Sign of the Times in Arizona Court HOA Ruling

Sign of the Times in Arizona Court HOA Ruling

A Pine Canyon HOA must allow “For Sale” signs in the community, the Arizona Court of Appeals recently ruled, despite deed restrictions that ban them. The ruling trumps restrictions, and squelched the association’s argument that its pre-existing ban on such signs can remain despite a 2009 law to the contrary.

The court noted that legislators made their intent quite clear. Significantly, the appellate judges rejected the assertion that the 2009 law unconstitutionally interfered with the contracts previously signed by all owners agreeing to the restriction. The ruling stated that there may be situations in which the ability of legislators to overturn existing covenants, conditions, and restrictions—CC&Rs—is limited, but statutes are presumed constitutional and the burden is on the association to prove otherwise.

The case involved homeowners who purchased a lot in Pine Canyon, a Flagstaff master-planned community managed by PC Village Association. That lot, along with all the others, is subject to the CC&Rs originally recorded in 2002 and amended two years later. One section of the restrictions prohibits the display of any sign that’s visible from neighboring property without the approval of the Village Association or the Design Review Committee.

In 2011, the homeowners posted a “For Sale” sign on their lot. After the association forced its removal, they sued to have the restriction declared unenforceable. When a trial judge sided with the couple, the association appealed.

The appeals court said the intent of lawmakers was clear: They wanted to void any existing CC&R provisions that prohibit “For Sale” signs. It noted the law specifically says signs that meet certain size requirements are permitted. And it also says the law applies to any restriction “without regard to the date the covenant, restriction, or condition was created, signed, or recorded.”

Addressing the association’s constitutional claim, the appeals court said that it’s up to the group challenging the law to show that it “substantially impairs” the contractual arrangement. Even then, the judge said, a challenger must also show there’s no “significant or legitimate public purpose” behind the law, or that the impairment is an “unreasonable means” of achieving that purpose.

The appeals court also said that while the CC&Rs prohibit nearly all signs, their terms also make it clear that the ban doesn’t apply to any sign that can’t be prohibited by law. That means property owners could have anticipated that there would be exceptions enacted by the legislature. The owners had hoped that the lawsuit would force the court to balance their rights with that of the other homeowners who bought their property with the assumption there would be no such signs. It was important that there should be provisions that assist owners in selling their homes, which sometimes depends on signs that advertise available homes, especially considering the difficulties many homeowners have faced selling property in recent years.

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