2006 Legislative Update
By Carolyn B. Goldschmidt, Esq.

            In this year’s Arizona legislative session, approximately 30 bills were introduced that pertained to community association issues.   As of the end of the session, we have  five laws that affect Planned Communities and Condominiums, and will become effective on September 21, 2006.  This article will summarize the portions of House Bill 2824 and Senate Bill 1007 that affect Association enforcement actions.

            Notice of Violation¹.   This law provides a formal procedure for an Owner to dispute an Association’s notice that his or her Lot or Unit is in violation of a requirement of the governing documents.   Within 10 business days of the date of the Association’s notice, the Owner may send, via certified mail, a written response that disputes the Association’s notice and requests any additional information needed.  The Owner’s response must be sent to the Association’s address shown on the notice of violation.   Within 10 business days after receipt of the Owner’s response, the Association must respond with a written explanation that must provide at least the following information, unless it was previously provided in the Association’s original notice of violation:

            (a)            The provision of the governing documents that allegedly has been violated.
            (b)            The date of the violation or the date the violation was observed.
            (c)            The first and last name of the person(s) who observed the violation.
            (d)            The process the Owner must follow to contest the notice.

            The Association may not proceed with any action to enforce the governing documents, including collection of attorney fees, unless this information has been included in its notice of violation or otherwise provided to the Owner.   Thus, an Association’s Board or manager should include the four categories of information listed above in the Association’s initial notice of violation to expedite the enforcement process if the Owner does not voluntarily comply.   The “process” that must be described could include the right to appear before the Board of Directors to present all information pertinent to the violation, or the necessity to present the Board with a written summary of such information.  The notice should also include  a description of the action(s) necessary to cure the violation.

            Adjudication of Complaints by Administrative Procedure.  This law allows an Owner or an Association to file a petition with the Department of Fire, Building and Life Safety (the “Department”)  for a hearing concerning violations of the governing documents or statutes that regulate Condominiums or Planned Communities.  The Department has not yet established procedures for this administrative process.   Prior to the effective date of this law, the Department will devise forms and establish the filing fee (which is nonrefundable).   It is anticipated that the filing fee will be $500, payable by the petitioner.  The hearing officer may order the fee to be refunded to the petitioner by the respondent, if the petitioner is successful in his or her claim.

            The Department’s staff will review the petition and response (which must be filed within 20 days of the date the petition is mailed to the Department.  If the petition is justified, the staff will refer the matter to the Office of Administrative Hearings (OAH) for further proceedings.  The OAH hearing officers are attorneys and the proceedings will be similar to a trial, with witnesses, evidence and legal arguments presented to the administrative law judge.  The judge may award a civil penalty against the respondent as well as enter an order of compliance.   All civil penalties and filing fees will be deposited in the Condominium and Planned Community Hearing Office Fund within the Department.  These funds will be used to offset the costs of administering cases.  No later than December 1, 2007, a joint legislative budget committee will review and make recommendations to the legislature regarding the filing fees charged to parties filing for administrative hearings.

            Disputes between owners and those alleging construction defects are exempt from the administrative hearing process.  In the original version of the bill, Associations under declarant control and those with an alternative dispute resolution process in their governing documents, were also exempt from this law.  However, these exemptions were deleted from the final version.

            The law states that the  Board of Directors of Association may authorize representation at the hearing by a corporate officer or by an employee or contractor of the Association.  Nevertheless, it is likely that only a corporate officer or the Association’s attorney will be authorized to represent the Association at the hearing, due to legal considerations that preclude individuals who are not licensed by the State Bar of Arizona from undertaking the unauthorized practice of law.  (A party always is authorized to appear on its own behalf, which allows a corporate officer to represent an Association at a hearing.)  Attorney fees may be awarded to the prevailing party at the hearing, if the governing documents authorize the administrative law judge to do so.

            Either the Association or an Owner may file a petition with the Department at any time during the procedure outlined above pertaining to notices of violation.  Furthermore, the non-prevailing party may appeal the decision of the administrative law judge to the Pima County Superior Court.  Procedural information will become available in the near future on the Department’s website:  http://www.dbfs.state.az.us/.

            Carolyn Goldschmidt founded the Goldschmidt Law Firm, which focuses on the representation of community association.   Carolyn has practiced community association law in Pima County since 1987, and is licensed by the State Bar of Arizona as a certified real estate specialist.