Jean Williams v. Surprise Farms II Community Association

Posted on July 31, 2020 by [email protected]

Case Summary

Case ID	20F-H2020054-REL
Agency	ADRE
Tribunal	OAH
Decision Date	2020-07-30
Administrative Law Judge	Tammy L. Eigenheer
Outcome	Petitioner failed to prove the HOA violated A.R.S. § 33-1803(A) or the CC&Rs by increasing the Annual Assessment by 20% without a vote, as the increase remained below the Maximum Annual Assessment and complied with the statutory 20% cap.
Filing Fees Refunded	$0.00
Civil Penalties	$0.00

Parties & Counsel

Petitioner	Jean Williams	Counsel	—
Respondent	Surprise Farms II Community Association	Counsel	Nick Nogami

Alleged Violations

A.R.S. § 33-1803; CC&Rs Article VII, Section 7.2 and 7.4(a)-(c)

Outcome Summary

Petitioner failed to prove the HOA violated A.R.S. § 33-1803(A) or the CC&Rs by increasing the Annual Assessment by 20% without a vote, as the increase remained below the Maximum Annual Assessment and complied with the statutory 20% cap.

Why this result: Petitioner’s assertion was based on an erroneous reading of the CC&Rs, confusing the maximum automatic increase of the Maximum Annual Assessment (10%) with the limit on the actual Annual Assessment increase.

Key Issues & Findings

Whether the 20% increase in the Annual Assessment effective April 2020 violated statutory limits or CC&R requirements for member approval.

Petitioner alleged the Respondent HOA violated A.R.S. § 33-1803 and the CC&Rs by increasing the Annual Assessment by 20% (from $720 to $864) effective April 2020 without obtaining a 2/3 majority vote of the members.

Orders: Petitioner’s petition is dismissed.

Filing fee: $0.00, Fee refunded: No

Disposition: respondent_win

Cited:

A.R.S. § 33-1803(A)
CC&Rs Article VII, Section 7.2
CC&Rs Article VII, Section 7.4

Analytics Highlights

Topics: assessment increase, HOA assessments, statutory compliance, CC&R interpretation

Additional Citations:

A.R.S. § 33-1803(A)
CC&Rs Article VII, Section 7.2
CC&Rs Article VII, Section 7.4

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Video Overview

Audio Overview

Decision Documents

20F-H2020054-REL Decision – 810957.pdf

Uploaded 2026-04-26T09:53:01 (103.0 KB)

20F-H2020054-REL Decision – 810957.pdf

Uploaded 2026-01-23T17:32:37 (103.0 KB)

Briefing on Administrative Law Judge Decision: Williams v. Surprise Farms II Community Association

Executive Summary

This briefing analyzes the Administrative Law Judge (ALJ) decision in case number 20F-H2020054-REL, where petitioner Jean Williams alleged that the Surprise Farms II Community Association improperly increased annual homeowner assessments. The ALJ dismissed the petition, concluding that the Association acted within its authority as defined by both its Covenants, Conditions, and Restrictions (CC&Rs) and Arizona state law.

The central finding of the case is that the petitioner erroneously interpreted the CC&Rs by confusing the “Annual Assessment” (the actual amount charged to homeowners) with the “Maximum Annual Assessment” (a calculated upper limit). The ALJ determined that the Association’s 20% increase in the Annual Assessment for 2020 was permissible because:

1. It did not exceed the 20% year-over-year cap allowed by Arizona Revised Statutes (A.R.S.) § 33-1803(A) without a member vote.

2. The resulting assessment of $864 was significantly below the $2,426 Maximum Annual Assessment permitted for 2020 under the community’s own CC&Rs.

Ultimately, the decision affirms the Board’s discretion to set the Annual Assessment, provided it stays within the dual constraints of the state’s percentage increase limit and the community’s own calculated maximum charge.

Case Overview

• Case Number: 20F-H2020054-REL

• Parties:

◦ Petitioner: Jean Williams

◦ Respondent: Surprise Farms II Community Association

• Administrative Law Judge: Tammy L. Eigenheer

• Hearing Date: July 10, 2020

• Decision Date: July 30, 2020

• Nature of Dispute: The petitioner contested the validity of a 20% increase in the annual homeowners association assessment implemented in April 2020, arguing it required a member vote.

Petitioner’s Allegations

Jean Williams filed a petition with the Arizona Department of Real Estate on March 31, 2020, alleging that the Surprise Farms II Community Association violated its governing documents and state law.

• Core Allegation: The Association illegally increased the “Maximum Monthly Assessment” by 20% without the approval of a two-thirds majority of association members.

• Cited Violations:

◦ A.R.S. § 33-1803: The statute governing assessment increases.

◦ CC&Rs Article VII, Sections 7.2 and 7.4(a)-(c): The sections of the community’s governing documents that outline assessment rules.

• Petitioner’s Argument: Williams contended that the Association’s CC&Rs limited any annual assessment increase to 10% unless a vote was held. She argued that the Association’s justification for the 20% increase, which cited A.R.S. § 33-1803, was a direct violation of the community’s covenants.

Respondent’s Position and Stipulated Facts

The Surprise Farms II Community Association denied all of the petitioner’s complaints. At the hearing, the Association did not present witnesses and relied on its legal argument. The respondent stipulated to the key facts regarding the assessment increases:

• April 2019 Increase: The Annual Assessment increased from $660.00 to $720.00 per year, a 9% increase, without a vote of the members.

• April 2020 Increase: The Annual Assessment increased from $720.00 to $864.00 per year, a 20% increase, without a vote of the members.

Governing Rules and Document Analysis

The ALJ’s decision rested on a detailed interpretation of state law and two distinct concepts within the Association’s CC&Rs: the “Annual Assessment” and the “Maximum Annual Assessment.”

Arizona Revised Statutes (A.R.S.) § 33-1803(A)

This state law establishes a default cap on assessment increases. It states that an association “shall not impose a regular assessment that is more than twenty percent greater than the immediately preceding fiscal year’s assessment without the approval of the majority of the members,” unless the community’s own documents impose an even lower limit.

CC&Rs Article VII: Key Definitions

The case hinged on the distinction between two terms defined in the CC&Rs:

1. Maximum Annual Assessment (Section 7.4): This section defines a ceiling for how much the Board could charge.

◦ It began at $480 in the first year.

◦ Crucially, this maximum automatically increases by up to 10% each year without a member vote.

◦ To raise the Maximum Annual Assessment above this automatic 10% annual increase, a two-thirds vote of members is required.

2. Annual Assessment (Section 7.2): This section defines the actual charge levied against each property.

◦ The Board has “sole discretion” to set this amount each year.

◦ The only limitation is that the Annual Assessment must be less than or equal to the “Maximum Annual Assessment” calculated under Section 7.4.

Administrative Law Judge’s Findings and Conclusion

The ALJ concluded that the petitioner failed to prove by a preponderance of the evidence that the Association violated the CC&Rs or state law. The decision was based on the following key points of analysis:

Erroneous Reading of the CC&Rs

The ALJ found the petitioner’s entire argument was “predicated on her erroneous reading of Article VII, Section 7.4 of the CC&Rs.” The petitioner incorrectly believed the 10% automatic increase to the Maximum Annual Assessment was a cap on the Annual Assessment itself.

The decision explicitly clarifies this distinction:

“Petitioner repeatedly asserted that an increase in the Annual Assessment was limited to ten percent in any given year unless approved by a vote of the members even though Article VII, Section 7.4 was entitled Maximum Annual Assessment and consistently referenced the same. By definition, the existence of a Maximum Annual Assessment necessitates an Annual Assessment that may be less than the maximum.”

Calculation of the Maximum Annual Assessment

The ALJ used the CC&Rs’ formula (a 10% cumulative increase per year since 2003) to calculate the authorized Maximum Annual Assessment for each year. This demonstrated the significant gap between what the Association could charge and what it actually charged.

Maximum Annual Assessment

$480.00

$528.00

$580.80

$638.88

$702.76

$773.03

$850.33

$935.36

$1,028.89

$1,131.77

$1,244.94

$1,369.43

$1,657.00

$1,822.70

$2,004.97

$2,205.46

$2,426.00

Legality of the 2020 Assessment Increase

The ALJ determined the Association’s 2020 increase was compliant with all rules for two reasons:

1. Compliance with State Law: The increase from $720 to $864 was exactly 20%, which is the maximum allowed under A.R.S. § 33-1803(A) without a member vote.

2. Compliance with CC&Rs: The new Annual Assessment of $864 was substantially lower than the calculated Maximum Annual Assessment of $2,426 allowed for 2020.

The Board therefore acted within its “sole discretion” as granted by Section 7.2 of the CC&Rs.

Final Order

Based on the finding that the Association acted properly, IT IS ORDERED that Petitioner’s petition is dismissed. The decision is binding unless a rehearing is requested within 30 days of the order.

Study Guide: Williams v. Surprise Farms II Community Association

This study guide provides a review of the Administrative Law Judge Decision in case number 20F-H2020054-REL, Jean Williams v. Surprise Farms II Community Association. It includes a short-answer quiz, an answer key, suggested essay questions, and a glossary of key terms to facilitate a comprehensive understanding of the case.

Short-Answer Quiz

Answer the following questions in 2-3 complete sentences, based on the provided legal decision.

1. Who were the primary parties involved in this case, and what were their respective roles?

2. What was the central allegation Jean Williams made against the Surprise Farms II Community Association in her petition?

3. What was the specific percentage and dollar amount of the Annual Assessment increase that took effect in April 2020, and was it approved by a vote of the members?

4. According to the decision, which two governing documents did the Petitioner allege the Respondent had violated?

5. What limitation does Arizona Revised Statute (A.R.S.) § 33-1803(A) place on an association’s ability to raise regular assessments?

6. How did the community’s CC&Rs define the relationship between the “Annual Assessment” set by the Board and the “Maximum Annual Assessment”?

7. What was the calculated “Maximum Annual Assessment” for the year 2020, according to the automatic increase formula in the CC&Rs?

8. According to the Administrative Law Judge, what was the petitioner’s fundamental misunderstanding of Article VII, Section 7.4 of the CC&Rs?

9. Who bore the “burden of proof” in this case, and what legal standard was required to meet it?

10. What was the final order issued by the Administrative Law Judge, and on what date was the decision made?

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Quiz Answer Key

1. The primary parties were Jean Williams, who was the Petitioner appearing on her own behalf, and the Surprise Farms II Community Association, which was the Respondent represented by Nick Nogami. The case was adjudicated by Administrative Law Judge Tammy L. Eigenheer.

2. The petitioner alleged that the association improperly increased the Maximum Monthly Assessment by 20% without the required approval from a two-thirds majority of the association members. She claimed this action violated the community’s CC&Rs and that the association incorrectly used A.R.S. § 33-1803 to justify the increase.

3. Effective April 2020, the Annual Assessment increased by twenty percent, from $720.00 per year to $864.00 per year. The respondent stipulated that this increase occurred without any vote of the members.

4. The Petitioner alleged that the Respondent had violated the provisions of A.R.S. § 33-1803 and specific sections of the association’s governing documents: Article VII, Section 7.2 and 7.4(a)-(c) of the Covenants, Conditions, and Restrictions (CC&Rs).

5. A.R.S. § 33-1803(A) states that an association cannot impose a regular assessment that is more than twenty percent greater than the previous fiscal year’s assessment without the approval of a majority of the members. This limit applies unless the community’s own documents impose an even lower limit.

6. Article VII, Section 7.2 of the CC&Rs granted the Board sole discretion to set the Annual Assessment. This discretion was limited by the provision that the amount must be subject to, and therefore less than or equal to, the “Maximum Annual Assessment” as calculated under Section 7.4.

7. Using the annual ten percent increase formula set forth in Article VII, Section 7.4 of the CC&Rs, the calculated Maximum Annual Assessment for the year 2020 was $2,426.00.

8. The judge concluded that the petitioner’s case was predicated on her erroneous reading of the CC&Rs. She incorrectly believed the 10% figure in Section 7.4 applied to the Annual Assessment itself, when in fact it was the automatic escalator for the Maximum Annual Assessment, which served as a ceiling for the board’s discretion.

9. The Petitioner, Jean Williams, bore the burden of proof in this proceeding. She was required to prove her allegations by a “preponderance of the evidence,” which is defined as evidence with the most convincing force.

10. The final order, issued on July 30, 2020, was that the Petitioner’s petition be dismissed. The Judge concluded that the Respondent did not violate the referenced provisions of the CC&Rs or A.R.S. § 33-1803(A).

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Essay Questions

The following questions are designed for longer-form, analytical responses. No answers are provided.

1. Analyze the distinction between “Annual Assessment” and “Maximum Annual Assessment” as defined in the Surprise Farms II CC&Rs. Explain how the petitioner’s failure to differentiate between these two terms was central to the case’s outcome.

2. Explain the interplay between the community’s CC&Rs (specifically Article VII, Sections 7.2 and 7.4) and the state law (A.R.S. § 33-1803(A)). How did the judge determine that the HOA’s actions complied with both governing authorities?

3. Describe the burden of proof in this case. Who held the burden, what was the standard required, and did they successfully meet it? Use specific details from the “CONCLUSIONS OF LAW” section to support your answer.

4. Trace the history of the assessment increases from April 2019 to April 2020. Detail the specific monetary and percentage increases for both years and explain why the 20% increase in 2020 was deemed legally permissible without a member vote, while an increase over 20% would not have been.

5. Discuss the legal reasoning behind the Administrative Law Judge’s decision to dismiss the petition. What specific conclusions of law and interpretations of the CC&Rs led directly to the ruling that the respondent did not improperly increase the annual assessment?

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Glossary of Key Terms

Definition

Administrative Law Judge (ALJ)

The official, in this case Tammy L. Eigenheer, who presides over administrative hearings and makes legal decisions and rulings.

Annual Assessment

As defined in the CC&Rs, “the charge levied and assessed each year against each Lot and Parcel pursuant to Article VII, Section 7.2 hereof.” The Board has sole discretion to set this amount, as long as it does not exceed the Maximum Annual Assessment.

A.R.S. (Arizona Revised Statutes)

The codified laws of the state of Arizona. The specific statute relevant to this case is A.R.S. § 33-1803(A), which governs HOA assessment increases.

Burden of Proof

The obligation on a party in a legal proceeding to prove their allegations. In this case, the Petitioner bore the burden of proving the Respondent violated the law and CC&Rs.

CC&Rs (Covenants, Conditions, and Restrictions)

The governing legal documents that set forth the rules for a planned community or homeowners association. In this case, the CC&Rs for Surprise Farms II were recorded in 2003.

HOA (Homeowners Association)

An organization in a subdivision, planned community, or condominium that makes and enforces rules for the properties and its residents. The Surprise Farms II Community Association is the HOA in this case.

Maximum Annual Assessment

A ceiling on the Annual Assessment, established by the CC&Rs. This amount was set at $480 initially and designed to increase automatically by ten percent each year without a member vote, serving as the upper limit for the Board’s assessment-setting discretion.

Petitioner

The party who files a petition initiating a legal case. In this matter, Jean Williams was the Petitioner.

Preponderance of the Evidence

The legal standard of proof required in this proceeding. It is met when the evidence presented has the “most convincing force” and shows that a fact is more likely to be true than not true.

Respondent

The party against whom a petition is filed. In this matter, the Surprise Farms II Community Association was the Respondent.

Why This Homeowner Lost Her Lawsuit Against the HOA (And What You Can Learn From It)

1.0 Introduction: The Dreaded HOA Letter

It’s a scenario many homeowners fear: a letter from the Homeowners Association (HOA) announcing a significant and unexpected fee increase. The feeling of frustration and powerlessness can be overwhelming. When Jean Williams received notice that her HOA was raising her annual assessment by a full 20%, she believed the board had overstepped its authority. The increase seemed to be a clear violation of the community’s governing documents, so she decided to fight back and took her HOA to court. The outcome, however, was not what she—or many other homeowners—would have expected.

2.0 The Core Misunderstanding: “Maximum” Dues vs. “Actual” Dues

The foundation of Jean Williams’s case was her belief that the community’s Covenants, Conditions, and Restrictions (CC&Rs) limited any annual fee increase to 10% without a vote from the members. This is where the critical misunderstanding occurred.

The judge in the case identified a crucial distinction in the legal language. The 10% limit mentioned in the CC&Rs did not apply to the Annual Assessment—the actual dollar amount billed to homeowners each year. Instead, it applied to the Maximum Annual Assessment, a theoretical ceiling on how high the fees could potentially go.

But why was this ceiling so high? The CC&Rs were designed so that this Maximum Annual Assessment would increase automatically by 10% every single year since its inception in 2003. This cumulative growth operated silently in the background for over a decade, creating a vast difference between the two figures. For the year 2020, the actual assessment billed to homeowners was $864. However, due to years of automatic increases, the allowable Maximum Annual Assessment had ballooned to $2,426. The board was operating with far more financial latitude than the petitioner realized.

3.0 How State Law Set the Real Limit at 20%

The next layer of this case involves the interplay between the HOA’s documents and state law. An Arizona state law, A.R.S. § 33-1803(A), dictates that an HOA cannot raise regular assessments by more than 20% in a single year without a vote from the majority of members, unless the community’s own documents set a lower limit.

This is the key legal point. Williams believed her community documents did set a lower limit of 10%. Critically, however, that 10% limit applied only to the wrong variable—the theoretical Maximum Annual Assessment ceiling, not the Annual Assessment actually paid. The CC&Rs’ failure to place a specific annual cap on the actual assessment created a legal vacuum. This vacuum was automatically filled by the Arizona state statute, making its 20% cap the only legally binding limit.

The HOA’s increase from $720 to $864 was exactly 20%. This placed their action right at the maximum threshold allowed by state law without requiring a member vote, making it legally permissible.

4.0 The Fine Print: The Power of “Sole Discretion”

The HOA board’s authority was further solidified by specific language embedded in its governing documents. Article VII, Section 7.2 of the CC&Rs explicitly granted the board “sole discretion” to determine the amount of the Annual Assessment.

The true power of this clause was unlocked by its connection to the two types of assessments. The board’s “sole discretion” was the legal tool that allowed them to set the Annual Assessment at any level they chose, provided it did not exceed the automatically growing Maximum Annual Assessment ceiling. With a ceiling of $2,426 and a previous fee of only $720, the board was legally empowered to enact the 20% increase without consulting homeowners.

5.0 The Judge’s Final Word: A Cautionary Tale

Ultimately, the judge concluded that the homeowner’s entire case was built on a misreading of the governing documents. The judge’s decision offers a clear and potent lesson for all homeowners, emphasizing that the precise wording of these legal documents is everything.

In the final decision, the judge wrote:

Petitioner’s assertion that Respondent could not increase the Annual Assessment by twenty percent was predicated on her erroneous reading of Article VII, Section 7.4 of the CC&Rs. … By definition, the existence of a Maximum Annual Assessment necessitates an Annual Assessment that may be less than the maximum.

The judge’s reasoning is precise: creating a “maximum” assessment in a legal document inherently implies the existence of a separate “actual” assessment that can be lower. Williams’s case collapsed because she treated these two distinct legal concepts as one and the same.

6.0 Conclusion: Are You Sure You Know What Your Documents Say?

The case of Jean Williams serves as a powerful reminder of how interlocking legal mechanics can produce unexpected outcomes. The board’s power was not derived from a single rule, but from the synthesis of three distinct elements: a high Maximum Assessment ceiling created by a silent, cumulative growth clause; the board’s “sole discretion” to set actual fees anywhere underneath that ceiling; and the state law’s 20% backstop that became the only relevant limit in the absence of a specific cap in the CC&Rs.

This case proves that the devil is truly in the details. It begs a critical question for every homeowner living in a planned community: When was the last time you read your community’s CC&Rs?

Case Participants

Petitioner Side

Jean Williams (petitioner)
Appeared and testified on her own behalf

Respondent Side

Nick Nogami (HOA attorney)
Surprise Farms II Community Association

Neutral Parties

Tammy L. Eigenheer (ALJ)
Judy Lowe (Commissioner)
Arizona Department of Real Estate

Warren R. Brown vs. Mogollon Airpark, Inc

Posted on October 18, 2018 by [email protected]

Case Summary

Case ID	18F-H1818029-REL-RHG, 18F-H1818045-REL, 18F-H1818054-REL
Agency	ADRE
Tribunal	OAH
Decision Date	2018-10-18
Administrative Law Judge	Thomas Shedden
Outcome	The ALJ dismissed the petitions regarding the assessment increase (Dockets 029 and 054), ruling that A.R.S. § 33-1803(A)'s 20% cap applies only to 'regular assessments' and not special assessments. However, the ALJ ruled in favor of Petitioner Brown regarding late fees (Docket 045), finding that the statutory limit on late charges applies to all assessments, ordering the HOA to rescind the $25 fee and refund the filing fee.
Filing Fees Refunded	$1,500.00
Civil Penalties	$0.00

Parties & Counsel

Petitioner	Warren R. Brown	Counsel	—
Respondent	Mogollon Airpark, Inc.	Counsel	Gregory A. Stein; Mark K. Sahl

Alleged Violations

A.R.S. § 33-1803(A)
A.R.S. § 33-1803(A)
A.R.S. § 33-1803(A)

Outcome Summary

The ALJ dismissed the petitions regarding the assessment increase (Dockets 029 and 054), ruling that A.R.S. § 33-1803(A)'s 20% cap applies only to 'regular assessments' and not special assessments. However, the ALJ ruled in favor of Petitioner Brown regarding late fees (Docket 045), finding that the statutory limit on late charges applies to all assessments, ordering the HOA to rescind the $25 fee and refund the filing fee.

Why this result: For the assessment issues, the ALJ rejected the petitioners' interpretation that 'regular' refers to the approval process rather than the assessment type, finding that applying the cap to special assessments would violate principles of statutory construction.

Key Issues & Findings

Assessment Increase (Docket 029 – Brown)

Petitioner alleged the HOA violated the statute by increasing assessments by $325 (39.4%), exceeding the 20% limit.

Orders: Petition dismissed.

Filing fee: $500.00, Fee refunded: No

Disposition: respondent_win

Late Fees (Docket 045 – Brown)

Petitioner alleged the HOA charged a $25 late fee, which exceeds the statutory limit of the greater of $15 or 10%.

Orders: Respondent ordered to rescind the $25 late fee and refund the $500 filing fee.

Filing fee: $500.00, Fee refunded: Yes

Disposition: petitioner_win

Assessment Increase (Docket 054 – Stevens)

Petitioner alleged the $325 assessment increase violated the statutory 20% cap and that the HOA used deceptive accounting.

Orders: Petition dismissed.

Filing fee: $500.00, Fee refunded: No

Disposition: respondent_win

Video Overview

Audio Overview

Decision Documents

18F-H1818045-REL Decision – 666285.pdf

Uploaded 2026-04-24T11:12:44 (151.9 KB)

18F-H1818045-REL Decision – 672623.pdf

Uploaded 2026-04-24T11:12:49 (144.6 KB)

18F-H1818045-REL Decision – 666285.pdf

Uploaded 2026-01-27T21:14:50 (151.9 KB)

18F-H1818045-REL Decision – 672623.pdf

Uploaded 2026-01-27T21:14:51 (144.6 KB)

Administrative Law Judge Decision: Brown and Stevens vs. Mogollon Airpark, Inc.

This briefing document provides a comprehensive analysis of the consolidated administrative hearing between Petitioners Warren R. Brown and Brad W. Stevens and Respondent Mogollon Airpark, Inc. (the HOA). The proceedings focused on the legality of assessment increases, late fees, and interest charges under Arizona Revised Statutes (A.R.S.).

Executive Summary

The matter originated from three separate petitions consolidated for a hearing held on September 28, 2018. The primary disputes involved a 39.4% total increase in annual assessments and the imposition of late fees and interest rates that allegedly exceeded statutory limits.

The Administrative Law Judge (ALJ) reached a split decision. Regarding the assessment increase, the ALJ ruled in favor of Mogollon Airpark, Inc., determining that the statutory 20% cap applies only to "regular assessments" and not to "special assessments." Consequently, petitions 18F-H1818029-REL-RHG and 18F-H1818054-REL were dismissed. However, in petition 18F-H1818045-REL, the ALJ ruled in favor of Warren R. Brown, finding that the HOA’s $25 late fee violated A.R.S. § 33-1803(A), which limits such charges. The HOA was ordered to rescind the fee and reimburse the petitioner's $500 filing fee.

Case Overview and Financial Context

The following table outlines the financial changes implemented by Mogollon Airpark, Inc. in 2018 that led to the legal challenge:

Item	Previous Year (2017)	New Rate (2018)	Percentage Increase
Total Assessment	$825.00	$1,150.00	39.4%
Regular Portion	$825.00	$941.00 ($116 increase)	14.1%
Special Portion	$0.00	$209.00	N/A
Late Fee	Not Specified	$25.00	N/A
Interest Rate	Not Specified	18%	N/A

Analysis of Key Themes

1. Statutory Interpretation of "Regular Assessment"

The central legal conflict involved A.R.S. § 33-1803(A), which states that an HOA shall not "impose a regular assessment that is more than [20%] greater than the immediately preceding fiscal year's assessment" without member approval.

Petitioners' Argument: Brown and Stevens argued that "regular" refers to the process by which an assessment is passed (motion, second, and vote) rather than the type of assessment. They contended that since the total amount rose by 39.4%, it violated the statute.
Respondent's Argument: Mogollon argued that "regular assessment" is a specific category of assessment. They claimed the "special assessment" of $209 was a separate category not subject to the 20% cap.
Judicial Conclusion: The ALJ agreed with the Respondent, noting that if "regular" only referred to the process, the word would be rendered "trivial or void" in the statute. The ALJ found that the 14.1% increase in the "regular" portion was within the legal 20% limit.

2. Authority to Impose Special Assessments

A recurring theme was whether the HOA had the authority to issue a special assessment at all.

The "Trial Run" Concern: Mr. Stevens testified that the $209 assessment was perceived as a "trial run" to see if the HOA could successfully bypass statutory limits to fund projects not authorized by governing documents.
Contractual Basis: The Petitioners argued the Bylaws and CC&Rs only allow dues for operating expenses and approved reserve funds.
Judicial Conclusion: The ALJ noted that while the Petitioners questioned the HOA's authority to impose special assessments, the "single-issue" nature of the petitions limited the hearing's scope to whether the HOA violated A.R.S. § 33-1803(A).

3. Allegations of Accounting Impropriety

Both petitioners alleged that Mogollon’s treasurer engaged in deceptive accounting to justify the assessment increase.

Claims of Fabricated Shortfall: Mr. Brown alleged that accounting procedures were altered to show a loss of funds, despite the 2016 board leaving the treasury $200,000 better off. Mr. Stevens alleged the use of "two sets of books" to create a false need for higher dues, stating his belief that the HOA actually possessed in excess of $1 million.
Judicial Conclusion: The ALJ acknowledged these allegations but did not rule on the substance of the accounting practices, suggesting that civil courts might be better suited for such claims.

4. Late Fee and Interest Limits

A.R.S. § 33-1803(A) limits late payment charges to the greater of $15 or 10% of the unpaid assessment.

The Conflict: The HOA charged a $25 late fee. They argued that because the limit appeared in a section discussing "regular assessments," it did not apply to late fees on "special assessments."
Judicial Conclusion: The ALJ rejected this argument. The statute’s limit on late charges applies to "assessments" generally, not just "regular assessments." Therefore, the $25 fee was found to be a violation of the law.

Important Quotes and Context

"Courts will not place an absurd and unreasonable construction on statutes."

Context: Used in Conclusion of Law #4 to explain that the ALJ must interpret the term "regular assessment" in a way that makes logical sense and provides a fair result.

"Under Mogollon’s interpretation, it is necessary to add the word 'regular' where the legislature chose not to use it. This violates principles of statutory construction."

Context: The ALJ's reasoning in Conclusion of Law #10 regarding why the HOA could not charge a $25 late fee. The legislature omitted the word "regular" in the late fee clause, meaning it applies to all assessments.

"It is believed that the accounting was deliberately misleading and was intended to present an inaccurate picture of the HOA finances."

Context: A statement from Mr. Brown's original petition (Finding of Fact #18) regarding the alleged motive behind the 2018 assessment increase.

Decision Summary by Docket

Docket Number	Petitioner	Ruling	Order
18F-H1818029-REL-RHG	Warren R. Brown	Dismissed	Petition dismissed; Mogollon is the prevailing party.
18F-H1818054-REL	Brad W. Stevens	Dismissed	Petition dismissed; Mogollon is the prevailing party.
18F-H1818045-REL	Warren R. Brown	Sustained	Brown is the prevailing party. HOA must rescind the $25 late fee and pay Brown’s $500 filing fee.

Actionable Insights

Statutory Precision: Organizations must distinguish between "regular" and "special" assessments in their financial planning. While regular assessments are capped by a 20% annual increase under A.R.S. § 33-1803(A), special assessments may fall outside this specific cap (provided the HOA has the underlying authority to levy them).
Uniform Late Fee Limits: Regardless of the type of assessment (regular or special), late fees must strictly adhere to the statutory limit of $15 or 10% of the unpaid amount. Associations cannot bypass this cap by reclassifying the assessment type.
Burden of Proof: In administrative hearings, the petitioner bears the burden of proof by a "preponderance of the evidence." Technical arguments regarding statutory definitions require strong support from principles of statutory construction to succeed.
Jurisdictional Limits: The Office of Administrative Hearings may be limited to specific statutory violations. Allegations of complex financial fraud or "deceptive accounting" may require resolution in civil court rather than an administrative tribunal.

Legal Study Guide: Brown and Stevens v. Mogollon Airpark, Inc.

This study guide provides a comprehensive analysis of the consolidated administrative hearing involving Warren R. Brown, Brad W. Stevens, and Mogollon Airpark, Inc. It examines the legal interpretations of Arizona statutes regarding Homeowners Association (HOA) assessments and late fees.

I. Case Overview and Context

Administrative Context

Venue: Office of Administrative Hearings, Phoenix, Arizona.
Administrative Law Judge: Thomas Shedden.
Hearing Date: September 28, 2018.
Consolidated Matters: Three petitions (Docket Nos. 18F-H1818029-REL-RHG, 18F-H1818045-REL, and 18F-H1818054-REL) were consolidated into a single hearing because they shared common allegations regarding deceptive accounting practices and statutory violations.

Key Parties

Party	Role	Legal Representation
Warren R. Brown	Petitioner (029 and 045 matters)	Self (Pro Se)
Brad W. Stevens	Petitioner (054 matter)	Self (Pro Se)
Mogollon Airpark, Inc.	Respondent (HOA)	Gregory A. Stein, Esq. and Mark K. Sahl, Esq.

II. Central Legal Issues and Facts

Financial Assessments in Dispute

In 2018, Mogollon Airpark, Inc. implemented significant changes to its assessment structure. The previous year’s assessment was $825.

2018 Assessment Breakdown:

Regular Assessment Increase: $116 (a 14.1% increase).
Special Assessment: $209.
Total Increase: $325 (a 39.4% total increase).
New Fees: A $25 late payment fee and 18% interest on past-due accounts.

Statutory Focus: ARIZ. REV. STAT. § 33-1803(A)

The primary legal conflict centered on the interpretation of A.R.S. § 33-1803(A), which dictates:

Assessment Caps: An association cannot impose a "regular assessment" more than 20% greater than the preceding fiscal year's assessment without majority member approval (unless community documents require a lower limit).
Late Fee Limits: Charges for late payments are limited to the greater of $15.00 or 10% of the unpaid assessment.

III. Arguments and Interpretations

Interpretation of "Regular Assessment"

Petitioners' Position: Brown and Stevens argued that "regular assessment" refers to the process by which an assessment is created (regularly scheduled votes via motion and second). Therefore, the total $325 increase (39.4%) violated the 20% statutory cap.
Respondent's Position: Mogollon argued that "regular assessment" is a specific type of assessment distinct from a "special assessment." They maintained that since the regular portion only increased by 14.1%, they were in compliance with the law.
ALJ Ruling: The judge sided with Mogollon. Under principles of statutory construction, if "regular" referred only to the process, the word would be rendered "trivial or void." The judge determined the 20% cap applies specifically to the category of "regular assessments."

Interpretation of Late Fee Limits

Respondent's Position: Mogollon argued the $25 late fee was lawful because A.R.S. § 33-1803(A) should only apply to regular assessments.
ALJ Ruling: The judge sided with Petitioner Brown (045 matter). The statute limits late charges for "assessments" generally, not just "regular assessments." By using the broad term "assessments," the legislature intended the cap ($15 or 10%) to apply to all late fees. Mogollon's $25 fee was found to be in violation.

Allegations of Accounting Impropriety

Petitioners alleged that Mogollon's treasurer used "deceptive and nonstandard accounting methods," including "keeping two sets of books," to fabricate a financial shortfall. They argued this was a "plan" to justify the 39.4% increase despite the HOA allegedly having over $1 million in funds. The ALJ noted that civil courts might be better suited for such fraud allegations and did not address the substance of the accounting practices in the final decision.

IV. Short-Answer Practice Questions

What was the previous year's assessment amount for Mogollon Airpark?

Answer: $825.

According to A.R.S. § 33-1803(A), what is the maximum percentage a regular assessment can increase without a majority vote?

Answer: 20%.

Why did the ALJ dismiss the 029 and 054 matters regarding the $325 increase?

Answer: Because the petitioners failed to prove that the increase in the regular assessment (which was only 14.1%) exceeded the 20% limit, and the judge ruled the cap does not apply to special assessments.

In the 045 matter, why was the $25 late fee ruled unlawful?

Answer: A.R.S. § 33-1803(A) limits late fees for all "assessments" to the greater of $15 or 10%; Mogollon’s $25 fee exceeded these statutory limits.

What is the "standard of proof" required for petitioners in this administrative hearing?

Answer: A preponderance of the evidence.

What was the ALJ’s order regarding Mogollon’s obligation to Warren R. Brown in the 045 matter?

Answer: Mogollon was ordered to rescind the $25 late fee and reimburse Mr. Brown his $500 filing fee.

V. Essay Prompts for Deeper Exploration

The Nuances of Statutory Construction: Analyze the ALJ's reasoning in applying different interpretations to the word "regular" versus the word "assessment" within the same statute (A.R.S. § 33-1803(A)). Why did the presence of the word "regular" in the first half of the statute exclude special assessments from the 20% cap, while the absence of that word in the second half meant late fee limits applied to all assessments?
The Burden of Proof and Evidence: Discuss the role of the "preponderance of the evidence" standard in this case. Evaluate why Brad Stevens's 600+ pages of exhibits and testimony regarding the HOA's $1 million surplus were insufficient to win the 054 matter, given the ALJ's focus on matters of law over accounting disputes.
Jurisdictional Limits of Administrative Hearings: The ALJ noted that civil courts might be better suited for allegations of accounting improprieties and deceptive practices. Explore the limitations of an administrative tribunal versus a civil court in resolving complex financial disputes within an HOA.

VI. Glossary of Important Terms

A.R.S. § 33-1803(A): The Arizona Revised Statute governing HOA assessments and late fees.
CC&Rs (Covenants, Conditions, and Restrictions): The governing documents that serve as a contract between the HOA and its members.
Community Documents: The collective term for an association’s Bylaws, CC&Rs, and other governing rules.
Preponderance of the Evidence: The legal standard of proof where the evidence is of "greater weight" or has the "most convincing force," inclining a fair mind to one side of the issue.
Prevailing Party: The party in a legal proceeding that successfully proves its case or defends against an allegation; in this case, Mogollon prevailed in 029/054, while Brown prevailed in 045.
Regular Assessment: An assessment levied on a recurring basis to cover the association's standard operating expenses.
Single-Issue Petition: A simplified petition filed with the Department of Real Estate focusing on a single alleged violation of statute or community documents.
Special Assessment: A specific, often one-time assessment charged to members for expenses not covered by regular assessments (e.g., paving).
Statutory Construction: The process by which courts interpret and apply legislation, ensuring every word is given meaning and results are sensible rather than "absurd."

HOA vs. Homeowners: Decoding the Mogollon Airpark Legal Ruling on Dues and Fees

In the high-altitude enclave of Mogollon Airpark, a legal dogfight over three hundred dollars has redefined the boundaries of HOA power in Arizona. Homeowners Warren R. Brown and Brad W. Stevens took their Association to court, challenging a sudden 39.4% spike in annual costs and aggressive late penalties.

The resulting administrative law ruling serves as a vital case study in Arizona’s planned community statutes. By examining ARIZ. REV. STAT. § 33-1803, the court clarified exactly where a Board’s authority ends and where homeowner protections—specifically the "20% cap"—begin.

The $325 Question: When is an Increase Too High?

The conflict began in 2018 when Mogollon Airpark, Inc. (the HOA) implemented a $325 increase per household. For the petitioners, this felt like a clear-cut violation of state law, which generally requires a majority vote for significant cost hikes.

To evaluate the legality of the Board’s move, the court looked at the breakdown of the $325 increase relative to the previous year’s $825 total:

2017 Total Assessment: $825
2018 "Regular" Portion Increase: $116 (a 14.1% increase)
2018 "Special" Portion (Paving): $209
Total 2018 Increase: $325
Total Percentage Increase: 39.4%

Brown and Stevens argued that any increase exceeding 20% in a single year is a violation of § 33-1803(A). They contended that "regular" in the statute refers to the process—meaning any assessment passed through a standard board vote should be subject to the cap. Under their interpretation, the label "special" was merely a semantic trick to bypass homeowner voting rights.

The Legal Definition of "Regular": Why the HOA Won the Assessment Battle

Despite the jarring 39.4% jump, Administrative Law Judge (ALJ) Thomas Shedden dismissed the petitions regarding the dues increase. The decision hinged on the principle of "Statutory Construction"—how courts interpret the precise wording of legislation.

The ALJ determined that the term "regular" in § 33-1803(A) defines a specific type of assessment rather than the voting process used to enact it. If "regular" merely meant an assessment passed by a motion and a vote, the judge reasoned, the word would be "trivial" or "redundant" because almost all assessments are passed that way.

The court's interpretation established two critical precedents:

The Cap is Narrow: The 20% limit only protects homeowners from increases in standard annual operating dues.
Special Assessments are Separate: Because the legislature included "regular" in the assessment cap portion of the law but omitted it elsewhere, the court concluded that "special" assessments—such as the $209 paving fee—do not count toward the 20% threshold.

Since the $116 "regular" increase was only 14.1% of the previous year's total, the HOA stayed within the legal boundary.

The Late Fee "Gotcha": Why the Homeowners Won the Penalty Battle

While the homeowners lost the fight over dues, Petitioner Warren R. Brown secured a strategic victory regarding penalties in Docket No. 18F-H1818045-REL. The HOA had been charging a $25 late fee and 18% interest on past-due accounts, even for the contested paving assessment.

Here, the ALJ applied a symmetrical logic that worked against the HOA. The ALJ noted that while the statute specifies "regular assessments" when discussing the 20% cap, the section governing late charges refers broadly to all "assessments."

The statute limits late charges to the greater of:

$15.00
10% of the unpaid assessment

The HOA argued the $25 fee was valid because it applied to a special assessment. The ALJ rejected this, refusing to "read in" the word regular where the legislature had purposely left it out. Consequently, the HOA was ordered to rescind Mr. Brown's $25 fee and—most significantly—reimburse his $500 filing fee.

Transparency and Accounting: The Allegations Beneath the Surface

The legal battle revealed deep-seated distrust within the community. Petitioner Brad W. Stevens provided 45 pages of testimony and 600 pages of exhibits, painting a picture of a Board manufacturing a financial crisis.

The allegations included:

The "Two Sets of Books": Claims that the treasurer used deceptive accounting to hide the fact that the 2016 board actually left the treasury $200,000 better off than when they started.
Hidden Reserves: Allegations that the HOA held over $1 million in reserves, making the paving assessment unnecessary.
The "Trial Run": Mr. Stevens testified that the paving assessment was a "trial run" to see if the Board could successfully bypass the membership to fund future unauthorized projects.

While the ALJ acknowledged these concerns, he noted that complex accounting disputes and claims of "fabricated shortfalls" are better suited for a civil court rather than an administrative tribunal.

Conclusion & Key Takeaways for Homeowners

The consolidated ruling for Mogollon Airpark highlights the technical nature of HOA law and the high bar for homeowners seeking to overturn Board decisions.

Final Case Outcomes

Case Number	Petitioner	Primary Issue	Outcome
18F-H1818029-REL-RHG	Warren R. Brown	$325 Assessment Increase	Dismissed (HOA Won)
18F-H1818045-REL	Warren R. Brown	$25 Late Fee / 18% Interest	Prevailing Party (Brown Won)
18F-H1818054-REL	Brad W. Stevens	$325 Assessment Increase	Dismissed (HOA Won)

Lessons Learned

For Boards: Your late fee structures must strictly adhere to the $15 or 10% limit across all assessment types. There is no statutory loophole for "special" assessment penalties.
For Homeowners: The 20% cap is not a total shield. If your Board classifies a portion of a hike as a "special assessment" for a specific project like paving, the statutory cap likely won't protect you.
For Both: Procedural accuracy is paramount. A previous version of the 029 petition was dismissed simply because the homeowner failed to cite a specific Bylaw, CC&R, or statute. In the administrative arena, specific citations are the only way to get your day in court.

Homeowners are encouraged to audit their own association's fee and penalty structures against ARIZ. REV. STAT. § 33-1803. If your late fees exceed $15 or 10%, your HOA may be operating outside the law.

Case Participants

Petitioner Side

Warren R. Brown (petitioner)
Petitioner in docket Nos. 18F-H1818029-REL-RHG and 18F-H1818045-REL; appeared on his own behalf
Brad W. Stevens (petitioner)
Petitioner in docket No. 18F-H1818054-REL; appeared on his own behalf

Respondent Side

Gregory A. Stein (respondent attorney)
Carpenter, Hazlewood, Delgado & Bolen LLP
Attorney for Respondent Mogollon Airpark, Inc.
Mark K. Sahl (respondent attorney)
Carpenter, Hazlewood, Delgado & Bolen LLP
Attorney for Respondent Mogollon Airpark, Inc.

Neutral Parties

Thomas Shedden (ALJ)
Office of Administrative Hearings
Administrative Law Judge presiding over the consolidated hearing
Judy Lowe (Commissioner)
Arizona Department of Real Estate
Recipient of the transmitted decision
Felicia Del Sol (clerk)
Office of Administrative Hearings
Transmitted the decision