ALJDEC decisions subject to certification as final

20F-H2020054-REL · Department of Real Estate - H/C · 2020-07-30

sIN THE OFFICE OF ADMINISTRATIVE HEARINGS

Jean Williams,

Petitioner,

vs.

Surprise Farms II Community Association,

Respondent

No. 20F-H2020054-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: July 10, 2020

APPEARANCES: Petitioner Jean Williams appeared on her own behalf. Respondent Surprise Farms II Community Association was represented by Nick Nogami.

ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer

_____________________________________________________________________

FINDINGS OF FACT

Surprise Farms II Community Association (Respondent) is an association of homeowners located in Arizona.

On or about March 31, 2020, Jean Williams (Petitioner) filed a Homeowners Association (HOA) Dispute Process Petition (Petition) with the Arizona Department of Real Estate (Department) alleging that Respondent had violated the provisions of A.R.S. § 33-1803 and Article VII, Section 7.2 and 7.4(a)-(c) of the CC&Rs. Petitioner’s statement of the issue provided, in pertinent part, as follows:

Our CC’s&R’s for our neighbor were incorporated in 2002 and 2004 which named our Association and which was recorded in Maricopa County Recorder; 2001-00996495; writing the Covenants in Article 7, Section 7.2 Annual Assessments subjected to the provisions in Section 7.4 Maximum Annual Assessments (a) (b) and (c) by increasing the Maximum Monthly Assessment to 20% which was not approved by a 2/3 majority of the community association members in good standing; and which the named respondents justified the increase using the Arizona Revised Statutes (A.R.S. § 33-1803) which went against our Covenant, Conditions and Restrictions of our Community Association.

All errors in original.

After being notified of the Petition, Respondent filed a response in which Respondent denied all of the complaint items in the Petition.

At hearing, Petitioner testified on her own behalf. Respondent did not present any witnesses and relied on its legal argument.

Respondent stipulated that effective April 2019, the Annual Assessment increased from $660.00 a year to $720.00 a year, a nine percent increase from the previous Annual Assessment, and that this increase occurred without any vote of the members.

Respondent also stipulated that effective April 2020, the Annual Assessment increased from $720.00 a year to $864.00 a year, a twenty percent increase from the previous Annual Assessment, and that this increase occurred without any vote of the members.

Petitioner argued that the Annual Assessment could not be increased twenty percent in one year without a vote of the members as outlined in Article VII, Section 7.4 of the CC&Rs.

CONCLUSIONS OF LAW

The Department has jurisdiction to hear disputes between a property owner and a homeowners association. A.R.S. § 32-2199 et seq.

In this proceeding, Petitioner bears the burden of proving by a preponderance of the evidence that Respondent violated Article VII, Section 7.2 and 7.4 of the CC&Rs and A.R.S. § 33-1803(A). A.A.C. R2-19-119.

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.” Black's Law Dictionary 1220 (8th ed. 2004).

A.R.S. § 33-1803(A) provides, in pertinent part, as follows:

Unless limitations in the community documents would result in a lower limit for the assessment, the association shall not impose a regular assessment that is more than twenty percent greater than the immediately preceding fiscal year's assessment without the approval of the majority of the members of the association.

Respondent’s CC&Rs were recorded in 2003 and contained Article VII, Section 7.4 that provided as follows:

Maximum Annual Assessment. The Annual Assessment to be established by the Board may not exceed a certain amount, hereinafter referred to as the “Maximum Annual Assessment, which Maximum Annual Assessment shall be determined and shall vary in accordance with the following provisions:

Until January 1 of the year following the Recordation of the first Tract Declaration, the Maximum Annual Assessment against each Owner shall be Four Hundred Eighty dollars ($480) per Membership.

Commencing with the year immediately following Recordation of the first Tract Declaration, and continuing each succeeding year thereafter, the Maximum Annual Assessment shall be increased effective January 1 of each such year without a vote of the Membership by . . . ten percent (10 %) . . ., but in no event greater than the maximum increase allowed under A.R.S. § 33-1803(A) if such statute is then effective. . . .

From and after January 1 of the year immediately following the recordation of the first Tract Declaration, the Maximum Annual Assessment shall be increased above the Maximum Annual Assessment otherwise determined under Subsection (b) above by a vote of two-thirds (2/3) of each class of Members who are voting in person or by proxy at a meeting duly called for such purpose.

Using the annual ten percent increase in the Maximum Annual Assessment set forth in Article VII, Section 7.4 of the CC&Rs, the Maximum Annual Assessment in each year from 2003 through 2020 was as follows:

2003 $480.00

2004 $528.00

2005 $580.80

2006 $638.88

2007 $702.76

2008 $773.03

2009 $850.33

2010 $935.36

2011 $1028.89

2012 $1131.77

2013 $1244.94

2014 $1369.43

2015 $1369.43

2016 $1657.00

2017 $1822.70

2018 $2004.97

2019 $2205.46

2020 $2426.00

Article VII, Section 7.2 of the CC&Rs provided as follows:

Annual Assessments. In order to provide for the uses and purposes specified in Article IX hereof, including the establishment of replacement and maintenance reserves, the Board in each year, commencing with the year in which the first Tract Declaration is recorded, shall assess against each Lot and Parcel which is Assessable Property an Annual Assessment . . . . The amount of the Annual Assessment, subject to the provisions of Section 7.4 hereof, shall be in the sole discretion of the Board but shall be determined with the objective of fulfilling the Association’s’ obligations under this Declaration and providing for the uses and purposes specified in Article IX.

“Annual Assessment” is defined in the CC&Rs to mean “the charge levied and assessed each year against each Lot and Parcel pursuant to Article VII, Section 7.2 hereof.”

The provisions of Article VII, Section 7.4 of the CC&Rs provided that the Maximum Annual Assessment automatically increased ten percent every year. Accordingly, at the time of the April 2020 increase in the Annual Assessment, the Maximum Annual Assessment was $2426.00 per year.

The provisions of Article VII, Section 7.2 of the CC&Rs provided that the Board had the sole discretion to increase the Annual Assessment, so long as it was within the limitation of the Maximum Annual Assessment determined above.

A.R.S. § 33-1803(A) limited the increase in the Annual Assessment in any given year to twenty percent without a vote of the members.

In this matter, Respondent increased the Annual Assessment by twenty percent effective April 2020. This Annual Assessment was less than the Maximum Annual Assessment of $2426.00 for 2020 and was within the limitation set forth in A.R.S. § 33-1803(A).

Accordingly, Petitioner failed to establish that Respondent improperly increased the Annual Assessment from $720.00 per year to $864.00 per year.

Petitioner’s assertion that Respondent could not increase the Annual Assessment by twenty percent was predicated on her erroneous reading of Article VII, Section 7.4 of the CC&Rs. Petitioner repeatedly asserted that an increase in the Annual Assessment was limited to ten percent in any given year unless approved by a vote of the members even though Article VII, Section 7.4 was entitled Maximum Annual Assessment and consistently referenced the same. By definition, the existence of a Maximum Annual Assessment necessitates an Annual Assessment that may be less than the maximum.

Therefore, this Tribunal concludes that Respondent did not violate the referenced provisions of the CC&Rs or the provisions of A.R.S. § 33-1803(A).

ORDER

IT IS ORDERED that Petitioner’s petition is dismissed.

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.

-54864001

001

-137160-45720000Done this day, July 30, 2020.

/s/ Tammy L. Eigenheer

Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner

Arizona Department of Real Estate-54864001

001

-137160-45720000