Rules of the Commissioner of the Arizona Department of Real Estate require that assurances be provided for completion of all public and private common-area subdivision facilities (as defined by the DRE) prior to issuance of a Public Report and prior to acceptance of any binding contract for sale [See the rule here]
Any assurances required by a City/County typically pertain only to public infrastructure (utilities, streets, etc.) The government entities and municipalities generally do not require assurance of completion of all common-area and private facilities before acceptance of the improvements and issuance of occupancy clearances. This includes any non-public amenities/necessities that are promised but not complete: perimeter walls, gate -if included-, streets or private driveways, pool, play areas, landscaping, parking structures, light poles… anything (other than the lots or units themselves) that enhances the project and that a prospective purchaser is promised will be included, but is not complete on filing.
However, DRE does require that some assurance is provided (cash or alternative) in favor of not the DRE or municipality, but a 3rd party (to the exclusion of the Declarant, or developer) who could use the funds to contract for or accomplish completion of the promised common and private facilities included in the offering for sale of the lots/units in the event the developer is unwilling or unable to complete the facilities. Since the HOA, after sale of one or more lots, is comprised of the lot owners that are interested in final completion of all facilities promised in the offering for sale, the HOA is typically that logical 3rd party.
The rule allows for several acceptable forms of assurance, the most common being financial (funds committed or on deposit and payable to a 3rd party). Less-desirable alternatives, like holding escrow open until completion, are not practical for the developer, although the contract for sale may still be binding.
Unfortunately, the only alternative to these assurances in order to obtain a Public Report is waiting until completion of all improvements before applying for the final Public Report and before offering the property for sale.
