Author Archives: AZ HOA Watch

Litigation Briefing: Fogelsong v. Park Townhouses Homeowners Association (Case No. 25F-H050-REL)

Executive Summary

This briefing document analyzes the legal dispute between Marilyn J. Fogelsong ("Petitioner") and the Park Townhouses Homeowners Association, Inc. ("Respondent" or "Association"), a small eight-unit planned community in Tucson, Arizona. The litigation, spanning from March 2025 through March 2026, centered on Petitioner’s allegations of statutory and governing document violations by the Association’s Board of Directors.

The dispute followed a transition in 2024 from self-management to the hiring of Tucson Realty & Trust Company ("TRT") for professional HOA management. Petitioner, a former Board President and 5% co-owner of a unit, raised four primary issues: conflicts of interest regarding the property manager, unauthorized maintenance of private property, violations of open meeting laws, and breach of fiduciary duties.

Following an initial hearing in July 2025 (where Respondent failed to appear) and a subsequent rehearing in February 2026, the Office of Administrative Hearings (OAH) denied all of Petitioner's claims. The presiding Administrative Law Judges (ALJs) concluded that Petitioner failed to meet the burden of proof required to establish statutory violations and that several claims were either filed under incorrect statutes or fell outside the Department of Real Estate's jurisdiction.

Detailed Analysis of Key Issues

The litigation was structured around four specific claims filed with the Arizona Department of Real Estate (ADRE).

Issue 1: Conflict of Interest (A.R.S. § 33-1811)

Petitioner alleged that the Board failed to disclose conflicts of interest when hiring TRT as the HOA property manager.

• Petitioner's Argument: TRT manages individual rental units for two Board members (Gerald Schwarzenbach and Mark Schlang). Petitioner claimed TRT showed "preferential treatment" by failing to remit parking fines collected from tenants to the HOA and failing to disclose tenant contact information as required by law.
• Respondent's Rebuttal: The Association argued that the dual role of a management company handling both the HOA and individual units was a long-standing practice (over 20 years). Mark Schlang testified that parking fines were not remitted because they could not be authenticated (lacking time/date stamps) and were eventually settled under protest to "clean up" the records.
• Judicial Finding: The ALJ ruled that Petitioner failed to prove that the hiring of TRT constituted a conflict of interest under A.R.S. § 33-1811. The evidence did not establish that the contract provided an impermissible benefit to Board members or their families.

Issue 2: Scope of Management (CC&R Paragraph 19)

Petitioner argued that the HOA exceeded its authority by pursuing a painting project for individual townhouses.

• Petitioner's Argument: Paragraph 19 of the CC&Rs restricts HOA management to "common areas" (driveways and specific landscaping). Petitioner claimed the Board used HOA resources to solicit bids for private structures, including her own, without consent.
• Respondent's Rebuttal: The Board clarified that while they solicited a bulk bid to ensure community aesthetic uniformity, they did not use HOA funds for private repairs. Instead, six of the eight owners voluntarily pooled their resources to hire the contractor individually.
• Judicial Finding: The ALJ found no evidence that HOA funds were actually expended on individual units. Because the work was performed as a collaborative effort among willing owners and not mandated as an HOA expense, no violation of the CC&Rs occurred.

Issue 3: Open Meeting Laws and Records Requests (A.R.S. § 33-1804)

Petitioner alleged that the Board held private meetings without notice and failed to provide requested documents within the statutory 10-day window.

• Petitioner's Argument: Requests for meeting minutes, financial statements, and management proposals made in early 2025 went ignored. Furthermore, a meeting held on February 17, 2025, was provided with only seven days' notice rather than the ten days required by the Bylaws.
• Judicial Finding: The ALJ noted that while the Board admitted to delays in providing records (due to confusion during the management transition), Petitioner pled her case under A.R.S. § 33-1804 (Open Meetings) rather than A.R.S. § 33-1805 (Records Requests). To find a violation under an unpled statute would violate the Respondent's due process. Regarding the February meeting, the notice sent via email was deemed sufficient for a Board meeting under the emergency/regular provisions of the Bylaws.

Issue 4: Fiduciary Duty (A.R.S. § 10-830)

Petitioner alleged the Board failed to act in good faith and with the care of an ordinarily prudent person.

• Outcome: This issue was stricken from both the original and rehearing proceedings. The ADRE and OAH do not have jurisdiction to adjudicate claims under Title 10 (Corporations and Associations); their authority is limited to Title 33 (Planned Communities) and condominium documents.

Key Entities and Roles

Important Quotes with Context

"It’s all new to me, but I don’t have a specific question." — Marilyn J. Fogelsong (Initial Hearing, 1:21 p.m.) Context: Petitioner's admission at the start of the first hearing, highlighting her status as a self-represented (pro se) litigant navigating administrative law for the first time.

"The association chose to find a professional management company to look after our interests because we are owners spread far and wide." — Gerald Schwarzenbach (Rehearing Testimony) Context: Explaining the rationale for returning to professional management through TRT after a period of self-management under Petitioner's tenure.

"Notice was given on February 10th, which was improper notice because our CCNRs require 10 days notice… and Arizona law does too." — Marilyn J. Fogelsong (Rehearing Testimony) Context: Petitioner’s central argument regarding the lack of transparency and statutory compliance in the Board’s decision-making process.

"Character is not at issue in an HOA dispute. Neither party shall be permitted to offer character evidence regarding a party or witness." — ALJ Jenna Clark (Minute Entry, Feb 9, 2026) Context: A legal ruling issued to prevent the hearing from devolving into personal attacks regarding Petitioner's alleged "systematic attempt to devalue the property."

Actionable Insights

Based on the findings of the Administrative Law Judges and the evidence presented in the case, the following insights are derived for future HOA governance or legal disputes:

1. Statutory Precision in Filing: The denial of Issue 3 (Records Requests) underscores the necessity of citing the correct statute. Filing a records request grievance under A.R.S. § 33-1804 (Open Meetings) rather than § 33-1805 (Records) is a fatal procedural error that an ALJ cannot correct without violating due process.
2. Clarifying Management Scope: To avoid disputes regarding "unsanctioned projects" on private property, Associations should clearly distinguish between HOA-funded maintenance and owner-funded maintenance facilitated by the HOA. In this case, the Board avoided liability because they did not mandate the project or spend Association funds on private units.
3. Conflict of Interest Disclosure: While the court did not find a violation, the friction caused by TRT's dual role suggests that HOAs should formally disclose any business relationships between the management firm and individual board members during open meetings to ensure compliance with A.R.S. § 33-1811.
4. Jurisdictional Limits: Petitioners must recognize that the ADRE only handles matters related to Title 33. Any claims regarding corporate "good faith" or general standards of conduct for directors (Title 10) must be pursued in Superior Court, as they fall outside administrative jurisdiction.
5. Documentation of Violations: For enforcement of fines (e.g., parking), documentation must be robust. The Board’s inability to collect or remit fines in this case stemmed from a lack of "independent verification" (time/date stamps), making the violations legally vulnerable.

Administrative Hearing Briefing: Krahn et al. v. Tonto Forest Estates Homeowners Association

Executive Summary

This document provides a comprehensive analysis of the consolidated legal proceedings between Petitioners John and Janet Krahn (et al.) and the Respondent, Tonto Forest Estates Homeowners Association (TFE). Between January 2024 and August 2025, the Arizona Office of Administrative Hearings (OAH) adjudicated six distinct petitions involving allegations of governing document violations and statutory non-compliance.

The litigation culminated in a series of hearings before Administrative Law Judge (ALJ) Adam D. Stone. The final rulings favored the Petitioners in five of the six matters. The core of the dispute centered on the interpretation of the Association's Covenants, Conditions, and Restrictions (CC&Rs) regarding septic system assessments, transparency in election ballot storage, the legitimacy of violation notices, and the timely fulfillment of records requests. While the Petitioners were successful in establishing most violations, the tribunal declined to award civil penalties, instead ordering the reimbursement of filing fees totaling $3,500.00 and directing the Association to comply with its governing documents and state statutes moving forward.

Detailed Analysis of Key Themes

1. Financial Accountability and Septic System Management

A primary point of contention involved CC&R Section 4.32, which governs the "Required Sewage Treatment System." The disputes highlighted a tension between collective association responsibility and individual owner obligations:

• Assessment Equity: The tribunal determined that TFE improperly assessed empty or undeveloped lots for septic-related expenses. The ALJ ruled that these assessments are only applicable once a dwelling unit is constructed.
• Maintenance vs. Replacement: The proceedings clarified the financial boundaries of septic repairs. While the Association is responsible for "monitoring, maintenance, and repair," owners are responsible for "capital improvements or replacements." The reimbursement of a $75.00 "P-Series Float" to a homeowner was ruled improper because the part was deemed a replacement rather than a repair.

2. Statutory Compliance and Notice Requirements

The litigation addressed the Association’s failure to adhere to the procedural requirements set forth in Arizona Revised Statutes (A.R.S.):

• Specificity in Violations: Under A.R.S. § 33-1803, the Association is required to provide specific references to governing documents when issuing violation notices. TFE’s "Friendly Reminders" regarding tree trimming were found deficient because they lacked guidance on which CC&R sections were violated.
• Records Access: The Association’s failure to fulfill a redacted records request within the statutory ten-day window (A.R.S. § 33-1805) was ruled a violation. The ALJ rejected the Association's defense that the records were withheld due to "pending litigation," noting the documents existed prior to the legal conflict.

3. Governance and Transparency

Two cases specifically examined the internal operations of the TFE Board:

• Election Anonymity: While Bylaw 3.9 requires "secret written ballots," the Association had been attaching ballots to envelopes during storage. The ALJ ruled this violated the intent of anonymity, even though the bylaws were silent on post-election storage procedures.
• Executive Session Authority: The only area where the Association prevailed was regarding the decision to file a claim with Directors and Officers (D&O) insurance. The ALJ ruled that under A.R.S. § 33-1804(A), the Board was within its rights to discuss and decide upon insurance invocation in a closed session, as it related to pending litigation involving a member.

Case-by-Case Breakdown of Decisions

Important Quotes and Legal Interpretations

On Septic System Responsibilities (CC&R 4.32)

"After installation of the Required Sewage Treatment System, the Association shall assume responsibility for the monitoring, maintenance and repair… If the Required Sewage Treatment System requires any capital improvements or replacements, such capital improvements or replacements shall be the responsibility of the Owner."

On Burden of Proof

The ALJ established the standard for the proceedings as follows:

"A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not… superior evidentiary weight that… is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other."

On Notice Specificity

Regarding tree-trimming notices, the ALJ found:

"Although the notice was merely a 'Friendly Reminder' and not an actual fine notice… it still did not provide Mr. Krahn with guidance as to which section of the CC&R’s was violated."

On Voting Anonymity

"While it is true that the Bylaw does not reference storage following the election, it would necessarily follow that all ballots after counting, should be stored in a similar anonymous fashion."

Actionable Insights for Association Governance

• Differentiated Assessments: Associations must strictly follow CC&R definitions regarding "Dwelling Units" versus "Lots." Assessments for services specific to improved property (like septic monitoring) cannot be blanket-applied to undeveloped land unless explicitly authorized.
• Procedural Rigor in Violations: To avoid statutory violations, all homeowner notices—even "friendly" ones—should cite the specific governing document provision being enforced.
• Records Request Deadlines: Boards cannot use "pending litigation" as a blanket excuse to withhold general association records (such as violation notices sent to other members) if those records are not privileged and were not created specifically for the litigation.
• Maintaining Secret Ballots: The duty to provide a "secret ballot" extends to the storage of those records. Any filing system that allows a third party to link a specific ballot to a specific member after the count is completed constitutes a violation of anonymity.
• Closed Session Limitations: Boards may legally take action in closed sessions regarding litigation strategy and insurance claims related to lawsuits involving members, provided the discussion falls under the specific exceptions of A.R.S. § 33-1804.

Final Financial Summary

Per the Order Nunc Pro Tunc (June 5, 2025) and the final ALJ decision, the Respondent is required to reimburse the following filing fees to the Petitioners:

• Case 24F-H033-REL: $1,000.00
• Cases 25F-H002, 006, 020, and 011: $500.00 each ($2,000.00 total)
• Total Reimbursement: $3,000.00 (Note: Case 25F-H009-REL was denied; therefore, the $500.00 fee for that case was not reimbursed).
• Civil Penalties: $0.00 (The tribunal declined to award civil penalties in all cases).

Legal Analysis and Briefing: John Krahn et al. vs. Tonto Forest Estates Homeowners Association

This briefing document provides a comprehensive analysis of the consolidated legal proceedings (No. 24F-H033-REL-RHG et al.) between John Krahn and other petitioners and the Tonto Forest Estates Homeowners Association (TFE HOA). It synthesizes the arguments, legal interpretations, and the final Administrative Law Judge (ALJ) decision regarding septic system assessments, maintenance responsibilities, and board transparency.

Executive Summary

The litigation involved a series of disputes centered on the interpretation of the association's Covenants, Conditions, and Restrictions (CC&Rs) and Arizona Revised Statutes (A.R.S.). The core conflict stemmed from how the HOA managed and assessed costs for individual septic systems within a community where roughly 10% of the lots remain undeveloped.

In her final decision dated March 4, 2026, ALJ Velva Moses-Thompson issued a mixed ruling. The Petitioners prevailed on the primary issue of septic assessments for empty lots, with the ALJ finding that undeveloped lots without septic systems cannot be charged for septic-related expenses under CC&R 4.32. However, the Respondent (the HOA) was found to be the prevailing party on three other dockets involving component replacement reimbursements, violation notice procedures, and the invocation of insurance coverage in executive sessions.

Detailed Analysis of Key Themes

1. Septic Assessment Equity for Undeveloped Lots

The most significant point of contention was whether the HOA could charge a uniform septic assessment to all lot owners, including those with empty lots.

• Petitioner Argument: Krahn argued that CC&R 4.32 explicitly ties septic obligations to "after installation" and the "construction of a Dwelling Unit." Since empty lots have no systems to monitor, maintain, or repair, they should not subsidize the systems of developed lots. He characterized these as "limited common expenses" benefiting only a subset of owners.
• HOA Argument: The HOA contended that septic maintenance is a "common expense" under CC&R 8.1, which requires assessments to be "allocated equally among all lots." They argued that a previous ruling (the "Burns case") forced them into this uniform assessment model to avoid "individualized assessments," which they believed were prohibited.
• ALJ Finding: The ALJ ruled that CC&R 4.32 only applies to lots with a dwelling unit and an installed sewage treatment system. Consequently, the HOA violated the CC&Rs by imposing septic assessments on empty lots.

2. Categorization of Maintenance: "Repair" vs. "Replacement"

The parties disagreed on whether the HOA's reimbursement of a $75 "P-series float" to a member was a "repair" (HOA responsibility) or a "replacement" (owner responsibility).

• Legal Semantic Dispute: The HOA used a dictionary definition of "repair" that includes "restoring by replacing a part." Krahn argued that any "replacement" of a component, regardless of size, is an owner responsibility under CC&R 4.32.
• ALJ Finding: The ALJ sided with the HOA, concluding that "replacement" in the context of CC&R 4.32 refers to "major expenditures" or "large-scale system overhauls." Minor part replacements required to restore function fall under the HOA's duty to "repair."

3. Board Governance and the Open Meeting Law

Petitioners challenged the board's decision to invoke Directors and Officers (D&O) insurance coverage during an executive (closed) session rather than an open meeting.

• Transparency Concerns: Krahn argued that invoking insurance is a "final board action" with significant financial consequences (e.g., premium increases of 750% and 50-fold deductible increases) and must occur in an open forum under A.R.S. § 33-1804.
• HOA Defense: The HOA argued that the decision was part of "litigation strategy" discussed with legal counsel, which is an enumerated category permitted for closed sessions.
• ALJ Finding: The ALJ found no violation. Under A.R.S. § 33-1804(A)(2), board meetings may be closed to consider pending or contemplated litigation.

Summary of Docket Outcomes

Important Quotes and Context

On Septic Responsibility

"After installation of the Required Sewage Treatment System, the Association shall assume responsibility for the monitoring, maintenance and repair… If the Required Sewage Treatment System requires any capital improvements or replacements, such capital improvements or replacements shall be the responsibility of the Owner."

— CC&R 4.32 (The foundational text for the septic dispute).

On the Definition of "Repair"

"Merriam-Webster defines 'repair' as 'to restore by replacing a part or putting together what is torn or broken; to fix; to restore to a sound or healthy state.' If the word 'replacement' was intended to apply to the replacement of minor parts, it would render the section allocating responsibility for capital improvements and replacements to the homeowner insignificant and superfluous."

— ALJ Decision (Finding 6) (Explaining why minor component swaps are repairs).

On Board Transparency

"Arizona law draws a deliberate distinction between consideration which may occur in close session and final board action particularly with financial consequences which must occur openly."

— John Krahn (Arguing that the financial impact of insurance claims necessitates an open vote).

"The open meeting law squarely allows for that type of discussion and decision in a closed session… The attorney general has already said [HOAs] are not public bodies and therefore are not within the purview of the [public body] opening meeting law."

— Austin Baillio (HOA Counsel) (Counter-arguing the flexibility of executive sessions for litigation matters).

Actionable Insights for Association Governance

1. Differentiated Assessments: The ruling confirms that HOAs must strictly adhere to "triggers" for assessments found in CC&Rs. If a document specifies that an obligation begins "after installation," the HOA cannot use general "common expense" clauses to override that specificity and charge owners who do not have the improvement.
2. Maintenance Definitions: Associations should clearly define the threshold between a "repair" and a "replacement" in their internal policies. The ALJ's focus on "large-scale system overhauls" as the definition of replacement provides a legal benchmark for distinguishing between minor parts and major capital expenditures.
3. Procedural Rigor in Violation Notices: Under A.R.S. § 33-1803, the association's duty to provide an exhaustive written explanation of a violation (including the specific CC&R provision and the name of the observer) is contingent upon the member first responding via certified mail. Associations should ensure their notices include the proper process for members to contest.
4. Executive Session Scope: While boards must be transparent, Arizona law provides broad protection for discussing litigation-related matters (including insurance) in closed sessions. Decisions made there that are directly tied to litigation strategy do not necessarily require a second, public vote if they fall under the protections of A.R.S. § 33-1804.
5. Financial Restitution: As the prevailing party in Docket 24F-H033, the HOA was ordered to pay the Petitioners' $500 filing fee. This underscores the financial risk associations face when defending interpretations of governing documents that conflict with plain-language readings of specific CC&R provisions.

Briefing Document: Krahn et al. v. Tonto Forest Estates Homeowners Association (Consolidated Cases)

Executive Summary

Between January 2024 and August 2025, the Arizona Office of Administrative Hearings (OAH) adjudicated a series of six consolidated petitions filed by John Krahn, Michael Holland, and associated trusts (the “Petitioners”) against the Tonto Forest Estates Homeowners Association (“TFE” or the “Respondent”). The disputes primarily concerned interpretations of the Association’s Covenants, Conditions, and Restrictions (CC&Rs), bylaws, and Arizona Revised Statutes (A.R.S.) Title 33 regarding planned communities.

The Administrative Law Judge (ALJ), Adam D. Stone, ultimately ruled in favor of the Petitioners on five of the six matters. The rulings established clear boundaries for HOA governance, specifically regarding the assessment of undeveloped lots for septic maintenance, the distinction between “repair” and “replacement” of infrastructure, the requirement for anonymity in secret ballots, and the mandatory transparency of non-privileged association records. While the Petitioners were successful in most claims, the tribunal declined to award civil penalties, finding that the Respondent’s new leadership expressed a credible commitment to future compliance.

Detailed Analysis of Key Themes

1. Assessment and Infrastructure Liability (CC&R 4.32)

The most significant financial disputes revolved around Section 4.32 of the CC&Rs, which governs the “Required Sewage Treatment System.” Two distinct issues were addressed:

• Assessments on Undeveloped Lots: The Respondent had been assessing all lots for septic-related expenses. The tribunal determined that because the installation of the sewage system is only required upon the construction of a “Dwelling Unit,” empty or undeveloped lots should not be subjected to these specific assessments. The ALJ noted that until a lot is converted to include a dwelling, the owner is not required to share in the sewage treatment assessments.
• Repair vs. Replacement Responsibility: Under CC&R 4.32, TFE is responsible for the “monitoring, maintenance and repair” of installed septic systems, while homeowners are responsible for “capital improvements or replacements.” The tribunal found that a $75.00 reimbursement for a “P-Series Float” was improper because the part constituted a replacement rather than a repair.

2. Procedural Transparency and Record Access

The litigation highlighted critical failures in the Association’s response to member requests and statutory notice requirements:

• Statutory Record Requests: Under A.R.S. § 33-1805(A), associations must fulfill record requests within ten business days. TFE withheld requested violation notices, claiming they were privileged due to ongoing litigation. The ALJ rejected this, noting the records were created by the manager prior to the litigation and were not privileged.
• Anonymity in Voting: Though TFE’s bylaws mandated secret written ballots for elections, the Association had been attaching ballots to envelopes or signature verification pages during storage. The tribunal ruled that post-election storage must maintain the same anonymity required during the voting process.

3. Standards for Violation Notices (A.R.S. § 33-1803)

The dispute over “Friendly Reminders” regarding tree maintenance (aesthetics) clarified the notice requirements for HOAs. The tribunal held that even informal notices regarding the condition of a property must cite the specific provision of the community documents being violated. Failure to provide guidance on which section of the CC&Rs was violated or the specific metrics for compliance (e.g., how far back to cut a tree) constitutes a violation of A.R.S. § 33-1803.

4. Limits of Open Meeting Requirements (A.R.S. § 33-1804)

The single issue on which the Respondent prevailed concerned the use of executive sessions. The Petitioners argued that the Board’s decision to file a claim with its Directors and Officers (D&O) insurance policy should have been made in an open meeting. The ALJ ruled that because the decision was made during the pendency of litigation (a defamation suit filed by a homeowner), the Board was within its rights to discuss and decide upon insurance invocation in a closed session.

Key Judgments and Financial Orders

The following table summarizes the ALJ’s final decisions for each consolidated case:

Note: In the Nunc Pro Tunc order dated June 5, 2025, the filing fee reimbursement for case 24F-H033-REL was corrected from $500 to $1,000.

Important Quotes with Context

On Septic Assessments and Equity

“To divide the costs amongst the empty lots would result in those property owners paying ‘more’ of share of the assessment while owners with only one lot would pay less of share… the CC&R is clear that only lots with dwelling units are required to share in the Assessments issued.”

• Context: Finding of Fact for Case 24F-H033-REL regarding the fairness of charging owners of undeveloped lots for septic maintenance.

On Anonymity in Governance

“While it is true that the Bylaw does not reference storage following the election, it would necessarily follow that all ballots after counting, should be stored in a similar anonymous fashion.”

• Context: Ruling on Case 25F-H020-REL regarding the Respondent’s failure to keep ballots and signature pages separate after an election.

On Executive Session Rights

“There was nothing in the statute that requires that only the discussion must be in private and not the actual action/decision to be made in open, especially when the litigation involved a homeowner/member of the Association.”

• Context: Conclusion of Law for Case 25F-H009-REL regarding the Board’s right to decide on legal defense strategies behind closed doors.

On Record Withholding

“The tribunal finds that Respondent wrongfully withheld the notices requested, as they were not privileged in anyway… the notices were drafted and sent out by the Association’s manager, prior to this pending litigation.”

• Context: Ruling on Case 25F-H011-REL regarding the 10-day record production requirement.

Actionable Insights for Association Management

• Review Assessment Structures: Associations must ensure that assessments related to specific infrastructure (like septic or sewage) are only applied to lots that are statutorily or contractually required to utilize that infrastructure under the CC&Rs.
• Distinguish Maintenance from Replacement: Management boards must maintain clear documentation for infrastructure expenditures. If the governing documents distinguish between “repair” (HOA cost) and “replacement” (Homeowner cost), even minor parts (e.g., a $75 float) should be scrutinized for their functional category to avoid improper use of association funds.
• Formalize “Friendly” Communications: All communications regarding property violations—regardless of how informal the tone—must include specific citations of the governing documents. Failure to cite the specific CC&R or Bylaw section renders the notice legally insufficient under Arizona law.
• Strict Adherence to Record Requests: Associations should not reflexively claim “pending litigation” or “privilege” to deny member record requests. Only documents created for the purpose of litigation or containing attorney-client privileged communications are exempt; general business records (like historical violation notices) must be produced within the 10-day window.
• Maintain Voting Anonymity Throughout: The requirement for “secret ballots” extends beyond the counting process. Boards must implement storage policies that ensure ballots cannot be re-linked to individual voters by anyone reviewing the records post-election.

Briefing Document: Consolidated Proceedings of Krahn et al. v. Tonto Forest Estates Homeowners Association

Executive Summary

This briefing document analyzes a series of consolidated administrative hearings held before the Arizona Office of Administrative Hearings (OAH) between December 2024 and May 2025. The proceedings involved multiple petitions filed by homeowners John Krahn, Janet Krahn, Joseph Pizzicaroli, and Michael Holland (Petitioners) against the Tonto Forest Estates Homeowners Association (Respondent or TFE).

The disputes centered on the interpretation of the Association's Covenants, Conditions, and Restrictions (CC&Rs), compliance with Arizona Revised Statutes (A.R.S.) governing planned communities, and the transparency of Board of Directors' decision-making processes. Of the six primary issues brought before Administrative Law Judge (ALJ) Adam D. Stone, the tribunal granted five petitions in favor of the homeowners and denied one in favor of the Association.

Final Case Outcomes Summary

Detailed Analysis of Key Themes

1. Interpretation of Financial Obligations under CC&Rs

A central conflict involved CC&R 4.32, which governs sewage treatment systems. The Petitioners argued that the Association improperly assessed empty/undeveloped lots for septic expenses and used communal funds to reimburse a former Board member for a "replacement" part rather than a "repair."

• Septic Assessments: The tribunal determined that only lots with dwelling units should be subject to septic assessments. Charging empty lots resulted in an inequitable distribution of costs.
• Repair vs. Replacement: The Association reimbursed $75.00 for a "P-Series Float." The Petitioners provided evidence that this was a replacement part, not a repair. The tribunal agreed, noting that under CC&R 4.32, capital improvements or replacements are the sole responsibility of the owner.

2. Governance Transparency and Record Access

The Association's handling of member records and election materials was scrutinized under A.R.S. § 33-1805.

• Redaction vs. Withholding: When Petitioners requested copies of violation notices sent to other members (to prove inconsistent enforcement), the Association withheld them entirely, claiming attorney-client privilege. The tribunal ruled that the Association wrongfully withheld these documents, as they were drafted by the management company prior to litigation. The ALJ emphasized that the Association had a statutory obligation to provide redacted copies rather than withholding the records in full.
• Ballot Anonymity: While Bylaw 3.9 requires secret written ballots, Petitioners discovered that ballots were stored attached to signature envelopes, potentially allowing anyone reviewing the records to see how specific members voted. The tribunal ruled that post-election storage must maintain the same anonymity as the election itself.

3. Enforcement of Community Standards

Case 25F-H006-REL addressed the Association’s "Friendly Reminders" regarding tree maintenance and neighborhood "aesthetics."

• Lack of Specificity: The Petitioner received a notice to cut back a tree but was not cited a specific CC&R provision or clear guidance on the required extent of the work.
• Statutory Compliance: Under A.R.S. § 33-1803, notices of violation must provide the specific provision allegedly violated. The tribunal found the Association’s notices lacked the necessary guidance to satisfy statutory requirements, even if the notices were framed as "reminders" rather than formal fines.

4. Open Meeting Laws and Discretionary Decisions

The most heavily litigated issue (25F-H009-REL) involved the Board's decision to invoke its Directors and Officers (D&O) insurance policy during a defamation lawsuit filed by John Krahn.

• Petitioner’s Argument: Krahn argued that the decision to invoke insurance—which resulted in a 750% premium increase and eventual policy cancellation—was a discretionary financial decision that should have been made in an open meeting under A.R.S. § 33-1804.
• Respondent’s Argument: Board President Dwight Jolivette argued that filing the claim was a legal strategy protected by the "pending litigation" exception and that the Board had a fiduciary duty to notify the insurer as soon as the lawsuit was served.
• Tribunal Ruling: The ALJ denied this petition, ruling that the Board was within its rights to discuss and decide to invoke insurance in a closed session because there was pending litigation. The tribunal found no statutory requirement for the final decision on such a matter to be made in an open meeting when it specifically involved litigation with a member.

Important Quotes with Context

On Open Meeting Laws and Secrecy

John Krahn: "The intent behind open meeting law is to prohibit decision-making in secret… Decisions cannot be made in executive session. They must be voted on publicly before they become binding."

• Context: Mr. Krahn arguing that the Board violated A.R.S. § 33-1804 by deciding to shift legal costs to insurance behind closed doors.

On Board Discretion and Legal Strategy

Dwight Jolivette: "Mr. Krahn is hanging his hat on one word… consideration. In other words, an HOA board can only think about things in an executive session. He can't act. We think that's wrong… Otherwise, HOA board won't be able to get much done and still preserve confidentiality and privilege."

• Context: The Board President's defense of taking action (filing an insurance claim) during a closed session regarding pending litigation.

On Record Redaction

Administrative Law Judge Stone: "The tribunal finds that Respondent wrongfully withheld the notices requested, as they were not privileged in any way… the notices were drafted and sent out by the Association’s manager, prior to this pending litigation."

• Context: Ruling in case 25F-H011-REL regarding the Association's refusal to provide redacted violation notices.

On Procedural Rigor

Dwight Jolivette: "I am not an attorney. I don't pretend to be one. I make a lot of mistakes… I do the best I can because it makes sense financially for us and we're trying to be good stewards of our association money."

• Context: Mr. Jolivette explaining why the Board handled its own legal defense and insurance decisions without a present attorney at the hearing.

Actionable Insights for Association Governance

• Assessments Must Align with Specific CC&R Language: Associations cannot expand assessments (such as septic fees) to empty lots if the governing documents specifically link those fees to dwelling units or installed systems.
• The "Repair vs. Replacement" Distinction is Critical: Boards must carefully review invoices to ensure they are not using general maintenance funds for capital replacements that are, by declaration, the homeowner's responsibility.
• Redaction is Mandatory, Not Optional: Under A.R.S. § 33-1805, an Association cannot refuse a records request entirely because some information is protected. They are legally obligated to redact the sensitive portions and provide the remaining document.
• Notice Clarity is a Statutory Requirement: Even informal "friendly reminders" should cite the specific CC&R or rule being enforced. Failure to do so renders the notice legally insufficient under A.R.S. § 33-1803.
• Secret Ballots Require Permanent Anonymity: Associations must ensure that their storage practices for election materials do not inadvertently allow the reconstruction of how individual members voted, as this violates the intent of "secret" ballot requirements.
• Litigation Decisions Have Higher Privacy Thresholds: While financial decisions typically require open meetings, decisions directly impacting pending litigation with a member can be made in closed sessions, provided they fall under the legal advice or pending litigation exceptions of A.R.S. § 33-1804.

Briefing Document: Petitioners vs. Tonto Forest Estates Homeowners Association

Executive Summary

This briefing document details the legal proceedings and administrative decisions regarding a series of consolidated cases brought before the Arizona Office of Administrative Hearings (OAH). The disputes involve several homeowners and living trusts (Petitioners), represented primarily by John Krahn and Michael Holland, against the Tonto Forest Estates Homeowners Association (Respondent or TFE), represented by Board President Dwight Jolivette.

The litigation, overseen by Administrative Law Judges (ALJs) Adam D. Stone and Velva Moses-Thompson, encompassed six distinct petitions (Case Nos. 24F-H033-REL, 25F-H002-REL, 25F-H006-REL, 25F-H009-REL, 25F-H011-REL, and 25F-H020-REL). These petitions alleged various violations of the Association’s Covenants, Conditions, and Restrictions (CC&Rs), Bylaws, and Arizona Revised Statutes (A.R.S.) governing planned communities.

Following hearings conducted between December 2024 and May 2025, the OAH issued a final decision on June 4, 2025 (later amended on June 5, 2025). The tribunal ruled in favor of the Petitioners in five out of the six matters, ordering TFE to comply with community documents and state statutes, and requiring the reimbursement of $3,500 in filing fees. While the tribunal found several violations, it consistently declined to award civil penalties, noting the Respondent’s efforts to remedy technical issues and ensure future compliance.

Detailed Analysis of Key Themes

1. Septic System Assessment and Maintenance Responsibilities

The tribunal addressed two separate issues regarding septic systems under CC&R 4.32.

• Assessment of Undeveloped Lots (24F-H033-REL): Petitioners argued that TFE improperly assessed empty or undeveloped lots for septic-related expenses. The ALJ ruled that according to CC&R 4.32, the obligation to install and subsequently maintain a sewage treatment system is tied to the construction of a "Dwelling Unit." Therefore, only lots with dwelling units are subject to these assessments. Dividing costs among empty lots was found to be a violation of the governing documents.
• Repair vs. Replacement (25F-H002-REL): A dispute arose regarding a $75.00 reimbursement to a former Board member for a "P-Series Float." Petitioners contended this was a replacement part, which is the homeowner's financial responsibility, while TFE argued it was a repair covered by the Association. The ALJ concluded the float was a replacement part, making the reimbursement an improper use of Association funds.

2. Notice of Violation and Enforcement Procedures (25F-H006-REL)

Petitioners challenged a notice regarding tree trimming, alleging it failed to meet statutory requirements under A.R.S. § 33-1803.

• Statutory Compliance: The tribunal found that although the notice was framed as a "Friendly Reminder," it lacked necessary guidance. Specifically, it did not identify the specific CC&R section allegedly violated or provide clear instructions on the extent of required trimming.
• Due Process: The tribunal noted that Mr. Krahn requested an appeal on the violation, but the Board failed to schedule it.

3. Ballot Secrecy and Post-Election Storage (25F-H020-REL)

This matter centered on the anonymity of the voting process under Bylaw 3.9.

• Violation of Secret Ballot: Petitioners alleged that TFE attached signature verification pages to ballots after elections, potentially allowing anyone reviewing records to identify how members voted.
• Ruling: The ALJ ruled that while the Bylaws do not explicitly detail storage procedures, the requirement for a "secret written ballot" implies that anonymity must be maintained even after the count is complete.

4. Board Transparency and Open Meeting Requirements (25F-H009-REL)

Petitioners alleged TFE violated A.R.S. § 33-1804(A) by deciding to invoke Directors and Officers (D&O) insurance coverage during a closed session rather than an open meeting.

• The Litigation Exception: This was the only case where the Respondent prevailed. The ALJ determined that because there was pending litigation (a defamation suit filed by Mr. Krahn against the Board), the Board was within its rights to both discuss and decide on insurance invocation in a closed session.
• Financial Impact: Petitioners argued the insurance claim led to policy cancellation and increased costs, but the Respondent testified that the cancellation was due to the insurer withdrawing from the market, not the claim itself.

5. Access to Association Records (25F-H011-REL)

Petitioners sought copies of all violation notices sent to other homeowners regarding "aesthetics" and tree trimming, requesting that personally identifying information be redacted.

• Withholding of Records: TFE withheld the documents based on legal advice, claiming they were part of ongoing litigation.
• Ruling: The ALJ found the records were wrongfully withheld. Because the notices were drafted and distributed by the Association’s manager prior to the litigation, they were not privileged and should have been produced within the statutory ten-business-day window.

Case Outcomes and Financial Summary

Important Quotes

Regarding Assessment Practices (24F-H033-REL)

"To divide the costs amongst the empty lots would result in those property owners paying 'more' of share of the assessment while owners with only one lot would pay less of share… the CC&R is clear that only lots with dwelling units are required to share in the Assessments issued." (ALJ Decision, Findings of Fact/Conclusions of Law)

Regarding Notice Standards (25F-H006-REL)

"The tribunal finds that although the notice was merely a 'Friendly Reminder' and not an actual fine notice… it still did not provide Mr. Krahn with guidance as to which section of the CC&R’s was violated." (ALJ Decision, Conclusions of Law)

Regarding Ballot Storage (25F-H020-REL)

"While it is true that the Bylaw does not reference storage following the election, it would necessarily follow that all ballots after counting, should be stored in a similar anonymous fashion." (ALJ Decision, Conclusions of Law)

Regarding Record Disclosure (25F-H011-REL)

"The tribunal finds that Respondent wrongfully withheld the notices requested, as they were not privileged in anyway. The tribunal disagrees with Mr. Jolivette’s interpretation of 'pending litigation' as defined in this statute." (ALJ Decision, Conclusions of Law)

Actionable Insights

• Assessment Accuracy: Homeowners associations must strictly adhere to the specific language of their CC&Rs when levying assessments. If the governing documents link maintenance costs to "Dwelling Units," undeveloped lots cannot be included in that specific financial pool.
• Enforcement Documentation: Compliance notices—even informal "friendly reminders"—must cite the specific community document provision being violated. Failure to do so renders the enforcement action legally deficient under A.R.S. § 33-1803.
• Voter Anonymity Infrastructure: To comply with "secret ballot" requirements, associations should implement storage policies that decouple identifying information (like signature pages) from the ballots themselves immediately after verification and before archiving.
• Transparency vs. Privilege: While Boards may discuss and act on insurance and legal strategies in closed sessions during active litigation, they cannot use "pending litigation" as a blanket excuse to withhold general association records (such as violation notices) that were generated in the normal course of business.
• Financial Risk of Non-Compliance: The consolidation of multiple single-issue petitions can lead to significant financial liability for an association. In this matter, the failure to address individual grievances resulted in a $3,500 reimbursement obligation to the Petitioners.