70-23-1101. Conversion of condominium to townhouse. (1) A condominium may be converted to a townhome or townhouse only if:

(a) no other structure occupies the vertical air space above or below the unit's converted footprint;

(b) all condominium units subject to the recorded condominium declaration are simultaneously converted to townhome or townhouse units; and

(c) all of the unit owners owning units subject to the recorded condominium declaration consent to the conversion by executing and recording an instrument to that effect and adhering to the requirements of this section.

(2) If a condominium unit is affected by a lien, the unit owner shall obtain the lienholder's written consent to the conversion. If a lienholder does not provide written consent to the conversion, the unit owner may consent on behalf of the lienholder only according to the following provisions:

(a) The unit owner shall deliver by certified mail, return receipt requested, to each affected lienholder or its servicer at the address specified in the recorded trust indenture or mortgage, the address specified in the last recorded assignment of the trust indenture or the mortgage, if any, and the address specified in the last mailed request for loan payment the following documents:

(i) written notification pursuant to 70-23-1102;

(ii) a litigation guarantee, provided that:

(A) the form of the guarantee has been approved by the insurance commissioner and is issued by a licensed title insurance producer;

(B) the guarantee was ordered on the unit by the person required to give notice; and

(C) the guarantee lists the identities and addresses of the parties of record that have an interest in or a possible claim of an interest in the unit designed to disclose all parties of record that would otherwise be necessary to name in a quiet title action;

(iii) the proposed declaration and bylaws for the converted townhomes or townhouses that:

(A) provides that the percentage of the undivided interest of each unit owner in the common area is the same as the percentage of undivided interest owned by the owner in the common elements prior to the conversion; and

(B) provides for the continuation of the prior condominium association of unit owners as a townhouse association of unit owners;

(iv) a surveyed site plan that:

(A) includes the boundaries of the footprint beneath each converted unit and any limited common elements, such as decks, patios, and walkways, that will be included in the conversion; and

(B) depicts the corners and boundaries of the property underlying each converted townhome or townhouse; and

(v) an appraisal of the fair market value of the unit presuming that the unit had been converted to a townhome or townhouse for the purpose of establishing that the fair market value of the unit as a townhome or townhouse is not less than the fair market value of the existing condominium unit.

(b) Within 120 days of the date of the mailing in subsection (2)(a), a lienholder may object only by:

(i) recording its objection with the office of the county clerk and recorder of the county in which the unit is situated; and

(ii) mailing notification of its objection by certified mail, return receipt requested, to the unit owner at the address specified on the notice of intent received pursuant to 70-23-1102.

(c) If a lienholder does not register an objection pursuant to subsection (2)(b), the lienholder is considered to have consented to the conversion after the expiration of the 120-day period.

(3) (a) Except as provided in subsection (3)(b), if the unit subject to conversion is not affected by a lien or if each lienholder has consented or is considered to have consented to the conversion pursuant to this section, the conversion is effective upon the recording of all of the following documents pertaining to each of the condominium units on the property with the office of the county clerk and recorder of the county in which the property is situated:

(i) an affidavit stating that the owner mailed the required notices of intent pursuant to 70-23-1102;

(ii) the declaration and bylaws, which must be substantially the same as the proposed declaration and bylaws specified in subsection (2)(a)(iii);

(iii) the surveyed site plan referenced in subsection (2)(a)(iv); and

(iv) evidence of the written consent of each affected lienholder. Sufficient evidence of written consent may be made through documents including but not limited to deeds, loan modifications, or the instrument reflecting a unit owner's consent on behalf of the lienholder as provided in 70-23-1103.

(b) If a lienholder is considered to have consented pursuant to subsection (2)(c), the unit owner may record the documents within 45 days after the expiration of the 120-day period provided in subsection (2)(b).

History: En. Sec. 1, Ch. 323, L. 2019.