Last week an Arizona court ruled that an upscale housing subdivision may not exclude a group home for disabled residents. The Court of Appeals’ “memorandum” decision did not establish a binding precedent. Still, it represents a significant step in supporting the rights of the disabled.
Montana Ranch (sometimes Montaña Ranch) is a deed-restricted subdivision in the northeast corner of Scottsdale, Arizona. In order to maintain its residential character in perpetuity, in 1985 the developers created Covenants, Conditions and Restrictions (CC&Rs) that apply to all homes in the subdivision. The developers amended the CC&Rs in 1997.
Today the subdivision is an upscale development in an upscale neighborhood. A quick look online for properties in Montana Ranch suggests that most are 3-4,000 square feet, 4-6 bedrooms, and priced at just below or above $1 million.
Like many residential subdivisions, Montana Ranch regulates the use its residents may make of their properties. One key restriction: no resident can conduct commercial activities on their property. The CC&Rs also mandated that every property must be used by a “single family unit.”
In 2016 Edmond and Kelly Beaith, owners of a Montana Ranch home, leased their property to a behavioral health agency. That entity wanted to operate a residential treatment center in the Beaith’s home. The Montana Ranch Homeowners Association ordered them to close the facility.
After they received a cease-and-desist letter from the homeowners association, Mr. and Mrs. Beaith responded. They argued that federal law superseded the CC&Rs. Specifically, they insisted that the Fair Housing Act applied. And that Act prohibits discrimination on the basis of a disability like drug or alcohol addiction. As a result, a group home for disabled residents could not be locked out of the neighborhood.
Like the better-known Americans with Disabilities Act (the ADA), the FHA mandates a consideration of “reasonable accommodations” before permitting an act like Montana Ranch’s. The Beaiths argued that the homeowners association should permit their use of the home. A real estate office and AirBnB rentals operated in the development without complaint, they noted.
The case proceeded to a trial in Arizona’s Maricopa County. Somewhat oddly (but with the parties’ agreement), the court divided the trial into two parts. One part tried by the court and another presented to a jury. After evidence was in, the court ruled that Montana Ranch could preclude the group home for disabled residents. The jury ruled that Montana Ranch had violated the Fair Housing Act.
After that split decision, the trial judge awarded attorneys fees and costs to Montana Ranch. The Beaiths appealed.
Group home for disabled residents permitted
The Court of Appeals disagreed with the trial judge. The jury’s verdict, said the appellate court, disposed of any argument about the FHA’s application. Montana Ranch could not impose its regulations on a group home for disabled residents.
According to the trial judge, the lease violated the association’s prohibition on commercial use. In fact, the Beaiths violated the commercial use prohibition the moment they signed their lease — and before a single resident with a disability moved into the home.
The appellate court noted that that was exactly what “reasonable accommodation” meant — the association could not assert the commercial restriction as a way of keeping out residents with a disability. The association’s attempt to block the group home for residents with a disability violated the FHA.
The Court of Appeals also set aside the award of attorneys fees to Montana Ranch. Because they were not successful, ruled the appellate court, they could not win their fees and costs. The Court of Appeals reversed the trial court order and remanded back to the trial judge for a hearing on whether the Beaiths should be awarded their attorneys fees and costs. Montana Ranch v. Beaith, June 30, 2020.
The Montana Ranch case is about substance abuse treatment. The same rules apply, though, to group homes for other types of residents with disabilities. A group home for people with developmental disabilities, or mental health issues, is also entitled to reasonable accommodations.