HOA Issue #4: AZ court ruling on HOA power to fine: a game changer in the industry?

Oct. 2017: Arizona appeals court rules that, before an HOA can legally fine a resident, it must first publish a schedule of reasonable fines.

HOA attorney complains that new court ruling makes it difficult to impose monetary fines

By Deborah Goonan, Independent American Communities

In October, 2017, an Arizona appeals court ruled that, before an association-governed community can legally fine a resident for a violation of Covenants, Conditions, & Restrictions (CC&Rs) or applicable Rules and Regulations, the HOA must first publish and notify members of its schedule of reasonable fines.

In Turtle Rock III HOA vs. Linda A. Fisher, Judge Jon W. Thompson wrote, in part:

…although the HOA had the authority under state statutes and the CC&Rs to promulgate a fine schedule for monetary penalties, there is no competent evidence in the record before us that it did so. 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 fee schedule existed, the HOA had the burden to prove its damages. Given our resolution of this matter, we need not address Fisher’s due process claim related to the required thirty day notice of a penalty. The trial court’s award of monetary penalties is reversed and the attorneys’ fees award below is reversed.

The case involves Turtle Rock HOA’s imposition of fines against Fisher, in 2014 and 2015, for maintenance violations. According to case records, Fisher was storing personal items inside her home, and in front of windows visible to neighbors. The personal belongings, apparently crammed too close to the window, damaged the blinds, exposing what the HOA deemed as clutter inside Fisher’s home. The HOA asked the trial court to issue an injunction (order) to force Fisher to tidy up her home and repair the window blinds.

By the time the issue reached trial court, the HOA asserted that Fisher had accrued $9,165.25  in penatlies resulting from $25 per day fines. The trial court ruled in favor of the association, but reduced monetary fines to $3,850. The trial court also awarded the HOA thousands of dollars in attorney fees. Fisher appealed.

On appeal, a three-judge panel agreed to uphold the injunction, requiring Fisher to maintain her property. However, the judge’s panel reversed the order for Fisher to pay $3,850 in fines, citing the HOA’s lack of a fee schedule prior to imposing fines. The court also opined that the HOA had a duty to prove damages in the case.

Because neither party prevailed in litigation, the appeals court also reversed the award of attorney fees to the HOA. Each party is therefore responsible for its own legal expenses.

HOA attorney laments that now it’s too “difficult” to fine members


Fast forward to March 2018.

A local newspaper (Wrangler News) reports that Arizona attorney Beth Mulcahy was heard complaining about the Turtle Rock ruling at a recent HOA summit held in Chandler.

Here’s the article:

Attorney to summit: Ruling makes it tougher for HOAs to levy fines

By Joyce Coronel – March 12, 2018

Wrangler News

Homeowners with unkempt front yards just caught a bit of a reprieve from the Arizona Court of Appeals. A recent decision by the court makes it more difficult for homeowners associations to levy fines.

Beth Mulcahy, an attorney whose practice is centered on representing community associations, explained the impact of the ruling to attendees at a recent HOA summit held by the city of Chandler.

The workshop draws residents who serve on HOA boards as well as many who do not. Chandler Mayor Jay Tibshraeny, alongside Chandler City Council members and Police Chief Sean Duggan, were on hand and addressed the crowd.

The typical complaint HOAs deal with is the neighbor who allows weeds to proliferate in the front yard. “In the past, what associations would do is first reach out to the owner. If that didn’t work they would levy fines,” Mulcahy said.

That has changed in recent months.

“It’s become more and more difficult for associations to levy fines for violations. This case almost puts it on the brink of making it impossible.”

Mulcahy was referring to the Turtle Rock HOA vs. Linda Fisher case heard in Phoenix and decided last October. The decision resulted in the reversal of a nearly $4,000 fine the HOA imposed on Fisher and is binding on all HOAs in Arizona.

Read more:


Mulcahy is a certified CCAL attorney in Arizona, and a loyal member of trade group Community Associations Institute (CAI).

Of course, it’s a well-known fact that, in the 1990s, CAI lobbied enthusiastically for states to grant boards of association-governed communities a police power: the right to penalize violations to CC&Rs, by imposing fines upon its members and residents.

To be clear, the recent appeals court ruling does not prevent an HOA from imposing fines. It merely creates a requirement for HOAs to inform all residents of the association’s right to fine — and the amount of those fines — for certain violations. The HOA must create a written schedule of fines for that purpose. And, in court, the HOA must show how the association or one of its members is damaged by the alleged violation.

Apparently, Mulcahy finds the minimal requirement of communicating rules and penalties to members of the association to be unreasonable and burdensome.

Furthermore, Mulcahy laments the fact that an association must provide real testimony and documentation of actual damages that result from a resident’s alleged violation of restrictive covenants or rules. Gone are the good old days, she says, when it was “easy” to fine a resident for not following the rules.

The fact that an industry-certified attorney objects to the Turtle Rock ruling should make it abundantly clear to housing consumers and policy makers that she does not advocate for the rights of individual homeowners.

Pseudo due process (Kangaroo Court)?

(Pixabay.com free image)

Although the Turtle Rock case is a baby step, in the right direction in terms of restoring some due process with regard to disputes over rule violations in HOAs, it doesn’t address the fact that the internal HOA hearing is not real due process.

Allow me to explain by sharing a personal story.

When I was a student in the fourth grade, our teacher created a classroom activity that he said would help us learn how the U.S. court system worked. For the purposes of retelling the story, I’ll refer to my teacher as Mr. Frank.

Mr. Frank decided to settle petty classmate disputes by holding mock court in the classroom.

The reader should understand that Mr. Frank had an authoritarian teaching style. He was fond of paddling students in front of the entire classroom for offenses as minor as leaning back in one’s desk chair or having a shirt untucked.

Students feared Mr. Frank, and none of us dared to tell our parents about it, for fear that we would be punished at home, too.

One day, as my class and I were ending our lunch break in the cafeteria, our lunch monitors summoned us to line up to exit the lunch room and return to our classrooms. As a quiet, usually obedient child, I stood up from my seat at the cafeteria table, just as I did every day, and got in line.

A classmate behind me started throwing a tattle-tale fit, accusing me of “cutting in line.” I had done nothing of the sort, but it didn’t matter, because this particular classmate was a member of a popular clique to which I did not belong. For no particular reason, she didn’t like me. Under the circumstances, the feeling was mutual.

When we returned to our classroom, my classmate, the Most Popular Girl in the Class (I’ll call her Miss Popular), promptly reported to Mr. Frank that I had “cut in line.” So, although I had done nothing wrong — and despite Miss Popular’s lies and the sheer pettiness of the dispute — I suddenly found myself as the defendant in classroom court.

Miss Popular chose a member of her clique as her “attorney.” I had a bit more difficulty chosing my “attorney,” since, even at the ripe old age of 9, I knew I’d have to choose someone outside the popular crowd. I knew I had to carefully select a classmate who would be truthful, rather than going along with this charade just to fit in with the crowd. It was no easy task.

After we each “lawyered up,” we were instructed to explain our side of the “cut in line” story to the rest of the students in class, who, by default, served as the “jury.”

But, of course, most fourth graders lack objective judgment. The “jury” ruling was purely a popularity contest. I was found “guilty” of cutting in line, and, as my penalty — handed down by Mr. Frank — I was forced to hold the door open for everyone in my class, each and every time we moved to and from the classroom, for the remainder of the school year.

Of course, a few years later I learned that our fourth grade “mock trial” failed to include checks and balances such as legal process, careful jury selection, separation of powers, and the right to appeal. What I had experienced that humiliating day in fourth grade was akin to Kangaroo Court.

Not surprisingly, Mr. Frank was dismissed from his teaching position several years later, when the school board finally acknowledged that he had a habit of being abusive toward his students.

HOA “due process” is no better than child’s play

(Morguefile.com free image)

I share this story to prove a point: the typical HOA violation hearing and fining policy lacks objectivity and, just like the fourth grade exercise orchestrated by my abusive teacher, it makes a complete mockery of due process.

Even if an Arizona HOA goes through the motions of posting and distributing a written schedule of fines, and takes photographs of alleged violations, what safeguards exist to prevent an HOA board, manager, or attorney from abusing their power over members? Who in the HOA decides if the fine schedule is fair or reasonable? Who will be the HOA’s judge as to whether or not alleged violations are exaggerated or completely made up? Who in the HOA decides if photographs are real, or taken out of contexts, or merely photo-shopped?

Typically, the HOA board and their homeowner allies decide if a rule violation has occurred, if the accused member is “guilty,” and the amount of the monetary penalty. All too often, HOA managers and attorneys instigate or perpetuate a culture of snitching on and penalizing an errant or unpopular member to serve as an example to the group. It’s how authoritarian leaders keep the common people in line.

Now that Turtle Rock has upset the status quo, at least a little, will Arizona courts blindly defer to an HOA’s written schedule of fines?  Will the requirements for the HOA to show damages be sufficiently rigorous and objective? Will new legal standards result in reasonableness and fair play?

Or, is the Turtle Rock ruling of minimal value in terms of protecting the due process rights of thousands of Americans who, by choice or by default, find themselves living under the arbitrary, selectively-enforced rules of an association-governed community?

Reference: Turtle Rock III HOA vs. Linda A. Fisher



Here’s what happened next:

Here’s why HOA statutory power to fine must be outlawed

A few months later, something unusual happened. Arizona Supreme Court chose to depublish the appellate court opinion in Turtle Rock v. Fisher. And it appears the Supreme Court was influenced by an Amicus Brief (Friend of the Court brief) filed by attorneys who are prominent members of Community Associations Institute. (CAI)

See the following posts by Staropoli:

AZ Supreme Court Prohibits publication of decision on HOA notice of fines

AZ SC ‘improvident’ decision in Turtle Rock HOA petition

Turtle Rock CAI brief urged depublication

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