HB2648 - 562R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 33-1202, Arizona Revised Statutes, is amended to read:

START_STATUTE33-1202. Definitions

In the condominium documents, unless specifically provided otherwise or the context otherwise requires, and in this chapter:

1. "Affiliate of a declarant" means any person who controls, is controlled by or is under common control with a declarant.

2. "Allocated interests" means the undivided interests in the common elements, the common expense liability and votes in the association allocated to each unit.

3. "Articles of incorporation" means the instrument by which an incorporated association or unit owners' association is formed and organized under this state's corporate statutes.

4. "Assessment" means the share of monies that is required for the payment of common EXPENSES and that the association assesses periodically against each unit.

4. 5. "Association" or "unit owners' association" means the unit owners' association organized under section 33-1241.

5. 6. "Board of directors" means the body, regardless of its name, designated in the declaration and given general management powers to act on behalf of the association.

6. 7. "Bylaws" means the bylaws required by section 33-1246.

7. 8. "Common elements" means all portions of a condominium other than the units.

8. 9. "Common expense liability" means the liability for common expenses allocated to each unit pursuant to section 33-1217.

10. "Common EXPENSE Lien" means the lien for assessments, charges for late payment of assessments if authorized in the DECLARATION, reasonable collection fees and costs incurred or applied by the association and reasonable attorney fees and costs that are incurred with respect to those assessments, if the attorney fees and costs are awarded by a court.

9. 11. "Common expenses" means expenditures made by or financial liabilities of the association, together with any allocations to reserves.

10. 12. "Condominium" means real estate, portions of which are designated for separate ownership and the remainder of which is designated for common ownership solely by the owners of the separate portions. Real estate is not a condominium unless the undivided interests in the common elements are vested in the unit owners.

11. 13. "Condominium documents" means the declaration, bylaws, articles of incorporation, if any, and rules, if any.

12. 14. "Declarant" means any person or group of persons who reserves, is granted or succeeds to any special declarant right.

13. 15. "Declaration" means any instruments, however denominated, that create a condominium and any amendments to those instruments.

14. 16. "Development rights" means any right or combination of rights reserved by or granted to a declarant in the declaration to do any of the following:

(a) Add real estate to a condominium.

(b) Create easements, units, common elements or limited common elements within a condominium.

(d) Withdraw real estate from a condominium.

(e) Make the condominium part of a larger condominium or planned community.

(f) Amend the declaration during any period of declarant control, pursuant to section 33-1243, subsection E, to comply with applicable law or to correct any error or inconsistency in the declaration, if the amendment does not adversely affect the rights of any unit owner.

(g) Amend the declaration during any period of declarant control, pursuant to section 33-1243, subsection E, to comply with the rules or guidelines, in effect from time to time, of any governmental or quasi-governmental entity or federal corporation guaranteeing or insuring mortgage loans or governing transactions involving mortgage instruments.

15. 17. "Identifying number" means a symbol or address that identifies one unit in a condominium.

16. 18. "Leasehold condominium" means a condominium in which all or a portion of the real estate is subject to a lease the expiration or termination of which will terminate the condominium or reduce its size.

17. 19. "Limited common element" means a portion of the common elements specifically designated as a limited common element in the declaration and allocated by the declaration or by operation of section 33-1212, paragraph 2 or 4 for the exclusive use of one or more but fewer than all of the units.

20. "Member EXPENSEs":

(a) means fees, charges, late charges and monetary penalties or interest that are imposed pursuant to section 33-1242, subsection A, paragraphs 10, 11 and 12.

(b) does not INCLUDE any amount that is included in a common EXPENSE lien.

18. 21. "Person" means:

(a) A natural person, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision or agency, or other legal or commercial entity.

(b) In the case of a subdivision trust, as defined in section 6-801, person means the beneficiary of the trust who holds the right to subdivide, develop or sell the real estate rather than the trust or trustee.

19. 22. "Real estate":

(a) Means any legal, equitable, leasehold or other estate or interest in, over or under land, including structures, fixtures and other improvements and interests which by custom, usage or law pass with a conveyance of land though not described in the contract of sale or instrument of conveyance. Real estate

(b) Includes parcels with or without upper or lower boundaries and spaces that may be filled with air or water.

20. 23. "Rules" means the provisions, if any, adopted pursuant to the declaration or bylaws governing maintenance and use of the units and common elements.

21. 24. "Special declarant rights" means any right or combination of rights reserved by or granted to a declarant in the declaration to do any of the following:

(a) Construct improvements provided for in the declaration.

(b) Exercise any development right.

(d) Use easements through the common elements for the purpose of making improvements within the condominium or within real estate which that may be added to the condominium.

(e) Appoint or remove any officer of the association or any board member during any period of declarant control.

22. 25. "Unit" means a portion of the condominium designated for separate ownership or occupancy.

23. 26. "Unit owner" means:

(a) A declarant or other person who owns a unit or, unless otherwise provided in the lease, a lessee of a unit in a leasehold condominium whose lease expires simultaneously with any lease the expiration or termination of which will remove the unit from the condominium but does not include a person having an interest in a unit solely as security for an obligation.

(b) In the case of a contract for conveyance, as defined in section 33-741, of real property, unit owner means the purchaser of the unit. END_STATUTE

Sec. 2. Section 33-1256, Arizona Revised Statutes, is amended to read:

START_STATUTE33-1256. Common expense liens; priority; mechanics' and materialmen's liens; notice; applicability

A. The association has a common expense lien on a unit for any assessment levied against that unit from the time the assessment becomes due. The association's common expense lien for assessments, for charges for late payment of those assessments, for reasonable collection fees and for reasonable attorney fees and costs incurred with respect to those assessments may be foreclosed in the same manner as a mortgage on real estate but may be foreclosed only if the unit owner has been delinquent in the payment of monies secured by the common expense lien, excluding charges for late payment of assessments if authorized in the declaration, reasonable collection fees, and costs incurred or applied by the association and reasonable attorney fees and charges for late payment of and costs incurred with respect to those assessments if awarded by a court, for a period of one year or in the amount of $1,200 or more, whichever occurs first, as determined on the date the action is filed. Fees, charges, late charges, monetary penalties and interest charged pursuant to section 33-1242, subsection A, paragraphs 10, 11 and 12, other than charges for late payment of assessments, The association board of directors shall exercise all reasonable efforts to COMMUNICATE with the unit owner, negotiate reasonable PAYMENT plans or apply any relevant and applicable collection remedies available PURSUANT to title 12, chapter 9 before filing a FORECLOSURE action. member expenses are not enforceable as assessments common expense liens under this section subsection. If an assessment is payable in installments, the full amount of the assessment is a lien from the time the first installment of the assessment becomes due.

B. The association has a lien for fees, charges, late charges, other than charges for late payment of assessments, monetary penalties or interest charged pursuant to section 33-1242, subsection A, paragraphs 10, 11 and 12 member expenses after the entry of a judgment in a civil suit for those fees, charges, late charges, monetary penalties or interest member expenses from a court of competent jurisdiction and the recording of that judgment in the office of the county recorder as otherwise provided by law. The association's lien for monies other than for assessments, for charges for late payment of those assessments, for reasonable collection fees and for reasonable attorney fees and costs incurred with respect to those assessments member expenses may not be foreclosed and is effective only on conveyance of any interest in the real property.

B. C. A common expense lien for assessments, for charges for late payment of those assessments, for reasonable collection fees and for reasonable attorney fees and costs incurred with respect to those assessments under this section is prior to all other liens, interests and encumbrances on a unit except:

1. Liens and encumbrances recorded before the recordation of the declaration.

2. A recorded first mortgage on the unit, a seller's interest in a first contract for sale pursuant to chapter 6, article 3 of this title on the unit recorded prior to before the lien arising pursuant to subsection A of this section or a recorded first deed of trust on the unit.

3. Liens for real estate taxes and other governmental assessments or charges against the unit.

C. D. Subsection B C of this section does not affect the priority of mechanics' or materialmen's liens or the priority of liens for other assessments made by the association. The common expense lien under this section is not subject to chapter 8 of this title.

D. E. Unless the declaration otherwise provides, if two or more associations have common EXPENSE liens for assessments created at any time on the same real estate, those liens have equal priority.

E. F. Recording of the declaration constitutes record notice and perfection of the common expense lien for assessments, for charges for late payment of those assessments, for reasonable collection fees and for reasonable attorney fees and costs incurred with respect to those assessments. Further recordation of any claim of common expense lien for assessments under this section is not required.

F. G. A common expense lien for unpaid assessments is extinguished unless proceedings to enforce the lien are instituted within six years after the full amount of the assessments becomes due.

G. H. This section does not prohibit:

1. Actions to recover sums for which subsection A or B of this section creates a lien.

2. An association from taking a deed in lieu of foreclosure.

H. I. A judgment or decree in any action brought under this section shall may include costs and reasonable attorney fees for the prevailing party.

I. J. The association on written request shall furnish to a lienholder, escrow agent, unit owner or person designated by a unit owner a statement setting forth the amount of any unpaid assessments common expense lien and member expenses against the unit. The statement shall be furnished within ten days after receipt of the request. and The statement is binding on the association, the board of directors and every unit owner if the statement is requested by an escrow agency that is licensed pursuant to title 6, chapter 7. Failure to provide the statement to the escrow agent within the time provided for in this subsection extinguishes any common expense lien for any unpaid assessment then due.

J. K. Notwithstanding any provision in the condominium documents or in any contract between the association and a management company or any other agent of the ASSOCIATION, including any agreement or contract with any attorney, unless the unit owner directs otherwise, all payments received on a unit owner's account shall be applied first to any unpaid assessments, due but not delinquent assessments, unpaid charges for late payment of those assessments if authorized in the declaration, unpaid reasonable collection fees and costs incurred or applied by the association and unpaid attorney fees and costs incurred with respect to those assessments if awarded by a court, in that order, with any remaining amounts applied next to other unpaid fees, charges and monetary penalties or interest and late charges on any of those amounts.

K. L. For a delinquent account for unpaid common expense assessments or for charges related to unpaid assessments liens, 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 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 boldfaced 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 shall be sent by certified mail, return receipt requested, and may be included within other correspondence sent to the unit owner regarding the unit owner's delinquent account.

L. M. Beginning January 1, 2020, Except for condominiums that have fewer than fifty units and 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 to the unit owner with the same frequency that assessments are provided for in the declaration. The statement of account shall include the current account balance due and the immediately preceding ledger history. If the association offers the statement of account by electronic means, a unit owner may opt to receive the statement electronically. 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, regarding that unit owner's unpaid account. After collection activity begins, a unit owner may request statements of account by written request to the attorney or collection agency. Any request by a unit owner for a statement of account after collection activity begins by an attorney or a collection agency that is not acting as the association's managing agent must be fulfilled by the attorney or the collection agency responsible for the collection. The statement of account provided by the attorney or collection agency responsible for the collection shall include all amounts claimed to be owing to resolve the delinquency through the date set forth in the statement, including attorney fees and costs, regardless of whether such amounts have been reduced to judgment.

M. N. 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 by other electronic means. For any form of payment other than for cash or for 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 association may not transfer ownership or control of debt for common expense liens or member expenses.

N. O. This section does not apply to timeshare plans or associations that are subject to chapter 20 of this title. END_STATUTE

Sec. 3. Section 33-1802, Arizona Revised Statutes, is amended to read:

START_STATUTE33-1802. Definitions

In this chapter and in the community documents, unless the context otherwise requires:

1. "Association":

(a) Means a nonprofit corporation or unincorporated association of owners that is created pursuant to a declaration to own and operate portions of a planned community and that has the power under the declaration to assess association members to pay the costs and expenses incurred in the performance of the association's obligations under the declaration. Association

(b) Does not include a nonprofit corporation or unincorporated association of owners that is created or incorporated before January 1, 1974 and that does not have authority to enforce covenants, conditions or restrictions related to the use, occupancy or appearance of the separately owned lots, parcels or units in a real estate development, unless the nonprofit corporation or unincorporated association of owners elects to be subject to this chapter pursuant to section 33-1801, subsection D.

2. "Common EXPENSE lien" means assessments, charges for late payment of assessments if authorized in the DECLARATION, reasonable collection fees and costs incurred or applied by the association and reasonable attorney fees and costs that are incurred with respect to those assessments, if the attorney fees and costs are awarded by a court.

2. 3. "Community documents" means the declaration, bylaws, articles of incorporation, if any, and rules, if any.

3. 4. "Declaration" means any instruments, however denominated, that establish a planned community and any amendment to those instruments.

5. "Member EXPENSEs":

(a) means fees, charges, late charges and monetary penalties or interest.

(b) does not INCLUDE any amount that is included in a common EXPENSE lien.

4. 6. "Planned community":

(a) Means a real estate development that includes real estate owned and operated by or real estate on which an easement to maintain roadways or a covenant to maintain roadways is held by a nonprofit corporation or unincorporated association of owners, that is created for the purpose of managing, maintaining or improving the property and in which the declaration expressly states 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 these purposes. Planned community

(b) Does not include any of the following:

(a) (i) A timeshare plan or a timeshare association that is governed by chapter 20 of this title.

(b) (ii) A condominium that is governed by chapter 9 of this title.

Sec. 4. Section 33-1807, Arizona Revised Statutes, is amended to read:

START_STATUTE33-1807. Common expense liens; priority; mechanics' and materialmen's liens; notice

A. The association has a common expense lien on a unit property for any assessment levied against that unit property from the time the assessment becomes due. The association's common expense lien for assessments, for charges for late payment of those assessments, for reasonable collection fees and for reasonable attorney fees and costs incurred with respect to those assessments may be foreclosed in the same manner as a mortgage on real estate but may be foreclosed only if the owner has been delinquent in the payment of monies secured by the common expense lien, excluding charges for late payment of assessments if authorized in the declaration, reasonable collection fees, and costs incurred or applied by the association and reasonable attorney fees and charges for late payment of and costs incurred with respect to those assessments if awarded by a court, for a period of one year or in the amount of $1,200 or more, whichever occurs first, as determined on the date the action is filed. Fees, charges, late charges, monetary penalties and interest charged pursuant to section 33-1803, other than charges for late payment of assessments The association board of directors shall exercise all reasonable efforts to COMMUNICATE with the member, negotiate reasonable PAYMENT plans or apply any relevant and applicable collection remedies available PURSUANT to title 12, chapter 9 before filing a FORECLOSURE action. Member expenses are not enforceable as assessments common expense liens under this section subsection. If an assessment is payable in installments, the full amount of the assessment is a lien from the time the first installment of the assessment becomes due.

B. The association has a lien for fees, charges, late charges, other than charges for late payment of assessments, monetary penalties or interest charged pursuant to section 33-1803 member EXPENSES after the entry of a judgment in a civil suit for those fees, charges, late charges, monetary penalties or interest member expenses from a court of competent jurisdiction and the recording of that judgment in the office of the county recorder as otherwise provided by law. The association's lien for monies other than for assessments, for charges for late payment of those assessments, for reasonable collection fees and for reasonable attorney fees and costs incurred with respect to those assessments member expenses may not be foreclosed and is effective only on conveyance of any interest in the real property.

B. c. A common EXPENSE lien for assessments, for charges for late payment of those assessments, for reasonable collection fees and for reasonable attorney fees and costs incurred with respect to those assessments under this section is prior to all other liens, interests and encumbrances on a unit property except:

1. Liens and encumbrances recorded before the recordation of the declaration.

2. A recorded first mortgage on the unit property, a seller's interest in a first contract for sale pursuant to chapter 6, article 3 of this title on the unit property recorded prior to before the lien arising pursuant to subsection A of this section or a recorded first deed of trust on the unit property.

3. Liens for real estate taxes and other governmental assessments or charges against the unit property.

C. D. Subsection B c of this section does not affect the priority of mechanics' or materialmen's liens or the priority of liens for other assessments made by the association. The common expense lien under this section is not subject to chapter 8 of this title.

D. E. Unless the declaration otherwise provides, if two or more associations have COMMON expense liens for assessments created at any time on the same real estate those liens have equal priority.

E. F. Recording of the declaration constitutes record notice and perfection of the COMMON expense lien for assessments, for charges for late payment of assessments, for reasonable collection fees and for reasonable attorney fees and costs incurred with respect to those assessments. Further recordation of any claim of COMMON expense lien for assessments under this section is not required.

F. G. A COMMON expense lien for an unpaid assessment is extinguished unless proceedings to enforce the lien are instituted within six years after the full amount of the assessment becomes due.

G. H. This section does not prohibit:

1. Actions to recover amounts for which subsection A of this section creates a lien.

2. An association from taking a deed in lieu of foreclosure.

H. I. A judgment or decree in any action brought under this section shall may include costs and reasonable attorney fees for the prevailing party.

I. J. On written request, the association shall furnish to a lienholder, escrow agent, unit owner member or person designated by a unit owner member a statement setting forth the amount of any unpaid assessment common expense lien and member expenses against the unit property. The association shall furnish the statement within ten days after receipt of the request. , and The statement is binding on the association, the board of directors and every unit owner if the statement is requested by an escrow agency that is licensed pursuant to title 6, chapter 7. Failure to provide the statement to the escrow agent within the time provided for in this subsection extinguishes any COMMON expense lien for any unpaid assessment then due.

J. K. Notwithstanding any provision in the community documents or in any contract between the association and a management company or any other AGENT of the association, including any agreement or contract with any attorney, unless the member directs otherwise, all payments received on a member's account shall be applied first to any unpaid assessments, due but not delinquent assessments, unpaid charges for late payment of those assessments if authorized in the declaration, unpaid reasonable collection fees and costs incurred or applied by the association, and unpaid attorney fees and costs incurred with respect to those assessments if awarded by a court, in that order, with any remaining amounts applied next to other unpaid fees, charges and monetary penalties or interest and late charges on any of those amounts.

K. L. For a delinquent account for unpaid assessments or for charges related to unpaid assessments common expense liens, the association shall provide the following written notice to the member at the member's address as provided to the association at least thirty 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:

The notice shall be in boldfaced type or all capital letters and shall include the contact information for the person that the member may contact to discuss payment. The notice shall be sent by certified mail, return receipt requested, and may be included within other correspondence sent to the member regarding the member's delinquent account.

L. M. Beginning January 1, 2020, Except for planned communities that have fewer than fifty lots and 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 to the member with the same frequency that assessments are provided for in the declaration. The statement of account shall include the current account balance due and the immediately preceding ledger history. If the association offers the statement of account by electronic means, a member may opt to receive the statement electronically. The association may stop providing any further statements of account to a member if collection activity begins by an attorney, or a collection agency that is not acting as the association's managing agent, regarding that member's unpaid account. After collection activity begins, a member may request statements of account by written request to the attorney or collection agency. Any request by a member for a statement of account after collection activity begins by an attorney or a collection agency that is not acting as the association's managing agent must be fulfilled by the attorney or the collection agency responsible for the collection. The statement of account provided by the attorney or collection agency responsible for the collection shall include all amounts claimed to be owing to resolve the delinquency through the date set forth in the statement, including attorney fees and costs, regardless of whether such amounts have been reduced to judgment.

M. N. An agent for the association may collect on behalf of the association directly from a member 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 by other electronic means. For any form of payment other than for cash or for mailed or hand-delivered bank drafts, checks, cashier's checks or money orders, the agent may charge a convenience fee to the member that is approximately the amount charged to the agent by a third-party service provider. The association may not transfer ownership or control of debt for common expense liens or member expenses. END_STATUTE