HB2604 - 452R - House Bill Summary

House of Representatives

HB 2604

homeowners' associations; condominiums

Sponsors: Representatives Voss, Johnson, Weason, Pearce, Allen: et al

DPA S/E	Committee on Commerce and Economic Development
DPA	Caucus and COW
X	Third Read
	As Passed the House

HB 2604 amends the current planned community and condominium homeowner association (HOA) laws.

Current Status

The Commerce and Economic Development Committee adopted a strike-everything amendment that makes changes to the current homeowners' association statutes. The Committee of the Whole adopted amendments that made several substantive changes.

History

Arizona statutes provide limited direction to condominium and planned community (single family) associations, which are commonly known as HOAs. Each HOA's codes, covenants and restrictions (CC&Rs) predominantly outline the manner in which the association membership and their elected board members must conduct themselves and their board business.

The proposal makes a number of changes to the statutes that regulate HOAs.

Amendment

A strike-everything amendment was adopted in the Commerce and Economic Development Committee as follows:

Condominium Associations

· Clarifies that an amendment becomes effective upon recordation, unless there is a later specified effective date. Notice of the amendment must be given to all members. [33-1227]

· Establishes that regardless of any provision in the declaration to the contrary an amendment is deemed adopted if there is the required number of votes. The association must preserve the related documents for a period of one year after recordation. [33-1227]

· Permits a majority affirmative vote of the membership to assign the Association's future income, including the common assessments. [33-1242]

· Requires proxy votes to be signed as well as dated. [33-1250]

Condominium and Planned Community Associations

· Stipulates that the HOA may not prohibit a member from displaying the American flag; however, the board may adopt pertinent rules. [33-1242 and 33-1810]

· States there is no requirement to notarize a member's written consent to an amendment. [33-1227 and 33-1808]

· For purposes of removing a board member, requires the board to post notice of a special meeting within 30 days after receiving a petition signed/dated by at least 25% of the voting members [1,000 members or less]. For HOAs with more than 1,000 members, the petition must be signed by at least 10% of the voters. A board member may not be removed without proper notice. In a civil action filed as a result of removing a board member, the prevailing party is entitled to reasonable attorney's fees and costs. The board must retain records for one year and shall permit their inspection. [33-1243 and 33-1809]

· Stipulates that the current Nonprofit Corporations section of law [10-3808] applies to removal of board members when cumulative voting applies. [33-1243 and 33-1809]

· Regardless of any provision to the contrary, allows a member to appeal the decision of any board-appointed subcommittee directly to the board of directors. [33-1243 and 33-1809]

· Clarifies that the board may close a meeting in order to discuss past litigation or other matters relating to the enforcement of the association's documents or rules. [33-1248 and 33-1804]

· Current law requires the association to provide the amount of any unpaid assessments to the lienholder or unit owner/designee. HB 2604 adds escrow agent. [33-1256 and 33-1807]

· Makes the notice requirement 10-50 days in advance of any unit owners' meeting, regardless of any provision in the association documents to the contrary. The Board of Directors' meetings must be noticed 48 hours in advance. [33-1248 and 33-1804]

· Requires the board to establish a comment period at meetings. [33-1248 and 33-1804]

· Specifies the requirements for members to review and copy records. Requests must be made in good faith for a proper purpose as outlined and at least five business days prior to review. Outlines the documents and records that are confidential. Allows the association to charge a reasonable fee for preparing and reproducing the records. [33-1258 and 33-1805]

· Requires the association to file notice with the county recorder stating all pertinent information relating to the association, the management company and contact person. Stipulates that any changes shall be recorded within 90 days. [33-1258 and 33-1805]

· Mandates the association shall furnish copies of the disclosure statement, regardless of the number of units in the association. [33-1260 and 33-1806]

· Allows the budget to be summarized if it exceeds 10 pages. Any member may obtain the full budget or annual financial report upon request and payment of copying costs not to exceed $.10 per page. [33-1260 and 33-1806]

Planned Community Associations

· Currently an association may only increase the regular assessment up to 20% more than the preceding year without the approval of a majority of the association's membership. The proposed strike-everything amendment allows for an increase when there is a majority of the votes cast at an association meeting, provided there is a quorum. A quorum consists of 50% of the voters present either in person or by proxy. [33-1803]

Amendments

The CED Committee adopted the strike-everything amendment.

The Committee of the Whole adopted the CED Committee amendment and further amended the bill as follows:

· Clarifies the number of votes that are required to amend the declaration is according to each community's association documents. The records must be kept two years.

· Mandates a separate board/association financial account from that of any personal account and prohibits commingling of monies.

· Outlines conflict of interest provisions and prohibits any board member from being employed by a management company.

· Allows the association to charge the actual cost of reproducing/preparing copies.

· Stipulates that filing a homeowners' association court action requires an approval of the membership as outlined in the community documents or by a majority vote of the membership [if no provision exists in the community documents].

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· 45th Legislature

· Second Regular Session 3 April 11, 2002