Arizona Court Rejects HOA’s Attempt to Charge Legal Fees Without Court Authority

Crosby v. Mesa Desert Heights Homeowners Ass’n, No. CV-24-0003, Court of Appeals of Arizona, First Division, October 10, 2024

Harper Hall PLC recently secured a significant victory for homeowners’ rights in the Arizona Court of Appeals, successfully challenging a homeowners association’s attempt to unilaterally impose legal fees on a homeowner during a pre-litigation architectural dispute. The decision in Crosby v. Mesa Desert Heights Homeowners Association establishes crucial limitations on associations’ ability to charge owners for legal expenses without court authorization.

The Core Issue

At its heart, this case addressed a concerning practice we frequently encounter in our HOA practice: associations attempting to circumvent traditional fee-shifting provisions by using special assessment or other claimed authority to impose pre-litigation legal fees on homeowners. In this case, the Association demanded payment of legal fees incurred during an architectural review dispute, even though no lawsuit had been filed and no court had awarded such fees.

How the Dispute Unfolded

The dispute began during what should have been a routine architectural review process. After exchanging correspondence about proposed building plans, the Association chose to retain counsel and demanded approximately $2,000 in legal fees from the homeowner. When our client rightfully refused to pay these unauthorized charges, the Association responded by unilaterally imposing a $2,500 Special Assessment on the client’s property.

The Association’s sole claimed authority for this assessment came from a standard provision in the CC&Rs allowing recovery of attorney fees by the prevailing party “in the event any action is instituted.” In an aggressive overreach, the Association attempted to stretch this typical fee-shifting provision beyond its clear meaning, arguing that pre-litigation disputes qualified as “actions” under the CC&Rs.

The Court’s Analysis: Plain Language Prevails

The Court of Appeals conducted a meticulous analysis of the term “action” within Section 12.09, examining both the provision’s context and relevant legal authorities. The Court’s reasoning centered on the provision's language, which spoke clearly of litigation through its references to “prevailing party,” “recover,” “judgment,” and “costs of suit.” These terms, the Court recognized, all point to formal legal proceedings, not preliminary disputes.

To reinforce this common-sense reading, the Court turned to established legal definitions. Arizona statutory law explicitly defines “action” as “any matter or proceeding in a court,” while Black's Law Dictionary confirms that an “action” means “the exercise of a claim before a judge.” Since no lawsuit existed when the Association imposed the Special Assessment, Section 12.09 provided no authority for recovering legal fees.

The Association’s attempts to find alternative justification proved equally unsuccessful. When the original basis for the assessment faced scrutiny, the Association attempted to justify it under Section 5.07 of the CC&Rs, which authorized Special Assessments for “bringing an Owner and his Lot into compliance” with community standards. The Court firmly rejected this post-hoc rationalization, particularly noting that the Association had never cited this provision in its pre-litigation demands. More fundamentally, the Court recognized that the lot was always in compliance because no non-compliant structure ever existed - the dispute centered entirely on proposed plans, not actual violations.

A Victory for Homeowner Rights

This decision marks a significant advance in protecting Arizona homeowners from unauthorized legal fee demands. The Court’s ruling establishes that associations cannot use special assessment or other authority to impose legal fees before litigation unless their governing documents specifically authorize such charges. Any attempt to recover legal fees must be grounded in specific governing document provisions actually authorizing that particular type of recovery.

The decision also reinforces important principles of document interpretation in the HOA context. Words with established legal meanings in CC&Rs will be interpreted according to their legal definitions, not associations’ preferred interpretations. Similarly, special assessment provisions for “bringing lots into compliance” apply only to actual violations, not potential or theoretical non-compliance.

Practical Impact for Arizona Homeowners

For Arizona homeowners, this ruling provides essential protection during architectural review and other pre-litigation disputes with their associations. Associations must now wait for court authorization before imposing legal fees on owners, and they cannot use special assessments as leverage during routine architectural disputes. Perhaps most importantly, associations must have clear, specific authority in their governing documents for any special assessments they impose, and post-hoc rationalizations for unauthorized assessments will face heightened scrutiny.

This decision represents a significant check on associations’ ability to use special assessments as a weapon in routine disputes. By requiring clear authority and proper procedure for imposing legal fees, the Court has helped ensure that homeowners can engage in good-faith disputes with their associations without fear of unauthorized financial penalties.

At Harper Hall PLC, we specialize in protecting homeowners’ rights in disputes with their associations. This victory demonstrates both the importance of challenging unauthorized association actions and the value of experienced counsel in HOA disputes. Our deep understanding of Arizona HOA law and commitment to homeowner rights enables us to successfully challenge overreaching association conduct. If your association has attempted to impose unauthorized legal fees or other charges, we encourage you to contact us to understand your rights and options.

Arizona Supreme Court Recognizes the Doctrine of Boundary By Acquiescence

Beck v. Neville, No. CV-22-0134-PR, Supreme Court of Arizona, January 9, 2024

This property dispute between neighbors Beck and Neville presented the Arizona Supreme Court the opportunity to formally recognize boundary by acquiescence under Arizona state law and define the contours of this doctrine. The case involved a small triangular parcel of land totaling 135 square feet near the property line between the neighbors’ adjoining lots. In 1998 and 2000, Beck and Neville purchased adjoining properties respectively. The properties sit at slightly different elevations, with the Beck property uphill from the Neville property.

In 2004, the Becks undertook some landscaping upgrades to their front yard which included installing decorative concrete paver bricks to prevent colored rocks from flowing downhill onto the Neville property. However, the landscapers mistakenly set the concrete pavers about 10 feet within the Becks' actual recorded property line instead of along the boundary. This created the appearance that the pavers lined a gravel driveway leading from the street back to the Neville property's front gate.

When the Becks learned of the landscapers' mistake, they notified the Nevilles but did not have the paver bricks relocated. The Nevilles claimed the Becks later removed and replaced the pavers in the same incorrect location in 2014, but the Becks denied making any changes. There were occasional disputes over the years when the Nevilles would not allow the Becks to park vehicles in the gravel driveway area, but no explicit assertions by the Nevilles of owning the disputed 135 square foot triangle,

This changed in 2019 when drainage work on the Beck property required digging up the area with the paver bricks, which the Becks planned to relocate to the recorded property line. The Nevilles then sent the Becks a cease-and-desist letter claiming ownership of the disputed land by adverse possession and boundary by acquiescence.

The Becks filed an action to quiet title. The trial court granted them summary judgment after finding insufficient evidence supported the Nevilles' claims. On appeal, the court of appeals reversed in a split decision and remanded for further proceedings.

The question of boundary by acquiescence had arisen in a few prior Arizona cases, with the landmark case of Mealey v. Arndt (2003) outlining some elements of the claim but never formally adopting the doctrine. Finding the issue squarely presented on appeal, the Arizona Supreme Court officially recognized the doctrine of boundary by acquiescence, under which neighboring landowners may mutually recognize and acquiesce to a boundary line over an extended period of time, even if it diverges from the legal property line. The Court reasoned that the doctrine serves policy goals of avoiding litigation and promoting stability of land ownership.

In outlining the required elements for a boundary by acquiescence claim, the Court closely followed the standards discussed in the Mealey v. Arndt case. This includes the claimant proving by clear and convincing evidence: (1) occupation or possession of land up to a clearly defined line; (2) mutual acquiescence between neighbors that the line represents the accepted boundary between properties; and (3) continued acquiescence for the statutory period (10 years in Arizona).

However, the Court added an additional element not explicitly included in Mealey – the requirement to prove uncertainty or dispute as to the true, legal boundary line at the time of acquiescence. The Court explains that without uncertainty, there would be no need for neighbors to accept a different boundary line. Requiring proof of uncertainty protects against unwitting property transfers and unnecessary disputes over boundaries that could be definitively ascertained from deeds, surveys or other records.

The Court justified the clear and convincing evidence standard by underscoring the unique importance of private property rights, tracing back principles valuing such rights to the Declaration of Independence. An interest as significant as one's own land, the Court reasoned, demands a higher standard of proof before ownership may be involuntarily altered.

Applying this new four-prong test for boundary by acquiescence to the facts of the case presented, the Court hedl that the Nevilles’ claim failed as a matter of law. Critically, the Nevilles provided no evidence of uncertainty over the recorded boundary line, which was clearly documented in deeds and surveys.

The evidence also did not sufficiently establish the elements of occupation and mutual acquiescence over the alternate boundary marked by the concrete pavers installed by the Becks in 2004. The Court reasoned that occasionally parking on a disputed area did not constitute actual possession and appropriation of the land, but merely casual use. And despite installing the pavers, the Becks did not demonstrate acceptance of a new property line, thus failing the mutual acquiescence test.

By formally adopting boundary by acquiescence and clarifying its elements, the Arizona Supreme Court provides important guidance to lower courts and property owners going forward. Requiring proof of uncertainty protects legal property lines, while respecting the informal arrangements neighbors may reasonably make through long-acquiesced use. The Court rightly sets a high bar through a heightened evidentiary standard, given the significance of altering legal property rights.