Categories
Arizona HOA Laws

Bomb or a Balm? Navigating New Technologies for Associations with Aplomb

Virtual Meetings and Electronic Voting for Arizona HOA Boards

Our Associations have taken notice of the efficiencies and cost savings offered by new virtual methods of public. They are simply too good to be ignored. But their dangers are not always obvious.

While our advice may be cutting edge, the legal landscape we live and work in is still digitally lacking. Our statutes and community documents still require notice be sent postage paid. Exceptions carved out in the law for remote meetings were intended to address the advent of Telephone Conferencing, not computers. We expect the legislature may hear something about electronic mail in the next decade or so. Until then, we have no guidance beyond the statutes… and our wits. How is an Association to know if a technology solution is a balm or a bomb?

Well, it requires a case-by-case assessment by a qualified attorney! But before we get to our shameless plug, let’s take a look at the two most popular and impactful technologies we get questions about all the time: virtual meetings and electronic mail!

Virtual Meetings – Balm for a Tortured Board?

Virtual meeting technology synergizes well with Arizona open meetings laws! The archaic telephone conferencing laws we mentioned are very helpful here. Virtual meetings are not a solution for every problem, but these following pointers will help you identify the pitfalls and powers presented by taking your meetings into virtuality:

  1. Check with counsel before adopting virtual, digital, or electronic technologies. Your Association may have terms in the CC&Rs, Bylaws, or Articles of Incorporation that pose a unique obstacle to your Association’s adoption of a new technology for operating purposes. Let counsel identify these issues first, lest an unsavory Member do so after the next annual meeting.

  2. Don’t assume your Members are tech savvy! Provide your Members clear instructions for attending virtual meetings. Include directions on downloading and using the virtual meeting client, with clear instructions for each attendance option offered. Don’t be surprised if some of your Members still have issues!

  3. Use a service that provides a direct dial-in option. It is nearly guaranteed that someone in your Association will be unable to access the meeting virtually. Always provide a dial-in option.

  4. Use a service that has tools that let you control the meeting, instead of allowing the meeting to control you! Look for options that allow you to: (1) control who accesses the meeting; (2) add and remove folks from the meeting quickly and easily; (3) mute meeting attendants; (4) easily record and share recordings of meetings; (5) control and moderate the in-meeting text chat.

  5. Assign someone to be Meeting Manager. The Meeting Manager is responsible for muting, un-muting, managing waiting rooms, moderating in-meeting chat, and any other tasks that are necessary to run the virtual meeting. Thanks Meeting Manager!

  6. Configure your service so that attendees join the meeting muted. When it is time for attendee participation, any attendee wishing to speak can inform the Meeting Manager via in-meeting chat.

  7. Have a clear, noticed virtual meeting procedure that includes a way for Members to have an opportunity to speak reasonably on issues during the meeting.

Electronic Mail for Associations – Avoiding a Ticking Time Bomb?

Your email procedure must be very precise to meet Arizona open meeting requirements. In Arizona, the Attorney General has opined that deliberations and voting conducted via email violate the open meeting law statutes.  The Arizona Legislature has made clear that is policy is to strive for as much transparency as possible.  When a quorum of the Board is discussing association business via email, that Board may be violating the open meeting laws.  Even if discussing an executive matter, the Members have a right to know that the meeting is taking place, and 48 hours’ notice is required.

We advise approaching email with caution. Email is problematic because it is not easily controlled. A member can include, exclude, forward, copy, blind copy, or spam anyone that they wish with little to no recourse.  We advise only deliberating and voting via email in the event of an emergency.  The Arizona Planned Community and Condominium Acts provide that an emergency meeting may be held if the matter cannot wait the 48 hours required for notice.   In that case, the emails can serve as the minutes of the meeting. 

A Board Member keeps leaving Sally off the thread? The Board is meeting by email to discuss topics that are not technically privy to executive session? The Association is not maintaining complete records of emails subject to open meeting requirements? A Member doesn’t have email or email access? These and many other scenarios could lead to an open meeting violation by your Association. And they are no fun. Trust us.

However, your Association may have an interesting or useful role for email in your community. In that situation, if you wish to proceed with incorporating email or any other technology into your Association’s process responsibly, we strongly advise that you obtain…

An Experienced Arizona HOA Attorney

The Brown Law Group specializes in HOA representation in Arizona.  Our firm only represents homeowners associations and condominium communities in the state.  We routinely work with associations to make sure their board meetings are adhering to open meeting laws in Arizona.  We can also review any changes your association has made during the past year to use technology in your voting process.  It is understandable to want to use technology wherever possible to make meeting and voting decisions easier, but these choices can cause more problems down the road for an association if they are not done the right way.  Contact the Brown Law Group today at 602-952-6925 to schedule an initial consultation or make an appointment with our attorneys on our contact us page.

The Brown Law Group shares this article for informational purposes only and it does not create an attorney-client relationship.

Categories
Arizona HOA Board Members

HOA Board Meeting Boot-Camp: What Every HOA Board Member in Arizona Needs to Know

The nominations tendered. The ballots cast and tallied. Suddenly you are on the Board. What was once whim gone as reality settles in and the first Board Meeting closes in on you… What’s your job again?

Getting on the Board is easier than you might think! Serving is something else. As a volunteer, you are required to serve and protect the fiduciary interests of the Association for no pay! Did they even train you for this? Probably not!

Never fear! We are here to help with these just-in-time emergency boot-camp pointers for handling and managing your meetings with professional precision. We address the most popular question at the end, but don’t skip ahead!

1.The Association is required to have an annual meeting of the membership every year. You can have more than this. But you need at least one. Also, all your meetings need to be held in Arizona. Don’t worry, you can still attend remotely, or even virtually! We dig into the advent of virtual meetings, virtual attendance and e-voting in our article <name>. Read more there to find out!

2. Notice of meetings must be provided to all members at least 48 hours before the meeting. Notice may be provided by any reasonable form of communication, including the Association newsletter, a clear and visible posting in the community, or email.

3. Emergency meetings do not require 48-hours’ notice. An emergency is any business or action that cannot be delayed for the 48-hour notice period. Not sure if it’s an emergency? Check with Association counsel!

At an emergency meeting, you must state the reason requiring the emergency meeting in your minutes. You also must read and approve those minutes at the next regular meeting of the Board.

4. Special meetings may be called by: (A) the president, (B) a majority of the Board, (C) by a vote of 25% of the members or any lower percentage provided in the Bylaws. If your Bylaws require more than 25% of the members to call a special meeting, it is unenforceable.

5. The agenda must be available to all attending members. It can be provided to the Members at, or before, the meeting.

6. All Association business must be done at meetings open to the Members, unless the business is subject to a statutory exemption.

This is called a sunshine law. It is a common fixture of public governance.

Under Arizona’s sunshine law, all member meeting, board meetings, or regularly scheduled committee meetings must be open to the Members or the Member’s written representative unless it is a topic that may be discussed in a closed session meeting pursuant to A.R.S. § 33-1804(A) or A.R.S. § 33-1248(A).

7. Each Member is entitled to speak to the Board and community on agenda issues. The Board may adopt time limits on a Member’s right to speak per issue as long as the restriction is reasonable and applied equally to all Members.

How do we determine what is reasonable? It depends!

The Association is installing a new ‘Children at Play’ sign near the clubhouse? The Board might reasonably limit each Member that wishes to speak to 3 minutes.

The Association discovered oil and is converting the Association monument into an oil derrick? We are gonna need more time for that one…

What? They brought cameras?

8. Members are permitted by law to audiotape and videotape open meetings of the Association. The Association may adopt reasonable rules governing recording of open meetings but may not preclude recording unless the Association records the meeting and makes the unedited recordings available to members on request without restrictions on its use.

This isn’t everything, but it’s a start! When you reach a question you have no answer for, and it will happen, remember you have an entire industry of professionals to help you learn, develop and grow as a Director of your Association!

When in doubt, reach out! Don’t forget we are…

Experienced Arizona HOA Attorneys

The Brown Law Group specializes in HOA representation in Arizona.  Our firm only represents homeowners’ associations and condominium communities in the state.  We routinely work with associations to make sure their board meetings are adhering to open meeting laws in Arizona.  We can also review any changes your association has made during the past year to use technology in your voting process.  It is understandable to want to use technology wherever possible to make meeting and voting decisions easier, but these choices can cause more problems down the road for an association if they are not done the right way.  Contact the Brown Law Group today at 602-952-6925 to schedule an initial consultation or make an appointment with our attorneys on our contact us page.

Categories
Arizona HOA Laws

What You Need to Know About HOAs and Short-Term Rental Laws in Arizona

Short-term rentals are on the rise. Snowbirds migrate here in the winter. All seasons are ripe for outdoor escapades. Arizona attracts short-term renters year-round.  

The short-term rental landlord is no longer only the sophisticated commercial property investor. Even casual owners now routinely use electronic short-term rental listings to drive rental income into their pockets. Their neighbors bear the consequences of irregular traffic, late-night parties, sound ordinance violations, littering, and impolite parking…

It’s hectic! And we get lots of questions about it. Like…

Can HOAs Restrict Short-Term Rentals in Arizona?

The Arizona Planned Community Act and Condominium Act provide that Associations may only regulate short term rentals if the Declaration of Covenants, Conditions and Restrictions (“CC&Rs”) contains a restriction prohibiting rentals or providing that rentals must be of a certain duration. An example of a short-term rental restriction we often see is a provision that a property may not be leased for less than thirty (30) days.

If your CC&Rs are silent on rental restrictions, there are no rental restrictions. Rental restrictions may only be added to the CC&Rs by amendment.  Rentals may not simply be restricted by a rule or regulation passed by the Board. The restriction must be in the CC&Rs.

We Have Problem Renters. What Can We Do?

You need to answer a question first — do your CC&Rs have a written restriction against rentals?

            Yes, they do!

Your rental restriction might allow the Association to prohibit all rentals. It might only allow a restriction of short-term rentals. Either way, the Association can enforce the restriction. Check with your Association’s counsel on the best way to enforce your Association’s rental restriction before you take action!

            No! They Don’t!

Your Association will not be able to deal with the short-term renters with a rental restriction. Don’t worry! There are other options, which leads us into another question we get…

Who Cares? Can’t We Just Go After the Owner!?

Yes! The Owner is responsible for making sure the property is compliant with the CC&Rs and community rules. The Association may fine an Owner for noise complaints, loud parties, parking violations, misuse of the common area amenities, trash can violations, and any other community rule violations by the Owner or the Owner’s renters.

Can’t the City or State Do Something About It?

Probably not. Unless it is a serious problem.

In 2019, the Arizona Legislature passed a law providing that a city or municipality many only regulate a vacation or short-term rental for: (1) requiring the Owner provide contact information for responding to short-term rental complaints; (2) protecting public health and safety; (3) enforcing zoning ordinances; (4) preventing use of short-term rental as a sober living home, for selling illegal or controlled substances, or for pornography, obscenity, topless dancing, or other adult-oriented businesses or unauthorized uses.

If you are dealing with one of these issues, the Association should consider submitting a complaint to the appropriate regulatory entity. Otherwise, the Association is the last line of defense against short-term renter shenanigans.

Rental issues are often tricky or difficult to manage. The Association industry has a wealth of resources available to help you manage the situation professionally. All you need do is…

Find an Experienced HOA Attorney in Arizona

The Brown Law Group provides industry leading general counsel for planned communities and condominiums of all types throughout Arizona.  Our firm can assist with any issues related to short term rentals in your Association or assist with amendments to your CC&Rs.  Contact us today in our Phoenix office at 602-952-6925 or our Tucson office at 520-299-3377 to schedule an initial consultation.  You can also make an appointment on our contact us page.

The Brown Law Group provided this article for informational purposes only and it does not create an attorney-client relationship.

Categories
Arizona HOA Laws

What an Arizona HOA Needs to Know about Fines and CC&R Violations

Arizona HOAs are obligated to enforce the restrictions contained in the Declaration of Covenants, Conditions and Restrictions (CC&Rs) and Rules and Regulations. Enforcing these restrictions can help to preserve the property values within the communities.  HOAs may send friendly reminders and violation notices to those homeowners that break the rules.  Arizona HOAs may also impose reasonable fines for violations of the restrictions and rules.  

Fine Enforcement in Arizona HOAs

When homeowners purchase property in a community governed by an HOA they are bound by the restrictions contained in the (CC&Rs). The CC&Rs define what homeowners can and cannot do with their property. It is important that HOAs hold each homeowner accountable to the CC&Rs. In many communities, the CC&Rs also permit the Board to enact rules for the community to which homeowners are contractually obliged to follow. 

Homeowners that fail to comply with their community rules and adequately maintain their property are in breach of their contractual obligations under the CC&Rs. HOAs have the ability to enforce these obligations with demand letters and lawsuits if necessary. To pursue a successful claim for fine enforcement actions, there are several preliminary considerations to set a foundation for successful enforcement.

Fine Policies & Notice Requirements

Before HOAs can impose fines for non-compliance to regulations, they should ensure that the CC&R or community rules have provisions that give the HOA authority to issue fines for the violation.

To fairly and uniformly enforce these fine, community associations need to have a fine policy laying out the process by which fines in a particular community shall be imposed. These fine policies often provide the number of notices, time between notices, time to cure a violation, and the monetary penalty imposed for each violation notice.  This law firm advises a “presumptive” policy that the HOA can follow for run of the mill violations, while allowing the HOA to deviate from the standard procedure to address more severe violations.  For example, a fine policy that provides for a 14-day time to cure period does not make sense for violations like loud parties.  Parties are usually over by the morning, and with a 14-day time to cure period, the HOA could not address that behavior. 

HOAs may assess “reasonable” fines.  Imposing a $2,000.00 fine for a homeowner’s failure to remove weeds from their property is unreasonable and would not be enforceable. The reasonableness element is subject to judicial discretion and depends on the particular facts of the case. The legal standard comes from the case of Tierra Ranchos v. Kitchukov where the court obligated HOAs to use their powers reasonably. Reasonableness should be the primary focus when an HOA is creating or enforcing its fine policy.

Fines must also be sufficient to compel the homeowner to comply.  Imposing a $25.00 monthly fine for storing a boat on the property is not likely sufficient.  It is more expensive for that homeowner to pay for off-site storage.  It makes financial sense for that homeowner to simply pay the fine and keep breaking the HOAs rules.  The fine policy must allow for the HOA to fine a larger amount. 

The Arizona Planned Community and Condominium Acts, A.R.S. §33-1803 and §33-1243 require  that homeowners are given notice of violations and an opportunity to be heard before fines are imposed. .

Collection of HOA Fines

Once a community has adopted a fine policy, an HOA may begin prosecuting enforcement. It is important to note that fines and related charges may not be included in the HOA’s assessment lien. Successful fine cases need documentation and adherence to the fine policy. Letters and notice are great, but a picture is truly worth a thousand words in fine cases.

Put yourself in the judge’s position on the bench who reviews a case with well-documented letters and notes detailing fines for weeds. The words alone do not give the judge a sense of the violation. Is there a single weed in a pristinely manicured lawn, or are the rocks in the front yard no longer visible due to the severity of the weeds? Showing a photo of the violation provides tremendous leverage to prove the reasonableness requirement for the HOAs use of power.

The best practice for HOAs is to have documentation, which includes:

  • Clear photographs of the violation(s),
  • Detailed record of violation, 
  • Violation notices sent in accordance with the fine policy,
  • Violation fines assessed in accordance with the fine policy, and
  • Record of notices given.

As the CC&Rs are a legally binding contract, breach of this contract gives an HOA authority to file a lawsuit against homeowners. Unlike Assessments, fines cannot be recovered through foreclosure. Instead, an HOA may obtain a judgment against the violating homeowner and attempt collection through settlement, garnishment, or by placing a judgment lien upon the subject property. Lawsuits are a last resort and most fine issues are resolved after an initial notice.

It is best to seek counsel from an HOA attorney on the best approach to take with regards to enforcing fine compliance as well as options to collect attorney fees on violations. 

Work with an Experienced HOA Attorney

If your HOA or association board is dealing with enforcing CC&R violations on a regular basis, The Brown Law Group can help guide your HOA through any potential legal issues.  Our experienced team of attorneys and collection specialists only represent HOAs and condominium associations in Arizona.  We offer an alternative to the traditional hourly billing and it’s one of the major reasons we lead the state in HOA assessment collections.  Contact us today in our Tempe office at 602-952-6925 or our Tucson office at 520-299-3377 to schedule an initial consultation.  You can also make an appointment on our contact us page.

The Brown Law Group provided this article for informational purposes only and it does not create an attorney-client relationship.

Categories
Arizona HOA Laws

What Your HOA Needs to Know About Assessment Payments in Arizona

Homeowners’ Associations carry a great deal of responsibility when it comes to maintaining the community. HOAs are often required by their governing documents to perform many actions, which may include maintaining insurance policies, paying for water or sewer charges, maintaining landscaping, caring for community facilities such as pools, playgrounds or golf courses, repairing roofing damages, maintaining common element areas, and much more.

HOAs cannot effectively meet these obligations without homeowners paying their assessments. Owners that are unable or unwilling to pay assessments may face legal action collect these unpaid assessments. Here is what you need to know about Assessment Payments. 

Obligation To Pay Assessments

All homes located within an HOA are governed by a contract called the Covenants, Conditions, and Restrictions (CC&Rs). By purchasing a property within an HOA, homeowners become contractually obligated to comply with the CC&Rs. Failure to comply is a breach of contract. The CC&Rs obligate homeowners to pay assessments to fund the various obligations of the community. 

Special assessments cover expenses which an HOA may not have sufficient funds to pay for from regular assessment payments.

Assessment payments are contractual in nature. A homeowner’s failure to pay these assessments is a breach of contract. HOAs can enforce their contractual rights to assessments by filing a lawsuit against delinquent homeowners when notices, letters, and requests from the HOA are ignored.

Arizona’s Property Lien Law & Foreclosure

In addition to the owner’s personal contractual obligations to pay assessments under the CC&Rs, property located within an HOA have a statutory assessment lien securing the assessment charges. A lien generally prevents an owner from selling or refinancing a property until the lien is released and assessments are paid, as it clouds the title to the property. 

Arizona Revised Statutes § 33-1807 and 33-1256 provide the statutory basis for the assessment lien. This statute provides that as soon as assessments become due, a lien is automatically placed against the property. HOAs frequently record a lien in their local county recorder’s office to make a public record of the lien in the event the home is refinanced or placed for sale.. 

When demand letters, breach of contract claims, and liens against a property fail to obtain payment of delinquent assessments, an HOA has the power to foreclose on its assessment lien. Foreclosure provides an avenue for HOAs to collect assessments, late fees, collection charges, attorney fees, and court costs for filing the foreclosure lawsuit.

HOAs may only employ the foreclosure option if one of the following is satisfied:

  • Assessments have not been paid for a period of one year; or
  • $1,200.00 or more in assessments are outstanding.

If either prong is satisfied, an HOA may proceed to collect the assessments due through foreclosure.

When evaluating a claim for foreclosure, it is important to note that some properties may already have liens in place. State and federal tax liens and first mortgages have priority over an HOA assessment lien. Other liens can include judgment liens, a second deed of trust, or a home equity line of credit.  The HOA assessment lien is superior to these liens.  It is important to discuss the implications of these liens in relation to the foreclosure process with your attorney.

Procedure To Collect Delinquent Assessment Fees in Arizona

Before an HOA can send an account to collections, homeowners must be afforded at least 30 days’ notice. The notice must be in writing and mailed via certified mail to the homeowner’s address. This is requirement is set out in A.R.S.. § 33-1807(K)  and A.R.S. 33-1256 which also outline that the notice must be boldface typed or in all capital letters. It must also include the contact information of the representative of the HOA that the homeowner can contact to discuss payment. The notice must also provide the following statement:

Your account is delinquent. If you do not bring your account current or make arrangements that are approved by the association to bring your account current within thirty days after the date of this notice, your account will be turned over for further collection proceedings. Such collection proceedings could include bringing a foreclosure action against your property. 

Once a homeowner is provided the statutorily required notice, and fails to satisfy the delinquent assessment balance, an HOA may send a homeowners’ account to collections and enforce its rights under contract and statute.

Find a Law Firm Dedicated to Representing HOAs with Assessment Collection

Whether your HOA is planning changes to your assessments or having issues with collection, The Brown Law Group can offer a many benefits to your association.  Our experienced team of attorneys and collection specialists only represent HOAs and condominium associations in Arizona.  We offer an alternative to the traditional hourly billing and it’s one of the major reasons we lead the state in HOA assessment collections.  Contact us today in our Tempe office at 602-952-6925 or our Tucson office at 520-299-3377 to schedule an initial consultation.  You can also make an appointment on our contact us page.

The Brown Law Group provided this article for informational purposes only and it does not create an attorney-client relationship.

Categories
Legislative Updates

2021 Arizona HOA Legislative Update

The COVID-19 pandemic shuttered the 2020 legislative session.  While there were several bills introduced in 2020 that would have impacted community associations, the legislature adjourned early and none of those bills were signed by Governor Ducey.   The Arizona legislature got back to work in 2021, passing several bills affecting community associations.

H2170 WRITS OF GARNISHMENT; ATTORNEY’S FEES 

Collecting Attorney’s Fees for Garnishments

The legislature amended laws relating to garnishment in Arizona Revised Statutes §§ 12-1572, 12-1574, 12-1580, 12-1591, 12-1598.03, 12-1598.04, 12-1598.07, 12-1598.10, 12-1598.12, and 12-1598.15.

Collecting judgments in Arizona just became more cost effective. For some creditors, obtaining a judgment is just the start of collecting the money owed to them. A judgment in a collection lawsuit is simply a piece of paper ordering one party to pay another. When a judgment debtor fails to pay the money ordered by a court, garnishment can be a powerful tool.

In the past, garnishment proceedings only served to reduce the net proceeds due to a creditor as attorney fees and court costs were uncollectable in garnishment proceedings. The new legislation now places the monetary burden for failure to pay a judgment on the uncooperative debtor by allowing those attorney fees and costs to be awarded in a garnishment action.

When efforts to resolve a collection judgment through voluntary payments or settlement agreements cannot be reached, creditors may now proceed with garnishment and have a statutory basis to request an award of attorney fees and costs. Creditors no longer have to sacrifice money owed to them in pursuit of collection.  

S1377 CIVIL LIABILITY; PUBLIC HEALTH PANDEMIC 

This legislation amends Title 12, Chapter 5, Article 1, Arizona Revised Statutes, by adding section: 12-515; Relating to Civil Liability.

Civil Liability Protection Relating to Public Health Pandemic

This Senate Bill provides for a liability shield that would protect nonprofit organizations, including community associations, from lawsuits related to the Covid-19 pandemic. Throughout the pandemic, our firm recommended that our communities close their amenities due to a lack of insurance coverage and a lack of a liability shield.  Without a liability shield, if a Member or guest contracted Covid and alleged that it was contracted association’s amenities, the association would not have insurance to cover the defense of that claim.  Whether the claim is valid would not matter much when the Association is required to pay out of pocket for its defense.

This liability shield now provides protection for community associations from such potential claims. Associations are now able to open their amenities.  Reasonable precautions must still be taken.  The liability shield will protect an association if it acted in good faith to protect members from Covid-19.  The individual claiming that they contracted Covid-19 while using the association’s amenities must prove by clear and convincing evidence that the association failed to take adequate protection measures or acted with willful misconduct or gross negligence.  If associations continue to enact appropriate precautions including enhanced cleaning, encouraging distancing, and requiring masks while using indoor amenities, the associations will be protected under the statute. 

This legislation is retroactive and will protect community associations from claims for acts that occurred on or after March 11, 2020.

S1722

POLITICAL SIGNS; CONDOMINIUMS; PLANNED COMMUNITIES 

This legislation amends sections: 16-1019, 33-1261 and 33-1808, Arizona Revised Statutes.  This legislation applies to both Planned Communities and Condominium. 

Definition of Political Sign

Political signs can be a contentious issue in community associations.  In recent elections, tensions have increased in the political climate.  While community associations must allow certain political signs, it is not always clear what type of sign qualifies as a political sign.  This legislation adds some much-needed clarity by providing a definition of a political sign.  A political sign is defined as one that attempts to influence the outcome of an election, including supporting or opposing the recall of a public officer or supporting or opposing the circulation of a petition for a ballot measure, question or proposition, or the recall of a public officer. 

Display of Political Signs

The Arizona Planned Community Act and Arizona Condominium Acts previously provided that an association may prohibit the display of political signs earlier than seventy-one days before the day of an election and later than three days after an election.  This legislation amends these timelines and provides some clarity.

This legislation provides that an association may prohibit the display of political signs as follows: 

  1. Earlier than seventy-one days before the day of a primary election.
  2. Later than three days after the day of the general election.
  3. For a sign for a candidate in a primary election who does not advance to the general election, later than fifteen days after the primary election.

Let The Brown Law Group Assist Your Arizona Community Association

The Brown Law Group provides industry leading general counsel for HOAs and condominium associations throughout Arizona.  Our firm regularly works with clients to address legal questions related to the community, management, enforcement, and collection of money due pursuant to the CC&Rs, Declaration, and governing documents.  Contact us today in our Phoenix office at 602-952-6925 or our Tucson office at 520-299-3377 to schedule an initial consultation.  You can also make an appointment on our contact us page.

 

Categories
Legislative Updates

2019 Legislative Update

2019 Legislative Update All new legislation here will be in effect on August 27, 2019, unless specifically stated otherwise below Senate Bill 1531

Amends section 33-1256 of the Condominium Act and section 33–1807 of the Planned Community Act.

Lien for Assessments

  1. The time to initiate a lien foreclosure is extended from three (3) years to six (6) years after the full amount of the assessments become due.
  2. Beginning August 27, 2019, the Association must send a notice at least thirty (30) days before sending a delinquent account to an attorney or collection agency. The notice must be sent to the Owner’s address provided to the association, certified mail, return receipt requested, and may be included with other correspondence sent to the Owner regarding the Owner’s delinquent account. The notice must be either boldfaced type or all capital letters and include the contact information for the person that the owner may contact to discuss payment. The notice must include the exact language below:

YOUR ACCOUNT IS DELINQUENT. IF YOU DO NOT BRING YOUR ACCOUNT CURRENT WITHIN THIRTY DAYS  AFTER THE DATE OF THIS NOTICE,

YOUR ACCOUNT WILL BE TURNED OVER FOR FURTHER COLLECTION PROCEEDINGS. SUCH COLLECTION PROCEEDINGS COULD INCLUDE BRINGING A FORECLOSURE ACTION AGAINST YOUR PROPERTY.

  1. BeginningJanuary 1, 2020except for associations with less than fifty (50) homes and that do not have a third party management company, an association must provide a statement of account instead of a periodic payment book. The statement of account must be sent with the same frequency that assessments are provided for in the declaration. The statement of account must include:
  2. a.  The current account balance; and
  3.  The immediately preceding ledger history. If the association offers the statement of account by electronic means, the Owner may opt to receive the statement electronically. The association may stop providing these statements if the account is sent to an attorney or collection agency. After collection activity begins, the Owner may request the statement by written request to the attorney or the collection agency. These requests must be fulfilled by the attorney or the collection agency. The statement of account provided by the attorney or collection agency must include all amounts claimed to be owing to resolve the delinquency, including attorney fees and costs, regardless of whether such amounts have been reduced to judgment.
  4. An agent for the association may collect on behalf of the association directly from the Owner the assessments and other amounts owed by cash or check, by mailed or hand–delivered bank drafts, checks, cashiers, or money orders, by credit, charge or debit card or by other electronic means. For any form of payment other than for cash for mailed or hand–delivered bank drafts, checks, cashier’s checks or money orders, the agent may charge a convenience fee that is approximately the amount charged to the agent by a third–party service provider.

PB&J: 1. This new legislation is intended to provide the owners with more time to enter into payment plans and to ensure that the owner is aware of exactly what is owed to the association. The extension of the lien foreclosure deadline will provide the association with more time to foreclose on its lien. Upon resale, title companies will now be permitted to collect six (6) years in delinquent assessments.

  1. 2.BeginningAugust 27, 2019, this law firm will be required to verify that the thirty–day notice was sent to an Owner at least thirty (30) days prior to opening a collections account. Beginning January 1, 2020, this law firm will be required to verify that statements of account were sent in accordance with this statute prior to opening a collections account.
  2. The new legislation requires that the thirty–day notice be sent via certified mail. Serial debtors often refuse to sign for and accept certified mail as they know it means “bad news”.  This law firm advises also sending the thirty-day notice via regular mail to preemptively refute any claims that the Owner did not receive the thirty–day notice.  The cost of the certified mail will likely be addressed in the management contract.  It is this law firm’s opinion that this charge is also a cost of collection that may be passed on to the Owner.  There is no requirement that it be the “final notice”. An association may send the thirty–day notice with the first or second notice.

Associations will now be required to provide statements of account instead of periodic payment books. While this will increase costs for the association, this requirement will not go into effect until January 1, 2020, giving associations and their management companies time to plan for and implement this requirement. The management companies will likely address the increased mailing and labor costs in their contracts with the associations. The statement of account must include the current balance and the immediately preceding ledger history. The statute does not define “immediately preceding ledger history.”  It is this law firm’s opinion that this means one preceding period, but that the statement of account might include at least two periods to be safe.

Associations are permitted to provide the statement of account electronically, if the Owners opt–in. This will save considerable time and money for both the associations and their management companies. We advise that the association send a negative notice to the owners to opt–in – such that if the owner does not respond he or she is automatically enrolled to receive electronic statements. The association may also treat owners who have signed up for auto debit for payment of assessments as having opted in to receive electronic statements. The association must have a good e–mail address to do so. It is this law firm’s opinion that the mailing costs are a cost of collection as that term is used in most CC&Rs and Arizona statutes. We advise that Owners who opt in for electronic delivery may be charged a lower fee for providing the statement.

Most CC&Rs require uniform assessments. If owners who opt–in for electronic delivery are charged less that owners who do not, it can be argued there are non–uniform assessments. To avoid that legal challenge, please create a separate collection cost and not lump it into the regular assessment.

The statement of account must be sent at the same frequency as the assessments are charged. If an association’s declaration permits, associations may save costs caused by the statements by changing the frequency of assessments to quarterly, semi–annually, or annually. Changing the assessments from monthly to annually can have a significant impact on the association’s cash flow, and this law firm suggests that it may be more prudent to change to either quarterly or semi–annually.

  1. 4. Associations may accept payment in most forms of legal tender, and may charge a fee to the Owner equal to that charged by the credit or debit card

House Bill 2672:  Amends A.R.S. §§9–500.39, 11–269.17, 42-1125.02, 42–2001, 42–2003, and adds §42–5042

Short Term Rentals

  1. 1. The owner of a short-term rental must provide the city or town with contact information for the owner or the owner’s designee who is responsible for responding to complaints in a timely manner in person, over the phone or by email at any time of the day before offering the property for
  2. 2. Within thirty (30) days after a verified violation, a city or town shall notify the department of revenue and the owner of the short–term rental of the verified violation, and whether a civil penalty was imposed.
  1. 3. A short–termrental may not be used for nonresidential uses, including for a special event that would otherwise require a permit or license, or for a retail, restaurant, banquet space or other similar
  2. 4. The property may not be rented without a current transaction privilege tax licens The owner must list the current transaction privilege tax license number on all advertisements.

PB&J: This new legislation provides cities and towns with more authority to regulate short–term rentals. The cities and towns will be able to more effectively address problem behaviors of short–term tenants. Associations may report violations to the city or town, or to the Department of Revenue.  This will provide associations with additional options when dealing with short–term rental problems.

Senate Bill 1309:  Amends A.R.S. §§12–551, 12–1611, 12–1612, and 12–1613

Judgment Renewals

  1. 1. Provides that judgments may be renewed, except judgments that were entered on or before August 2, 2013 that were not renewed on or before August 2, 2018.

PB&J: In 2018, the legislature passed a bill that provided that judgments were now valid for ten (10) years, increased from five (5) years. This year’s legislation clarifies that to qualify, a judgment reaching its expiration date must have been renewed on or before August 2, 2018.

Arizona Registrar of Contractors

  1. 1. Provides that planned communities and condominiums are eligible for an award from the Residential

Contractors’ Recover Fund if both:

  1. The builder or developer transferred control to the association; and
  2. A licensed residential contractor’s failure to adequately build or improve a residential structure or appurtenance caused damage to the common elements within the complex.
  1. 2. Provides that the maximum award from the Residential Contractors’ Recover Fund is $30,0000, but that in no case may an award may not exceed the actual damages suffered as a direct result of a contractor’s violation.
  2. 3. The statute of limitations for an action for judgment that may result in collection from the Residential Contractors’ Recovery Fund is two years after the date of the commission of the act by the contractor. The claimant must notify the Registrar of Contractors of the commencement of the action within thirty (30) days. The Registrar may intervene and defend the action.

PB&J: The Residential Contractors’ Recovery Fund provides for financial protection to residential owners for work performed by licensed contractors. Associations did not previously qualify to recover monies from this fund. This new legislation allows for associations to recover up to $30,000.00 if a licensed contractor did not adequately complete work to a residential structure so that the common area/common elements were damaged.

House Bill 2151:  Amends A.R.S. §§12–1567, 22–247, and 22–525

Satisfaction of Judgment

  1. 1. A Satisfaction of Judgment must be filed within forty (40) days of the judgment has been paid in full, in Superior or Justice Court, and thirty (30) days after the judgment has been paid in full in Small Claims Court.
  2. 2. If the prevailing party fails to file a satisfaction of judgment, the opposing party may file a motion to compel satisfaction of the judg If the motion is granted, the judgment is deemed satisfied.

PB&J:  This new legislation creates a new deadline for a judgment creditor to file a Satisfaction of Judgment after a judgment is paid in full. This will prevent the judgment creditor from leaving the judgment on record indefinitely, possibly affecting the judgment debtor’s credit.

House Bill 2230:  Amends A.R.S. §§12–1574 and 12–1577

Writs of Garnishment

  1. 1. Awrit of garnishment may be served on any banking corporation by certified mail, return receipt requested, at the garnishee’s regular place of business, or to the garnishee’s statutory agent, or at a location designated by the garnishee. The effective date is the day of rece

PB&J: A judgment creditor is now permitted to serve a writ of garnishment on a banking corporation by certified mail. This helps to simplify the garnishment process and saves costs for the judgment creditor.

Construction Defects

  1. 1. Amendsthe Purchaser Dwelling Act to provide that, at the onset of a claim alleging construction defects, the subcontractors must be provided notice of the cla
  2. 2. Providesthe purchaser with the option of having the original subcontractor perform the repairs, or a different subcontra  If the homeowner selects a different subcontractor, the new subcontractor’s liability is limited only to that subcontractor’s scope of work.
  3. 3. Establishes a streamlined process for construction defect claims, by allowing for the bifurcation of the dwelling actions to dismiss claims without merit, release parties without fault, and assign remaining responsibility based on the relative degree of fault of a defendant or third–party defenda
  4. 4. Establishes proportional liability for developers by limiting the scope of permissible indemnity agreements, ensuring that responsible parties pay their respective share of any loss to the extent of fault.
  5. 5. Allows a court to award attorney fees to the prevailing party for each contested iss Provides guidelines for the court to consider when determining whether attorneys’ fees are reasonable.  Allows for the recovery of expert witness fees in cases involving a single homeowner.

PB&J: This new legislation is intended to create a more accelerated and streamlined process for the resolution of construction defect claims that is more efficient, fair, and convenient for the parties. It is intended help the contractors to identify and make the repairs to avoid a costly and complex litigation. The addition of the attorney fee and expert witness fee provisions will help to prohibit the incurrence of excessive fees.

House Bill 2687:  Amends the Condominium Act, sections 33–1228

Termination of Condominium

  1. 1. Atleast thirty (30) days before recording a termination agreement, the Board must hold a regular or special meeting, at which a person or entity that purports to have the agreement of at least 80% of the votes, shall either produce 1) copies of a signed notarized statement for each Owner that has executed a termination agreement or 2) a signed termination agreement that includes a sufficient number of Unit Owners.
  2. 2. TheBoard may not take action by written consent or any other method that does not provide for an actual meeting that is open to all unit owners.
  3. 3. Any termination agreement that is recorded without compliance of the above provisions is inva
  4. 4. The fair market value of the Unit will also include the pro rata share of any monies in the association’s reserve fund and the operating account and an additional five percent of that total for relocation costs
  5. 5. A UnitOwner may obtain a second independent appraisal at the Unit Owner’s expense, and if it differs from the Association’s appraisal by 5% or less, the higher appraisal is fina If it is more than 5% higher than the amount   determined by the Association’s appraiser, the Unit Owner shall submit to arbitration, at the association’s expense, and the arbitration amount is the final sale amount.  As part of the arbitration process, the appraisers shall fully disclose their appraisal methodologies and shall disclose any other transaction occurring between the buyer and the sellers.

PB&J:  This new legislation provides some additional protections for the Unit Owners in the termination of a condominium.  It provides for more transparency regarding the vote to terminate the condominium.  The Unit Owners will also be entitled to their pro rata shares of the reserve fund and operating account upon termination of the condominium

Senate Bill 1094:  Amends sections 33–1801 and 33–1802 of the Planned Community Act

Definition of Planned Community

  1. 1. Does not apply to condominiums.
  2. Provides that the Planned Community Act does not apply to a nonprofit corporation or unincorporated association or owners association that was created before January 1, 1974 and that does not have the authority to enforce covenants related to the use, occupancy, or appearance of the lots, unless a majority of all of the members elect subject the corporation or association to the Planned Community Act.
  3. The majority of all of the Members may elect to subject a nonprofit corporation or unincorporated association that has the power to assess members to pay the costs and expenses incurred in the performance of obligations created by recorded covenants for a real estate development to the Planned Community Act. If approved, a Notice of Election must be recorded with the County Recorder.  The Notice of Election is effective on the date of recordation. A Notice of Election may be rescinded in the same manner as an election.

PB&J: This new legislation clarifies which nonprofit corporations and owners associations will be subject to the laws contained in the Planned Community Act. It allows corporations and associations that would otherwise be exempt to elect to subject the corporation or association to the Planned Community Act. This legislation was passed for a specific community (Sun City in Maricopa County) that does not have architectural controls

Categories
Legislative Updates

2018 Legislative Update

2018 Legislative Update

All new legislation effective as of August 3, 2018

House Bill 2262Amends sections 33-1228 of the Condominium Act.

Condominium Termination

  1. In the event of a termination of a condominium, the unit owners’ interests are valued at the fair market values of their units, limited common elements, and common element interests, plus an additional five percent (5%) of the total amount for relocation costs forowner-occupied units.
  2. The association shall select an independent appraiser to determine the total fair market value.
  3. The determination of the independent appraiser shall be distributed to the unit owners and is final unless disapproved by unit owners within sixty days.
  4. Any unit owner may obtain a second independent appraisal at the unit owner’s expense, and if the appraisal amount differs from the association’s appraisal amount by five percent (5%) or less, the higher appraisal is final.
  5. If the amount determined by the second appraiser is more than five percent (5%) higher than the association’s appraisal amount, the unit owner shall submit to arbitration at the association’s expense, and the arbitration amount is the final sale amount.
  6. An additional five percent of the final sale amount shall be added for relocation costs forowner-occupied units.

PB&J:  This new legislation adds an additional five percent (5%) to the final sale price of a unit in the event of termination for owner-occupied units.  Tenant occupied or unoccupied units will not receive the additional funds.  This will help to assist owners with moving expenses in the event of termination. This legislation also increases the time period for review of the association’s independent appraisal from thirty (30) to sixty (60) days, thus allowing the owners additional time to obtain an independent appraisal.

Senate Bill 1465:  Amends A.R.S. §36-2061.

 

Sober Living Homes

  1. The Arizona Department of Health Services is required to to certify and license each sober living home in Arizona using rules and minimum standards adopted by a recognized national organization.
  2. The licensure of a sober living home is for one (1) year.  Any person operating a sober living home without a license shall pay a civil penalty of up to one thousand dollars ($1,000) for each violation.
  3. A sober living home must comply with all federal, state, and local laws.

PB&J:  Under the Fair Housing Act, an association must allow sober living homes within the community.  Prior to this legislation, sober living homes in Arizona were largely unregulated.  Associations have had difficulty enforcing violations of the community rules with improperly run sober living homes.  This new legislation provides standards and guidelines for the operation of a sober living home.

 

House Bill 2240:  Amends A.R.S. §12-1551.

 

Judgment Renewal

  1. Provides that judgments are now valid for ten (10) years, increased from five (5) years.

PB&J:  Allows an association an additional five (5) years to collect on a judgment before renewal. PBJ provides renewal at no cost to the Association.

Categories
Legislative Updates

2016 Legislative Update

2016 Legislative Update

All new legislation here will be in effect on August 6, 2016

House Bill 2172: Adds section 33-1817 (3) to the Planned Community Act. Does not apply to condominiums. 

Architectural Review Standard

  1. An association shall not unreasonably withhold the approval of an owner’s construction project’s architectural designs, plans and amendments.

PB&J: This is already the law. Whether a particular ARC decision is “unreasonable” is determined by a judge or a jury. They essentially are empowered to second guess the Board. The word “unreasonable” is vague and subjective. Please know that many judges and most juries in Arizona do not favor homeowner associations.

House Bill 2592: Adds section 10-3708(F) to the Arizona Nonprofit Corporation Act. Applies to both planned communities and condominiums.

Electronic Voting

  1. If an association is conducting a member vote via written ballot without a meeting, the association may provide notice to the owners that the vote shall be conducted by electronic means, including an online voting system.
  2. The written ballot can be delivered electronically if the online voting system 1) authenticates the voter’s identity, 2) authenticates the validity of the vote to ensure that it was not altered in transit, 3) transmits a receipt to the voter, and 4) stores electronic votes for recount, inspection, and review. The initial notice must include a reasonable procedure by which an owner may obtain and cast a ballot via some other form of delivery, including U.S. mail and fax.  The

PB&J:  This new legislation represents a shift toward moving elections toward a fully electronic process. If an association begins using an online voting platform, it must be sure to continue to allow voting via other forms of delivery at the request of the member. This new law will save some money.

 

House Bill 2341:  Revises A.R.S. §36-136(I)(4)(a). Applies to both planned communities and condominiums.

Potlucks

  1. Exempts an association holding a social event, like a potluck, from rules relating to food preparation, serving, and storage of food and drink.

PB&J:  The association may hold informal, noncommercial social events without the regulation of the state.

House Bill 2106:    Amends section 33-1242(B) of the Condominium Act and section 33-1803(C) of the

Planned Community Act.

Enforcement Procedure

  1. A member who receives a written notice of violation now has a longer grace period of twenty-one (21) days to send a response via certified mail regarding the notice of violation.  The law currently provides for a grace period of ten (10) days.
  2. If the Owner sends the response via certified mail within 21 days, the Association is required to respond with the following information: 1) the provision of the community documents violated, 2) the date of the violation or the date the violation was observed, 3) the first and last name of the person who observed the violation, and 4) the process the owner must follow to contest the violation.

PB&J:  If the association includes the information in paragraph 2 above in the original notice of violation, this new legislation should not have much of an impact on the association. Associations may wish to add the provisions of paragraph 2 into their initial “Friendly Reminder” notice to the Owner. If all of the information is contained in the original notice, the association does not have to wait the 21 days to proceed. On the other hand, if the association does not include this information in the original notice, the association must wait 21 days to proceed. Owners rarely send in the request by certified mail therefore this certified mail provision is rarely implicated. These provisions only apply to violations related to the condition of the property, not the behavior of the owner or a resident.

House Bill 2382:  Amends A.R.S. §33-440.  Adds section 33-1817(A) to the Planned Community Act.  Does not apply to the Condominium Act. Does not apply during the period of Declarant control without the written consent of the Declarant.

Declaration Amendments

  1. An amendment to the declaration may apply to fewer than all of the lots and the amendment is deemed to conform to the general design of the community if: 1) the amendment receives the affirmative vote of the number of eligible voters as prescribed in the declaration and 2) the amendment receives the affirmative vote or written consent of all of the owners of the lots to which the amendment applies.
  2. Amendments must be recorded thirty (30) days after the adoption of the amendment.
  3. Amendments are effective immediately upon recordation of the instrument in the County in which the association is located, notwithstanding any other provision in the declaration 

PB&J:  Arizona courts have previously held that a non-uniform amendment must be approved by 100% of the Owners. Now, the association can pass a non-uniform amendment that affects fewer than all of the lots without a unanimous vote of the owners. If the association’s declaration requires 75% of the owners to vote in favor of an amendment for passage, then to pass a non-uniform amendment, 75% of alof the owners must vote in favor of the amendment for passage, as well as 100% of all of the owners affected by the amendment.

Amendments will now be effective immediately upon recordation in the County Recorder’s Office.. This provision will supersede any duration or periodic renewal clause in the declaration to the contrary.

Senate Bill 1498:  Amends sections 33-1242 and 33-1250 of the Condominium Act and sections 33-1803 and

33-1812 of the Planned Community Act.

Voting, Late Fees, and Administrative Complaint Rights

  1. Late charges may only be imposed after the association has provided notice that the assessment is overdue or has provided notice that the assessment is considered overdue after a certain date.
  2. With a notice of violation, the association must provide an owner notice of his option to petition for an administrative hearing the matter with the Department of Real Estate.
  3. If there will be voting at a members’ meeting, and absentee ballots are provided, the completed ballot and envelope and any related materials shall contain the name, address, and either the actual or electronic signature of the person voting.
  4. If the community documents allow secret ballots, only the envelope or any non-ballot related materials shall contain the name, address and either the actual or electronic signature of the vote.
  5. Ballots, envelopes, and related materials, including sign in-sheets, shall be retained in electronic or paper format and made available for member inspection for at least one year after completion of the election.

PB&J:  Most associations are likely already notifying owners that a late fee will be charged if the assessment is not paid by a certain date, and this provision should not affect most associations.

Arizona law currently provides for an owner to file a petition with the Department of Fire, Building, and Life Safety against a homeowners association. Under the budget that the Arizona legislature recently passed, this administrative complaint process will move to the Arizona Department of Real Estate. Most homeowners are likely not aware of this complaint process, and the new law requiring the association to notify owners of this option will likely increase the number of complaints filed. Realtors are often hostile to associations. We can speculate that associations will be met with more hostility on this shift.

The new provisions related to ballots will allow the association to more easily authenticate validity of the ballots and streamline the election process.

Senate Bill 1449: Adds A.R.S. §13-3729, and amends A.R.S. §28-8242 and §28-8280.

Unmanned Aircraft

  1. Provides that a person may not operate a model airplane or drone if the operation is 1) prohibited by a federal law or regulation or 2) interferes with law enforcement or emergency operation.
  2. A person who operates an aircraft in the air, on the ground, or on the water in a careless or reckless manner that endangers the life or property of another is guilty of a class 1 misdemeanor. In determining whether the operation was careless or reckless, the court shall consider the standards of safe operation prescribed by federal statutes.
  3. A city, town, or county generally may not adopt any ordinance that relates to the ownership or operation of a drone.

PB&J:  The private operation of drones is a relatively new trend.  There a few laws that currently regulate the private use of drones. This statute takes steps towards this type of regulation, by providing that an operator may not use a drone in a manner that endangers the life or property of another. There are many issues left to be addressed, such as privacy issues associated with flying a drone over another’s property within an association.

The U.S. Federal Aviation Administration (“FAA”) recently published rules for the commercial use of small drones.  These rules provide that the drone must always remain within sight of the pilot, and the drone may only be operated during daylight hours.  The rules also provide for a maximum altitude of 400 feet. The FAA rules apply only to the use of commercial drones.

Senate Bill 1248 :  Amends A.R.S. §§ 9-499.04, 11-005 and 44-1799.08.

Breed Based Dog Regulations

  1.  A city or town may regulate the control of dogs if the regulation is not specific to any breed.

PB&J:  Cities and towns may no longer enact or enforce regulations that are specific to dangerous breeds such as pit bulls, bull mastiffs, and rottweilers.  Associations may continue to regulate and prohibit dangerous breeds. Associations may no longer rely on city and town ordinances restricting dangerous breeds as an enforcement tool.  Although it does not apply to associations, this is another example of our legislators passing bills that have no basis in fact. There are many reputable studies that compile data regarding dog attacks. Some breeds simply attack more than others. An open question is whether cities and towns can prohibit wolf hybrids.

Senate Bill 1496:   Amends section 33-1243 of the Condominium Act and section 33-1813 of the Planned

Community Act.

Removal of Directors

  1. If at least one, but fewer than a majority of the directors are removed by the members, the vacancies shall be filled as provided in the community documents.
  2. If a majority of the directors are removed by the members, or if the community documents do not provide a method for filling board vacancies, the association must hold a separate election for the replacement of the removed directors within thirty (30) days of the special meeting to remove the directors.
  3. If a director is removed, he is not eligible to serve on the board again until after the expiration of his term, unless the community documents provide for a longer period of ineligibility.
  4. The association must retain all documents related to the removal process and election for at least one year.

 

PB&J:  This new legislation prevents the remaining directors from appointing new directors if a majority of the directors are removed. An election must be held, allowing the members to exercise their votes. This is a welcome improvement to the statute.

Senate Bill 1350:  Adds A.R.S. §9-500.38, A.R.S. §11-269.15 and A.R.S. §15-1650.01.

Limitations on Regulation of Vacation Rentals and Short-Term Rentals.

  1. Cities, towns, and counties have the right to tax online vacation rentals.
  2. Cities, towns, and counties cannot prohibit, restrict the use of, or regulate vacation and short-term rentals, unless for a health, safety, or welfare purpose.

PB&J:  This new legislation prevents cities from prohibiting short term vacation rentals. Associations may no

longer rely on city and town ordinances restricting short term vacation rentals as an enforcement tool. Associations may continue to prohibit shorter term rentals. This rental restriction must be in the declaration. An association cannot prohibit short term vacation rentals via rule or resolution.
BROWN | OLCOTT “PB&J”

Categories
Legislative Updates

2017 Legislative Update

2017 Legislative Update

All new legislation here will be in effect on August 8, 2017

House Bill 2411: Amends A.R.S. §33–440. Amends sections 33–1804, 33–1806, and 33 1812 of the Planned Community Act. Amends section 33-1248, 33-1250, 33-1260 of the Condominium Act

Open Meetings

  1. Homeowners generally no longer need to give advance notice or request permission before making an audio or video recording of a meeting.
  2. The Board may require advance notice or prohibit audio or videotaping by those attending only if the Board records the meeting and then makes the recording available upon request. The Board also may not restrict use of the recording as evidence in a dispute resolution process.
  3. All meeting notices, both for meetings of the Members and Board meetings, must include the date, time, and place of the meeting.
  4. A notice of any annual, regular, or special meeting must state the purpose for which the meeting is called.
  5. Before entering into any closed portion of a meeting, or on a notice stating that a meeting will be closed, the Board must identify the section of the open meeting statute that authorizes the Board to close the meeting.
  6. Emergency meetings may only be called for matters that cannot the wait the forty–eight (48) hours required for notice. At the emergency meeting, the Board may only act on emergency matters.
  7. This legislation reiterates that it is the policy of this State that meetings be conducted openly and that notices contain all information necessary to inform the owners of the matters to be discussed at the meetings. Provides that owners may speak before a vote of the Board or Members is taken. Provides that both the Directors and Community Managers must take the policy in favor of open meetings into account.

PB&J: This new legislation strengthens the public policy that all associations should conduct their affairs in an open and transparent manner.

This legislation allows owners to record all open meetings without first providing notice to the Board. This law firm recommends that all Boards assume that everything that is said in an open meeting is being recorded and may end up on the internet – and behave accordingly. The Board may prohibit recordings if it records the meetings and makes those recordings available upon request. This law firm does not recommend recording every meeting. It can be cumbersome for every meeting. the association to maintain, store, and make the recordings available upon request. The recordings would also become discoverable if the association were sued.

This legislation provides that all meeting notices, for both meetings of the Members and Board meetings, must include the date, time, place, and purpose for which the meeting is called. This requirement also applies to closed executive meetings.  Additionally, before entering into the closed portion of a meeting, or on the notice of a closed meeting, the Board must identify the section of the open meeting statute that authorizes the Board to close meeting.

The permitted topics include; 1) Legal advice from an attorney 2) pending or contemplated litigation, 3) personal, health, or  financial information about a member, employee, or contractor of the association, 4) matters related to the job performance of, compensation of, or specific complaint against an employee of the association or a contractor of the association and 5) discussion of a member’s appeal of a violation or a penalty imposed by the association. We advise the Board that it is easiest to add the statue reference to the notice.

The legislation is not clear whether a Board may address additional topics that were not included in the original notice as they arise. This law firm suggests that if additional topics do arise, the Board may address that topic in the interest of efficiency.The Board should then provide notice to the members at the next open meeting that it discussed additional topics.

It is probably easiest to add a check the box table to the meeting notice.

□ Legal advice from an attorney

□ Pending or contemplated litigation,

□ Personal, health, or financial information about a member, employee, or contractor of the association.

□ The job performance of, compensation of, or specific complaint against an employee of the association or a contractor of the association.

□ Discussion of a member’s appeal of a violation or a penalty imposed by the association.

Arizona law currently provides that an association may hold an emergency meeting on a matter that cannot wait until the next regularly scheduled meeting. This legislation provides that emergency meetings may only be held on business than cannot wait the forty–eight (48) hours required to give notice to the members. The legislation is silent on specific topics that would be considered an emergency. It is up to the Board to determine what can and cannot wait forty-eight (48) hours. This law firm recommends that Boards take care not to abuse this statute. Emergency meetings should be reserved for matters that truly cannot wait forty–eight (48) hours. A circumstance that threatens personal injury, waste of assets (broken pipe) or property damage if not addressed for forty hours is an emergency.

 

Voting & Secret Ballots

  1. Repeals the requirement enacted in 2016 requiring the envelope and related materials used for returning an absentee or mail–in ballot to contain the name, address, and signature of the person voting.
  2. If an association uses secret ballots, only the envelope must contain the name, address, and signature of the person voting.

PB&J: In 2016, the legislature passed a requirement that all envelopes and related materials used for returning an absentee or mail–on ballot contain the name, address, and signature of the person voting. This created a lot of confusion. The 2016 requirement did not provide a remedy if the envelope was not signed, but the ballot was otherwise in compliance and could be authenticated. This new legislation makes the voting and ballot authentication process much easier. As long as the ballot is signed and contains the name, address, and signature of the Member it should be counted, If an association uses secret ballots, the envelope must still be signed, and the ballot should not be signed. Members quite rightfully do not want to place signatures on the exterior of a mailed envelope. To make it easier for Members to return  to secret ballots in compliance with this legislation, this law firm recommends that a two–envelope system be used.

Resale Disclosure

  1. Provides that an association may charge an owner a fee of not more than an aggregate of four hundred dollars to  compensate the association for the costs incurred in the preparation and delivery of a statement or other documents furnished by the association for the purposes of resale disclosure, or other services related to the transfer or use of the property.

PB&J: This legislation includes costs related to the delivery of disclosure statement or package in the cap of $400.00. An association may no longer charge an owner $400.00 for the disclosure statement or package and additional fees for the delivery of the disclosure statement or package.

Senate Bill 1060:  Amends section 33–1803 of the Planned Community Act and section 33–1242 of the

Condominium Act.

Administrative Complaint Process

  1. 1.        Arizona lawprovides that an owner may file an administrative complaint against an associa In the Arizona Legislature’s 2016 budget, the legislature moved this administrative complaint process from the department of Fire, Building, and Life Safety to the Real Estate Department. This bill makes a technical change updating the statue to reflect and formalize the jurisdictional change to the State Real Estate Department.

PB&J:  This legislation makes a technical change to formalize that the Arizona Department of Real Estate will have jurisdiction over homeowners association administrative complaints. Realtors are often hostile to associations. We can speculate that  associations will be met with more hostility on this shift.