HB2713 - 571R

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

Section 1. Section 12-552, Arizona Revised Statutes, is amended to read:

START_STATUTE12-552. Actions involving development of real property design, engineering and construction of improvements

A. Notwithstanding any other statute, and except for a MUNICIPALITY or a county as prescribed by subsection B of this section, an action or arbitration based in contract may not be instituted or maintained against a person who develops or develops and sells real property, or performs or furnishes the design, specifications, surveying, planning, supervision, testing, construction or observation of construction of an improvement to real property more than eight four years after substantial completion of the improvement to real property.

B. Notwithstanding any other statute, a municipality or a county may not institute or maintain an action or arbitration against a person who develops or develops and sells real property or performs or furnishes the design, specifications, surveying, planning, supervision, testing, construction or observation of construction of an improvement to real property that is dedicated to the municipality or county more than eight years after the improvement to real property has been accepted by the municipality or county for ownership, operation and maintenance if the action or arbitration is based on either any of the following:

1. A municipal or county code, ordinance or other legal requirement.

2. A permit that is required as a condition of development.

3. An IMPROVEMENT that is directly contracted for by the municipality or county.

C. The limitations of subsection B of this section do not apply to an action or arbitration that is based on a claim of a wilful, reckless or concealed violation of a municipal or county requirement.

D. Subsection B of this section does not limit any immunity or defense that is available to a municipality or county pursuant to chapter 7, article 2 of this title.

E. Notwithstanding subsection A or B of this section, in the case of injury to real property or an improvement to real property the following apply: ,

1. For a municipality or a county:

(a) If the injury occurred during the eighth year after the substantial completion or, in the case of a latent defect, was not discovered until the eighth year after substantial completion, an action to recover damages for injury to the real property may be brought within one year after the date on which the injury to real property or an improvement to real property occurred or a latent defect was discovered. , but

(b) Notwithstanding subdivision (a) of this paragraph, an action may not be brought more than nine years after the substantial completion of the improvement.

2. For all claimants that are not prescribed by paragraph 1 of this subsection:

(a) If the injury occurred during the fourth year after the substantial completion or, in the case of a latent defect, was not discovered until the fourth year after substantial completion, an action to recover damages for injury to the real property may be brought within two years after the date on which the injury to real property or an improvement to real property occurred or a latent defect was discovered.

(b) Notwithstanding subdivision (a) of this paragraph, an action may not be brought more than six years after the substantial completion of the improvement.

F. The limitations in subsections A, B and E of this section include any action based on implied warranty arising out of the contract or the construction, including implied warranties of habitability, fitness or workmanship.

G. This section does not apply to actions for personal injury or death or shorten the period of warranty provided in an express written warranty.

H. For the purposes of subsections A, E and F of this section, an improvement to real property is considered substantially complete when any of the following first occurs:

1. It is first used by the owner or occupant of the improvement.

2. It is first available for use after having been completed according to the contract or agreement covering the improvement, including agreed changes to the contract or agreement.

3. Final inspection, if required, by the governmental body that issued the building permit for the improvement.

I. In this section an action based in contract is an action based on a written real estate contract, sales agreement, construction agreement, conveyance or written agreement for construction or for the services set forth in subsection A of this section. This section does not extend the period prescribed by the laws of this state for bringing any action. If a shorter period of limitation is prescribed for a specific action, the shorter period governs.

J. With respect to an improvement to real property that was substantially complete on or before September 15, 1989, the eight and nine-year periods established in subsections A and E of this section shall begin to run on September 15, 1989. Notwithstanding the provisions of subsection H of this section and section 12-505, subsection A, this subsection applies to claims that accrued before May 14, 1992. END_STATUTE

Sec. 2. Section 33-2002, Arizona Revised Statutes, is amended to read:

START_STATUTE33-2002. Homeowners' association dwelling actions; conditions

A. Notwithstanding any provision to the contrary in title 10, chapter 39 or chapter 9 or 16 of this title and in addition to any requirements prescribed in the community documents of a homeowners' association, a homeowners' association may file a homeowners' association dwelling action only after all of the following have occurred:

1. The board of directors has provided full disclosure in writing to all members of the homeowners' association and each seller and construction PROFESSIONAL against whom a dwelling action is PROPOSED of all material information relating to the filing of the a dwelling action. The material information shall include a statement that describes the nature of the action and the relief sought, including any demands, notices, offers to settle or responses to offers to settle made either by the homeowners' association or the seller, and the expenses and fees that the homeowners' association anticipates will be incurred, directly or indirectly, in prosecuting the dwelling action, including attorney fees, consultant fees, expert witness fees, court costs and impacts on the values of the dwellings that are the subject of the action and those that are not. The material information described by this paragraph shall be distributed to all members before the meeting described in paragraph 2 of this subsection occurs.

2. The homeowners' association has held a meeting of its members and board of directors for which reasonable and adequate notice was provided to all members, the seller and EACH construction professional against whom a dwelling action is proposed in the manner prescribed in section 33-1248 or 33-1804, as applicable. The meeting shall include a presentation by the homeowners' association or its attorneys of the ALLEGED construction defects. The seller and each CONSTRUCTION professional against whom a dwelling action is proposed shall have the right to present at the meeting and offer to remedy any defect.

3. The board of directors At least two-thirds of the members of the homeowners' association authorizes vote to authorize the filing of the action pursuant to the voting procedures prescribed in the community documents. At the time of commencing a dwelling action or amending a complaint to add a cause of action for a construction defect, the homeowners' association has an affirmative duty to demonstrate compliance with the procedures prescribed in the community documents and the requirements of this section, . including the following:

(a) A member's VOTE SHALL BE SUBMITTED ONLY ONCE AND MAY BE OBTAINED IN ANY WRITTEN FORMAT that confirms the member's VOTE TO APPROVE OR REJECT THE PROPOSED DWELLING ACTION. THE homeowners' ASSOCIATION SHALL MAINTAIN A RECORD OF ALL VOTES UNTIL THE CONCLUSION OF THE CONSTRUCTION DEFECT ACTION, INCLUDING ANY APPEALS.

(b) Before hOLDING A VOTE PURSUANT TO THIS PARAGRAPH:

(i) THE HOMEOWNERS' ASSOCIATION shall OBTAIN AN INSPECTION FROM A PROFESSIONAL ENGINEER who is registered pursuant to title 32, chapter 1. THE INSPECTION SHALL DESCRIBE THE DWELLINGS OR COMMON ELEMENTS that are the subject of A PROPOSED ACTION, DESCRIBE THE PHYSICAL CONDITION OF THE UNITS OR COMMON ELEMENTS IN QUESTION, AND ANY MAINTENANCE, REPAIRS OR MODIFICATIONS PERFORMED BY THE HOMEOWNERS' ASSOCIATION OR OWNERS.

(ii) THE HOMEOWNERS' ASSOCIATION PROVIDEs WRITTEN NOTICE OF THE INSPECTION TO BE CONDUCTED BY A PROFESSIONAL ENGINEER who is registered pursuant to title 32, chapter 1 TO ALL HOMEOWNERS AND THE SELLER NOT LATER THAN SEVEN DAYS BEFORE THE DATE OF INSPECTION. THE NOTICE SHALL IDENTIFY THE SPECIFIC DWELLINGS TO BE INSPECTED, DESCRIBE THE PHYSICAL CONDITION OF THE DWELLINGS TO BE INSPECTED, AND SPECIFY IN REASONABLE DETAIL ANY MATERIAL DEFICIENCY IN THE DWELLINGS. THE NOTICE SHALL INCLUDE THE NAME OF THE PROFESSIONAL ENGINEER PERFORMING THE INSPECTION, THE DWELLINGS TO BE INSPECTED, AND THE DATE AND TIME OF THE INSPECTION. THE SELLER OR A seller's DESIGNEE SHALL HAVE THE RIGHT TO ATTEND THE INSPECTION.

4. The homeowners' association provides the seller with notice of the alleged construction defects and the right to repair or replace the alleged construction defects pursuant to section 12-1363. The right to repair or replace PURSUANT to section 12-1363 commences after a vote in favor of filing an action occurs as prescribed by this section.

B. If the notice required by subsection A, paragraph 2 of this section is provided to the homeowners' association's members less than sixty days before the expiration of a statute of limitations affecting the right of the association to bring a homeowners' association dwelling action, the statute of limitations is tolled for sixty days. The homeowners' association may meet the remaining requirements of subsection A of this section during the tolling period.

C. Notwithstanding any provision to the contrary in title 10, chapter 39 or in chapter 9 or 16 of this title and in addition to any requirements prescribed in the community documents of a homeowners' association, the board of directors of a homeowners' association or its authorized representative shall disclose in writing to the members of the homeowners' association a plan that describes the manner in which the proceeds of a homeowners' association dwelling action, whether obtained by way of judgment, settlement or other means, have been or will be allocated. The plan shall be disclosed within thirty days after the homeowners' association receives the proceeds of any homeowners' association dwelling action. The plan is not binding on the homeowners' association, but the board of directors or its authorized representative must disclose any material changes to the plan to the members of the homeowners' association within thirty days of after making the changes.

D. A homeowners' association shall prepare and preserve for a period of five years records that are adequate to demonstrate its compliance with this section.

E. A director who acts in good faith pursuant to this chapter is not liable for any act or failure to act pursuant to this chapter. In any action filed against a director arising out of any act or failure to act pursuant to this chapter, a director is presumed in all cases to have acted in good faith. The burden is on the party challenging a director's conduct to establish by clear and convincing evidence facts that rebut the good faith presumption.

F. In any contested dwelling action, the seller has standing to assert a failure of the homeowners' association to comply with the procedures prescribed by the community documents and the requirements of this section. END_STATUTE

Sec. 3. Applicability

Section 12-552, Arizona Revised Statutes, as amended by this act, applies to actions filed after the effective date of this act.

Sec. 4. Short title

This act may be cited as the "Home Ownership Act".