HB2277 - HOAs; fiscal duties

REFERENCE TITLE: HOAs; fiscal duties State of Arizona House of Representatives Fifty-seventh Legislature Second Regular Session 2026 HB 2277 Introduced by Representatives Keshel: Carter N, Carter P AN ACT amending sections 33-1202, 33-1215, 33-1243, 33-1245, 33-1254 and 33-1803, Arizona Revised Statutes; RELATING to condominiums and planned communities. (TEXT OF BILL BEGINS ON NEXT PAGE) Be it enacted by the Legislature of the State of Arizona: Section 1. Section 33-1202, Arizona Revised Statutes, is amended to read: START_STATUTE 33-1202. 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. 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 33-1217 or 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. (c) Subdivide units, convert units into common elements or convert common elements into units. (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 I , 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 I , 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. 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. (b) Exercise any development right. (c) Maintain sales offices, management offices, signs advertising the condominium, and models. (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. 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 33-1215, Arizona Revised Statutes, is amended to read: START_STATUTE 33-1215. Contents of declaration A. The declaration shall contain: 1. The name of the condominium, which shall include the word "condominium" or be followed by the words "a condominium", and the name of the association. 2. The name of every county in which any portion of the condominium is located. 3. A legal description of the real estate included in the condominium. 4. A description of the boundaries of each unit created by the declaration, including each unit's identifying number. 5. A description of any limited common elements, other than those specified in section 33-1212, paragraphs 2 and 4, but the declaration shall contain a description of any porches, balconies, patios and entryways, if any, as provided in section 33-1219, subsection B, paragraph 11. 6. A description of any development rights and other special declarant rights, together with a legal description of the real estate to which each of those rights applies, any time limit within which each of those rights must be exercised and any other conditions or limitations under which the rights described in this paragraph may be exercised or will lapse. 7. An allocation to each unit of the allocated interests in the manner described in section 33-1217. 8. Any restrictions on use, occupancy and alienation of the units. 9. All matters required by sections 33-1216, 33-1217, 33-1218, 33-1219 and 33-1226 and section 33-1243, subsection E I . 10. A statement that the assessment obligation of the unit owner under section 33-1255 is secured by a lien on the owner's unit in favor of the association pursuant to section 33-1256. 11. If the condominium is a conversion from multifamily rental to condominiums, a statement containing all of the following: (a) A statement that the property is a conversion from multifamily rental to condominiums. (b) The date original construction was completed. (c) The name and address of the original owner, builder, developer and general contractor as shown on the applicable city, town or county building permit. (d) The name and address of each subsequent owner as determined by a search of the county recorder's records in the county in which the property is located. (e) The subdivider's agreement to provide the following information on request: (i) The name and address of any builder, developer, general contractor, subcontractor, architect and engineer who designed or made improvements to the property immediately before the first condominium was sold. (ii) A specific description of all improvements made. B. If a city, town or county is unable to produce a building permit as required in subsection A, paragraph 11, subdivision (c) of this section, the subdivider shall submit a letter from the applicable city, town or county stating that the information required by subsection A, paragraph 11, subdivision (c) of this section is not available. C. The declaration may contain any other matters the declarant deems appropriate. END_STATUTE Sec. 3. Section 33-1243, Arizona Revised Statutes, is amended to read: START_STATUTE 33-1243. Board of directors and officers; conflict; powers; fiscal duties; limitations; removal; annual audit; applicability 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 L 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. D. After termination of the period of declarant control, the board of directors shall develop, or have developed, an annual operating budget for the fiscal year based on a prudent and good faith estimate of the common expenses reasonably necessary to satisfy its obligations to the unit owners to manage cost and to provide for the maintenance and operation of the common elements, utilities or other services required by the declaration, the reasonable and necessary operating and administrative expenses of the association and appropriate allocations to reserve accounts. A copy of any proposed budget and the current year-to-date budget comparison report must be either posted on a community website or provided to any unit owner present at the board of directors meeting at which the board of directors will consider the approval of that budget. Notwithstanding any provision of the condominium documents to the contrary, for any condominium of fifty units or more, any board-approved annual budget that results in an assessment increase of five percent or more over the prior year's initial annual assessment, excluding any installment payments for financing previously approved pursuant to subsection G of this section, must be ratified by unit owners before the application of that assessment. If necessary, unit owner ratification shall be established by the affirmative vote of a simple majority of the unit owners voting on the ballot initiative, pursuant to section 33-1250, whether or not a quorum is satisfied. The ballot question may be included on the ballot for any annual or special meeting of the unit owners or processed separately. The board of directors shall manage the association's expenses within the overall approved budget for the fiscal year. If unanticipated and unbudgeted association expenses become necessary and are not able to be [Text truncated for display. Full text available on LegiScan.]