THE ACTIVITY CENTER RENOVATION PROJECT
LIQUOR LICENSE TRIAL: THE REAL DEAL
A Factual Account History
The 2020 Activity Center Renovation Project & the Court Hearing held in the late fall of 2020 with the AZ Real Estate Office of Administrative Hearings was about the non- compliance to our HOA's governing documents. A 'separate' resident vote as per Master Declaration 6.7 was required to apply for a liquor license in the Activity Center, for the purpose of establishing a business venture to sell and serve alcohol. This changes our common use area to a business purpose. Hence the vote needed to be specific to the matter, according to the correct 'interpretation' of the declaration. See below:
Master Declaration 6.7 reads as follows:
"Section 6.7 Change in Use of Common Area. There shall be no substantial change in use of any portion of Common Area unless approved by at least sixty percent (60%) of Members voting on the matter. For purposes of this Section, a "substantial change in use" is one that changes the character and nature of the way in which the Common Area is used, including, but not limited to, changing natural open space to business use."
Read the News Report
A dispute complaint with the AZ Department of Real Estate had been filed in regard to the Activity Center's renovation proposal and Vote.
The Court was asked to rule that converting square footage of existing common area to a state licensed Wine & Beer Cafe/Bar is considered "a substantial change of use of common area... including a business use", which had required "a resident vote on the matter", as per Master Declaration Article 6.7. It ought to have been placed on the March 2020 Ballot as a separate vote, separate from the vote to grant the Spending Authority to the Board in order to proceed with the Activity Center Renovation proposal, on which we all voted.
Our leadership was asked to participate in mediation for this non-compliance to our governing documents, in lieu of litigation, but declined. Because they declined, the dispute complaint was filed with the AZ Real Estate Board. The Board hired an attorney and spent community funds to represent them rather than settle out of court.
A person who had served on the board, stood up at a meeting where it was being discussed and stated, "This frivolous lawsuit is costing the community over $10,000.!" But if mediation had been accepted, it would have cost considerably less. In fact, the resident who filed the complaint had even offered to help pay for it. Once a litigation procedure commences, the attorney's fees escalate.
The Benefit of Mediation:
Mediation is less adversarial and less expensive. The parties come together to negotiate and resolve their conflict. Even though the parties are in dispute, both seek settlement and are willing to open the lines of communication.
ClLICK HERE to read more about the benefits of HOA mediation.
UPDATE Mar 2022
The court trial ended after two hearings, with the judge leaving the case open. Why? The project wasn't "ripe yet". The judge thought the trial was premature, since the liquor license hadn't yet been applied for and no construction had started on the bar.
The fact is, the Cafe/Wine Bar needs a license in order to sell liquor, whether it is via a new application or by an extension of our existing licenses from either The Views Restaurant or the Golf Course. Doing this will essentially turn the designated spaces for the bar and lounge areas at the Activity Center into a permanent business venture. A Resident Vote is required on this change of usage, as per Master Declaration 6.7. Therefore, the judge ruled that the case could be re-opened at that later juncture. There was no win or no lose of the two parties, in the judges decision, the trial was just ill-timed.
Note that the Activity Center had a temporary license when The Views Restaurant was closed for renovation awhile back, but it had expired years ago and was a moot point to this case.
Will the leaders and management of our community take corrective action to put this matter to a resident vote for a change in use of a common area to a business use - before they apply or extend the liquor license? According to this news report below, apparently not.
The rules set forth in our Association are not always followed as written.
The Resident who filed the complaint as a matter of principle, decided not to pursue the issue further.
