Varhely, Emry & Muriel Vs. Eighth Street Townhouse Association

1 Final agency action regarding decision below:

3 ALJCERT ALJ decision certified as final

5 IN THE OFFICE OF ADMINISTRATIVE HEARINGS 6 EMRY & MURIEL VARHELY, No. 12F-H1213009-BFS 7 Petitioners, 8 ADMINISTRATIVE vs LAW JUDGE DECISION 9

10 EIGHTH STREET SQUARE TOWNHOUSE ASSOCIATION, 11 Respondent. 12 HEARING: February 13, 2013 13 APPEARANCES: Muriel Varhely appeared on behalf of Petitioners. 14 Respondent was represented by Nikita Patel, Esq. 15 ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer 16 ______17 RULING 18 This hearing involved an allegation made by Petitioners Emry and Muriel Varhely 19 that Eighth Street Square Townhouse Association (Respondent) violated A.R.S. § 33- 20 1806 by failing to notify them of existing violations at the time they were purchasing a 21 parcel in the community. The Administrative Law Judge concludes that Petitioners 22 failed to establish a violation by Respondent. 23 FINDINGS OF FACT 24 1. Respondent is an association of homeowners located in Phoenix, Arizona. 25 2. Eighth Street Square has 48 units1 and is governed by Covenants, 26 Conditions, and Restrictions (Declaration). 27 3. In February 2012, Petitioners entered into a contract to purchase a unit in 28 Eighth Street Square. The unit was owned by ING Bank FSB which acquired title 29 through foreclosure. 30

1 The units are numbered 1 through 49 without a unit 13.

Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826 4. On March 13, 2012, Respondent provided “CondoCerts” information 1 regarding the unit Petitioners were purchasing in response to a request for information 2 from the escrow company. According to the information provided, there were 3 association violations pertaining to the unit. 4 5. Prior to Petitioners closing escrow on the unit, Respondent provided them 5 with a copy of some documents relating to the unit. At no time prior to closing escrow 6 did Petitioners receive a statement from Respondent as to whether the records of the 7 association reflected any alterations or improvements to the unit that violated the 8 Declaration. 9 6. On or about March 13, 2012, Petitioners closed escrow on the unit. 10 7. On October 22, 2012, Petitioners filed a Petition with the Department of 11 Fire, Building and Life Safety (Department) alleging Respondent violated A.R.S. § 33- 12 1806 by failing to provide them with the required documents at the time they were 13 purchasing the unit. Petitioners paid a $550.00 filing fee to the Department. 14 8. On October 24, 2012, the Department sent a letter to Respondent 15 notifying it that Petitioner had filed the Petition alleging that Respondent violated 16 Arizona statute. 17 9. On November 12, 2012, Respondent filed an Answer with the Department 18 denying the allegations set forth in the Petition. 19 10. On December 27, 2012, the Department issued a Notice of Hearing to the 20 parties notifying them that a hearing on the Petition would be conducted by the Office of 21 Administrative Hearings. 22 11. On February 13, 2013, a hearing was held on the Petition and the parties 23 presented evidence and argument regarding the statute and the documents provided to 24 Petitioners. 25 CONCLUSIONS OF LAW 26 1. The Department has jurisdiction to hear disputes between a property 27 owner and a planned community association. A.R.S. § 41-2198.01(B). 28 2. In this proceeding, Petitioners bear the burden of proving by a 29 preponderance of the evidence that Respondent violated A.R.S. § 33-1806. A.A.C. R2- 30 19-119.

2 3. A preponderance of the evidence is “[e]vidence which is of greater weight or 1 more convincing than the evidence which is offered in opposition to it; that is, evidence 2 which as a whole shows that the fact sought to be proved is more probable than not." 3 BLACK'S LAW DICTIONARY 1182 (6th ed. 1990). 4 4. A.R.S. § 33-1806 provides, in pertinent part: 5 A. For planned communities with fewer than fifty units, a member shall 6 mail or deliver to a purchaser or a purchaser’s authorized agent within ten 7 days after receipt of a written notice of a pending sale of the unit . . . all of the following in either paper or electronic format: 8 . . . . 9 3. A dated statement containing: . . . . 10 (e) If the statement is being furnished by the association, 11 a statement as to whether the records of the association reflect any alterations or improvements to the unit that violate the declaration. 12 The association is not obligated to provide information regarding 13 alterations or improvements that occurred more than six years before the proposed sale. Nothing in this subdivision relieves the 14 seller of a unit from the obligation to disclose alterations or 15 improvements to the unit that violate the declaration, nor precludes the association from taking action against the purchaser of a unit 16 for violations that are apparent at the time of purchase and that are

17 not reflected in the association's records. (f) If the statement is being furnished by the member, a 18 statement as to whether the member has any knowledge of any

19 alterations or improvements to the unit that violate the declaration. . . . . 20 G. For the purposes of this section, unless the context otherwise

21 requires, “member” means the seller of the unit title and excludes . . . a trustee of a deed of trust who is selling the property in a trustee’s sale 22 pursuant to chapter 6.1 of this title.

23 5. Petitioners argued Respondent violated A.R.S. § 33-1806 by failing to 24 provide them with a statement as to whether the records of the association reflected any 25 alterations or improvements to the unit that violated the Declaration within ten days of 26 receiving notice of the pending sale of the unit they eventually purchased. 27 6. Respondent maintained that because Eighth Street Square has less than 28 50 units, Respondent was not responsible for providing a statement regarding existing 29 violations. 30

3 7. Petitioners also alleged that because Respondent provided some of the 1 other documents and statements required under A.R.S. § 33-1806, it was obligated to 2 provide all of the documents and statements. Petitioners argued that they had no 3 knowledge the community contained less than 50 units and, as such, relied on 4 Respondent’s act of providing some of the documents to indicate no violations existed. 5 8. It is noted that if Eighth Street Square had 50 units or more, Respondent 6 would have been required to provide the statement in accordance with A.R.S. § 33- 7 1806, and it would have had to include a statement confirming the existence of 8 alterations or improvements to the unit purchased by petitioner that violated the 9 Declaration. If no violations existed, Respondent would have been required to provide 10 an affirmative statement to that effect, not merely the absence of a statement that a 11 violation existed. 12 9. Petitioners also argued that there was no evidence that the seller of the 13 unit, ING Bank FSB, was aware of the existing violation. Petitioners maintained that if 14 the seller did not have knowledge of the violation, it would not be able to inform 15 Petitioners of the violation and that Respondent was responsible to notify them of the 16 violation. 17 10. Regardless of the seller’s knowledge of a violation or that Respondent 18 provided some documents relating to the unit, Respondent had no obligation under 19 A.R.S. § 33-1806 to notify Petitioners of the known violation. 20 11. Petitioners failed to establish by a preponderance of the evidence that 21 Respondent violated A.R.S. § 33-1806 by failing to provide them with a statement as to 22 whether the records of the association reflected any alterations or improvements to the 23 unit that violated the declaration. 24 RECOMMENDED ORDER 25 In view of the foregoing, IT IS ORDERED that no action is required of 26 Respondent in this matter and that the Petition be dismissed. 27 In the event of certification of the Administrative Law Judge Decision by the 28 Director of the Office of Administrative Hearings, the effective date of the Order will be 29 five days from the date of that certification. 30 Done this day, March 1, 2013.

4 1 /s/ Tammy L. Eigenheer 2 Administrative Law Judge

4 Transmitted electronically to: 5

6 Gene Palma, Director Department of Fire Building and Life Safety 7