There are thousands of community associations in Arizona today.
Characteristics of a Community Association
All owners become members of a community association when they accept a deed to a lot/unit located in a community association.
- The governing documents (i.e. CC&Rs, articles of incorporation, bylaws and rules and regulations) create obligations on the part of the homeowners and the community association.
Most community associations are set up as non-profit corporations and are subject to the laws affecting non-profit corporations.
Types of Community Associations
Condominium: In a condominium, the owner owns a separate interest in the unit or apartment together with an undivided interest in the common area. For example: If there are 50 units in a condominium association, each owner owns his/her individual unit (i.e. usually the airspace inside the four walls) plus 1/50th of the common areas.
Planned Community: An individual owns an interest separate from the other owners, usually called a lot, parcel or residence. In Arizona, the common areas in a planned community are typically owned by the association (not the owners). Please see ARS 33-1802(4), or contact your community association attorney, for a detailed definition of a “Planned Community”.
The Legal Documents Regulating Community Associations
The legal documents that regulate community associations have provisions that bind both the community association and the individual owner. The controlling legal documents for a community association are the plat, declaration of covenants, conditions and restrictions (“CC&Rs”), bylaws, articles of incorporation and rules and regulations.
Plat: All subdivisions require the preparation, approval and recording of a plat. The plat for a community association will identify the lots/units subject to separate ownership and the common area.
Declaration of Covenants, Conditions and Restrictions (“CC&Rs”): The CC&Rs are the enabling document that creates the covenants and restrictions that run with the land and are binding on all current and successive owners. This document is recorded with the county recorder’s office before an owner purchases a lot/unit in a community association.
Articles of Incorporation: The articles of incorporation establish the association as a legal entity with the Arizona Corporation Commission. It is advisable to incorporate a community association to limit the liability of individual members for the acts of the association by incorporating.
Bylaws: The bylaws are used for the internal government and operation of the association. The bylaws typically define composition, election and appointment of the board of directors, and the “how to” run the association specifics.
Rules and Regulations: The board is usually empowered in the CC&Rs or bylaws to adopt rules and regulations regarding the community association’s common areas and/or behavior by residents within the community. If rules and regulations conflict with the CC&Rs or bylaws, the rules and regulations are unenforceable. Rules and regulations must be reasonable, easy to understand and consistent with the authority given regarding rule-making in the CC&Rs and/or Bylaws.
The hierarchy of the legal documents is as follows: Plat, CC&Rs, articles of incorporation, bylaws and rules and regulations. In the event of a conflict between the documents, the document earlier in the hierarchy prevails or trumps the other document.
Key Figures in a Community Association
Community associations are composed of different groups of people working together to manage the association. To effectively run a community association, association leaders must understand the roles and responsibilities of each group and how they interact. The key players in the administration of a community association are: the developer, board of directors, officers, owners, committee members and possibly the management company and manager.
The developer (also known as the declarant) is in control of the association during the early phases of the community. The developer oversees the preparation of the governing documents and creates structure for the community association. The developer is responsible for creating the original budget, basic administrative procedures, maintaining financial, legal and lot/unit owner’s records, minutes of board meetings and all documents pertaining to the community association. The developer has a fiduciary responsibility to the association and the owners. Once a certain percentage of the lots/units are sold, the developer transfers control of the community association to the owners.
The Board of Directors
Owners elect the board of directors. The board of directors manages the community. The governing documents (and Arizona law) give the board the authority and obligation to act. Some examples of powers vested in the board are the following:
- Duty to enforce governing documents;
- Architectural control in conjunction with ACC;
- Duty to maintain and repair the property;
- Duty to insure;
- Duty to provide services and facilities to members;
- Duty to levy and collect assessments; and
- Duty to conduct annual meetings and regular board meetings.
The board has a fiduciary duty to act in good faith in the best interest of the community association and with such care that a reasonably prudent person would act in the same position under similar circumstances.
The governing documents (usually the bylaws or articles of incorporation) have provisions which relate to officers. Officers of associations are usually elected by the board of directors. The board consists of the following officers: president, vice-president, secretary and treasurer.
Association Members Rights
Association members (owners) have rights and obligations while living in a community association.
Examples of an association member’s rights are:
- To elect board members;
- To amend CC&Rs and raise assessments;
- To review records of the association as allowed by Arizona law;
- To be given reasonable notice of CC&R violations and an opportunity to respond prior to assessment of fines; and
- To ask questions.
Association Members Obligations
Examples of an association member’s obligations are:
- To adhere to the community association’s documents;
- To pay assessments on time;
- To maintain their homes; and
- To stay informed about community association activities.
The governing documents (usually the CC&Rs or bylaws) authorize standing committees and authorize the board to appoint committees. Committees assist the board in gathering information, making recommendations and they contribute valuable input on decisions by gathering members’ views.
Examples of typical committees in a community association are:
- Architectural committee;
- Budget and finance committee;
- Elections or nominating committee;
- Maintenance committee;
- Social and recreational committee; and
- Newsletter committee.
The Management Company Manager
The management company’s/manager’s duties for the association depend on the requirements of the association. Typically the management company will perform the following (but not limited to) duties with the help of a designated manager:
- Initial collection of assessments (one or two demand letters);
- Financials and budget;
- Maintenance of all records;
- Preparation for regular and annual meetings; and
- Correspondence to owners.
The board of directors, various standing committees and special committees are typically comprised of association member volunteers.