New Utah Law Requires Registration by HOA’s

A new Utah law for HOA’s  goes into effect shortly that requires both condo and non-condo  homeowners associations to register as an HOA with the State of Utah by July 1st, 2011, and to keep info updated when directors change over time.  This is completely separate from registering as a nonprofit corporation with the Division of Corporations. Now HOAs that are nonprofit corporations will need to do both (the law doesn’t require an HOA to be a nonprofit corporation, but it is recommended and is typical).

The consequence for not registering an HOA and keeping the information updated is that the HOA will not be able to enforce its liens against delinquent homeowners.  This is a huge (and harsh) consequence, obviously.  So, it is imperative that HOA’s register and keep their info current with the state, or they will lose their lien rights when collecting past-due assessments.

Along with a registration fee not to exceed $37.00, each HOA has to provide the following to the state and kept it updated whenever the information changes :

• The name and address of the homeowner association
• The name, address, and telephone number and, if applicable, email address of the president of the association
• The name and address of each management committee member and contact information for the manager, if applicable
• The name, address, telephone number, and, if the contact wishes to use email or fax for communicating information, the email address or fax number of a primary contact person who has the lien payoff information a closing agent needs in connection with the closing of the sale or refinance of a lot/unit

Another new law states that lien payoff information must be provided by the HOA within five (5) business days from when a closing agent makes a proper request for it (has to be in writing, be accompanied by a written consent for the release of the payoff information signed and dated by the owner, etc.), or the lien is not enforceable at closing.  Also, the association is now prohibited from charging a fee for providing payoff information needed for closing on a unit, unless the fee is specifically authorized by the CC&Rs, bylaws or rules, and the fee can’t exceed $50.  Ascertaining payoff information for a delinquent owner is an administrative burden on the HOA that is appropriately paid for by the offending owner, not shared by the other innocent, paying owners.  So, the board should adopt a rule right away authorizing a fee for providing payoff information.

It’s important to note that assessments are both a lien on a unit and a personal debt of the owner.  So, while the lien may become unenforceable by failing to adhere to this new law, the past-due assessments will still remain the personal debt of that owner, even after they sell their unit and move on.  So, an action in court could still be pursued by the HOA.

The state has not set up a way to register yet, but we’ll provide updates on this issue and more information on how to register as it becomes available.

UPDATE: The registry is up and running. Read about it in this post.

Curtis G. Kimble