A recent opinion from the Texas Court of Appeals, Angelwylde HOA, Inc., v. Fournier, No. 03-21-00269-CV (Tex. App. Mar. 17, 2023), held that a 12-month minimum rental restriction, which was adopted in accordance with the amendment provision in the CC&Rs is valid and enforceable.  While the case law is not binding upon Arizona community associations, Arizona Courts will likely be addressing similar issues in the near future.

A recent Arizona Supreme Court ruling, Kalway v. Calabria Ranch, placed restrictions on a community association’s ability to create new, affirmative obligations to the CC&Rs via amendment, without obtaining unanimous consent of the owners.  The primary issue in Kalway is whether the original CC&Rs provided adequate notice to the owners of a potential future amendment.  If it did not, such an amendment would require unanimous approval of the membership.  The Supreme Court further explained its reasoning as follows:

The restriction itself does not have to necessarily give notice of the particular details of a future amendment; that would rarely happen. Instead, it 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…

The original declaration must give sufficient notice of the possibility of a future amendment; that is, amendments must be reasonable and foreseeable.

The Kalway case did not specifically address rental restrictions and there has been much speculation as to how the Kalway case may impact short-term rental amendments moving forward.  If the Angelywylde case is any indication as to how an Arizona Court may analyze a similar issue, it would be a positive development for community associations attempting to restrict short-term rentals.

Similar to portions of the Kalway analysis, the Texas Court of Appeals found that the right to amend includes the right to correct, improve, or reform an existing restriction, but prohibits the complete destruction of an existing restriction.  The Texas Court of Appeals also found that modifications to deed restrictions that impose greater restrictions are not prohibited by law so long as they are consistent with the overall plan of development; and, that the courts generally look favorably upon restrictions that maintain the residential nature or residential development.  After reviewing the substance of the amendments, along with the language in the original CC&Rs, the Court in Angelwylde concluded that the amendments were valid and enforceable because they corrected, reformed, or improved the existing restrictions rather than destroying them.

As noted above, the Angelwylde case is not binding case law in Arizona. However, it does provide an interesting analysis of a hot-button topic in Arizona that will likely make its way through to the Arizona Court of Appeals in the future.