SB12-024, Residential Nonprofits

SB12-024

RESIDENTIAL NONPROFIT CORPORATION REFUNDS AND OPEN MEETINGS

Senator Harvey

Staff Name:  Constance Moylan

What the Bill Does:

SB12-024  has three components. First, it modifies and limits  the obligations of a Residential Nonprofit Corporation  to issue a refund to resident members upon termination of their membership. SB12-024 would limit the refund to transfer of membership and for no other reason. Second, SB12-024 would also modify the current law on obligations between a Residential Nonprofit Corporation and members or their estates who terminate for reasons beyond their control, such as death. SB12-024 would allow the Residential Nonprofit Corporation  to hold the member or their estate liable for any funds that come due up to 30 days past the uncontrolled termination. Finally, SB12-024 also clarifies the Open Meeting Provisions by stating clearly that that sub-committee meetings in which subcommittees have authority to make final decisions for the board must make the agendas and meeting themselves reasonably available and open to members.

 Colorado Context:  Current Colorado Law requires that Residential Nonprofit Corps issue refunds for the following reasons: resignation, termination, expulsion, or suspension from the corporation, or the transfer of the residential membership to another member. The proposed bill would limit these refunds to transfer of membership only.  Also, current Colorado Law does not hold the member or their estate liable for funds due for such period payments that would fall into that 30 days category.  The proposed bill would permit the Residential Nonprofit Corporations to continue to bill and collect fees from members who terminated for reasons out of their control, such as death, or from the deceased member’s estate. The current law affects contracts dated March 2011 or later.[1]

National Context:  Since contract law varies so greatly from state to state, there is no consistent standard for approaching the obligations for refund to resident members.  The assumption is that each party to a contract has the right to contract freely for their own mutual benefit.  The Colorado Statute for Nonprofits Official Comments notes  that this is based on the Uniform Commercial Code Section 1-103, which reads “the principles of law and equity, including the law merchant and the law relative to capacity to contract,” apply here as well. SB12-024 provides greater protection to the corporation than to individual members.[2]

Fiscal Impact: None on state or local revenue or expenditures. The bill impacts the contractual relationship between a residential nonprofit corporation and its residential membership.

[2] Uniform Commercial Code: UCC Section 1-103