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Recent Changes in Kentucky Condominium Law
Erik C. Lattig
With the passage of the Kentucky
Condominium Act (KCA) during its
2010 legislative session, the Kentucky
General Assembly undertook a complete
overhaul of existing condominium laws in the
Commonwealth.
Sponsored by Rep. Scott Brinkman (District
32), the legislation was signed into law by
Governor Steve Beshear in early April and
will take effect on January 1, 2011. The effort
to modernize Kentucky’s condominium law
involved a five year process of research,
comment and discussion involving interested
parties across the state with the KCA being
modeled largely after the Uniform Condominium
Act of 1980 (UCA) promulgated by
the National Conference of Commissioners
on Uniform State Laws.
Although modeled after the UCA, the drafters
chose not to adopt some twenty sections of
the UCA’s first four Articles nor Article 5 of
the uniform act (which sets up a regulatory
regime for condominiums).
Notable omissions from the UCA include
provisions requiring the issuance of a public
offering statement for certain condominium
regimes and protections for renters in the
event of a conversion of a condominium to a
non-condominium form of ownership.
Nonetheless, an overhaul of Kentucky
condominium law was long overdue as the
existing Horizontal Property Law, codified
under Sections 805 through 910 of Chapter
381 of the Kentucky Revised Statues (KRS),
was enacted in 1962 and was based largely
on so-called “first generation” condominium
acts from other jurisdictions, most notably
the Puerto Rico Horizontal Property Act
of 1958.
Applicability
As a general rule, the KCA applies to all condominium
regimes created after its effective
date. Although existing regimes will continue
to be governed by the current law, there are
several important exceptions to this rule.
First, an existing condominium regime may
choose to subject itself to the provisions of
the KCA. However, this may prove difficult to
achieve, especially in large condominiums, as
a unanimous vote of approval in which 100
percent of the unit owner’s participation is
required to opt in to the new Act.
As a practical matter, achieving unanimity
on any issue confronting an existing condominium
regime is a daunting task, as many
practitioners in this area can certainly attest.
In addition, if a condominium chooses to opt
in, the KCA also requires modification of the
declaration, bylaws, plats and plans of the
regime where necessary to comply with the
requirements of the Act.
Second, certain sections of the KCA will
have applicability to all condominiums
regardless of when they were created.
However, those sections of the KCA with
retroactive applicability will only apply to
existing condominiums to the extent the
events or circumstances involved occur after
the effective date of the Act.
For example, a resale of a unit in an existing
regime which occurs before January 1, 2011
will not be subject to the provisions of these
retroactive sections whereas the resale of a
unit after January 1, 2011 will be subject to
the new rules, even though the unit is part
of a condominium created under the current
law. Those sections which have retroactive
applicability are enumerated in Section 2(2)
of the KCA and include the following:
Section 5
(creating separate title to units and
providing for separate taxation and
assessment of individual units);
Section 6
(maintaining the applicability of existing
ordinances, regulations and building
codes);
Section 7
(providing new rules for taking or partial
taking by eminent domain);
Section 15
(construction and severability of declarations
and bylaws, applicability of
the rule against perpetuities and the
marketability of title to units or common
elements where a declaration is
defective);
Section 16
(requirements for a legally sufficient
description of individual units);
Section 34
(powers, rights and duties of the association);
Section 35
(powers, rights and duties of the executive
board of an association);
Section 42
(creates protections for unit owners
from tort claims filed against the declarant
or the association);
Section 47
(creation, perfection and priority of
liens for unpaid assessments); and,
Section 49
(financial reporting requirements for
condo associations).
Section 3 of the KCA sets forth the definitions
for the Act, and while this section as a whole
does not have retroactive applicability, it will
apply to the extent necessary in construing
the retroactive sections listed above.
The third exception to the retroactive applicability
of the above referenced sections of KCA
to existing condominium regimes deals with
amendments to existing (pre-Act) regimes. As
noted above, Section 2(3) of the KCA requires
any amendment (made after January 1, 2011)
to the declaration, bylaws, plats or plans of
an existing condominium to conform to the
requirements of the KCA.
Furthermore, amendments that comply with
requirements of the KCA are valid even if they
violate the existing horizontal property law.
It also bears noting that if an amendment to
an existing condominium regime grants any
person rights, powers or privileges under the
KCA, then that person will also be subject to
the KCA’s correlative obligations, liabilities
and restrictions.
Finally, Section 2(6) of the KCA also requires
that all amendments to the declaration for
an existing regime be adopted in conformity
with the procedures and requirements
specified by the original condominium
instruments (such
as a master deed or
declaration) and by
the KCA.
As a general rule,
Section 28 of the
KCA states in part
that except as otherwise
provided in
subsection 4 of Section 28, all amendments
require approval by 67 percent of the unit
owners. The exception to this approval
threshold set forth in Section 28(4) states
that “an amendment shall not create or
increase special declarant rights, increase
the number of units, change the boundaries
of any unit, the allocated interests of a unit,
or the uses to which any unit is restricted,
in the absence of unanimous consent of the
unit owners.”
Thus where the master deed for an existing
declaration requires, for example, a simple
majority vote of the council of co-owners, if
the master deed is amended subsequent to the
effective date of the Act, the question arises as
to the voting threshold that must be reached in
order for the amendment to be valid.
Is the simple majority required under the
existing master deed sufficient? Or would
the higher 67 percent threshold set forth in
Section 28 be required (or even unanimous
consent in the case of those matters listed in
Section 28(4))?
It is likely that a court interpreting Sections
2(6) and 28 of the KCA as those provisions
apply to amendments of pre-Act regimes
would take the position that the higher
threshold must be complied with. However,
a definitive answer to these questions may
not be available until corrective legislation is
enacted or these provisions of the KCA are
interpreted by Kentucky courts.
The final exception to the rule of retroactive
applicability is the power granted to
the executive board of an existing pre-KCA
condominium under Section 2(5) of the
Act to rely on its provisions to deal with
any situation that “presents a public safety
or public health issue to one or more unit
owners in the association.” The board may
utilize this power even where doing so
[O]ne of the purported benefits
of this statutory overhaul
is to include broader, more
ex tensive definitions than
could be found in the existing
horizontal property law.
would explicitly violate its own declaration
or bylaws.
Important Changes
According to the drafters of the KCA, one
of the purported benefits of this statutory
overhaul is to include broader, more extensive
definitions than could be found in the existing
horizontal property law.
One of the most important definitional
changes is the revision of the restrictive definition
of the term “unit” found in KRS 381.810.
Under the existing law, a “unit” is defined as
“an enclosed space as measured from interior
unfinished surfaces consisting of one or
more rooms occupying all or part of a floor
in a building of one
or more floors or
stories regardless
of whether it be designed
for residence,
for office, for the
operation of any industry
or business,
for any other type
of independent use
or any combination of the above uses.”
This definition limited the types of property
to which the condominium form of ownership
could be applied. Conversely, the KCA
provides a much broader definition of the
term in Section 3(23), defining it as “a physical
portion of the condominium designated
for separate ownership, the boundaries of
which are described in Section 17 of this Act
[which sets forth the required contents of a
condominium declaration].”
As a result, the condominium form of ownership
can be used for a variety of property
interests in Kentucky, including boat docks,
parking slots or camp sites.
Another important change brought about by
the KCA is the addition of provisions governing
the transition of control of the condominium
from the declarant to the association.
The existing horizontal property law did not
explicitly define how control shifted from the
developer to the council of co-owners with
the issue to be determined by the provisions
of the master deed. Under Section 33 of the
KCA, the unit owners’ association must be
organized “no later than the date the first
unit in the condominium is conveyed” unless
otherwise stated in the declaration.
The KCA also permits the declaration to
provide for a period of declarant control
of the association. During this period of
control, the declarant (or someone he or she
has appointed) may appoint and remove the
officers and members of the executive board.
However, the KCA also imposes limits on the
period of declarant control.
The period will automatically terminate within
the indicated timeframe if any of the following
benchmarks are reached: (i) sixty days after
the conveyance, to unit owners other than
24 Louisville Bar Briefs
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