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With the advent in the past 5 years of short-term rental websites and apps like Airbnb, VRBO, and Homeaway, many homeowners raced to see what their association’s governing documents allow when it comes to leasing and renting of lots and units. Many individuals praise the growing popularity of short-term rentals, citing the economic benefits for those renting out their properties, and the benefits of convenience, comfort, and choices for those looking for alternatives to the hotel industry. However, not everyone sees agrees with these benefits, and point to the less desirable traits that these “weekend guests” bring with them, such as increase in traffic, security issues, and increase in noise and trash, etc. 

Many questions are starting to be answered by state and municipal legislatures, as well as associations, on how they will deal with this growing trend. 

Arizona Law Currently Allows Associations to Prohibit Short-Term Rentals 

In 2016, Arizona’s Governor signed Senate Bill 1350 into law, officially prohibiting Arizona cities and towns from prohibiting vacation rentals or short-term rentals. This bill is codified in A.R.S. Section 9-500.39. Although cities and towns can still create rules and regulations governing short-term rentals and fire codes, health and sanitation, and zoning ordinances, no municipality can legally prohibit short-term rentals. 

With cities and towns no longer able to prohibit short-term rentals, many Associations began examining what their own documents have to say about short-term and vacation rentals. Currently, Arizona law does not prohibit associations from disallowing short-term rentals in their communities. Although this may change in the not-too-distant future, associations are allowed to regulate and prohibit short-term rentals. 

What Kind of Association Restrictions are Enforceable? 

Although the Arizona legislature has not yet taken away associations’ ability to prohibit short-term rentals, Arizona law is quite specific about the manner in which associations must prohibit these types of leases. Specifically, Arizona law states that an owner may use his property as rental property unless rentals are prohibited in the Declaration, including any time period restrictions contained in the Declaration. See A.R.S. Section 33-1260.01(A) (for condominiums) and A.R.S. Section 33-1806.01(A) (for planned communities). 

Essentially, this means that any rental prohibitions or time period restrictions contained in other Association documents (such as the Bylaws or in Rules and Regulations) are insufficient to restrict owners’ use of their property for rentals. The restrictions against rentals must appear in an Association’s Declaration (CC&Rs) to be enforceable. If your Association’s CC&Rs are currently silent on the rental issue, the document must be amended to include any restrictive language – a Board resolution or policy will not do. Also note, however, that the Association can also make Rules governing leases if there is a rental-restriction provision in the CC&Rs, as discussed further below. 

Further, there are also questions raised about what kind of language in the CC&Rs is sufficient to restrict or prohibit short-term rentals. For example, obviously a provision in the CC&Rs that states “Owners may not lease their Unit for fewer than 30 days” is a clear restriction against short-term rentals, and is 

enforceable. However, what about more ambiguous language such as “the Unit shall not be used for transient or hotel purposes,” or simply that the Unit shall not be used for “business purposes.” 

Currently, case law throughout the country comes to differing conclusions on whether the “Business Use” restrictions in CC&Rs prohibit short-term rentals, such as weekend Airbnbs. The same is true for the “hotel” or “transient” language in some documents. Arizona courts have not yet weighed in on this issue. One court considered whether the listing for the rental included typical hotel “amenities” such as fresh towels, complementary WiFi, maid service, room service, etc. in holding that an owner’s use violated the provision restricting a Unit’s use for hotel uses. As short-term rentals continue to expand, certainly more courts will weigh in on this issue and provide further guidance. 

What Information from Tenants is the Association Entitled to? 

Even if the Association’s CC&Rs prohibit rentals for less than thirty days, the Association can generally create “leasing rules” to govern any owners who do rent their units. For both condominiums and planned communities, Arizona law allows Associations to require owners to provide (1) the names and contact information for all adult tenants; (2) the time period of the lease; and (3) a description and license plate numbers of the tenants’ vehicles. See A.R.S. 33-1806.01; A.R.S. 33-1260.01. An association may also charge a fee of not more than $25 to process this information. 

Keep in mind, associations are always prohibited from requiring an Owner to provide the Association with a copy of the tenant’s rental application, credit report, lease agreement/contract, and cannot charge a fee greater than $15 for incomplete or late information. 

Contact an Arizona HOA Lawyer for Further Help 

At Goodman Law, our sole focus is on meeting the legal needs of HOAs, including creating and implementing HOA policy and responding to homeowner concerns. Contact us today to discuss any legal challenge your HOA is facing.