ALJDEC decisions subject to certification as final

19F-H1919048-REL · Department of Real Estate - H/C · 2019-06-19

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 30, 2019 APPEARANCES: Petitioner Peter de Scheel appeared on behalf of himself. Bradley R. Jardine, Esq. appeared on behalf of Respondent Sandpiper Scottsdale Association, Inc. ADMINISTRATIVE LAW JUDGE: Velva Moses-Thompson _____________________________________________________________________ FINDINGS OF FACT Background and Procedure The Arizona Department of Real Estate (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 (HOA) whose members own homes in Sandpiper in Scottsdale, Arizona. Petitioner owns a home in Sandpiper at 7550 E. McCormick Parkway and is a member of Respondent. On or about August 21, 2018, Respondent notified Petitioner that he needed to repair his architectural wood beams by December 25, 2018, because the beams were disintegrating. Petitioner responded to Mary Loud Pace, the community manager for Respondent, and expressed that Respondent was responsible for repairing the architectural beams. On or about February 14, 2018, Petitioner filed a single-issue petition with the Department that alleged that Respondent’s determination that Petitioner was responsible for the repair and maintenance of his architectural beams violated its Covenants, Conditions, and Restrictions (“CC&Rs”) Article VI Section 1 and Article V Section 1. Respondent filed a written answer to the petition, denying that it had violated any CC&Rs. Respondent stated in its answer that it was a condominium association. The Department referred the petition to the Office of Administrative Hearings for an evidentiary hearing. A hearing was held on May 30, 2019. Petitioner testified on his own behalf. Respondent submitted exhibits 1, 5, 6 and 8, and presented the testimony of Mary Lou Pace, community manager, Carol Nesland, the President of the Board of Directors, and Pamela L. Polo, the former property manager of Respondent. Relevant CC&Rs Respondent’s CC&Rs provide, “WHEREAS, Declarant desires to provide for the construction thereon of a planned residential area consisting of townhouses, interspersed condominiums and common area, including without limitation open spaces and recreational facilities; and”. Article V of the CC&Rs is entitled Exterior Maintenance. Section 1 provides, “By Association. In addition to the maintenance upon the Common Area, the Association shall provide exterior maintenance upon each Improved Condominium Lot and Improved Lot which is subject to assessment hereunder, as follows: paint, repair, replace and care for exterior building surfaces and other such exterior improvements. Such exterior maintenance shall not include roofs, except in the case of Improved Condominium Lots; nor shall such exterior maintenance include glass surfaces, air conditioning units, trees, shrubs, grass, walks, driveways, parking areas, landscaping, improvements built or placed by an Owner within the patio or enclosed yard space, or repairs or replacements caused by any of the perils covered by a standard form fire insurance policy with extended coverage endorsement theron, or caused by flood, earthquake or other Acts of God.” [1] 12. Article VI of the CC&Rs is entitled Duties and Powers of the Owner’s Association. Section 1(c) provides “Exterior Maintenance. Maintain the exterior of the Living Units in the manner and subject to the limitations set forth in Article V.”[2] 13. Respondent’s CC&Rs Article I, sets forth definitions, including the definition of improved lot at section 9, which provides in relevant part as follows: “Lot” shall mean any plot of land shown upon any recorded subdivision map of the Properties with the exception of the Common Area. An “Improved Lot” shall mean a Lot upon which has been completed a single family residence. Every Improved Lot, other than a Condominium Lot, shall be conclusively presumed for all purposes hereunder to include one Living Unit. In the case of a Condominium Lot, each Apartment Space shall, unless the context otherwise indicates, constitute a separate Lot for purposes of this Declaration. Hearing Evidence 14. Ms. Lou Pace has been Respondent’s community manager for four years. Ms. Lou Pace explained that Respondent has consistently required homeowners to repair the architectural beams. 15. On or about January 3, 2019, Respondent’s community manager, Mary Lou Pace, sent an electronic mail message to Respondent’s members which included the following language, “Please remember that our CC&Rs require each owner to maintain their property including driveways, roofs, architectural beams and posts, garage doors, and walkways whether on common ground or within a lot line. [3] 16. Ms. Polo was the prior community manger form 1984 to 2015. Ms. Polo asserted that historically, homeowners are required to repair the roof. 17. Ms. Nesland is the President of Respondent’s Board of Directors.

Ms. Nesland issued a newsletter to the members which provided, ““Please remember that our CC&Rs require each owner to maintain their property including driveways, roofs, architectural beams and posts, garage doors, and walkways whether on common ground or within a lot line.” Ms. Nesland stated that she distinguished architectural beams from the roof in the newsletter only to clarify that the repair and maintenance of the architectural beams are the responsibility of the homeowner. Ms. Nesland contended that architectural beams are a part of the roof. However, Ms. Nesland contended that the architectural beams are a part of the roof. 18. Ms. Nesland stated that Respondent is a planned unit development and never met the criteria for a condominium association. Ms. Nesland asserted that the developers never submitted a declaration of horizontal property regime. 19. Ms. Nesland asserted that Respondent does not own qualify as a condominium because its owners do not own an undivided interest in the common grounds. 20. Petitioner did not dispute that homeowners are responsible for the maintenance of the roofs under the CC&Rs. Petitioner contended that the architectural beams are not a part of the roof. Moreover, Petitioner contended that architectural beams are not listed in the exceptions under the exterior maintenance provision found in Article V, Section 1 of the CC&Rs. Petitioner argued that architectural beams are a part of the exterior and that Respondent is responsible for the maintenance of the exterior, which includes the architectural beams under CC&R Article V, Section 1 and Article VI Section 1(c). CONCLUSIONS OF LAW Arizona Revised Statutes (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.[4] This matter lies with the Department’s jurisdiction. Petitioner bears the burden of proof to establish that Respondent violated its CC&Rs by a preponderance of the evidence.[5] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[6] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[7] 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.”[8] In Arizona, if a restrictive covenant is unambiguous, it is enforced to give effect to the intent of the parties.[9] “Restrictive covenants must be construed as a whole and interpreted in view of their underlying purposes, giving effect to all provisions contained therein.”[10] Article V, section 1 and Article VI, section 1(c) of the CC&Rs require Respondent to maintain the exterior of members’ lots, with the exception of roofs and several other listed items. However, there is no exception for architectural beams. Respondent specifically distinguished roofs from architectural beams in its newsletter. Although Respondent is not a condominium association, Respondent’s CC&RS show that Respondent intended to construct condominiums. Ms. Polo provided testimony that the repair and maintenance of roofs have historically been the responsibility of the homeowners. However, Ms. Polo did not allege that historically, architectural beams were considered to be a part of the roof. Respondent did not establish by a preponderance of the evidence that the architectural beams are a part of the roof. The preponderance of the evidence shows that architectural beams are a part of the exterior. Therefore, Respondent is responsible for the repair and maintenance of the architectural beams pursuant to Article V, section 1 and Article VI, section 1(c) of the CC&Rs. Petitioner has established that Respondent violated the CC&Rs when it required him to repair the architectural beams attached to his home.

order IT IS ORDERED that Petitioners’ petition is granted because he has established that Respondent violated CC&Rs. IT IS FURTHER ORDERED that Respondent shall reimburse to Petitioner the $500.00 that he paid to file his single-issue petition. 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 days of the service of this Order upon the parties. Done this day, June 19, 2019.

/s/ Velva Moses-Thompson Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner Arizona Department of Real Estate

Transmitted US Mail to: Peter de Scheel 7542 N Sacaton Rd. Scottsdale, Arizona 85258

Bradley R. Jardine, Esq. Jardine, Baker, Hickman & Houston, P.L.L.C. 3300 N. Central Ave., Suite 2600 Phoenix, AZ 85012 ----------------------- [1] See Respondent’s Exhibit 1. [2] Id. at 4. [3] See Exhibit 5. [4] See A.R.S. § 33-1803, which authorizes homeowners associations in planned communities to enforce the development’s CC&Rs [5] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [6] See A.A.C. R2-19-119(B)(2). [7] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [8] Black’s Law Dictionary at page 1220 (8th ed. 1999). [9] See Powell v. Washburn, 211 Ariz. 553, 556 ¶ 9, 125 P.3d 373, 376 (2006). [10] Lookout Mountain Paradise Hills Homeowners’ Ass’n v. Viewpoint Assocs., 867 P.2d 70, 75 (Colo. App. 1993) (quoted in Powell, 211 Ariz. at 557 ¶ 16, 125 P.3d at 377).

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