2016 Changes in the Law

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1 Jeffrey B. Corben Chad M. Gallacher Penny L. Koepke Charles E. Maxwell Michael J. McGirr Brian W. Morgan* W. William Nikolaus Samuel C. Richardson Charles B. Sellers Mark W. Waldron LAW OFFICES OF Pierpont Commerce Center 4854 East Baseline Road Suite 104 Mesa, Arizona Telephone: Facsimile: *Also admitted in Utah 2016 Changes in the Law The following changes will become effective August 6, ENFORCEMENT GRACE PERIOD AND ALJ NOTICE (CONDOMINIUMS AND PLANNED COMMUNITIES): Grace period for enforcement is extended and Notice about ALJ Process must now be provided. HB 2106 amends A.R.S (B) and (C) to extend the period of time in which a homeowner may respond to a violation notice in writing via certified mail from 10 business days to 21 calendar days after the date of the notice. S.B amends A.R.S (D) and (E) [violation notices about a condition of the property in violation of the governing documents] to require an association to provide written notice of the owner s option to petition for an administrative hearing on the matter in the Department of Fire, Building and Life Safety pursuant to A.R.S This is in addition to the other information that must be provided. 2. ALJ HOA DISPUTE PROCESS TRANSFERRED TO DEPARTMENT OF REAL ESTATE (CONDOMINIUMS AND PLANNED COMMUNITIES: HOA Dispute Process is Transferred from the Department of Fire, Building and Life Safety to the Department of Real Estate. SB 1530 dissolves the Department of Fire, Building and Life Safety and transfers the functions of HOA disputes to the Department of Real Estate. There will be no practical change to the process. An AV Rated Law Firm Devoted Exclusively to Community Association Law and Litigation.

2 P A G E 2 3. ONLINE VOTING; BALLOTS AND RETENTION OF VOTING MATERIALS (NON-PROFIT CORPORATIONS, PLANNED COMMUNITIES AND CONDOMINIUMS) New procedures and requirements for online voting, ballots, secret ballots, and retention of voting material. I. HB 2592 amends A.R.S by adding requirements and procedures for using online voting: A meeting notice shall include a reasonable procedure by which a member may obtain and cast a ballot by a form of delivery other than casting at a meeting, including U.S. mail, fax and by electronic means. After a notice complying with this requirement is sent to all owners, a written ballot may be delivered through an online voting system that does all of the following: 1. Authenticates the member s identity. 2. Authenticates the validity of each electronic vote to ensure the vote is not altered in transit. 3. Transmits a receipt to each member who casts a vote. 4. Stores electronic votes for recount, inspection and review purposes. II. SB 1498 amends A.R.S (C) and (A): A. Completed ballots and envelopes, and any related materials shall contain the name, address and either the actual or electronic signature of the person voting. a. Exception Secret Ballots: If governing documents allow secret ballots, only the envelope or any non-ballot related materials (i.e., sign in sheet) shall contain the name, address and either the actual or electronic signature of the voter. B. Ballots, envelopes and related materials, including sign-in sheets, must be retained in electronic or paper format and be made available for inspection for at least one year after completion of the election. 4. VACATION AND SHORT-TERM RENTALS; ONLINE LODGING, TAXATION (PLANNED COMMUNITIES AND CONDOMINIUMS) Cities and Counties can only regulate, but may not prohibit short-term and vacation rentals. This does not necessarily prevent community associations from prohibiting or restricting short term rentals if they are restricted or prohibited in the declaration. SB 1350 establishes regulations and a tax scheme for online lodging, vacation and short-term rental operations (i.e., VRBO, Airbnb) by amending A.R.S , , , 42-

3 P A G E , , , and , and adding A.R.S , , , , and In summary: A. A city, town or county may not prohibit or restrict vacation or short-term rentals. A municipality or county may regulate vacation and short term rentals for the following purposes: a. Protection of public health and safety. b. Adopting and enforcing residential use and zoning ordinances (i.e. noise or nuisance issues). c. Limiting or prohibiting the housing of sex offenders, operating or maintaining a structured sober living home, selling of illegal drugs, liquor control or adult orientated businesses. B. Allows an online lodging marketplace to obtain licenses for the payment of taxes to the state, and to begin paying taxes and keeping records of taxes paid. C. Restricts the Arizona Department of Revenue from disclosing tax information of an online lodging marketplace to any party without first having the permission of that the online lodging marketplace. 5. REMOVAL AND FILLING VACANCIES OF REMOVED DIRECTORS (PLANNED COMMUNITIES AND CONDOMINIUMS) Procedures in statutes must be followed for all director removal actions, but procedures in governing documents must be followed for filling the vacancies of removed directors. Directors removed are ineligible to serve on board until remainder of term expires. SB 1496 amends A.R.S and : A. Removal Meeting: Meetings for voting on removal of non-declarant appointed directors must comply with all the procedures in the statute, notwithstanding any provisions in the governing documents to the contrary. B. Filling Vacancies: 1. Removal of at least 1, but fewer than a majority of directors. Vacancies filled by following procedures in governing documents. 2. Removal of a majority of directors. If removed pursuant to the removal statute, or if the governing documents do not provide method for filling board vacancies, the association shall hold an election for the removed directors at a separate meeting not more than 30 days after the recall meeting.

4 P A G E 4 C. Removed Director Ineligible. A director removed pursuant to the statute is ineligible to serve on the board until the expiration of the removed director s term or a longer period provided in the governing documents. 6. LATE FEES (PLANNED COMMUNITIES AND CONDOMINIUMS) Requires notice of the delinquency be provided before late charges can be imposed. SB 1498 amends A.R.S (A)(11) and (A), to provide that late charges may be imposed only after the association has provided notice that the assessment is delinquent or provided notice that the assessment is considered overdue after a certain date. 7. PROCEDURE FOR AMENDING DECLARATIONS (PLANNED COMMUNITIES AND PRIVATE COVENANT, DEED RESTRICTED COMMUNITIES) New procedures for amending declarations and allows non-uniform amendments of declarations. Does not apply to condominium associations. HB 2382 amends A.R.S and by adding several provisions including: A. Except during the period of declarant control, or if during declarant control with the written consent of the declarant in each instance, the following apply to an amendment to a declaration: 1. The declaration may be amended by the association, or if there is no association or board, by the owners, by the affirmative vote or written consent of the requisite number of owners or eligible voters, and the assent of any other individuals or entities as specified in the declaration. 2. An amendment to the declaration may apply to fewer than all of the lots or less than all of the property if approved by both: a. The affirmative vote or written consent of the requisite number of owners or eligible voters and the assent of any other individuals or entities, as specified in the declaration; and b. The amendment receives the affirmative vote or written consent of all of the owners of lots or properties to which the amendment applies. 3. A written instrument setting forth the amendment must be recorded within 30 days of the amendment s adoption. 4. An amendment is effective immediately following the amendment s recording, even if the declaration provides for periodic renewal.

5 P A G E 5 8. ARCHITECTURAL DESIGN APPROVAL (PLANNED COMMUNITIES) HB 2172 amends A.R.S by adding a provision that states an association may not unreasonably withhold approval of a construction project s designs, plans and amendments. 9. Potluck Regulation Exemptions (Condominiums and Planned Communities): Potlucks are now allowed in community associations. HB 2341 amends A.R.S by broadening the food and drink rule exemption to include potlucks not conducted at the workplace. Previously, only noncommercial social event(s) that take place at a workplace qualified as exempt. The summary contained herein is for reference only, is general in nature, and provided as a courtesy of Maxwell & Morgan, P.C. With respect to specific questions or legal issues, you should seek our advice and assistance.