Briefing Document: Hulbert Family Trust v. The Summit at Copper Square Condominium Association

Executive Summary

This briefing document analyzes the consolidated administrative matters (Nos. 24F-H049-REL and 24F-H055-REL) involving the Gregory M. and Donna P. Hulbert Family Trust (the "Petitioner") and The Summit at Copper Square Condominium Association (the "Association" or "Respondent"). The case, presided over by Administrative Law Judge (ALJ) Samuel Fox, centers on allegations of fiduciary neglect, financial mismanagement, and violations of the Association’s Declaration (CC&Rs).

The Petitioner, represented by Donna Hulbert, argues that the Association’s Board of Directors has failed in its stewardship of a 23-story residential high-rise. Key grievances include a multi-year delay in addressing structural damage caused by a swimming pool leak, a critically underfunded reserve and operating budget, and unauthorized modifications to common areas. The Respondent contends that these matters fall within the Board’s broad discretionary powers and that they have acted reasonably by following the advice of hired professionals.

Detailed Analysis of Key Themes

1. Structural Integrity and Maintenance Delays

The central physical issue involves a persistent leak from the fifth-floor swimming pool area through an 18-inch concrete slab into the fourth-floor garage ceiling.

• Timeline of Neglect: Evidence suggests damage was noted as early as January 2020. Despite recommendations for investigation in 2022, no formal forensic investigation occurred until September 2023.
• Expert Findings: Reports from Jervasio (April and July 2024) identified water infiltration causing ongoing damage, including rebar corrosion (evidenced by staining) and deterioration of the slab.
• Controversy of Action: The Petitioner alleges the Board intentionally delayed remediation by seeking redundant opinions from the same firm. The Respondent argues the delay was necessary to identify the specific source of the leak, which has only recently been repaired.
• Long-term Risks: Experts indicate that while there is no immediate loss of slab strength, the deterioration is progressive due to chloride ions from pool water adhering to the rebar, which continues to corrode even after the leak is stopped.

2. Financial Stewardship and Budgetary Practices

The Petitioner presents a detailed critique of the Association's financial health, alleging the Board ignores standard accounting and management practices provided by their management company, First Service.

• Operating Fund Deficiencies: Management recommends an operating account funded at three times monthly expenses. The Petitioner alleges it is currently funded at approximately 0.3 times expenses (30%).
• Reserve Fund Crisis: The Petitioner calculates that if all required reserve projects for the current year are executed, the reserves will be exhausted, potentially leaving a $150,000 deficit. The current funding level is estimated at 25-29%, whereas a level below 30% is considered a high risk for special assessments.
• Budgeting Methodology: Allegations state the Board sets the budget based on the prior year's budget plus a flat 7.5% increase, rather than using "actual" historical expenditures. This has led to significant overruns, specifically in plumbing/water damage (budgeted $20k vs. ~$89k actual in 2023).
• Reserve Borrowing: To cover operating shortfalls, the Association reportedly borrowed nearly $400,000 from the reserve fund between 2022 and 2023.

3. Declaration Violations and Common Area Use

The dispute extends to the Board’s interpretation of the Association's Declaration regarding common elements.

• The "Puppy Potty": The Board installed a dog pad on the roof. The Petitioner argues this violates Article 5 of the Declaration, which prohibits pets on common areas except for ingress and egress through specific service areas.
• Third-Party Access: The Board allowed news crews onto common areas during the Diamondbacks' playoffs. The Petitioner contends the Declaration limits common area access to owners and their guests, and the Board lacks the unilateral authority to grant easements to strangers for media purposes.
• Governance Discretion: The Respondent argues the Board has the "sole discretion" regarding the use, maintenance, and repair of common areas.

4. Transparency and Governance

Petitioner claims a systematic effort to marginalize homeowner participation:

• Meeting Conduct: Meeting agendas are described as lacking specifics. Homeowners are limited to 30 minutes of total collective comment.
• Information Access: The Petitioner alleges critical reports (like the Jervasio structural report) were withheld until forced by formal document requests.
• Remote Access: The Board recently eliminated remote access (Google Meet/Teams) for board meetings, which the Petitioner views as an attempt to silence opposition from non-resident owners.

Important Quotes

Donna Hulbert (Petitioner)

"In large part, the most important evidence here today is that there has been leaking from the fifth floor swimming pool area down through an 18-inch concrete slab to the fourth floor garage ceiling… It’s been going on for over five years."

"We have an operating account that according to our management company should be funded at three times operating expenses. It is funded at 0.3 times operating expenses."

"As early as January of 2020, there was evidence of damage… the deterioration would continue… if not remediated, there would be loss of strength of a concrete slab."

"You don’t just get to as the board president, no matter how well-meaning, disregard all the documents and put a puppy potty on the roof."

Darl Wilson (Respondent Counsel)

"These are board decisions where the board has a lot of discretion, especially in the budgetary and the repairs… The CC&R specifically states that the repairs and maintenance are the sole discretion of the board."

"Just because there’s leaking and cracking doesn't necessarily mean that there is a structural problem that needs to be repaired. Concrete cracks and leaks all the time."

"Miss Hulbert wants her budget her way and she wants things to be ran at the complex her way. And even if she was a board member, she doesn't get it her way."

Administrative Law Judge Samuel Fox

"My power to order things is extremely limited to requiring that they follow the documents and the law… I cannot create an enforceable order for them to do anything in particular."

Summary of Financial Data Points

Actionable Insights

• Structural Remediation: Destructive testing (coring) was scheduled to begin in late August 2024. The results of this testing are critical for determining the extent of rebar corrosion and the necessary scope of remediation.
• Fiscal Correction: The Association's reliance on reserve borrowing to fund operating expenses is unsustainable. A transition to budgeting based on actual historical costs—particularly for recurring water and plumbing issues—is necessary to prevent future deficits.
• Reserve Stabilization: At a funding level near 25%, the Association faces a high probability of a special assessment. The Board must reconcile the "fully funded" recommendations of the reserve study with current spending on capital improvements.
• Legal Compliance: If the Board wishes to maintain the roof-top dog pad or allow third-party media access, they may need to seek a formal amendment to the Declaration to avoid ongoing claims of breach of fiduciary duty.
• Transparency Protocols: Improving the specificity of meeting agendas and providing proposals to homeowners in advance of votes would mitigate claims of "governance by whim" and ensure meaningful homeowner participation.