A special assessment is an assessment that is not contemplated in an association's budget and is collected in addition to the regular assessments. With aging infrastructure throughout our communities, associations are turning to special assessments as an option to pay for their unexpected repairs and replacements. However, there are no statutory procedures in Arizona governing the process for imposing a special assessment. Instead, the association's governing documents will control the right to impose a special assessment and the process to approve the special assessment.
Judicial Relief may be an option
The procedure for passing a special assessment often requires significant membership approval before the special assessment may be imposed. Unfortunately, lack of voter participation and opposition to additional financial obligations (without regard to financial necessity) can stand in the way of the success of a special assessment proposal and an association's ability to ensure that it is properly funded. In these scenarios, "Judicial Relief" may be an option.
"Judicial relief," A.R.S. § 10-3160, empowers courts to intervene in the affairs of a homeowners association formed as a nonprofit corporation under certain circumstances. In regards to a failed special assessment, this statue may be a means for an association to file a petition for relief with the court for an order that dispenses of certain requirements relating to the holding of, or voting at, meetings or obtaining votes, including any requirement as to quorums or as to the number or percentage of votes needed for approval. For example, if the special assessment has repeatedly failed due to lack of quorum, the association could seek authorization to reduce the quorum requirement established by the governing documents.
Refer to association's governing documents
Judicial Relief may be vital for the ecosystem of homeowners associations in the near future, offering a pathway to relief from situations where internal mechanisms have failed. However, it is important to note that Judicial Relief is not a means of circumventing the procedures established by the governing documents. Associations seeking this type of relief will be required to prove that it is "impractical or impossible" for the association to obtain the necessary consent for the special assessment. This is a high standard that will likely be insurmountable unless the association can show repeated failed attempts at obtaining membership approval and a definitive and defensible need for the special assessment as a safeguard to ensure the association can continue to operate in the best interests of their missions and the community.
Originally published March 26, 2024
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