August 23, 2004
Some homeowners associations and their management companies are getting nervous about a new round of state laws going into effect Wednesday.
Reform advocates have argued that the Legislature is restoring balance between associations and individual homeowners.
Association members have been granted new rights to demand access to financial details about their associations and to speak out at board meetings.
But many in the association industry worry that the changes will create headaches for volunteer boards and, in some cases, escalate feuds between factions.
"It’s difficult to make these laws apply to every association when you have so many different types of associations out there," said Curtis Ekmark, a Scottsdale lawyer who represents boards and management companies. "Some are 30,000 units, and some are 12 townhouses."
A dozen new laws adopted by the Legislature this year mark the most significant reform for homeowners associations since their powers were greatly expanded by state lawmakers in 1986.
The sweeping changes include ending the authority of associations to foreclose on houses for unpaid fines, requiring annual budget audits and guaranteeing members a right to speak at board meetings on specific issues.
Reform advocates contend that homeowners can now be better watchdogs of their boards to prevent bad choices that have brought negative attention to the industry. In general, the reforms should force boards to act more like local governments instead of their traditional role as private corporations, said Pat Haruff, president of the Mesabased Coalition for Home Owner Rights and Education.
Fred Fischer, a reform advocate and officer for his Gilbert association, said boards focus on protecting property values and the financial health of an association, and often fail to anticipate the harm to individual owners.
"People in general don’t know to handle the responsibility," Fischer said. "They haven’t been trained or educated."
Ekmark said the hottest issue is the loss of associations’ ability to foreclose for unpaid fines. A new law does allow them to file liens for unpaid fines and related legal costs, and require payment, with interest, when the property is sold. The new law doesn’t affect the ability of associations to foreclose on liens for unpaid monthly or annual dues.
Savvy homeowners will quickly realize they don’t have to pay association fines, Ekmark said, forcing associations to spend more money on attorneys as they seek to get those homeowners to comply with rules.
Ekmark said some of the other laws are likely to have unintended consequences. For example, the law that guarantees a member’s right to address a board also allows boards to set "reasonable" time limits for speeches.
But unlike the Open Meetings Law that covers Arizona governments, association boards are now required to allow anyone to speak on every issue on the agenda, Ekmark said.
"If you’ve got nine issues on your agenda and three or more people who want to speak, suddenly you’re adding three hours to your agenda," Ekmark said. "I don’t think that’s going to happen in a lot of communities, but I think communities are anxious to see how that plays out."
Nearly everyone involved in homeowners association issues predicts additional reform efforts next year. Resident activists such as Haruff want a state agency to be granted specific enforcement and arbitration powers over associations.
But industry experts such as Ekmark want the Legislature to create uniform standards for recalling board members and rewriting the conditions, covenants and restrictions that usually govern association operations.
"Let’s face it, the people who are unhappy with their homeowner associations are unhappy for two reasons — they don’t like the board or they don’t like the association documents," Ekmark said. "If you solve those two issues, you solve 99 percent of the problems and you don’t need government micromanaging all of these little issues."
New HOA laws
New laws affecting homeowners associations:
HB2177: Requires board meetings to be open to all members or their representatives, and creates a right to address the board at appropriate times. Also requires financial records and most other records to be available for inspection by members.
HB2374: Limits the use of voting proxies to only those spelled out in writing by the member approving the proxy.
HB2377: Allows a homeowner to challenge fines of more than $250 before a justice of the peace instead of filing suit in Superior Court.
HB2379: Requires associations to conduct a financial review or audit of its accounts within six months after a fiscal year ends, and to make that review available to association members.
HB2380: New members must sign a form that says their contract with the association includes waiving the state homestead exemption so liens can be placed on their property for failure to pay dues or fines.
HB2381: Requires board members to declare a conflict of interest before voting on any issue that could financially benefit them or their families.
HB2402: Forbids foreclosure on homes and condominiums for unpaid fines levied by an association. Liens can be filed, but fines, interest and legal fees are paid when the property is sold. Also requires a court judgment before foreclosure on liens for unpaid membership or assessments.
HB2478: Ended the ability of associations to forbid any display of political signs; went into effect July 4.
HB2492: Overrides any parking restrictions to allow public safety vehicles to be parked on streets and driveways.
SB1105: Changes the definition of a "common area" to apply when association membership is offered to all residential property owners in a development, instead of only when such membership is mandatory. Property taxes on "common areas" are substantially discounted.
SB1125: Requires associations to file contact information with a county recorder’s office, and to update the listing within 90 days of any changes.
SB1137: Allows any member to file a court challenge against the board. Prior law required at least 50 members or 10 percent of the total membership to join in a challenge.
Source: Arizona Legislature
Other laws that go into effect Wednesday:
HB2116: Provides law enforcement with new tools for cracking down on identity theft and forbids all use of Social Security numbers as account identification by 2009.
HB2209: Classifies recording a film being shown in a movie theater as a Class 1 misdemeanor.
HB2277: Requires state agencies to make every effort to use waterless urinals in new buildings.
HB2368: Increases the homestead exemption from $100,000 to $150,000.
HB2557: Requires more disclosure and better documentation when family members authorize organ and tissue donations.
HB2570: Allows liquor to be sold until 2 a.m.
HB2573: Makes stealing a pet to train for dog fighting a Class 6 felony.
HB2680: Grants great-grandparents a legal right to adopt.
SB1004: Increases the property tax exemption limit from $100,000 to $200,000 for widows, widowers and disabled people. The exemption is worth $3,000.
SB1127: Makes impersonating a peace officer a Class 6 felony.
SB1222: Requires judges to explain the rights of crime victims before the start of legal proceedings each day.
SB1239: Allows surviving spouses of deceased disabled veterans to seek exemption from the state vehicle license tax until the spouse remarries or dies.
SB1269: Requires most state agencies to provide a summary list when refusing to release public records.
SB1335: Makes it a Class 3 felony to marry a minor or to enter into a relationship that resembles marriage when the adult is already married to someone else.
Source: Arizona Legislature