Tag Archives: A.R.S. § 33-1258(A)

Nancy L Babington v. Park Scottsdale II Townhouse Corporation

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Case Summary

Case ID 20F-H2020064-REL-RHG
Agency ADRE
Tribunal OAH
Decision Date 2021-03-24
Administrative Law Judge Tammy L. Eigenheer
Outcome full
Filing Fees Refunded $500.00
Civil Penalties $2,500.00

Parties & Counsel

Petitioner Nancy L. Babington Counsel —
Respondent Park Scottsdale II Townhouse Corporation Counsel Mark K. Sahl and Scott B. Carpenter

Alleged Violations

A.R.S. § 33-1258(A)

Outcome Summary

Following a rehearing based on newly discovered evidence, the Administrative Law Judge found that Respondent violated A.R.S. § 33-1258(A) by failing to timely provide records it possessed. Respondent was ordered to reimburse the Petitioner $500.00 for the filing fee and pay a $2,500.00 civil penalty to the Department of Real Estate.

Key Issues & Findings

Failure to make association financial and other records reasonably available for examination/provide copies within ten business days.

Petitioner alleged Respondent violated A.R.S. § 33-1258 by failing to provide requested records (including bank statements and contracts) following a formal request on May 1, 2020. The Administrative Law Judge, in the rehearing, found that the evidence showed Respondent was in possession of bank statements and two signed contracts at the time of the request, contradicting prior testimony, thereby establishing a violation of the statute.

Orders: Respondent was ordered to pay Petitioner $500.00 for the filing fee reimbursement and pay a civil penalty of $2,500.00 to the Department of Real Estate, both payments due within 30 days.

Filing fee: $500.00, Fee refunded: Yes, Civil penalty: $2,500.00

Disposition: petitioner_win

Cited:

  • A.R.S. § 33-1258
  • A.R.S. § 32-2199.02
  • A.A.C. R2-19-119

Analytics Highlights

Topics: HOA records request, A.R.S. 33-1258, Rehearing, Civil Penalty, Possession of Records
Additional Citations:

  • A.R.S. § 33-1258
  • A.R.S. § 32-2199.02
  • A.A.C. R2-19-119

Video Overview

Audio Overview

Decision Documents

20F-H2020064-REL Decision – 866802.pdf

Uploaded 2026-04-24T11:28:35 (123.5 KB)

20F-H2020064-REL Decision – 823263.pdf

Uploaded 2026-04-24T11:28:38 (108.6 KB)

Briefing Document: Babington v. Park Scottsdale II Townhouse Corporation

Executive Summary

This document synthesizes the findings from two administrative hearings concerning a records request dispute between homeowner Nancy L. Babington (Petitioner) and the Park Scottsdale II Townhouse Corporation (Respondent). The case, No. 20F-H2020064-REL, culminated in a reversal of an initial ruling, finding the Respondent in violation of Arizona law A.R.S. § 33-1258 for failing to provide association records within the statutory timeframe.

The initial hearing on August 28, 2020, resulted in a denial of the petition. The Respondent successfully argued that it could not produce the requested documents because they were not in its possession, largely due to a dispute with a former management company. However, a rehearing was granted after the Petitioner discovered new evidence.

The rehearing on March 4, 2021, established that the Respondent, through its management company Associa Arizona, was in possession of key requested documents—specifically bank statements and signed contracts—at the time of the initial request. Evidence revealed the bank statements were held at a central corporate office in Texas and were not retrieved, while signed contracts had not been forwarded to the management company by board members. The Administrative Law Judge found this directly contradicted the Respondent’s initial defense.

As a result, the Administrative Law Judge reversed the earlier decision, ordering the Respondent to reimburse the Petitioner’s $500 filing fee and imposing a $2,500 civil penalty payable to the Arizona Department of Real Estate. The case underscores an association’s responsibility to produce all records in its possession, regardless of physical location within the corporate structure, and affirms the court’s authority to levy penalties for violations.

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1. Case Overview

• Case Number: 20F-H2020064-REL

• Petitioner: Nancy L. Babington

• Respondent: Park Scottsdale II Townhouse Corporation

• Core Allegation: Violation of A.R.S. § 33-1258, which mandates that a condominium owners’ association must make its financial and other records reasonably available for examination by a member within ten business days of a request.

• Hearings Conducted:

◦ Initial Hearing: August 28, 2020

◦ Rehearing: March 4, 2021

• Presiding Administrative Law Judge: Tammy L. Eigenheer

2. Chronology of the Dispute

The dispute originated from difficulties following a change in the Respondent’s management company and subsequent records requests by the Petitioner.

• June-July 2019: The previous management company, Community Management & Consulting, LLC (CMC), terminated its agreement with the Respondent. A “financial disagreement” led to CMC withholding records, complicating the transition.

• Post-July 2019: Respondent hired Associa Arizona as its new management company. Associa and the Respondent’s counsel attempted to obtain the withheld records from CMC.

• April 29, 2020: After previous attempts to get information, Petitioner Nancy L. Babington sent a formal email to Associa and the Respondent’s Board of Directors. In the email, she stated:

• May 1, 2020: Linda Parker, Director of Client Services with Associa, replied, stating the request was not specific and asked the Petitioner to identify the exact records needed.

• May 1, 2020: The Petitioner responded with a detailed list of nine specific items:

1. All bank statements with copies of cancelled checks since Sept 1, 2019.

2. Any and all financial statements since Sept 1, 2019.

3. Any and all 1099s issued for 2019.

4. Any and all Executive Session meeting minutes conducted in 2020 (excluding statutory exemptions).

5. Any and all contracts signed in 2020.

6. Any and all outstanding invoices with a due date over 45 days.

7. Any documentation regarding the legality of the $204.75 maintenance fee.

8. Any proof of Stephen Silberschlag’s liability insurance.

9. Any landscaping plans.

• May 4, 2020: Ms. Parker from Associa responded that the company could only provide records within its possession.

• May 15, 2020: Following another email from the Petitioner, Ms. Parker stated that Associa had scheduled a meeting with the board on May 20 to discuss the request further.

• May 28, 2020: Having not received any of the requested documents, the Petitioner filed a petition with the Arizona Department of Real Estate.

3. The Initial Hearing and Decision (August – September 2020)

The first hearing focused on whether the Respondent had violated the statute by failing to produce the documents.

• The Respondent argued that it was unable to provide documents that were not in its possession.

• Joseph Silberschlag, Secretary of the Board of Directors, testified that issues with the former management company (CMC) meant neither the Respondent nor Associa had possession of many necessary documents.

• Specifically, he stated that without previous financial documents and starting balances from CMC, the association was unable to create current financial statements.

• The Respondent maintained it was under no statutory obligation to create documents to fulfill the Petitioner’s request.

• The Administrative Law Judge (ALJ) concluded that the Petitioner “failed to establish by a preponderance of the evidence that Respondent violated A.R.S. § 33-1258(A).”

• The finding was based on the Respondent’s argument that it did not possess the requested documents at the time of the request.

• On September 17, 2020, the ALJ issued a decision denying the Petitioner’s petition.

4. The Rehearing and Reversal (March 2021)

Following the initial decision, the case was reopened based on new evidence presented by the Petitioner.

• After the September 2020 decision, the Respondent provided some of the requested documents to the Petitioner.

• Upon reviewing these documents, the Petitioner realized that the Respondent had, in fact, been in possession of several key records prior to her May 1, 2020 request.

• She filed a Rehearing Request with the Department of Real Estate, citing “newly discovered material evidence that could not with reasonable diligence have been discovered and produced at the original hearing.” The request was granted.

The rehearing revealed crucial details about the location and accessibility of the requested records.

Record Type

Petitioner’s Evidence

Respondent’s Testimony/Explanation

Bank Statements

The documents received post-hearing showed that bank statements had been sent to Associa starting in August 2019.

Evelyn Shanley, Community Director for Associa, testified that statements for all HOAs were sent to a central office in Richardson, Texas. She admitted she did not contact the Texas office to obtain the statements for the Petitioner’s request. Counsel for the Respondent conceded the statements in Texas were in the possession of Associa.

Contracts

Petitioner presented two contracts signed by Board members on March 27 and March 31, 2020, prior to her request.

Ms. Shanley admitted the two signed contracts existed but stated that the Board of Directors members had not provided them to Associa.

1099 Forms

Petitioner noted a document indicating four vendors were eligible for 1099s.

Ms. Shanley denied that any 1099s had been issued.

• The documents were not in the “immediate possession” of the local Associa office.

• The matter was now moot because the Petitioner had received all requested documents.

• A civil penalty was inappropriate because the Petitioner did not specifically request one on her initial petition form.

• The evidence presented at the rehearing was “directly contradictory” to the representations made by the Respondent at the initial hearing.

• The Petitioner successfully established by a preponderance of the evidence that the Respondent violated A.R.S. § 33-1258(A) by failing to provide documents (bank statements and contracts) that were in its possession.

• The ALJ rejected the Respondent’s argument against a civil penalty, stating that the plain language of A.R.S. § 32-2199.02 allows the judge to levy a penalty for established violations, and “nothing in the statute limits the available remedies to those specifically requested by a petitioner.”

5. Final Order and Penalties

The Administrative Law Judge Decision issued on March 24, 2021, reversed the initial finding and imposed penalties on the Respondent.

IT IS ORDERED that:

1. Respondent must pay the Petitioner her filing fee of $500.00 within 30 days.

2. Respondent must pay to the Department of Real Estate a civil penalty in the amount of $2,500.00 within 30 days.

Study Guide: Babington v. Park Scottsdale II Townhouse Corporation

This study guide provides a review of the administrative case involving Petitioner Nancy L. Babington and Respondent Park Scottsdale II Townhouse Corporation. It includes a short-answer quiz to test factual recall, a separate answer key, a set of essay questions for deeper analysis, and a glossary of key terms and entities involved in the proceedings.

Short-Answer Quiz

Answer each question in 2-3 sentences based on the information provided in the case documents.

1. Who were the primary parties in this case, and what was the Petitioner’s central allegation?

2. What specific Arizona statute was the Respondent accused of violating, and what does this law generally require?

3. What was the Respondent’s main defense during the initial hearing on August 28, 2020, for not providing the requested records?

4. What was the conclusion of the Administrative Law Judge in the first decision, issued on September 17, 2020?

5. On what legal grounds did the Petitioner successfully file for a rehearing of her case?

6. What new evidence regarding bank statements was presented by the Petitioner at the March 4, 2021, rehearing?

7. How did the Respondent’s management company, Associa Arizona, explain its failure to produce the bank statements and signed contracts in response to the initial request?

8. What was the final outcome of the rehearing, and how did it contradict the initial decision?

9. What two financial penalties were imposed upon the Respondent in the final order of March 24, 2021?

10. What was the Respondent’s argument against the imposition of a civil penalty, and why did the Administrative Law Judge reject it?

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Answer Key

1. The primary parties were Petitioner Nancy L. Babington, a property owner, and Respondent Park Scottsdale II Townhouse Corporation, a condominium owners association. The Petitioner alleged that the Respondent failed to provide association records she formally requested, in violation of Arizona law.

2. The Respondent was accused of violating A.R.S. § 33-1258. This statute requires a condominium owners association to make its financial and other records reasonably available for examination by a member and to provide copies of requested records within ten business days.

3. During the initial hearing, the Respondent’s main defense was that it was unable to provide the documents because they were not in its possession. The Respondent claimed its former management company, CMC, was withholding records and that without starting balances, it could not create new financial documents.

4. The Administrative Law Judge denied the Petitioner’s petition in the first decision. The judge concluded that the Petitioner failed to establish by a preponderance of the evidence that the Respondent violated the statute because the Respondent did not possess the documents and was not required to create them.

5. The Petitioner was granted a rehearing based on the discovery of “newly discovered material evidence that could not with reasonable diligence have been discovered and produced at the original hearing.” After the first decision, the Respondent provided documents that proved it had, in fact, been in possession of some of the requested records prior to her request.

6. At the rehearing, the Petitioner testified that after receiving the documents, she realized bank statements had been sent to Associa’s central office in Richardson, Texas, starting in August 2019. This demonstrated that the records were in the management company’s possession when she made her request.

7. Associa’s representative testified that bank statements went to a central office in Texas and were not forwarded to the local office because financial packets could not be prepared without starting balances from the previous management company. Regarding the contracts, Associa claimed that the Board of Directors members who signed them had not provided the contracts to Associa.

8. The final outcome of the rehearing was a ruling in favor of the Petitioner. The judge found that evidence presented at the rehearing directly contradicted the Respondent’s earlier claims, establishing that the Respondent did possess bank statements and contracts and had violated A.R.S. § 33-1258(A).

9. In the final order, the Respondent was ordered to pay the Petitioner’s filing fee of $500.00. Additionally, the Respondent was ordered to pay a civil penalty of $2,500.00 to the Arizona Department of Real Estate.

10. The Respondent argued that a civil penalty was not appropriate because the Petitioner did not specifically request one by checking the box on the petition form. The judge rejected this, stating that the plain language of A.R.S. § 32-2199.02 allows the judge to levy a civil penalty for established violations, and this authority is not limited by the remedies requested by a petitioner.

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Essay Questions

The following questions are designed for analytical and in-depth responses. Answers are not provided.

1. Analyze the concept of “possession” of records as it evolved from the first hearing to the second. How did the Respondent’s initial interpretation of “immediate possession” differ from the Administrative Law Judge’s final conclusion regarding the records held by Associa’s Texas office?

2. Discuss the significance of the “preponderance of the evidence” standard in this case. Explain specifically how the Petitioner failed to meet this standard in the first hearing but succeeded in the second, citing the key pieces of evidence that shifted the outcome.

3. Evaluate the role and responsibilities of the management company, Associa Arizona, in this dispute. To what extent were its internal procedures and actions (or inactions) the primary cause of the Respondent’s violation of A.R.S. § 33-1258?

4. Trace the timeline of communication between Nancy Babington and Associa Arizona from April 29, 2020, to May 15, 2020. Analyze how the responses from Associa may have contributed to the perception that the Respondent was refusing to provide information, ultimately leading to the petition being filed.

5. The Administrative Law Judge has the statutory authority to levy a civil penalty for each violation found. Based on the facts of this case, including the Respondent’s representations at the first hearing and the contradictory evidence presented at the second, construct an argument justifying the imposition of the $2,500 civil penalty.

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Glossary of Key Terms

Term / Entity

Definition

A.R.S. § 32-2199 et seq.

The Arizona Revised Statute cited as giving the Arizona Department of Real Estate jurisdiction to hear disputes between a property owner and a condominium owners association.

A.R.S. § 33-1258

The Arizona Revised Statute at the core of the dispute. It requires that an association’s financial and other records be made “reasonably available” for examination and that the association has ten business days to fulfill a request for examination or to provide copies.

Administrative Law Judge (ALJ)

The official from the Office of Administrative Hearings (Tammy L. Eigenheer in this case) responsible for conducting the hearings, weighing evidence, and issuing a legally binding decision and order.

Associa Arizona

The management company hired by the Respondent to handle its operations after the termination of the previous management agreement. It was the primary point of contact for the Petitioner’s records request.

Civil Penalty

A monetary fine levied by the Administrative Law Judge for a violation of the law. In this case, a $2,500 penalty was ordered to be paid to the Department of Real Estate.

Community Management & Consulting, LLC (CMC)

The Respondent’s former management company. CMC terminated its agreement with the Respondent and was withholding association records due to a financial disagreement, which was a key part of the Respondent’s defense in the initial hearing.

Department of Real Estate (Department)

The Arizona state agency with which the Petitioner filed her petition and which has jurisdiction over such disputes.

A legal argument made by the Respondent’s counsel during the rehearing. Counsel asserted that the matter was moot (no longer relevant or in dispute) because, by the time of the rehearing, the Petitioner had received all the documents she requested.

Newly Discovered Material Evidence

The legal basis upon which the Petitioner was granted a rehearing. It refers to significant evidence that was not available at the time of the original hearing despite reasonable diligence.

Petitioner

The party who initiates a legal action or petition. In this case, Nancy L. Babington, a condominium owner.

Preponderance of the Evidence

The standard of proof required for the Petitioner to win her case. It is defined as evidence that is more convincing and shows that the fact sought to be proved is “more probable than not.”

Rehearing

A second hearing granted by the Commissioner of the Department of Real Estate to re-examine a case, which was held on March 4, 2021, after the Petitioner presented newly discovered evidence.

Respondent

The party against whom a petition is filed. In this case, Park Scottsdale II Townhouse Corporation, the condominium owners association.

Select all sources
823263.pdf
866802.pdf

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20F-H2020064-REL-RHG

2 sources

These two sources are Administrative Law Judge Decisions concerning a dispute between Nancy L. Babington, a homeowner, and the Park Scottsdale II Townhouse Corporation, her condominium owners association, regarding the provision of association records under Arizona statute A.R.S. § 33-1258. The first document details the initial hearing, held in August 2020, where the judge ruled in favor of the association, concluding that the association was not in violation because it lacked possession of the requested documents due to issues with its former management company. The second document outlines the rehearing, granted due to newly discovered evidence suggesting the association or its new management company, Associa Arizona, actually possessed some records, such as bank statements and contracts, despite earlier claims. Based on the rehearing’s findings, the judge determined the association violated the statute by not providing the records within the ten-day requirement and ordered the association to reimburse the petitioner’s filing fee and pay a civil penalty.

2 sources

How did newly discovered evidence lead to reversal of the initial legal decision?
What were the specific consequences for the respondent following the administrative rehearing?
How did the interpretation of statutory record possession requirements change between hearings?

Based on 2 sources

00:00
00:00

NotebookLM can be inaccurate; please double check its responses.

Case Participants

Petitioner Side

  • Nancy L. Babington (petitioner)

Respondent Side

  • Lydia A. Peirce Linsmeier (HOA attorney)
    CARPENTER, HAZLEWOOD, DELGADO & BOLEN LLP
    Represented Respondent at initial hearing
  • Mark K. Sahl (HOA attorney)
    CARPENTER, HAZLEWOOD, DELGADO & BOLEN LLP
    Represented Respondent at rehearing
  • Scott B. Carpenter (HOA attorney)
    CARPENTER, HAZLEWOOD, DELGADO & BOLEN LLP
    Represented Respondent at rehearing
  • Debbie Schumacher (board member)
    Park Scottsdale II Townhouse Corporation
  • Marty Shuford (board member)
    Park Scottsdale II Townhouse Corporation
  • Joseph Silberschlag (board member)
    Park Scottsdale II Townhouse Corporation
    Secretary; testified
  • Angelina Rajenovich (board member)
    Park Scottsdale II Townhouse Corporation
  • Dermot Brown (board member)
    Park Scottsdale II Townhouse Corporation
  • Lori Nusbaum (board member)
    Park Scottsdale II Townhouse Corporation
  • Linda Parker (HOA staff)
    Associa Arizona
    Director of Client Services for property manager
  • Evelyn Shanley (HOA staff)
    Associa Arizona
    Community Director for property manager; testified at rehearing
  • Laura Smith (HOA staff)
    Associa Arizona

Neutral Parties

  • Tammy L. Eigenheer (ALJ)
    OAH
  • Judy Lowe (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
  • c. serrano (staff)
    Signed order transmission

Other Participants

  • Stephen Silberschlag (unknown)
    Subject of Petitioner's record request

Annette Cohen vs. CBS 136 Homeowners Association

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Case Summary

Case ID 18F-H1818033-REL
Agency ADRE
Tribunal OAH
Decision Date 2018-06-26
Administrative Law Judge Tammy L. Eigenheer
Outcome Petitioner was deemed the prevailing party because Respondent established a technical violation of A.R.S. § 33-1258(A) by failing to provide requested documents within the 10-day limit. However, the Administrative Law Judge found a civil penalty was not appropriate given the circumstances.
Filing Fees Refunded $500.00
Civil Penalties $0.00

Parties & Counsel

Petitioner Annette Cohen Counsel —
Respondent CBS 136 Homeowners Association Counsel Brian E. Ditsch

Alleged Violations

A.R.S. § 33-1258(A)

Outcome Summary

Petitioner was deemed the prevailing party because Respondent established a technical violation of A.R.S. § 33-1258(A) by failing to provide requested documents within the 10-day limit. However, the Administrative Law Judge found a civil penalty was not appropriate given the circumstances.

Key Issues & Findings

Failure to provide requested association records within 10 business days

Petitioner requested sign-in sheets for the January 10, 2018, and February 15, 2018, CBS HOA meetings. Respondent acknowledged a technical violation of the statute by failing to provide the requested documents within the required 10-day timeframe, although they were ultimately provided prior to the hearing.

Orders: Respondent must comply with the applicable provisions of A.R.S. § 33-1258(A) in the future, and pay Petitioner her filing fee of $500.00 within thirty (30) days.

Filing fee: $500.00, Fee refunded: Yes

Disposition: petitioner_win

Cited:

  • A.R.S. § 33-1258
  • A.R.S. § 33-1258(A)

Analytics Highlights

Topics: records request, failure to provide documents, condominium owners association, filing fee refund
Additional Citations:

  • A.R.S. § 32-2199 et seq.
  • A.R.S. § 33-1258
  • A.A.C. R2-19-119
  • A.R.S. § 33-1258(A)
  • A.R.S. §32-2199.02(B)
  • A.R.S. § 32-2199.04
  • A.R.S. § 41-1092.09

Video Overview

Audio Overview

Decision Documents

18F-H1818033-REL Decision – 642888.pdf

Uploaded 2026-04-24T11:11:47 (74.5 KB)

18F-H1818033-REL Decision – 655537.pdf

Uploaded 2026-04-24T11:11:50 (83.3 KB)

18F-H1818033-REL Decision – 642888.pdf

Uploaded 2026-01-23T17:23:22 (74.5 KB)

18F-H1818033-REL Decision – 655537.pdf

Uploaded 2026-01-23T17:23:25 (83.3 KB)

Administrative Hearing Briefing: Cohen v. CBS 136 Homeowners Association

Executive Summary

This document synthesizes the findings and decision from the administrative hearing case Annette Cohen v. CBS 136 Homeowners Association (No. 18F-H1818033-REL). The core of the dispute was the Homeowners Association’s (HOA) failure to provide requested documents—specifically, meeting sign-in sheets—to a member, Annette Cohen, within the ten-business-day timeframe mandated by Arizona statute A.R.S. § 33-1258.

At the hearing, the Respondent HOA acknowledged this “technical violation,” attributing the delay to operational difficulties arising from a recent change in management companies. The Petitioner, Ms. Cohen, argued the delay was intentional and warranted a civil penalty.

The Administrative Law Judge, Tammy L. Eigenheer, found that the HOA did violate the statute. In the final order, the Judge declared Ms. Cohen the prevailing party and mandated future compliance by the HOA. While a civil penalty was deemed inappropriate under the circumstances, the Judge ordered the HOA to reimburse Ms. Cohen’s $500 filing fee.

Case Overview

Entity / Individual

Petitioner

Annette Cohen

Respondent

CBS 136 Homeowners Association (CBS)

Respondent’s Counsel

Brian Ditsch, Sacks Tierney P.A.

Respondent’s Mgmt. Co.

Key Witness

Susan Rubin (PRM)

Adjudicating Body

Office of Administrative Hearings, Phoenix, Arizona

Administrative Law Judge

Tammy L. Eigenheer

Case Number

18F-H1818033-REL

Hearing Date

June 6, 2018

Decision Date

June 26, 2018

Chronology of the Dispute

The dispute centered on two separate sets of document requests made by Petitioner Annette Cohen.

• Request 1 (January 10 Meeting):

◦ On or about Jan. 10, 2018: Ms. Cohen requested the sign-in sheets from the annual meeting held on this date.

◦ Jan. 2018: The management company PRM took over management of the CBS 136 HOA.

◦ Feb. 15, 2018: After more than a month, and after two scheduled review appointments were cancelled by the management company, the sign-in sheets were finally provided to Ms. Cohen by email.

• Request 2 (February 15 Meeting):

◦ Feb. 19, 2018: Ms. Cohen requested the sign-in sheets from the February 15, 2018 HOA meeting. Receipt of this request was acknowledged by PRM.

◦ Feb. 21, 26, 27 & March 5, 2018: Ms. Cohen made repeated follow-up requests for the same information.

• Formal Proceedings:

◦ March 9, 2018: Ms. Cohen filed a formal petition with the Arizona Department of Real Estate.

◦ April 10, 2018: The Respondent HOA filed an answer denying all allegations.

◦ June 6, 2018: An administrative hearing was held. The documents had been provided to Ms. Cohen at some point prior to this hearing.

◦ June 26, 2018: The Administrative Law Judge issued the final decision.

Core Allegation and Legal Framework

Petitioner’s Allegation

Annette Cohen alleged that the CBS 136 Homeowners Association violated A.R.S. Title 33, Chapter 16, Section 33-1258 by failing to provide association records for review and copying within the statutorily required timeframe.

Governing Statute: A.R.S. § 33-1258(A)

The legal basis for the petition is Arizona Revised Statute § 33-1258(A), which governs a member’s right to access association records. The statute states, in relevant part:

“all financial and other records of the association shall be made reasonably available for examination by any member… The association shall have ten business days to fulfill a request for examination. On request for purchase of copies of records by any member… the association shall have ten business days to provide copies of the requested records. An association may charge a fee for making copies of not more than fifteen cents per page.”

The petitioner bears the burden of proving a violation by a preponderance of the evidence, defined as evidence that “shows that the fact sought to be proved is more probable than not.”

Arguments and Evidence Presented at Hearing

Once the Respondent acknowledged the delay, the hearing focused solely on determining the appropriate remedy.

Petitioner’s Position (Annette Cohen)

• Intentional Negligence: Ms. Cohen argued that the Respondent “intentionally ignored her request for the documents.”

• Request for Penalty: Based on the belief of intentional neglect, she asserted that a civil penalty was an appropriate remedy.

• Unreasonable Delay: She noted that the documents “could have easily been emailed to her within the 10 day deadline,” but that the HOA’s management company did not present this as an option until after the deadline had already passed.

Respondent’s Position (CBS 136 HOA)

• Acknowledged Violation: At the June 6, 2018 hearing, the Respondent “acknowledged that the requested documents were not provided within the 10 day timeframe set forth in statute.”

• Mitigating Circumstances: The defense centered on testimony from Susan Rubin of the management company, PRM. Ms. Rubin testified to the following:

◦ No requests are “ever purposefully ignored.”

◦ PRM had only taken over management of the HOA in January 2018.

◦ At the time of the requests, PRM was “still getting documents from the former management company.”

◦ The delay was not due to ignoring the request, but because it “took a little longer than expected to provide the documents.”

Administrative Law Judge’s Decision and Order

Findings and Conclusions

• Violation Established: The Judge concluded there was “no dispute that Respondent failed to provide the requested documents within 10 days.” Therefore, the Petitioner “established by a preponderance of the evidence that Respondent violated A.R.S. § 33-1258(A).”

• Rejection of Civil Penalty: Despite the Petitioner’s argument, the Administrative Law Judge did “not find such a penalty to be appropriate given the circumstances in this matter.”

Final Order

The Judge issued a three-part order binding on the parties:

1. Prevailing Party: The Petitioner, Annette Cohen, is “deemed the prevailing party.”

2. Future Compliance: The Respondent, CBS 136 Homeowners Association, is ordered to “comply with the applicable provisions of A.R.S. § 33-1258(A) in the future.”

3. Reimbursement of Filing Fee: The Respondent must pay the Petitioner her filing fee of $500.00 directly to her within thirty (30) days of the order.

Study Guide: Cohen v. CBS 136 Homeowners Association

Short-Answer Quiz

Instructions: Please answer the following ten questions in 2-3 complete sentences, using only the information provided in the case documents.

1. Who were the primary parties involved in case No. 18F-H1818033-REL, and what were their respective roles?

2. What specific documents did the Petitioner, Annette Cohen, request from the Respondent?

3. According to the petition, what was the core legal violation alleged by Ms. Cohen against the Homeowners Association?

4. What was the timeline for the Respondent’s failure to produce the sign-in sheets from the January 10, 2018 meeting?

5. How did the Respondent initially respond to the petition after it was filed with the Arizona Department of Real Estate?

6. What admission did the Respondent make at the June 6, 2018 hearing?

7. What was the Respondent’s explanation for the delay in providing the requested documents to the Petitioner?

8. What remedy did the Petitioner argue was appropriate for the violation, and on what grounds?

9. What legal standard of proof was the Petitioner required to meet, and did the judge find that she met it?

10. What were the three components of the final Order issued by the Administrative Law Judge?

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Answer Key

1. The primary parties were Annette Cohen, who was the Petitioner, and the CBS 136 Homeowners Association, which was the Respondent. The Petitioner is the party who filed the complaint, and the Respondent is the party against whom the complaint was filed.

2. The Petitioner requested the sign-in sheets from two separate meetings. She requested the sign-in sheets from the January 10, 2018 annual meeting and the sign-in sheets from the February 15, 2018 CBS HOA meeting.

3. The core legal violation alleged by Ms. Cohen was that the Respondent had violated Arizona Revised Statutes (A.R.S.) Title 33, Chapter 16, Section 33-1258. This statute requires homeowner associations to provide requested records to members for examination or copying within a ten-business-day timeframe.

4. Ms. Cohen requested the January 10, 2018 sign-in sheets on or about that same date (January 10). She did not receive them via email until February 15, 2018, which is well beyond the ten-business-day limit stipulated by law.

5. On or about April 10, 2018, the Respondent filed an answer to the petition. In this official response, the Respondent denied all of the allegations made by the Petitioner.

6. At the June 6, 2018 hearing, the Respondent acknowledged its failure to comply with the law. The Respondent admitted that the requested documents were not provided within the 10-day timeframe set forth in the statute, constituting a technical violation.

7. The Respondent, through the testimony of Susan Rubin from its management company PRM, explained the delay was not intentional. Ms. Rubin stated that PRM had just taken over management of the HOA in January 2018 and was still in the process of getting documents from the former management company.

8. The Petitioner argued that a civil penalty was the appropriate remedy. She contended that the Respondent intentionally ignored her requests and could have easily emailed the documents within the deadline, but failed to do so until after the deadline had passed.

9. The Petitioner had the burden of proving her case by a “preponderance of the evidence.” The judge found that she successfully met this standard because there was no dispute that the Respondent failed to provide the documents within the required 10 days.

10. The three components of the final Order were: 1) The Petitioner, Annette Cohen, was deemed the prevailing party; 2) The Respondent was ordered to comply with A.R.S. § 33-1258(A) in the future; and 3) The Respondent was ordered to pay the Petitioner’s $500.00 filing fee within thirty days.

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Essay Questions

Instructions: The following questions are designed for longer, essay-format responses. Use the provided case documents to formulate a comprehensive analysis.

1. Analyze the arguments presented by both the Petitioner and the Respondent regarding the appropriate remedy for the acknowledged statutory violation. Evaluate the mitigating circumstances offered by the Respondent and discuss why the Administrative Law Judge may have found them persuasive enough to deny a civil penalty while still finding in favor of the Petitioner.

2. Discuss the legal framework governing disputes between property owners and condominium associations in Arizona as outlined in the case documents. Explain the roles of the Arizona Department of Real Estate and the Office of Administrative Hearings, and detail the specific requirements of A.R.S. § 33-1258(A).

3. Examine the concept of “preponderance of the evidence” as defined in the judge’s decision. Explain how the Petitioner successfully met this burden of proof, particularly in light of the Respondent’s initial denial of all allegations versus its later admission at the hearing.

4. Deconstruct the final Order issued by Judge Tammy L. Eigenheer. What were the three distinct parts of the Order, and what legal and practical purpose did each part serve in resolving the dispute, compensating the Petitioner, and ensuring future compliance by the Respondent?

5. Trace the procedural history of this case, creating a timeline of key events from Ms. Cohen’s first document request to the issuance of the final Order. Discuss the significance of each step, including the multiple requests, the petition filing, the Respondent’s answer, the hearing, and the final decision.

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Glossary of Key Terms

Definition

Administrative Law Judge

The official, in this case Tammy L. Eigenheer, who presides over hearings at the Office of Administrative Hearings and issues a decision.

A.R.S. § 33-1258(A)

The specific section of Arizona Revised Statutes cited in the case. It mandates that a homeowners association must make records available for member examination within ten business days and may charge up to fifteen cents per page for copies.

Burden of Proof

The obligation on a party in a legal proceeding to prove their assertions. In this case, the Petitioner bore the burden of proving the Respondent violated the statute.

CBS 136 Homeowners Association

The Respondent in the case; an association of condominium owners located in Sun City West, Arizona.

Department

The Arizona Department of Real Estate, the state agency with jurisdiction to hear disputes between property owners and condominium owners associations.

Findings of Fact

The section of the decision that outlines the factual history and evidence presented in the case, as determined by the judge.

Office of Administrative Hearings

The state office where the formal hearing on the petition was conducted.

Petitioner

The party who initiates a legal action by filing a petition. In this case, the Petitioner was Annette Cohen.

Preponderance of the Evidence

The standard of proof required for the Petitioner to win the case. It is defined as evidence that is more convincing and shows that the fact sought to be proved is “more probable than not.”

The management company that took over management of the CBS 136 Homeowners Association in January 2018.

Respondent

The party against whom a petition is filed. In this case, the Respondent was the CBS 136 Homeowners Association.

Technical Violation

An acknowledged infringement of a rule or statute where the substance of the rule may not have been maliciously violated. The Respondent admitted to a technical violation of the 10-day timeframe for document production.

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18F-H1818033-REL

2 sources

Both documents are identical excerpts from an Administrative Law Judge Decision from the Arizona Office of Administrative Hearings, concerning a dispute between Annette Cohen (Petitioner) and the CBS 136 Homeowners Association (Respondent). The case, No. 18F-H1818033-REL, addressed the Petitioner’s claim that the Respondent violated A.R.S. § 33-1258(A) by failing to provide requested association meeting sign-in sheets within the mandated ten-day period. Though the Respondent acknowledged a technical violation of the statute, the Administrative Law Judge determined that a civil penalty was not appropriate given the circumstances, such as the change in management. Ultimately, the Petitioner was deemed the prevailing party, and the Respondent was ordered to comply with the statute in the future and reimburse the Petitioner’s $500.00 filing fee.

2 sources

Based on 2 sources

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NotebookLM can be inaccurate; please double check its responses.

Case Participants

Petitioner Side

  • Annette Cohen (petitioner)
    Appeared on her own behalf

Respondent Side

  • Brian Ditsch (respondent attorney)
    Sacks Tierney P.A.
  • Susan Rubin (witness)
    PRM (management company)
    Testified for Respondent

Neutral Parties

  • Tammy L. Eigenheer (ALJ)
    Office of Administrative Hearings
  • Judy Lowe (commissioner)
    Arizona Department of Real Estate
    Recipient of decision notice

Other Participants

  • Felicia Del Sol (clerical staff)
    Transmitted the decision

Franks, Charlene -v- Palms II Homeowners Association

Posted on by

Case Summary

Case ID 07F-H067025-BFS
Agency Department of Fire, Building and Life Safety
Tribunal Office of Administrative Hearings
Decision Date 2007-06-11
Administrative Law Judge Michael K. Carroll
Outcome Petitioner prevailed on 5 of 17 allegations. The HOA was ordered to obtain an annual audit, refund excess assessments ($0.10/mo), provide access to financial records, obtain a fidelity bond, and repair specific common areas. Filing fee reimbursement was denied because the Petitioner did not prevail on the majority of issues.
Filing Fees Refunded $0.00
Civil Penalties $0.00

Parties & Counsel

Petitioner Charlene Franks Counsel —
Respondent Palms II Homeowners Association Counsel —

Alleged Violations

Declaration, Article VI, Section 6
Declaration, Article VI, Section 9
A.R.S. §33-1258(A)
Declaration, Article XII, Section 7
Declaration, Article IX, Section 1
Various

Outcome Summary

Petitioner prevailed on 5 of 17 allegations. The HOA was ordered to obtain an annual audit, refund excess assessments ($0.10/mo), provide access to financial records, obtain a fidelity bond, and repair specific common areas. Filing fee reimbursement was denied because the Petitioner did not prevail on the majority of issues.

Why this result: Petitioner failed to prevail on the majority of issues (12 of 17 lost).

Key Issues & Findings

No Annual Audit

Petitioner alleged the HOA failed to conduct an annual audit as required by the Declaration. The HOA argued the By-Laws did not require it, but the Declaration controls.

Orders: An annual audit, prepared by a certified public accountant, shall be obtained by the Association prior to establishing the annual amount to be assessed.

Filing fee: $0.00, Fee refunded: No

Disposition: petitioner_win

Improper Assessment Increase

The Board raised the assessment by $14.00, exceeding the 10% limit ($13.90) by $0.10.

Orders: A credit or refund of $0.10 per month for each month of assessments paid during 2006 shall be provided.

Filing fee: $0.00, Fee refunded: No

Disposition: petitioner_win

Failure to Provide Books and Records

Petitioner was denied access to actual invoices and receipts supporting accounting summaries.

Orders: Association must allow members to review all financial records including receipts, invoices, bids, etc.

Filing fee: $0.00, Fee refunded: No

Disposition: petitioner_win

No Insurance Bond

The independent contractor manager was not bonded as required by the Declaration.

Orders: Manager must obtain a fidelity bond in amount equal to at least 3 months assessments plus reserve funds.

Filing fee: $0.00, Fee refunded: No

Disposition: petitioner_win

Improper Maintenance

Photos showed crumbling perimeter wall and peeling paint, falling below the standard of care required.

Orders: Association shall repair the crumbling perimeter wall and flaking paint within six months.

Filing fee: $0.00, Fee refunded: No

Disposition: petitioner_win

Various Dismissed Allegations (12 Counts)

Petitioner raised 12 other allegations which were not proven or deemed moot.

Orders: No violation established for these allegations.

Filing fee: $0.00, Fee refunded: No

Disposition: petitioner_lose

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Decision Documents

07F-H067025-BFS Decision – 169617.pdf

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07F-H067025-BFS Decision – 169617.pdf

Uploaded 2026-01-25T15:20:12 (125.4 KB)

Briefing Document: Franks v. Palms II Homeowners Association (No. 07F-H067025-BFS)

Executive Summary

This briefing document synthesizes the June 11, 2007, administrative decision regarding a dispute between Petitioner Charlene Franks and the Palms II Homeowners Association (HOA). The Petitioner alleged 17 separate violations of state statutes and community governing documents. The Administrative Law Judge (ALJ) determined that the HOA was in violation of five specific requirements related to financial audits, assessment limits, records transparency, fidelity bonding, and property maintenance.

Key Takeaways:

• Supremacy of the Declaration: The original 1984 Declaration remains the superior governing document. Updated By-Laws cannot supplant specific requirements of the Declaration (such as mandatory audits) unless the Declaration is formally amended by a 75–90% vote of the owners.

• Transparency and Access: Under A.R.S. §33-1258A, HOA members have a statutory right to examine original financial records, including invoices and receipts, not just summary reports.

• Mandatory Compliance: The HOA was ordered to provide refunds for over-assessments, obtain a certified audit, secure a fidelity bond for its manager, and complete specific property repairs within six months.

• Absence of Bad Faith: While the HOA was noncompliant in several areas, the ALJ found no evidence of bad faith or reckless disregard, thus declining to impose civil penalties or reimburse the Petitioner’s filing fees.

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Governing Authority and Background

The Palms II Homeowners Association was incorporated on June 15, 1989, succeeding the Gardens III Condominiums.

• Governing Documents: The Association is governed primarily by the Declaration of Covenants, Conditions and Restrictions (Declaration) filed May 9, 1984. While Palms II adopted its own By-Laws to replace the original Gardens III By-Laws, the 1984 Declaration remains the primary authority.

• Amendment Standards: The Declaration requires a signature from 90% of owners to amend within the first 20 years, and 75% thereafter. The Association’s By-Laws, which can be amended by a simple majority of the Board, cannot override specific mandates found in the Declaration.

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Analysis of Allegations and Findings

The following table categorizes the 17 allegations and the ALJ’s findings regarding each:

Allegation

Subject

Ruling

Summary of Evidence/Reasoning

Annual Audit

Violation

The Declaration explicitly requires a CPA audit before setting annual assessments. The absence of this requirement in the By-Laws does not excuse the Board.

Assessment Increase

Violation

Assessments were raised by 14.00/month,exceedingthe1013.90) by $0.10 without a two-thirds member vote.

Access to Records

Violation

Under A.R.S. §33-1258A, the HOA failed to provide Petitioner with underlying documents (invoices, receipts, bids).

Fidelity Bond

Violation

The Declaration requires a fidelity bond for anyone handling funds. The independent contractor manager was not bonded.

Maintenance

Violation

Peeling paint and a crumbling perimeter wall fell below the “reasonably high standard of care” required by the Declaration.

Financial Reporting

No Violation

Discrepancies in P&L statements were attributed to simple accounting errors by a volunteer homeowner.

Annual Report

No Violation

The Board’s use of annual P&L and Balance Sheets satisfied the “annual report” requirement.

Annual Budget

No Violation

Neither the Palms II By-Laws nor the Declaration explicitly require a formal “budget” document.

Accounting for Funds

No Violation

While no audit was performed, financial records were sufficient to account for receipts and disbursements.

Meeting Timelines

No Violation

Delays in annual meetings were caused by a lack of quorum, not a refusal to meet.

Check Signing

No Violation

The Board has the discretion to designate the manager as the sole signer, though it acknowledged the risk.

Nominating Committee

No Violation

A committee was designated; no minimum size is required by the governing documents.

Candidate Notice

No Violation

Notice provided in election ballots and meeting announcements was deemed sufficient.

Proxies

The Association transitioned to absentee ballots in compliance with A.R.S. §33-1250C.

Common Area Usage

No Violation

Plantings in common areas had received prior Board approval.

Enforcement

No Violation

No evidence of improper enforcement of community documents was presented.

Breach of Duty

No Violation

No evidence was presented that the Board allowed the manager excessive control in violation of statutes.

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Detailed Findings on Key Violations

1. Mandatory Annual Audit (Allegation 3)

The Association argued that annual audits were an unnecessary expense for a small organization and pointed to their updated By-Laws, which did not require one. However, the ALJ ruled that Article VI, Section 6 of the Declaration is the controlling authority. It stipulates that assessments can only be established after the Board examines an annual audit prepared by a Certified Public Accountant (CPA).

2. Statutory Right to Records (Allegation 8)

The HOA provided summary financial statements but refused access to the source documentation. The ruling clarified that A.R.S. §33-1258A mandates that all financial records be made “reasonably available.” This includes:

• Invoices and receipts.

• Contractor bids.

• Payment records and bills.

3. Property Maintenance Standards (Allegation 11)

Under Article IX, Section 1 of the Declaration, the HOA must maintain a standard that reflects “a high pride of ownership.” Photographic evidence demonstrated that a perimeter wall and the exterior eaves of certain units had been neglected for several years. The Board’s defense of “lack of funds” was insufficient to excuse the failure to meet the standard of care required by the Declaration.

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Administrative Order

The Association was ordered to take the following corrective actions:

1. Financial Audit: Obtain an annual audit prepared by a CPA before establishing the assessment amount for the next fiscal year.

2. Member Refunds: Provide a credit or refund of $0.10 per month for all assessments paid during 2006 to every member.

3. Future Assessments: Adhere to the 10% maximum annual increase limit unless a two-thirds member vote is obtained.

4. Information Access: Allow members or their representatives to review all financial records, including all source documents (invoices, bids, etc.).

5. Bonding Requirement: Ensure any non-employee manager obtains a fidelity bond covering at least three months of assessments plus reserve funds.

6. Property Repair: Complete repairs to the crumbling perimeter wall and flaking paint depicted in the hearing exhibits within a reasonable time, not to exceed six months from the date of the order.

Finality of Decision

The ALJ’s decision is the final administrative action and is not subject to a request for rehearing. It is enforceable through contempt of court proceedings in Superior Court, which may result in an award of attorney fees and costs to the prevailing party.

Case Study Guide: Franks vs. Palms II Homeowners Association

This study guide provides a comprehensive review of the administrative hearing decision regarding the dispute between Charlene Franks (Petitioner) and the Palms II Homeowners Association (Respondent). It explores the legal interpretation of community governing documents, state statutes, and the fiduciary responsibilities of homeowners association boards.

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Part I: Short-Answer Quiz

Instructions: Answer the following questions in 2–3 sentences based on the provided administrative decision.

1. What is the historical relationship between Gardens III Condominiums and Palms II Homeowners Association?

2. Why did the Administrative Law Judge (ALJ) determine that the discrepancies in the 2004 and 2005 financial statements did not constitute a violation?

3. According to the Declaration, what must occur before the Board of Directors can establish the annual assessment amount?

4. Why were the Palms II By-laws insufficient to override the audit requirement found in the Declaration?

5. What specific calculation led the ALJ to conclude that the 2006 assessment increase was a violation of the Declaration?

6. Under A.R.S. §33-1258A, what rights do Association members have regarding financial records?

7. What was the Respondent’s justification for the delay in holding annual meetings, and how did the ALJ rule on this?

8. What are the specific requirements for a fidelity bond when a management agent is retained?

9. How did the ALJ define the standard of care for property maintenance at Palms II?

10. Why did the ALJ decline to award civil penalties or the reimbursement of filing fees to the Petitioner despite finding five violations?

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Part II: Answer Key

1. What is the historical relationship between Gardens III Condominiums and Palms II Homeowners Association? Gardens III was the original condominium development governed by a 1984 Declaration. When Palms II was incorporated in 1989, it consisted of the same units and formally adopted the original Declaration to govern its membership and obligations.

2. Why did the Administrative Law Judge (ALJ) determine that the discrepancies in the 2004 and 2005 financial statements did not constitute a violation? The ALJ found that the statements were prepared by a volunteer homeowner accountant and that the discrepancies were the result of simple accounting errors rather than intentional falsification. Since the evidence was undisputed that these were unintentional mistakes, no violation of state statutes or community documents was proven.

3. According to the Declaration, what must occur before the Board of Directors can establish the annual assessment amount? The Declaration requires the Board of Directors to examine both an annual report and an annual audit prepared by a certified public accountant. The ALJ emphasized that the language in the Declaration explicitly links the setting of assessment amounts to the review of these specific documents.

4. Why were the Palms II By-laws insufficient to override the audit requirement found in the Declaration? The Declaration is the superior document and requires a 75% to 90% owner vote for amendment, whereas the By-laws can be changed by a simple majority of the Board. Because the By-laws specifically incorporate the Declaration, the absence of an audit requirement in the By-laws cannot supplant the explicit mandate for an audit contained within the Declaration.

5. What specific calculation led the ALJ to conclude that the 2006 assessment increase was a violation of the Declaration? The Declaration limits annual assessment increases to 10% without a two-thirds membership vote. Since the previous assessment was $139.00, the maximum allowed increase was $13.90, but the Board raised it by $14.00, resulting in an unauthorized overage of $0.10 per month per member.

6. Under A.R.S. §33-1258A, what rights do Association members have regarding financial records? This state statute mandates that all financial and other records of the association be made reasonably available for examination by any member or their designated representative. This includes supporting documents such as invoices, receipts, bids, and payment records that form the basis of accounting summaries.

7. What was the Respondent’s justification for the delay in holding annual meetings, and how did the ALJ rule on this? The Association argued that meetings were delayed past the required February date because they failed to achieve a quorum of members in attendance. The ALJ ruled that no violation occurred because the meetings were eventually held once a quorum was reached, acknowledging the procedural necessity of meeting the quorum requirement.

8. What are the specific requirements for a fidelity bond when a management agent is retained? The Declaration requires the management agent to obtain a fidelity bond at their own expense covering their personnel. This bond must cover an amount equal to at least the total of three months of assessments on all units plus the Association’s reserve funds.

9. How did the ALJ define the standard of care for property maintenance at Palms II? The ALJ cited Article IX of the Declaration, which requires a “reasonably high standard of care” intended to ensure the project reflects a “high pride of ownership.” The existence of a crumbling perimeter wall and peeling paint for several years was found to fall below this mandatory standard.

10. Why did the ALJ decline to award civil penalties or the reimbursement of filing fees to the Petitioner despite finding five violations? The ALJ determined that the Petitioner did not prevail on the majority of the 17 allegations, making a fee reimbursement unjustified. Furthermore, while the Association was noncompliant in several areas, the ALJ found no evidence of bad faith, reckless disregard, or sufficient negligence to warrant civil penalties.

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Part III: Essay Questions

1. The Hierarchy of Governing Documents: Analyze the conflict between the Palms II By-laws and the 1984 Declaration regarding the annual audit. Why is the legal weight of a Declaration generally superior to that of By-laws in a community association context?

2. Transparency and Statutory Compliance: Discuss the implications of A.R.S. §33-1258A on HOA governance. Why is the access to raw financial data (invoices, bids, etc.) critical for members, and how does it differ from simply receiving a Profit & Loss statement?

3. Fiduciary Duty and Maintenance: The Respondent argued that maintenance was deferred due to a lack of funds. Evaluate the Board’s responsibility to balance budget constraints with the “high pride of ownership” standard mandated by the Declaration.

4. The Role of Independent Contractors in HOA Management: The case highlights issues with a manager who was an independent contractor rather than an employee. Discuss the risks associated with check-signing authority and bonding requirements for third-party managers as identified in the ALJ’s decision.

5. The Limits of Administrative Oversight: Although the ALJ found five violations, he did not find “bad faith” or “reckless disregard.” Explore the distinction between administrative noncompliance and actionable negligence in the management of a planned community.

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Part IV: Glossary of Key Terms

Definition

A.R.S. §33-1258A

An Arizona Revised Statute requiring homeowners associations to make financial and other records reasonably available for member examination.

Administrative Law Judge (ALJ)

A presiding officer who hears evidence and issues decisions in disputes involving state agency regulations or administrative petitions.

Annual Audit

A formal examination of an organization’s accounts, which the Palms II Declaration requires to be performed by a Certified Public Accountant (CPA).

Articles of Incorporation

The legal document filed with the state to create the Palms II Homeowners Association as a corporate entity.

Assessment

A periodic fee (monthly, in this case) paid by homeowners to the Association to cover common expenses and reserves.

By-laws

A set of rules adopted by an association to govern its internal management, such as meeting dates and officer duties.

Declaration (CC&Rs)

The Covenants, Conditions, and Restrictions that govern the land and the obligations of the members; it is typically the superior governing document.

Fidelity Bond

A form of insurance that protects the Association against losses caused by the dishonest or fraudulent acts of those handling its funds.

Management Agent

An individual or corporation contracted by the Board to handle the daily operations of the Association.

Petitioner

The party (in this case, Charlene Franks) who files a petition or claim alleging violations of law or governing documents.

A written authorization allowing one person to act or vote for another; the Association transitioned away from these in favor of absentee ballots.

Quorum

The minimum number of members who must be present (in person or by ballot) at a meeting to make the proceedings of that meeting valid.

Respondent

The party (in this case, Palms II HOA) against whom a petition is filed and who must respond to the allegations.

The 10-Cent Violation: 5 Surprising Lessons from a Real-Life HOA Legal Battle

Living in a homeowners association (HOA) often feels like a delicate truce between individual property rights and community standards. For many, the Board of Directors can seem like an untouchable “Goliath,” wielding power through complex rules and assessments. However, the case of Charlene Franks vs. Palms II Homeowners Association serves as a powerful warning shot to boards that treat their governing documents as suggestions rather than mandates.

The conflict centered on a Declaration filed in 1984—long before the dispute reached a Phoenix courtroom in 2007. Petitioner Charlene Franks brought 17 allegations against her association, and while she only prevailed on five, those victories represent a masterclass in community governance. They prove that even decades-old rules can come back to haunt a negligent board, and that in the eyes of the law, there is no such thing as a “minor” violation.

1. The Audit Trap: Why the “Declaration” Is King

The most common mistake an HOA board can make is assuming their By-Laws are the final word. In this case, the Palms II Board argued that an annual audit was an “unnecessary expense.” They pointed to their current By-Laws, which could be amended by a simple majority vote of the Board and contained no audit requirement.

However, the legal hierarchy is clear: the Declaration of Covenants, Conditions and Restrictions is the “constitution” of the community; the By-Laws are merely the “operations manual.” The original 1984 Declaration explicitly required an audit by a certified public accountant. Because the Declaration required a signature from 75% to 90% of all owners to be amended—unlike the By-Laws, which the Board could change on a whim—the Board had no right to ignore it.

2. The 10-Cent Lesson: Precision Over “Close Enough”

In 2006, the Board raised monthly fees from $139.00 to $153.00. Under the Declaration, the Board was permitted to increase assessments by up to 10% annually without a full membership vote. To the average person, a $14 increase sounds like a reasonable “round number.” To the court, it was an illegal overcharge.

The Math of the Violation:

• Original Assessment: $139.00

• Maximum 10% Increase Allowed: $13.90

• Actual Increase Charged: $14.00

• The Discrepancy: $0.10

This ten-cent error upended the Board’s assessment hike. The court ruled that “close enough” is not a legal defense, ordering the Association to provide a credit or refund to every member who paid the assessment in 2006. This underscores a vital principle: boards must follow the mathematical letter of their founding documents, or they risk the entire financial structure being invalidated.

3. Transparency: You Have a Right to the Receipts

HOA boards often try to pacify inquisitive homeowners with “filtered” data, such as Profit & Loss statements or balance sheets prepared by an accountant. In this case, the Board felt these summaries were sufficient. Charlene Franks disagreed, demanding the raw data: the actual invoices, bids, and receipts.

The Judge upheld the petitioner’s right to see the “man behind the curtain” under A.R.S. §33-1258A. The lesson for homeowners is empowering: you are legally entitled to the supporting documents that prove where every cent of your dues is going.

4. Maintenance: “Lack of Funds” Is Not a Defense

When confronted with evidence of a crumbling perimeter wall and peeling unit paint, the Board offered a common excuse: they had to prioritize projects due to a “lack of funds.” They argued the property was in “relatively good shape” for its age.

The court rejected this defense entirely. The Declaration mandated a “reasonably high standard of care” so that the project would reflect a “high pride of ownership.” As a legal advocate would note, “lack of funds” is often a political choice—a Board’s refusal to pass a special assessment to meet their maintenance obligations. The Judge ruled that political inconvenience does not waive the standard of care, ordering the Association to fix the flaking paint and crumbling walls within six months.

5. The Checkbook Risk: The Dangers of the Unbonded Manager

One of the most alarming revelations in the case involved the Association’s manager. Despite being paid $1,000.00 per month and serving as the sole authorized signer on the Association’s checking account, the manager was not covered by a fidelity bond.

The Board relied on a general insurance policy covering “employee dishonesty,” but because the manager was an independent contractor, that coverage was useless. The Declaration required any “management agent” to obtain a fidelity bond at their own expense to protect the Association’s reserves. By allowing one person total control over the checkbook without the protection of a bond, the Board placed the entire community’s financial security at risk.

Conclusion: Accountability Over Perfection

The Franks vs. Palms II decision proves that HOA governance is a matter of strict accountability to the fine print. While the Board wasn’t found to have acted in “bad faith,” their failure to follow the 1984 Declaration regarding audits, assessment caps, and bonding was enough to trigger a court-ordered overhaul of their operations.

For every homeowner, this case is a reminder: the power of your “Goliath” is limited by the very documents they were sworn to uphold. If you looked at your own community’s founding Declaration today, would you find a forgotten protection—or a 10-cent violation—hiding in the fine print?

Case Participants

Petitioner Side

  • Charlene Franks (Petitioner)
    Appeared on her own behalf

Respondent Side

  • Carol Noxon (Representative)
    Palms II Homeowners Association
    Appeared on behalf of Respondent
  • Jean Tipfer (Representative)
    Palms II Homeowners Association
    Appeared on behalf of Respondent

Neutral Parties

  • Michael K. Carroll (Administrative Law Judge)
    Office of Administrative Hearings
  • Robert Barger (Agency Official)
    Department of Fire Building and Life Safety
    Listed in distribution (H/C)
  • Joyce Kesterman (Agency Official)
    Department of Fire Building and Life Safety
    Listed in distribution