ARIZONA HOUSE OF REPRESENTATIVES

Fifty-seventh Legislature

First Regular Session

House: GOV DPA 4-3-0-0

HB 2442: homeowners' associations; budget ratification; requirements

Sponsor: Representative Keshel, LD 17

Caucus & COW

Overview

Establishes certain procedures and requirements for a condominium association or homeowners association relating to the approval of an annual operating budget and additional unanticipated expenses.

History

The board of directors of a condominium are required to provide a summary of an adopted budget to all unit owners within 30 days of adoption. Unless the board of directors is expressly authorized in the declaration to adopt and amend budgets from time to time, any budget amendment must be ratified by the unit owners. If seeking ratification, the board of directors must set a date for a meting of the unit owners to consider ratification no fewer than 14 or more than 30 days after mailing of a budget summary. Unless a majority of all unit owners reject a proposed budget, it will be ratified. Should a proposed budget be rejected, the periodic budget last ratified by unit owners will continue until unit owners ratify a subsequent budget proposal (A.R.S § 33-1243).

The board of directors of a Homeowners Association (HOA) must prepare an annual financial audit at the end of every fiscal year. All audit information must be made available to owners within 180 days of the end of the fiscal year. The HOA retains the right to increase dues up to a maximum of 20% per year and may raise the dues further should they obtain a majority vote from association members (A.R.S. §§ 33-1810, 33-1803).

Provisions

1. Specifies the board of directors of a condominium association or homeowners association has a duty to develop an annual operating budget for the fiscal year that is based on a reasonably prudent and good faith estimate of the common expenses necessary to satisfy their obligations to the unit owners or members. (Sec. 3, 6)

2. Requires a copy of a proposed budget to be made reasonably available for unit owner or member review at least 48 hours before the board meeting at which the approval of the budget will be considered. (Sec. 3, 6)

3. Outlines the procedure for which the board of directors must follow if the approved annual operating budget and any supplemental amendment to the budget, except for certain previously approved loan installment payments, would result in an annualized assessment increase from the previous year that is greater than the percentage change in the CPI for the preceding 12 months. (Sec. 3, 6)

4. Allows an association to establish and fund reserve accounts to address anticipated long-term or major maintenance and upgrade of common elements, or for other purposes, provided that doing so is authorized in the declaration or community documents. (Sec. 3, 6)

5. Prohibits the board or its managing agent from spending or transferring any monies from the association's reserve accounts for any purpose that is not included in the declaration or community documents' authorized use of that account without prior authorization from the unit owners or members. (Sec. 3, 6)

6. Outlines a procedure for circumstances involving unanticipated and unbudgeted operating expenses. (Sec. 3, 6)

7. Requires the unit owners or members to ratify, by a majority vote of all allocated votes in the association, or a larger percentage if required by the declaration or community documents, a special assessment or to secure financing for any reason, if approved by the board. (Sec. 3, 6)

8. Asserts that a board of director's failure to adhere to the provisions of this act involving budgets results in any action or assessment deemed invalid and unenforceable. (Sec. 3, 6)

9. Modifies the definition of unit owner expenses and member expenses. (Sec. 1, 5)

10. Defines assessment, common expense liability, common expenses and consumer price index. (Sec. 1, 3, 5, 6)

11. Makes technical and conforming changes. (Sec. 1, 2, 3, 4, 5, 6)

Amendments

Committee on Government

1. Allows the board of directors to file an action seeking injunctive relief if they believe unit owners or members unreasonably withheld ratification of an approved budget.

2. Specifies the prescribed injunctive relief, if granted by the court, would allow the board to implement the approved budget.

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6. HB 2442

7. Initials JH Page 0 Caucus & COW

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