New Arizona Legislation Affecting HOAs

The 2014 Arizona Legislative Session (51st Legislature, First Regular Session) adjourned and left us with seven bills pertaining to planned communities and condominiums that were signed into law by the Governor. This year 17 bills were introduced that would affect HOA governance. One of the bills included changes to seven statutes.

This article reviews the changes in the law that pertain to an association’s powers to control rentals. The new statute applies to rentals in planned communities and in condominiums and becomes effective on July 27, 2014. You may remember that a law addressing rentals in Arizona community associations was passed last year with many of the same provisions that will be discussed in this article. Last year’s rental property law was declared invalid and, therefore, went through the legislative process again with a few changes.

As a threshold, the statute states that an association cannot prohibit a dwelling unit owner  from renting his/her unit unless there is a provision in the Declaration of Covenants, Conditions and Restrictions restricting rentals. In addition, a landlord/owner must abide by any time period restrictions in the Declaration that pertain to rentals.

The statute provides that a landlord/owner may designate in writing a third party (e.g., a residential property manager) to act as the owner’s agent with respect to all Association matters relating to the rental unit, except the owner’s right to vote and to serve on the Board of Directors. The association is authorized to deal with the owner’s third party agent on all association matters.

There is a wide variety of requirements that different Arizona homeowners associations have imposed on landlord/owners prior to this new legislation. Now, an association CAN require its receipt of ONLY the following information:

  • Tenant’s name
  • Contact information for adult tenants
  • Duration of lease
  • Vehicle(s) description
  • License plate(s)

An association CANNOT require the landlord to produce any of the following:

  • Rental application
  • Credit report
  • Lease agreement
  • Personal information (except for above-enumerated information).

In an age-restricted community, the association can require the production of a government-issued identification document that bears a photograph and confirms that the tenant meets the age restriction requirements.

The association or its managing agent may charge a fee of not more than $25.00 to process the owner’s required disclosures for a new tenant. (This fee does not apply to lease renewals.) Neither the association nor its managing agent can impose any other fee or requirement on a rental unit that is different from those imposed on an owner-occupied unit. In addition, the association cannot prohibit absentee owners from serving on the Board, regardless of any provision to the contrary in the Bylaws.

The association or its managing agent cannot charge more than $15.00 as a penalty for incomplete or late information from a landlord/owner. If the association or managing agent charges a fee, assessment, penalty or other charge that is not authorized by this statute, the requirement to pay the $25.00 fee and to provide information to the association is nullified.

Many associations have recommended or required that landlord/owners use a crime free lease addendum or follow other facets of a crime free program. The new law states that an association cannot require a tenant to sign a waiver or other document limiting the tenant’s due process rights as a condition of the tenant’s occupancy of the rental unit. However, the law also states that there is no prohibition on the landlord/owner requiring a crime free lease addendum.

In addition, an association is not prohibited from enforcing sex offender occupancy restrictions in CC&Rs if the registered sex offender is classified as Level 2 or Level 3. (Before an association board considers recommending to the members such a restriction, consult with your Association’s attorney.) And, finally, the new law adds community associations to the list of entities that can bring an action in a County superior court against the owner, owner’s managing agent or any other party responsible for the property to abate and prevent a “nuisance”, which is defined in A.R.S. §12-991 as “residential property that is regularly used in the commission of a crime”. This gives a homeowners association another tool to deal with a rental unit that may be causing disruption in the community.

Written by: Carolyn B. Goldschmidt
June 2014