November 1, 2017 – The Arizona Court of Appeals held last week in Turtle Rock III Homeowners Assoc. v. Fisher that homeowners associations (“HOAs”) must have a written, promulgated schedule of fines in order to impose them against members, and the HOA must be able to prove that the fines are reasonable.

In this case, the HOA sought to impose a $25 per day fine against a homeowner for violations of the CC&Rs. The HOA was successful in the trial court, but the homeowner appealed. On appeal the homeowner maintained that because the HOA presented no evidence of a written schedule of fines, the fines were unreasonable and inconsistent with A.R.S. §33-1803(B) which requires monetary penalties to be reasonable.

The Court of Appeals reversed, agreeing with the homeowner. “Without competent evidence of a fee schedule timely promulgated demonstrating the fine amounts and the appropriateness of such amounts, monetary penalties are per se unreasonable.” Even if a written fee schedule existed, however, the HOA still had the burden to prove the fines were reasonable.

This case highlights for HOAs and homeowners alike, both the importance of a written fine schedule for violations of CC&Rs and a basis to prove the fines are reasonable in order for them to be enforceable.

View the Turtle Rock III Homeowners Assoc. v. Fisher (No. 1 CA-CV 16-0455) (October 26, 2017) opinion here.

For more information, or if you have questions, please contact Chris McNichol at mcnichol@gustlaw.com.