Briefing Doc – 17F-H1716024-REL
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.
