SB326 By Senator Ward RFD Fiscal Responsibility and Economic Development Rd 1 15-MAR-17

SYNOPSIS: This bill would create the Alabama Homeowners' Association Act to govern homeowners' associations responsible for the maintenance of common areas of a residential development and with the authority to levy assessments that are enforceable as liens against real property.

This bill would require that any association formed after January 1, 2018, to organize under the Alabama Nonprofit Corporation Act, including all duties, requirements, obligations, rights, and privileges under the act and would require the filing of certain association documents with the Secretary of State.

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

This bill would authorize a homeowners' association to adopt and enforce reasonable rules regarding the use of the common areas.

This bill would provide that an association will have a lien on every lot for unpaid assessments levied against that lot provided that the lien is properly recorded and notice is afforded to the owner of the lot.

A BILL TO BE ENTITLED AN ACT

Relating to certain homeowners' associations; to define terms; to require certain associations to organize under the Alabama Nonprofit Corporation Act; to require the filing of certain association documents with the Secretary of State; and to require the Secretary of State to implement and maintain a public searchable electronic database of association filings; to provide for the election of a board of directors; to require the declarant to deliver certain information to the board upon election; to provide for notice of meetings to members of the association; to authorize a homeowners' association to adopt and enforce rules regarding the use of the common areas; to provide for the enforcement of rules against tenants of a member of the association; to authorize the association to assess charges for certain violations of the declaration and association rules; to provide for liens on a lot for unpaid assessments; to provide for judgments enforcing liens and releases for satisfaction of liens; to provide for dissolution of the nonprofit corporation and the liquidation of assets; and to repeal Chapter 20 of Title 35, Code of Alabama 1975.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. This act shall be known and may be cited as the Alabama Homeowners' Association Act.

Section 2. For the purposes of this act, the following terms shall have the following meanings:

(1) ASSOCIATION. A homeowners' association.

(2) BOARD OF DIRECTORS. The group of persons vested with the management of the association irrespective of the name by which the group is designated.

(3) COMMON AREA. Property within a development which is owned, leased, or required by the declaration to be maintained or operated by a homeowners' association for the use of its members and designated as common area in the declaration or on a recorded subdivision map or plat.

(4) DECLARANT. The person or entity who submits property to a declaration.

(5) DECLARATION. Any instrument, however denominated, including any amendment, modification, restatement, or supplement, recorded in the office of the judge of probate in the county in which the development or any part thereof is located which satisfies the following:

a. Imposes on the association maintenance or operational responsibilities for the common areas, and

b. Creates the authority in the association to levy an assessment on lots, the owners or occupants of the lots, or other entities to provide for maintenance or services for the benefit of some or all of the lots in the development, the owners or occupants of the lots, or the common area.

c. Is a covenant running with the land enforceable by and against successors and assigns.

(6) DEVELOPMENT. Real property subject to a declaration that contains lots for residential use and common areas in which any owner is a member of an association and the owner's lot is subject to assessments pursuant to a declaration.

(7) DIRECTOR. A duly elected or appointed member of the board of directors of an association.

(8) HOMEOWNERS' ASSOCIATION. An entity incorporated as a nonprofit corporation pursuant to Chapter 3, Title 10A, Code of Alabama 1975, and provided for in a declaration.

(9) LOT. Any parcel of land within a development designated for separate ownership and shown on a recorded subdivision map or plat, other than a common area.

(10) MEMBER. An owner or occupant of a lot in a development subject to a declaration having membership rights as defined in the declaration or other governing documents of the association.

(11) POTENTIAL PURCHASER. A person having a contractual right or option to acquire a lot or a person or entity who intends to execute a mortgage to secure an indebtedness.

Section 3. (a) This act applies to all developments subject to a declaration providing for a homeowners' association recorded in the office of the judge of probate in the county in which the development, or any part thereof, is located on or after January 1, 2018, and any association formed prior to that time, provided the association, by a majority of its members, elects to be governed by this act.

(b) This act does not apply to any of the following:

(1) A development for commercial, industrial, or other nonresidential use.

(2) Any association that is subject to regulation under Chapters 8 or 8A, Title 35, Code of Alabama 1975.

(3) A real estate cooperative, time-share development, or campground.

Section 4. (a) The principles of law and equity, including, but not limited to, the law of nonprofit corporations in Chapter 3, Title 10A, Code of Alabama 1975, 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 act, except to the extent inconsistent with this act.

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

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

Section 5. (a) On or after January 1, 2018, a homeowners' association created pursuant to a declaration shall be organized as a nonprofit corporation pursuant to Chapter 3, Title 10A, Code of Alabama 1975, and shall be governed in all respects as a nonprofit corporation.

(b)(1) A homeowners' association, 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, Code of Alabama 1975.

(2) In addition or supplemental to any other filing required in Chapter 3, Title 10A, Code of Alabama 1975, a homeowners' association shall file the following documents with the Secretary of State:

a. Articles of incorporation.

b. Bylaws, resolutions, or other governing documents of the association.

c. The original covenants, conditions, or restrictions adopted by the association.

(3) The Secretary of State shall implement and maintain an electronic database, organized by association name, accessible by the public through the Secretary of State's website which provides the capability to search and retrieve the documents listed in subdivision (2). Any documents filed with the Secretary of State shall be filed in accordance with Division 4, Article 3, Chapter 4, Title 35, Code of Alabama 1975, provided such documents filed with the Secretary of State pursuant to this act shall not be deemed to provide notice pursuant to Chapter 4, Title 35 of Code of Alabama 1975.

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

(c) The organizational documents of a homeowners' association shall provide for all of the following:

(1) Methods of efficient communications with the members of the association unless a different method is required by Chapter 3, Title 10A, Code of Alabama 1975.

(2) Rules and regulations for the conduct of any meetings of the association.

(3) The compilation, organization, and maintenance of full and complete financial records of the association available to any member at a reasonable time and place upon the payment of reasonable associated costs.

(4) Reasonable rules and regulations for the use, maintenance, repair, replacement, or modification of any common areas, if any, including penalties for violations.

(5) Power to grant easements, leases, licenses, and concessions through or over the common areas, if any.

(6) Statements regarding the payment of dues and assessments to be provided to any person having an interest, upon the payment of reasonable associated costs.

(7) Preparation and submission of the annual budgets of the association to the members.

(8) Any other act a nonprofit corporation is required to do under law.

(d) In addition to the requirements set forth in subsection (c), the organizational documents of a homeowners' association may provide for the following:

(1) Indemnification and insurance for the association, its officers, and directors.

(2) Fidelity bonds for any person or entity having custody or control of any funds of the association.

(3) Periodic audits of the financial records of the association.

(4) Power to acquire real and personal property for the benefit of the association and its members.

(5) Power to hire and discharge managing agents and other employees, agents, and independent contractors.

Section 6. A homeowners' association provided for in a declaration and subject to this act shall be formed prior to the conveyance of any lot in the development by the declarant.

Section 7. A declaration or the governing documents of a homeowners' association may provide for a period in which the declarant will maintain control of the election of directors and officers of the association and a right to reasonably alter, amend, or modify the declaration.

Section 8. If a conflict exists between the declaration and the governing documents of a homeowners' association, the declaration prevails, except to the extent that the declaration is inconsistent with this act.

Section 9. (a) Within 120 days of the date the members have the right to elect a board of directors pursuant to the declaration or other governing documents of the association to elect a board of directors, the declarant shall give written notice pursuant to Section 10A-3-2.03, Code of Alabama 1975, of a special meeting of the membership for the purpose of electing a board of directors.

(b) In addition to the notice required under Section 10A-3-2.03, Code of Alabama 1975, the notice under subsection (a) shall also satisfy the following:

(1) State that the purpose of the meeting is the election of a board of directors pursuant to the declaration and the governing documents of the association.

(2) Provide for nominations of candidates for election to the board of directors at the meeting on the written consent of at least 10 percent of the membership, unless otherwise provided in the governing documents.

(3) State the names of all existing directors and the names of the directors who may continue to serve as directors.

Section 10. Within 90 days of the selection of the board of directors of the association as provided in Section 7, the declarant, or his or her designee, shall deliver to the board of directors all of the following:

(1) All books, records, and governing documents of the association in the possession of the declarant, or any person or entity under the declarant's control.

(2) All records of any outstanding and unpaid assessments.

(3) Any contracts of the association with any third parties respecting the operation of the association or the maintenance and upkeep of any property of the association.

(4) Any insurance policies currently in force.

(5) A list of the names and addresses of the members of the association as shown on its records.

(6) Any written unexpired warranties of any contractor or subcontractors, suppliers, or manufacturers relative to the common area or any improvements to the common area.

Section 11. (a) The board of directors, to the extent authorized by the declaration and governing documents, may do the following:

(1) Suspend a member's right to use facilities or services provided directly through the association for nonpayment of assessments under subdivision (2), to the extent that access to the member's lot is not denied.

(2) Assess reasonable penalties against a member for any violation of the declaration or rules adopted by the board of directors after the member is afforded the opportunity to be heard and represented by counsel before the board of directors.

(b) If a tenant of a member violates the declaration or rules adopted by the board of directors, in addition to exercising any of its powers and rights against the member, the board of directors may do any of the following:

(1) Exercise any of the actions authorized in subdivision (1) of subsection (a) directly against a tenant of a member.

(2) Assess a penalty authorized in subdivision (2) of subsection (a) directly against a tenant after giving notice to the tenant and member and an opportunity to be heard before the board of directors.

(3) Enforce any other rights against the tenant for the violation with the member as landlord could lawfully have exercised under the lease or which the board of directors could have exercised against the unit owner.

(c) The amount of any penalty assessed under this section shall be considered an assessment for purposes of Section 12.

Section 12. (a) Except as may be otherwise provided in the declaration or the governing documents of an association, an association shall have, and there is declared, a lien on every lot for unpaid assessments levied against that lot arising on and from the date the assessment is due as fixed and determined by the board of directors at an annual meeting after giving notice as provided in Chapter 3, Title 10A, Code of Alabama 1975. The lien may be enforced or foreclosed as provided in the declaration or governing documents or as provided in this section. Written notice of the assessment and lien shall be given to the owner of any lot 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, Title 35, Code of Alabama 1975, 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 association, 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 lot subject to the assessment is located, which shall contain all of the following:

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

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

(3) The name of the owner or owners of the lot 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 association.

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

(e) An association may bring an action in a court having jurisdiction to enforce a lien declared in this section in the county where the lot 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.

(f) The court in which the action is pending may enforce the lien by a sale of the property after the giving of notice. Notice of a sale shall be given in the county where the lot is located. Notice of all sales under this subsection shall be given by publication once a week for three successive weeks in a newspaper published in the county or counties in which the lot is located. If the lot is located in more than one county, publication shall be made in all counties where the lot is located. The notice of sale must give the time, place, and terms of the sale, together with the description of the lot. If no newspaper is published in the county where the lot is located, the notice must be placed in a newspaper published in an adjoining county for three successive weeks.

Section 13. (a) A homeowners' association subject to this act shall maintain records and information to be made available to each member or potential purchaser, upon written request, within a reasonable time not to exceed 30 days from the date of the request, and upon the payment of reasonable associated costs. Any homeowners' association may provide the records and information in paper or electronic form or direct the member or potential purchaser to the location of any public record containing the records or information.

(b) Upon written request by a member or potential purchaser and upon payment of reasonable costs, the homeowners' association, as specified in subsection (a), shall provide or direct the member or potential purchaser to the location of the public record containing the following:

(1) Documents reflecting the most recent assessments or any mandatory dues and charges with the amounts, including dates due and payable.

(2) Common areas owned by the association and those common areas not owned by the association but which HOA dues go to pay.

(3) A copy of the current operating budget and reserve funds, if any, and a statement of financial condition for the last fiscal year.

(4) Documents evidencing any insurance coverage provided for all lot owners by the association, including any fidelity bond.

(5) Documents evidencing any loans against the association and any collateral provided by the association for the loans.

(6) The official name of the association with current contact information of the current officers and agent, if any.

(7) A copy of the current covenants, conditions, and restrictions adopted by the association along with any amendments, modifications, restatement, or supplement and current architectural control regulations.

(8) Any association initiation or transfer fees which may be due at the time of the real estate closing.

(9) A list of all existing common areas.

(10) The case number or other identifying information of any pending lawsuits, judgments, liens, arbitration, or any other dispute resolution process to which the association is a party and contained in a public record.

Section 14. Upon the termination of a declaration, or at such other time as required by law, the board of directors shall take those steps necessary for the immediate dissolution and liquidation of the association and any remaining assets.

Section 15. Chapter 20, Title 35, Code of Alabama 1975, the Alabama Homeowners' Association Act, comprised of Sections 35-20-1 to 35-20-14, inclusive, is repealed.

Section 16. This act shall become effective on January 1, 2018, or its otherwise becoming law.

Property, Real and Personal

Homeowners Associations

Secretary of State

Nonprofit Corporations

Code Repealed