Steven Schumacher v. The Ridge at Sedona Association of Homeowners, Inc.

Case Summary

Case ID	26F-H031-REL
Agency	—
Tribunal	—
Decision Date	2026-09-16
Administrative Law Judge	Jenna Clark
Outcome	Petition Denied and Dismissed with Prejudice
Filing Fee Reimbursement	—
Civil Penalties	—

Parties & Counsel

Petitioner	Steven Schumacher	Counsel	Self-represented (Pro Se)
Respondent	The Ridge at Sedona Association of Homeowners, Inc.	Counsel	—

Alleged Violations

No violations listed

Video Overview

Audio Overview

Case Documents

26F-H031-REL Case document – 1418035.pdf

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26F-H031-REL Case document – 1418059.pdf

(8.8 KB)

26F-H031-REL Case document – 1431541.pdf

(50.4 KB)

26F-H031-REL Case document – 1433527.pdf

(67.3 KB)

26F-H031-REL Case document – 1469008.pdf

(157.0 KB)

Administrative Hearing Briefing Document: Schumacher v. The Ridge at Sedona Association of Homeowners, Inc. (No. 26F-H031-REL)

Executive Summary

This briefing document synthesizes the proceedings, legal arguments, evidentiary disclosures, and final adjudication of Arizona Office of Administrative Hearings (OAH) Docket No. 26F-H031-REL, Steven Schumacher v. The Ridge at Sedona Association of Homeowners, Inc. The dispute centered on whether the homeowners association (HOA) violated its governing Covenants, Conditions, and Restrictions (CC&Rs)—specifically Article VII, Section 7.2.3—by equally assessing master insurance policy premiums across all 69 property owners rather than assessing structural coverage costs exclusively against attached condominium owners.

Petitioner Steven Schumacher, a detached home owner, argued that because the HOA’s master insurance policy provides guaranteed 100% replacement coverage for 50 attached condominium units (valued at over $20 million) while excluding structural coverage for 19 detached single-family homes, allocating insurance premiums equally (a 1/69th share) forced detached owners to improperly subsidize attached unit coverage. He contended that insurance premiums for attached structures constitute maintenance, repair, or replacement expenses under CC&R Section 7.2.3 and Arizona Revised Statutes (A.R.S.) § 33-1255(C), requiring a 1/50th allocation to attached units only.

Respondent, represented by counsel Daniel Leffler, argued that Article VIII, Section 8.2 specifically governs insurance, designating all association-obtained insurance premiums as common expenses to be shared equally (1/69th) pursuant to Article II, Section 2.6. Respondent further noted that under Section 2.5.1, the outer building shells of attached units are defined as common elements in which all 69 owners hold an undivided equal interest.

Following a formal administrative hearing on September 1, 2026, Administrative Law Judge (ALJ) Jenna Clark issued a decision on September 16, 2026, denying the petition and dismissing the matter with prejudice. The tribunal found that Petitioner had not proved a violation of Article VII, Section 7.2.3 by a preponderance of the evidence. Although both parties agreed that insurance was assessed equally, the written decision rested on insufficient evidence of an improper or unlawful assessment (1469008.pdf, pp. 8–9).

Case Overview and Procedural History

Case Information Summary

Parameter	Details
Tribunal	Office of Administrative Hearings (OAH), State of Arizona
Referring Agency	Arizona Department of Real Estate (ADRE)
Docket Number	No. 26F-H031-REL
Petitioner	Steven Schumacher (Detached Unit Owner, 56 Ridge Rock Rd., Sedona, AZ 86351)
Respondent	The Ridge at Sedona Association of Homeowners, Inc.
Respondent Counsel	Daniel Leffler, Esq.; Jill J. Ormond, Esq.; Rebecca L. Donsky, Esq. (Gordon Rees Scully Mansukhani, LLP)
Presiding Officer	Administrative Law Judge Jenna Clark
Property Profile	Hybrid community of 69 units (19 detached single-family lots; 50 attached condominiums in 16 buildings)
Management Company	AAM LLC
Filing Fee Paid	$500.00 tendered by Petitioner

Comprehensive Procedural Timeline

“ [Jan 09, 2026] Petitioner files HOA Dispute Petition with ADRE ($500 fee paid) │ [Feb 03, 2026] ADRE issues Notice of Petition to Respondent │ [Feb 23, 2026] Respondent files Answer denying all complaint items │ [Mar 18, 2026] ADRE issues Notice of Hearing setting OAH trial for April 17, 2026 │ [Apr 21, 2026] ALJ grants Respondent's continuance request; resets hearing to June 11, 2026 │ [Jun 03, 2026] ALJ denies Respondent's motion for continuance for lack of good cause │ [Jun 08, 2026] ALJ grants Respondent's Request for Reconsideration; resets hearing to Sept 01, 2026 │ [Sep 01, 2026] Formal Administrative Hearing conducted via Google Meet (10:47 AM - 12:10 PM) │ [Sep 16, 2026] ALJ Decision issued: Petition DENIED and DISMISSED WITH PREJUDICE “

Detailed Analysis of Key Themes

Theme 1: Governing Document Interpretation & Contract Construction Rules

The central legal debate focused on contract interpretation principles applicable to restrictive covenants. In Arizona, CC&Rs operate as an enforceable contract between the association and unit owners.

“ ┌─────────────────────────────────────────────────────────────┐ │ COMPETING ALLOCATION ARGUMENTS │ └──────────────────────────────┬──────────────────────────────┘ │ ┌───────────────────────┴───────────────────────┐ ▼ ▼ Article VIII, Section 8.2 Article VII, Section 7.2.3 Article II, Section 2.6 Article II, Section 2.6 Exception ┌───────────────────────────────┐ ┌───────────────────────────────┐ │ "Premiums for all insurance │ │ "All Common Expenses │ │ obtained... shall be Common │ │ pertaining to maintenance, │ │ Expenses and paid by Assoc." │ │ repair, or replacement of... │ │ Respondent: equal 1/69th │ │ Attached Units... assessed │ └───────────────────────────────┘ │ ONLY against Attached Units" │ │ Petitioner: 1/50th share │ └───────────────────────────────┘ “

Specific vs. General Provisions: Respondent’s primary legal argument, supported by witness Donald Schneider (a legal practitioner and former board Vice President), relied on the canon of construction where specific provisions govern general ones. Article VIII specifically addresses "Insurance" and Section 8.2 explicitly classifies all insurance premiums as common expenses. Articles I through VII address broader governance and maintenance duties without referencing insurance premium assessments.
The Scope of Section 7.2.3: Petitioner argued that building insurance falls within Section 7.2.3 because insurance ultimately funds the "repair or replacement" of attached buildings. Respondent disputed this, arguing that Section 7.2.3 applies to direct operational maintenance and reserve items—such as exterior painting ($60/month reserve fee assessed solely to attached unit owners)—rather than master risk-mitigation insurance policies.
Absence of Cross-References: Article VIII contains no cross-reference back to Article VII or Section 7.2.3. Section 2.6 explicitly enumerates exceptions to equal 1/69th allocation (specifically referencing Sections 7.2.3, 7.2.4, and 7.2.5), but omits Article VIII entirely.

Theme 2: Property Classification, Common Elements, and Risk Allocation

The physical layout of The Ridge at Sedona heavily impacted the legal positions of both parties.

“` THE RIDGE AT SEDONA (69 TOTAL UNITS) │ ┌──────────────────────────┴──────────────────────────┐ ▼ ▼ 19 Detached Units 50 Attached Units (Units 1-12, 63-69) (Units 13-62)

Single-family lots – Housed in 16 structures
Structures self-insured by owners – Building outer shell = Common Element
Pay 1/69th master insurance – Covered by Master Policy ($20M replacement)
Pay $286/mo base operational fee – Pay 1/69th master insurance + $60/mo paint fee

“`

Undivided Interest in Common Elements: Under Section 2.5.1, the outer structural shell of attached condominium buildings is classified as a "Common Element." Section 2.6 provides that every unit owner holds an undivided 1/69th (or 1/70th per document drafting) interest in all common elements.
Insurable Interest: Because detached unit owners hold an undivided fractional ownership interest in the outer shells of the attached structures, Respondent argued that detached owners possess an insurable interest that the master policy protects. When an insured loss occurs, policy payouts go directly to the association to execute repairs, preserving community-wide structural integrity and property values.
Petitioner's Counter-Argument on Benefit: Petitioner contended that detached owners receive zero benefit from the $20,049,384 property coverage limit dedicated to attached condo units, pointing to the insurance certificate which expressly states: "There is no residential building coverage for the 19 single family dwellings." He asserted that requiring detached owners to pay for property coverage on structures they cannot inhabit or individually maintain forces an improper cross-subsidization between owner classes.

Theme 3: Statutory Authority vs. Declaration Mandates

The hearing examined the relationship between Arizona state statutes governing condominiums and planned communities and the HOA's internal declaration.

Petitioner invoked A.R.S. § 33-1255(C), arguing that insurance costs benefiting attached units should be charged only to those units. Respondent argued that the petition alleged a violation of Section 7.2.3, not a statutory violation. The written decision records these positions and resolves the pleaded CC&R claim on the evidence (1469008.pdf, pp. 6–8).

Application of A.R.S. § 33-1255(C): Petitioner asserted that state law prohibits assessing expenses that benefit fewer than all units against non-benefited units.
Respondent’s Argument on Statutory Claims: In closing, Respondent argued that Petitioner had not pleaded violations of A.R.S. § 33-1255(C) or CC&R Section 2.6. The decision records that argument on pages 6–7; its Conclusions of Law find that Petitioner failed to prove the pleaded Section 7.2.3 violation. They do not hold that the CC&Rs override the statute.

Theme 4: Administrative Hearing Dynamics and Burden of Proof

Burden of Proof Standard: Pursuant to Arizona Administrative Code (A.A.C.) R2-19-119, the Petitioner carries the burden of proving allegations by a preponderance of the evidence (showing that the allegation is more probably true than not).
Pleading Discrepancies and Rebuttal Admissions: In his initial written petition, Schumacher alleged that the "full cost" of insurance was being improperly assessed against detached units. On cross-examination and during rebuttal, Schumacher clarified that he did not mean detached owners paid 100% of the HOA's insurance bill while attached owners paid $0; rather, he meant that detached owners were paying a 1/69th share of the full premium package (including property coverage on attached structures). This clarified the assessment formula. The ALJ ultimately found insufficient evidence of an improper assessment under the pleaded provision; equal assessment itself was undisputed.
Procedural Ruling on Directed Verdict: Following Petitioner’s case-in-chief, Respondent’s counsel moved for a Directed Verdict / Judgment as a Matter of Law under Rule 50 of the Arizona Rules of Civil Procedure. ALJ Clark denied the motion, clarifying that civil procedure rules governing directed verdicts do not apply to administrative proceedings where a petitioner has paid a statutory filing fee ($500) to receive a full administrative adjudication.

Theme 5: HOA Governance, Discord, and Democratic Amendment Requirements

Transcripts revealed a long history of community divisiveness regarding common expense allocations.

2022 Allocation Dispute: In early 2022, an owner outcry occurred after the board attempted to reallocate eight categories of common expenses upon receiving an outside legal opinion. Donald Schneider was added to the board specifically to address this discord and liaise with outside counsel (Jason Miller).
The CC&R Revision Committee: The HOA formed a committee, chaired by Steven Schumacher, to explore modernizing the 30-year-old declaration. The committee evaluated various proposals, including converting certain common elements into limited common elements (e.g., shifting landscaping responsibility) and altering insurance allocations.
Voting Threshold Barriers: Discussions regarding structural changes stalled because converting common elements or reallocating basic assessment formulas requires supermajority owner votes (66 2/3%) or complete approval (100%) under Arizona law and the declaration, particularly if replatting is involved. The committee ultimately abandoned these proposals when owners recognized the voting thresholds were unattainable.

Comprehensive Evidentiary Disclosure Summary

During the September 1, 2026 hearing, the tribunal marked and admitted specific documentary exhibits. Below is the complete record of admitted evidence:

Exhibit ID	Source / Presenter	Description & Key Contents	Legal / Evidentiary Significance
Administrative File	OAH / ADRE	Official ADRE File: Petition (Jan 9, 2026), Notice of Petition, Respondent Answer, Notice of Hearing, Continuance Orders.	Establishes agency jurisdiction under A.R.S. §§ 32-2199 and 41-1092.
Petitioner Ex. 2	Steven Schumacher	Ardent Insurance Quote & Policy Schedule detail for Policy #N030PK3474-00 (Active Apr 1, 2025 – Apr 1, 2026). Lists 16 buildings; Property value $20,049,384.	Used by Petitioner to show breakdown of GL and Property costs between 50 condo units and 19 single-family homes.
Petitioner Ex. 3	Steven Schumacher	Insurance Breakdown Verification Worksheet from broker Leanne Broom (forwarded by Pam Holloway).	Shows broker's premium calculation: $874 total GL/common area for 19 detached homes; $31,925 total GL/Property for 50 attached condos.
Petitioner Ex. 4	Steven Schumacher	Unofficial Community Newsletter (What's Up on the Ridge, Nov 2025).	Mentions a $25,000 insurance deductible for attached unit owners; subject to Respondent's foundation objection.
Respondent Ex. A	HOA Respondent	Subdivision Plat / Map of The Ridge at Sedona.	Confirms physical layout: 69 total units (50 attached, 19 detached).
Respondent Ex. B	HOA Respondent	Amended & Restated Declaration of CC&Rs (July 26, 1996).	Ground truth for CC&R Art. II § 2.5.1, § 2.6; Art. V § 5.1; Art. VII § 7.2.3; Art. VIII § 8.2, § 8.3.
Respondent Ex. D	HOA Respondent	Certificate of Liability Insurance (Acord, issued June 25, 2025) & Policy Endorsements.	Confirms $20,049,384 property limit, $25,000 deductible, single-entity coverage for condos, and 100% guaranteed replacement cost.
Respondent Ex. E	HOA Respondent	Approved Operating Budget for Fiscal Year 2025–2026.	Shows $34,000 total insurance expense included in $286/mo base fee for all 69 units, plus $60/mo attached-only painting reserve.

Important Quotes with Context

1. On Contract Interpretation and Specific vs. General Provisions

Donald F. Schneider (Witness for Respondent): "Article 8 is all about insurance. And Article 8 does not refer back to the first seven articles. There's no reference back to it to tie it in to the more general… and generally my understanding as a lawyer is that typically the more specific provisions govern over the more general provisions when it comes to a particular subject." Context: Delivered during direct examination on September 1, 2026. Schneider explained why Article VIII (Insurance) overrides general assessment language in Article VII, establishing that insurance premiums must be treated as equal common expenses.

2. On Undivided Fractional Ownership of Building Shells

Donald F. Schneider (Witness for Respondent): "My understanding is that the outer shell of the buildings defined as initial cap buildings in the declaration are common elements… Section 2.6 provides that every one of us, every one of the 69 or 70 owners… owns an undivided equal interest in common elements. And so applying it to the buildings for which insurance is obtained, we all have the same interest in the buildings…" Context: Responding to questions regarding CC&R Section 2.5.1 and Section 2.6. Schneider outlined the legal framework establishing that detached owners possess a fractional ownership interest in the physical shells of the condominium structures, justifying an equal 1/69th insurance assessment.

3. On Detached Owners Subsidizing Attached Unit Property Coverage

Steven Schumacher (Petitioner): "Detached units are not benefiting from $20-plus million of property insurance on property we don't own… What we don't own is replacing at guaranteed replacement cost a condominium. And to be paying for that and paying for my own insurance is what I'm contesting… Just follow what's here." Context: Delivered during Petitioner's closing argument on September 1, 2026. Schumacher summarized his core grievance: that detached owners are forced to maintain individual homeowners insurance for their own structures while simultaneously paying a 1/69th share of the master policy covering attached condo structures.

4. On Pleading Inconsistencies and Equal Allocation

Daniel Leffler, Esq. (Counsel for Respondent): "Petitioner needed to establish that the detached unit owners paid for the full cost of insurance for the fiscal year 2025–2026… The notion that insurance was exclusively assessed against attached unit owners is absurd. The claim that section 7.2.3 has been violated by an equal application in assessing insurance equally to all owners is asinine… Section 7.2.3 has nothing to do with insurance." Context: Delivered during Respondent's closing argument. Counsel relied on the equal allocation to argue that Petitioner had not proved his claim. Petitioner clarified that by "full cost" he meant the categories of coverage included in the shared premium, not that detached owners alone paid the entire bill (1469008.pdf, pp. 6–7).

5. On the Tribunal's Final Legal Conclusion

Jenna Clark (Administrative Law Judge): "Both parties are in agreement that all unit owners are assessed equally for insurance, with neither type paying more than the other. There is insufficient evidence in the record to find that the Association unequally or otherwise improperly or unlawfully assessed for common expenses pertaining to the maintenance, repair or replacement of the buildings containing Attached Units to Detached Units… The PETITION must be denied." Context: Findings of Fact and Conclusions of Law Nos. 7–8 from the formal ALJ Decision issued September 16, 2026. This ruling definitively dismissed all claims against the HOA with prejudice.

What the Written Decision Establishes

The pleaded claim and burden: Petitioner had to prove a violation of CC&R Article VII, Section 7.2.3 by a preponderance of the evidence. The ALJ found that he had not sustained that burden.
The assessment evidence: Both parties agreed that all unit owners were assessed equally for insurance. The ALJ found insufficient evidence of an improper or unlawful assessment for the attached-building maintenance, repair, or replacement expenses addressed by the pleaded provision.
Arguments remain distinct from holdings: Respondent advocated equal insurance allocation under Article VIII and argued that the statutory claim was unpleaded. Those positions should not be recast as an ALJ ruling that insurance provisions always override allocation exceptions or state law.
The result: The petition was denied and dismissed with prejudice. No civil penalties were imposed, and each party was to bear its own preparation and litigation costs.

These conclusions concern this record and the pleaded claim. The decision does not prescribe a universal insurance-allocation formula or an amendment requirement for other disputes (1469008.pdf, pp. 6–9).

Comprehensive Study Guide: Schumacher v. The Ridge at Sedona Association of Homeowners, Inc. (Docket No. 26F-H031-REL)

1. Executive Summary & Key Concepts

Administrative Case Overview

This study guide examines the administrative proceedings before the State of Arizona Office of Administrative Hearings (OAH) in the matter of Steven Schumacher (Petitioner) v. The Ridge at Sedona Association of Homeowners, Inc. (Respondent), Docket No. 26F-H031-REL.

The dispute centers on whether a homeowners' association (HOA) violated its governing Covenants, Conditions, and Restrictions (CC&Rs) by assessing the premiums for commercial general liability and property building insurance equally across all unit owners (on a 1/69th basis) rather than assessing building property insurance exclusively against attached unit owners (on a 1/50th basis).

“` +———————————————————————–+ | THE RIDGE AT SEDONA HOA | | (69 Units) | +———————————–+———————————–+ | +—————————-+—————————-+ | | v v ATTACHED UNITS DETACHED UNITS

50 Condominiums – 19 Single-Family Residences
Housed in 16 Buildings – Independently Owned Lots
Outer Shell = Common Element – Self-Insured / Owner Covered
Assessed 1/50th for 7.2.3 Expenses – Excluded from 7.2.3 Expenses

“`

Key Entities and Individuals

Entity / Person	Role / Description
Jenna Clark	Administrative Law Judge (ALJ), Arizona Office of Administrative Hearings.
Steven Schumacher	Petitioner; owner of a detached single-family residential property at 56 Ridge Rock Rd., Sedona, AZ 86351.
The Ridge at Sedona Association of Homeowners, Inc.	Respondent; domestic non-profit homeowners' association overseeing a 69-unit hybrid residential development in Sedona, AZ (Hilton Bell Rock subdivision), managed by AAM LLC.
Donald F. Schneider	Respondent's witness; former HOA Board Vice President and Legal Liaison (served early 2022 to mid-2024), former CC&R Revision Committee member, practicing attorney, and owner of 53 Rimtrail Circle (continuously an HOA member since mid-2019).
Daniel Leffler, Esq.	Counsel representing Respondent at the September 1, 2026 hearing.
Jill J. Ormond, Esq. & Rebecca L. Donsky, Esq.	Counsel of record for Respondent (Gordon Rees Scully Mansukhani, LLP).
Susan Nicolson	Commissioner, Arizona Department of Real Estate (ADRE).
Tom Hazard	Board member / budget witness called by Respondent; excused without testifying after facts were clarified.
Pamela Schumacher	Observer present at the hearing.

Governing Legal Framework & Provisions

Arizona Revised Statutes (A.R.S.)

A.R.S. § 33-1255(C): Mandates that any common expense or portion thereof benefiting fewer than all units shall be assessed exclusively against the units benefited.
A.R.S. § 33-1253: Requires condominium associations to maintain specific property and liability insurance policies.
A.R.S. §§ 32-2102 & 32-2199 et seq.: Authorizes the Arizona Department of Real Estate and OAH to receive, hear, and decide dispute petitions between homeowners and HOAs.

CC&Rs of The Ridge at Sedona Association

Article II, Section 2.5.1: Defines the outer shell of attached buildings ("initial cap Buildings") as common elements.
Article II, Section 2.6 (Allocation of Common Element Interest and Expense Liabilities): Establishes that undivided common element interest and general common expenses are allocated equally among all units (1/69th share, noted historically as 1/70th in text), except for common expenses assessed to less than all units under Sections 7.2.3, 7.2.4, and 7.2.5. Expenses under Section 7.2.3 are allocated equally among attached units at 1/50th each.
Article V, Section 5.1 (Duties of the Association): Directs the association to maintain, repair, and replace all common elements as a common expense.
Article VII, Section 7.2.3 (Common Expense Assessment): Expressly provides that all common expenses pertaining to the maintenance, repair, or replacement of the buildings containing attached units shall be assessed only against attached units (1/50th share each), and no detached unit shall be assessed for such common expenses.
Article VIII, Section 8.2 (Payment of Premiums): Specifies that premiums for all insurance obtained by the association pursuant to Article VIII shall be common expenses and paid for by the association.
Article VIII, Section 8.3 (Insurance Obtained by Unit Owners): Clarifies that association insurance does not prevent individual unit owners from obtaining supplemental insurance for their own units and personal liability.

Core Arguments & Legal Interpretations

Case Timeline & Procedural History

January 9, 2026: Petitioner files an HOA Dispute Process Petition with the Arizona Department of Real Estate (ADRE), tendering a $500 filing fee.
February 3, 2026: ADRE serves Notice of Petition on Respondent.
February 23, 2026: Respondent submits its Answer denying the allegations.
March 18, 2026: ADRE issues a Notice of Hearing scheduling the matter before OAH for April 17, 2026.
April 21, 2026: Administrative Law Judge Jenna Clark issues an Order Granting Continuance at Respondent's request, resetting the hearing to June 11, 2026 (Disclosure due June 4, 2026; Subpoena requests due May 27, 2026).
June 3, 2026: ALJ Clark issues an Order Denying Continuance because Respondent failed to identify an unavailable witness, testimony, or emergency.
June 8, 2026: ALJ Clark grants Respondent’s Request for Reconsideration and issues an Order Granting Continuance, resetting the hearing to September 1, 2026 (Disclosure due August 18, 2026; Subpoenas due August 10, 2026).
September 1, 2026: Continued evidentiary hearing held remotely via Google Meet. Evidentiary record closed after witness testimony, exhibit admissions, and closing arguments.
September 16, 2026: ALJ Jenna Clark issues the Administrative Law Judge Decision denying the petition and dismissing it with prejudice.

2. Short-Answer Practice Questions

Question 1

What specific CC&R section was alleged in Steven Schumacher’s petition to have been violated by The Ridge at Sedona Association of Homeowners, Inc., and what relief was requested?

Answer: Petitioner alleged a single violation of CC&R Article VII, Section 7.2.3. He alleged that the HOA improperly assessed detached unit owners for insurance premiums protecting attached unit buildings starting in fiscal year 2025–2026. He requested an administrative order directing Respondent to abide by the referenced CC&R provisions when allocating insurance assessments. He did not request civil penalties.

Question 2

How does the composition of units at The Ridge at Sedona affect the allocation of common expenses under CC&R Article II, Section 2.6, and Article VII, Section 7.2.3?

Answer: The community consists of 69 total units: 19 detached units (single-family residential lots) and 50 attached units (condominiums located across 16 buildings). Under Section 2.6, general common expenses are shared equally among all units on a 1/69th share basis. However, expenses governed by Section 7.2.3—which covers maintenance, repair, or replacement of buildings containing attached units—are allocated exclusively to attached units on a 1/50th share basis.

Question 3

What argument did Respondent's witness Donald F. Schneider make regarding contract interpretation when contrasting Article VII and Article VIII of the CC&Rs?

Answer: Schneider testified that under standard legal principles of contract interpretation, specific provisions govern over general provisions. He noted that the first seven articles deal with general community matters without specifying insurance expenses, whereas Article VIII is specifically dedicated to insurance. Because Article VIII, Section 8.2 dictates that all insurance premiums obtained by the association are common expenses and contains no cross-reference or exception tying back to Article VII or Section 7.2.3, insurance must be shared equally among all 69 unit owners.

Question 4

Why did ALJ Clark deny Respondent’s initial Motion for Continuance on June 3, 2026?

Answer: The motion was denied for lack of good cause because Respondent failed to identify the unavailable witness, the nature of their proposed testimony, or the specific nature of the emergency preventing their attendance. (The continuance was subsequently granted on June 8, 2026, upon Respondent's Request for Reconsideration).

Question 5

What evidence did Petitioner introduce regarding the breakdown of insurance premiums from the HOA's insurance broker?

Answer: Petitioner introduced Exhibit 3 (a worksheet verification from insurance broker Leanne Broom provided by Pam Holloway), which broke down the total premium ($32,787). The breakdown allocated $874 across the 19 detached homes for general liability/common areas, $1,752 for condo general liability across 50 units, and $30,171 for property coverage on $19,884,384 of condo building values across the 50 attached units. Petitioner argued this proved the insurance broker explicitly calculated structural building insurance exclusively for attached units.

Question 6

What was the Respondent’s legal argument regarding unit ownership boundaries under CC&R Section 2.5.1 and Section 2.6?

Answer: Respondent argued that under Section 2.5.1, the outer shell of attached buildings is classified as a common element. Section 2.6 provides that all 69 unit owners hold an undivided equal interest in all common elements. Because every detached owner (including Petitioner) holds a 1/69th interest in these common element outer shells, insuring those shells protects a common asset in which all owners share ownership, justifying an equal 1/69th assessment for insurance premiums.

Question 7

What procedural evidentiary rule did ALJ Clark invoke regarding non-party witness appearances during the administrative hearing?

Answer: ALJ Clark ordered that all non-party witnesses were required to appear remotely via Google Meet, and that parties were required to mark proposed exhibits using numbers for Petitioner, letters for Respondent, and employ Bates Stamps on all submitted exhibit pages.

Question 8

Why did Respondent's counsel move for a directed verdict under Rule 50 of the Arizona Rules of Civil Procedure during the September 1, 2026 hearing, and how did the ALJ rule?

Answer: Respondent’s counsel moved for a directed verdict arguing that Petitioner admitted under cross-examination that insurance premiums were assessed equally (1/69th) to all owners, contradicting his written petition's claim that detached owners paid the "full cost." ALJ Clark denied the motion, stating that Rule 50 of the Rules of Civil Procedure is inapplicable to administrative proceedings, particularly where the petitioner paid a statutory fee ($500) to receive a full administrative adjudication on the merits.

Question 9

What role did Exhibit 4 ("What’s Up on the Ridge" newsletter) play in the hearing, and what objection was raised against it?

Answer: Petitioner used Exhibit 4 (a November 2025 community newsletter) to show that attached unit owners were advised of a new $25,000 policy deductible for water leaks and structural repairs, arguing it proved structural coverage applied only to attached units. Respondent’s counsel objected on foundation grounds because the document was an unsanctioned, unofficial publication created by an anonymous volunteer owner rather than an official board document. The ALJ admitted the document over objection, noting it would be given appropriate weight.

Question 10

What was the ultimate ruling of Administrative Law Judge Jenna Clark in the Final Order issued September 16, 2026?

Answer: ALJ Clark ruled that Petitioner failed to sustain his burden of proving by a preponderance of the evidence that Respondent violated CC&R Article VII, Section 7.2.3. She noted that both parties agreed the owners were assessed equally, but found insufficient evidence of an improper or unlawful assessment under the pleaded provision (1469008.pdf, p. 8). The petition was denied and dismissed with prejudice, no civil penalties were levied, and each party was ordered to bear its own litigation costs.

3. Essay Prompts for Deeper Exploration

Essay Prompt 1: Rules of Contract Interpretation in Community Association Governance

Prompt: Analyze the competing principles of contract interpretation presented by Petitioner and Respondent in Schumacher v. The Ridge at Sedona Association of Homeowners, Inc. Compare Petitioner's argument—that specific cost-allocation rules (Article VII, Section 7.2.3) and statutory mandates (A.R.S. § 33-1255(C)) supersede general insurance definitions—against Respondent’s argument that specific subject-matter articles (Article VIII, Section 8.2) govern without implicit exceptions. Distinguish those arguments from the ALJ’s narrower finding that Petitioner had not proved a violation of Section 7.2.3. Identify what the written decision does and does not decide (1469008.pdf, pp. 6–8).

Essay Prompt 2: Harmonizing State Condominium Statutes with Governing Documents

Prompt: A.R.S. § 33-1255(C) provides that common expenses benefiting fewer than all units must be assessed exclusively against the units benefited, while A.R.S. § 33-1253 requires HOAs to maintain master insurance coverage. Discuss how property rights, common element definitions (CC&R Section 2.5.1), and undivided percentage interests (CC&R Section 2.6) intersect with statutory requirements when determining whether property building insurance on multi-family attached units constitutes a general common expense or a restricted common expense.

Essay Prompt 3: Evidentiary Burdens and Procedural Mechanics in Administrative Hearings

Prompt: Examine the procedural lifecycle of an HOA dispute before the Arizona Office of Administrative Hearings as illustrated in this case. Detail the significance of pleading specificity, the burden of proof under Arizona Administrative Code R2-19-119, the inadmissibility of civil procedure motions (such as Rule 50 directed verdicts), and the impact of cross-examination admissions when an administrative tribunal evaluates whether a violation of governing documents occurred.

4. Glossary of Important Terms

Administrative Law Judge (ALJ): An independent judicial officer who presides over administrative hearings, evaluates evidence, questions witnesses, and issues binding decisions or recommendations to state agencies (e.g., ALJ Jenna Clark).
Arizona Department of Real Estate (ADRE): The state administrative agency authorized under A.R.S. §§ 32-2102 and 32-2199 et seq. to regulate real estate and receive HOA dispute petitions.
Attached Units: Condominium residences (units 13 through 62 at The Ridge at Sedona, total 50 units) housed within 16 multi-unit building structures, where outer building shells are defined as common elements.
Bates Stamps: A standardized method of numbering legal and evidentiary document pages sequentially (e.g., required for exhibit submissions in OAH proceedings).
CC&Rs (Covenants, Conditions, and Restrictions): The recorded governing declaration that creates an enforceable legal contract between a homeowners' association and property owners, establishing rights, obligations, and assessment structures.
Common Elements: Portions of a real estate development owned collectively by all unit owners as undivided percentage interests (e.g., 1/69th interest in building outer shells, gates, and shared grounds under Section 2.5.1 and 2.6).
Common Expenses: Operating costs incurred by an HOA to maintain, operate, or insure common elements, allocated among owners as general assessments or special/restricted assessments.
Detached Units: Single-family residential lots (units 1 through 12 and 63 through 69 at The Ridge at Sedona, total 19 units) whose owners independently own and insure their entire structural dwellings.
Dismissal with Prejudice: A final judicial or administrative determination denying a claim on its merits, prohibiting the petitioner from re-filing the same claim in future proceedings.
Limited Common Elements: Common elements reserved for the exclusive use of one or more, but fewer than all, unit owners (e.g., specific patios, balconies, or assigned spaces).
Preponderance of the Evidence: The standard of proof required in administrative civil proceedings (A.A.C. R2-19-119), defined as evidence proving that a contention is more probably true than not.
Replatting: The formal legal process of altering recorded subdivision maps or property boundaries, which under Arizona statute requires a supermajority vote (66 2/3%) of property owners.
Single Entity Coverage: Insurance coverage maintained by an HOA covering building structures ("walls-in") excluding tenant/owner improvements and betterments inside individual condominium units.
Supermajority Vote: A heightened voting threshold (e.g., two-thirds or 66 2/3% of members) required by CC&Rs or state statute to amend declarations or modify property plats.

HOA Insurance Battles: Understanding CC&R Interpretation and Assessment Allocations in Hybrid Communities

1. Introduction: The High Stakes of HOA Assessment Disputes

Managing assessment allocations in a hybrid homeowners association (HOA)—a community that combines both detached single-family dwellings and attached condominium units—presents one of the most complex governance challenges in real estate law. Because structural footprints, exterior maintenance needs, and property insurance liabilities differ significantly between standalone homes and shared multi-unit buildings, boards and owners frequently clash over what constitutes an association-wide common expense versus a localized expense benefiting only a subset of owners.

"The central conflict in hybrid HOA governance lies in balancing standard equal assessment rules against the equitable allocation of expenses that benefit specific unit types."

This tension reached a legal head in an administrative case heard before Administrative Law Judge Jenna Clark of the Office of Administrative Hearings (OAH), operating on behalf of the Arizona Department of Real Estate: Steven Schumacher v. The Ridge at Sedona Association of Homeowners, Inc. (Case No. 26F-H031-REL). The dispute offers a masterclass in contractual interpretation, statutory application under Arizona HOA law, and the strict evidentiary standards required when challenging community association assessment practices.

2. Breakdown of the Dispute: Detached vs. Attached Units

The Ridge at Sedona Association of Homeowners, Inc. is a residential development located in Sedona, Arizona, comprising 69 total units. The community structure is divided into two distinct unit classifications:

19 Detached Units: Independently owned residential lots and standalone single-family dwellings (Units 1–12 and 63–69).
50 Attached Units: Condominiums housed across 16 multi-unit association buildings (Units 13–62).

On January 9, 2026, Petitioner Steven Schumacher, an owner of a detached residential lot at 56 Ridge Rock Road, filed a formal petition with the Arizona Department of Real Estate, paying a $500 filing fee. Schumacher challenged the association’s fiscal year 2025–2026 operating budget, which set total property and casualty insurance expenses at $34,000.

Schumacher alleged that the association improperly assessed the full cost of master property insurance—which specifically provides structural coverage and guaranteed replacement for the 16 attached condominium buildings—equally across all 69 unit owners (a 1/69th split per unit), rather than charging the structural property coverage exclusively to the 50 attached condominium owners (a 1/50th split).

Community Structure & Unit Characteristics

Unit Classification	Key Attributes & Insurance/Maintenance Allocation Arguments
Detached Units (19 Single-Family Lots)	• Independently owned lots and standalone structural dwellings. • Owners carry individual homeowner property insurance for their standalone residential structures. • Argued that paying a 1/69th share of the master policy forces them to subsidize structural replacement insurance for buildings they do not own and receive no direct structural benefit from.
Attached Condominiums (50 Units across 16 Buildings)	• Units housed within 16 multi-family building shells. • Outer building shells are defined as Common Elements under Section 2.5.1 of the CC&Rs. • Receive direct coverage under the association's master insurance policy (including 100% guaranteed replacement cost). Pay an additional $60/month dedicated reserve fee exclusively for exterior painting.

3. The Legal Tug-of-War: Article VII vs. Article VIII of the CC&Rs

The legal controversy presented during the September 1, 2026 hearing focused on contractual interpretation, specifically contrasting general assessment exceptions against specialized insurance mandates within the association’s Declaration of Covenants, Conditions, and Restrictions (CC&Rs).

CC&R Framework Conflict Article VII (Section 7.2.3 – General Assessment Exceptions): Dictates that expenses pertaining to maintenance, repair, or replacement of buildings containing attached units shall be assessed exclusively against attached units on a 1/50th share. VS. * Article VIII (Section 8.2 – Payment of Premiums): States that premiums for insurance obtained under that article are common expenses paid by the association. Section 8.2 itself does not specify equal shares for individual owners; the association advocated that allocation using the governing documents as a whole (1469008.pdf, pp. 4, 6).

Opposing Legal Theories

Petitioner's Argument (Section 7.2.3 & Special Assessment): Petitioner Schumacher argued that CC&R Article VII, Section 7.2.3 explicitly commands that all common expenses pertaining to the "maintenance, repair or replacement of the Buildings containing the Attached Units" must be assessed exclusively against attached units on a 1/50th basis. Supporting his argument with A.R.S. § 33-1255(C)—which mandates that any common expense benefiting fewer than all units shall be assessed exclusively against the units benefited—Schumacher contended that detached owners were improperly forced to subsidize a policy carrying $20,049,384 in total insured property value. This figure includes $19,884,384 dedicated strictly to the 50 attached condominium units with 100% guaranteed replacement coverage, while the remaining $165,000 accounts for shared common elements (such as entry gates and common structures) shared across all 69 owners. Schumacher argued that detached owners derive no structural benefit from the condominium building coverage.

Respondent's Defense (Article VIII & Specific Governance): Respondent, represented by legal counsel Daniel Leffler and backed by testimony from former board member Donald Schneider, relied on Article VIII, Section 8.2 of the CC&Rs. Section 8.2 explicitly provides that "premiums for all insurance obtained by the Association pursuant to this Article shall be Common Expenses and shall be paid for by the Association." Defense counsel demonstrated that under Section 2.5.1, the outer building shells of the attached structures are defined as common elements, and under Section 2.6, all 69 owners hold an undivided, equal interest in all common elements. Respondent asserted the established legal doctrine that specific contractual provisions (Article VIII governing Insurance) supersede general assessment rules (Article VII), noting that Article VIII contains no language referencing back to Article VII exceptions.

4. Hearing Highlights: Cross-Examination and Budgetary Controversies

During cross-examination, Petitioner Schumacher questioned former Board Vice President Donald Schneider, highlighting a key community budget operational discrepancy: why the association separates exterior painting costs from full building replacement property insurance premiums.

Painting Maintenance (Article V/VII) vs. Property Insurance Premiums (Article VIII)

Governance & Financial Category	Exterior Painting Maintenance (Article V/VII)	Property Insurance Premiums (Article VIII)
Governing CC&R Provision	Article V (Section 5.1) & Article VII (Section 7.2.3)	Article VIII (Sections 8.1 & 8.2)
Budgeted Allocation Method	Assessed exclusively to Attached Units ($60/month reserve fee per attached unit).	Assessed equally across all 69 Units (1/69th share embedded in the $286/month base fee).
Petitioner's Position	Demonstrates the HOA recognizes attached outer shells require specialized assessment tracks under Section 7.2.3.	Argued replacement insurance falls under "repair and replacement" of building shells, requiring an identical attached-only assessment track.
Respondent's Position	Specific maintenance/painting operational item governed by general association duties under Article V.	Governed strictly and independently by Article VIII, which mandates all insurance premiums are common expenses shared equally.

Tactical Defense Strategy and Procedural Rulings

Respondent's Rule 50 Motion for Directed Verdict: Following Petitioner's testimony, defense counsel Daniel Leffler moved for a directed verdict under Rule 50 of the Arizona Rules of Civil Procedure. Counsel argued that because Schumacher conceded during cross-examination that insurance premiums were allocated equally on a 1/69th basis among all 69 owners, he directly disproved his own petition's literal pleading, which alleged that detached owners paid the "full cost" (100%) of the policy. Defense counsel asserted that Schumacher was using the tribunal to force a contractual reallocation that requires a supermajority membership vote rather than proving an actual CC&R violation. ALJ Jenna Clark denied the motion, explaining as a matter of procedure that Rule 50 directed verdicts are inapplicable to administrative tribunal proceedings where a petitioner has paid the statutory filing fee to receive an adjudication on the merits.
Handling of Evidentiary Issues:

Petitioner's Exhibit 3 (Insurance Broker Worksheet): Prepared by insurance broker Leanne Broom, this document detailed the premium calculation ($30,171 for condo property insurance; $1,752 for condo general liability; $874 for home general liability). It was admitted into evidence without objection to establish the premium breakdown.
Petitioner's Exhibit 4 (Community Newsletter): An unsanctioned owner newsletter titled What's Up on the Ridge discussing a $25,000 policy deductible for attached units. Respondent raised a foundational objection because the author was anonymous and unverified. ALJ Clark overruled the objection, admitting the document while noting it would only receive appropriate evidentiary weight.

5. The ALJ’s Decision

On September 16, 2026, Administrative Law Judge Jenna Clark denied the petition and dismissed it with prejudice. She found that Schumacher had not proved the alleged violation of CC&R Article VII, Section 7.2.3 by a preponderance of the evidence.

Case Parameter	Written Decision
Final Case Outcome	Petition denied and dismissed with prejudice
Pleaded CC&R Violation	Article VII, Section 7.2.3 — not established by the evidence
Assessment Evidence	Both parties agreed that all owners were assessed equally for insurance
Reason for Denial	Insufficient evidence of an improper or unlawful assessment under the pleaded provision
Civil Penalties & Costs	No civil penalties; each party bears its own preparation and litigation costs

Reading the Result in Context

The parties advanced different interpretations of the declaration. The association relied on Article VIII and common-element ownership to defend equal insurance assessments; Schumacher relied on the allocation exception in Section 7.2.3 and invoked A.R.S. § 33-1255(C). The written decision records Respondent’s unpleaded-claim argument as a closing argument, not as a holding that the declaration overrides the statute.

The ALJ’s stated reason for denial was the failure of proof on this record. The result does not establish that insurance expenses must always be divided equally, that an insurance article always overrides other provisions, or that a formal amendment is the only possible route to a different allocation. The distinction between each party’s argument and the tribunal’s actual findings matters when reading this case (1469008.pdf, pp. 6–9).

Case Participants

Petitioner Side

Steven Schumacher (Petitioner)
Pamela Schumacher (Observer)

Respondent Side

Daniel Leffler (Counsel for Respondent)
Donald Schneider (Witness)
The Ridge at Sedona Association of Homeowners, Inc.
Jill J. Ormond (Counsel for Respondent)
Gordon Rees Scully Mansukhani, LLP
Rebecca L. Donsky (Counsel for Respondent)
Gordon Rees Scully Mansukhani, LLP
Tom Hazard (Potential Witness)
The Ridge at Sedona Association of Homeowners, Inc.
Pam Holloway (Potential Witness)
The Ridge at Sedona Association of Homeowners, Inc.
Jason Miller (Attorney)

Neutral Parties

Jenna Clark (Administrative Law Judge)
Office of Administrative Hearings
Susan Nicolson (Commissioner)
Arizona Department of Real Estate

Other Participants

Leanne Broom (Insurance Broker)
Larry Cobasol (Insurance Broker)

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