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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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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Be a Better Leader for your Association!

What makes one community association successful while another struggles?

After 20 years of experience working with community associations, I have come to the conclusion that one of the reasons is leadership. This article will define leadership, talk about the importance of leadership, characteristics of a good community association leader and how boards can lead at a higher level.

What is the importance of leadership?

Strong leadership gives and organization guidance, stability, continuity from year to year and a unity of purpose.

There are many definitions for leadership:

Drea Zigarmi, in his book The Leader Within, defines leadership as “the act of arousing, engaging, and satisfying the motives of followers – in an environment of conflict, competition or change – that results in the followers taking a course of action toward a mutually shared vision.”

What are some of the characteristics of a great community association leader?

1. A leader must be moral and ethical

2. A leader engages in proper behavior

3. A leader has read, understands and follows the governing documents and the laws regarding community associations

4. A leader is educated on community association topics and procedures

5. A leader follows the advice of professionals who are hired to help

6. A leader is respectful of other board members and community members

7. A leader places the good of the association as a priority and encourages others to do the same

8. A leader encourages mentoring and support of board members

9. A leader can conduct an efficient and effective board meeting

10. A leader sets a good example

11. A leader arouses others in the community to step up and help the community and to follow the association’s documents

If leaders are not respected by their members, they can never effectively lead an organization.

Leadership is often divided into 4 styles. What type of leader are you?

Directing leaders give specific instruction and closely supervise group tasks; they show exactly what they want others to do and how to do it.

Coaching leaders direct and supervise tasks but they also explain decisions, ask for suggestions and encourage those they work with. They will encourage all to contribute when deciding what to do and how to do it.

Supporting leaders share in the decision-making. They facilitate and support the group members’ efforts. They might say to the group, “I will be here to help if you need me.”

Delegating leaders give all decision and problem solving responsibility to the group members. The president of a board of directors may be one style, or a combination of the leadership styles. Additionally, he or she may use a different style depending on the desired outcome or the makeup of the committee or board he or she is working with.

Community Association Boards Leading at a Higher Level

Leading at a higher level is defined by Ken Blanchard, the business leadership guru, as is “the process of achieving worthwhile results while acting with respect, care, and fairness for the wellbeing of all involved.” According to Ken Blanchard, in order to lead at a higher level, boards need to do the following:

1. Set sights on the right target and vision. (Develop goals at the beginning of each year to make your community association better and work toward accomplishing those goals);

2. Treat homeowners’ right – (treating all fairly, with respect and in accordance with governing documents and community association law);

3. Treat fellow board members right (working together to accomplish the goals of the association and acknowledging their support of the association).

4. Be the right kind of leader (adhering to the characteristics of a good leader).

I believe leadership and education are intertwined so I hope that you will continue to learn as you lead your communities toward excellence.

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Hiring Unlicensed Contractors Costs More Money in the End. Period!


Have you ever heard the phrase “penny wise but pound foolish”? Over the years, I have seen some expensive mistakes made by association boards. One common mistake is trying to save a little money by hiring an unlicensed contractor. I’ve often found that, in the end, the unlicensed contractor ends up costing a lot more money for the association.

My advice… Hire licensed and bonded contractors for projects that under Arizona law require you to hire licensed and bonded contractors.

Here’s a good example of a construction project costing an association a lot more money in the long run than it should have. The property manager of an association hired an unlicensed contractor to install new rain gutters on the condominium building. The unlicensed contractor, who did not have workers’ compensation insurance, hired a person to perform some of the work at a contracted daily amount. When a rain gutter came in contact with a high-voltage electrical wire, the worker was severely shocked and fell, sustaining serious injuries. This case eventually came before an appellate court to determine which entity was considered the “employer” for purposes of workers’ compensation liability. The court determined that both the management company and the unlicensed contractor were employers of the injured man. Furthermore, the court found that the homeowners’ association was also liable as an employer based on the management company’s authorized actions in the association’s behalf. In this case, the association was required to compensate the worker for the worker’s medical bills, injuries and loss of income.

This case does have a moral – associations and property management companies should never hire unlicensed contractors (unless it is minor handyman work – see below for definition – or contact the Arizona Registrar of Contractor’s Office for clarification). Both associations and property management companies may be deemed “employers” and subject to liability for workers’ compensation benefits when an employee of an unlicensed and uninsured contractor is hired to work at an association. It should be standard procedure for contractors who work for an association to provide proof of a contractor’s license as well as proof of insurance prior to the start of work.

The Arizona Registrar of Contractor’s Office ( or 602-542-1525) has a user friendly website with great information. Check this site for license and bond information and for complaints or disciplinary action against a prospective contractor. Where there is smoke, there is usually fire. So, if the contractor already has open (or closed) complaints, we suggest re-considering the use of that contractor. A contractor must have a current and active license, showing he or she is qualified to perform the type of work required, before he or she can even bid on a project. Violation of this statute is a class 1 misdemeanor.

The most frequently claimed exemption to the licensing requirements is that of the “handyman”. Arizona statute allows individuals who perform minor repairs or installations to do so without being licensed. To qualify for this exemption two conditions must be met: 1) The work does not require a local building permit; AND 2) The total cost of the project, including labor, materials and all other items does not exceed $1,000.00.

Finally, don’t forget to have our law firm review the contract between the association and contractor BEFORE the contract is executed. We can help protect the association by inserting association-friendly language in the contract to protect the association in the event of problems with the contractor down the road.

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What is “reasonable”?

The terms “reasonable” and “unreasonable” are frequently used in the Community Association legal industry. Both the Arizona Planned Communities Act and Arizona Condominium Act use the terms “reasonable” and “unreasonable” throughout various sections of the legislation. For instance, ARS 33-1242 grants the association the authority “after notice and an opportunity to be heard,” to “impose reasonable monetary penalties on unit owners for violations of the declaration, bylaws and rules of the association.”  ARS 33-1817(B) (3) provides that “approval of a construction project’s architectural designs, plans and amendments shall not unreasonably be withheld” by the association or design review committee.

In advising Board Members in Arizona, I typically receive questions about whether or not a particular decision is legal. In rendering my legal opinion to my client, not only do I try to provide advice and options for the client to stay within the confines of the law, but I also try to provide my clients with the best practice and/or advice on how to find a reasonable solution that will help keep them out of legal trouble and be a win-win situation. In my experience, the Boards that I work with that communicate well and that make reasonable decisions, have fewer problems, than those who make unreasonable decisions. While these words may sound obvious, being a Board Member for a Community Association can be extremely emotional, demanding and stressful, and sometimes the reasonable solution may not seem all that clear or judgment may be clouded by the emotional aspect of the position. I am hopeful that this post will provide Board Members with some tips and tools to make more reasonable decisions on behalf of the association.

First, it is important to keep in mind that if a Board decision is challenged in Court, ultimately the determination of reasonableness will be a question of fact for the jury to decide. There will be a number of factors that will likely go into each analysis, but I’m always trying to think ahead to how a court/jury would look at the Board’s decision if it proceeded to a lawsuit. Therefore, Board Members should also treat the determination of what is reasonable in a particular situation, on a case by case basis.  What is reasonable in one set of circumstances may not be reasonable for the next case. Factors may include, but are not limited to: the costs associated with the decision; how the Board has treated a similar situation in the past; if the Board is allowed to grant a variance; the ultimate goal or outcome desired.

Second, the Board should understand the scope of its authority in making decisions by reviewing the Association’s governing documents. Some Articles of Incorporation, CC&Rs and Bylaws give the Board broad authority to make decisions. Others limit the Board’s authority in certain ways. For example, if an Association’s CC&Rs give the Board enforcement power and require each homeowner to maintain the landscaping on his/her Lot, but does not provide details of what the landscaping should entail, would it be reasonable for the Board to require that each homeowner hire a professional landscaping company to maintain the landscaping on his/her own Lot? In my opinion, this would be an unreasonable requirement outside of the scope of the Board’s power and authority.

Third, the Board should learn how to communicate better with the homeowners/members in the community. A Board or Board Member may be automatically perceived as unreasonable if he/she is not willing to listen to homeowners and not willing to open the lines of communication. Advances in technology give Boards additional ways to communicate with homeowners through email, electronic newsletters, websites, and social media. With that being said, the use of email in people’s everyday lives can create a greater sense of urgency or an expectation of a quicker response time. I advise my clients to try to acknowledge receipt of emails within 24 hours and to let the person know when they can expect a Board answer or decision. Individual Board members should not be making decisions on behalf of the whole Board. Therefore a reasonable response may be, “[t]hank you for your email. The Board will add this topic/question to the agenda for the next Board meeting. Please feel free to attend to hear the Board’s discussion.”

Fourth, there is a balancing act between being flexible and also being consistent. One of the most prevalent complaints I see homeowners make is that the Board is selectively enforcing the governing documents. While some governing documents authorize the Board to grant variances in certain situations, in most cases the Board should aim to enforce each provision equally and consistently among homeowners. With that being said, the Board is governing a group of neighbors and sometimes it can be more effective and reasonable to do the “neighborly thing.” For example, if there is a person in the association who lives alone who recently broke his/her leg and cannot adequately maintain his/her landscaping, rather than levying a fine each day and/or week after hearing the reasons for the violations, the Board could consider discussing alternative options to keep the yard maintained. Maybe a Board member or other neighbor would be willing to volunteer and do a cleanup, or maybe the Board can help the neighbor find a landscaping company. This solution is more reasonable in my opinion because the end goal for the Board should be compliance and trying to improve and keep up the property values.

Fifth, the Board should learn how to complete a cost/benefit analysis. The costs associated with some decisions do not always outweigh the benefits. There are many times when the Board should consider whether a specific decision could end in litigation or an increase its insurance premiums. The Board should look at its options and conduct a cost/benefit analysis of a situation if there is a risk of litigation. While the prevailing party in a breach of contract lawsuit is entitled to its reasonable attorneys’ fees, there are certain causes of action where the prevailing party may not be awarded its attorneys’ fees. Therefore, the Board should discuss the risks of litigation with its legal counsel. In my opinion, part of being reasonable is using “preventative   legal.” Further, the Board has a fiduciary duty to do what it believes to be in the best interest of the Association. As such, if the Board does not have expertise or knowledge in a certain area, it should consult with legal, a CPA, reserve specialist or other expert in the field to help make the reasonable and best decision.

Finally, the Board is going to have to work to get along in order to make a reasonable decision as a whole. Board members bring different experiences and expertise to the Board, and there will likely be many different personalities on the Board at any one time. In my experience, Board conflict can be reduced if each Board Member understands the type of persons he/she is working with. I recommend that Board Members working together each take a DiSC profile personality test. The DiSC profile test provides a report about your personality and in my  experience helps improve communication among team members. My employees take the personality test prior to starting at Mulcahy Law Firm so that I can better communicate and work with each individual employee on my team. I would encourage you to consider taking the free test. Here is a link to the free Disc personality test:  In my experience, sometimes knowing that a person may react a certain way or speak a certain way helps relieve some of the emotional responses you may have if you didn’t know that is just the way the person is. Emotional decision making can lead to unreasonable decision making.

It is important to remember that sometimes there is no right or wrong answer. Sometimes the Board can only do its best, given the circumstances. In these cases, my advice is to have justifications for the ultimate decision and consult with experts if you are feeling uneasy or unsure.

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Tips on keeping the board meetings in control…

We often receive questions from board members seeking advice on how to handle board meeting conflicts. We are here to help.

Board member vs. board member

Board Member to board member conflict will bring the association board meeting productivity to a halt. It is important that all board members work together to prevent conflicts, and, when they do arise, the members should work together to properly address the conflicts.

Limit potential board member conflict by focusing on these points set forth below:

  1. Give all board members an opportunity to contribute with equal time;
  2. Consider enacting regulations, such as discussion time limits;
  3. Allow follow up discussion on a topic after all board members have been given the opportunity to speak;
  4. Educate new board members on board processes and outstanding issues;
  5. Encourage mentoring of new board members.

Other times, the conflict at a meeting is caused by a difficult owner or owners. Difficult owners can be very outspoken regarding their view of the management of the association. The “Gadfly” is an expert at criticizing, cajoling and pinpointing the errors of others. S/he demands change, constantly interrupts, attacks personal integrity and alleges conflicts of interest.

Do you have an “expert” criticizer that finds thrill in pointing out the errors of others on the board? Someone that demands change, constantly interrupts, attacks personal integrity and alleges conflict of interest? This “Gadfly” can be exhausting and very difficult to deal with.

How to deal with the “Gadfly”:

  1. Establish and announce meeting procedures at the beginning of a board meeting, in a newsletter or in the meeting notice;
  2. Enforce established meeting procedures uniformly;
  3. Host a homeowner forum at the beginning of the board meeting with a strict time limit;
  4. Establish control. No one should be allowed to interrupt board meetings by speaking out of turn and raising irrelevant issues;
  5. Respond in a modulated, non-argumentative voice. Do not respond with anger, argue or trade insults. The board does not have to rebut the comments of any member;
  6. Utilize parliamentary control — by knowing when and how to a) table a motion; b) postpone a motion; c) refer a matter to a committee; d) adopt special rules of

Lastly and most importantly, it is very important to establish that name calling, interrupting and personal attacks should be prohibited at all board and committee meetings.

I am hopeful that the strategies in this Blog will help bring order to your meetings!

The author wishes to acknowledge that Conducting Meetings – A Guide to Running Productive Community Association Board Meetings by the Community Association Institute and M.J. Keats was a source for this publication

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It’s pool time – pay attention!

The heat is here, the first day of summer is tomorrow (June 21) and owners and their guests are flocking to the association’s pool… pool safety starts with you. It goes without saying; the importance of pool safety is something that we can’t stress enough.

What to say to that person who likes to “prop open” the pool gate?

PLEASE close the gate! For safety and liability reasons, your board should take a proactive stance regarding the improper propping open of a gate. If your board has not already done so, your board should consider adopting and enforcing a rule stating that propping open the pool gate is prohibited – no excuses for leaving the gate open! The association should notify homeowners and all vendors (i.e. pool companies/landscapers who might prop a gate open) of the association’s rules and pool policy prohibiting propping open of a gate — in writing (i.e. letters, newsletters, etc.).

What to do today?

Go check your association’s pool gate to confirm that it is a self-closing gate and the lock is high enough that a young child cannot reach it without assistance from an adult.

What’s that beeping sound?

That’s the alarm notifying us that the pool gate is open! We suggest that the board research an alternative to deter owners and vendors from propping open the pool gate. An effective method is to install a gate alarm. When attached to the gate, the alarm creates a loud beeping noise if the gate is propped open.

It is important to point out that an alarm can be an annoyance to owners living near the pool so the board will need to weigh the pros and cons of a gate alarm vs how serious this issue is at your association.

What to say to that owner that keeps violating pool rules?

PLEASE follow the rules! If the association’s CC&Rs allow the board to revoke residents’ common area pool privileges for violations of the rules and regulations, our firm suggests that the board revoke pool privileges for violations of pool safety rule(s).

What to handout to your members?

This, right HERE! This American Red Cross handout has a complete list of safety guidelines that your board, members and their guests should review.

Some final [important] thoughts..

Put serious thought about the signs that are posted at your pool…

  • No Lifeguard on Duty
  • No Diving
  • CPR Instructions
  • In case of an emergency, call 9-1-1
  • Please keep gate closed

Finally, make sure the address/location of the pool is POSTED in an obvious location on the pool-deck. In the unfortunate event that a patron has to call 9-1-1, they will need to be able to provide authorities with the address of the pool.

Have a great summer and be safe!

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Special Assessments

If you live in a community association, either a planned community or a condominium development, chances are that you pay an annual, quarterly, or monthly assessment to the community association. Regular assessment payments from homeowners are necessary for the community association to pay for things like, the maintenance of the common elements, vendors’ contracts, like a management company, and for insurance premiums.

While the Arizona Condominium Act does not have a limitation on assessments, the Arizona Planned Communities Act places a limitation on the amount the regular assessment can be increased by the association each year. ARS 33-1803(A) states in relevant part, “unless limitations in the community documents would result in a lower limit for the assessment, the association shall not impose a regular assessment that is more than twenty percent greater than the immediately preceding fiscal year’s assessment without the approval of the majority of the members in the association.” Neither the Arizona Condominium Act nor the Arizona Planned Communities Act contains provisions that specifically address “Special Assessments.”

A special assessment is an assessment that the community association levies against homeowners, in addition to the regular assessment, when the association does not have enough money in its operating or reserve account to fund a specific project, accident, or other unpredicted expense. The association’s governing documents, typically the Declaration of Covenants, Conditions and Restrictions (CC&Rs), usually contains a provision outlining the process that the association must adhere to in order to levy a special assessment. The board of directors for the association should review the requirements in the association’s governing documents before levying a special assessment. There may be specific notice requirements and voting procedures for the special assessment process and there may only be certain things a special assessment can be levied for. Most CC&Rs require a homeowner vote and a certain percentage of homeowners to approve the special assessment before the association is allowed to levy it.

While there may be unpredicted emergencies or situations that make it near impossible for an association to avoid a special assessment, there are things that the association and its board can do to limit the risk of a special assessment, including, but not limited to:

  • The board should ratify a well thought out and planned budget for the year. When ratifying a new budget, the board should assess the needs of the community for the future, should review and analyze the association’s contracts and other expenses, and should plan for unexpected and miscellaneous expenses.
  • The board can plan to have a reserve study completed and updated every 3-5 years by a reserve specialist. A reserve study identifies the planned replacement of major community assets. Having a well-funded reserve account reduces the need for special assessments.
  • The board should review its insurance coverage with its insurance agent each year to make sure the association has adequate coverage in the case of an emergency or accident on the association’s property or within the association. The board should also ensure it has adequate D & O coverage and proper fidelity insurance. The board can ask its insurance agent to come walk through the community to evaluate risk areas and to adjust insurance accordingly, if needed.
  • The board should consider adopting a “preventative” legal approach. The board should try to contact its attorney before an issue/situation escalates to litigation. Most associations do not budget enough legal fees in their yearly budget to cover the legal fees involved in a lawsuit.

While associations should try to limit the likelihood of a special assessment, there may be situations that arise, making the special assessment necessary. If a special assessment is necessary in your association, make sure your association adheres to the process and requirements outlined in your association’s governing documents. If you have a question about the process, contact your manager and attorney for assistance.

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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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