SENATE BILL 183

50th legislature - STATE OF NEW MEXICO - first session, 2011

INTRODUCED BY

Cisco McSorley

FOR THE COURTS, CORRECTIONS AND JUSTICE COMMITTEE

AN ACT

RELATING TO REAL PROPERTY; AMENDING THE CONDOMINIUM ACT; INCREASING THE DEGREE OF CARE REQUIRED OF APPOINTED CONDOMINIUM BOARD MEMBERS; DECREASING THE AMOUNT OF TIME A DECLARANT MAY CONTROL A CONDOMINIUM ASSOCIATION; REQUIRING NOTICE AND OPEN MEETINGS; PROVIDING FOR DISCLOSURE OF RECORDS; ALLOWING AUDITS; PROVIDING FOR ALTERNATIVE DISPUTE RESOLUTION AND ATTORNEY FEES; REQUIRING EARLIER DISCLOSURE OF CONDOMINIUM INFORMATION TO PURCHASERS.

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

     SECTION 1. Section 47-7C-3 NMSA 1978 (being Laws 1982, Chapter 27, Section 36) is amended to read:

     "47-7C-3. EXECUTIVE BOARD MEMBERS AND OFFICERS--DUTIES--REMOVAL--BUDGET--DECLARANT CONTROL.--

          A. Except as provided in the declaration, the bylaws or other provisions of the Condominium Act, the executive board may act in all instances on behalf of the association. In the performance of their duties, the officers and members of the executive board [are required to] shall exercise, if appointed by the declarant, the degree of care and loyalty required of [fiduciaries] a trustee of the unit owners and, if elected by the unit owners, ordinary and reasonable care.

          B. The executive board shall not act on behalf of the association to amend the declaration, to terminate the condominium or to elect members of the executive board or determine the qualifications, powers and duties or terms of office of executive board members, but the executive board shall fill vacancies in its membership for the unexpired portion of any term.

          C. Within thirty days after adoption of any proposed budget for the condominium, the executive board shall provide a summary of the budget to all the unit owners and shall set a date for a meeting of the unit owners to consider ratification of the budget not less than fourteen nor more than thirty days after mailing of the summary. Unless at that meeting a majority of all the unit owners or any larger vote specified in the declaration reject the budget, the budget is ratified, whether or not a quorum is present. In the event the proposed budget is rejected, the periodic budget last ratified by the unit owners shall be continued until such time as the unit owners ratify a subsequent budget proposed by the executive board.

          D. Subject to [Subsection E] the provisions of this section, the declaration may provide for a period of declarant control of the association, during which period a declarant, or persons designated by [him] the declarant, may appoint and remove the officers and members of the executive board. Regardless of the period provided in the declaration, a period of declarant control terminates no later than the earlier of:

                (1) [one hundred eighty] sixty days after conveyance of [ninety] seventy-five percent of the units [which] that may be created to unit owners other than a declarant;

                (2) two years after all declarants have ceased to offer units for sale in the ordinary course of business; [or]

                (3) [five] two years after [any] a development right to add new units was last exercised; or

                (4) the day that the declarant, after giving written notice to the unit owners, records an instrument voluntarily surrendering all rights to control activities of the association.

          E. A declarant may voluntarily surrender the right to appoint and remove officers and members of the executive board before termination of [that] the period of declarant control, but in that event, [he] 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.] F. Not later than sixty days after conveyance of [fifty] twenty-five percent of the units [which] that may be created to unit owners other than a declarant, at least one member and not less than twenty-five percent of the members of the executive board shall be [appointed by the declarant from among the] elected by unit owners. No member so [appointed] elected shall be an affiliate of the declarant if [such] persons other than the declarant are available.

          G. Not later than sixty days after conveyance of fifty percent of the units that may be created to unit owners other than the declarant, no less than thirty-three percent of the members of the board shall be elected by unit owners other than the declarant.

          [F.] H. Not later than the termination of any period of declarant control, the unit owners shall elect an executive board of at least three members, at least a majority of whom shall be unit owners. The executive board shall elect the officers. The executive board members and officers shall take office upon election.

          [G.] I. Notwithstanding any provision of the declaration or bylaws to the contrary, the unit owners, by a two-thirds' vote of all persons present and entitled to vote at [any] a meeting of the unit owners at which a quorum is present, may remove any member of the executive board with or without cause, other than a member appointed by the declarant."

     SECTION 2. A new section of the Condominium Act is enacted to read:

     "[NEW MATERIAL] EXECUTIVE BOARD MEETINGS OPEN TO MEMBERS--EXCEPTIONS.--

          A. A unit owner may attend any meeting of the executive board, except for meetings of the executive board held in executive session as described in Subsection B of this section.

          B. A meeting of the executive board may be closed for executive session only to address:

                (1) pending or contemplated litigation; or

                (2) personnel matters.

          C. The subject matter discussed in executive session shall be noted in the minutes."

     SECTION 3. Section 47-7C-8 NMSA 1978 (being Laws 1982, Chapter 27, Section 41) is amended to read:

     "47-7C-8. [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 twenty percent, or any lower percentage specified in the bylaws, of the votes in the association. Not less than ten days nor more than sixty days in advance of any meeting, the secretary or other officer specified in the bylaws shall cause notice to be hand-delivered or sent prepaid by United States mail to the mailing address of each unit or to any other mailing address designated in writing by the unit owner. The notice of any meeting shall state the time and place of the meeting and the items on the agenda, including the general nature of any proposed amendment to the declaration or bylaws, any budget changes and any proposal to remove a director or officer.] MEMBER MEETINGS--BOARD MEETINGS-- LOCATION--NOTICE--AGENDAS--SPECIAL MEETINGS--EMERGENCY MEETING--UNANIMOUS CONSENT.--

          A. An association shall hold a meeting of the unit owners annually at a time, date and place stated or fixed in accordance with the bylaws.

          B. All meetings of the association and the executive board shall be held in the state.

          C. Not less than ten days nor more than sixty days in advance of any meeting of the association, notice shall be provided to all unit owners. Notice shall be hand-delivered, sent electronically, if the unit owner has given the association an electronic address, or sent prepaid by United States mail to the mailing address of each unit owner or to any other mailing address designated in writing by a unit owner. The notice shall state the time, date, place and agenda of the meeting.

          D. The executive board shall provide notice to unit owners of all board meetings. Notice shall be given at least ten days in advance of the meeting by phone, hand-delivery, mail, electronic delivery, posting on the association's web site, newsletter, conspicuous posting or any other reasonable means as determined by the executive board. Notice to unit owners of a meeting of the executive board is not required if emergency circumstances require action by the board before notice can be given. The notice shall state the time, date, place and agenda of the meeting.

          E. The agenda for all executive board meetings, unless it is an emergency meeting called pursuant to Subsection H of this section, and any special meetings of the unit owners shall not change once notice of the meeting has been provided to unit owners. The agenda for the annual meeting of the unit owners may be modified by request of any unit owner present at the meeting.

          F. Unless the bylaws or declaration otherwise provides, the executive board may meet by telephonic, video, webcast or other conferencing process if:

                (1) the meeting notice states the conferencing process to be used and provides information explaining how unit owners may participate in the conference directly or by meeting at a central location or conference connection; and

                (2) the process provides all lot owners the opportunity to hear the discussion so as to comply with Section 2 of this 2011 act.

          G. Special meetings of the executive board or association may be called by the president, by a majority of the board or by members having at least twenty percent, or a lower percentage specified by the articles or bylaws, of votes in the association. The notice of a special meeting shall meet all requirements set forth in Subsection B of this section and shall also state the purpose for which the meeting is called, including the general nature of any proposed amendment to the community documents, any changes in assessments that require approval of the members and any proposal to remove a director or an officer.

          H. An emergency meeting of the executive board may be called by the president of the association's board, or by any two members of the executive board other than the president, if there are circumstances that could not have been reasonably foreseen that require immediate attention and possible action by the executive board and that of necessity make it impracticable to provide notice as required by this section.

          I. Instead of meeting, the executive board may act by unanimous consent as documented in a record authenticated by all of the executive board members. The executive board secretary shall promptly give notice to all unit owners of any action taken by unanimous consent. After termination of the period of declarant control, the executive board may act by unanimous consent only to undertake ministerial actions or to implement actions previously taken at a meeting of the executive board."

     SECTION 4. A new section of the Condominium Act is enacted to read:

     "[NEW MATERIAL] RECORD DISCLOSURE TO MEMBERS--UPDATED INFORMATION.--

          A. All financial and other records of the association shall be made available for examination by a unit owner at any reasonable time.

          B. The association shall not charge a fee for making the financial and other records available for review. The association may charge a reasonable fee for copies.

          C. As used in this section, "financial and other records" includes:

                (1) the declaration;

                (2) the name, address and telephone number of the association's designated agent;

                (3) the association bylaws;

                (4) the names and addresses of all association members;

                (5) minutes of all meetings of the association's unit owners and board, other than executive sessions; a record of all actions taken by the unit owners or board without a meeting; and a record of all actions taken by a committee in place of the board on behalf of the association;

                (6) the operating budget for the current fiscal year;

                (7) current assessments, including both regular and special assessments;

                (8) financial statements and accounts, including amounts held in reserve;

                (9) the most recent financial audit or review, if any;

                (10) all contracts entered into by the association or the board on behalf of the association;

                (11) insurance policies, including company names, policy limits, deductibles, additional named insureds and expiration dates for property, general liability, association director and officer professional liability and fidelity policies; and

                (12) other financial information of the association."

     SECTION 5. A new section of the Condominium Act is enacted to read:

     "[NEW MATERIAL] FINANCIAL AUDIT.--The association, upon a majority vote of all the unit owners, may request that the executive board provide for a financial audit or review of the association's records. The audit or review shall be made available to unit owners within thirty calendar days of its completion."

     SECTION 6. A new section of the Condominium Act is enacted to read:

     "[NEW MATERIAL] ALTERNATIVE DISPUTE RESOLUTION.--

          A. Prior to the filing of a court action, a dispute between the association and a unit owner shall be submitted for alternative dispute resolution. The cost of the alternative dispute resolution services shall be divided equally between the disputing parties, unless otherwise determined.

          B. The parties shall agree upon a neutral party to preside over the alternative dispute resolution process. The form of alternative dispute resolution chosen pursuant to this section may be binding or nonbinding, with the voluntary consent of the parties.

          C. If an agreement is reached, it shall be presented to a court of competent jurisdiction as a stipulation. The court may enter the stipulation as an order of the court. Thereafter, if either party violates the stipulation, the other party may apply immediately to the court for relief.

          D. Unless otherwise agreed, either party to the alternative dispute resolution process may terminate the process at any time without prejudice.

          E. As used in this section, "alternative dispute resolution" means mediation, arbitration, conciliation or other nonjudicial procedure that involves a neutral party in the decision-making process."

     SECTION 7. A new section of the Condominium Act is enacted to read:

     "[NEW MATERIAL] ATTORNEY FEES AND COSTS.--In a civil action between a unit owner and the unit owner's association, the prevailing party may, in the discretion of the court, be awarded reasonable attorney fees and costs."

     SECTION 8. Section 47-7D-3 NMSA 1978 (being Laws 1982, Chapter 27, Section 55) is amended to read:

     "47-7D-3. DISCLOSURE STATEMENT--GENERAL PROVISIONS.--

          A. Except as provided in Subsection B of this section, a disclosure statement must contain or fully and accurately disclose:

                (1) the name and principal address of the declarant and of the condominium;

                (2) a general description of the condominium, including, to the extent possible, the types, number and declarant's schedule of commencement and completion of construction of buildings and amenities that the declarant anticipates including in the condominium;

                (3) the number of units in the condominium;

                (4) copies of the declaration, other than the plats and plans, and any other recorded covenants, conditions, restrictions and reservations affecting the condominium; 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 under Section [38 of the Condominium Act] 47-7C-5 NMSA 1978;

                (5) any current balance sheet and a projected budget for the association, either within or as an exhibit to the disclosure 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 without limitation:

                     (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; and

                     (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 [he] the declarant pays, and that [he] the declarant expects may become at [any] a subsequent time 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, together with 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 condominium;

                (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 and limitations on the enforcement thereof or on damages;

                (11) a statement that:

                     (a) within [seven] ten days after receipt of a disclosure statement a purchaser, before conveyance, may cancel any contract for purchase of a unit from a declarant;

                     (b) if a declarant fails to provide a disclosure statement to a purchaser before conveying a unit, that purchaser may rescind the purchase within six months from the date of conveyance;

                     (c) shall set forth the procedures set forth in Subsection C of Section [60 of the Condominium Act] 47-7D-8 NMSA 1978; and

                     (d) if a purchaser receives the disclosure statement more than [seven] ten days before signing a contract to purchase a unit, [he] the purchaser cannot cancel the contract;

                (12) a statement of any unsatisfied judgments or pending suits against the association and the status of any pending suits material to the condominium of which a declarant has actual knowledge;

                (13) a statement that any deposit made in connection with the purchase of a unit shall be held in an escrow account until closing and shall be returned to the purchaser if the purchaser cancels the contract pursuant to Section [60 of the Condominium Act] 47-7D-8 NMSA 1978, together with the name and address of the escrow agent;

                (14) any restraints on alienation of [any] a portion of the condominium;

                (15) a description of the insurance coverage provided for the benefit of unit owners;

                (16) 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 condominium; and

                (17) the extent to which financial arrangements have been provided for completion of all improvements labeled "MUST BE BUILT" pursuant to Section [21 of the Condominium Act] 47-7B-9 NMSA 1978.

          B. If a condominium composed of not more than twenty-five units is not subject to [any] development rights and no power is reserved to a declarant to make the condominium part of a larger condominium, group of condominiums or other real estate, a public offering statement may but need not include the information otherwise required by Paragraphs (9), (10) and (15) through (17) of Subsection A of this section.

          C. A declarant promptly shall amend the disclosure statement to report [any] a material change in the information required by this section."

     SECTION 9. Section 47-7D-8 NMSA 1978 (being Laws 1982, Chapter 27, Section 60) is amended to read:

     "47-7D-8. PURCHASER'S RIGHT TO CANCEL.--

          A. A person required to deliver a disclosure statement pursuant to Subsection C of Section [54 of the Condominium Act] 47-7D-2 NMSA 1978 shall provide a purchaser of a unit with a copy of the disclosure statement and all amendments thereto before conveyance of that unit and not later than the date of [any] a contract of sale. Unless a purchaser is given the disclosure statement more than [seven] ten days before execution of a contract for the purchase of a unit, the purchaser, before conveyance, may cancel the contract within [seven] ten days after first receiving the disclosure statement.

          B. If a purchaser elects to cancel a contract pursuant to Subsection A of this section, [he] the purchaser may do so by hand-delivering notice thereof to the [offerer] offeror or by mailing notice thereof by prepaid United States mail to the [offerer] offeror or to [his] the offeror's agent for service of process. Cancellation is without penalty, and all payments made by the purchaser before cancellation shall be refunded promptly.

          C. If a person required to deliver a disclosure statement pursuant to Subsection C of Section [54 of the Condominium Act] 47-7D-2 NMSA 1978 fails to provide a purchaser to whom a unit is conveyed with that disclosure statement and all amendments thereto as required by Subsection A of this section, the purchaser is entitled to rescind the purchase within six months from the date of conveyance upon delivery to the seller of a deed subject to no encumbrance attaching to the property suffered or caused by the purchaser."

     SECTION 10. Section 47-7D-9 NMSA 1978 (being Laws 1982, Chapter 27, Section 61) is amended to read:

     "47-7D-9. RESALES OF UNITS--RESALE CERTIFICATE REQUIRED.--

          A. [Except] Unless exempt under Subsection B of Section 47-7D-1 NMSA 1978 or in the case of a sale where delivery of a disclosure statement is required, [or unless exempt under Subsection B of Section 53 of the Condominium Act] a unit owner shall furnish to a purchaser before conveyance a copy of the declaration, other than the plats and plans; the bylaws and the rules or regulations of the association; and a resale certificate from the association containing:

                (1) a statement disclosing the existence and terms of any right of first refusal or other restraint on the free alienability of the unit;

                (2) a statement setting forth the amount of the monthly common expense assessment and any unpaid common expense or special assessment currently due and payable from the selling unit owner;

                (3) a statement of any other fees payable by unit owners;

                (4) a statement of any capital expenditures anticipated by the association for the current and two next succeeding fiscal years;

                (5) a statement of the amount of any reserves for capital expenditures and of any portions of those reserves designated by the association for any specified projects;

                (6) the most recent regularly prepared balance sheet and income and expense statement, if any, of the association;

                (7) the current operating budget of the association;

                (8) a statement of any unsatisfied judgments against the association;

                (9) a statement describing any insurance coverage provided for the benefit of unit owners; and

                (10) a statement of the remaining term of any leasehold estate affecting the condominium and the provisions governing any extension or renewal thereof.

          B. The association, within ten working days after receipt of a request by a unit owner, shall furnish 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 [seven] ten days thereafter or until conveyance, whichever first occurs."

     SECTION 11. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2011.

- 20 -