Gordon Gross, et al. v. The Shores at Rainbow Lake Community Association
At a Glance
| Parties | Owners challenged a 2021 amendment that banned short-term rentals and limited occupancy by unrelated renters in a planned community. |
|---|---|
| Panel | Presiding Judge Samuel A. Thumma, Judge Jennifer B. Campbell, Judge Michael J. Brown |
Summary
Gross applied Kalway in a practical, highly relevant HOA setting: rental restrictions. The community amended its CC&Rs to prohibit rentals shorter than 30 days and to bar more than four unrelated individuals from leasing a property. The Court of Appeals split the amendment. It held the short-term rental ban was invalid because it prohibited conduct the earlier CC&Rs had allowed and was not reasonably foreseeable from the original declaration. But it upheld the unrelated-persons occupancy limit because that restriction was viewed as a clarification and refinement of existing use limits rather than a brand-new burden. The opinion is one of the clearest Arizona appellate examples of how courts separate an impermissible new use restriction from a permissible refinement of an existing one.
Holding
The court held that the new short-term rental ban was invalid under Arizona amendment-notice principles, but the cap on unrelated renters was valid because it was reasonably foreseeable from the existing CC&Rs.
Reasoning
The court framed the dispute as one about owner notice and reasonable expectations. A recorded declaration can be amended, but only within the fair scope of what the original declaration put buyers on notice might later be refined. Under that approach, an amendment cannot simply reverse an existing freedom and call the result a refinement.
Applying that rule, the short-term rental ban was too much because the preexisting documents had not warned owners that leasing could later be cut off in that way. The unrelated-occupants limit came out differently because the original scheme already contained structure about occupancy and residential use, making the later cap a closer fit with the bought-for framework.
Why This Matters for HOAs
Gross is one of the best Arizona Court of Appeals cases for short-term-rental disputes after Kalway. It gives both sides a usable analytic framework for asking whether an amendment is genuinely foreseeable or instead a new restriction in disguise.
Boards considering rental amendments should read it before drafting. Homeowners challenging new lease limits will cite it often.
