HOA - ALJDEC decisions

24F-H021-REL · Department of Real Estate - H/C · 2024-02-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of

George Holub

Petitioner

3 Canyons Ranch Master Homeowners’ Association

Respondent

No. 24F-H021-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 26, 2024

APPEARANCES: Petitioner George Holub appeared on her own behalf. Respondent 3 Canyons Ranch Master Homeowners’ Association was represented by Marcus Martinez, Esq. who appeared via Google Meet.

ADMINISTRATIVE LAW JUDGE: Adam D. Stone

EXHIBITS ADMITTED INTO EVIDENCE: Petitioner’s Exhibits which were included in the hearing packet from the Department of Real Estate and Respondent’s Exhibits 1 through 7 were admitted into evidence.

_____________________________________________________________________

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 September 18, 2023, Petitioner filed a two-issue petition against the Association with the Department. Petitioner tendered $1,000.00 to the Department with his petition.

On or about October 20, 2023, the 3 Canyons Ranch Master Homeowners’ Association (“Association”) filed its Answer with the Department whereby it denied all complaint items in the petition.

Per the Notice of Hearing, the Department referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on December 14, 2023, regarding the following issues based on Petitioner’s petition:

Petitioner alleged Respondent violated ARS 33-1803(A),(C),(E) and (D4) after Respondent

"nearly doubled the assesment amount from previous year" [sic]

2. "imposed violation fee without first discussing the violation with [Petitioner] in front of the board members"

The Parties and Governing Documents

Respondent is a homeowners’ association whose members own properties in a residential real estate development located in Hereford, Arizona.

Petitioner is a property owner and a member of the Association.

The Association is governed by its Covenants, Conditions, and Restrictions (“CC&Rs”), and overseen by a Board of Directors (“the Board”). The Association is also regulated by Title 33, Chapter 16, Article 1 of the Arizona Revised Statutes (“Ariz. Rev. Stat.”)

Hearing Evidence

Petitioner testified on his own behalf. Respondent called Mike Needham as a witness. The Agency Record from the Department and Notice of Hearing were also admitted into the evidentiary record.

Petitioner’s testimony

Petitioner testified that he purchased the house in May 2022, and resided in the same for approximately one month before returning to his other residence in Idaho. Petitioner testified he received no information from the Association regarding a welcome letter or other community documents.

As to the assessment issue, Petitioner testified further that on July 1, 2023, he received a statement from the Association showing that the yearly assessment had gone from $525.00 per year to $1,010.00 per year. Petitioner testified that he contacted the property manager to inquire as to the dues increase. It was Petitioner’s belief that a dues increase of the amount could not be accomplished without a vote per Arizona Revised Statutes.

In addition, Petitioner testified that Mr. Needham sent him an e-mail on September or October informing Petitioner that the correct assessment amount was $525.00.

As to the fine for the alleged violation, Petitioner testified that he wanted to add a courtyard and a 5 foot 6 inch wall on his property. He commenced construction on August 9, 2022. On October 24, 2022, he received a Notice of Violation letter via email.

Petitioner then testified that he submitted his building plans to the Association on January 19, 2023. Petitioner testified that he had to submit the plans three different times as the Association would reject the same.

Mike Needham’s testimony

Mr. Needham was the President of the Board of Directors, and had been a member of the board since December 2010.

Mr. Needham testified that he was made aware of the mistake in the amount of the assessment and immediately corrected the same, and a new ledger was created on July 7, 2023, which accurately reflected the $525.00 yearly assessment amount. Mr. Needham testified that he also emailed Petitioner in September or October 2023, that the correct assessment amount was $525.00.

As to the fine for the violation, Mr. Needham testified that that he sent a Notice of Violation via Certified Mail on September 15, 2022. Unfortunately, this letter was returned as “undeliverable”. However, On October 24, 2022, the Board re-sent the Notice of Violation to Petitioner via e-mail and Petitioner confirmed receipt of the same.

Next, Mr. Needham testified that at the January 2023 meeting, it was voted to fine Petitioner $500.00 for his failure to have his lot improvements approved by the Board. Mr. Needham testified that this letter was sent to “Jolly Acres” at a “Kelsi Ave.” address. This was because Petitioner informed Mr. Needham that his LLC, Jolly Acres, was now the owner of the property and to mail all documents to that address. Mr. Needham searched the Arizona Corporations Commission website for the Jolly Acres address. However, in April 2023, Petitioner first told Mr. Needham that the address for Jolly Acres was now the property address.

Conclusions of Law

This matter lies within the Department’s jurisdiction. Pursuant to Ariz. Rev. Stat. §§ 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 community documents or violations of the statutes that regulate planned communities as long as the petitioner has filed a petition with the department and paid a filing fee as outlined in Ariz. Rev. Stat. § 32-2199.05.

Pursuant to Ariz. Rev. Stat. §§ 32-2199(2), 32-2199.01(D), 32-2199.02, and 41-1092, OAH has the authority to hear and decide the contested case at bar.

In this proceeding, Petitioner bears the burden of proving by a preponderance of the evidence that Respondent violated Ariz. Rev. Stat. § 33-1803.

“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.”

Ariz. Rev. Stat. § 33-1803 provides, in relevant part, as follows:

A. 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. Unless reserved to the members of the association, the board of directors may impose reasonable charges for the late payment of assessments. A payment by a member is deemed late if it is unpaid fifteen or more days after its due date, unless the community documents provide for a longer period. Charges for the late payment of assessments are limited to the greater of fifteen dollars or ten percent of the amount of the unpaid assessment and may be imposed only after the association has provided notice that the assessment is overdue or provided notice that the assessment is considered overdue after a certain date. Any monies paid by the member for an unpaid assessment shall be applied first to the principal amount unpaid and then to the interest accrued.

B. After notice and an opportunity to be heard, the board of directors may impose reasonable monetary penalties on members for violations of the declaration, bylaws and rules of the association. Notwithstanding any provision in the community documents, the board of directors shall not impose a charge for a late payment of a penalty that exceeds the greater of fifteen dollars or ten percent of the amount of the unpaid penalty. A payment is deemed late if it is unpaid fifteen or more days after its due date, unless the declaration, bylaws or rules of the association provide for a longer period. Any monies paid by a member for an unpaid penalty shall be applied first to the principal amount unpaid and then to the interest accrued. Notice pursuant to this subsection shall include information pertaining to the manner in which the penalty shall be enforced.

C. A member who receives a written notice that the condition of the property owned by the member is in violation of the community documents without regard to whether a monetary penalty is imposed by the notice may provide the association with a written response by sending the response by certified mail within twenty-one calendar days after the date of the notice. The response shall be sent to the address identified in the notice.

D. Within ten business days after receipt of the certified mail containing the response from the member, the association shall respond to the member with a written explanation regarding the notice that shall provide at least the following information unless previously provided in the notice of violation:

1. The provision of the community documents that has allegedly been violated.

2. The date of the violation or the date the violation was observed.

3. The first and last name of the person or persons who observed the violation.

4. The process the member must follow to contest the notice.

E. Unless the information required in subsection D, paragraph 4 of this section is provided in the notice of violation, the association shall not proceed with any action to enforce the community documents, including the collection of attorney fees, before or during the time prescribed by subsection D of this section regarding the exchange of information between the association and the member and shall give the member written notice of the member's option to petition for an administrative hearing on the matter in the state real estate department pursuant to section 32-2199.01. At any time before or after completion of the exchange of information pursuant to this section, the member may petition for a hearing pursuant to section 32-2199.01 if the dispute is within the jurisdiction of the state real estate department as prescribed in section 32-2199.01.

As to the assessment issue, Petitioner has not met its burden to prove that the Association violated the statute. The testimony provided, demonstrated that there was an error in the ledger Petitioner received initially, but that was corrected as evidenced by the July 7, 2023 ledger, and by Mr. Needham’s e-mail on September/October 2023 confirming that annual assessment was $525.00 per year.

As to the fine, nothing in the statute requires the Association to send the notice via certified mail. Therefore, although Petitioner never received the Notice of Violation via mail, he did receive the same on October 24, 2022. From the evidence provided, the Notice complied with all of the statutory requirements and the fine was not imposed until the January 11, 2023 board meeting, almost two and half months later, which gave Petitioner plenty of time to respond. As to Petitioner’s claim that he then never received the letter concerning the fine, the tribunal finds this claim to be disingenuous. While Petitioner informed Mr. Needham that Jolly Acres was now the owner and to mail all community documents to them, he did not provide an address nor update a corrected address with the Association. Thus, this was not the Association’s fault that he did not receive notice of the fine.

Based upon the foregoing, Petitioner did not meet her burden of proof in demonstrating that the Association was in violation of Ariz. Rev. Stat. § 33-1803.

ORDER

IT IS ORDERED that Petitioner’s petition in this matter be denied.

IT IS FURTHER ORDERED pursuant to Ariz. Rev. Stat. § 32-2199.02(A), Respondent shall not reimburse Petitioner’s filing fee as required by Ariz. Rev. Stat. § 32-2199.01.

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 12, 2024.

/s/ Adam D. Stone

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile February 12, 2024 to:

Susan Nicolson

Commissioner

Arizona Department of Real Estate

100 N. 15th Avenue, Suite 201

Phoenix, Arizona 85007

Marcus Martinez

[email redacted]

George Holub

[email redacted]

By: OAH Staff