ARIZONA STATE SENATE
Forty-seventh Legislature, Second Regular Session
FINAL AMENDED
FACT SHEET FOR S.B. 1007
condominiums; homeowners’ associations; records; fees
Purpose
Prohibits a homeowners’ association (HOA) from foreclosing on a lien for delinquent assessments of less than $1,200 or assessments that are delinquent for one year, establishes a timeline for an HOA to make records available for review and to provide copies of the records to an HOA member and establishes a process in which an HOA member can respond to a notice of violation prior to enforcement of the community documents.
Background
Condominium and planned community HOAs are regulated by statute. Condominium HOAs and their boards of directors have been regulated in Arizona since 1986. Laws 1994, Chapter 310, established regulations pertaining to the formation and operation of master planned community HOAs.
An HOA is a common interest organization to which all the owners of lots in a planned community or owners of units in a condominium must belong. The four defining characteristics of an HOA 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.
Statute allows a lien to be placed on a unit for any unpaid assessment, late fees, collection fees, attorney fees and other costs incurred with respect to the unpaid assessment. The lien may be placed on the unit from the time the assessment becomes due and authorizes the foreclosure of the HOA’s lien in the same manner as a mortgage on real estate. Liens for assessments are not subject to the homestead exemption protection.
Statute requires all financial and other records of the HOA to be made reasonably available for examination by any HOA member or the member’s designated representative with some exception. Statute allows an HOA to impose reasonable monetary penalties upon its members for violations of the declaration, bylaws and rules of the HOA. The monetary penalty may be imposed only after notice has been given to the member and the member has been given an opportunity to be heard. Also, the notice must include information pertaining to the manner in which the penalty will be enforced.
There is no fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Prohibits foreclosure by an HOA until an owner has been delinquent in the payment of monies secured by a lien, excluding reasonable collection fees, reasonable attorney fees and charges for late payment of those assessments, for a period of one year or in the amount of $1,200 or more, whichever occurs first.
2. Requires an HOA to provide a unit owner with written notice of violation of the community documents and a description of the process to contest the notice before the HOA enforces the documents regarding the condition of the property.
3. Provides an HOA member who receives the notice regardless of whether a monetary penalty is imposed by the notice an opportunity to send the HOA a written response by certified mail within ten business days after the date of the notice.
4. Requires the HOA to respond to the HOA member with a written explanation regarding the notice within ten business days of receipt of the response from the HOA member.
5. Requires the HOA’s explanation to provide at least the following information:
a) the provision of the community documents that has been allegedly violated.
b) the date of the violation or the date the violation was observed.
c) the process the HOA member must follow to contest the notice.
6. Prohibits an HOA from proceeding with any action to enforce the community documents before or during the exchange of information period between the HOA and the HOA member.
7. Removes contemplated litigation from the conditions in which records may be withheld.
8. Prohibits an HOA from charging an HOA member or the member’s representative for making financial and other records of the HOA available for review.
9. Requires an HOA to make the records available within ten business days of the request and requires the HOA to provide copies of the requested records within ten business days of the request.
10. Limits the copying fees to no more than 15 cents per page.
11. Makes conforming changes.
12. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Removes the limitation on charges for preparing the information statement required for resale units and requires an HOA to make records available for review at no charge.
2. Establishes a timeline for an HOA to make records available for review and to provide copies of the records for an HOA member.
3. Limits the copying fees to no more than 15 cents per page.
Amendments Adopted by Committee of the Whole
1. Restores an HOA’s ability to consider contemplated litigation in executive session.
2. Allows records to be withheld or meetings to be closed for issues regarding records of an HOA that are directly related to personal, health or financial information of an HOA member.
Amendments Adopted by House of Representatives
1. Prohibits an HOA from foreclosing on a lien for delinquent assessments of less than $1,200 or assessments that are delinquent for one year.
2. Establishes a process in which an HOA member can respond to a notice of a violation prior to enforcement of the community documents.
Senate Action House Action
GOV 1/12/06 DPA 5-2-0 FMPR 3/6/06 DPA 5-0-1
3rd Read 2/6/06 26-1-3 3rd Read 3/30/06 57-0-3
Final Read 4/4/06 28-1-1
Signed by the Governor 4/10/06
Chapter 71
Prepared by Senate Research
May 2, 2006
NS/jas