homeowners' associations;
governance
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Committee on Public Institutions and Rural Affairs |
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Committee on Commerce and Economic Development |
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Caucus and COW |
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Third Read |
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As Passed the House |
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HB 2405 amends various statutes relating to homeowners associations, including open meeting laws, inspection of public records, budgets and reports, and rental restrictions.
Community associations are commonly referred to as homeowners' associations [HOAs], even though they technically are governed by two different chapters of law. Title 33, Chapter 9, the Condominium Act, applies to all condominiums created after January 1, 1986. Title 33, Chapter 16, first enacted in 1994, applies to all planned communities [single-family homes]. These statutes define master planned community, allow for penalties on a past due assessment and for a violation of the declaration, bylaws or rules, specify the conditions for closed meetings, specify conditions for disclosure and examination of financial records and require specified information to be furnished upon the resale of a unit.
· Stipulates that if a board of directors of a homeowners’ association of any planned community with fifty units or more violates the open meeting laws two or more times in a twelve month period, the second and subsequent violations are deemed breaches of the board’s fiduciary duty.
Inspection of Public Records
· States that A.R.S. Title 39 §§ 121 and 121.01, relating to inspection and copies of public records, shall apply to the board of directors of a homeowners’ association of any planned community with fifty units or more, as if it were a public body.
· Stipulates that the board of directors of a homeowners’ association of any planned community with fifty units or more shall provide copies of records within ninety-six hours after receiving a records request.
Record of Requests for Action
· States that the homeowners’ association shall hold regular meetings as provided in the community documents.
· Requires the homeowners’ association to keep a written record of all its actions, including the reason for denying taking action upon any request made to that board.
Voidable Contracts
· Requires that any of the following contracts may be terminated without a penalty by the association at any time after the termination of any period of declarant control:
Ř Any management or employment contract.
Ř Any lease between the declarant and the association.
Ř Any contract that is not bona fide or was unconscionable to the members at the time it was entered.
Ř Any contract that by its terms prohibits it to be included in the records of the association and available to the members.
· Requires the board of directors to notify the contractual party of the termination at least thirty days before termination.
Declarant Control, Conflicts of Interest,
Budgets and Reports
· Provides the following for planned communities homeowners’ associations with fifty or more units:
Ř Stipulates that the board of directors and the declarant have a fiduciary duty to the homeowners’ association and shall comply with a reasonable person standard in all of their actions as directors.
Ř Requires the declarant to maintain and account for association monies separate from the declarant’s monies.
Ř Provides that the declarant shall maintain accurate records of those monies and shall provide those records to the association upon termination of declarant control.
Ř States that A.R.S. Title 38, sections 502, 506 and 510, relating to conflicts of interest, shall apply to homeowners associations.
Ř Requires that A.R.S. Title 38, sections 443, 447 and 481, relating to official acts, shall apply to the members of the board of directors and its officers and employees.
Ř Stipulates that the declarant has a fiduciary obligation to the association and shall comply with a reasonable person standard in all financial dealings with the association.
Ř Makes a class 6 felony a violation of those standards that results in financial benefit for a board member, an officer, an employee or the declarant.
Ř Requires the board of directors to prepare and send quarterly financial statements to each member.
· Stipulates that for an association with annual revenues between the amounts of one hundred thousand and five hundred thousand dollars, within four months of the end of the fiscal year and at least every two years, the board shall obtain an audit performed by a certified public accountant and shall provide it to the association members within forty-five days after receipt.
· States that for an association with annual revenues of more than five hundred thousand dollars, within four months of the end of the fiscal year and at least every year, the board shall obtain an audit performed by a certified public accountant and shall provide it to the association members within forty-five days after receipt.
· Requires the board to obtain a reserve study every five years and to update it annually.
· Provides that the board shall establish a reserve fund and shall maintain it according to the study and its updates.
· Stipulates that the declarant of any association shall provide to the board of directors an audit performed by a certified public accountant at the time of the termination of declarant control.
Rental Restrictions
· Provides the following for planned communities homeowners’ associations with one hundred or more units:
Ř Prohibits a unit owner from renting to any person for less than sixty days.
Ř Prohibits a unit owner that does not occupy the unit for at least two months annually from renting that unit for more that a single three month.
Ř Requires the unit owner to ensure that any appropriate transaction privilege tax is collected and paid.
Ř Provides that the unit owner shall notify the county assessor of the change in the assessment class for the rented real property.
Ř Stipulates that the board of directors shall require the removal of all structures that are encroaching on the common areas, and they are without written authorization.
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DOCUMENT FOOTER ---------
45th Legislature
Second Regular Session 3 February
5, 2002
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DOCUMENT FOOTER ---------