ALJDEC decisions subject to certification as final

17F-H1717027-REL · Department of Real Estate - H/C · 2017-06-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Mark Virden

Petitioner,

vs.

Lakeside Ski Village HOA

Respondent.

No. 17F-H1717027-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: June 7, 2017

APPEARANCES: Petitioner Mark Virden appeared on his own behalf. Respondent Lakeside Ski Village HOA was represented by Stewart F. Salwin.

ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer

_____________________________________________________________________

FINDINGS OF FACT

Lakeside Ski Village HOA (Respondent) is an association of homeowners located in Arizona.

Mark Virden (Petitioner) filed a petition with the Arizona Department of Real Estate (Department) on or about March 23, 2017, alleging that Respondent had violated the provisions of A.R.S. § 33-1811 when it allowed the construction of a light duty internet service tower on the common area property of the HOA. Petitioner specifically alleged, in relative part, as follows:

33-1811: Board of Directors, Contracts, and Conflicts: This law states that if a member of the board is receiving compensation, and has not declared that conflict in advance, then any contract entered into in violation of this law is void and unenforceable!

To make things worse, the board member whose spouse paid the upfront fee to the tower company is a licensed realtor, Susan Talarico. If anyone should understand the fiduciary responsibility to owners of a HOA, it’s a realtor serving on a Board of that HOA. She clearly shouldn’t do something that benefits her and her family over other homeowners without their knowledge. She has since resigned but her husband has taken her place on the board.

To this day, the only owners in our subdivision that have the service from this tower are the two board members...The Talaricos, our Treasurer and Carl Rygg our Vice President who are receiving the free service forever. They have stated that since they made a cash contribution to the tower company, they are entitled to this free service.....however; their contribution would only pay the equivalent of about 1-2 years of service for the two households. Also, to this day, these board members have refused to let us see their contract for their compensation. IT could be more than the fee service but we don’t know. When we initially asked the VP what their compensation was, he stated “it’s none of your business”.

All errors in original.

Respondent’s Answer to the petition denying all allegations.

On April 19, 2017, the Department issued a Notice of Hearing to the parties notifying them that a hearing on the Petition would be conducted by the Office of Administrative Hearings.

On June 7, 2017, a hearing was held on the Petition and the parties presented evidence and argument regarding the violations alleged in the Petition.

At the hearing, the underlying facts were not in dispute.

Initially, it must be noted that Respondent does not have a traditional Board. Instead, the members act as the Board. Respondent’s Bylaws provide that “[t]he affairs of the Association will be managed by the Members, who by the Association’s Articles of Organization are authorized to exercise all powers normally exercised by a board of directors.” Respondent Exhibit 2.

Respondent’s Declaration of Covenants, Conditions, Restrictions and Easements (CC&Rs) provides that “[t]he Architectural Committee may permit one or more aerial satellite dishes or satellite communication systems, and/or other apparatus and equipment for an antenna or cable system for the benefit of all or portions of the Project.” Respondent Exhibit 1.

At some point, AireBeam approached Respondent to determine if there was a demand for the installation of a tower to provide high speed internet, phone, and internet television. Normally, AireBeam pays for the installation of the tower once it receives commitments from a sufficient number of subscribers to make the project profitable.

Respondent’s Officers sent out notification to the members regarding the opportunity and indicated that they believed they would need commitments from approximately half of the members to move the project forward. Respondent Exhibit 3.

Respondent did not obtain the requisite number of subscribers. At that point, Lou Talarico, whose wife was on the Architectural Committee, offered to pay the upfront cost of the tower. In exchange, Mr. Talarico and Carl Rygg were to receive internet service as long as the tower was operational. Respondent Exhibit 4.

Upon Mr. Talarico’s offer to pay the upfront cost, the Architectural Committee approved the construction of the tower on Respondent’s common area.

AireBeam built the tower within 150 feet of Petitioner’s front door, and Petitioner found the tower to be “a huge eye sore.”

CONCLUSIONS OF LAW

The Department has jurisdiction to hear disputes between a property owner and a condominium owners association. A.R.S. § 32-2199 et seq.

In this proceeding, Petitioner bears the burden of proving by a preponderance of the evidence that Respondent violated A.R.S. § 33-1804. A.A.C. R2-19-119.

A preponderance of the evidence is “[e]vidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not." Black's Law Dictionary 1182 (6th ed. 1990).

A.R.S. § 33-1811 provides, in pertinent part, as follows:

If any contract, decision or other action for compensation taken by or on behalf of the board of directors would benefit any member of the board of directors or any person who is a parent, grandparent, spouse, child or sibling of a member of the board of directors or a parent or spouse of any of those persons, that member of the board of directors shall declare a conflict of interest for that issue. The member shall declare the conflict in an open meeting of the board before the board discusses or takes action on that issue and that member may then vote on that issue. Any contract entered into in violation of this section is void and unenforceable.

Petitioner asserted that, because Mr. Talarico received compensation in exchange for paying the upfront cost of the tower, the compensation had to be disclosed in an open meeting “of the board” prior to a vote to approve the tower.

As previously noted, the Architectural Committee was empowered by the CC&Rs to permit one or more aerial satellite dishes or satellite communication systems for the benefit of all or portions of the HOA. Nothing in the CC&Rs requires that the Architectural Committee’s decision must be ratified by the members acting as a board.

Therefore, the evidence established that the Architectural Committee had the authority to approve the tower pursuant to the CC&Rs and that Mr. Talarico’s agreement with AireBeam, assuming arguendo, that it was compensation, did not have to be disclosed to the members acting as a board.

Alternatively, Petitioner argued that because people outside the HOA may subscribe for the service resulting from the tower, the tower was not “for the benefit of all or portions” of the HOA, and therefore, the Architectural Committee did not have the authority to approve the tower. However, the language of the CC&R does not require that the satellite dish or other system may benefit exclusively all or portions of the HOA.

This Tribunal concludes that the Architectural Committee’s approval of the AireBeam tower was proper under Respondent’s governing documents.

RECOMMENDed order on rehearing

In view of the foregoing, it is ORDERED that Petitioner’s petition in this matter is denied. Pursuant to A.R.S. § 32-2199.02(B), this Order is binding on the parties unless a rehearing is granted pursuant to A.R.S. § 32-2199.04 based on a petition setting forth the reasons for the request for rehearing, in which case the order issued at the conclusion of the rehearing would be binding on the parties.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five days from the date of that certification.

Done this day, June 27, 2017

/s/ Tammy L. Eigenheer

Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner

Arizona Department of Real Estate