§514A-83.6 
Associations of apartment owners; budgets and reserves.  (a)  The board of directors of each association
of apartment owners shall prepare and adopt an annual operating budget and
distribute it to the apartment owners.  At a minimum, the budget shall include
the following:



(1)  The estimated revenues and operating expenses of
the association;



(2)  Information as to whether the budget has been
prepared on a cash or accrual basis;



(3)  The total replacement reserves of the association
as of the date of the budget;



(4)  The estimated replacement reserves the
association will require to maintain the property based on a reserve study
performed by the association;



(5)  A general explanation of how the estimated
replacement reserves are computed;



(6)  The amount the association must collect for the
fiscal year to fund the estimated replacement reserves; and



(7)  Information as to whether the amount the
association must collect for the fiscal year to fund the estimated replacement
reserves was calculated using a per cent funded or cash flow plan.  The method
or plan shall not circumvent the estimated replacement reserves amount
determined by the reserve study pursuant to paragraph (4).



(b)  The
association shall assess the apartment owners to either fund a minimum of fifty
per cent of the estimated replacement reserves or fund one hundred per cent of
the estimated replacement reserves when using a cash flow plan; provided that a
new association created after January 1, 1993, need not collect estimated replacement
reserves until the fiscal year which begins after the association's first
annual meeting.  For each fiscal year, the association shall collect the amount
assessed to fund the estimated replacement for that fiscal year reserves, as
determined by the association's plan, except:



(1)  The commission shall adopt rules to permit an
existing association to fund its estimated replacement reserves in increments
after January 1, 1993, and prior to January 1, 2000; and



(2)  The commission shall adopt rules to permit an
association to fund in increments, over three years, estimated replacement
reserves that have been substantially depleted by an emergency.



(c)  The
association shall compute the estimated replacement reserves by a formula which
is based on the estimated life and the estimated capital expenditure or major
maintenance required for each part of the property.  The estimated replacement
reserves shall include:



(1)  Adjustments for revenues which will be received
and expenditures which will be made before the beginning of the fiscal year to
which the budget relates; and



(2)  Separate, designated reserves for each part of
the property for which capital expenditures or major maintenance will exceed
$10,000.  Parts of the property for which capital expenditures or major
maintenance will not exceed $10,000 may be aggregated in a single designated
reserve.



(d)  No
association or apartment owner, director, officer, managing agent, or employee
of an association who makes a good faith effort to calculate the estimated
replacement reserves for an association shall be liable if the estimate
subsequently proves incorrect.



(e)  The
commission may request a copy of the annual operating budget of the association
of apartment owners as part of the association's registration with the
commission under section 514A-95.1.



(f)  A
board may not exceed its total adopted annual operating budget by more than
twenty per cent during the fiscal year to which the budget relates, except in
emergency situations. Prior to the imposition or collection of an assessment
under this paragraph, the board shall pass a resolution containing written
findings as to the necessity of the extraordinary expense involved and why the
expense was not or could not have been reasonably foreseen in the budgeting
process, and the resolution shall be distributed to the members with the notice
of assessment.



(g)  The
requirements of this section shall override any requirements in an
association's declaration, bylaws, or any other association documents relating
to preparation of budgets, calculation of reserve requirements, assessment and
funding of reserves, with the exception of:



(1)  Any provisions relating to the repair and
maintenance of property;



(2)  Any requirements in an association's declaration,
bylaws, or any other association documents which require the association to
collect more than fifty per cent of reserve requirements; or



(3)  Any provisions relating to upgrading the common
elements, such as additions, improvements, and alterations to the common
elements.



(h) 
Subject to the procedures of section 514A-94 and any rules adopted by the
commission, any apartment owner whose association board fails to comply with
this section may enforce compliance by the board.  In any proceeding to enforce
compliance, a board which has not prepared an annual operating budget and
reserve study shall have the burden of proving it has complied with this
section.



(i)  The
commission may adopt rules to implement this section.



(j)  As
used in this section:



"Capital
expenditure" means an expense that results from the purchase or
replacement of an asset whose life is greater than one year, or the addition of
an asset that extends the life of an existing asset for a period greater than
one year.



"Cash
flow plan" means a minimum twenty-year projection of an association's
future income and expense requirements to fund fully its replacement reserves
requirements each year during that twenty-year period, except in an emergency;
provided that it shall not include a projection of special assessments or loans
during that twenty-year period, except in an emergency.



"Emergency
situation" means any extraordinary expenses:



(1)  Required by an order of a court;



(2)  Necessary to repair or maintain any part of the
property for which the association is responsible where a threat to personal
safety on the property is discovered;



(3)  Necessary to repair any part of the property for
which the association is responsible that could not have been reasonably
foreseen by the board in preparing and distributing the annual operating
budget;



(4)  Necessary to respond to any legal or
administrative proceeding brought against the association that could not have
been reasonably foreseen by the board in preparing and distributing the annual
operating budget; or



(5)  Necessary for the association to obtain adequate
insurance for the property which the association must insure.



"Major
maintenance" means an expenditure for maintenance or repair that will
result in extending the life of an asset for a period greater than one year.



"Replacement
reserves" means funds for the upkeep, repair, or replacement of those
parts of the property, including but not limited to roofs, walls, decks,
paving, and equipment, that the association is obligated to maintain. [L 2007,
c 244, pt of §2]