HB 2656
Initials DC/GG Page 1 Regulatory Oversight
ARIZONA HOUSE OF REPRESENTATIVES
Fifty-seventh Legislature
First Regular Session
HB 2656: HOA's; termination of declarant
Sponsor: Representative Carter N, LD 15
Committee on Regulatory Oversight
Overview
Amends the statutes relating to the termination of declarant control for condominium and
planned community homeowners' associations (HOAs).
History
A.R.S. § 33-1243 states that the declaration may provide for a period of declarant control over
the Condominium HOA. Regardless of the stated period, the declarant control must
terminate not later than the earlier of 90 days after conveyance of 75% of the units created
to unit owners other than the declarant; or four years after all declarants cease to offer units
for sale in the ordinary course of business.
A.R.S. § 33-1820 requires declarant control of a Planned Community HOA to terminate no
later than the date that the second to last lot in the HOA is conveyed to a buyer. The HOA
must maintain the common areas to the level that the declarant maintained them and
cannot impede the declarant's ability to develop, construct and sell its lots or impede access
to or use of the common areas.
Provisions
Condominium Associations
1. Modifies the termination of declarant control to be the earlier of the following:
a) 90 days after conveying 75% of the units in the recorded plat to unit owners;
b) two years (rather than four) after all declarants have ceased to offer units for sale;
c) the date/time specified in the declaration;
d) on the voluntary termination date;
e) 60 days after the effective date of this amendment as outlined. (Sec. 2)
2. Stipulates the termination of declarant control is effective by the declarant or assignee
recording an instrument in the County Recorder's office relinquishing declarant control
and special declarant rights and notifying all unit owners. (Sec. 2)
3. States that failure to terminate control over the association as outlined may result in a
maximum penalty of $500 per day assessed by a court of competent jurisdiction. (Sec. 2)
4. Prescribes the duties of the declarant, regardless of any provisions in the condominium
documents to the contrary, as follows:
a) to use reasonable and prudent care to manage and maintain the association and
common elements;
☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal Note
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b) to establish a sound fiscal foundation for the association, including reserves for the
long-term as outlined;
c) to issue an annual report to unit owners with the amount the declarant has subsidized
association services or costs;
d) to maintain association financial and business records with reasonable access by unit
owners;
e) to comply with and enforce association documents; and
f) to provide for transition of control as outlined. (Sec. 2)
5. Delineates the process for electing the board of directors after termination of declarant
control and specifies the board's powers and duties. (Sec. 2)
6. Declares the control and responsibilities of the association are with the elected board of
directors and unit owners. (Sec. 2)
7. Subjects the association to maximum civil penalties of $100 per day by a court of
competent jurisdiction for any action by the association to infringe on the declarant's
statutory rights as outlined. (Sec. 2)
8. Defines class A membership and class C membership. (Sec. 2)
9. Revises the definition of assessment, common expense liability, development rights and
special declarant rights. (Sec. 1)
10. Makes technical and conforming changes. (Sec. 1, 2, 3, 4)
Planned Community Associations
11. Specifies that after the termination of declarant control, if the declaration permits a
reduced assessment due to undeveloped lots or incomplete homes, then the common
expense assessment may be an amount not less than 25% of the common expense
assessment for other lots. (Sec. 6)
12. Repeals and replaces the current law regarding declarant control. (Sec. 7)
13. Modifies the termination of declarant control, which is the earlier of the following:
a) 90 days after conveying 75% of the lots or homes identified in the recorded plat to unit
owners;
b) two years after all declarants have ceased to offer lots or homes for sale;
c) the date/time specified in the declaration;
d) on the voluntary termination date;
e) 60 days after the effective date of this amendment as outlined. (Sec. 8)
14. States the termination of declarant control is effective by the declarant or assignee
recording an instrument in the County Recorder's office relinquishing declarant control
and special declarant rights and notifying all unit owners. (Sec. 8)
15. Stipulates that failure by a declarant to terminate control over the association as outlined
may result in a maximum penalty of $500 per day assessed by a court of competent
jurisdiction. (Sec. 8)
16. Prescribes the duties of the declarant, regardless of any provisions in the community
documents to the contrary, as follows:
a) to use reasonable and prudent care to manage and maintain the association and
common property;
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b) to establish a sound fiscal foundation for the association, including reserves for the
long-term as outlined;
c) to issue an annual report to members with the amount the declarant has subsidized
association services or costs;
d) to maintain association financial and business records with reasonable access by any
member;
e) to comply with and enforce association documents; and,
f) to provide for transition of control as outlined.(Sec. 8)
17. Declares that control and responsibilities of the association are with the elected board of
directors and home or lot owners. (Sec. 8)
18. Outlines the rules, requirements and restrictions that the declarant, the association
members and the board of directors must abide by following the termination of the period
of declarant control. (Sec. 8)
19. Subjects the association to maximum civil penalties of $100 per day by a court of
competent jurisdiction for any action by the association to infringe on the declarant's
statutory rights as outlined. (Sec. 8)
20. Stipulates that before the election of the board of directors, a contract for management,
employment, or any other contract or lease agreement that was entered into as outlined
may be terminated without penalty by the association with at least 30 days' notice after
the new board elected by the members takes office. (Sec. 8)
21. Makes contracts without the required provisions voidable at the option of the association.
(Sec. 8)
22. Defines allocated interests, assessments, common expense liability, common expenses,
development rights and special declarant rights, class A membership and class C
membership. (Sec. 5, 8)
23. Makes technical and conforming changes. (Sec. 5, 6)