NCPA - National Center for Policy Analysis


May 28, 2008

The Arizona Senate is considering a bill that would regulate homeowner associations (HOAs) by imposing government mandates on HOA contracts (contracts between HOAs and their members). 

According to Nick Dranias of the Goldwater Institute, the new bill would:

  • Violate freedom of contract -- the principle that the government should not interfere with agreements reached by willing parties (since the relationship between homeowner associations and their members is a voluntary contract, any law that overrides that relationship violates this principle).
  • Violate the Arizona Constitution, which provides, "No…law impairing the obligation of a contract, shall ever be enacted." 
  • Erase provisions that are meant to discourage litigation. 
  • Override "loser pays" provisions in homeowner association agreements that require a losing litigant to reimburse the association for the attorneys' fees and costs incurred in defending a lawsuit. 
  • Threaten homeowner associations and their members with a greater risk of litigation and higher assessments.

The regulation of homeowner associations is unwise and unconstitutional.  It is ill-advised to encourage an across-the-board increase in litigation against all associations.  If freedom of contract means anything in Arizona, it means that we shouldn't all suffer together when the state overreaches in deciding what's best for us, says Dranias.

Source: Nick Dranias, "Regulating HOAs Violates Freedom of Contract," Goldwater Institute, May 22, 2008.


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