Assigned to GOV                                                                                                                            FOR COMMITTEE

ARIZONA STATE SENATE

Fifty-Third Legislature, First Regular Session

FACT SHEET FOR S.B. 1288

homeowners' associations; board conflicts

Purpose

Sets forth additional requirements for when a member of the board of directors (Board) within a homeowners' association (HOA) or unit owners' association (UOA) must declare a conflict. Prohibits the member of the Board from voting if a conflict has been declared after termination of declarant control.

Background

 An HOA is a common interest organization to which all the owners of lots in a planned community must belong. Similarly, a UOA is a common interest organization to which all owners of a unit in a condominium must belong. The four defining characteristics of all HOAs and UOAs are: 1) all owners are automatically members; 2) governing documents create mutual obligations; 3) mandatory fees or assessments are generally levied against owners and used for the operation of the association; and 4) owners share a property interest in the community (A.R.S. §§ 33-1202, 33-1802).

A member of the Board is required to declare a conflict on any action before the Board regarding compensation that would benefit a member of the Board or Board member's parent, grandparent, spouse, child or sibling. The declaration must be made during an open meeting of the Board prior to any action or discussion, but the member may still vote on the action (A.R.S. §§ 33-1243, 33-1811). 

The period of declarant control terminates no later than the earlier of either 90 days after the conveyance of 75 percent of the units or four years after all declarants have ceased to offer units for sale in the ordinary course of business (A.R.S. 33-1243). A declarant is any person or group of persons designated by the declaration of a planned community with certain rights, including the right to construct improvements or exercise development rights (A.R.S. § 33-1202).

There is no anticipated fiscal impact to the state General Fund associated with this legislation.

Provisions

1. Stipulates a member of the Board, upon termination of declarant control, must declare a conflict and abstain from voting on any action for compensation that would benefit any member of the Board or the Board member's parent, grandparent, spouse, child, sibling, employer or employee.

2. Becomes effective on the general effective date.

Prepared by Senate Research

January 30, 2017

RH/rr