1. (a) The declaration and bylaws shall not impose limitations on the power of the association to deal with the developer that are more restrictive than the limitations imposed on the power of the association to deal with other persons.

2. (b) Unless otherwise permitted by the declaration, bylaws, or this chapter, an association may adopt rules and regulations that affect the use of or behavior in units that may be used for residential purposes only to:

   1. (1) Prevent any use of a unit that violates the declaration or bylaws;
   2. (2) Regulate any behavior in or occupancy of a unit that violates the declaration or bylaws or unreasonably interferes with the use and enjoyment of other units or the common elements by other unit owners; or

   3. (3) Restrict the leasing of residential units to the extent those rules are reasonably designed to meet underwriting requirements of institutional lenders who regularly lend money secured by first mortgages on units in condominiums or regularly purchase those mortgages.

      Otherwise, the association shall not regulate any use of or behavior in units by means of the rules and regulations.

3. (c) Any payments made by or on behalf of a unit owner shall first be applied to outstanding common expenses that are assessed to all unit owners in proportion to the common interest appurtenant to their respective units, including commercial property assessed financing assessment expenses incurred for improvements financed pursuant to section 196-64.5. Only after the outstanding common expenses have been paid in full may the payments be applied to other charges owed to the association, including assessed charges to the unit such as ground lease rent, utility sub-metering, storage lockers, parking stalls, boat slips, insurance deductibles, and cable. After these charges are paid, other charges, including unpaid late fees, legal fees, fines, and interest, may be assessed in accordance with an application of payment policy adopted by the board; provided that if a unit owner has designated that any payment is for a specific charge that is not a common expense as described in this subsection, the payment may be applied in accordance with the unit owner's designation even if common expenses remain outstanding.

4. (d) No unit owner who requests legal or other information from the association, the board, the managing agent, or their employees or agents, shall be charged for the reasonable cost of providing the information unless the association notifies the unit owner that it intends to charge the unit owner for the reasonable cost. The association shall notify the unit owner in writing at least ten days prior to incurring the reasonable cost of providing the information, except that no prior notice shall be required to assess the reasonable cost of providing information on delinquent assessments or in connection with proceedings to enforce the law or the association's governing documents.

   After being notified of the reasonable cost of providing the information, the unit owner may withdraw the request, in writing. A unit owner who withdraws a request for information shall not be charged for the reasonable cost of providing the information.

5. (e) Subject to any approval requirements and spending limits contained in the declaration or bylaws, the association may authorize the board to borrow money for the repair, replacement, maintenance, operation, or administration of the common elements and personal property of the project, or the making of any additions, alterations, and improvements thereto; provided that written notice of the purpose and use of the funds is first sent to all unit owners and owners representing fifty per cent of the common interest vote or give written consent to the borrowing. In connection with the borrowing, including non-commercial property assessed financing, the board may grant to the lender the right to assess and collect monthly or special assessments from the unit owners and to enforce the payment of the assessments or other sums by statutory lien and foreclosure proceedings. The cost of the borrowing, including, without limitation, all principal, interest, commitment fees, and other expenses payable with respect to the borrowing or the enforcement of the obligations under the borrowing, shall be a common expense of the project. For purposes of this section, the financing of insurance premiums by the association within the policy period shall not be deemed a loan and no lease shall be deemed a loan if it provides that at the end of the lease the association may purchase the leased equipment for its fair market value.
6. (f) For financing assessments imposed upon the project under a commercial property assessed financing program pursuant to section 196-64.5 and due from the association, the cost of the commercial property assessed financing, including all principal, interest, commitment fees, servicing fees, and other expenses payable with respect to this borrowing or the enforcement of the obligations under the borrowing, shall be a common expense of the project and the unit owners' proportionate share of the financing assessment shall be collected in the same manner as common expenses. The written consent of at least fifty per cent of all unit owners to finance qualifying improvements with commercial property assessed financing shall include an acknowledgment that the annual financing assessment required to fund debt service on the commercial property assessed financing shall be included as part of the association's adopted revised budget.

[L 2004, c 164, pt of §2; am L 2005, c 93, §7; am L 2006, c 273, §15; am L 2018, c 195, §§3, 6; am L 2019, c 192, §2; am L 2020, c 56, §2; am L 2024, c 41, §8]

Case Notes

Court agreed with defendants that, to the extent that the complaint alleged a claim for violation of this statute, the claim should be construed as a negligence-based claim. Thus, the claim was subject to the two-year statute of limitations and discovery rule. 185 F. Supp. 3d 1247 (2016).

Court concluded that the last act of alleged discrimination or retaliation that plaintiff, a condominium owner, relied upon in plaintiff's intentional infliction of emotional distress claim and other negligence claims was the filing of a lien on plaintiff's unit by defendant, an apartment association. However, plaintiff did not allege any allegedly unlawful acts within the two-year statute of limitations period before the filing of the complaint. Thus, court concluded that plaintiff's claims of intentional infliction of emotional distress, negligent infliction of emotional distress, negligence, gross negligence, and violation of this statute were time-barred. Summary judgment was granted in favor of defendants. 185 F. Supp. 3d 1247 (2016).

Condominium declaration provision that in development controversies (proceedings against respondent), petitioner must, inter alia, hire an attorney with a certain quality rating, obtain an opinion letter indicating that petitioner has a substantial likelihood of success on the merits, and impose a special litigation assessment to fund arbitration or litigation, violated subsection (a) because it imposed limitations on petitioner association of apartment owners in arbitration or litigation with respondent more restrictive than those imposed on other persons. 130 H. 152, 307 P.3d 132 (2013).

Given the types of proceedings categorized as "operational proceedings" by the condominium declaration in question, it could not be said that provisions in the declaration requiring approval by at least seventy-five per cent of unit owners before commencing any major litigation or arbitration and governing the funding of proceedings applied "uniquely" to proceedings between petitioner and respondent; moreover, as an action against respondent may be an action for damages wherein the total amount in controversy is not more than $10,000, it may also be possible for petitioner to initiate litigation against respondent that is an "operational proceeding", and therefore not subject to the provisions in question. 130 H. 152, 307 P.3d 132 (2013).

Condominium declaration provisions requiring approval by at least seventy-five per cent of unit owners before commencing any major litigation or arbitration and governing the funding of proceedings did not apply only to proceedings against respondent; rather the provisions applied to any proceeding other than an "operational proceeding" as defined by the declaration. Thus, the provisions did not violate subsection (a) because the provisions limited petitioner's power to institute major proceedings against any party and did not favor respondent. 129 H. 117 (App.), 295 P.3d 987 (2013).