ALJDEC decisions subject to certification as final

21F-H2120027-REL · Department of Real Estate - H/C · 2021-02-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Thomas W. Sweeney,

Petitioner,

vs.

Warner Ranch Landing Association,

Respondent

No. 21F-H2120027-REL

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: January 25, 2021

APPEARANCES: Petitioner Thomas W. Sweeney appeared on his own behalf. Austin Baillio, Esq. represented Respondent Warner Ranch Landing Association. Christopher Reynolds and Michael Goldberg provided testimony on behalf of Respondent Warner Ranch Landing Association.

ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella

FINDINGS OF FACT

On or about November 18, 2020, Petitioner Thomas W. Sweeney filed a Homeowners Association (HOA) Dispute Process Petition (“Petition”) with the Arizona Department of Real Estate (“Department”) alleging a violation of community documents by Respondent Warner Ranch Landing Association. Petitioner indicated a single issue would be presented, paid the appropriate $500.00 filing fee, and asserted a violation of Article 8, Section 8.1.5 of the CC&Rs.

On or about December 22, 2020, the Department issued a Notice of Hearing in which it set forth the issue for hearing as follows:

The Association has increase[d] annual assessments in violation of Article VIII Section 8.1.5 of the Community Document CC&Rs.

At hearing, Petitioner testified on his own behalf and Respondent presented the testimony of Michael Goldberg and Christopher Reynolds.

The relevant portion of the CC&Rs sets forth the following:

8.1.5 Maximum Annual Assessment.

The Annual Assessments provided for herein shall not at any time exceed the Maximum Annual Assessment, as determined in accordance with this Subsection 8.1.5. For the fiscal year ending December 21, 1987, the Maximum Annual Assessment shall be Eight Hundred Forty Dollars ($840.00) per year for each Lot. Thereafter, unless a greater increase is approved by the affirmative vote of two-thirds (2/3) of the votes of each class of Members represented in person or by valid proxy at a meeting of Members duly called for such purpose, the Maximum Annual Assessment for any fiscal year shall be equal to the Maximum Annual Assessment for the immediately preceding fiscal year increased at a rate equal to the greater of: (a) the percentage increase for the applicable fiscal year over the immediately preceding fiscal year in the Consumer Price Index—All Urban Consumers—All Items (1967=100 Base) published by the Bureau of Labor Statistics of the U.S. Department of Labor (or its successor governmental agency), or, if such index is no longer published by said Bureau or successor agency, in the index most similar in composition to such index; or (b) five percent (5%). Notwithstanding the foregoing, the Board may, without approval of the Members, increase the Maximum Annual Assessment for any fiscal year by an amount sufficient to permit the Board to meet any increases over the preceding fiscal year in : (i) premiums for any insurance coverage required by the Declaration to be maintained by the Association; or (ii) charges for utility services necessary to the Association’s performance of its obligations under this Declaration, in either case (i) or (ii) notwithstanding the fact that the resulting increase in the Maximum Annual Assessment is at a rate greater than otherwise permitted under the preceding sentence. Nothing herein shall obligate the Board to levy, in any fiscal year, Annual Assessments in the full amount of the Maximum Annual Assessment for such fiscal year, and the election by the Board not to levy Annual Assessments in the full amount of the Maximum Annual Assessments for any fiscal year shall not prevent the Board from levying Annual Assessments in subsequent fiscal years in the full amount of the Maximum Annual Assessment for such subsequent fiscal years (as determined in accordance with this Subsection 8.1.5). In the event that, for any fiscal year, the Board elects to levy an Annual Assessment at less than the full amount of the Maximum Annual Assessment for such fiscal year, the Board may, if in its reasonable discretion the circumstances so warrant, subsequently levy a supplemental Annual Assessment during said fiscal year so long as the total of the Annual Assessments levied during such fiscal year does not exceed the Maximum Annual Assessment for such fiscal year.

A.R.S. § 33-1803(A) provides that an HOA cannot “impose a regular assessment that is more than [20%] greater than the immediately preceding fiscal year's assessment ....”

Petitioner asserted at hearing that his interpretation of Section 8.1.5 of the CC&Rs is that the maximum allowable annual assessment of 5% “only applies if the consumer price index no longer exists.” Petitioner testified that he purchased his home in 2011 and at that time, an $820.00 semi-annual assessment was in place and continued for the following six years, until 2018. In 2018, the annual assessment increased by 5%. Petitioner testified that in 2021, annual dues were increased by 10%. Petitioner testified that in 2020, the semi-annual assessment was $925.40, and that the 2021 semi-annual assessment should be $962.70. Petitioner further asserted that he believes the 10% increase was put in place due to the Members rejecting a request for a special assessment. Petitioner did not present any evidence in support of his position, but rather, only offered his own interpretation of Section 8.1.5 of the CC&Rs.

Christopher Reynolds, the Community Manager for Respondent, testified that Section 8.1.5 of the CC&Rs states that annual assessments can increase automatically pursuant to the Consumer Price Index (“CPI”) (or another index), or by 5%, and that the Board is not required to raise annual assessments every year. Mr. Reynolds explained that the maximum annual assessment in 1987 was $840.00. Mr. Reynolds further explained that the CPI has never been greater than 5% since 1987 except for in June 2008. Mr. Reynolds testified that if the annual assessment had automatically increased by 5% each year beginning in 1988, by 2021, the annual assessment would have been $4,412.81, unless the Board approved a greater increase. Mr. Reynolds acknowledged that pursuant to statute, there cannot be more than a 20% increase from the previous year’s annual assessment. Mr. Reynolds testified that for the 2021 annual assessment, the Board voted to raise the assessment by 10% from the previous year because the Association’s reserves are not adequately funded for the Association’s projects, such as road improvements.

Michael Goldberg, Vice-president of the Board for the past eight years, testified that he was involved in the budgeting process, and that in 2020, the annual assessment was $1,898.50, and that $4,202.67 would have been the maximum allowable annual assessment. Mr. Goldberg testified that the 2021 annual assessment was raised 10% by the Board, which is actually $2,324.00 less than the maximum allowable assessment, that this was communicated to the Members, and is in compliance with section 8.1.5.

Petitioner argued that Respondent has exceeded the maximum annual assessment.

Respondent argued that the third sentence of Section 8.1.5 is an exception to the maximum rate increase if the Members vote for such an increase, that the 5% allowable amount was used to calculate the maximum annual assessment, and that the 10% increase is below the maximum allowable increase per statute.

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. § 32-2199. That statute provides that such petitions will be heard before the Office of Administrative Hearings.

Petitioner bears the burden of proof to establish by a preponderance of the evidence that Respondent violated Article 8.1.5 of its CC&Rs. 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). Respondent bears the burden to establish affirmative defenses by the same evidentiary standard. See A.A.C. R2-19-119(B)(2).

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960). 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.” Black’s Law Dictionary at page 1220 (8th ed. 1999).

This matter rests upon an interpretation of Section 8.1.5 of the CC&Rs. The plain reading of Section 8.1.5 of the CC&Rs states that “unless a greater increase is approved by the affirmative vote of two-thirds (2/3) of the votes of each class of Members . . ., the Maximum Annual Assessment for any fiscal year shall be equal to the Maximum Annual Assessment for the immediately preceding fiscal year increased at a rate equal to the greater of: (a) the percentage increase for the applicable fiscal year over the immediately preceding fiscal year in the Consumer Price Index . . ., or successor agency . . .; or (b) five percent (5%).” (Emphasis added.) This provision allows Respondent to increase the annual assessment in either manner set forth above. Section 8.1.5 further allows Respondent, without approval of the Members, to increase the Maximum Annual Assessment for any fiscal year by an amount sufficient to permit Respondent to meet increases in its obligations for insurance or utilities, as long as such increase is not over the statutory limit of 20%.

Petitioner failed to establish that Respondent acted in violation of the community documents.

order

IT IS ORDERED that Petitioner Thomas W. Sweeney’s Petition be 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, February 4, 2021.

/s/ Sondra J. Vanella

Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner

Arizona Department of Real Estate

Transmitted through US Mail to:

Thomas W. Sweeney

26 E La Vieve Lane

Tempe, Arizona 85284

Warner Ranch Landing Association

c/o B. Austin Bailio

4854 E Baseline Rd., Suite 104

Mesa, Arizona 85206

-54864001

001

-137160-45720000