HOAs; fiscal duties

HB2277 - 572R - I Ver

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 accommodated within the current approved budget, the association may
develop and approve an amendment to the annual budget and resultant
supplemental assessment, as appropriate. The amendment and
supplemental assessments must be ratified by the unit owners pursuant to this
subsection before incurring the expenses or applying the
assessment. The association's budgeted allocation to reserve
accounts is considered committed expenses and may not be reduced to address
unbudgeted expenses without the prior approval of the unit owners.

E. It is the duty of the board of
directors to act in the best interest of the association and to ensure that
reasonable prudency is applied to the commitment, protection and expenditure of
association monies.� The board of directors shall:

1. Consider this duty in the
solicitation and review of competitive bid proposals and the negotiation and
award of any contract for goods or services.� The board of directors may not
agree to any provision of a proposed contract that is unconscionable to the
interests of the association and the unit owners as a whole.

2. Provide for oversight over every
contractor providing services to the association and shall ensure that the
services of the contractor comply with this chapter, meet the expectations of
the association and provide value to the association commensurate with the cost
of services.

3. Ensure that all association monies
are deposited in accounts established in the association's name alone.� The
association shall retain control over all association accounts and at least one
current board of directors member shall have signature authority over those
accounts. The association may assign deposit and withdrawal
authority to a designated managing agent or certified public accountant subject
to the oversight of the board of directors.

4. Provide for a detailed review of
any financial reports provided by the association's managing agent, certified
public accountant, treasurer or financial institution, to validate that only
authorized and appropriate expenditures have been withdrawn from association
accounts.� Any discrepancies or concerns identified shall be investigated and
resolved before the approval of the financial reports by the board of directors.

F. If authorized in the declaration,
the association may establish and fund the specified reserve accounts, however
denominated, necessary to address long-term capital improvements or major
maintenance of the common elements or for any other purpose as established in
the declaration.� Any expenditures or withdrawals from declaration-authorized
reserve accounts must be reasonably related to the declaration's authorized
purpose for that account and the unit owners' reasonable expectations for the
use of those monies.

G. Notwithstanding any provision in
the condominium documents to the contrary, if the board of directors votes to
approve a special assessment, however denominated, or to secure financing for
any reason that assigns future revenues or creates a security interest in the
common elements, that special assessment or financing must be first ratified by
the affirmative vote of fifty-five percent of all allocated votes in the
condominium, before the application of the assessment or commitment to the
financing.

H. Any assessment applied that
violates subsection D or G of this section is invalid and unenforceable as a
matter of law.

E.

I.
The
declaration may provide for a period of declarant control of the association,
during which period a declarant or persons designated by the declarant may
appoint and remove the officers and members of the board of
directors. Regardless of the period provided in the declaration, a
period of declarant control terminates not later than the earlier of:

1. Ninety days after conveyance of seventy-five
percent of the units that may be created to unit owners other than a declarant.

2. Four years after all declarants have ceased to
offer units for sale in the ordinary course of business.

F.

J.
A
declarant may voluntarily surrender the right to appoint and remove officers
and members of the board of directors before termination of the period
prescribed in subsection
E

I
of
this section, but in that event the declarant may require, for the duration of
the period of declarant control, that specified actions of the association or
board of directors, as described in a recorded instrument executed by the
declarant, be approved by the declarant before they become effective.

G.

K.
Not
later than the termination of any period of declarant control the unit owners
shall elect a board of directors of at least three members, at least a majority
of whom must be unit owners.� The board of directors shall elect the officers.�
The board members and officers shall take office on election.

H.

L.
Notwithstanding
any provision of the declaration or bylaws to the contrary, all of the
following apply to a meeting at which a member of the board of directors, other
than a member appointed by the declarant, is proposed to be removed from the
board of directors:

1. The unit owners who are eligible to vote at the
time of the meeting may remove any member of the board of directors, other than
a member appointed by the declarant, by a majority vote of those voting on the
matter at a meeting of the unit owners.

2. The meeting of the unit owners shall be called
pursuant to this section and action may be taken only if a quorum is present.

3. The unit owners may remove any member of the
board of directors with or without cause, other than a member appointed by the
declarant.�

4. For
the
purposes of calling
for removal of a member of the board of directors, other than a member
appointed by the declarant, the following apply:

(a) In an association with one thousand or fewer
members, on receipt of a petition that calls for removal of a member of the
board of directors and that is signed by the number of persons who are eligible
to vote in the association at the time the person signs the petition equal to
at least twenty-five percent of the votes in the association or by the number
of persons who are eligible to vote in the association at the time the person
signs the petition equal to at least one hundred votes in the association,
whichever is less, the board shall call and provide written notice of a special
meeting of the association as prescribed by section 33-1248, subsection
B.

(b) Notwithstanding section 33-1248,
subsection B, in an association with more than one thousand members, on receipt
of a petition that calls for removal of a member of the board of directors and
that is signed by the number of persons who are eligible to vote in the
association at the time the person signs the petition equal to at least ten
percent of the votes in the association or by the number of persons who are
eligible to vote in the association at the time the person signs the petition
equal to at least one thousand votes in the association, whichever is less, the
board shall call and provide written notice of a special meeting of the
association. The board shall provide written notice of a special
meeting as prescribed by section 33-1248, subsection B.

(c) The special meeting shall be called, noticed and
held within thirty days after receipt of the petition.

(d) If all of the requirements of this subsection
for calling a special meeting are met and the board of directors fails to call,
notice and hold a special meeting within thirty days after receipt of the
petition, the members of the board of directors are deemed removed from office
effective at midnight of the thirty-first day.

(e) For
the
purposes of a
special meeting called pursuant to this subsection, a quorum is present if the
number of owners who are eligible to vote in the association at the time the
person attends the meeting equal to at least twenty percent of the votes of the
association or the number of persons who are eligible to vote in the
association at the time the person attends the meeting equal to at least one
thousand votes, whichever is less, is present at the meeting in person or as
otherwise allowed by law.

(f) If a civil action is filed regarding the removal
of a board member, the prevailing party in the civil action shall be awarded
its reasonable attorney fees and costs.

(g) The board of directors shall retain all
documents and other records relating to the proposed removal of the member of
the board of directors and any election or other action taken for that
director's replacement for at least one year after the date of the special
meeting and shall allow members to inspect those documents and records pursuant
to section 33-1258.

(h) A petition that calls for the removal of the
same member of the board of directors shall not be submitted more than once
during each term of office for that member.

5. On removal of at least one but fewer than a
majority of the members of the board of directors at a special meeting of the
membership called pursuant to this subsection, the vacancies shall be filled as
provided in the condominium documents.

6. On removal of a majority of the members of the
board of directors at a special meeting of the membership called pursuant to
this subsection, or if the condominium documents do not provide a method for
filling board vacancies, the association shall hold an election for the
replacement of the removed directors at a separate meeting of the members of
the association that is held not later than thirty days after the meeting at
which the members of the board of directors were removed.

7. A member of the board of directors who is removed
pursuant to this subsection is not eligible to serve on the board of directors
again until after the expiration of the removed board member's term of office,
unless the condominium documents specifically provide for a longer period of
ineligibility.

I.

M.
For
an association in which board members are elected from separately designated
voting districts, a member of the board of directors, other than a member
appointed by the declarant, may be removed only by a vote of the members from
that voting district, and only the members from that voting district are
eligible to vote on the matter or be counted for
the

purposes of determining a quorum.

J.

N.
Unless
any provision in the condominium documents requires an annual audit by a
certified public accountant, the board of directors shall provide for an annual
financial audit, review or compilation of the association.� The audit, review
or compilation shall be completed
no

not

later than one hundred eighty days after the end of the association's fiscal
year and shall be made available on request to the unit owners within thirty
days after its completion.

K.

O.
This
section does not apply to timeshare plans or associations, or the period of
declarant control under timeshare instruments, that are subject to chapter 20
of this title.
END_STATUTE

Sec. 4. Section 33-1245, Arizona Revised
Statutes, is amended to read:

START_STATUTE
33-1245.

Termination of contracts and leases of declarant; applicability

A. A
contract for any of the following, if entered into before the board of
directors elected by the unit owners pursuant to section 33-1243,
subsection
G

K
takes office,
shall contain a provision in the contract that the contract may be terminated
without penalty by the association at any time after the board of directors
elected by the unit owners takes office:

1. Any management contract or employment contract.

2. Any other contract or lease between the
association and a declarant or an affiliate of a declarant.

3. Any contract or lease that is not bona fide or
was unconscionable to the unit owners at the time entered into under the
circumstances then prevailing.

B. The board of directors shall notify the
appropriate contractual party of the termination at least thirty days before
termination.

C. This section does not apply to any lease if the
termination of the lease would terminate the condominium or reduce its size.

D. If a contract covered by this section fails to
contain the provisions required by subsection A of this section, the contract
is voidable at the option of the association.

E. This section does not apply to timeshare plans or
associations that are subject to chapter 20 of this title.
END_STATUTE

Sec. 5. Section 33-1254, Arizona Revised
Statutes, is amended to read:

START_STATUTE
33-1254
.
Surplus monies

A.
Unless
otherwise provided in the declaration
except as provided
in subsection B of this section, notwithstanding any provision in the
condominium documents to the contrary
, any surplus monies of the
association

association's operating account
remaining
after payment of or provision for common expenses and any prepayment of
reserves shall be
paid
refunded
to
the unit owners in proportion to their common expense liabilities or credited
to them to reduce their future common expense assessments.

B. The association may submit the
question to the unit owners to apply surplus monies in the operating account to
long-term major maintenance reserve accounts.� A simple majority of unit
owners' votes cast decides the question, whether or not a quorum is satisfied.

END_STATUTE

Sec. 6. Section 33-1803, Arizona Revised
Statutes, is amended to read:

START_STATUTE
33-1803.

Fiscal duties; penalties; notice to member of violation

A. Unless limitations in the community
documents would result in a lower limit for the assessment, the association
shall not impose a regular assessment that is more than twenty percent greater
than the immediately preceding fiscal year's assessment without the approval of
the majority of the members of the association.

A. After termination of the period of
declarant control, the association's 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 members to manage cost and to provide for the annual
maintenance and operation of the common property, the maintenance of community
private property or other services required by the declaration, the reasonable
and necessary administrative and operating expenses of the association and�
appropriate allocations to reserve accounts.� A copy of any proposed budget and
current year-to-date budget comparison report must be either posted on a
community website or provided to any member in attendance at the meeting at
which the board will consider the approval of that budget.
�
Notwithstanding any provision of the community documents to the
contrary, for any planned community of fifty members 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 F of this
section, must be ratified by members before the application of that assessment. If
necessary, member ratification shall be established by the affirmative vote of
a simple majority of the members voting on the ballot initiative, pursuant to
section 33-1812, whether or not a quorum is satisfied.� The ballot
question may be included on the ballot for any annual or special meeting of the
members or processed separately.� The association 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 that cannot be accommodated within the current approved budget, the
association may develop and approve an amendment to the annual budget and
resultant supplemental assessment, as appropriate.� The amendment and
supplemental assessments must be ratified by the members pursuant to this
subsection before incurring the expenses or applying the assessment.� The
association's budgeted allocation to reserve accounts shall be considered
committed expenses and may not be reduced to address unbudgeted expenses
without the prior approval of the members.

B. Except as provided in subsection C
of this section, notwithstanding any provision in the community documents to
the contrary, any surplus monies of the

association's
operating account remaining after payment of or provision for common expenses
and any prepayment of reserves shall be refunded to the members in proportion
to their common expense liabilities or credited to them to reduce their future
common expense assessments.

C. The association may submit the
question to the members to apply surplus monies in the operating account to
long-term major maintenance reserve accounts.� A simple majority of members'
votes cast decides the question, whether or not a quorum is satisfied.

D. It is the duty of the board of
directors to act in the best interest of the association and to ensure that
reasonable prudency is applied to the commitment, protection and expenditure of
association monies.� The board shall:

1. Consider this duty in the
solicitation and review of competitive bid proposals and the negotiation and
award of any contract for goods or services.� The board may not agree to any
provision of a proposed contract that is unconscionable to the interests of the
association and the members as a whole.

2. Provide for oversight over every
contractor providing services to the association and shall ensure that the
services of the contractor comply with this chapter, meet the expectations of
the association defined in the contract and provide value to the association
commensurate with the cost of services.

3. Ensure that all association monies
are deposited in accounts established in the association's name alone.� The
association shall retain control over all association accounts and at least one
current board member shall have signature authority over those
accounts. The association may assign deposit and withdrawal
authority to a designated managing agent or certified public accountant subject
to the oversight of the board.

4. Provide for a detailed review of
any financial reports provided by the association's managing agent, certified
public accountant, treasurer or financial institutions, to validate that only
authorized and appropriate expenditures have been withdrawn from association
accounts. Any discrepancies or concerns identified shall be investigated and
resolved before the approval of the financial reports by the board.

E. If authorized in the declaration,
the association may establish and fund the specified reserve accounts, however
denominated, necessary to address long-term capital improvements or major
maintenance of the common elements or for any other purpose as established in
the declaration.� Any expenditures or withdrawals from declaration-authorized
reserve accounts must be reasonably related to the declaration's authorized
purpose for that account and the members' reasonable expectations for the use
of those monies.

F. Notwithstanding any provision in
the community documents to the contrary, if the board of directors votes to
approve a special assessment, however denominated, or to secure financing for
any reason that assigns future revenues or creates a security interest in the
common property, that special assessment or financing shall be first ratified
by the affirmative vote of fifty-five percent of all allocated votes in
the association before the application of the assessment or commitment to the
financing.

G. ANY ASSESSMENT APPLIED that
violates SUBSECTION A or F OF THIS SECTION IS INVALID AND UNENFORCEABLE AS A
MATTER OF LAW.

H.
Unless reserved to the
members of the association, the board of directors may impose reasonable
charges for the late payment of assessments.� A payment by a member is deemed
late if it is unpaid fifteen or more days after its due date unless the
community documents provide for a longer period. Charges for the
late payment of assessments are limited to the greater of
fifteen
dollars

$15
or ten percent of the amount of the
unpaid assessment and may be imposed only after the association has provided
notice that the assessment is overdue or provided notice that the assessment is
considered overdue after a certain date.� Any monies paid by the member for an
unpaid assessment shall be applied first to the principal amount unpaid and
then to the interest accrued.

B.

I.
After
notice and an opportunity to be heard, the board of directors may impose
reasonable monetary penalties on members for violations of the declaration,
bylaws and rules of the association. Notwithstanding any provision in the
community documents, the board of directors shall not impose a charge for a
late payment of a penalty that exceeds the greater of
fifteen
dollars

$15
or ten percent of the amount of the
unpaid penalty. A payment is deemed late if it is unpaid fifteen or
more days after its due date, unless the declaration, bylaws or rules of the
association provide for a longer period.� Any monies paid by a member for an
unpaid penalty shall be applied first to the principal amount unpaid and then
to the interest accrued.� Notice pursuant to this subsection shall include
information pertaining to the manner in which the penalty shall be enforced.

C.

J.
A
member who receives a written notice that the condition of the property owned
by the member is in violation of the community documents without regard to
whether a monetary penalty is imposed by the notice may provide the association
with a written response by sending the response by certified mail within twenty-one
calendar days after the date of the notice. The response shall be
sent to the address identified in the notice.

D.

K.
Within
ten business days after receipt of the certified mail containing the response
from the member, the association shall respond to the member with a written
explanation regarding the notice that shall provide at least the following
information unless previously provided in the notice of violation:

1. The provision of the community documents that has
allegedly been violated.

2. The date of the violation or the date the
violation was observed.

3. The first and last name of the person or persons
who observed the violation.

4. The process the member must follow to contest the
notice.

E.

L.
Unless
the information required in subsection
D
K
, paragraph 4 of this section is provided in the notice of
violation, the association shall not proceed with any action to enforce the
community documents, including the collection of attorney fees, before or
during the time prescribed by subsection
D
K
of this section regarding the exchange of information
between the association and the member and shall give the member written notice
of the member's option to petition for an administrative hearing on the matter
in the state real estate department pursuant to section 32-2199.01. At
any time before or after completion of the exchange of information pursuant to
this section, the member may petition for a hearing pursuant to section 32-2199.01
if the dispute is within the jurisdiction of the state real estate department
as prescribed in section 32-2199.01.
END_STATUTE