New Law Affects Homeowner Associations

June 10, 2013

A new law in New Mexico will affect homeowner associations and those who form them, represent them, and buy and sell houses in neighborhoods that have them.

New Mexico’s Homeowner Association Act takes effect July 1. Among other things, it requires homeowner associations – even existing ones – to file a “notice of homeowner association” with the county clerk. The notice gives vital statistics such as name, address, management company (if any) and certain recording information. Existing homeowner associations have through June 29, 2014, to make the new filing. New associations have 30 days after recording their declaration of covenants. Failure to file will mean the association cannot charge assessments, levy fines or enforce liens.

Someone selling property that is subject to a homeowner association has to give the buyer a written disclosure certificate. The certificate includes a disclosure of assessments and other costs, a description of the association’s capital reserves, and the association’s balance sheet and budget. The buyer can cancel within seven days of receiving the certificate. The seller also must give the owner copies of the declaration, bylaws, covenants and other association rules. The seller can require the association to do the legwork and furnish the certificate and other information on his behalf and will not be liable to the buyer if the association provides erroneous information.  The disclosure and cancellation provisions are much like those already in place for residential condominiums.

In a common homeowner association setup, the declarant (usually the developer of the subdivision) controls the association for a certain period of time. The Act trumps the language of association documents and establishes statutory declarant control periods, with some exceptions.

Other highlights of the Act include:

  • A homeowner association has to make financial and other records available for examination by lot owners within 10 business days of being asked.
  • A homeowner association is given the right to lien lots for assessments. (Such a right probably existed already for most homeowner associations.)
  • If the declarant appoints a member of the homeowner association board (instead of the member being elected), that member has a fiduciary degree of responsibility toward the lot owners, meaning a high degree of care and loyalty to the lot owners.
  • Associations for master planned communities or developments with more than 100 lots are required to conduct annual financial audits or reviews within 180 days of the end of the fiscal year.

The Act does not apply to condominiums; they are governed by the Condominium Act.

Sutin, Thayer & Browne is one of New Mexico’s largest law firms, with offices in Albuquerque and Santa Fe, providing exceptional legal services since 1946.

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