1. A. Except as provided in the declaration, the bylaws or other provisions of the Condominium Act, the executive board may act in all instances on behalf of the association. In the performance of their duties, the officers and members of the executive board are required to exercise, if appointed by the declarant, the care required of fiduciaries of the unit owners and, if elected by the unit owners, ordinary and reasonable care.
2. B. The executive board shall not act on behalf of the association to amend the declaration, to terminate the condominium or to elect members of the executive board or determine the qualifications, powers and duties or terms of office of executive board members, but the executive board shall fill vacancies in its membership for the unexpired portion of any term.
3. C. Within thirty days after adoption of any proposed budget for the condominium, the executive board shall provide a summary of the budget to all the unit owners, and shall set a date for a meeting of the unit owners to consider ratification of the budget not less than fourteen nor more than thirty days after mailing of the summary. Unless at that meeting a majority of all the unit owners or any larger vote specified in the declaration reject the budget, the budget is ratified, whether or not a quorum is present. In the event the proposed budget is rejected, the periodic budget last ratified by the unit owners shall be continued until such time as the unit owners ratify a subsequent budget proposed by the executive board.

4. D. Subject to Subsection E of this section, the declaration may provide for a period of declarant control of the association, during which period a declarant, or persons designated by him, may appoint and remove the officers and members of the executive board. Regardless of the period provided in the declaration, a period of declarant control terminates no later than the earlier of:

   1. (1) one hundred eighty days after conveyance of ninety percent of the units which may be created to unit owners other than a declarant;
   2. (2) two years after all declarants have ceased to offer units for sale in the ordinary course of business; or

   3. (3) five years after any development right to add new units was last exercised.

      A declarant may voluntarily surrender the right to appoint and remove officers and members of the executive board before termination of that period, but in that event he may require, for the duration of the period of declarant control, that specified actions of the association or executive board, as described in a recorded instrument executed by the declarant, be approved by the declarant before they become effective.

5. E. Not later than sixty days after conveyance of fifty percent of the units which may be created to unit owners other than a declarant, at least one member and not less than twenty-five percent of the members of the executive board shall be appointed by the declarant from among the unit owners. No member so appointed shall be an affiliate of the declarant if such persons are available.
6. F. Not later than the termination of any period of declarant control, the unit owners shall elect an executive board of at least three members, at least a majority of whom shall be unit owners. The executive board shall elect the officers. The executive board members and officers shall take office upon election.
7. G. Notwithstanding any provision of the declaration or bylaws to the contrary, the unit owners, by a two-thirds' vote of all persons present and entitled to vote at any meeting of the unit owners at which a quorum is present, may remove any member of the executive board with or without cause, other than a member appointed by the declarant.

History: Laws 1982, ch. 27, § 36.

ANNOTATIONS

Compiler's notes. — This section is similar to § 3-103 of the Uniform Condominium Act, with the following main exceptions: Subsection D(1) of this section of the state Condominium Act substitutes "one hundred eighty days after conveyance of ninety percent" for "[60] days after conveyance of [75] percent," as it appears in subsection (d)(i) of § 3-103 of the Uniform Condominium Act; Subsection E of this section of the state Condominium Act, designed to act in conjunction with Subsection D to provide for the gradual transfer of control from the declarant to the unit owners, is comparable to subsection (e) of § 3-103 of the Uniform Condominium Act, but changes have been made as to the timing and extent of the transition from declarant to unit owner control.

COMMISSIONERS' COMMENT

1. Subsection (a) [Subsection A] makes members of the executive board appointed by the declarant liable as fiduciaries of the unit owners with respect to their actions or omissions as members of the board. This provision imposes a very high standard of duty because the board is vested with great power over the property interests of unit owners, and because there is a great potential for conflicts of interest between the unit owners and the declarant.

Officers and board members elected by the unit owners are required only to exercise ordinary and reasonable care. This lower standard of care should increase the willingness of unit owners to serve as officers and members of the board.

2. The provisions of paragraph (c) [Subsection C] permit the unit owners to disapprove any proposed budget, but a rejection of the budget does not result in cessation of assessments until a budget is approved. Rather, assessments continue on the basis of the last approved periodic budget until the new budget is in effect.

3. Subsections (d) and (e) [Subsections D and E] recognize the practical necessity for the declarant to control the association during the developmental phases of a condominium project. However, any executive board member appointed by the declarant pursuant to subsection (d) [Subsection D] is liable as a fiduciary to any unit owner for his acts or omissions in such capacity.

4. Subsection (d) [Subsection D] permits a declarant to surrender his right to appoint and remove officers and executive board members prior to the termination of the period of declarant control in exchange for a veto right over certain actions of the association or its executive board. This provision is designed to encourage transfer of control by declarants to unit owners as early as possible, without impinging upon the declarant's rights (for the duration of the period of declarant control) to maintain ultimate control of those matters which he may deem particularly important to him. It might be noted that the declarant at all times (even after the expiration of the period of declarant control) is entitled to cast the votes allocated to his units in the same manner as any other unit owner.

5. Subsection (e) [Subsection E], in combination with subsection (d) [Subsection D], provides for a gradual transfer of control of the association to the unit owners from the declarant. Such a gradual transfer is preferable to a one-time turnover of control since it assures that the unit owners will be involved, to some extent, in the affairs of the association from a relatively early date and that some unit owners will acquire experience in dealing with association matters.

Am. Jur. 2d, A.L.R. and C.J.S. references. — 15A Am. Jur. 2d Condominiums and Cooperative Apartments §§ 14, 16, 28, 29.

31 C.J.S. Estates § 153 et seq.