AB781: Bill Text

If there is a statutory reserve account for the condominium, the annual budget must provide reserve funds for the account. See s. 703.163 (8) (intro.), created by Sec. 33 of the bill, below.

AB781, s. 33 Section 33 . 703.163 of the statutes is created to read:

AB781,22,2 703.163 Statutory reserve account. (1) Definitions. In this section:

AB781,22,5 (a) "Reserve funds" means funds derived from assessments against unit owners that are deposited in a statutory reserve account. The term does not include funds for ordinary operations, including amounts held for operational contingencies.

AB781,22,7 (b) "Statutory reserve account" means a separate account established under this section to hold reserve funds.

AB781,22,11 (c) "Statutory reserve account statement" means a statement indicating whether a statutory reserve account has been established for a condominium and, if there is no statutory reserve account, how it is anticipated that future expenditures for the repair and replacement of common elements will be funded.

AB781,22,14 (2) Application; other reserve accounts not affected. (a) 1. Except as provided in subds. 2. and 3., this section applies to condominiums consisting exclusively of units that are restricted to residential uses.

AB781,22,17 2. This section does not apply to a small condominium unless the declarant or the association, with the written consent of a majority of the unit votes, elects to be governed by this section.

AB781,23,2 3. This section applies to a condominium consisting of both residential and nonresidential units if the declarant or the association, with the written consent of a majority of the unit votes of the residential units and a majority of the unit votes of the nonresidential units, elects to be governed by this section.

AB781,23,6 (b) This section does not affect a reserve account or a similar account existing on the effective date of this paragraph .... [revisor inserts date], or a reserve account or similar account established on or after the effective date of this paragraph .... [revisor inserts date], that is not a statutory reserve account.

AB781,23,14 (3) New condominiums; establishment of statutory reserve account by declarant. (a) Except as provided in par. (c), the declarant of a condominium that is created on or after the effective date of this paragraph .... [revisor inserts date], shall establish a statutory reserve account when the condominium is created and shall execute a statutory reserve account statement. The declarant shall determine the annual amount to be assessed unit owners for reserve funds after considering the factors under sub. (7) (a) to (e) and, if the condominium is a conversion condominium with more than 4 units, the report prepared under s. 703.33 (2) (cm) 1.

AB781,24,2 (b) Reserve fund assessments for the reserve account established under par. (a) may first be assessed on a particular unit when a certificate of occupancy has been issued that applies to that unit. The declarant may elect to defer payment of the accrued assessments for a particular unit until the first conveyance of that unit. The declarant may not defer payment of accrued reserve fund assessments for more than 5 years from the date the exterior construction of the building in which the unit is located is completed. The declarant is liable for all reserve fund assessments on a unit that accrue before the unit is conveyed. If there are accrued reserve fund assessments against a unit, the declarant shall disclose in writing to the first purchaser of the unit whether the declarant has included any accrued reserve fund assessments in the purchase price of the unit or, if not included, how any accrued assessment will be paid.

AB781,24,7 (c) The declarant may elect not to establish a statutory reserve account under par. (a) at the time the condominium is created or, at any time thereafter, may elect to terminate a statutory reserve account during the period of declarant control under s. 703.15 (2) (c). An election under this paragraph shall be made by executing a statutory reserve account statement.

AB781,24,16 (4) New condominium; determination by association to establish statutory reserve account. If a declarant has elected under sub. (3) (c) not to establish a statutory reserve account or to terminate an account, establishment of a statutory reserve account shall be addressed at the first annual meeting of the association held after, or at a special meeting of the association held within one year after, the expiration of any period of declarant control under s. 703.15 (2) (c). A statutory reserve account is established under this subsection with the written consent of a majority of the unit votes. If a statutory reserve account is established under this subsection, the association shall execute a statutory reserve account statement.

AB781,25,2 (5) Existing condominiums; statutory reserve account unless elect otherwise. The association for a condominium created before the effective date of this subsection .... [revisor inserts date], shall, within 18 months after the effective date of this subsection .... [revisor inserts date], or within 18 months after the expiration of any period of declarant control under s. 703.15 (2) (c), whichever is later, establish a statutory reserve account unless the association, with the written consent of at least two-thirds of the unit votes, elects not to establish a statutory reserve account. Upon the establishment of or the election not to establish a statutory reserve account, the association shall execute a statutory reserve account statement.

AB781,25,7 (6) Election by association to establish or terminate statutory reserve account. (a) If an association elects not to establish a statutory reserve account under sub. (4) or (5), or if an association elects to terminate a statutory reserve account under par. (b), the association may at any time thereafter elect to establish a statutory reserve account with the written consent of a majority of the unit votes.

AB781,25,12 (b) An association may, at any time with the written consent of at least two-thirds of the unit votes, terminate a statutory reserve account established under par. (a) or sub. (3) (a), (4), or (5) except that a statutory reserve account established by a declarant under sub. (3) (a) may not be terminated until after the expiration of any period of declarant control under s. 703.15 (2) (c).

AB781,25,14 (c) Upon the establishment or termination of a statutory reserve account, the association shall execute a statutory reserve account statement.

AB781,25,19 (7) Reserve fund. If there is a statutory reserve account for the condominium, the annual budget adopted under s. 703.161 shall provide for reserve funds. Reserve funds may be used as provided in sub. (8). The association shall determine the amount to be assessed unit owners for reserve funds after considering all of the following:

AB781,25,20 (a) The reserve funds currently in the statutory reserve account.

AB781,25,22 (b) The estimated cost of repairing or replacing common elements, other than routine maintenance.

AB781,25,23 (c) The estimated remaining useful life of common elements.

AB781,26,3 (d) The approximate proportion of the estimated cost of repairing or replacing common elements that will be covered by the statutory reserve account and the approximate proportion that will be funded by other means.

AB781,26,4 (e) Any other factor that the association considers relevant.

AB781,26,7 (8) Use of statutory reserve account. (a) Except as provided in par. (b), funds in a statutory reserve account may be used for the repair and replacement of common elements, other than routine maintenance.

AB781,26,13 (b) Funds in a statutory reserve account may be used for normal repair or maintenance, customary services, or other operational costs in excess of amounts budgeted and any contingency funds available for these purposes, with the written consent of at least two-thirds of the unit votes. Funds from the statutory reserve account used under this paragraph must be replaced within 3 years from the date of withdrawal.

AB781,26,15 (9) Permitted investment of reserve funds. Reserve funds may be invested in any of the investments listed under s. 66.0603 (1m) (a).

AB781,26,21 (10) Liability immunity. No declarant, unit owner, association, or director, officer, manager, or employee of an association is liable in connection with the establishment or termination of, or decision not to establish or terminate, a statutory reserve account or for any deficiencies in the statutory reserve account that relate to the determination of amounts to be assessed for reserve funds. This subsection is in addition to any other liability protection available under law.

AB781,26,25 (11) Recording of statutory reserve account statement. Each statutory reserve account statement executed under this section shall bear the name of the condominium as it appears on the declaration and shall be recorded with the register of deeds of the county where the condominium instruments are recorded.

Note: Requires a declarant or association to establish a "statutory reserve account" to fully or partially fund repairs and replacements of common elements other than routine maintenance, unless the declarant or association elects not to establish an account.

The statutory reserve account provisions generally apply only to exclusively residential condominiums, other than small condominiums. Small condominiums and mixed-use (residential and nonresidential units) condominiums may choose to be governed by the statutory reserve account provisions.

The statutory reserve account provisions expressly do not affect: (1) existing reserve accounts or similar accounts; or (2) reserve accounts or similar accounts that are not statutory reserve accounts established on or after the effective date of the bill.

The declarant must establish a statutory reserve account for a new condominium (a condominium established on or after the effective date of the bill) but the declarant may opt out of the requirement. If the declarant establishes a statutory reserve account, assessments for the account may first be assessed against a particular unit when a certificate of occupancy has been issued that applies to that unit. The declarant may defer payment of assessments on a particular unit until the unit is conveyed, but for not more than 5 years from the date the exterior construction of the building in which the unit is located is completed. If there are accrued reserve fund assessments against a unit, the declarant must disclose to the first purchaser of the unit whether any of the accrued assessments are included in the purchase price and, if not, how any accrued assessment will be paid.

If the declarant has opted out, establishment of an account must be addressed at the first annual meeting of the association held after, or at a special meeting held within one year of, termination of declarant control. A statutory reserve account is established by the association with the written consent of a majority of the unit votes. If the declarant has not opted out of the statutory reserve account requirement for a new condominium, the association at any time after the expiration of declarant control may elect to terminate the account with the written consent of at least two-thirds of the unit votes.

Existing condominiums (condominiums established before the effective date of the bill) must, within 18 months after the bill's effective date, or within 18 months after the expiration of declarant control, whichever is later, establish a statutory reserve account unless, with the written consent of at least two-thirds of the unit votes, the association elects not to establish an account.

More generally, an association may at any time elect to establish a statutory reserve account, with the written consent of a majority of the unit votes, or to terminate a statutory reserve account, with the written consent of at least two-thirds of the unit votes.

Factors that a declarant or association is to consider in determining the amount to be assessed unit owners for the statutory reserve account include: funds currently in the account; the estimated cost of repairing or replacing common elements, other than routine maintenance; the estimated remaining useful life of common elements; the approximate proportion of the estimated cost of repairing or replacing common elements that will be covered by the account and the approximate proportion that will be funded by other means; and any other factor considered relevant. In the case of a conversion condominium, the declarant must also consider the required report of an independent architect or engineer.

Funds in a statutory reserve account may be invested in any investment in which local governments are generally authorized to invest by statute.

Funds in a statutory reserve account may be used only for the repair and replacement of common elements, other than routine maintenance, unless there is written consent of at least two-thirds of the unit votes to use the funds for normal repair or maintenance, customary services or other operational costs in excess of amounts budgeted. If used for the latter purposes, the funds must be replaced within 3 years from the date of withdrawal from the account.

A "statutory reserve account statement" must be executed when a statutory reserve account is established or an election is made not to have or to terminate a statutory reserve account. If an election not to establish, or to terminate, a statutory reserve account is made, the statement must indicate how it is anticipated that future expenditures for repairs and replacements of common elements will be funded. The statement must be recorded with the register of deeds.

Finally, a declarant, unit owner, association, or director, officer, manager or employee of an association is not liable in connection with the establishment or termination, or decision not to establish or terminate, a statutory reserve account or for any deficiencies in a statutory reserve account that relate to the determination of amounts to be assessed for reserve funds.

AB781, s. 34 Section 34 . 703.165 (title) and (1) of the statutes are created to read:

AB781,28,3 703.165 (title) Lien for unpaid common expenses, unpaid damages, and unpaid penalties.

AB781,28,7 (1) Definition. In this section, "assessments" means regular and special assessments for common expenses and charges, fines, or assessments against specific units or unit owners for damages to the condominium or for penalties for violations of the declaration, bylaws, or association rules.

Note: Creates a title for new s. 703.165 and a definition of assessment for use throughout the section. The definition expands the scope of the lien provisions of current s. 703.16 (3) to (9) (renumbered s. 703.165 (2) to (8) by Sec. 31 of the bill). Currently, those lien provisions apply to failure to pay assessments for common expenses. The new definition, in combination with the treatment of s. 703.16 (3) to (9) by Sec. 31 of the bill, expands the coverage of the lien provisions to include failure to pay charges, fines, or assessments for damages to the condominium and for violations of the declaration, bylaws, or association rules.

AB781, s. 35 Section 35 . 703.19 (8) of the statutes is amended to read:

AB781,29,6 703.19 (8) Preservation of the right of appeal. The owner of each unit taken shall have the individual right of may appeal of the necessity of taking and of the condemnation award made for the taking. An association shall have the right of A unit owner may appeal of the necessity of taking of the common elements and the right of appeal of, and the condemnation award made for the taking, of the owner's interest in the common elements. An appeal by an association shall be binding upon the individual unit owners for the necessity of taking or the condemnation award made for the taking of the common elements. The unit owners having an interest in the ownership of limited common elements may individually or as a group appeal the necessity of taking or the condemnation award made for the taking of the limited common elements.

Note: Repeals the right of an association to appeal the necessity of taking, and the condemnation award made for the taking, of the common elements and the binding effect of the appeal upon individual unit owners. The revision reflects the policy judgment that individual unit owners should have the right of appeal. See also s. 703.195, created by Sec. 36 of the bill, below, for a related provision.

AB781, s. 36 Section 36 . 703.195 of the statutes is created to read:

AB781,29,9 703.195 Acquisition of common elements by condemnors. (1) Definitions. In this section:

AB781,29,11 (a) "Acquire" means to obtain title to real property by purchase or condemnation.

AB781,29,13 (b) "Common elements" means all of a condominium except its units and any limited common elements.

AB781,29,15 (c) "Condemnor" means a person specified in s. 32.01 (1) who has the authority to condemn property under ch. 32.

AB781,29,19 (2) Applicability. This section applies to the acquisition by a condemnor of a portion of the common elements of a condominium that is created 6 months or more after the effective date of this subsection .... [revisor inserts date]. This section is in addition to any applicable provision in ch. 32.

AB781,30,9 (3) Notice to unit owners and association. A condemnor who seeks to acquire a portion of the common elements of a condominium and who wishes to negotiate with the association instead of with each unit owner shall notify the association and each unit owner of the proposed acquisition, in writing, at least 30 days before delivery of the appraisal required under s. 32.05 (2) (b) or 32.06 (2) (b). The notice to the unit owners shall be sent by certified mail, requesting a return receipt signed by the addressee only. Notice is deemed complete on the date the addressee acknowledges receipt. The notice required under this subsection is in addition to any notice required under s. 32.05 or 32.06 and shall be provided simultaneously with the pamphlets that are prepared under s. 32.26 (6) and provided under ss. 32.05 (2a) and 32.06 (2a). The condemnor is responsible for the expense of sending the notice under this subsection.

AB781,30,11 (4) Content of notice to unit owners. The notice to the unit owners required under sub. (3) shall, at a minimum, contain all of the following:

AB781,30,12 (a) The name and address of the condemnor.

AB781,30,13 (b) The legal description of the property to be acquired.

AB781,30,15 (c) The public purpose for which the property is being acquired and a statement that the condemnor in good faith intends to use the property for that purpose.

AB781,30,17 (d) The following statement in substantially identical language, in at least 12-point bold type, if printed, or in capital letters, if typewritten:

AB781,30,25 THIS NOTICE IS REQUIRED BY SECTION 703.195 OF THE WISCONSIN STATUTES. SECTION 703.195 OF THE WISCONSIN STATUTES PROVIDES THAT THE CONDOMINIUM ASSOCIATION OF WHICH YOU ARE A MEMBER MUST ACT AS YOUR AGENT TO CONVEY YOUR INTEREST IN THE AFFECTED PORTION OF THE CONDOMINIUM'S COMMON ELEMENTS IF YOU WISH. HOWEVER, YOU HAVE THE RIGHT TO NEGOTIATE WITH THE .... (NAME OF ACQUIRING AGENCY) ON YOUR OWN AND MAY REFUSE TO BE REPRESENTED BY THE ASSOCIATION.

AB781,31,10 IN ORDER FOR YOU TO PROCEED TO NEGOTIATE WITH THE .... (NAME OF ACQUIRING AGENCY) ON YOUR OWN, YOU MUST WITHIN 30 DAYS AFTER RECEIPT OF THIS NOTICE SIGN THIS DOCUMENT AT THE INDICATED LOCATION AND DEPOSIT IT IN THE UNITED STATES MAIL. .... (NAME OF ACQUIRING AGENCY) HAS ENCLOSED FOR YOUR CONVENIENCE A POSTAGE PRE-PAID, ADDRESSED ENVELOPE FOR THIS PURPOSE. FAILURE TO SIGN AND RETURN THIS NOTICE MEANS THAT YOU CONSENT TO THE ASSOCIATION ACTING AS YOUR AGENT TO NEGOTIATE AND CONVEY YOUR INTEREST IN THE AFFECTED PORTION OF THE CONDOMINIUM'S COMMON ELEMENTS.

AB781,31,20 IF THE ASSOCIATION ACTS AS YOUR AGENT, YOU WILL BE LEGALLY BOUND BY ANY DECISION OF THE ASSOCIATION'S BOARD OF DIRECTORS RELATING TO THE CONVEYANCE OF YOUR INTEREST IN THE AFFECTED PORTION OF THE CONDOMINIUM'S COMMON ELEMENTS. REGARDLESS OF WHETHER YOU CHOOSE TO NEGOTIATE ON YOUR OWN OR TO ALLOW THE ASSOCIATION OR ANY OTHER PERSON OR ENTITY TO NEGOTIATE ON YOUR BEHALF, YOU WILL RETAIN ALL RIGHTS TO CHALLENGE THE RIGHT OF CONDEMNATION, THE NECESSITY OF CONDEMNATION, OR ANY AMOUNT OF COMPENSATION AVAILABLE TO YOU UNDER CHAPTER 32 OF THE WISCONSIN STATUTES.

AB781,31,23 (e) A prominent place for the unit owner to sign his or her name to indicate the unit owner's objection to the association acting as the agent for the unit owner in the conveyance of the common elements at issue.

AB781,32,6 (5) Method of objecting by unit owner. A unit owner who objects to the association acting as the agent for the owner shall indicate the objection as provided on the form under sub. (4) (e) and send the form, within 30 days after the notice under sub. (3) is received, to the condemnor by U.S. mail to the address indicated on the notice. The objection is made when the completed form is mailed to the condemnor. Before initiating negotiations with the unit owner under s. 32.05 (2a) or 32.06 (2a), the condemnor shall provide the association and those unit owners who have objected a written list of all of the unit owners who have objected.

AB781,32,13 (6) No objection by unit owner; association as agent. If a unit owner does not timely object under sub. (5), the unit owner is deemed to have consented to the association acting as the unit owner's agent in the conveyance of the common elements at issue and the association shall act as the agent for the unit owner in the conveyance to the condemnor of the unit owner's interest in the common elements at issue. Failure of the unit owner to object within the required time does not affect any other rights of the unit owner under ch. 32.

AB781,32,16 (7) Method of conveyance. The association shall execute any conveyance under this section as the agent for each of the unit owners who did not timely object under sub. (5). Those unit owners shall be identified, by name, on the conveyance.

AB781,32,19 (8) Objection by unit owner; unit owner retains rights. A unit owner who timely objects under sub. (5) retains all of his or her rights under ch. 32 with regard to the acquisition of the common elements at issue and to unit ownership.

Note: Provides a procedure for a condemnor who wishes to negotiate with the association instead of with each unit owner for the acquisition of a portion of the common elements (excluding limited common elements) for a public project. The procedure is based on a Florida statute. [West's F.S.A. s. 73.073 (2001 Supplement).] "Acquisition" refers to obtaining title to real property by purchase or condemnation.

In general terms, a condemnor who seeks to acquire a portion of the common elements is required to notify the association and each unit owner. If a unit owner fails to object to the association representing the unit owner in the property acquisition within 30 days after receiving the notice, the owner is deemed to have agreed to that representation in any subsequent proceeding relating to the acquisition of the common elements at issue.

A unit owner who timely objects to representation by the association in the acquisition retains all of his or her rights with regard to the acquisition and all other rights pertaining to unit ownership.

The optional procedure may be used only to acquire a portion of the common elements of a condominium that is created 6 months or more after the effective date of the bill.

AB781, s. 37 Section 37. 703.20 (3) of the statutes is created to read:

AB781,33,10 703.20 (3) Declarant responsibilities for records. During the period of declarant control under s. 703.15 (2) (c), the declarant is responsible for creating and maintaining the financial and operational records of the association and shall turn the records over to the directors elected under s. 703.15 (2) (f). During the period of declarant control under s. 703.15 (2) (c) and for one year thereafter, upon written request to the association by the lesser of 3 unit owners or the owners of 10% of the units, not including units owned by the declarant, the association shall arrange for an independent audit of its financial records, but no request may be made for an audit within 24 months after the completion of a previous audit.

Note: Requires the creation and maintenance of, and provides means of access to, financial and operational records of the association during the period of declarant control. The declarant is responsible for the creation and maintenance of the records during the period of declarant control and must turn the records over to the board of directors elected after the period of declarant control expires.

Also, during the period of declarant control and one year thereafter, requires the association to arrange for an independent audit of the association's financial records if requested by the lesser of 3 unit owners or the owners of 10% of the units (not including units owned by the declarant). A limit is provided on the frequency of requesting an audit.

AB781, s. 38 Section 38. 703.24 of the statutes is repealed and recreated to read:

AB781,33,14 703.24 Remedies for violations by unit owner or tenant of a unit owner. (1) Definition. In this section, "violation" means failure to comply with this chapter or the declaration, bylaws, or association rules.

AB781,34,2 (2) Liability for unit owner violation. A unit owner who commits a violation is liable for any charges, fines, or assessments imposed by the association pursuant to the bylaws or association rules as a result of the violation and may be subject to a temporary or permanent injunction.

AB781,34,6 (3) Liability for violation by tenant. (a) If a tenant of a unit commits a violation that results in a charge, fine, or assessment imposed by the association pursuant to the bylaws or association rules, the tenant is liable for the charge, fine, or assessment.

AB781,34,13 (b) If the association complies with the notice requirement of sub. (4), the owner of the unit occupied by the tenant when the violation occurred is liable for any charges, fines, or assessments imposed by the association for which the tenant is liable under par. (a) that are not paid by the tenant within 30 days after receiving the notice under sub. (4). This paragraph does not affect the liability of the tenant to the unit owner for any charges, fines, or assessments paid by the unit owner under this paragraph.

AB781,34,18 (4) Notice requirement for violation by tenant. If an association imposes a charge, fine, or assessment as a result of a violation by a tenant of a unit in the condominium, the association shall give notice to the tenant by any method under s. 704.21 (1) (a) to (e) and to the owner of the unit occupied by the tenant by any method under s. 704.21 (2) (a) to (d). The notice shall include all of the following:

AB781,34,19 (a) The amount of charges, fines, or assessments for which the tenant is liable.

AB781,34,23 (b) Notice that if the tenant fails to pay the association the amount for which the tenant is liable within 30 days after the tenant receives the notice, the owner is liable to the association for the amount unpaid by the tenant although the tenant may be liable to the unit owner for any amounts the unit owner pays.

AB781,34,25 (5) Other liability not affected. This section does not otherwise affect the liability of a unit owner or tenant who commits a violation.

Note: 1. Repeals and recreates s. 703.24, relating to liability of a unit owner for damages or injunctive relief caused by the failure of the unit owner to comply with ch. 703, the declaration, or bylaws. Current s. 703.24 provides as follows:

"If any unit owner fails to comply with this chapter, the declaration or bylaws, the unit owner may be sued for damages caused by the failure or for injunctive relief, or both, by the association or by any other unit owner.".

2. Subsection (2) revises current s. 703.24. It makes a unit owner who fails to comply with ch. 703, the declaration, the bylaws, or the association rules liable for any resulting charges, fines or assessments imposed pursuant to association bylaws or rules. Deletion of the current reference to suing a unit owner for damages for failure to comply is not intended to change the liability of a unit owner to the association or any other unit owner for damages caused by failure to comply with ch. 703, the declaration, bylaws, or rules. In this regard, see sub. (5).

3. Subsections (3) and (4) are new. The provisions make a tenant who commits a violation liable for any charges, fines, or assessments imposed by the association for the violation. Subsection (3) (b) provides that if the association complies with the notice requirement of sub. (4), the owner of the unit occupied by the tenant when the violation occurred is liable for any association charges, fines, or assessments for which the tenant is liable that remain unpaid 30 days after the tenant received notice. Double recovery by an association of any charges, fines, or assessments is not intended. Subsection (4) sets forth the notice requirement for holding the unit owner liable for a tenant's violation if the tenant does not pay the charges, fines, or assessments within the specified time.