IS YOUR COMMUNITY ASSOCIATION A CONDOMINIUM OR A PLANNED COMMUNITY?

In Arizona, the vast majority of community associations are formed as either Condominiums, which are subject to the Arizona Condominium Act (A.R.S. Section 33-1201, et seq.); or, Planned Communities, which are subject to the Arizona Planned Communities Act (A.R.S. Section 33-1801, et seq.).  In many communities, the distinction is clear. However, there are some cases where the classification of Condominium v. Planned Community is less obvious (e.g. townhouses).

Pursuant to ARS Section 33-1202(10) of the Condominium Act,

“Condominium” means real estate, portions of which are designated for separate ownership and the remainder of which is designated for common ownership solely by the owners of the separate portions. Real estate is not a condominium unless the undivided interests in the common elements are vested in the unit owners.

Pursuant to ARS Section 33-1802(4) of the Planned Communities Act,

“Planned community” means a real estate development that includes real estate owned and operated by or real estate on which an easement to maintain roadways or a covenant to maintain roadways is held by a nonprofit corporation or unincorporated association of owners, that is created for the purpose of managing, maintaining or improving the property and in which the owners of separately owned lots, parcels or units are mandatory members and are required to pay assessments to the association for these purposes. Planned community does not include a timeshare plan or a timeshare association that is governed by chapter 20 of this title or a condominium that is governed by chapter 9 of this title.

As such, the primary difference between a Condominium and a Planned Community is the ownership of the common elements.  In a Condominium, the Owners typically own an undivided interest in the common elements and such ownership is reflected in the Declaration and on each Deed.  In a Planned Community, the Association typically owns the common elements (or has an easement or covenant to maintain roadways).

While the Condominium Act and Planned Communities Act have many similar provisions, there are also important differences that could potentially impact your community.  If you are unsure whether your community association is considered a Condominium or Planned Community, pursuant to Arizona law, please contact Mulcahy Law Firm, P.C.

 

 

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Associations caught in a pickle. Pickleball v. tennis….

Pickleball is becoming a hot topic for many associations and homeowners throughout Arizona. Mulcahy Law Firm is seeing issues emerge regarding the sport, including the possibility of associations converting tennis courts into pickleball courts and noise issues associated with pickleball. This article aims to walk associations through some of the issues and possible solutions for pickleball disputes.

  1. What is pickleball?

While most people are familiar with the sport of tennis, not all may be familiar with pickleball. Pickleball was invented in 1965 in Seattle, Washington, and is now played by millions of people around the world.[1] Pickleball is said to be a hybrid sport between tennis and ping pong.[2] It is played on a court that is roughly half the size of a tennis court, or 20’ x 44’.[3] Players hit a ball with holes, similar to a whiffle-ball, with a paddle over a net that is 36” high.[4] Pickleball can be played with two or four players and is known to be a sport that is easy for new players and a sport that can be played by people of all ages.[5] It has grown in popularity so quickly because it is known to be a fun sport for all age groups and can be played at various levels.[6]

  1. Can tennis players and pickleball players work together to get along?

The increased popularity in pickleball appears to be creating disputes among homeowners and Boards in associations throughout the valley. The dispute we commonly hear is when there are two primary groups in the association, one pro pickleball group and one pro tennis group, and the groups do not want to see courts in the community used for multiple purposes. Most times, the association will already have a tennis court in the community. Therefore the question is whether the tennis court should be converted into a pickleball court or if instead the association should add special lines for pickleball to the tennis court.

According to Terri Graham, owner of Spirit Promotions, which produced the 2016 US Open Pickleball Championships, it does not need to be an all or nothing problem.[7] Ms. Graham encourages clubs around the country to schedule play time for both tennis and pickleball groups.[8] Tennis can become harder for older people or persons with injuries to continue playing. According to Graham, pickleball is a great way for people to stay healthy and active and a “part of the fitness continuum.”[9] Further, the sport is likely to continue to grow because the USA Pickleball Association has “Ambassadors, people who are really enthusiastic, whose job it is to hold demos and clinics and help get people introduced to and interested in the sport.” As associations see more people playing pickleball, there may not be another solution, other than to all be friends.

  1. Can tennis courts be converted to also accommodate pickleball courts?  Or should boards consider building new pickleball courts?

From a logistics standpoint, tennis courts can be converted into pickleball courts in two ways, shared use or dedicated use.[10] One tennis court can be converted into one pickleball court, two pickleball courts, or four pickleball courts, depending on how many different lines the association wants painted on the tennis court. For step by step instructions on how to convert a tennis court into a pickleball court for shared use, we found the following blog post helpful: How to Convert a Tennis Court into a Pickleball Court.

The Association could also decide to fully convert tennis courts into permanent pickleball courts. It appears that 1 tennis court can permanently be converted into 4 pickleball courts. This may be a good option for your association if your tennis courts are rarely used and your Association has an enthusiastic group of pickleball players.

If the association currently has tennis courts, and the Board is considering adding lines to it so that the courts can be used for shared use, or if the Board is considering fully converting the tennis court to a pickleball court, the Board should review its CC&Rs to ensure it can change the use of the common areas. Sometimes, an association needs certain homeowner approval in order to change the use of a common area. To the same point, if there are currently no courts within the association and the Board is considering converting other portions of common areas into courts, the Board should review its CC&Rs to ensure it can change the use of the common areas. The Board may need a specific homeowner approval in order to change the use of a common area.

  1. Noise issues for Pickleball

If you google “noise issues with pickleball” dozens of complaints from homeowners within associations that have pickleball courts will emerge. The game of tennis is relatively quiet in comparison to pickleball. Therefore you can understand why someone who purchased a home within a community with tennis courts could become very upset when the tennis courts are converted into pickleball courts and draw more players and more noise.

There are ways to reduce the noise from the ball hitting the paddle in pickleball. Options include: soundproofing material placed around the pickleball court; quieter paddles; and quieter balls.[11] The sun City Grand Pickleball Club in Surprise, Arizona has 22 courts, and 1,303 members.[12] The Board of Directors for the Club issued a list of approved and banned paddles after contracting with an independent sound study company to determine which paddles were “creating sound at a decibel that some residents living in the area found unacceptable.”[13]  The Board created a chart of paddles that are allowed and paddles that are banned at the courts.

In line with what the Board for the Sun City Grand Pickleball Club did, Boards for associations can consider adopting rules regarding the times that pickleball is allowed to be played within the association, and may also consider adopting a list of approved paddles. If the Association has a larger budget for the project, the association may also consider looking into a sound proofing fence to surround the courts.

  1. Where can you play pickleball in Arizona?

If having pickleball courts within your association is not a feasible option, there are dozens of locations around the valley where pickleball enthusiasts can catch a game. There are a number of websites dedicated to coordinating games and playing times for pickleball players. A website called, “Meetup”, helps coordinate games by date and location.[14] Another website specifically listed homes for sale in Arizona that are located within pickleball retirement communities.[15]

Stay tuned for more information on this hot topic. Visit mulcahylawfirm.com for more homeowner association tips and topics.

[1] What is Pickleball?, https://purepickleball.com/pages/what-is-pickleball (visited January 14, 2018).

[2] What is Pickleball?, https://purepickleball.com/pages/what-is-pickleball (visited January 14, 2018).

[3] What is Pickleball?, https://purepickleball.com/pages/what-is-pickleball (visited January 14, 2018).

[4] What is Pickleball?, https://purepickleball.com/pages/what-is-pickleball (visited January 14, 2018).

[5] What is Pickleball?, https://purepickleball.com/pages/what-is-pickleball (visited January 14, 2018).

[6] What is Pickleball?, https://purepickleball.com/pages/what-is-pickleball (visited January 14, 2018).

[7] Pickleball and Tennis: Can They Be Friends?, http://www.tennisindustrymag.com/articles/2015/11/15_pickleball_and_tennis_can_t.html (last visited January 14, 2018).

[8] Pickleball and Tennis: Can They Be Friends?, http://www.tennisindustrymag.com/articles/2015/11/15_pickleball_and_tennis_can_t.html (last visited January 14, 2018).

[9] Pickleball and Tennis: Can They Be Friends?, http://www.tennisindustrymag.com/articles/2015/11/15_pickleball_and_tennis_can_t.html (last visited January 14, 2018).

[10] How to Convert Tennis courts to Pickleball Courts, https://blog.pickleballcentral.com/2014/10/29/how-to-convert-tennis-courts-to-pickleball-courts/ (last visited January 14, 2018).

[11] Pickleball Nosie Problems: nearby Residents Complain, Shhhh Quiet!, https://www.pickleballportal.com/blog/pickleball-noise-quiet-paddles/ (last visited January 14, 2018).

[12] http://grandpickleball.org/ (last visited January 14, 2018).

[13] SCG News- Pickleball Paddle Approved/ Banned List, http://pball.grandpickleball.org/paddlerule.pdf.

[14] https://www.meetup.com/PhoenixAreaPickleball/ (last visited January 14, 2018).

[15] http://pickleballarizona.com/ (last visited January 14, 2018).

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New Paradise Valley Ordinance Cracks Down on “Unruly Gatherings”

On March 8, 2018, the Town Council of Paradise Valley adopted an Unruly Gatherings Ordinance (2018-05), aimed to deter house parties that disturb neighboring residences and that comprise the safety and welfare of the public. When the police respond to an Unruly Gathering it drains police resources and while the police are responding, it prevents them from securing other areas of town. The ordinance defines “Unruly Gathering” as “a gathering of five (5) or more persons on any private property, including property used to conduct business, in a manner which causes a disturbance of the quiet enjoyment of private or public property by any person or persons and also includes one of the following: excessive noise, impeding traffic, obstruction of public streets by crowds or vehicles, use or possession of illegal drugs, drinking in public areas, the service of alcohol to minors or consumption of alcohol by minors, fighting, disturbing the peace, and/or littering.”[1]

 

The Ordinance outlines processes for the police officers who respond to the disturbance to issue criminal citations for the Unruly Gathering, which will be a class 1 misdemeanor. If convicted, the first citation minimum penalty is $1,000. The penalties increase with additional violations.

 

Further, any Responsible Person[2] receiving a citation where two or more police officers have to break up an Unruly Gathering with eleven (11) or more persons, will also be assessed a Police Service Fee[3], which will be a reimbursement for the costs the police department incurred to respond to the Unruly Gathering. The costs include time for the police officers, dispatchers and vehicle equipment used.

 

Finally, the police will post a Notice on the Property stating the date that an Unruly Gathering occurred and warning that subsequent Unruly Gatherings within ninety (90) days will result in additional citations and fees. If a home is being rented through a short term rental website, such as Airbnb or HomeAway, the notice provides incoming renters with knowledge that an Unruly Gathering took place at the property within the past ninety (90) days.

 

It is our firm’s opinion that this Ordinance can be used offensively by homeowners associations in Paradise Valley to help deter and limit parties at properties where the homeowner frequently rents the home on a short-term basis and the renters are causing disturbances. This ordinance is a good tool to deter repeat offenders.

 

If your homeowners association is located in Paradise Valley and you are planning a community party or get-together, where there may be excessive noise or crowds/excessive vehicles, it is probably best to apply for a special event permit through the Town of Paradise Valley prior to the party. If you forget and the police respond to the event, please note, the ordinance provides an Owner of a property who has been cited with a first offense Unruly Gathering to apply for a special event permit retroactively. The Town Manager has the discretion to grant a special event permit retroactively.

 

[1] All information provided in this article was obtained on the Paradise Valley website and Town of Paradise Valley, AZ, Ordinance 2018-05 (March 8, 2018). (https://paradisevalleyaz.legistar.com/LegislationDetail.aspx?ID=3362329&GUID=079F1245-C64B-43CB-8891-21B797CFCA06&Options=&Search=) (last visited March 21, 2018).

[2] “Responsible Person” means any person in attendance at an Unruly Gathering  including any Owner, occupant, tenant, or tenant’s guest or any sponsor, host or organizer of a social activity or special occasion constituting the Unruly Gathering, even if such person is not in attendance. If such a person is a Juvenile, the term “Responsible Person” includes, in addition to the Juvenile, the Juvenile’s parents or guardians. Responsible Person does not include Owners or persons in charge of Premises where an Unruly Gathering takes place if the persons in attendance obtained use of the Premises through illegal entry or trespassing. A person need not be present at the time of the party, gathering, or event to be deemed responsible.” (Ordinance Number 2018-05)

[3] “Police Service Fee” means the fee to reimburse the cost of services provided by the Police Department in response to the Unruly Gathering. The Police Service Fee is more fully defined in §10-13-7(C).

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Are Bike-Sharing Programs a Nuisance?

If you live near Scottsdale or Phoenix, you have probably noticed a large number of colorful bikes that have recently been introduced to the area. These bikes are part of bike-sharing programs that have partnered with the cities of Phoenix, Scottsdale, Tempe and Mesa. The premise of these programs is very simple: download the company’s app to rent a bike, ride the bike anywhere you need to go and leave the bike at your destination. The bikes are outfitted with a GPS system that allows the company to locate the bike and move it back to a pickup area when a customer is done using the bike. The cost to rent these bikes is minimal. LimeBike, the most prominent bike sharing service in Scottsdale, charges users $1.00 for every 30 minutes that the bike is being used.

Who owns these bikes?

There are several bike-sharing companies that have recently introduced their bikes to the Scottsdale, Phoenix, Tempe and Mesa area: LimeBike (the green and yellow bikes), Ofo (the yellow bikes) and Spin (the orange bikes) are all dockless bikes, meaning that they do not need to be returned to a specific location. GR:D bikes (the green bikes) are docked bikes in Phoenix and Tempe. These companies are not affiliated with the cities of Scottsdale, Phoenix, Tempe and Mesa; and the companies claim that these programs do not result in any cost to the city.

Although the bikes can only be picked up in a designated area, most of them can be left anywhere. This has resulted in many bikes being left throughout neighborhoods in Scottsdale and Phoenix. While many residents are enjoying these bikes, there are others who feel that these bikes create nuisance issues when they are left in high traffic areas and neighborhoods.

Are These Bikes a Nuisance?

Some residents certainly seem to think so. There have been reports of residents throwing discarded bikes into garbage cans and even into the canal. Some residents feel that the discarded bikes are an eyesore and users should not be permitted to leave the bikes wherever they please. Currently, the cities of Scottsdale, Phoenix, Mesa and Tempe do not consider the bikes to be a nuisance, but that could change if enough residents feel that something needs to be done.

Several cities across the country are facing similar concerns. The city council of Coronado, California recently declared all dockless bikes to be a nuisance and has given the city the authority to impound any bikes that are left within city limits. [1] Paradise Valley is considering whether its city council will take similar measures to address the dockless bikes left within city limits.

Some of the bike-sharing companies are attempting to address these concerns by encouraging users to leave the bikes in an approved area. Ofo gives users an in-app credit rating if they have a history of safe parking and responsible bike usage. Users with high credits are offered free rides, company apparel and offers from local businesses. Users with low credit scores can be suspended from the app. Hopefully these incentives will promote responsible parking and help decrease the number of bikes that are left in unsafe areas and neighborhoods.

What can an association do when a bike is left in the community?

Our office has received many questions from boards about what an association can or should do with these bikes when they are left in or near association property. As mentioned above, most of these bikes are outfitted with a GPS system. The company that owns the bike is supposed to track the bike, pick it up and put it back in a designated pickup area. The timeframe to have a bike removed varies depending on where the bike has been left. If your community is near a high traffic area, the bike maybe rented by a new rider before the company has a chance to remove it. However, if your community is in a less populated area it may take some time for the company to pick up the bike.

Every bike has a label with its company’s contact information. If a bike has been left within your community you can contact the proper company and ask them to remove the bike. LimeBike and Ofo employees claim they will remove a bike within 24 hours of it being reported. If a bike is still not removed within 24 hours you can contact the local police department for removal.

Many of our clients live in gated communities and have found bikes that have been left inside of the association gates. When these bikes are left in a gated community the company attempting to pick them up cannot gain access to the bike unless they are allowed in. It can be difficult for owners within the community to remove the bikes because they lock when they are not in use and in order to unlock the bike, someone would need to pay to use the bike. Some frustrated owners have had to pick up the bike and carry it out of the gates so it can be removed by the company.

If you live in a gated community and a bike is left inside of the Association gates you should contact the proper company and ask how they suggest you address the situation. You should also notify the board of directors if the bikes present an ongoing problem. The Board may be able to reach out to these companies so the companies are aware that bikes are being left in the community and they can remove the bikes in a timely manner.

Whether or not these bikes currently are a nuisance remains to be determined, but it seems that bike-sharing programs are not going anywhere for the time being.

[1] http://www.cbs8.com/story/37771242/coronado-to-declare-dockless-bikes-a-public-nuisance

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Why are HOAs a good thing?

Approximately 65 million Americans (or 1 in every 5) live in homeowner associations, including condominiums and planned communities in the United States.[1] The number of homeowner association communities in the United States has risen from approximately 10,000 communities in 1970 to 342,000 communities in 2016.[2] In a recent study, Arizona ranked tenth in the country in number of community associations, and had approximately 9,500 community associations, or 1.9 million residents living within community associations.[3]

Given the trend in growth of the number of people living in community associations across the country, and the lack of positive press regarding community associations, I think it is important to highlight the value of community associations and to consider all of the reasons why living in a homeowner association can be a positive experience.

  • As a homeowner within a community association, you will likely have access to a number of facilities, including, but not limited to, pools and spas, fitness centers, golf, and tennis or pickleball courts. This allows you to utilize facilities within your own neighborhood without the need of transporting to an off-site fitness center or club. In 2016, it was estimated that approximately $88 billion was collected in assessments from homeowners across the country, which help maintain amenities like pools and fitness facilities.[4]
  • The homeowners association through its various vendors will likely maintain all of the areas that the association owns and may even maintain limited common elements, or elements that specific homeowners have exclusive use of, like patios and driveways. Further, if you live in a condominium, you will likely have little to no exterior maintenance responsibilities at all.
  • There are elected directors who have a fiduciary duty to make decisions that will be in the best interests of the community and to enforce a set of conditions, covenants and restrictions regarding the uses of the property. The enforcement of conditions, covenants and restrictions helps ensure that properties will not go into disrepair and therefore there will hopefully be an overall preservation of home value within the community. In 2016, a study estimated that elected directors and committee members spent approximately 80,000,000 hours for services within the communities.[5]
  • The elected directors have a duty to enforce the restrictions uniformly and therefore there should be a sense of consistency and uniformity throughout the community. A consistent and uniform community usually looks more aesthetically pleasing. In 2016, the value of homes within community associations was valued at $5.545 trillion.[6]
  • The community association usually fosters a sense of community and will likely provide you with social events to attend, such as potlucks, bingo, and pool events.
  • The elected directors and a community manager (if the Association has one) will be watching out for the best interests of the community and therefore there may be a higher sense of safety and security. Some association communities may be gated or have camera surveillance to help increase the safety of its residents.
  • You have the opportunity to run for the Board of Directors and give back to your community. Being a Board member allows you to positive impact the community that you live in. It also allows you to be a part of a non-profit corporation (if your association is incorporated) and to govern the corporation in a way that is consistent with the Nonprofit Corporation Act and other state and federal laws. In 2016, a study estimated that the value of time provided by board and committee members was $1.93 billion.[7]
  • The community association will allow you to be connected to a group of people who have expertise and advice on different topics. For instance, neighbors could share a spreadsheet of preferred handymen, painters and landscapers that he/she has had a good experience with or would recommend. There are also apps like Nextdoor, which allow for a private online network for your neighborhood.
[1] Community Associations Institute, https://www.caionline.org/AboutCommunityAssociations/Pages/default.aspx (February 26, 2018).

[2] Community Associations Institute, https://www.caionline.org/AboutCommunityAssociations/Pages/StatisticalInformation.aspx (February 26, 2018).

[3] Community Associations Institute, https://www.caionline.org/AboutCommunityAssociations/Statistical%20Information/2016StatsReviewFBWeb.pdf (February 26, 2018).

[4] Id.

[5] Id.

[6] Id.

[7] Id.
Posted in Annual Meetings, Board Meetings, Community Association Law, Homeowner Associations, HOA, Community Association Management, Education, Financial, Maintenance, Social Aspects, Volunteers | Leave a comment

Selecting a Management Company

As any board member will tell you, managing the day-to-day operations of an association can be a daunting task. Many associations hire a professional management company to assist them with their responsibilities. But with so many management companies out there, how do you know which one is right for your association? Below is a step-by-step process that our firm has found to be very effective in finding and hiring the right management company.

Step 1: Identify and create a time line for the selection process. Form a committee who can be dedicated to the selection process. This committee should identify the association’s needs, specifically what is needed and expected from a management company. If your association currently has a management company, make sure you review the management contract so you can determine when you need to provide them with notice that you terminating the agreement.

Step 2: Start developing bidding specifications. Make sure you ask yourself these two questions: 1) What is the association’s budget for management services?; and 2) What level of management does the association require?

Step 3: Identify a list of pre-qualified companies. Only consider companies that specialize in association management. Speak with board members of neighboring associations who have similar needs to your Association and ask if they feel their association is being successfully managed. Remember that association management is not a one size fits all situation. The needs of your association may be very different than the needs of neighboring associations.

Step 4: Narrow the field. Narrow your options to 3 to 5 companies by speaking with them and asking if they are willing to submit a bid to your association. Have a general description of the association ready to share with the company.

Step 5: Develop a request for the bids. The request for a bid should contain the following information and requests: 1. a date to tour the property (do not accept a bid from someone who has not toured the property); 2. the date the bidding closes; 3. all contact information for the association and where to send the bid; 4. a summary of the association (include the number of lots/units, acreage of common areas, special features, type of construction, current annual budget and current management expiration date); 5. the general needs of the association (make sure that the general bid covers all of the association’s basic needs); 6. ask for references or credentials; 7.  make sure to ask for the specifics. Ask about the company’s basic management fee, hourly costs for service not covered in the basic fee, independent contracting items and associated costs, collection costs for delinquent accounts, board and meeting charges; proof of fidelity and/or liability insurance, workman’s compensation and other insurance policies; charges for mass mailing and procedures; credentials that the assigned manager would possess; support services including accounting and services coordinator; emergency procedure details; and a list of specialized services.

 Step 6: Close bidding, open bids received. The board should compare and review the bids in an open discussion. The board should narrow down the candidates it would like to review further.

Step 7: Review candidate’s references, licenses, bonds, etc. The committee and the board of directors should review and validate all of the candidate’s licenses, references, etc. Only call back the companies who have proper and complete credentials. We also recommend that the Board visit the management company’s office to get a better sense of how the company is run.

Step 8: Identify the leading candidates and conduct a final interview. Ask the manager who will be assigned to the association to be at the interview. Ask the manger questions like how many associations they currently manage or how they handle homeowners and difficult people. This is your chance to ask any and all questions. The more you know the better you will be able to determine which company best fits your association’s needs!

Step 9: Schedule a meeting with the association’s attorney to review the management contract before you sign. Allowing an attorney to review the contract will help the board understand all of the terms. An attorney can also make sure that the transfer period between management companies has been accounted for in the contract. A management contract will be one of the most important contracts the board will agree to and it will have an enormous impact of the day-to-day business of the association. The board needs to make sure that there are no lingering concerns when they sign the management contract!

Step 10: Schedule a meeting with your new management company! Use this meeting to sign the contract, determine any turnover dates and provide your new management company all of the association’s documentation.

This may seem like a long process, but it is important that the board really take their time when selecting a new management company. This decision is not just about the association’s finances, it is also about the best fit for the association. Following these steps will allow a board to ensure that they have properly vetted the new management company and they can be sure that they have done what is bet for the association.

Posted in Annual Meetings, Board Meetings, Board of Directors, Community Association Law, Homeowner Associations, HOA, Education, Maintenance | Leave a comment

FHA REQUESTS FOR REASONABLE ACCOMMODATIONS AND MODIFICATIONS

The Fair Housing Act (“FHA”) prohibits a community association from discriminating against a person in providing services or facilities in connection with a sale or rental because of disability.  Prohibited discrimination includes (1) a refusal to make reasonable accommodations; and (2) a refusal to permit reasonable modifications.  In a community association context, a common example of a request for a reasonable accommodation is a request to keep an emotional support animal despite the fact that the association has a no-pet policy. A common example of a request for a reasonable modification is a request to install a wheelchair ramp, which may otherwise violate an architectural control restriction.

If a resident within your community makes a request for a reasonable accommodation or reasonable modification, what should you do?

The first step is to identify any request that may fall under the FHA. It is important to note that requests can be made verbally or in writing, and the applicant making the request is not required to use the words “reasonable accommodation” or “reasonable modification”.  As such, it is important for board members and community managers to familiarize themselves with the FHA so that they can be aware when Fair Housing laws may be triggered (which is not always obvious).

If you identify a request that you feel may fall under the FHA, the second step is to immediately contact your community association lawyer. Due to the nuances of Fair Housing laws, having competent legal advice is vital.  Once a request for a reasonable accommodation/modification is submitted, the community association has an obligation to engage in an “interactive process.”

Qualification for a reasonable accommodation/modification is a three-pronged test:

  • Does the applicant have a verifiable disability?
  • Does the request qualify as a Reasonable Accommodation or Reasonable Modification?
  • Is there a nexus between the disability and the Reasonable Accommodation or Reasonable Modification?

Engaging in the interactive process includes promptly opening a dialogue with the applicant to determine whether the three-pronged test has been met. In the circumstance that the applicant has satisfied (1) above and shown a verifiable disability, but the association does not feel that the applicant has satisfied (2) above for any reason, the interactive process also requires that the association and applicant discuss possible alternative accommodations or modifications.

DO

  • Take any request that could implicate the FHA very seriously
  • Contact your community association lawyer ASAP
  • Respond promptly to the applicant and engage in the interactive process

DON’T

  • Ignore or unreasonably delay responding to any request that could implicate the FHA
  • Flatly deny the request, without engaging in the interactive process
  • Act in any manner or fashion that could be deemed hostile or discriminatory against the applicant submitting the request

While the above-described process may seem onerous, and the reality that certain applicants will abuse the law may seem frustrating, it is important to keep in mind that the intent of the Fair Housing laws is to ensure that disabled individuals avoid discrimination and are afforded equal opportunity to use and enjoy the dwelling.

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Things to consider when hiring a handyman…

Board members and managers frequently ask my firm whether their Association can hire a handyman to complete projects or repairs within their Association. My response is generally yes, but there are a number of considerations that I advise the Board to first contemplate.

First, the Board should review the situation to determine whether the work should be done by a licensed contractor or by a handyman. The Arizona Registrar of Contractors states that “[a]ny business which contracts or offers to contract to build, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure, development or improvement, or to do any part of the work must be a licensed contractor. Also included in work requiring a license is the erection of scaffolding, connections to utility service lines, metering devices and sewer lines, mechanical or structural service to a structure or improvement and any other work in connection with the project.” This is a broad definition that most contractors likely fall within. However, A.R.S. §32-1121 does list certain persons that are not required to be licensed in Arizona. One of the exemptions is known as the Handyman Exemption.

The Handyman Exemption essentially allows persons who install or attach products or materials where the value of the contract, including all of the labor and materials, is less than $1,000 to do the work without a license. The full description of the Handyman Exemption can be found at A.R.S. §32-1121(A)(4).

While a handyman may seem like an easier hire for small projects within the Association, hiring a handyman can be troublesome when it comes to the issue of workers’ compensation insurance. Therefore, when determining who to hire for a specific project, the Board also needs to consider whether the Association has adequate insurance coverage.

Most Boards do not think the Association has employees and therefore they wonder how and why their Association would ever need workers’ compensation insurance. This is a very logical question because most all Board members provide their services to the Association on a volunteer basis and are not considered employees of the Association. Further, while your Association may hire a professional management company to help manage the Association’s financials and other affairs, the professional management company may take care of hiring the Association’s contractors and vendors. While all of these things may be true for your Association, your Association may still need workers’ compensation insurance.

The Board should review the Association’s insurance provisions in the CC&Rs. Some CC&Rs require that the Association have workers’ compensation insurance. If this is the case, the Board has an obligation to attain the necessary workers’ compensation insurance pursuant to the CC&Rs. Further, the Board should talk to the Association’s insurance agent about obtaining the needed or recommended insurance, depending on who the Association hires to do work within the community.

If the Board decides to hire a licensed, bonded and insured contractor to complete repairs and work within the Association, there may still be situations that arise whereby it would be beneficial for the Association to have workers’ compensation insurance. For instance, most times the Association or its manager asks for proof of insurance and licensing up front. If during the course of a project, the contractor’s insurance or license expires, the Association may not be made aware of the expiration. If during that time, the contractor or his/her employees gets hurt on the job, it would be beneficial for the Association to have workers’ compensation insurance in that scenario.

If the Board decides to hire a handyman to do work within the Association, it is crucial that the Board determine whether or not the Association has the adequate insurance coverage, including workers’ compensation. In Arizona, in the context of worker’s compensation insurance, Courts typically use the “right to control test” to determine whether an individual should be considered an “employee” or “independent contractor”. [1] Courts look at a number of factors to make this determination, including: 1) the extent of control that the employer may exercise in the details of the work; 2) whether the one employed is engaged in a distinct occupation or business; 3) the skill required in the particular occupation; 4) the kind of occupation and whether the work is done under the direction of an employer or without supervision; 5) the length of employment; 6) who supplies the tools and place of work; 7) whether the work is part of the regular business of the employer.[2]

When the Association hires a handyman, the Association likely will pay the handyman by the job or by the hour; may supply the tools and place of work; and may control the details of the work or how the work is completed. The factors may weigh more in favor of the handyman being categorized as an “employee” and therefore, if the handyman was injured on the job, the Association could be held responsible for the injuries. It is important to note that each hire should be looked at on a case by case basis because of the various factors that courts consider. However, when in doubt I would highly advise that the Board discuss situation with the Association’s insurance agent and/or attorney.

[1] Ringling Bros. v. Superior Ct. of Pima County, 680 P.2d 174, 140 Ariz. 38 (Ct. App. 1983).

[2] Fry v. Industrial Commission, 546 P.2d 1149, 26 Ariz. App. 140 (Ct. App. 1976).

Posted in Board of Directors, Education, Maintenance, Safety in Associations | Leave a comment

ARE RECEIVERSHIPS EVER A GOOD IDEA?

Regardless of what issues your community may be facing, receivership should only be considered as an absolute last resort, and only in the most dire of circumstances. Receiverships are expensive, time-consuming and transfer decision/making power to someone outside of the community.

In the community association context, the receivership requires an owner in the community or member(s) of the Board to file a lawsuit in Superior Court against the Association asking for the equitable remedy of having a court appointed receiver.  The Court then typically conducts an emergency hearing within 2-3 weeks of the lawsuit being filed.  The judge will only appoint a receiver if, after hearing all the evidence at the hearing, there is a compelling reason to do so (e.g. immediate threat of injury, damage or destruction to property and/or to property values) and all other possible efforts to resolve the problems have been explored and have been unsuccessful.

The two most common scenarios where receivership becomes a possible legal remedy are (1) lack of willing board candidates; and (2) financial insolvency.  If your community is having difficulty finding volunteer board members, make every effort to reach out to the membership (repeatedly, if necessary) to communicate the importance of board volunteerism, and explain the possible consequences (i.e. receivership) of failing to assemble a board to run the affairs of the community.  If your community finds itself in a desperate financial situation, closely examine your community’s financials and governing documents to identify possible opportunities to increase revenues and decrease expenses.

If your community is facing any of the above-discussed (or similar) issues, please contact Mulcahy Law Firm, P.C. for legal assistance in avoiding receivership.

Posted in Board of Directors, Community Association Law, Homeowner Associations, HOA, Education, Finances, Financial | Leave a comment

LIEN PRIORITY – WHERE DOES YOUR HOA LIEN STAND?

Pursuant to A.R.S. Section 33-1256(B) / 33-1807(B), an HOA lien for assessments, late fees related to assessments and collection fees/attorney fees/costs incurred with respect to assessments has lien priority ahead of all other liens, interests and encumbrances on a lot/unit except: (1) liens and encumbrances recorded before the recordation of the declaration; (2) a recorded first mortgage/first deed of trust on the lot/unit; and (3) liens for real estate taxes and other governmental assessments or charges against the lot/unit.

The most common circumstances where lien priority becomes relevant are:

Trustee’s Sale: If a first mortgage or first deed of trust notices a trustee’s sale on a lot/unit and the lot/unit is ultimately lost at trustee’s sale, the HOA lien is legally extinguished because the first mortgage or deed of trust has lien priority ahead of the HOA.

If the lot/unit sells to a third party at the trustee’s sale and excess proceeds are generated, lien priority also becomes relevant, as the remaining lienholders with the highest priority have first claim to the excess proceeds. As such, if excess proceeds are generated, the HOA’s claim would be superior to all other claimants, with the exception of liens/encumbrances recorded before recordation of the declaration and liens for real estates taxes and other governmental assessments or charges against the lot/unit.

If a second mortgage or deed of trust notices a trustee’s sale on a lot/unit and the lot/unit is ultimately lost at trustee’s sale, the HOA lien would survive the trustee’s sale (i.e. it would not be extinguished) because the HOA has lien priority ahead of a second position mortgage or deed of trust.

HOA Foreclosure: If the HOA decides to pursue a foreclosure lawsuit, lien priority becomes relevant for two reasons – first, any lienholders who hold inferior positions should be named defendants in the lawsuit so that the HOA can assert its lien priority and extinguish their rights; and second, any lienholders who hold superior positions will survive the foreclosure and could potentially impact the likelihood of the HOA successfully recording its judgment balance pursuant to a sheriff’s sale.

Short Sale: If a lot/unit is being sold pursuant to a short sale, it typically involves some or all lienholders negotiating their debt (i.e. accepting less than the full balance). The higher the HOA is in lien priority relative to the other lienholders, the more leverage the HOA has in negotiations and the higher likelihood of collecting the full balance owed.

If an issue arises in your HOA where lien priority is in doubt, or if you have any further questions regarding lien priority, please contact Mulcahy Law Firm, P.C.

Posted in Board Meetings, Collections - Assessments, Community Association Law, Homeowner Associations, HOA, Education, Legislation | Leave a comment