(1) An association may not, after the period of administrative control, bring a legal action against a declarant, a board of directors, or an employee, an independent contractor, or the agent of the declarant or the previous board of directors related to the period of administrative control unless: (a) the legal action is approved in advance at a meeting where owners of at least 51% of the allocated voting interests of the lot owners in the association are: (i) present; or (ii) represented by a proxy specifically assigned for the purpose of voting to approve or deny the legal action at the meeting; (b) the legal action is approved by vote in person or by proxy of owners of the lesser of: (i) more than 75% of the allocated voting interests of the lot owners present at the meeting or represented by a proxy as described in Subsection (1)(a); or (ii) more than 51% of the allocated voting interests of the lot owners in the association; (c) the association provides each lot owner with the items described in Subsection (2); (d) the association establishes the trust described in Subsection (3); and (e) the association first: (i) notifies the person subject to the proposed legal action of the legal action and basis of the association's claim; and (ii) gives the person subject to the claim a reasonable opportunity to resolve the dispute that is the basis of the proposed legal action. (2) Before lot owners in an association may vote to approve an action described in Subsection (1), the association shall provide each lot owner: (a) a written notice that the association is contemplating legal action; and (b) after the association consults with an attorney licensed to practice in the state, a written assessment of: (i) the likelihood that the legal action will succeed; (ii) the likely amount in controversy in the legal action; (iii) the likely cost of resolving the legal action to the association's satisfaction; and (iv) the likely effect the legal action will have on a lot owner's or prospective lot buyer's ability to obtain financing for a lot while the legal action is pending. (3) Before the association commences a legal action described in Subsection (1), the association shall: (a) allocate an amount equal to 10% of the cost estimated to resolve the legal action, not including attorney fees; and (b) place the amount described in Subsection (3)(a) in a trust that the association may only use to pay the costs to resolve the legal action. (4) This section does not apply to an association that brings a legal action that has an amount in controversy of less than $75,000. (5) In a legal action brought by one or more lot owners solely against the declarant before the end of the period of declarant control, a declarant may not use any funds paid by a lot owner to the association to pay for costs of the declarant's legal defense.
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