A Message from Commissioner Judy Lowe
Industry News, Market Update
July 22, 2016
Commissioner, Arizona Department of Real Estate (ADRE)
Homeowner Association Dispute Process Now With Arizona Department of Real Estate
The 2011 Arizona Legislature passed legislation providing Arizona homeowners a venue for resolving disputes with Condominium Homeowners Associations and Planned Community Associations, referred to and known as HOAs. These administrative procedures provide an alternative to the civil court system and do not limit the legal rights of the parties to further pursue matters. The legislation became law on July 20, 2011.
The 2016 Arizona Legislature passed legislation moving the Homeowners Association (HOA) dispute process to the Arizona Department of Real Estate from the Arizona Department of Fire, Building, and Life Safety that was effective July 1, 2016.
Let us review the situation: homeowners associations, unlike neighborhood associations, are formal legal entities created to maintain common areas and enforce private deed restrictions (CC&Rs). Most condominium and townhome developments as well as some newer single-family subdivisions have homeowners associations, which were typically created when the development was built. It is estimated that there are 9,000+ HOAs in Arizona.
A homeowners association is administered by governing documents (By Laws, CC&Rs, Rules, etc.), as well as federal, state and local jurisdictional laws and statutes. Arizona Revised Statutes (ARS) that apply to condominiums are found in ARS Title 33, Chapter 9; Planned Communities in ARS Title 33, Chapter 16; and since Associations may be Arizona non-profit corporations, in ARS Title 10, Chapter 24 through 40.
The structure of an Association may include: the builder/declarant of the community, the owners of the individual properties comprising the community and the elected Board of Directors. The Board of Directors, when approved by the owners in the HOA governing documents, have the right to hire a Community Management Company (not Property Management Company) to oversee the maintenance, collection of monthly assessments, issue violation notices, etc., for the entire community.
Sometimes a dispute may occur between an HOA and an owner. When a dispute cannot be settled among the parties, a resolution is sought outside of the community. ADRE will now act as the medium for facilitating a settlement through an ombudsman, mediation or a hearing by an Office of Administrative Hearings (OAH)
Administrative Law Judge (ALJ). The process will include the following steps utilizing the ADRE message center at www.azre.gov:
Only the property owner or the Association files a written petition to ADRE pertaining to a dispute between the owner and the Association, or vice versa, including all required documents.
The Petitioner pays a fee to ADRE for a single issue complaint of $500 as well as a $500 for each additional issue, which may be made by check or money order (online payment available soon).
The Respondent will be notified of the petition with a request for a timely response. The ADRE HOA ombudsman may make a call to the parties. When the OAH hearing date is requested the petition fee becomes non-refundable.
How can the Arizona real estate industry help with this process? Professionals working in the industry can make sure to emphasize to all home buyers residing with a homeowners association community that they read the HOA, CC&Rs and Rules prior to the buyer inspection period. Also, encourage new homeowners to stay involved in the election of the HOA Board of Directors and to attend all Board and annual meetings.
This article is provided from the 2016 2nd Quarter ADRE Bulletin. The ADRE publishes its real estate bulletin quarterly, and distributes it through Late Breaking News. Go to azre.gov to sign up to receive the complete version of the bulletin.