KY Condo Laws October 2012

Update – Kentucky’s Condominium Law

Its Protections for Condominium Purchasers and Sellers

Condominium buyers should routinely request a Condominium Seller’s Certificate.  It works, for buyers of condominiums, much like a Seller Disclosure works for other buyers — except the Certificate has to be requested.

Condo buyers and inspectors are better informed if they get a Certificate, just it is they are when home buyers get a Seller Disclosure, and integrate the disclosures in the contract and inspection reports.

Requirements for the condo disclosure rules are set out in Kentucky’s January 1, 2011 Condominium Act (the “Condo Act”), at KRS 381.9101 to 381.9207.  The amendments became effective on April 11, 2012.

The Condo Act amendments includes provisions intended to further protect condo purchasers and sellers.  The Protection of Condominium Purchasers provisions in the Kentucky Condominium Act are: KRS 381.9201, 381.9203, 381.9205 and 381.9207.

For example, there are new ethical standards for board members and officers of a condominium association, which were not included in the law as enacted in 2011.

Moreover, a board member is required to “discharge his or her duties as an officer or a member of the executive board, including his or her duties as a member of a committee: (a) in good faith; (b) on an informed basis; and (c) in a manner he or she honestly believes to be in the best interests of the corporation.”  KRS 381.9170.

Under the amended law, a condominium association is still required to complete a certificate containing information about: restrictions, assessments or other fees, expenses, reserves for capital expenditures, and any lawsuits or unsatisfied judgments against the association. However, there are a few changes to the law regarding the required content for the certificate. Consequently, the Commission-approved Condominium Seller’s Certificate form (Form M107) has been revised. The revised form, which may be used to satisfy the certificate requirement in the amended 2011 Condo Act, can be accessed from the Commission’s website www.krec.ky.gov and from the following link: Condominium Seller’s Certificate

Notably, the amended 2011 Condo Act clearly states that the certificate is not required in the case of: (1) a gratuitous disposition of a unit, (2) a disposition pursuant to a court order, (3) a disposition by a government or governmental agency, (4) a disposition by foreclosure or deed in lieu of foreclosure; (5) a disposition to a person in the business of selling real estate who intends to offer those units to purchasers, and where the purchaser has modified or waived the statutory certificate requirements by agreement, or (6) a disposition that may be canceled at any time and for any reason by the purchaser without penalty. KRS 381.9201(2).  If none of these exemptions apply, then the condominium certificate requirements must be satisfied.

Licensees should become familiar with the statutory requirements concerning the provision of the Condominium Seller’s Certificate. For this reason, the Commission has prepared an outline of the certificate requirements in KRS 381.9203, which includes the rights, responsibilities and protections that they provide for purchasers, sellers, and the licensees who represent them. The outline (Form M108) can be accessed from the Commission’s website and from the following link: Condominium Seller’s Certificate Requirements Outline

Finally, if a licensee has a seller-client who does not know, or is uncertain about, whether the property to be sold is or is not subject to the requirements of the amended 2011 Condo Act, then the licensee should advise the seller-client to contact a private attorney. A private attorney can review the documents that govern the association (particularly, the declaration or master deed)—and, thereafter, provide the seller with the legal advice that he or she needs. NOTE: NEITHER A LICENSEE NOR THE COMMISSION CAN PROVIDE THIS SERVICE. Licensees are not authorized to provide it because they do not possess a license to practice law, and the Commission lacks jurisdiction over such matters.

Specifically, Kentucky’s updated condominium law provisions are not included in Kentucky’s real estate license laws, KRS Chapter 324. They are found in KRS Chapter 381 and can be accessed from the following website: http://www.lrc.ky.gov/KRS/381-00/CHAPTER.HTM

Moreover, as KRS 324.2812 states, the Commission does not have any jurisdiction over “community association managers and the management or business activities of not-for-profit community associations, which include townhouse, condominium, homeowner, or neighborhood associations.” Again, if you have questions or concerns in these areas, a private attorney should be contacted.

1 See

2 See

3 See

4 See

Kentucky’s Condominium Seller’s

Certificate Requirements Outline

(Revised May 2012)

On April 11, 2012, amendments to Kentucky’s January 1, 2011 Condominium Act (hereafter, the “2011 Condo Act”)1 became effective. These laws include provisions to protect condominium purchasers and sellers, as well as the licensees who represent them. Licensees should become familiar with the statutory requirements concerning the provision of the Condominium Seller’s Certificate. For this reason, the Commission has prepared the following outline of the certificate requirements in KRS 381.9203:

I. RIGHTS OF CONDO PURCHASERS:

A. A condo purchaser has a right to receive:

1. A certificate, which satisfies the requirements in KRS 381.9203, and is “current to the date of issuance and signed and dated by the association’s manager or authorized agent”2;

2. A copy of the following association records:

a. the declaration, other than the plats and plans;

b. the bylaws; and

c. the rules or regulations;

B. If an association fails to provide a completed certificate or if it is provided later than ten (10) days after the condo unit owner/seller requests it, then the condo purchaser’s contract to buy will be voidable “until the certificate has been provided and for five (5) days thereafter or until conveyance, whichever first occurs.”3

C. Failure to provide a certificate does not void a deed to a purchaser.4

II. CONDO SELLER’S RESPONSIBILITY & PROTECTION & LICENSEE PROTECTIONS:

A. If none of the certificate exemptions listed in KRS 381.9201(2) apply, then a seller of a condo unit must furnish the above-listed documents to a condo purchaser, “before execution of any contract for sale of a unit, or otherwise before conveyance.”5 (Emphasis added).

B. Neither a condo unit owner nor his or her agent providing a purchaser with the certificate issued pursuant to the updated condo law will be held liable to the purchaser:

1. if the association fails or delays to timely provide the required certificate; or

2. if the association provides and includes any erroneous information in the certificate.

III. THE ASSOCIATION’S RIGHTS & RESPONSIBILITIES:

A. An association has the right to charge a “reasonable” fee:

1. to prepare the certificate required in KRS 381.9203, but the fee for this service “shall not exceed the lesser of two hundred twenty-five dollars ($225) or eighty percent (80%) of the current monthly assessment fee charged that unit by the association.”6 (Emphasis added).

2. to update a previous certificate issued in the same fiscal year of the association, but the fee for this service shall not exceed fifty dollars ($50). 7

3. to provide a condo unit owner with a copy of the association’s year-end financial report, upon request and payment of the association’s fee for providing this service.

B. An association must:

1. Furnish the required certificate to the seller of a unit, within ten (10) days after receipt of the unit owner’s written request, to enable the unit owner to furnish it to “a purchaser or purchaser’s agent before execution of any contract for sale of the unit, or otherwise before conveyance by the unit owner”;8 (Emphasis added).

2. Keep sufficient details in its financial records to enable the association to satisfy the certificate requirements;9

3. Prepare all financial statements in accordance with generally-accepted accounting principles, excluding the statement of cash receipts and disbursements which must be kept on a cash basis.10

C. Failure to provide a certificate does not void a deed to a purchaser.11

IV. IMPORTANT REMINDERS:

A. If a licensee has a seller-client who does not know, or is uncertain about, whether the property to be sold is or is not subject to the requirements of the amended 2011 Condo Act, then the licensee should advise the seller-client to contact a private attorney.

B. Kentucky’s updated condominium law provisions are not included in Kentucky’s real estate license laws, KRS Chapter 324. They are found in KRS Chapter 381 and can be accessed from the following website: http://www.lrc.ky.gov/KRS/381-00/CHAPTER.HTM

C. The KREC does not have any jurisdiction over “community association managers and the management or business activities of not-for-profit community associations, which include townhouse, condominium, homeowner, or neighborhood associations.”12

1 See KRS 381.9101 to 381.9207.

2 See KRS 381.9203(1).

3 See KRS 381.9203(3).

4 See KRS 381.9203(5).

5 See KRS 381.9203(1).

6 See KRS 381.9167(1)(l).

7 See KRS 381.9167(1)(l).

8 See KRS 381.9203(1).

9 See KRS 381.9197(1).

10 See KRS 381.9197(1).

11 See KRS 381.9203(5).

12 See KRS 324.2812.

 Download the Sellers Certificate Click Here

 

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