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I sent a request for original documents to verify the large amount of reserves our HOA has reported. At the agreed upon meeting there were no original documents provided and the copies did nothing to...
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Business Judgement Rule

Can a homeowner file a complaint with the AZ Department of Real Estate regarding a Board decision that in the homeowner’s opinion violates the business judgement rule? I don’t want to get too specific, but...
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  • From Nicole Crown on Bylaws Lost and Found

    Thank you for the quick reply. A unique situation is an understament about what is going on in this small community.

    I would like to give some more factual background surrounding the case.

    Myself along with 22 owners, in a complex of 41 units filed a petition to remove all of the BOD. The BOD and their council say that all unit owners who signed the petition are delinquent in their assessment dues and do not call the special meeting. I file a lawsuit. The court sets up a briefing schedule. The court rules in my favor stating that the only governing documents proven to be in existence are the CCR’s , we do not have adopted bylaws, and they are required to have a removal.
    Our CCR’s state that all homeowners are entitled to cast one vote as long as they are a homeowner. There is also a clause for non-payment of assessment dues that does not include language that your vote is dependent on your paying/non-paying of dues.
    While we are waiting for them to call the removal meeting the BOD adopts the initial bylaws of the association by unanimous written consent. They send ballots stating delinquent homeowners can not vote because of the newly adopted bylaws containing a suspension of voting rights clause if you are delinquent in your assessments. We vote anyway and I take them back to court and the court once again rules in my favor. The court rules that the BOD is removed, and that the bylaws were not adopted properly. They were ordered to host a new election in compliance with state statute.
    They did not have any intention of hosting the new election and so through 22 signatures, the membership has called an election.
    This is where it gets complicated. About 30 days after the court ruling they find a copy of the bylaws that were signed by the original declarant and our election is not scheduled until December 23rd. . They filed a motion to reconsider with the court based on this new found evidence. We have been operating with no bylaws for over ten years. One owner out of 41 units had bylaws. Do the bylaws govern? Do the CCR’s govern? Statue is silent who is eligible to vote. Would this be considered a waiver of bylaws, if they have been out of circulation for as long as they have been?

    Go to comment
    2019/12/17 at 8:28 pm
  • From dennisl on Bylaws Lost and Found


    This is clearly an unusual situation. When a community is formed by the developer, he/she first must establish and record the Declaration or CC&R’s as they are commonly called. Then the developer applies to the Arizona Corporations Commission to establish a non-profit corporation, in that application the developer must provide the Articles of incorporation and Bylaws for the requested corporation for the commissions review and approval. While those original documents should always be available from the Corporations Commission only the Articles must be maintained current with the Corporations Commission. Changes to the bylaws are not recorded with the county recorder and need not be transmitted to the corporations commission. The most current version of the bylaws are binding on the corporation that is the association. Some bylaws prescribe that they can only be changed by a vote of the membership and others prescribe that they can be changed by vote of the board. While I would say that a majority require member approval for any change.

    Having said all of this, state law in most cases supersedes the community documents including the bylaws. If the bylaws contradict state law then the state law prevails. Since I believe that your question is related to the fact that you removed the BOD by vote of the members. Most CC&R’s define the voting rights for members, so irrespective of what ever was stated in the bylaws the CC&R’s would prevail and even if the bylaws did not exist or were lost the CC&R’s are always available. State law describes the process for removing board members so no matter what the governing documents including the CC&R’s say about how to remove a member of the board after the period of declarant control ends the state law prevails. If you are a Planned Community (HOA) that ARS 33-1813 applies. It describes the process for establishing a petition to remove one or all board members, The numbers of eligible members required to sign that petition for the meeting and that a simple majority of the eligible members voting at that meeting decides the issue. The key is eligible voters and state law does not determine who is eligible or not (at least yet) the community documents establish that.
    Without seeing what your community documents CC&R’s and bylaws say about voting eligibility there is nothing more that I can address more specifically.

    To your specific question yes bylaws are binding on the association, even if the association board is so incompetent that it loses it’s own governing document. If the association failed to provide new home buyers a copy of the governing documents they violated the law (ARS 33-1806) and can be held accountable for that failure even if they were so incompetent to have actually lost the documents.
    If I’ve not answered your question adequately please fee free to follow up.


    Go to comment
    2019/12/17 at 6:04 pm
  • From dennisl on Homeowner


    When requesting records it is important that you be specific for two reasons the more specific you are the more likely that you will get access to the requested records. If there are issue in your association you can be assured that as a delay tactic they will claim that they don’t understand your request and going thru the game of providing something that is not what you were looking for. Quite frankly I don’t understand what you were looking for from the association. The second reason is that the law requires that the association provide access to any association record within 10 business days from the date of the written request. If you want to win a slam dunk case you have to have made a clear records request and the association must have failed to provide you access to that information within 10 business days.

    Your comments about the ADRE and ALJ process are simply not founded, if the homeowner is prepared to prove his/her case against the association. You have to understand the process and what you can and cannot bring to that venue and you must be prepared to defend your case alone against the association attorney. I spend a great amount of time helping homeowners formulate their petitions and helping them understand what they will face in those hearing and how to prepare themselves to present their case. Records request are the easiest issue to present in that venue, because if your request is clear and the association failed to provide you access to the records in 10 business days then they violated the law and the ALJ will force the association to comply with the law and may fine the association as they see fit.
    While the ADRE dispute resolution process is not free at $500 per issue with a maximum of 4 issues per petition, it is substantially less expensive than superior court and currently the only viable way for homeowners to enforce the law.



    Go to comment
    2019/12/12 at 2:43 pm
  • From nick on Business Judgement Rule


    Thank you very much for your comprehensive reply! From your response, it appears that the Tierra Ranchos case is effectively being ignored and the promulgated business judgement rule shields the HOA Board from poor decision making, especially if the HOA management company and its representatives back the Board.

    The “object” in my case is a streetlight on common area that has engendered email “wars” and boorish behavior from the minority who are opposed to it. If this minority light-phobic crowd gets elected to the Board and puts the removal of a streetlight on a future Board meeting agenda, I would have to convince the HOA community manager in 3 to 5 minutes with before (pitch black) and after photos of the area, past committee meeting records where a streetlight was recommended, email notifications of past crimes that have taken place in other areas of the property, the Board only changing the gate code once a year, and the Martinez vs Woodmar IV case as the clincher, of how foolish it would be to remove the streetlight, correct? If the community manager disagrees with my argument and tells a new Board they have every right to remove the light, then is my only recourse other than campaigning for a new Board, to wait for a crime to occur on the dark street and then possibly the victim would file a civil suit against the HOA that would cost him/her big $$ in legal fees?

    Go to comment
    2019/11/26 at 5:00 pm
    • From dennisl on Business Judgement Rule

      Basically the association owns the common property and has every right to ensure that the common property is protected and provides a safe environment for the community members. I suspect that the opposition to these lights come from homeowners that are impacted in their homes by these lights shining in their windows. There is a way that the street protection can be provided and the impact to the homes in the immediate area of the lights can be minimized. Put side shades on the lights so that they do not shine into the windows of the adjacent neighbors. Many cities have similar shades on street lighting that are close to residential areas. If this is the case in your community than this would be a reasonable compromise. The greater issue is the protection of the homeowners and ultimately the protection of the association from liability, and if this compromise does not satisfy the impacted homeowners, than it is your duty to act in the best interest of the entire community and not just this group of homeowners.


      Go to comment
      2019/11/26 at 6:51 pm
  • From dennisl on Directors/Members at Large


    I apologize for my delay in responding to your question. The number of board positions are always dictated by your bylaws. Some will state a specific number and other will stipulate a range say between 5 and 7 directors. The board can then determine how many directors they want to have within that range. The community and only the community elects the directors and the directors then elect the officers, typically a president, vice president, treasurer and secretary. So if you have 5 board members and four of them are officers than the last one is a director at large. But if with the same 5 member board the directors decide to name one individual as both secretary and treasurer or if the board designates a person that is not a director based on expertise as the treasurer, than the board will have two directors at large. A director at large is simply a director that is not an officer of the corporation.

    The board cannot under any circumstance appoint a director at large that has not been elected to the board by the members of the community. The board can appoint assistants to the secretary or assistants to the treasurer that are not board members to simply help the board members in those positions to perform their duties. Those assistants have no voting power or authority to act on behalf of the association.

    Hopefully this clarifies the issue for you.


    Go to comment
    2019/11/25 at 5:03 pm
  • From dennisl on Business Judgement Rule


    You have several issues in your question the first is relative to the business judgement rule. While every HOA attorney and every community manager will swear that because the rule is codified in Arizona statutes for non-profit corporations of which most if not all common interest communities are, that it applies to all such communities. The truth is that in 2000 the American Law Institute published the Restatement of Law third for Property Servitudes which clearly debunked that theory because it provided too much preferential treatment of Board’s decision making. That position was made part of Arizona case law in the Appellate courts ruling and decision in Tierra Ranchos HOA v Kitchukov 1 CA-CV 06-0474 in 2006. To this day the HOA industry ignores this fact and continues to promote that the business judgement rule continues to apply to all common interest communities. The main reason for this is that the business judgement rule includes a provision that indemnifies the board from liability if they make decisions based on the advice of their advisors. What this means is that if a board makes a decision based on the advice of their community manager or their attorney even if that advise is wrong or illegal the board is protected from liability from its decision. This is a blank check to all community managers and HOA attorneys. So guess why they (the HOA Industry) wants to continue this charade?

    The bottom line here is that the business judgement rule does not and cannot be applied to CIC boards.

    The second part of your question is if you can file a Petition to ADRE and the ALJ based on the business judgement rule? The answer to that is simple and is no. The ADRE dispute resolution process is limited to violations of ARS Title 33 Chapters 9 and 16. The business judgement rule is from ARS Title 10. All of your proposed justifications are also not specifically addressed in the business judgement rule even if it applied to your HOA.

    The third issue is buried within your question. I will make an assumption that the “object” that you refer too is some type of security light, or something to that effect. Allow me to provide this example to clarify your issue. Again the Arizona Supreme court in their decision and ruling in Martinez v. Woodmar IV Condominium that the association had a duty to protect its members from predictable risk. In that case the association was found libel for the shooting of a guest in the community by a gang of external community individuals based on the failure of the association to maintain its street lighting, fences and security gates and guards. While you cannot deal with this issue with the ADRE process if the security issue is removed and something happens because of it, the association can and will be held liable for potentially untold judgements because of their failure to protect their members or their guest.

    Both cases cited in this response can be found on this site under Resources and Tools.


    Go to comment
    2019/11/25 at 4:47 pm
  • From dennisl on Officer Elections

    Quite frankly I see no issue with the approach taken by your board. If any board member had an objection to the approach taken he/she could have voiced that objection and the board would have considered alternate approaches. Basically you had a nomination process and a vote on those nominees. could this have been handled differently maybe, would the outcome have been different if the approach was different probably not. The people elected the board and the board elect it’s officers by any method they see fit.


    Go to comment
    2019/11/22 at 2:30 pm
  • From dennisl on Email as an “in writing” notice


    The law clearly states in writing and an e-mail is in writing. If the association does not acknowledge your e-mail and you have proof that a board member received the request and they fail to provide you access to the requested records than they are violating the law. Your board secretary does not have the authority to interpret the law other than the plain language of the law. If the legislators had intended that only letters be acceptable than they would have stated “by letter or certified mail” as they do in other situations. E-mails are universally accepted as written documents in electronic format.
    Some e-mail services like outlook have a read receipt feature that sends a confirmation to the sender when the recipient opens the e-mail. That is irrefutable proof that the addressee received the e-mail and opened it.
    Inform your board secretary that whether he acknowledges receipt of your e-mail or not, he has 10 business days to provide access to the requested records or you will file a petition to the Arizona Department of Real Estate to force them to comply with the law.

    This is not hard folks. All homeowners have a right to view any association record upon written request. Yet this single simple issue is the source of the vast majority of all association based legal actions and cases including ALJ petitions. Boards or community managers simply refuse to follow the law and provide that access, why because they can and often simply get away with it. Some day, I’ll be able to put some teeth into the law to hold boards and management companies accountable to the law. The law should not be optional if it is not convenient.


    Go to comment
    2019/11/21 at 5:19 pm
  • From dennisl on Dog attack on dog, common area.


    I’m not an attorney so I cannot give you legal advice. I cannot see any culpability of the association in this situation. Nor am i aware of any association being required in any way to keep a record of these events. Because of your financial loss as well as the loss of your pet you could file a claim in justice (small claims) court against the owner of the other dog.
    I’m sorry for your loss.

    Go to comment
    2019/11/16 at 6:41 am
  • From dennisl on Removal of Community Sign Boards

    Once again unfortunately your situation is all too common in these communities. Despite provisions in the governing documents as citizens of this country we have an unalienable right to freedom of speech. But as with everything all speech is not free, you are not free to make or post false statements about anyone, if you knowing post or even speak falsehoods about anyone you could be held accountable to slander and defamation. But the truth can never be considered slander or defamation if it is a true and accurate statement of facts. There are many communities where homeowners are prevented from communicating with other homeowners relative to community business or issues to protect the power of the board. The board and only the board has the ability to communicate their perspective or position on any issue to the entire community. Opposition to those positions are suppressed in any way possible, and the people casting those opposing positions are demeaned, and belittled and labeled as trouble makers and worse yet targeted for retaliation by the association.

    To this end I’ve presented two pieces of legislation and have obtained sponsors for that legislation to make all of this illegal. One piece of legislation will require associations to distribute to the entire community arguments for or against any issue to be decided by the community. With this the community will be given both sides on anything and then be allowed to make informed decisions for themselves as to how they will vote on the issue. This is what happens with every ballot issue for local municipality and state elections. It should not be different for these communities. The second bill will prevent the association from restricting the posting of signs for or against any issue facing the community or in the door to door soliciting of support or opposition on those issues. It will also prevent the association from disallowing the use of the common or private property for the peaceful assembly of community members for the purpose of discussing or communicating the need for community action on any community related business. The freedom of speech and to assemble is fundamental under our constitution and the principles of Property Servitudes Law clearly states that any provision in the CC&R’s that would unreasonably burden those fundamental constitutional rights are invalid and void. These bills will codify those principles into Arizona Law.

    Proposing legislation is the first step, getting a sponsor to introduce that legislation is the next but the real work comes in getting 16 Senators and 31 Representative and the Governor to vote for that legislation. This is where all of you come in. If you want these protections to come about and stop the abuse and attack of your fundamental rights then you must join us in our fight to get these bills passed. I will be there for all of you talking to every legislator that will listen of the significance and importance of these pieces of legislation and fighting for their passage, but will you stand with me and join that fight or simply watch from a distance and hope that I’m successful.

    Together we can get the legislators to listen to these please for justice, but alone I am simply one voice in the nearly 8 Million People living in this state, that can be easily ignored.


    Go to comment
    2019/10/31 at 12:55 pm