Since taking office in 2013, state Sen. David Farnsworth has worked each year at the Legislature toward a unique goal: increasing oversight for homeowners associations in Arizona.
Along with other critics of the state’s HOA rules, the Mesa Republican says the regulations currently in place for HOAs are insufficient and lead to problems for homeowners. Farnsworth introduced legislation this year aimed at making changes to how the associations operate.
“We have a real mess,” Farnsworth said about the state of HOA regulations. “It’s a very complex and challenging situation and there’s no easy solution.”
Concerns from critics of the current policy stem from the way the current dispute process works and the fact that community management companies — hired by HOAs to run their properties’ day-to-day operations — don’t need a license to be community managers in Arizona.
Community management leaders argue their own regulations have kept members in check and they have doled out discipline themselves when necessary.
“We feel like we’re policing our own fairly well,” said Linda Lang, president and CEO of the Arizona Association of Community Managers, which lobbies for community management companies.
LEGISLATION
Farnsworth’s bills would add regulations to the operation of HOAs. SB 1496 deals with HOA directors, stipulating that if a member of the board of directors is removed from their position, he or she cannot be reappointed to that post. It’s an issue that has been raised by homeowners.
The other bill is SB 1498, which would require HOAs to provide ample warning time for homeowners before charging late fees and inform homeowners of their right to dispute the fees through a state process. HOAs would also have to maintain members’ voting records for one year.
Both bills have passed the Legislature. Gov. Doug Ducey signed SB 1498 into law. The other bill has not yet been signed.
Farnsworth has introduced HOA-related legislation every year since he joined the Legislature. He said his desire to tighten HOA regulations stems from his constituents’ concerns.
Farnsworth said on some bills, he has faced resistance from two lobbying groups for HOAs and community managers: Arizona Association of Community Managers and Community Associations Institute, which lobbies on behalf of HOAs. But he has also worked with them to get legislation passed.
AACM and CAI both back SB 1496 and SB 1498. This year Farnsworth introduced two other bills aimed at HOAs, including one that would require community managers to be licensed, but pulled them after discussions with the two groups.
“The statutes governing homeowners associations are not perfect and we need to, little by little, improve them,” Farnsworth said.
CHANGES UNDERWAY
The HOA complaint process is in flux.
Currently, if a homeowner has a complaint against an HOA, that person contacts the Arizona Department of Fire, Building and Life Safety to go through a dispute process. But Ducey has flagged that agency to be eliminated, in his push for agency consolidation.
“We looked at the Department of Fire, Building and Life Safety and it became apparent that a lot of their duties and responsibilities could be relocated and consolidated into existing agencies with similar missions,” said Daniel Ruiz, a spokesman for Ducey. The governor’s office estimates the move would save taxpayers about $500,000.
Under the budget that passed the state Legislature last week, the HOA dispute process moves to the Arizona Department of Real Estate.
“That’s the natural place that you would go,” Ruiz said.
The Department of Real Estate hopes to address heightened oversight for HOAs and the community management companies they hire, now that the dispute process is in its jurisdiction, said Judy Lowe, commissioner of the real estate oversight agency.
The community managers association, however, did not support moving the dispute process to the real estate agency.
“It’s not a very good fit for this,” Lang said.
ISSUES WITH CURRENT RULES
In 2015, the Department of Fire, Building and Life Safety received 18 complaints about HOAs. The department refers disputes to an administrative law judge.
Farnsworth said this dispute process has not worked well for homeowners.
“It’s very expensive for people to go that route,” he said.
More often, complaints regarding HOAs or community management companies are directed not to the state, but to the Arizona Association of Community Managers, Lang said.
AACM, the community management group, maintains a professional standards board that hears complaints from homeowners about their member organizations.
Last year, group managed 350 complaints from homeowners against its member companies. Since AACM was founded in 2003, three companies have been stripped of membership due to complaints about their practices, Lang said.
AACM also requires its members to participate in education programs it offers, which includes classes on Arizona law, HOA finance and the basics of association management. Members are also required to sign a code of ethics.
Critics aren’t sold on AACM’s complaint process.
“That’s not real regulation,” said Roger Wood, a Tempe attorney who represents homeowners against HOAs. “It’s self-regulation.”
NOT LICENSED
Community management companies aren’t required to be licensed by any state agency to operate in Arizona, so there isn’t a government agency to go to with complaints about them. For this reason, many homeowners with grievances against the community management companies hired by their HOAs go through civil litigation, Wood said.
Wood cites examples of cases in Tucson in which HOA disputes have spiraled into legal cases.
One homeowner ended up racking up thousands of dollars in fines and legal fees after missing notices to pay his HOA over a parking violation. Another case involved a homeowner suing her HOA after it increased fees to support the private Skyline Country Club, which was on the brink of foreclosure.
Much of the evidence used against HOAs is anecdotal, said Carolyn Goldschmidt, an attorney who represents them. She is also a member of the Southern Arizona chapter of HOA lobbying group Community Associations Institute.
Much of the criticism of Arizona HOAs likely stems from a philosophical opposition to the idea of having a body govern how a person maintains his or her property, Goldschmidt said.
“A lot of homeowners don’t like HOAs,” she said. “They don’t like the idea that they don’t have to ask permission for their house projects. They just don’t like to be controlled.”
