FLAGSTAFFCONFESSIONS | 07/2022 | AIRBNB HOST? Check out Kalway vs. Calabria Ranch HOA

Maarten Kalway v. Calabria Ranch HOA LAYING DOWN THE LAW – SUPREME COURT ISSUES NEW RULING PROTECTING SHORT-TERM RENTALS LAYING DOWN THE LAW, PROPERTY MANAGEMENT May 1, 2022 Written by Columnist: Christopher J. Charles, Esq. The Supreme Court of Arizona recently handed down a landmark decision that effectively prevents HOAs from restricting short-term rentals in the vast majority of communities. In 2016, Governor Ducey signed into law SB1350 which authorized short-term rentals in the State of Arizona. Per SB1350 (codified at A.R.S. §9-500.39) short-term rentals are legal in Arizona and the state, county, and local municipalities may not take any action to restrict short term rentals. “Short-term rental” is defined by the statute as “any individually or collectively owned single-family or one-to-four-family house or dwelling unit or any unit or group of units in a condominium, cooperative or timeshare, that is also a transient public lodging establishment or owner-occupied residential home offered for transient use if the accommodations are not classified for property taxation under section 42-12001. Vacation rental and short-term rental do not include a unit that is used for any nonresidential use, including retail, restaurant, banquet space, event center or another similar use.” Rental period durations for short-term rentals often range anywhere from twelve months to one night. Following the enactment of A.R.S. §9-500.39, the legislature passed an additional law to further protect owners’ legal rights to rent their properties: A member may use the member’s Property as a rental Property unless prohibited in the declaration and shall use it in accordance with the declaration’s rental time period restrictions. A.R.S. §33-1806.01. But per the statutes and Arizona common law, although the State cannot take any action to restrict short-term rentals, the Governor and the legislature left open the door as to whether private parties (such as HOAs) could restrict short-term rentals through deed restrictions and covenants conditions and restrictions (CC&RS). As a result, since the passing of SB1350 in 2016, hundreds of HOAs have taken action to amend their existing CC&Rs to restrict short term rentals in their community. But now in light of the recent Supreme Court decision, many, if not all, of the CC&R amendments which have been implemented to restrict short-term rentals are void and ineffective. Below is a summary of the important ruling from the Supreme Court which provides guidance on whether an amendment to CC&Rs is valid and enforceable: · · any “amendments [to the CC&Rs] must be reasonable and foreseeable” · “[W]e hold that an HOA cannot create new affirmative obligations where the original declaration did not provide notice to the homeowners that they might be subject to such obligations” · “The notice requirement relies on a homeowner’s reasonable expectations based on the declaration in effect at the time of purchase” · “The law will not subject a minority of landowners to unlimited and unexpected restrictions on the use of their land merely because the [CC&Rs] permitted a majority to make changes to existing covenants” · CC&Rs “must give notice that a restrictive or affirmative covenant exists and that the covenant can be amended to refine it, correct an error, fill in a gap, or change it in a particular way.” · “[F]uture amendments cannot be entirely new and different in character”

Kalway v. Calabria Ranch HOA, LLC, No. CV-20-0152-PR. Further, in light of the Kalway decision, in communities where amended CC&Rs have been recorded with the County Recorder’s Office, anyone who caused the amended CC&Rs to be recorded, and remain of record following the Kalway decision, may be subject to civil liability for slander of title per A.R.S. §33-420, including damages and attorneys’ fees. Unfortunately, in most cases where amended CC&Rs have been recorded to restrict short term rentals, legal action will be required to clarify the property owners’ rights and responsibilities and to clear title to the properties.