Court Reverses Trial Court’s Award of Daily Damages Against Owner

Arizona Appellate Court decision (October 26, 2017).

The case involved a dispute between a homeowners association (“Association”) and a homeowner (“Owner”) over Owner’s alleged violations of Association’s governing documents with regard to the manner in which Owner was maintaining her property. Association filed an action against Owner in late 2015 alleging Owner’s breaches of Association’s CC&Rs for Owner’s failure to perform maintenance on her property. Association asserted that Owner “was using her home as a storage facility and she had allowed parts of the exterior to become broken, missing, or dilapidated.” Association further alleged that Owner had “excessive items within the home that can be viewed from neighboring property and/or constitute a health and safety hazard to the rest of the members in the community.” For these alleged violations, Association request the court to issue an injunction against Owner to compel her to comply with the CC&Rs and was imposing fines on Owner at a rate of $25.00 per day.

When the case went to trial, Association did not introduce a fine schedule into evidence, but the trial court issued a judgment in favor of Association which compelled Owner to perform the requested maintenance and ordered Owner to pay Association nearly $11,000 in attorney fees, $3,850 in penalties, and $474 in costs. Owner appealed part of the trial court judgment contending: (i) it was error for the trial court to issue an injunction requiring her to make changes to the interior of her property; and (ii) the trial’s award of penalties violated the CC&Rs and applicable Arizona law.

The appellate court affirmed the trial court’s injunction regarding the interior portions of Owner’s property because Owner did not properly raise the issues in the lower court. With regard to the penalties, the appellate court ruled that monetary fines must be reasonable and “ad hoc” fines are per se unreasonable.  The court stated that, even if Association has the authority to levy fines, “it must promulgate the schedule of fines prior to imposing the fines, and the failure to prove promulgation is fatal.”  The court further stated that the record did not support a determination that a $25.00 per day fine was reasonable and without competent evidence that Association had a fee schedule that was timely promulgated to homeowners which demonstrated the potential fine amounts and the appropriateness of such amounts, the $25.00 per day fine was per se unreasonable. Thus, the appellate court affirmed the trial courts order for an injunction directing Owner to comply with the CC&Rs, but reversed the trial court’s judgment for the $3,850 in penalties assessed against Owner.

See case decision: Turtle_Rock_III_Homeowners_Ass’n_v._Fisher_(Ariz._App._2017)1