Case Summary
| Case ID | 19F-H1918013-REL |
|---|---|
| Agency | ADRE |
| Tribunal | OAH |
| Decision Date | 2018-12-17 |
| Administrative Law Judge | Tammy L. Eigenheer |
| Outcome | no |
| Filing Fees Refunded | $0.00 |
| Civil Penalties | $0.00 |
Parties & Counsel
| Petitioner | George E Lord | Counsel | — |
|---|---|---|---|
| Respondent | The Boulders at La Reserve Condominium Association | Counsel | Maria Kupillas |
Alleged Violations
A.R.S. § 33-1242, A.R.S. § 33-1260.01, and CC&Rs
Outcome Summary
The Administrative Law Judge dismissed the Petition in its entirety, concluding that the Petitioner failed to establish by a preponderance of the evidence that the Respondent Condominium Association violated A.R.S. § 33-1242, A.R.S. § 33-1260.01, or the association's CC&Rs.
Why this result: Petitioner failed to establish a violation of any statute or covenant alleged. The core findings supported the HOA's position that the lessee was engaging in prohibited business activity and subletting, and that the charged attorney fees were permissible.
Key Issues & Findings
Alleged violations concerning notice procedures, leasing restrictions, prohibited business use, and excessive fees.
Petitioner alleged Respondent violated A.R.S. § 33-1242 by failing to include proper citations in violation notices, violated A.R.S. § 33-1260.01 and CC&Rs by imposing illegal restrictions on occupancy dates and prohibiting tenant guests, and violated fee limits under A.R.S. § 33-1260.01(E) by charging $250 in attorney fees.
Orders: The Petition was dismissed.
Filing fee: $0.00, Fee refunded: No
Disposition: petitioner_loss
- A.R.S. § 33-1242
- A.R.S. § 33-1260.01
- A.R.S. § 33-1258
- A.A.C. R2-19-119
- CC&Rs Section 7.21
- CC&Rs Section 7.3
Analytics Highlights
- A.R.S. § 33-1242
- A.R.S. § 33-1260.01
- A.R.S. § 33-1258
- A.A.C. R2-19-119
- CC&Rs Section 7.21
- CC&Rs Section 7.3
Video Overview
Audio Overview
Decision Documents
19F-H1918013-REL Decision – 677039.pdf
19F-H1918013-REL Decision – 677040.pdf
Briefing Document: Lord v. The Boulders at La Reserve Condominium Association
Executive Summary
This document synthesizes the findings and conclusions from the Administrative Law Judge Decision in case number 19F-H1918013-REL, involving Petitioner George E. Lord and Respondent The Boulders at La Reserve Condominium Association. The judge ultimately dismissed all claims brought by the Petitioner, ruling that the Association acted within the bounds of Arizona statutes and its governing documents.
The core of the dispute centered on Mr. Lord’s leasing of three condominium units to an individual, Barrie Shepley, who used the properties to house participants for his commercial fitness training camps. The Association contended this arrangement constituted a prohibited short-term sublease and an improper business use of the units, leading them to suspend amenity access for the occupants.
The judge’s decision affirmed the Association’s position on all counts. Key takeaways include:
• Substance Over Form: The judge concluded that despite the absence of a formal sublease agreement, the nature of the arrangement—specifically a camp pricing structure that varied based on the number of occupants per condo—was effectively a sublet designed to house an “itinerant population,” contrary to the “spirit and purpose” of the community’s rules.
• Business Use Violation: The operation was found to be a business activity that violated the CC&Rs by requiring persons (camp participants) to come to the residential units.
• Procedural Compliance: The Association’s violation notices were deemed compliant with Arizona law. The judge noted that the statute only requires a detailed citation of the violated rule after the owner responds to the initial notice, which the Petitioner failed to do.
• Legality of Fees: A $250 charge levied by the Association’s counsel was determined to be a permissible charge for attorney’s fees related to potential collection, not an illegal penalty for leasing information as the Petitioner alleged.
As a result of these findings, the Petitioner’s request for relief was denied, and the petition was dismissed in its entirety.
I. Case Overview
• Parties:
◦ Petitioner: George E. Lord (unit owner)
◦ Respondent: The Boulders at La Reserve Condominium Association
• Case Number: 19F-H1918013-REL
• Venue: Arizona Office of Administrative Hearings
• Presiding Judge: Tammy L. Eigenheer, Administrative Law Judge
• Hearing Date: November 26, 2018
• Decision Date: December 17, 2018
• Final Disposition: The petition filed by George E. Lord was dismissed.
II. Factual Background and Timeline of Events
1. Lease Agreements: On or about December 4, 2017, Petitioner George Lord, through his management company, leased two units at The Boulders to Barrie Shepley for a term from March 7, 2018, to April 30, 2018. A third unit was subsequently leased to Mr. Shepley on or about January 15, 2018.
2. Commercial Use: Mr. Shepley operated a Canadian fitness business, “Personal Best,” which offered training camps in Tucson. Accommodations at The Boulders were included in the camp packages. The price for a camp varied based on occupancy:
◦ $950.00 each for four campers in a condo
◦ $1075.00 each for three campers in a condo
◦ $1299.00 each for two campers in a condo
3. Occupancy Begins: On March 7, 2018, guests of Mr. Shepley (camp participants) began arriving to occupy the three leased units.
4. Association Intervention: On March 9, 2018, Community Manager Danielle Morris emailed Mr. Lord, stating the Association’s belief that he was in violation of the CC&Rs by allowing subleasing for periods less than the 30-day minimum. Ms. Morris informed him that amenity access cards for the three units were deactivated.
5. Dispute Escalation: Mr. Lord contended that the occupants were merely “guests” of Mr. Shepley, not subletters. Ms. Morris countered that the Association required the names of all occupants and the duration of their stays, and that each occupant must stay for a minimum of 30 days.
6. Information Provided: On March 13, 2018, Mr. Lord provided the names of the occupants and their dates of occupancy, requesting that amenities be restored.
7. Violation Reiterated: On March 16, 2018, Ms. Morris stated the violation was ongoing, as occupants staying from March 7 to March 31 did not meet the 30-day minimum stay requirement.
8. Formal Notice of Violation: On March 18, 2018, Mr. Lord received formal Notices of Violations for the three units. The notices stated that amenity access was suspended because the HOA was not provided with the names of adult occupants and their timeframes. The notice warned that a $300 fine could be applied. Mr. Lord did not respond to these notices.
9. Attorney Involvement: On March 22, 2018, Mr. Lord received a letter from the Association’s legal counsel outlining its legal position and noting an amount due of $250 for attorney’s fees already incurred.
10. Lease Cancellation & Financial Loss: On April 2, 2018, Mr. Shepley cancelled the remainder of the leases due to the lack of amenities for his guests. Mr. Lord asserted a resulting financial loss of $6,900 in rental fees for April 2018.
11. Petition Filing: On August 31, 2018, Mr. Lord filed a petition with the Arizona Department of Real Estate, alleging the Association violated state statutes and its own CC&Rs.
III. Petitioner’s Allegations and Arguments
Mr. Lord’s petition was based on three primary allegations against the Association:
• Allegation 1: Defective Violation Notice (A.R.S. § 33-1242): The Petitioner argued that the Notices of Violations were legally deficient because they failed to cite the specific statute or CC&R provision that had allegedly been violated.
• Allegation 2: Unlawful Occupancy Requirements (A.R.S. § 33-1260.01 & CC&Rs): The Petitioner asserted that the Association overstepped its authority by demanding that each occupant, whom he characterized as a “guest” of the primary lessee, must stay for a minimum of 30 days. He argued the 30-day minimum lease term applied only to the primary lease with Mr. Shepley, not to the occupants.
• Allegation 3: Improper Fees (A.R.S. § 33-1260.01(E)): The Petitioner claimed that the $250 charge from the Association’s attorney constituted an illegal fee, penalty, or charge related to providing leasing information, which he argued was prohibited by statute.
IV. Administrative Law Judge’s Findings and Conclusions
The Administrative Law Judge found that the Petitioner failed to meet the burden of proof for any of his allegations and dismissed the petition. The judge’s reasoning is detailed below.
Finding 1: No Violation of A.R.S. § 33-1242 (Violation Notice)
The judge determined that the Association’s initial Notices of Violations were legally sufficient.
• Legal Reasoning: A.R.S. § 33-1242(C) requires an association to cite the specific provision of the condominium documents that has been violated. However, this obligation is only triggered after the unit owner sends a written response to the initial notice by certified mail.
• Factual Basis: The Petitioner admitted that he did not respond to the formal Notices of Violations he received.
• Conclusion: Because the Petitioner did not take the legally required step to trigger the Association’s duty to provide a specific citation, the Association did not violate the statute.
Finding 2: No Violation of A.R.S. § 33-1260.01 or CC&Rs (Leasing Rules)
The judge concluded that the Association was justified in its actions regarding the occupancy of the units.
• The Arrangement was a “Form” of Subletting: The judge ruled against the Petitioner’s argument that the occupants were merely “guests.” The fact that the price of the fitness camp changed based on how many people shared a unit was seen as evidence that Mr. Shepley was, in effect, subletting the units for his business.
• Prohibited Business Activity: The judge found that Mr. Shepley was operating a business from the units in a manner prohibited by Section 7.3 of the CC&Rs, which disallows business activity that “involve[s] persons coming to the Unit.”
• Spirit of the Law: The decision acknowledged that the specific facts of the case “falls between the cracks of the specific language of the statutes and the regulations.” However, the judge emphasized that the Association’s actions were consistent with the broader intent of its rules, stating, “given the totality of the circumstances, the spirit and purpose of the applicable rules is to allow an association to know who is in the community and to prevent an itinerant population.”
• Conclusion: The Petitioner failed to establish that the Association violated leasing statutes or its own CC&Rs.
Finding 3: No Violation of A.R.S. § 33-1260.01(E) (Fees)
The judge found that the $250 charge was not an illegal penalty.
• Nature of the Charge: The evidence showed that no fines for the lease policy violation had actually been assessed. The $250 charge was explicitly for attorney’s fees related to the potential collection of assessments.
• Legal Reasoning: The judge stated, “Nothing in the cited statute or the CC&Rs prohibits such a charge being implemented.” The fee was not a penalty for “incomplete or late information” as covered by the statute, but a charge for legal costs incurred by the Association.
• Conclusion: The Petitioner failed to establish a violation regarding the assessed fees.
V. Referenced Statutes and Governing Documents
Reference
Provision Summary
Relevance to Case
A.R.S. § 33-1242(B)&(C)
Outlines the process for a unit owner to respond to a violation notice and the association’s subsequent duty to provide specific details of the violation.
The judge found no violation because the Petitioner did not follow the procedure to trigger the association’s duty.
A.R.S. § 33-1260.01(C)
Limits the information an association can require about a tenant to names, contact info for adults, lease period, and vehicle information.
The Petitioner’s case rested on interpreting this statute; the judge found the Association’s inquiries justified by the unique circumstances.
A.R.S. § 33-1260.01(E)
Prohibits an association from imposing fees greater than $15 for incomplete or late leasing information.
The Petitioner argued the $250 attorney fee violated this, but the judge found it was a permissible charge for legal costs, not a penalty.
CC&R Section 7.21
Requires leases to be in writing, for a term of not less than 30 days, and requires owners to provide lessee names and lease dates.
The Association argued the arrangement violated the 30-day minimum stay rule for occupants, which the judge upheld in spirit.
CC&R Section 7.3
Prohibits business activities within a unit that involve persons coming to the unit.
The judge found Mr. Shepley’s fitness camp, which housed participants in the units, was a clear violation of this provision.
Leasing Policy
States a $300 fine may be imposed for violations of the 30-day minimum lease policy.
The Notice of Violation referenced this potential fine, though it was never actually assessed.
VI. Final Order and Procedural Notes
• Order: Based on the above findings, the Administrative Law Judge ordered that the Petition be dismissed.
• Binding Nature: The decision is binding on the parties unless a rehearing is granted. A request for rehearing must be filed with the Commissioner of the Department of Real Estate within 30 days of the service of the Order.
• Related Filings: On the same day the decision was issued, December 17, 2018, the court also issued a separate “Order Vacating Hearing,” likely a procedural filing to cancel a future hearing that was rendered unnecessary by the dismissal of the case.
Study Guide: Lord v. The Boulders at La Reserve Condominium Association
This study guide provides a detailed review of the administrative case No. 19F-H1918013-REL, heard by the Arizona Office of Administrative Hearings. The case involves a dispute between a condominium unit owner, George E. Lord, and his condominium association, The Boulders at La Reserve, concerning leasing policies, occupant regulations, and alleged statutory violations.
Short-Answer Quiz
Instructions: Answer the following questions in two to three complete sentences, based on the information provided in the source documents.
1. Who were the primary parties involved in this administrative hearing, and what were their respective roles?
2. Describe the business arrangement that Barrie Shepley, the petitioner’s lessee, was operating from the leased condominium units.
3. What was the first official action the Condominium Association’s management took in response to the arrival of Barrie Shepley’s guests, and what was their stated reason?
4. According to the Association, what two specific provisions of the governing documents were being violated by the petitioner and his lessee?
5. What was the petitioner’s central argument for why the occupants of the units were not in violation of the Association’s 30-day minimum stay requirement?
6. On what procedural grounds did the petitioner, George Lord, claim that the Association’s “Notice of Violations” was itself a violation of Arizona law (A.R.S. § 33-1242)?
7. Why did the Administrative Law Judge ultimately rule that the Association did not violate A.R.S. § 33-1242?
8. How did the judge interpret the fact that the price for Barrie Shepley’s fitness camps varied based on the number of people sharing a condo?
9. What financial loss did the petitioner claim to have suffered, and what was the direct cause of this loss?
10. What was the final ruling, or “Order,” issued by the Administrative Law Judge in this case?
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Answer Key
1. The primary parties were George E. Lord, the petitioner and owner of multiple condominium units, and The Boulders at La Reserve Condominium Association, the respondent and governing body for the community. The case was adjudicated by Administrative Law Judge Tammy L. Eigenheer.
2. Barrie Shepley operated a fitness business called “Personal Best” that offered training camps in the Tucson area. The price for these camps included accommodations at The Boulders, with the cost per person varying based on how many campers shared a condominium unit.
3. The Association’s first action was to deactivate the amenity access cards for the three units leased by Shepley. Danielle Morris, the Community Manager, stated this was due to a belief that the petitioner’s lessee was subleasing the units for periods of less than the 30-day minimum in violation of the CC&Rs.
4. The Association alleged violations of the CC&Rs related to subleasing for less than the 30-day minimum timeframe. The formal Notices of Violations also cited the failure to provide the names of all adult occupants and the timeframes of their stays to the HOA.
5. The petitioner argued that because his lessee, Mr. Shepley, was not charging a specific rental fee to the occupants, they were merely “guests” and not sub-lessees. Therefore, the 30-day minimum stay requirement applicable to leases did not apply to them.
6. The petitioner alleged that the Association’s failure to include a citation to the specific statute or CC&R provision that had allegedly been violated in the initial Notice of Violations was a violation of A.R.S. § 33-1242.
7. The judge ruled against the petitioner because A.R.S. § 33-1242 only requires an association to provide the specific provision violated after the unit owner sends a written response to the initial notice by certified mail. The petitioner admitted that he did not respond to the Notices of Violations.
8. The judge found that the tiered pricing structure supported the conclusion that Mr. Shepley was, “in a form, subletting the units.” The fact that the camp price decreased as more people shared a unit indicated that the occupants were paying for their accommodations, not simply staying as guests.
9. The petitioner asserted a financial loss of $6,900 in rental fees for April 2018. This loss was directly caused by Barrie Shepley canceling the remainder of his leases due to the lack of amenities for his occupants.
10. The Administrative Law Judge’s final order was that the Petition filed by George E. Lord be dismissed. This decision was binding unless a rehearing was granted.
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Essay Questions
Instructions: The following questions are designed to test a deeper, more analytical understanding of the case. Formulate a comprehensive response to each prompt, citing specific facts, arguments, and legal interpretations from the case file.
1. Analyze the Administrative Law Judge’s reasoning for concluding that Barrie Shepley was “in a form, subletting” the units. Discuss the evidence cited and the concept of the “spirit and purpose” of the rules versus their literal interpretation.
2. Examine the procedural misstep made by the petitioner, George Lord, after receiving the Notices of Violations. How did this action directly impact the judge’s ruling on his claim regarding A.R.S. § 33-1242?
3. Discuss the conflict between a unit owner’s right to lease their property and a condominium association’s right to enforce its governing documents, using the specific provisions of the CC&Rs (Sections 7.21 and 7.3) and state law (A.R.S. § 33-1260.01) as examples from the case.
4. Explain the distinction the judge made between the $300 potential fine mentioned in the Notice of Violations and the $250 attorney’s fee charged to the petitioner. How did this distinction relate to A.R.S. § 33-1260.01(E), and why was the Association’s action deemed permissible?
5. Evaluate the concept of an “itinerant population” as mentioned by the judge. How did Barrie Shepley’s business model contribute to this concern for the Association, and how did it ultimately weigh into the judge’s decision to dismiss the petition?
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Glossary of Key Terms
Term / Name
Definition
Administrative Law Judge (ALJ)
An official who presides over administrative hearings, weighs evidence, and makes legal rulings on disputes involving government agencies. In this case, Tammy L. Eigenheer.
A.R.S. (Arizona Revised Statutes)
The codified body of laws for the state of Arizona. The petitioner alleged violations of specific statutes within this code, namely A.R.S. § 33-1242 and § 33-1260.01.
A.R.S. § 33-1242
A state law governing the process for notifying a unit owner of a violation of condominium documents and the procedures for the owner to respond and contest the notice.
A.R.S. § 33-1260.01
A state law that places limitations on what information an association can require from a unit owner regarding a tenant and caps certain fees or penalties for incomplete information at $15.
Amenity
A feature or facility of a property that provides comfort, convenience, or pleasure. In this case, access to amenities was controlled by key cards, which the Association deactivated.
Barrie Shepley
The individual who leased three condominium units from the petitioner. He operated a fitness business, “Personal Best,” and used the units to house clients attending his training camps.
Covenants, Conditions, and Restrictions. These are the governing legal documents that set out the rules for a planned community or condominium. The Association alleged Shepley’s use of the units violated Sections 7.21 (leasing limitations) and 7.3 (business use limitations).
George E. Lord
The Petitioner in the case. He was the owner of multiple condominium units at The Boulders at La Reserve and filed the petition against the Association.
Itinerant population
A term used by the judge to describe a population of short-term, transient occupants. The judge concluded that the purpose of the Association’s rules was, in part, to prevent this type of occupancy.
Notice of Violations
A formal written document sent by the Association to the petitioner informing him of alleged violations of the governing documents and outlining potential consequences, such as fines.
Petitioner
The party who files a petition initiating a legal or administrative action. In this case, George E. Lord.
Preponderance of the evidence
The standard of proof required in this administrative hearing. It means that the petitioner had the burden of showing that the facts they sought to prove were “more probable than not.”
Respondent
The party against whom a petition is filed. In this case, The Boulders at La Reserve Condominium Association.
Subletting
The practice of a tenant leasing a rented property to a third party. The Association contended Shepley was subletting the units to his campers, while the petitioner argued they were merely guests.
The Boulders at La Reserve Condominium Association
The Respondent in the case. The homeowners’ association (HOA) responsible for governing the condominium community in Oro Valley, Arizona.
The $6,900 ‘Guest’ Mistake: 3 Hard Lessons from an HOA Lawsuit
A $6,900 loss in rental income and a losing legal battle with his HOA—all because of a dispute over the definition of a “guest.” This case between owner George Lord and The Boulders at La Reserve Condominium Association is a masterclass in how quickly and completely an owner can lose when they misinterpret the rules and underestimate an association’s power.
For any homeowner or landlord, this dispute provides three crucial lessons distilled from the administrative court’s decision. Understanding these precedents is essential before you ever find yourself at odds with your own HOA.
Lesson 1: The “Spirit of the Rule” Can Outweigh Your Clever Workaround
The dispute began when the property owner, Mr. Lord, leased three condos to Barrie Shepley, who ran fitness training camps. Mr. Shepley then used the condos to house his camp attendees, often for periods shorter than the HOA’s 30-day minimum lease term.
The owner argued his arrangement complied with the rules. He claimed his tenant, Mr. Shepley, was not subleasing the units; the attendees were merely “guests,” and therefore not subject to the 30-day minimum. It was a clever workaround, but it fell apart under scrutiny for two distinct reasons.
First, the judge looked past the “guest” label to the financial substance of the arrangement. A key piece of evidence was the camp’s pricing: the cost changed based on how many campers shared a condo ($950 each for four campers vs. $1299 each for two). The judge saw this as clear proof that housing was being paid for, making it a form of subletting.
Second, the judge found that the arrangement constituted a prohibited business activity. The association’s CC&Rs (Section 7.3) explicitly forbade any business activity that “involve[s] persons coming to the Unit.” Since the fitness camp required attendees to come to the condos for lodging, it was a direct violation. The judge’s decision was therefore not just based on a subjective interpretation, but was also grounded in a concrete rule violation.
The court looked at the “totality of the circumstances” to make its ruling, a point powerfully summarized in the final decision:
However, given the totality of the circumstances, the spirit and purpose of the applicable rules is to allow an association to know who is in the community and to prevent an itinerant population.
Pro Tip: Before implementing a workaround, ask yourself: “Does this honor the community’s stated goal?” If the answer is no, you’re on thin ice, even if you think you’ve found a loophole.
Lesson 2: You Must Follow Procedure to the Letter, Or You Forfeit Your Rights
Confident in his “guest” interpretation, the homeowner made his next critical error by underestimating the importance of legal procedure. He argued that the HOA’s initial “Notice of Violations” was invalid because it failed to cite the specific CC&R provision that had allegedly been violated.
This argument was swiftly dismissed due to a simple but fatal mistake: the owner never sent a formal written response to the notice by certified mail.
Under Arizona law (A.R.S. § 33-1242), an owner’s formal written response via certified mail triggers the HOA’s obligation to provide the specific provision that was violated. Without that trigger, the HOA’s duty to explain further is never activated. The homeowner failed to pull the trigger. Because he did not follow this exact procedure, his claim was thrown out, and the HOA had no further legal obligation to detail its case.
Analyst’s Takeaway: In a legal dispute, communication that isn’t sent via the officially mandated channel (like certified mail) is legally equivalent to communication that never happened.
Lesson 3: The HOA’s Legal Fees Can Hit Your Wallet Sooner Than You Think
Early in the dispute, the owner received a letter from the HOA’s legal counsel. The letter outlined the association’s position and included a charge for $250.00. This was not a fine for the violation. It was a fee for the lawyer’s time, as explained in the letter:
“As you know, the Association is entitled to recover its costs and attorneys’ fees from you, including $250.00 already incurred for the preparation of this letter.”
Many governing documents contain clauses that allow an HOA to recover its “costs of enforcement.” This letter was an enforcement action, and the legal fee was the cost. The judge found that nothing in the law or CC&Rs prohibited the HOA from immediately passing this expense to the owner.
This initial charge was a precursor to a much larger financial blow. As an enforcement tool for the violations discussed in Lesson 1, the HOA suspended the tenants’ access to community amenities. This pressure tactic worked perfectly. The tenant, Mr. Shepley, cancelled his leases due to the lack of amenity access, leading to the owner’s stated loss of $6,900 in rental fees.
Pro Tip: Assume your HOA’s first legal letter starts a running tab. Budget for legal costs from day one of a formal dispute, not just for potential fines.
Conclusion: Knowledge is Your Best Defense
The case of Lord vs. The Boulders at La Reserve establishes three clear precedents for owners: a rule’s intent can supersede its literal interpretation, procedural shortcuts void your rights, and the financial clock starts ticking the moment an HOA retains counsel.
This case is a firm reminder of an HOA’s power to enforce its rules, but it also highlights the owner’s responsibility to understand them. It begs the question: In our own communities, are we fully aware of the rules we’ve agreed to live by?
Case Participants
Petitioner Side
- George E. Lord (petitioner)
Respondent Side
- Maria Kupillas (respondent attorney)
Law offices of Farley, Choate & Bergin - Danielle Morris (community manager)
The Boulders at La Reserve Condominium Association
Neutral Parties
- Tammy L. Eigenheer (ALJ)
- Judy Lowe (ADRE Commissioner)
Arizona Department of Real Estate - LDettorre (ADRE staff)
Arizona Department of Real Estate - AHansen (ADRE staff)
Arizona Department of Real Estate - djones (ADRE staff)
Arizona Department of Real Estate - DGardner (ADRE staff)
Arizona Department of Real Estate - ncano (ADRE staff)
Arizona Department of Real Estate
Other Participants
- Barrie Shepley (renter/key individual)
