Legislative Update

The Arizona Legislature opened the Fifty-fourth First Regular Session on Monday, January 14, 2019. While our firm has been tracking the proposed bills over the past month, we have noticed a number of proposed bills that would impact community associations, including planned communities and condominiums. While none of these bills have been signed by the governor yet, here are a few of the interesting bills we are following:

SB1480: Applies to both Planned Communities and Condominiums
• This bill has proposed changes to ARS §33-1227 and ARS §33-1817, which apply to the ways that an association can amend its Declaration (CC&Rs).
• Proposed changes to ARS §33-1227 for condominiums:
o The Association could propose an amendment to the Declaration that applies to fewer than all of the Units if:
 -The amendment is deemed to conform to the general design and plan of the community; and
 -The number of unit owners or eligible voters specified in the Declaration or at least 67% of the votes allocated in the association, whichever is greater, vote for or give the written consent to the amendment; and
 -All of the unit owners of units to which the amendment applies vote for or give written consent to the amendment.
o An action to challenge the validity of an amendment is extended from one to four years, unless the amendment involves the creation or collection of a debt pursuant to Section 12-548.
o The following proposed amendments would need unanimous consent of unit owners:
- An amendment that would change the basis for allocating voting rights or assessments among unit owners.
 –An amendment that would change or restrict the uses or occupancy of or the behaviors in any unit.
o An amendment would not need unanimous consent if the amendment was prohibiting or materially restricting the use of an individually owned unit that threatens to harm or unreasonably interfere with the reasonable use and enjoyment of other property in the community.
o Any proposed amendments after the date of this bill would need to also include updates to the Declaration to make the Declaration consistent with the new proposed changes in this bill.

• Proposed changes to ARS §33-1817 for planned communities:
o Adds the requirement that an amendment to the Declaration receive the affirmative vote of at least 67% of the number of owners or eligible votes or any higher percentage that is specified in the Declaration.
o If an amendment is going to do any of the following, the association will need unanimous consent:
 -Create or increase special declarant rights; and
 -Change the basis for allocating voting rights or assessments among community members; and
 -Prohibit or restrict the uses or occupancy of or behaviors in any property.
 –
However, an amendment can prohibit or materially restrict the use of individually owned property that threatens to harm or unreasonable interfere with the reasonable use and enjoyment of other property in the community, without unanimous consent.
o An action to challenge the validity of an amendment needs to be brought within four years, unless the amendment involves the creation or collection of a debt pursuant to section 12-548.


SB1531: Applies to both Planned Communities and Condominiums
o This bill extends the length of time to enforce a lien for unpaid assessments from three years to six years.
o This bill proposes the order in which an owner’s payment should be applied: “[i]n the order the debt was accrued, to any unpaid assessments, unpaid charges for late payment of those assessments, unpaid reasonable collection fees and unpaid attorney fees and costs incurred with respect to those assessments and unpaid interest on any of those account. Any remaining amounts shall be applied, in the order the debt was accrued, to other unpaid fees, charges and monetary penalties or interest and late charges on any of those amounts.”
o For a delinquent account for unpaid assessments or charges related to unpaid assessments, the Association shall provide the following written notice to the unit owner at the owner’s last known address at least fifteen days before authorizing an attorney for the association to begin a collection action:
-YOUR ACCOUNT IS DELINQUENT. IF YOU DO NOT BRING YOUR ACCOUNT CURRENT OR MAKE ARRANGEMENTS THAT ARE APPROVED BY THE ASSOCIATION TO BRING YOUR ACCOUNT CURRENT WITHIN FIFTEEN DAYS AFTER THE DATE OF THIS NOTICE, YOUR ACCOUNT WILL BE TURNED OVER TO THE ASSOCIATION’S ATTORNEY FOR FURTHER COLLECTION PROCEEDINGS. SUCH COLLECTION PROCEEDINGS COULD INCLUDE BRINGING A FORECLOSURE ACTION AGAINST YOUR PROPERTY.
o The notice shall be in boldfaced type or all capital letters and shall include the contact information for the person that the unit owner may contact to discuss payment. The notice may be included within other correspondence sent to the unit owner regarding the unit owner’s delinquent account.
o Except for a Planned Community or Condominium has less than fifty lots/units and does not contract with a third party for management services on behalf of the Association,  the Association shall provide a statement of account in lieu of a periodic payment book to the member with the same frequency that assessments are provided for in the declaration. The statement of account shall include the current balance due and immediately preceding ledger history. The Association may not provide any further statements to a member if a civil action is filed regarding that member’s unpaid account.
o An agent for the Association may collect on behalf of the Association directly from a member the assessments and other amounts owed by cash or check, or credit, charge or debit card or by other electronic means. The agent may charge a convenience fee to the member that is approximately the amount charged to the agent by a third-party service provider.


HB2374: Applies to Planned Communities
• The proposed changes to this bill are to ARS §33-1801 and ARS §33-1802, which provide which planned communities in Arizona are subject to the Arizona Planned Communities Act and provide the definitions of both “Association” and “Planned Community.”
• The first proposed change to ARS §33-1801 is that the Arizona Planned Communities Act would only apply to planned communities and other associations that were incorporated or organized after 1973. This means that any planned communities or associations that were incorporated prior to 1973 would not be subject to the laws within the Arizona Planned Communities Act.
• Further, there is an additional change to the definition of “Association,” whereby an organization that is created for the sole purpose of supporting recreational activities in a real estate development would not be included.
• Finally, the definition of “Planned Community” has proposed changes whereby in order to be a Planned Community the Declaration has to expressly state that both, owners are mandatory members and that owners are required to pay assessments to the association.

Stay tuned on our firm’s website for additional updates throughout this legislative session: http://www.mulcahylawfirm.com/home.php.
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