The Arizona Supreme Court denied the Village of Oakcreek Association’s petition for a review of the Arizona Court of Appeals’ decision in Village of Oakcreek Association v. Lance Bonham on April 2.

The court’s denial of review leaves in place previous Supreme Court, Arizona Court of Appeals and Yavapai County Superior Court rulings that homeowners associations cannot ban the use of properties included in an HOA as short-term rentals if the covenants of the HOA did not originally provide for the possibility of such a restriction in the future.

The Supreme Court also denied VOCA’s request for attorneys’ fees.

As a result of Bonham’s suit, the Superior Court order striking the amendments banning STRs from VOCA’s covenants remains in place.

Facts of the Case

In 2009 Lance Bonham became the beneficiary of his mother’s trust, which held title to her home, in VOCA’s jurisdiction, and the sole trustee prior to Dec. 23, 2015, before deeding the property to himself on Jan. 23, 2017. Following the passage of Senate Bill 1350 in 2016, which legalized STRs statewide, VOCA members voted twice to amend the association’s covenants to ban STRs in November 2016 and April 2017. Bonham began renting his home as an STR in 2021, and VOCA sued to compel him to cease operating it as a rental.

The Yavapai County Superior Court dismissed V O C A’s s u i t i n November 2022, relying on the Arizona Supreme Court’s recent decision in Kalway v. Calabria Ranch that “an HOA cannot create new affirmative obligations where the original declaration did not provide notice to the homeowners that they might be subject to such obligations.”

The Supreme Court had reiterated the principle that amendments to a set of covenants, such as an STR ban, must be “reasonable and foreseeable” at the time the covenants are established to avoid infringing on owners’ rights.

VOCA appealed the decision in December 2022, and the Court of Appeals affirmed the Superior Court ruling in October 2023, finding that owners must have sufficient notice of a future rental restriction at the time they acquire a property for such a restriction to be valid. The Court of Appeals also reiterated its previous ruling that STRs are not a business enterprise.