HB243: Transfer of Common Property

Tuesday, June 27, 2017 | posted by Mindy Knudsen 1:47 PM

Article by Bruce Jenkins, LAC Chair of Legislative Analysis and attorney at Jenkins Bagley PLLC.

For decades the Utah Land Use Development and Management Act, Utah Code 10-9a-606 and 17-27a-606 (“LUDMA”), has been inconsistent with the common practice of non-condominium associations owning the common area.  Until the passage of HB243, LUDMA ostensibly prevented a non-condominium homeowner association (a planned development) from owning the common area.  Moreover, LUDMA has been at odds with the Uniform Common Interest Ownership Act (“UCIOA”) on this point.  Fortunately, with the assistance and cooperation of Curt Webb of the House of Representative and Jodi Hoffman, attorney for the Utah League of Cities and Towns, LAC was finally able to fix the problems with LUDMA and bring Utah Law in line with the common practice of having non-condominium homeowner associations own the common property within the association.

The prior problem with LUDMA stemmed from the following requirements:

Utah Code 10-9a-606/17-271-606:  (1) (a) A parcel designated as a common or community area on a plat recorded . . . may not be separately owned or conveyed independent of the other lots, units, or parcels created by the plat map unless: (1) the parcel is being acquired by a municipality or governmental purpose and (2) the conveyance is approved by the owners of at least 75% of the lots, units, or parcels on the plat, after the municipality gives approval.  (Emphasis added).

Few declarations (CC&Rs) for non-condominium homeowner associations provide for the common property of the association to be owned as a part of the title of the individual lots in joint tenancy.  Rather, the declarations provide that the common area is to be owned by the association.  The owners then have rights to the common area as members of the homeowner association.  This is consistent with UCIOA which, in the committee notes, makes it clear that in planned communities it is the association, not the lot owners, that own the common area. (UCIOA committee note: the definition of “condominium” “[in UCIOA] makes clear that, unless the real estate title to the common elements is vested in the owners of the units, the project is not a condominium. Thus, for example, if the title to a common element is in an association in which each unit owner is a member, a project is not a condominium, but a planned community.”) LUDMA was directly contrary to this and required that, even in planned communities, the common elements are to be owned by the unit members.

The problems with LUDMA were real and not just theoretical. A few years ago the author of this article had a county recorder, citing LUDMA, attempt to reject an amendment to a planned community’s plat map until the association obtained from the original developer a rescission of the deed that conveyed the common areas to the association. Fortunately, the recorder relented and did not require the rescission deed before allowing the plat to be amended.

LUDMA also contained the additional problem of requiring that any transfer of common area must only be to a municipality.  If, for example, a condominium or non-condominium homeowner association wanted to sell a parcel of common area which was “landlocked” and not accessible to all unit owners, the association could not convey that common area to a third-party or to a unit owner who might be able to benefit from the property. Instead, the common area could only be transferred to the local municipality. This problem has now been resolved with the amendments to LUDMA. Under HB 243 an association can now convey a parcel of common area to a third-party or a member of the association upon: (i) the affirmative vote of 67% of the voting interest of the association, (ii) the approval of the local governmental authority, and, (iii) during the period of declarant control, the declarant.

It is fortunate that Utah now treats the ownership of common area by a non-condominium association in a way that is consistent with UCIOA, common practice, and the rest of the country.

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