Homeowner Associations or HOAs are becoming more prevalent in Arizona every year. The vast majority of new residential development is governed by an HOA. Spurred by homeowners’ rights groups, legislators, and attorneys, new laws are created every year that provide new or modified rights and remedies for homeowners living in an HOA. Unfortunately, most homeowners are not aware of many of these rights.
HOAs fall into one of two categories: 1) Condominiums, in which the homeowners share proportionally in the ownership of the common areas, or 2) Planned Communities, in which the common area is owned by the HOA itself. This distinction is important because it determines which state laws apply to the HOA and its homeowners.
The other factor in determining homeowner rights is the HOA’s governing documents. This includes the Articles of Incorporation, Bylaws, and perhaps most importantly the Declaration of Covenants, Conditions and Restrictions (referred to as the Declaration or CC&Rs). The HOA board of directors may also adopt rules that interpret and carry out the Declaration or Bylaws. These governing documents are the specific regulations that apply to your community and often include restrictions on parking, pets, landscaping requirements, payment of HOA assessments, etc. In most cases, if there is a conflict between the HOA’s governing documents and state law, the state law will trump.
The following topics generally focus on planned community law, but most principles will apply to condominiums as well.
Assessments or Dues
Homeowners must pay the assessments of the HOA on a monthly, quarterly or annual basis, as the case may be. However, the following general principles apply:
1. Any monies paid by the homeowner must first be applied to the principal balance of the assessments and then to late charges, collection fees, or other unpaid penalties.
2. Upon written request, your HOA must furnish a written statement setting forth any unpaid assessments on your property. The HOA must provide this statement within 15 days of your request.
3. The HOA’s lien for assessments, late fees, and reasonable collection fees may be foreclosed in the same manner as a mortgage on real estate. But the HOA can only foreclose on your home if you are at least one year overdue on assessments, or if you owe $1,200 or more, excluding reasonable collection fees, attorney fees and late fees incurred.
If you violate a rule of the HOA, your HOA may threaten to fine you. Unlike assessments, fines may no longer form the basis of a foreclosure action. The only way the HOA can collect fines from you is if you voluntarily pay them, or if the HOA files a lawsuit against you to collect them.
Under Arizona law, an HOA may not issue a fine until it first offers you a hearing before the board of directors. If the HOA fails to provide you an opportunity for a hearing before the fine is imposed, the fine is illegal and not enforceable.
Records, Meeting Minutes, Accounting
As a homeowner, you have the right to view all records, books, meeting minutes, etc. of the HOA. Upon your written request specifying which records you wish to view, the HOA must provide you access to the records within 10 business days. If you do not wish to view the documents on site, you may also request copies of specific documents. The HOA must provide the copies within 10 business days and may not charge you more than 15 cents per page. There are a few exceptions to this law, such as attorney-client privileged material, but the exceptions are rare.
Open Meetings of the Board
In general, all meetings of the board of directors must be open to all members of the HOA. Notice of the meetings must be provided in a reasonable manner at least 48 hours in advance of the meeting. A “meeting” can occur anytime two or more board members discuss HOA business or issues.
There are 4 very specific exceptions to the open meeting requirement that involve discussion of the following topics:
1. Legal advice from an attorney for the board or the HOA.
2. Pending or contemplated litigation.
3. Personal, health, or financial information about or against an individual member of the HOA, an employee of the HOA, or an employee of a contractor of the HOA.
4. Matters relating to the job performance of, compensation of, health records of, or specific complaints against an employee of the HOA or an employee of a contractor of the HOA who works under the direction of the HOA.
Unless one of these exceptions applies, your board should be holding open meetings. The board is also required to allow a reasonable number of speakers on either side of an issue.
New Protections for Homeowners
Recently, the Arizona legislature adopted laws that prevent an HOA from banning “for sale” signs or solar panels. There are a few minor exceptions to these rules, but generally the HOA cannot interfere in these areas.
These are only some of the many rights you have as a homeowner within an Arizona HOA. As always, this article is not legal advice and cannot substitute for the advice of an Arizona licensed attorney.