ALJDEC decisions subject to certification as final

21F-H2120004-REL · Department of Real Estate - H/C · 2020-11-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Foothills Club West Homeowners Association,

Petitioner,

v.

Subrahmanyam & Sudhakar Living Trust,

Respondent.

No. 21F-H2120004-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: October 5, 2020.

APPEARANCES: John Halk, Esq., represented Petitioner Foothills Club West Homeowners Association (“Foothills”). Mary T. Hone, Esq. represented Subrahmanyam & Sheila Sudhakar, Trustees of the Subrahmanyam & Sheila Sudhakar Living Trust (“Respondents”).

ADMINISTRATIVE LAW JUDGE: Kay Abramsohn

_____________________________________________________________________

FINDINGS OF FACT

The Arizona Department of Real Estate (“the Department”) is authorized by statute to receive and to decide Petitions for Hearings from home owners’ associations and from members of home owners’ associations in Arizona.

The Arizona Office of Administrative Hearings (“the Tribunal”) is a separate state agency authorized by statute to hear and decide such referred contested matters.

On or about July 24, 2020, Foothills filed a single-issue petition (“Petition”) with the Department. The Petition alleged that Respondents constructed an unauthorized and unapproved 2nd story addition (“Addition”) to their property in violation of the Foothills governing documents, specifying “CC&Rs Article 7, Section 7.3, and Article 9, Sections 9.3, 9.4, and 9.5.” The Petition noted that Respondents completed the Addition despite receiving a denial [of approval] from Foothills Architectural. Finally, the Petition further noted that Respondents have not complied with the parties’ agreement to remove the Addition in exchange for waiver of the imposed fines and some additional stipulations. Petitioner requested that the Tribunal issue an order finding a violation of the governing documents and requiring Respondents to complete demolition of the Addition within sixty (60) days.

Through counsel, on or about August 21, 2020, Respondents denied the allegations, making no specific responses.

The parties failed to resolve the matter informally.

On September 25, 2020, the Tribunal issued an ORDER regarding the hearing and indicating the parties must make disclosure no later than September 29, 2020.

On September 28, 2020, Respondents moved to consolidate another case, the petition for which (i.e., Respondents’ cross-petition), Respondents indicated had been uploaded to the Department on September 15, 2020.

On September 28, 2020, Foothills responded that it had not been notified of any such cross-petition and understood that no filing fee had been paid by Respondents to the Department.

On September 29, 2020, Foothills filed its disclosure.

On September 30, 2020, the Tribunal advised the parties that a case not yet referred to the Tribunal could not be consolidated with the existing matter.

On September 30, 2020, Foothills filed an amended disclosure.

On September 30, 2020, Respondents filed disclosure.

On October 1, 2020, four days before the hearing, Respondents filed with the Tribunal an amended response to the Petition. Respondents did not file the amended response with the Department. The amended response contains a 6-page narrative statement and includes exhibits duplicative of Respondents’ September 30, 2020 disclosure.

The instant matter proceeded to administrative hearing for a determination on the issue raised in the single-issue Petition.

At hearing, the parties did not dispute the basic facts regarding Respondents’ construction of the Addition, the City of Phoenix stop-work order, Respondents’ request for approval to Foothills Architectural, and the denial.

The hearing record demonstrated the following facts:

Respondents have lived in Foothills for 22 years.

The CC&Rs were in effect since June 1, 1989.

On October 17, 2013, Foothills adopted amended guidelines (“Guidelines”) for architectural improvements applying to all of the lots within Foothills.

In October of 2018, Respondents began construction of the Addition.

On November 7, 2018, the City of Phoenix (“City”) issued a stop-work order, noting that the work required a permit.

By letter dated November 7, 2018, Foothills issued a violation notice to Respondents.

On December 17, 2018, Respondents obtained a permit.

On or about January 18, 2019, Respondent requested approval from Foothills Architectural.

By letter dated January 18, 2019, Foothills issued a penalty notice to Respondents.

By letter dated February 22, 2019, Foothills issued a notice to Respondents denying the application, for the following reason:

Copies of City permit approval needed, incomplete plans, and no documentation on roof line or roofing materials. Fails aesthetics of surrounding community, additional construction to cease.

After communication between the parties, the parties came to an agreement, wherein Foothills would waive the imposed penalties and Respondents would complete demolition of the Addition.

Multiple photographs in the hearing record demonstrate the progression of construction of a second-story addition in the rear of the Respondents’ home.

At hearing, Foothills argued that the Respondents began construction of the Addition in violation of the CC&R Article 9, Section 9.3 requirements to first obtain approval through the Architectural Committee and that the Addition was subsequently completed despite Respondents receiving a denial of approval from Foothills Architectural. Foothills argued that the Foothills approval was required for the construction and that any City approval was a different matter. Finally, Foothills noted that the parties had come to an agreement, and requested that the Tribunal enforce the parties’ agreement due to the Respondents’ violations of the CC&Rs.

Respondents argued that they had not known in the beginning what was required and that, once notified of the violation, they not only followed the association’s guidance but also met with the association Board in the process of seeking approval for the Addition. Respondents noted that they had continued to cooperate with the Board, even providing the City Certificate of Occupancy. Respondents indicated that the Addition cannot be seen from the front of the property. Respondent indicated that they did not know what “Fails aesthetics ...” meant or exactly how the Addition violated community rules. Respondents argued that they did not receive a letter indicating they could appeal the disapproval and feel as though they have not yet received a “denial.”

Respondents do not dispute that they have an agreement with Foothills regarding demolishing the Addition and the waiver of the imposed penalties. Regarding the parties’ agreement and its terms, Respondents indicated that they had asked Foothills for more time, essentially due to COVID issues and the need to keep themselves (being at-risk) and their family members safe from the uncertainty of having workers come into the home. Additionally, at hearing, Respondents requested to be able to keep the Addition.

At the time of the hearing, the Addition had not been demolished.

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, an owner or an association may petition the department for a hearing concerning violations of community governing documents or violations of the statutes that regulate planned communities as long as an owner or an association has filed a petition with the department and paid a 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, this Tribunal has the authority to hear and decide the contested case at bar. This Tribunal has the authority to interpret the contract between the parties. See Tierra Ranchos Homeowners Ass'n v. Kitchukov, 216 Ariz. 195, 165 P.3d 173 (App. 2007).

Because a petition is required specify an issue, or issues, to be determined, the petition sets forth the only dispute, or the multiple disputes, a petitioner has with the other party. The Tribunal has authority to make a determination on the stated issue(s) raised in a petition.

In these proceedings, Foothills bears the burden of proving by a preponderance of the evidence that Respondents have violated the community document(s) provisions or statutes alleged to have been violated.

Foothills has filed and paid the fee for a single-issue petition. Therefore, in the instant matter, the Tribunal shall determine the single-issue of the alleged violations by Respondents of the Foothills’ governing documents.

“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 9, Section 9.3 provides as follows in pertinent part:

No original construction, modification, alteration or addition subject to the Architectural Committee’s jurisdiction ... shall be commenced until it has been approved or is deemed approved by the Architectural Committee as provided herein. Any Owner ... seeking to construct or install any new improvements ... or make any modification, alteration or addition to any existing improvement ... shall first submit to the Architectural Committee detailed plans, specifications ...

The Architectural Committee shall have forty-five (45) days after its receipt of such ... to approve or disapprove ... or to request additional information, and, if the Architectural Committee disapproves, to give such Owner ... reasonably detailed written reasons for such disapproval.

CC&R Article 9, Section 9.4 sets forth a homeowner’s obligation to obtain approval from the Architectural Committee.

CC&R Article 9, Section 9.5 indicates that Foothills may not limit the right of a homeowner to change the interior of their home, “except to the extent such remodeling or painting is visible from outside such [home] ... or affects the exterior appearance of such [home] ...”

The Administrative Law Judge concludes that Foothills has demonstrated Respondents’ violation of the community governing documents, as stated in CC&R Article 9, Sections 9.3, 9.4, and 9.5, because Respondents began to construct a modification, the Addition, to their existing home prior to obtaining approval from Foothills Architectural Committee and, further, Respondents continued to construct the Addition despite receiving a denial of approval from Foothills Architectural Committee.

The Administrative Law Judge concludes that Foothills is the prevailing party on this Petition and Respondents’ appeal should be dismissed.

order

IT IS ORDERED that Respondents’ appeal is dismissed and Foothills is deemed the prevailing party with regard to Foothills’ 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 30 days of the service of this Order upon the parties.

Done this day, November 27, 2020.

/s/ Kay Abramsohn

Administrative Law Judge

Transmitted electronically 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]

Nathan Tennyson, Esq.

John Falk, Esq.

BROWN/OLCOTT, PLLC

[email redacted]

Counsel for Petitioner

Mary T. Hone, Esq.

Mary T. Hone, PLLC

[email redacted]

Counsel for Respondent