Tag Archives: A.R.S. § 33-1806

Aaron Ricks (Somerstone Properties, LLC), v. Montelena Master

Posted on by

Case Summary

Case ID 21F-H2120024-REL
Agency ADRE
Tribunal OAH
Decision Date 2021-02-16
Administrative Law Judge Tammy L. Eigenheer
Outcome The Administrative Law Judge dismissed the Petition because the Petitioner failed to meet the burden of proof to establish that the Montelena Master Community Association violated A.R.S. § 33-442 or its CC&Rs regarding the imposition of a transfer fee. The ALJ found that the use of the fee to fund operating expenses and/or reserves was an acceptable purpose under the relevant statute.
Filing Fees Refunded $500.00
Civil Penalties $0.00

Parties & Counsel

Petitioner Aaron Ricks (Somerstone Properties, LLC) Counsel —
Respondent Montelena Master Community Association Counsel Troy Stratman

Alleged Violations

A.R.S. § 33-442, A.R.S. § 33-1806

Outcome Summary

The Administrative Law Judge dismissed the Petition because the Petitioner failed to meet the burden of proof to establish that the Montelena Master Community Association violated A.R.S. § 33-442 or its CC&Rs regarding the imposition of a transfer fee. The ALJ found that the use of the fee to fund operating expenses and/or reserves was an acceptable purpose under the relevant statute.

Why this result: Petitioner failed to establish Respondent acted in violation of the community documents and A.R.S. § 33-442.

Key Issues & Findings

Challenge to unauthorized/unlawful transfer fees charged by HOA

Petitioner alleged that the $2500.00 transfer fee charged to the purchaser was an unlawful transfer fee in violation of A.R.S. § 33-442 and specific CC&R provisions, arguing that the authorized use of the fee (Master Association’s operating expenses and/or reserves) was not specific enough to meet the statutory exception under A.R.S. § 33-442(C).

Orders: Petitioner’s petition is dismissed.

Filing fee: $500.00, Fee refunded: No

Disposition: petitioner_loss

Cited:

  • A.R.S. § 33-1806
  • A.R.S. § 33-442
  • A.R.S. § 32-2199
  • A.R.S. § 41-1092.07(G)(2)
  • A.A.C. R2-19-119(A)
  • A.A.C. R2-19-119(B)(1)
  • Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952)

Analytics Highlights

Topics: HOA transfer fee, A.R.S. 33-442, CC&R violation, Operating expenses, Reserves
Additional Citations:

  • A.R.S. § 33-1806
  • A.R.S. § 33-442
  • A.R.S. § 32-2199
  • A.R.S. § 32-2199.02(B)
  • A.R.S. § 32-2199.04
  • A.R.S. § 41-1092.09
  • A.R.S. § 41-1092.07(G)(2)
  • A.A.C. R2-19-119(A)
  • A.A.C. R2-19-119(B)(1)

Video Overview

Audio Overview

Decision Documents

21F-H2120024-REL Decision – 855401.pdf

Uploaded 2026-04-24T11:31:43 (95.8 KB)

21F-H2120024-REL Decision – 855401.pdf

Uploaded 2026-01-23T17:36:12 (95.8 KB)

This is a concise summary of the Administrative Law Judge Decision in the matter of *Aaron Ricks (Somerstone Properties, LLC) v. Montelena Master Community Association*.

Concise Summary of Administrative Hearing

Key Facts and Parties

The hearing took place on January 27, 2021, before Administrative Law Judge Tammy L. Eigenheer. Petitioner, Aaron Ricks, filed a Homeowners Association (HOA) Dispute Process Petition on or about October 27, 2020, alleging violations of community documents and statute. The dispute centered on alleged "unlawful fees ($5,000 in total)" that Petitioner claimed he was forced to pay to sell his home. The specific fee at issue was a $2500.00 transfer fee charged to the purchaser each time a parcel was sold.

Main Issues and Legal Basis

The core issue for the hearing was whether the Respondent, Montelena Master Community Association, violated A.R.S. § 33-1806, A.R.S. § 33-442, and the Association’s Declaration of Covenants, Conditions, and Restrictions (CC&Rs) Article 6.9.2/6.9.2.9, specifically regarding the imposition of the transfer fee.

The legal focus was A.R.S. § 33-442, which generally prohibits transfer fees but provides exceptions. The key exception cited was A.R.S. § 33-442(C)(3), which allows fees if they are used exclusively for a purpose authorized in the document, touch and concern the land, and are not passed through to a specific third party or declarant (unless authorized to manage property or part of an approved development plan).

Key Arguments

  1. Respondent’s Position (Motion for Summary Judgment): Respondent filed a Motion for Summary Judgment arguing the Petition should be dismissed because the CC&Rs (Sections 7.15 and 6.6) authorized the fee, which touched and concerned the land. A 2010 Board Resolution specified the Transfer Fee was "to be used exclusively to fund the Master Association’s operating expenses and/or the Master Association’s reserves". Counsel argued this usage was sufficient to meet A.R.S. § 33-442(C) requirements. Respondent also asserted that the CC&R sections cited by the Petitioner (6.9.2 and 6.9.2.9) addressed a "Contribution to Reserves," not the specific Transfer Fee being contested.
  2. Petitioner’s Position: Petitioner acknowledged the statutory exception but argued that the transfer fee must be used for a very specific limited purpose (e.g., a swimming pool or landscaping project), rather than a general purpose like operating expenses or reserves, for the fee to be compliant with A.R.S. § 33-442. Petitioner also asserted that specific CC&R sections precluded the fee. (Petitioner offered no argument regarding A.R.S. § 33-1806).

Legal Points and Outcome

The Administrative Law Judge (ALJ) noted that the Petitioner bore the burden of proof to establish violations by a preponderance of the evidence.

The ALJ determined that Petitioner failed to establish a violation of the community documents and A.R.S. § 33-442. Crucially, Petitioner offered no legal authority to support his interpretation that A.R.S. § 33-442 required the transfer fee to be designated for a more specific purpose than the association’s operating expenses and/or reserves identified in the governing documents.

The final decision was that Petitioner’s petition is dismissed. This decision was done on February 16, 2021.

Questions

Question

Who is responsible for proving that an HOA violated the law or community documents during a hearing?

Short Answer

The homeowner (Petitioner) bears the burden of proof.

Detailed Answer

In an administrative hearing, the homeowner filing the petition must prove that the HOA committed the alleged violations. This must be established by a 'preponderance of the evidence,' meaning the homeowner's claims are more likely true than not.

Alj Quote

Petitioner bears the burden of proof to establish that Respondent committed the alleged violations by a preponderance of the evidence.

Legal Basis

A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1)

Topic Tags

  • burden of proof
  • legal procedure
  • evidence

Question

Can an HOA charge a transfer fee that is used for general operating expenses rather than a specific project?

Short Answer

Yes, funding operating expenses or reserves is considered a valid purpose.

Detailed Answer

Under Arizona law (A.R.S. § 33-442), transfer fees are generally prohibited unless they fall under specific exceptions. One exception is if the fee is used for a purpose authorized in the document. The ALJ ruled that using fees for 'operating expenses and/or… reserves' satisfies this requirement; it does not need to be for a specific limited purpose like a swimming pool.

Alj Quote

Petitioner offered no authority to support his interpretation that A.R.S. § 33-442 required that the transfer fee had to be for a more specific purpose than those identified in the governing documents.

Legal Basis

A.R.S. § 33-442(C)

Topic Tags

  • transfer fees
  • operating expenses
  • financial management

Question

Can the HOA Board set the amount of a transfer fee without a vote if the CC&Rs allow it?

Short Answer

Yes, if the CC&Rs grant the Board the authority to set the amount.

Detailed Answer

If the community's Declaration of Covenants, Conditions, and Restrictions (CC&Rs) specifically states that the transfer fee amount is 'to be set by the Board' or established 'from time to time by the Board,' the Board has the authority to determine the fee amount.

Alj Quote

The Master Association may require the new Owner of a Lot or Parcel to pay to the Master Association, or its designated representative, a transfer fee in an amount to be set by the Board . . . .

Legal Basis

CC&Rs Section 6.6; CC&Rs Section 7.15

Topic Tags

  • board authority
  • CC&Rs
  • fees

Question

Can an HOA charge both a Transfer Fee and a Reserve Contribution fee on the same sale?

Short Answer

Yes, an HOA can charge multiple distinct fees if authorized by the governing documents.

Detailed Answer

The ALJ found that a Transfer Fee can be charged in addition to other fees, such as a Reserve Contribution, provided the governing documents (like a Board Resolution or CC&Rs) explicitly state that the fee is in addition to other assessments.

Alj Quote

This Transfer Fee shall be in addition to any other fees and assessments due and payable in relation to the transfer of the property, including, but not limited to, a Reserve Contribution pursuant to Article 6, Section 6.9 of the Declaration.

Legal Basis

Board Resolution (Recorded July 23, 2010)

Topic Tags

  • reserve contribution
  • transfer fees
  • closing costs

Question

What does 'preponderance of the evidence' mean in an HOA dispute?

Short Answer

It means the evidence shows a claim is more probably true than not.

Detailed Answer

This legal standard requires the party with the burden of proof to provide evidence that has 'superior evidentiary weight.' It does not mean removing all doubt, but rather sufficient evidence to incline a fair mind to one side over the other.

Alj Quote

A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.

Legal Basis

Arizona Law of Evidence § 5

Topic Tags

  • legal definitions
  • evidence
  • standard of proof

Question

Is a transfer fee valid if I purchased the property out of bankruptcy?

Short Answer

Yes, if the CC&Rs require payment immediately upon becoming the owner.

Detailed Answer

The manner of purchase (e.g., out of bankruptcy) does not automatically exempt an owner from transfer fees if the CC&Rs mandate that 'Each person or entity who purchases a Lot… shall pay… immediately upon becoming the Owner.'

Alj Quote

Therefore, Respondent was able to charge Petitioner the transfer fee pursuant to his purchase of the property out of bankruptcy.

Legal Basis

CC&Rs Section 7.15

Topic Tags

  • bankruptcy
  • property transfer
  • exemptions

Case

Docket No
21F-H2120024-REL
Case Title
Aaron Ricks (Somerstone Properties, LLC) v. Montelena Master Community Association
Decision Date
2021-02-16
Alj Name
Tammy L. Eigenheer
Tribunal
OAH
Agency
ADRE

Questions

Question

Who is responsible for proving that an HOA violated the law or community documents during a hearing?

Short Answer

The homeowner (Petitioner) bears the burden of proof.

Detailed Answer

In an administrative hearing, the homeowner filing the petition must prove that the HOA committed the alleged violations. This must be established by a 'preponderance of the evidence,' meaning the homeowner's claims are more likely true than not.

Alj Quote

Petitioner bears the burden of proof to establish that Respondent committed the alleged violations by a preponderance of the evidence.

Legal Basis

A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1)

Topic Tags

  • burden of proof
  • legal procedure
  • evidence

Question

Can an HOA charge a transfer fee that is used for general operating expenses rather than a specific project?

Short Answer

Yes, funding operating expenses or reserves is considered a valid purpose.

Detailed Answer

Under Arizona law (A.R.S. § 33-442), transfer fees are generally prohibited unless they fall under specific exceptions. One exception is if the fee is used for a purpose authorized in the document. The ALJ ruled that using fees for 'operating expenses and/or… reserves' satisfies this requirement; it does not need to be for a specific limited purpose like a swimming pool.

Alj Quote

Petitioner offered no authority to support his interpretation that A.R.S. § 33-442 required that the transfer fee had to be for a more specific purpose than those identified in the governing documents.

Legal Basis

A.R.S. § 33-442(C)

Topic Tags

  • transfer fees
  • operating expenses
  • financial management

Question

Can the HOA Board set the amount of a transfer fee without a vote if the CC&Rs allow it?

Short Answer

Yes, if the CC&Rs grant the Board the authority to set the amount.

Detailed Answer

If the community's Declaration of Covenants, Conditions, and Restrictions (CC&Rs) specifically states that the transfer fee amount is 'to be set by the Board' or established 'from time to time by the Board,' the Board has the authority to determine the fee amount.

Alj Quote

The Master Association may require the new Owner of a Lot or Parcel to pay to the Master Association, or its designated representative, a transfer fee in an amount to be set by the Board . . . .

Legal Basis

CC&Rs Section 6.6; CC&Rs Section 7.15

Topic Tags

  • board authority
  • CC&Rs
  • fees

Question

Can an HOA charge both a Transfer Fee and a Reserve Contribution fee on the same sale?

Short Answer

Yes, an HOA can charge multiple distinct fees if authorized by the governing documents.

Detailed Answer

The ALJ found that a Transfer Fee can be charged in addition to other fees, such as a Reserve Contribution, provided the governing documents (like a Board Resolution or CC&Rs) explicitly state that the fee is in addition to other assessments.

Alj Quote

This Transfer Fee shall be in addition to any other fees and assessments due and payable in relation to the transfer of the property, including, but not limited to, a Reserve Contribution pursuant to Article 6, Section 6.9 of the Declaration.

Legal Basis

Board Resolution (Recorded July 23, 2010)

Topic Tags

  • reserve contribution
  • transfer fees
  • closing costs

Question

What does 'preponderance of the evidence' mean in an HOA dispute?

Short Answer

It means the evidence shows a claim is more probably true than not.

Detailed Answer

This legal standard requires the party with the burden of proof to provide evidence that has 'superior evidentiary weight.' It does not mean removing all doubt, but rather sufficient evidence to incline a fair mind to one side over the other.

Alj Quote

A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.

Legal Basis

Arizona Law of Evidence § 5

Topic Tags

  • legal definitions
  • evidence
  • standard of proof

Question

Is a transfer fee valid if I purchased the property out of bankruptcy?

Short Answer

Yes, if the CC&Rs require payment immediately upon becoming the owner.

Detailed Answer

The manner of purchase (e.g., out of bankruptcy) does not automatically exempt an owner from transfer fees if the CC&Rs mandate that 'Each person or entity who purchases a Lot… shall pay… immediately upon becoming the Owner.'

Alj Quote

Therefore, Respondent was able to charge Petitioner the transfer fee pursuant to his purchase of the property out of bankruptcy.

Legal Basis

CC&Rs Section 7.15

Topic Tags

  • bankruptcy
  • property transfer
  • exemptions

Case

Docket No
21F-H2120024-REL
Case Title
Aaron Ricks (Somerstone Properties, LLC) v. Montelena Master Community Association
Decision Date
2021-02-16
Alj Name
Tammy L. Eigenheer
Tribunal
OAH
Agency
ADRE

Case Participants

Petitioner Side

  • Aaron Ricks (petitioner)
    Somerstone Properties, LLC

Respondent Side

  • Troy Stratman (HOA attorney)
    Stratman Law Firm, PLC

Neutral Parties

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

Varhely, Emry & Muriel vs. Eighth Street Townhouse Association

Posted on by

Case Summary

Case ID 12F-H1213009-BFS
Agency Department of Fire, Building and Life Safety
Tribunal OAH
Decision Date 2013-03-01
Administrative Law Judge Tammy L. Eigenheer
Outcome The ALJ dismissed the petition because the Respondent, having fewer than 50 units, was not statutorily required to provide the specific disclosure statement regarding unit alterations or improvements that the Petitioners claimed was missing.
Filing Fees Refunded $550.00
Civil Penalties $0.00

Parties & Counsel

Petitioner Emry & Muriel Varhely Counsel —
Respondent Eighth Street Square Townhouse Association Counsel Nikita Patel

Alleged Violations

A.R.S. § 33-1806

Outcome Summary

The ALJ dismissed the petition because the Respondent, having fewer than 50 units, was not statutorily required to provide the specific disclosure statement regarding unit alterations or improvements that the Petitioners claimed was missing.

Why this result: The Respondent successfully established that it governs a community with fewer than 50 units, which exempted it from the specific disclosure requirement alleged by the Petitioners.

Key Issues & Findings

Failure to provide statement regarding existing violations at sale

Petitioners alleged the HOA violated A.R.S. § 33-1806 by failing to provide a statement as to whether association records reflected any alterations or improvements to the unit that violated the declaration prior to closing escrow.

Orders: The Petition is dismissed; no action is required of Respondent.

Filing fee: $550.00, Fee refunded: No

Disposition: respondent_win

Video Overview

Audio Overview

Decision Documents

12F-H1213009-BFS Decision – 327965.pdf

Uploaded 2026-04-24T10:44:41 (86.7 KB)

12F-H1213009-BFS Decision – 333516.pdf

Uploaded 2026-04-24T10:44:45 (57.9 KB)

12F-H1213009-BFS Decision – 327965.pdf

Uploaded 2026-01-25T15:28:22 (86.7 KB)

12F-H1213009-BFS Decision – 333516.pdf

Uploaded 2026-01-25T15:28:23 (57.9 KB)

Administrative Law Judge Decision: Varhely v. Eighth Street Square Townhouse Association

Executive Summary

This briefing document analyzes the administrative legal proceedings in the matter of Emry & Muriel Varhely vs. Eighth Street Square Townhouse Association (No. 12F-H1213009-BFS). The case centered on allegations that the Eighth Street Square Townhouse Association (Respondent) violated Arizona Revised Statutes (A.R.S.) § 33-1806 by failing to disclose existing property violations to the Petitioners during their unit purchase in February 2012.

The Administrative Law Judge (ALJ) concluded that the Petitioners failed to establish a violation by the Respondent. The decision turned primarily on the size of the community, as the statutory disclosure obligations for associations differ based on whether a planned community contains more or fewer than 50 units. Because the Eighth Street Square community consists of only 48 units, the legal burden for providing specific violation statements did not fall upon the Association under the cited statute. The decision was certified as final on April 10, 2013.

Detailed Analysis of Key Themes

1. Statutory Disclosure Obligations (A.R.S. § 33-1806)

The core of the dispute involved the interpretation of A.R.S. § 33-1806, which mandates the disclosure of certain information to purchasers of units within planned communities.

  • The 50-Unit Threshold: The statute distinguishes between small and large communities. For communities with fewer than 50 units, the "member" (seller) is typically responsible for providing required documentation to the purchaser.
  • The Definition of "Member": Under A.R.S. § 33-1806(G), a "member" is defined as the seller of the unit title. Importantly, this definition excludes trustees of a deed of trust selling property in a trustee's sale.
  • Association Responsibility: The Association’s obligation to provide a statement regarding alterations or improvements that violate the Declaration is specifically tied to the size of the community. In this case, since Eighth Street Square has 48 units, the Association was not legally mandated to provide the statement of violations that the Petitioners expected.
2. Burdens of Proof and Evidence

The proceedings were governed by the standard of a "preponderance of the evidence."

  • Petitioner's Burden: As the initiating party, the Varhelys bore the burden of proving that the Association had a legal duty to provide the violation statement and failed to do so.
  • Respondent's Defense: The Association argued that because the community fell below the 50-unit threshold, they were not responsible for the specific disclosures requested.
  • The Ruling on Knowledge: The ALJ noted that even if the seller (ING Bank FSB) was unaware of the violation, and even though the Association had provided some documentation, this did not create a statutory obligation for the Association to provide a full statement of violations where one did not exist by law.
3. Impact of Partial Disclosure

A secondary theme was the Petitioners' reliance on partial information. The Association had provided "CondoCerts" and some other unit-related documents prior to closing. The Petitioners argued that because the Association provided some documents, they were obligated to provide all relevant documents, including a statement of violations. The ALJ rejected this argument, ruling that voluntary partial disclosure does not extend an association's statutory obligations beyond what is written in A.R.S. § 33-1806.

Important Quotes with Context

On the Definition of Preponderance of the Evidence

"Evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not."

— Context: Cited from Black's Law Dictionary to establish the legal standard the Petitioners had to meet to prove the Association violated the law.

On the Statutory Obligation for Small Communities

"For planned communities with fewer than fifty units, a member shall mail or deliver to a purchaser… a statement as to whether the member has any knowledge of any alterations or improvements to the unit that violate the declaration."

— Context: Referring to A.R.S. § 33-1806(A) and (f), highlighting that in small communities, the disclosure burden rests with the seller ("member"), not the association.

On the Association's Lack of Obligation

"Regardless of the seller’s knowledge of a violation or that Respondent provided some documents relating to the unit, Respondent had no obligation under A.R.S. § 33-1806 to notify Petitioners of the known violation."

— Context: The ALJ's definitive legal conclusion that the Association was not liable for the nondisclosure, despite the Petitioners' arguments regarding the seller's lack of knowledge.

Summary of Findings and Actionable Insights

Case Timeline and Facts
Event Date
Purchase Contract Entered February 2012
Respondent provided "CondoCerts" March 13, 2012
Escrow Closed March 13, 2012
Petition Filed with Department October 22, 2012
Administrative Hearing Held February 13, 2013
ALJ Decision Issued March 1, 2013
Decision Certified as Final April 10, 2013
Actionable Insights for Stakeholders
  • Due Diligence on Community Size: Purchasers in Arizona planned communities should determine the total number of units in the association early in the due diligence process. If the community has fewer than 50 units, the purchaser cannot legally compel the association to provide the violation disclosures mandated for larger communities.
  • Seller Disclosure Limitations: In cases involving foreclosures (such as the purchase from ING Bank FSB in this case), the "member" disclosure requirements may be complicated by the seller's lack of history with the property. Purchasers should be aware that if the association is not required to disclose violations, and the seller has no knowledge of them, the purchaser may inherit existing violations.
  • Statutory Limits on Association Liability: Providing some documentation out of courtesy or standard procedure does not legally bind an association to fulfill all disclosure requirements of A.R.S. § 33-1806 if the community size falls below the statutory threshold.
  • Appellate Rights: Following an ALJ decision, parties have the right to request a rehearing from the Department of Fire, Building and Life Safety or seek review by the Superior Court, provided they act within the statutory timeframes (in this case, action was required by April 5, 2013, to prevent the decision from becoming final).

Case Study: Varhely v. Eighth Street Square Townhouse Association – A.R.S. § 33-1806 Application

This study guide provides a comprehensive overview of the administrative legal dispute between Emry and Muriel Varhely (Petitioners) and the Eighth Street Square Townhouse Association (Respondent). It focuses on the interpretation of Arizona Revised Statutes (A.R.S.) § 33-1806 regarding disclosure obligations in planned communities.

Key Concepts and Case Summary

The central issue of this case was whether a homeowners association is legally required to disclose existing violations to a potential buyer when the community contains fewer than 50 units.

Background and Dispute

In February 2012, the Petitioners contracted to purchase a unit in Eighth Street Square, a community in Phoenix, Arizona. The unit was previously owned by ING Bank FSB, which had acquired it through foreclosure. During the escrow process, the Respondent provided "CondoCerts" information and other documents but did not provide a specific statement regarding whether association records reflected alterations or improvements that violated the community’s Declaration.

After closing escrow, the Petitioners alleged that the Respondent violated A.R.S. § 33-1806 by failing to provide notice of existing violations.

Legal Thresholds and Findings

The Administrative Law Judge (ALJ) determined the following:

  • Unit Count: Eighth Street Square consists of 48 units (numbered 1 through 49, excluding unit 13).
  • Statutory Requirement: Under A.R.S. § 33-1806, the obligation for an association to provide a statement regarding violations only applies to planned communities with 50 units or more.
  • Burden of Proof: The Petitioners bore the burden of proving a violation by a preponderance of the evidence, which they failed to do because the community fell below the 50-unit threshold.
  • Outcome: The Petition was dismissed, and the decision was certified as final when the Department of Fire, Building and Life Safety took no action to modify the ALJ’s recommendation.

Short-Answer Practice Questions

1. What is the specific unit count of Eighth Street Square, and why is that number significant in this case? The community has 48 units. This is significant because A.R.S. § 33-1806 dictates different disclosure responsibilities for associations with fewer than 50 units compared to those with 50 or more.

2. Who was the seller of the unit, and how did they acquire the title? The seller was ING Bank FSB. The bank acquired the title to the unit through foreclosure.

3. According to A.R.S. § 33-1806(G), who is generally responsible for providing disclosure documents in a sale? The "member," which is defined as the seller of the unit title. However, this definition specifically excludes a trustee of a deed of trust selling property in a trustee's sale.

4. What was the Petitioners' primary argument regarding the Respondent's partial disclosure? The Petitioners argued that because the Respondent provided some documents required under the statute, they were obligated to provide all required documents, including the statement on violations. They also argued they were unaware the community had fewer than 50 units.

5. What is the "preponderance of the evidence" standard used in this hearing? It is evidence that is of greater weight or more convincing than the evidence offered in opposition; essentially, it shows that the fact sought to be proved is more probable than not.

Essay Prompts for Deeper Exploration

1. The 50-Unit Disclosure Threshold Analyze the implications of the 50-unit threshold established in A.R.S. § 33-1806. Discuss how this threshold shifts the burden of due diligence between the buyer, the seller, and the association. In your response, consider the ALJ’s ruling that the association had no obligation to notify the Petitioners of violations, regardless of whether the seller was aware of them.

2. Disclosure Obligations in Foreclosure Sales Examine the complexities of real estate disclosures when a property is sold by a bank following foreclosure (as seen with ING Bank FSB). How does A.R.S. § 33-1806(G) impact a buyer's ability to obtain information about property violations, and what protections, if any, does the statute provide to associations in these scenarios?

3. Equitable Reliance vs. Statutory Language The Petitioners argued they relied on the Respondent’s act of providing some documents as an indication that no violations existed. Evaluate the conflict between "equitable reliance" (the idea that one's actions create an expectation) and the strict interpretation of statutory language as applied by the ALJ in this decision.

Glossary of Important Terms

Term Definition
A.R.S. § 33-1806 The Arizona Revised Statute governing the resale of units in a planned community and the required disclosure of association records.
Administrative Law Judge (ALJ) An official who presides over hearings and adjudicates disputes involving government agencies.
Covenants, Conditions, and Restrictions (Declaration) The legal documents that establish the rules and regulations for a planned community or homeowners association.
CondoCerts A service or document providing specific association information, often requested by escrow companies during a property sale.
Escrow A legal arrangement where a third party holds funds or assets until specific conditions of a contract (like a home sale) are met.
Preponderance of the Evidence The legal standard of proof in most civil cases, meaning the claim is more likely to be true than not true.
Planned Community A real estate development which includes common areas and is governed by an association of homeowners.
Trustee's Sale A foreclosure sale of real property conducted by a trustee under a deed of trust.
Violation An alteration or improvement to a unit that does not comply with the community’s Declaration or rules.

Understanding the "Rule of 50": A Cautionary Tale of HOA Disclosures and A.R.S. § 33-1806

1. Introduction: The Hidden Risks of the "As-Is" Purchase

For many real estate investors and homebuyers, a foreclosure property sold "as-is" represents a prime opportunity for equity. However, when that property is situated within a planned community, a specific statutory threshold—which I call the "Rule of 50"—can transform a perceived bargain into a legal minefield. In Arizona, the size of your community is not just a matter of density; it is the legal pivot point that determines who is responsible for disclosing property violations.

The case of Emry & Muriel Varhely vs. Eighth Street Square Townhouse Association serves as a sobering reminder of how disclosure expectations can clash with statutory realities. The Varhelys discovered that "not knowing" the law is no defense when a community falls below the 50-unit threshold. In such cases, the burden of disclosure shifts away from the Association, often leaving buyers in the lurch during distressed sales.

2. The Dispute: A Surprise Violation After Closing

The Varhelys' legal journey began with a purchase from ING Bank FSB, which had acquired a unit in the Eighth Street Square community through foreclosure. Like many bank-owned sales, the transaction was handled with a degree of distance that left the buyers vulnerable.

While the Association provided "CondoCerts" to the escrow company—which noted the existence of general violations—the Varhelys did not receive a formal, detailed statement regarding specific unapproved alterations or improvements before they closed. It was only after taking possession that the gravity of the property's non-compliance became clear.

Timeline of the Dispute:

  • February 2012: Petitioners enter into a contract to purchase the unit from ING Bank FSB.
  • March 13, 2012: The Association provides "CondoCerts" to the escrow company. These documents mention violations but lack a formal statement on specific improvements violating the community’s Declaration.
  • March 13, 2012: Escrow closes, and title is transferred to the Varhelys.
  • October 22, 2012: Realizing the impact of the undisclosed issues, the Varhelys file a petition with the Department of Fire, Building and Life Safety.
  • February 13, 2013: An administrative hearing is held to determine if the Association breached its duties under A.R.S. § 33-1806.

A critical fact established during the proceedings was the exact size of the community. While units were numbered 1 through 49, unit number 13 does not exist, bringing the total count to exactly 48 units. This single missing unit changed the entire legal landscape of the case.

3. The Legal Turning Point: A.R.S. § 33-1806 Explained

The resolution of this dispute hinged entirely on the interpretation of A.R.S. § 33-1806. This statute dictates the disclosure obligations during the resale of a unit within a planned community, and it draws a hard line at the 50-unit mark.

Disclosure Obligations by Community Size

Communities with < 50 Units Communities with 50+ Units
The "Member" (the seller) is legally responsible for mailing or delivering the disclosure documents to the purchaser. The Association bears the primary burden of providing the statement of violations and other required documents.
The Association has no statutory obligation under A.R.S. § 33-1806 to provide a violation statement directly to the purchaser. The Association must provide a statement as to whether its records reflect any alterations or improvements that violate the declaration.

Under A.R.S. § 33-1806(G), a "Member" is defined as the seller of the unit title. While this definition excludes a trustee in a trustee's sale, it applied to ING Bank FSB in this instance, as the bank had already acquired title and was acting as the seller.

4. Why the Homeowners Lost: The Association’s Defense

In administrative proceedings, the Petitioners bear the burden of proof by a preponderance of the evidence. This means the Varhelys had to prove it was more probable than not that the Association violated a specific legal duty.

The Association’s defense was built on statutory immunity. Because Eighth Street Square consisted of only 48 units, the Association had no legal obligation under A.R.S. § 33-1806 to provide the specific violation statements the Varhelys sought. The Administrative Law Judge (ALJ) dismissed the homeowners' arguments based on the following:

  • Irrelevance of Buyer Knowledge: The Varhelys argued they did not know the community had fewer than 50 units. The ALJ ruled that the statute applies based on the factual unit count, regardless of a buyer's awareness.
  • The "Partial Disclosure" Fallacy: The Varhelys claimed that because the Association provided some documents (the CondoCerts) to escrow, they were then obligated to provide all documents. The ALJ rejected this, noting that providing voluntary information does not create a statutory mandate where none exists.
  • The "Double Jeopardy" Clause: Crucially, A.R.S. § 33-1806(A)(3)(e) contains a warning for all buyers. It states that even if the Association is not required to disclose, the seller is not relieved of their obligation to disclose violations. Furthermore, the Association is not precluded from taking enforcement action against a buyer for violations that were "apparent at the time of purchase," even if they weren't in the records.
5. The Final Verdict: Dismissal and Certification

The Petitioners ultimately failed to establish a violation by the Respondent. On March 1, 2013, ALJ Tammy L. Eigenheer issued a recommended order for the dismissal of the petition, concluding that no action was required of the Association.

As the Department of Fire, Building and Life Safety took no action to modify or reject this recommendation by the April 5 deadline, the decision achieved administrative finality. On April 10, 2013, the decision was officially certified as the final administrative decision.

6. Key Takeaways for Arizona Homebuyers
  1. Verify the Statutory Threshold: Do not assume a community is "large." Verify the unit count personally. If the community has 49 or fewer units (remembering to check for "missing" unit numbers like Unit 13), your primary legal recourse for non-disclosure is against the seller, not the HOA.
  2. Foreclosure Disclosure Gaps: In a foreclosure-resale scenario, the bank is the "Member" and is responsible for disclosures in small HOAs. However, banks often have no "actual knowledge" of violations. This creates a "disclosure vacuum" where the bank doesn't know and the HOA isn't legally required to tell you.
  3. Beware of "Apparent" Violations: Under A.R.S. § 33-1806, an HOA in a small community can still fine you for violations that were visible at the time of purchase, even if they never mentioned them during escrow. Your due diligence must include a physical inspection specifically aimed at HOA compliance.
  4. Sue the Right Party: The Varhelys’ case was dismissed largely because they targeted the Association. In communities with fewer than 50 units, any legal challenge regarding a failure to provide A.R.S. § 33-1806 disclosures must generally be directed at the seller.

Navigating the complexities of HOA law requires more than just reading a contract; it requires an understanding of the statutory thresholds that protect Associations from liability. When buying into a small community, the mantra must be caveat emptor—buyer beware.

Case Participants

Petitioner Side

  • Emry Varhely (petitioner)
    Spelled 'Varhaly' in Source 2 mailing list
  • Muriel Varhely (petitioner)
    Appeared on behalf of Petitioners

Respondent Side

  • Nikita Patel (attorney)
    Carpenter, Hazlewood, Delgado & Bolen, PLC
    Represented Respondent

Neutral Parties

  • Tammy L. Eigenheer (ALJ)
    Office of Administrative Hearings
  • Gene Palma (Director)
    Department of Fire, Building and Life Safety
  • Cliff J. Vanell (Director)
    Office of Administrative Hearings
    Signed Certification of Decision
  • Joni Cage (administrative staff)
    Department of Fire, Building and Life Safety
    Listed c/o for Gene Palma

Sellers, John & Debborah vs. Crossings at Willow Creek Property Owners Association

Posted on by

Case Summary

Case ID 12F-H1213003-BFS
Agency DFBLS
Tribunal OAH
Decision Date 2013-01-23
Administrative Law Judge Tammy L. Eigenheer
Outcome The ALJ dismissed the case because the Petitioners were not the buyers or sellers in the transaction where the alleged disclosure failure occurred, and thus lacked standing to sue.
Filing Fees Refunded $500.00
Civil Penalties $0.00

Parties & Counsel

Petitioner John and Debborah Sellers Counsel —
Respondent Crossings at Willow Creek Property Owners Association Counsel —

Alleged Violations

A.R.S. § 33-1806

Outcome Summary

The ALJ dismissed the case because the Petitioners were not the buyers or sellers in the transaction where the alleged disclosure failure occurred, and thus lacked standing to sue.

Why this result: Petitioners lacked standing as they were not parties to the transaction.

Key Issues & Findings

Failure to provide disclosure documents

Petitioners alleged that the Respondent failed to properly disclose information required under A.R.S. § 33-1806 to a purchaser of a lot in the planned community.

Orders: The petition was dismissed because the Petitioners lacked standing.

Filing fee: $500.00, Fee refunded: No

Disposition: respondent_win

Video Overview

Audio Overview

Decision Documents

12F-H1213003-BFS Decision – 322099.pdf

Uploaded 2026-04-24T10:43:44 (70.7 KB)

12F-H1213003-BFS Decision – 327761.pdf

Uploaded 2026-04-24T10:43:47 (59.6 KB)

12F-H1213003-BFS Decision – 322099.pdf

Uploaded 2026-01-25T15:27:48 (70.7 KB)

12F-H1213003-BFS Decision – 327761.pdf

Uploaded 2026-01-25T15:27:48 (59.6 KB)

Briefing Document: John and Debborah Sellers vs. Crossings at Willow Creek Property Owners Association

Executive Summary

The matter of John and Debborah Sellers vs. Crossings at Willow Creek Property Owners Association (No. 12F-H1213003-BFS) was an administrative case heard by the Arizona Office of Administrative Hearings (OAH). The Petitioners, John and Debborah Sellers, alleged that the Crossings at Willow Creek Property Owners Association (the Association) violated state statutes by failing to provide mandatory disclosure documents to the purchaser of a lot within the community.

The central issue of the case was not the validity of the alleged disclosure failure, but rather the legal standing of the Petitioners to bring the claim. During a pre-hearing conference on December 12, 2012, it was established that the Petitioners were not parties to the real estate transaction in question and had suffered no direct harm. Consequently, Administrative Law Judge (ALJ) Tammy L. Eigenheer recommended the dismissal of the petition on the grounds that the Petitioners did not have a "dispute" within the statutory meaning required to seek relief. This decision was certified as the final administrative action on February 28, 2013, after the Department of Fire, Building and Life Safety took no action to modify or reject the recommendation.

Key Parties and Case Information

Entity Role Representation
John and Debborah Sellers Petitioners Self-represented
Crossings at Willow Creek Property Owners Association Respondent Peter Giambanco, Board President
Tammy L. Eigenheer Administrative Law Judge Office of Administrative Hearings
Cliff J. Vanell Director Office of Administrative Hearings
Department of Fire, Building and Life Safety Oversight Agency Gene Palma, Director

Detailed Analysis of Key Themes

1. Statutory Disclosure Requirements (A.R.S. § 33-1806)

The initial petition was grounded in an alleged violation of A.R.S. § 33-1806. This Arizona statute mandates that a planned community association must provide a specific list of documents to a purchaser or the purchaser’s authorized agent. These disclosures must be made within ten days of the association receiving written notice of a pending sale. The Petitioners claimed the Association failed to fulfill this obligation during the sale of a parcel in the community.

2. The Requirement of Legal Standing (A.R.S. § 41-2198.01(B))

The case pivoted on the interpretation of A.R.S. § 41-2198.01(B), which governs disputes between owners and associations. The statute stipulates that a hearing may be petitioned for regarding violations of community documents or state statutes, but it implies the existence of a direct dispute between the owner and the association.

The ALJ identified a "potential issue as to Petitioners' standing" because the Petitioners admitted to the following:

  • They were not buyers or sellers in the transaction at issue.
  • They were not parties to the sale.
  • They suffered no actual harm from the Association’s alleged failure to provide documents.

The ALJ concluded that because the Petitioners were not party to the transaction, they did not have a "dispute" with the Respondent within the meaning of the law. Without a personal stake or direct harm, the Petitioners lacked the standing necessary to proceed to a hearing on the merits.

3. Procedural Timeline and Certification

The administrative process followed a strict statutory timeline:

  • August 7, 2012: Petition filed.
  • August 29, 2012: Respondent denied any violation.
  • December 12, 2012: Pre-hearing conference held to address motions and standing.
  • January 23, 2013: ALJ issued the decision recommending dismissal.
  • February 27, 2013: Statutory deadline for the Department of Fire, Building and Life Safety to accept, reject, or modify the ALJ decision.
  • February 28, 2013: The decision was certified as final due to agency inaction.

Important Quotes with Context

On the Nature of the Dispute

"Petitioners acknowledged they were not parties to the sale in question as either buyers or sellers and that they had suffered no harm from the alleged failure of Respondent to provide the documents required."

  • Context: This finding from the ALJ’s December 12 conference effectively ended the Petitioners' ability to seek a judgment on the merits of the alleged disclosure violation.
On the Statutory Definition of Standing

"Petitioners do not have a dispute with Respondent within the meaning of A.R.S. § 41-2198.01(B) and lack standing to proceed with a hearing on the merits in this case alleging a violation of A.R.S. § 33-1806, failure to provide documents to purchasers other than Petitioners."

  • Context: The ALJ explains that the right to petition the department for a hearing is reserved for those directly involved in the dispute or affected by the violation.
On the Finality of the Decision

"Pursuant to A.R.S. § 41-1092.08(D), the attached Administrative Law Judge Decision is certified as the final administrative decision of the Department of Fire Building and Life Safety."

  • Context: This quote from the Certification of Decision signifies the conclusion of the administrative process, as the oversight agency did not intervene within the allotted timeframe.

Actionable Insights

For Homeowners and Petitioners
  • Verify Standing Before Filing: A petitioner must be a direct party to the transaction or dispute in question. Filing a petition based on a violation that affects a third party (e.g., another buyer) is likely to result in dismissal for lack of standing.
  • Demonstrate Harm: Successful administrative petitions generally require proof of harm or a direct interest in the statutory violation being alleged.
For Property Owners Associations
  • Statutory Compliance is Mandatory: While the Association won this case on a procedural technicality (standing), the underlying statute (A.R.S. § 33-1806) still requires the timely provision of disclosure documents to actual purchasers.
  • Procedural Awareness: Associations should be prepared to challenge the standing of petitioners who are not directly involved in the specific transactions or incidents they are citing as violations.
Regarding the Appeals Process
  • Right to Rehearing: Parties dissatisfied with a certified decision have the right to request a rehearing from the Department of Fire, Building and Life Safety under A.R.S. § 41-1092.09(A).
  • Superior Court Review: Administrative decisions may be reviewed by the Superior Court, though a party may be required to exhaust administrative remedies (seeking a rehearing) before petitioning the court.

Study Guide: John and Debborah Sellers v. Crossings at Willow Creek Property Owners Association

This study guide provides a comprehensive overview of the administrative legal case regarding alleged disclosure violations within a planned community. It explores the legal concepts of standing, the procedural timeline of administrative hearings, and the statutory requirements for property associations in Arizona.

Case Overview: No. 12F-H1213003-BFS

The case involves a dispute between John and Debborah Sellers (Petitioners) and the Crossings at Willow Creek Property Owners Association (Respondent). The Petitioners alleged that the Association failed to comply with state statutes regarding the disclosure of information during a property sale. However, the central legal issue shifted from the merits of the disclosure to the standing of the Petitioners to bring the claim.

Key Statutory References
  • A.R.S. § 33-1806: Governs the disclosure of documents and information to a purchaser upon the pending sale of a lot within a planned community.
  • A.R.S. § 41-2198.01(B): Outlines the eligibility of owners or associations to petition the Department for a hearing regarding violations of community documents or statutes.
  • A.R.S. § 41-1092.08: Relates to the certification and finality of Administrative Law Judge (ALJ) decisions.

Key Legal Concepts and Findings

1. Disclosure Requirements for Planned Communities

Under Arizona law (A.R.S. § 33-1806), when a property within an association is being sold, the association is required to provide a specific list of documents to the purchaser or their authorized agent. This disclosure must occur within ten days after the association receives written notice of a pending sale.

2. The Concept of Standing

Standing refers to the legal right of a party to initiate a lawsuit or petition. In this case, the Administrative Law Judge (ALJ) identified a potential issue regarding whether the Petitioners had the right to a hearing.

  • The Rule: A.R.S. § 41-2198.01(B) specifies that a petition for a hearing may be filed for a dispute between an "owner and a condominium association or planned community association."
  • The Violation of Standing: During the pre-hearing conference, the Petitioners acknowledged they were not parties to the sale in question. They were neither the buyers nor the sellers, and they admitted to suffering no harm from the alleged lack of disclosure.
3. Administrative Procedural Timeline

The case followed a specific trajectory through the Office of Administrative Hearings (OAH):

  • August 7, 2012: Petition filed.
  • August 9, 2012: Respondent notified of the Petition.
  • August 29, 2012: Respondent denied the allegations.
  • October 19, 2012: Notice of Hearing issued.
  • December 12, 2012: Pre-hearing conference and oral arguments held.
  • January 23, 2013: ALJ Decision issued, recommending dismissal.
  • February 27, 2013: Statutory deadline for the Department to accept, reject, or modify the ALJ decision.
  • February 28, 2013: Decision certified as final because no action was taken by the Department.

Short-Answer Practice Questions

1. What specific Arizona Revised Statute did the Petitioners claim the Respondent violated?

Answer: A.R.S. § 33-1806, regarding the failure to properly disclose required information to a purchaser of a lot.

2. According to the ALJ’s findings, why did the Petitioners lack standing to proceed with the hearing?

Answer: They were not a party to the real estate transaction (neither buyers nor sellers) and had suffered no harm, meaning there was no "dispute" between an owner and the association as defined by A.R.S. § 41-2198.01(B).

3. Within how many days must an association provide required documents to a purchaser after receiving notice of a pending sale?

Answer: Within ten days.

4. What happens if the Department of Fire, Building and Life Safety fails to act on an ALJ’s decision by the statutory deadline?

Answer: Pursuant to A.R.S. § 41-1092.08(D), the ALJ decision is certified as the final administrative decision.

5. What recourse does a party have after an ALJ decision is certified as final?

Answer: A party may request a rehearing from the Department (A.R.S. § 41-1092.09(A)) or seek review by the Superior Court (A.R.S. § 41-1092.08(H)).

Essay Prompts for Deeper Exploration

  1. The Importance of Standing in Administrative Law: Analyze why the court requires a petitioner to be a party to a transaction or have suffered direct harm to bring a case. Discuss how this prevents "intermeddling" in the private transactions of others within a planned community.
  2. Statutory Deadlines and Finality: Examine the procedural timeline of Case No. 12F-H1213003-BFS. How do the deadlines imposed on the Department of Fire, Building and Life Safety ensure a timely resolution for the parties involved, and what are the implications of the Department's silence?
  3. Planned Community Transparency: Evaluate the purpose of A.R.S. § 33-1806. Why is it vital for a purchaser in a planned community to receive specific association documents, and how does this statute protect the interests of prospective homeowners?

Glossary of Important Terms

Term Definition
Administrative Law Judge (ALJ) A presiding officer who conducts hearings and issues decisions for administrative agencies.
A.R.S. Arizona Revised Statutes; the codified laws of the state of Arizona.
Certification of Decision The process by which an ALJ's recommendation becomes a final, binding administrative action, often due to the lapse of time without agency intervention.
Department of Fire, Building and Life Safety The state agency responsible for overseeing disputes between owners and homeowners' associations in this jurisdiction.
OAH Office of Administrative Hearings; the venue where the pre-hearing conference and arguments took place.
Petitioners The parties (in this case, John and Debborah Sellers) who file a formal written request for a legal hearing.
Planned Community A real estate development where owners are subject to an association and specific disclosure rules (governed by Title 33).
Respondent The party (in this case, Crossings at Willow Creek Property Owners Association) against whom a petition is filed.
Standing The legal status required to bring a case to court, usually requiring the party to be directly involved in the dispute or harmed by the action.

Understanding Legal "Standing": Lessons from Sellers v. Crossings at Willow Creek

1. Introduction: The Price of Procedural Error

For dedicated HOA watchdogs, identifying a clear violation of state law by a Board of Directors feels like a "slam dunk" case. However, in the world of administrative law, being right about a violation is only half the battle. If you aren't the party directly harmed by that violation, you may find your case dismissed before you even get to present your evidence.

This is the "Bounty Hunter Trap"—a situation where well-intentioned homeowners attempt to police their associations for technical violations that occurred in transactions involving other parties. The case of John and Debborah Sellers vs. Crossings at Willow Creek Property Owners Association (No. 12F-H1213003-BFS) serves as a stark warning. The Sellers identified what they believed was a clear statutory breach, but they were ultimately defeated by a fundamental legal hurdle: Standing.

2. The Allegation: A Failure of Disclosure

The dispute began on August 7, 2012, when John and Debborah Sellers filed a petition with the Department of Fire, Building and Life Safety. They alleged that the Crossings at Willow Creek Property Owners Association (the Respondent) had failed to meet its mandatory disclosure obligations during the sale of a property within the community.

The Department notified the Respondent of the petition on August 9, 2012, and by August 29, the Association had formally denied the violation. At the heart of the Sellers’ claim was A.R.S. § 33-1806, which outlines strict transparency requirements for planned communities:

  • The association must provide a specific set of governing and financial documents to a purchaser or the purchaser’s authorized agent.
  • These documents must be delivered within ten business days after the association receives written notice of a pending sale.

The Sellers claimed the Association failed to provide these documents to a third-party purchaser within that 10-day window. While this may have been a valid observation of a statutory failure, the case quickly shifted from the Association’s conduct to the Sellers’ right to bring the claim in the first place.

3. The Concept of "Standing": A Threshold Issue

In any legal proceeding, "standing" is the requirement that the party bringing the suit has a sufficient connection to and harm from the law or action challenged. Administrative Law Judge (ALJ) Tammy L. Eigenheer flagged standing as a "potential issue" early in the process.

Before the matter ever reached a full evidentiary hearing, "multiple motions" were filed by the parties. This prompted the ALJ to recognize standing as a threshold issue—a gatekeeper rule that can kill a case before the facts are even debated. The ALJ focused on the specific language of the enforcement statute:

A.R.S. § 41-2198.01(B) “For a dispute between an owner and a condominium association or planned community association… the owner or association may petition the department for a hearing concerning violations of condominium documents or planned community documents or violations of the statutes that regulate condominiums or communities.”

The nuance here is critical: while the Sellers were "owners" within the association (granting them the general right to file petitions), the ALJ ruled they lacked standing for this specific dispute. Because the duty created by A.R.S. § 33-1806 is owed specifically to the "purchaser or the purchaser's authorized agent," a third-party owner who is not part of that transaction cannot claim a legal "dispute" exists.

4. The Turning Point: Why the Sellers’ Case Was Dismissed

On December 12, 2012, the parties gathered for a pre-hearing conference that included oral arguments on the pending motions. This was the Sellers' opportunity to prove they had a dog in the fight. Instead, the conference led to two fatal admissions by the Petitioners:

  1. They were not parties to the sale: They were neither the buyers nor the sellers of the lot in question.
  2. They suffered no harm: They admitted that the Association's alleged failure to disclose documents to the third-party purchaser did not cause them any personal injury, financial loss, or infringement of their own rights.

The ALJ’s logic was ironclad: Under A.R.S. § 41-2198.01(B), there must be a genuine dispute. Without being a party to the transaction, the Sellers were essentially attempting to litigate on behalf of someone else. Consequently, the ALJ determined they lacked the standing to proceed to a hearing on the merits.

5. The Administrative Result and Finality

On January 23, 2013, ALJ Eigenheer issued a "Recommended Order" dismissing the petition. In the Arizona administrative system, this recommendation is transmitted to the agency director for a final decision. In this case, the process illustrated the "ticking clock" of administrative finality.

The Certification of Decision, signed by Director Cliff J. Vanell, detailed the following timeline:

  1. January 23, 2013: The ALJ’s decision was electronically transmitted to the Department.
  2. February 27, 2013: This was the statutory deadline for the Department to accept, reject, or modify the decision.
  3. February 28, 2013: Because Director Vanell took no action by the deadline, the "inaction" became legally equivalent to approval. The ALJ’s recommendation was certified as the final administrative decision.

6. Key Takeaways for Homeowners and Associations

The Sellers case provides essential strategic lessons for those navigating HOA law:

  • You Cannot Sue on Behalf of Your Neighbor: Standing is personal. Even if you witness a clear violation of the law, you cannot petition for relief unless you are a party to the specific transaction or dispute.
  • A "Violation" is Not a "Case": Simply observing a statutory breach is insufficient. To maintain standing, a petitioner must demonstrate "actual harm." Without a showing of injury, the OAH will dismiss the matter as a non-dispute.
  • The Director Has the Last Word: Homeowners must realize that the ALJ’s word is a recommendation. The finality of the case rests with the Department Director (such as Cliff J. Vanell). If the Director does not act within the 35-day window, the ALJ’s decision becomes binding by default.

7. Conclusion

Sellers v. Crossings at Willow Creek is a cautionary tale for those who seek to hold their associations accountable. While the Petitioners may have been correct that the Association failed its disclosure duties, their failure to respect procedural boundaries was their undoing.

Accountability is the bedrock of property owners' associations, but the legal system is not a platform for "bounty hunting" technicalities. Before filing a petition, you must ensure you are the right person to bring the claim. Understanding standing isn't just about legal jargon—it's the non-negotiable price of entry to the courtroom.

Case Participants

Petitioner Side

  • John Sellers (petitioner)
    Appeared on own behalf
  • Debborah Sellers (petitioner)
    Appeared on own behalf

Respondent Side

  • Peter Giambanco (Board President)
    Crossings at Willow Creek Property Owners Association
    Represented Respondent

Neutral Parties

  • Tammy L. Eigenheer (ALJ)
    Office of Administrative Hearings
  • Gene Palma (Director)
    Department of Fire, Building and Life Safety
  • Holly Textor (staff)
    Department of Fire, Building and Life Safety
    Recipient of transmission
  • Cliff J. Vanell (Director)
    Office of Administrative Hearings
    Certified the decision
  • Joni Cage (staff)
    Department of Fire, Building and Life Safety
    Recipient of copy

Sallus, Suzanne vs. Sunrise Desert Vistas POA

Posted on by

Case Summary

Case ID 12F-H1212008-BFS
Agency Department of Fire, Building and Life Safety
Tribunal Office of Administrative Hearings
Decision Date 2012-10-02
Administrative Law Judge Tammy L. Eigenheer
Outcome The Administrative Law Judge ruled in favor of the Petitioner, finding that the HOA violated A.R.S. § 33-1806 by failing to provide legally required resale disclosure documents directly to the purchaser within the statutory timeframe. The HOA's reliance on its website was deemed insufficient as the website did not contain all required information (specifically regarding financials and pending litigation).
Filing Fees Refunded $550.00
Civil Penalties $0.00

Parties & Counsel

Petitioner Suzanne Sallus Counsel M. Philip Escolar
Respondent Sunrise Desert Vistas Property Owners Association Counsel —

Alleged Violations

A.R.S. § 33-1806

Outcome Summary

The Administrative Law Judge ruled in favor of the Petitioner, finding that the HOA violated A.R.S. § 33-1806 by failing to provide legally required resale disclosure documents directly to the purchaser within the statutory timeframe. The HOA's reliance on its website was deemed insufficient as the website did not contain all required information (specifically regarding financials and pending litigation).

Key Issues & Findings

Failure to provide resale disclosure documents

Petitioner alleged Respondent failed to provide required documents upon pending sale of the property. Respondent argued directing the title agent to the website was sufficient. The ALJ found the website did not contain all required documents and that Respondent failed to disclose pending litigation.

Orders: Respondent ordered to comply with A.R.S. § 33-1806 and provide copies of all required documents within 10 days; Respondent ordered to pay Petitioner filing fee of $550.00.

Filing fee: $550.00, Fee refunded: Yes

Disposition: petitioner_win

Cited:

  • A.R.S. § 33-1806
  • A.R.S. § 41-2198.01(B)

Video Overview

Audio Overview

Decision Documents

12F-H1212008-BFS Decision – 308830.pdf

Uploaded 2026-04-24T10:41:17 (122.1 KB)

12F-H1212008-BFS Decision – 313396.pdf

Uploaded 2026-04-24T10:41:20 (59.0 KB)

12F-H1212008-BFS Decision – 308830.pdf

Uploaded 2026-01-25T15:26:57 (122.1 KB)

12F-H1212008-BFS Decision – 313396.pdf

Uploaded 2026-01-25T15:26:58 (59.0 KB)

Briefing Document: Sallus vs. Sunrise Desert Vistas Property Owners Association (Case No. 12F-H1212008-BFS)

Executive Summary

This document summarizes the administrative legal proceedings and final decision in the matter of Suzanne Sallus (Petitioner) vs. Sunrise Desert Vistas Property Owners Association (Respondent). The case centered on an alleged violation of Arizona Revised Statutes (A.R.S.) § 33-1806, which mandates that planned community associations provide specific documentation to potential purchasers during the escrow process.

Following a hearing on September 12, 2012, Administrative Law Judge (ALJ) Tammy L. Eigenheer determined that the Respondent failed to fulfill its statutory obligations. Despite the Respondent's claims that it had provided sufficient information via its website and that certain lawsuits were no longer "pending," the ALJ ruled in favor of the Petitioner. The Respondent was ordered to provide all legally required documents and reimburse the Petitioner’s $550.00 filing fee. The decision was certified as final on November 13, 2012.

Detailed Analysis of Key Themes

1. Statutory Obligations Under A.R.S. § 33-1806

The primary legal issue was the Respondent’s failure to comply with A.R.S. § 33-1806(A), which applies to planned communities with 50 or more units. The statute requires associations to deliver a comprehensive set of documents to a purchaser within ten days of receiving notice of a pending sale.

The documentation required by law includes:

  • Bylaws, rules, and the declaration (CC&Rs).
  • A dated statement including association contact information, assessment amounts, and any unpaid fees.
  • Statements regarding association insurance coverage and total reserve funds.
  • A statement regarding any known alterations or improvements that violate the declaration.
  • A specific, signed acknowledgment of the contract between the association and the purchaser.
  • The current operating budget and the most recent annual financial report.
  • The most recent reserve study.
  • A summary of any pending lawsuits involving the association.
2. Adequacy of Digital Disclosure

A central theme of the defense was that the Respondent had directed the Petitioner’s agent to its website (www.sdvpoa.org), claiming this satisfied the disclosure requirements. The ALJ rejected this for several reasons:

  • Incomplete Content: While the CC&Rs and Bylaws were on the site, many other mandated documents (insurance statements, reserve totals, and violation records) were missing.
  • Access Restrictions: The website's "Financials" page stated that reports were available only "to property owners on request." Because the Petitioner was in escrow and not yet an owner, she did not have the required access.
  • Lack of Specificity: The Respondent’s communications directed the Petitioner to the website specifically for CC&Rs and Bylaws, making no mention of financial records or other statutory disclosures being available there.
3. Definition of "Pending Lawsuits"

The Respondent argued it did not need to disclose the "Given Lawsuit" and the "Violette Lawsuit" because settlement agreements had been signed in February 2011, prior to the Petitioner entering escrow.

However, the ALJ established a clear legal standard for "pending" litigation:

  • The Given Lawsuit was not dismissed by the Superior Court until March 16, 2011.
  • The Violette Lawsuit was not dismissed until March 21, 2011.
  • Since the Respondent was notified of the pending sale on March 12, 2011, both cases were legally "pending" as they had not yet been dismissed by the court.
4. Jurisdictional Challenges

The Respondent attempted to have the case dismissed by arguing that the Department lacked jurisdiction because the Petitioner was a member of the Board of Directors at the time she filed her petition (April 2012). The ALJ ruled that since the Petitioner was a homeowner and the association was a party to the action, the Department maintained jurisdiction under A.R.S. § 41-2198.01(B).

Important Quotes with Context

On the Burden of Proof

"Petitioner bears the burden of proving by a preponderance of the evidence that Respondent violated A.R.S. § 33-1806… Evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not."

  • Context: The ALJ defining the legal standard required for the Petitioner to win the case.
On Statutory Non-Compliance

"While it may be argued Respondent’s directive to see the CC&Rs and Bylaws on the association website fulfilled the requirement of providing those documents… the website did not contain all of the documents required by the statute."

  • Context: The ALJ addressing the Respondent's defense that providing a web link was sufficient to meet the multi-faceted requirements of Arizona law.
On Pending Litigation

"Accordingly, both cases were pending and had not been dismissed as of the date Respondent was notified of the pending sale of the parcel to Petitioner."

  • Context: The ALJ’s conclusion that settlement signatures do not terminate "pending" status; only a formal court dismissal suffices.

Actionable Insights

Stakeholder Key Insight
Property Owners Associations (POAs) Direct Delivery is Mandatory: Directing buyers to a website is insufficient if that website does not contain all documents required by A.R.S. § 33-1806 or if access is restricted to current owners.
POAs / Boards Legal Status of Lawsuits: Litigation must be disclosed as "pending" until a court officially enters an order of dismissal, regardless of whether a settlement has been signed.
Home Buyers Statutory Rights: Purchasers in communities with 50+ units are entitled to specific financial and legal disclosures. Failure to receive these provides grounds for legal recourse through the Department of Fire, Building and Life Safety.
Escrow/Title Agents Notice Sufficiency: Contacting an association to request fee information and providing the purchaser's name/address constitutes formal notice of a pending sale, triggering the 10-day statutory clock for document delivery.

Final Order Summary

  1. Compliance: The Respondent was ordered to provide the Petitioner with all documents required under A.R.S. § 33-1806 within ten days of the order.
  2. Financial Restitution: The Respondent was ordered to pay the Petitioner $550.00 (the cost of the filing fee) within 30 days of the effective date.
  3. Finality: The decision was certified by the Director of the Office of Administrative Hearings on November 8, 2012, and transmitted as a final agency action on November 13, 2012.

Study Guide: Sallus v. Sunrise Desert Vistas Property Owners Association

This study guide examines the administrative law case of Suzanne Sallus vs. Sunrise Desert Vistas POA (No. 12F-H1212008-BFS). The case centers on the legal disclosure obligations of planned community associations in Arizona and the jurisdictional authority of the Department of Fire, Building and Life Safety.

Key Case Overview

In 2012, Petitioner Suzanne Sallus alleged that the Sunrise Desert Vistas Property Owners Association (Respondent) violated Arizona Revised Statutes (A.R.S.) § 33-1806. The dispute arose when the Respondent failed to provide mandated disclosure documents during Sallus's 2011 purchase of a parcel within the community. The Administrative Law Judge (ALJ) ultimately ruled in favor of the Petitioner, establishing a clear precedent regarding the delivery of association records.

Core Legal Concepts and Statutes

A.R.S. § 33-1806: Disclosure Requirements

This statute dictates the duties of a planned community association when a unit is being sold. For communities with 50 or more units, the association must provide specific documents to the purchaser or their agent within ten days of receiving written notice of a pending sale.

Required documents include:

  • Bylaws and association rules.
  • The community declaration (CC&Rs).
  • A dated statement containing principal contact info and assessment amounts.
  • A statement on whether the unit is covered by association-maintained insurance.
  • The total amount held in reserves.
  • A statement regarding any known violations or alterations to the unit.
  • A specific, mandated "contract acknowledgment" statement to be signed by the purchaser.
  • The current operating budget and most recent annual financial report.
  • The most recent reserve study (if one exists).
  • A summary of any pending lawsuits in which the association is a named party.
A.R.S. § 41-2198.01: Jurisdiction

The Department of Fire, Building and Life Safety has the authority to hear disputes between property owners and planned community associations. This jurisdiction does not extend to disputes between owners where the association is not a party.

Preponderance of the Evidence

Under A.A.C. R2-19-119, the Petitioner carries the burden of proof. Legal standards define "preponderance of the evidence" as evidence that is more convincing than the opposition's, making a fact more probable than not.

Case Facts and Timeline

Date Event
Late Feb. 2011 Petitioner enters escrow for a parcel in Sunrise Desert Vistas (SDV).
March 12, 2011 Equity Title Agency (acting for Petitioner) requests fee and assessment info.
March 12, 2011 Respondent provides limited info via email, directing Petitioner to a website for CC&Rs.
March 16, 2011 The Given lawsuit against the POA is dismissed by the Superior Court.
March 21, 2011 The Violette lawsuit against the POA is dismissed by the Superior Court.
April 2, 2011 Petitioner closes escrow.
May 2011–April 2012 Petitioner serves on the SDV Board of Directors.
April 2, 2012 Petitioner files a petition alleging violations of A.R.S. § 33-1806.
Sept. 12, 2012 Administrative hearing is held.
Nov. 8, 2012 ALJ decision is certified as final.

Short-Answer Practice Questions

  1. What is the minimum community size required for A.R.S. § 33-1806 disclosure mandates to apply?
  • Answer: The community must have 50 or more units.
  1. How many days does an association have to provide disclosure documents once notified of a pending sale?
  • Answer: Ten days.
  1. Why did the Respondent argue the Department lacked jurisdiction in this case?
  • Answer: The Respondent argued that because the Petitioner was a member of the Board of Directors at the time the petition was filed, it was a dispute among owners rather than between an owner and the association.
  1. What was the ALJ's ruling regarding the Respondent's use of a website to provide CC&Rs and Bylaws?
  • Answer: While providing links might satisfy the "electronic format" requirement for those specific documents, the website did not contain all other mandated documents (like insurance statements, reserve totals, or pending lawsuit summaries).
  1. **Why were the Given and Violette lawsuits considered "pending" even though settlement agreements were signed in February 2011?**
  • Answer: They were not dismissed by the Superior Court until March 16 and March 21, 2011, respectively. Therefore, they were still legally pending when the Respondent was notified of the sale on March 12.
  1. What financial penalty was levied against the Respondent?
  • Answer: The Respondent was ordered to reimburse the Petitioner’s $550.00 filing fee and provide all missing documents within ten days.

Essay Prompts for Deeper Exploration

  1. The Limits of Digital Disclosure: Evaluate the Respondent’s defense that directing a buyer to a website constitutes sufficient disclosure. In the context of A.R.S. § 33-1806, discuss why a general "Financials" page that requires an email request is insufficient for a buyer in escrow.
  1. Defining "Pending" Litigation: Analyze the distinction between a signed settlement agreement and a court-ordered dismissal. Why is it vital for a purchaser to be informed of litigation that is technically still active on the court docket, regardless of private settlements?
  1. Jurisdictional Boundaries: Discuss the implications of A.R.S. § 41-2198.01. If the Petitioner had sued another individual board member instead of the Association itself, how would the jurisdictional outcome have changed based on the "party to the action" rule?

Glossary of Important Terms

  • A.R.S. § 33-1806: The Arizona statute governing the disclosure of association records to prospective buyers in planned communities.
  • Administrative Law Judge (ALJ): An official who presides over hearings and adjudicates disputes involving government agencies.
  • Bylaws: The internal rules that govern the administration and management of a homeowners association.
  • CC&Rs (Declaration): Covenants, Conditions, and Restrictions; the legal documents that establish the rules of the community and are recorded with the county.
  • Escrow: A legal arrangement where a third party holds funds or assets until specific conditions of a sale are met.
  • Lien: A legal claim on a property for the payment of a debt, such as unpaid association assessments.
  • Preponderance of the Evidence: The standard of proof in civil and administrative cases, requiring that a claim be "more likely than not" to be true.
  • Reserve Study: An analysis of an association's reserve fund and a schedule of future anticipated major repairs and replacements of common areas.
  • Stipulation for Dismissal with Prejudice: An agreement between parties to end a lawsuit permanently; it cannot be refiled.

Understanding Your Rights: The Mandatory Disclosure Lessons from Sallus v. Sunrise Desert Vistas POA

1. Introduction: More Than Just a Key Exchange

When you sign a contract to purchase a home in a planned community, you are doing more than just buying real estate; you are entering into a binding legal relationship with a Homeowners Association (HOA). In Arizona, this transition is protected by strict statutory safeguards designed to prevent buyers from flying blind. Unfortunately, many associations treat financial and legal data as state secrets rather than public records.

The case of Sallus v. Sunrise Desert Vistas POA stands as a landmark victory for homeowner transparency. It proves that even while a buyer is "in escrow," they possess powerful statutory rights to information. This dispute exposed the association's gatekeeping of vital financial data and established that "transparency" requires more than just a link to a website—it requires full, proactive disclosure of the community’s health.

2. The Case Study: Sallus v. Sunrise Desert Vistas POA

In early 2011, Suzanne Sallus entered escrow to purchase a parcel in the Sunrise Desert Vistas (SDV) community. What followed was a masterclass in association non-compliance and the legal consequences that follow.

  • The Timeline: On March 12, 2011, the Petitioner’s authorized agent, Equity Title Agency, notified the association of the pending sale and requested the mandatory resale information. The association responded with limited fee information and a website link, but failed to provide a complete disclosure packet. Despite this, the Petitioner closed escrow on April 2, 2011.
  • The Jurisdictional Battle: After later serving on the association’s Board of Directors, Sallus filed a formal petition in April 2012. The association attempted to argue that the Department lacked jurisdiction because Sallus was a board member at the time of the filing. The Administrative Law Judge (ALJ) flatly rejected this, noting that as a homeowner and a party to the action, her rights under A.R.S. § 41-2198.01(B) remained intact.
  • The Core Allegation: The Petitioner alleged a clear violation of A.R.S. § 33-1806: the association failed to provide the mandatory documentation required for a community of 50+ units within the 10-day statutory window.
  • The Outcome: The ALJ ruled in favor of the homeowner. Under the authority of A.R.S. § 41-2198.01, the association was hit with a mandatory order to reimburse the Petitioner’s $550 filing fee and was compelled to provide all missing documentation.
3. The Mandatory Disclosure Checklist: What Every Buyer Deserves

Under A.R.S. § 33-1806, an association with 50 or more units has exactly 10 days from the receipt of notice from a purchaser or their authorized agent to deliver a comprehensive disclosure packet. As a buyer, you must demand the following:

  • Governing Documents: Current copies of the association’s bylaws, rules, and the declaration (CC&Rs).
  • Financial Health Indicators: The current operating budget, the most recent annual financial report (or a ten-page summary), and the most recent reserve study.
  • The "Dated Statement" Requirements: This is a single, critical document that must include:
  1. Insurance Details: A statement of the association’s insurance coverage for the unit.
  2. Reserve Totals: The exact amount of money currently held in the association’s reserve fund.
  3. Violation History: A record of any known alterations or improvements to the unit that violate the CC&Rs. Note that the association is not obligated to provide info on violations that occurred more than six years before the sale.
  4. Purchaser Acknowledgement: A high-stakes statement the buyer must sign, acknowledging that the CC&Rs and bylaws are a binding contract and that failure to pay assessments can lead to the loss of the home through foreclosure.
  • Pending Litigation: A summary of any active lawsuits where the association is a named party, including the specific dollar amounts being claimed.
4. Debunking Common HOA Defenses

The Sallus case serves as a warning to associations that attempt to "shortcut" their legal obligations. The following table contrasts the failed arguments of the association against the legal realities identified by the ALJ.

Association’s Argument Legal Reality
Website Accessibility: "We told the buyer to find the CC&Rs and Bylaws on our website." Delivery Failure: The ALJ ruled that the statute requires the association to "mail or deliver" the packet in paper or electronic format. A URL is not delivery. Furthermore, the "Financials" page was restricted to current "owners" only, illegally locking out buyers in escrow.
Settled Lawsuits: "We didn't disclose the Given and Violette cases because we signed settlement agreements before escrow opened." Pending Status: A lawsuit remains "pending" until the court enters an official dismissal. The association received notice of the sale on March 12; however, the Given dismissal wasn't entered until March 16 and the Violette dismissal on March 21. Both were legally pending during the disclosure window.
5. Final Takeaways for Homebuyers and Board Members

This ruling is a reminder that the power imbalance between an association and a buyer is mitigated by law—but only if those laws are enforced.

For Homebuyers:

  • Demand, Don't Ask: Do not let an association hide behind a login screen. Demand the delivery of the full packet in a format you can access immediately.
  • Scrutinize the Acknowledgement: Understand that signing the "Purchaser Acknowledgement" is the moment you waive your right to claim ignorance of association rules or foreclosure risks.
  • Verify the Litigation Gap: Ask specifically about lawsuits that may be "settled" but not yet dismissed, as these can still represent financial liabilities.

For HOA Boards:

  • The 10-Day Clock is Absolute: The clock starts the moment you or your management company receives notice from the buyer or their title agent.
  • Website Referrals are Insufficient: Simply pointing to a website does not satisfy the legal requirement to "deliver" a complete disclosure packet.
  • Transparency for Prospects: Prospective owners in escrow have the same legal right to financial transparency as current owners. Restricting "Financials" pages to current owners is a statutory violation.
  • Maintain Court Records: You must track official court dismissal dates, not just settlement signing dates, to ensure accurate litigation disclosure.
6. Closing Call to Action

Transparency is the bedrock of a healthy planned community. When associations gatekeep information, they undermine the buyer's ability to make an informed investment and expose the entire membership to unnecessary legal costs. Adhering to the strict disclosure mandates of A.R.S. § 33-1806 is not optional; it is a fundamental requirement to avoid administrative penalties and the mandatory reimbursement of legal filing fees. Stay informed, demand your documents, and protect your rights.

Case Participants

Petitioner Side

  • Suzanne Sallus (Petitioner)
    Sallus Family Trust
    Served as member of SDV Board of Directors from May 2011 through April 2012
  • M. Philip Escolar (attorney)
    Escolar Law Office
    Represented Petitioner

Respondent Side

  • Grace Violette (board member)
    Sunrise Desert Vistas Property Owners Association
    President of Respondent; represented Respondent at hearing; also named in separate lawsuit dismissed March 2011

Neutral Parties

  • Tammy L. Eigenheer (ALJ)
    Office of Administrative Hearings
  • Gene Palma (Director)
    Department of Fire, Building and Life Safety
  • Cliff J. Vanell (Director)
    Office of Administrative Hearings
    Certified the ALJ decision
  • Holly Textor (agency staff)
    Department of Fire, Building and Life Safety
    Listed on mailing distribution