HOA Basics in Arizona
Today’s Arizona communities are typically governed by covenants, conditions, and restrictions (CC&Rs) along with an associated homeowners’ association (HOA). These HOAs enforce restrictions and sometimes also operate as (or hire) a property management company to manage the community. This is true for both condominium communities and community associations that have only single family homes.
A commercial real estate developer will establish the HOA while developing the community. When the community is sold, management of that HOA is transitioned to elected members of the community. The elected members serve as the HOA board and are responsible for overseeing the management of the HOA. To assist in this volunteer effort, the HOA may hire a licensed property management company.
An HOA has many purposes. One of the main purposes is to provide a framework for managing the community property. Today, HOAs often oversee hundreds of homes and professionally manage millions of dollars worth of community property. This task requires a huge coordination and collaboration effort, which can be expensive and time-consuming. An HOA, however, has an important role that goes beyond simply managing the community property.
For many, purchasing a home in an HOA community is enticing because HOAs often provide beautiful landscapes with manicured parks, pools , and recreation facilities. Providing and maintaining the community property to these standards is a primary responsibility of the HOA and its managers or landscapers.
An HOA is also responsible for adopting, amending, and enforcing rules and restrictions. Enforcement of rules and restrictions is a critical function of an HOA. An HOA wants to ensure rules and restrictions are followed so that members of the community experience some uniformity. Reasonably predictable community aesthetics can increase property values and curb appeal while discouraging undesirable behaviors.
While many appreciate the benefits an HOA and its rules provide, others may perceive an HOA and its rules and restrictions as an inconvenience. For example, rules pertaining to the length of grass in yards or parking constraints may irk those who want to maintain their yard or park their work truck on the street. Other restrictions may be perceived as arbitrary or inconvenient. For those who are particularly disgruntled, what may seem like a trivial infraction can escalate into a contested enforcement action that involves litigation.
Complications also arise when there are challenges within an HOA. Disagreements over rule enforcement, interpretation, or amendments occur regularly. Member disputes, election disputes, and enforcement disputes can complicate an HOA’s day-to-day management while potentially increasing the HOA’s costs of doing business. These disputes are handled differently depending on the dispute and municipality in which the community is located.
Common Arizona HOA Laws
Arizona has several laws that specifically address homeowner associations. One of the most significant pieces of legislation is the Arizona Planned Communities Act, which governs unincorporated communities organized under the Arizona Nonprofit Corporation Act.
The Planned Communities Act covers a variety of issues regarding management, maintenance, and enforcement of community standards. For example, the law requires disclosure of community documents to prospective buyers and mandates an HOA’s maintenance responsibilities for common areas. HOAs must also establish grievance processes and provide an address for the delivery of documents, which is important for legal notifications.
HOAs may not impose "fees" without specific authority. Instead, they can impose "fines" or "assessments."
Fines are for misconduct related to the governing documents or reasonable rules and regulations. These fines may be imposed after notice and a hearing before a hearings committee. Fines for violations of the Open Meeting Law or for failing to comply with the Fair Housing Act are capped at $10 per day. All other fees assessed by the association can be no more than $15 each day. Assessments are fees imposed against lots that have been properly assessed by the board of directors.
Failure to provide notice of violations, fines and assessments may increase the HOA’s liability for damages. However, they can impose fees for failure to pay their fees or fines.
Fines and assessments become a lien on the homeowner’s property. Failure to pay an assessment of $1,200 or more over a year or delinquency of 3 months or more, whichever is greater, grants the HOA the right to foreclose on the property.
HOAs must follow the procedure set out in the Planned Communities Act. They may not have rules or regulations that violate fair housing. For example, an HOA cannot restrict children from living in the community. Discrimination based on race, color, religion, sex, national origin, and recent laws also ban discrimination based on disability.
Common interest developments are governed by the Arizona Uniform Common Interest Ownership Act. This act provides regulations for condominiums, suburban planned communities and cooperatives.
Rights and Responsibilities of Homeowners
Homeowners within an Arizona homeowners association have a range of rights and responsibilities outlined by Arizona law. These laws protect homeowners and ensure fair treatment, while also outlining their obligations to the community.
One of the fundamental rights of homeowners in Arizona is the ability to vote on key issues pertaining to the management and operation of the association. Under Arizona Revised Statutes 33-1811, homeowners have the right to cast their vote on matters such as the election of board members, amendments to the community declaration, and special assessments. Voting rights extend to all members of the homeowners association and require the association to provide clear procedures for conducting elections.
Homeowners also have the right to attend and participate in all proper meetings of the homeowners association. Arizona Revised Statutes 33-1804 grants homeowners access to association meetings and the opportunity to express their concerns, provide feedback, and stay informed on community matters. It is essential for associations to maintain open lines of communication and accessibility to ensure homeowners are aware of meeting times and locations.
In addition to their active roles in community governance, homeowners have financial rights and obligations that they must uphold. For instance, homeowners are required to pay regular assessments, which are often used to cover maintenance, repairs, and other necessary costs associated with common areas. The Arizona Planned Community Act outlines the protocols for assessment collection and can result in additional fees, interest, and even foreclosure if homeowners fail to meet their financial obligations.
In summary, Arizona homeowners associations empower residents through voting participation and the right to attend meetings. However, these rights come with obligations such as payment of assessments and adherence to community rules and regulations. It is essential for homeowners to be knowledgeable about their rights and responsibilities and for associations to communicate obligations clearly to ensure a harmonious and well-functioning community.
Resolving Disputes with HOAs
Disputing with an HOA: Mediation, Arbitration, and Court
Despite their preemptive value in protecting homeowners from unwanted disturbance of the peace, conflicts do arise from time to time. HOAs generally have a conflict resolution process established in their governing documents but this is usually limited to mediation. Mediation is where the parties come to an informal understanding to resolve their differences. Courts often require parties to attend mediation as part of every litigation process to expedite the case and find common ground.
Arbitration goes a step beyond mediation where a neutral third party hears the dispute and makes a determination. Arbitration is more formal than mediation and the parties are typically bound to the result.
When mediation fails to resolve the issue between the homeowner and the HOA, statutory arbitration may be an option. In 2011, the Arizona Legislature enacted the Homeowners’ Association Dispute Resolution Act (Act). Specifically, A.R.S. 12-1361 through A.R.S. 12-1370. The Act applies to condos, co-ops and planned communities with mandatory membership where the declaration is recorded after December 31, 2011. This means that if you live in a CLRC community (one managed by Community Associations Institute earlier this year), the Act does not apply to you.
The statute sets out specific requirements for arbitration and the process. Cost of arbitration is established in the statute, which can be extremely expensive. The hearing can only address whether HOA design standards violate the declaration or statutes specifically addressing land use.
When arbitration is not an option, the court process is always there for you to pursue damages against the HOA.
New Laws in Arizona HOA Legislation
In 2018 alone, there were two significant developments in association legislation worth noting: SB 1365 and HB 2135. In addition, there are three pending pieces of legislation worth watching: SB 1082, SB 1379 and HB 2272.
SB 1365
SB 1365 allows for amendments to association articles, bylaws and other documents to be recorded, under certain conditions, without the need for consent of mortgagees. This bill attempts to eliminate the state statute requiring a mortgagee be sent an "amendment notice" prior to a valid amendment to an association’s declaration being approved. It has been a hardship for HOAs and an inconvenience for unit owners needing to amend their declarations with mortgage companies who may or may not be responsive to the request for an amendment notice. This new law does not apply to amended declarations that "modify the priority of a mortgage or deed of trust" as the law considers such modifications to be "material."
HB 2135
SB 2135 will allow professional managers to exercise the power of sale under a lien against property subject to an association’s declaration. Professional managers will be able to initiate foreclosure and sell property, collect the proceeds and apply them against an association’s assessment debt. For example, if an association has a lien on a property for unpaid assessments, a professional manager could foreclose on that lien in the same way a mortgage lender forecloses on its delinquent borrower’s property. This bill will allow for the appointment of receivers as well, making it easier for HOA boards to enforce assessments through litigation when necessary .
Pending Legislation – SB 1082
SB 1082, which passed the Senate and is now in the House Rules committee, would require community managers to be licensed by the Department of Financial Institutions and to pass a test. It would also require community managers to complete continuing education in certain subjects. This bill is similar to the current pool and spa license requirement, in that, regulating an industry that is arguably difficult to legislate is a challenge. However, while it would create more work and education for existing managers and introduce licensing costs, it could enhance the profession and lead to fewer headaches all around. A side benefit is that complexity can work to lessen the chances of a manager becoming a lobbyist for their profession.
Pending Legislation – SB 1379
Senate Bill 1379 relates to the disclosure of association records. While the current version makes some improvement in records access rights for unit owners, it would also remove sections of the statute that make association records somewhat accessible. We will be watching to see whether this bill remains as it is currently written.
Pending Legislation – HB 2272
House Bill 2272 would expand the list of crimes that a prospective director would be prohibited from committing in order to serve on an association board. This bill is in conflict with SB 1405, which will allow board members to take foreign positions. For example, a convicted felon would not currently pass the requirements of HB 2272 and SB 1405. The expansion of disqualifying crimes is something we will continue to watch.
Common Ways Your HOA Could Violate Arizona Law
Homeowners’ associations in Arizona typically have strict rules that are meant to keep the community looking clean and beautiful. However, some people simply don’t abide by the rules. The most common rule violations in Arizona HOA communities include:
Solar panels
Pets (typically too many or dogs outside on a leash, etc.)
Parking violations
Exterior modifications
Landscape issues
Trash and recycling
Noise violations
Violation of community rules, such as using an amenity after hours.
An HOA can decide to pass various penalties, some of which will be depending upon the HOA’s governing documents. It is important to note that Arizona law does NOT allow an HOA to use fines as a means to enforce the community’s rules and regulations. However, a HOA may be able to pass other types of penalties, such as:
Suspension of member rights and privileges
Monetary penalty (fine) for violation of the governing documents
Enforcement of the corrective action plan
Foreclosure on the member’s property (if HOA assessments are too far past due).
If you’re concerned about a potential violation of either your own or another’s unit, it is best to address these concerns directly with the association rather than to address them immediately with the offending party. The HOA board members might have already contacted offending parties, or there might be an ongoing compliance order already in effect. It is always considered best practice to contact the HOA board first rather than hash out a dispute between members.
Good Practices for Arizona HOAs
To help ensure compliance with Arizona HOA laws, many associations implement best practices in governance and communication. One such best practice is to address as many issues as possible in the governing documents. This will minimize the need for policy decisions, which can lead to confusion or inconsistencies in the enforcement of the CC&Rs. For example, if making alterations to the exterior of a unit or-home requires prior approval by the association, that requirement should be stated in Clear language in the governing documents so that there is no question whether it is required or not. Once regular policy decisions are made, they are easily enforced and will ensure that the association is not accused of treating individual owners unfairly.
To foster transparency, most associations will create a formal resolution with an effective date and keep that resolution stored with the other governing documents of the association. The resolution should be communicated to the members and attached to any legal documents concerning restrictions, such as a Notice of Lien for Violations of the Governing Documents.
Finally, consistency in communication with association members is key. Any individual giving advice to board members must be aware of the current laws applicable to HOA and must understand the specifics of the governing documents. Otherwise, board members may be given inconsistent or inaccurate information and have no idea that the advice given was inaccurate. The only people who should be giving advice to members on legal issues are those with the legal expertise and appropriate licenses to do so.
Additional HOA Resources for Homeowners
As you seek more information or assistance with Arizona HOA laws, there are several valuable resources that you can turn to. The state of Arizona maintains three primary websites that disseminate information about communities, the laws that govern them and applicable courts. The Arizona Department of Real estate (ADOR) is the regulatory body for the A.R.S Title 33, the Davis-Stirling Common Interest Ownership Act, and the Arizona Revised Statutes, as well as the 2009 Legislative House Bill 2763. To navigate to these resources, visit ADOR’s website for Condominiums & Planned Communities. The Arizona Department of Insurance (ADOI) also plays an important role in condominium and planned community regulations. ADORI issues and regulates licenses for managers and management companies and also investigates complaints against managers. To learn more, visit ADORI’s website. The Arizona Department of Housing (ADOH) addresses residential landlord-tenant issues, and the rules that govern them, through the Residential Landlord Tenant Act (A.R.S. 33-801 through 33-819). ADOH also provides a number of helpful PDFs dealing with landlord responsibility, tenant responsibility, and tenant rights in Arizona . If you’re looking for more information about the architectural review process, document creation and interpretation or member dues, or you need to know how to enforce your Community’s governing documents, contact the CID Manager at the Arizona Department of Housing. You’ll find lots of useful information on this website. HOA managers, board members and association attorneys all play important roles in the management of homeowner associations. They are an excellent resource for advice, instruction and other insight into the responsibilities that come with owning property in a community. Here are four professional organizations devoted to serving these groups: The Department of Real Estate’s online licensing system houses Archived License Records and allows you to check the status of your manager or management company license. The Arizona Department of Insurance (ADOI) offers a searchable database where homeowners and association attorneys can verify the licensing status of managers and management companies. The American Society of Association Executives is dedicated to helping community managers, boards and association attorneys stay abreast of the issues, trends and developments (including legal matters) that affect homeowner associations.