This litigation involves an older subdivision that was developed with “residential only" deed restrictions in 1965. Some of the lots are on the corner of streets that are now highly trafficked arterials. In 2020, a 69% majority of lot owners voted to amend the deed restrictions to enable commercial development on the corner. This type of amendment (a selective release of restrictions on some lots) was explicitly authorized by an Arizona statute enacted in 2016. Thompson Thrift Development, Inc., is the proposed commercial developer.
In the ensuing declaratory judgment litigation, the unhappy/dissenting owners have challenged the amendment on various grounds. Specifically, the amendment is not retroactive to existing property; the legislation that authorized such amendments violates the contract clause of the Constitution; and the dissenters did not receive sufficient notice under the common law. Thompson Thrift Development, Inc., prevailed in the trial court. The case is pending in the Arizona Court of Appeals.
In March 2022, the Arizona Supreme Court issued an Opinion called Kalway v. Calabria Ranch, 252 Ariz. 532 (2022) that has created great uncertainty over amendments to all types of deed restrictions. The uncertainty hovers over communities with and without homeowner's associations. In Kalway, the Arizona Supreme Court concluded that amendments to deed restrictions are subject to a common law “notice and foreseeability" standard. Thus, a general provision in the deed restrictions reserving the power to amend is not sufficient notice. Some parts of the Kalway opinion imply that the Court's logic only applies to amendments that impose new obligations, while other statements in the opinion suggest that it applies to all amendments, including amendments that reduce or remove use restrictions. It is likely that the appeal in my case will address this issue.
This is obviously important within Arizona. Because Kalway may become a leading case on the standards of Section 6.7 of the Restatement (Third) of Property, it has national resonance as well.
Amicus Brief
Supreme Court of Arizona – March 2024 Opinion
Court: Court of Appeals of Arizona
Topic: Covenants
Brief Author: Mark Lines, Esq., CCAL, Shaw & Lines, LLC, Phoenix, Arizona.
Filed: May 18, 2023
CAI Amicus Review Panel:
Mr. Robert Diamond, Esq., CCAL, Co-Chair of Amicus Committee (VA)
Mr. Edmund Allcock, Esq., CCAL, Co-Chair of Amicus Committee (MA)
Mr. Augustus Shaw, Esq., CCAL, CCAL BOG Liaison (AZ)
Mr. Bruce Jenkins, Esq., CCAL (UT)
Mr. Todd Sinkins, Esq., CCAL (VA)
Ms. Karyn Kennedy Branco, Esq. (NJ)
Ms. Joan Lewis-Heard, Esq. (CA)