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Arkansas Court of Appeals Favors Hot Springs Village in Assessment Dispute

October 19, 2017

The Arkansas Court of Appeals today upheld a lower-court decision stating that the Hot Springs Village Property Owners Association (POA) acted properly in its use and collection of assessed funds and its development and improvement of the community.

The Hot Springs Village POA maintained four points on appeal. The points included a two-tiered assessment fee structure for property within Hot Springs Village, use of overlay zones, non-paying inventory lots contributing to a quorum and general assessment funds used in master planning.

“We are grateful to the Court of Appeals for its time and attention in considering this case and understanding the unique structure and financial situation faced by Hot Springs Village,” said Lesley Nalley, CEO of the Hot Springs Village Property Owners Association. “Property owners approved this fair and equitable assessment system. The Court recognized that property owners in Hot Springs Village have the right to govern themselves in a way that benefits the community and affords the opportunity for growth.”

The decision found that the POA, “acted in good faith and in what it considered the best interests of the POA and Hot Springs Village.”

Under the two-tiered structure in question, Hot Springs Village POA levies assessments on lots based on whether they have been developed. For instance, owners of lots with water meters, known as improved lots, pay a higher assessment than owners of unimproved lots.

Two property owners filed a lawsuit in 2015 challenging four points of the structure. They argued that the two-tiered system was illegal based on the Village’s governing documents and protective covenants.

A three-judge panel of the court disagreed saying the two-tier system, which was the primary focus of litigation, fell within the definition of an annual assessment. In addition, the appeals court stated that the POA indeed has the authority to create overlay zones.

As to the third issue related to a quorum, the appeals court said that the trial judge was correct in citing a previous agreement that stipulated exactly what constitutes a quorum. Last, the appellate court agreed that the assessment funds were being used properly for maintenance and to promote the health, safety, and welfare of property owners.

POA board chairman John Weidert said, “I consider this decision to be hallmark and one that will ensure Hot Springs Village can get to the business at hand of creating and protecting value now and into the future.”

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