2019 ARIZONA LEGISLATIVE UPDATE | Krupnik & Speas, LLC

All of the laws identified below become effective August 27, 2019 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 2230 – Amending Sections 12-1574 and 12-1577, Arizona Revised Statutes; Relating to Garnishments.

This bill simplified the process for serving garnishments to allow service by certified mail, return receipt requested. This applies both to service on garnishees and to service on financial institutions.

HB 2672 – Amending Sections 9-500.39 and 11-269.17 and adding Sections 42-2001, 42-2003, and 42-5042; Relating to Vacation Rentals.

This bill gives the cities and towns some authority to restrict the use or regulate vacation rentals or short-term rentals. The bill added provisions allowing cities and towns to regulate short-term rentals for the following purposes (in addition to their present authority to regulate):

Requiring the owner of a vacation rental or short-term rental to provide the city or town with contact information for the owner or the owner’ designee who is responsible for responding to complaints in a timely manner in person, over the phone or by e-mail at any time of day before offering for rent or renting the vacation rental or short-term rental;

Within 30 days after a verified violation, a city or town shall notify the Department of Revenue and the owner of the vacation rental or short-term rental of the verified violation of the city’s or town’s applicable laws, regulations or ordinances and, if the owner of the vacation rental or short-term rental received the verified violation, whether the city or town imposed a civil penalty on the owner of the vacation rental or short-term rental and the amount of the civil penalty, if assessed. A “verified violation” means a finding of guilt or civil responsibility for violating any state law or local ordinance relating to a purpose prescribed in subsection B (the reasons that the city can have ordinances impacting short-term rentals), or subsection F (prohibiting non-residential uses of shortterm rentals).

If the owner of the vacation rental or short-term rental has provided contact information to the city or town and if the city or town issues a citation for a violation of the city’s or town’s applicable laws, the city or town shall make a reasonable attempt to notify the owner or the owner’s designee of the citation within 7 business days after the citation is issued.

The law added a restriction preventing a vacation rental or short-term rental from being used for nonresidential uses, including a special event that would otherwise require a permit or license pursuant to a city or town ordinance or a state law or rule or for a retail, restaurant, banquet space or other similar use.

The same laws apply to counties.

An online lodging operator may not offer for rent or rent a lodging accommodation without a current transaction privilege license. The online lodging operator shall list the transaction privilege tax license number on each advertisement for each lodging accommodation the lodging operator maintains, including online lodging marketplace postings.

The law added penalties for failing to have a transaction privilege tax license and failing to list it on the advertisement, and for verified violations

HB 2687 – Amending Section 33-1228, Arizona Revised Statutes; Relating to Condominiums.

This bill only affects a condominium association if they plan to terminate the condominium. The
bill adds certain notification requirements and changes the appraisal process.

SB 1033 – Amending Section 42-18054, Arizona Revised Statutes; Relating to Property Tax

This bill now requires the county assessor to mail a copy of the property tax statement to the
mortgagor (i.e. the owner of the property) if the property has a mortgage. The assessor also must
mail a copy of the property tax statement to the mortgagee upon the request of the mortgagee.

SB 1094 – Amending Sections 33-1802 and 33-1803, Arizona Revised Statutes; Relating to Planned Communities

This bill changed the definition of “planned community”. The bill states that, for a community to fit the definition of “planned community”, the declaration must expressly state both that the owners of separately owned lots, parcels or units are mandatory members and that the owners are required to pay assessments to the association for that purpose. The bill also added an exception, stating that “planned community” does not apply to a real estate development that is not managed or maintained by an association.

The bill also stated that an “association” does not include a nonprofit or unincorporated association of owners created before January 1, 1974 that does not have the authority to enforce covenants, conditions and restrictions against the property unless the members vote to become subject to the laws governing Planned Communities. An association that has the power under recorded covenants to assess members can choose to become subject to the laws governing Planned Communities by obtaining the written approval of a majority of all the owners and recording a notice of election. If such an election is made, it can be rescinded in the future by the same process.

SB 1271 – Amending Sections 12-1362 and 12-1363 and adding Sections 12-1364 and 32-1159.01, Arizona Revised Statutes; Relating to Purchaser Dwelling Actions

Many changes were made to the laws regarding purchaser dwelling actions (i.e. causes of actions relating to construction defects). Essentially, the law brings the subcontractors and other construction professionals into the notification process and into the same lawsuit against the general contractor or developer. The law also sets forth a two-phase process for the trial. The first phase is for the purchaser (i.e. association) to prove there are construction defects. The second phase is for the seller (i.e. general contractor or developer) to prove the liability of any third-party defendant (i.e. any construction professional or other party added to the suit by the developer).

The bill also gives the construction professional the right to inspect, the right to test, and the right to repair the premises.

The bill also sets forth a statutory process to determine whether a party is entitled to attorney’s fees and expert fees.

SB 1397 – Amending many Sections of Arizona Revised Statutes; Relating to Contractors

This bill made many changes to the Registrar of Contractors (“ROC”) and the regulation of contractors. This bill also made changes to the Prompt Pay Act.

Changes were made to who needs to carry a license. A provision was added requiring a person applying for a residential contractor’s license or the renewal of a residential contractor license to pay an assessment of up to $600 to go into the Residential Contractor’s Recovery Fund (“RCR Fund”). An award from the RCR Fund is limited to residential real properties for work performed by licensed residential contractors. The maximum individual award is $30,000. An action for a judgment that may ultimately result in an order for collection from the RCR Fund cannot be brought more than two years after the date of the commission of the act by the contractor that caused the injury or from the date of occupancy.

The ROC is authorized to issue cease and desist orders or a citation for contracting practices or transactions that constitute a violation of statute or rule.

SB 1531 – Amending Sections 33-1256 and 33-1807, Arizona Revised Statutes, Relating to Condominiums and Planned Communities

This bill clarified certain provisions in the law and added some new requirements:

Clarified that determining an owner’s delinquency for the purpose of foreclosure is based on the amount owed on the date the action is filed.
Changed the expiration of an assessment lien from three years to six years.
Added a requirement that, for a delinquent account for unpaid assessments or for charges related to unpaid assessments, the association shall provide the following written notice to the unit owner at the unit owner’s address as provided to the association at least thirty (30) days before authorizing an attorney, or a collection agency that is not acting as the association’s managing agent, to begin collection activity on behalf of the association:

YOUR ACCOUNT IS DELINQUENT. IF YOU DO NOT BRING YOUR ACCOUNT CURRENT OR MAKE ARRANGEMENTS THAT ARE APPROVED BY THE ASSOCIATION TO BRING YOUR ACCOUNT CURRENT WITHIN THIRTY DAYS AFTER THE DATE OF THIS NOTICE, YOUR ACCOUNT WILL BE TURNED OVER FOR FURTHER COLLECTION PROCEEDINGS. SUCH COLLECTION PROCEEDINGS COULD INCLUDE BRINGING A FORECLOSURE ACTION AGAINST YOUR PROPERTY.

The notice shall be in bold-faced type or all capital letters and shall include the contact information for the person that the unit owner may contact to discuss payment. The notice will be sent via certified mail, return receipt requested. The notice can be included with other correspondence sent to the owner regarding the owner’s delinquent account.
Added a requirement that, beginning January 1, 2020, except for condominiums and planned with less than 50 units that do not contract with a third party to perform management services on behalf of the association, the association shall provide a statement of account in lieu of a periodic payment book in the same frequency that assessments are provided for in the declaration. The statement shall include the current account balance due and the immediately preceding ledger history.
1. If the association offers the statement of account by electronic means, an owner may opt to receive the statement electronically.
2. The association may stop providing any further statements of account to a unit owner if collection activity begins by an attorney, or a collection agency that is not acting as the association’s managing agent.
3. After collection activity begins, an owner may request statements of account by written request to the attorney or collection agency.
4. The statement provided by the attorney or collection agency shall include all amounts due and owing to resolve the delinquency through the date set forth in the statement, including attorney fees and costs, regardless of whether the amounts have been reduced to judgment.
5. An agent for the association may collect on behalf of the association directly from a unit owner the assessments and other amounts owed by cash or check, by mailed or hand-delivered bank drafts, checks, cashier’s checks or money orders, by credit, charge or debit card or other electronic means. For any form of payment other than for cash or mailed or hand-delivered bank drafts, checks, cashier’s checks or money orders, the agent may charge a convenience fee to the unit owner that is approximately the amount charged to the agent by a third-party service provider.

The information contained in this 2019 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.