Section 229 – Liability of declarant or board of directors — Period of administrative control.

• (1) An association may not, after the period of administrative control, bring a legal action against a declarant, a board of directors, or an employee, an independent contractor, or the agent of the declarant or the previous board of directors related to the period of administrative control unless:
  • (a) the legal action is approved in advance at a meeting where owners of at least 51% of the allocated voting interests of the lot owners in the association are:
    • (i) present; or
    • (ii) represented by a proxy specifically assigned for the purpose of voting to approve or deny the legal action at the meeting;
  • (b) the legal action is approved by vote in person or by proxy of owners of the lesser of:
    • (i) more than 75% of the allocated voting interests of the lot owners present at the meeting or represented by a proxy as described in Subsection (1)(a); or
    • (ii) more than 51% of the allocated voting interests of the lot owners in the association;
  • (c) the association provides each lot owner with the items described in Subsection (2);
  • (d) the association establishes the trust described in Subsection (3); and
  • (e) the association first:
    • (i) notifies the person subject to the proposed legal action of the legal action and basis of the association’s claim; and
    • (ii) gives the person subject to the claim a reasonable opportunity to resolve the dispute that is the basis of the proposed legal action.

• (2) Before lot owners in an association may vote to approve an action described in Subsection (1), the association shall provide each lot owner:
  • (a) a written notice that the association is contemplating legal action; and
  • (b) after the association consults with an attorney licensed to practice in the state, a written assessment of:
    • (i) the likelihood that the legal action will succeed;
    • (ii) the likely amount in controversy in the legal action;
    • (iii) the likely cost of resolving the legal action to the association’s satisfaction; and
    • (iv) the likely effect the legal action will have on a lot owner’s or prospective lot buyer’s ability to obtain financing for a lot while the legal action is pending.

• (3) Before the association commences a legal action described in Subsection (1), the association shall:
  • (a) allocate an amount equal to 10% of the cost estimated to resolve the legal action, not including attorney fees; and
  • (b) place the amount described in Subsection (3)(a) in a trust that the association may only use to pay the costs to resolve the legal action.

• (4) This section does not apply to an association that brings a legal action that has an amount in controversy of less than $75,000.

Enacted by Chapter 284, 2017 General Session

Technically renumbered to avoid duplication of section number also enacted in HB201, Chapter 324.