Background
K. Hovnanian at Gallery, LLC developed an eighteen-unit residential community and created Gallery Community Association to manage it. Hovnanian conveyed the common areas to Gallery, which was required by the community’s covenants, conditions, restrictions, and easements to maintain both those areas and the units’ exteriors. The individual homeowners, however, owned the units and their exteriors.
After discovering alleged defects in the common areas and some unit exteriors, Gallery sued Hovnanian under Arizona’s dwelling-action statutes, alleging a breach of the implied warranty of workmanship and habitability. The superior court granted summary judgment to Hovnanian because Gallery was neither a homebuyer nor the owner of the individual units, and because the common areas were not residences. The court of appeals reversed.
The Court’s Holding
The Arizona Supreme Court held that A.R.S. § 33-2002 and related provisions authorize an HOA to bring a dwelling action for construction defects arising from a failure to adhere to generally accepted community workmanship standards. Read together, the statutes modified the common law and authorized what amounts to an implied-warranty claim, even though the HOA lacks contractual privity with the builder-vendor.
The Court also held that Gallery could pursue claims involving both the common areas and the individually owned unit exteriors. The common areas qualified as “dwellings” because Gallery owned them, while newly constructed residential units qualified under the statutory definition regardless of HOA ownership. Because Gallery satisfied § 33-2002’s procedural prerequisites, the Court reversed summary judgment, remanded for further proceedings, and vacated the court of appeals’ opinion while agreeing with its result.
Key Takeaways
- Arizona’s HOA dwelling-action statutes authorize an HOA to sue for construction defects that constitute a breach of workmanship and habitability standards.
- An HOA need not have contractual privity with the builder-vendor to bring the statutorily authorized claim.
- The action may cover HOA-owned common areas and individually owned residential units, provided the statutory requirements are satisfied.
Why It Matters
The decision expands an Arizona HOA’s ability to address community-wide construction defects directly, rather than relying exclusively on individual homeowners to enforce implied-warranty rights. It also clarifies that § 33-2002 does more than establish pre-suit procedures: together with the statutory definitions incorporated into the scheme, it authorizes a substantive HOA dwelling action.
The ruling does not decide whether Gallery can prove the alleged defects or recover damages. It permits the lawsuit to proceed beyond summary judgment on remand.