ALJDEC decisions subject to certification as final

19F-129-REL · Department of Real Estate · 2019-09-18

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 28, 2019 APPEARANCES: Assistant Attorney General Deian Ousounov appeared on behalf of the Arizona Department of Real Estate. Robert Miller, Esq. appeared on behalf of Respondent Robert Bornholdt. ADMINISTRATIVE LAW JUDGE: Velva Moses-Thompson _____________________________________________________________________ FINDINGS OF FACT 1. Respondent Robert Bornholdt was issued real estate broker’s license number BR007742000 by the Arizona Department of Real Estate (DRE) on October 3, 1988. 2. On October 3, 1988, DRE issued a real estate self-employed broker license number SE00774200 to Robert Bornholdt dba New Home Brokers (NHB). 3. Mr. Bornholdt has been the designated broker of NHB since May 9, 2014. 4. NHB’s license expires on July 31, 2019. 5. On September 27, 2002, Mr. Bornholdt registered the trade name, New Home Brokers, with the Arizona Secretary of State’s Office. 6. On December 8, 2006, the entity, New Home Brokers, LLC (NHB LLC) was incorporated with Mr. Bornholdt as the statutory agent and only member. New Home Brokers, LLC, is not licensed with the DRE. 7. On August 14, 2002, the Department issued real estate salesperson’s license number SA535530000 to Stephen Van Campen. Mr. Van Campen has been employed as a salesperson by NHB from July 25 – August 31, 2014, September 3, 2014 through November 7, 2017, February 21 – May 31, 2018, and July 10, 2018 to present. 8. In March 2011, the Department disciplined Mr. Bornholdt through a Consent Order where he was issued a two-year provisional license, ordered to pay a civil penalty of $2,500, and required to attend six hours of continuing education classes. The disciplinary action was due to Mr. Bornholdt’s violations of the Securities Act which involved real estate activities, and his failure to timely disclose a Cease and Desist Order issued against him by the Arizona Corporation Commission. 9. On or about May 2, 2015 and June 2, 2017, Mr. Bornholdt and submitted Broker Audit Declarations as a part of his broker license renewal. The Declarations listed Mr. Bornholdt as the designated broker along with his license number. The Declarations also listed the brokerage business name/DBA – Robert Bornholdt/New Home Brokers, and the NHB’s license number. 10. The Broker Audit Declarations contained a series of questions, including but not limited to, “whether the broker or the broker’s agents have disclosed their status as licensees in their ads and signage, whether the broker or the broker’s agents may not have acted directly or indirectly without informing the other parties of any prospective interest or conflict in the transaction.” See Exhibits 7 and 8. 11. The Broker Audit Declarations included a section with the following language, “The brokerage conducts: (check all that apply) Residential Real Estate, Commercial Sales and Leasing, Business Brokerage, Farm and Ranch, Residential Property Management, Commercial Property Management, New Home subdivision, Other Subdividing/Undivided Land, Timeshare, Other, If “Other” was selected, then list the other types of business below:” See Exhibit 7, pg. 1 and Exhibit 8, pg. 1. 12. On the May 2, 2015 and June 2, 1017 Broker Audit Declarations, the only box checked by Mr. Bornholdt was Residential Real Estate. Mr. Bornholdt did not check the box for Residential Property Management. 13. Mr. Bornholdt signed the Broker Audit Declarations wherein Mr. Bornholdt declared and affirmed that his responses were true, full, complete and accurate to the best of his knowledge. The affirmation also provided, in relevant part, “I further understand that any false, misleading or incomplete answers to this Audit Declaration may be construed as a violation of A.R.S. 32-2153(A)(3), (A)(17), (A)(21), (A)(22), and/or (B)(8).” 14. On February 2, 2016, DRE Auditor Mary-Carol Ennis informed Mr. Bornholdt by electronic mail (e-mail) that she wanted to schedule an on- site audit of his brokerage for the morning of February 2, 2016. Ms. Ennis also requested that Mr. Bornholdt confirm his availability. 15. On February 16, 2016, Mr. Bornholdt informed Ms. Ennis that he just arrived back in town and would be leaving again that week. 16. On February 25, 2016, Ms. Ennis thanked Mr. Bornholdt for the information. Ms. Ennis stated that she would like to schedule the audit for March 3, 2016. 17. Mr. Bornholdt did not inform DRE of his availability. DRE has never completed an on-site audit of NHB. 18. On August 10, 2018, DRE notified Mr. Van Campen that it had received a complaint from Suzanne R. Charles which contained allegations that Mr. Van Campen was conducting unlicensed real estate activity. See Exhibit 11 pg. 2. The notice provided, in relevant part, as follows:[1]

The Arizona Department of Real Estate, (Department) is in receipt of a complaint filed against you, by SUZANNE R. CHARLES, alleging that you; Received and accepted compensation for real estate activity under DMT Services, which is both unlicensed, as well as outside of your Broker. Additionally, it is alleged that you mislead tenants by misrepresenting DMT Services as a licensed Property Management Company. 19. On August 10, 2018, DRE notified Mr. Bornholdt of the complaint filed against Mr. Van Campen. See Exhibit 11. 20. In response to the August 10, 2018 letter, Mr. Van Campen notified the Department that Ms. Charles was a former tenant of one of the properties managed by NHB and owned by Chin Properties. Mr. Van Campen also provided several copes of property management agreements (PMA) which listed NHB as the broker and Mr. Van Campen as the salesperson. 21. Mr. Van Campen provided 14 PMAs to DRE that were executed before May 2, 2015. See Exhibit 24. 22. Mr. Bornholdt signed each PMA as “Bob Bornholdt”. See Exhibit 24. 23. Bob Bornholdt is not a name licensed with DRE. See Exhibit 24. 24. Mr. Bornholdt used the initial “BB” when he provided his initial on the PMAs. See Exhibit 24. 25. Each PMA provided, in relevant part, as follows:[2] • Owner agrees to pay Broker a management fee of $75 monthly when the Property is leased • Owner agrees to pay Broker a commission of 6% annual lease… • Broker shall disburse to Owner by the … day of the month or the first business day thereafter, rent and other funds due and collected.. • Upon successful lease renewal, New Brokers, LLC will receive (20%) percent of the monthly (rental) fee as compensation.

26. Mr. Bornholdt informed the Department that NHB did not lease or list the property that was owned by Chin Properties and leased to Ms. Charles. Mr. Bornholdt also stated that Ms. Charles paid her rent directly to the property owner. Mr. Bornholdt asserted that DMT Services did not conduct real estate activities. 27. On August 29, 2018, Brandon Stuart, Senior DRE Investigator, contacted Shane Higginbotham by e-mail regarding a rental property located at 9520 Meadowbrook. See Exhibit 14, pg. 2. Mr. Stuart informed Mr. Higginbotham that the 9520 Meadowbrook rental property listed Mr. Higginbotham’s brokerage as the property management company. Mr. Higginbotham responded to Mr. Stuart’s email and informed Mr. Stuart that he previously managed 9250 Meadbrook through June 2015 and that New Home brokers took over the lease in July of 2015. Mr. Stuart’s email provided in relevant part as follows:[3] Thank you for reaching out to me. Mr. Chinn had his portfolio with us which included 9250 Meadowbrook and three others, from roughly June 2011 until July 2015 when he moved it to New Home Brokers using Steve Van Campen. I took over as designated broker at AZ Home Renters LLC in July 2014 and as I went through each file, in March 2015 I did notice the Meadowbrook lease had an error that was authorized by Mr. Van Campen naming AZ Home Renters LLC as the landlord. I wrote a new lease agreement and tried to have the tenant sign the new lease naming the registered owners as landlord, adding some new addendum’s and a rent increase from $1,150 to $1,195 per month which the tenant refused to sign, as a result she was given a month to month increase notice in April 2015 which took effect in June 2015, (both attached below (raising the rent to $1,250 per month which she did pay to us, her last month with us. The original lease, the rent increase notice and the keys were all given to New Home Brokers in July 2015.

28. On August 30, 2018, DRE contacted the Chinns and informed them that it was conducting an investigation into a complaint against Mr. Van Campen, and that the Chinns were identified as a potential witness. The Department requested the following documents:[4] • Property Management Agreement with MR. Van Campen or New Home Brokers, pertaining to 9250 West Meadowbrook Avenue in Phoenix, Arizona.

• Lease Agreements between yourself and Ms. Charles for the Phoenix Property.

• Explanation or documentation of rent payments and how they were received.

29. The Chinns informed DRE that they had a property management agreement with NHB and a copy of the lease agreement with Ms. Charles. See Exhibit 17. The Chinns informed the DRE that NHB deposited rent checks from Ms. Charles into a Chase bank account which were made out to the Chinn Trust. See id. Mr. Chinn informed DRE that New Home Brokers initiated an eviction against Ms. Charles due to non-payment of rent. See id at 17 and Exhibit 20. 30. On September 20, 2018, DRE sent a letter to Mr. Bornholdt requesting a written signed narrative addressing four points that Mr. Bornholdt advised Mr. Stuart of during a conversation which occurred on August 8, 2018: • DMT Services “Does not Conduct” any Property Management Services; • New Home Brokers conducts a “limited” amount of sales, which you classified as “one” principal transaction in 2017, done by Stephen Van Campen New Home Brokers Leases Properties; however, all of the properties which are leased are owed by you. • New Home Brokers “Does not conduct” any Property Management Services outside of the leased properties which you own.

31. Mr. Bornboldt’s response to DRE’s request provided, in relevant part, as follows:[5] …. New Home Brokers leases properties for various clients. I mostly do my own properties. On a rare occasion, I’ll help a friend with their property……

With regard to property management, we act in the role of a forwarding agent. A property owner is required to hold all deposits, tenants to pay all rents to owner and owners must make all decision on the property. An owner must be solely responsible for any eviction procedures.

32. At hearing, Mr. Bornholdt explained that he first became licensed 37 years ago. Mr. Bornholdt started as a sales associate and later acquired a Century 21 franchise. Mr. Bornholdt stated that he has been audited many times. Mr. Bornholdt contended that he as an individual broker did not conduct property management. Mr. Bornholdt asserted that the $75 fee went to Mr. Van Campen. Mr. Bornholdt testified to the effect that when he completed the Broker Audit Declarations, he did not know that he was completing the Broker Audit Declarations on behalf of the brokerage, but only on behalf of himself. Mr. Bornholdt stated that he had partial knowledge of Mr. Van Campen’s activities. Mr. Bornholdt testified that he signed the PMAs through a “Document Sign” service and did not always read the entire agreement. 33. I do not find Mr. Bornholdt’s testimony to be credible. CONCLUSIONS OF LAW 1. The Department bears the burden of persuasion. Ariz. Rev. Stat. § 41-1092.07(G)(2). 2. The standard of proof on all issues in this matter is that of a preponderance of the evidence. Ariz. Admin. Code § R2-19-119. 3. A preponderance of the evidence is: The 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. Black’s Law Dictionary 1373 (10th ed. 2014).

4. The preponderance of the evidence shows that Mr. Hornboldt has violated Ariz. Rev. Stat. section 32-2125, Ariz. Rev. Stat. section 32-2153(A) (21), (A) (22), (B) (1), (B) (3). 5. Based on the proven violations, the Department has authority to revoke Mr. Hornboldt’s license pursuant to Ariz. Rev. Stat. section 32-2153(A)(3). 6. Mr. Bornholdt contended that revocation was a severe form of punishment and that some combination of a probation, continuing education, or divesture of the supervision of agents would be appropriate. 7. The Administrative Law Judge does not agree with Ms. Bornholdt because the preponderance of the evidence shows that Mr. Bornholdt submitted false information to DRE. Given Mr. Bornholdt’s years of experience with DRE audits, and as a real estate salesperson and broker, Mr. Bornholdt’s assertions that he was not aware that he was completing the Broker Audit Declarations on behalf of the brokerage is unconvincing. 8. Considering the facts and circumstances of this matter, the Department’s decision to revoke Mr. Bornholdt’s license is appropriate. RECOMMENDED ORDER IT IS ORDERED that Robert Bornholdt, holder of license number BR007742000 is revoked. 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 is five days after the date of that certification.

Done this day, September 17, 2019.

/s/ Velva Moses-Thompson Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner Arizona Department of Real Estate

----------------------- [1] See Exhibit id. [2] See Exhibit 24. [3] See Exhibit id. [4] See Exhibit 15. [5] See Exhibit 18, pg. 18.

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Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826