HOA - ALJDEC decisions

24F-H023-REL · Department of Real Estate - H/C · 2024-05-16

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of:

Robert P. Fink & Brittany L. Oleson,

Petitioners,

Casas Arroyo Association, Inc.,

Respondent.

No. 24F-H023-REL

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: January 18, 2024, with further hearing on April 18, 2024; the record closed on May 7, 2024

APPEARANCES: Petitioners Robert P. Fink and Brittany L. Oleson appeared on their own behalf. David Onuschak, Esq. represented Respondent Casas Arroyo Association, Inc.

Witnesses: Juanita Havill and Erik Powell

ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella

EXHIBITS ADMITTED INTO EVIDENCE: Petitioners’ Exhibits 2, 12, 16, 17, 23, 24, 25, 26, 28, and the new affidavits submitted on April 17, 2024, marked as Exhibits 31 and 32.

Administrative Notice was taken of the Agency record which contained all of Petitioners’ originally filed Exhibits.

FINDINGS OF FACT

On or about October 16, 2023, Robert P. Fink and Brittany L. Oleson (“Petitioners”) filed a Homeowners Association (HOA) Dispute Process Petition (“Petition”) with the Arizona Department of Real Estate (“Department”) alleging a violation of the CC&Rs by Casas Arroyo Association, Inc. (“Respondent”). Petitioners indicated a single issue would be presented, paid the appropriate $500.00 filing fee, and asserted a violation of the CC&Rs “Article II Section 1(c).”

On or about December 1, 3023, the Department issued a Notice of Hearing in which it set forth the issue for hearing as follows:

Petitioner[s] alleged Respondent of violating [sic] Article II Section 1(c) of the CC&Rs by passing a ballot measure, “with the agreement of members representing only sixty-nine percent of the eligible votes.”

At hearing, Petitioners testified on their own behalf and presented the testimony of Juanita Havill. Respondent presented the testimony of Erik Powell, a Board member.

Referenced CC&Rs

Article II Section 1(c) of the 2006 recorded CC&Rs provides in relevant part as follows:

SECTION 1. MEMBERS’ EASEMENTS OF ENJOYMENT. Every owner shall have a right and easement of enjoyment in and to the Common Area and such easement shall be appurtenant to and shall pass with the title to each and every Lot. The common elements shall remain undivided, and shall at all times be owned by the Association or its successors, it being agreed that this restriction is necessary in order to preserve the rights of the owners with respect to the operation and management of the common elements. It is expressly acknowledged and agreed by all parties concerned that this paragraph is for the mutual benefit of owners in Casa Arroyo and it is necessary for the protection of said owners. Such right and easement of enjoyment shall be subject to the following provisions:

. . . .

(c) The right of the Association to dedicate or transfer all or any part of the Common Area to any public agency, authority or utility for such purposes and subject to such conditions as may be agreed to by the members, as hereinafter defined. No such dedication or transfer shall be effective unless an instrument signed by members representing three quarters (3/4) of the eligible vote of the Association agreeing to such dedication or transfer and approved by the Board of Directors of Tunnel Springs Ranch Corporation, Inc., has been recorded. Likewise, no improvements shall be placed upon the common area and no act or action shall be taken which would increase the density of residences on the Properties except by agreement of members representing not less than three quarters (3/4) of the eligible votes of the Association and the approval of the Board of Directors of Tunnel Springs Ranch Corporation, Inc.

Article IV Section 2 of the 2006 recorded CC&Rs provides in relevant part as follows:

SECTION 2. PURPOSE OF ASSESSMENTS. The assessments levied by the Association shall be used exclusively to promote the recreation, health, safety and welfare of the residents in the properties and for the improvement and maintenance of the Common Area, and of the homes situated upon the Properties.

Hearing Evidence

The community is located approximately 30 miles north of the Mexico border. Respondent installed a security gate due to an uptick in crime including human trafficking, drug trafficking, and other criminal activities such as property damage and home invasions in the community. As far back as 2014, Border Patrol recommended that Respondent take security measures. Petitioners opposed the installation of a security gate and filed the instant Petition.

Mr. Fink spent a considerable amount of time at hearing testifying to and referencing exhibits regarding the following events:

On September 9, 2023, at a Board of Directors meeting, the Board approved a motion to conduct a vote of the members to approve the placement of a security gate on the common area at the sole point of access to the community. The Board indicated that existing funds would be used, and no special assessment would be imposed on the members. Mr. Fink testified that the Board indicated that the approval of the gate installation would require two thirds of eligible member votes. Mr. Fink contended that the applicable CC&Rs require a vote of three quarters of the eligible votes, which equates to thirty-nine (39). Mr. Fink testified that the minimum number of votes necessary to approve the installation of a security gate on the common area is thirty (30).

In a September 14, 2023 email to the members of the community, Board Secretary Erik Powell stated that the voting process for the security gate was ongoing as of that date with ballots due on September 25, 2023. The email included a cover letter from President Tom Hardesty and a ballot. The cover letter reiterated that the standard for approval of the gate was two thirds of those who voted.

In a September 26, 2023 email to all community members, the Board advised that it passed the ballot measure to place a security gate at the Highway 82 community entrance. The email stated that there were twenty-seven (27) votes in favor of installing a gate and ten (10) votes against installing a gate.

The parties spent time at hearing addressing whether the gate was a capital improvement, and whether CC&R provisions regarding such or the provision regarding special assessments applied to the instant matter. The parties further referenced letters written by two attorneys upon which Respondent’s Board relied when deciding to install the gate.

Mr. Fink acknowledged at hearing that he served on the Water and Roads Committee for Respondent in 2021 and 2022, and due to water erosion, had suggested that a water curb be installed at a cost of $3,500.00. A special assessment was not implemented and there was no vote concerning the water curb installation.

Juanita Havill testified on behalf of Petitioners. Ms. Havill has resided in the community since 2000, and has served on the Board in various capacities from 2003 through 2021. Ms. Havill testified that since 2014, the Board has been discussing the security issues within the community and ways in which to improve security. Initially, when the proposal for a gate was discussed, the cost was thought to be approximately $25,000.00, which would have required a special assessment. Ms. Havill testified regarding her understanding of the voting requirements which would have required three quarters of the members’ approval and two thirds of member approval for the special assessment. However, Ms. Havill testified that the cost of the gate was approximately $3,000.00 and that at special assessment was not needed, as it was funded out of the general fund.

Erik Powell, a Board member, testified on behalf of Respondent. Mr. Powell testified that the Association had enough funds in its budget to pay for the gate, and therefore, a special assessment was not necessary. Mr. Powell testified that a vote regarding the gate installation was not necessary.

Mr. Powell testified that at the end of 2021, one of the roads in the community washed out and created dangerous conditions. Mr. Fink was a member of the Roads Committee and recommended the installation of a check dam concrete curb. This was not put to a vote of the community and the cost was comparable to the security gate.

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

Petitioners bear the burden of proof to establish that Respondent committed the alleged violation by a preponderance of the evidence. Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.

“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.”

Petitioners allege a violation of Article II Section 1(c) of the 2006 recorded CC&Rs. One cannot read Section 1(c) of Article II without taking into consideration the context of the entire provision:

This provision governs the dedication or transfer of all or any part of the common area to any public agency, authority or utility. A three quarters vote of the eligible voting members is required to transfer or dedicate all or any part of the Common Area to any public agency, authority or utility. Further, the provision indicates that no improvements shall be placed upon the common area and no act or action shall be taken which would increase the density of residences on the Properties except by agreement of members representing not less than three quarters of the eligible votes of the Association. This sentence is written in the conjunctive. The word “and” is used to connect the two clauses. It is not written in the disjunctive, as the word “or” is not part of the sentence. The installation of a security gate does not dedicate or transfer all or any part of the common area to any public agency, authority or utility. Therefore, a three quarters vote is not required. Further, the installation of a security gate is not an improvement that increases the density of the residences. Therefore, a three quarters vote is not required. The Administrative Law Judge concludes that the provision of the CC&Rs cited by Petitioners is inapplicable to the instant matter.

Moreover, Article IV Section 2 of the 2006 recorded CC&Rs grant authority to Respondent to use the general assessment monies to “promote the recreation, health, safety and welfare of the residents.”

Based on a review of the credible and relevant evidence of record, it is held that Petitioners failed to establish by a preponderance of the evidence that Respondent violated the provisions of Article II Section 1(c) of the CC&Rs.

ORDER

IT IS ORDERED that no action is required of Respondent in this matter and that

Petitioners’ 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, May 16, 2024.

/s/ Sondra J. Vanella

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile May 16, 2024 to:

Susan Nicolson, Commissioner

Arizona Department of Real Estate

[email redacted]

Tom Hardesty

[email redacted]

David Onuschak, Esq.

[email redacted]

Robert P. Fink & Brittany L. Oleson

[email redacted]

By: OAH Staff