ALJDEC decisions subject to certification as final

18F-H1817006-REL · Department of Real Estate - H/C · 2017-12-06

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Charles Mandela

Petitioner,

Blue Ridge Estates Homeowner Association

Respondent.

No. 18F-H1817006-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: November 28, 2017, at 9:00 a.m.

APPEARANCES: Charles Mandela (“Petitioner”) appeared on his own behalf; Blue Ridge Estates Homeowner Association (“Respondent”) was represented by Brian C. Axt, Esq., Resnick & Louis, P.C.

ADMINISTRATIVE LAW JUDGE: Diane Mihalsky

_____________________________________________________________________

FINDINGS OF FACT

Background and Procedure

The Arizona Department of Real Estate (“the Department”) is authorized by statute to receive and to decide Petitions for Hearings from members of homeowners’ associations and from homeowners’ associations in Arizona.

Respondent is a homeowners’ association whose members own single-family houses on lots in the Blue Ridge Estates development in Happy Jack, Arizona.

Petitioner owns a house in and is a member of Respondent.

On or about September 7, 2017, Petitioner filed a single-issue petition with the Department that alleged that Respondent had violated Covenants, Conditions, and Restrictions (“CC&Rs”) § 3.1(a) and Architectural Committee Aligned Standard (“Architectural Committee regulation”) 3(D) by allowing members to build play structures, swing sets, or treehouses on their properties, even though their properties had another detached structure, such as a garage or shed.

Respondent filed a written answer to the petition, denying that it had violated any CC&Rs or Architectural Committee regulation. The Department referred the petition to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing.

A hearing was held on November 28, 2017. Petitioner submitted five exhibits and testified on his own behalf. Respondent submitted nine exhibits and presented the testimony of its Board’s president, Joseph Hancock.

Relevant CC&Rs and Architectural Committee Standards

Respondent’s Declaration of CC&Rs was recorded at the Coconino County Recorder on June 17, 1998. Respondent is not an age-restricted community and was intended to be a “uniquely planned recreation property.”

Section 1.17 of the CC&Rs defines “improvements” as “the buildings, garages, carports, roads, driveways, parking areas, fences, walls, utilities and service lines, decks, hedges, plantings, planted trees and shrubs, and all other structures or landscaping improvements of every type and kind.

Article III of the CC&Rs is entitled “Land Use Classifications, Permitted Uses and Restrictions.” Section 3.1 of the CC&Rs provides in relevant part as follows:

Permitted Uses and Restrictions – Single Family. The Property shall be used, improved and devoted exclusively to Single Family Residential Use. No business, commercial, manufacturing, industrial, mercantile, vending or similar activity of any kind whatsoever shall be conducted on any of the Property . . . . No building or structure shall be erected or maintained separate from the Single Family Residence located on any Lot, other than a garage in accordance with Coconino County zoning ordinances in existence at the time. . . . No garage or shed shall be built prior to the issuance of a Coconino County building permit for the construction of a Single Family Residence.

Section 3.6 of the CC&Rs prohibits temporary structures from being placed, erected or maintained on any portion of the property. Section 3.7 of the CC&Rs prohibits trailers, mobile homes, or permanent tents from being placed on any property. Section 3.24 of the CC&Rs provides that “[n]o building, fence, wall, screen, residence or other structure shall be commenced, erected, maintained, improved or altered in respect of any Lot without the prior written approval of the . . . Architectural Committee.”

Pursuant to the authority granted by CC&R § 10.2, the Architectural Committee promulgated the following regulations to be aligned with Article III, Sections 1, 6, and 7:

ARTICLE III

LAND USE CLASSIFICATIONS, PERMITTED USES AND RESTRICTIONS

Section 3.1 Permitted Uses and Restrictions . . . .

. . . .

As per Article 3.7 No mobile homes or manufactured homes of any kind shall be allowed on any portion of the Property, this includes mobile homes, manufactured homes or modular homes. All homes must be site built.

. . . .

D. One detached structure may, with Architectural Committee approval, be constructed on a property. The residence must be constructed and completed before the detached structure is built.

. . . .

Section 3.6 Temporary Structures . . . .

A temporary structure or building is defined as one without a cement or block foundation to which the structure or building is permanently attached and may not include any container, (vehicle, r.v., house trailer, hauling trailer etc.) not harmonious with the residence and forest.

Section 3.7 Trailers and Motor Vehicles . . . .

. . . .

D. If you can live/sleep in it, you cannot park it in Blue Ridge Estates. However, if you can park it in your garage and close the door, a Non-Compliance notice will not be issued.

Section 4.2 of the CC&Rs provides that “[b]y a majority vote of the Board, the Association may, from time to time and subject to the provisions of this Declaration, adopt, amend and repeal rules and regulations to be known as the ‘Rules and Regulations.’”

Section 12.2 of the CC&Rs provides in relevant part as follows:

Except as otherwise provided herein, this Declaration may be amended . . . by the affirmative vote (in person or by proxy) or written consent of Members owning at least seventy-five percent (75%) of all Lots. . . .

Hearing Evidence

Petitioner has lived in Respondent’s subdivision for approximately 25% of each year since 2007. Petitioner testified that for the past 18 years, Respondent has interpreted § 3.1 of the CC&Rs to allow only one detached structure on a lot, regardless of whether the structure was a detached garage or shed or a play structure, swingset, or treehouse.

Petitioner testified that between 2002 and 2016, Respondent removed nine structures that were not compliant with CC&R § 3.1, including a gazebo, a play house, an observation deck, and a zipline structure. Petitioner testified that Respondent has only allowed one detached structure and that if a member has a detached garage or shed, the member cannot have a swingset, play structure, or tree house on his property.

To support his testimony, Petitioner submitted a letter dated February 7, 2006, from Carpenter Hazlewood, PLC, that opined that Respondent could enforce CC&R § 3.1 against “grandfathered” detached structures that had been built without the approval of the Architectural Committee, in relevant part as follows:

Were it not for the second sentence, [CC&R § 3.1] would clearly limit erecting a separate building or structure to a “garage”. However, the second sentence muddies the water by mentioning a “garage or shed” not being built prior to the Residence building permit being issued. How can these be reconciled? It still appears that only one structure (garage or shed) is permitted.

The document entitled “Alignment of CC&Rs Article III with Architectural Committee Standards Article X” seems to correctly clarify the issue. On page 2, it states in C that “one detached structure may, with Architectural Committee approval, be constructed on a property”, and that the Residence has to be completed before building the detached structure” (slightly more strict than the CC&Rs but not inconsistent). Therefore, you may enforce the “one detached structure” requirement going forward by giving notice of your intention to strictly do so as of a certain date.

We noticed a couple of interesting issues in reviewing the Coconino county zoning code. . . . First, the Rural Residential Zone rules define swimming pools, hot tubs and spas as detached accessory structures. . . . You may want to clarify the Association does NOT consider them structures (if that is true) even if the County does. Second, the County says accessory structures less than 120 square feet do not require building permits, but they are subject to County setback requirements. You may want to clarify whether there is any minimum size “structure”, such as a small metal storage shed, that would not be considered a detached structure by the Association.

The February 7, 2006 letter did not mention swingsets, play structures, or tree houses.

Petitioner also submitted a Dismissal Notice dated September 9, 2015, from the Office of the Arizona Attorney General Division of Civil Rights Section that dismissed Mr. Hancock’s claim of discrimination, that stated in relevant part as follows:

Based upon its investigation, the Division of Civil Rights Section concludes that the information obtained is not sufficient to establish violations of the statute(s) and further investigation is unlikely to produce such evidence. This does not certify that the Respondent is in compliance with the Statute(s). No finding is made as to any other issues that might be construed as having been raised by this charge/complaint. . . .

Petitioner also submitted Carpenter Hazlewood’s June 18, 2015 response to Mr. Hancock’s claim against Respondent for housing discrimination and a letter dated January 14, 2016, containing an opinion on whether a letter sent by member John Mariconda to certain of Respondent’s members was defamatory. Neither of these letters mentioned CC&R § 3.1 or whether it allowed swingsets, play structures, or tree houses in addition to a detached garage or shed. Petitioner testified that both Mr. Hancock’s discrimination claim and Mr. Mariconda’s letter involved swingsets, play structures, or tree houses.

Petitioner submitted a Play Structure Approval Request from Respondent’s website regarding CC&R § 3.1 that he testified he had drafted when he was on the board and the president of the Architectural Committee, in relevant part as follows:

In the Board of Directors meeting on Saturday, June 25, 2016 it was unanimously voted to adopt changes to the CCR’s [sic], which will allow play structures on your lot and they will not be considered a second allowable structure, nor a Temporary Structure. . . . You’re allowed no more than two (2) play structures . . . .

Petitioner testified that because 75% of Respondent’s members had not approved the changes to the CC&Rs, the form could not be used.

Mr. Hancock has been Respondent’s president for approximately two years. He has lived in Respondent development for 11 years. He and his wife, Leonie, have six children and 20 grandchildren. Mr. Hancock testified that he and his wife have a swingset that his children, grandchildren, and the neighbor children use.

Mr. Hancock acknowledged that he removed a play structure from his property.

Mr. Hancock testified that Respondent has 193 lots, 71 of which are occupied by the owners. There are currently 16 swingsets or play structures in Respondent development. Mr. Hancock testified that Respondent retained the firm of Poli & Ball, PLC to render an opinion about whether Article III of the CC&Rs prohibited swingsets and play structures, even if a detached garage or shed had already been constructed on the property. Poli & Ball opined that the aligned regulations that the Architectural Committee had promulgated “[could] be changed, as long as it is consistent with the CC&Rs” and since Respondent was intended to be a planned recreation property for single family residential use, “[p]lay structures are perfectly consistent with recreation and family use.”

Respondent submitted an email from Jason Miller at Carpenter Hazlewood, in which he generally agreed with Poli & Ball’s opinion that Respondent could amend the Architectural Committee’s regulations to explicitly allow play structures consistently with the CC&Rs.

Mr. Hancock testified that the Play Structure Approval Request from Respondent’s website that Petitioner had submitted contained a typographical error, in that Respondent’s board had meant to amend the Architectural Committee’s regulations, not the CC&Rs. Respondent submitted the minutes of the June 25, 2016 board meeting at which Poli & Ball’s opinion letter was read and the board passed a motion to amend the CC&Rs. Respondent submitted the minutes of the December 3, 2016 board meeting, at which the play structure opinion from Carpenter Hazlewood was discussed:

Joe Hancock explained the board had a review with HOAMCO along with Carpenter [Hazlewood] and found the Play Structure document on the BRE Website was incorrect. The board had approved “Modifying the Rules and Regulations,” however, the document posted on the website stated changing the CC&R’s. The wording change was mistakenly made by the then previous Chair of the Architectural Committee and posted to the website. The approved Play Structure Rule Change has been placed on the website. This mistake has no doubt been the cause of much misunderstanding with some of the members. With the draft of a play structure guideline made by the previous board in 2015 and the approved Play Structure Ruling from the current board the Attorney from Carpenter [Hazlewood] determined the current board acted within the bounds of the BRE HOA Board of Directors jurisdiction to make the Play Structure Ruling Change.

Respondent submitted minutes from the October 7, 2017 board meeting, which provided in relevant part as follows:

Per Legal Counsel, a Clarification Vote of the Architectural Rule Change on Play Structures. This item was addressed by President Hancock. He stated that the topic of the play structures had been discussed in February of 2016 and then voted on in June of 2016. However at the time the fact that it was a rule change was [mis]-quoted as a change to the CC&R’s. This was not identified as an error in how it was recorded until October 2016. It was then voted on in December of 2016. For clarification, the changes [were] stated again and the fact that it was a rule change and not a change to the CC&R’s was clarified and voted on by the board. . . . The motion was carried.

Respondent submitted the amended Play Structure Approval Request, which provided in relevant part as follows:

Per the modified Rules and Regulations dated April 6, 2016, this form must be submitted to Architectural Committee for approval of any Play Structure. A play structure is defined, but not limited to, Swing Sets, Jungle Gyms, Tree Houses, Tree Viewing Stands and Ground Placed Play Houses/Forts. You’re allowed [to have] one (1) . . . one of each, but no more than (2) play structures. . . .

CONCLUSIONS OF LAW

A.R.S. § 32-2199(B) permits an owner or a planned community organization to file a petition with the Department for a hearing concerning violations of planned community documents under the authority Title 33, Chapter 16. Such petitions will be heard before the Office of Administrative Hearings, an independent state agency.

Petitioner bears the burden of proof to establish that Respondent violated CC&R § 3.1 by a preponderance of the evidence. Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”

In Arizona, if a restrictive covenant is unambiguous, it is enforced to give effect to the intent of the parties. “Restrictive covenants must be construed as a whole and interpreted in view of their underlying purposes, giving effect to all provisions contained therein.” CC&R § 3.1 is entitled “Permitted Uses and Restrictions – Single Family.” Titles of CC&Rs may be used to understand the parties’ intent. The Architectural Committee’s promulgation of Regulation 3.1(A) to prohibit only mobile homes, manufactured homes, and modular homes, and 3.7(D) to provide the clarification that “[i]f you can live/sleep in it, you cannot park it” in Respondent’s development make clear that Article III is concerned with keeping Respondent single-family residential by prohibiting structures and vehicles that could be used as a second residential dwelling on a lot. Respondent was not required to amend the CC&Rs to permit play structures on properties that already had a detached garage or shed because a play structure cannot be easily converted into a second residence. Respondent could amend the Architectural Committee’s regulations to provide clarification on the status of play structures, swingsets, and tree houses because allowing a play structure is not inconsistent with CC&R § 3.1’s allowance of the construction of a second enclosed structure after the residence was completed.

Petitioner did not establish that Respondent uniformly has enforced CC&R § 3.1 to require members to remove play structures if they already had a detached garage or shed on their property. Instead, it appears that the status of play structures, swingsets, and tree houses has been unsettled and the subject of some contention, at least partially due to Petitioner’s advocacy of the interpretation of CC&R § 3.1 on which he based his petition. Respondent established that it properly resolved the issue of the status of play structures, swingsets, and tree houses under CC&R § 4.2 by amending the Architectural Committee’s Regulations to explicitly permit play structures. Therefore, Petitioner’s petition should be denied, all the play structures that the Architectural Committee has previously approved should be allowed to remain on members’ property, and the Architectural Committee may consider and, if appropriate, grant future Play Structure Approval Requests that are submitted to the Committee.

RECOMMENDed order

IT IS ORDERED that Petitioners’ petition is denied because he has not established that CC&R § 3.1 prohibits play structures under any circumstances.

NOTICE

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. Pursuant to A.R.S. § 41-1092.09, a request for rehearing in this matter must be filed with the Commissioner of the Department of Real Estate within 30 days of the service of this Order upon the parties.

Done this day, December 6, 2017.

/s/ Diane Mihalsky

Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner

Arizona Department of Real Estate

Charles Mandela

4769 Starlight Dr.

Happy Jack, AZ 86024

Brian C. Axt, Esq.

Resnick & Louis, PC

8111 E Indian Bend Rd.

Scottsdale, AZ 85250

By: