Court of Appeals Clarifies When and How HOAs Can Collect Fees

The Arizona Court of Appeals, in a recently-published decision, clarified the circumstances under which an HOA was allowed to collect attorneys' fees from a homeowner. In Bocchino v. Fountain Shadows Homeowners Association, the Court of Appeals held that an HOA was not entitled to collect attorneys' fees that it purportedly incurred in obtaining an Injunction Against Harassment against a homeowner when it did not seek an award of attorney fees from the court and no fees were awarded by the court. Dessaules Law Group represented the successful homeowner.

The HOA in Bocchino sought and obtained an ex parte Injunction Against Harassment on behalf of several board members claiming that the homeowner was harassing them. The homeowner did not challenge the Injunction, did not request a hearing, and instead decided to sell her home and move out of the community. The HOA never requested fees from the court issuing the Injunction but simply added fees to the homeowner's account that is collected at closing. Although the HOA never mentioned the Declaration in the Injunction Against Harassment action, it argued that the Declaration allowed it to obtain its fees from the homeowner.

The Superior Court ruled that the HOA was not allowed to collect the fees it incurred. The Court of Appeals affirmed on two grounds. First, it held that a party seeking attorneys' fees relating to an Injunction Against Harassment had to request fees in that action or waived any claim to its fees. Second, the Court of Appeals held that the HOA's Declaration "does not expressly provide that the Association may assess, directly against a homeowner, attorney fees incurred in a judicial proceeding that has not been awarded by a qualified tribunal. "

It is a common practice among HOAs in Arizona to collect attorneys' fees from homeowners without obtaining an award from a court. Once an HOA has obtained a money judgment, for example, it will seek to collect additional attorneys' fees not specifically awarded in the judgment that it incurs post-judgment. Although the Court of Appeals in Bocchino did not expressly address this practice, it made several comments suggesting that this practice is unlawful. For example, the Bocchino court rejected on "sound policy" reasons the Association's argument that judicial approval of an HOA's fees was not necessary because the fee provision in the Declaration allowed the Association to recover “all” the fees incurred.

The Court further observed:

[T]he Association has cited no authority for the proposition that it was permissible to simply charge Bocchino’s Association account for attorney fees it incurred without first receiving an award from the court. Requiring the tribunal that resolves the litigation to evaluate attorney fee claims – as generally required by our statutes and rules – constitutes sound policy. Courts play a significant role in assessing and awarding attorney fees incurred in judicial proceedings. 

Finally, in a footnote, the Court of Appeals observed that "[w]hether the fees the Association incurred were prima facie reasonable (or clearly excessive) was a question for the court that issued the injunction." There is no reason to believe that this "sound policy," however, is limited to Injunctions Against Harassment and there is nothing in the opinion that suggests it should be narrowly construed. 

While we do not believe that the Bocchino opinion will end the practice of HOAs collecting unawarded attorneys' fees without any judicial oversight, Bocchino provides clear direction that the practice is improper and should end.

The case is Bocchino v. Fountain Shadows Homeowners Association.

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