ARS 33-1804(C) provides:

Unless otherwise provided in the articles or bylaws of the association, for meetings of the board of directors that are held after the termination of declarant control of the association, notice to members of meetings of the board of directors shall be given at least forty-eight hours in advance of the meeting by newsletter, conspicuous posting or any other reasonable means as determined by the board of directors.

ARS 10-3822(B) provides:

Unless the articles of incorporation, bylaws or subsection C of this section provide otherwise, special meetings of the board of directors shall be preceded by at least two days’ notice of the date, time and place of the meeting. The notice need not describe the purpose of the special meeting unless required by the articles of incorporation or bylaws.

So, what does all of this mean?

First, both of these statutes are subject to Bylaws. In other words, these statutes do not apply when the Bylaws prescribe a different notice requirement for board meetings.

Second, and assuming the Bylaws do not provide for something else, the Board must send out notice to the members preceding the special meeting. According to the statutes, the notice does not need to explain the purpose for the meeting or the agenda unless required by the bylaws or articles of incorporation.

Third, the notice must be 48 hours before the meeting. The board needs to establish and publicize the way notice is going to be given. If the board is going to post notice on a website or on a bulletin board, both would be OK if the owners know that is where the notices are posted and it is agreed that the place is “conspicuous” or the board believes it is “reasonable.”  Naturally, some may complain that posting on a website is not a “conspicuous” place.  Bulletin boards located in the community center is much less susceptible to scrutiny as they are often used by boards to post notice.  If the notice is posted in a commonly accepted place, it is generally acceptable.

Fourth, a board can’t suddenly change the venue of posting notice while at the same time giving proper notice.

Fifth, some ask whether the 48 hour notice includes or excludes weekends. This question is answered by what is usual and customary in the community. If the board does not want to (or wants to) count weekends or holidays or whatever, they should let the owners know beforehand.

Sixth, ARS. 33-1804(C) says that notice to members of meetings of the board of directors is not required if emergency circumstances require action by the board before notice can be given. Thus, the above analysis does not apply in emergency situations.

Seventh, ARS 33-1804(C) says that the failure of any member to receive actual notice of a meeting of the board of directors does not affect the validity of any action taken at that meeting.

The statutes are located in the Arizona Condominium Act for Condominiums and the Arizona Planned Community Act for Planned Communities.  Specifically, A.R.S. 33-1258 and A.R.S. 33-1805 provide that “all financial and other records of the association shall be made reasonably available for examination by any member or any person designated by the member in writing as the member’s representative.” If the analysis were to stop here the conclusion would be easy. All records of the association would be ”public” records and must be disclosed to any member who wants to see them. But the analysis does not stop here.

Certain records of the association and the board “may be withheld from disclosure to the extent that the portion withheld relates to any of the following: 1) Privileged communication between an attorney for the association and the association, 2) pending litigation, 3) meeting minutes or other records of closed executive meetings, 4) personal, health or financial records of 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, and 5) records 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.”

Some think that “financial information of a member” includes delinquency lists. Others disagree. The higher court has not ruled on this specific question yet so it is anybody’s guess as to who is right. I don’t care who is right and who is wrong. It doesn’t matter. The statute says that some records “may be withheld from disclosure” not “must be withheld from disclosure.” Delinquency lists can be posted if the board so decides.

Before posting delinquency lists, the board should consider the consequences. The delinquent members will not be happy to learn that the “naughty list” went public. Conversely, posting the delinquency list can help. It may help delinquent owners pay their past-due accounts or it may help folks understand why the association doesn’t have the money to do some of the things it wants to do.

If a board decides to post its delinquency list it MUST remember to say that the delinquency list is good as of a certain date. If an association states, for example, “John Doe owes the association $800,” what happens if John just paid the money? He has been disparaged (some may even say defamed) and may try to sue the association for libel. So if an association decides to post the names of delinquent owners, it needs to make sure that it puts a date on the list. For example, the list could say “as of August 1, 2010, the following members are delinquent.”

Hoop One-send out a letter to the homeowner informing him/her what the violation is and when it must be cured. This is called a “Notice of Violation.“ The law says that only after Notice can you issue fines. Make sure your Notice of Violation contains the following information: 1) the provision of the community documents 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 observe the violation, 4) the process the member must follow to contest the notice. And make sure you give the homeowner plenty of time to cure the violation. You want to be reasonable in this process and not appear over-aggressive.

Hoop Two-if the violation is not corrected within the time to cure set forth in the Notice of Violation and the homeowner has not contested the Notice of Violation, impose only reasonable monetary penalties. What is reasonable in an HOA with multi-million dollar homes may be much higher than the same violation in an Arizona HOA with smaller homes. Make sure the fine fit’s the violation. Don’t impose a large fine for the first violation unless the violation is a serious impediment to the rest of the community.

Hoop three-require that the homeowner be accountable to that fine.  Arizona HOA law says that fines do not constitute a lien until a judgment is obtained. In other words, the fine doesn’t have much legal significance until reduced to judgment. If the homeowner does not correct the violation and refuses to pay the fines, the board of directors, may consider obtaining a judgment against the offending homeowner. True, it will cost some money in attorneys’ fees to do so but you can ask the court to order the homeowner to reimburse you all of your attorneys’ fees if you win.

Hoop four-follow the same process for everyone in the community and be consistent. Failing to follow these steps or failing to ensure that homeowners bring their properties into compliance through court order may result in the association being sued. That is, the association should enforce the CC&Rs or run the risk of being sued by a complaining homeowner or homeowners for breach of contract because it did not enforce the CC&Rs against violators. The law is the way it is because people move into HOAs because they don’t want to have to worry about their neighbor’s yard looking atrocious and because they want to have peace of mind knowing that their assessments are going to holding everyone to the same standards.

First, the members should call a special emergency meeting to elect an interim board.  Special meetings of the association may be called by the members having at least twenty-five per cent, or any lower percentage specified in the bylaws, of the votes in the association.   This can be challenging if the community is apathetic.  Unless otherwise provided in the articles of incorporation or bylaws, notice needs to be sent out not fewer than 10 nor more than 50 days in advance of the special meeting.  Absentee ballots should be enclosed with the notice so that members may cast their votes without actually attending the meeting.  Absentee ballots are required and must meet certain specific requirements as outlined in A.R.S. 33- 1250 and 33-1812.  In-person ballots should also be prepared for those wishing to cast their votes at the special meeting.  Once the votes are in, they are tallied and the interim board is elected.  Ideally, the interim board would serve until the next annual meeting where a permanent board would be elected.

But what if the concerned members can’t get the required involvement to call and hold a special meeting?  In this example, the members may consider requesting a judge appoint a receiver.  Receivers are like “guardians” who are vested with the authority to run the association until it can get back on its feet.  Members can petition the court for a receiver by filing a Complaint with the Court.  Great care should be taken to ensure that the request is made on an “emergency” basis because the community needs to have someone to pay the bills, collect assessments, and maintain the common area.  The members should retain a qualified Arizona HOA attorney familiar with community association law to help them with this option.

Sometimes a few members assume the board functions without a special meeting or court intervention.  This can be risky and may result in expensive litigation if other members challenge the unilateral action.

Whatever the members decide to do, they must decide quickly because associations act through boards (especially if they are a non-profit corporations).

A corporation shall keep a copy of all of the following records at its principal office, at its known place of business or at the office of its statutory agent:
1. Its articles or restated articles of incorporation and all amendments to them currently in effect.
2. Its bylaws or restated bylaws and all amendments to them currently in effect.
3. Resolutions adopted by its board of directors relating to the characteristics, qualifications, rights, limitations and obligations of members or any class or category of members.
4. The minutes of all members’ meetings and records of all actions taken by members without a meeting for the past three years.
5. All written communications to members generally within the past three years, including the financial statements furnished for the past three years under section 10-11620.
6. A list of the names and business addresses of its current directors and officers.
7. Its most recent annual report delivered to the commission under section 10-11622.
8. An agreement among members under section 10-3732.

Some attorneys argue that this means that associations must keep all corporate records indefinitely but can move some of those records (see 4 and 5) to a storage area after 3 years.  Other Arizona HOA attorneys argue that associations can “destroy” the records after 3 years.  And still other attorneys take a middle line approach that the records be kept for 10 years or so.    

The courts have not defined what “permanent” means in Arizona so this is an open ended question.

The safest thing to do, especially in litigation prone communities, is to keep all of the records forever.  This is especially true if a homeowner wants to try and argue that the association must keep “permanent” records pursuant to 10-11601(A).    

Now, what is the definition of “records?”  One Arizona Court of Appeals case (it is unpublished so it does not create binding law) said that a member is only entitled to inspect “records” listed in ARS 10-11601(1-8).  But that case did not address the additional statutory requirements set forth in the Planned Community Act.  Those additional statutes make it seem like everything the association generates in writing is a “record” that needs to be disclosed to the members upon request.  Accordingly, it may not be advisable to destroy documents/records not mentioned in ARS 10-11601(1-8) above.

Whatever a community decides to do, it should consider their specific circumstances with the help of a qualified Arizona HOA attorney with community association experience.

In addition to listening and being open to suggestions, communication back to the homeowners is of paramount importance as well. Another saying that has been more recently coined, but should be given equal consideration is “Transparency, transparency, transparency.” The homeowners want to know what is going on in their association. They want to know such things as how much money is being spent to maintain the common areas and how much money is being spent on attorneys, CPAs and the like. Give them the records (non-privileged records) when they ask for them. Be honest with the community. Tell them the problems that plague your community. You will be surprised—and pleased—with the response you get. The trust and support you gain from open communication will be well worth any efforts you put forth to accomplish this.

Need more information about creating better communication and stronger relationships with homeowners? Click here.

Authored by:  Clint G. Goodman, attorney with the law firm of Jackson White, P.C.; 40 N. Center Street, Mesa, AZ  85201; (480) 464-1111.

What are some other methods that your Arizona HOA uses to save money on landscaping costs?  Are there any other tips you have about negotiating the price of landscaping maintenance that you’d like to share?  Please comment below.

ANSWER:  Boards owe the members a duty to act reasonably in the exercise of their discretionary powers.  I’ve heard arguments for increasing dues and the arguments against it.  In one association I know, another increase would make it so that most folks couldn’t afford the assessment.  The same is true of requiring a special assessment.  On the other hand, if nothing is done, the community may be headed for disaster.  I know of another community that did not make these tough decisions several years ago and now is being faced with condemnation because it is no longer a safe place to live.  The roofs are about to collapse, the roads have pot-holes the size of crates, the pool is empty and cracked, and the list goes on.  As one can see, there may not be an easy answer to this question.  In situations like these, it makes sense to hold a town-hall style meeting to discuss the financial condition.  At that meeting, the board and members can have a productive conversation about the future of the community and potential consequences if nothing is done to build the reserves.  Another suggestion I have is to review the budget.  Many communities can save thousands of dollars by trimming the fat or by purposely budgeting with a shortfall in mind.

Authored by:  Clint G. Goodman, attorney with the law firm of Jackson White, P.C.; 40 N. Center Street, Mesa, AZ  85201; (480) 464-1111.

ANSWER:  Conflicts between the bylaws and CC&Rs are resolved in favor of the CC&Rs.  But I’m not so sure a conflict exists here.  If the CC&Rs set a “minimum” but do not set a “maximum,” a board may be authorized in increasing the number to something above the “minimum.”  Doing so, however, must not conflict with any maximum periods set forth in the CC&Rs.  I would also write that if the CC&Rs authorize the board to set a maximum period, no bylaw is necessary.  I think the better approach would be for the board to adopt a Rule that leasing cannot be anything less than 4 or 6 months.  I would also caution anyone considering adding to the bylaws to comply with the amendment requirements set forth therein.  If the Bylaws do not refer to an amendment process, then I would direct folks attention to the Non-profit Corporation Act’s bylaw amendment provisions.