ALJDEC decisions subject to certification as final

18F-H1818032-REL · Department of Real Estate - H/C · 2018-05-29

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Dina R. Galassini,

Petitioner,

Plaza Waterfront Condominiums Owners Association, Inc.,

Respondent.

No. 18F-H1818032-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: May 09, 2018 at 9:00 AM.

APPEARANCES: Petitioner Dina R. Galassini appeared on her own behalf. Jim Flood, Plaza Waterfront Homeowners Association Board Member, appeared on behalf of Plaza Waterfront Condominiums Owners Association, Inc. (“Respondent” or “the Association”). Roger Isaacs and Gary Pedersen appeared as witnesses for Respondent. Peter Saiia, Suzanne Isaacs, and Paul Blessing observed.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

_____________________________________________________________________

After review of the hearing record in this matter, the undersigned Administrative Law Judge makes the following Findings of Fact and Conclusions of Law, and issues this Recommended Order to the Director of the Arizona Department of Real Estate (“the Department”).

FINDINGS OF FACT

Procedure and Background

Per the Notice of Hearing, the Department referred this matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing on May 09, 2018 , regarding the following issue:

Petitioner alleges that Plaza Waterfront Condominium Association (“Respondent”) is violating Community CC&R’s Article 1 section 1.14 (A, D), section 1.50 and the Reciprocal Easement Agreement sections 1 (A, B) and 2 (A, B, C). [sic]

On April 20, 2018, Respondent submitted Motion to Dismiss Petition and Compel Compliance with Dispute Resolution Provisions of CC&Rs. Respondent argued that pursuant to Article 12 of the applicable Declaration of Covenants, Conditions and Restrictions (“CC&Rs”), Petitioner was required to participate in mandatory dispute resolution because her underlying claim was between the Association and a member, but had failed to do so. Thus, Respondent argued, the tribunal has no jurisdiction over the contested case.

In response, on April 30, 2018, Petitioner submitted Petitioner’s Opposition to Respondent’s Motion to Dismiss. Petitioner argued that she had complied with the dispute resolution process as outlined in Article 12 of the CC&Rs. She also argued that the tribunal had proper jurisdiction over the matter because it had personal jurisdiction over Respondent. Petitioner also alleged causation and financial harm. Thus, Petitioner argued, the tribunal does have jurisdiction over the contested case.

The undersigned Administrative Law Judge issued a Minute Entry on May 01, 2018 to advise both parties that they would be permitted to make jurisdiction arguments at the hearing set for May 09, 2018.

The Parties

The Association is a mixed use two-story real estate development located in Fountain Hills, AZ. It is comprised of residential and commercial property. There are a total of twenty-seven units: the eleven units on the upper level are residential, and the remaining sixteen units on the lower level are commercial. Each unit is privately owned, and each owner is a member of the Association. The Association is governed by its CC&Rs, and overseen by a Board of Directors (“the Board”).

Part of the Board’s responsibilities is to create an annual budget for the Association, which it issues towards the end of December for the upcoming year.

The budget is a projection of the monies needed by the Association to cover its operating expenses and provide adequate reserves for repair and replacement of [limited] common elements of the property the Association maintains. The CC&Rs describe the four budget assessment categories: residential only, commercial only, equal division among owners, and percentage of ownership. Owners pay their designated pro rata share to fund the annual budget.

Petitioner is a commercial unit owner, and formerly served as a Coordinator for the Association.

Tribunal Jurisdiction

At the hearing, Respondent renewed its motion to dismiss, alleging generally that Petitioner had not adhered to the aforementioned provisions in Article 12 of the CC&Rs.

Petitioner counter-argued that she emailed her initial claim to the Board on February 16, 2017, and mailed a certified letter on January 12, 2018, to which she was informed, “See you in court” by the Board’s Statutory Agent on or about the same day, which Petitioner viewed as Respondent’s failure to engage in mediation with her.

Substantive Testimony and Evidence

Petitioner attempted to raise a number of claims against Respondent stemming from concerns regarding the Association’s budget and its regulation per the CC&Rs and Reciprocal Easement Agreement. However, because Petitioner only paid to have a single issue adjudicated, she conceded that her primary point of contention is whether the Association correctly posted owner assessments for the 2018 commercial parking lot budget, per the CC&Rs.

Petitioner testified that the Board does not have the authority to assess the commercial parking lot as a limited common element without a ratified vote by all owners, and that in doing so the Board has unfairly and inequitably burdened her with this increased liability.

The original Declarant of the property entered into a binding agreement with the local city government regarding the number of parking spaces the development would have. The Association remains bound by that agreement.

The development has two parking lots: one located on the ground level of the property that is primarily for commercial use, and a gated subterranean lot for resident use.

The commercial lot has seventy-two parking spaces.

The primary function of the commercial lot is to serve commercial owners, their customers, and their vendors during regular business hours.

Residents may use the commercial lot outside of regular business hours, from seven o’clock in the evening until seven o’clock in the morning, Monday through Saturday. The remaining times are restricted for commercial use only, save a small portion of the commercial lot that residents are permitted to use to access their mail and trash receptacles.

Insofar as the commercial parking lot is concerned, the Association splits the budget into three separate parts: commercial (whereby owners are assessed at 55% of an expense), residential (whereby owners are assessed at 12% of an expense), and by separate structure (whereby a building that shares the parking lot with Respondent is assessed at 12% for expenses).

Of the 67% of expenses owed, remaining from the separate structure’s 33% contribution, the Association breaks down their assessment further as follows: 17.5% owed by residential owners, and 82.5% owed by commercial owners.

Per the CC&Rs, the Board does not have to obtain owner votes on proposed assessments to the parking lot, because the parking lot is a limited common element.

Per Article 2.6 of the CC&Rs, each unit is allocated a percentage of undivided interests in the common elements and in the common expenses calculated by dividing the gross square footage of each unit by the gross square footage of all the units.

Per Article 7.3 of the CC&Rs, the Board is expressly authorized to adopt and amend budgets for the Association. The ratification of a budget must be approved by at least three-fourths vote by the Board, but unit owners do not get to vote. For each fiscal year the total amount of the estimated common expenses set forth in the budget adopted by the Board shall be assessed against each unit in proportion of the unit’s common expense liability.

Per Article 4.1 of the CC&Rs residential owners are prohibited from using commercial parking spaces, except during non-business hours. In this section residential owners are further advised that additional restrictions on parking in commercial spaces may be enacted and posted to protect commercial owners; specifically their employees and invitees, that operate after regular business hours or on Sundays.

Conclusions of Law

Jurisdiction Issue

This matter lies within the Department’s jurisdiction. Pursuant to Ariz. Rev. Stat. § 32-2199.01(A) regarding a dispute between an owner and a condominium association (under title 33, chapter 9 or 16), the owner or association may petition the department for a hearing concerning violations of condominium documents or violations of the statutes that regulate condominiums as long as the petitioner has filed a petition with the department and paid a filing fee as outlined in Ariz. Rev. Stat. § 32-2199.05.

Pursuant to Ariz. Rev. Stat. §§ 32-2199 and 41-1092 the Office of Administrative Hearings has the authority to hear and decide the contested case at bar.

Pursuant to Ariz. Rev. Stat. § 41-1033 any person, in a manner and form prescribed by the agency, may petition an agency to request the making of a final rule or a review of an existing agency practice or substantive policy statement that the petitioner alleges constitutes a rule.

Section 12.2 of the CC&Rs states, in pertinent part, that a party who has a claim or cause of action against Respondent, related to a common element or unit of the development, must notify Respondent in a specific writing (“Claim Notice”) of the nature of the claim, and provide a factual and legal basis for the claim, as well as provide a proposed remedy.

Section 12.3 of the CC&Rs states, in pertinent part, that Claimant and Respondent must negotiate in good faith in an attempt to resolve the claim. However, if parties do not resolve the claim within thirty days after the date of the Claim Notice, Claimant must terminate negotiations. Claimant then has an additional thirty days to file a request for mediation. If parties do not resolve the claim within thirty days after submitting to mediation, the mediation process will be terminated by the mediator.

Section 12.4 of the CC&Rs states, in pertinent part, that Claimant will have fifteen days after mediation is terminated to submit the claim to binding arbitration.

Article 12 of the CC&Rs holds that if Claimant fails to timely file at any point, Claimant is deemed to have waived the claim, thereby discharging Respondent from liability.

Because Respondent did not adhere to Article 12 of its CC&Rs, Respondent has given the Office of Administrative Hearings jurisdiction over the matter pursuant to Ariz. Rev. Stat. § 41-1092.06.

Parking Lot Issue

Pursuant to Ariz. Rev. Stat. §33-1202(7), “common element” means all portions of a condominium other than the units. Pursuant to Ariz. Rev. Stat. § 33-1202(17) “limited common element” means a portion of the common elements specifically designated as a limited common element, by operation of Ariz. Rev. Stat. § 33-1212, paragraph 2 or 4, for the exclusive use of one or more but fewer than all of the units. See also Ariz. Rev. Stat. § 33-1255(C)(2).

In the present case, the CC&Rs control the Association’s budget assessments. As the Association’s governing body, the Board is authorized to make assessments for common elements in the development, including limited common elements.

The commercial parking lot has been correctly categorized as a limited common element by the Board because the lot was designed and exists for the exclusive use of one or more but fewer than all of the units.

Respondent’s 2018 posting appears to be an equitable allocation of funds for the Association’s commercial parking lot. Although Petitioner argues that Respondent’s posting was incorrect, the greater weight of the evidence demonstrates that it is Petitioner who is incorrect. The commercial parking lot is a limited common element, by legal definition, and the Association has the authority to post common element assessments.

As such, the Tribunal holds that no violations of CC&R’s Article 1 sections 1.14 (A, D) and 1.50 of the CC&R’s, and the Reciprocal Easement Agreement sections 1 (A, B) and 2 (A, B, C) exist in this matter.

ORDER

Based on the foregoing findings and conclusions,

IT IS ORDERED that Petitioner Dina R. Galassini’s petition is dismissed.

Pursuant to Ariz. Rev. Stat. §32-2199.02(B), this Order is binding on the parties unless a rehearing is granted pursuant to Ariz. Rev. Stat. § 32-2199.04. Pursuant to Ariz. Rev. Stat. § 41-1092.09, a request for rehearing in this matter must be filed with the Commissioner of the Arizona Department of Real Estate within 30 days of the service of this Order upon the parties.

Done this day, May 29, 2018.

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner

Arizona Department of Real Estate

2910 North 44th Street, Room 100

Phoenix, AZ 85018

Attn:

[email redacted]

Dina R. Galassini

15832 E Brodiea Dr.

Fountain Hills, AZ 85268

[email redacted]

Plaza Waterfront Condominiums Owners Association, Inc.

c/o Gary Pedersen Statutory Agent

MCO Realty

9617 N. Saguaro Blvd.

Fountain Hills, AZ 85268

[email redacted]