HOA parking enforcement - Are On-Street Parking Bans Valid?

Residential Arizona Parking Laws

Wondering if your HOA can fine you for parking on the street?

We regularly meet with homeowners whose HOAs threaten to impose fines or even take them to court to enforce HOA on-street parking bans. In one case, the HOA spent more than $40,000.00 unsuccessfully attempting to enforce an on-street parking ban against a family that had five licensed drivers in the family.

HOA parking enforcement. Are these HOA street parking bans enforceable?

HOA parking rules in Arizona say that the HOA has "no authority over and shall not regulate any roadway" if it is a public street.

BUT this law only applies to planned communities whose CC&Rs were recorded since December 31, 2014. So if your HOA is new or if it has recorded an amendment to its CC&Rs since December 31, 2014, the HOA does not have the authority to ban you from or enforce parking on public streets.

What about those older HOA’s or those that have not yet amended or refiled their CC&Rs?

The answer often depends on the precise language used in the CC&Rs. However, it does not make sense for HOAs to be able to regulate public streets. HOAs, after all, are not public entities.

No Arizona court has had the chance to address this specific issue. The argument is that the power to regulate public roads is vested exclusively in governmental bodies and private entities, such as homeowners’ associations, do not have the power to impose restrictions on the use of it. In some cases, this can turn on the language used in the CC&Rs, plat map, or other governing documents.

Finally, it is important to keep in mind that HOAs cannot enforce street parking bans, even if they are valid, if they are doing so in a selective, random, arbitrary, capricious, unreasonable and/or potentially discriminatory manner. A use restriction that singles out and targets a particular homeowner is unreasonable, arbitrary, capricious, and unenforceable. If all of your neighbors also park on the street and you're the only one getting fines or threatening letters, you may have a good selective enforcement defense.

If you feel you need legal assistance with regard to the new short-term rental law or if you have any questions, check out our HOA Law or Real Estate Law page for more information. Or contact us today.

If you liked this article, you might also like reading our blog about rental restrictions and collecting fees.

HOA Codes of Conduct and Why They Are Unenforceable

The Issue with HOA Codes of Conduct in Arizona

Codes of Conduct are all the rage in HOAs and condominium communities. Some associations are even attempting to insert these Codes of Conduct into their bylaws, declarations, and other governing documents.

There's just one major flaw with Codes of Conduct -- they are invalid and unenforceable. 

Consider what appears to be a fairly innocuous Code of Conduct:

1. Board Members shall act in the best interests of the Association as a whole. Board Members serve for the benefit of the entire community, and shall, at all times strive to do what is best for the Association as a whole.

2. No Board member shall willingly misrepresent facts to advance a personal cause or influence the community to advance a personal cause.

3. Board members shall use their best efforts at all times to make reasonable decisions that are consistent with the Declaration, Bylaws, and other governing documents of the Association, and to be familiar with all such documents.

4. Board Members shall set high standards for themselves as Association representatives. Board Members shall hold themselves to the highest standards as members of the Association, and shall in all way comply with the provisions of the Association’s governing documents and the relevant law.

5. Board members shall at all times work within the Association’s framework, refrain from unilateral action, and abide by the system of management established by the Association’s governing documents and the Board. The Board shall conduct business in accordance with relevant law and the Association’s governing documents, and shall set upon decisions duly made, and no Board Member shall act unilaterally or contrary to such decisions.

6. Board Members shall behave professionally at meetings. Board members shall conduct themselves at all meetings, including Board meetings, annual meetings of the members and committee members, in a professional and businesslike manner. Personal attacks against other Board Members, Association member, residents, officers, management, or guests are not consistent with the best interests of the community and will not be tolerated. Language at meetings shall be kept professional. Though differences of opinion are inevitable, they must be expressed in a professional and businesslike manner.

7. Board Members shall not defame or disparage any other Board Member, Association member resident, vendor, Association agent or third-party.

8. Board members shall not harass, threaten or otherwise intimidate aby other Board Member, Association member, resident, vendor, Association agent, or third-party.

So what's wrong with it?

Everything.

Literally, everything. Notably, the Code of Conduct does not state who gets to decide what constitutes the “best interests of the Association,” what is “best for the Association as a whole,” or what constitutes a "willing misrepresentation" or a “personal cause.” Who gets to decide whether these standards are met? If your answer is "the rest of the board," then you've just identified one of the biggest problems with Codes of Conduct - they are subjectively and arbitrarily enforced by those who hold power to keep dissenting voices or the opposition from speaking up. Who decides what is disparaging? Truthful statements can be disparaging. Who decides whether someone is feeling harassed, threatened, or intimidated?

Also, keep in mind that board members owe fiduciary duties to the associations that they serve. And these fiduciary duties often require board members to review documents, conduct investigations, and ask hard questions. The above Code of Conduct, however, suggests board members are prohibited from conducting such an investigation if they believe the “system of management” is not functioning properly or that they could violate the Code of Conduct by conducting an investigation if a majority of the board decides there's nothing to investigate? 

When Codes of Conduct are included in bylaws, declarations, or other governing documents, they take on added problems. An association’s governing documents form a contract between the association as a whole and its members. Bylaws, like declarations and the other governing documents, also constitute part of this contract.

Basic rules of contract interpretation, therefore, apply when interpreting them. A fundamental rule of contract construction is that contract provisions cannot be enforced when the terms are too vague or uncertain. Codes of conduct that purport to require individuals to conform behavior to certain subjective standards, such as using “best efforts at all times to make reasonable decisions,” setting “high standards” and “hold themselves to the highest standards as members,” to name but two, are too vague and indefinite because they do not allow individuals, such as Plaintiff, to conform her conduct to the rule or know what conduct would constitute a violation.

Other terms that fall into the “too vague to be enforced” category include similar subjective terms that are “obscure and indefinite in meaning as a matter of law.” A contract provision is not enforceable “[i]f the essential terms are so uncertain that there is no basis for deciding whether the agreement has been kept or broken.”

An objective standard is impossible to employ since the determination of such violations is, by their nature, subjective and impossible to calculate on an objective standard. How does an individual know whether she or he is meeting the standard or what behavior violates it? The fact that the majority apparently gets to make the decision unilaterally further underscores the invalidity and unenforceability of Bylaws disqualifying owners based on the subject determination of an individual’s conduct.

Put another way, how does a member possibly confirm his or her behavior to the code of conduct against what objective measure is it to be tested? How does a member know she or he is acting “in the best interests of the Association” or striving “to do what is best for the Association as a whole”? What if a majority of the board believes a board member is not pursuing the “best interests” of the Association because she or he believes that the Association’s best interests diverge with what the majority of the board believes or wants? Also, what is the penalty for violating it and who gets to decide?

Subjective rules might be great for kids on the playground but they have no place in a quasi-governmental association. 

Read more about HOA law by going to our HOA law page or schedule a consultation with one of our highly experienced attorneys for questions and inquiries. Or, continue reading to our next blog about Foreign Court definition.

Your HOA's Short-Term Rental Restrictions May be Illegal

Can an HOA Restrict Rentals?

Let’s break this down…

HOA Rental Restrictions in Arizona

Short-term rental restrictions are popping up in planned communities and condominiums throughout Arizona at an alarming rate.

While exactly what constitutes "short-term" may vary from one association to another, with prohibitive periods ranging from 30 days to in some cases one year, the bans are real and they are having a disastrous impact on owners.

In some cases, these bans are being adopted by board edict; in others, a large number of homeowners band together. In both cases, it is very likely that new rental restrictions are unlawful regardless of the number of owners who support them.

HOA Rental Restriction Enforcement

There are several arguments for why new rental restrictions are invalid even in cases where a majority or super-majority of members votes to enforce the ban.

The Arizona Condominium Act, for example, provides that an amendment to a declaration "shall not create or increase special declarant rights, increase the number of units or change the boundaries of any unit, the allocated interests of a unit or the uses to which any unit is restricted, in the absence of unanimous consent of the unit owners.” A rental restriction is the classic type of use restriction that would seemingly require such unanimous consent. 

In addition, the Arizona Court of Appeals in Dreamland Villa v. Raimey held that amendments to declarations must be with unanimous consent if they “unreasonably alter the nature of the covenants" and that “any amendment must be directed at, and is limited by, the scope of restrictions and cannot create new obligations not previously mentioned.

Associations cannot “use the Declaration’s amendment provision as a vehicle for imposing a new and different set of covenants, thereby substituting a new obligation for the original bargain of the covenanting parties,” the Dreamland Villa court held that an amendment that “would unreasonably alter the nature of the covenants,” such as those having a “substantial and unforeseeable” impact on owners, must be disallowed because “such servitudes [cannot] be imposed non-consensually under the generic amendment power.”

Such amendments are also often arbitrary and unreasonable. Courts have recognized that associations must act reasonably and cannot enforce restrictions or take acts that are arbitrary, unreasonable, or selective. Their rulemaking powers are limited to the adoption of “reasonable” rules and they do not have the power to adopt rules that “restrict the use or occupancy of, or behavior within, individually owned lots or units.” 

So… Can an HOA Restrict Rentals?

We believe that the law is clear that new rental restrictions cannot be adopted with less than unanimous consent of all members. Associations, however, are coming up with creative ways to try to circumvent this unanimity requirement, passing rules regulating who can and cannot use the common areas such as pools or boat docks (surprise: short-term renters are the ones being denied these rights). 

If you are the victim of a rental restriction or have questions, call today for a consultation. In many cases, you have to act swiftly to prevent the new rental restriction from being enforced. If you do not, you could lose the right to do so!

If you are seeking legal assistance about short-term rental ban or simply want to find out more. Check out Real Estate and HOA Law or schedule a consultation to talk to an attorney.

How to Fight HOA Fines—and Win!

If you live in a homeowners’ association, then you know that you have specific rules and guidelines that regulate how you use your property and that the homeowners’ association may declare you to be in “violation” if you fail to follow its rules. Violations may, sooner or later, lead to HOA fines that you believe are unwarranted, unfair, or unreasonable. Disputes between homeowners and their associations are far too common.

A 2015 survey by the Coalition for Community Housing Policy in the Public Interest revealed that 72 percent of people surveyed had been involved in a dispute with their association. In other words, If you live in an HOA, it is statistically just a matter of time before you find yourself in a dispute with the HOA. Noise, parking, walls and fences, painting, landscaping, tenants, garage storage, new construction, repairs, remodeling. Literally just about anything can lead to a dispute. And disputes will lead to violations, which will in most cases lead to fines.

You can fight such violations and fines.

Fight Your HOA the Right Way

When it comes to fighting your HOA, it is important that you understand how to take on your HOA board. There are most certainly do’s and don’ts when it comes to HOA disputes.

Before we get into all the details, if you have been cited, fined, or sued by your HOA, your first step should be to contact an HOA attorney. A reputable HOA attorney will be knowledgeable and experienced in HOA dispute matters as well as state laws. Your attorney can advise you of your rights and responsibilities and also represent you when negotiating with your HOA or in court.

Common HOA Violations Against Homeowners

Here are some of the most common HOA violations filed against homeowners:

• Failing to pay HOA assessments timely (though not technically a “violation” in the sense we are talking about, it can lead to substantial penalties and fees)

• Failing to upkeep your home to the standards required in the CC&Rs, rules and regulations, design or architectural guidelines

• Failing to obtain permission before changing or adding to the features of your home (including architectural, landscaping, or even occasional yard trinket)

• Parking vehicles in unauthorized areas

• Having features (such as gazebos, trailers, or boats) visible from beyond the property

• Violating regulations regarding pets, their sizes or numbers

Exact steps to take to fight HOA fines:

1.       Research Your HOA’s Regulations and Guidelines

Perhaps you didn’t read through your CC&Rs (covenants, conditions, and restrictions) with a fine-tooth comb when you first purchased your home, but if you find yourself in a dispute with your HOA, you need to get really familiar with them now. Perhaps you didn’t think that you needed the board’s permission before placing the cute garden gnome in your front yard? Perhaps you assumed that you could install an RV gate without permission because you bought a house with RV parking in the back and noticed all of your neighbors had RV gates?

Take a look at the rules that set the scope of the HOA’s power. If you’ve been fined, these documents should clearly define the rule(s) that you violated. And your HOA should be following their written policy of issuing notices and fines for rule violations accordingly.

2.       Understand Your Rights as The Homeowner

It’s important that you know (a) whether you are actually in violation of the HOA’s rules and, if so, (b) whether you have grounds for an appeal or a variance. Even if you are in violation and no grounds exist for an appeal or violation, it does not automatically lead to the conclusion that you should be fined. Fines must be reasonable and “reasonableness” in the context of fines means many things.

Is it reasonable to charge someone thousands of dollars because they left their trashcan on the curb or have an emotional support animal that is slightly bigger than what the rules allow? You need to evaluate whether or not you truly violated an explicitly stated rule or guideline. If you did not, this could be grounds for an appeal. Additionally, evaluate whether the HOA adhered to the proper process for issuing notices and fines for the rule violation. If they did not, this too could be grounds for an appeal.

This is a crucial time and consulting a lawyer is highly recommended. There may be compelling reasons not to appeal the alleged violation and what you say or do not say may be of paramount importance to your eventual success. If you submitted a design review request that was ignored, for example, what you say will be different than if you submitted one that was denied or if you never submitted one at all. Speaking with a lawyer before you undertake the appeal process will help you shape what you say and when.

3.       Contact Your HOA

If you have received a notification that you are in violation of the HOA’s rules, you may want to avail yourself of any appeal rights. Write your HOA to inform them that you are disputing the violation and any fine. Make sure that you follow any timelines set forth in the violation or fine notice. Under Arizona law, you have the right to request certain information (including who observed the violation and when the violation was observed).

Often, violations are identified, and fines are imposed by a management company that has not consulted with the board of directors. Your contact with the HOA may be the first time the board is learning of your specific issue. Do not assume that the board of directors knows about your situation.

4.       Prepare Your Appeal

Yes - You CAN appeal an HOA decision! Most of the time the entire appeal will be the letter you send to the board of directors disputing the fine. For this reason, you will want to err on the side of including more, rather than fewer, details. But at the same time, you do not want to include too many details. What is “too many” versus “too few”? It is one of the reasons we recommend you consult a lawyer.

Remember who your audience is. It is not simply the board of directors. It is also the judge who may end up hearing the case if you or the HOA bring the matter to court. For that reason, we recommend that you imagine your letter blown up on a giant screen in the courtroom. Is there something in there that you are going to regret saying or need to explain? If so, maybe you need to revise the letter.

Some of the important points to include in your appeal are:

(a) state if you have corrected the alleged violation;

(b) if the alleged violation is something that has existed for a long time, you will want to mention that as well (it is a lot harder for a board of directors to tell you to get rid of the tree if the tree has been there for 10-12 years than if you just planted it);

(c) are there extenuating circumstances;

(d) if you observe the identical violation throughout the community, include this fact (with photographs);

(e) if you previously received permission from a prior board, this is a key fact to mention. Make sure to include photographs, copies of documents and records (if you have them), etc.

You also may want to consider gathering witness statements for you appeal to the HOA board as well. Boards can often be swayed by public opinion. If all of your neighbors like your paint color and you can present their statements to the board, this may have a positive effect for you. Also, try to talk to others who have similar conditions or violations in the neighborhood. It is not uncommon for property managers to play favorites so find out whether your neighbors are being fined or whether they’ve been granted a variance.

Finally, there is beauty in brevity. Long is not always the best strategy. A board member is not going to read 10, or even 5, and probably not even 3, pages. Make your point, make it clear, and make it concise.

5.       Attend Your Appeal Meeting

If you have requested a hearing, you should receive the opportunity to speak with the board. It is important to do your homework. Know where your board members live. Do any of their homes have a similar condition or violation? Be on time. Express a willingness to find middle ground.  

It is important to understand that the HOA decision appeal serves two purposes:

1. You are hoping to convince the board members to give you what you want.

2. You are gathering facts for possible legal action. Does it appear they are acting arbitrarily? Can they explain why the feature in dispute does not fit into the “aesthetics” of the community? Can they explain to you why you shouldn’t be allowed to have the same feature that countless others have?

Under Arizona law, you have the right to record the meeting. Because Arizona is a “one party” state for purposes of recording, you do not even need to inform anyone else that you are recording (you are, in other words, the “one party”). If you anticipate that the appeal will not be the end of the dispute, you may want to exercise that right. If you end up in court, one argument you may want to make is that the decision is arbitrary or unreasonable. A recording of the proceeding may prove vital to asserting this defense in court.

6.       Await the Decision

It is unlikely the board will make a decision with you in the room. They likely will go into an executive, or closed, session to discuss your appeal and you will be notified later on. If the HOA does not grant your appeal or variance, it likely will begin or continue to impose fines if the condition is not addressed. It also may consult with a lawyer of its own to bring legal action to compel you to change the condition. You can find more about the HOA dispute process here.

HOA Attorneys Will Make Sure Your Best Interests are Protected

Having an HOA attorney in your corner will be beneficial in cases appealing or defending yourself against your HOA. Should your case continue, you’ll need the legal expertise of a professional to help you navigate the lawsuit and ensure that your best interests are protected.

If you need additional legal advice regarding your HOA, get in touch with the team at Dessaules Law Group today to see how we can help protect you and fight against unjust HOA fines and violations.

What is SPDS? (Seller Property Disclosure Statement)

It can feel like there’s a mountain of paperwork in buying or selling a new home. But one document that shouldn’t go unnoticed is a Seller Property Disclosure Statement, often referred to as the SPDS, or ‘spuds’. 

In this article we share exactly what an SPDS is and why it’s so important in real estate.

What is a Seller Property Disclosure Statement (SPDS)?

The SPDS is a document used when buying or selling a home which is designed to protect both parties. It gives the seller the opportunity to disclose insight into the condition of the property, providing a lot more information for the buyer to consider during the home inspection period. This includes any known defects or damages that have occurred during the seller’s time in the home.

Sellers are legally obligated by law to disclose all known material facts about a property to the buyer. While a Seller Property Disclosure Statement is not required, it is extremely advised to do so.

To make matters easier, the SPDS is divided into six sections:

Ownership and General Property

Here the seller must provide information about the property including the address and occupancy and ownership details.

Building and Safety Information

This section details the physical aspects of the property which must include any past or present issues as well as improvements that have been made. 

Utility Information

Types of utilities offered such as gas and electricity, and which suppliers currently provide them.

Environmental Information

This section covers environmental hazards, issues related to soil settlement, erosion, drainage and noise, and odors, or nuisances in the surrounding areas.

Sewer and Wastewater 

Information regarding the type of treatment available for sewer and wastewater.

Other Conditions and Explanations

Here the seller can disclose any other miscellaneous information not covered in the previous sections that may affect the value of the property or the buyer’s decision in purchasing.

The SPDS must be delivered within five days of contract acceptance by the seller. From here, the buyer has five days to cancel the contract and receive a full refund.

Why SPDS is important

A Seller Property Disclosure Statement not only streamlines the process of buying and selling a property (avoiding back and forth questioning in regards to the property’s condition). It also protects the seller from future liability. 

Failure to disclose accurate, up to date information can account for unavoidable real estate lawsuits. Therefore the completion of a SPDS is highly encouraged.

Should you share your SPDS with your home inspector?

Ultimately, yes. While sellers are responsible for disclosing all known property facts within a Seller Property Disclosure Statement, buyers are the party responsible for verifying the information. It’s therefore crucial to share this document with your home inspector for further investigation, particularly if there are any areas of concern. 

For example, if mold is reported within the property, you will want the inspector to check for any additional damage to walls or flooring. 

Looking for real estate legal support?

Based in Arizona, the Dessaules Law Group has considerable experience in all aspects of real estate law, representing landlords and tenants, buyers and sellers, borrowers and lenders, and homeowners.

Contact our attorneys today to learn more about our real estate services.

"Openness" and "Transparency" - The Basic Requirements of all HOA Meetings

Both the Arizona Condominium Act ("ACA") and the Planned Community Act ("PCA") contain the following provision:

It is the policy of this state as reflected in this section that all meetings of a condominium, whether meetings of the unit owners' association or meetings of the board of directors of the association, be conducted openly and that notices and agendas be provided for those meetings that contain the information that is reasonably necessary to inform the unit owners of the matters to be discussed or decided and to ensure that unit owners have the ability to speak after discussion of agenda items, but before a vote of the board of directors or members is taken.  Toward this end, any person or entity that is charged with the interpretation of these provisions, including members of the board or directors and any community manager, shall take into account this declaration of policy and shall construe any provision of this section in favor of open meetings.

About Those Annoying "I Want to Buy Your Home" Messages

Cash Buyers for Houses

If you own a home, chances are you know what I’m talking about. A voicemail pops up in your inbox from a number you do not recognize. Or maybe it’s a text. Here’s one I pulled from my voicemail recently:

Hey, we’re interested in buying your property as-is. If you’re open to an offer, please let us know as soon as possible. Thank you.

In writing this article, I found four copies of this identical voicemail from four different numbers and four different Arizona area codes, all left in a span of three days. Sometimes the messages take on a far more personal tone:

Hey, this is Carla. I’m calling you to see if you’re interested in selling your property. I’m looking to make a fair cash offer. I will buy your house in as-is condition. If you’d like an all-cash offer…

I found two different identical messages from “Carla.” Identical. No, I don’t think her name is Carla and I’m not looking to sell my home. But I receive a lot of these messages.

Sometimes, I receive one a day. Some weeks are lighter but others are heavier. I once called one of these numbers, out of curiosity or boredom, only to confirm my suspicion that a “fair offer” meant “lowball offer.” But I did get to listen to ten minutes of why I should accept such a lowball offer for my house. “Because when we sign this contract, we’re partners. And you’d want to be fair to your partner, right?”

Very rarely do these calls identify the address they’re interested in purchasing. The is because “Carla” is often a prerecorded message left on your voicemail in violation of federal law.

Telephone Consumer Protection Act

The federal Telephone Consumer Protection Act prohibits telemarketers from using an automated dialing system or an artificial or prerecorded voice without your prior express consent. This means that, unless you’ve expressly consented in advance, each time that someone leaves a message for you, they are violating the law. Proving these cases, however, is not easy. You generally need proof of multiple calls with an identical message (to prove the prerecorded voice).

A consumer who receives these calls may be entitled to statutory damages of at least $500 per violation. A court may, in its discretion, increase the amount of the award to an amount “equal to not more than 3 times the amount available” where the violation was committed “willfully” or “knowingly.”

This means that you may be eligible for $1,500 per violation. The cases are often conducive to class action treatment given the common scheme that is employed. You do not need to have your number listed on the National Do Not Call Registry in order to have a claim, but it helps prove a willful or knowing violation if it is.

If you are tired of receiving these calls and want to do something about it, give us a call today to schedule a consultation.

What are CC&Rs?

If you’re planning to buy a home in a condominium or planned community in Arizona, you will be a member of the homeowners’ association (HOA). Your HOA will have a recorded document spelling out your rights and obligations and the basic rules that govern the association. This document is commonly referred to as a Declaration of Covenants, Conditions, and Restrictions (CC&Rs).

 Gathering the Facts About the CC&Rs

HOAs have their benefits and drawbacks. It is important that you understand the CC&Rs, your rights and obligations (both financial and otherwise), and how the HOA operates.

Reading through the CC&Rs can be a tedious and time-consuming task but there is vital information in this document that you might want to know before you buy your home. Here are some important steps you can take to make an informed home-buying decision.

Requesting a Copy of All HOA Documents

If you are considering purchasing a home with an HOA, we strongly recommend you request a copy of all association documents. The CC&Rs are also available through the county recorder. But you also may want to read through the bylaws, any rules and regulations that the HOA has established, some recent financial statements, and possibly even meeting minutes of recent board meetings to see how the HOA operates (or how dysfunctional it might be). The meeting minutes should give you some insight into how the HOA functions for its members, how often they meet, when the last election was held, and how well or poorly the board functions. Your research into the background of the HOA is important as you decide whether or not this is somewhere that you can see yourself living happily.

Members are entitled to all of these documents. So if you have not yet completed the purchase, you should be able to ask the seller to provide these documents if they are not otherwise available.

Understanding the Financial Responsibility

Every HOA comes with regular fees that are used to pay for expenses related to common areas. These fees and dues should be explicitly outlined for you. Some initial questions to consider are:

• Are assessments paid monthly, quarterly, or annually?

• What is the amount of regular assessment?

• How frequently has it increased in the last few years?

When considering purchasing a home, you’ll want to start your research into the fees beginning with the upfront costs required and the total yearly fees. This will give you a good idea of the financial responsibility that you can expect. 

You also will want to consider special assessments. Special assessments are, as the name suggests, special charges that an HOA can impose on homeowners. This includes expenses for emergencies or other unexpected costs. The CC&Rs should be able to tell you whether the members, or the board, can adopt special assessments and, if so, in what circumstances. The existence of numerous special assessments may be a red flag for the association. Meeting minutes can also tell you whether attempts have been made to pass special assessments, giving you an indication of whether there might be some financial issues in the community into which you’re moving.

You’ll also want to see if the HOA has a reserve account. A reserve account is a savings account where HOAs squirrel money away to save for long-term capital improvements such as road improvements, roof replacement (in the case of a condominium), or community pool upgrades. A special assessment may be an indication that an HOA has an underfunded reserve account that it is trying to supplement.

The best way to gain insight into the financial operations of your potential HOA is to review their financial records and see if they increase dues or approve emergency assessments regularly.

The final issue to consider are fines. Is there a fine policy and, if so, what is it? How frequently are fines imposed and for what types of CC&R violations? Do the meeting minutes reflect a number of people asking for the HOA to waive fines? If so, this may be a community whose board liberally imposes fines.

Getting Familiar with the Services the HOA Provides

Many homeowners enjoy living in an HOA community as there are many included services. Typically, the HOA mainly covers the cost of common area maintenance, but this will vary depending on whether you’re considering living in a condo or a single-family association.

Condo fees generally cover everything in the many common areas. Things like landscaping, pool maintenance, building repairs, etc. are all covered by the HOA. For single-family communities, the common areas are usually covered, but the individual homeowner is generally responsible for maintenance on their own property. There are also fewer common areas in single-family situations.

Be sure to fully review your HOA documents so get a full understanding of what your potential homeowner’s association will cover and what you’ll be responsible for as the homeowner.

Contact Dessaules Law Group for Document Review and Legal Advice

The attorneys here at Dessaules Law Group can review all HOA documents before you purchase a home in Arizona to ensure that you understand the full picture. We can advise on all future obligations and help you to understand any potential risks or pitfalls associated with the agreement.

We are highly experienced HOA attorneys. Contact us today to schedule a consultation.

Covid-19 Is Not A Free Pass for HOA’s

COVID-19 for HOAs

While the Covid-19 pandemic has created a lot of confusion, one thing is clear: it should not be used as an excuse to take advantage of others. Yet, this is precisely what some Homeowner’s Associations have been doing.

Over the last few months, many HOAs have refused to reopen common elements (including fitness centers, pools, dog parks, and other recreational facilities), unless the homeowners sign a blanket liability waiver. Signing a blanket liability waiver excuses the HOA from any liability for its own neglect. That means if someone trips and falls near the pool because the HOA failed to fix a hole in the surrounding cement, the HOA cannot be held liable. Lately, these HOAs have been citing COVID-19 as a justification for the waivers. In essence, the HOA is using the current pandemic to force homeowners to sign their rights away. Fortunately, these waivers are usually unenforceable.

Concerns

The Covenants, Conditions and Restrictions (“CC&Rs”) which govern most HOAs expressly give every homeowner an equal right to use and enjoy the common elements in the community. However, the HOA is tasked with maintaining and repairing those areas. HOAs are even required to insure the common elements in case there are accidents or injuries. The HOA is responsible for maintaining the safety of the common elements, not the homeowners.

While HOAs are afforded the right to impose reasonable restrictions on common element use (i.e. no swimming after midnight, social distance while using common areas), a blanket liability waiver goes far beyond what could be considered “reasonable.” It excuses the HOA from its maintenance obligations and subjects the homeowners to the HOA’s negligence.

Liability Waivers

Fortunately, in Arizona, liability waivers are often strictly construed against the drafter—the HOA in this case. That means a Court will interpret a waiver as narrowly as possible and resolve any ambiguities in favor of the homeowner. Additionally, the waiver is only valid if: (1) it does not contradict public policy; and (2) the waiver was actually bargained for.

If an HOA’s liability waiver takes protection away from a class of persons that it should be protecting, it is against public policy, and therefore unenforceable. And HOAs are responsible for protecting the homeowners. This is why the HOA has a duty to maintain and insure the common elements, while the homeowners have the right to enjoy the common elements. Blanket liability waivers run afoul of public policy because they expose homeowners to the very risks and liability that the HOA is tasked with managing.

HOA liability waivers that are not bargained for are also not enforceable. A liability waiver is nothing more than a contract between two parties. A contract is only valid if each party gives something up in exchange for the bargain. Savoca Masonry Co. v. Homes & Son Const. Co., 112 Ariz. 392, 394 (1975) (stating an enforceable contract requires consideration). In cases with blanket liability waivers, the homeowner is signing away any right to sue the HOA in exchange for access to the common elements—which the homeowner already has a legal right to access. This is often called an “illusory promise” where one party is agreeing to do something it is already required to do. Illusory promises are not enforceable. Shattuck v. Precision-Toyota, Inc., 115 Ariz. 586, 588 (1977) (“an illusory contract is unenforceable for lack of mutuality.).

Finally, the HOA cannot enforce a waiver that has no limits. An HOA has a duty to disclose all the facts that will impact a homeowner’s decision to sign, or not sign, a liability waiver. See Maurer v. Cerkvenik-Anderson Travel, Inc., 890 P.2d 69 (Ariz. App. 1994). That means the liability waiver has to explicitly state what risks the homeowner is agreeing to assume by signing. Yet, a blanket liability waiver generally excuses the HOA from liability without reference to any of the risks. This is another argument that a homeowner can use to invalidate a liability waiver.

Conclusion

Many HOAs are exploiting a global pandemic to skirt their legal obligations at the expense of homeowners. They accomplish this by forcing homeowners to sign blanket liability waivers to access common elements in the community. These liability waivers are often unenforceable because they go against public policy, they are not bargained for, and they are unlimited in scope.

Contact an HOA Attorney

Whether you have been denied access to the common elements of your community because you refuse to sign a liability waiver, or, worse, you have been injured due to the HOA’s neglect after signing such a waiver, an HOA attorney can help protect your rights. You may be entitled to actual damages, punitive damages, and attorney’s fees incurred in such a suit.

Our attorneys have substantial experience in HOA and contract law. We are prepared to help you, whether that means providing advice or taking on litigation. Please do not hesitate to reach out to us with your concerns.

Get Off My Credit Report!

Credit Reports

Federal law requires the three credit bureaus, TransUnion, Experian, and Equifax, to provide you with a free annual credit report. We encourage you to pull your credit annual with each of the three credit agencies because the same information does not always appear on all three credit reports. We are here to help if there are items on your credit report that should not be there. 

Accessing Your Credit Report

Credit reports will tell you why a party has pulled your credit. There is a section in credit reports for “Hard Inquiries” and “Soft Inquiries.” A Hard Inquiry usually involves inquiries from you applying for credit or financing or as a result of a collection. “Hard Inquiries” will usually stay on your credit reports for twenty-five months and they impact your credit score. A Soft Inquiry, by contrast, does not impact your credit score. 

The Fair Credit Reporting Act

The first question to ask is whether the party pulling your credit has the right to look at your credit. The answer to this depends on your relationship with the party pulling the credit.

The Fair Credit Reporting Act provides that a party can only obtain a consumer credit report under certain circumstances “and no other.” Debt collectors may pull your credit only if it “intends to use the information in connection with a credit transaction involving the consumer (that’s you)” and involves “the extension of credit to, or review or collection of an account of, the consumer (you again).”

This federal law prohibits someone from pulling your credit unless there is a credit transaction. If you apply for a credit card, for example, the credit card company will ask you for permission to pull your credit. The credit card company also might pull your credit if you default because you have initiated the transaction (by asking for credit). 

However, the Fair Credit Reporting Act (“FCRA”) prohibits an HOA or its lawyers from pulling your credit unless it first obtains a valid judgment. The Ninth Circuit Court of Appeals has held that it is a violation of the FCRA to pull an adverse party’s credit report for the purpose of determining whether the consumer had sufficient assets to pay a judgment before obtaining a judgment. Mone v. Dranow, 945 F.2d 306, 308 (9th Cir. 1991).

Your HOA’s lawyers cannot look at your credit for any reason, such as deciding whether you might be collectible until they obtain a judgment. As the Ninth Circuit has reaffirmed this holding several times over the last twenty-five years, we believe that a good argument can be made that a debt collector who obtains your credit before filing a lawsuit or before judgment has acted in willful violation of the FCRA. Only “a judgment creditor is authorized under the statute to obtain a credit report in connection with collection efforts.” Pintos v. Pacific Creditors Ass’n, 605 F.3d 665, 676 (9th Cir. 2010). 

Contact an HOA Attorney

You may obtain actual damages, statutory damages, and punitive damages for willful violations of the FCRA. You are also entitled to recover attorneys’ fees and court costs under the law. 

If you have been sued or have received a demand letter threatening a lawsuit, we recommend obtaining your free credit reports. 

Our lawyers are standing by to assist you in interpreting your credit report and counseling you on any potential claims you may have. Get in touch today.

“Don’t Tread on Me”? Try “Don’t Bite Me, Please!”

Is there anyone out there who loves rattlesnakes enough to share a house with them? It certainly isn’t the King family! The Kings have caught a whopping 29 rattlesnakes in the one year that they have lived in the home that they purchased for the not insubstantial sum of $700,000.00. Let that sink in: 29. Rattlesnakes. In a single year.

The problem for the Kings, other than the obvious snake infestation, is that their homeowner's association is refusing to let them extend their gate to the road to create a barrier. They’ve spent $7,000 so far on “snake fencing” but need the gate in order to better protect their home. You know, so they don’t get a bit getting into or out of their cars parked in their garage or elsewhere around their house and property. The HOA claims that the gate doesn’t conform with the community’s “aesthetic guidelines.” Those guidelines aren’t written down anywhere and, in our experience, board members are incapable of describing or defining a community’s “aesthetics.” Perhaps the “aesthetic” includes people routinely getting bit by rattlers?

A HOA has the duty to protect homeowners. This duty extends beyond merely protecting property values from vague, make-believe concerns of diminished property values due to one’s choice of house color or landscaping. If an HOA exists to do anything, it should ensure that homeowners have the right to protect themselves from actual threats. Note that the Kings are not asking the HOA to pay for anything; they are simply asking the HOA to give them permission, at their own expense, to protect their home from snakes visiting their home on the frequency of more than two per month. There would be no cost to the HOA to allow the Kings to protect themselves.

Undefinable ”aesthetics,” whatever that might mean, should not trump one’s right to protect one’s life from an actual threat. Snake bites are real. People can die from them. One of the Kings’ neighbors, for example, spent four days in the ICU and needed twenty-one (21 )vials of anti-venom. And that was from a “baby” rattler. Imagine if it was a teenager or mature rattlesnake.

We have no doubt that the community’s “aesthetics” would change overnight if it was one of the board member’s homes that was snake central or if a board member had to risk a snake bite every time she or he exited their car or walked into their garage. And maybe that is really the question that board members should ask when considering whether to place their own subjective ideas of what looks good over the health and safety of a community’s owners.

If snakes traditionally are a symbol of evil, then perhaps this HOA Board of Directors should adopt a snake as the HOA’s banner and fly it proudly at the community’s gates. At least that might give unsuspecting purchasers some warning of the dangers that the HOA won’t protect them from.

https://sacramento.cbslocal.com/2019/07/18/hoa-rattlesnake-barrier-property-family/

For more information about HOA Laws, check out our HOA Law page.

Having issues with your HOA and street parking? Check out this post.

If you are facing any issue with your HOA schedule a consultation with one of our attorneys. Get ahead of your situation before it gets worse.

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What About My Emotional Support Pet

HOA President Accused of Embezzlement.

This is why owners need to pay attention, ask questions, and inspect records in an HOA:

A trial date has been established for Joseph Girgenti, a Johnson County resident facing allegations of embezzlement from his own homeowner's association.

Girgenti, who served as the president of the Innisbrooke HOA in Center Grove, near Fairview and Morgantown Roads, is accused of misappropriating over $21,000.

Authorities assert that Girgenti wrote more than 20 checks to himself in the past year, diverting the funds for personal expenses. The investigation commenced in October after another member of the HOA received complaints about the group's failure to meet financial obligations.

Joseph Girgenti's trial is slated to commence on September 24, where he will face charges related to the alleged theft from the Innisbrooke HOA.

The case underscores the significance of ensuring transparency and accountability in homeowner's associations, emphasizing the need for diligent financial oversight to prevent such instances of misappropriation.

You can read the full story here

If you want to learn more about your rights regarding HOA related records inspection. Check out our HOA Law page for more information or schedule a consultation to speak with one of our attorneys.

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Dear Sun City Residents: Your Elected Representative is Lying to You, Nevada Jury Awards $20 Million Against HOA for Failing to Maintain Swingset

New Short-Term Rental Law to Take Effect in August

HOA Rental

New Arizona HOA Short-Term Rental Law

A new law impacting owners of short-term rentals will take effect in August. If you own property that you offer for short-term rentals or are considering getting into the short-term rental business, you need to make sure you are in compliance.

HB 2672, which Governor Doug Ducey signed into law in May, regulates vacation and short-term rentals. The new law plays on fears that short-term rentals are creating an influx of “party houses.” While every industry has its bad actors, we find no evidence behind the fear of rampant party houses.

As companies like Airbnb and VRBO actively discourage so-called party houses by allowing owners to give ratings to tenants, the occasional party house, where neighborhoods are displaced by excessive noise, trash, and traffic, appears to be a rare exception.

The law’s aim is designed to regulate short-term rentals and prohibit their use s venues for weddings and other large events. Newly-signed House Bill 2672 gives local governments authority to regulate short-term rentals to prevent their commercial use and requires owners to provide contact information.

It also requires cities and towns to notify the Arizona Department of Revenue and the owner of any violation of law within 30 days.

Owners are subject to fines starting at $250.00 and increasing to $1,500.00, and more, per violation.

HB 2672, which takes effect on August 2019, can be found here.

Legal Help with Your HOA

If you feel you need legal assistance with regard to the new short-term rental law or if you have any questions, check out our HOA Law or Real Estate Law page for more information.

Dear Sun City Residents: Your Elected Representative is Lying to You

Representative Kevin Payne wrote a guest commentary in the Sun City Independent entitled “PCA bill designed to protect Sun City.” A copy is here: https://yourvalley.net/yourvalley/your-life/payne-pca-bill-designed-to-protect-sun-city/.

Representative Kevin Payne writes that Recreation Centers of Sun City’s compliance with the Arizona Planned Community Act would put Sun City’s 55-plus age restriction in jeopardy. This is simply not true. Nothing in the Planned Community Act jeopardizes Sun City’s age restrictions.

 Every retirement community in Arizona is subject to and complies with the Planned Community Act. They do so without jeopardizing their age-restricted status. The Planned Community Act makes all Sun City owners “members” of the Recreation Centers of Sun City (“RCSC”), with the right to attend and speak at all RCSC board and committee meetings, including closed-door workshop sessions. It also gives every homeowner the right to vote, recall board members, and inspect RCSC’s records. In 2018, the Maricopa County Superior Court determined that RCSC must do these things. 

 The fact that the Planned Community Act’s protections apply to Sun City owners in no way jeopardize Sun City’s age restrictions and it is disingenuous for your elected representative to even suggest such a thing. Other communities that have restrictions in recorded documents, such as Sun City West, are free to enforce age restrictions provided they are in recorded documents. To be clear, Sun City’s age restrictions are set forth in RCSC’s Facilities Agreements and the various sets of CC&Rs recorded against Sun City properties. No one is attempting to take away Sun City’s age restrictions. Nor could they do so under the Planned Community Act. If someone tells you that the Planned Community Act will strip away Sun City’s age-restricted status, they are lying to you.

 In fact, the Planned Community Act contains several provisions that help retirement communities enforce their age-restrictions. Because the age restriction requirements are recorded against all Sun City homes, there is no risk of Sun City being “the next Youngtown.” Youngtown’s age restrictions were not set forth in recorded declarations or agreements; Sun City’s are. These are nothing but untrue scare tactics to avoid RCSC having to act with transparency. While it is unfortunate RCSC is engaging in such a disinformation campaign, it is disheartening that your elected representative would also stoop to this level.

 Representative Payne also falsely states that the Planned Community Act would require RCSC to open its doors to everyone. However, RCSC’s Facilities Agreements make clear that it gets to decide which of its members can use its facilities and the Planned Community Act does not interfere with this right. All the Planned Community Act says is that everyone, whether you are allowed to use the facilities or not, can attend and participate in meetings, look at documents, and vote to challenge RCSC decisions with which they don’t agree. What is wrong with that?

 Finally, Representative Payne is apparently uneducated when he states that RCSC does not foreclose. It has filed many foreclosure actions over the years and its Facilities Agreements give it the right to foreclose after just ninety (90) days. One of the many homeowner protections in the Planned Community Act is that RCSC would have to wait at least a year before it is able to foreclose and not just 90 days. We ask again: What is wrong with that?

 We do not understand where Representative Payne has received his misinformation or why he feels the need to drum up fear by spreading this misinformation. Rather than supporting a bill that will remove RCSC from the Planned Community Act based on the lies and deceptions that you have heard, you should encourage RCSC to honor the protections the law affords you. We urge you to contact your representatives and set the record straight!

Representative Payne’s bill, HB 2374, is deeply flawed and his continued defense of it consists of nothing more than simply regurgitating RCSC’s false talking points. Write your representatives and senators to lodge your opposition to HB 2374.

For more information about HOA Laws, check out our HOA Law page.

If you are looking for representation schedule a consultation with one of our attorneys.

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Link to Find Your Arizona Legislators

Find your legislators at the following link: https://www.azleg.gov/memberroster/

Arizona residents may want to find their Arizona legislators for several reasons:

1. Representation: Knowing who your state legislators are allows you to understand who is representing your interests in the state government. This is crucial for staying informed about the policies and decisions that may directly impact your community and daily life.

2. Communication: Being aware of your legislators enables you to communicate with them regarding specific issues or concerns that matter to you. You can contact them to express your opinions, seek information, or advocate for certain policies.

3. Access to Resources: Your legislators can serve as a resource for information about state services, programs, or initiatives. If you have questions about government services or need assistance navigating state resources, reaching out to your legislators can be helpful.

4. Community Involvement: Engaging with your elected officials fosters a sense of community involvement. By understanding the positions and activities of your Arizona legislators, you can actively participate in civic life, attend town hall meetings, and contribute to discussions about the future of your community.

5. Voting: Knowing your legislators is essential during election seasons. Understanding their positions and voting records allows you to make informed decisions when casting your vote, ensuring that the representatives align with your values and priorities.

You can also check out our list of highly experienced attorneys and schedule a consultation to talk with them. Or read our blog post about SB 1531.

SB 1531: Bad for HOAs. But REALLY Bad for Homeowners

The Arizona Senate has introduced legislation, SB 1531 (senate bill 1531), that will have the dual effect of harming both homeowners associations and homeowners.

We urge everyone to contact your senators and representatives and urge them to vote NO on this SB 1531.

In order to appreciate the (presumably unintended) harmful effects of the legislature, it is important to first understand the current state of the law….

Arizona law presently allows HOAs and condominium associations to foreclose if, and only if, assessments are unpaid for a period of one year or $1,200.00. Associations cannot foreclose for CC&R violation fines and all other amounts (late fees, collection charges, and attorneys’ fees) are excluded when calculating whether the $1,200.00 or one year threshold has been met. In addition, Arizona law requires that all payments must first be applied to unpaid assessments. This ensures that associations receive the money they are owed.

So how would Senate Bill 1531, if passed, change this? In several ways:

It would allow associations to apply payments to the “oldest” charge, including fines, collection charges, or unawarded attorneys’ fees. The proposed language: “All payments received…shall be applied to any unpaid amounts in the order the debt was accrued if those charges, costs, fees or other amounts are specifically authorized in the declaration.” Why is this bad:

1. It forces homeowners to pay older CC&R violation fines even if they dispute the validity of the violation or the reasonableness of the fine. The law presently requires an association to file a lawsuit, prove the violations exist and establish that the fines are reasonable before collecting fines.

2. It forces homeowners to pay unawarded attorneys’ fees, in whatever amount the association’s attorney claims is owed. The law presently requires an association to request an award of attorneys’ fees and costs from a court, prove the fees are reasonable and gives owners the right to challenge the fees as unreasonable or excessive.

3. It encourages HOA attorneys to run up attorneys’ fees, apply any payments received to those fees, and eventually file a lawsuit when the owner fails to pay all amounts demanded. This could result in the HOA never seeing a dime even where the owner is making regular payments. The law presently recognizes that assessments are important and the association should always be paid first before the lawyers, most of whom do not actually bill the associations.

When associations get to apply an owner’s payment first to fines or unawarded attorneys’ fees, this means that the payments are not being applied to assessments. The association is being deprived of its revenue stream and an owner would have to pay the disputed violation fines or all unawarded attorneys’ fees demanded In order to avoid foreclosure.

WE FIND IT HARD TO BELIEVE THAT THE ARIZONA LEGISLATURE WOULD DEPRIVE AN OWNER OF THE RIGHT TO CHALLENGE VIOLATIONS, FINES, OR UNAWARDED ATTORNEYS’ FEES AND GIVE HOAs AND ATTORNEYS THE MEANS TO FORCIBLY COLLECT THESE AMOUNTS UNDER THREAT OF FORECLOSURE.

SB 1531 also changes the statute of limitations for foreclosure actions from three to six years.

Under current law, an association loses the right to foreclose for assessments that are more than three years old. When you factor in an association’s right to apply payments to the oldest first, this means that the threat of foreclosure will hang over an owner’s head for years.

The unintended consequences of SB 1531 far outweigh what few protections it might create for homeowners or associations. For example, it prohibits associations from providing statements to owners once a lawsuit is filed. The consequence of this is to allow the HOA attorney to run up legal fees providing documents that the Planned Community Act and the Condominium Act otherwise require associations to provide. It gives associations an incentive to impose fines and forces homeowners to file lawsuits to challenge them. In our experience, homeowners are often unaware of fines being placed on their account.

Perhaps the greatest unintended consequence relates to an owner’s ability to prevent foreclosure once a foreclosure action is filed by paying the amount of the unpaid assessments. Because SB 1531 would allow HOA attorneys to apply payments first to unawarded attorneys’ fees, an owner could be forced to pay all unawarded attorneys’ fees in addition to the unpaid assessments rather than pay the assessments and ask the Court to decide whether the attorneys’ fees being demanded are reasonable. The law is clear: courts, not HOA attorneys, get to decide what is a reasonable attorney fee.

We do not believe that the current law is perfect. Far from it, the current law has serious problems. But SB 1531 does not solve any of the current problems. It simply magnifies existing problems and creates bigger problems. SB 1531 benefits management companies and HOA attorneys at the clear expense of homeowners and HOAs. Call your senators and representatives and urge them to vote NO to SB 1531.

And if you have any questions about this matter, contact our HOA Attorney defense team and we would be happy to discuss it with you.

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Link to Find Your Arizona Legislators

Are Short-Term Rental Restrictions Valid?

Short-term HOA rental restrictions are currently a hot topic.

Notwithstanding changes in tax laws providing significant benefits of short-term rentals of second homes, more and more HOAs and condominium associations are attempting to amend their CC&Rs to add short-term rental restrictions. We believe most of these amendments are invalid under Arizona law.

What is a Short-Term Rental Restriction?

Before we address why short-term rental restrictions are likely invalid and unenforceable, it is first necessary to define the terms we will be using. A "short-term rental restriction" is, generally, any restriction on the length of time that a property can be leased and often refers to restrictions of less than six months though it also can refer to restrictions of less than one year. For purposes of this article, restrictions of rentals on a daily, weekly, monthly, or biannual basis fall under the "short-term rental restriction" umbrella. "CC&Rs," short-hand for "Declaration of Covenants, Conditions, and Restrictions," refers to the recorded document or documents that govern the Association. CC&Rs are not Bylaws or Articles of Incorporation or Organization.

The following is a common CC&R provision:

Leasing Restrictions. Occupancy of an entire Dwelling Unit on a Lot, but not less than the entire Dwelling Unit, may be granted to a tenant from time to time by the Owner, subject to the provisions of the Master Declaration and the Association Rules. Written leases are required for any Dwelling Unit on a Lot. All leases must restrict occupancy to a Single Family. Before the commencement of each lease term, the Owner of the Lot shall provide the Board with written notice to the Board of the names of the lessee and their family members and the terms of the lease.

In addition, if the Board of Directors creates and/or adopts a "rental registration form," the Owner shall submit such form to the Master Association for every rental. Any agreement for the lease of a Dwelling Unit must be expressly subject to the Governing Documents of the Master Association. The lease must contain a provision that any violation of the Governing Documents of the Master Association shall be a default under the lease and is grounds for eviction.

There is nothing in this "Leasing Restriction" prohibiting or restricting rentals to a set term. So the question is whether and under what conditions an Association can amend this Leasing Restriction to prohibit short-term rentals. The CC&Rs also contains a generic amendment provision allowing for amendments based on a Majority of the Members (i.e., 51%).

Notwithstanding such a generic amendment provision, the Dreamland Villa case states that a Majority of the Members generally does not have the right to amend CC&Rs to add new restrictions that "unreasonably alter the nature of the covenants." Dreamland Villa Cmty. Club, Inc. v. Raimey, 224 Ariz. 42, 51, 226 P.3d 411, 420 (App. 2010). In order to determine whether the new proposed restrictions "unreasonably alter the nature of the covenants," courts look at whether the proposed amendment is foreseeable based on the language of the existing CC&Rs. If the existing CC&Rs do not place a purchaser on notice that they might be subject to new restrictions of the nature of the one being proposed, then a majority vote of members is insufficient to pass the amendment and unanimous approval of all members is required.

We recognize that the requirement of unanimous consent might seem unfair to some. There are some who argue that the mere fact that CC&Rs can be amended should be sufficient to put an owner on notice that she or he might be subject to new restrictions. But this superficial analysis ignores that real estate is often the single biggest asset most people will buy and they are entitled to buy in reliance on the existing CC&Rs. An owner who buys property specifically to use as short-term rentals and relies on the absence of such a prohibition in the existing CC&Rs does not reasonably anticipate that the singular purpose for their purchase might be outlawed by 51% of their neighbors.

Accordingly, substantial and unforeseeable limitations on an owners' rights generally require unanimity (100%). Amendments to recorded declarations cannot create new obligations or restrictions where the recorded declaration’s provisions did not alert the homeowners to the possibility that they would be subject to the new restrictions. If a recorded declaration does not contain or at least provide for later adoption of a specific restriction or requirement, it is invalid.

The Arizona Legislature has made this unanimity requirement part of the Condominium Act. A.R.S. § 33-1227 states that "an amendment shall not create or increase special declarant rights, increase the number of units or change the boundaries of any unit, the allocated interests of a unit or the uses to which any unit is restricted, in the absence of unanimous consent of the unit owners." Because short-term rental restrictions change "the uses to which any unit is restricted," the Condominium Act expressly would require "unanimous consent of the unit owners." Although the Planned Condominium Act does not contain a similar provision requiring unanimity, the Dreamland Villa case and other legal authorities recognize that the requirement of "unanimous consent" also applies in planned communities.

There are two final considerations. First, though the determination of whether a rental restriction is "substantial and unforeseeable" would appear to be one that can be made as a matter of law just be looking at the original CC&Rs, several courts have ruled that it is up to a jury to decide whether the new restrictions are "substantial and unforeseeable." Second, the Condominium Act requires that any challenge to the validity of an amendment "shall not be brought more than one year after the amendment is recorded." This means that, out of an abundance of caution, any lawsuit challenging the adoption of a rental restriction should be brought within one year of its adoption.

For more information or to discuss a short-term rental restriction in your association, contact Jonathan Dessaules at [email protected] or 602-274-2360 or visit our HOA Law page.

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DLG Prevails in Jury Trial in Challenge to Short-Term Rental Ban, New Short-Term Rental Law to Take Effect in August

DLG Prevails in Jury Trial in Challenge to Short-Term Rental Ban

Dessaules Law Group attorneys recently prevailed in a jury trial in a lawsuit brought against an HOA challenging the validity of a short-term rental ban. The HOA's Board of Directors obtained the approval of more than 75% of the owners to adopt the ban on rentals of less than six (6) months and recorded the proposed amendment. Five property owners voted against the ban.

The original CC&Rs did not contain any rental restrictions and allowed for an amendment if 75% of the owners voted in support of its amendment. DLG argued that, notwithstanding the 75% amendment provision, the unanimous consent of all owners (that is, 100%) was necessary because the rental ban was a new and material restriction that was substantial and unforeseeable in the original CC&Rs. The case went to the jury to decide whether rental restrictions prohibiting rentals of less than six (6) months was a substantial and foreseeable change.

The jury, after deliberating just over one hour following a two-day trial, returned a verdict finding that the proposed amendment was invalid because it was a new prohibition that was not contemplated in the original CC&Rs.

We believe this was the first case of this nature to be tried to a jury in Arizona.

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Are Short-Term Rental Restrictions Valid?, New Short-Term Rental Law to Take Effect in August

To see the team behind this victory, you can check out our attorneys page and find out more about their background and other achievements.

Post-Judgment Collection of Unawarded Attorneys’ Fees Violates the Fair Debt Collection Practices Act

Arizona Judgment Collection

The United States District Court for the District of Arizona has ruled in a case brought under the Fair Debt Collection Practices Act (“FDCPA”) that a law firm that submits a demand for payment of unawarded post-judgment attorneys’ fees in a judgment-debtor’s refinance violates the FDCPA.

In March 2016, the law firm representing a homeowners’ association obtained a judgment against the debtor for $7,373.57. Although the law firm had included language in the judgment purporting to entitle the judgment-creditor to post-judgment attorneys’ fees and costs, the justice court that entered the judgment specified that any fees and costs would only be awarded “after submission and approval by the court.” In April 2016, less than one month later, the law firm claimed that the amount owed under the judgment was $8,760.09, which included an additional $1,053.88 in post-judgment attorneys’ fees and costs incurred after entry of the judgment. In May 2016, the law firm claimed that the post-judgment fees and costs had grown to $1,655.88 and that the total amount of the judgment was $9,162.26. And in June 2016, the law firm wrote the lender refinancing the debtor’s property (so that the debtor could pay off the judgment) that the balance due was $9,476.21. The law firm collected the full $9,476.21 out of the refinance proceeds, including approximately $2,000.00 in post-judgment attorneys' fees and costs. 

The debtor filed an FDCPA action, claiming that the law firm violated the FDCPA because its representations in collecting the judgment were “false, deceptive, or misleading” and the firm had used “unfair and unconscionable means to collect or attempt to collect [a] debt.” The District Court ruled that the law firm violated the FDCPA by demanding and collecting almost $2,000.00 of post-judgment attorneys’ fees without ever submitting those fees to the court for approval.” The Court explained:

Essentially, [the law firm] saw an opportunity to recover all the fees they wanted without the trouble of justifying the amounts to a court, and they took it. This is precisely the type of exploitative behavior the FDCPA was enacted to prohibit. Therefore, the Court concludes that Defendants violated [the FDCPA] by misrepresenting to Quicken Loans that these feeds were legally due and owing... The Court also concludes that Defendants violated [the FDCPA] by collecting an amount that was not expressly authorized by law because the Judgment specifically required approval by the justice court of additional attorneys’ fees. 

The case is Jason v. Maxwell & Morgan PC. DLG represented the Plaintiff. 

Related Articles: 
Ninth Circuit, Court of Appeals Clarifies When and How HOAs Can Collect Fees

If you want to learn more about your rights as a consumer or HOA law in general. You can read more about it on our HOA Defense and Consumer Rights page.

Ninth Circuit Concludes HOA Attorneys’ Post-Judgment Debt Collection Practices Were Misleading

The Ninth Circuit Court of Appeals in McNair v. Maxwell & Morgan, P.C., recently held that a law firm that files a judicial foreclosure action to collect unpaid homeowner association assessments is acting as a "debt collector" and engaging in "debt collection" activities subject to the Fair Debt Collection Practices Act ("FDCPA"). 

The FDCPA applies to "debts" and regulates the conduct of "debt collectors." A "debt" is defined in the FDCPA as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes.” 15 U.S.C. § 1692a(5). A debt collector is any entity or person who "regularly collects or attempts to collect ... debts owed or due ... another.” The district court had concluded that filing a judicial foreclosure action was not "debt collection" activity and the law firm that filed it and a subsequent writ of special execution to conduct the sale of Ms. McNair's home was not engaged in “debt collection” activities. 

The Ninth Circuit rejected this conclusion. In holding that judicial foreclosure actions constitute debt collection activities, the Court distinguished judicial foreclosure actions from non-judicial foreclosure actions. Because the object of the action is "to retake and resell the security," not to collect money, and deficiency judgments following non-judicial foreclosures are prohibited in many states, the Ninth Circuit held that the latter is not debt collection activities subject to the FDCPA.

Judicial foreclosure actions filed over unpaid homeowner associations, by contrast, principally seek to collect unpaid homeowner association fees. The Ninth Circuit rejected the argument that such fees are not "debts," holding that they constitute obligations "to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes[.]” Thus, the Court found that the record was clear that the law firm and its lawyers "were in fact 'debt collectors' collecting 'debt.'”

Having established that homeowner association assessments were "debts" under the FDCPA and the law firm and its lawyers were "debt collectors" subject to the FDCPA, The Ninth Circuit held that the law firm and its lawyers violated the FDCPA by including $1,597.50 in unawarded post-judgment attorneys' fees in a writ of special execution filed to complete the sale of McNair's property because "no court had yet approved the quantification of the 'accruing' attorneys' fees claims in the Writ." 

The Ninth Circuit held that the law firm "falsely misrepresented the legal status of this debt, by implicitly claiming that the accruing attorneys’ fees of $1,597.50 already had been approved by a court."

The case is McNair v. Maxwell & Morgan, P.C.

Related Articles:
Post-Judgment Collection of Unawarded Attorneys’ Fees Violates the Fair Debt Collection Practices Act, Court of Appeals Clarifies When and How HOAs Can Collect Fees

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