Category: Association Legal News

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.

4. BeginningJanuary 1, 2020, except 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:
5. a.  The current account balance; and
6.  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.
7. 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.

2. 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.
3. 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.

4. 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.

3. 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
4. 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.

2. 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.
3. 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