Mandatory, Voluntary, HOA, POA in Arizona

Let’s start with the misnomer that an HOA is different from a POA in Arizona.  Here’s the legal definition, according to ARS 33-1802.  Note that the only word is “Association”.  There is reference to a POA in the ADRE development rules as a “fleshing out” of the Statutes.

“Association” 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.

Do you see any word stating homeowner or a property owner?

The issue for Arizona Buyers is whether or not the “Association” is mandatory or voluntary.

Let me explain…

When a developer of an HOA or POA writes its governing documents they are almost always mandatory.  When a subdivision, development, or entity that is originally formed as a corporation does not file annual reports with the Arizona Corporation Commission, the Corporation can and does administratively dissolve the entity’s corporation.  A case in point is Verde Village Property OwnersAssociation.  We point this out because, while established in 1972 as a mandatory association, their corporation was dissolved on 7-31-75  and reinstated on 4-1-76.  There is no proof of annual report submission until the 1982 report submitted to the A.C.C on 5-25-83.

The A.C.C states:

“By law, failure to submit the corporation annual report on or before its due date will result in monetary penalties of $9 per month. A Notice of Pending Administrative Dissolution will be mailed to the corporation’s statutory agent approximately 90 days after the due date. If the annual report is not submitted, approximately 60 days after the date of the Notice, the corporation will be administratively dissolved.

See 10-11420, 10-11421. and 10-11422.

When an “Association” becomes voluntary, can they assess fines and fees against the non-members?

We are not attorneys and suggest that any buyer who chooses to purchase a property within a voluntary association, satisfy themselves as to the legality of the voluntary association’s ability to levy fees, fines, or to enforce the governing documents against a non-member?  Should the buyer choose not to join the association, the buyer might want to contractually obligate the seller to pay any and all fees of the voluntary association.  When that same buyer goes to sell, it might be prudent to note in disclosure that the voluntary association charges a transfer fee but that the fee will be that of the buyer as the seller is a non-member.

Where does all of this stand legally?

In the hands of the Courts.  It will take judicial decree for this issue to be resolved.  A case of unintended consequences.

If any group wants to form an “association” that has been dissolved, in order to be mandatory, ALL members must agree to be part of the “association”.

Arizona buyers:  call the “association” and ask for information, read the governing documents, then see an attorney.  Feel free to ask us for names of attorneys who specialize in “association” issues.

Have a happy buying experience!!

Kathy Howe

  • how2educate LLC
  • Lifestyles of Arizona LLC
  • 1120 W SR89A
  • Sedona, AZ 86336
  • 928-274-4088
  • kathy@kathyhowe.com
  • Uptown Sedona resident

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