House of Representatives

SB 1342

homeowners' associations

Sponsors: Senators Gerard, Bundgaard, Smith

and Representative McClure

 

DPA

Committee on Counties & Municipalities

X

Committee on Commerce & Economic Development

 

Caucus and COW

 

Third Read

 

 

As Passed the House

 

SB 1342 makes numerous changes to statutes governing condominium and planned community associations.

Current Status

SB 1342 passed the Counties and Municipalities Committee amended to require associations to file the name, address and phone number of the association, designated agent or management company with the County Recorder’s Office.  The amendment also makes changes to the membership of the appeals committee and makes a technical correction.

 

History

Community associations are commonly referred to as homeowners' associations and are governed by two different chapters of law.  Title 33, Chapter 9, applies to all condominiums created after January 1, 1986.  Title 33, Chapter 16, applies to all planned communities (single-family homes).  These statutes define key terms, allow associations to collect penalties for past due assessments or violations, outline meeting procedures and specify the association information that must be provided to a new owner upon notice of sale.

Provisions

General

·              Exempts members of a condominium association or planned community from the non-profit corporation code concerning challenging a corporation’s power to act. (Sec. 1)

·              Removes language relating to the examination of records or documents for members of a condominium association or a planned community from the non-profit corporation code.  (Sec. 2)

·              Requires a justice of the peace to provide expedited resolution of disputes between  association members and their association, unless certain circumstances exist. (Sec. 3)

·              Makes technical and conforming changes.  (Secs. 4, 5, 6, 7 and 10)

 
Condominium Associations and Planned Communities

·              Allows a member to appeal any monetary penalty. (Secs. 6 &16)

·              Establishes a separate committee to handle appeals, specifies the membership and requires it to report a decision back to the board of directors (board). (Sec. 6 &16)

·              Allows the appeal committee’s decision to be overruled by the board if by a unanimous vote. (Secs. 6 & 16)

·              Makes the board’s decision final unless one of the parties files a court action. (Secs. 6 &16)

·              States that all members of the board have an obligation to act in good faith in accordance with association documents. (Secs. 6 &16)

·              Requires the board to provide a special meeting notice within 30 days of receiving a petition to remove a board member.  The petition must be signed and dated by at least 25% of the members if the association has less than 1000 members, or at least 10% if the association has more than 1000 members.  If the meeting notice doesn’t include notice of the removal petition, the board member may not be removed. (Secs. 6 & 21)

·              States for a meeting to remove a board member, quorum is at least 25% of the owners being present or voting by proxy. (Secs. 6 & 21)

·              Provides that in any court action concerning the removal of a board member, the prevailing party is entitled to legal costs. (Secs. 6 & 21)

·              Requires the board to retain records on the removal of a board member for at least one year and allows members of the association access to those records. (Secs. 6 & 21)

·              Clarifies that the board may close a meeting for employment or personnel matters or to receive legal advice from an attorney.  Strikes language allowing the board to close meetings to discuss litigation or matters relating to the enforcement of rules. (Secs. 8 & 17)

·              Requires all board and association meetings to be held in Arizona. (Secs. 8 & 17)

·              Requires notice of an association or board meeting to meet statutory requirements, regardless of the bylaws or articles. (Secs. 8 & 17)

·              Requires all notices of board meetings to include the specific agenda for the meeting. (Secs. 8 & 17)

·              Requires the board to provide a summary of its activities to its members at least every three months. (Secs. 8 & 17)

·              Allows owners and lessees to observe the counting of written ballots and proxies. (Secs. 9 & 21)

·              Requires the board to keep all written ballots and proxies for at least 30 days. (Secs. 9 & 21)

·              Clarifies that any member may run for the board as long as the member provides a valid petition at the appropriate time. (Secs. 9 & 21)

·              States that until a member has had the opportunity to appeal any monetary fee or penalty for a violation, the association may not have a lien for that fee or penalty. (Secs. 10 & 20)

·              Allows an escrow agent to request in writing that the association provide a statement indicating any unpaid assessments against a unit. (Secs. 10 & 20)

·              Requires the association to release a lien promptly after it has been paid. (Secs. 10 & 20)

·              Prohibits the association from shutting off utility services to a unit. (Secs. 10 & 20)

·              Allows any member to inspect and copy association records as long as they provide five days notice to the association. (Secs. 11 & 18)

·              Requires all association records to be kept in Arizona. (Secs. 11 & 18)

·              Requires the board to keep records on all meetings, and allows the board to withhold documents that contain information on employment or personnel matters or legal advice for the board or association. (Secs. 11 & 18)

·              Allows the association to charge a copying fee no more than $0.50 per page if a member requests copies of association records. (Secs. 11 & 18)

·              States that the association does not have to disclose financial or other records if the disclosure violates law. (Secs. 11 & 18)

·              Adds the articles of incorporation and a statement on the reserve fund to the list of items that an association must provide to a unit purchaser.  In addition, the bill allows the association to provide that information to either the purchaser or the purchaser’s agent after receiving notice from the member of the pending sale of the unit. (Secs. 12 & 19)

·              Removes the requirement for the association to provide a statement whether any changes made to the unit are in violation of the declaration. (Secs. 12 & 19)

·              Adds the owner’s agent to the list of people who may be sued if all statutorily required information is not given to the purchaser. (Secs. 12 & 19)

·              Prohibits the board from contracting with a management company unless a majority of the board approves the company. (Secs. 13 & 21)

 

Condominium Associations Only

·              Provides that within 30 days of the board adopting a budget, a summary must be provided to owners, regardless of what is contained in the association’s declaration. (Sec. 6)

·              Requires any budget to be ratified by the owners, regardless of the association’s declaration. (Sec. 6)

·              Provides that if a budget is ratified, the budget last accepted by the owners is continued until the board adopts a new budget and the owners accept it. (Sec. 6)

·              Allows the board to impose penalties on members for violations of the declaration, bylaws or rules after providing notice and an opportunity for the owner to be heard on the issue. (Sec.6)

·              Prohibits a lessee from placing a vote by proxy. (Sec. 9)

·              Voids a proxy if it isn’t dated and signed and allows a unit owner to revoke the proxy verbally if in attendance at the meeting. (Sec. 9)

·              Prohibits the board from imposing an assessment that is 20% higher than the assessment for the previous year, unless the increase is approved by a majority of voters at the association meeting. (Sec. 10)

 

Planned Communities Only

·              Makes the chapter on planned communities applicable when the association is organized. (Sec. 14)

·              Defines declarant, affiliate of a declarant, development rights, member, special declarant rights, unit, and unit owner. (Sec. 15)

·              Requires the board to provide owners with a summary of the proposed budget within 30 days of it being adopted. (Sec. 16)

·              Provides that a meeting on the budget must be scheduled for within 14 days but not more than 30 days after the budget summary is mailed. (Sec. 16)

·              States that if the owners reject the proposed budget, the most recently adopted budget will be extended until a new budget can be proposed by the board and adopted by the owners. (Sec. 16)

·              Specifies that a quorum must be present at a meeting to approve increasing the assessment more than 20% above the previous year’s assessment. (Sec. 16)

·              Prohibits the board from imposing a penalty on a member unless the member has violated the association’s declaration, bylaws or rules. (Sec. 16)

·              Allows the declaration to be amended if at least 67% of the owners in the association approve of the change.  While the association is under declarant control, the consent of the declarant may be required to amend the declaration.  The declaration may also require the written consent of the declarant to amend the declaration during declarant control.  (Sec. 21)

·              Provides that the validity of the amendment cannot be challenged after one year. (Sec. 21)

·              Allows the declarant to appoint or remove members of the board during declarant control. (Sec. 21)

·              States that declarant control ends when 75% of the units have been sold or four years have passed since the declarant has sold a unit. (Sec. 21)

·              Allows a declarant to surrender control to the board early, but also allows the declarant to require the board or association to get approval from the declarant before making certain decisions. (Sec. 21)

·              Requires the association members to elect a board on or before the declarant surrenders control of the association and specifies the membership of the board. (Sec. 21)

·              Allows the members to remove a member of the board with at least a two-thirds vote, unless the declarant appoints that member.  The board must provide notice of the meeting to remove a member of the Board within 30 days of receiving a valid petition.  Notice of the removal petition must be included in the meeting notice. (Sec. 21)

·              Provides that if the association has board members elected from specific voting districts, only the members in that district may vote to remove a member of the board representing their district. (Sec. 21)

·              Provides that certain contracts or leases entered into under declarant control must include a clause that will allow the association to terminate the contract with no penalty after the declarant surrenders control of the association.  The board must notify contract holders at least 30 days before their contract is terminated. (Sec. 21)

·              Specifies how multiple owners of a unit may vote at association meetings. (Sec. 21)

Ø        If only one owner is present, that owner may cast all votes allocated to the unit.

Ø        If more than one is present, the votes must be all cast for the majority of the owners.

Ø        Majority agreement is implied if none of the other owners protest.

 

·              Specifies how proxies may be used to vote at association meetings. (Sec. 21)

Ø        Proxies may not be valid after one year.

Ø        Proxies are only valid if it has the unit owner’s address and is signed and dated.

Ø        An owner may revoke a proxy if the owner can provide a more recent one.

·              Allows the declaration to specify that lessees vote on certain issues.  If a lessee is allowed to vote: (Sec. 21)

Ø        The owner leasing out the unit may not vote.

Ø        Lessees split their votes the same way multiple owners would.

Ø        Lessees should get the same meeting notice and records access that the owners would.

·              Prohibits the association from casting votes on units that it owns unless otherwise stated in the declaration. (Sec. 21)

 

Amendments

SB 1342 was amended in the Counties and Municipalities Committee as follows:

·              Requires condominium and planned community associations to file in the Office of the County Recorder a notice with the name of the association, designated agent or management company, along with its phone number and address.  The association must update this information within 90 days of any changes.

·              Allows the local justice court to appoint a person to the three-person appeals committee if the two other appointees cannot agree upon a third person within 10 days.

·              Makes a technical change.

 

 

 

 

 

 

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45th Legislature                       

Second Regular Session            5          April 18, 2002

 

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