Superior Court rules Camelback Country CC&Rs trump short-term rental provisions

A view of an entryway into the Town of Paradise Valley along Tatum Boulevard. (File photo)

The homeowners of Paradise Valley’s Camelback Country Estates have been granted a declaratory judgment on behalf of the Superior Court of Arizona, ruling short-term rentals within the neighborhood violate established Covenants, Conditions and Restrictions of the community.

The issue arises from a lawsuit filed on behalf of Camelback Country Estates Unit One Homeowners Association, Inc., vs. Forty Sixth Place LLC, a Nevada limited liability company; Ferne and John Doe D’Addario, a married couple; and Pacific Capital Enterprises LLC, a Delaware limited liability company.

Camelback Country Estates was represented by Bruce E. Samuels of Lewis Roca Rothberger Christie law firm.

Bruce Samuels

“The HOA was dealing with two homes among the 35 homes in the HOA, two were being rented essentially for party houses, it became more and more of a concern when dozens of people would show up at one or both of these houses in any given weekend,” Mr. Samuels explained.

“It was interfering with neighbors’ enjoyment of their own homes and yards. The HOA held meetings and decided to see if there was anything they could do about it.”

Within the complaint, Mr. Samuels argues the case involves violations of use restrictions on houses in a previously quiet Paradise Valley residential community. The defendants were using their properties as short-term or vacation rentals in violation of established CC&Rs, the complaint states.

On July 9, 2018, the community’s CC&Rs were amended to further clarify use restrictions for renting or leasing properties in the community.

Specifically, the CC&Rs restrict use of properties in the community to single-family residential use, and prohibits any business, trade or professional operations of any kind. Additionally, no nuisances of whatever kind of description shall be permitted to exist or operate upon lots, which are offensive, unsanitary, unsightly or detrimental to any other lot.

Camelback Country Estates is located off of Doubletree Ranch Road in Paradise Valley (Independent Newsmedia/Terrance Thornton)

The Paradise Valley Zoning Ordinance also prohibits renting or use of residential properties as a commercial venue for weddings, luncheons, dinners, auctions, sales or similar events.

The plaintiffs in the case, Camelback Country Estates, believed the defendants have rented, leased or otherwise used their properties in the community in violation of the CC&Rs by using them for short-term or vacation rentals of less than 30 days, and for commercial event rentals.

On May 14, 2018, the HOA sent the defendants a notice that they were in violation of the CC&Rs and allowed 30 days to cure their breach, the complaint states.

Allegations regarding 8812 N. 65th Street:

  • Marketed on VRBO and Airbnb;
  • Pacific Capital’s website notes the house “has the ability to sleep 32 guests” with a casita that “accommodates 4-6 people”;
  • A VRBO listing notes the house “sleeps 38” and can be booked for $2,000 nightly;
  • The house listing also states that “renovation is currently under way to develop this spectacular home into an award winning vacation rental”;
  • Comments from guests at the house note that they rented it for a “group of 15,” and a bachelor party rented it for a “huge group.” Other guests commented they rented it for “20 guys… for my bachelor party,” and for a bachelor party with “20+ 20-somethings.”

Allegations regarding 8624 N. 64th Place:

  • Marketed on VRBO and Airbnb;
  • Per the VRBO listing, the house can sleep 26 people and has “14 REAL beds!”
  • Comments made about this property include guests commenting about a bachelorette party, a 14-person bachelor party, a “team meeting,” “three families” who stayed there, good for “large groups for our company,” and a “business group” that stayed there.

Mr. Samuels says his firm asked the court to enforce Camelback Country Estates’ CC&Rs.

“While we were trying to address the situation short of a lawsuit, the CC&Rs initially said ‘no transient tenants allowed,’” he explained. “In my mind, that word certainly applied to these weekend rentals, but it was undefined — transient was undefined. The HOA had a separate lawfirm that does its HOA work revise their CC&Rs to make it very clear that any rentals less than 30 days would not be allowed.”

In 2016, Senate Bill 1350, sponsored by Arizona Senate Majority Whip Debbie Lesko (R), was passed and went into effect, restricting local cities and towns from being able to regulate or restrict the use of vacation rentals or short-term rentals within municipal boundaries.

The relatively new bill, however, does not leave HOAs powerless, Mr. Samuels contends.

“CC&RS, ultimately, those restrictions apply unless they’re somehow unenforceable,” he said. “The state statute I mentioned earlier was one passed several years ago where state legislators and the governor said towns and municipalities should not restrict short-term rentals. That law did not affect HOAs. We determined that the HOA could proceed to enforce its CC&Rs.”

Ultimately, the judge agreed to enter into the judgment at the request of the plaintiffs, as both sides agreed to resolve the case.

“It’s important because the short-term rental market is obviously hot this time of year with spring training. The reality too is it’s one thing to rent to a single-family use; it’s a whole other thing to turn this into party rentals, corporate retreats and bachelor parties,” he said. “These homes were essentially being used as a hotel in some ways, and there’s where they decided ‘we’ve got to do something about this, it’s becoming a constant issue.’”

While Ferne D’Addario is listed as an owner of the property, Mr. Samuels says she claimed to no longer have anything to do with the property. According to the original complaint, Forty Sixth Place and Ms. D’Addario entered into an agreement for sale of the 8812 N. 65th Street property in July 2016. Under the agreement for sale, Ms. D’Addario remains the owner until the terms of the same are complete.

“My understanding is they lived in that house for a while, and then entered into a transaction to sell the house, but the terms of the sale stated payments were required over time before the sale would close. Ferne D’Addario decided to sell the house and carry as owner while payments were carried by the buyer,” Mr. Samuels explained.

“Pacific Capital ended up essentially managing that property, so when we sued Pacific Capital, we decided we had to also sue Ferne D’Addario, even though she was in Canada. Her claim was she no longer had anything to do with the house anymore; she resolved with us fairly quickly, and let us continue to work through the process with Pacific Capital.”

News Services Editor Melissa Rosequist can be reached by e-mail at mrosequist@newszap.com or follow her on Twitter at www.twitter.com/Mrosequist_

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