Homeowners Associations – Their Rights, Reach and Structures in Arizona

A homeowners association is a nonprofit corporation or unincorporated association created pursuant to a declaration (commonly called a “declaration of covenants, conditions and restrictions”). In those communities that have homeowners associations–and there are thousands of them across the state–membership in the association is mandatory and community documents impose restrictions on the use of the properties within the community.

Associations exist for both condominiums and planned communities. Although the associations for condominiums and planned communities are both commonly referred to as “homeowners associations,” the associations are subject to slightly different laws. Because considerably more people live in planned communities than condominiums in the state, this article is based on the laws applicable to planned communities.

Assessments and Violations

A homeowners association has the power under the declaration to assess association members the costs and expenses incurred in the performance of the association’s obligations under the declaration (typically, the upkeep of common areas and enforcement of deed restrictions).

An association may not impose a regular assessment that is more than twenty percent greater than the immediately preceding fiscal year’s assessment without the approval of the majority of its members. In most cases, the association’s board of directors may impose reasonable charges for the late payment of assessments. A payment by a member is deemed late if it is unpaid fifteen or more days after its due date, unless the community documents provide for a longer period. Charges for the late payment are limited to the greater of $15 or ten percent of the amount of the unpaid assessment.

The association’s board of directors may impose reasonable monetary penalties on members for violations of the declaration, bylaws and rules of the association, after giving the member the opportunity to be heard. The board of directors may not impose a late charge for an unpaid penalty that exceeds the greater of $15 or ten percent of the unpaid penalty. A payment is deemed late if it is unpaid fifteen or more days after its due date, unless the community documents provide for a longer period.

A member who receives a written notice that the condition of his property is in violation of the community documents may provide the association with a written response (by certified mail) within ten business days after the date of the notice. The association, within ten business days after receipt of the response, must respond to the member with a written explanation regarding the notice. The notice must contain specific information regarding the violation, as set forth in the statutes. Unless the required information is provided, the association cannot proceed with any action to enforce the community documents. At any time before or after the exchange of information, the member may petition for an administrative hearing (discussed below) if the dispute is within the jurisdiction of the department of fire, building, and life safety.

Open Meetings and Records

All meetings of the association, board of directors, and any regularly scheduled committee meetings are open to all members of the association or any member’s designated representative. All members and designated representatives so desiring must be permitted to speak at an appropriate time during the deliberations and proceedings. Persons attending may tape record or videotape those portions of the meetings of the board of directors and meetings of the members that are open. Any portion of a meeting may be closed only if that portion is limited to consideration of certain legal matters, personal member information, or association employee matters. The association must hold a meeting at least once a year. Special meetings of the association may be called upon proper notice to the members.

All meetings of a planned community generally must be conducted openly and notices and agenda must be provided for those meetings that contain the information that is reasonably necessary to inform the members of the matters to be discussed or decided and to ensure that members have the ability to speak after discussion of agenda items, but before a vote of the board of directors is taken.

With limited exception, all financial and other records of the association must be made reasonably available for examination by any member or his designated representative. The association may not charge a member for making material available for review. The association has ten business days to fulfill a request for examination.

The board of directors must provide for an annual financial audit, review or compilation of the association. The audit, review or compilation must be completed no later than 180 days after the end of the association’s fiscal year and must be made available upon request to the members within thirty days after its completion.

In communities with fewer than 50 units, a member must mail or deliver to a purchaser within ten days after receipt of a written notice of pending sale of the unit copies of the community documents and a dated statement containing certain information regarding the association. The information required to be furnished is described in A.R.S. Section 33-1806. In communities with 50 or more units, the association is obligated to furnish the required information, but it may charge the member statutorily prescribed fees to do so.

Lien for Assessments

The association has a lien on a unit for any assessment levied against that unit from the time the assessment becomes due. The association’s lien for assessments, for charges for late payment of those assessments, for reasonable collection fees and for reasonable attorney fees and costs incurred with respect to those assessments may be foreclosed, but only if the owner has been delinquent in the payment of assessments for one year or in the amount of $1,200, whichever occurs first. The association’s lien for monies other than for assessments, for charges for late payment of those assessments, for reasonable collection fees and for reasonable attorney fees and costs incurred with respect to those assessments may not be foreclosed and is effective only on conveyance of an interest in the property.

Homeowners’ Rights

Under Arizona law, an association may not prohibit certain activities within the community that it governs. Some of those activities include:

Display of the American flag or military flag, if the flag is displayed in a manner consistent with the federal flag code.

Display of the POW/MIA flag.

Display of the Arizona state flag, or an Arizona Indian nations flag.

Display of the Gadsden flag.

The indoor or outdoor display of a political sign on the member’s property, within 45 days before an election and seven days after an election.

The use of cautionary signs regarding children.

Children engaging in recreational activity on residential roadways that are under the association’s jurisdiction and on which the posted speed is twenty-five miles per hour or less.

The indoor or outdoor display of a for sale sign on the member’s property.

The circulation of political petitions.

The installation or use of a solar energy device.

Although the association may not prohibit the above activities, in most cases it may enact rules regulating a particular activity that are not inconsistent with the statutes.

Administrative Hearings to Resolve Disputes

The Legislature recently passed legislation providing for the administrative resolution of disputes between homeowners and associations. The new law does not limit the rights of the parties to pursue matters in the legal system, but it provides an alternative. The owner or association may petition the department of fire, building and life safety for a hearing concerning violations of community documents or the statutes that regulate planned communities. The petition must be in writing on a form approved by the department and accompanied by a nonrefundable filing fee. The filing fee for a single violation (disputed issue) is $550; for multiple violations it is $2,000. The amount of the filing fee is subject to change. For current fees and forms, the reader is invited to visit the department’s Web site, www.dfbls.az.gov/hoa.aspx.

The department does not have authority to hear any dispute among or between owners to which the association is not a party.

On receipt of the petition and the filing fee, the department must mail (by certified mail) a copy of the petition along with notice to the other party that a response is required within twenty days. After receiving the response, the petition will be referred to the office of administrative hearings for a hearing. Failure to file a response will result in the issuance of a default decision in favor of the petitioner.

An administrative law judge will hear all contested matters. After a hearing, the judge will issue an order. If the party who filed the petition prevails at the hearing, the administrative law judge will order the other party to reimburse the winning party the filing fee paid. The order issued by the administrative law judge may be appealed to the Arizona Superior Court.