in any one of the following ways:

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

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

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

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

§ 2-121. MERGER OR CONSOLIDATION OF COMMON INTEREST

COMMUNITIES

(a) Any two or more common interest communities with the same form of ownership, by agreement of the unit owners as provided in subsection (b) of this section, may be merged or consolidated into a single common interest community by agreement of the unit owners. In the event of a merger or consolidation, unless the agreement otherwise provides, the resultant common interest community is the successor, for all purposes, of all the preexisting common interest communities, and the operations and activities of all associations of the preexisting common interest communities are merged or consolidated into a single association that holds the powers, rights, obligations, assets and liabilities of the preexisting associations.

(b) An agreement of two or more common interest communities to merge or consolidate pursuant to subsection (a) of this section shall be evidenced by an agreementprepared, executed, recorded and certified by the president of the association of each of the preexisting common interest communities following approval by owners of units to which are allocated the percentage of votes in each common interest community required to terminate that common interest community. The agreement shall not be effective until it is recorded in all municipalities in which the common interest community is located.

(c) Every merger or consolidation agreement shall provide for the reallocation of the allocated interests in the new association among the units of the resultant common interest community either:

(1) by stating the reallocations or the formulas upon which they are based; or

(2) by stating the percentage of overall allocated interests of the new common interest community which are allocated to all of the units comprising each of the preexisting common interest communities, and providing that the portion of the percentages allocated to each unit formerly comprising a part of a preexisting common interest community must be equal to the percentages of allocated interests allocated to that unit by the declaration of the preexisting common interest community.

§ 2-122. ADDITION OF UNSPECIFIED REAL ESTATE

If the right to add unspecified real estate is reserved in the declaration of a planned community, the declarant, in addition to any other development right, may amend the declaration at any time during the time specified in the declaration to add additional real estate to the planned community without describing that real estate in the original declaration; provided, the amount of real estate added to the planned community does not exceed ten percent of the real estate described in subdivision 2-105(a)(3) of this title and the number of units is not increased beyond the number stated in the original declaration.

§ 2-123. MASTER PLANNED COMMUNITIES

(a) The declaration for a common interest community may state that it is a master planned community if the declarant has reserved the development right to create at least 500 units that may be used for residential purposes, and at the time of the reservation that declarant owns or controls more than 500 acres on which the units may be built.

(b) If the requirements of subsection (a) of this section are satisfied, the declaration forthe master planned community need not state a maximum number of units and need not contain any of the information required by subdivisions 2-105(a)(3) through (14) until the declaration is amended under subsection (c) of this section.

(c) When each unit in a master planned community is conveyed to a purchaser, the declaration must contain:

(1) a sufficient legal description of the unit and all portions of the master planned community in which any other units have been conveyed to a purchaser; and

(2) all the information required by subdivisions 2-105(a)(3) through (14) with respect to that real estate.

(d) The only real estate in a master planned community which is subject to this title is units that have been declared or which are being offered for sale and any other real estate described pursuant to subsection (c) of this title. Other real estate that is or may become part of the master planned community is only subject to other law and to any other restrictions and limitations that appear as encumbrances duly recorded and indexed in the town clerk's office.

(e) If the public offering statement conspicuously identifies the fact that the community is a master planned community, the disclosure requirements contained in Article 4 apply only with respect to units that have been declared or are being offered for sale in connection with the public offering statement and to the real estate described pursuant to subsection (c) of this section.

(f) Limitations in this title on the addition of unspecified real estate (section 2-122 of this title) do not apply to a master planned community.

(g) The period of declarant control of the association for a master planned community terminates in accordance with any conditions specified in the declaration or otherwise at the time the declarant, in a recorded instrument and after giving written notice to all the unit owners, voluntarily surrenders all rights to control the activities of the association.

Article 3. Management of the Common Interest Community

§ 3-101. ORGANIZATION OF UNIT OWNERS' ASSOCIATION

A unit owners' association shall be organized before the first unit in the commoninterest community is conveyed. The membership of the association at all times shall consist only of the unit owners or, following termination of the common interest community, of the former unit owners entitled to distributions of proceeds, or their heirs, successors or assigns. The association shall be organized as a profit or nonprofit corporation, trust, partnership or unincorporated association.

§ 3-102. POWERS OF UNIT OWNERS' ASSOCIATION

(a) Except as provided in subsection (b) of this section, and subject to the provisions of the declaration, the association has the following powers:

(1) To adopt and amend bylaws and rules and regulations.

(2) To adopt and amend budgets for revenues, expenditures and reserves and collect assessments for common expenses from unit owners.

(3) To hire and discharge managing agents and other employees, agents and independent contractors.

(4) To initiate, defend or intervene in litigation or administrative proceedings in its name on behalf of itself or two or more unit owners on matters affecting the common interest community.

(5) To make contracts and incur liabilities.

(6) To regulate the use, maintenance, repair, replacement and modification of common elements.

(7) To make additional improvements to the common elements.

(8) To acquire, hold, encumber and convey in its name any interest to real estate or personal property, except as provided by section 3-112 of this title.

(9) To grant easements, leases, licenses and concessions through or over the common elements.

(10) To impose and receive payments, fees or charges 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 for services provided to unit owners.

(11) To impose charges for late payment of assessments and, after notice and a hearing, reasonable fines for violations of the declaration, bylaws and rules and regulationsof the association.

(12) To impose reasonable charges for the preparation and recordation of amendments to the declaration, resale certificates or statements of unpaid assessments.

(13) To provide indemnification for its officers and executive board and maintain liability insurance for its officers and directors.

(14) To assign its right to future income, including the right to receive common expense assessments, to the extent provided by the declaration.

(15) To exercise any other power conferred by the declaration or bylaws, or which is legally provided for similar entities or which is necessary and proper to govern and operate the association.

(16) To require, by regulation, 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 in the manner described in the regulation as a prerequisite to commencement of a judicial proceeding.

(b) The declaration may not impose limitations on the power of the association to deal with the declarant which are more restrictive than the limitations imposed on the power of the association to deal with other persons.

(c) Unless otherwise permitted by the declaration or this title, an association may adopt rules and regulations that affect the use of or behavior in units that may be used for residential purposes only to:

(1) prevent any use of a unit which violates the declaration;

(2) regulate any behavior in or occupancy of a unit which 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 who regularly lend money secured by first mortgages on units in common interest communities or regularly purchase those mortgages. Otherwise, the association may not regulate any use of or behavior in units.

(d) If a tenant of a unit owner violates the declaration, bylaws, or rules and regulations 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 which the unit owner as landlord could lawfully have exercised under the lease or which the association could lawfully have exercised directly against the unit owner, or both.

(e) The rights granted under subdivision (d)(3) of this title may only be exercised 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 and regulations.

§ 3-103. EXECUTIVE BOARD MEMBERS AND OFFICERS

(a) Except as otherwise provided in the declaration, bylaws or other provisions of this title, the executive board may act 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 required of an officer or director of a corporation organized under Title 11B.

(b) The executive board shall not amend the declaration, terminate the common interest community, elect members of the executive board or determine the qualifications, powers, duties or terms of office of executive board members. The members of the executive board shall serve until their successors are duly elected and qualified. The boardmay fill vacancies for the unexpired portion of any term.

(c) Within 30 days after adoption of any proposed budget for the common interest community, the executive board shall provide a summary of the budget to all the unit owners. The board shall set a date, not less than 14 or more than 30 days after the date the budget summary is sent to the unit owners, for a meeting of the unit owners to ratify the budget. The budget shall be ratified, unless a majority of all the unit owners or a larger vote specified in the declaration rejects the budget, whether or not a quorum is present. If the budget is rejected, the budget last ratified by the unit owners shall be in effect until the unit owners ratify a budget proposed by the executive board.

(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. Except as provided in subsection 2-123(g) of this title, a period of declarant control shall terminate on the earliest of the following dates:

(A) 60 days after 75 percent 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 written notice to unit owners, records an instrument voluntarily surrendering all rights to control activities of the association.

(2) A declarant may voluntarily surrender the right to appoint and remove officers and members of the executive board before termination of that period but in that event the declarant may require, for the duration of the period of declarant control, 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.

(e) At least 25 percent of the members of the executive board shall be elected by unit owners who are not declarants within 60 days after 25 percent of the created units is conveyed to owners other than a declarant. At least 33-1/3 percent of the executive boardshall be elected by unit owners who are not declarants within 60 days after 50 percent 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. The executive board shall elect its officers who shall take office upon election.

(g) Notwithstanding any provision of the declaration or bylaws, the unit owners may remove a member of the executive board, except a member appointed by a declarant, with or without cause by a two-thirds vote of all persons present and entitled to vote at a unit owners' meeting at which a quorum is present.

§ 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 otheragreement 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 which 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.

§ 3-105. TERMINATION OF CONTRACTS AND LEASES OF

DECLARANT

Except as provided in section 1-207, if entered into before the executive board elected by the unit owners pursuant to section 3-103(f) of this title takes office,

(1) any management contract, employment contract, lease of recreational or parking areas or facilities;

(2) any other contract or lease between the association and a declarant or an affiliate of a declarant; or

(3) any contract or lease that is not bona fide or was unconscionable to the unit owners at the time entered into under the circumstances then prevailing

may be terminated without penalty by the association any time after the executive board is elected with 90 days' notice to the other party. This section does not apply to a lease which 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.

§ 3-106. BYLAWS

(a) The bylaws of the association shall provide for:

(1) the number of members of the executive board and the titles of the officers of the association;

(2) election by the executive board of a president, treasurer, secretary and any other officers the bylaws specify;

(3) the qualifications, powers and duties, terms of office and manner of electing and removing executive board members and officers and filling vacancies;

(4) powers that the executive board or officers may delegate to other persons or to a managing agent;

(5) which of the officers may prepare, execute, certify and record amendments to the declaration on behalf of the association;

(6) the frequency of association meetings, which in no case shall be less than oneper year;

(7) specification of 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; and

(8) the method of amending the bylaws.

(b) Subject to the provisions of the declaration, the bylaws may provide for any other matters the association deems necessary and appropriate.

§ 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.

§ 3-108. MEETINGS

A meeting of the association shall be held at least once each year. Special meetings of the association may be called by the president, a majority of the executive board, or by unit owners having 20 percent of the votes in the association, or any lower percentagespecified in the bylaws. No later than ten nor more than 60 days before a meeting, the secretary or other officer specified in the bylaws shall notify each unit owner by hand delivery or prepaid United States mail to the mailing address of each unit or to the mailing address designated in writing by the unit owner. The notice shall state the time and place of the meeting and the agenda, including the general nature of any proposed amendment to the declaration or bylaws, budget changes, and any proposals to remove an officer or member of the executive board.

§ 3-109. QUORUMS

(a) Unless the bylaws provide otherwise, a quorum exists if persons entitled to 20 percent of the votes that may be cast for election of the executive board are present in person or by proxy at the beginning of the meeting.

(b) Unless the bylaws specify a larger percentage, a quorum exists throughout any meeting of the executive board if persons entitled to 50 percent of the votes on that board are present at the beginning of the meeting.

§ 3-110. VOTING; PROXIES

(a) If only one of multiple owners of a unit is present at an association meeting, that owner is entitled to 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 provides otherwise. There is majority agreement if any one of the owners casts the votes allocated to that unit without prompt protest by any of the other unit owners.

(b) Votes allocated to a unit may be cast pursuant to a proxy executed by a unit owner. If a unit is owned by more than one person, each owner may vote or register protest to the voting by the other owners of the unit through a proxy. A unit owner may revoke a proxy only by actual notice of revocation to the person presiding over the association meeting. A proxy is void if it is not dated or purports to be revocable without notice. A proxy terminates one year after the date executed, unless a shorter term is specified.

(c) If the declaration requires that votes on specified matters affecting the commoninterest community be cast by lessees rather than unit owners of leased units, subsections (a) and (b) of this section apply to lessees, the lessees are entitled to notice of meetings; access to records and other rights regarding those matters as if they were unit owners; and the unit owners who have leased their units to other persons may not vote on those specified matters. Unit owners shall also be notified of all meetings at which lessees are entitled to vote.

(d) No votes allocated to a unit owned by the association may be cast.

§ 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 which 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 which 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 notprecluded 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.

§ 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.

§ 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, the association shall maintain the following insurance coverage:

(1) Property insurance on the common elements and, in a planned community, also on property which will become common elements, to insure against all risks of direct physical loss commonly insured against or, in the case of a conversion building, against fire and extended coverage perils. The total amount of 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) 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 death, bodily injury or property damage arising out of or in connection with the use, ownership or maintenance of the common elements.

(b) In the case of a building which contains units having horizontal boundaries described in the declaration, 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 United States 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 subsections (a)(1) and (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 theassociation 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 which is damaged or destroyed shall be repaired or replaced promptly by the association unless:

(A) the common interest community is terminated, in which case section 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 which are not rebuilt must be distributed to the owners of those units and the owners ofthe 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.

§ 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 to the unit owners in proportion to their common expense liabilities or credited to them to reduce their future common expense assessments.

§ 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, all common expenses shall be assessed against all the units in accordance with the allocations set forth in the declaration. Any past due common expense assessment or installment shall accrue interest at a rate established by the association, not exceeding the legal rate.

(c) To the extent required by the declaration:

(1) any 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) any common expense or portion of it which does not benefit all units shall be assessed only against the units 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 any common expense is caused by the misconduct of any unit owner, the association may, after notice and hearing, assess that expense exclusively against that unit.

(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.

§ 3-116. LIEN FOR ASSESSMENTS

(a) The association has a statutory lien on a unit for any assessment levied against that unit or fines imposed against its unit owner. Unless the declaration otherwise provides, fees, charges, late charges, fines and interest charged pursuant to subdivisions 3-102(a)(10), (11), and (12) of this title are enforceable as 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 except:

(1) liens and encumbrances recorded before the recordation of the declaration; and

(2) 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. The lien is also prior to all security interests described in subdivision (2) of this subsection 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 which would have become due in the absence of acceleration during the six months immediately preceding institution of an action to enforce the lien. This subsection does not affect the priority ofmechanics' 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 Article 3 of this title.

(c) 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.

(d) 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.

(e) 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.

(f) This section does not prohibit an action to recover sums for which subsection (a) of this section creates a lien or an association from taking a deed in lieu of foreclosure.

(g) A judgment or decree in any action brought under this section shall include an award of costs and reasonable attorney fees to the prevailing party.

(h) The association, upon written request, 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.

(i) The association's lien may be foreclosed pursuant to section 4531a of Title 12 in which case the association shall notify all the lienholders of the affected unit of its action.

(j) 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.

(k) In an action by an association to collect assessments or to foreclose a lien for unpaid assessments, 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 thistitle.

§ 3-117. OTHER LIENS

(a) Except as provided in subsection (b) of this subsection, a judgment for money against the association pursuant to section 4531a of Title 12, if recorded, is not a lien on the common elements, but is a lien in favor of the judgment lienholder against 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.

§ 3-118. ASSOCIATION RECORDS

The association shall keep financial records sufficiently detailed to enable the association to comply with section 4-109 of this title. All financial and other records shall be made reasonably available for examination by any unit owner or the unit owner's authorized agents.

§ 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.

Article 4. Protection of Purchasers

§ 4-101. WAIVER

(a) This article applies to all units subject to this title, except as provided in subsection (b) of this section or as modified or waived by agreement of purchasers of units in a common interest community in which all units are restricted to nonresidential use.

(b) Neither a public offering statement nor a resale certificate need be prepared or delivered in the case of:

(1) a gratuitous disposition of a unit;

(2) a disposition pursuant to court order;

(3) a disposition by a government or governmental agency;

(4) a disposition by foreclosure or deed in lieu of foreclosure;

(5) a disposition to a dealer;

(6) a disposition that may be canceled at any time and for any reason by the purchaser without penalty;

(7) a disposition of a unit restricted to nonresidential purposes.

§ 4-102. LIABILITY FOR PUBLIC OFFERING STATEMENT

REQUIREMENTS

(a) Except as provided in subsection (b) of this section, a declarant shall prepare a public offering statement conforming to the requirements of sections 4-103, 4-104, 4-105 and 4-106 of this title before offering any interest in a unit to the public.

(b) A declarant may transfer responsibility for preparation of all or a part of the publicoffering statement to a successor declarant or to a dealer who intends to offer units in the common interest community. In the event of any such transfer, the transferor shall provide the transferee with any information necessary to enable the transferee to fulfill the requirements of subsection (a) of this section.

(c) Any declarant or dealer who offers a unit to a purchaser shall deliver a public offering statement in the manner prescribed in subsection 4-108(a) of this title. The person who prepared all or a part of the public offering statement is liable under section 4-117 of this title for any false or misleading statement stated in it or for any omission of material fact from it with respect to that portion of the public offering statement which the person prepared. If a declarant did not prepare or cause to be prepared any part of a public offering statement that the declarant delivers, the declarant is not liable for any false or misleading statement stated in it or for any omission of material fact from it unless the declarant had actual knowledge of the statement or omission or, in the exercise of reasonable care, should have known of the statement or omission.

(d) If a unit is part of a common interest community and is part of any other real estate regime in connection with the sale of which the delivery of a public offering statement is required under the laws of this state, a single public offering statement conforming to the requirements of sections 4-103, 4-104, 4-105 and 4-106 of this title, as they relate to each regime in which the unit is located, and to any other requirements imposed by law may be prepared and delivered in lieu of providing two or more public offering statements.

§ 4-103. PUBLIC OFFERING STATEMENT; GENERAL PROVISIONS

(a) Except as provided in subsection (b) of this section, a public offering statement shall contain or fully and accurately disclose all the following:

(1) The name and principal address of the declarant and of the common interest community, and a statement that the common interest community is either a condominium or planned community.

(2) A general description of the common interest community, including to the extent known, the types, number, and declarant's schedule of commencement and completion of construction of buildings, and amenities that the declarant anticipatesincluding in the common interest community.

(3) The number of units in the common interest community.

(4) Copies and a brief narrative description of the significant features of the declaration, other than any plats and plans, and any other recorded covenants, conditions, restrictions and reservations affecting the common interest community; the bylaws and any rules or regulations of the association; copies of any contracts and leases to be signed by purchasers at closing; and a brief narrative description of any contracts or leases that will or may be subject to cancellation by the association or managing entity under section 3-105 of this title.

(5) Any current balance sheet and a projected budget for the association, either within or as an exhibit to the public offering statement, for one year after the date of the first conveyance to a purchaser, and thereafter the current budget of the association, a statement of who prepared the budget, and a statement of the budget's assumptions concerning occupancy and inflation factors. The budget shall include all of the following:

(A) A statement of the amount, or a statement that there is no amount, included in the budget as a reserve for repairs and replacement.

(B) A statement of any other reserves.

(C) The projected common expense assessment by category of expenditures for the association.

(D) The projected monthly common expense assessment for each type of unit.

(6) Any services not reflected in the budget that the declarant provides, or expenses that the declarant pays, and that the declarant expects may become a common expense of the association and the projected common expense assessment attributable to each of those services or expenses for the association and for each type of unit.

(7) Any initial or special fee due from the purchaser at closing and a description of the purpose and method of calculating the fee.

(8) A description of any liens, defects or encumbrances on or affecting the title to the common interest community.

(9) A description of any financing offered or arranged by the declarant.

(10) The terms and significant limitations of any warranties provided by the declarant, including statutory warranties and limitations on the enforcement thereof or on damages.

(11) A statement of any unsatisfied judgments or pending suits against the association and the status of any pending suits material to the common interest community of which a declarant has actual knowledge.

(12) Any restraints on alienation of any portion of the common interest community and any restrictions:

(A) on use, occupancy, and alienation of the units, and

(B) on the amount for which a unit may be sold or on the amount that may be received by a unit owner on sale, condemnation, or casualty loss to the unit or to the common interest community, or on termination of the common interest community.

(13) A description of the insurance coverage provided for the benefit of unit owners.

(14) Any current or expected fees or charges to be paid by unit owners for the use of the common elements and other facilities related to the common interest community.

(15) The extent to which financial arrangements have been provided for completion of all improvements which the declarant is obligated to build pursuant to section 4-119 of this title.

(16) A brief narrative description of any zoning and other land use requirements affecting the common interest community.

(17) All unusual and material circumstances, features, and characteristics of the common interest community and the units.

(b) If a common interest community composed of not more than four units is not subject to any development rights and no power is reserved to a declarant to make the common interest community part of a larger common interest community, group of common interest communities or other real estate, a public offering statement need not include the information otherwise required by subdivisions (4), (9), (10), (15), (16) and (17) of subsection (a) of this section.

(c) A declarant shall promptly amend the public offering statement to report any material change in the information required by this section.

§ 4-104. COMMON INTEREST COMMUNITIES SUBJECT TO

DEVELOPMENT RIGHTS

If the declaration provides that a common interest community is subject to any development rights, the public offering statement shall disclose, in addition to the information required by section 4-103 of this title:

(1) the maximum number of units, and the maximum number of units per acre, that may be created;

(2) how many or what percentage of the units that may be created will be restricted exclusively to residential use, or a statement that no representations are made regarding use restrictions;

(3) if any of the units that may be built within real estate subject to development rights are not to be restricted exclusively to residential use, a statement, with respect to each portion of that real estate, of the maximum percentage of the real estate areas and the maximum percentage of the floor areas of all units that may be created therein, that are not restricted exclusively to residential use;

(4) a brief narrative description of any development rights reserved by a declarant and of any conditions or limitations upon the exercise of development rights;

(5) the maximum extent to which each unit's allocated interest may be changed by the exercise of any development right described in subdivision (3) of this section;

(6) the extent to which any buildings or other improvements that may be erected pursuant to any development right in any part of the common interest community will be compatible with existing buildings and improvements in the common interest community in terms of architectural style, quality of construction and size, or a statement that no assurances are made regarding compatibility;

(7) description of all other improvements that may be made and limited common elements that may be created within any part of the common interest community pursuant to any development right reserved by the declarant, or a statement that no assurances aremade in that regard;

(8) limitations on the location of any building or other improvement that may be made within any part of the common interest community pursuant to any development right reserved by the declarant, or a statement that no assurances are made in that regard;

(9) a statement that any limited common elements created pursuant to any development right reserved by the declarant will be of the same general types and sizes as the limited common elements within other parts of the common interest community, or a statement of the types and sizes planned, or a statement that no assurances are made in that regard;

(10) a statement that the proportion of limited common elements to units created pursuant to any development right reserved by the declarant will be approximately equal to the proportion existing within other parts of the common interest community, or a statement of any other assurances in that regard, or a statement that no assurances are made in that regard; and

(11) the extent to which any assurances made pursuant to this section apply or do not apply in the event that any development right is not exercised by the declarant.

§ 4-105. TIME SHARES

If the declaration provides that ownership or occupancy of any unit is or may be in time shares, the public offering statement shall disclose in addition to the information required by section 4-103 of this title:

(1) the number and identity of units in which time shares may be created;

(2) the total number of time shares that may be created;

(3) the minimum duration of any time share that may be created; and

(4) the extent to which the creation of time shares may affect the enforceability of the association's lien for assessments provided in section 3-116 of this title.

§ 4-106. CONVERSION BUILDINGS

(a) The public offering statement of a common interest community containing any conversion building which may be occupied for residential use shall contain, in addition to the information required by section 4-103 of this title:

(1) a statement by the declarant, based on a report by an independent architect or engineer, describing the present condition of all structural components and mechanical and electrical installations material to the use and enjoyment of the building;

(2) a statement by the declarant of the expected useful life of each item reported in subdivision (1) of this section, or a statement that no representations are made in that regard; and

(3) a list of any outstanding notices of uncured violation of the building code or other municipal regulations and the cost of curing those violations.

(b) This section applies to any buildings containing units that may be occupied for residential use.

§ 4-107. COMMON INTEREST COMMUNITY SECURITIES

If an interest in a common interest community is currently registered with the Securities and Exchange Commission of the United States, a declarant satisfies all requirements relating to the preparation of a public offering statement under this title if the declarant delivers to the purchaser a copy of the public offering statement filed with the Securities and Exchange Commission. An interest in a common interest community is not a security under the provisions of chapter 131 of Title 9.

§ 4-108. RESERVED

§ 4-109. RESALES OF UNITS

(a) Except in the case of a sale where delivery of a public offering statement is required or is exempt under subsection 4-101(b) of this title, a unit owner shall furnish to a purchaser before the conveyance or transfer of the right of possession of a unit, whichever is earlier, a copy of the declaration, without any plats and plans, the bylaws, the rules or regulations of the association and a certificate which discloses the following:

(1) The effect on the proposed disposition of any right of first refusal or other restraint on the free alienability of the unit held by the association.

(2) The amount of the periodic common expense assessment and any unpaid common expense or special assessment currently due and payable from or by the seller.

(3) Any other fees payable by the owner of the unit being sold.

(4) The amount of any reserves for capital expenditures and of any portions of those reserves designated by the association for any specified projects.

(5) The most recent regularly prepared balance sheet and income and expense statement, if any, of the association.

(6) The current operating budget of the association.

(7) Any unsatisfied judgments against the association and the status of any pending suits in which the association is a defendant.

(8) The amount of any insurance coverage provided for the benefit of unit owners.

(9) Any alterations or improvements to the unit, or to the limited common elements assigned to it which violate any provision of the declaration within the knowledge of the executive board.

(10) Any violations of the health or building codes with respect to the unit, the limited common elements assigned to it, or any other portion of the common interest community within the knowledge of the executive board or managing entity.

(11) The remaining term of any leasehold estate affecting the common interest community and the provisions governing any extension or renewal of it.

(12) Any restrictions in the declaration affecting the amount that may be received by a unit owner upon sale, condemnation, casualty loss to the unit or the common interest community, or termination of the common interest community.

(b) The association, within ten days after a request by a unit owner, shall furnish to the unit owner a certificate containing the information necessary to enable the unit owner to comply with this section. A unit owner providing a certificate pursuant to subsection (a) of this section is not liable to the purchaser for any erroneous information provided by the association and included in the certificate.

(c) A purchaser is not liable for any unpaid assessment or fee greater than the amount set forth in the certificate prepared by the association. A unit owner is not liable to a purchaser for the failure or delay of the association to provide the certificate in a timely manner, but the purchase contract is voidable by the purchaser until the certificate has been provided and for five days thereafter.

§ 4-110. ESCROW OF DEPOSITS

Any deposit made in connection with the purchase or reservation of a unit from a person required to deliver a public offering statement pursuant to subsection 4-102(c) of this title shall be placed in escrow and held either in this state or in the state where the unit is located in an account designated solely for that purpose by a licensed real estate broker, an attorney licensed in that state or a banking institution the accounts of which are insured by an agency or instrumentality of the government until the deposit is

(1) delivered to the declarant at closing;

(2) delivered to the declarant after the purchaser's default under a contract to purchase; or

(3) refunded to the purchaser.

§ 4-111. RELEASE OF LIENS

(a) In the case of a sale of a unit where delivery of a public offering statement is required pursuant to subsection 4-102(c) of this title, before conveying a unit, a seller shall:

(1) record or furnish to the purchaser releases of all liens, except liens on real estate that a declarant has the right to withdraw from the common interest community, which the purchaser does not expressly agree to take subject to or assume and which encumber:

(A) in a condominium, that unit and its common element interest; and

(B) in a planned community, that unit and any limited common elements assigned to it; or

(2) provide a surety bond or substitute collateral for or insurance against the lien.

(b) Before conveying real estate to the association, the declarant shall have that real estate released from:

(1) all liens the foreclosure of which would deprive unit owners of any right of access to or easement of support of their units; and

(2) all other liens on that real estate unless the public offering statement describes certain real estate which may be conveyed subject to liens in specified amounts.

§ 4-112. RESERVED

§ 4-113. EXPRESS WARRANTIES OF QUALITY

(a) Express warranties made by a seller to a purchaser of a unit are created as follows:

(1) Any affirmation of fact or promise which relates to the unit, its use or rights appurtenant to it, area improvements to the common interest community that would directly benefit the unit, or the right to use or have the benefit of facilities not located in the common interest community warranties conformity of the unit and related rights and uses.

(2) Any model or description of the physical characteristics of the common interest community, including plans and specifications for improvement warranties conformance of the common interest community to the model or description.

(3) Any description of the quantity or extent of the real estate comprising the common interest community, including plats or surveys warranties conformity of the common interest community to the description, subject to customary tolerances.

(4) A provision that a purchaser may put a unit only to a specified use warranties the legality of the specified use.

(b) Neither formal words, such as "warranty" or "guarantee," nor a specific intention to make a warranty is necessary to create an express warranty of quality, but a statement purporting to be merely an opinion or commendation of the real estate or its value does not create a warranty.

(c) A conveyance of a unit transfers to the purchaser all express warranties of quality made by previous sellers.

§ 4-114. IMPLIED WARRANTIES OF QUALITY

(a) A declarant and any dealer warrant that a unit will be in at least as good condition at the time of the conveyance or delivery of possession, whichever is earlier, as it was at the time of contracting, reasonable wear and tear excepted.

(b) A declarant and any dealer impliedly warrant that a unit and the common elements in the common interest community are suitable for the ordinary uses of real estate of its type and that any improvements made or contracted for by him or her, or made by anyperson before the creation of the common interest community, will be:

(1) free from defective materials; and

(2) constructed in accordance with applicable law, according to sound engineering and construction standards, and in a workerlike manner.

(c) In addition, a declarant and any dealer warrant to a purchaser of a unit that may be used for residential use that an existing use, continuation of which is contemplated by the parties, does not violate applicable law at the time of conveyance or delivery of possession, whichever is earlier.

(d) Warranties imposed by this section may be excluded or modified as specified in section 4-113 of this title.

(e) For purposes of this section, improvements made or contracted for by an affiliate of a declarant are made or contracted for by the declarant.

(f) A conveyance of a unit transfers to the purchaser all the declarant's implied warranties of quality.

§ 4-115. EXCLUSION OR MODIFICATION OF IMPLIED WARRANTIES

OF QUALITY

(a) Except as limited by subsection (b) of this section, with respect to a purchaser of a unit that may be used for residential use, implied warranties of quality:

(1) may be excluded or modified by agreement of the parties; and

(2) are excluded by express disclaimer, such as "as is," "with all faults," or other language that implies the exclusion of warranties.

(b) With respect to a purchaser of a unit that may be occupied for residential use, no general disclaimer of implied warranties of quality is effective, but a declarant and any dealer may disclaim liability in an instrument signed by the purchaser for a specified defect or specified failure to comply with applicable law, if the defect or failure was a part of the basis of the bargain.

§ 4-116. STATUTE OF LIMITATIONS FOR WARRANTIES

(a) Unless a period of limitation is tolled under section 3-111 of this title or affected by subsection (d) of this section, a judicial proceeding for breach of any obligation arisingunder section 4-113 or 4-114 of this title shall be commenced within six years after the cause of action accrues, but the parties may agree to reduce the period of limitation to not less than two years. An agreement to reduce the six-year period shall be evidenced by a separate instrument executed by the purchaser.

(b) Subject to subsection (c) of this section, a cause of action for breach of warranty of quality, regardless of the purchaser's lack of knowledge of the breach, accrues:

(1) as to a unit, at the time the purchaser to whom the warranty is first made enters into possession if a possessory interest was conveyed or at the time of acceptance of the instrument of conveyance if a nonpossessory interest was conveyed; and

(2) as to each common element, at the time the common element is completed or, if later, as to

(A) a common element that may be added to the common interest community or portion of it, at the time the first unit is conveyed to a bona fide purchaser, or

(B) a common element within any other portion of the common interest community, at the time the first unit is conveyed to a bona fide purchaser.

(c) If a warranty of quality explicitly extends to future performance or duration of any improvement or component of the common interest community, the cause of action accrues at the time the breach is discovered or at the end of the period for which the warranty explicitly extends, whichever is earlier.

(d) During the period of declarant control, the association may authorize an independent committee of the executive board to evaluate and enforce by any lawful means warranty claims involving the common elements, and to compromise those claims. Only members of the executive board elected by unit owners other than the declarant and other persons appointed by those independent members may serve on the committee, and the committee's decision must be free of any control by the declarant or any member of the executive board or officer appointed by the declarant. All costs reasonably incurred by the committee, including attorney's fees, are common expenses, and must be added to the budget annually adopted by the association under section 3-115 of this title. If the committee is so created, the period of limitation for claims for these warranties begins torun from the date of the first meeting of the committee, regardless of when the period of declarant control terminates.

§ 4-117. EFFECT OF VIOLATIONS ON RIGHTS OF ACTION

(a) If a declarant or any other person subject to this title fails to comply with any provision of this title or any provision of the declaration or bylaws, any person or class of persons adversely affected by the failure to comply has a claim for appropriate relief. The court, in an appropriate case, may award reasonable attorney fees.

(b) Parties to a dispute arising under this title, the declaration, or the bylaws may agree to resolve the dispute by any form of binding or nonbinding alternative dispute resolution, but:

(1) a declarant may agree with the association to do so only after the period of declarant control passes unless the agreement is made with an independent committee of the executive board elected pursuant to subsection 4-116(d) of this title; and

(2) an agreement to submit to any form of binding alternative dispute resolution must be in a writing signed by the parties.

§ 4-118. LABELING OF PROMOTIONAL MATERIAL

No promotional material may be displayed or delivered to prospective purchasers which describes an improvement which is not in existence unless the description of the improvement in the promotional material is conspicuously labeled or identified either as "must be built" or as "need not be built."

§ 4-119. DECLARANT'S OBLIGATION TO COMPLETE AND RESTORE

(a) Unless an improvement is labeled "need not be built," the declarant shall complete all improvements depicted on any site plan or other graphic representation, if the site plan or other graphic representation is contained in the public offering statement or in any promotional material distributed by or for the declarant.

(b) The declarant is subject to liability for the prompt repair and restoration, to a condition compatible with the remainder of the common interest community, of any portion of the common interest community affected by the exercise of rights reserved pursuant to or created by sections 2-110, 2-111, 2-112, 2-113, 2-115 or 2-116 of this title.

§ 4-120. SUBSTANTIAL COMPLETION OF UNITS

If delivery of a public offering statement is required for the sale of a unit, a contract of sale may be executed, but interest in that unit shall be conveyed only after the declaration is recorded and the unit is substantially completed, as evidenced by a recorded certificateof substantial completion executed by an independent architect, professional surveyor or engineer, or by issuance of a certificate of occupancy.

Sec. 4. 9 V.S.A. § 4202a(14) is amended to read:

(14) "Security" includes any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to a foreign currency, or, in general, any interest or instrument commonly known as a "security," or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase any of the foregoing. "Security" shall not include land situated out of the state or any interest in a unit as defined in chapter 19 of Title 27.

Sec. 5. STATUTORY REVISION

The statutory revision commission is directed to codify this act into Title 27A in conformance with the existing Vermont Statutes Annotated format. Such codification shall include the "official comments" of the Uniform Common Interest Ownership Act as set forth in the official text of the National Conference of Commissioners on Uniform Laws, provided that such comments shall, in addition, include appropriate references to any Vermont variations to the official text.

Sec. 6. EFFECTIVE DATE

This act shall take effect on January 1, 1999.

Approved: April 21, 1998