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HB4050 - 572R - I Ver
REFERENCE TITLE:
homeowners' associations; foreclosure process.
State of Arizona
House of Representatives
Fifty-seventh Legislature
Second Regular Session
2026
HB 4050
Introduced by
Representative
Carter P
AN
ACT
amending sections 33-1202, 33-1256,
33-1802 and 33-1807, 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
association's charges that are applied to each unit owner to fund the actual or
anticipated common expenses based on each unit owner's common expense liability
.
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
sections
33-1217
or
and
33-1255.
10. "Common expense lien" means the lien
for assessments, charges for late payment of assessments
or
interest on those 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
in any
action
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
for the maintenance,
operation, use, upgrade, replacement or acquisition of the common elements,
utilities or other services required by the declaration and the association's
reasonable ADMINISTRATIVE and operational expenses as authorized in the declaration
.
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, 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, 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
charges
":
(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
or the condominium documents
.
(b) Does not include any amount that is included in
a common expense lien.
END_STATUTE
Sec. 2. Section 33-1256, Arizona Revised Statutes, is amended to read:
START_STATUTE
33-1256.
Common expense liens; priority; mechanics' and materialmen's
liens; notice; applicability
A. The association
has a common expense lien on a unit for any
valid
assessment
levied against that unit from the time the assessment becomes
due. The association's common expense lien may be foreclosed in the
same manner as a mortgage on real estate but may be foreclosed only if the unit
owner has been and remains delinquent in the payment of
assessments,
any assessment or portion of the assessment
for a period
of
one year
eighteen months
or in
the amount of
$1,200
$10,000
or
more, whichever occurs first, as determined on the date the action is filed.
� For any special assessment with an initial value of $10,000 or more,
only the eighteen-month delinquency threshold applies.
The
association board of directors shall exercise reasonable efforts to communicate
with the unit owner and offer a reasonable payment plan before filing a
foreclosure action.� If an assessment is payable in installments, the full
amount of the assessment is a
common expense
lien from
the time the first installment of the assessment becomes due.
B. Notwithstanding any provision in the condominium
documents, unit owner
expenses
charges
are
not enforceable as common expense liens under this section. The
association has a
judgment
lien for unit owner
expenses
charges
after the entry of a
judgment in a civil suit for those unit owner
expenses
charges
from a court of competent jurisdiction and the
recording of that judgment in the office of the county recorder as otherwise
provided by law. The association's judgment lien for unit owner
expenses
charges
may not be foreclosed and
is effective only on conveyance of any interest in the real property.
C. A common expense lien under this section is prior
to all other liens, interests and encumbrances on a unit except:
1. Liens and encumbrances recorded before the
recordation of the declaration.
2. A recorded first mortgage on the unit, a seller's
interest in a first contract for sale pursuant to chapter 6, article 3 of this
title on the unit recorded before the
common expense
lien
arising pursuant to subsection A of this section or a recorded first deed of
trust on the unit.
3. Liens for real estate taxes and other
governmental assessments or charges against the unit.
D. Subsection C of this section does not affect the
priority of mechanics' or materialmen's liens.� The common expense lien under
this section is not subject to chapter 8 of this title.
E. Unless the declaration otherwise provides, if two
or more associations have common expense liens created at any time on the same
real estate, those
common expense
liens have equal
priority.
F. Recording the declaration constitutes record
notice and perfection of the common expense lien.� Further recordation of any
claim of common expense lien under this section is not required.
G. A common expense lien is extinguished unless
proceedings to enforce the
common expense
lien are
instituted within six years after the full amount of the assessments becomes
due.
H. This section does not prohibit:
1. Actions to recover sums for which subsection A or
B of this section creates a
perfected and otherwise effective
lien.
2. An association from taking a deed in lieu of
foreclosure.
I. A judgment or decree in any action brought under
this section may include costs and reasonable attorney fees for the prevailing
party.
J. The association on written request shall furnish
to a lienholder, escrow agent, unit owner or person designated by a unit owner
a statement setting forth the amount of any unpaid liens prescribed by
subsection A or B of this section against the unit. The statement
shall be furnished within ten days after receipt of the request.� The statement
is binding on the association if the statement is requested by an escrow agency
that is licensed pursuant to title 6, chapter 7. Failure to provide
the statement to the escrow agent within the time provided for in this
subsection extinguishes any lien for any unpaid assessment then due.
K. Notwithstanding any provision in the condominium
documents or in any contract between the association and a management company
or any other agent of the association, including any agreement or contract with
any attorney, unless the unit owner directs otherwise, all payments received on
a unit owner's account shall be applied first to any unpaid assessments, due
but not delinquent assessments, unpaid charges for late payment of
or interest on
those assessments if authorized in the
declaration, unpaid reasonable collection fees and costs incurred or applied by
the association and unpaid attorney fees and costs incurred
in
any action
with respect to those assessments if awarded by a court, in
that order, with any remaining amounts applied next to other unpaid fees,
charges and monetary penalties or interest
and late charges
on any of those amounts.
L. For a delinquent account for unpaid common
expense liens, the association shall
provide
deliver
the following written notice to the unit owner at the
unit owner's address
as provided to the association
of record
at least thirty days before authorizing an attorney,
or a collection agency that is not acting as the association's managing agent,
to begin collection activity on behalf of the association:
Your account is delinquent. If you do not bring
your account current or make arrangements that are approved by the association
to bring your account current within thirty days after the date of this notice,
your account will be turned over for further collection
proceedings. Such collection proceedings could include bringing a
foreclosure action against your property.
The notice shall be in
boldfaced
bold-faced
type or all capital letters and shall include
the contact information for the person that the unit owner may contact to
discuss payment. The notice shall be sent by certified mail, return
receipt requested
, and may be included within other
correspondence sent to the unit owner regarding the unit owner's delinquent
account
.
� If the association does not comply with the
notice requirements prescribed by this subsection, all subsequent collection
costs incurred by the association are uncollectible against the unit owner.
M. Except for condominiums that have
fewer than fifty units and that do not contract with a third party to perform
management services on behalf of the association, the association shall provide
a statement of account in lieu of a periodic payment book to the unit owner
with the same frequency that assessments are provided for in the
declaration. The statement of account shall include the current
account balance due and the immediately preceding ledger history. If
the association offers the statement of account by electronic means, a unit
owner may opt to receive the statement electronically.� The association may
stop providing any further statements of account to a unit owner if collection
activity begins by an attorney, or a collection agency that is not acting as
the association's managing agent, regarding that unit owner's unpaid account.�
After collection activity begins, a unit owner may request statements of
account by written request to the attorney or collection agency. Any
request by a unit owner for a statement of account after collection activity
begins by an attorney or a collection agency that is not acting as the
association's managing agent must be fulfilled by the attorney or the
collection agency responsible for the collection.� The statement of account
provided by the attorney or collection agency responsible for the collection
shall include all amounts claimed to be owing to resolve the delinquency
through the date set forth in the statement, including attorney fees and costs,
regardless of whether such amounts have been reduced to judgment.
M. The association shall maintain a
true and accurate record of accounts for each unit in the
condominium. These accounts shall distinguish between charges that
are included in the common expense lien and other unit owner charges.� With
respect to the accounts:
1. The association may use any
process or tool it deems appropriate for the billing of money owed on the unit
owner's accounts, including the use of periodic payment books. The
association shall provide either secure online viewing access to the individual
unit owner's account or, on request by the unit owner, an electronic copy of
the statement of account for the current fiscal year, without charge.
2. The association or its agents
shall make good faith efforts to evaluate and resolve any charges on the unit
owner's account that are contested by the unit owner, including a request for
review and correction by the board of directors, if necessary.
3. Any charge assessed in violation
of the declaration or this chapter on either the common expense lien or the
unit owner charges is invalid and unenforceable.
4. Any contested charge from the unit
owner's statement of account may be challenged in a court of competent
jurisdiction in any action by the association to enforce or apply the common
expense lien or judgment lien. If the court finds the charge to be
invalid, the charge and any subsequent related collection cost or fees that are
included in the common expense lien or judgment lien based on that charge shall
be extinguished and excluded from the common expense lien or judgment lien by
order of the court.
N. An agent for the association may collect on
behalf of the association directly from a unit owner the assessments and other
amounts owed by cash or check, by mailed or hand-delivered bank drafts, checks,
cashier's checks or money orders, by credit, charge or debit card or by other
electronic means.� For any form of payment other than for cash or for mailed or
hand-delivered bank drafts, checks, cashier's checks or money orders, the
agent may charge a convenience fee to the unit owner that is approximately the
amount charged to the agent by a third-party service provider.
O.
The association may not
transfer ownership or control of debt for common expense liens or unit owner
expenses
charges
.
O.
P.
This
section does not apply to timeshare plans or associations that are subject to
chapter 20 of this title.
END_STATUTE
Sec. 3. Section 33-1802, Arizona Revised
Statutes, is amended to read:
START_STATUTE
33-1802.
Definitions
In this chapter and in the community documents, unless the
context otherwise requires:
1. "Allocated interests"
means the common expense liability and voting rights that are allocated to each
member of the association.
2. "Assessment" means the
association's charges that are applied to each member to fund the actual or
anticipated common expenses based on each member's common expense liability.
1.
3.
"Association":
(a) Means a nonprofit corporation or unincorporated
association of owners that is created pursuant to a declaration to own and
operate portions of a planned community and that has the power under the
declaration to assess association members to pay the costs and expenses
incurred in the performance of the association's obligations under the
declaration.
(b) Does not include a nonprofit corporation or
unincorporated association of owners that is created or incorporated before
January 1, 1974 and that does not have authority to enforce covenants,
conditions or restrictions related to the use, occupancy or appearance of the
separately owned lots, parcels or units in a real estate development, unless
the nonprofit corporation or unincorporated association of owners elects to be
subject to this chapter pursuant to section 33-1801, subsection D.
4. "Common expense
liability" means the share or assignment of common expenses that are
allocated to each member by the declaration.
2.
5.
"Common
expense lien" means the lien for assessments, charges for late payment of
assessments
or interest on those assessments
if
authorized in the declaration, reasonable collection fees and costs
that are
incurred or applied by the association and reasonable
attorney fees and costs that are incurred
in any action
with
respect to those assessments, if the attorney fees and costs are awarded by a
court.
6. "Common expenses" means
expenditures made by or financial liabilities of the association for the
maintenance, operation, use, upgrade, replacement or acquisition of the common
property, the MAINTENANCE of member property or utilities or other services
required by the declaration and the association's reasonable ADMINISTRATIVE and
operational expenses as authorized in the declaration.
3.
7.
"Community
documents" means the declaration, bylaws, articles of incorporation, if
any, and rules, if any.
4.
8.
"Declaration"
means any instruments, however denominated, that establish a planned community
and any amendment to those instruments.
5.
9.
"Member
expenses
charges
":
(a) Means fees, charges
, late charges
and monetary penalties or interest
that are imposed pursuant to
the community documents
.
(b) Does not include any amount that is included in
a common expense lien.
6.
10.
"Planned
community":
(a) Means a real estate development that includes
real estate owned and operated by or real estate on which an easement to
maintain roadways or a covenant to maintain roadways is held by a nonprofit
corporation or unincorporated association of owners, that is created
for the purpose of managing, maintaining or improving
to manage, maintain or improve
the property and in which the
declaration expressly states both that the owners of separately owned lots,
parcels or units are mandatory members and that the owners are required to pay
assessments to the association for these purposes.�
(b) Does not include
any of the following:
(i) A timeshare plan
or a timeshare association that is governed by chapter 20 of this title.
(ii) A condominium
that is governed by chapter 9 of this title.
(iii) A real estate
development that is not managed or maintained by an association.
END_STATUTE
Sec. 4. Section 33-1807, Arizona Revised Statutes, is amended to read:
START_STATUTE
33-1807.
Common expense liens; priority; mechanics' and materialmen's
liens; notice
A. The
association has a common expense lien on a property for any
valid
assessment levied against that property from the time the assessment
becomes due. The association's common expense lien may be foreclosed
in the same manner as a mortgage on real estate but may be foreclosed only if
the owner has been and remains delinquent in the payment of any assessment or
portion of the assessment for a period of eighteen months or in the amount of $10,000
or more, whichever occurs first, as determined on the
date the action is filed.
� For any special assessment with an
initial value of $10,000 or more, only the eighteen-month delinquency threshold
applies.
� The association board of directors shall exercise reasonable
efforts to communicate with the member and offer a reasonable payment plan
before filing a foreclosure action. If an assessment is payable in
installments, the full amount of the assessment is a common expense lien from
the time the first installment of the assessment becomes due.
B. Notwithstanding any provision in the community
documents, member
expenses
charges
are
not enforceable as common expense liens under this section. The
association has a judgment lien for member
expenses
charges
after the entry of a judgment in a civil suit for those
member
expenses
charges
from a court
of competent jurisdiction and the recording of that judgment in the office of
the county recorder as otherwise provided by law. The association's
judgment lien for member
expenses
charges
may
not be foreclosed and is effective only on conveyance of any interest in the
real property.
C. A common expense lien under this section is prior
to all other liens, interests and encumbrances on a property except:
1. Liens and encumbrances recorded before the
recordation of the declaration.
2. A recorded first mortgage on the property, a
seller's interest in a first contract for sale pursuant to chapter 6, article 3
of this title on the property recorded before the common expense lien arising
pursuant to subsection A of this section or a recorded first deed of trust on
the property.
3. Liens for real estate taxes and other
governmental assessments or charges against the property.
D. Subsection C of this section does not affect the
priority of mechanics' or materialmen's liens.� The common expense lien under
this section is not subject to chapter 8 of this title.
E. Unless the declaration otherwise provides, if two
or more associations have common expense liens created at any time on the same
real estate those common expense liens have equal priority.
F. Recording the declaration constitutes record
notice and perfection of the common expense lien. Further
recordation of any claim of common expense lien under this section is not
required.
G. A common expense lien is extinguished unless
proceedings to enforce the common expense lien are instituted within six years
after the full amount of the assessment becomes due.
H. This section does not prohibit:
1. Actions to recover amounts for which subsection A
or B of this section creates a
perfected and otherwise effective
lien.
2. An association from taking a deed in lieu of
foreclosure.
I. A judgment or decree in any action brought under
this section may include costs and reasonable attorney fees for the prevailing
party.
J. On written request, the association shall furnish
to a lienholder, escrow agent, member or person designated by a member a
statement setting forth the amount of any unpaid liens prescribed by subsection
A or B of this section against the property. The association shall
furnish the statement within ten days after receipt of the request.� The
statement is binding on the association if the statement is requested by an
escrow agency that is licensed pursuant to title 6, chapter 7.� Failure to
provide the statement to the escrow agent within the time provided for in this
subsection extinguishes any lien for any unpaid assessment then due.
K. Notwithstanding any provision in the community
documents or in any contract between the association and a management company
or any other agent of the association, including any agreement or contract with
any attorney, unless the member directs otherwise, all payments received on a
member's account shall be applied first to any unpaid assessments, due but not
delinquent assessments, unpaid charges for late payment of
or
interest on
those assessments if authorized in the declaration, unpaid
reasonable collection fees and costs incurred or applied by the association,
and unpaid attorney fees and costs incurred
in any action
with
respect to those assessments if awarded by a court, in that order, with any
remaining amounts applied next to other unpaid fees
,
and
charges and monetary penalties or interest
and late charges
on any of those amounts.
L. For a delinquent account for unpaid common
expense liens, the association shall
provide
deliver
the following written notice to the member at the
member's address
as provided to the association
of record
at least thirty days before authorizing an attorney,
or a collection agency that is not acting as the association's managing agent,
to begin collection activity on behalf of the association:
Your account is delinquent.� If you do not bring your account
current or make arrangements that are approved by the association to bring your
account current within thirty days after the date of this notice, your account
will be turned over for further collection proceedings. Such
collection proceedings could include bringing a foreclosure action against your
property.
The notice shall be in bold-faced type
or all capital letters and shall include the contact information for the person
that the member may contact to discuss payment. The notice shall be
sent by certified mail, return receipt requested
, and may be
included within other correspondence sent to the member regarding the member's
delinquent account
.�
if the association does not comply
with the notice requirements PRESCRIBED by this subsection, all subsequent
collection costs are uncollectible against the member.
M. Except for planned communities that
have fewer than fifty lots and that do not contract with a third party to
perform management services on behalf of the association, the association shall
provide a statement of account in lieu of a periodic payment book to the member
with the same frequency that assessments are provided for in the
declaration. The statement of account shall include the current
account balance due and the immediately preceding ledger history. If
the association offers the statement of account by electronic means, a member
may opt to receive the statement electronically. The association may
stop providing any further statements of account to a member if collection
activity begins by an attorney, or a collection agency that is not acting as
the association's managing agent, regarding that member's unpaid
account. After collection activity begins, a member may request
statements of account by written request to the attorney or collection
agency. Any request by a member for a statement of account after
collection activity begins by an attorney or a collection agency that is not
acting as the association's managing agent must be fulfilled by the attorney or
the collection agency responsible for the collection. The statement
of account provided by the attorney or collection agency responsible for the
collection shall include all amounts claimed to be owing to resolve the
delinquency through the date set forth in the statement, including attorney
fees and costs, regardless of whether such amounts have been reduced to
judgment.
M. The association shall maintain a
true and accurate record of accounts for each property in the planned
community.� These accounts shall distinguish between charges that are included
in the common expense lien and other member charges.� With respect to the
accounts:
1. The association may use any
process or tool it deems appropriate for the billing of money owed on the
member's accounts, including the use of periodic payment books.� The
association shall provide either secure online viewing access to the individual
member's account or, on request by the member, an electronic copy of the
statement of account for the current fiscal year, without charge.
2. The association or its agents
shall make good faith efforts to evaluate and resolve any charges on the
member's account that are contested by the member, including a request for
review and correction by the board of directors, if necessary.
3. Any charge assessed in violation
of the declaration or this chapter on either the common expense lien or the
member charges is invalid and unenforceable.
4. Any contested charge from the
member's statement of account may be challenged in a court of competent
jurisdiction in any action by the association to enforce or apply the common
expense lien or judgment lien. If the court finds the charge to be invalid, the
charge and any subsequent related collection cost or fees that are included in
the common expense lien or judgment lien based on that charge shall be
extinguished and excluded from the common expense lien or judgment lien by
order of the court.
N. An agent for the association may collect on
behalf of the association directly from a member the assessments and other
amounts owed by cash or check, by mailed or hand-delivered bank drafts, checks,
cashier's checks or money orders, by credit, charge or debit card or by other
electronic means. For any form of payment other than for cash or for
mailed or hand-delivered bank drafts, checks, cashier's checks or money
orders, the agent may charge a convenience fee to the member that is
approximately the amount charged to the agent by a third-party service
provider.
O.
The association may not
transfer ownership or control of debt for common expense liens or member
expenses
charges
.
END_STATUTE