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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HOLIDAY LIGHTS/DECORATIONS

The Holiday season has officially arrived! Adopting a Holiday Lights/Decorations policy can be a great way to encourage the community to embrace the spirit of the Holidays, while also regulating lights and decorations to ensure consistency and equal treatment amongst the membership.

The following are several suggestions for your community’s Holiday Lights/Decorations Policy:

• Avoid a total ban on holiday decorations – most courts will consider a ban unreasonable;
• Ensure that any holiday related rules are applied equally to all residents within the community;
• Survey the community or hold a public meeting to obtain resident’s opinions about decorations before enacting restrictions;
• Set specific time limits for decorations and holiday lighting (for example, after Thanksgiving to January 8);
• To avoid a risk of fire, ask residents to avoid overloading electrical circuits with holiday lighting;
• Remind residents that electrical cords are dangerous and require that owners place the cords out of the reach of children;
• Require that lights be rated for outdoor use with no exposed wiring;
• Set specific hours that lights and music can be turned on and off (by a certain hour every night, for example 10 p.m.), provide a maximum brightness for lights, and provide a maximum decibel level for the music;
• Remind residents of the decorating policy and safety requirements in the association’s newsletter, web site and bulletin board;
• Form a committee to decorate the common areas (if necessary, residents can donate lights and decorations);
• Sponsor a holiday decorating contest to build community spirit and offer donated prizes and/or recognition in a news -letter or web site to the winner; and
• Create a policy on “Haunted Houses” or other holiday related events in homes which are open to the public.

Implementation and enforcement of an adopted policy will ensure that your community enjoys the Holidays in a safe and responsible manner. Happy Holidays!

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‘Tis the Season to Start Thinking About Annual Meetings!

At this time of year, just around the holidays, questions regarding annual meetings fill our “First Friday” phone lines. Yes, your Board must conduct an Annual Meeting! Under Arizona law, A.R.S. Section 33-1804(B) and 33-1248(B) an association must conduct an annual meeting of its membership at least once a year. An annual meeting requires planning and execution to make it successful. Set forth below are some tips to help your association conduct a “flawless” annual meeting.

  1. Check the governing documents for any special annual meeting and voting requirements (such as secret ballot) and plan accordingly. Typically, an association’s bylaws will set forth the requirements of an annual meeting including the plate, quorum and voting.
  2. Set up an efficient registration system prior to the members arrival. Set up an appropriate number of registration tables and make signs that assign a portion of the alphabet to each table (for example, A-H, IO, P-Z). A registrar should be assigned to each table and the member rosters should be divided according to the tables so that the registrars will only work with those names that are in their section of the alphabet.
  3. Have an accurate roster of owners. Under Arizona law, an association has a duty to keep an accurate roster of owners and their current addresses. This membership list should be updated and complete for the annual meeting.
  4. Bring a laptop with internet access to provide the most up-to-date ownership information when members are registering and questions arise. The Maricopa County Assessor’s Office website will help you tremendously.
  5. Publicize and conduct sign-in and a “social time” 30 to 60 minutes prior to the start of the meeting and request that owners come early to sign in.
  6. Have a greeter at the door to welcome and direct members.
  7. Have association governing documents available (so that questions can be accurately answered).
  8. Appoint a troubleshooter. There will always be unexpected events during registration at an annual meeting. Therefore, a troubleshooter (with no other responsibilities) should be designated by the board to handle anything out of the ordinary (such as questions about ownership, right to vote and delinquent owners).
  9. Provide ample sign-in materials. Determine what registration materials are needed (roster, sign-in sheets, handouts, pens, pencils and ballots), how many copies are required and prepare them in advance.
  10. Have a plan to distribute materials in an orderly fashion. Assign a person to distribute materials at check-in. If you have several things to hand out, creating a packet of materials that can easily be handed to people as they check in assures that each person gets all the necessary materials.
  11. The board should appoint several independent “inspectors of election” to oversee the voting and elections. Their duties are to tabulate and record the votes on the formal tally sheets created for the expressed purpose of capturing the votes. At least one of the inspectors should be from the opposing side if there are factions at the annual meeting. However, no one should be an inspector who may have an interest in the election results (such as candidates, candidate’s spouses, current officers, directors or the management company). Count ballots with one group of inspectors and re-count, if necessary, with a different group. If the association’s attorney is present, the attorney also helps oversee this process.
  12. The association must first obtain a quorum (a minimum number of owners present in person or by mail in/absentee ballot) to lawfully conduct business at an annual meeting. The number of members needed to constitute a quorum is almost always indicated in the association bylaws. Arizona law provides a default quorum of ten percent if the association’s documents are silent regarding a quorum.
  13. Look at your governing documents prior to the annual meeting for guidance regarding whether nominations from the floor are allowed at an annual meeting.
  14. The president should:
  • Start the annual meeting promptly at the designated time
  • Conduct the meeting by following the agenda
  • Act in a business-like manner
  • Use parliamentary procedure to ensure that the meeting moves along quickly
  • Consider a homeowner’s forum at the end of the meeting or when the ballots are being counted by the inspectors of election. This allows time for homeowners to comment on aspects of association life. Limit homeowner comment time to 1-3 minutes per owner depending on the number in attendance. You can ask those wanting to speak to sign in to determine how much time will be needed for the forum.

To learn more about annual meetings review our Mulcahy Community Association Cheat Sheet, How to Conduct a Successful Annual Meeting.

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How to Effectively Deal with a Bully in a Community Association

Most Members in an Association understand that rules and social decorum dictate how they are to interact with Board members, Association employees, and other members. However, there are a small percentage of people that do not abide by rules and social decorum and they are always looking for a fight. These people need to be dealt with differently than usual bullies because they are simply looking to create an altercation and they will not respond to a positive approach to their “problem.”

  • The bullies discussed in this handout are more difficult than bullies who are periodic “gadflies.” These bullies are people who always respond negatively, even when a board member or manager interacts with them positively and politely.
  • Board members and managers need to respond to these bullies with strength. These kinds of bullies will not respond to common reasoning.
  • When a bully creates an issue, the situation needs to be addressed as soon as possible. The bully needs to be informed, expressly or impliedly, that their behavior will not be tolerated and they will not be rewarded for making the Board’s/manager’s life difficult.
  • Try to be clear and concise when defusing a situation with a bully. Clarity will give you more confidence in your/the Board’s position and it will make it harder for the bully to prolong the confrontation.
  • One way to deal with a bully is to call them out on their behavior. Tell them that you know they are purposefully trying to escalate a situation. They may be shocked that you have actually called their bluff.
  • Make sure that you and the Board enforce reasonable boundaries. Bullies love to push and invade boundaries so make sure that you clearly inform the bully of the boundaries established and make sure that they are strictly enforced. Example: Announce rules for meeting etiquette at the beginning of an annual or board meeting so the bully can’t claim ignorance of the rules.
  • Be as calm as possible while still being forceful. A bully is looking to get a dramatic reaction when they create confrontation. Take a breath and try to remain level-headed; this will give you the upper hand in the exchange.
  • Try to make sure that you always interact with the bully around other people. Being around others may force the bully to tone down their behavior.
  • Remember that if you feel that the bully may get physical or is placing you in a dangerous situation you need to remove yourself and others from the situation and call the police if necessary.
  • If you feel that the bully is going to continue to present a physical threat avoid any conversations in person and have a security guard or police officer present at future meetings.
  • Remember that it is okay to adjourn a meeting if the bully is taking over the meeting and won’t let the Board proceed with other business.
  • Stay positive! Usually an Association only has one bully. Don’t let that bully dampen your outlook on serving the Association. The homeowners appreciate what the Board and managers do for them!

If your association has questions, please contact Mulcahy Law Firm, P.C. at 602.241.1093 to have an attorney assist you.

 

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Preventing Theft of Association Funds

We aren’t the only ones that have seen this in the news week after week! Theft of association funds has unfortunately become common in community associations throughout the nation.

No board of directors ever wants to find out that money that is needed to run the association and maintain the common area is now gone due to embezzlement. As an association board, you can help prevent the possibility of theft of association funds by following some easy and common sense steps.

What can the association do? Understand and identify the risk the association faces and implement steps and actions that board members can do to help prevent the association from falling victim.

Warning signs of potential fraud include the following: missing bank statements and reconciliations, general ledgers that do not balance, missing and altered documents, photocopies rather than originals, unexplained cash shortages, unauthorized credits to receivable accounts, increased past due accounts, duplicate payments to vendors, unauthorized purchase transactions and payments for unspecified services.

Accounting checks and balances are vital steps toward protecting the association’s assets, but, vigilance and awareness are also needed. The board of directors should periodically set aside time for a full discussion of all financial matters, and, above all, they must maintain a level of skepticism.

A major board decision is the selection of a management company to perform financial services. Working together, the board and advisers can make a good selection by considering:

  1. The company’s reputation for integrity;
  2. Experience of the managers and the company; and
  3. The qualifications of, and processes followed by the financial department.

A thorough review of the management company’s and the association’s insurance policies should be undertaken and appropriate action taken. It is then important to remain vigilant, reviewing all processes dealing with your association’s money. Even though the association may have hired a management company; the association’s financial actions and records remain the responsibility of the board of directors.

Our law firm suggests that boards have the following accounting and financial controls in place to prevent embezzlement and fraud in their association:

  1. Keep association records up to date;
  2. Assign control of all reserve funds to the entire board;
  3. Monthly financial reports should be prepared and made available for board review (include in the monthly report: a balance sheet, a statement of revenues and expenses and a comparison of actual revenues and expenditures to budgeted amounts);
  4. Require two signatures (including at least one board member) on all checks or transfers greater than a pre-designated amount;
  5. Prior to signing checks, authorized check signers must review invoices and supporting documentation;
  6. Review bank statements and reconciliations on a monthly basis;
  7. Keep only a small amount of petty cash on hand and in a secure place;
  8. Regularly review delinquent receivable balances;
  9. Purchase adequate fidelity insurance to cover the volunteers and employees who handle funds. In addition, arrange for directors and officers coverage (D&O insurance) in the event the board is accused of financial mismanagement;
  10. Hire a CPA to conduct an independent annual review or audit; and
  11. If your board discovers that funds are missing from your association, remove the suspected fraud perpetrator from a position of control, put a stop on all bank account activity and check with your association attorney for advice on how to proceed.

For more information on this very topic, please review our Mulcahy Community Association Cheat Sheet titled Tips for Preventing Theft and Fraud of Association Funds.

 

If you have any questions, please contact Beth Mulcahy at 602.241.1093 or bmulcahy@mulcahylaw.net.

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Now is the time to Start Planning your 2019 Association Budget!

Most community association documents require an associations’ board of directors to adopt a budget for each fiscal year and early to late fall is typically the time of year devoted to that process. Because the management company is familiar with all aspects of the association, they usually prepare the budget for the board’s approval. However, an association’s finance committee should be encouraged to help with the process. Whether the manager, a committee or a combination thereof develops the budget, it requires time and research to complete the process.

The association budget is broken down into two documents: (1) operations and (2) reserves. The operations budget consists of daily and monthly expenditures such as landscape maintenance, insurance, legal fees, water, social programs, etc. The reserve budget is money reserved for large capital expenditures such as painting, roofs, common area improvements, etc. Both operations and reserves should be addressed annually and budgeted appropriately. In my opinion, the board of directors has a fiduciary duty to review the operating budget of the association and provide annual reports if requested.

As the general counsel attorney for over 1,000 community associations in Arizona, I am often asked for tips on budget preparation. Set forth below are 9 steps to help simplify the budget process and preparation:
1. Review last year’s budget and records and compare the differences between what was budgeted and what was actually spent. Review each line item in the budget. Is there a difference between what was budgeted and what was expended? Why is there a difference?
2. Evaluate the needs of the community for the upcoming year. Does the annual assessment need to be raised because of an increase in delinquencies and cost of living? Are there new expenditures for any of the line items in the operational budget that will benefit the community?
3. Assess the needs of the community for the future. What long term or capital projects need to be addressed in the reserve budget? When was the last reserve study conducted? Considering the cost of living increases, should a new reserve study be conducted? Does a larger percentage of the annual assessment need to be directed to the reserve budget?
4. Ask questions of the association’s vendors. Are there potential cost increases or added services a vendor might deem necessary for the association? Are proposed cost increases necessary?
5. Review and analyze the association’s contracts. Are changes in services needed that may require an increase or decrease in the contract amount? Does the association need to get three bids to determine value received?
6. Receive and analyze information from the vendors with regard to the budget.
7. Plan for the miscellaneous. Surprises are not fun in the operational budget. Consider including a line item for a reasonable amount of money to handle the unexpected.
8. Budget the line item amount taking all research and information gathered into account.
9. Prepare for the budget presentation to the board and homeowners. Have backup information available and reasons as to how and why each line item was established.
In a planned community the budget must be approved by the board, but there is no requirement that the budget be approved by the membership prior to the start of the fiscal year (unless the governing documents require this, which in my experience would be unusual). The Arizona Condominium Act (A.R.S. Section 33-1243) requires that the board of directors provide (typically by mail) a summary of the proposed condominium budget to all unit owners within thirty days after adoption. The unit owners in accordance with the procedures set forth in A.R.S. 33-1243 (D) shall ratify any budget or amendment, unless the board of directors is expressly authorized in the declaration to adopt and amend budgets from time to time. If ratification is required, the board of directors is required to set a date for a meeting of the unit owners (not fewer than fourteen nor more than thirty days after mailing the summary) to consider ratification of the budget. The budget is ratified whether or not a quorum is present, unless a majority or any larger vote of the unit owners as specified in the declaration rejects it at that meeting. If the proposed budget is rejected, the periodic budget last ratified by the unit owners will be continued until such time as the unit owners ratify a subsequent budget proposed by the board of directors.

If you have questions and need answers on budgeting questions or you’d like to request a copy of a sample budget, please contact Beth Mulcahy, Esq. at 602.241.1093 or bmulcahy@mulcahylawfirm.com.

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Who is responsible for damages throughout the community after a storm?

We’ve had a number of large monsoons tear through the Valley this summer. While we love some rain, unfortunately, many of the monsoons cause extensive damages with their rain, wind and lightening. In the days following a monsoon, I usually receive many calls and questions about who is responsible for the damages caused by the monsoon to different areas throughout a community.

One of the most common scenarios that I receive questions about is when a tree that is located on common area property falls onto a neighboring Lot or home owned by an individual homeowner. The Association typically wants to know who should be responsible for the damages the tree causes.

In general terms, an association’s governing documents (typically the CC&Rs) will address the maintenance responsibilities of the association and the homeowners, respectively. All else being equal, the association is responsible for maintenance as set forth in the CC&Rs; and, likewise, the Owners are responsible for maintenance as set forth in the CC&Rs.  Typically the CC&Rs will include a provision about maintenance responsibilities being shifted (from the Association to the Owner, or vice versa) in certain circumstances, for instance, if an owner’s willful or negligent acts are the cause of the need for maintenance.

In regards to the situation of a tree falling and causing damage to a Lot or home, in general if the damages were a result of the Association’s failure to maintain the tree, then the Association would be responsible for the damages. However, if the damages were unrelated to the Association’s failure to maintain the tree, then maintenance responsibilities are not shifted. As such, if a tree falls as a result of a monsoon, it is my opinion that the responsibility for the damages would fall on whoever is responsible for that area under the CC&Rs. In this case, the owner of the Lot or home would be responsible for the damages to the Lot or home.

It is always a good idea for both associations and homeowners to check in on their insurance policies to be sure the community will be ready when the next storm hits. The Association should check in with its insurance company to see if there is coverage for extensive storm damage.

Please contact our firm for advice if your Association has storm damage and/or flooding after the next monsoon. Our firm will help the Board by talking through the Association’s maintenance responsibilities and insurance coverage, in order to help the Board make the best decisions.

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DOG BREED RESTRICTIONS

Pet restrictions in community associations can be a very controversial topic. Animal lovers consider dogs (and pets in general) to be members of the family, so any type of restriction that places limitations on an owner’s right to keep his/her pets within the home can be met with serious resistance.

Breed specific restrictions, which are a subset of pet restrictions, are also very controversial. In the context of a Condominium, certain breeds may be restricted based on size/weight and such restrictions may be considered reasonable based on the limited size and close quarters of most Condominiums. However, this article is more focused on breed restrictions that are tied to so-called “dangerous” breeds (e.g. pit bulls).

Pursuant to Arizona law, the Board has an obligation to maintain the common areas safe from known or foreseeable dangers. Proponents of breed restrictions may argue that restricting so-called “dangerous” breeds is consistent with the Board’s obligations to maintain the common areas safe from foreseeable dangers. Opponents of breed restrictions may argue that a rule restricting a dog based solely on breed is arbitrary, discriminatory and/or unreasonable if the specific dog in question has not shown any dangerous or aggressive tendencies.

Arizona law is not entirely settled on this particular issue. However, it is relevant to note that in 2016, the Arizona Legislature weighed in on this issue with regard to a city or county’s ability to restrict/regulate breeds.  Pursuant to ARS 9-499.04(C), “A city or town may regulate the control of dogs if the regulation is not specific to any breed.”  Although that legislation is not specific to Planned Communities or Condominiums, it should be taken into consideration.

Other possible factors to consider with regard to breed restrictions would be (1) whether to include a grandfather clause, which would permit existing dogs to remain in the community; (2) how to address mixed breeds; and (3) how to determine the exact breed of a particular dog, if the breed is in question.

Regardless of breed, if the Board becomes aware of any aggressive or dangerous dog (or other pet/animal) within the community, I would strongly urge the Board to take action to further investigate and make every effort to maintain the common areas in a reasonably safe manner.

If you have any specific questions regarding breed restrictions, or pet restrictions in general, please do not hesitate to contact our office.

 

 

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Desert Mountain Club Inc. v. Eric Graham, et al., No. 1 CA-CV 17-0100 (April 12, 2018)

The Arizona Court of Appeals issued an opinion earlier this year regarding a dispute between a nonprofit golf and recreation club (“Club”) and two equity membership members in the club (“Members”).  Although this case isn’t specifically about a homeowners association or a condominium, it does provide valuable insight as to how the Arizona Court of Appeals views an association’s governing documents vs. state law.

Under the facts of this case,  the Club and the two Members disagreed on whether specific provisions of the Desert Mountain Club Inc.’s Bylaws or state law applied to a dispute about termination of a club membership.  The Club’s Bylaws outlined four specific ways that a member could terminate their membership to the Club. When a member terminates their membership, the Bylaws provided that he/she must continue to pay dues and fees until their membership is sold to a new member. Upon the resale of that membership, the old member must pay the Club a transfer fee of $65,000 or 20% of the sale, whichever is greater. The Bylaws also had provisions that “gave the Club’s Board discretion on how to enforce delinquent or non-payments, including by expulsion or ‘any and all other remedies allowed by law.”

In 2014, the two Members wrote to the Club that they were resigning their membership and would not pay any dues or assessments. The Club sued both couples for resigning their membership and then failing to pay the assessments that they owed. The trial court granted summary judgment in favor of the Club and the members appealed.

On Appeal, the members argued that ARS §10-3620 allowed them to resign at any time without payment obligations and that the bylaws did not specifically address “resignation.”   ARS 10-3620 states in relevant part,

  1. A member may resign at any time, except as set forth in or authorized by the articles of incorporation or bylaws.
  2. The resignation of a member does not relieve the member from any obligations the member may have to the corporation as a result of obligations incurred or commitments made prior to resignation.

The Arizona Court of Appeals held that ARS §33-3620 “does not guarantee a member of a non-profit the right to resign without obligation. By its terms, the statute allows articles or bylaws to restrict the default right of resignation.” Therefore, the Court looked at the four ways to terminate membership outlined in the Bylaws and stated that even though the process is “burdensome and expensive” it is a contractual agreement between the members and the Club.

Next, on appeal the Members also argued that the Club violated ARS §10-3610, which provides, “all members have the same rights and obligations with respect to any other matters, except as set forth in or authorized by the articles of incorporation or bylaws.” The members argued that the Club’s Board was treating members differently who didn’t pay dues.  In some cases, the Board extended a settlement offer, while in others the Board expelled the members, and in this case the Board filed a lawsuit.   The Court further held that ARS §10-3610, “like §10-3620(A), makes the non-profit’s bylaws the higher authority.” “The Club therefore had discretion to redress some members’ delinquent payments with expulsion, and others’—like the Members’—with a lawsuit to collect its dues and transfer fee.” Therefore, while the Board’s discretion must be used reasonably and not arbitrarily or capriciously, the Board’s discretion was protected in the bylaws and there was no showing of an abuse of the discretion.

What are the key takeaways from this case for HOA and condo boards?  Associations need to look at the plain language of the association’s documents vs. state law regarding rights and responsibilities of owners and associations.  If the language of the state law defers authority on a subject to the association’s documents, the association’s documents should be followed (and vice versa).  For example, the language under state law for the removal of a board member from office indicates that state law trumps an association’s documents if the association’s documents conflict with state law regarding the procedure to remove a board member from office.  The bottom line is that when there are conflicts between an association’s documents and state law, it is always a good idea for an association to consult with legal counsel to determine what provision should be followed.  And, the way to make that determination is to look at the plain language of both to see which one trumps the other.

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BOARD MEMBER REMOVAL

Does your Association board and/or owners know the process under Arizona law for removal of a board member/director at large from office?  In Arizona, the Arizona Condominium Act, ARS Section 33-1243(H), and the Arizona Planned Communities Act, ARS Section 33-1813(A), provide for very specific protocols for the removal of Board Members in Condominiums and Planned Communities, respectively. Please also note that both statutes provide for removal, with or without cause, so long as the required protocol is met. The general protocol requires the following steps:

  • The Board must receive a petition that calls for removal of a member of the board of directors and that is signed by the number of persons who are eligible to vote in the association at the time the person signs the petition equal to (1) in an association of less than 1,000 members, at least twenty-five percent of the votes in the association or by the number of persons who are eligible to vote in the association at the time the person signs the petition equal to at least one hundred votes in the association, whichever is less; (2) in an association of more than 1,000 members, at least ten percent of the votes in the association or by the number of persons who are eligible to vote in the association at the time the person signs the petition equal to at least one thousand votes in the association, whichever is less;
  • Upon receipt of the petition, the Board must notice and hold a special meeting to vote on removal within 30 days; and
  • So long as a quorum is present at the special meeting, the members of the association who are eligible to vote at the time of the meeting may remove any member of the board of directors, by a majority vote of those voting on the matter at the meeting.

Currently, there is no Arizona case law that specifically addresses removal of a board member from office.  A recent case in Pennsylvania (A Pocono Country Place Property Owners Association, Inc. v. Kowalski, No. 904 C.D. 2017 (Pa. Commw. Ct. May 7, 2018)) sheds some light on whether a court can unilaterally remove a director from office for bad behavior despite the fact that state law addressed a procedure for removal of the director and that procedure was not followed.  In this case, 8 board members filed suit against 1 board member, seeking his removal from the board and banning him from serving in the future, based on his behavior towards the other board members, which allegedly included a number of insulting, hostile and potentially discriminatory emails.  While the Court found the Defendant’s conduct to be “deplorable”, it ruled that such conduct did not constitute grounds for court intervention pursuant to the Pennsylvania Nonprofit Corporation law.

From the facts presented in the case, the behavior of the 1 board member fell below the expectations of a board member.  However, a court couldn’t intervene in this matter and remove the director from office because the state’s statutory removal provisions had not been adhered to.  As such, an important takeaway from this case for Arizona associations is that the procedures for removal of a board member outlined in ARS Section 33-1243(H) and ARS Section 33-1813(A) must be strictly adhered to.

If your community is dealing with an existing or potential removal issue, please feel free to contact my office for assistance.

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