Briefing Doc – 17F-H1717027-REL
Briefing: Virden v. Lakeside Ski Village HOA (Case No. 17F-H1717027-REL)
Executive Summary
This briefing document outlines the legal dispute between homeowner Mark Virden (Petitioner) and the Lakeside Ski Village Homeowners Association (Respondent) concerning the construction of an internet service tower on HOA common property. The Petitioner alleged a violation of Arizona’s conflict of interest statute (A.R.S. § 33-1811), asserting that HOA officials received undisclosed compensation—lifelong free internet service—in exchange for approving the tower.
The case culminated in a definitive ruling against the Petitioner. An Administrative Law Judge (ALJ) denied the petition, a decision that was subsequently adopted and finalized by the Commissioner of the Arizona Department of Real Estate. The core of the ruling rested on the HOA’s unique governance structure. The decision to approve the tower was made not by the general “board of directors” (in this HOA, the members act as the board), but by the Architectural Committee, which was vested with independent authority to do so by the HOA’s governing documents (CC&Rs). Consequently, the ALJ concluded that the state law requiring conflict of interest disclosures before the board was not applicable to the committee’s action, rendering the Petitioner’s central argument invalid. The approval of the tower was deemed proper under the HOA’s governing rules.
Case Overview
Entity
Name / Description
Case Number
17F-H1717027-REL
Petitioner
Mark Virden
Respondent
Lakeside Ski Village HOA
Presiding ALJ
Tammy L. Eigenheer
Adjudicating Body
Arizona Office of Administrative Hearings
Final Authority
Commissioner, Arizona Department of Real Estate
Timeline of Key Events
• Circa 2017: The internet company AireBeam approached the HOA to install a service tower but did not secure enough subscribers to fund the project.
• Circa 2017: Lou Talarico, husband of an Architectural Committee member, offered to pay the tower’s upfront cost in exchange for free service for himself and HOA Vice President Carl Rygg. The Architectural Committee subsequently approved construction.
• March 23, 2017: Mark Virden filed a petition with the Arizona Department of Real Estate, alleging a conflict of interest violation.
• June 7, 2017: A hearing was held at the Office of Administrative Hearings.
• June 27, 2017: ALJ Tammy L. Eigenheer issued a decision denying the Petitioner’s petition.
• July 10, 2017: The Commissioner of the Department of Real Estate issued a Final Order adopting the ALJ’s decision.
Petitioner’s Allegations and Arguments
The petition filed by Mark Virden centered on a violation of A.R.S. § 33-1811, which governs contracts and conflicts of interest for HOA boards of directors.
Primary Allegation: Undisclosed Conflict of Interest
The Petitioner alleged that the HOA violated state law by failing to disclose a conflict of interest related to the tower’s approval.
• The Conflict: Susan Talarico, a licensed realtor serving on the Architectural Committee, had a conflict because her husband, Lou Talarico, paid an upfront fee to the tower company. In exchange for this payment, the Talaricos and HOA Vice President Carl Rygg were to receive free internet service for as long as the tower remained operational.
• The Alleged Violation: According to the petition, this arrangement constituted compensation that should have been formally declared in an open meeting before any action was taken, as required by law. The petition states: “This law states that if a member of the board is receiving compensation, and has not declared that conflict in advance, then any contract entered into in violation of this law is void and unenforceable!”
• Perceived Inadequate Compensation: The Petitioner claimed the value of the free service far exceeded the cash contribution, stating, “…their contribution would only pay the equivalent of about 1-2 years of service for the two households.”
• Lack of Transparency: The petition alleges a refusal by the involved board members to provide details of their arrangement. When asked about the compensation, the Vice President reportedly stated, “it’s none of your business.”
Secondary Argument
The Petitioner alternatively argued that the Architectural Committee exceeded its authority. Because the tower could provide service to individuals outside the HOA, it was not exclusively “for the benefit of all or portions” of the HOA, as stipulated by the governing documents.
Personal Grievance
The petition notes a direct personal impact on the Petitioner, stating that the tower was constructed within 150 feet of his front door and that he found it to be “a huge eye sore.”
Respondent’s Governance and Authority
The Lakeside Ski Village HOA’s defense rested on its specific governing documents and organizational structure, which were found to be central to the case’s outcome.
• Unconventional Board Structure: The HOA does not have a traditional, separate board of directors. Its Bylaws stipulate that “The affairs of the Association will be managed by the Members, who by the Association’s Articles of Organization are authorized to exercise all powers normally exercised by a board of directors.”
• Delegated Authority to Architectural Committee: The HOA’s Declaration of Covenants, Conditions, Restrictions and Easements (CC&Rs) grants specific and independent power to its Architectural Committee. The CC&Rs state: “The Architectural Committee may permit one or more aerial satellite dishes or satellite communication systems, and/or other apparatus and equipment for an antenna or cable system for the benefit of all or portions of the Project.”
This structure meant that the authority to approve the tower resided with the committee, not the general membership acting as a board.
Adjudication and Final Ruling
The dispute was adjudicated by the Office of Administrative Hearings, with the final decision adopted by the Department of Real Estate. The Petitioner’s claims were ultimately rejected.
Administrative Law Judge’s Decision
The ALJ’s decision, issued on June 27, 2017, denied the petition based on the following legal rationale:
• Architectural Committee’s Authority Was Dispositive: The ALJ found that the CC&Rs explicitly empowered the Architectural Committee to approve the communication tower. Crucially, the decision established that “Nothing in the CC&Rs requires that the Architectural Committee’s decision must be ratified by the members acting as a board.”
• Conflict of Interest Law Not Applicable: A.R.S. § 33-1811 applies to actions and decisions taken “by or on behalf of the board of directors.” Because the Architectural Committee acted under its own authority granted by the CC&Rs, its decision was not an action of the “board” as defined by the statute.
• Conclusion on Disclosure: The ALJ concluded that even if the free internet service was considered compensation (assuming arguendo), the arrangement “did not have to be disclosed to the members acting as a board.”
• Rejection of Secondary Argument: The ALJ dismissed the argument that the tower did not benefit the HOA, noting that the CC&R language “does not require that the satellite dish or other system may benefit exclusively all or portions of the HOA.”
The final conclusion of the tribunal was that “the Architectural Committee’s approval of the AireBeam tower was proper under Respondent’s governing documents.”
Final Order of the Department of Real Estate
On July 10, 2017, Judy Lowe, Commissioner of the Department of Real Estate, issued a Final Order that formally adopted the ALJ’s decision.
• Outcome: The Petitioner’s petition was officially denied.
• Binding Nature: The Order is binding on the parties and represents a final administrative action.
• Avenues for Appeal: The Order noted that a party may request a rehearing within 30 days for specific causes, such as procedural irregularity, newly discovered evidence, or an arbitrary or capricious decision. Furthermore, a party may appeal the final administrative decision by filing a complaint for judicial review.
