Briefing on Larson v. Tempe Gardens Townhouse Corporation

Executive Summary

This briefing document synthesizes the legal dispute between homeowners James and Shawna Larson (Petitioners) and the Tempe Gardens Townhouse Corporation (Respondent). The core conflict centered on the Respondent’s requirement that Petitioners remove their patio cover at their own expense to facilitate a community-wide building repair and painting project. The case initially faced a jurisdictional challenge, with an Administrative Law Judge (ALJ) recommending dismissal due to the speculative nature of the Respondent’s threat to remove the cover. This recommendation was rejected by the Commissioner of the Department of Real Estate, who found the matter ripe for adjudication and ordered a new hearing.

The final Administrative Law Judge Decision ultimately ruled in favor of the Respondent. The decision found the HOA’s plan to remove the patio covers was reasonable, necessary for the safe and proper completion of the project, and authorized under the community’s CC&Rs. Crucially, the ruling established that the patio cover is a “limited common element” under Arizona statute. Consequently, the financial responsibility for its removal and potential reinstallation rests solely with the Petitioners as the homeowners to whom the element is assigned. The Petitioners’ petition was dismissed, and the Respondent was deemed the prevailing party.

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Procedural History

The case progressed through several distinct legal phases, beginning with a petition and culminating in a final administrative decision after a rehearing.

Outcome/Significance

June 15-16, 2017

Petition Filed

James and Shawna Larson filed a petition with the Department of Real Estate alleging a violation of the Respondent’s CC&Rs.

August 25, 2017

Order Recommending Dismissal

Administrative Law Judge Suzanne Marwil recommended dismissing the petition, finding no “justiciable controversy” because the Respondent had not yet acted on its threat to remove the patio cover, rendering the issue speculative.

August 31, 2017

Order Rejecting Recommendation

Judy Lowe, Commissioner of the Department of Real Estate, rejected the ALJ’s recommendation. Citing a June 1, 2017 letter from the Respondent, the Commissioner determined the matter was “ripe for adjudication” and ordered the hearing to be rescheduled.

September 1, 2017

Notice of Re-Hearing Issued

The Arizona Department of Real Estate formally scheduled a new hearing in the matter.

November 20, 2017

Rehearing Conducted

A full hearing on the merits was conducted before Administrative Law Judge Thomas Shedden.

December 11, 2017

Final Administrative Law Judge Decision

ALJ Thomas Shedden issued a final decision, dismissing the Petitioners’ petition and finding in favor of the Respondent.

Core Dispute Analysis

The conflict arose from a maintenance project initiated by the Tempe Gardens Townhouse Corporation, which consists of 169 units. The project involved repairing and painting the exteriors of the community’s twenty-five two-story buildings.

Respondent’s (HOA’s) Mandate and Rationale

• Project Requirement: The HOA informed homeowners with patio covers that they were required to remove the covers at their own expense before repairs and painting could begin.

• Enforcement Threat: In a letter dated June 1, 2017, the HOA stated that if the Larsons’ patio cover was not removed within ten days, the HOA would remove it under the authority of CC&R section 10(a) and charge the homeowners for the cost.

• Legal Justification: The HOA asserted its authority based on:

◦ CC&R Section 9(b): Grants the Respondent responsibility for maintaining the building exteriors.

◦ CC&R Section 9: States, “Any cooperative action necessary or appropriate to the proper maintenance and upkeep of the … [building] exteriors … shall be taken by the [Respondent].”

• Practical Necessity: The HOA argued that removal was essential for the project’s proper and safe completion, a position supported by its project manager.

Petitioners’ (Larsons’) Objections and Counter-Arguments

• Initial Legal Position: In their brief, the Petitioners stated that “the true issues underlying this issue are not about whether Respondent’s current threatened actions are a violation of the CC&Rs. The true issues relate to Respondent Association’s actions and inactions that have lead up to the point where the Parties now find themselves addressing this administrative law panel.”

• Lack of Authority: In a May 19, 2017 letter, the Larsons’ counsel argued the HOA had no legal authority to support its request.

• Unreasonable Cost: The Petitioners asserted that the cost of removal and reinstallation would be “thousands of dollars” and provided bids ranging from $3,980 to $5,975.

• Historical Precedent: The patio cover was in place when the Larsons purchased their unit in 1999, and they argued the HOA did not disclose any violation at that time.

• Proposed Alternatives:

1. The Larsons offered to have the back of their unit painted at their own expense, which the HOA rejected over concerns about project warranty and management.

2. During the November 20 hearing, after hearing testimony, the Larsons offered not to reinstall their patio cover if the Respondent would pay for its removal.

Key Evidence and Testimony

The final decision heavily relied on the testimony of Wayne King, the project manager hired by the HOA, and an analysis of competing cost estimates.

Testimony of Wayne King (Project Manager)

• Project Scope: King testified that the project involved not only painting but also repairing damaged siding, much of which was caused by improperly flashed patio covers. To “do the job right,” the process required sanding, power washing, and patching before painting.

• Contractor Requirements: All five contractors who bid on the project required the patio covers to be removed.

• Safety and Logistics: King explained why working around the covers was not viable:

◦ Scaffolding: “Regular” scaffolding would not fit, and commercial scaffolding would not provide access to the entire building.

◦ Lifts: Using a “reach” or forklift was not an option due to overhead powerlines creating a safety hazard.

◦ Worker Safety: Allowing painters to walk on homeowners’ patio covers was not a safe option. He noted that changes in safety laws since the buildings were last painted necessitated different methods.

• Warranty: King testified that the paint company would not provide a warranty for the project if individual homeowners, like the Larsons, painted their own units.

Cost Estimates and Discrepancies

• Petitioners’ Estimates: The Larsons submitted two bids for their wooden patio cover:

◦ Bid 1: $1,250 to remove and dispose; $3,980 to remove and rebuild with new wood.

◦ Bid 2: $5,975 to remove and replace the structure.

• Respondent’s Estimates:

◦ The HOA’s initial letter offered a contractor who would remove aluminum covers for $150. The cost for the Larsons’ wood cover was stated as $225, though this was not a firm price.

◦ Wayne King testified that the Petitioners’ estimates were “very high” and opined that $1,000 should cover the cost of removing and rebuilding, assuming existing materials were reused. He acknowledged decking material would likely need replacement but estimated 80% of rafters could be reused.

Legal Findings and Final Decision

The Administrative Law Judge Decision of December 11, 2017, provided a comprehensive legal analysis that concluded in the Respondent’s favor.

Governing Authority and Reasonableness

• Deference to the HOA: Citing Tierra Ranchos Homeowners Ass’n v. Kitchukov, the decision established that the tribunal must accord the HOA deference in its decisions regarding maintenance and repair, provided it acts reasonably.

• Finding of Reasonableness: Based on the credible testimony of Wayne King, the judge found that the Respondent’s proposed plan for repairing and painting was reasonable, as the buildings could not be “properly and safely painted without the patio covers being removed.”

• Authorization under CC&Rs: The judge concluded that CC&R sections 9 and 9(b) were “sufficient to show that Respondent has the authority to remove Petitioners’ patio to complete the painting work.”

“Limited Common Element” Doctrine and Cost Allocation

The central legal issue of financial responsibility was resolved by applying Arizona state statutes.

1. Classification: The Petitioners’ patio cover was classified as a limited common element within the meaning of ARIZ. REV. STAT. section 33-1212(4).

2. Statutory Rule: The judge then applied ARIZ. REV. STAT. section 33-1255(C), which states:

3. Conclusion on Cost: Based on a “reasonable reading” of this statute, the decision concluded that the Petitioners must bear the cost of removing the patio cover and, should they choose to do so, the cost of reinstalling it.

Final Ruling

• The evidence supported the conclusion that the Respondent had the authority to require the removal of the patio cover at the Petitioners’ expense.

• IT IS ORDERED that the petition filed by James and Shawna Larson is dismissed.

• The Respondent, Tempe Gardens Townhouse Corporation, was deemed the prevailing party.

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Key Parties and Representatives

Name(s)

Representation

Petitioners

James and Shawna Larson

Lisa M. Hanger, Esq.

Respondent

Tempe Gardens Townhouse Corporation

Nathan Tennyson, Esq. (Brown Alcott PLLC)

ALJ (Initial)

Suzanne Marwil

Office of Administrative Hearings

ALJ (Final)

Thomas Shedden

Office of Administrative Hearings

Commissioner

Judy Lowe

Arizona Department of Real Estate