Overview
A proposal to add A.R.S. §§ 33-1243.01 and 33-1803.01 to prohibit associations from passing through attorneys’ fees and costs to owners (in all cases including collections). Also, in any litigation, arbitration, mediation, administrative action, or other claim, all parties shall bear their own attorneys’ fees and costs, except that an owner may recover fees and costs if the governing documents so provide.
Key Changes
Current Law
Associations may pass through attorney fees and costs to owners in collections actions and other disputes as authorized by governing documents or statute. Prevailing parties in litigation may recover attorney fees as provided by statute or governing documents.
Proposed Amendment (Inactive)
- Prohibition on Passing Through Attorney Fees: Associations are prohibited from passing through attorney fees and costs to owners in all cases, including collections actions.
- Each Party Bears Own Fees: In any litigation, arbitration, mediation, administrative action, or other claim, all parties bear their own attorney fees and costs, except that an owner may recover fees and costs if the governing documents so provide.
- Exception for Third-Party Claims: The provisions relating to charging and recovering attorney fees do not apply to claims by an association against third-party vendors, declarants, developers, or any individual or entity other than homeowners who are not declarants.
- Exception for Statutory Actions: The attorney fee restrictions do not apply to actions brought pursuant to A.R.S. § 12-552.
Legislative Timeline
- March 20, 2025 – Held in Senate Committee on Government
- March 13, 2025 – Senate Second Read
- March 12, 2025 – Senate First Read; Assigned to Senate Committee on Government
- February 27, 2025 – House Third Read; Passed 42-15-3 as amended and transmitted to Senate
- February 26, 2025 – Floor amendment proposed by Rep. Carter N.
- The Amendment proposed adds that the provisions relating to charging and recovering of attorneys’ fees do not apply to claims by an association against third-party vendors, declarants, developers or any individual or entity other than the homeowners who are not declarants.
- Passed out of Committee of the Whole with a “Do Pass as Amended” recommendation.
- February 24, 2025 – Passed out of committee with a “Constitutional and in Proper Form” determination
- February 18, 2025 – Passed out of committee with a “Do Pass as Amended” recommendation
- February 14, 2025 – Amendments proposed by Rep. Michael Way.
- The amendments proposed purport to resolve conflicts with other statutory provisions and exempt actions brought pursuant to A.R.S. § 12-552.
- February 14, 2025 – On February 18, 2025 agenda for House Committee on Commerce
- February 13, 2025 – House Second Read
- February 12, 2025 – House First Read; Assigned to House Committee on Commerce and House Committee on Rules
Impact
The prohibition on passing through attorney fees to owners would eliminate a significant cost recovery mechanism for associations pursuing collections and other enforcement actions. Associations would need to absorb all legal costs into operating budgets, potentially increasing regular assessments for all owners to cover legal expenses previously borne by individual violators or delinquent owners.
The provision allowing owners to recover fees if governing documents permit creates an asymmetry where owners may recover attorney fees but associations cannot. The exception for third-party claims preserves associations’ ability to recover fees in disputes with vendors, developers, and declarants. The exception for A.R.S. § 12-552 actions (statute of repose cases) maintains existing fee recovery mechanisms for construction defect and similar claims. The measure would fundamentally alter the financial dynamics of association enforcement and dispute resolution.