AB818: Bill Text

LRB-2216/1

KRP:jld&ahe

2017 - 2018 LEGISLATURE

2017 Assembly BILL 818

January 8, 2018 - Introduced by Representatives Ballweg, Born, Kremer, Kuglitsch and Tusler, cosponsored by Senator Olsen. Referred to Committee on Housing and Real Estate.

AB818,1,8 An Act to renumber 703.28 (1); to renumber and amend 703.165 (2) and 703.28 (2); to amend 703.09 (1) (c), 703.09 (2), 703.095, 703.115 (1) (b), 703.12, 703.13 (6) (e), 703.13 (7) (c), 703.13 (8) (c), 703.15 (4) (d) 1., 703.165 (5) (intro.), 703.165 (5) (c), 703.18 (2) (a) and (b) and 703.22 (title), (2) and (3); and to create 703.09 (2m), 703.15 (4) (dm), 703.165 (2) (b), 703.167, 703.18 (2) (c), 703.28 (1m) (intro.), 703.28 (3) (intro.) and 703.28 (4) of the statutes; relating to: various changes to condominium law and rights related to first mortgage security interests in condominium units.

Analysis by the Legislative Reference Bureau

This bill makes various changes to condominium law and rights related to first mortgage security interests in condominium units.

Association procedure for raising funds and requiring first mortgagees to release liens or accept title to units

The bill creates a procedure that a condominium association may use to raise funds that it intends to use for the repair or replacement of common elements of a condominium building that are affected by a defect. The association may use the procedure only if, among other things, 1) the defect is related to the initial construction of the building or work performed by or for a declarant during the period of declarant control of the association; and 2) the cost to repair or replace the defective common elements is 20 percent or more of the value of the affected building.

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.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB818,1 Section 1. 703.09 (1) (c) of the statutes is amended to read:

AB818,4,4 703.09 (1) (c) A general description of each unit, including its perimeters, location, and any other data sufficient to identify it the unit with reasonable certainty.

AB818,2 Section 2. 703.09 (2) of the statutes is amended to read:

AB818,5,6 703.09 (2) Except as provided in sub. (4) and ss. 703.093, 703.13 (6) (c) and (d) and (8) (b), and 703.26, a condominium declaration may be amended with the written consent of at least two-thirds of the aggregate of the votes established under sub. (1) (f) or a greater percentage if provided in the declaration. An amendment becomes effective when it is recorded in the same manner as the declaration. The document submitting the amendment for recording shall state that the required consents and approvals for the amendment were received. A Except as provided in sub. (2m), a unit owner's written consent is not effective unless it is approved in writing by the first mortgagee of the unit, or the holder of an equivalent security interest, if any. Approval from the first mortgage lender or equivalent security interest holder, or the person servicing the first mortgage loan or its equivalent on a unit, constitutes approval of the first mortgagee or equivalent security interest holder under this subsection.

AB818,3 Section 3. 703.09 (2m) of the statutes is created to read:

AB818,5,11 703.09 (2m) (a) In this subsection, “first mortgagee" means the first mortgagee of a unit or the holder of an equivalent security interest, the first mortgage lender on a unit or the equivalent security interest holder, or the person servicing the first mortgage loan or its equivalent on a unit.

AB818,5,14 (b) A unit owner, or the association on behalf of a unit owner, may obtain the approval required under sub. (2) by providing written notice of the amendment to the first mortgagee that includes all of the following:

AB818,5,15 1. A copy of the amendment.

AB818,5,16 2. A request for approval or disapproval of the amendment.

AB818,5,18 3. A form upon which the first mortgagee may indicate its approval or disapproval of the amendment.

AB818,5,22 4. A statement that, if the first mortgagee fails to complete and return the form described under subd. 3. or otherwise disapprove the amendment in writing within 60 days from the date of mailing of the notice, the first mortgagee is considered to have given its approval of the amendment.

AB818,6,4 (c) The unit owner or association shall deliver the notice under par. (b) by certified or registered mail or by 1st class mail to the last-known address of the first mortgagee. If no other address is known to the unit owner or association, the unit owner or association may deliver the notice to the address of the first mortgagee as the address appears on the mortgage or equivalent security instrument and to the address to which the unit owner sends any periodic payments on the first mortgage loan or its equivalent.

AB818,6,8 (d) If the first mortgagee fails to complete and return the form described under par. (b) 3. or otherwise disapprove the amendment in writing within 60 days after the unit owner or association mails the notice under par. (c), the first mortgagee is considered to have given its approval of the amendment as required under sub. (2).

AB818,4 Section 4. 703.095 of the statutes is amended to read: