ALJ Redux: Déjà Vu All Over Again?

The administrative hearing process for community associations is coming back effective July 20th.  It has been more than two years since the Arizona Department of Fire Building & Life Safety (DFBLS) last accepted a homeowner complaint against a community association after our firm obtained an injunction against the state prohibiting the DFBLS from processing any more cases because the law violated the Arizona Constitution.  The Arizona Legislature approved SB1148 this spring, which endeavors to repair the defects in the former law they originally passed in 2006.  It is “déjà vu all over again”, and are you ready for it?  We want to remind everyone how the process works, what the potential pitfalls are, and how we think the new process will be different.
 
Complaints are filed with the DFBLS by either a homeowner or an association, and the complaint must be about a dispute between a homeowner and the association.  The DFBLS still does not regulate community associations, and the actual hearing is conducted by the administrative law judges (“ALJs”) in the Office of Administrative Hearings (“OAH”), which is a completely separate and independent executive agency of the State. 
 
The statute does not give the DFBLS authority to hear disputes between neighbors or disputes against contractors.  Notably, the statute does not mention anything about disputes with management.  While we believe it is improper for a complaint to be filed against a management company, if one is filed, it should not be ignored.  It should be answered by arguing that the complainant named the wrong party.   
 
Associations need to act quickly when served with a complaint by the DFBLS.  Parties have 20 days to submit a response to the complaint, but there is no grace period.  This 20 day period can be strictly applied.  If you fail to submit a response within that time, you may have a finding entered against you by default.  There is no second bite at the apple, and we have no reason to suspect that the DFBLS will be merciful on that point.  It is absolutely critical that these complaints be acted upon promptly.  As a final note, the 20 days runs from the date the DFBLS mails the complaint by certified mail, not from the date of receipt.  Refusal to accept or even failure to receive the certified mail does not appear to be a defense for failing to respond to the complaint.
 
Advocates for the original law in 2006 wanted to create a hearing process that did not require attorneys, and the statute included language that would allow “contractors” to represent associations in these hearings.  However, the statute was and remains in direct conflict with the rules of the Arizona Supreme Court regarding the unauthorized practice of law.  The DFBLS made clear while the first law was being applied that it would require compliance with the Supreme Court’s rules and that it would not allow just any officer or manager to represent an association in these hearings.  In most cases, an association will have to be represented by an attorney. 
 
The only exception is if an association has a full-time employee who is not receiving compensation for the representation; the association has authorized the employee to represent it; and the representation is not the primary duty of the employee. See Rule 31(c)(11), Arizona Supreme Court.  Aside from the violation of the Supreme Court’s rule on practicing law, if an association tries to represent itself contrary to the Supreme Court’s rule, the DFBLS or administrative law judge may reject any written answer and may not allow the association to present evidence or argument at the hearing.

The new DFBLS process will change in a couple of ways.  First, parties can now request a “rehearing” if they are not happy with the final decision of the administrative law judge.  The petition for rehearing will be heard by the director of the DFBLS and not by the ALJ who heard the case.  This process actually involves the DFBLS more than just accepting filing fees and forwarding cases to the administrative law judges.  Second, the filing fees for complaints may be increased.  Previously, the filing fees were $550 for single claim complaints and $2,000 for multiple claim complaints.  The director of the DFBLS has the discretion to change the filing fees, and the fees are supposed to be self-supporting for the program, i.e. the DFBLS pays the Office of Administrative Hearings for the time they use its ALJs.  When the process stopped two years ago, the collected fees are believed to have been insufficient to meet the amounts owed to the OAH.  The DFBLS will be considering the filing fee issue in the coming weeks, but we expect it may be increased.

If you have any questions about the ALJ hearing process, please contact Jason Smith in our office for more information.  If you wish to have our Implementation Manual discussing all of the new legislation, including SB1148, click here.