Homeowner Legal Options Against HOA Abuse of Power

Homeowner Associations (“HOAs”) are intended to operate in the community’s best interest, making the community a more pleasant place to live while also maintaining property values. Unfortunately, HOAs sometimes become a source of disputes and disagreement that hinder rather than help to achieve these community goals. Disagreements are common between homeowners and HOAs regarding community issues. Common examples of such disputes include the unequal enforcement of community rules, disagreements over the interpretation of rules, and disagreements over enforcement actions against neighbors for alleged rule violations.

HOAs have broad powers, the main source of which derives from the community’s Declaration of Covenants, Conditions, and Restrictions (“CC&R’s” or the “Declaration”). Other sources of power include the community bylaws, architectural rules, and other community rules adopted by the board of directors. Common HOA powers include the ability to restrict land usage through architectural guidelines, the imposition of fines for violations, the recording of liens upon member’s homes for unpaid assessments, and the power to sue members to enforce its rules.

Homeowners often perceive that an HOA is abusing its powers for a number of reasons. Personal disputes between neighbors can sometimes boil over into HOA disputes, whereby the HOA’s resources are marshaled against disfavored residents. This can lead to a community belief that the HOA is no longer operating in the community’s best interest and changes must be made for the HOA to function properly.

Fortunately for homeowners, Arizona has adopted the Planned Community Act and the Condominium Act that provide some protections for homeowners regardless of the powers given to the HOA in its community documents. Arizona courts have also placed restrictions upon HOA power that apply to all HOAs, regardless of the HOA’s rules.

Below is a list of some of the actions homeowners can take to restrict HOA power or to ensure that the HOA is acting in the community’s best interest.

Removal of Board Members

Any HOA board member can be removed if a sufficient number of HOA members vote to remove this board member. By law, all HOAs that are covered by the Planned Community Act or the Condominium Act have a uniform process to remove board members.

To begin the removal process, a petition must be circulated calling for a special meeting to vote on the removal of the board member. An HOA must hold this special meeting within thirty (30) days from the receipt of a petition signed by an adequate number of HOA members. In smaller HOAs, those with one thousand or fewer units, this petition must be signed by twenty-five percent (25%) of the members entitled to vote in the community or one hundred members, whichever is less. In larger HOAs, those with one thousand or more members, the petition must be signed by ten percent (10%) of the HOA’s members or one thousand members, whichever is less.

Once the HOA has received a petition with a sufficient number of signatures, the Board of Directors is required to provide written notice to all homeowners of the special meeting and to hold the meeting within thirty (30) days of receipt of the petition. At that special meeting, a quorum of at least twenty percent (20%) of the total owners entitled to vote must be present either in person or by absentee ballot. Assuming there is such a quorum, it only takes the vote of a simple majority of those present at the meeting to remove the board member or members.

HOAs often decide to contest these removal efforts; therefore, it is recommended that members considering removing board members discuss the removal process with an attorney experienced in board removals to increase the probability that these removal efforts will be successful.

Amending Community Rules

The main source of HOA power is found in the Declaration. Nearly every Declaration allows the HOA’s powers to be amended. Even if the Declaration does not contain amendment language, it may be amended upon unanimous consent of the community. By amending the Declaration, homeowners can change the HOA’s powers, such as limiting the HOA’s authority to fine homeowners for certain violations, or even eliminate the HOA altogether.

Amendment provisions contained in Declarations vary widely. Some Declarations allow amendments by a simple majority vote of the homeowners, some Declarations require all homeowners to unanimously approve amendments, and other Declarations require varying percentages anywhere between 50% and 100%.

Amending a Declaration is often difficult due to the significant community support required for such an amendment and the particular rules that must be followed to properly vote on and approve such an amendment. Additionally, the process can become more difficult if an HOA decides to “fight” efforts to amend its power. Meeting with an attorney experienced in amending HOA Declarations is recommended in order to increase the chance that such amendment efforts will be successful.

Restrictions on HOA Power

Arizona law places certain restrictions on HOAs, regardless of the powers given to the HOA in the community documents. Below is a list of some common restrictions on HOA power. If the following principles are not followed, an HOA decision could be invalidated.

• Board members must act as fiduciaries to the association, meaning all board members must put the interests of the community ahead of their own personal interests when acting on behalf of the HOA.
• If any HOA action could financially benefit a board member or that board member’s immediate family, the board member must state this conflict at an open meeting before voting on the issue.
• HOAs must act reasonably and treat members fairly. An HOA may not carry out its duties in a manner that is arbitrary, capricious, or unreasonable. In other words, community rules must be reasonably enforced.
• HOAs may not selectively enforce community rules against particular homeowners. HOA rules must be enforced as equally as possible.

Conclusion

Homeowners can bring a lawsuit against their HOA, and in some circumstances against individual board members, if the HOA abuses its power. Homeowners can ask the Court to declare that a statute or community rule has been violated and request that the Court order the HOA’s compliance with that statute or rule. The prevailing party in such disputes can be awarded its reasonable attorneys’ fees and costs incurred in bringing such a lawsuit, within the judge’s discretion.

Homeowners and HOAs also formerly enjoyed access to the Office of Administrative Hearings through the Arizona Department of Fire, Building & Life Safety to resolve community disputes. This process permitted an administrative law judge to review an HOA’s actions and order compliance with the HOA’s governing documents or state law, in a relatively inexpensive and timely manner. However, in early 2009, this process was declared to violate the Arizona Constitution and this expedited complaint process is no longer available for Arizona homeowners. It remains to be seen whether the Arizona legislature will attempt to recreate this HOA process. In the meantime, HOA disputes are now solely within the jurisdiction of Arizona’s courts.

Lawsuits against an HOA should be viewed only as a homeowners final option if all other efforts have failed. The best method for avoiding HOA lawsuits is usually for the opposing parties to simply meet face-to-face and attempt to work out a compromise. Sometimes, it may even be in the homeowners best interest to comply with an unreasonable demand from an HOA. If all other efforts fail, a lawsuit may become the best option; however, a homeowner should meet with a licensed Arizona attorney experienced in HOA disputes to discuss all available options.

This article is not intended to be specific legal advice. It only provides general legal information. You should consult an Arizona licensed attorney if you have a legal issue. The Bainbridge Law Firm, L.L.C., is experienced in this area of law and are available for consultation. You may contact our Phoenix office at 602-902-1930.