33-2002. Homeowners' association dwelling actions; conditions

A. Notwithstanding any provision to the contrary in title 10, chapter 39 or chapter 9 or 16 of this title and in addition to any requirements prescribed in the community documents of a homeowners' association, a homeowners' association may file a homeowners' association dwelling action only after all of the following have occurred:

1. The board of directors has provided full disclosure in writing to all members of the association of all material information relating to the filing of the action. The material information shall include a statement that describes the nature of the action and the relief sought including any demands, notices, offers to settle or responses to offers to settle made either by the association or the seller and the expenses and fees that the association anticipates will be incurred, directly or indirectly, in prosecuting the action including attorney fees, consultant fees, expert witness fees, court costs and impacts on the values of the dwellings that are the subject of the action and those that are not. The material information described by this paragraph shall be distributed to all members before the meeting described in paragraph 2 of this subsection occurs.

2. The association has held a meeting of its members and board of directors for which reasonable and adequate notice was provided to all members in the manner prescribed in section 33-1248 or 33-1804, as applicable.

3. The board of directors of the homeowners' association authorizes the filing of the action pursuant to the procedures prescribed in the community documents. At the time of commencing a dwelling action or amending a complaint to add a cause of action for a construction defect, the homeowners' association has an affirmative duty to demonstrate compliance with the procedures prescribed in the community documents and the requirements of this section.

4. The association provides the seller with notice of the alleged construction defects and the right to repair or replace the alleged construction defects pursuant to section 12-1363.

B. If the notice required by subsection A, paragraph 2 of this section is provided to the homeowners' association's members less than sixty days before the expiration of a statute of limitations affecting the right of the association to bring a homeowners' association dwelling action, the statute of limitations is tolled for sixty days. The homeowners' association may meet the remaining requirements of subsection A of this section during the tolling period.

C. Notwithstanding any provision to the contrary in title 10, chapter 39 or in chapter 9 or 16 of this title and in addition to any requirements prescribed in the community documents of a homeowners' association, the board of directors of a homeowners' association or its authorized representative shall disclose in writing to the members of the association a plan that describes the manner in which the proceeds of a homeowners' association dwelling action, whether obtained by way of judgment, settlement or other means, have been or will be allocated. The plan shall be disclosed within thirty days after the association receives the proceeds of any homeowners' association dwelling action. The plan is not binding on the homeowners' association, but the board of directors or its authorized representative must disclose any material changes to the plan to the members of the association within thirty days of making the changes.

D. A homeowners' association shall prepare and preserve for a period of five years records that are adequate to demonstrate its compliance with this section.

E. A director who acts in good faith pursuant to this chapter is not liable for any act or failure to act pursuant to this chapter. In any action filed against a director arising out of any act or failure to act pursuant to this chapter, a director is presumed in all cases to have acted in good faith. The burden is on the party challenging a director's conduct to establish by clear and convincing evidence facts that rebut the good faith presumption.

F. In any contested dwelling action, the seller has standing to assert a failure of the homeowners' association to comply with the procedures prescribed by the community documents and the requirements of this section.