HOA - ALJDEC decisions

23F-H007-REL · Department of Real Estate - H/C · 2023-01-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of

Donald F. Molley,

Petitioner,

vs.

Verde Meadows Crest Homeowners Association,

Respondent.

No. 23F-H007-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 05, 2023 at 9:00 AM.

APPEARANCES: Donald Molley (“Petitioner”) appeared on his own behalf. Kari Wickenheiser appeared on behalf of Verde Meadows Crest Homeowners Association (“Association” and “Respondent”).

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

_____________________________________________________________________

After review of the hearing record in this matter, the undersigned Administrative Law Judge makes the following Findings of Fact and Conclusions of Law, and issues this Order to the Commissioner of the Arizona Department of Real Estate (“Department”).

FINDINGS OF FACT

Background and Procedure

The Department is authorized by statute to receive and to decide petitions for hearings from members of homeowners’ associations and from homeowners’ associations in Arizona.

On or about August 03, 2022, Petitioner filed a 2-issue petition with the Department which alleged that (1) the Association “[used] Board funds to hire a contractor to maintain the front yard of all units, including grounds, trees, bushes, fencs [sic], and lamp post lights” in violation of section 12.B of the Covenants, Conditions and Restrictions (“CC&Rs”), and (2) for the Association’s alleged failure to “provide requested financial documents and meeting minutes” in violation of the Arizona Revised Statute (“Ariz. Rev. Stat.”) § 33-1805.

On August 04, 2022, the Department issued a HOA Notice of Petition to Respondent.

On or about August 26, 2022, Respondent returned its Answer to the Department whereby it denied both of Petitioner’s claims.

On August 29, 2022, the Department referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on October 28, 2022. Per the Notice of Hearing the issue(s) to be determined at hearing are as follows:

Petitioner states the following within the petition: “It states in our CCR’s [sic]. The homeowners will take care of their own maintenance in front yard and back yard area. The Board is using the HOA funds to hire a contractor to maintain the front yard of all units” in violation of Section, 12.B of the Association CC&Rs. Petitioner additionally states that Respondents have failed to respond to Petitioner’s requests for financial documents and meeting minutes in violation of A.R.S. § 33-1805.

(All errors in original.)

The Parties and Governing Documents

Respondent is a homeowners’ association whose members own townhouses in the Verde Meadows Crest residential real estate development located in Tucson, Arizona. Membership for the Association is compromised of the Verde Meadows Crest subdivision.

Petitioner is a Verde Meadows Crest subdivision townhouse owner and a member of the Association.

Respondent is recognized federally and by the State of Arizona as a nonprofit organization under Internal Revenue Code (“IRC”) section 501(c)(4).

Respondent’s Articles of Incorporation were filed on January 05, 2021, in the Pima County Recorder’s Office.

The Association is governed by its Declaration of Building and Use Restrictions (“Declaration”), and overseen by a Board of Directors (“the Board”). The Declaration empowers the Association to regulate “restrictions upon the use and enjoyment of the residential building lots and portions of residential lots.” When a party buys residential property in the development, the party receives a copy of the Declaration and agrees to be bound by its terms. Thus, the Declaration forms an enforceable contract between the Association and each property owner. Section 12.B of the Declaration provides the following:

The occupant of any dwelling shall not make or permit any disturbing noises on the properties by himself, his family or guest, nor do or permit anything to be done by such persons that will interfere with the rights, comfort or convenience of other occupants. If any owner of a Lot fails to maintain the Lot, or the residence located on the Lot, in a manner satisfactory to the Association, the Association has the right, after giving the owner ten (10) day notice to cure the deficiency, to enter on the Lot and make any necessary repairs, maintenance, rehabilitation or restoration of the premises and the exterior of any improvements. The cost of maintenance performed by the Association shall be charged against the owner by invoice and collected in the same manner as assessments.

Hearing Evidence

Petitioner testified on his own behalf. Kari Wickenheiser testified on behalf of Respondent. The Department’s electronic file and Notice of Hearing were admitted into the record. The substantive evidence of record is as follows:

Issue #1 – Alleged violation of Declaration Section 12.B

Petitioner testified that Respondent used Association funds to maintain other property owners’ lawns. Petitioner, however, could not identify the amount Respondent allegedly spent on said landscaping, by whom the maintenance was performed, on which lots the maintenance was performed, or when and for what duration the alleged maintenance took place.

Issue #2 – Alleged violation of Ariz. Rev. Stat. § 33-1805

Petitioner testified that he verbally requested “financials” and “meeting minutes” from Respondent, but could not provide the date(s) of the request(s) and/or name the person(s) to whom the request(s) were made. Petitioner testified that he could not recall if he followed-up on his verbal request(s).

On or about July 06, 2022, Petitioner submitted a written request to the Association’s Board of Directors for “a copy of the monthly bank Statements [sic] and a financial report each month starting with January of 2022.” Petitioner further requested “a copy of the Association’s bank statements and the financial books for 2021.”

On an unknown date, Respondent complied with Petitioner’s request regarding the Association’s 2021 financial statement. Ms. Wickenheiser testified that Respondent was unable to comply with Petitioner’s request for the Association’s 2022 financial statement, as it had not been completed, in large part, because Petitioner had served as the Association’s Treasurer for that fiscal year and had failed to remit the Association’s financial documentation to Respondent after he was voted out of office.

Additional Evidence

The Association is townhome subdivision that does not own any common areas or real property. Townhome owners in the Association do not own undivided interests in any common elements.

The Association’s Covenants, Conditions and Restrictions (“CC&Rs”) are comprised of the Declaration, Articles of Incorporation, and its Bylaws.

Closing Arguments

In closing, Respondent argued that Petitioner lacked standing to bring his petition, and that the Department did not have any statutory jurisdiction over the Association.

In closing, Petitioner argued that regardless of whether Respondent was legally classified as a “planned community” or “condominium association,” the Department should nevertheless take disciplinary action against Respondent.

Conclusions of Law

In Arizona, when construing statutes, we look first to a statute's language as the best and most reliable index of its meaning. If the statute's language is clear and unambiguous, we give effect to that language and apply it without using other means of statutory construction, unless applying the literal language would lead to an absurd result. Words should be given “their natural, obvious, and ordinary meaning."

Statutes should be interpreted to provide a fair and sensible result.

When the legislature uses a word or words in one section of a statute, but not another, the tribunal may not read those words into the section where the legislature did not include them. Unless defined by the legislature, words in statutes are given their ordinary meanings.

Each word, phrase, clause, and sentence of a statute or rule must be given meaning so that no part will be void, inert, redundant, or trivial.

Only in a dispute between an owner and a condominium association or between an owner and a planned community association does the owner have the right to petition the Department of Real Estate for a hearing concerning violations of condominium documents or planned community documents, or the statutes regulating either type of association.

A “condominium” is “real estate, portions of which are designated for separate ownership and the remainder of which is designated for common ownership solely by the owners of the separate portions. Real estate is not a condominium unless the undivided interests in the common elements are vested in the unit owners.”

A condominium association is a “unit owners' association” organized under Ariz. Rev. Stat 33-1241.

A planned community is “a real estate development that includes real estate owned and operated by or real estate on which an easement to maintain roadways or a covenant to maintain roadways is held by a nonprofit corporation or unincorporated association of owners, that is created for the purpose of managing, maintaining or improving the property and in which the declaration expressly states both that the owners of separately owned lots, parcels or units are mandatory members and that the owners are required to pay assessments to the association for these purposes.”

A planned community association is “a nonprofit corporation or unincorporated association of owners that is created pursuant to a declaration to own and operate portions of a planned community and that has the power under the declaration to assess association members to pay the costs and expenses incurred in the performance of the association's obligations under the declaration...”

The material facts in the case at bar are clear.

Here, the record reflects that the Association is not a condominium association because it is not a unit owners’ association organized pursuant to Ariz. Rev. Stat. § 33-1241. The record also reflects that the Association is also not a planned community association because it does not own any real property. As a result, neither the Condominium Act nor the Planned Communities Act governs the Association and neither Act can be enforced against it. Thus, the Department does not have the jurisdiction pursuant to Ariz. Rev. Stat. §§ 32-2102 and 32-2199 et seq., regarding the underlying dispute(s). As a result, OAH does not have the authority to hear or decide the contested case at bar under Ariz. Rev. Stat. §§ 32-2199(2), 32-2199.01(A), 32-2199.01(D), 32-2199.02, and 41-1092 et seq.

As an aside, while an analysis of whether Petitioner sustained his burden of proof under Ariz. Admin. Code R2-19-119 is unnecessary, it is noted that the record is devoid of evidence to support a finding that, notwithstanding the jurisdictional disconnect, Respondent is in violation of either Declaration Section 12.B or Ariz. Rev. Stat. § 33-1805.

Based upon a review of the credible and relevant evidence in the record, the undersigned Administrative Law Judge has no choice but to conclude that the underlying petition must be denied because Petitioner is not an owner in a condominium or a planned community and does not have the right to petition the Department for a hearing regarding his dispute with the Association.

ORDER

Based on the foregoing,

IT IS ORDERED that Petitioner’s petition be denied.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five days from the date of that certification.

NOTICE

Pursuant to Ariz. Rev. Stat. §32-2199.02(B), this Order is binding on the parties unless a rehearing is granted pursuant to Ariz. Rev. Stat. § 32-2199.04. Pursuant to Ariz. Rev. Stat. § 41-1092.09, a request for rehearing in this matter must be filed with the Commissioner of the Arizona Department of Real Estate within 30 days of the service of this Order upon the parties.

Done this day, January 20, 2023.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Louis Dettorre, Commissioner

Arizona Department of Real Estate

100 N. 15th Ave., Ste. 201

Phoenix, Arizona 85007

[email redacted]

[email redacted]

[email redacted]

[email redacted]

Donald Molley, Petitioner

5051 S. Cherry Ave.

Tucson, AZ 85706

[email redacted]

Sean K. Moynihan, Esq.

Smith & Wamsley, PLLC, Counsel for Respondent

7375E. Tanque Verde Rd.

Tucson, AZ 85715

[email redacted]

By: OAH Staff