HB2656 - 571R

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 means the association's charges that are applied to each unit owner to fund:

(a) the anticipated common expenses based on the approved annual or supplemental budget.

(b) an approved special expenditure.

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

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.

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

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

9. "Common expense liability" means the liability for common expenses allocated to each unit pursuant to section sections 33-1217 and 33-1255.

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.

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

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.

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

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

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

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 before the sale of the first unit or pursuant to section 33-1230.

(f) Amend the declaration without unit OWNERS' approval 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 without unit OWNERS' approval 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.

(h) If the condominium is developed in phases, amend the DECLARATION without the unit owners' approval to make any grouping or phase of units identified on the plat subject to the provisions of the DECLARATION.

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

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.

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. "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, the beneficiary of the trust who holds the right to subdivide, develop or sell the real estate rather than the trust or trustee.

21. "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.

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

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

23. "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 initial public report issued pursuant to Section 32-2183 and approved plat.

(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 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, without limiting the unit owners from voting on any other issue during the period of DECLARANT control.

(f) Allocate enhanced voting rights to the DECLARANT of not more than three votes per unit owned and subject to the DECLARATION during the period of DECLARANT control pursuant to section 33-1243.

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

25. "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, the purchaser of the unit.

26. "Unit owner expenses":

(a) Means fees, charges, late charges and monetary penalties or interest that is 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. END_STATUTE

Sec. 2. Section 33-1243, Arizona Revised Statutes, is amended to read:

START_STATUTE33-1243. Board of directors and officers; conflict; powers; limitations; removal; annual audit; applicability; definitions

A. Except as provided in the declaration, the bylaws, subsection B of this section or other provisions of this chapter, the board of directors may act in all instances on behalf of the association.

B. The board of directors shall not act on behalf of the association to amend the declaration, terminate the condominium, elect members of the board of directors or determine the qualifications, powers and duties or terms of office of board of directors members. Except as provided in subsection H k of this section, the board of directors may fill vacancies in its membership for the unexpired portion of any term.

C. If any contract, decision or other action for compensation taken by or on behalf of the board of directors would benefit any member of the board of directors or any person who is a parent, grandparent, spouse, child or sibling of a member of the board of directors or a parent or spouse of any of those persons, that member of the board of directors shall declare a conflict of interest for that issue. The member shall declare the conflict in an open meeting of the board before the board discusses or takes action on that issue and that member may then vote on that issue. Any contract entered into in violation of this subsection is void and unenforceable.

D. Except as provided in the declaration, within thirty days after adoption of any proposed budget for the condominium, the board of directors shall provide a summary of the budget to all the unit owners. Unless the board of directors is expressly authorized in the declaration to adopt and amend budgets from time to time, any budget or amendment shall be ratified by the unit owners in accordance with the procedures set forth in this subsection. If ratification is required, the board of directors shall set a date for a meeting of the unit owners to consider ratification of the budget not fewer than fourteen or more than thirty days after mailing of the summary. Unless at that meeting a majority of all the unit owners or any larger vote specified in the declaration rejects the budget, the budget is ratified, whether or not a quorum is present. If the proposed budget is rejected, the periodic budget last ratified by the unit owners shall be continued until such time as the unit owners ratify a subsequent budget proposed by the board of directors.

E. The declaration may provide for a period of declarant control of over the association, during which period a declarant or persons designated by the declarant may appoint and remove the officers and members of the board of directors, along with other special DECLARANT rights and the condominium documents. Regardless of the period provided in the declaration, a the period of declarant control terminates not later than the earlier of:

1. Ninety days after conveyance of seventy-five percent of the units that may be created that are identified in the recorded plat to unit owners other than a declarant.

2. Four two years after all declarants have ceased to offer units for sale in the ordinary course of business.

F. A declarant may voluntarily surrender the right to appoint and remove officers and members of the board of directors before termination of the period prescribed in subsection E of this section, but in that event the declarant may require, for the duration of the period of declarant control, that specified actions of the association or board of directors, as described in a recorded instrument executed by the declarant, be approved by the declarant before they become effective.

3. The date or time period specified in the declaration.

4. on the voluntary termination of the period of declarant control by the declarant.

5. Sixty days after the effective date of this amendment to this section for any condominium that satisfies any of the CRITERIA of this subsection on the effective date of this amendment to this section.

f. The termination of the period of DECLARANT control shall be made EFFECTIVE by the declarant or assignee by both:

1. recording an instrument in the office of the county recorder relinquishing declarant control and special declarant rights PURSUANT to this section.

2. Notifying all unit owners of the recording of the instrument in paragraph 1 of this subsection.

g. The failure of a DECLARANT to terminate control over the association pursuant to subsections e and f of this section may subject the DECLARANT to civil penalties in an amount of not more than $500 per day by a court of competent jurisdiction.

h. Notwithstanding any provisions in the condominium documents, during the PERIOD of DECLARANT control the declarant has the FOLLOWING duties to the ASSOCIATION and unit owners:

1. To use REASONABLE care and prudence in managing the ASSOCIATION and MANAGING and MAINTAINing the common elements.

2. To establish a sound fiscal basis for the ASSOCIATION by IMPOSING and COLLECTING assessments on all units, subject to the DECLARATION, and ESTABLISHING reserves for the long-term maintenance of the common elements.

4. To provide all unit owners an annual report on the amount the DECLARANT has subsidized ASSOCIATION services or costs.

5. To maintain association financial and business records and provide reasonable access to view those documents on request by any unit owner.

6. To comply with and enforce the condominium documents.

7. on transition of control to an association board of directors elected by the unit owners, to disclose in a written instrument all material facts and circumstances affecting both of the following:

(a) the property's condition that the association is responsible to maintain.

(b) the Financial condition of the ASSOCIATION, INCLUDING the interest of the DECLARANT and the declarant's affiliates in any contract, lease or other agreements entered into by the association.

G. i. Not later than the termination of any period of declarant control, the unit owners casting the number of votes allocated for class A membership or class C membership, as applicable, per unit subject to the declaration shall elect a board of directors of at least three members, at least a majority of whom must be unit owners pursuant to section 33-1250 and the CONDOMINIUM documents. The board of directors shall elect the officers. The board members and officers shall take office on election.

j. Notwithstanding any provision in the condominium documents, after the termination of the period of declarant control, all of the following apply:

1. The association through its board of directors or unit owners may not restrict or impede the ability of the DECLARANT to EXERCISE any development or annexation rights established in the DECLARATION or plat or to access, develop, construct, improve, add or remove, market and sell or lease any remaining units in the condominium, including the use of any common elements necessary for those PURPOSES. In exercising the rights listed in this paragraph, the declarant may not impede unit owners' access to their units.

2. The declarant retains the right to amend the declaration or plat without the approval of the unit owners to EXERCISE ESTABLISHED development, annexation or removal rights. The ASSOCIATION may not amend the DECLARATION in such a way that would impact the declarant's development or annexation rights without the written consent of the declarant.

3. if the declarant owns an unsold or leased unit, the association shall maintain the common elements consistent with the STANDARDS previously established by the declarant.

4. The declarant assumes the allocated interest, rights and obligations of Class A membership for any remaining units subject to the declaration except for any reduced assessment ALLOWED by the declaration or PURSUANT to section 33-1255 for any undeveloped or unfinished units.

5. All direct control and responsibility over the affairs and operation of the association vest in the elected board of directors and unit owners of the ASSOCIATION. Any provision of the CONDOMINIUM documents restricting that AUTHORITY by the declarant expires and it is no longer valid.

6. Any action by the association to infringe on the rights of the declarant established in paragraphs 1 through 4 of this subsection may subject the association to civil penalties of not more than $100 per day by a court of competent jurisdicition.

H. k. Notwithstanding any provision of the declaration or bylaws to the contrary, all of the following apply to a meeting at which a member of the board of directors, other than a member appointed by the declarant, is proposed to be removed from the board of directors:

1. The unit owners who are eligible to vote at the time of the meeting may remove any member of the board of directors, other than a member appointed by the declarant, by a majority vote of those voting on the matter at a meeting of the unit owners.

2. The meeting of the unit owners shall be called pursuant to this section and action may be taken only if a quorum is present.

3. The unit owners may remove any member of the board of directors with or without cause, other than a member appointed by the declarant.

4. For purposes of calling for removal of a member of the board of directors, other than a member appointed by the declarant, the following apply:

(a) In an association with one thousand or fewer members, on receipt of a petition that calls for removal of a member of the board of directors and that is signed by the number of persons who are eligible to vote in the association at the time the person signs the petition equal to at least twenty-five percent of the votes in the association or by the number of persons who are eligible to vote in the association at the time the person signs the petition equal to at least one hundred votes in the association, whichever is less, the board shall call and provide written notice of a special meeting of the association as prescribed by section 33-1248, subsection B.

(b) Notwithstanding section 33-1248, subsection B, in an association with more than one thousand members, on receipt of a petition that calls for removal of a member of the board of directors and that is signed by the number of persons who are eligible to vote in the association at the time the person signs the petition equal to at least ten percent of the votes in the association or by the number of persons who are eligible to vote in the association at the time the person signs the petition equal to at least one thousand votes in the association, whichever is less, the board shall call and provide written notice of a special meeting of the association. The board shall provide written notice of a special meeting as prescribed by section 33-1248, subsection B.

(d) If all of the requirements of this subsection for calling a special meeting are met and the board of directors fails to call, notice and hold a special meeting within thirty days after receipt of the petition, the members of the board of directors are deemed removed from office effective at midnight of the thirty-first day.

(e) For purposes of a special meeting called pursuant to this subsection, a quorum is present if the number of owners who are eligible to vote in the association at the time the person attends the meeting equal to at least twenty percent of the votes of the association or the number of persons who are eligible to vote in the association at the time the person attends the meeting equal to at least one thousand votes, whichever is less, is present at the meeting in person or as otherwise allowed by law.

(f) If a civil action is filed regarding the removal of a board member, the prevailing party in the civil action shall be awarded its reasonable attorney fees and costs.

(g) The board of directors shall retain all documents and other records relating to the proposed removal of the member of the board of directors and any election or other action taken for that director's replacement for at least one year after the date of the special meeting and shall allow members to inspect those documents and records pursuant to section 33-1258.

(h) A petition that calls for the removal of the same member of the board of directors shall not be submitted more than once during each term of office for that member.

5. On removal of at least one but fewer than a majority of the members of the board of directors at a special meeting of the membership called pursuant to this subsection, the vacancies shall be filled as provided in the condominium documents.

6. On removal of a majority of the members of the board of directors at a special meeting of the membership called pursuant to this subsection, or if the condominium documents do not provide a method for filling board vacancies, the association shall hold an election for the replacement of the removed directors at a separate meeting of the members of the association that is held not later than thirty days after the meeting at which the members of the board of directors were removed.

7. A member of the board of directors who is removed pursuant to this subsection is not eligible to serve on the board of directors again until after the expiration of the removed board member's term of office, unless the condominium documents specifically provide for a longer period of ineligibility.

I. l. For an association in which board members are elected from separately designated voting districts, a member of the board of directors, other than a member appointed by the declarant, may be removed only by a vote of the members from that voting district, and only the members from that voting district are eligible to vote on the matter or be counted for purposes of determining a quorum.

J. m. Unless any provision in the condominium documents requires an annual audit by a certified public accountant, the board of directors shall provide for an annual financial audit, review or compilation of the association. The audit, review or compilation shall be completed no later than one hundred eighty days after the end of the association's fiscal year and shall be made available on request to the unit owners within thirty days after its completion.

K. n. This section does not apply to timeshare plans or associations, or the period of declarant control under timeshare instruments, that are subject to chapter 20 of this title.

o. for the purposes of this section:

1. "Class A membership" means the membership rights established in the declaration for individual unit owners other than the declarant.

2. "Class C membership" means the membership rights ESTABLISHED in the declaration for commercial owners. END_STATUTE

Sec. 3. Section 33-1245, Arizona Revised Statutes, is amended to read:

START_STATUTE33-1245. Termination of contracts and leases of declarant; applicability

A. A contract for any of the following, if entered into before the board of directors elected by the unit owners pursuant to section 33-1243, subsection G I takes office, shall contain a provision in the contract that the contract may be terminated without penalty by the association at any time after the board of directors elected by the unit owners takes office:

1. Any management contract or employment contract.

2. Any other contract or lease between the association and a declarant or an affiliate of a declarant.

3. Any contract or lease that is not bona fide or was unconscionable to the unit owners at the time entered into under the circumstances then prevailing.

B. The board of directors shall notify the appropriate contractual party of the termination at least thirty days before termination.

C. This section does not apply to any lease if the termination of the lease would terminate the condominium or reduce its size.

D. If a contract covered by this section fails to contain the provisions required by subsection A of this section, the contract is voidable at the option of the association.

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

Sec. 4. Section 33-1255, Arizona Revised Statutes, is amended to read:

START_STATUTE33-1255. Assessments for common expenses; applicability

A. Until the association makes a common expense assessment, the declarant shall pay all common expenses. After any assessment has been made by the association, assessments shall be made at least annually, based on a budget adopted at least annually by the association.

B. Except for assessments under subsections C, D, E and F of this section, all common expenses shall be assessed against all the units in accordance with the allocations set forth in the declaration pursuant to section 33-1217, subsection A. Any past due common expense assessment or installment bears interest at the rate established by the board subject to the condominium documents.

C. Unless otherwise provided for in the declaration, all of the following apply:

1. Any common expense associated with the maintenance, repair or replacement of a limited common element shall be equally assessed against the units to which the limited common element is assigned.

2. Any common expense or portion of a common expense benefitting fewer than all of the units shall be assessed exclusively against the units benefitted.

D. Assessments to pay a judgment against the association may be made only against the units in the condominium at the time the judgment was entered, in proportion to their common expense liabilities.

E. If any common expense is caused by the misconduct of any unit owner, the association may assess that expense exclusively against that unit.

F. after the termination of the period of declarant control, if the declaration so provides, the common expense assessment for any unit on which construction has not been substantially completed may be an amount which that is not less than twenty-five per cent percent of the common expense assessment for units which that have been substantially completed. However, this reduced common expense assessment shall not be permitted, allowed unless the declarant is obligated under the declaration to pay to the association any deficiency in monies due to the declarant having paid a reduced common assessment and necessary for the association to be able to timely pay all common expenses that are incurred in the fiscal year, including the budgeted allocation to reserves.

G. If common expense liabilities are reallocated, common expense assessments and any installment on the assessments not yet due shall be recalculated in accordance with the reallocated common expense liabilities.

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

Sec. 5. 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. "Allocated interests" means the common expense liability and voting rights that are allocated to each member by the declaration.

2. "Assessment" means the ASSOCIATION'S charges that are applied to each member to fund:

(a) the anticipated common expenses based on the APPROVED annual or supplemental budget.

(b) an approved special EXPENDITURE.

1. 3. "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.

(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.

4. "Common expense liability" means the share or assignment of common expenses that are allocated to each member by the declaration.

2. 5. "Common expense lien" means the lien for assessments, charges for late payment of assessments if authorized in the declaration, reasonable collection fees and costs that are 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.

6. "Common Expenses" means EXPENDITURES made by or financial liabilities of the association for the maintenance, operation, upgrade and replacement of common property, the ASSOCIATION'S ADMINISTRATIVE and OPERATING expenses and ANY allocations to reserves.

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

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

9. "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) Construct improvements provided for in the INITIAL public report issued pursuant to section 32-2183 and approved plat.

(b) Add real estate to a planned community by amending the plat without the members' approval.

(d) Subdivide lots, convert lots into common property or convert common property into lots.

(e) Withdraw real estate from a planned community by amending the plat without the members' approval.

(f) If the planned community is developed in phases, amend the declaration without the members' approval to MAKE any grouping or phase of lots identified on the plat subject to the provisions of the declaration.

5. 10. "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.

6. 11. "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.

(b) Does not include any of the following:

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

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

(iii) A real estate development that is not managed or maintained by an association.

12. "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) EXERCISE any development rights.

(b) Maintain sales offices, management offices and signs advertising the planned community and models.

(c) Use easements through the common property to make improvements within the planned community or within real estate that may be added to the planned community.

(d) Appoint or remove any officer or board member of the ASSOCIATION during the period of declarant control pursuant to section 33-1820 without limiting the ability of any member from voting on any other issue during the period of declarant control.

(e) Allocate enhanced voting rights to the DECLARANT of not greater than three votes per lot owned and subject to the DECLARATION during the period of declarant control pursuant to section 33-1820.

(f) Amend the declaration without members' approval during the PERIOD of declarant control pursuant to section 33-1820 to comply with applicable state or FEDERAL law or to correct any error or inconsistency in the declaration, if the amendment does not adversely affect the rights of any member. END_STATUTE

Sec. 6. Section 33-1803, Arizona Revised Statutes, is amended to read:

START_STATUTE33-1803. Assessment limitation; penalties; notice to member of violation

A. Unless limitations in the community documents would result in a lower limit for the assessment, the association shall not impose a regular assessment that is more than twenty percent greater than the immediately preceding fiscal year's assessment without the approval of the majority of the members of the association. Unless reserved to the members of the association, the board of directors may impose reasonable charges for the late payment of assessments. A payment by a member is deemed late if it is unpaid fifteen or more days after its due date, unless the community documents provide for a longer period. Charges for the late payment of assessments are limited to the greater of fifteen dollars $15 or ten percent of the amount of the unpaid assessment and may be imposed only after the association has provided notice that the assessment is overdue or provided notice that the assessment is considered overdue after a certain date. Any monies paid by the member for an unpaid assessment shall be applied first to the principal amount unpaid and then to the interest accrued.

b. following the termination of the period of declarant control, if the declaration allows a reduced assessment to the declarant based on undeveloped lots or incomplete homes, the common expense assessment for any declarant-owned lot where the CERTIFICATE of OCCUPANCY has not yet been granted may be an amount that is not less than twenty-five percent of the common expense assessment for other lots. however, the DECLARANT shall be obligated to pay the association for any deficiency in monies necessary for the ASSOCIATION to timely pay for common expenses that are incurred in the FISCAL year, including the budgeted allocation to reserves.

B. c. After notice and an opportunity to be heard, the board of directors may impose reasonable monetary penalties on members for violations of the declaration, bylaws and rules of the association. Notwithstanding any provision in the community documents, the board of directors shall not impose a charge for a late payment of a penalty that exceeds the greater of fifteen dollars $15 or ten percent of the amount of the unpaid penalty. A payment is deemed late if it is unpaid fifteen or more days after its due date, unless the declaration, bylaws or rules of the association provide for a longer period. Any monies paid by a member for an unpaid penalty shall be applied first to the principal amount unpaid and then to the interest accrued. Notice pursuant to this subsection shall include information pertaining to the manner in which the penalty shall be enforced.

C. d. A member who receives a written notice that the condition of the property owned by the member is in violation of the community documents without regard to whether a monetary penalty is imposed by the notice may provide the association with a written response by sending the response by certified mail within twenty-one calendar days after the date of the notice. The response shall be sent to the address identified in the notice.

D. e. Within ten business days after receipt of the certified mail containing the response from the member, the association shall respond to the member with a written explanation regarding the notice that shall provide at least the following information unless previously provided in the notice of violation:

1. The provision of the community documents that has allegedly been violated.

2. The date of the violation or the date the violation was observed.

3. The first and last name of the person or persons who observed the violation.

4. The process the member must follow to contest the notice.

E. f. Unless the information required in subsection D e, paragraph 4 of this section is provided in the notice of violation, the association shall not proceed with any action to enforce the community documents, including the collection of attorney fees, before or during the time prescribed by subsection D e of this section regarding the exchange of information between the association and the member and shall give the member written notice of the member's option to petition for an administrative hearing on the matter in the state real estate department pursuant to section 32-2199.01. At any time before or after completion of the exchange of information pursuant to this section, the member may petition for a hearing pursuant to section 32-2199.01 if the dispute is within the jurisdiction of the state real estate department as prescribed in section 32-2199.01. END_STATUTE

Sec. 7. Repeal

Section 33-1820, Arizona Revised Statutes, is repealed.

Sec. 8. Title 33, chapter 16, article 1, Arizona Revised Statutes, is amended by adding a new section 33-1820, to read:

START_STATUTE33-1820. Declarant control; contracts; definitions

A. THE DECLARATION MAY PROVIDE FOR A PERIOD OF DECLARANT CONTROL OVER THE ASSOCIATION, DURING WHICH TIME A DECLARANT OR PERSONS DESIGNATED BY THE DECLARANT MAY APPOINT AND REMOVE THE OFFICERS AND MEMBERS OF THE BOARD OF DIRECTORS, ALONG WITH OTHER SPECIAL DECLARANT RIGHTS AND THE COMMUNITY DOCUMENTS. REGARDLESS OF THE PERIOD PROVIDED IN THE COMMUNITY DOCUMENTS, THE PERIOD OF DECLARANT CONTROL TERMINATES NOt LATER THAN THE EARLIER OF:

1. NINETY DAYS AFTER THE CONVEYANCE OF SEVENTY-FIVE PERCENT OF THE LOTS OR HOMES IDENTIFIED IN THE RECORDED PLAT TO OWNERS OTHER THAN A DECLARANT.

2. TWO YEARS AFTER ALL DECLARANTS HAVE CEASED TO OFFER LOTS OR HOMES FOR SALE IN THE ORDINARY COURSE OF BUSINESS.

3. THE DATE OR TIME PERIOD SPECIFIED IN THE DECLARATION.

4. ON THE VOLUNTARY TERMINATION OF THE PERIOD OF DECLARANT CONTROL BY THE DECLARANT.

5. SIXTY DAYS AFTER THE EFFECTIVE DATE OF THIS section FOR ANY PLANNED COMMUNITY THAT SATISFIES ANY OF THE CRITERIA OF THIS SUBSECTION ON THE EFFECTIVE DATE of this section.

b. The termination of the period of DECLARANT control shall be made EFFECTIVE by the declarant or assignee by both:

1. recording an instrument in the office of the county recorder relinquishing declarant control and special declarant rights PURSUANT to this section.

2. Notifying all unit owners of the recording of the instrument in paragraph 1 of this subsection.

c. The failure of a DECLARANT to terminate control over the association pursuant to subsections a and b of this section may subject the DECLARANT to civil penalties in an amount of not more than $500 per day by a court of competent jurisdiction.

d. NOTWITHSTANDING ANY PROVISION WITHIN THE COMMUNITY DOCUMENTS, DURING THE PERIOD OF DECLARANT CONTROL, THE DECLARANT has THE FOLLOWING DUTIES TO THE ASSOCIATION AND ITS MEMBERS:

1. TO USE REASONABLE CARE AND PRUDENCE IN MANAGING THE ASSOCIATION AND MANAGING AND MAINTAINING THE COMMON PROPERTY.

2. TO ESTABLISH A SOUND FISCAL BASIS FOR THE ASSOCIATION BY IMPOSING AND COLLECTING ASSESSMENTS ON ALL PROPERTIES SUBJECT TO THE DECLARATION AND ESTABLISHING RESERVES FOR THE LONG-TERM MAINTENANCE OF THE COMMON PROPERTY.

3. TO PROVIDE ALL MEMBERS AN ANNUAL REPORT OF THE AMOUNT THE DECLARANT HAS SUBSIDIZED ASSOCIATION SERVICES AND COSTS.

4. TO MAINTAIN ASSOCIATION FINANCIAL AND BUSINESS RECORDS OF THE ASSOCIATION AND PROVIDE REASONABLE ACCESS TO VIEW THOSE RECORDS ON REQUEST OF ANY MEMBER.

5. TO COMPLY WITH AND ENFORCE THE COMMUNITY DOCUMENTS.

6. ON TRANSITION OF CONTROL TO AN ASSOCIATION BOARD OF DIRECTORS ELECTED BY THE MEMBERS, to DISCLOSE IN A WRITTEN INSTRUMENT ALL MATERIAL FACTS AND CIRCUMSTANCEs affecting both of the following:

(a) the PROPERTY'S CONDITION THAT THE ASSOCIATION IS RESPONSIBLE TO MAINTAIN.

(b) the FINANCIAL CONDITION OF THE ASSOCIATION, INCLUDING THE INTEREST OF THE DECLARANT AND THE DECLARANT'S AFFILIATES IN ANY CONTRACT, LEASE OR OTHER AGREEMENTS ENTERED INTO BY THE ASSOCIATION.

e. NOT LATER THAN THE TERMINATION OF THE PERIOD OF DECLARANT CONTROL, THE MEMBERS CASTING THE NUMBER OF VOTES ALLOCATED FOR CLASS A membership OR class C MEMBERSHIP, AS APPLICABLE, PER LOT SUBJECT TO THE DECLARATION SHALL ELECT A BOARD OF DIRECTORS PURSUANT TO SECTION 33-1812 AND THE COMMUNITY DOCUMENTS. THE BOARD OF DIRECTORS SHALL ELECT THE OFFICERS. THE BOARD MEMBERS AND OFFICERS SHALL TAKE OFFICE ON ELECTION.

f. NOTWITHSTANDING ANY PROVISION IN THE COMMUNITY DOCUMENTS, FOLLOWING THE TERMINATION OF THE PERIOD OF DECLARANT CONTROL, ALL OF THE FOLLOWING APPLY:

1. THE ASSOCIATION, THROUGH ITS BOARD OF DIRECTORS OR MEMBERS, may NOT RESTRICT OR IMPEDE THE ABILITY OF THE DECLARANT TO EXERCISE ANY DEVELOPMENT OR ANNEXATION RIGHTS ESTABLISHED IN THE DECLARATION OR PLAT OR TO ACCESS, DEVELOP, CONSTRUCT, IMPROVE, ADD OR REMOVE, MARKET AND SELL OR LEASE ANY REMAINING LOTS IN THE PLANNED COMMUNITY, INCLUDING THE USE OF ANY COMMON PROPERTY NECESSARY FOR THOSE PURPOSES. THE DECLARANT, IN EXERCISING any rights granted in this section, may NOT IMPEDE MEMBERS' ACCESS TO THEIR HOMES OR LOTS.

2. THE DECLARANT RETAINS THE RIGHT TO AMEND THE DECLARATION OR PLAT TO EXERCISE ESTABLISHED DEVELOPMENT, ANNEXATION OR REMOVAL RIGHTS WITHOUT THE APPROVAL OF THE MEMBERS. THE ASSOCIATION MAY NOT AMEND THE DECLARATION IN A WAY THAT WOULD IMPACT THE DECLARANT'S DEVELOPMENT OR ANNEXATION RIGHTS WITHOUT THE WRITTEN CONSENT OF THE DECLARANT.

3. if THE DECLARANT OWNS AN UNSOLD OR LEASED LOT OR HOME, THE ASSOCIATION SHALL MAINTAIN THE COMMON PROPERTY CONSISTENT WITH THE STANDARDS PREVIOUSLY ESTABLISHED BY THE DECLARANT. THE DECLARANT SHALL BE ALLOWED TO DEVELOP ANY REMAINING LOTs UNDER THE ARCHITECTURAL CONTROL GUIDELINES IN PLACE AT THE TIME OF THE TERMINATION OF DECLARANT CONTROL WITHOUT THE REVIEW AND APPROVAL OF THE DESIGN REVIEW COMMITTEE.

4. THE DECLARANT ASSUMES THE ALLOCATED INTERESTs, RIGHTS AND OBLIGATIONS OF CLASS A MEMBERSHIP FOR ANY REMAINING LOTS OR HOMES SUBJECT TO THE DECLARATION EXCEPT IF THE DECLARATION ALLOWS FOR A REDUCED ASSESSMENT FOR UNDEVELOPED LOTS OR UNFINISHED HOMES PURSUANT TO SECTION 33-1803.

5. ALL DIRECT CONTROL AND RESPONSIBILITY OVER THE AFFAIRS AND OPERATION OF THE ASSOCIATION VEST IN THE ELECTED BOARD OF DIRECTORS AND MEMBERS OF THE ASSOCIATION. ANY PROVISION IN THE COMMUNITY DOCUMENTS RESTRICTING THAT AUTHORITY BY THE DECLARANT shall EXPIRE AND IS NO LONGER VALID.

6. ANY ACTION BY THE ASSOCIATION TO INFRINGE ON THE RIGHTS OF THE DECLARANT ESTABLISHED IN PARAGRAPHS 1 THROUGH 4 OF THIS SUBSECTION MAY SUBJECT THE ASSOCIATION TO CIVIL PENALTIES of NOT more than $100 PER DAY BY A COURT OF competent JURISDICTION.

g. before the election of the board of directors, A CONTRACT FOR ANY MANAGEMENT CONTRACT OR EMPLOYMENT CONTRACT, ANY OTHER CONTRACT OR a LEASE BETWEEN THE ASSOCIATION AND A DECLARANT OR AN AFFILIATE OF A DECLARANT and ANY CONTRACT OR LEASE THAT IS NOT BONA FIDE OR WAS UNCONSCIONABLE TO THE MEMBERS AT THE TIME that the contract was ENTERED INTO UNDER THE CIRCUMSTANCES THEN PREVAILING SHALL CONTAIN A PROVISION IN THE CONTRACT THAT THE CONTRACT MAY BE TERMINATED WITHOUT PENALTY BY THE ASSOCIATION AT ANY TIME with at least thirty days' notice aFTER THE BOARD OF DIRECTORS ELECTED BY THE MEMBERS TAKES OFFICE.

h. IF A CONTRACT FAILS TO CONTAIN THE PROVISIONS REQUIRED BY SUBSECTION g of this section, THE CONTRACT IS VOIDABLE AT THE OPTION OF THE ASSOCIATION.

i. FOR THE PURPOSE OF THIS SECTION:

1. "CLASS A MEMBERSHIP" means THE MEMBERSHIP RIGHTS ESTABLISHED IN THE DECLARATION FOR INDIVIDUAL MEMBERS OTHER THAN THE DECLARANT.

2. "CLASS C MEMBERSHIP" means THE MEMBERSHIP RIGHTS ESTABLISHED IN THE DECLARATION FOR COMMERCIAL OWNERS.END_STATUTE