Assigned to GOV                                                                                                        AS PASSED BY THE SENATE

ARIZONA STATE SENATE

Forty-seventh Legislature, Second Regular Session

AMENDED

FACT SHEET FOR H.B. 2824

homeowners’ associations; condominiums; hearings

Purpose

            Grants an administrative law judge jurisdiction over disputes between homeowners’ associations (HOA) and HOA members. 

Background

            An HOA is a common interest organization to which all the owners of lots in a planned community or owners of units in a condominium must belong.  The four defining characteristics of an HOA are: 1) all owners are automatically members; 2) governing documents create mutual obligations; 3) mandatory fees or assessments are generally levied against owners and used for the operation of the association; and 4) owners share a property interest in the community.

            The Office of Administrative Hearings (OAH) through administrative law judges (ALJ) conduct administrative hearings regarding actions of state regulatory agencies, boards and commissions. In addition to hearing appealable agency actions and contested cases, ALJs are authorized to adjudicate complaints regarding and ensure compliance with the Arizona Mobile Home Parks Residential Landlord and Tenant Act (Act).  A person subject to the Act may petition the Department of Building and Fire Safety (DBFS) for a hearing concerning violations of the Act by filing a petition with DBFS and paying a $50 filing fee.  DBFS must mail a copy of the petition to the respondent, who must provide a response within ten days as to why the petition should be dismissed. After receiving the response, the DBFS is required to review the petition for hearing and if justified, refer the petition to OAH.  The ALJ may order any party to abide by the statute and may level a civil penalty on the basis of each violation.  

            The legislation authorizes the Director of DBFS to set a filing fee to reimburse the costs of OAH to conduct the hearings and offset the administrative costs incurred by DBFS.

Provisions

1. Establishes the Condominium and Planned Community Hearing Office Fund (Fund), administered by the Director of DBFS, to be used to reimburse the actual costs of the OAH for conducting hearings regarding HOA disputes and remaining monies may be used to offset the DBFS’s costs for administering cases filed.  Monies are continuously appropriated.

2. Grants DBFS’s administrative law judge jurisdiction to adjudicate complaints regarding and ensure compliance with HOA statutes and HOA documents.

3. Allows an HOA or an HOA member to petition DBFS for a hearing concerning violations of the HOA’s community documents or HOA statutes regarding a dispute between the HOA member and the HOA. 

4. Requires the petitioner to file a petition with DBFS and pay a nonrefundable filing fee in an amount to be established by DBFS to be deposited in the Fund.

5. Specifies that DBFS does not have jurisdiction to hear: a) any dispute between owners to which the HOA is not a party; b) any dispute in an HOA that provides an arbitration or mediation process for resolution, except arbitration that is not completed within 45 days after receipt of the complaint; c) any dispute that arises during the period of declarant control; and d) any dispute regarding construction defects.

6. Allows the respondent 20 days rather than 10 days to respond to the complaint.

7. Declares an order issued by the ALJ in an action regarding an HOA final and not subject to a request for rehearing.

8. Specifies that this act does not limit the ability of the courts to hear and adjudicate HOA matters.

9. Requires the Joint Legislative Budget Committee, by December 1, 2007, to review and make recommendations to the Legislature regarding the filing fees charged to parties filing for an administrative hearing regarding HOA disputes to ensure the hearing officer program is fiscally sound and self-supporting.

10. Requires the DBFS Director to issue a default decision for failure of the respondent to answer the complaint rather than the ALJ proceeding with a default hearing.  

11. Allows a contractor of the HOA to represent the HOA in the administrative hearing.

12. Allows an ALJ to impose civil penalties regarding the Arizona Mobile Home Parks Residential Landlord and Tenant Act and caps the penalty at $500.

13. Makes technical and conforming changes.

14. Becomes effective on the general effective date.

Amendments Adopted by the Government Committee

· Exempts HOA’s under declarant control and issues regarding construction defects from the hearing process.

Amendments Adopted by Committee of the Whole

1. Increases the amount of time the respondent has to respond to the petition for a hearing from 10 days to 20 days.

2. Allows a contractor of the HOA to represent the HOA in the hearing.

3. Exempts HOAs that provide a mediation process from the administrative hearing process and increases the arbitration and mediation completion timeline from 30 days to 45 days to qualify for the exemption.

4. Caps the civil penalty for Arizona Mobile Home Parks Residential Landlord and Tenant Act violations at $500 and replaces the $50 filing fee for Act complaints with a fee in an amount to be set by DBFS.

House Action Senate Action

JUD                 2/16/06   DPA      9-0-0-0                   GOV               3/30/06     DPA     5-0-1-0

FMPR             2/15/06   W/D                                     APPROP         4/18/06     W/D

3^rd Read           3/15/06                 53-1-5-0-1              3^rd Read           5/3/06                    28-1-1-0

Prepared by Senate Research

May 18, 2006

NS/jas