SENATE BILL 624

49th legislature - STATE OF NEW MEXICO - first session, 2009

INTRODUCED BY

Stephen H. Fischmann

AN ACT

RELATING TO REAL PROPERTY; ESTABLISHING A STATUTORY FRAMEWORK FOR PARTICIPATION BY A UNIT OWNER IN A RESIDENTIAL CONDOMINIUM, COOPERATIVE OR OTHER PLANNED COMMUNITY IN DECISIONS AFFECTING THE UNIT OWNER'S INVESTMENT; REQUIRING DISCLOSURE OF AN ASSOCIATION'S FINANCIAL RECORDS TO UNIT OWNERS IN THE ASSOCIATION; REQUIRING AN AUDIT OF FINANCIAL RECORDS OF A RESIDENTIAL CONDOMINIUM, COOPERATIVE OR OTHER PLANNED COMMUNITY.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     Section 1. SHORT TITLE.--This act may be cited as the "Homeowner Participation Act".

     Section 2. DEFINITIONS.--As used in the Homeowner Participation Act:

          A. "association" mean a homeowners' association or group of participants in a community that makes decisions regarding maintenance, management or expansion of common areas;

          B. "community" means a residential or mixed-use condominium, cooperative or other planned community in which individual units are sold to at least one owner who is not the developer and in which unit owners share an interest in common lands or facilities;

          C. "completed unit" means a unit that is ready to be occupied;

          D. "covenant" means the agreement among unit holders and the developer restricting the uses, sizes, design and character of their common holdings;

          E. "developer" means a person who holds the construction or zoning permit for the community and who has invested in the materials and labor to create the community; and

          F. "unit owner" means the owner, or the owner's designee identified in a notarized writing by the unit owner, of a house, apartment, condominium, lot or other single segment in a community.

     Section 3. ESTABLISHMENT OF AN ASSOCIATION.--As soon as one of the units in a community has sold, a developer shall establish an association and shall:

          A. organize the association as a nonprofit organization, subject to Section 501(c)(3) or Section 501(c)(4) of the federal Internal Revenue Code of 1986, as a for-profit organization or limited liability company in accordance with the laws of this state;

          B. convene the first meeting of the association when one-fourth of the total number of units in the community have sold; and

          C. preside over the association as long as the developer retains a majority of the votes in the association.

     Section 4. MEMBERSHIP IN THE ASSOCIATION--ORGANIZATION--PARTICIPATION--DUTIES.--The association shall:

          A. elect officers annually from among unit holders, who shall receive one vote for each completed unit that the unit holder owns. A developer shall receive one vote for each completed unit the developer owns and one-half of one vote for each vacant community lot the developer owns until termination of the developer's role as provided in Section 9 of the Homeowner Participation Act;

          B. vote on matters that affect the financial status or the character of the community, acting upon majority vote;

          C. establish, collect and disburse dues collected by unit owners for maintenance and improvement of the community;

          D. produce a statement allocating financial interests and expenses of each unit in a community, apportioning interests according to a formula that shall be available to the unit owner and that may be overturned upon majority vote of the entirety of the association membership; and

          E. submit its financial and other records for audit by an independent accountant annually and make these audits available to a unit owner upon request.

     Section 5. DISCLOSURE REQUIRED.--

          A. An association shall respond within ten days to a request by a unit owner for information, including the association's and the developer's:

                (1) fiscal year;

                (2) operating budget for the current fiscal year; 

                (3) current assessments by unit type, including both regular and special assessments;

                (4) annual financial statements, including amounts held in reserve;

                (5) most recent available financial audit and insurance policies, including information on company names, policy limits, deductibles, additional named insureds and expiration dates; and

                (6) the association's bylaws and rules.

          B. In addition to the information provided pursuant to Subsection A of this section, an association shall release an annual financial audit completed no later than one hundred eighty days after the end of the association's fiscal year upon request.

          C. A purchaser of a unit in a community shall receive at closing a statement from the association containing:

                (1) the name and address of the association's primary contact person;

                (2) a copy of the bylaws of the association;

                (3) a statement of the amount of the common regular assessment in the community and the unpaid common regular assessment, special assessment or other assessment, fee or charge currently due and payable from a selling unit owner;

                (4) a statement as to whether a portion of the unit is covered by insurance maintained by the association;

                (5) the total balance of the association's cash reserves;

                (6) a statement as to whether records of the association indicate an alteration or improvement to the unit being sold that violates the covenant of the association; and 

                (7) a statement of pending litigation resulting from actions of the owner, developer or association.

     Section 6. DECLARATION REQUIRED.--A purchaser of a unit in a community shall be presented at closing, sign and return to the association within fourteen calendar days a declaration stating:

     "By signing this statement, I acknowledge that I have read and understand the association's contract with me. I also understand that as a matter of New Mexico law, if I fail to pay my association assessments, the association may foreclose on my property.".

     Section 7. AUDIT REQUIREMENT.--An association shall subject its books and records to audit using generally accepted auditing standards at least annually and shall make the audit available upon request to an interested purchaser of a unit.

     Section 8. COST OF VIOLATING A COVENANT.--A party aggrieved by an alleged violation of the covenant may sue for actual and punitive damages in the county in which the developer maintains an office or the district court of any county in which a hearing on the matter was conducted. An appellant whose appeal was dismissed without prejudice shall have fifteen days after receiving service of the notice of dismissal to file a notice of appeal in the district court in which the first appeal was properly filed. A party may appeal the district court's decision to an appellate court, which may exercise its discretion whether to grant review. A party may seek further review by filing a petition for writ of certiorari with the supreme court.

     Section 9. TERMINATION OF DEVELOPER'S ROLE.--A developer shall no longer participate in the affairs of the association sixty days after three-fourths of the units in a community are completed and purchased by unit owners and shall turn over to the association all records, contracts and pending contracts that affect the community.

     Section 10. APPLICABILITY.--The provisions of the Homeowner Participation Act shall apply to a person who develops a community and persons who purchase units in a community on or after July 1, 2010 and shall turn over to the association records. Contracts and pending contracts that affect the development.

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