ALJDEC decisions subject to certification as final

19F-H1919062-REL · Department of Real Estate - H/C · 2019-08-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 2, 2019 APPEARANCES: Petitioner Sean McCoy (Petitioner) appeared on his own behalf. Respondent Barclay Place Homeowners Association (Respondent or Association) was represented by Nathan Tennyson. ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer _____________________________________________________________________ FINDINGS OF FACT 1. On or about May 8, 2019, Petitioner Sean McCoy filed a Homeowners Association (HOA) Dispute Process Petition (Petition) with the Arizona Department of Real Estate (Department). Petitioner indicated a three issues would be presented, paid the appropriate $1,500.00 filing fee, and asserted violations of A.R.S. § 33-1810, A.R.S. § 33-1805, A.R.S. § 33-1804, Barclay Place Homeowners Association Bylaws Article VIII, Section 8(D), and Amendment to the Bylaws 3.3, and Desert Ranch Bylaw 2.4. Petitioner summarized his three issues as follows: Complaint One: Failure to allow videotaping, discriminatory application. . . . Complaint Two: Failure to provide required Compiled Financial Statement. . . . Complaint Three: Denial of Homeowner’s right to reasonable access and communication.

2. On or about May 31, 2019, Respondent submitted an Answer to the Petition in which it denied all of the complaint items in the Petition. 3. On or about June 11, 2019, the Department issued a Notice of Hearing in which it set forth the issue for hearing as follows: The Petitioner alleges that the Barclay Place Homeowners Association violated A.R.S. § 33-1810, 33-1805, 33-1804 and Community Document Bylaws Article VIII, Section 8(D), Amendment to Bylaws in a multiple issue petition. 4. At hearing, Petitioner testified on his own behalf. Frank Puma, Jamie Murad, and Dana Young Jungclaus testified on behalf of Respondent. Complaint Item One 5. Prior to October 10, 2017, members were allowed to audio or video record meetings of the Association. 6. At the October 10, 2017 Board meeting, Petitioner was asked not to record the meeting because the Board was going to record the meeting and make the recording available to the members. 7. The October 10, 2017 Board meeting was recorded on Mr. Puma’s iPhone and was made available to the membership. 8. Mr. Puma testified that another meeting was recorded on someone else’s phone, but the file was corrupted and could not be extracted. 9. Mr. Puma acknowledged another meeting may not have been recorded because no one thought to turn on a recorder at the time of the meeting. 10. Respondent’s witnesses denied that any meeting was intentionally not recorded. Complaint Item Two 11. On or about May 1, 2017, Respondent changed management companies and Arizona Community Management Services, LLC (AZCMS) became the management company. 12. At the conclusion of 2017, AZCMS failed to compile the documents necessary to complete the required annual financial compilations. 13. Petitioner requested the 2017 compiled financial statements from Respondent multiple times since early 2018. 14. The 2018 compiled financial statements were completed timely. 15. Petitioner filed the Petition in May 2019. 16. Mr. Puma testified that AZCMS provided the documents to the certified public accountant in the month prior to the hearing because he “forgot” the 2017 financials had not been done. Complaint Item Three 17. Petitioner’s third complaint item was less clear than the two previous items. Petitioner alleged that the direction from the Board, AZCMS, and the Board’s attorney that all of his communication with the Board or AZCMS go through the Board’s attorney was a violation. Petitioner cited A.R.S. § 33-1805(A), A.R.S. § 10-3621, and A.R.S. § 10-3830 in support of his allegation. 18. Petitioner asserted that his “rights to verbal or written communication with management and all Board Members outside of HOA Board Meetings were terminated.” At hearing, Petitioner referenced his First Amendment rights being infringed upon by the limitation that he not contact the Board or AZCMS directly. 19. Petitioner asserted that requiring him to go through the attorney to request documents that should otherwise be available to him constituted an additional charge in violation of A.R.S. § 33-1805(A). 20. Petitioner also argued that his right to communicate directly with the Board or AZCMS constituted a termination of his right’s without cause, notice, and an opportunity for appeal in violation of A.R.S. § 10-3621. 21. Mr. Puma testified that such limitations are not uncommon in the industry when the homeowner is a physical or emotional threat or engaging in harassing behaviors that prevents the management company from doing their work. Mr. Puma stated that the numerous records requests from Petitioner were overly cumbersome and he notified the Board that AZCMS would have to start billing the Board for the staff time involved in responding to Petitioner’s requests. CONCLUSIONS OF LAW Arizona statute permits an owner or a planned community organization to file a petition with the Department for a hearing concerning violations of planned community documents or violations of statutes that regulate planned communities. A.R.S. § 41-2198.01. That statute provides that such petitions will be heard before the Office of Administrative Hearings. Petitioner bears the burden of proof to establish that Respondent committed the alleged violations by a preponderance of the evidence.[1] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[2] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[3] 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.”[4] Complaint Item One A.R.S. § 33-1804(A) provides, in pertinent part, as follows: Persons attending may audiotape or videotape those portions of the meetings of the board of directors and meetings of the members that are open. The board of directors of the association shall not require advance notice of the audiotaping or videotaping and may adopt reasonable rules governing the audiotaping and videotaping of open portions of the meetings of the board and the membership, but such rules shall not preclude such audiotaping or videotaping by those attending, unless the board audiotapes or videotapes the meeting and makes the unedited audiotapes or videotapes available to members on request without restrictions on its use as evidence in any dispute resolution process.

Beginning in October 2017, the Board determined it would audio or video record the meetings and advised attendees that a recording would be made available following the meeting. Nothing in A.R.S. § 33-1804(A) requires that the Board notify members in advance of the meeting that they would not be permitted to record the meeting. As such, the decision of the Board to prohibit recordings of the meetings because the Board would be recording the meeting and making the recordings available was not a violation of the statute. While there may have been two instances since October 2017 in which the recordings were not available following the meeting, once because the recording was corrupted and once because no one remembered to record the meeting, such issues or oversights did not constitute a violation of the statute. Thus, Petitioner failed to sustain his burden to establish a violation of A.R.S. § 33-1804(A). Complaint Item Two A.R.S. § 33-1810 provides, in relevant part, as follows: Unless any provision in the planned community documents requires an annual audit by a certified public accountant, the board of directors shall provide for an annual financial audit, review or compilation of the association. The audit, review or compilation shall be completed no later than one hundred eighty days after the end of the association's fiscal year and shall be made available upon request to the members within thirty days after its completion.

The uncontroverted evidence presented at hearing established that Respondent failed to provide an annual financial compilation for 2017 within 108 days after the end of Respondent’s fiscal year. Mr. Puma acknowledged that the information necessary to complete the 2017 financial compilation was not forwarded to the accountant until approximately one month prior to the hearing despite the petition in this matter being filed on or about May 4, 2019. Thus, Petitioner established that Respondent violated A.R.S. § 33-1810. Complaint Item Three A.R.S. § 33-1805(A) provides, in relevant part, as follows: The association shall not charge a member or any person designated by the member in writing for making material available for review.

A.R.S. § 10-3621 involves the termination, expulsion, and suspension of the members of a corporation. Thus, the statute is inapplicable to this matter. A.R.S. § 10-3830 addresses the requirement that directors in a corporation are required to act in good faith. The direction from the Board, AZCMS, and the Board’s attorney that all of Petitioner’s communication with the Board or AZCMS go through the Board’s attorney was a standard practice in the industry when a homeowner’s communication or requests become onerous to the Board or management company such that they are unable to complete their duties. Petitioner was not prohibited from making requests or asking questions of the Board or management company, but was simply limited in the manner in which to do so.

Thus, Petitioner failed to establish that the direction to cease all direct communication with the Board or AZCMS was a violation of any applicable statute. ORDER IT IS ORDERED that Petitioner’s petition is granted in part and denied in part as set forth above. IT IS FURTHER ORDERED that Petitioner be deemed the prevailing party with respect to Complaint Item Two and that Respondent be deemed the prevailing party with respect to Complaint Item One and Complaint Item Three. IT IS FURTHER ORDERED that Respondent pay Petitioner that part of his filing fee related to Complaint Item Two, that is $500.00, to be paid directly to Petitioner within thirty (30) days of this Order.

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, August 27, 2019.

/s/ Tammy L. Eigenheer Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile August 27, 2019, to:

Judy Lowe, Commissioner Arizona Department of Real Estate 100 N. 15th Avenue, Suite 201 Phoenix, Arizona 85007 Attn: [email redacted] [email redacted] [email redacted] [email redacted] [email redacted] [email redacted]

Sean McCoy PO Box 12757 Scottsdale, AZ 85267

Nathan Tennyson BROWN/OLCOTT, PLLC 373 S. Main Ave. Tucson, AZ 85701

Nathan Tennyson BROWN/OLCOTT, PLLC 5201 N. 7th Ave Phoenix, AZ 85013 [email redacted]

By: ----------------------- [1] See Ariz. Rev. Stat. section 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). [2] See A.A.C. R2-19-119(B)(2). [3] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [4] Black’s Law Dictionary 1220 (8th ed. 1999).

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