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McDowell Mountain Ranch Community Association, an Arizona nonprofit homeowners association in Scottsdale, sued homeowner James F. Simons in January 2004 for injunctive relief after he began a construction project at the rear of his home without the architectural approval his community’s Declaration of Covenants, Conditions, and Restrictions (CC&Rs) required. Simons did not answer the complaint or appear at the injunction hearings; the trial court entered a permanent injunction, and the association pursued contempt proceedings until Simons began moving toward compliance. The association then sought its attorneys’ fees under CC&R Article XV, Section 15.14, which obligated an offending owner to pay “all attorney fees and court costs incurred” by the association in enforcing the CC&Rs, and it requested $8,000 in fees plus costs. Without holding the hearing Simons had asked for, the trial court crossed out the requested figure and awarded only $4,000, giving no explanation. On appeal, Division One held that CC&Rs are a contract and that a court generally must enforce a contractual fee provision, reducing the amount only where the fees are clearly or “obviously” excessive—a showing the objecting owner bears the burden to make. Finding no record support for the 50% reduction, the court vacated the fee award and remanded. Judge Orozco dissented.

The Court of Appeals began from the settled principle that a community’s CC&Rs “constitute a contract between the subdivision’s property owners as a whole and individual lot owners” (Ahwatukee Custom Estates Mgmt. Ass’n v. Turner). It distinguished contractual fee provisions from the discretionary fee statute, A.R.S. § 12-341.01(A): unlike statutory fees, a court “lacks discretion to refuse to award fees under a contractual provision” (Chase Bank of Ariz. v. Acosta), and contracts for the payment of attorneys’ fees are enforced according to their terms (Heritage Heights Home Owners Ass’n v. Esser). In Heritage Heights, the court had held that a homeowner became contractually bound to a deed provision requiring the offending owner to pay all attorneys’ fees and costs the enforcing party incurred, and that recovery of all such fees, including on appeal, had to be granted.

The court then recognized a limit drawn from Elson Development Co. v. Arizona Savings & Loan Ass’n: a contractual fee provision is “binding only to the extent that it is reasonable,” but “where the services have been rendered, and the amount stipulated is not obviously excessive, the stipulation as to the amount should govern.” Reading Section 15.14 as closer to the “all fees” language of Heritage Heights than to the fixed percentage in Elson, the court held that the association was entitled to all of its fees except those that are obviously or clearly excessive. Surveying decisions from other jurisdictions, it adopted the rule that fees fixed by a fee-shifting contract are presumptively reasonable and that the party challenging them bears the burden of proving excessiveness. Because the association had submitted two fee applications satisfying Schweiger v. China Doll Restaurant, it made a prima facie showing, and the burden shifted to Simons to demonstrate that the requested fees were clearly excessive.

Applying those rules, the court found the trial court had erred. By cutting the request in half without explanation—and without holding the hearing Simons requested—the trial court appeared to have placed the burden of proving reasonableness on the association and to have exercised the broad discretion that applies to statutory fee awards under A.R.S. § 12-341.01 and § 12-2030. That discretion is more narrowly circumscribed when the parties have contractually agreed that the prevailing party recovers all of its fees. The record did not support a determination that 50% of the association’s fees were clearly excessive, so the award was vacated. On remand, the trial court may hold a hearing to consider any evidence Simons offers and then award all fees properly incurred except those it expressly finds clearly excessive (noting that a $200 charge for a demand letter about an unrelated recreational-vehicle violation not pleaded in the complaint should be subtracted). The court also awarded the association its fees and costs on appeal under the CC&Rs and A.R.S. § 12-342, upon compliance with Ariz. R. Civ. App. P. 21.

For Arizona homeowners associations and the owners they regulate, this published opinion clarifies how much control a trial court has over attorneys’ fees when the governing documents contain an “all fees” enforcement clause. The court treats such CC&R provisions as an enforceable contract: if the association prevails and documents its fees properly, it is presumptively entitled to the full amount, and the court may not simply trim the request as it might under the discretionary fee statute. The practical effect is that the burden shifts to the objecting owner, who must come forward with evidence that specific fees are clearly or obviously excessive rather than relying on the court to police reasonableness on its own.

At the same time, the decision is not a blank check for associations. Fees must still be documented in a proper China Doll application, work unrelated to the pleaded violations can be excluded (as with the $200 recreational-vehicle demand letter here), and an owner who requests a hearing on excessiveness is generally entitled to be heard before the court rules. The opinion also drew a dissent from Judge Orozco, who read Heritage Heights and Elson to preserve the trial court’s duty to assess reasonableness and who would have affirmed the 50% reduction as an implicit finding that the fees were excessive—illustrating that the scope of judicial review over contractual fee awards remained genuinely contested.

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