Can Arizona HOAs Collect Legal Fees? Your Questions, Answered
There are many benefits of moving into a neighborhood with a homeowners’ association (HOA). All board members of the association have a fiduciary duty to represent the interests of the neighborhood residents and community as a whole, meaning there is an opportunity to make one’s voice heard. The HOA also oversees the amenities of the neighborhood, such as the community pool or walking paths. In exchange, homeowners in the neighborhood agree to abide by covenants, conditions and restrictions (CC&Rs) that aim to promote safety and curb appeal.
Living in a neighborhood with an HOA comes at a literal cost: The fees that homeowners pay for an association to oversee the community. Before moving in, be sure to review these fees and how to pay them—there can be consequences for homeowners who are delinquent in payment.
Arizona law provides strong protections to homeowners’ associations, including the right to collect legal fees. Here’s what homeowners need to know.
Can an Arizona HOA Collect Legal Fees?
In short, yes.
Arizona HOAs are within their rights to collect legal fees from homeowners in the event of contract disputes because most of these disputes involve the contract between the association and the homeowners who agreed to live in the community. This is outlined in A.R.S. § 12-341.01, which provides the prevailing party in contract-related litigation the opportunity to attempt to recover legal fees.
What Are the Limitations of Arizona HOAs Collecting Legal Fees?
There are three types of fees Arizona HOAs can collect: Late payment fees, reasonable collection fees and reasonable attorney’s fees. Before the association can rightfully collect legal fees, the attorney’s fees must be deemed “reasonable” and must be awarded by the court.
Until 2018, there were several collection disputes between HOAs and homeowners. The HOAs would demand payment for unawarded legal fees and attribute the practice to their interpretation of A.R.S. § 12-341.01. However, the Court in Bocchino v. Fountain Shadows Homeowners Association, 244 Ariz. 323, 418 P.3d 1096 (Ct. App. 2018) ruled: “Courts play a significant role in assessing and awarding attorney fees incurred in judicial proceedings.” The ruling invalidated the language in the CC&Rs stating litigation was not necessary to collect legal fees.
What Happens if Arizona HOA Fees Go Unpaid?
Homeowners with property in neighborhoods overseen by homeowners’ associations should be aware that Arizona provides immense protection for these associations. Under Ariz. Rev. Stat. § 33-1807, a lien is automatically placed upon any property once the owners are delinquent in paying any fees that are due. This clouds the title and complicates any sale of the property until the title is cleared.
If the homeowner has no plans to sell the property, there are two instances in which the unpaid HOA fees can lead to foreclosure via the lien. The homeowner must be delinquent in payment for more than one year, or the principal of the unpaid fees must equal or surpass $1,200. In either scenario, the HOA can foreclose on the home, per Arizona law.
Find an Experienced Phoenix Real Estate Attorney
The attorneys at MacQueen & Gottlieb have significant experience with real estate law in Arizona. Our attorneys can assist you with any issues and help you understand your rights. If you live in an HOA community and are experiencing disputes, our attorneys can assist you in pursuing that case. Contact us today at (602) 726-2229 to schedule an initial consultation or make an appointment online.