ALJDEC decisions subject to certification as final

20F-H2020051-REL-RHG · Department of Real Estate - H/C · 2021-01-08

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Debra K. Morin,

Petitioner,

Solera Chandler Homeowners' Association, Inc.,

Respondent.

No. 20F-H2020051-REL-RHG

ADMINISTRATIVE LAW JUDGE REHEARING DECISION

TELEPHONIC HEARING: December 16, 2020.

APPEARANCES: Debra K. Morin (Petitioner) represented herself. Lydia Linsmeier, Esq. represented Solera Chandler Homeowners’ Association (Solera).

ADMINISTRATIVE LAW JUDGE: Kay Abramsohn

_____________________________________________________________________

FINDINGS OF FACT

Background and Procedure

Pursuant to Arizona Revised Statutes (A.R.S.) 33-1801 et seq., the Arizona Department of Real Estate (Department) is authorized by statute to receive and to decide Petitions for Hearings from members of planned community associations in Arizona.

Petitioner has lived in Solera for four years.

On or about March 12, 2020, Petitioner filed a two-issue petition (Petition) with the Department alleging Solera had violated the following:

(a) the Articles of Incorporation (A)(5) and (A)(6);

(b) the By-Laws (A)(3.11.13), (3.11.18.), (3.12);

(d) the CC&Rs (A)(1) in 1.4;

(e) the CC&Rs (A)(2) in 2.1;

(f) the CC&Rs (A)(7) in 7.1;

(g) the R&Rs (A)(1) in 1.1, in 1.2, and in 1.4; and

(h) the Solera Code of Ethics for Board Members #1, #6, #7, #8, and #9.

Petitioner’s Issue #1 was as follows: Solera, the Solera Board of Directors (Board), and Premier Management Company (Premier) “do not allow direct communication from homeowners.” Petitioner indicated that she wanted this “policy” rescinded and that she had raised this issue at a March 4, 2020 Board Meeting.

Petitioner’s Issue #2 was as follows: Solera, the Board, and Premier “are not providing oversight to the General Manager in maintaining all Areas of Association Responsibility ... in good condition and repair at all times.” Petitioner indicated that “all” the landscaping in the Areas of Association Responsibility (AREAS) is “still having uncontrolled weeds” and that the Community Center and the AREAS were “not maintained in good condition and repair at all times.”

In her Petition, Petitioner argued that Solera, the Board and Premier are required to be held to the law and the governing documents to maintain the AREAS “in good condition at all times just as homeowners are expected to do so.” Petitioner requested relief, in the event that her Petition was affirmed, that (1) the Board publically admit at a Board meeting their failures to follow the governing documents and specify the steps the Board is taking to “improve direct communication with homeowners;” (2) establish “direct communication rules” for reporting management deficiencies; and, (3) compliance monitoring by the “Real Estate Board.”

Solera filed a Response to the Petition and, further, on April 2, 2020, filed a Motion to Dismiss the Petition, asking the Department to dismiss the Petition because the issues were outside the Department’s jurisdiction pursuant to Arizona Revised Statutes (A.R.S.) § 32-2199.01(A) and that the relief Petitioner requested could not be granted as a matter of law.

The matter was referred to the Arizona Office of Administrative Hearings (Tribunal) for conduct of an administrative hearing regarding the Petition.

On May 12, 2020, Solera renewed its Motion to Dismiss.

The Tribunal issued its Minute Entry on May 18, 2020, noting that Petitioner had not responded to the Motion to Dismiss.

At the May 20, 2020 hearing, the parties presented their arguments regarding the Motion to Dismiss. The statutory parameters of the Tribunal’s jurisdiction do not include interpretation of or application of a non-governing document such as the Board’s Code of Ethics; this circumstance called for removal from consideration herein of the underlying allegations regarding ethics and mismanagement of Solera based on the Solera Code of Ethics. As a result, Petitioner withdrew her Issue #1.

Regarding Solera’s Motion to Dismiss, the Tribunal ruled that, with Petitioner’s withdrawal of Issue #1 and removal of the underlying allegations of ethics and oversight/mismanagement based on non-governing documents, a bare-bones issue remained in the Petition, essentially, Petitioner’s allegation of a failure of Solera to maintain the AREAS “in good condition and repair at all times.” Based on that ruling, Solera’s Motion to Dismiss was effectively denied.

At the original hearing, Petitioner focused on documenting each AREAS location at which she had observed weeds or maintenance issues. In that regard, Petitioner presented over eighty (80) photographs, some of which were taken before and some of which were taken after the Petition was filed.

As to other items she had observed in AREAS, Petitioner complained of the Community Center exterior, street conditions, street asphalt and sealing repairs, storm drains, sidewalks, water pooling and/or intrusion issues, walls, curbing, exposed landscaping lights wiring, exposed landscaping drip irrigation lines, tree removal and stumps, and weeds in granite rock locations.

At the original hearing, Petitioner’s position was the same as to all maintenance issues she observed and raised, which was that the same maintenance standard must be applied to Solera (based on CC&R Article 7, Section 7.1) that is being applied to the homeowners (based on CC&R Article 7, Section 7.2) regarding Solera’s responsibility to “maintain in good condition and repair at all times” their respective AREAS and homes/lots.

At the original hearing, Petitioner argued that the homeowners have no discretion with regard to any delay in taking care of issues and Solera should not be able to take months to address an issue.

At the original hearing, Petitioner argued that the General Manager is not monitoring and maintaining the AREAS and, thus, Solera is responsible to do so and, further, that Solera, the Board, and Premier are all culpable for these problems.

The hearing evidence regarding Petitioner’s complaint to Solera about weeds is representative of the overall situation she believes exists as to Solera, the Board and Premier.

Following the two original administrative hearing sessions, the Administrative Law Judge issued an Administrative Law Judge Decision (Decision) dated August 19, 2020, concluding that, pursuant to the CC&Rs, Solera is the “sole judge” regarding appropriate maintenance, repair and replacement of all AREAS” and that Petitioner had not demonstrated that Solera was in violation of its governing documents “through any failure to maintain in good condition and repair at all times the AREAS.” The Decision further concluded that Solera was in compliance with its governing documents “including CC&R Article 7, Section 7.1” and that Solera was the prevailing party, and dismissing the Petition.

On or about September 24, 2020, after receiving the Decision, Petitioner filed a Homeowner’s Association (HOA) Dispute Rehearing Request (Rehearing Request), stating her specific grounds as follows:

irregularities in the proceeding causing confusion and disruption of her presentation;

failure by the Administrative Law Judge to issue the Decision within mandated time frames;

misconduct by the prevailing party through disingenuous testimony of the Solera witness;

misconduct by Counsel for Solera through a pre-hearing letter and regarding disclosure process;

the Decision being arbitrary, capricious, or an abuse of discretion in incompletely citing CC&R Article 7, Section 7.1; and finally,

taking exception with multiple factual statements within the Decision, and stating it was “preposterous to conclude that [she] had not demonstrated that Solera Homeowners Association Board of Directors, Premier Management Company, and General Manager [had] failed to maintain all AREAS of Association Responsibility in good condition and repair at all times as the maintenance standard requires of the Association common areas as well as all homeowners,” arguing that “[t]here must be equal consideration to have a valid contract.”

On or about October 23, 2020, the Commissioner of the Arizona Department of Real Estate issued an Order Granting Rehearing and Notice of Hearing (Order). In the Order, the Commissioner indicated “the Department hereby grants the Petitioner’s request for rehearing for the reasons outlined in the Petitioner’s Rehearing Request,” stating that Petitioner had claimed:

[I]rregularities in the proceedings or any order of abuse of discretion by the Administrative Law Judge that deprived a party of a fair hearing; misconduct by the Department, Administrative Law Judge or the prevailing party; that the findings of fact or decision is arbitrary, capricious, or an abuse of discretion; and, that the findings of fact or decision is not supported by the evidence or is contrary to law.

On December 16, 2020, the Tribunal conducted a rehearing.

The rehearing record includes the hearing record from the original hearing and the hearing record from the rehearing. The rehearing record includes the Rehearing Request and its attachments (Attachment), and the other filings made by the parties to the Department regarding the Rehearing Request.

Based on consideration of the evidence presented at the original hearing and at the rehearing, the Administrative Law Judge finds as follows:

In correction of the Decision’s Finding of Fact (FOF) #28, Petitioner first opened, and then testified, at rehearing that, “during that period,” (which she testified to be January 2020 and February 2020), one hundred and eleven (111) homeowners received one or more violation notices regarding weeds, debris, and trimming. After acknowledging in cross-examination that she had not provided any documentation to the rehearing record in support of such a number, Petitioner corrected her testimony to be that “numerous” homeowners had received notices.

At rehearing, Petitioner argued that the “stronger” City of Chandler (City) standards should have been considered by the Administrative Law Judge. In these matters, a Petitioner is limited to jurisdictional and justiciable issues. In this case, City standards are neither under review in this matter nor relevant to the matter; the instant matter consists solely of a petition against a homeowner’s association alleging violations of the association’s governing documents.

The Landscape Maintenance & Service Contract (Contract), effective January 1, 2017, between Solera and Integrated Landscape Management LLC, (ILM) is not a Solera governing document.

The Premier Community Management (Premier) document entitled “Job Description – General Manager – Solera Chandler HOA” is a template document used by Premier when hiring managers; the document is not a Solera governing document. Ms. Frazier did not recall executing such a document with Premier when she was hired.

At rehearing, Petitioner presented photographic evidence from July, August and September of 2020 regarding storm drains; these photographs document leaves/debris in various locations. Petitioner argued, therefore, the storm drains had not been cleaned out in May or June of 2020 as Ms. Frazier had testified in the original hearing. However, other than a footnote, the Decision did not make any specific findings addressing Ms. Frazier’s testimony regarding storm drains.

At rehearing, Ms. Frazier noted that the debris shown in Attachment I, page 2, lower left photograph, is a build-up of debris from the Lone Tree Golf Course and that, if it goes out into street and to the other side, it would be a different matter. She indicated that the debris shown in that photograph is the responsibility of the adjacent Lone Tree Golf Course and not the responsibility of Solera to clean out.

At rehearing, Petitioner presented a September 3, 2020 email (and its email stream) from Ms. Frazier indicating that Solera did not have an Arborist, and that Solera did not have more than one company on contract regarding the trees. Petitioner argued that this new evidence contradicted Ms. Frazier’s testimony as found in Decision FOF #24.

At rehearing, Ms. Frazier stated that the landscaping company ILM had separate divisions and that one of the divisions handled trees over ten feet tall.

At rehearing, Petitioner argued that the Decision FOF#19 gave Solera permission to violate CC&Rs Article 6, Section 6.15, by finding that Ms. Fraizer indicated Solera “typically” did a review of its Reserves “annually.” Petitioner argued the CC&Rs only allow review every five years. However, the Petition did not allege any violation of CC&R Article 6. New issues, i.e., issues not stated in the Petition, are not permitted in either an original hearing or a rehearing.

At rehearing, as to the curbs, Petitioner argued that the portion of AREAS that she was concerned about was, in fact, the responsibility of Solera and was not the responsibility of City.

At rehearing, as to the wires, Petitioner argued that they were uncovered for the entire two years after the eucalyptus trees were removed.

At rehearing, as to weeds, Petitioner argued that Solera was not being charged by the landscaping company for the use of “dye” as to the weeds and that Ms. Frazier’s testimony about the use of “dye” to show that Solera was addressing the weeds had prejudiced the Decision.

At rehearing, Petitioner indicated that she had reached a place at which the “overwhelming complacency” of the Board had driven her to prepare her multiple emails on February 21, 2020, and that the emails demonstrated Solera’s lack of responsiveness and also demonstrated that Solera does not have a system of checks and balances to address “maintenance” of AREAS at all times.

At rehearing, Petitioner essentially argued that the Tribunal was either uninformed or unaware of the Department’s process or the Department’s instructions to the public, which she argued did not say that documents presented at hearing were limited to the period prior to a Petition being filed but did say that additional evidence could be presented at hearing. Petitioner further argued that, unless some rule of law states otherwise, such “additional” evidence should be considered by the Tribunal.

At rehearing, Petitioner reemphasized her production at the original hearing of an “enormity” of photographic evidence that, in her opinion, documented examples of Solera’s failure to maintain all AREAS of Association Responsibility “in good condition and repair at all times.”

At rehearing, Petitioner argued that the Administrative Law Judge had given little consideration to the breadth of the evidence (i.e., the “310 pictures”) showing that the Board had neglected all AREAS when the Decision concluded that Petitioner had not demonstrated that Solera, Premier, and General Manager had failed to maintain all AREAS of Association Responsibility in good condition and repair at all times according to the CC&Rs “maintenance” standard in Article 7, Section 7.1.

At rehearing, Petitioner acknowledged that CC&R Article 7, Section 7.1 did state that the Board is the sole judge as to appropriate maintenance and repair. However, Petitioner remained adamant that, nevertheless, Solera is responsible to maintain the AREAS in good condition at all times, just as homeowners are required to do pursuant to CC&R Article 7, Section 7.2.

In Closing, Petitioner argued that the “maintenance” standard encompasses the entire development and that, for the development to be a cohesive unit, the “maintenance” standard has to apply both to Solera and to the homeowners.

The photographs in the hearing and rehearing record document the existence, at those dates embedded in the photographs, of items that deal with maintenance and repairs in various locations of Solera AREAS.

Petitioner’s overall position continues to be that the same maintenance standard must be applied to Solera (from CC&R Article 7, Section 7.1) that Solera applies to the homeowners (from CC&R Article 7, Section 7.2), and that each has a responsibility to “maintain in good condition and repair at all times” their respective AREAS and homes/lots.

Solera’s position is that it met and continues to meet its CC&R responsibilities to “manage, maintain, repair and replace” the AREAS. Solera re-urged its original hearing positions that, pursuant to the CC&R Article 7, Section 7.1, the Board is “the sole judge as to appropriate maintenance, repair and replacement” of all AREAS and that Petitioner’s subjective opinions as to what, when, or how maintenance and/or repair work ought to be done are simply not relevant.

CONCLUSIONS OF LAW

This matter lies within the Department’s jurisdiction. Pursuant to A.R.S. §§ 32-2102 and 32-2199 et al., regarding a dispute between an owner and a planned community association, 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 the appropriate filing fee as outlined in A.R.S. § 32-2199.05.

Pursuant to A.R.S. §§ 32-2199(2), 32-2199.01(D), 32-2199.02, and 41-1092, OAH has the authority to consider and decide the contested petitions, the authority to order any party to abide by the statute, community documents and contract provisions at issue, the authority to interpret the contract between the parties, and the authority to levy a civil penalty on the basis of each proven violation. See also Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007).

In these proceedings, a petitioner bears the burden of proving by a preponderance of the relevant evidence that a respondent had violated the planned community document(s’) provisions or statutes alleged to have been violated.

“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.”

CC&R Article 7, Section 7.1, Areas of Association Responsibility, provides, in pertinent part, that the Board “shall be the sole judge as to the appropriate maintenance, repair and replacement of all [AREAS], but all [AREAS], and the Improvements located thereon, shall be maintained in good condition and repair at all times.”

CC&R Article 7, Section 7.2, Lots, provides, in pertinent part:

Except as otherwise may be provided in a Supplemental Declaration, each Owner of a Lot shall be responsible for maintaining, repairing or replacing his Lot, and all buildings, Residential Units, landscaping or other Improvements situated thereon (including, without limitation, any landscaping installed within the street right-of-way contiguous to a Lot), except for any portion of the Lot which is in an Area so Association Responsibility. All buildings, Residential Units, landscaping or other Improvements shall at all times be kept in good condition and repair as established by the Maintenance Standard. All grass, hedges, shrubs, vines and plants of any type on a Lot shall be irrigated (to the extent necessary to produce healthy plant material), mowed, trimmed and cut at regular intervals so as to be maintained in neat and attractive manner. Trees, shrubs, vines, plants and grass which die shall be promptly removed and replaced with living foliage of like kind, unless different foliage is approved in writing by the Architectural Review Committee. ... All Lots upon which no Residential Units, buildings or other structures, landscaping or Improvements have been constructed shall be maintained in a weed free and attractive manner.

Emphasis added here.

“Maintenance Standard” is defined in CC&R Article 1, Section 1.30 as “the standard of maintenance of Improvements established from time to time by the Board and/or the Architectural Review Committee in the Design Guidelines, or in the absence of any such standards, the standards of maintenance of Improvements generally prevailing through the Project.”

CC&R Article 9, Section 9.1, Enforcement, provides, pertinent part, that Solera “or any owner” shall have the right to enforce “the Project Documents in any manner provided for in the Project Documents or by law or in equity ...” However, only the Board has the power to levy reasonable monetary penalties against an owner for violations of the documents when the owner is given notice and an opportunity to be heard.

CC&R Article 9, Section 9.5, Interpretation, provides, in pertinent part, which, with the exception of a judicial construction, Solera has “the exclusive right to construe and interpret the provisions of the [CC&Rs].” Further, Solera’s construction or interpretation of the CC&Rs “is final, conclusive and binding as to all Persons and property benefited or bound by” the CC&Rs.

The hearing and rehearing records demonstrated that Petitioner’s Petition was brought based on her belief and opinion that the Board, Premier, and General Manager were non-responsive to her and to her complaints, and that they were not providing appropriate oversight in order to maintain the development’s AREAS. However, a homeowner’s dissatisfaction with management is not within the purview of this process or the jurisdiction of the Tribunal. This statutory process permits disputes between homeowners and an association solely as to alleged violations of governing documents or alleged violations of applicable statutory provisions.

The remaining allegation in this matter, is an allegation that Solera fails to maintain the AREAS in good condition and repair at all times as required in CC&R Article 7, Section 1. In this regard, Petitioner maintains that the same maintenance standard must be applied to Solera (from CC&R Article 7, Section 7.1) that is applied to all homeowners (from CC&R Article 7, Section 7.2) on their respective responsibilities to “maintain in good condition and repair at all times” their respective AREAS and homes/lots. Petitioner maintains that Solera is in violation of CC&Rs Article 7, Section 7.1 as demonstrated by her documentation of various maintenance issues within AREAS that she argued are not maintained “in good condition and repair at all time” at various times.

The photographs in the hearing and rehearing record demonstrate the existence, at whatever dates are embedded in the photographs, of items dealing with maintenance and repair/disrepair of AREAS. All photographic evidence was reviewed for purposes of this Rehearing Decision.

While CC&R Article 9, Section 9.1 allows an owner to bring to the Board a complaint, in combination with CC&R Article 9, Section 9.5, the CC&Rs lift the Board’s authority above that of a homeowner. CC&R Article 9, Section 9.9 provides that Solera has the right to record a notice of violation of the CC&Rs by/against a homeowner regarding determined violations of the applicable governing document; there is no such opportunity provided to homeowners within the governing documents. Thus, it is clear, that pursuant to the governing documents, the Board’s authority is lifted above that of a homeowner.

Because CC&R Article 7, Section 7.1 specifies that the Board is the sole judge regarding appropriate maintenance, repair and replacement of all AREAS, only Solera is charged with determining when and how to maintain, and perform repair and replacement AREAS within the development as a function of Solera’s management and operation responsibilities. CC&R Article 7, Section 7.1 lifts the Board’s authority above that of a homeowner when it specifies that the Board is the sole judge regarding appropriate maintenance, repair and replacement of all AREAS. On rehearing, Petitioner failed to provide legal support for her argument that the same maintenance standard is required to be applied to the Board as it is applied to a homeowner.

Given an exhaustive review of the hearing records and the exhibits presented for consideration in both hearings, the Administrative Law Judge concludes that Petitioner has failed to sustain her burden to establish a violation by Solera of the governing documents. The Administrative Law Judge concludes that Solera is in compliance with its governing documents including CC&R Article 7, Section 7.1. The Administrative Law Judge concludes that Solera is the prevailing party in this rehearing, and, thus, the Rehearing Petition should be dismissed.

order

IT IS ORDERED that Solera is the prevailing party with regard to the Rehearing, and Petitioner’s appeal is dismissed.

This administrative law judge ORDER, having been issued as a result of a rehearing, is binding on the parties. A.R.S. § 32-2199.02(B). A party wishing to appeal this order must seek judicial review as prescribed by A.R.S. § 41-1092.08(H) and title 12, chapter 7, article 6. Any such appeal must be filed with the Superior Court within thirty-five days from the date when a copy of this order was served upon the parties. A.R.S. § 12-904(A).

ORDERED this day, January 8, 2021.

/s/ Kay Abramsohn

Administrative Law Judge

-54864001

001

-137160-45720000

Transmitted by either mail, e-mail, or facsimile January 8, 2021 to:

Judy Lowe, Commissioner

Arizona Department of Real Estate

100 N. 15th Avenue, Suite 201

Phoenix, Arizona 85007

Debra K Morin

3900 E Gleneagle Pl.

Chandler, AZ 85249

Lydia A. Perce Linsmeier, Esq.

CARPENTER, HAZLEWOOD, DELGADO & BOLEN LLP

1400 E. Southern Ave., Suite 400

Tempe, Arizona 85282-54864001

001

-137160-45720000