Arizona Legislative updates: Assessments, HOA foreclosure, Condominium Association termination (March 2019)

By Deborah Goonan, Independent American Communities

Updated March 23, 2019

A summary of several bills impacting HOA-governed communities, and closely tracked by the Arizona Homeowners Coalition (AZHOC). Subjects: Assessments, HOA foreclosure, Condominium Association termination

HB-2374 Planned Communities; applicability; recreation center

*UPDATE: Good news for homeowners! According to Dennis Legere of  AZHOC, HB-2374 is not on the Senate Government Committee agenda for this week. The bill is effectively dead for this legislative session. A bill summary follows.

Sun Cities Recreation Centers heavily promoted this bill, for the express purpose of exempting themselves from compliance with Arizona Planned Communities Act. The legislation was drafted after SCRC lost twice in court. Viewpoint Lake homeowners sued SCRC, challenging the association for not meeting open meetings and transparency standards as required by state law.

Note: SCRC charges mandatory fees to lot owners for various recreational amenities and event planning. Homeowners cannot opt out of membership in SCRC.

Here are the proposed exemptions to the Planned Communities Act:

  • Any planned community or “association” incorporated or organized prior to 1974
  • Any association organized for the “sole purpose of supporting recreational activities in a real estate development.”

The bill redefines a planned community as a real estate development that is responsible for maintaining roads or easements, and that meets BOTH of the following criteria:

“owners of separately owned lots, parcels or units are mandatory members,” and

“the owners are required to pay assessments to the association for these purposes.”

The bill passed in the House, and was transmitted to the Senate. House representative had agreed to vote YES on HB-2374, with the promise of a Senate amendment to the original bill.

HB-2374 House Engrossed

Track HB-2374

Think about the implications if HB-2374 were to be enacted as law in Arizona.

If you’re a homeowner paying mandatory assessments, fees, or “dues” to maintain recreational and entertainment facilities, and to plan community social activities, you would lose your right to attend Association meetings and to examine financial records upon request.

Should it matter if your mandatory-membership association does not maintain the roads in your community?

If the Senate had passed HB-2374, it would have sent the message that any HOA or POA can simply avoid the Planned Community Act’s transparency and accountability standards by creating two separate entities: one to collect fees to maintain infrastructure, and a second entity to manage recreational services.

If SCRC wants to operate as a private business, with no obligation to disclose its financial records, or hold open meetings, then it should convert to a voluntary membership club.

If Arizona Senate had approved this bill, owners of property in association-governed common interest communities in Arizona would have lost the right to know how their HOA, POA, or recreation association spends their mandatory fees.

Thanks to homeowner advocates and concerned voters, who took the time to voice their concerns, evidently convincing Senator Farnsworth to stop HB 2374.


SB-1531 HOAs; assessments; cost

Several weeks ago, the Senate passed this HOA assessments and foreclosure bill, with the promise of amendments in the House.

Recall that, on February 18th, the Senate Government Committee held a public hearing. AZHOC advocates Dennis Legere and homeowner advocate Theresa Fogle offered testimony in opposition to the bill. Legere answered several questions from Committee members, explaining why the bill is harmful to homeowners.

In addition, dozens of other involved Arizona homeowner citizens wrote to their Senators, leading several Senators of the Government Committee to press AACM managers on the issues of:

  • “no-cost” collection firms,
  • insufficient written notice to homeowner of HOA debt, lien, and pending foreclosure,
  • Applying payment of fines, attorney fees, and collection costs ahead of unpaid assessments.

After lengthy committee discussion, the committee agreed (5-2) to pass SB 1531. Several Senators voted “yes,” with Senator Farnsworth’s promise of making several floor amendments to removed the offending provisions, and make the bill more homeowner friendly.

Amendments to SB1531

Senate committee members did make several amendments.

Thankfully, the following language changing priority of payments has been removed:

Any unpaid amounts in the order debt was accrued if those charges, costs, fees, or other amounts are specifically authorized in the Declaration to be charged to the unit owner.

Therefore, each homeowner payment received by the HOA must still be applied first to current and past due assessments, as required by the current statute.

However, the law still allows a loophole for third party collection agents to demand payment of their legal fees before they can reduce or pay off the balance of the actual HOA assessment delinquency. That policy is likely to lead to more HOA foreclosures, rather than preventing them.

See Attorney Jonathan Dessaules’ well-written explanation of why SB1531 is bad for homeowners in the source links below.

The Senate did add a common sense amendment requiring certified mail and 30-day advance notice of collections and lien notifications.

However, the bill also creates a legal obligation for all associations with more than 50 units to send monthly account statements to each member by snail mail, even if the association already provides monthly payment books and/or online access to statements.

Legere says that this unnecessary measure will increase costs for homeowners, while creating a new revenue stream for management companies to print and mail documents each month.

SB-1531 Senate Engrossed

Track SB1531
AZ Legislative summary

Additional Sources:

SB 1531: Bad for HOAs. But Really, Really Bad for Homeowners
March 5, 2019 Attorney Jonathan Dessaules

Will new bill cost homeowners more? Posted: 7:00 AM, Mar 19, 2019
Updated: 10:51 AM, Mar 19, 2019
By: Courtney Holmes , Joe Ducey

 


HB-2687 Condominium; terminations; appraisals

These amendments create additional responsibilities for the association, when at least 80% of voting interests favor of terminating the association.

First, the condo association would be required to conduct an open meeting and present written proof that is has gathered sufficient votes in favor of termination.

Second, if a condo owner who disagrees with the association’s appraised value of a unit would be entitled to pay for a second appraisal. If the appraisal amounts differ by more than 5%, an Arbitrator will decide on fair market value for the unit. If the appraisal amounts differ by 5% or less, the unit owner would be compensated the higher amount.

The bill also adds 5% of the sale price of the unit for relocation expenses.
HB-2687 House Engrossed