2017 Legislative Bills – Changes in the Law

The following changes will become effective August 9, 2017.  With respect to specific questions or legal issues, you should seek legal advice/assistance.

1.      Recording Open Meetings

HB2411 is attached at Exhibit A, Pages 1 through 17. HB2411 makes changes to how community associations must conduct meetings. Before HB2411, both a planned community (A.R.S. § 33-1804) and condominium (A.R.S. § 33-1248) were allowed to adopt “reasonable rules” regarding an owner (or their designated representative so designated in writing) who desired to audiotape or videotape all or a portion of an open board of directors meeting or a membership meeting (such as the annual meeting). HB2411 modifies both A.R.S. § 33-1804 (Exhibit A, Page 11, Line 23) for planned communities and A.R.S. § 33-1248 (Exhibit A, Page 3, Line 38) for Condominiums to eliminate the possibility that a community association’s “reasonable rules” would require advance notice of an attendee’s intent to audiotape or videotape the meeting.

BEST PRACTICE: Assume that every word and action in an open board meeting and at any membership meeting is being video recorded at all times.

CAVEAT: HB2411 provides that both Condominiums and planned communities can require advance notice of an owner’s intent to record (but the advance notice requirement must be in reasonable rules adopted by the association) if the Board “audiotapes or videotapes the meeting and makes the unedited audiotapes or videotapes available to members on request without restrictions on its use as evidence in any dispute resolution process.”

There are challenges with the caveat:

  1. It is not clear from HB2411 if the “on request” availability of association created recordings of meetings allows the association to prohibit all recording by attendees or simply allows the association to impose an advance notice requirement. Our reading is that it likely only applies to the advance notice requirement.
  2. The requirement to produce the recording “on request” without a timeframe suggests that an owner has a right to immediately receive the copy of the audio or video tape or digital file. This requirement alone creates a possible “gotcha” for an association that would go to the trouble of creating the recordings.

We suggest that community associations carefully consider whether to take advantage of the “Caveat” and to consider the pros and cons of getting into the unedited audiotaping and/or videotaping habit.

2.    Closed or “Executive Session” Board Meetings

HB2411 makes changes to how community association Boards of Directors move into a closed or “executive session” board meeting. Before HB2411, both a planned community (A.R.S. § 33-1804) and condominium (A.R.S. § 33-1248) were allowed to go into executive session without informing the membership why the board is moving into executive session.  It was sufficient to say, “We’re going into executive or closed session”.  HB2411 modifies both A.R.S. § 33-1804 (Exhibit A, Page 12, Line 30) for planned communities and A.R.S. § 33-1248 (Exhibit A, Page 5, Line 1) for Condominiums to require the board of directors to specifically identify, by reference to the closed meeting statute section number, the reason for the executive session.  This can be done in two ways.  First, the community-wide notice informing the membership of the board meeting can refer to the statutory reference.  Second, in circumstances where the board moves into a closed session seamlessly from an open session, the board can do it verbally and note it in the meeting minutes.  For reference, the statutory references and suggested verbiage for a notice or to be said verbally are below:

Planned Communities

Reason: Suggested Statement:
Legal advice from an attorney for the board or the association. On final resolution of any matter for which the board received legal advice or that concerned pending or contemplated litigation, the board may disclose information about that matter in an open meeting except for matters that are required to remain confidential by the terms of a settlement agreement or judgment.  

The Board of Directors will be meeting in executive session pursuant to A.R.S. Section 33-1804(A)(1)

Pending or contemplated litigation. The Board of Directors will be meeting in executive session pursuant to A.R.S. Section 33-1804(A)(2)
Personal, health or financial information about an individual member of the association, an individual employee of the association or an individual employee of a contractor for the association, including records of the association directly related to the personal, health or financial information about an individual member of the association, an individual employee of the association or an individual employee of a contractor for the association.  

 

The Board of Directors will be meeting in executive session pursuant to A.R.S. Section 33-1804(A)(3)

Matters relating to the job performance of, compensation of, health records of or specific complaints against an individual employee of the association or an individual employee of a contractor of the association who works under the direction of the association.  

The Board of Directors will be meeting in executive session pursuant to A.R.S. Section 33-1804(A)(4)

Discussion of a member’s appeal of any violation cited or penalty imposed by the association except on request of the affected member that the meeting be held in an open session.  

The Board of Directors will be meeting in executive session pursuant to A.R.S. Section 33-1804(A)(5)

 

 

 

Condominiums

Reason: Suggested Statement:
Legal advice from an attorney for the board or the association. On final resolution of any matter for which the board received legal advice or that concerned pending or contemplated litigation, the board may disclose information about that matter in an open meeting except for matters that are required to remain confidential by the terms of a settlement agreement or judgment.  

The Board of Directors will be meeting in executive session pursuant to A.R.S. Section 33-1248(A)(1)

Pending or contemplated litigation. The Board of Directors will be meeting in executive session pursuant to A.R.S. Section 33-1248(A)(2)
Personal, health or financial information about an individual member of the association, an individual employee of the association or an individual employee of a contractor for the association, including records of the association directly related to the personal, health or financial information about an individual member of the association, an individual employee of the association or an individual employee of a contractor for the association.  

 

The Board of Directors will be meeting in executive session pursuant to A.R.S. Section 33-1248(A)(3)

Matters relating to the job performance of, compensation of, health records of or specific complaints against an individual employee of the association or an individual employee of a contractor of the association who works under the direction of the association.  

The Board of Directors will be meeting in executive session pursuant to A.R.S. Section 33-1248(A)(4)

Discussion of a member’s appeal of any violation cited or penalty imposed by the association except on request of the affected member that the meeting be held in an open session.  

The Board of Directors will be meeting in executive session pursuant to A.R.S. Section 33-1248(A)(5)

3.    Emergency Board Meetings

HB2411 makes changes to how community association Boards of Directors hold “emergency” meetings. Before HB2411, both a planned community (A.R.S. § 33-1804) and a condominium (A.R.S. § 33-1248) were allowed to have an “emergency meeting” if an item could not wait until the “next regularly scheduled” board meeting. The consequence of conducting an “emergency meeting” was that notice to the membership was not required (making attendance of owners to an emergency meeting on an open session topic nearly impossible). HB2411 does not modify this statement found in A.R.S. § 33-1804(C) and A.R.S. § 33-1248(C): Notice to unit owners of meetings of the board of directors is not required if emergency circumstances require action by the board before notice can be given.

HB2411 does, however, restrict the circumstances where an “emergency meeting” could result in no notice being given to the members to only those circumstances where the matter is so urgent that it cannot wait 48 hours rather than the current standard of, “Until the next regularly scheduled board meeting.”

4.      Ballots

HB2411 makes changes to how community associations conduct voting. Last year, there was a change to A.R.S. § 33-1812, planned communities, and A.R.S. § 33-1250, Condominiums, which contained this statement:

  1. The completed ballot and envelope and any related materials shall contain the name, address and either the actual or electronic signature of the person voting, except that if the condominium/planned community documents permit secret ballots, only the envelope or any nonballot-related materials shall contain the name, address and either the actual or electronic signature of the voter.

This language created confusion as to whether both the ballot and envelope must be signed in order for a vote to be counted. Thankfully, the Legislature has modified this provision with the following language that clarifies that an owner need not sign both the ballot and the envelope in a non-secret ballot voting situation:

  1. The completed ballot shall contain the name, the address and either the actual or electronic signature of the person voting, except that if the condominium/planned community documents permit secret ballots, only the envelope shall contain the name, the address and either the actual or electronic signature of the voter.

5.    Non-Uniform Amendments in non-condo, non-planned community subdivisions

HB2411 enacts changes to A.R.S. § 33-420 (applicable to non-planned communities and non-condominiums) regarding “non-uniform” amendments to a “Declaration” (generally referred to as “CC&Rs”).  The modifications to A.R.S. § 33-440, see Exhibit A, Pages 2 and 3) clarify that A.R.S. § 33-440 applies to non-planned communities.  A.R.S. § 33-40 tracks changes made in 2016 to A.R.S. § 33-1817 regarding non-uniform amendments.

6.   Department of Real Estate Clerical Clean Up

SB1060, attached as Exhibit A, Pages 18 through 22, clarifies that the dispute resolution process that exists outside of the judicial branch is lodged in the Department of Real Estate, not the Department of Fire, Building, and Life Safety. This change was made last year but a clerical error left a reference to the DFBLS in both the planned community statutes and the condominium act.   See Exhibit A, Page 20, Line 38 (condominiums), and Exhibit A, Page 22, Line 15 (planned communities).

7. Resale and Transfer Fees

SB1175, attached as Exhibit A, Pages 23 through 26, clarifies that prohibition on certain types of transfer fees found in A.R.S. § 33-442 applies to 501(c)(3) and 501(c)(4) organizations as well as “nonprofit mandatory membership organizations that are created pursuant to a declaration, covenant or other applicable law and that are composed of the owners of homes, condominiums, cooperatives or manufactured homes or any other interest in real property.”

 

© 2017, Carpenter, Hazlewood, Delgado & Bolen LLP

February 14, 2018 Newest Communities