ARIZONA STATE SENATE
Phoenix, Arizona
homeowners’
associations; condominiums
(NOW: condominiums; homeowners’ associations)
Purpose
Makes widespread
changes to homeowner association (HOA) open meeting laws, board member removal,
document disclosure, voting and elections, assessments, declaration amendments,
prospective purchaser notice requirements and flag displays.
Background
Currently, state law provides for planned community HOA’s and for condominium HOA’s. Condominium HOA’s and their board of directors have been regulated in Arizona since 1986, while Laws 1994, Chapter 310 established regulations pertaining to the formation and operation of master planned communities’ HOA’s. H.B. 2604, in part, standardizes the two areas of law.
There is no anticipated fiscal impact to the state general fund associated with this measure.
Provisions
1. Allows the closure of regular and special HOA board meetings for discussion of past litigation and matters related to the enforcement of HOA bylaws and rules.
2. Removes ability for HOA bylaws to provide alternatives to statutory meeting notice requirements.
3. Requires HOA boards to provide a comment period for HOA members to comment on HOA matters during regular and special HOA board meetings. Allows HOA boards to limit the number of comments and length of comments.
HOA Records and Financial
Information (33-1258, 33-1805 & 33-1260, 33-1806)
4. Allows HOA unit owners to inspect and copy HOA records during regular business hours at the HOA’s principal office if the unit owner, at least five days prior to the date on which the unit owner would like to inspect the records, provides written notice that meets all of the following conditions:
a) The unit owner’s demand is made in good faith and for a proper purpose.
b) The unit owner describes with reasonable particularity the purpose and the records desired for inspection.
c) The records are directly connected with the unit owner’s purpose.
5. Allows HOA unit owners to inspect and copy the HOA budget without condition.
6. Allows HOAs to withhold records that relate to any of the following:
a) Personnel matters or medical records.
b) Communications with the HOA’s attorney.
c) Pending, past or contemplated litigation.
d) Pending, past or contemplated matters related to the enforcement of the HOA’s documents or rules.
7. Allows HOAs to charge for costs of preparing and reproducing the documents.
8. Allows HOAs to refuse to disclose financial and other records if the disclose violates any local, state or federal laws.
9. Confirms the right of a HOA member to inspect records pursuant to court action and the power of the court to exam records.
10. Requires HOAs to record in the county recorder’s office a notice stating the name of the HOA, designated agent or management company and contact information. Requires HOAs to amend its notice or record within 90 days if there is a change in address or management company.
11. Requires HOAs to furnish a copy of the disclosure statement within ten days of a pending sale, regardless of the number of units in the HOA.
12. Allows the HOA to provide a summary of the budget to prospective purchasers in lieu of the entire budget if it is more than ten pages, but is required provide a copy of the entire budget on request and on payment of a copying fee.
13. Requires HOAs to provide a copy of the entire annual financial report to a prospective purchaser on request and on payment on a copying fee.
14. Eliminates from the required documents that HOAs must make available to prospective purchasers a statement as to whether the unit’s alterations or improvements violates the HOA declaration.
15. Limits the ability of a prospective purchaser or seller to pursue an action for failure to disclose the required information to HOAs.
16. Applies condominium HOA statutory element to planned community HOAs relating to the ability of the HOA owners, by a two-thirds vote of all persons present and entitled to vote at a meeting at which a quorum is present, to remove any HOA board member, with or without cause, other than a member appointed by the declarant.
17. Requires HOA boards to provide notice of a special meeting regarding the removal of a HOA board member within 30 days after receiving a petition.
18. Prohibits removal of a board member at any meeting unless notice of the proposed removal is included in the general board meeting notice.
19. Prohibits the removal of a HOA board member without a quorum of the unit owners to whom at least 25 percent of the votes are allocated in person or by proxy at the meeting.
20. Requires HOA boards to retain for one year voting records on the removal and allow HOA members to inspect those records.
21. Entitles a prevailing party in a civil action filed regarding the removal to reasonable attorney fees and costs.
22. Stipulates for a HOA in which board members are elected from separately specified voting districts, a HOA director may only be removed by a vote of the members from a voting district.
23. Applies the procedure for removal of directors elected by members or directors under the nonprofit corporation laws to the removal of directors of an HOA.
24. Allows a HOA member to appeal to the HOA board any decision adverse to the member that was made by a committee, subcommittee or other body appointed by the board.
25. Requires the HOA board to maintain separate accounts for monies that belong to the HOA or HOA board. Prohibits commingling of HOA or HOA board monies with personal monies of any HOA board member.
26. Stipulates that a HOA board member employed as an employee or independent contractor or compensated by a management company employed by the HOA board or HOA is an unlawful conflict of interest.
27. Requires HOAs to furnish a statement of unpaid assessments to an escrow agent upon request.
28. Prohibits planned community HOAs from imposing a regular assessment that is more than 20 percent higher than the immediately proceeding fiscal year’s assessment without the approval of a majority of the votes cast at a HOA meeting at which a quorum is present. (33-1803)
29. Requires an HOA prior to filing a dwelling action to have approval of the filing by the HOA members in accordance with the community documents. Stipulates that the HOA must approve the filing by a majority vote of the members if the community documents do not contain provisions relating to the approval of such filings.
30. Prohibits HOAs from banning the display of the American flag on an HOA member’s property.
31. Allows HOAs to enact reasonable rules that regulate the time of day, place and manner of display.
32. Requires HOAs to provide notice of an amendment to the declaration to all HOA members.
33. Specifies an amendment to the declaration is effective on the recording of the amendment, unless a later effective date is designated.
34. Deems an amendment adopted if a sufficient number of members votes for or consents in writing to the amendment. Requires the community documents to prescribe the number of members required for voting for or consenting to the amendment.
35. Requires HOAs to retain the documents relating to the amendment with the other HOA records for at least two years.
36. States that a member’s written consent to an amendment is not required to be notarized or otherwise acknowledged. (33-1227 & 33-1808)
37. Allows HOAs to assign its right to future income, including the right to receive common expense assessment if approved by a majority of the membership.
38. Requires proxy votes to be signed.
39. Repeals existing record restrictions for nonprofit corporations. (10-11602)
40. Makes technical and conforming changes,
41. Provides for a general effective date.
CED 3/25/02 DPA/SE 6-1-1-2
3rd Read 4/09/02 32-20-8-0
Prepared by Senate Staff
April 15, 2002