HOA boards are much more than groups of homeowners. They arelegal organizations that may set and impose legally binding rules forhomeowners within a specific community. HOAs are required to abide by certainlaws in Arizona, and a recent court ruling changed how those rules arefollowed.
The Arizona Court of Appeals recently decided the case of AZ N H Revocable Trust v. Sunland Springs. This case involved a disputebetween a homeowner and the HOA board in a particular community. The caserevolved around issued of how closed and open meetings are conducted and howinformation about closed meetings should be disseminated to voting members ofthe association. Although these issues might sound like bureaucratic jargon,they play a significant role in keeping HOA homeowners and voters informed aboutwhat their HOA board is doing.
If your HOA needs legal help, call our Arizona associationgovernance lawyers at Halk, Oetinger, and Brown at (602) 759-9205 for aconfidential legal assessment.
Can Voting Occur inClosed HOA Meetings in Arizona?
A major component of the recent decision from the ArizonaCourt of Appeals is when association voting may occur. HOAs may conduct openmeetings where all voting members may attend, and closed meetings wherespecific, limited topics are considered, often involving private or sensitiveinformation.
Open Meetings vs. ClosedMeetings
HOAs regularly conduct open meetings and closed meetings todiscuss community issues. The difference is that all voting members may attendopen meetings, while closed meetings are more restricted.
Under the law, meetings may be closed for the“consideration” of certain subjects. Such subjects often involve sensitive orprivate information. Often, meetings are closed when an HOA board discusseslegal disputes or consults with legal counsel.
In the recent case in the Arizona Court of Appeals, thecourt had to determine whether “consideration” at closed meetings includedvoting.
When Voting is Allowedto Occur
In the case of A Z N H Revocable Trust v. Sunland Springs,one of the major issues of the case is whether an HOA board may vote on certainissues at closed meetings. The court ultimately ruled that this is not allowed,and voting must happen only during open meetings where all voting members mayattend.
The Court reasoned that, under Arizona law, voting membersmust be allowed to speak to the board before a vote, which would not bepossible if voting were permitted in closed meetings.
Why Public Policy FavorsOpen Meetings
Our Arizona association governance attorneys agree thatpublic policy in Arizona generally favors voting in open meetings and notclosed sessions. While certain issues may be best left for consideration in aclosed meeting, voting on the issue should be held in open sessions. Otherwise,the HOA would lack democratic transparency.
In short, before an issue is put to a vote, it should firstbe discussed in a closed session, if necessary, before being voted on in anopen session.
When Must HOAs DetermineWhat Will Be Considered in a Closed Meeting?
While closed meetings are not illegal, their lack oftransparency can be frustrating for community members and HOA voters. The Courtin the Sunland Springs case had trouble deciding whether an HOA boardmust explain why certain issues are reserved for closed meetings.
Deciding What Will BeConsidered in a Closed Meeting
In the Sunland Springs case, the HOA allowed itsPresident to determine what issues were discussed in closed meetings and why.The homeowner who filed the appeal in this case argued that formal actionthrough open meetings should be used to determine what is considered in closedmeetings, thus allowing voting members a say on closed meetings.
The court remanded the issue because there was insufficientinformation to determine whether this method complies with the law.
Who is Allowed toDetermine What is Considered in a Closed Meeting?
As it stands now, HOA boards do not have to permit votingmembers to vote on what is or is not considered in closed meetings, and boardmembers may decide without formal action at open meetings what will bediscussed in a closed meeting.
The court explained that nothing in the law suggests thatthe only way an HOA may comply with statutory law is to decide what isconsidered in closed meetings through formal action at open meetings.
Whether the President of the HOA alone has the authority todecide what is considered at a closed meeting remains up in the air.
How Do HOAs ProvideNecessary Information to Voters Regarding Open and Closed Meetings?
The issues up for consideration at HOA meetings must beexplained to members in advance. However, in the Sunland Springs case,there was some debate over whether notice was required for all meetings or onlyfor open meetings.
Must HOA Boards ProvideNotice Regarding Closed Meetings in Arizona?
The appealing homeowner in the Sunland Springs caseargues that notice regarding closed meetings should provide members withinformation reasonably necessary to inform them of closed meetings. Theyfurther argued that such notice was adequately provided.
The opposing party argued that the law requires notice onlyfor open meetings. The Court disagreed and concluded that notice must beprovided for open and closed meetings.
How Does Notice Complywith Arizona HOA Laws?
What exactly constitutes adequate notice of a closedmeeting? The Court in this case ultimately decided that adequate notice for aclosed meeting requires only minimal information.
The Court determined that proper notice of a closed meetingmust include the meeting's date, time, and location. Next, the HOA must includethe specific paragraph from A.R.S. § 33-1804(D) that justifies the closedmeeting. No further information about what is considered in the meeting or whyis required in the notice.
Meeting Agendas forClosed Meetings
While Arizona statutes specify requirements for notices ofclosed HOA meetings, they do not explain what is required for meeting agendas.
To clear up this ambiguity, the Court in Sunland Springslooked to the statutes under A.R.S. §§ 33-1804(A) and (F).
Subsection (A) requires that association boards allowmembers to speak after the board has considered and discussed a specific agendaitem, but before formal action on that item is taken. Subsection (F) requiresassociation boards to provide agendas that include sufficient information toinform members of the matters discussed or decided in advance of meetings.
The Court determined that HOA boards are required to provideinformation in meeting agendas reasonably necessary to inform members,including for closed meetings. While this does not include personallyidentifying information or information protected by the attorney-clientprivilege, there must be more information than a mere reference to theparagraph under subsection (A).
Ask Our ArizonaAssociation Governance Attorneys for Legal Support
If your HOA needs legal help, call our Arizona associationgovernance lawyers at Halk, Oetinger, and Brown at (602) 759-9205 for aconfidential legal assessment.
