HB78 By Representative Pringle RFD State Government Rd 1 02-FEB-16

SYNOPSIS: This bill would establish the Alabama Cooperative Housing Corporation Act of 2016, to regulate cooperatives, a form of ownership of real property in which legal title is vested in a corporation or other entity, and the cooperative unit's occupants receive an exclusive right to occupy the unit.

This bill would require any cooperative housing corporation formed after January 1, 2017, to organize under the Alabama Nonprofit Corporation Act, and be subject to all the duties, requirements, obligations, rights, and privileges under the act, and would require the filing of certain cooperative documents with the Secretary of State.

This bill would require the Secretary of State to implement and maintain an electronic database, organized by cooperative name and accessible by the public through the Secretary of State's website, with the capability to search and retrieve cooperative filings.

The bill also provides requirements for the adoption of certain governing documents of the cooperative, including the master declaration, bylaws, and master list; provides for the transfer or sale of shares of the cooperative under certain conditions and allows for the exercise of a right of first refusal; and authorizes cooperative housing corporations to claim a homestead exemption on cooperative property, with the tax reduction to be apportioned among the owners on a per unit basis.

A BILL TO BE ENTITLED AN ACT

To create the Alabama Cooperative Housing Corporation Act; to add Chapter 8C to Title 35, Code of Alabama 1975, to define terms; to require certain cooperatives to organize under the Alabama Nonprofit Corporation Act; to require the filing of certain cooperative documents with the Secretary of State; to require the Secretary of State to implement and maintain a public searchable electronic database of cooperative filings; to provide for the adoption of governing documents, including requirements for master declarations, bylaws, and master lists; to provide for the transfer or sale of shares of the cooperative under certain conditions; to provide for obligations of owners toward the association; to authorize a cooperative to amend cooperative documents under certain conditions; to provide for liens; to provide for the right of first refusal under certain conditions; and to add Section 40-9-19.2 to Chapter 9 of Title 40, Code of Alabama 1975; to authorize cooperatives to claim a homestead exemption under certain conditions.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. A new Chapter 8C is added to Title 35 of the Code of Alabama 1975, to read as follows:

Chapter 8C. ALABAMA COOPERATIVE HOUSING CORPORATION ACT OF 2016.

§35-8C-1.

This chapter shall be known and may be cited as the Alabama Cooperative Housing Corporation Act of 2016.

§35-8C-2.

For the purposes of this chapter, the following terms shall have the following meanings:

(1) ASSESSMENT. A share of the funds required for the payment of common expenses, which from time to time is assessed against the unit owner.

(2) ASSOCIATION. The nonprofit corporation that is responsible for the administration of a cooperative.

(3) BUYER. A person who purchases a share or shares of a cooperative. The term may be used interchangeably with the term purchaser.

(4) BYLAWS. The governing regulations adopted under this chapter for the administration and management of the property.

(5) COMMON ELEMENTS. Includes all of the following:

a. The land described in the master deed, declaration, and other documents creating the cooperative.

b. As to any improvement, the foundations, structural and bearing parts, supports, main walls, roofs, basements, halls, corridors, lobbies, stairways, elevators, entrances, and exits and other means of access, excluding any specifically reserved or limited to a particular unit or group of units.

c. Yards, gardens, walkways, parking areas, and driveways, excluding any specifically reserved or limited to a particular unit or group of units.

d. Portions of the land or any improvement or appurtenance reserved exclusively for the management, operation, or maintenance of the common elements.

e. Installations of all central services and utilities.

f. All apparatus and installations existing or intended for common use.

g. All other elements of any improvement necessary or convenient to the existence, management, operation, maintenance, and safety of the cooperative property or normally in common use.

h. Other elements and facilities that are designated in the master deed as common elements.

(6) COMMON EXPENSES. Expenses for which the unit leases are proportionately liable, including, but not limited to, all of the following:

a. All expenses of administration, maintenance, repair, and replacement of the common elements.

b. Expenses agreed upon as common by all lessees or owners.

c. Expenses declared common by this chapter or by master deed or bylaws.

(7) COOPERATIVE HOUSING CORPORATION OR COOPERATIVE. Any system of land ownership and possession in which the fee title to the land and structure is owned by a corporation in which the shareholders or other owners each have a long term proprietary lease or other long term arrangement of exclusive possession for a specific unit of occupancy within the structure.

(8) LIMITED COMMON ELEMENTS. Those common elements which are for the use of one or more specified units to the exclusion of other units.

(9) MASTER DECLARATION. The master declaration as amended and recorded under the terms of this chapter by which the owner in fee simple or lessee of the property submits to a cooperative plan of ownership.

(10) OWNER. A person listed in the master register as a holder of a share in a cooperative.

(11) PROPRIETARY LEASE. A grant of a long term exclusive right of possession and occupancy of a designated unit to a owner or a grant of a leasehold of the cooperative structure.

(12) UNIT. A part of the cooperative structure designed or intended for occupancy and includes the proportionate undivided interest in the common elements and in any limited common elements as assigned in the provisions of the master declaration or any amendment thereof.

§35-8C-3.

(a) The principles of law and equity, including, but not limited to, the law of nonprofit corporations in Chapter 3 of Title 10A (commencing with Section 10A-3-1), the law of real estate, and the law relative to the capacity to contract, principal and agent, eminent domain, estoppel, negligence, fraud, misrepresentation, duress, coercion, mistake, receivership, substantial performance, or other validating or invalidating cause supplement this chapter, except to the extent inconsistent with this chapter.

(b) Every duty governed by this chapter imposes an obligation of good faith in its performance or enforcement.

(c) The remedies provided in this chapter shall be liberally administered so that the aggrieved party is put in as good a position as if the other party had fully performed.

§35-8C-4.

(a) On or after January 1, 2017, a cooperative housing corporation created pursuant to a master declaration shall be organized as a nonprofit corporation pursuant to Chapter 3 of Title 10A (commencing with Section 10A-3-1), and shall be governed in all respects as a nonprofit corporation.

(b)(1) A cooperative housing corporation, its members, and directors shall be subject to all of the obligations, duties, and responsibilities of and shall have all of the rights and benefits provided in Chapter 3 of Title 10A (commencing with Section 10A-3-1).

(2) In addition or supplemental to any other filing required in Chapter 3 of Title 10A (commencing with Section 10A-3-1), a cooperative housing corporation shall file the master declaration with the Secretary of State.

(3) The Secretary of State shall implement and maintain an electronic database, organized by cooperative name and accessible by the public through the Secretary of State's website, with the capability to search and retrieve the master declaration required in subdivision (2). Any documents filed with the Secretary of State shall be filed in accordance with Division 4 of Article 3, Chapter 4 of this title (commencing with Section 35-4-120), provided such documents filed with the Secretary of State pursuant to this chapter shall not be deemed to provide notice pursuant to Chapter 4 of this title (commencing with Section 35-41-1).

(c) The Secretary of State may adopt rules necessary for the implementation of this section, including reasonable fees for the filing of documents.

§35-8C-5.

(a) The master declaration of a cooperative housing corporation shall contain all of the following information:

(1) A legal description by metes and bounds and tax lot and block of the lands to be dedicated to the cooperative form of ownership.

(2) A statement dedicating the land described in the master declaration to the cooperative form of ownership.

(3) The name by which the cooperative is to be identified, which name shall include the words "Cooperative Housing Corporation," "Cooperative," or "Coop."

(4) A copy of the recorded deed that vests ownership in the person who signs the master declaration to create the cooperative.

(5) The bylaws that regulate the cooperative.

(6) The master register containing all cooperative units allocated for separate occupancy.

(7) A written description and architectural plans prepared to scale by an architect or engineer licensed in this state which detail the improvements existing or to be erected on the lands to create the cooperative and identify the locations and dimensions of the common elements, limited common elements, and each unit. The written description and architectural plans shall be signed, certified, and sealed by an engineer or architect authorized to practice his or her profession in this state. The certification shall state that the description and plans are a correct and accurate representation of the improvements described and shown on the plans.

(8) A statement of existing financing that is a lien on the building and the manner in which the financing will be paid and discharged as a lien before or after closing of units.

(9) Other provisions, including, but not limited to, restrictions or limitations upon the use, occupancy, transfer, leasing, or other disposition of any unit, if the restriction or limitation is otherwise permitted by law, and limitations upon the use of common elements.

(10) A method of amending the master declaration which requires recording of any amendment with the Secretary of State before it becomes effective.

(b) The bylaws of a cooperative housing corporation may provide for any or all of the following:

(1) The election of directors and other officials by unit or district.

(2) Voting by owners on the basis of one vote per member or one vote per unit rather than one vote per share.

(3) Action required or permitted to be taken at a meeting of owners may be taken by mail ballot.

(4) A method of proportional membership representation of owner meetings by delegates from units.

(5) Redemption or recall of stock.

(6) Termination of membership rights and privileges of owners, including the forced sale of a share or shares of the cooperative for continuing and unresolved violations, restrictions, limitations, or requirements after all other remedies provided in the bylaws have been exhausted.

(7) Standards for eligibility to become an owner.

(8) Allocation of net savings of the corporation among the permitted uses.

(9) A right of first refusal by the association.

(c) The master register shall contain all of the following information:

(1) Separate identification of each unit by distinctive letter, name, or number or combination thereof.

(2) The percentage of common ownership representing each owner's proportionate undivided interest in the common elements; the interests shall be stated as percentages aggregating 100 percent.

(3) The name and present address of each present owner and occupant of each identified unit.

§35-8C-6.

The master declaration or master register may be amended in the manner set forth in this chapter, provided that no amendment shall affect any cooperative unit unless the possessor of record thereof and the holders of record of any liens thereon join in the execution of the amendment or execute a consent thereto with the formalities of a deed.

§35-8C-7.

(a) The association, to the extent authorized by the bylaws, may do any of the following:

(1) Suspend an owner's right to use facilities, common elements, or services provided directly through the cooperative for nonpayment of assessments, to the extent that access to the owner's unit is not denied.

(2) Assess reasonable penalties against an owner for any violation of the rules adopted by the association and included in the bylaws after the owner is afforded the opportunity to be heard and represented by counsel before the association.

(b) The amount of any penalty assessed under this section shall be considered an assessment for purposes of Section 35-8C-8.

§35-8C-8.

(a) Except as may be otherwise provided in the master declaration or bylaws of the cooperative housing corporation, the cooperative has, and there is declared, a lien on every unit for unpaid assessments levied against the unit arising on and from the date the assessment is due as fixed and determined by the association at an annual meeting after giving notice as provided in Chapter 3 of Title 10A (commencing with Section 10A-3-1). The lien may be enforced or foreclosed as provided in the master declaration or bylaws or as provided in this section. Written notice of the assessment and lien shall be given to the owner of any unit on which the assessment and lien is claimed by personal delivery or first class United States mail, postage prepaid.

(b) A lien declared by this section shall have priority, except as may be otherwise provided in Chapters 4 and 11 of this title, over all other subsequent liens and encumbrances except state and county ad valorem taxes, municipal improvement assessments, UCC fixture filings, mortgages, and deeds of trust securing an indebtedness.

(c) The cooperative, within 12 months from the date any assessment becomes due, shall record a statement of lien, verified by an officer or director of the association having personal knowledge of the facts, in the office of the judge of probate of the county in which a unit subject to the assessment is located. The statement of lien shall contain all of the following:

(1) A description of the unit on which the lien is claimed.

(2) The name of the cooperative claiming the lien.

(3) The name of the owner or owners of the unit on which the lien is claimed.

(4) The amount of any unpaid assessments together with the date of the assessments.

(5) The amount of any other interests and costs claimed by the cooperative.

(d) At least 30 days prior to recording a statement of lien, the cooperative shall give written notice by certified mail to the owner of the unit or other person obligated for the lien, as shown on the books and records of the cooperative, that the statement will be recorded in the office of the judge of probate.

(e) A cooperative may bring an action in a court having jurisdiction to enforce a lien declared in this section in the county where the unit is located by filing a verified complaint, attaching a copy of the statement of the lien, alleging those facts showing it is entitled to a lien for the claimed unpaid assessment in accordance with the Alabama Rules of Civil Procedure.

§35-8C-9.

(a) The sale or transfer of a cooperative share or an assignment thereof or other like instrument is achieved by the recording of the transfer document or a short form memorandum thereof with the Secretary of State, which is executed and acknowledged in recordable form and which contains the following information:

(1) All information set forth in subsection (a) of Section 35-8C-5.

(2) The name of the cooperative housing corporation as set forth in the master declaration and master register, including the name of the political subdivision and county in which the property is located.

(3) The unit designation as set forth in the master declaration and register.

(4) A reference to the last prior transfer of the unit, if previously transferred.

(5) A statement of the proportionate undivided interest in the common elements appurtenant to the unit as set forth in the master declaration and master register or any amendments thereof.

(6) The full name and address of the transferor and transferee of the unit.

(7) An executed and acknowledged consent of the cooperative board authorizing and approving the transfer or assignment.

(8) The number of shares transferred.

(9) A statement of the full consideration paid for the cooperative unit which includes the purchase price paid plus the amount derived from application of the percentage of ownership held in conjunction with the unit to the unpaid balance of the fee or leasehold mortgage encumbering the entire structure as of the date of the transfer or assignment.

(10) All other information, consistent with this chapter, which the parties may deem appropriate.

§35-8C-10.

A cooperative housing corporation may exercise a right of first refusal to buy a unit pursuant to a right of first refusal provision included in the bylaws of the cooperative, provided that the exercise of the right of first refusal does not otherwise violate state or federal law.

§35-8C-11.

(a) Any cooperative property may be exempted from this chapter by a deed of revocation duly executed by all unit lessees or the sole owner of the property and the holders of all mortgages or other liens affecting all units and recorded in the master register.

(b) The exemption of any property from this chapter does not bar the subjection of the property to this chapter at a later date.

Section 2. Section 40-9-19.2 is added to Chapter 9 of Title 40 of the Code of Alabama 1975, to read as follows:

§40-9-19.2.

(a) A cooperative housing corporation organized under Chapter 8C of Title 35 (commencing with Section 35-8C-1) may apply for an exemption under Section 40-9-19, to be applied against the valuation of property of the corporation that is occupied by owners.

(b) The application for the homestead exemption must include a list of all owners and must be updated annually to reflect changes in the ownership and residency of qualifying shareholders.

(c) The exemption shall be equal to the amount specified in subsection (a) of Section 40-9-19, multiplied by the number of units in the cooperative property occupied by owners.

(d) A cooperative housing corporation that receives an exemption pursuant to this section shall apportion the property tax reduction resulting from the exemption among the owners on a per unit basis.

(e) Any supplemental assessment resulting from ineligibility for the homestead exemption must be applied in the same manner against the owners for whom the ineligibility applies.

Section 3. This act shall become effective on January 1, 2017, following its passage and approval by the Governor, or its otherwise becoming law.

Property, Real and Personal

Cooperatives

Business Entities

Nonprofit Corporations

Secretary of State

Homestead Exemption

Taxation

Popular Names

Code Added