Over the last decade or so, short-term rentals (“STR’s”), such as Airbnb, have become a popular trend throughout the world. In 2016, Arizona was one of the first states to pass a law prohibiting local governments from restricting STRs.
More recently, Arizona lawmakers have begun to allow local governments to impose some regulations on STRs, such as fines for excessive noise. But many Arizona property owners have been altogether prevented from using their property as an STR because their Homeowners’ Associations (“HOAs”) have amended their governing documents to ban them entirely.
However, in 2022, the Arizona Supreme Court ruled on a watershed case that is expected to invalidate many CC&R amendments, such as those banning STRs. The Kalway v. Calabria Ranch HOA case involved a Tucson HOA that had amended its CC&Rs by majority vote, as prescribed by their CC&Rs and Arizona Statute A.R.S. 33-1817(A).
Even though the Calabria CC&Rs clearly stated they could be “amended at any time…” by a “Majority Vote of the Owners…,” the Arizona Supreme Court held that a “general-amendment-power provision… may be used to amend only those restrictions for which the HOA’s original declaration has provided sufficient notice.” (Emphasis added.)
In other words, CC&R amendments must be “reasonable and foreseeable.” Under Kalway, a homeowner should not be subjected to new restrictions on their property that they could not have expected at the time of purchase. The Kalway Court decided that if the contemplated restriction is not reasonably found within the text of the original declaration, any proposed amendment to the CC&Rs may possibly require approval by a unanimous vote. The Court reviewed Calabria’s amendments individually to determine whether they were foreseeable. Many of the amendments were not and, thus, were invalidated by the Court thereby requiring the HOA to obtain a unanimous vote before adopting the amendments as part of the CC&Rs.
And, as one example of how Arizona courts are applying the recent precedent, in a 2023 memorandum decision, the Arizona Court of Appeals applied Kalway in Macleod v. Mogollon Airpark. In MacLeod, an HOA had amended its CC&Rs in 2018, as approved by three-fourths of the lot owners, which was all that was required by the CC&Rs. Macleod, who was in violation of the amended CC&Rs, appealed decisions by the ADRE and Superior Court, after both upheld the validity of the amendment.
On appeal, MacLeod argued that under Kalway, the ADRE and Superior Court rulings were incorrect. The Appellate Court then applied Kalway’s reasoning and reviewed the CC&Rs to determine whether the amendment was foreseeable based on the original CC&Rs. Finding that the original CC&Rs “did not provide sufficient notice of the possibility of a future restriction” as was imposed by the amendment, and because “MacLeod did not consent to the amendment,” the Court struck the contested amendment language.
Your HOA may still be able to restrict or prohibit short-term rentals, however, if it has valid rental restrictions in its original CC&Rs. Under Kalway, an HOA may still amend its CC&Rs in a foreseeable way.
The Brei Law Firm can help you review your CC&Rs and any amendments to determine whether your HOA has restricted your property use in accordance with current Arizona law. Our attorneys’ real-world experience has shown us the best ways to negotiate our clients’ interests. Our Tucson Law Firm is available at 520-297-4411.
© June, 2023. Please note: this article is not intended to, nor does it, constitute legal advice, and is for informational purposes only. To obtain legal advice, please consult a qualified attorney.