Arizona & Nevada HOA legislative updates (October 2019)

By Deborah Goonan, Independent American Communities
Debgoonan@icloud.com

Arizona enacts three new laws affecting rights of homeowners, for better or for worse. Nevada makes it illegal for HOAs to prohibit a homeowner from keeping a pet. Read on for details.

Arizona

This year, Arizona Homeowners Coalition (AZHOC) followed eight bills affecting homeowners, condominium, and cooperative associations. Three of those bills are now state law.

While AZHOC did not introduce any of these bills, the organization did succeed in eliminating or neutralizing some of the more harmful language drafted by HOA-industry trade groups.

Here are summaries of the three new laws.

SB-1094 Exemptions of certain associations from the Arizona Planned Community Act

As noted in a previous post here on IAC, SB-1094 was written by and for Sun Cities Recreation Association (SCRA), based upon a class action lawsuit filed by homeowners several years ago.

Sun Cities has argued for years that it is not a Homeowners Association as defined in the Arizona Planned Communities Act. Therefore, community leaders say they are not obligated to follow state laws that require HOAs to hold open meetings and provide access to financial records.

Homeowners from Viewpoint Lake objected to SCRA’s lack of transparency. They sued SCRA, claiming the Association is subject to the requirements of the Planned Community Act. The court agreed with homeowners — twice.

Not willing to accept their legal defeat, SCRA chose to work with attorneys and legislators to redefine a “homeowners association” in the Planned Community Act.

The new law creates two exemptions to the Planned Communities Act:

  • Any planned community or “association” incorporated or organized prior to 1974, and one “that does not have authority to enforce covenants, conditions or restrictions related to the use, occupancy or appearance of the separately owned lots, parcels or units.”
  • 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.”

Because SCRA was established prior to 1974, because it does not enforce covenants and restrictions, and because it maintains recreational facilities only, it is now exempt from all requirements of the Planned Communities Act.

Members of Viewpoint Lake HOA are required, by covenant, to pay fees to SCRA. But this new law takes away homeowners’ rights to attend SCRA board meetings and gain access to financial records.

Not a good deal for homeowners.

Unintended consequences?

Dennis Legere, principle advocate for AZHOC says that SB-1094 will have unintended consequences that affect the rights of all Arizona homeowners governed by HOAs.

According to Legere:

While the passage of this bill primarily impacts the rights of the 65,000 homeowners in two communities Sun Cities Recreation Association, and Green Valley Recreation Association from the protections and rights of the planned community act, the bill contains language that could allow attorneys for every planned community in the state to advise and argue that the planned community act no longer applies to them.

The most vulnerable communities that could be impacted by this bill would be property owners associations (POA’s) with no homes, and master associations that leave the actual home restrictions to the local HOA’s. I absolutely need to hear from any of you [property owners], if your community takes a position that they no longer are subject to the planned community act because of this law.

Despite the unsavory politics that led to the passage of SB-1094, the class action lawsuit against Sun Cities communities is currently pending in Superior Court. The crux of the homeowners’ case emphasizes Property Servitudes Common Law, rather than provisions of the Condominium or Planned Community Acts.

In other words, the issue of whether or not SCRA can legally exempt itself from transparency standards is not completely settled.

Homeowners interested in contacting Dennis Legere to discuss their rights can reach him at (602) 357-4905.

To learn more about AZHOC, visit HOAtruth.com

Reference:

CHAPTER 185
SENATE BILL 1094
AN ACT AMENDING SECTIONS 33-1801 AND 33-1802, ARIZONA REVISED STATUTES; RELATING TO PLANNED COMMUNITIES.

Legal gavel lawsuit
(Pixabay.com free image)

HB 2687 – Condominium deconversions

New provisions of state law now offer some additional protections for owners facing a condominium termination and deconversion, particularly when the process driven by investors in a hostile corporate takeover of the condominium board.

These homeowner protections include the following:

  • The investor group initiating a termination must now provide validation (proof) that it has indeed reached the required threshold for termination — 80%  of voting interests.

 

  • Condo unit owners are legally entitled to fair compensation for their property. The appraisal process is no longer solely controlled by self-interested investors, who are often motivated to buy out unit owners at the lowest price possible.

 

  • Upon termination, condo owners are entitled to an additional 5% payment, to help cover their relocation costs.

 

  • Owners are entitled to receive their prorated share of operating and reserve account balances at the time the condo association is terminated.

Notably, state law still does not address the fundamental constitutional issue faced by property owners in a condo termination or deconversion.

State law still won’t prevent what amounts to eminent domain for condominiums. Developers and investors can still wilfuly take private property from some property owners, against their will, for their own private gain. And they can continue to do so with the tacit approval of local and state government.

Reference:

CHAPTER 233
HOUSE BILL 2687
AN ACT
AMENDING SECTION 33-1228, ARIZONA REVISED STATUTES, AS ADDED BY LAWS 1985, CHAPTER 192, SECTION 3; REPEALING SECTION 33-1228, ARIZONA REVISED STATUTES, AS AMENDED BY LAWS 2018, CHAPTER 235, SECTION 1; RELATING TO CONDOMINIUMS.

SB-1531 Good news and bad news for homeowners

In the face of stiff opposition from trade groups, AZHOC made substantial efforts to reshape this bill to provide some level of HOA foreclosure reform.

SB-1531 was drafted by Community Associations Institute (CAI) and Arizona Association of Community Managers (AACM).

The original version of this legislation set the following priority of payment standard: Each homeowner’s partial HOA payment would first be used to reduce attorney fees, collections costs and fines, before a single penny would be applied to the principle balance of past due assessments.

That’s the kind of accounting and collection scheme that almost guarantees a homeowner will never catch up with the debt, increasing the likelihood of HOA foreclosure.

AZHOC’s efforts reversed this order of applying payments, so that state law now requires an HOA to apply partial payments (as in payment plans) to reduce the actual assessment debt first, before paying other fees and fines.

Other GOOD and BAD provisions include:

GOOD: Mandates that an association must provide written notice of assessment or fee delinquency to homeowners. Notice must be made by certified mail 30 days prior to forwarding the account to any collection agency or attorney.

This gives a homeowner one last chance to pay the amounts due or to arrange a payment plan with the HOA. In turn, it prevents HOA collection companies and attorneys from tacking on their unlimited fees. Those predatory feed can add up to at least 3 to 10 times the amount of the past-due HOA fees.

BAD: The law does not limit the amount of attorney fees and collection costs that can be applied to a delinquent account once it moves to collections. Therefore, by default, state law continues to enable predatory collection practices.

GOOD: An HOA must provide an accurate, itemized account statement to any homeowner upon request.

GOOD: Professional community association managers of HOAs with 50 or more units must provide itemized billing statements to all members on a monthly basis, but…

BAD: There is no similar requirement for self-managed associations or HOAs with fewer than 50 units.

BAD: A new provision added to the bill by interest groups CAI and AACM makes it nearly impossible for a homeowner to avoid foreclosure after the HOA files a legal action.

Current law only allows an HOA to foreclose on a home or condo if the total past-due assessment balance is at least $1,200, or if the owner has not paid assessments for an entire year.

The new provision allows an HOA to proceed with a foreclosure action based on the balance “as determined on the date the action is filed”.

What this means is that, once the HOA officially files for foreclosure, a homeowner cannot stop the HOA from foreclosing, even if a homeowner pays every penny of the past-due assessments.  The only way a homeowner can stop the process is to pay the total amount due, to include interest, collection costs, and attorney fees.

In this scenario, HOA attorneys and collection companies win, housing consumers lose.

Reference:

CHAPTER 200
SENATE BILL 1531
AN ACT
AMENDING SECTIONS 33-1256 AND 33-1807, ARIZONA REVISED STATUTES; RELATING TO CONDOMINIUMS AND PLANNED COMMUNITIES.

Nevada

Homeowners have the right to own and keep one pet in their HOA-governed community

In a radical, first of its kind state law, Nevada took a step forward for pet lovers.

As of October 2, 2019, no HOA can prevent a resident from owning and keeping a pet in their home, including a condominium unit.

Specifically, neither the governing documents (Covenants and Restrictions) or board enacted rules can stop a unit owner from keeping one “domesticated bird, cat, dog or aquatic animal kept within an aquarium or other animal as agreed upon by the association and the unit’s owner.”

The law does not apply to an association if its governing documents restricted pets on or before October 1, 2019.

The HOA (including a condo or co-op association) can still limit the number of pets to one. The association can also enact and enforce reasonable restrictions with regard to keeping a pet (such as picking up after the pet, using a leash, etc.).

Finally, an HOA can still exclude dangerous or vicious dogs in accordance with current state law. (See NRS 202.500).

Notice, however, that the new language implies that a unit owner can still prohibit their tenant from keeping a pet.

This law won’t be popular with homeowners who prefer to live in a no-pet community, particularly if they suffer from allergies or are fearful of certain domesticated animals. ♦

Reference:

AB 161 Title:
AN ACT relating to common-interest communities; prohibiting common-interest communities from restricting the ownership of pets by a unit’s owner under certain circumstances; and providing other matters properly relating thereto.

Text of AB 161