Arkansas will not issue a POA a new sewage-treatment permit — and 2025 re-enacted the bar
Arkansas will not issue a POA a new sewage-treatment permit — and 2025 re-enacted the bar
2026-09-09 · Arkansas · Legislation
An Arkansas property owners association cannot get a permit to run its own sewage treatment works. It cannot renew one it does not already have, and it cannot take a transfer of somebody else's. That bar has been in the Arkansas Code since 2018, and the General Assembly re-enacted it in 2025 as part of Act 935.1
For most Arkansas associations this is invisible. For the amenity communities that supply their own utilities — and Arkansas has several — it is a hard structural limit on what the association can be.
The bar and the grandfather
The provision sits at Ark. Code Ann. § 8-4-203(b)(1)(E). As it now reads, the Division of Environmental Quality “shall not issue, renew, or transfer permit coverage for nonmunicipal domestic sewage treatment works to property owners' associations or homeowners' associations after January 1, 2018.”
Against that, a narrow grandfather: “A property owners' association or homeowners' association with permit coverage before December 31, 2017, may retain permit coverage if [it] complies with this section.”
So the universe of Arkansas associations that may lawfully operate their own sewage treatment works is closed. It consists of those that were already inside it before 2018, and it can only shrink.
One point of precision, and we would rather state it than gloss it. Act 935's enrolled text does not preserve a readable record of which words were added in 2025 and which were carried forward with renumbering. What we can verify is what the section says today and that the 2025 legislature re-enacted it. We are not claiming the 2025 act created the bar — it did not; the January 1, 2018 date does that.
What Act 935 did add
The new material is a threshold on expansion. The Division may not consider an application to issue, or to modify to increase the design flow of, a permit for a nonmunicipal domestic sewage collection system unless either the Division determines there is a significant threat of pollution without it, or the applicant “demonstrates that there is no other viable cost-effective alternative by submitting a feasibility study for the connection to the existing publicly owned treatment works that has a collection system within five (5) miles of the proposed treatment works.”
The Act also cut the initial trust-fund contribution fee from 10 percent to 8 percent, capped at $100,000; changed the fee-reduction duty from “shall” to “may”; and moved the point at which contributions cease from the third permit renewal to the second.
The direction of travel is unmistakable: Arkansas wants nonmunicipal sewage systems connected to public treatment works where one is within reach, and it does not want associations running them.
Why this matters to an amenity community
Several of Arkansas's large recreational developments supply their own water, sewer and roads. Where the operator is a suburban or municipal improvement district, this bar does not apply — a district is a public body politic, not a property owners association. Where the operator is a POA, it does.
That produces three practical consequences.
Succession is a trap. An association that inherits a treatment works from a developer, or acquires one from a failing private operator, cannot take a transfer of the permit. The plant does not come with the paperwork. Any Arkansas board contemplating taking over a wastewater system from a declarant should establish who will hold the permit before the transaction, not after.
Growth is constrained. A grandfathered association may retain coverage, but a modification increasing design flow now runs into the five-mile feasibility test. An association whose community is still building out, and whose plant is near capacity, may find the answer is connection to a nearby public system rather than expansion.
The grandfather is conditional. Retention depends on continuing compliance. An association that loses coverage does not get it back, because it cannot be issued a new permit.
The alternative Arkansas has been building
There is a route out, and it opened in the same session. Act 736 of 2025 expanded eligibility under the Water Authority Act, and in December 2025 the Attorney General was asked what that meant for the largest gated community in the state.
His answer, in Opinion 2025-052, was that Hot Springs Village itself cannot become a water authority — as an unincorporated community it “has no legal status” — but that its POA could qualify, because it is a nonprofit corporation. Two conditions gate it: a factual finding by the Natural Resources Division Director that the association supplies water “to or for the benefit of members of the general public,” which is doubtful where it serves only its own members, and, for formation as opposed to conversion, a second joining entity.2
A water authority is a public body politic. It may exercise eminent domain, issue interest-bearing bonds, borrow tax-exempt funds, and its projects and project income are exempt from ad valorem taxation.
Put the two together and a coherent state policy appears: Arkansas does not want associations operating utilities as associations. It offers them a path to operate as something else. The price of that path is becoming a public entity, with the transparency, procurement and governance duties that follow — and, on the evidence of the Improvement District Transparency Act litigation, real consequences for failing them.
The questions for a board
Does your association hold a permit at all? Many Arkansas communities are on municipal sewer, individual septic systems, or a system owned by a district rather than the association. The answer determines whether any of this reaches you.
If it does, when was coverage first issued? Before December 31, 2017 is the line. An association that believes it is grandfathered should hold the documentation proving it, because the alternative is a plant it cannot lawfully permit.
What does the recorded instrument promise? Utility service is usually a covenant obligation as well as an operational one. An association obliged by its declaration to provide sewer service, and legally barred from obtaining a permit to do so, has a problem that belongs in front of counsel and in the budget long before it becomes an enforcement question.
And check the corporate basics. Every argument above depends on the association existing as a corporation. An Arkansas nonprofit that misses the free annual report due each August 1 faces administrative dissolution under Ark. Code Ann. §§ 4-33-1420 to -1424, with a cure period and a two-year reinstatement window. A dissolved association trying to hold a utility permit, enforce a covenant or record a lien is in a materially worse position than one that filed a form.
What to watch next
Whether any Arkansas POA actually pursues water-authority status, which would be the first real test of the Attorney General's “general public” question. And whether the General Assembly revisits the 2018 bar when it convenes in January 2027 — nothing has been filed, and nothing can be until pre-filing opens on November 16, 2026.
Related Arkansas HOA Topics
- Act 935 of 2025 (SB546), amending Ark. Code Ann. § 8-4-203 — enrolled text, including the property owners association permit bar and the pre-2018 grandfather ↩
- Ark. Att'y Gen. Op. No. 2025-052 (Dec. 4, 2025) — a POA may qualify as a “qualified corporation” under the Water Authority Act as amended by Act 736 of 2025 ↩
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