Tag Archives: 2017

Briefing Document: Gronlund vs. Cottonfields Community Association (Case No. 17F-H1716024-REL)

Executive Summary

This document synthesizes the legal proceedings and decision in the case of Kurt Gronlund versus the Cottonfields Community Association, adjudicated by the Arizona Office of Administrative Hearings. The core of the dispute centers on the petitioner’s allegation that the Homeowners Association (HOA) board improperly amended a critical land-use agreement in 2011 without a required vote of the membership, ultimately enabling the commercial rezoning of an adjacent golf course.

The Administrative Law Judge (ALJ) granted the HOA’s motion for summary judgment, and the Commissioner of the Arizona Department of Real Estate adopted this decision, dismissing the petition. The dismissal was not based on the merits of the petitioner’s claim but on a crucial lack of jurisdiction. The ALJ determined that the Department of Real Estate could not rule on the matter for two primary reasons:

1. The governing agreement in question (the REMA) is not a “community document” as defined by the relevant Arizona statute, placing it outside the Department’s purview.

2. The relief sought by the petitioner would directly implicate the property rights of a third party (the Golf Course Owner) and a prior legal settlement, which exceeds the Department’s statutory authority.

While acknowledging the petitioner’s concerns about the golf course development may be “well-founded,” the decision concluded that the petitioner’s available remedies lie in electing a new HOA board, filing a lawsuit in a judicial forum, or seeking legislative change.

Case Overview

This case involves a dispute between a homeowner and his HOA regarding the amendment of a land-use agreement governing a golf course property.

Parties Involved

Name / Entity

Description

Petitioner

Kurt Gronlund

A homeowner within the Cottonfields community and a member of the Respondent association.

Respondent

Cottonfields Community Association

The Homeowners Association (HOA) for the Cottonfields development.

Third Party

The Golf Course Owner

A separate legal entity that owns the golf course property adjacent to the community.

Case Chronology

• December 11, 2001: The developer records both the Reciprocal Easement and Maintenance Agreement (REMA) and the community’s CC&Rs.

• March 2011: The Cottonfields HOA board votes 3-2 to amend the REMA.

• March 3 & May 16, 2011: Amendments 2 and 3 to the REMA, which alter the legal description of the golf course property, are officially recorded.

• 2014: Litigation (Case No. CV2014-000639) begins in Maricopa County Superior Court between the HOA and the Golf Course Owner regarding the REMA and its amendments.

• July 2015: The HOA and the Golf Course Owner execute a settlement agreement.

• August 7, 2015: The superior court lawsuit is dismissed with prejudice.

• October 5, 2016: The HOA president represents to the City Council that homeowners favor rezoning the golf course. The Council approves a rezone from “GC” (Golf Course) to Commercial, relying on the 2011 REMA amendments.

• February 3, 2017: Kurt Gronlund files a Homeowners Association Dispute Process Petition with the Arizona Department of Real Estate.

• April 27, 2017: The HOA files a Motion for Summary Judgment, arguing a lack of jurisdiction.

• May 10, 2017: Oral arguments on the motion are held.

• May 11, 2017: The Administrative Law Judge issues a decision recommending dismissal.

• May 11, 2017: The Commissioner of the Department of Real Estate issues a Final Order adopting the ALJ’s decision and dismissing the case.

Core Dispute: Unilateral Amendment of the REMA

The petitioner’s case is founded on the claim that the HOA board acted in violation of its own governing documents when it facilitated changes to the REMA without consulting the community’s homeowners.

Petitioner’s Allegations

On February 3, 2017, Kurt Gronlund filed a petition asserting that the HOA board’s actions in 2011 were illegal and directly led to the loss of protection for homeowner property values.

• The Unilateral Action: The petition states, “[In] March 2011 the HOA board voted 3-2 to unilaterally amend REMA 5.1’s use restriction on the golf course property without the required vote of the approximately 450 eligible class members…”

• The Consequence: These amendments were used as justification for the HOA president to support a commercial rezoning of the golf course property before the City Council on October 5, 2016. The petitioner argues this “stripped away that last layer of protection” for homeowners who believed the golf course could not be developed without their approval.

• Homeowner Reliance: During oral arguments, the petitioner testified that members relied on the protections within the CC&Rs and REMA when purchasing their homes, believing development required a two-thirds majority vote.

Petitioner’s Requested Relief

The petitioner respectfully requested that the Administrative Court issue the following orders:

1. Find that REMA Section 5.1 may not be amended without the member vote required by REMA Article 12 and CC&Rs Section 14.2.

2. Find that Amendments 2 and 3 to the REMA are void and unenforceable.

3. Order the HOA Board to remove Amendments 2 and 3 from the public record.

Analysis of Governing Document Provisions

The dispute hinges on the interpretation of and interaction between two key legal documents: the REMA and the HOA’s CC&Rs.

Document

Section

Description

Key Language

Section 5.1

Use Restriction: Restricts the golf course property’s use to either a golf course or open space.

“The Golf Course Property shall be used solely and exclusively for Golf Course Use or as open space, and for no other purposes.”

Article 12

Amendment Procedure: Stipulates that changes to Section 5.1 require the same member vote as an amendment to the HOA’s Declaration (CC&Rs).

“…no termination, cancellation, change, modification or amendment of paragraph 5.1… shall be made without the written approval thereof by the number of Members… required to amend the Declaration pursuant to Section 13.2 thereof.”

Section 14.2

Member Vote Requirement: Defines the threshold for amending the CC&Rs.

“…may be amended only by the affirmative vote (in person or by proxy) or written consent of: (a) Members holding not less than two-thirds (2/3) of all Class A votes then entitled to be cast; and (b) Members holding not less than two thirds (2/3) of all Class B votes…”

Section 14.17

Third-Party Rights: Protects the rights of the Golf Course Owner, stating that provisions benefiting them cannot be amended without their written consent.

“…no provision of this Declaration… which grants to or confers upon the Golf Course Owner or the Golf Course Property any rights… shall be modified, amended or revoked in any way without the express written consent of the Golf Course Owner.”

Jurisdictional Challenge and Legal Rationale for Dismissal

The HOA’s defense focused not on the factual allegations but on the argument that the Department of Real Estate was the improper forum for this dispute. The ALJ ultimately agreed with this position.

Respondent’s Motion for Summary Judgment

The Cottonfields Community Association argued that the Department could not grant the petitioner’s requested relief because:

1. The REMA is not a “community document” as defined under Arizona law (A.R.S. § 32-2199.01(A)).

2. The Golf Course Owner is a third party over whom the Department lacks jurisdiction.

3. Any ruling would affect the rights of this third party and could impact the 2015 settlement agreement from the superior court case.

Administrative Law Judge’s Conclusions of Law

The ALJ’s decision was based on a strict interpretation of the Department’s statutory authority.

• REMA is Not a “Community Document”: The judge found that although the REMA references the CC&Rs, it does not meet the legal definition of a community document under A.R.S. § 33-1802(2), which defines them as “the declaration, bylaws, articles of incorporation, if any, and rules, if any.” The Department’s authority under A.R.S. § 32-2199.01(A) is limited to violations of these specific documents.

• Implication of Third-Party Rights: The decision states that the petitioner’s request to void the amendments “implicates the Golf Course Owner’s interests in its property and may affect the settlement that the Golf Course Owner entered into with Respondent.” The law does not grant the Department “jurisdiction over disputes that implicate the rights of third parties.”

• Petitioner’s Available Remedies: While validating the petitioner’s underlying worries, the judge outlined specific alternative courses of action. The decision states: “Petitioner’s concerns about development of the golf course may be well-founded. However, under applicable statutes, at this time, his available remedies are to elect a board that will better protect members’ interest in maintaining the golf course, to file suit in a judicial forum against Respondent and the Golf Course Owner, or to ask the legislature to amend A.R.S. §§ 33-1802(2) and 32-2199.01(A).”

Final Order and Disposition

Based on the legal conclusions regarding jurisdiction, the case was dismissed.

• ALJ Recommendation: On May 11, 2017, Administrative Law Judge Diane Mihalsky recommended that the complaint be dismissed.

• Commissioner’s Final Order: On May 11, 2017, Judy Lowe, Commissioner for the Arizona Department of Real Estate, issued a Final Order stating: “The Commissioner accepts the ALJ decision that the petition in this matter be dismissed.”

• Further Action: The Final Order noted that a party may file for a rehearing or review within thirty days, or may appeal the final administrative decision by filing a complaint for judicial review.

Administrative Hearing Briefing: Sellers v. Rancho Madera Condominium Association

Executive Summary

This document synthesizes the proceedings and outcome of the administrative case John Sellers v. Rancho Madera Condominium Association. The core of the dispute was Petitioner John Sellers’s allegation that the Respondent, Rancho Madera Condominium Association, violated Arizona Revised Statute (A.R.S.) § 33-1258 by refusing to produce specific records: bank account signature cards and read-only online banking credentials for the association’s account with Mutual of Omaha.

The Administrative Law Judge (ALJ) ultimately recommended the petition be denied, a decision that was formally adopted by the Commissioner of the Arizona Department of Real Estate. The ruling hinged on a narrow interpretation of the statute. The ALJ concluded that the requested items were not “financial and other records of the association” as required by law. Key findings supporting this conclusion were:

• Custody: The signature cards, if they exist, are records held by the bank (Mutual of Omaha), not the association.

• Nature of Request: Online user names and passwords constitute “information,” not a “document” or “record” in the statutory sense.

• Sufficient Disclosure: The association had already provided a comprehensive set of financial documents (bank statements, contracts, resolutions, etc.) sufficient for a member to ascertain whether the association was prudently managing its funds, thereby satisfying the plain-meaning purpose of A.R.S. § 33-1258.

The petitioner’s arguments that such records must exist under federal banking regulations and that electronic access is superior to paper records were deemed policy arguments to be addressed to the legislature, not grounds for finding a statutory violation.

Case Overview

Case Name

John Sellers, Petitioner, vs. Rancho Madera Condominium Association, Respondent

Case Number

No. 17F-H1716021-REL (also listed as DOCKET NO. 17F-H1716021-REL and CASE NO. HO 17-16/021)

Petitioner

John Sellers (Appeared on his own behalf)

Respondent

Rancho Madera Condominium Association

Respondent’s Counsel

Lydia Peirce Linsmeier, Esq., Carpenter, Hazlewood, Delgado & Bolen, PLC

Adjudicating Body

Arizona Office of Administrative Hearings

Reviewing Body

Arizona Department of Real Estate

Administrative Law Judge

Diane Mihalsky

Commissioner

Judy Lowe, Arizona Department of Real Estate

Core Allegation and Legal Framework

Petitioner’s Claim

On or about December 20, 2016, John Sellers, a condominium owner and member of the Rancho Madera Condominium Association, filed a petition with the Arizona Department of Real Estate. The petition alleged that the association had violated A.R.S. § 33-1258 by refusing to provide two specific items related to its bank account at Mutual of Omaha:

1. Bank account signature cards.

2. Read-only user names and passwords for online access to the account.

Sellers argued that these documents must exist, citing federal banking statutes and regulations intended to combat terrorism.

Governing Statute: A.R.S. § 33-1258

The case revolved around the interpretation of A.R.S. § 33-1258, “Association financial and other records.” The key provisions of this statute state:

• A. Right to Examine: “Except as provided in subsection B of this section, all financial and other records of the association shall be made reasonably available for examination by any member…”

• Timeline: An association has ten business days to fulfill a request for examination and ten business days to provide copies upon request.

• Fees: An association may charge a fee of not more than fifteen cents per page for copies.

• B. Withholdable Records: The statute allows an association to withhold records related to:

1. Privileged attorney-client communication.

2. Pending litigation.

3. Records of board meetings not required to be open to all members.

4. Personal, health, or financial records of individual members or employees.

5. Records related to job performance or complaints against employees.

• C. Legal Prohibitions: An association is not required to disclose records if doing so would violate state or federal law.

The Uniform Condominium Act, of which this statute is a part, does not provide a more specific definition of “financial and other records.”

Factual Findings and Evidence Presented

Records Provided by the Association

Prior to the hearing, the Respondent had already provided the Petitioner with a substantial volume of financial records. Emails attached to the initial petition indicated that the following documents were furnished:

• All bank statements

• Account opening documentation

• Forms for members’ direct debit authorizations

• The Board’s resolution authorizing the opening of the bank account

• Agreements between the property management company, Trestle Management Group, and Mutual of Omaha regarding fees, indemnities, and netting

• The association’s insurance certificate

• The association’s management contract with Trestle Management Group

Witness Testimony

A hearing was held on March 7, 2017, where testimony was presented by both parties.

• Petitioner’s Testimony: John Sellers testified on his own behalf and submitted ten exhibits.

• Respondent’s Witnesses:

◦ Marc Vasquez (Vice President of Trestle Management Group): Testified that all signature cards for the association’s bank accounts were held by the bank at which the accounts were opened. He stated that Mutual of Omaha was the custodian of those cards.

◦ Alan Simpson (Vice President of Respondent’s Board) & Marc Kaplan (President of Respondent’s Board): Both testified that they did not have user names and passwords for the association’s Mutual of Omaha account. They believed, however, that the association’s treasurer may have had such credentials to access the account online.

Administrative Law Judge’s Decision and Rationale

The ALJ’s decision, issued on March 29, 2017, denied the Petitioner’s petition. The reasoning was based on a direct interpretation of A.R.S. § 33-1258 and the evidence presented.

• Burden of Proof: The decision established that the Petitioner bore the burden of proving by a “preponderance of the evidence” that the Respondent had violated the statute. A preponderance of the evidence is defined as proof that “convinces the trier of fact that the contention is more probably true than not.”

• Statutory Interpretation: The ALJ determined that the “plain meaning” of A.R.S. § 33-1258 is to provide members with access to documents that allow them to “ascertain whether the association is prudently managing its members’ assessments.” The decision explicitly states that the numerous documents already provided by the Respondent fulfilled this purpose.

• Custody and Control: A central finding was that the requested items were not “records of the association.” The signature cards were records held and maintained by a third party, Mutual of Omaha. The statute does not compel an association to produce records that are not in its possession or under its control.

• Information vs. Documents: The decision drew a distinction between records and information, stating, “The user names and passwords are information, not a document.” Furthermore, it noted that these items “do not relate to Respondent’s actual expenditure of members’ assessments” but rather to the mechanisms for disbursing funds.

• Scope of the Statute: The ALJ concluded that A.R.S. § 33-1258 does not require an association to “create, maintain, or provide this information or documentation to Petitioner, either to serve his convenience or to allow him to ascertain Respondent’s or Mutual of Omaha’s compliance with federal banking statutes that are not incorporated in the Uniform Condominium Act.”

• Policy Arguments: The Petitioner’s contention that “paper access to the account information is inferior to electronic access” was dismissed as “a policy argument that should be addressed to the Legislature.” The statute only requires that records be made “reasonably available,” which the Respondent had done.

Procedural History and Final Outcome

c. Dec. 20, 2016

John Sellers files a petition with the Arizona Department of Real Estate.

Mar. 7, 2017

An evidentiary hearing is held before ALJ Diane Mihalsky. An order is issued holding the record open for the parties to submit legal memoranda regarding the scope of A.R.S. § 33-1258.

Mar. 21, 2017

The deadline for submitting legal memoranda passes, and the record on the matter is closed.

Mar. 29, 2017

ALJ Diane Mihalsky issues the “Administrative Law Judge Decision,” which includes Findings of Fact, Conclusions of Law, and a Recommended Order to deny the Petitioner’s petition.

Mar. 30, 2017

Judy Lowe, Commissioner of the Department of Real Estate, issues a “Final Order.” This order formally accepts and adopts the ALJ’s decision, and the petition is denied.

The Final Order, effective immediately upon service, represented the final administrative action in the matter. The order noted that parties could file a motion for rehearing within 30 days or appeal the final administrative decision through judicial review.

Briefing Document: Janicek v. Sycamore Vista No. 8 HOA

Executive Summary

This briefing document analyzes the administrative legal dispute between petitioner Jay Janicek and respondent Sycamore Vista No. 8 Homeowners Association (HOA), culminating in the case No. 17F-H1716019-REL. The core of the conflict was the HOA Board’s attempt to amend its governing Declaration via a “Declaration of Scrivener’s Error” without the required 75% vote from lot owners. This action was intended to reinsert a definition of “Completed Lots” that had been omitted from a 2009 amendment and was followed by a $10 annual assessment increase on developed lots.

The Administrative Law Judge (ALJ) ultimately ruled in favor of the petitioner, granting his petition and invalidating the “Declaration of Scrivener’s Error.” The judge found that the change was a substantive amendment, not a correction of a clerical error, and the Board’s unilateral action violated Arizona state law (A.R.S. § 33-1817). However, in a critical distinction, the ALJ ruled that the $10 assessment increase on developed lots was permissible and should stand, as the authority to set different rates for completed and uncompleted lots was already established in the valid 2009 First Amendment to the Declaration.

The judge also rejected the petitioner’s conflict of interest claim against three Board members with financial ties to the developer, deeming the petitioner’s interpretation of the relevant statute (A.R.S. § 33-1811) to be overbroad. The final order, adopted by the Arizona Department of Real Estate Commissioner, required the HOA to pay the petitioner’s $500 filing fee and to comply with state statutes regarding amendments and conflicts of interest in the future.

Case Details

Details

Case Name

Jay Janicek, Petitioner, vs. Sycamore Vista No. 8 HOA, Respondent

Case Number

HO 17-16/019

Docket Number

17F-H1716019-REL

Jurisdiction

Office of Administrative Hearings / Arizona Department of Real Estate

Petitioner

Jay Janicek (appeared personally)

Respondent

Sycamore Vista No. 8 HOA (represented by Evan Thomson, Esq.)

Administrative Law Judge

Suzanne Marwil

Hearing Date

March 2, 2017

ALJ Decision Date

March 14, 2017

Final Order Date

March 16, 2017

Commissioner

Judy Lowe, Commissioner, Arizona Department of Real Estate

Background and Core Dispute

The conflict originated from changes to the Sycamore Vista No. 8 HOA’s Declaration of Covenants, Conditions, Restrictions and Easements (Declaration).

• 2005 Declaration: The original “2005 Amended and Restated Declaration” contained Section 6.8, which established a uniform assessment rate for all lots. Crucially, it exempted the Declarant and Developer from payments on any property except for “Completed Lots.” This section provided a specific definition for “Completed Lots,” describing them as any lot with a dwelling unit ready for occupancy.

• 2009 First Amendment: On December 4, 2008, after securing a vote from 75% of lot owners, the HOA adopted the “First Amendment to the 2005 Declaration.” This amendment deleted the original Section 6.8 in its entirety and replaced it with new language stating: “annual dues may be assessed at one uniform rate for Completed Lots and a different uniform rate for Uncompleted Lots.” This amendment, however, omitted the definition of a “Completed Lot” that was present in the 2005 version.

• Seven-Year Period: For seven years following the 2009 amendment, the revised Section 6.8 remained unchanged, without the specific definition.

The “Declaration of Scrivener’s Error”

In June or July 2016, the HOA Board proposed a “Declaration of Scrivener’s Error” to address the omitted definition.

• Board’s Position: The Respondent, represented by its president Steven Russo, argued that the purpose of the declaration was simply to correct a clerical error by reinserting the definition of a developed versus undeveloped lot, which was “inadvertently omitted” from the 2009 First Amendment. The Board stated it was acting on the advice of its legal counsel.

• Petitioner’s Position: Mr. Janicek contended that this declaration was not a correction of a minor error but was a substantive change to the Declaration. As such, he argued it required the approval of 75% of the lot owners, a process that was not followed.

• Adoption: On August 3, 2016, the Board adopted the Declaration of Scrivener’s Error by a 3-2 vote. Petitioner Janicek and another Board member representing developed lot owners voted against the measure.

• Immediate Consequence: Following the adoption, the Board voted to increase the annual assessment for developed lot owners by $10.00, while the assessment for undeveloped lots remained unchanged. This action prompted Mr. Janicek to file his petition.

Allegations of Fiduciary Duty and Conflict of Interest

Petitioner Janicek accused the Respondent of a violation of its fiduciary duty and a conflict of interest. He noted that three members of the Board had a financial interest in NT Properties, the company that owned the community’s undeveloped lots. These lots directly benefited from the assessment structure that placed a higher burden on developed lots.

Administrative Law Judge’s Decision and Rationale

The ALJ’s decision, issued on March 14, 2017, contained three central conclusions of law that addressed the distinct issues raised in the petition.

1. The “Scrivener’s Error” was an Invalid Amendment

The judge found decisively in favor of the petitioner on the core issue of the amendment process.

• Substantive Change, Not Clerical Error: The Tribunal found that the change constituted an amendment to the Declaration, not a correction of a simple clerical error.

• Violation of A.R.S. § 33-1817: The judge ruled that the procedure for amending the Declaration requires a vote by the lot owners, as specified in the Declaration and state law. The HOA violated this statute by attempting to amend the document via a simple Board vote.

• Key Judicial Reasoning: The judge noted that the same section had been properly amended by a homeowner vote in 2009. The ruling states, “after a period of seven years, it defies logic to suggest that a further change to section was simply a clerical error.”

• Conclusion: The Declaration of Scrivener’s Error (Exhibit C) was declared invalid and could not operate to amend the Declaration.

2. The Assessment Increase Was Valid

Despite invalidating the method used by the Board, the judge upheld the Board’s right to implement the assessment increase.

• Existing Authority: The ruling stated that the invalidity of Exhibit C “does not implicate Respondent’s right to impose an increased assessment on the developed lots.”

• Basis in 2009 Amendment: The judge found that the language of the valid 2009 First Amendment—which expressly states that “annual dues may be assessed at one uniform rate for Completed Lots and a different uniform rate for Uncompleted Lots”—provided the Board with sufficient authority to set differential rates.

• Conclusion: The raised assessment was allowed to stand.

3. Conflict of Interest Claim Rejected

The Tribunal rejected the petitioner’s argument that Board members with ties to NT Properties had a conflict of interest under A.R.S. § 33-1811.

• “Overbroad” Interpretation: The judge found the petitioner’s interpretation of the conflict-of-interest statute to be “overbroad.”

• Rationale: The ruling stated that this interpretation “ignores that make-up of the Board as outlined in the Declaration and disregards the express language permitting the Board to assess annual dues.”

• Conclusion: The Board members were not required to declare a conflict of interest and were permitted to vote on the issue.

Final Order

The petition filed by Jay Janicek was granted. The Administrative Law Judge’s decision was officially adopted by the Commissioner of the Arizona Department of Real Estate in a Final Order dated March 16, 2017. The final order mandated the following:

• The Sycamore Vista No. 8 HOA must pay the petitioner, Jay Janicek, the $500.00 filing fee.

• The HOA must comply with the applicable provisions of Arizona Revised Statutes § 33-1817 (regarding the proper procedure for amending a declaration) and § 33-1811 (regarding conflicts of interest) in the future.

Administrative Hearing Briefing: Sellers vs. Grayhawk Community Association

Executive Summary

This document synthesizes the findings and rulings in the administrative case of John Sellers (Petitioner) versus the Grayhawk Community Association (Respondent), adjudicated by the Arizona Office of Administrative Hearings and finalized by the Department of Real Estate. The core of the dispute was the Petitioner’s claim that the Respondent unlawfully restricted his electronic, view-only access to a bank account in violation of Arizona Revised Statutes (A.R.S.) § 33-1805(A).

The Administrative Law Judge (ALJ) denied the petition, concluding that the Petitioner failed to meet his burden of proof. The evidence showed the Respondent initially provided the requested electronic access, which the Petitioner successfully used before changing the password. The Petitioner offered no evidence that the Respondent subsequently interfered with or restricted this access. Furthermore, the issue was rendered moot when the bank in question closed the account. The ALJ affirmed that the Respondent’s offer to provide paper records satisfied the statutory requirement to make records “reasonably available.” This decision was subsequently adopted as a Final Order by the Commissioner of the Department of Real Estate.

Case Overview

Details

Case Name

John Sellers, Petitioner, vs. Grayhawk Community Association, Respondent.

Case Numbers

Docket No. 17F-H1716016-REL; Case No. HO 17-16/016

Adjudicating Body

Arizona Office of Administrative Hearings

Administrative Law Judge

Suzanne Marwil

Hearing Date

February 16, 2017

ALJ Decision Date

February 21, 2017

Final Order Date

March 3, 2017

Final Order Issued By

Judy Lowe, Commissioner, Department of Real Estate

The Core Dispute

Petitioner’s Position

John Sellers alleged that after he requested and received view-only access to the Association’s Alliance Association Bank account, the Respondent unilaterally restricted that access. He claimed the Respondent’s failure to restore access by his deadline of the close of business on November 25, 2016, constituted a violation of A.R.S. § 33-1805(A), which governs a member’s right to examine association records. The petition, for which a $500 fee was paid, was specifically focused on this single issue.

Respondent’s Position

The Grayhawk Community Association argued that it had gone beyond its statutory obligations by arranging for the bank to create a new online password specifically for the Petitioner. They maintained that after providing this access, they did not interfere with or restrict it in any way. They contended that the Petitioner’s subsequent inability to access the account was due to unknown reasons. The Respondent noted that the bank closed the account on November 28, 2016, making any form of electronic access permanently unavailable and rendering the issue moot. They also offered to provide paper copies of the relevant bank records.

Chronology of Key Events

• October 18, 2016: Petitioner John Sellers requests, among other items, an electronic, read-only password for the Respondent’s Alliance Association Bank account.

• November 2, 2016: The Respondent notifies the Petitioner that such a password did not exist at the time of the request.

• November 16, 2016: After requesting the bank create a password, the Respondent forwards the new login information to the Petitioner.

• Post-November 16, 2016: The Petitioner successfully logs into the bank account using the provided information and changes the password.

• Thanksgiving Day (November 24, 2016): The Petitioner attempts to log in again but “could not see anything.” Based on the assumption that the Respondent had restricted his access, he emails community manager Michael Fee.

• Thanksgiving Day Demand: In his email, the Petitioner sets a deadline for the Respondent to restore his access by the end of the business day on Friday, November 25, 2016, threatening to file a petition if the deadline is not met. Mr. Fee replies that he will contact the bank.

• November 28, 2016: Having not heard further from the Respondent, the Petitioner files the petition in this matter.

• November 28, 2016: On the same day, the Respondent informs the Petitioner that they do not know the reason for the lack of access and denies that anyone affiliated with the association interfered. It is also on this date that Alliance Association Bank closes the account in question.

Analysis of the Administrative Law Judge’s Decision

The ALJ’s decision was based on a hearing held on February 16, 2017. The ruling systematically dismantled the Petitioner’s case based on the evidence presented.

Burden and Standard of Proof

• Pursuant to Arizona Administrative Code (A.A.C.) R2-19-119(B), the Petitioner held the burden of proof.

• The required standard of proof was a preponderance of the evidence, meaning the Petitioner had to show it was more likely than not that his claim was true.

Key Findings of Fact

1. Access Was Provided: It was undisputed that the Respondent provided the Petitioner with login information and that this information initially worked, enabling him to access the account.

2. Petitioner Changed Password: After gaining access, the Petitioner changed the password.

3. No Evidence of Interference: The Petitioner offered “no evidence that Respondent took any action to deny Petitioner online access.” His belief that access was restricted was a “unilateral assumption.” The record did not establish why the new password failed to work on Thanksgiving Day.

4. Issue Rendered Moot: The undisputed closure of the bank account by the bank on November 28, 2016, made the request for electronic access moot, as such access was no longer available to anyone.

Key Conclusions of Law

1. Failure to Meet Burden of Proof: The ALJ concluded that the “Petitioner has failed to meet his burden of proof.” The record was “devoid of any evidence” that the Respondent denied the requested information or took any action to restrict access.

2. Compliance with A.R.S. § 33-1805(A): The statute requires that association records “be made reasonably available for examination.” The ALJ found that the Respondent complied with the statute by initially providing electronic access and later offering to “furnish the Petitioner paper copies of documents it possessed related to that bank account.”

3. Electronic vs. Paper Access: The Petitioner’s argument that paper access is inferior to electronic access was dismissed as a “policy argument that should be addressed to the Legislature.” The plain language of the existing statute does not mandate a specific format for record examination.

Final Order and Outcome

On March 3, 2017, the Commissioner of the Department of Real Estate issued a Final Order, which fully adopted the ALJ’s decision.

• Petition Denied: The Commissioner accepted the ALJ’s decision that the petition be denied.

• Future Compliance Directive: The order stated, “The Commissioner accepts the Recommended Order that Respondent shall comply with the applicable provisions of Arizona Revised Statutes (‘A.R.S.’) § 33-1804 (A) in the future.”

• Binding Decision: The order became a final administrative action, effective immediately and binding on the parties.

• Rehearing and Appeal Process: Parties were notified that a motion for rehearing or review could be filed within 30 days. A request for rehearing should be addressed to Abby Hansen, 2910 N. 44th Street, Suite 100, Phoenix, Arizona, 85018. The order could also be appealed via a complaint for judicial review.

Briefing Document: DeBoer vs. Turtle Rock III Homeowners Association

Executive Summary

This document summarizes the findings and outcome of the legal dispute between homeowner Richard A. DeBoer and the Turtle Rock III Homeowners Association (HOA). The central issue was the HOA Board of Directors’ practice of conducting votes on non-emergency matters via email, which the petitioner alleged violated Arizona’s open meeting laws.

An Administrative Law Judge (ALJ) for the State of Arizona concluded that the HOA Board did violate state law (A.R.S. § 33-1804) by using email to approve the purchase of new street lights and the removal of existing fixtures, thereby circumventing requirements for open meetings accessible to all members. The Board’s defense, that it had relied on poor advice from its management company, was not sufficient to overcome the violation.

Consequently, Mr. DeBoer was declared the prevailing party. The HOA was ordered to cease this practice, pay a $1,000 civil penalty to the Arizona Department of Real Estate, and reimburse Mr. DeBoer for his $500 filing fee. The ALJ’s decision was formally adopted by the Commissioner of the Department of Real Estate, making it a final administrative order.

Case Background

• Case Name: Richard A. DeBoer vs. Turtle Rock III Homeowners Association

• Case Numbers: 17F-H1616006-REL (Office of Administrative Hearings), HO17-16/006 (Department of Real Estate)

• Jurisdiction: The dispute was filed with the Arizona Department of Real Estate and heard by the Office of Administrative Hearings.

• Petitioner: Richard A. DeBoer, a homeowner.

• Respondent: Turtle Rock III Homeowners Association, located in Phoenix, Arizona.

Key Dates

August 23, 2016

Petition filed by Richard A. DeBoer.

December 19, 2016

Hearing held before the Office of Administrative Hearings.

January 9, 2017

Administrative Law Judge Decision issued.

January 12, 2017

Final Order issued by the Department of Real Estate Commissioner.

January 13, 2017

Compliance letter sent to the HOA by the Department of Real Estate.

February 11, 2017

Deadline for HOA to show proof of payment for petitioner’s filing fee.

March 13, 2017

Deadline for HOA to pay the civil penalty.

Petitioner’s Allegations

Richard A. DeBoer’s petition, filed on August 23, 2016, alleged that the Turtle Rock III HOA Board of Directors had a “common practice” of conducting unnoticed email meetings to vote on non-emergency matters. This practice was alleged to be in violation of both Arizona state law and the HOA’s own bylaws.

• March 2016: The Board conducted an email vote to approve the purchase and installation of four high-mast street lights in the common area.

• April 2016: The Board conducted an email vote to approve the removal and sale or disposal of fourteen large, iconic, architectural light fixtures from the common areas.

• The email meetings were not open to all association members.

• Members were denied the opportunity to attend and speak before the Board took formal action.

• The subject matter did not meet the criteria for a closed meeting.

• The Board failed to provide members with at least 48 hours’ advance notice.

• The meetings did not qualify as emergency meetings.

• Proper notices and agendas containing information “reasonably necessary to inform the members” were not provided.

• The petitioner alleged the actions were contrary to Turtle Rock III Bylaws, Division VI, Item 2.i, which incorporates Robert’s Rules of Order.

• Specifically, the email meetings were conducted without authorization in the bylaws and failed to provide for “a single official gathering in one room or area.”

• The format lacked the required “conditions of opportunity for simultaneous aural communication among participating members.”

Respondent’s Defense and Testimony

The Turtle Rock III HOA initially filed an answer denying all allegations made in the petition.

During the hearing on December 19, 2016, the following testimony was provided on behalf of the HOA:

• Verl Curtiss (Board President) and Steve Pilcher (Board Treasurer) both acknowledged that the email votes regarding the lighting had occurred.

• Their defense centered on the claim that they had been advised by their management company and manager that their actions were not in violation of Arizona statutes or the HOA’s bylaws.

• Mr. Pilcher testified that they believed they had received “good advice.”

Legal Findings and Conclusion

The Administrative Law Judge (ALJ), Tammy L. Eigenheer, determined that the petitioner bore the burden of proving the violation by a “preponderance of the evidence.”

The decision focused on A.R.S. § 33-1804(A), which states:

“Notwithstanding any provision in the declaration, bylaws or other documents to the contrary, all meetings of the members’ association and the board of directors… are open to all members of the association… and all members or designated representatives so desiring shall be permitted to attend and speak at an appropriate time during the deliberations and proceedings.”

Based on the evidence and testimony, including the Board’s admission that email votes took place, the ALJ issued a clear conclusion:

“This Tribunal concludes that the Board’s prior practice of taking action in the absence of a meeting by obtaining unanimous written consent of the Board’s members via email violated the charged provisions of A.R.S. § 33-1804(A).”

Final Order and Penalties

The ALJ’s Recommended Order was officially accepted and adopted as a Final Order by Judy Lowe, the Commissioner of the Arizona Department of Real Estate, on January 12, 2017. The HOA was ordered to undertake the following actions:

1. Cease and Desist: The Respondent must comply with all applicable provisions of A.R.S. § 33-1804(A) in the future.

2. Fee Reimbursement: The Respondent must pay the Petitioner, Richard A. DeBoer, his filing fee of $500.00 within thirty (30) days of the Order.

3. Civil Penalty: The Respondent must pay a civil penalty of $1,000.00 to the Department of Real Estate within sixty (60) days of the Order.

The Final Order constituted a final administrative action, subject to appeal or a motion for rehearing within 30 days.

Key Parties and Officials

Name/Entity

Richard A. DeBoer

Petitioner / Homeowner

Turtle Rock III Homeowners Association

Respondent

Verl Curtiss

President, Respondent’s Board of Directors

Steve Pilcher

Treasurer, Respondent’s Board of Directors

Goodman Law Group

Respondent’s Representative

Tammy L. Eigenheer

Administrative Law Judge

Office of Administrative Hearings

Adjudicating Body

Arizona Department of Real Estate

Regulatory Agency / Jurisdiction for HOA Disputes

Judy Lowe

Commissioner, Department of Real Estate

Abby Hansen

HOA Dispute Coordinator, Department of Real Estate