Various changes to condominium law and rights related to first mortgage security interests in condominium units

Under the procedure, the association must estimate the total cost required to repair or replace the defective common elements and must levy assessments against the unit owners to raise those funds. Under the procedure, the association must notify the unit owners that the association is using the procedure and inform the unit owners of the approximate cost that may be assessed against each unit owner and the date or dates that the association anticipates that it may levy those assessments.

The association is not required to levy assessments against all unit owners at the same time or to levy the entire amount a particular unit owner may be assessed all at once. Rather, the association may choose to levy the assessments in one or more increments and on one or more dates determined by the association.

After the association levies an assessment against a unit owner, if the unit owner fails or refuses to pay the assessment, the association may foreclose the assessment lien on the unit owner's unit or accept a deed in lieu of foreclosure with respect to the unit. If the association acquires title to a unit using the procedure and the unit is subject to a first mortgage lien that was executed after the effective date of the bill, the association may require the first mortgagee to do one of the following within 60 days after the association notifies the first mortgagee of its options: 1) release the first mortgagee's security interest in the unit; or 2) accept a quit claim deed from the association with respect to the unit.

Liability of first mortgagee for condominium assessments The bill provides that, if a mortgagee becomes the owner of a unit following foreclosure of a first mortgage, the mortgagee is jointly and severally liable with the former unit owner for any unpaid assessments coming due during the 12 months immediately preceding the date on which the foreclosure sale is confirmed.

Approval of first mortgagee to amendment of condominium declaration Under current law, a condominium declaration may be amended with the written consent of at least two-thirds of the total number of votes that may be voted at meetings of the association of unit owners, or a greater percentage if provided in the declaration. Also under current law, a unit owner's written consent is not effective unless it is approved in writing by the first mortgagee of the unit, if any.

The bill creates a procedure under which a unit owner, or the condominium association on behalf of the unit owner (requester), may obtain that first mortgagee approval. Under the bill, the requester may deliver written notice of the amendment by certified or registered mail or first class mail to the last-known address of the first mortgagee. If the first mortgagee fails to disapprove the amendment in writing within 60 days after the requester mails the notice, the first mortgagee is considered to have given its approval.

Certification of plats and plans showing altered unit boundaries Under current law, if a condominium's documents allow it, unit owners in the condominium may make any of the following changes to the boundaries of their units:

1. Unit owners of adjoining units may relocate the mutual boundaries between those units.

2. A unit owner may separate a unit into two or more units.

3. Unit owners of adjoining units may merge two or more adjoining units into one unit.

Currently, if unit owners make any of those changes, the condominium documents must be amended to reflect the altered boundaries, and plats and plans showing the altered boundaries and unit dimensions must be prepared and certified as to their accuracy by a civil engineer, architect, or professional land surveyor.

The bill provides that only a professional land surveyor, and not a civil engineer or architect, may certify the accuracy of those plats and plans.

Right of unit owners to vote at association meetings Under current law, a unit owner generally is entitled to vote at all meetings of the condominium association unless 1) the unit owner has failed to furnish the association with the unit owner's name and current mailing address; or 2) the association has filed a statement of condominium lien against the unit owner's unit with respect to unpaid condominium assessments. The bill provides that, for a condominium created after the effective date of the bill, after the period of declarant control of the association has expired, no unit owner may vote at a meeting of the association if, at the time of the meeting, the unit is partially or fully exempt from any condominium assessments.

Percentage of votes required for removal The bill provides that, for a condominium created after the effective date of the bill, if the unit owners of units to which at least 80 percent of the votes are allocated consent in writing, the condominium property may be removed from the provisions of the condominium law. In other words, ownership of the property would change from the condominium form of ownership to ownership in common. The bill also provides that, if all of the units in a condominium are nonresidential, the declaration for the condominium may specify a smaller percentage of votes that are required for removal, except that the percentage may not be less than the percentage of votes required to amend the condominium's declaration. Under current law, unanimous consent of all unit owners is required to change the property from the condominium form of ownership.

Determining ownership interests after removal Under current law, after condominium property is removed from the provisions of the condominium law, the unit owners own the property in common with each former unit owner owning an undivided interest in the property that is equal to the percentage of undivided interest previously owned by the unit owner in the common elements of the condominium.

The bill provides that, for a condominium created after the effective date of the bill, the declaration of the condominium may provide for the use of an alternative procedure for determining former unit owners' respective ownership interests in the property after removal. If the declaration provides for use of the alternative procedure, upon removal of the condominium property, an appraiser must determine the fair market value of each unit, and each unit owner's undivided ownership interest in the property after removal will be a percentage calculated by dividing the fair market value of the unit owner's unit by the fair market value of all units in the condominium.

Division of proceeds after partition Under current law, if the common elements of a condominium are damaged to an extent more than available insurance proceeds, the unit owners may choose to partition the condominium property, rather than repair or reconstruct the damaged common elements. Currently, if the condominium property is partitioned, the proceeds of sale and available insurance proceeds are divided among the unit owners in proportion to their percentage interest in the common elements.

The bill provides that, for a condominium created after the effective date of the bill, the declaration of the condominium may provide for the use of an alternative procedure for determining the unit owners' respective shares of the proceeds after partition. If the declaration provides for use of the alternative procedure, upon partition of the condominium property, an appraiser must determine the fair market value of each unit as the unit existed immediately prior to the damage, and each unit owner's share of the proceeds after partition will be a percentage calculated by dividing the fair market value of the unit owner's unit by the fair market value of all units in the condominium as they existed immediately prior to the damage.