Case Summary
| Case ID | 18F-H1817020-REL |
|---|---|
| Agency | ADRE |
| Tribunal | OAH |
| Decision Date | 2018-05-29 |
| Administrative Law Judge | Velva Moses-Thompson |
| Outcome | full |
| Filing Fees Refunded | $500.00 |
| Civil Penalties | $0.00 |
Parties & Counsel
| Petitioner | Lewis Smith | Counsel | Mark J. Bainbridge, Esq. |
|---|---|---|---|
| Respondent | Desert Isle Homeowners Association, Inc. | Counsel | William D. Condray, Esq. |
Alleged Violations
ARIZ. REV. STAT. section 33-1804(F)
Outcome Summary
The Administrative Law Judge granted the Petitioner's request for relief, finding that the Respondent HOA violated ARIZ. REV. STAT. section 33-1804(F) by failing to provide adequate notice and agenda information regarding the proposed CC&R amendment to prohibit short term rentals. The Respondent was ordered to pay the filing fee to the Petitioner.
Key Issues & Findings
Violation of open meeting and notice requirements regarding CC&R amendment
The Board violated ARIZ. REV. STAT. section 33-1804(F) when it failed to provide notice or an agenda to all of its members of information that was reasonably necessary to inform the members that an amendment to the CC&Rs to prohibit short term members would be discussed at its special board of directors meetings held on November 8, 2017 and November 20, 2017.
Orders: Petitioner's petition was granted. Respondent was ordered to pay Petitioner the filing fee required by ARIZ. REV. STAT. section 32-2199.01.
Filing fee: $500.00, Fee refunded: Yes
Disposition: petitioner_win
- ARIZ. REV. STAT. section 33-1804
- ARIZ. REV. STAT. section 33-1804(B)
- ARIZ. REV. STAT. section 33-1804(E)(1)
- ARIZ. REV. STAT. section 33-1804(F)
- ARIZ. REV. STAT. section 41-2198.01
- ARIZ. REV. STAT. section 32-2199.02(A)
- ARIZ. REV. STAT. section 32-2199.01
Analytics Highlights
- ARIZ. REV. STAT. section 33-1804
- ARIZ. REV. STAT. section 33-1804(B)
- ARIZ. REV. STAT. section 33-1804(E)(1)
- ARIZ. REV. STAT. section 33-1804(F)
- ARIZ. REV. STAT. section 41-2198.01
- ARIZ. REV. STAT. section 32-2199.02(A)
- ARIZ. REV. STAT. section 32-2199.01
Video Overview
Audio Overview
Decision Documents
18F-H1817020-REL Decision – 629473.pdf
18F-H1817020-REL Decision – 629515.pdf
18F-H1817020-REL Decision – 636989.pdf
Administrative Law Judge Decision Briefing: Smith vs. Desert Isle Homeowners Association, Inc.
Executive Summary
This document provides a comprehensive analysis of the legal dispute between Petitioner Lewis Smith and Respondent Desert Isle Homeowners Association, Inc. The core of the case revolves around allegations that the HOA’s Board of Directors violated Arizona’s open meeting laws.
The Administrative Law Judge (ALJ) ultimately ruled in favor of the Petitioner, finding that the Desert Isle HOA violated ARIZ. REV. STAT. § 33-1804(F). The decision established that the Board failed to provide its members with agendas containing information “reasonably necessary to inform the members” about discussions concerning a proposed amendment to the Covenants, Conditions, and Restrictions (CC&Rs) that would prohibit short-term rentals. This failure occurred during Board of Directors meetings held on November 8 and November 20, 2017.
As a result of this finding, the Petitioner’s petition was granted, and the Respondent was ordered to pay the Petitioner’s filing fee. The ruling underscores the state’s policy that planned community meetings must be conducted with transparency, and agendas must provide sufficient detail for members to understand the matters to be discussed or decided.
Case Overview
Case Number
18F-H1817020-REL
Tribunal
Office of Administrative Hearings (Phoenix, Arizona)
Petitioner
Lewis Smith
Respondent
Desert Isle Homeowners Association, Inc.
Administrative Law Judge
Velva Moses-Thompson
Hearing Date
April 16, 2018
Decision Date
May 29, 2018
Central Allegation
On or about December 5, 2017, Petitioner Lewis Smith filed a petition with the Arizona Department of Real Estate alleging that the Desert Isle HOA violated ARIZ. REV. STAT. § 33-1804. The petition contended that the Board of Directors discussed and advanced a significant CC&R amendment without proper notification to the association members.
The petition states, in part:
“All Board members have been meeting to discuss and add an amendment to the CC&R’s [sic] Prohibiting short term renters. These meetings have not been conducted openly and no notice or agenda were provided containing information necessary to inform members of the association of the matters to be discussed… At no time was the issue to add an amendment for short term rentals properly noticed or on an agenda for discussion before it became a ballot vote.”
Chronology of Events
October 23, 2017:
• Lewis Smith, William H. Winn, Kevin Barnett, and Chester Jay submit a formal request to the Board for a special members’ meeting.
• The stated purposes of the meeting were to:
1. Select and fund an attorney to update the HOA’s bylaws and CC&Rs to comply with current Arizona law.
2. Discuss obtaining a reserve study for the association’s capital needs.
3. Discuss a separate attorney letter regarding HOA governance.
October 24, 2017:
• Board President Doug Robinson responds to the request, expressing support for a meeting but stating that more than 30 days would be needed to gather supporting documentation.
October 31, 2017:
• A second group of homeowners, including Board members Greg Yacoubian, Doug Robinson, Curt Carlson, and Mike Andrews, submits a request to add an item to the agenda of the forthcoming special meeting.
• Their request was to “amend the CC&Rs by adding a section prohibiting ‘Short Term Rentals’ and defining minimum time allowed for Rentals.”
November 5, 2017:
• The Board provides an agenda for a Board of Directors meeting scheduled for November 8, 2017. The agenda did not include any item related to the proposed amendment to prohibit short-term rentals.
November 8, 2017:
• The Board of Directors meeting is held.
• The Board votes to call a special members’ meeting before November 23, 2017, to address the two petitions.
• During the “BOARD INPUT” section, member Curt Carlson “spoke of past issues about short term renting,” but this was not a formal agenda item for discussion or action.
November 10, 2017:
• The Board emails Lewis Smith, acknowledging his petition and requesting a “narrative explanation from you on each of your subjects” by November 17, 2017, to prepare the meeting information package for all homeowners.
November 18, 2017:
• The Board sends an agenda for another Board of Directors meeting scheduled for November 20, 2017.
• The agenda lists “Review/approval of special meeting mailing package” as a topic but provides no specific details regarding the proposed amendment on short-term rentals.
December 1, 2017:
• Board President Doug Robinson emails all homeowners to explain the upcoming special meeting on December 16, 2017.
• The email states: “To avoid cost and time we put both petitions together and are having one meeting that will required [sic] all owners to vote for or against these two petitions.”
• The agenda for the December 16 meeting is attached, which explicitly lists a vote on prohibiting short-term rentals.
December 16, 2017:
• The special members’ meeting is held. A vote is taken on the proposed amendment to prohibit short-term rentals.
• Vote Result: 9 homeowners in favor, 6 homeowners against.
Legal Framework and Analysis
The case centered on the interpretation and application of Arizona Revised Statutes related to planned communities.
Key Statute: ARIZ. REV. STAT. § 33-1804
This statute governs meetings and notices for planned communities. The judge’s decision rested heavily on the policy outlined in subsection (F).
• § 33-1804(B): Requires that notice for any special meeting of members must state the purpose, including “the general nature of any proposed amendment to the declaration or bylaws.”
• § 33-1804(E)(1): Requires that the agenda for a Board of Directors meeting be made available to all members in attendance.
• § 33-1804(F): This subsection contains the state’s declaration of policy, which was central to the judge’s conclusion. It states:
Burden of Proof
The Petitioner, Lewis Smith, bore the burden of proving that the Respondent violated the statute by a “preponderance of the evidence.” This standard is defined as evidence that is sufficient “to incline a fair and impartial mind to one side of the issue rather than the other.”
Findings and Conclusion of the Court
The Administrative Law Judge found that the Petitioner successfully met the burden of proof. The decision concludes that the agendas for the November 8 and November 20 Board of Directors meetings were legally insufficient.
Conclusion of Law #4:
“Petitioner established by a preponderance of the evidence that the Board violated ARIZ. REV. STAT. section 33-1804(F) when it failed to provide notice or an agenda to all of its members of information that was reasonably necessary to inform the members that an amendment to the CC&Rs to prohibit short term members would be discussed at its special board of directors meetings held on November 8, 2017 and November 20, 2017.”
Final Order
• The Petitioner’s petition in the matter was granted.
• Pursuant to ARIZ. REV. STAT. § 32-2199.02(A), the Respondent (Desert Isle HOA) was ordered to pay the Petitioner the filing fee.
• The Order is legally binding unless a rehearing is requested with the Commissioner of the Department of Real Estate within 30 days of the service of the Order.
Parties and Legal Representation
Address
Legal Counsel
Petitioner
Lewis Smith
5459 E. Sorrento Dr.
Long Beach, CA 90803
Mark J. Bainbridge, Esq.
The Bainbridge Law Firm LLC
2122 E. Highland Ave. Ste. 250
Phoenix, AZ 85016-4779
Respondent
Desert Isle Homeowners Association, Inc.
411 Riverfront Dr. #7
Bullhead City, AZ 86442
William D. Condray, Esq.
2031 Highway 95 Ste. 2
Bullhead City, AZ 86442-6004
Study Guide: Smith v. Desert Isle Homeowners Association, Inc.
This guide provides a detailed review of the administrative case No. 18F-H1817020-REL between Petitioner Lewis Smith and Respondent Desert Isle Homeowners Association, Inc. It includes a short-answer quiz, an answer key, suggested essay questions, and a comprehensive glossary of key terms and entities involved in the matter.
Short-Answer Quiz
Answer the following questions in 2-3 sentences based on the information provided in the case documents.
1. Who are the primary parties in case No. 18F-H1817020-REL, and who represented them legally?
2. What was the three-part purpose of the special meeting requested by Lewis Smith and other homeowners on October 23, 2017?
3. A second petition was submitted on October 31, 2017. What was its purpose and who were the petitioners?
4. What key actions were taken regarding officers and a special meeting during the Board of Directors meeting on November 8, 2017?
5. What did the Desert Isle HOA Board demand from Lewis Smith in its email on November 10, 2017, to proceed with the special meeting?
6. What was the central allegation Lewis Smith made in his petition to the Arizona Department of Real Estate on December 5, 2017?
7. What was the outcome of the vote on the proposed amendment to prohibit short-term rentals at the December 16, 2017 special meeting?
8. Which specific section of the Arizona Revised Statutes did the Administrative Law Judge find the Board had violated?
9. According to the case documents, what is the definition of “preponderance of the evidence”?
10. What was the final ruling issued by Administrative Law Judge Velva Moses-Thompson on May 29, 2018?
Answer Key
1. The primary parties were the Petitioner, Lewis Smith, and the Respondent, Desert Isle Homeowners Association, Inc. Lewis Smith was represented by Mark J. Bainbridge, Esq., and the Desert Isle HOA was represented by William D. Condray, Esq.
2. The purpose of the meeting was threefold: to select and fund an attorney to update the HOA’s bylaws and CC&Rs to comply with current Arizona law; to discuss obtaining a reserve study for the association’s capital needs; and to discuss an attorney letter regarding HOA governance.
3. Greg Yacoubian, Doug Robinson, Curt Carlson, and Mike Andrews submitted a request to amend the CC&Rs by adding a section to prohibit “Short Term Rentals.” They requested this subject be added to the agenda of the special meeting already requested by Lewis Smith’s group to save time and money.
4. At the November 8, 2017 meeting, a motion passed unanimously to remove the existing VP, treasurer, and secretary. New officers and assistants were elected, and another motion passed to call the special meeting requested by the two groups of owners before November 23, 2017.
5. The Board requested a “narrative explanation” from Lewis Smith for each of his proposed subjects. The Board stated it would expect four narratives plus any referenced attorney engagement letters and needed the materials by November 17, 2017, to prepare the special meeting package.
6. Lewis Smith alleged that the Desert Isle HOA Board members met to discuss and add an amendment prohibiting short-term rentals without conducting the meetings openly. He stated that no proper notice or agenda was provided to inform members of the matters to be discussed before the issue became a ballot vote.
7. At the December 16, 2017 meeting, the proposed amendment to prohibit short-term rentals was voted on by homeowners. Nine homeowners voted in favor of the amendment, and six homeowners voted against it.
8. The Judge found that the Board violated ARIZ. REV. STAT. section 33-1804(F). The violation occurred when the Board failed to provide an agenda with information reasonably necessary to inform members that an amendment to the CC&Rs prohibiting short-term rentals would be discussed at the board meetings on November 8 and November 20, 2017.
9. The documents provide two definitions. The first is “such proof as convinces the trier of fact that the contention is more probably true than not.” The second, from Black’s Law Dictionary, is “The greater weight of the evidence… sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”
10. The Administrative Law Judge granted the Petitioner’s petition. The Judge’s order required the Respondent (Desert Isle HOA) to pay the Petitioner the filing fee required by statute.
Essay Questions
1. Construct a detailed timeline of events from the initial petition by Lewis Smith on October 23, 2017, to the final Administrative Law Judge Decision on May 29, 2018. Include all key meetings, communications, and legal filings mentioned in the documents.
2. Analyze the ways in which the Desert Isle Homeowners Association Board failed to comply with the open meeting policies outlined in ARIZ. REV. STAT. section 33-1804. Use specific examples from the meeting agendas and communications to support the analysis.
3. Discuss the concept of “burden of proof” as it applies to this case. Explain who held the burden of proof for the violation and any affirmative defenses, and how the “preponderance of the evidence” standard was met by the Petitioner.
4. Compare and contrast the two petitions submitted by homeowners in October 2017. Evaluate how the Board handled each request and the procedural steps it took that ultimately led to the legal dispute.
5. Based on the findings of fact, evaluate the communication between the Desert Isle HOA Board and its members. Discuss the effectiveness and legality of the Board’s notices, agendas, and email correspondence regarding the special meeting and the proposed CC&R amendment.
Glossary of Key Terms
Term / Entity
Definition
Administrative Law Judge (ALJ)
The official who presides over administrative hearings, in this case, Velva Moses-Thompson. The ALJ hears evidence and issues a decision based on findings of fact and conclusions of law.
ARIZ. REV. STAT. section 33-1804
An Arizona state statute governing meetings in planned communities. It requires open meetings, proper notice to members (between 10 and 50 days prior), and agendas that are reasonably necessary to inform members of matters to be discussed or decided.
ARIZ. REV. STAT. section 41-2198.01
An Arizona state statute that permits an owner or planned community organization to file a petition with the Department of Real Estate for a hearing concerning violations of community documents or relevant statutes.
Board of Directors (Board)
The governing body of the Desert Isle Homeowners Association, Inc. At the time of the events, key members included Doug Robinson (President), Curt Carlson, and Mike Andrews.
Burden of Proof
The obligation to prove one’s assertion. In this case, the Petitioner bore the burden of proof to establish the violation, and the Respondent bore the burden for any affirmative defenses.
CC&Rs (Covenants, Conditions, and Restrictions)
The governing documents of the Desert Isle planned community. The petitions submitted by homeowners sought to amend these documents.
Desert Isle Homeowners Association, Inc.
The Respondent in the case; the planned community organization and non-profit corporation responsible for managing the Desert Isle community.
Lewis Smith
The Petitioner in the case; a homeowner in the Desert Isle community who filed a petition against the HOA.
Notice of Hearing
A formal notification issued by the Department of Real Estate setting the date and location for an administrative hearing. In this case, it was issued on January 22, 2018.
Office of Administrative Hearings
The state tribunal where the hearing for this case was conducted.
Petitioner
The party who files a petition initiating a legal action. In this case, Lewis Smith.
Post-hearing Briefs
Written legal arguments submitted by parties after a hearing has concluded. The record in this case was held open until May 9, 2018, to receive these briefs.
Preponderance of the Evidence
The standard of proof required in this administrative hearing. It is defined as evidence that is sufficient to convince the trier of fact that a contention is more probably true than not.
Reserve Study
A study to determine an association’s long-term capital needs for its common areas. Lewis Smith’s petition requested a discussion about obtaining one.
Respondent
The party against whom a petition is filed. In this case, Desert Isle Homeowners Association, Inc.
Special Meeting
A meeting of association members called for a specific purpose outside of regularly scheduled meetings. Both petitions in this case requested a special meeting.
