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The Kentucky Condominium Act 

KRS 381.9101 to 381.9207 became in effect on January 1, 2011 and was amended effective April 1, 2012. Below are some important highlights, for the full act please click here and scroll down until you reach the start at 381.9101.  

Why is a New Condo Act Required?

  • Previously condominiums were governed under the ‘Horizontal Property Act’ that was passed into law in 1962
  • The New Law is modeled after the Uniform Condominium Act developed in mid 1980’s
  • The underlying purposes and policies of this Act are to simplify, clarify, and modernize the law governing condominiums and to make uniform the law among the various jurisdictions
  • Improve consumer protection
  • Update the law to reflect new types of condominium developments

Who does the Act Impact?

  • Developers of Condominium Projects
  • Condominium Owners
  • Condominium Boards
  • Buyers & Sellers of Condominiums
  • Association Managers
  • Association Attorneys and CPA’s
  • Bankers and Mortgage Companies
  • Insurance Companies
  • Realtors

Provisions relating to existing condos:

KRS 381.9109 Gives a clear formula for:
  • Tax assessment by unit,
  • Homesteads for residences

KRS 381.9111
  • Prohibits zoning discrimination

KRS 381.9113
  • Provides a formula for eminent domain
  • takings and allocations of awards

KRS 381.9129
  • Construes bylaws as severable and not against the rule on perpetuates
  • Identifies priority of documents

​​KRS 381.9131 Contains unit description rules for:
  • Deed recordings
  • At the Courthouse in County of the property

KRS 381.9167
  • Empowers the board to amend bylaws, adopt and amend budget, enter contracts, obtain insurance, etc.
  • Create and levy fines for violations
  • Impose charges for certificates
  • Impose Emergency Assessments

KRS 381.9167 Emergency Assessment Clause for all existing and new projects
  • Available regardless of declaration
  • Is not a Special Assessment
  • Must have “judicial order” or “Opinion fixed with a professional seal” from architect or engineer
  • Two ways to initiate:
                Approval by 75% of the Total Board of Directors 
                Approval by a majority vote of owners present at a special membership meeting
  • ​​Assessment may be lessened or rescinded by simple majority vote of the total owners

​KRS 381.9169 
Existing and New Projects Control turned over to Homeowners not later than-
  • 60 days after 75% units conveyed or
  • 2 years after right to add more units expires
  • 7 years after first unit conveyed other than declarant

New Board Adopted Budget Process
  • To owners within 30 days after Board adopts
  • If an increase of greater than 15%, schedule a special meeting set to consider ratification
  • Budget is deemed ratified unless a majority of total owners vote to reject the budget

KRS 381.9183
  • Tort liability formula for developer, board, and owners
  • Declarant/Developer cannot waive liability

KRS 381.9193
  • Automatic Liens for assessments and fines
  • 5-year lien limit - Includes collection costs and Legal Fees

KRS 381.New Section #
​Director and Officer Conduct Standards
  • Defines the Standard of conduct that already exists for not-for-profit corporations (KRS 273.00)
  • Improved definition of Fiduciary Responsibility
  • Discharge their duties:
                In good Faith;
                On an informed basis;
                In the best interest of the association and members
  • Extends standard of care to unincorporated condos

​Provisions relating to new condos filed after January 1, 2011

  • ​381.9109 Provides for separate unit assessments
  • 381.9119 Provides intent to modernize condo laws
  • 381.9121 Provides severability of laws
  • 381.9123 Provides obligation of good faith
  • 381.9125 Provides for recording of declarations
  • 381.9127 Provides for unit boundaries
  • 381.9133 Provides for Declaration contents
  • 381.9135 Provides for Leasehold Condominiums
  • 381.9137 Provides for allocation of interest/voting
  • 381.9139 Provides for limited common elements
  • 381.9141 Provides requirements for plats and plans
  • 381.9143 Provides for development rights/duties
  • 381.9145 Provides for alteration of units
  • 381.9147 Provides for relocation of unit boundaries
  • 381.9149 Provides for subdivision of units
  • 381.9151 Provides for easements/encroachments
  • 381.9155 Provides for Amendment rights
  • 381.9157 Provides for rights of Termination
  • 381.9159 Provides for Lenders Rights
  • 381.9161 Provides for Master Association Rights
  • 381.9163 Provides for Merger/Consolidation
  • 381.9165 Provides for Association Organization
  • 381.9171 Provides for Transfer of Declarant Rights
  • 381.9173 Provides for Bylaws requirements
  • 381.9175 Provides for Upkeep/Maintenance
  • 381.9177 Provides for Meeting Requirements
  • 381.9179 Provides for Quorum Requirements
  • 381.9181 Provides Rules for Voting and Proxies
  • 381.9185 Provides for Common Element Conveyance/Encumbrance
  • 381.9187 Provides for Insurance Rights
  • 381.9189 Provides Rules for Surplus Funds
  • 381.9191 Provides Assessment Provisions
  • 381.9195 Provides Rules for Other Liens
  • 381.9199 Provides for Association as Trustee
  • 381.9201 Provides Waiver Rules for Certificates
  • 381.9203 Provides Rules upon Unit Resale
  • 381.9205 Provides for Release of Liens
  • 381.9207 Provides for Declarant’s Duty to Complete and Restore

Key Takeaways​

1.    The rules have changed
2.     Accountability of Boards & Directors has increased
3.     Managing tomorrow the same way as you have for past ten years is asking for trouble (lawsuits)
4.     Many aspects are more important
  • Disclosure documents
  • Recording Board Actions in Meeting Minutes
  • Financial Management
                1. Improving quality of financial records
                2. Budgeting & Budget approvals
                3. Annual external reviews and audits
                4. Long term financial planning
  • Owner – Board communications

​Impact on Board Operations

  • Boards need to discharge their duties:
                In good faith;
                On an informed basis;
                In the best interest of the association & members
  • Long Term Replacement and Financial Planning are more important
                Reserve Studies to plan Capital Expenditures
                Regular Dues Increases vs. Special Assessments
                Deferred maintenance leads to “Death Spiral”
  • ​Maintain Accurate Minutes & Records
                ​Discussions of Special Assessments should be recorded and then disclosed

Financial Management – KRS 381.9197

  • Financial records and Financial Statements must be in accordance with Generally Accepted Accounting Principles (GAAP)
  • Annual external preparation of Financial Statements in accordance with the following income standards:
                <$100,000; Report of receipts and disbursements
                $100,001 & $250,000; Standards of Compilation
                $250,001 & $500,000: Standards of a Review
                >$500,001; Standards of an Audit​
  • Boards have the authority and sole discretion to increase the standard of preparation

Financial Information Disclosures

  • Total Amount of Reserve Funds
  • Capital Expenditure Plan
  • Current Balance Sheet and Income & Expense Statements
  • Current Year Budget
  • Special Assessment History & Projection
  • Report the date of the last available externally prepared financial statement

​Resale Seller Disclosure – KRS 381.9203

​The Kentucky Real Estate Commission (KREC) has a form you can use and can be downloaded here
  • The KREC form can be used but it is not required, you can create your own form but make sure all the information is covered.
  • Header information identifies the property to be sold and its location
  • Item A; association’s right of first refusal
  • Item B; amount of the monthly common expense assessment
  • Item C; amount of all unpaid assessments
  • Item D; any other unpaid amounts that are due
  • Item E; Capital expenditures for the current year and the next two years
  • Item F; Amount of Reserves for Capital expenditures for the current year and the next two years
  • Item G; Copies of the Current Operating Budget and most recent Balance Sheet and Income and Expense Statements 
  • Item H; Date of the most current financial report prepared for the association per KRS 381.9197
  • Item I; amount of any unsatisfied judgments against the association
  • Item J; Disclosure of any legal suits in which the association is a named party and the amount in dispute or contest is more than $10,000 
  • Item K; If the association maintains insurance attach a copy of the Insurance Certificate
  • Item L; Disclosure of any leasehold estate
  • Item M: Name and mailing address of the association manager or Authorized agent
  • Signature of person preparing the certificate
  • Attachments:
                Operating Budget, Balance Sheet and Income Statement
                Insurance Certificate
                Governing documents; Declaration, Articles of Incorporation,
                Bylaws and Rules of the association

  • Significant Considerations
                Recommend that the association add a disclaimer statement to the Certificate stating the information is accurate as                 of the date of issuance and that the information is subject to change at anytime without notice
                The association cannot deny the validity of any statement contained in the certificate
                Association may charge for the preparation in an amount not to exceed 80% of one month’s assessment up to                 maximum of  $225
                May charge $50 for an update to a previously issued certificate
  • Association’s need to keep track of every certificate issued for their own records
                Include a copy of the actual certificate