August 21, 2018 – The Arizona Supreme Court has vacated a decision of the Arizona Court of Appeals regarding the right of homeowners associations to impose monetary penalties for members’ violations of HOA rules. An Arizona statute entitles HOA boards to impose reasonable monetary penalties for such violations.
Last year, the court of appeals in the case of Turtle Rock III Homeowners Association v. Fisher interpreted the statute to require HOAs to adopt in advance a schedule of fines that are appropriate in relation to the damages caused by a member’s violation of an HOA rule. See our alert regarding the court of appeals decision here.
The HOA in the case then engaged Gust Rosenfeld appellate attorney Charles W. Wirken to petition the Arizona Supreme Court to review the court of appeals’ decision. The high court granted review and ordered the parties to file briefs on two issues: (1) are ad hoc penalties unreasonable, and (2) if the statute permits ad hoc penalties, are they unreasonable if not based on actual damages to the HOA.
In its brief, the HOA argued that the Legislature intended to permit penalties in amounts suited to the circumstances of each violation and that proof of actual damages is not required. The brief is available here.
Without deciding the issues, the Arizona Supreme Court has ordered that the court of appeals’ decision be “depublished.” In other words, the court of appeals’ interpretation of the statute is no longer the law and its decision cannot be used as precedent in other cases. The statute permitting HOAs to levy reasonable fines for violations of HOA rules remains in effect.
For more information, or if you have questions, please contact Chris McNichol at firstname.lastname@example.org.