ALJDEC decisions subject to certification as final

12F-H1213002-BFS · Department of Fire Building and Life Safety - H/C · 2012-12-21

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 17, 2012, at 8:00 a.m. APPEARANCES: Katherine A. Windis (hereinafter “Petitioner”) appeared on her own behalf. Fairway Court West Condominium Association (hereinafter “Fairway”) appeared through its attorney, R. Corey Hill, Esq., Hill & Hill, PLC. ADMINISTRATIVE LAW JUDGE: M. Douglas _____________________________________________________________________

Evidence and testimony were presented and the following Findings of Fact, Conclusions of Law and Recommended Order are made: FINDINGS OF FACT The Department of Fire, Building and Life Safety (the “Department”) is authorized by statute to receive Petitions for Hearings from members of homeowners’ associations and from homeowners’ associations in Arizona. Fairway is a homeowners’ association located in Sun City, Arizona. Petitioner owns a residence in and is a member of Fairway. Petitioner filed a petition with the Department alleging that Fairway had violated the provisions of A.R.S. § 33-1217 and A.R.S. § 33-1252. Petitioner specifically alleged that Fairway’s Board of Directors passed a resolution on April 23, 2012, allowing owners of first floor units to encroach on common areas. In her response to the Prehearing Order, Petitioner added an alleged violation of A.R.S. § 33-1218. Fairway’s Answer to the Petition provided, in part, as follows: [Fairway] denies that it caused or permitted any “encroachment on common property” to occur, denies that it received any letter that “17 unit owners signed” as alleged, affirmatively stated that the subject Resolution [April 23, 2012] speaks for itself and is in conformity with Arizona law and the applicable CC&R’s and admits that “no vote of unit owners was taken” with respect to the Resolution, such being unnecessary. [Fairway] further affirmatively stated that no “filing with Maricopa County” is required with respect to the subject Resolution …. Pursuant to A.R.S. § 33-1212(4), unless the Declaration states otherwise, “[a]ny … stoops, porches, balconies, entryways or patios … serving a single unit, but located outside the unit’s boundaries, are limited common elements allocated exclusively to that unit.”

Petitioner’s Testimony Petitioner testified that on April 23, 2012, Fairway’s Board of Directors approved the following resolution: As part of our on-going conversion to desert landscaping the board is allowing pavers to be placed outside the lower lanai areas. These are not to be permanent installations. The paved area shall not exceed 8 x 16 feet nor be less than 7 x 15 feet. The pavers shall be at least 2 inches thick and shall be of a color consistent with other existing installations. The installation and ongoing maintenance costs will be the unit owner’s responsibility. All installations must have board approval in writing prior to the start of the project. If the owner fails to maintain the pavers the board has the right to remove them or to maintain them at the owner’s expense. Such installations will be considered to be “Limited Common Areas” and as such will be under the control of the Association.[1]

Petitioner testified that she and all other property owners that own property in Fairway have an undivided interest in all common areas and pay taxes on that undivided interest. Petitioner stated that the Board’s April 23, 2012 resolution allows first-floor condominium owners to encroach on common property by placing pavers on patios outside of first-floor condominium units. Petitioner testified that the Board failed to comply with applicable statute by conveying common property to private owners for private use without the required approval of at least 80% of the property owners of Fairway.[2] Petitioner testified that the Board’s April 23, 2012 resolution violated Fairway’s Rules and Regulations. Petitioner read several Rules and Regulations that she alleged the Board’s April 23, 2012 resolution violated. Petitioner stated the Board’s resolution favored the rights of first-floor unit owners over the rights of second-floor unit owners. Petitioner testified that she moved into Fairway in 2005. Petitioner testified that two units have pavers in the front of Fairway and two units have pavers behind the units. Petitioner acknowledged that she had previously served as Chairman of the Board for Fairway. Petitioner stated that there were no requests to install pavers while she was on the board. Petitioner stated that there was not enough time during her year long tenure as a member of the board to do take any action against homeowners who had installed pavers.[3] Petitioner testified that the Board had allowed first-floor unit owners to encroach upon common property by installing pavers in front of first-floor unit lanais. Petitioner stated that she did not know if there had been a transfer of ownership of common property. Petitioner testified that that Fairway’s Board had allowed first floor unit owners to convert common property to private-use property.[4] Petitioner acknowledged that first floor unit owners had a right to have ingress and egress from their residence when their original lanais had been enclosed. Petitioner testified that some first-floor unit owners are putting in a second patio for their units on common property. Petitioner stated that all encroachments on common land should not occur. Petitioner testified that there are concrete walkways leading to the front of all first floor units. Petitioner stated that the land behind the first floor units is common property.[5]

Dave Harris’s Testimony

Fairway’s vice-chairperson for the Board, Dave Harris (hereinafter “Mr. Harris”) testified that he purchased his residence in 2002. Mr. Harris stated that he does not have a paver entryway. Mr. Harris testified that the Board’s April 23, 2012 resolution was passed to come up with a set of rules to govern the installation of pavers. Mr. Harris stated that six units already had installed pavers over the lanai entryways. Mr. Harris testified that the Board regarded the entrance way to the enclosed lanais for the first floor units as limited common areas.[6] Mr. Harris testified that the Board intended to provide guidance to unit owners as to what the Board would like to see for future installations. Mr. Harris stated that the installation of the pavers was part of the conversion of the landscaping at Fairway from grass to desert landscaping. Mr. Harris testified that the property covered by the pavers is still common area. Mr. Harris denied that the Board conveyed any property to any individual owners. Mr. Harris stated that five members of the Board voted in favor of the resolution, one member of the Board opposed the resolution, and one member of the Board was absent.[7] Mr. Harris testified that the four front ground units in Fairway have paver patios installed, two north units have paver patios, and unit 115 has paver patios in front and back. Mr. Harris stated that he believes that the patios with pavers installed on them are limited common property because they are located on entryways to the units.[8] Mr. Harris testified that the Board did not consider authorizing second- floor units to have paver covered patios next to the first-floor units. Mr. Harris stated that second-floor units do not have a rear entrance. Mr. Harris testified that the stairway and elevators for the second-floor units are common property that is used by second floor units. Mr. Harris stated the size of the paver patios allowed for the ground floor units was based upon the width of the ground-floor units.[9]

PROVISIONS OF LAW REFERENCED AT HEARING

1. A.R.S. § 33-1212 provides, in pertinent part, as follows: 4. Any shutters, awnings, window boxes, doorsteps, stoops, porches, balconies, entryways or patios, and all exterior doors and windows or other fixtures designed to serve a single unit, but located outside the unit's boundaries, are limited common elements allocated exclusively to that unit.

2. A.R.S. § 33-1217 provides, in pertinent part, as follows:

A. The declaration shall allocate a fraction or percentage of undivided interests in the common elements and in the common expenses of the association, and a portion of the votes in the association, to each unit and state the formulas used to establish those allocations. Except as otherwise provided in this chapter, the allocations shall not discriminate in favor of units owned by the declarant. B. If units may be added to or withdrawn from the condominium, the declaration must state the formulas to be used to reallocate the allocated interests among all units included in the condominium after the addition or withdrawal. C. The declaration may provide: 1. That different allocations of votes shall be made to the units on particular matters specified in the declaration. 2. For cumulative voting only for the purpose of electing members of the board of directors. 3. For class voting on specified issues affecting the class if necessary to protect valid interests of the class. D. Except for minor variations due to rounding, the sum of the undivided interests in the common elements and common expense liabilities allocated at any time to all the units must each equal one if stated as fractions or one hundred per cent if stated as percentages. If a discrepancy exists between an allocated interest and the result derived from application of the pertinent formula, the allocated interest prevails. E. Except as otherwise permitted by the provisions of this chapter, the common elements are not subject to partition, and any purported conveyance, encumbrance, judicial sale or other voluntary or involuntary transfer of an undivided interest in the common elements made without the unit to which that interest is allocated is void.

3. A.R.S. § 33-1218 provides, in pertinent part, as follows: A. Except for the limited common elements described in section 33- 1212, paragraphs 2 and 4, other than porches, balconies, patios and entryways, the declaration shall specify to which unit or units each limited common element is allocated. The allocation shall not be altered without the consent of the unit owners whose units are affected. B. Except as the declaration otherwise provides, a limited common element may be reallocated by an amendment to the declaration. The amendment shall be executed by the unit owners between or among whose units the reallocation is made, shall state the manner in which the limited common elements are to be reallocated and, before recording the amendment, shall be submitted to the board of directors. Unless the board of directors determines within thirty days that the proposed amendment is unreasonable, which determination shall be in writing and specifically state the reasons for disapproval, the association shall execute its approval and record the amendment. C. A common element not previously allocated as a limited common element shall not be so allocated except pursuant to provisions in the declaration. The allocations shall be made by amendments to the declaration.

4. A.R.S. § 33-1252 provides, in pertinent part, as follows: A. Portions of the common elements may be conveyed or subjected to a mortgage, deed of trust or security interest by the association if persons entitled to cast at least eighty per cent of the votes in the association, or any larger percentage the declaration specifies, agree to that action in the manner prescribed in subsection B, except that all the owners of units to which any limited common element is allocated must agree in order to convey that limited common element or subject it to a mortgage, deed of trust or security interest. The declaration may specify a smaller percentage only if all of the units in the condominium are restricted exclusively to nonresidential uses. Proceeds of the sale or encumbrance of the common elements are an asset of the association. B. An agreement to convey common elements or subject them to a mortgage, deed of trust or security interest shall be evidenced by the execution of an agreement, or ratifications of the agreement, in the same manner as a deed, by the requisite number of unit owners. The agreement shall specify a date after which the agreement will be void unless previously recorded. The agreement and all ratifications of the agreement shall be recorded in each county in which a portion of the condominium is situated and are effective only on recordation. C. The association, on behalf of the unit owners, may contract to convey common elements or subject them to a mortgage, deed of trust or security interest, but the contract is not enforceable against the association until approved pursuant to subsections A and B. Thereafter, the association has all powers necessary and appropriate to [affect] the conveyance or encumbrance, including the power to execute deeds or other instruments. D. Except as permitted in this chapter, any purported conveyance, encumbrance, judicial sale or other voluntary transfer of common elements is void. E. A conveyance or encumbrance of common elements pursuant to this section does not deprive any unit of its rights of access and support. F. A conveyance or encumbrance of common elements pursuant to this section does not affect the priority or validity of preexisting encumbrances.

CC&Rs cited by Petitioner at Hearing

1. CC&R 1.10. Administration of Rules provides, in pertinent part, as follows:

It shall be the duty of the Board of Directors to administer impartially the rules and regulations governing the use and occupancy of the condominiums.

2. CC&R 2.03 Exterior provides, in pertinent part, as follows:

No structural changes are permitted. Owners own only to the exterior walls. Beyond the exterior walls is regarded as the “Common Area”, which is jointly owned by all the owners. The Board of Directors maintains the “Common Area.” This is done so as to preserve the beauty of the structure and maintain property value.

3. CC&R 2.05 Walkways and Common Areas provides, in pertinent part, as follows: All walkways are part of the “Common Area” for the use of all owners and their guests. There must be no chairs, stools, benches or any other items placed on common property. All walks must kept free and clear for easy and convenient walking, wheelchair access and emergency personnel.

4. CC&R 2.21 Use of Common Area provides, in pertinent part, as follows: The deed to first floor condominiums and the deed to second floor condominiums grant equal rights and privileges, as well as the same restrictions and responsibilities as to lawns, carports, driveways and plantings. Any area beyond outside walls is common property for the use and enjoyment of all.

CONCLUSIONS OF LAW

1. A.R.S. § 41-2198.01 permits an owner or a planned community organization to file a petition with the Department for a hearing concerning violations of planned community documents or violations of statutes that regulate planned communities. That statute provides that such petitions will be heard before the Office of Administrative Hearings. 2. The burden of proof at an administrative hearing falls to the party asserting a claim, right, or entitlement and the standard of proof on all issue in this matter is by a preponderance of the evidence. See A.A.C. R2-19-119. 3. Proof by “preponderance of the evidence” means that it is sufficient to persuade the finder of fact that the proposition is “more likely true than not.” In re Arnold and Baker Farms, 177 B.R. 648, 654 (9th Cir. 1994). 4. Petitioner failed to meet her burden of proof to establish that the April 23, 2012 Resolution of the Board for Fairway that allowed pavers to be installed on entryways or patios outside of the first floor units is in violation of applicable statute or the cited CC&Rs of Fairway. Credible testimony and evidence established that the pavers are installed on areas that are designed to serve as ingress and egress areas for a single condominium unit and are limited common elements allocated exclusively to that condominium unit.

RECOMMENDed order

In view of the foregoing, it is ORDERED that Fairway be deemed the prevailing party in this matter. It is further ORDERED that this petition be dismissed. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of this Order will be five (5) days from the date of that certification. Done this day, December 21, 2012.

/s/ M. Douglas Administrative Law Judge

Transmitted electronically to:

Gene Palma, Director Department of Fire Building and Life Safety

----------------------- [1] See Exhibit No. 3-1 (Minutes of Fairway Court West Condominium Association Board Meeting, April 23, 2012) [2] 12/17/12 Hearing Record (hereinafter “H.R.”) at 18:10-29:00. [3] H.R. at 35:31-41:30. [4] H.R. at 41:31-46:10 [5] H.R. at 46:11-1:00:41. [6] H.R. at 1:00:42-1:03:32. [7] H.R. at 1:03:33-1:08:00. [8] H.R. at 1:08:01-1:11:49. [9] H.R. at 1:11:50-1:16:51.

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826