(1) DEFINITIONS. In this section: (a) “Reserve funds” means funds derived from assessments against unit owners that are deposited in a statutory reserve account. The term does not include funds for ordinary operations, including amounts held for operational contingencies. (b) “Statutory reserve account” means a separate account established under this section to hold reserve funds. (c) “Statutory reserve account statement” means a statement indicating whether a statutory reserve account has been established for a condominium and, if there is no statutory reserve account, how it is anticipated that future expenditures for the repair and replacement of common elements will be funded. (2) APPLICATION; OTHER RESERVE ACCOUNTS NOT AFFECTED. (a) 1. Except as provided in subds. 2. and 3., this section applies to condominiums consisting exclusively of units that are restricted to residential uses. 2. This section does not apply to a small condominium unless the declarant or the association, with the written consent of a majority of the unit votes, elects to be governed by this section. 3. This section applies to a condominium consisting of both residential and nonresidential units if the declarant or the association, with the written consent of a majority of the unit votes of the residential units and a majority of the unit votes of the nonresidential units, elects to be governed by this section. (b) This section does not affect a reserve account or a similar account existing on November 1, 2004, or a reserve account or similar account established on or after November 1, 2004, that is not a statutory reserve account. (3) NEW CONDOMINIUMS; ESTABLISHMENT OF STATUTORY RESERVE ACCOUNT BY DECLARANT. (a) Except as provided in par. (c), the declarant of a condominium that is created on or after November 1, 2004, shall establish a statutory reserve account when the condominium is created and shall execute a statutory reserve account statement. The declarant shall determine the annual amount to be assessed unit owners for reserve funds after considering the factors under sub. (7) (a) to (e) and, if the condominium is a conversion condominium with more than 4 units, the report prepared under s. 703.33 (2) (cm) 1. (b) Reserve fund assessments for the reserve account established under par. (a) may first be assessed on a particular unit when a certificate of occupancy has been issued that applies to that unit. The declarant may elect to defer payment of the accrued assessments for a particular unit until the first conveyance of that unit. The declarant may not defer payment of accrued reserve fund assessments for more than 5 years from the date the exterior construction of the building in which the unit is located is completed. The declarant is liable for all reserve fund assessments on a unit that accrue before the unit is conveyed. If there are accrued reserve fund assessments against a unit, the declarant shall disclose in writing to the first purchaser of the unit whether the declarant has included any accrued reserve fund assessments in the purchase price of the unit or, if not included, how any accrued assessment will be paid. (c) The declarant may elect not to establish a statutory reserve account under par. (a) at the time the condominium is created or, at any time thereafter, may elect to terminate a statutory reserve account during the period of declarant control under s. 703.15 (2) (c). An election under this paragraph shall be made by executing a statutory reserve account statement. (4) NEW CONDOMINIUM; DETERMINATION BY ASSOCIATION TO ESTABLISH STATUTORY RESERVE ACCOUNT. If a declarant has elected under sub. (3) (c) not to establish a statutory reserve account or to terminate an account, establishment of a statutory reserve account shall be addressed at the first annual meeting of the association held after, or at a special meeting of the association held within one year after, the expiration of any period of declarant control under s. 703.15 (2) (c). A statutory reserve account is established under this subsection with the written consent of a majority of the unit votes. If a statutory reserve account is established under this subsection, the association shall execute a statutory reserve account statement. (5) EXISTING CONDOMINIUMS; STATUTORY RESERVE ACCOUNT UNLESS ELECT OTHERWISE. The association for a condominium created before November 1, 2004, shall, within 18 months after November 1, 2004, or within 18 months after the expiration of any period of declarant control under s. 703.15 (2) (c), whichever is later, establish a statutory reserve account unless the association, with the written consent of a majority of the unit votes, elects not to establish a statutory reserve account. Upon the establishment of or the election not to establish a statutory reserve account, the association shall execute a statutory reserve account statement. (6) ELECTION BY ASSOCIATION TO ESTABLISH OR TERMINATE STATUTORY RESERVE ACCOUNT. (a) If an association elects not to establish a statutory reserve account under sub. (4) or (5), or if an association elects to terminate a statutory reserve account under par. (b), the association may at any time thereafter elect to establish a statutory reserve account with the written consent of a majority of the unit votes. (b) An association may, at any time with the written consent of a majority of the unit votes, terminate a statutory reserve account established under par. (a) or sub. (3) (a), (4), or (5) except that a statutory reserve account established by a declarant under sub. (3) (a) may not be terminated until after the expiration of any period of declarant control under s. 703.15 (2) (c). (c) Upon the establishment or termination of a statutory reserve account, the association shall execute a statutory reserve account statement. (7) RESERVE FUND. If there is a statutory reserve account for the condominium, the annual budget adopted under s. 703.161 shall provide for reserve funds. Reserve funds may be used as provided in sub. (8). The association shall determine the amount to be assessed unit owners for reserve funds after considering all of the following: (a) The reserve funds currently in the statutory reserve account. (b) The estimated cost of repairing or replacing common elements, other than routine maintenance. (c) The estimated remaining useful life of common elements. (d) The approximate proportion of the estimated cost of repairing or replacing common elements that will be covered by the statutory reserve account and the approximate proportion that will be funded by other means. (e) Any other factor that the association considers relevant. (8) USE OF STATUTORY RESERVE ACCOUNT. (a) Except as provided in par. (b), funds in a statutory reserve account may be used for the repair and replacement of common elements, other than routine maintenance. (b) Funds in a statutory reserve account may be used for normal repair or maintenance, customary services, or other operational costs in excess of amounts budgeted and any contingency funds available for these purposes, with the written consent of at least two-thirds of the unit votes. Funds from the statutory reserve account used under this paragraph must be replaced within 3 years from the date of withdrawal. (9) PERMITTED INVESTMENT OF RESERVE FUNDS. Reserve funds may be invested in any of the investments listed under s. 66.0603 (1m) (a). (10) LIABILITY IMMUNITY. No declarant, unit owner, association, or director, officer, manager, or employee of an association is liable in connection with the establishment or termination of, or decision not to establish or terminate, a statutory reserve account or for any deficiencies in the statutory reserve account that relate to the determination of amounts to be assessed for reserve funds. This subsection is in addition to any other liability protection available under law. (11) RECORDING OF STATUTORY RESERVE ACCOUNT STATEMENT. Each statutory reserve account statement executed under this section shall bear the name of the condominium as it appears on the declaration, shall be prepared in the standard format for recorded documents under s. 59.43 (2m) and (5) (a), shall comply with s. 706.05 (2) (a) and (b), and shall be recorded with the register of deeds of the county where the condominium instruments are recorded.
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