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HOA Powers Limited by the Arizona Supreme Court

HOA Powers Limited by the Arizona Supreme Court

Good news from the Arizona Supreme Court! In the recent case of Maarten Kalway v. Calabria Ranch HOA the court ruled in favor of the homeowner. As do most HOA Covenants, Conditions and Restrictions (CC&Rs), the Calabria Ranch CC&Rs included a general power to amend. CC&Rs restrict an owner’s free use of property. Because of this, Courts in Arizona have repeatedly held that CC&Rs are to be strictly construed.

The Calabria Ranch HOA utilized its right to amend and changed their CC&Rs in such a way that Mr. Kalway’s use of his property, and likely its value, would be greatly diminished. This was done by a vote without Mr. Kalway’s permission or knowledge. Mr. Kalway objected. The Court needed to decide to what extent a HOA can use a general amendment power in its CC&Rs to place additional restrictions on a landowner’s use of their land.

The Court noted that CC&Rs are in the nature of a contract and are usually enforced according to their terms. Nevertheless, the Court interpreted the restrictions to reflect the reasonable expectations of the landowners. It found in favor of the owner and held, among other things, that an HOA may not rely upon a general amendment power provision in its CC&Rs to place additional restrictions on a landowner’s use of their land where the original CC&Rs did not provide notice to the owners that they might be subject to such regulations in the future.

The Kalway Court decision provides a measure of reassurance to a potential purchaser of property in an HOA that what they see when reviewing the CC&Rs prior to purchase is what they will get; that there should be no amendments that will make new restrictions on the use of their property unless notice was given in the CC&Rs that such a future change is possible.

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