New Arizona Law Could Affect Homeowner Associations

Sherman & Howard L.L.C.

Governor Ducey signed SB1350 on June 12, 2016, and it becomes effective January 1, 2017.  The bill prohibits municipalities from restricting or regulating the ability of homeowners to use their property as vacation rentals and short-term rentals, with certain specified exceptions. Some homeowners welcomed this legislation because it removed obstacles to renting their home on a short term basis, with companies such as Airbnb and VRBO.  However, other homeowners and community associations are concerned that the bill potentially affects whether their current declarations of covenants, conditions, and restrictions (CC&Rs) can be used to stop members from using their properties as vacation rentals.

ARS Section 33-1806.01 expressly states that “[a] member may use the member’s property as a rental property unless prohibited in the declaration and shall use it in accordance with the declaration’s rental time period restrictions.” Accordingly, unless the CC&Rs expressly restrict “vacation rentals,” “transient lodging” or “short-term rentals,” the short term rental of properties within homeowner association communities is probably lawful. If current CC&Rs do not expressly restrict “vacation rentals,” “transient lodging” or “short-term rentals,” then members desiring such restrictions will need to amend the CC&Rs in the manner required under the CC&Rs.

Many CC&Rs provide that members desiring to rent their property must provide detailed information regarding the tenant. ARS Section 33-1806.01 specifically states that “[n]otwithstanding any provision in the community documents, on rental of a member’s property an association shall not require a member … to disclose any information regarding a tenant other than the name and contact information for any adults occupying the property, the time period of the lease, including the beginning and ending dates of the tenancy, and a description and the license plate numbers of the tenants’ vehicles.” The section further provides that if the community is an age-restricted community, the member or the tenant “shall show a government issued identification that bears a photograph and that confirms that the tenant meets the community’s age restriction requirements.”

It is important to note that the statute relating to rentals does not take effect until January 1, 2017.  We recommend that developers considering new residential projects and associations concerned about the enforceability of their current restrictions consult with experienced counsel to ensure their CC&Rs will be enforceable under the new law.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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