homeowners' associations; rulemaking

SB1659 - 572R - I Ver

REFERENCE TITLE:
homeowners' associations; rulemaking

State of Arizona

Senate

Fifty-seventh Legislature

Second Regular Session

2026

SB 1659

Introduced by

Senator
Ortiz

AN
ACT

amending sections 33-1242 and 33-1817,
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 33-1242, Arizona Revised
Statutes, is amended to read:

START_STATUTE
33-1242.

Powers of unit owners' association; rules; notice to unit owner
of violation

A. Subject to the provisions of the declaration, the
association may:

1. Adopt and amend
both:

(
a
)
Bylaws
.

And

(
b
)
Rules
as described in subsections B, C and D of this section
.

2. Adopt and amend budgets for revenues,
expenditures and reserves and collect assessments for common expenses from unit
owners.

3. Hire and discharge managing agents and other
employees, agents and independent contractors.

4. Institute, defend or intervene in litigation or
administrative proceedings in its own name on behalf of itself or two or more
unit owners on matters affecting the condominium.

5. Make contracts and incur liabilities.

6. Regulate the use, maintenance, repair,
replacement and modification of common elements.

7. Cause additional improvements to be made as a
part of the common elements.

8. Acquire, hold, encumber and convey in its own
name any right, title or interest to real or personal property, except that
common elements may be conveyed or subjected to a security interest only
pursuant to section 33-1252.

9. Grant easements, leases, licenses and concessions
through or over the common elements.

10. Impose and receive any payments, fees or charges
for the use
,
or
rental
or operation
of the common elements other than limited common
elements described in section 33-1212, paragraphs 2 and 4 and for
services provided to unit owners.

11. Impose charges for late payment of assessments
after the association has provided notice that the assessment is overdue or
provided notice that the assessment is considered overdue after a certain date
and, after notice and an opportunity to be heard, impose reasonable monetary
penalties on unit owners for violations of the declaration, bylaws and rules of
the association.

12. Impose reasonable charges for the preparation
and recordation of amendments to the declaration or statements of unpaid
assessments.

13. Provide for the indemnification of its officers
and executive board of directors and maintain directors' and officers'
liability insurance.

14. Assign its right to future income, including the
right to receive common expense assessments, but only to the extent the
declaration expressly provides.

15. Be a member of a master association or other
entity owning, maintaining or governing in any respect any portion of the
common elements or other property benefitting or related to the condominium or
the unit owners in any respect.

16. Exercise any other powers conferred by the
declaration or bylaws.

17. Exercise all other powers that may
be exercised in this state by legal entities of the same type as the
association.

18.

17.
Exercise
any other powers necessary and proper for the governance and operation of the
association.

B. Notwithstanding any provision of
the condominium documents to the contrary, the association shall enforce the
specific covenants, conditions and restrictions in the declaration with
reasonable discretion as necessary to protect property values in the
community.� The association shall reasonably provide for the protection,
preservation and upkeep of the common elements, to provide for and promote
safety in the use of the common elements and to manage the availability of the
common elements.� If the declaration grants the general power to adopt rules,
the association has the authority to adopt rules or policies to:

1. Protect unit owners from
unreasonable interference in the enjoyment, privacy and use of their units or
common elements caused by the use or behaviors of other unit owners, residents
or guests and to protect the structural integrity or the safety of adjacent
units or their occupants or the condominium as a whole.

2. Protect unit owners, residents and
guests from discrimination or the creation of hostile environment harassment as
described in 24 code of Federal Regulations section 100.600.

3. Allow for the application of
reasonable accommodations to address accessibility needs raised by disabled
owners as required by the americans with disabilities act as defined in section
41-1492.�

4. Satisfy valid underwriting
requirements of institutional lenders under federal law and 24 code of Federal
Regulations section 203.43
b
, including restricting the
number of nonowner occupied units.

5. Maintain reasonable decorum and
civility in the conduct of all association meetings or interactions with board
of directors members, unit owners or any other contractor or agent of the
association if the rules apply to and are enforced equally on all parties.

6. Establish policies for the
business conduct and expectations of the condominium association, its agents
and contractors.

7. Limit
the enforcement of restrictions identified in the declaration that the
association reasonably believes will not have an adverse impact on adjacent
property values for specific situations based on extenuating circumstances,
without waiving its right to enforce those restrictions on units without the
extenuating circumstances.

C. For the purposes of subsection B
of this section, a rule is reasonable if it is not arbitrary or capricious and
it is enforced fairly and consistently on all unit owners.

D. Except as otherwise provided in
subsection B of this section, elsewhere in this chapter or as explicitly
authorized and noticed in the declaration, the association may not:

1. Adopt rules that restrict Any
physical characteristic, the use or occupancy of individual units or the rights
or behaviors of unit owners.

2. Create a rule or policy, or take
any action that unreasonably burdens or restricts a fundamental constitutional
right of the unit owners, including freedom of speech, freedom of religion,
freedom to assemble peacefully, freedom to petition their governing body to
redress grievances, the right to due process of law, the right to privacy,
freedom from unreasonable and excessive penalties, or as protected by the
consumer review fairness act of 2016 (P.L. 114-258; 130 Stat. 1355; 15 United
States code section 45
b
).

3. Adopt rules that change the basis
for the allocated interest or common expense liability.� Any rule or policy
inconsistent with this subsection is invalid and unenforceable.

E. In any action or hearing pursuant
to section 32-2199.01 that is initiated by a unit owner against the association
for a violation of this section or in any action initiated by the association
to enforce an alleged violation of rules or policies, the association has the
burden of proof to establish that any rule or policy that is established by the
association complies with the requirements of this section.

B.

F.
A
unit owner who receives a written notice that the condition of the property
owned by the unit owner is in violation of a requirement of the condominium
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.

C.

G.
Within
ten business days after receipt of the certified mail containing the response
from the unit owner, the association shall respond to the unit owner 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 condominium 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 unit owner must follow to contest
the notice.

D.

H.
Unless
the information required in subsection
C
G
, paragraph 4 of this section is provided in the notice of
violation, the association shall not proceed with any action to enforce the
condominium documents, including the collection of attorney fees, before or
during the time prescribed by subsection
C

G
of this section regarding the exchange of information between
the association and the unit owner and shall give the unit owner written notice
of the unit owner'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 unit owner 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

Sec. 2. Section 33-1817, Arizona Revised
Statutes, is amended to read:

START_STATUTE
33-1817.

Declaration amendment; rules; design, architectural committees;
review

A. Except during the period of declarant control, or
if during the period of declarant control with the written consent of the
declarant in each instance, the following apply to an amendment to a
declaration:

1. The declaration may be amended by the
association, if any, or, if there is no association or board, the owners of the
property that is subject to the declaration, by an affirmative vote or written
consent of the number of owners or eligible voters specified in the
declaration, including the assent of any individuals or entities that are
specified in the declaration.

2. An amendment to a declaration may apply to fewer
than all of the lots or less than all of the property that is bound by the
declaration and an amendment is deemed to conform to the general design and
plan of the community, if both of the following apply:

(a) The amendment receives the affirmative vote or
written consent of the number of owners or eligible voters specified in the
declaration, including the assent of any individuals or entities that are
specified in the declaration.

(b) The amendment receives the affirmative vote or
written consent of all of the owners of the lots or property to which the
amendment applies.

3. Within thirty days after the adoption of any
amendment pursuant to this section, the association or, if there is no
association or board, an owner that is authorized by the affirmative vote on or
the written consent to the amendment shall prepare, execute and record a
written instrument setting forth the amendment.

4. Notwithstanding any provision in the declaration
that provides for periodic renewal of the declaration, an amendment to the
declaration is effective immediately on recordation of the instrument in the
county in which the property is located.

B. Notwithstanding any provision of
the community documents to the contrary, the association shall enforce the
specific covenants, conditions and restrictions in the declaration with
reasonable DISCRETION as necessary to protect property values in the
community.� The association shall reasonably provide for the protection,
preservation and upkeep of the common areas, to provide for and promote safety
in the use of the common areas and to manage the availability of the common
areas.� If the declaration grants the general power to adopt rules, the
association has the authority to adopt rules or policies to:

1. Protect members from the
unreasonable interference in the enjoyment, privacy and use of their property
or common areas caused by the property use or behaviors of other members or
guests.

2. Protect members and residents and
guests from discrimination or the creation of hostile environment harassment as
described in 24 code of Federal Regulations section 100.600.

3. Allow for the application of
reasonable accommodations to address accessibility needs raised by disabled
members or residents as required by the americans with disabilities act as
defined in section 41-1492.

4. Maintain reasonable decorum and
civility in the conduct of all association meetings or interactions with board
members, members or any other contractor or agent of the association if the
rules apply to and are enforced equally on all parties.

5. Establish policies for the
business conduct and expectations of the planned community association, its
agents and contractors.

6. Limit the enforcement of
restrictions identified in the declaration that the association reasonably
believes will not have an adverse impact on adjacent property values for
specific situations based on extenuating circumstances, without waiving its
right to enforce those restrictions on lots without the extenuating
circumstances.

7. Restrict the application of
specific building colors, materials or characteristic, objectional and DIVISIVE
displays, landscaping or plantings only to the extent that it reasonably and
justifiably believes would negatively impact the aesthetic character of the
community or directly impact the property values of the adjacent properties.�
The association may not limit the members' options for those features to only
specifically approved colors, materials, features or plantings unless explicitly
authorized and noticed in the declaration.

8. Establish reasonable maintenance
standards on private structures or landscaping that will be reasonably
necessary to protect the property values or the safety, including wildfire
safety, of adjacent properties.�� The standards may not exceed the standards
applied by the association to the association's common areas.

C. If the declaration grants the
association the general authority to

establish separate
design control guidelines on private property, the guidelines are valid if they
are reasonable and limited only to high order general restrictions necessary to
maintain the declaration's intended character and structural, aesthetic and
setback harmony of the community that are reasonably necessary and directly
related to the association's primary purpose of maintaining property values.

D. For the purposes of this section,
for any rule or design guideline to be reasonable, it may not be arbitrary or
capricious and must be enforced fairly and consistently on all members.

E. Except as otherwise provided in
subsections B and C of this section, elsewhere in this chapter or as explicitly
authorized and noticed in the declaration, the association may not:

1. Adopt rules that restrict any
physical characteristic, the use or occupancy of individual properties or the
rights or behaviors of members.

2. Create a rule or policy, or take
any action that unreasonably burdens or restricts a fundamental constitutional
right of the members, including freedom of speech, freedom of religion, freedom
to assemble peacefully, freedom to petition their governing body to redress
grievances, the right to due process of law, the right to privacy, freedom from
unreasonable and excessive penalties, or as protected by the consumer review
fairness act of 2016 (P.L. 114-258; 130 Stat. 1355; 15 United States code
section 45
b
).

3. Restricts the member's rights to:

(
a
) Use the
member's property as the member chooses.

(
b
) apply the
member's personal taste and desires.

(
c
) Meet the
member's reasonable individual family needs.

4. Adopt rules that change the basis
for the allocated interest or common expense liability.� Any rule or policy
inconsistent with this subsection is invalid and unenforceable.

F. In any action or hearing pursuant
to section 32-2199.01 that is initiated by a member against the association for
violation of this section or any action that is initiated by the association to
enforce rules or design guidelines, the association has the burden of proof to
establish that any rule, design guideline or policy that is established by the
association complies with the requirements of this section.

B.

G.
Notwithstanding
any provision in the community documents:

1. Membership on a design review committee, an
architectural committee or a committee that performs similar functions, however
denominated, for the planned community shall include at least one member of the
board of directors who shall serve as chairperson of the committee.

2. For new construction of the main residential
structure on a lot or for rebuilds of the main residential structure on a lot
and only in a planned community that has enacted design guidelines,
architectural guidelines or other similar rules
as described in
subsections B, C and D of this section
, however denominated, and if the
association documents
permit
allow

the association to charge the member a security deposit and the association
requires the member to pay a security deposit to secure completion of the
member's construction project or compliance with approved plans, all of the
following apply:

(a) The deposit shall be placed in a trust account
with the following instructions:

(i) The cost of the trust account shall be shared
equally between the association and the member.

(ii) If the construction project is abandoned, the
board of directors may determine the appropriate use of any deposit monies.

(iii) Any interest earned on the refundable security
deposit shall become part of the security deposit.

(b) The association or the design review committee
must hold a final design approval meeting for the purpose of issuing approval
of the plans, and the member or member's agent must have the opportunity to
attend the meeting. If the plans are approved, the association's design review
representative shall provide written acknowledgement that the approved plans,
including any approved amendments, are in compliance with all rules and
guidelines in effect at the time of the approval and that the refund of the deposit
requires that construction be completed in accordance with those approved
plans.

(c) The association must provide for at least two
on-site formal reviews during construction for the purpose of determining
compliance with the approved plans. The member or member's agent
shall be provided the opportunity to attend both formal reviews.� Within five
business days after the formal reviews, the association shall cause a written
report to be provided to the member or member's agent specifying any
deficiencies, violations or unapproved variations from the approved plans, as
amended, that have come to the attention of the association.

(d) Within thirty business days after the second
formal review, the association shall provide to the member a copy of the
written report specifying any deficiencies, violations or unapproved variations
from the approved plans, as amended, that have come to the attention of the
association.� If the written report does not specify any deficiencies,
violations or unapproved variations from the approved plans, as amended, that
have come to the attention of the association, the association shall promptly
release the deposit monies to the member. If the report identifies
any deficiencies, violations or unapproved variations from the approved plans,
as amended, the association may hold the deposit for one hundred eighty days or
until receipt of a subsequent report of construction compliance, whichever is
less. If a report of construction compliance is received before the
one hundred eightieth day, the association shall promptly release the deposit
monies to the member.� If a compliance report is not received within one
hundred eighty days, the association shall release the deposit monies promptly
from the trust account to the association.

(e) Neither the approval of the plans nor the
approval of the actual construction by the association or the design review
committee shall constitute a representation or warranty that the plans or
construction comply with applicable governmental requirements or applicable
engineering, design or safety standards. The association in its
discretion may release all or any part of the deposit to the member before
receiving a compliance report. Release of the deposit to the member does not
constitute a representation or warranty from the association that the
construction complies with the approved plans.

3. Approval of a construction project's
architectural designs, plans and amendments shall not unreasonably be withheld.

END_STATUTE