STATE OF OKLAHOMA

Req. No. 3033 Page 1

STATE OF OKLAHOMA

2nd Session of the 49th Legislature (2004)

COMMITTEE SUBSTITUTE

FOR ENGROSSED

HOUSE BILL 1668 By: Vaughn of the House

and

Coffee of the Senate

COMMITTEE SUBSTITUTE

[ Oklahoma Real Estate Development Act – homeowners

associations – dispute resolution – noncompliance –

repealer - codification – effective date ]

BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:

SECTION

. NEW LAW A new section of law to be codified

in the Oklahoma Statutes as Section 850 of Title 60, unless there is

created a duplication in numbering, reads as follows:

This act shall be known and may be cited as the “Oklahoma Real

Estate Development Act”.

SECTION

. AMENDATORY 60 O.S. 2001, Section 851, is

amended to read as follows:

Section 851. The term "real A. As used in the Oklahoma Real

Estate Development Act, unless the context otherwise requires:

1. “Amend” or “amendment” means change in any form, including

without limitation, the addition of new language or a new subject

not previously addressed;

2. “Annual assessments” means a sum charged annually to the lot

owners on a reasonable prorated basis, as set forth in the

declaration or governing documents for the payment of common expense

liability, including, but not limited to, the operating expenses of

the owners’ association. Provided, the declarant may elect to

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charge reduced annual assessments or exempt from payment of annual

assessment lot owners who are not owner occupants;

3. “Board of directors” means the body, regardless of name,

designated in the declaration to act on behalf of the association;

4. “Common areas” means:

a. any real estate within a real estate development which

is owned by the association, other than a lot, and

b. any other interests in real estate for the benefit of

lot owners which are subject to the declaration;

5. “Common expenses” means expenditures made by, or financial

liabilities of, the association, including, but not limited to,

general operating and reserve expenses;

6. “Common expense liability” means the liability for common

expenses allocated to each lot pursuant to the declaration or

governing documents;

7. “Declarant” means any person or group of persons acting in

concert who:

a. as part of a common promotional plan, offers to

dispose of the interest in a lot not previously

disposed of, or

b. succeeds to any development right or obligation;

8. “Declaration” means any instruments, covenants, owner

certificates, and other filed documents, however denominated but not

a plat, that create a real estate development, including any

amendments to those filed documents;

9. “Development rights” means any right or combination of

rights reserved by a declarant in the declaration to:

a. add real estate to a real estate development,

b. create lots or common areas, or

c. subdivide lots or convert lots into common areas;

10. “Governing documents” means the plat, declaration, deeds,

articles of incorporation, bylaws, rules and regulations and other

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documents which govern the operation of the real estate development

or owners’ association;

11. “Lot” means a physical portion of the real estate

development designated for separate ownership or occupancy, the

boundaries of which are described pursuant to the declaration;

12. “Lot owner” or “owner” means a declarant or other person

who owns or holds legal or equitable title to a lot, but does not

include a person having an interest in a lot solely as security for

an obligation;

13. “Owner occupant” means the lot owner occupying a residence

constructed on a lot located in a real estate development;

14. “Owners’ association” means an association created under

subsection A of Section 852 of this title or Section 42-106.1 of

Title 11 of the Oklahoma Statutes;

15. “Person” means an individual, corporation, business trust,

estate, trust, partnership, association, joint venture, government,

governmental subdivision or agency, or other legal entity;

16. “Plat” means the instrument filed in the office of the

county clerk within which the real estate development is located,

setting forth the boundary lines for the lots, common areas,

easements and areas dedicated for public purposes, and as governed

by Section 288.1 of Title 19 of the Oklahoma Statutes;

17. “Real estate” means any estate or interest in, over, or

under land, including structures, fixtures, and other improvements

and interests that by custom, usage, or law pass with a conveyance

of land though not described in the contract of sale or instrument

of conveyance. Real estate includes parcels with or without upper

or lower boundaries, and space that may be filled with air or water;

18. “Real estate development” means real estate with respect to

which a person, by virtue of their ownership of a lot, is obligated

to pay for real estate taxes, insurance premiums, maintenance, or

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improvement of other real estate described in the declaration. Real

estate development shall also include developments:

1. Which

a. which consist or will consist of separately owned

lots, parcels or areas with either or both of the

following features:

a. One

(1) one or more additional contiguous or

noncontiguous lots, parcels or areas owned in

common by the owners of the separately owned

lots, parcels or areas.,

b. Mutual

(2) mutual, common or reciprocal interests in or

restrictions upon, all or portions of such

separately owned lots, parcels or areas, or

both., or

2. The

b. the estate in a separately or commonly owned lot,

parcel or area may be an estate of inheritance, estate

in fee, an estate for life, or an estate for years.

Either common ownership of the additional contiguous or

noncontiguous lots, parcels or areas referred to in subparagraph a.

division (1) of paragraph 1. above subparagraph a of this paragraph,

or the enjoyment of the mutual, common or reciprocal interests in,

or restrictions upon the separately owned lots, parcels or areas

pursuant to subparagraph b. division (2) of paragraph 1. above

subparagraph a of this paragraph, or both, may be through ownership

of shares of stock or membership in an owners association or

otherwise;

19. “Residential purposes” means use for dwelling purposes;

20. “Security interest” means an interest in real estate or

personal property, created by contract or conveyance, which secures

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payment or performance of an obligation. The term includes a lien

created by a mortgage, deed of trust, trust deed, security deed,

contract for deed, land sales contract, lease intended as security,

assignment of lease or rents intended as security, pledge of an

ownership interest in an association, and any other consensual lien

or title retention contract intended as security for an obligation;

and

21. “Special assessments” means a sum other than annual

assessments assessed by an association uniformly to all lots for the

purpose of construction, replacement or maintenance of improvements

or other extraordinary expenses of the owners’ association.

B. All provisions of the governing documents are severable.

C. The rule against perpetuities does not apply to defeat any

provision of the governing documents.

D. In the event of a conflict between the provisions of the

governing documents, the declaration prevails, except to the extent

the declaration is inconsistent with the Oklahoma Real Estate

Development Act.

E. All provisions of the Oklahoma Real Estate Development Act

shall be construed as to affect the overall purpose of the real

estate development plan, including the establishment and operation

of a valid owners’ association and the protection of rights of

owners and their property values.

SECTION

. NEW LAW A new section of law to be codified

in the Oklahoma Statutes as Section 852a of Title 60, unless there

is created a duplication in numbering, reads as follows:

A. Notwithstanding any governing document language to the

contrary, a real estate development is created by recording a

declaration executed in the same manner as a deed. If the governing

documents provide for any common area, or for the owners to bear a

common expense liability, or for the enforcement of covenants or

restrictions, an owners’ association shall be created upon the

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filing of the declaration. The filing of a declaration requiring

common area ownership or common expense liability or enforcement

shall be prima facie evidence of the creation of the owners’

association at the time of filing. The declaration shall be

recorded in every county in which any portion of the real estate

development is located.

B. In a real estate development, if the right is expressly

reserved in the declaration, the declarant may annex property lying

contiguous to the real estate development by amending the

declaration during the period of time so provided in the declaration

for such annexation.

C. 1. The declaration shall contain:

a. the names of the real estate development and the

owners’ association,

b. the name of every county in which any part of the real

estate development is situated,

c. a legally sufficient description of the real estate

permitted to be included in the real estate

development,

d. a description of any real estate as set forth in the

plat that is or must become common areas,

e. a description of any development rights reserved by

the declarant,

f. if annexation or additional properties may be added to

the real estate development and owners’ association at

a future time, a statement that the declarant has

reserved the right to annex or add contiguous

properties to the real estate development,

g. each pro rata allocation of common expense

liabilities, and

h. initial covenants, conditions, obligations or

restrictions related to the uses or occupancy of a lot

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or other property located within the real estate

development.

2. The declaration may contain any other matters appropriate

for real estate development.

D. 1. Unless otherwise provided, the declaration may be

amended by a majority vote of the then record owners of lots in the

real estate development. The original declarant may provided in the

declaration that as long as the declarant owns a lot within the real

estate development the declarant may unilaterally amend the

declaration. Such unilateral declarant amendments shall be

consistent with the overall plan for the real estate development; or

designed to remedy problems within the real estate development not

anticipated at the time the declaration was filed, and the

amendments cannot significantly increase the common expense

liability for other lot owners. Once more than ninety percent (90%)

of the lots within the real estate development have been sold to

owner occupants, such unilateral amendments can only occur with the

concurrence of a majority vote of the board of directors of the

owners’ association.

2. No action to challenge the validity of an amendment adopted

by the declarant or lot owners pursuant to this section may be

brought more than one (1) year after the amendment is recorded.

3. Every amendment to the declaration shall be recorded in

every county in which any portion of the real estate development is

located and is effective only upon recordation.

4. Amendments to the declaration shall be prepared, executed,

recorded in the office of the county clerk where the real estate

development is located, and certified on behalf of the association

by the president and secretary or other appropriate officers of the

association. The certification shall include a statement that the

required percentage of votes of lot owners approving the amendments

was obtained. The original signatures of the lot owners approving

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the amendments shall be retained in the business records of the

association, and made available for inspection and copying by any

lot owner, or the lot owner’s designated legal, or other

representatives on reasonable advance notice. Amendments adopted

pursuant to the amendment rights of the declarant shall be prepared,

executed and recorded by the declarant.

E. 1. Any development right created or reserved under the

Oklahoma Real Estate Development Act or within the governing

documents may be transferred from the declarant to another person

only by a recorded instrument, other than a deed providing for the

transfer of the development right.

SECTION

. AMENDATORY 60 O.S. 2001, Section 854, is

amended to read as follows:

Section 854. Membership of said owners A. 1. After creating

the owners’ association by the filing of a declaration, the

declarant may organize an owners’ association shall consist of

recorded owners of separately owned lots in the real estate

development. Membership is transferred upon legal transfer of title

to the separately owned lots. The owners association may also

enforce the covenant and restrictions of the real estate development

when specified by the covenants and restrictions as a nonprofit

corporation, trust or other business entity. The membership of the

association at all times consists exclusively of all lot owners.

2. The owners of more than fifty percent (50%) of the lots

within any existing or future real estate development may further

organize an owners’ association into a nonprofit corporation or

other business entity at any time.

B. An owners’ association may exercise the following powers:

1. Adopt and amend budgets for revenues, expenditures,

and reserves and collect both annual and special

assessments;

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2. Impose charges for late payment of assessments,

including interest charges of up to eighteen percent

(18%) per annum and, after notice and an opportunity

to be heard, levy reasonable fines for violations of

the governing documents;

3. Exercise any other powers conferred by the governing

documents;

4. Exercise all other powers that may be exercised in

this state by legal entities of the same type as the

association; and

5. Exercise any other powers necessary and proper for the

governance and operation of the association.

C. Bylaws may be adopted for an owners’ association in any

manner provided by the laws of this state. Bylaws may be recorded

in the office of the county clerk in which the real estate

development is located. If adopted, the bylaws of the owners’

association shall include:

1. The number of members of the board of directors and the

titles of the officers of the owners’ association;

2. Election by the board of directors of a president, vice

president, treasurer, secretary and any other officers of the

owners’ association the bylaws specify;

3. The qualifications, powers and duties, terms of office, and

manner of electing and removing members and officers of the board of

directors and filling vacancies; and

4. Amendment of the bylaws by a majority vote of the board of

directors.

D. Except as provided in the governing documents or limited by

Oklahoma law, the board of directors may act in all instances on

behalf of the association. In the performance of their duties,

officers and members of the board of directors appointed by the

declarant shall exercise the degree of care and loyalty required of

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a trustee. Officers and members of the board of directors not

appointed by the declarant shall exercise the degree of care and

loyalty required of an officer or director of a corporation

organized under the Oklahoma General Corporation Act and in a

fiduciary capacity with regard to the funds and assets of the

association, including maintenance of common areas and improvements.

E. The declaration may provide for a period of declarant

control of the association, during which a declarant, or persons

designated by the declarant, may appoint and remove the officers and

members of the board of directors. Further, as long as the

declarant owns one lot within the real estate development, the

declarant shall have the unilateral right to approve plans for all

initial construction of owner-occupied residences on lots within the

real estate development.

F. Except for approval of initial construction as set forth

herein, declarant control of the owners’ association terminates no

later than the earlier of:

1. Sixty (60) days after conveyance of ninety percent (90%) of

the lots within the real estate development to owner occupants;

2. The date specified in the declaration; or

3. The date the declarant records an instrument transferring

all rights to control activities of the owners’ association to the

lot owners.

G. The declarant shall not turn over control of the owners’

association to the lot owners, until the following have occurred:

1. The declarant delivers the signed originals or duplicate

copies of the original governing documents, including any amendments

thereto, the books and records of the owners’ association, including

resolutions and minutes, the bank statements and financial records

of the owners’ association, including an accounting for funds

received and expenditures made utilizing assessments obtained from

the lot owners, and any unexpected funds collected from the lot

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owners for maintenance of the common areas or operation of the

owners’ association;

2. The common areas and improvements, if any, are deeded to the

owners’ association free and clear of any outstanding claims,

including real property taxes; and

3. The declarant furnishes to the lot owners thirty (30) days’

advance written notice of the intent of the declarant to transfer

control of the owners’ association and responsibility for

maintenance of the common areas and improvements to the lot owners,

including notice of the date, time and location of a meeting. At

the meeting, the declarant will transfer the documents, records,

funds and deed(s) as set forth herein and at expense of the

declarant for orderly transition of control of the owners’

association from the declarant to the lot owners.

H. 1. Not later than sixty (60) days after conveyance of fifty

percent (50%) of the lots to owner occupants, the declarant shall

appoint one owner occupant to the board of directors.

2. No later than the termination of any period of declarant

control, the lot owners shall elect a board of directors of at least

three members, at least a majority of whom must be lot owners. The

board of directors shall appoint the officers. The members and

officers of the board of directors shall take office upon election.

3. Any provision of the governing document notwithstanding, a

quorum is present throughout any meeting of the association if

persons entitled to cast twenty percent (20%) of the votes that may

be cast for election of the board of directors are present in person

or by proxy at the beginning of the meeting.

4. Any provision of the governing documents notwithstanding, a

quorum is deemed present throughout any meeting of the board of

directors if persons entitled to cast fifty percent (50%) of the

votes on that board are present at the beginning of the meeting.

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5. Except as otherwise provided within this section, each lot

shall have one vote in association matters, which may be subject to

a good standing provision. The declaration may provide for the

declarant to have more than one vote per lot, until such time as

declarant transfers control of the owners’ association over to the

lot owners as set forth in subsection G of this section.

SECTION

. AMENDATORY 60 O.S. 2001, Section 855, is

amended to read as follows:

Section 855. The powers granted the owners association under

this act A. The Oklahoma Real Estate Development Act shall apply

only to owners associations all real estate developments created

subsequent to after the effective date of this act. The Oklahoma

Real Estate Development Act and any amendments thereto shall be a

part of the charter or certificate of incorporation of every owners’

association existing on the effective date of this act, except so

far as the same are inapplicable and inappropriate to the objects of

the owners’ association. The provisions of this section shall not

affect or impair as to any owners’ association any rights protected

or guaranteed by the Constitution of this state or the United

States.

B. The requirements of the Oklahoma Real Estate Development Act

shall not apply to nonresidential or commercial real estate

developments.

SECTION

. NEW LAW A new section of law to be codified

in the Oklahoma Statutes as Section 856a of Title 60, unless there

is created a duplication in numbering, reads as follows:

A. Any person owning property in a real estate development or

the owners’ association created under the Oklahoma Real Estate

Development Act shall be entitled to bring an action against any

other person to enforce any of the restrictions and covenants or

obligations under any governing document of the real estate

development. In any action to enforce any restriction and covenant

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or obligation of any governing document pursuant to the provisions

of this section, the prevailing party shall be entitled to recover

reasonable attorney fees to be determined by the court, which shall

be taxed as costs in the action.

B. The association has a statutory lien on a lot for any

assessment levied against that lot or fines imposed against its lot

owner. Recording of the declaration that provides for a common

expense liability constitutes record notice and perfection of the

lien to lot owners taking title subsequent to the filing of the

declaration. The owners’ association lien may be foreclosed in any

manner provided by law for the foreclosure of mortgages or deeds of

trust, with or without power of sale.

SECTION

. REPEALER 60 O.S. 2001, Section 852, is hereby

repealed.

SECTION

. This act shall become effective November 1, 2004.

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