Arizona HOAs Subject to Claims for Restitution

The new Arizona experiment in HOA justice by means of the administrative judge resolution of disputes has been hailed as a leveling of the playing field. Homeowners now have a relatively inexpensive and less formal procedure to obtain justice against an HOA board’s disregard of the laws and governing documents.

ALJ decisions can now have a financial impact on HOAs if they lose cases that involved the collection of fines and other charges against the homeowner, and were found to be in violation of the law or governing documents. In case 07F-H067004-BFS, not yet decided, the homeowner petitioner asked for punitive damages and restitution. The ALJ ruled that punitive damages were out, but restitution was permitted, depending on the facts. This ruling was based on a 1993 Arizona Appeals Court opinion (Cactus Wren v. The Department of Building, Fire and Safety, 869 P.2d 1212) affirming the decision by the administrative hearing officer.

Of the twenty-two complaints filed against HOAs to date, six have been decided: HOAs won 3 cases, the homeowner 1 case, and 2 cases were “split decisions” going to one and the other on the separate case complaints. The cases are being heard before the Office of Administrative Hearings (OAH)where HOA attorneys do not automatically get fees paid if they win, and where the Administrative Law Judge may penalize the HOA up to $500. This should make HOA boards think twice about filing suits urged on by the attorney, and attempt to reach an agreement with the alleged violator.

No longer can HOA boards file suits or frivolous fines without being subject to financial penalties. The HOA boards are now being held accountable for their actions by the state. This will have an impact on homeowners not involved in the case when such actions by their boards cause them to reach into their pocketbooks to foot the bill. Now, perhaps the homeowners, usually denoted as “apathetic homeowners”, will feel the need to watch over their boards.