AB647: Bill Text

LRB-1733/2

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2009 - 2010 LEGISLATURE

2009 Assembly BILL 647

January 6, 2010 - Introduced by Representatives Hebl, Turner, Pocan and Bies, cosponsored by Senator Risser. Referred to Committee on Housing.

AB647,2,11 An Act to repeal 703.28 (1m), 703.28 (2) and 703.29; to renumber and amend 703.115 (1), 703.13 (4), 703.13 (7) (b), 703.13 (7) (c), 703.13 (7) (d), 703.25 (3), 703.34 (intro.) (except 703.34 (title)), 703.34 (1), 703.34 (2), 703.34 (3) and 703.365 (7); to amend 703.02 (5), 703.02 (6), 703.02 (6m), 703.02 (12), 703.02 (14g), 703.02 (15), 703.02 (16), 703.03, 703.04, 703.05, 703.06, 703.07 (2), 703.08 (1) (intro.), 703.08 (2) (intro.), 703.08 (3), 703.09 (1c), 703.09 (2), 703.10 (1), 703.10 (2) (d), 703.10 (2) (f), 703.10 (4), 703.10 (6), 703.105 (1m), 703.105 (2), 703.12, 703.13 (2), 703.13 (5) (a), 703.13 (5) (b), 703.13 (5m) (a) 3., 703.13 (5m) (b), 703.13 (6) (b), 703.13 (6) (c), 703.13 (6) (e), 703.13 (8) (b), 703.13 (8) (c), 703.14 (1), 703.15 (2) (a), 703.15 (2) (b), 703.15 (2) (c) 1. (intro.), 703.15 (2) (c) 1. a., 703.15 (2) (c) 1. b., 703.15 (2) (c) 1. c., 703.15 (2) (c) 2., 703.15 (2) (d), 703.15 (2) (e), 703.15 (2) (f), 703.15 (3) (a) (intro.), 703.15 (3) (a) 1., 703.15 (3) (a) 2., 703.15 (3) (a) 3., 703.15 (3) (b) (intro.), 703.15 (4) (d) 1., 703.15 (4) (e), 703.155 (1), 703.155 (2), 703.16 (1), 703.16 (2) (b), 703.161 (2) (intro.), 703.165 (2), 703.165 (3), 703.165 (5) (c), 703.165 (7), 703.17 (1), 703.18 (2) (b), 703.19 (3) (intro.), 703.19 (3) (b), 703.19 (3) (c), 703.20 (1), 703.22 (title), 703.22 (2), 703.22 (3), 703.24 (2), 703.26 (1), 703.26 (2) (a), 703.26 (3) (a), 703.28 (1), 703.33 (1) (intro.), 703.34 (title), 703.365 (1) (b), 703.365 (4) (b), 709.02 (2) (intro.) and 709.02 (2) (d); to repeal and recreate 703.365 (6); and to create 703.02 (9c), 703.02 (9d), 703.09 (3) (bm), 703.115 (1c), 703.13 (4) (b), 703.13 (4) (c), 703.13 (4) (d), 703.13 (4) (e), 703.13 (7) (b) 1., 703.13 (7) (cm), 703.13 (7) (dm), 703.15 (2) (c) 3., 703.15 (6), 703.161 (2) (g), 703.161 (3), 703.25 (3) (b), 703.275 (4m), 703.28 (2m), 703.28 (3), 703.28 (4), 703.33 (9), 703.34 (2m), 703.365 (10), 703.365 (11) and 703.365 (12) of the statutes; relating to: miscellaneous modifications to the condominium laws.

Analysis by the Legislative Reference Bureau

This bill makes a number of miscellaneous changes to the condominium provisions in current law, including the following:

1. Under current law, residential real property may not be converted to a condominium unless the owner gives notice of the conversion to each tenant. Then, for 60 days after the notice, a tenant has the first right to purchase the unit if offered for sale and generally may not be required to vacate the property for 120 days after the notice. The bill clarifies that these provisions apply only to residential tenants.

2. Current law provides that a property may be subjected to the condominium form of ownership if the sole or all owners join in the execution and recording of a condominium declaration in accordance with the condominium provisions. The bill provides that any first mortgagee must also join in, consistent with current practice, and that a plat of the condominium must also be recorded. The bill provides that, for purposes of receiving notices or giving approvals under the condominium provisions, the term "mortgagee" includes the party servicing the mortgage or land contract. The bill also provides that if a mortgagee's consent or approval is required for any action related to the condominium and the mortgagee cannot be contacted with reasonable diligence, the condominium association (association) may seek approval from a court to proceed with the action. In deciding the matter, the court must consider whether the action is needed to permit the effective management and operation of the condominium and the action's impact on the value of the units as security for mortgages on the units.

3. Under current law, a unit is defined as a part of a condominium intended for any type of independent use. In response to the holding in ABKA Ltd. Partnership v. DNR, 2002 WI 106, 255 Wis. 2d 486, 648 N.W. 2d 854, the bill clarifies that a unit may be of any size and for any use.

4. Current law requires that a seller of a condominium unit make certain disclosures to the purchaser before the sale closing by furnishing copies of certain documents. The bill specifically limits these disclosures to sales of residential units and authorizes them to be made electronically if the purchaser properly consents to that method.

5. The bill provides that if one or more units of a condominium are removed from the condominium or destroyed and not rebuilt, the percentage interests in the common elements must be adjusted to maintain the same ratio of those interests in the remaining units. Likewise, the bill provides that if a condominium plat shows a building with a specified number of units but the building is constructed in such a way that precludes it from containing all of the units, the percentage interests appertaining to the units not constructed must be added on a pro rata basis to the remaining units. Any change to the percentage interests in the common elements must be done by an amendment to the declaration.

6. The bill makes some modifications to the procedures for relocating mutual boundaries of adjoining units, merging adjoining units, and separating a unit into two or more units of the existing condominium, and provides for separating a unit into two or more ownership interests by subjecting the unit itself to the condominium form of ownership.

7. Current law provides that a unit owner may not make any alteration that would jeopardize the soundness or safety of the property or reduce its value or change the exterior appearance of a unit or any other portion of the condominium that is not a part of the unit. The bill additionally prohibits a unit owner from making any alteration that would interfere with the condition or operation of the mechanical systems affecting property that is not a part of the unit. The bill also clarifies that each occupant of a unit, as well as the unit owner, must comply with the bylaws and rules adopted under the bylaws.

8. Current law provides that a unit owner may not change the exterior appearance of his or her unit without the permission of the board of directors of the association. The bill provides that if a unit owner makes alterations within his or her unit that involve changing the configuration of the rooms, the unit owner must file plans with the association showing the reconfiguration.

9. Current law provides that a bylaw or rule may not prohibit a unit owner from displaying the American flag or from displaying in his or her condominium a sign related to a political candidate or a referendum question, but that the size and location may be regulated. The bill clarifies that a political sign may not be prohibited in a unit owner's unit, and provides that the display of such a sign or a flag may be limited to those parts of the condominium over which the unit owner has the exclusive right to use.

10. Current law provides that, if an amendment to a condominium declaration has the effect of reducing the value of a unit owner's interest in any common element and increasing the value of another unit owner's interest in the common element, the other unit owner must compensate the unit owner whose interest was decreased in value. The bill provides that any action to recover this compensation must be commenced no later than one year after the amendment is recorded, or be barred.

11. Current law provides that title to a condominium unit is not rendered unmarketable by any provision of the bylaws. The bill provides that title is not rendered unmarketable because the unit is subject to the terms of a declaration, plat, bylaws, or rules.

12. Current law provides that a county may adopt an ordinance requiring local municipal review of condominium instruments before recording and that the review must be completed within ten days or the instrument is approved for recording. The bill clarifies that the instrument is approved for recording, after the time has passed, without any signature of the reviewer or any certification that it has been reviewed or approved. The bill also provides that a condominium instrument includes a correction instrument and a removal instrument for purposes of local municipal review of condominium instruments before recording.

13. While under current law a declarant may reserve the right to expand a condominium by subjecting additional property to the declaration, the bill provides that a declarant may include in the original declaration a right to expand the condominium by adding land or more units or both, and that if more units are added the percentage of undivided interests in the common elements must be reallocated among all the units.

14. Under current law, a declarant must establish an association to govern the condominium no later than the date of the first conveyance of a unit to a purchaser, and the association must be organized as a profit or nonprofit corporation or as an unincorporated association. The bill provides that an association shall immediately exist as an unincorporated association as of the date of the first conveyance of a unit to a purchaser, unless the declarant has organized an association as a nonprofit corporation before the first conveyance; that after the first conveyance the association may be organized as a nonprofit corporation only with the consent of all the unit owners; and that the declarant shall operate the association until the declarant transfers control of it to the unit owners.

15. The bill clarifies that the period of declarant control of the association may not exceed ten years for an expandable condominium, three years for any other condominium, or thirty days after the conveyance to purchasers of 75 percent of the common element interest, if that is earlier, and that the declarant may transfer control of the association before the mandatory expiration of that period. The bill provides that the declarant must turn over all association records and accounts to the association directors when declarant control of the association ends. Under current law, the unit owners must elect at least 25 percent of the directors of the executive board of the association before the conveyance to purchasers of 25 percent of the common element interest and elect at least 33 1/3 percent of the directors before the conveyance of 50 percent of the common element interest. The bill changes this election requirement to at least 25 percent of the directors within 30 days after the conveyance of 25 percent of the common element interest and at least 33 1/3 percent of the directors within 30 days after the conveyance of 50 percent of the common element interest. The bill provides that any statute of limitations affecting the association's right of action against the declarant is tolled until declarant control ends.

16. Currently, condominium bylaws must provide that the terms of at least one-third of the elected directors must expire annually. The bill changes this so that the bylaws must provide that a term of an elected director may not exceed three years.

17. Current law requires an association to adopt and distribute to all unit owners an annual budget that includes specified information, such as all anticipated common expenses. The bill requires that each budget distributed to a unit owner include the amount assessed to the owner's unit for common expenses.

18. Current law provides that an association must obtain insurance for the property against loss or damage and that the premiums are common expenses. Under the bill, an association must obtain insurance unless the declaration provides otherwise, such as requiring the unit owners to obtain the insurance coverage. The insurance may include reasonable deductibles, and the association must determine whether the deductible will be paid as a common expense or how it will be allocated if not.

19. Current law provides that in a voluntary grant of a unit, the grantee is jointly and severally liable with the grantor for all unpaid assessments with respect to the unit for which a statement of lien is recorded. The bill provides that this applies to all grants other than one resulting from foreclosure of a first mortgage on the unit, and changes the reference to "recorded" to "filed," since statements of lien are filed. Under current law, an unpaid assessment constitutes a lien on the unit on which it is assessed if a statement of lien is filed within two years after the date the assessment becomes due. The bill changes the time within which a statement of lien must be filed to three years after the last installment of the assessment becomes due. Current law provides that such a lien may be enforced in the same manner and subject to the same requirements as a foreclosure of mortgages on real property in this state. The bill clarifies that this includes the reductions in the time for redeeming the property if the party foreclosing waives a deficiency judgment.

20. Current law provides for condominiums to merge. The bill specifies requirements for the plat of the resultant condominium when two or more condominiums merge, such as identifying the plat of every condominium that is included in the merger by name and recording data and identifying units both by their designations in the merged condominiums and in the resultant condominium.

21. Current law provides that all of the unit owners may remove a part or all of the condominium property from the condominium provisions of the statutes by recording a removal instrument; that if a merger of two or more condominiums would result in a new plat for the resultant condominium, the merged condominiums must first be removed from the condominium provisions of the statutes by recording a removal instrument; and that condominium property removed from the condominium provisions of the statutes is deemed to be owned in common by the unit owners. The bill modifies these provisions.

Under the bill, all or any part of the condominium property may be removed from the condominium provisions of the statutes by recording a removal instrument as an amendment to the declaration and an addendum to the plat. If all of the property is being removed, all unit owners must approve, and, upon removal from the provisions, the property is owned in common by the unit owners. If less than all of the property is being removed, the removal instrument must be signed by unit owners holding at least 80 percent of the aggregate votes, including all the owners of the units being removed, and must specify the part of the property being removed, who will own the property being removed after its removal, and the consideration, if any, being given to the association for the removal. If the property will be owned differently from the manner in which it was owned before removal, the removal instrument must contain language conveying the property.

22. Under current law, a small condominium is one with 12 or fewer units. Certain provisions of the condominium statutes apply specifically and exclusively to those small condominiums that elect to be subject to them (electing small condominiums), as well as the general condominium provisions that are not in conflict with the specific provisions. All general condominium provisions apply to small condominiums that do not elect to be subject to the specific small condominium provisions, except that current law provides that the general provisions related to expanding a condominium do not apply to any small condominium. The bill prohibits a declaration for a small condominium from providing that the general provisions related to expanding a condominium do apply.

Current law sets out arbitration procedures if the board of an association of an electing small condominium does not approve an expenditure or action proposed by a unit owner or if a unit owner objects to an expenditure or action proposed by the board. The bill modifies this arbitration process. Under the bill, any operational decision in an electing small condominium may be submitted to arbitration if the required majority for the action cannot be achieved or if the proposed action would involve unbudgeted expenditures in excess of $2,500 per unit in any one year or in excess of $5,000 overall. In addition, if a unit owner in an electing small condominium proposes an action or expenditure by the association and the association does not adopt the unit owner's proposal, cannot achieve the majority necessary to take an action, or levies assessments for unbudgeted expenditures in excess of $2,500 per unit in any one year or in excess of $5,000 overall, the unit owner may request reconsideration and, if not satisfied with the result, submit the matter to arbitration. The results of the arbitration are final, and the association must pay the costs if the unit owner's challenge is upheld, and the unit owner must pay the costs if the challenge is denied.

The bill requires the declaration for any small condominium to designate one of the unit owners as the resident agent and to specify how real estate taxes for the year the small condominium is created will be divided if different from the percentage interests in the common elements. The bill provides that any improvement, decoration, or repair to the exterior of any two-unit small condominium must be agreed to by the owners of both of the units and that, if they do not agree, the matter may be submitted to the board of directors and that the decision of the board of directors may be challenged in an arbitration proceeding.

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

AB647, s. 1 Section 1. 703.02 (5) of the statutes is amended to read:

AB647,7,4 703.02 (5) "Condominium instruments" mean the declaration, plats, and plans of a condominium, as amended from time to time, together with any attached exhibits or schedules.

AB647, s. 2 Section 2. 703.02 (6) of the statutes is amended to read:

AB647,7,10 703.02 (6) "Conversion condominium" means property that includes a structure which that, before the recording of a condominium declaration, was wholly or partially occupied by persons other than those who have contracted for the purchase of condominium units and those who occupy with the consent of the purchasers.

AB647, s. 3 Section 3. 703.02 (6m) of the statutes is amended to read:

AB647,7,16 703.02 (6m) "Correction instrument" means an instrument drafted by a licensed land surveyor that complies with the requirements of s. 59.43 (2m) and that, upon recording, corrects an error in a condominium plat or updates a condominium plat for changes that do not require an addendum. "Correction instrument" does not include an instrument of conveyance.

AB647, s. 4 Section 4. 703.02 (9c) of the statutes is created to read:

AB647,7,19 703.02 (9c) "First mortgage" includes a security interest that is equivalent to a first mortgage.

AB647, s. 5 Section 5. 703.02 (9d) of the statutes is created to read:

AB647,8,2 703.02 (9d) "First mortgagee" includes a holder of a security interest that is equivalent to a first mortgage.

AB647, s. 6 Section 6. 703.02 (12) of the statutes is amended to read:

AB647,8,7 703.02 (12) "Mortgagee" means the holder of any recorded mortgage encumbering one or more units or a land contract vendor and, for purposes of receiving notices or giving approvals, includes the party servicing the mortgage or land contract.

AB647, s. 7 Section 7. 703.02 (14g) of the statutes is amended to read:

AB647,8,12 703.02 (14g) "Removal instrument" means an instrument that complies with the requirements of s. 59.43 (2m) and that removes property, either all or a portion of a condominium, from the provisions of this chapter upon recording. "Removal instrument" does not include an instrument of conveyance.