Assigned to GOV                                                                                                                            FOR COMMITTEE

ARIZONA STATE SENATE

Fifty-Third Legislature, First Regular Session

FACT SHEET FOR S.B. 1289

homeowners' associations; hearings; attorney fees

Purpose

            Prohibits the award of attorney's fees to a homeowners' association (HOA) or unit owners' association (UOA) with a matter before an administrative law judge within the Office of Administrative Hearings (OAH).

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).

Laws 2016, Chapter 128 transferred the administrative hearing dispute to the Arizona Department of Real Estate (ADRE). The ADRE is responsible for the administrative hearing process overseeing complaints between UOAs and HOAs and individual member owners. The administrative hearing process allows a petition to be filed with ADRE by a UOA, HOA or an individual member owner. Upon review of the petition, ADRE refers the case to the OAH, where an administrative law judge has the authority to adjudicate complaints between UOA, HOA and individual member owners (A.R.S §§ 32-2199, 32-2199.01).  An order issued by an administrative law judge is enforceable though contempt of court proceedings (A.R.S. § 32-2199.02).

            The Uniform Administrative Hearing Procedures, which regulate OAH proceedings, mandate that appealable actions be held within 60 days after the notice of appeal is filed, contested cases be held within 60 days after the agency's request for a hearing, and the OAH prepare and serve a notice of hearing on all parties to the appeal or contested case at least 30 days before the hearing (A.R.S. § 41-1092.05). All parties have the opportunity to respond, present evidence and deliver arguments on all relevant issues discussed in the hearings (A.R.S. § 41-1092.07). The administrative law judge must issue a written decision within 20 days after the hearing is concluded (A.R.S. § 41-1092.08).

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

Provisions

1. Prohibits an administrative law judge or the Commissioner of ADRE from making an award of attorney fees to an HOA or UOA for any matter filed within OAH regardless of the community documents.

2.  Specifies the recovery of reasonable attorney fees in a contested action arising out of a contract does not apply to hearings held by OAH regarding a dispute between an HOA or UOA and an individual member.

3. Becomes effective on the general effective date.

Prepared by Senate Research

January 30, 2017

RH/rr