All of the laws identified below become effective August 6, 2016 unless otherwise noted.

The following is a summary of bills that were passed by the Arizona legislature this legislative session that could have some impact on, or be of interest to, planned community associations and condominium associations. This information only provides a summary of the bills and the changes to the laws. To determine all changes to the law based on each bill, please refer to the applicable bill.

HB 2341 – Amending Section 36-136, Arizona Revised Statutes; Relating to the Regulation of Food.

This bill eliminated the requirement that a potluck take place at a workplace to be exempt from specified rules governing food or drink safety. In other words, if potlucks occur within an association, those potlucks are now exempt from rules adopted by the Director of the Department of Health Services that govern food or drink safety. However, this law does not protect the association from any liability that may occur due to a person getting sick after eating at a potluck hosted by the association.

HB 2106 – homeowners’ associations; enforcement grace period (amends A.R.S. 33-1242 and 33-1803).

This bill extends the period of time that owners have to contest a notice of violation from 10 business days to 21 calendar days.

SB 1498 – homeowners’ associations; fees; hearings; elections (amends A.R.S. 33-1242, 33-1250, 33-1803, and 33-1812).

This bill made a number of changes to the Planned Community Act and Condominium Act:

1. Specifies that any charge for late payment of assessments may only be imposed by an association after providing actual notification of overdue assessments or notice that assessments are overdue after a certain date.
2. As part of the enforcement process, requires an association to advise the owner of their right to petition for an administrative hearing on the outstanding violation to the Department of Fire, Building and Life Safety. However, because of another bill that was passed by the legislature (SB 1530), the Department of Fire, Building and Life Safety will no longer be hearing matters relating to condominiums and planned communities. Rather, that responsibility has been transferred to the Arizona Real Estate Department. Therefore, the language will actually need to advise owners of their rights to petition for an administrative hearing with the Arizona Department of Real Estate.
3. Sets forth new requirements for voting:
   1. Stipulates that, whenever ballots are used, the completed ballot and envelope and any
      related materials must contain the name, address, and either the actual or electronic
      signature of the person voting. However, if the governing documents permit secret
      ballots, only the envelope or any non-ballot-related materials shall contain the name,
      address, and either the actual or electronic signature of the voter.
   2. Requires that ballot, envelopes, and related materials, including sign-in sheets if used,
      shall be retained in electronic or paper format and made available for unit owner
      inspection for at least one year after completion of the election.

HB 2592 – nonprofit corporations; electronic voting (amends A.R.S. 10-3708).

This bill amended the nonprofit corporation act to allow for written ballots by electronic voting. After providing notice that a vote shall be conducted by electronic means, and including a reasonable procedure by which a member may obtain and cast a ballot through some other form of delivery (including mail and fax transmission) the corporation may deliver a written ballot 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 that the vote is not altered in transit.
3. Transmits a receipt to each member who casts an electronic vote.
4. Stores electronic votes for recount, inspection and review purposes.

SB 1496 – homeowners’ associations; director removal (amends A.R.S. 33-1243 and 33-1813).

This bill addressed the process for replacing board members who are removed by the members pursuant to the statutory process:

1. If at least one but less than a majority of the members of the board are removed, the vacancies shall be filled as provided in the association’s governing documents.
2. If a majority of the board members are removed, or if the association’s governing documents do not provide a method for filling board vacancies, the association shall hold an election for the replacement of the removed directors at a separate meeting of the members of the association. This meeting to elect replacement directors must be held within 30 days after the meeting at which the board members were removed.
3. A board member who is removed pursuant to the statutory process is not eligible to serve on the board again until after the expiration of the removed board member’s term of office, unless the association’s governing documents provide for a longer period of ineligibility.

HB 2382 – property; declaration amendment; procedure (amends A.R.S. 33-440 and 33-1817).

This law applies to planned communities and to communities governed by deed restrictions that are neither a planned community nor a condominium.

The law now requires any amendment adopted by the association or the members to be recorded with the county recorder within 30 days after adoption.

This bill added a process that will allow some associations to more easily amend their declarations. The law now allows for any amendment to be effective immediately upon recording, even if the declaration only allows for amendments to occur on a periodic basis (such as every 5 or 10 years).

This bill also allows the possibility of a non-uniform amendment (which is an amendment that applies to fewer than all of the lots or less than all of the property subject to the declaration) if both of the following requirements are met:

1. The amendment receives the affirmative vote or written consent of the number of owners or eligible voters specified in the declaration, including the assent of any individuals or entities that are specified in the declaration.
2. The amendment receives the affirmative vote or written consent of all of the owners of the lots or property to which the amendment applies.

HB 2172 – planned communities; architectural designs; approval (amends A.R.S. 33-1817).

This bill added the following statement to the law regarding architectural approval: “Approval of a construction project’s architectural designs, plans and amendments shall not unreasonably be withheld.”

HB 2114 – relating to employment relationships (amends A.R.S. 23-1601 and 1602).

This law sets forth language to be included in a Declaration of Independent Business Status. Compliance with this provision of the law creates a rebuttable presumptions of an independent contractor relationship between the independent contractor and the party within whom the independent contractor contracts.

HB 2447 – database; posting; requirements (amends sections of the nonprofit corporation act and other provisions). This law does not become effective until January 1, 2017.

This law directs to the Arizona Corporation Commission (“ACC”) to create and maintain a database for documents filed from an entity known to do business in a population of more than 800,000. The documents that must be included in the database (that affects associations) are the articles of incorporation, dissolution, amendment, reinstatement, reorganization, or merger of a nonprofit corporation. Also of interest are these same documents for corporations, application or withdrawal of an application of a foreign corporation to transact business, and formation, amendment or merger of a LLC.

The law further requires an entity within 60 days of the commission approving the filing to either (a) publish the copy of the documents the appropriate number of times and provide an affidavit showing the publication with the commission; or (b) the commission will input the information regarding the approval into the database.

HB 2555 – judgment liens; recorded information statement.

This bill clarifies the requirements for the recording of a judgment for it to become a lien. The law now states that a judgment requiring the payment of money does not become a lien on real property until a separate information statement (containing the information required by law) is attached to the judgment being recorded. This requirement does not apply to any judgment obtained by the State of Arizona.

SB 1350 – establishes regulations for online lodging; vacation and short-term rental options. This law does not become effective until January 1, 2017.

This bill does not directly apply to planned communities or condominium associations. Rather, the bill regulates cities, towns, and counties’ ability to prohibit short-term rentals. The bill does not overrule minimum lease terms in an association’s declaration.

The information contained in this 2016 ARIZONA LEGISLATIVE UPDATE is for informational purposes only and is not specific legal advice or a substitute for specific legal counsel. Readers should not act upon this information without seeking professional counsel.