This case involved a dispute between a planned community association member (Owner) and his homeowners association (Association) over the validity of an amendment stating that HOA prohibits short-term rentalsto Associations declaration that sought to prohibit rentals that were for less than 90 days (short-term rentals). Prior to the adoption of the amendment, Associations declaration did not limit property rentals.

At some point in time following the purchase of his property in the community in late 1990s, and before Associations adoption of an amendment to its declaration, Owner began using his residence as a short-term rental on multiple occasions. In 2014, Association sought to amend its declaration to prohibit short-term rentals and impose fines for violations of the prohibition.

Section 8.3 of Associations declaration permitted an amendment of the declaration by an instrument in writing, executed and acknowledged by the then Lot owners of not less than sixty-seven percent (67%) of the Lots in the Project. Association circulated the proposed amendment to its members and received written consent forms signed, but not notarized or acknowledged, from 43 of the 63 Association members. Acting on said consents, Association deemed the amendment restricting short-term rentals adopted.

Following Associations adoption of the amendment, Owner continued to rent his residence out for short-term rentals and ignored Associations demands that he discontinue the rentals. Association then filed suit against Owner based on his violations of the short-term rental restriction and sought an injunction preventing future violations and damages for unpaid fines, as well as costs and attorneys fees.

In his defense of the lawsuit, Owner contended that the amendment prohibiting short-term rentals was invalid because it had not been properly adopted by Association. Specifically, Owner contended that the required member consents had not been obtained by Association because the signed consent forms had not been either notarized or witnessed by the various owners who submitted their consents, as required by Section 8.3 of Associations declaration.

The trial court granted summary judgment in favor of Owner and found that the 2014 amendment to the declaration that prohibited short-term rentals was invalid and of no force or effect. Having ruled in favor of Owner, the trial court also awarded Owner $40,000 in attorneys fees and costs. Association then appealed the trial courts judgment.

The appellate court found that the undisputed facts showed that, although the requisite number of owners executed the amendment consent forms, they in no way acknowledged the consents whether by notarization, witnessed signatures, certification, confirmation, or oral approval, etc. As such, the consents did not comply with the requirements of Section 8.3 of the declaration regarding the adoption of amendments to the declaration. Accordingly, the appellate court found that the purported amendment prohibiting short-term rentals was invalid and unenforceable and the trial courts judgment in favor of Owner was affirmed. As such, the award of $40,000 in attorneys fees and costs to Owner was also affirmed. The appellate court also awarded Owner his attorneys fees and costs incurred in connection with the appeal.

Unpublished Arizona Appellate Court decision (March 3, 2020).

See case decision: L._Diamantes_Homeowners_Ass’n_v._Goodman