**Case Summary: *Cindy Denapoli vs. Southern Ridge Condominium Association***
**Case No. 13F-H1314006-BFS**

**Proceedings Overview**
This hearing took place on April 10, 2014, before the Arizona Office of Administrative Hearings regarding a petition filed by Cindy Denapoli (Petitioner) against the Southern Ridge Condominium Association (Respondent). The Petitioner appeared on her own behalf, while the Respondent was represented by counsel. The decision was certified as final on June 2, 2014, after the Department of Fire, Building and Life Safety took no action to modify or reject the Administrative Law Judge's decision.

**Background and Key Facts**
* **Association Structure:** Southern Ridge is a condominium association located in Mesa, Arizona. It is entirely investor-owned with no owner-occupants.
* **The "Rental Pool":** The majority of unit owners (102 of 113) formed a "Rental Pool" to share non-common expenses and distribute net profits,. The Petitioner is a unit owner but is not a member of this Rental Pool.
* **Management:** "Preferred Communities" handles the Association's accounting, while "Professional Equity Management" (PEM) serves as the management company,.
* **The Disputed Practice:** The Association’s accounting firm issued a monthly check of approximately $9,666 for management fees directly to the Rental Pool (aka "Southern Ridge Apartments") rather than to the management company,. The Rental Pool would then pay PEM and distribute remaining funds or profits to Rental Pool members only,.

**Main Issues and Arguments**
The Petitioner alleged that the Association violated **A.R.S. § 33-1255(C)(2)**. She argued that the monthly fees assessed to all owners as "HOA dues" were being paid to the Rental Pool, thereby financially subsidizing the Rental Pool members,. She asserted that the fee benefitted only the Rental Pool units, yet she was required to contribute to it despite receiving no distribution from the Rental Pool,.

The Respondent denied the allegations but admitted through testimony that the $9,666 monthly fee was paid to the Rental Pool,. Mr. Watkins, the Association's treasurer, testified that PEM objected to direct payment from the Association and that the Rental Pool paid PEM for services. He acknowledged that net profits from the Rental Pool were distributed only to its members and not to other owners.

**Legal Analysis**
The Administrative Law Judge focused on **A.R.S. § 33-1255(C)(2)**, which states that "[a]ny common expense or portion of a common expense benefitting fewer than all of the units shall be assessed exclusively against the units benefitted".

The Judge found that:
1. The monthly check was issued to the Rental Pool, which is not a corporate entity or LLC.
2. The Rental Pool used these funds to pay expenses and distributed net profits on a pro-rata basis to its members.
3. No distributions were made to condominium owners who were not part of the Rental Pool.

**Final Decision and Outcome**
The Tribunal concluded that Southern Ridge Condominium Association violated **A.R.S. § 33-1255(C)(2)** by assessing expenses against all units that benefitted only the Rental Pool members.

**Order:**
* The Petitioner was deemed the prevailing party.
* The Respondent was ordered to fully comply with A.R.S. § 33-1255(C)(2) in the future.
* The Respondent was ordered to pay the Petitioner’s filing fee of **$550.00**.
* The Respondent was ordered to pay a civil penalty of **$200.00** to the Department.