The Arizona Legislature passed House Bill 2495 ('HB2495') during its recently completed session, which amends the Condominium Act and the Planned Communities Act. HB2495 was signed by Governor Symington, and will become effective on July 21, 1997.

HB2495 makes several important changes to the Condominium Act and the Planned Communities Act, many of which modify the changes made by HB2299 enacted last year. Every condominium association and planned community association needs to become familiar with the provisions of HB2495, particularly as they change practices and procedures implemented by associations last year to comply with HB2299.

The provisions of HB2299 requiring that notice of board meetings be given to members of the association have been modified slightly. Notice of board meetings must now be given at least 48 hours in advance of the meeting. The provision that notice is not required if emergency circumstances require action before notice can be given was retained in the statute and is still effective.

HB2495 makes several revisions to the resale disclosure statement requirements of the prior law. However, existing law was not changed that for associations with fewer than 50 units, the seller must furnish the documents and information, and for associations with 50 or more units, the association must furnish the documents and information.

The documents and information which must be furnished to the purchaser are set forth in §33-1260 (for Condominiums) and §33-1806 (for Planned Communities). The information to be provided is the same whether the unit is in a condominium or a planned community. Currently, the association is required to provide the purchaser with copies of the bylaws, rules of the association and the declaration. The previous exception which allowed the Association to avoid giving the purchaser a copy of the declaration if the purchaser had otherwise received one has been removed by HB2495.

HB2495 also amends the current law to require the association to provide additional documents to a purchaser. In addition to furnishing the purchaser with the declaration, the bylaws and the rules, the seller or the association must furnish the purchaser the following documents:

(1) A copy of the most recent reserve study of the association, if any.

(2) A copy of the current operating budget of the association.

(3) A copy of the most recent annual financial report of the association. If the report is more than ten pages, the association may provide a summary.

Current law requires the seller or the association to also furnish a purchaser with a dated statement containing certain information (the 'Resale Disclosure Statement'). HB2495 makes certain changes to what information must be included in the Resale Disclosure Statement. Under HB2495, the Resale Disclosure Statement must contain the following information:

(1) The telephone number and address of a principal contact for the association, which may be an association manager, management company, officer of the association or other person designated by the board of directors.

(2) The amount of the common regular assessment and any unpaid common regular assessment, special assessment or other assessment, fee or charge currently due from the seller.

(3) A statement as to whether a portion of the unit is covered by insurance maintained by the association.

(4) The total amount of money held by the association as reserves.

(5) If the Resale Disclosure Statement is being furnished by the Association, a statement whether the records of the association reflect any alterations or improvements to the unit that violate the declaration. This is a change from the prior law and limits the disclosure required by the association to items reflected in the records of the association, not whether the association has any knowledge of any violations. It is no longer necessary for the association to conduct an inspection to protect itself against visible violations that may not be reflected in the records of the association. The new law specifically provides that the association will be able to enforce against the purchaser of a unit existing violations that are apparent at the time of purchase but are not reflected in the association's records. The association is not required to provide information in its records regarding violations that occurred more than six years before the proposed sale.

(6) If the Resale Disclosure Statement is being furnished by the Seller, a statement whether the Seller has any knowledge of any alterations or improvements that violate the declaration.

(7) A statement of the case names and case numbers for pending litigation with respect to the unit filed by the association against the unit owner or filed by the unit owner against the association. The association only needs to reveal any litigation with respect to the unit being sold. The association is not required to reveal any other pending litigation by or against the association. We recommend disclosing the court in which the litigation is pending, in addition to the case name and the case number required by the statute. The statement does not need to describe or summarize the nature of the litigation, and we advise against providing such information.

The previous requirement that the Resale Disclosure Statement must contain a statement as to whether the seller or the association has any knowledge of any violations of health or building codes with respect to the unit has been deleted by the law.

HB2495 also changes the time within which the seller or the association must provide the documents and Resale Disclosure Statement to the purchaser. The documents and the Resale Disclosure Statement must be mailed or delivered to the purchaser within ten (10)days after' receipt of a written notice of the pending sale. The notice to the association must contain the name and address of the purchaser. If the last day for furnishing the documents and the Resale Disclosure Statement falls on a Sunday or other legal holiday, then the seller or the association has until the next day which is not a Sunday or other legal holiday in which to furnish the documents and the Resale Disclosure Statement.

HB2495 does not change the provisions of the existing law which expressly gives an association the right to charge the unit owner a reasonable fee to compensate the association for the costs incurred in the preparation of the Resale Disclosure Statement. The association is required to make available to any interested party the amount of any such fee established from time to time by the association. The board of directors of each association containing fifty or more units should adopt a resolution establishing the fee to be charged for the issuance of the Resale Disclosure Statement.

HB2495 provides that a purchaser or seller damaged by the failure of an association to disclose the required information may pursue any and all remedies at law or in equity against the association, including the recovery of reasonable attorney fees. This is a change from the prior law, which allowed any person alleging damages to bring a claim. Also, the prior law did not provide for recovery of reasonable attorneys' fees.

HB2495 amends § 33-1803 of the Planned Communities Act with respect to the amount by which an association can increase the regular assessment from one year to the next. An association may not impose a regular assessment that is more than twenty percent (20%) greater than the immediately preceding fiscal year's assessment without the approval of the majority of the members of the association, unless limitations in the association documents would result in a smaller assessment increase.

HB2495 also amends § 33-1803 to state that an assessment payment by a member is deemed late if it is unpaid fifteen (15) or more days after its due date (changed from 30 days in the prior law), unless the community documents provide for a longer period.

Section 33-1807 has been amended to provide that a lien for unpaid assessments is extinguished unless proceedings to enforce the lien are instituted within three years after the full amount of the assessment becomes due. The prior law had required such action to be taken within one year. The Condominium Act and the Planned Communities Act are now consistent in this regard.

Section 33-1807 currently provides that upon written request, the association shall furnish to a lienholder, unit owner or other person designated by a unit owner within seven business days a recordable statement setting forth the amount of any unpaid assessment against the unit. HB2495 amends Section 33-1807 to provide that the statement must now be furnished within fifteen (15) calendar days after receipt of the request. If the request is received from an escrow agent, the statement is binding on the association, the board of directors and every unit owner. Failure to provide a statement requested by an escrow agent within the fifteen day period extinguishes any lien for any unpaid assessment then due. HB2495 also deletes the requirement that the statement be recordable.

Dyekman, Meda,

Curtis, Cohen, P..L.C.

6750 East Camelback Road

Suite 104

Scottsdale, Arizona 85251

(602) 481-0202

(602) 481-0555 (Fax)

This update is only a summary of the new legislation, and is not intended as legal advice for a specific set of circumstances. For further information contact Don Dyekman, Dan Curtis or Burt Cohen at the above address or phone.