Briefing Doc – 18F-H1817020-REL
Administrative Law Judge Decision Briefing: Smith vs. Desert Isle Homeowners Association, Inc.
Executive Summary
This document provides a comprehensive analysis of the legal dispute between Petitioner Lewis Smith and Respondent Desert Isle Homeowners Association, Inc. The core of the case revolves around allegations that the HOA’s Board of Directors violated Arizona’s open meeting laws.
The Administrative Law Judge (ALJ) ultimately ruled in favor of the Petitioner, finding that the Desert Isle HOA violated ARIZ. REV. STAT. § 33-1804(F). The decision established that the Board failed to provide its members with agendas containing information “reasonably necessary to inform the members” about discussions concerning a proposed amendment to the Covenants, Conditions, and Restrictions (CC&Rs) that would prohibit short-term rentals. This failure occurred during Board of Directors meetings held on November 8 and November 20, 2017.
As a result of this finding, the Petitioner’s petition was granted, and the Respondent was ordered to pay the Petitioner’s filing fee. The ruling underscores the state’s policy that planned community meetings must be conducted with transparency, and agendas must provide sufficient detail for members to understand the matters to be discussed or decided.
Case Overview
Case Number
18F-H1817020-REL
Tribunal
Office of Administrative Hearings (Phoenix, Arizona)
Petitioner
Lewis Smith
Respondent
Desert Isle Homeowners Association, Inc.
Administrative Law Judge
Velva Moses-Thompson
Hearing Date
April 16, 2018
Decision Date
May 29, 2018
Central Allegation
On or about December 5, 2017, Petitioner Lewis Smith filed a petition with the Arizona Department of Real Estate alleging that the Desert Isle HOA violated ARIZ. REV. STAT. § 33-1804. The petition contended that the Board of Directors discussed and advanced a significant CC&R amendment without proper notification to the association members.
The petition states, in part:
“All Board members have been meeting to discuss and add an amendment to the CC&R’s [sic] Prohibiting short term renters. These meetings have not been conducted openly and no notice or agenda were provided containing information necessary to inform members of the association of the matters to be discussed… At no time was the issue to add an amendment for short term rentals properly noticed or on an agenda for discussion before it became a ballot vote.”
Chronology of Events
October 23, 2017:
• Lewis Smith, William H. Winn, Kevin Barnett, and Chester Jay submit a formal request to the Board for a special members’ meeting.
• The stated purposes of the meeting were to:
1. Select and fund an attorney to update the HOA’s bylaws and CC&Rs to comply with current Arizona law.
2. Discuss obtaining a reserve study for the association’s capital needs.
3. Discuss a separate attorney letter regarding HOA governance.
October 24, 2017:
• Board President Doug Robinson responds to the request, expressing support for a meeting but stating that more than 30 days would be needed to gather supporting documentation.
October 31, 2017:
• A second group of homeowners, including Board members Greg Yacoubian, Doug Robinson, Curt Carlson, and Mike Andrews, submits a request to add an item to the agenda of the forthcoming special meeting.
• Their request was to “amend the CC&Rs by adding a section prohibiting ‘Short Term Rentals’ and defining minimum time allowed for Rentals.”
November 5, 2017:
• The Board provides an agenda for a Board of Directors meeting scheduled for November 8, 2017. The agenda did not include any item related to the proposed amendment to prohibit short-term rentals.
November 8, 2017:
• The Board of Directors meeting is held.
• The Board votes to call a special members’ meeting before November 23, 2017, to address the two petitions.
• During the “BOARD INPUT” section, member Curt Carlson “spoke of past issues about short term renting,” but this was not a formal agenda item for discussion or action.
November 10, 2017:
• The Board emails Lewis Smith, acknowledging his petition and requesting a “narrative explanation from you on each of your subjects” by November 17, 2017, to prepare the meeting information package for all homeowners.
November 18, 2017:
• The Board sends an agenda for another Board of Directors meeting scheduled for November 20, 2017.
• The agenda lists “Review/approval of special meeting mailing package” as a topic but provides no specific details regarding the proposed amendment on short-term rentals.
December 1, 2017:
• Board President Doug Robinson emails all homeowners to explain the upcoming special meeting on December 16, 2017.
• The email states: “To avoid cost and time we put both petitions together and are having one meeting that will required [sic] all owners to vote for or against these two petitions.”
• The agenda for the December 16 meeting is attached, which explicitly lists a vote on prohibiting short-term rentals.
December 16, 2017:
• The special members’ meeting is held. A vote is taken on the proposed amendment to prohibit short-term rentals.
• Vote Result: 9 homeowners in favor, 6 homeowners against.
Legal Framework and Analysis
The case centered on the interpretation and application of Arizona Revised Statutes related to planned communities.
Key Statute: ARIZ. REV. STAT. § 33-1804
This statute governs meetings and notices for planned communities. The judge’s decision rested heavily on the policy outlined in subsection (F).
• § 33-1804(B): Requires that notice for any special meeting of members must state the purpose, including “the general nature of any proposed amendment to the declaration or bylaws.”
• § 33-1804(E)(1): Requires that the agenda for a Board of Directors meeting be made available to all members in attendance.
• § 33-1804(F): This subsection contains the state’s declaration of policy, which was central to the judge’s conclusion. It states:
Burden of Proof
The Petitioner, Lewis Smith, bore the burden of proving that the Respondent violated the statute by a “preponderance of the evidence.” This standard is defined as evidence that is sufficient “to incline a fair and impartial mind to one side of the issue rather than the other.”
Findings and Conclusion of the Court
The Administrative Law Judge found that the Petitioner successfully met the burden of proof. The decision concludes that the agendas for the November 8 and November 20 Board of Directors meetings were legally insufficient.
Conclusion of Law #4:
“Petitioner established by a preponderance of the evidence that the Board violated ARIZ. REV. STAT. section 33-1804(F) when it failed to provide notice or an agenda to all of its members of information that was reasonably necessary to inform the members that an amendment to the CC&Rs to prohibit short term members would be discussed at its special board of directors meetings held on November 8, 2017 and November 20, 2017.”
Final Order
• The Petitioner’s petition in the matter was granted.
• Pursuant to ARIZ. REV. STAT. § 32-2199.02(A), the Respondent (Desert Isle HOA) was ordered to pay the Petitioner the filing fee.
• The Order is legally binding unless a rehearing is requested with the Commissioner of the Department of Real Estate within 30 days of the service of the Order.
Parties and Legal Representation
Address
Legal Counsel
Petitioner
Lewis Smith
5459 E. Sorrento Dr.
Long Beach, CA 90803
Mark J. Bainbridge, Esq.
The Bainbridge Law Firm LLC
2122 E. Highland Ave. Ste. 250
Phoenix, AZ 85016-4779
Respondent
Desert Isle Homeowners Association, Inc.
411 Riverfront Dr. #7
Bullhead City, AZ 86442
William D. Condray, Esq.
2031 Highway 95 Ste. 2
Bullhead City, AZ 86442-6004
