January 2006
In This Issue:
Bankruptcy Documents Authorize Developer to Sue Landowners for Unpaid Assessments
Filing a Lien Does Not Defame or Slander Owner
Purchaser at Foreclosure Sale Is Not Liable for Assessments Until Delivery of Deed
Unit Owner Not Responsible for Maintenance Fees Charged to Interval Owners
Setback Requirement Abandoned Due to Previous Variances
Satellite Dish Installed on Condominium Common Area Violates Covenants
Owners Required to Vacate Units for Mold Remediation
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Bankruptcy Documents Authorize Developer to Sue Landowners for Unpaid Assessments
Angel Fire Resort Operations, L.L.C. v. Corda, 116 P.3d 841 (N.M. App. 2005)
Assessments: A community's governing documents, restated after the developer emerged from bankruptcy, authorized the new owner to sue homeowners for past-due assessments.


Angel Fire Resort, a community in Colfax County, New Mexico, was previously owned by a corporation that underwent bankruptcy reorganization in the mid-1990s. As part of the reorganization, Angel Fire Resort Operations, L.L.C. ("declarant") bought the corporation's properties, which included a ski area, golf course, and other amenities. The bankruptcy documents included a plan of reorganization and the Supplemental Declaration of Restrictive Covenants and Easements ("supplemental declaration"), as well as the articles of incorporation of the Association of Angel Fire Property Owners ("association") and the association's bylaws.  
 
Before the bankruptcy reorganization, the property was subject to covenants obligating each owner to pay all charges of the association, and stating that the declarant could proceed "at law or in equity" to prevent violations and enforce the covenants. The supplemental declaration states: "Declarant shall assess and the Property Owner of each Homesite shall pay to Declarant a nonrefundable annual assessment plus gross receipts tax, if applicable, to be used only for the improvement, maintenance, upkeep, repair and operation of and additions to the Amenities. . . ." The supplemental declaration says the association or declarant may enforce the assessment provisions. The supplemental declaration does not address the manner of enforcement, but does provide that landowners' rights to use amenities may be suspended or terminated for failure to pay assessments.
 
The declarant sued several landowners for failure to pay annual assessments. The landowners argued they could not be sued for past-due assessments due to "(1) the presence of an express remedy involving a lawsuit in the prior covenants, (2) the apparent deletion of such an express remedy in the current documents, and (3) the presence of an express remedy involving suspension of use of the amenities in the current documents and other bankruptcy documents. . . ." Their primary contention was that if something were stated somewhere in a document and then missing in another place, it could be inferred that its absence was intentional in the other place.
 
The landowners petitioned the court to dismiss the declarant's suits on the ground that the documents did not allow for suits for unpaid assessments. In a cross-motion, the declarant requested that the court strike the landowners' motions and rule that their position be rejected as a matter of law. The trial court dismissed the declarant's suits, and the declarant appealed.
 
In its review, the appeals court found the words "enforced" and "enforcement" used in many places in the supplemental declaration, expressly indicating that enforcement must be "brought within a certain time frame" or it would be barred forever. Additionally, the court found numerous references throughout the restated documents to the landowners' mandatory obligations to pay the assessments. The assessments are described as "required" annual assessments that "shall be paid" by the landowners.
 
The articles of incorporation provide that the association can levy assessments and enforce payment of those assessments against the landowners. The articles of incorporation also give the association the right to file liens on any lot to secure payment of assessments and obligations to the association and to collect, foreclose, or otherwise enforce the liens. The association also has the power to do anything necessary to perfect the filing, enforcement, and discharge of the liens.
 
The bylaws permit the association's board of directors to levy and collect yearly assessments. The supplemental declaration provides that the declarant's obligation to maintain amenities and the landowners' obligations to pay assessments to maintain the amenities are property interests that run with the land, and those interests were expressly restated in the supplemental declaration as mutual obligations. The court also noted that the reorganization plan expressly provided that the declarant was entitled to seek any orders, judgments, injunctions, or rulings it deems necessary to carry out the intentions and purposes of the reorganization plan. 
 
In finding that the declarant's interpretation of the governing documents was the only reasonable one, the court first considered the overriding purpose of the bankruptcy documents -- to settle disputes between parties to enable the declarant to emerge as an economically viable organization. The assessment structure adopted in the supplemental declaration was intended to provide substantial funds to enable the declarant to maintain and further develop the amenities. The court interpreted the use of the word "enforce" throughout the governing documents to indicate that the declarant had the contractual right to enforce the agreement for the protection of a legal process.
 
The landowners argued that because there was no reference to legal action as a remedy for nonpayment of assessments in the supplemental declaration, the drafters of the supplemental declaration meant to exclude such legal action as a remedy. The court disagreed, because in other instances relating to the covenants and sections of the supplemental declaration, there was no enumeration of what legal remedies were allowed. The court stated that the language in other parts of the bankruptcy documents provided strong support for construing "enforcement" in the supplemental declaration to mean the use of legal action. Further, the court noted that the association, which is empowered along with the declarant to enforce payment of assessments, is expressly allowed to file, record, and foreclose liens to secure the payment of assessments from landowners.
 
The court believed its reasoning was consistent with a long line of authority supporting the position that breaches of contracts give the injured parties rights to damages against the offending parties. Therefore, the overwhelming weight of authority and sensible construction of the bankruptcy documents led the court to conclude that the supplemental declaration allowed the declarant to sue landowners to enforce payment of assessments. The court reversed the trial court's ruling and remanded the case with instructions to grant the declarant's cross-motion.
 
Editor's Observation: Interestingly, the court noted that both the declarant and the landowners relied on the definition of "common-interest community" from the Restatement (Third) of Property. The Restatement defines the term as "a real-estate development with individually owned lots that are burdened with a servitude that imposes an obligation that cannot be avoided by nonuse or withdrawal."

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Filing a Lien Does Not Defame or Slander Owner
Lee, Jr. v. Washington Square Homeowners' Association, Inc., 273 Ga. App. 392, 615 S.E. 2d 210 (2005)
Covenants Enforcement: An association's filing of a lien for late fee assessments was not a slander or defamation on an owner's title to his unit. 


Robert Lee Jr. owned a townhouse in Washington Square and was a member of the Washington Square Homeowners' Association Inc. ("association"). As a homeowner, Lee was subject to Washington Square's Declaration of Covenants and Restrictions and the association's bylaws, which authorized the association to collect assessments from members for maintenance of the common properties. Although Lee paid his assessments, he continually mailed them to the wrong address. In 1999, Lee began using automatic bank-issued checks for these payments. The association sent each owner a payment book every year for the assessments, which included the address to which payments must be sent. In December 2000, the association changed the address for receipt of payments, which the payment book identified. Lee received the payment book but failed to alter the payment address to which his bank sent the checks. 
       
Due to this mix-up, the payments were mailed to the wrong address, late fees were assessed, and a lien was placed on Lee's unit. However, prior to the mailing of the demand letter and before the association's attorney filed the lien, Lee sent a $500 check to the association for payment of the past-due amounts. The attorney was never notified, and the lien was recorded in June 2001. Subsequently, Lee sued the association and its attorney for defamation, negligence, and slander of title. The trial court ruled in favor of the association, and Lee appealed. Finding that Lee failed to show "any duty owed to him by the association and its board members beyond the requirements of the [declaration]," the appeals court upheld the grant of summary judgment. 
       
The court found that the declaration dictated the relationship between Lee and the association, and that covenants run with the title to the land and are specialized contracts that benefit all owners. As to his negligence claim, Lee failed to show any duty outside of that contract, which required him to pay assessments. 
       
In addition, Lee failed to show any evidence of slander of title. Under Georgia law, for a court to find slander of title, four essential elements are necessary: (1) publication of slanderous or libelous words, (2) malice, (3) the plaintiff sustains special damages, and (4) the plaintiff owns the estate that was slandered or libeled. In the view of the trial and appeals courts, Lee failed to produce any evidence of intent or malice on behalf of the association or its management company. In fact, Lee stated as much in his deposition and failed to produce any claims for special damages. Therefore, the appeals court upheld the trial court's decision.

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Purchaser at Foreclosure Sale Is Not Liable for Assessments Until Delivery of Deed
Micheve, L.L.C.  v. Wyndham Place at Freehold Condominium Association, 370 N.J. Super. 524, 851 A.2d 743 (2004)
Assessments: The date on which payments of fees and assessments to the association commence is the date on which the deed is delivered, regardless of whether the purchase took place at a foreclosure sale. 


On Feb. 7, 2000, a foreclosure judgment was entered against a condominium unit in the Wyndham Place at Freehold Condominium Association ("association"). On Feb. 25, 2000, the association filed a lien against the unit for unpaid assessments. Micheve L.L.C. ("Micheve") purchased the unit for investment purposes at a sheriff's sale on April 8, 2002, and the sheriff's deed of sale was executed on June 4, 2002. 

Between the date of the sheriff's sale and the date the deed was transferred, the association passed a board resolution regarding the payments of fees and assessments. The resolution provided that any owner acquiring a unit after June 1, 2002, was required to pay $750, a one-time capital contribution equal to three months of fees, and $125. At trial, the association asserted that it was entitled to collect these fees from Micheve because Micheve took title to the unit on June 4, 2002, three days after the effective date of the resolution.
 
On Sept. 17, 2002, Micheve sold the unit to a third party, at which time the association assessed Micheve $3,125.70. That amount included $920.28 of assessments from the date of the sheriff's sale to the date Micheve sold the unit, a capital contribution charge of $1,285.14, and a $125 processing fee.  Although Micheve disputed $750 of the capital contribution charge, it paid the amounts the association demanded. 
 
On Oct. 12, 2002, Micheve sued the association, asserting that the association illegally charged it for past-due fees and assessments. The trial court ruled that Micheve was entitled to a refund of the association fees that were due six months before the sheriff's sale, because New Jersey law provides that a purchaser at a foreclosure sale is not responsible for unpaid common expenses attributable to a former owner.
 
At issue in the case was the date for determining when Micheve became the unit-owner. The trial court determined that the date was not the date of the sheriff's sale, but the date the sheriff's deed was delivered to Micheve, or June 4, 2002. Therefore, Micheve was liable for the $750 additional capital contribution fee and the $125 processing fee.
 
The New Jersey Condominium Act ("Act") permits associations to place liens on units for unpaid assessments, subject to proper notice to the owner. The lien must be recorded and provide the unit number, name of the owner, and amount and date of past-due assessments. Even with proper notice, such a lien has limited priority over prior recorded mortgages. Liens for unpaid association fees are subject to the following limitations: A lien for assessments may not exceed the aggregate assessments for the six-month period prior to filing the lien, the lien must be recorded prior to the association receiving a summons and complaint regarding a foreclosure, and priority for any such lien expires five years after recording.
 
The Act also provides that a mortgagor acquiring a unit at foreclosure "shall not be liable for the share of common expenses or other assessments by the association pertaining to such unit or chargeable to the former unit-owner which became due prior to acquisition of title as a result of the foreclosure." Any such amounts are deemed a common expense collectible from all other owners. Therefore, the court determined that the association was not entitled to collect maintenance fees accrued by the previous owner.
 
The association argued, however, that because Micheve was a purchaser at a foreclosure sale rather than a mortgagor, the Act did not apply. The court defended its position, stating that the association was ignoring the plain meaning of the statute, which provided that a mortgagor "or other purchaser" obtaining title was not responsible for earlier charges. Under the Act, an association may recover such proceeds only if the association institutes the foreclosure proceedings and provides notice to the sheriff that sale proceeds will be applied toward association expenses. In this case, the association was not aware of a foreclosure proceeding. Therefore, the court upheld the trial court's ruling that the association's tactic to recover proceeds months after the foreclosure was not permissible and that the association was not entitled to the prior owner's accrued association fees.
 
In its cross-appeal, Micheve argued that it was not liable for additional assessments imposed on units as of June 1, 2002, because the trial court incorrectly ruled that the delivery date of the sheriff's deed was the controlling date for determining when Micheve took title to the unit. Micheve also contended that the delivery of the deed was "merely ministerial" and held no significance, and asserted, in the alternative, that the date should be either the date of the sheriff's sale (April 8, 2002) or the date of full payment (May 30, 2002).
 
The court, however, agreed with the trial court that the date of the sheriff's sale cannot be the controlling date because a right of redemption existed for the foreclosed owner after the occurrence of the sheriff's sale. Additionally, it is the deed that conveys title, not the date of the sale. Finally, the court noted that the burdens of ownership do not arise until the conveyance of the deed and transfer of title. The court upheld the lower court's decision that such obligations arose on the delivery date of June 4, 2002. Therefore, Micheve was responsible for the $750 additional assessment and the $125 processing fee. Micheve also argued that if the trial court was correct that the controlling date was June 4, 2002, then Micheve was not responsible for maintenance fees it paid between April and June and was entitled to a refund. Although Micheve admits it did not request a refund at the hearing, it asserts that such an argument is implied. The court, however, disagreed.

The parties fully argued the issue of the controlling date, at which time Micheve never questioned whether a finding in the association's favor regarding the date of acquisition of title would entitle Micheve to a refund or other fees that were not even at issue in the case. The association was precluded from presenting any new evidence on the issue during appeal. The court affirmed the trial court's ruling on all issues.

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Unit Owner Not Responsible for Maintenance Fees Charged to Interval Owners
Surrey Condominium Association Inc., v. Webb, 163 S.W.3d 531 (Mo. App. 2005)
Assessments: Assessments for maintenance fees chargeable to interval owners are not the responsibility of the unit owners, and the governing documents do not authorize this assessment against the unit owners.


Imogene and Delbert Webb owned one of the 28 units in the Surrey condominium project, governed by the Surrey Condominium Association, Inc. ("association"). The Webbs paid a monthly fee of $60; however, in 2000, the monthly fee, including maintenance fees, was raised to $400 per month. The Webbs refused to pay. The association stated that the increase was to re-carpet and refurnish the units; however, the Webbs' unit had not been refurbished -- only units subject to interval ownership had been refurbished. Although the Webbs offered to pay the original assessment amount, the association declined the payment and sued the Webbs for unpaid maintenance fees of $9,700 and to enforce the assessment lien. The trial court determined that both the assessments and the assessment lien were void and unenforceable. The court ruled in favor of the Webbs, and the association appealed, arguing that the ruling allowed the Webbs to avoid paying their fair share of the common expenses. 
       
Determining that the condominium's declaration did not authorize the assessment of maintenance fees against the Webbs, the appeals court upheld the trial court's ruling. In doing so, the court noted that the declaration bound the association to exercise its assessment authority only in a manner consistent with the declaration. In this case, the declaration did not provide the association with the authority to assess maintenance expenses against owners such as the Webbs.
 
As the appeals court noted, the project consisted of 28 condominium units that may be purchased in one of two ways: unit ownership and interval ownership. The distinction of ownership was important to the court because the declaration sets forth the assessment obligation based on the class of ownership. Article VII of the declaration states that both unit owners and interval owners must pay their pro rata share of the common expenses. This provision also states that the interval owners' shares of common expenses must be further broken down in accordance with the percentage of ownership interest in the unit, and are assessed as part of the maintenance fee.

The declaration also states that interval owners must pay a maintenance fee, as well as that their share of common expenses such as repainting interior walls, replacing furniture, insurance for unit contents, and membership in an interval-exchange organization.
       
At trial, the association stated that the Webbs' assessment was based on the same category and expenses of an interval owner and even stated that the expenditures provided no benefit to unit owners such as the Webbs. The expenditures attributed to the Webbs' assessment included contributions to reserve funds used to remodel units, weekly parties to entice interval owners, fees for use of credit cards to pay assessments, and a reserve fund for uncollected maintenance fees. The trial court found that the Webbs received no benefit from the expenditures and determined that the maintenance fees and resulting lien were void and unenforceable against the Webbs.
 
On appeal, the association's argument centered on its belief that the trial court's decision created a situation in which the Webbs were not required to pay their fair share of the common expenses. However, in the appeals court's view, under Missouri law "a condominium association may only exercise its powers within the constraints of its condominium declaration." The court noted that the declaration convinced the court that the association can only assess a maintenance fee against an interval owner and not against a unit owner.

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Setback Requirement Abandoned Due to Previous Variances
Western Sunview Properties, LLC v. Federman, 338 F. Supp. 2d 1106 (Dist. Haw. 2004)

Architectural Control: Plaintiffs were denied relief under design guidelines when the court determined that the provision in question was effectively abandoned because of the number of variances that had previously been granted and of which plaintiff was aware.

Western Sunview Properties LLC, ("Western") owns Lot 5 in the Bluffs at Mauna Kea. Irwin and Concepcion Federman own Lot 6. The community is a luxury subdivision developed by Mauna Kea Properties, Inc. ("MKP") and is part of the larger Mauna Kea Resort. All lots are subject to the Declaration of Protective Covenants, Conditions, and Restrictions and the By-Laws of the Bluffs at Mauna Kea Community Association. Plans for any lot improvements must be submitted to the association's design committee for approval.
 
The community is part of a special management area ("SMA"), and the developer obtained an SMA permit as part of the development process. The SMA permit requires a 40-foot setback from the shoreline. This area is known as the special setback area ("SSA").
       
Western executed a sales contract for Lot 5 in September 1999 and completed the transaction in January 2000. In July 2000 the Federmans retained architects to design their home on Lot 6. The design committee approved plans for a pool, spa, and terrace but disapproved plans for two palapas (small pavilions) in the lot's SSA. In connection with the design approval process, the sole member of the design committee at that time, William Mielcke, visited Lot 6. After Mielcke's visit, the Federmans were told to lower their pool and terrace elevation to protect the view from Lot 5. By late 2001, a new design committee was in place, and the Federmans again submitted the requested variances to the design committee for approval. The design committee still refused to grant a variance for the palapas.  The Federmans revised their plans to eliminate the palapas, and the plans were approved in February 2002. Construction began in March 2002.
       
In September 2000, Western engaged an architect and received variances from the design committee regarding the roof, paving, a rock wall, a gate, boulders, and a ditch, all of which were within the SSA of its lot. Western's architect visited the community about once a month to inspect Lot 5. During one visit, the architect became aware of the construction and excavation on the Federmans' adjacent lot.  Western asserted that the real-estate agents and MKP were aware of the SSA restrictions and that the developer advised the Federmans that considerable controversy surrounded construction within the SSA.
       
Western also claimed the Federmans had connections with the design committee that led to approval for structures that were otherwise impermissible. Specifically, Western alleged that the Federmans' attorney and engineer were on the design committee at some point during the approval process, although no conflict was disclosed.
       
Western eventually sued the Federmans and the developer, alleging that the variances granted to the Federmans for construction within the SSA violated the design requirements. Section 4.17 of the design requirements governs residential lots and the SSA. That section prohibits construction of buildings or structures within SSAs to preserve hillsides and protect views. However, Section 8.8 of the declaration gives the design committee the authority to grant variances for improvements that do not strictly comply with the design guidelines if the improvement is "suitable to the area in which it will be located." Western maintained that variances regarding the SSA were construction compliance issues rather than general design guidelines and, therefore, were not subject to the variance provision set forth in the design requirements.
       
Although the Federmans stated that the design committee is not required to consult with adjacent lot owners during the approval process, Western asserted that other owners in the community had obtained their neighbors' approval before building any improvements in SSAs. Western also contended that Section 12.5 of the declaration, which relates to general enforcement rights, gives any owner within the community the right to enforce the declaration through legal or equitable means.
       
In addition to design requirement issues, Western claimed the Federmans falsely reported their purchase price with use of artificial landscape credits. As a result, Western claimed, it and all subsequent purchasers were deprived of accurate market information, and Western had relied on such false information when purchasing Lot 5. The Federmans claim they did not report the purchase price for Lot 6 to any real-estate agent, multiple-listing service, or Western.
       
The court first examined whether the design committee had the authority to grant variances with respect to the SSA, and determined that the design committee had effectively abandoned the variance provision in the design guidelines because pools or terraces that did not block views were consistently allowed in the SSAs. Each oceanfront lot in the community received variances for the construction of improvement within its SSA. Additionally, at least six such lots received variances to build pools and terraces within their SSAs. The Federmans asserted that Western contacted broker Deborah Au and specifically asked whether pools were permitted in the SSA, and that Au provided Western with documents stating that the design committee permitted pools that did not block views. The court ruled in favor of the Federmans on their summary-judgment claim regarding abandonment. Given that the provision of the design guidelines related to residential lots and the SSA was effectively abandoned, the court determined that Western was not entitled to injunctive relief.
       
The court also denied Western's nuisance claim against the Federmans. Western asserted that the Federmans' construction created an unreasonable and substantial interference with its use and enjoyment of Lot 5. However, the court determined that Western could not establish that a pool and terrace diminished the view from its lot. Western was also unable to establish that its home's value suffered, especially since it received a substantial offer to purchase its lot.
       
The Federmans asserted that Western did not have the right to enforce the setbacks established by the SMA permit. The court agreed, finding there was no private right of action to enforce a shoreline setback. The statute gives exclusive enforcement authority to the county planning department or an agency designated by the county. Therefore, Western was not the appropriate party to sue the Federmans.
       
Regarding Western's claim that the Federmans engaged in fraud and negligent misrepresentation by falsely reporting the sale price of Lot 6 to the state Bureau of Conveyances, the court denied both parties' motions for summary judgment. The court determined that the Federmans did make representations that they knew to be false with respect to the purchase price of Lot 6. Although the Federmans may not have contemplated Western's specific reliance, the court ruled that the Federmans were not required to have a particular person in mind. The court noted that a question of fact existed as to whether the Federmans knew that prospective purchasers would rely on their misrepresentation of the selling price.  The court denied Western's request for punitive damages, however, noting that the misrepresentation did not rise to the level of wanton, oppressive, or malicious conduct.

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Satellite Dish Installed on Condominium Common Area Violates Covenants
Board of Managers of Holiday Villas Condominium I v. Bautista, N.Y. City Civ.Ct., CV040414/04, May 5, 2005
Covenants Enforcement/Use Restrictions: A New York court ruled that an unapproved satellite dish installed on a patio that was designated as limited common area violated a condominium's governing documents.

Ruel and Antoinette Bautista owned a unit in Holiday Villas Condominium I, located in Staten Island, New York, that was subject to the condominium association's bylaws, covenants, and restrictions. The Bautistas did not acquire title to any exterior portions of the condominium, including the patio outside the unit, which is classified as "limited common area."   
       
In 1999, the condominium's board of managers enacted rules that permitted owners to install exterior antennae and satellite dishes on the common elements. The rule provided that owners must sign an installation agreement that specified, among other things, that any satellite dish must be 18 inches or smaller and placed on the upper roof of the building. In May 2001, during an inspection by the board of managers, a board member observed the Bautistas' satellite dish on the patio outside their unit. The board began sending the Bautistas letters in June 2001, asking them to remove the satellite dish because it was located on common area and not approved by the board. The Bautistas ignored the requests, and in December 2003, the board began assessing the Bautistas a $100 weekly penalty, and finally sued them for failure to pay the fines and assessments levied against them. A trial was held on April 4, 2005.
       
Ruel Bautista testified that he installed the satellite dish in 1997. It measured approximately 33 inches so it would be large enough to receive broadcasts from his native country, the Philippines. He contacted the board in 1997 for approval to install the dish on the roof, but his application was denied because the dish was too large. The board had no record of this correspondence.
       
Each unit, the common elements, and the limited common elements are defined in Holiday Villas' Plan of Condominium. The plan defines limited common elements as certain portions of the common elements limited in use to specified owners, subject to the board's right to enter any such areas for maintenance, repair, or improvement. Also included in the plan is a provision that the condominium must carry liability insurance for personal injuries occurring in common areas.
       
The bylaws set forth the rules by which each owner must abide and provide that "No radio or television aerial shall be attached to or hung from the exterior of the Unit except such as shall have been approved in writing by the Board."
       
The Bautistas argued that they were entitled to install the satellite dish because the Code of Federal Regulations ("CFR") prohibits 

Any restriction, including but not limited to any state or local law or regulation, including zoning, land-use, or building regulations, or any private covenant, contract provision, lease provision, homeowners association rule or similar restriction on property within the exclusive use or control of the antenna where the user has a direct or indirect ownership or lease-hold interest in the property that impairs the installation, maintenance, or use of an antenna that is (A) used to receive direct broadcast satellite service, including direct-to-home satellite service, or to receive or transmit fixed wireless signals via satellite, and (B) one meter or less in diameter. 

In considering the Bautistas' argument, the court cited Woodbridge Condominiums Owners' Association v. Jennings (No. 2003-L-112, Ohio App. Ct., September 30, 2004, CALR November 2005), in which the owner installed a satellite dish on a patio next to the unit, an area considered limited common area, in violation of the condominium rules and regulations. In Woodbridge, the court ruled in favor of the owner, noting that the rule was subject to the CFR and was preempted by the federal statute. The determinative in that case was the finding that the patio, although part of the common area, was for the exclusive use of the owner and under the owner's exclusive control. The fact that the owner had exclusive control of the area triggered the statute, and the statute preempted the association's rules. 
       
Interestingly, the Woodbridge court noted that other prior cases from around the country that dealt with this issue almost uniformly held that as long as the condominium rule was reasonable, the restrictive rules would be enforced over the individual whims of unit owners. In New York cases that involved the same issue as it pertained to apartment buildings, the courts' findings were also determined by the locations of satellite dishes and whether the locations were in the exclusive control of the tenants.
       
The court found that inherent in the condominium concept is the principle that to promote the well-being of the majority of owners, because they are living in such close proximity, each owner must give up a degree of freedom of choice that he or she might enjoy with a privately owned property. It further determined that, although on its face it appeared the federal government had preempted state law and condominium rules concerning placement of satellite dishes, the statute did not apply to property that was not within the exclusive use or control of the antenna user. 
       
The Bautistas' satellite dish was located on the patio in front of their unit. Under the condominium plan, this area may be used by the Bautistas to the exclusion of other unit owners, but not to the exclusion of the board of managers. The patio was not included in the defined area assigned to the exclusive use of the Bautistas. Further, the patio area is the public's means of entering and leaving the Bautista's unit, and the condominium is responsible for maintaining and carrying liability insurance on the area. The court acknowledged that if the Bautistas had installed the satellite dish on a deck or balcony attached to their unit, the statute would clearly apply. However, because the patio was designated to be common area accessible by others, it fell outside the ambit of the CFR. 
               
In the court's opinion, the installation of the satellite dish constituted a "taking" as defined in the statute because under the statute, the servient owner may apply a reasonable fee or cost on a user, presumably as compensation for the intrusion onto the property. The court concluded that the condominium was entitled to compensation for the intrusion.  
       
The Bautistas raised the statute as a defense to the board's claim for the fines it assessed. The court explained it did not have direct declaratory judgment jurisdiction, and the Bautistas must seek declaratory relief in the Supreme Court. The court added, however, that it felt the Bautistas were being premature in seeking to have the court intervene in a situation without having exhausted the remedies available to them under the condominium documents. 
       
The board sought damages in the amount of $100 a week against the Bautistas. The Bautistas were charged with violating Section 6(a) of the house rules, which prohibits any object being attached to the front patio of a unit without the board's prior written consent. Section 24 fixes the penalty for violating Section 6(a) at $25. The provision does not state if the fine is weekly or monthly. Since the assessments are billed on a monthly basis, the court determined that it was reasonable for the fines to be assessed monthly as well. The court found the portions of the documents that provided for penalties were vague and unenforceable, so the court awarded the board $505 with interest from the date of judgment, as well as reimbursement for court costs.

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Owners Required to Vacate Units for Mold Remediation
Forrestal Village Community Services Association, Inc. v. Mayor, No. C-199-04, New Jersey Superior Ct., May 11, 2005
Documents/Powers of the Association: An association has the implied authority to require owners to temporarily vacate their units, at their sole cost and expense, for purposes of mold remediation.


The Forrestal Village Community is comprised of condominium units originally constructed as apartments. After the condominium conversion, water damage was noticed in several units. The Forrestal Village Community Services Association Inc. ("association") sued the company responsible for the condominium conversion, asserting construction defects that led to water damage and mold growth. The parties settled the case, and the association was awarded $2 million, although it had claimed $4.6 million in damages.
       
The association held several open meetings to discuss the remediation project. During and following the litigation, the owners were specifically assessed for roof and balcony replacements. More water damage and mold growth was discovered in that process. Another special assessment was levied to cover that portion of the remediation project not covered by the settlement amount.
       
The approved resolution regarding the remediation project required owners and tenants to vacate their homes at their own expense for the project to be completed. The total estimated time the owners were required to vacate was approximately 28 days. The special assessment did not cover relocation costs during this time period. Although they did not challenge the calculation method for the special assessment, Marissa Mayor and several other owners objected to the relocation requirement.
 
The association sued Mayor and the other owners, asking the trial court to require that they move out of their units temporarily for the remediation. The court addressed (1) whether the association was authorized to require owners to vacate their units temporarily for such purposes under either the governing documents or New Jersey's Condominium Act ("Act"), and (2) what standard of review applies to the association's rule-making authority.
       
The Act states that condominium associations "shall be responsible for the administration and management of the condominium and condominium property, including but not limited to the conduct of all activities of common interest to the unit owners." The court cited Condominium and Homeowner Association Practice: Community Association Law (2d ed. 1988), noting that "the condominium form of ownership is based upon the principle of shared ownership and shared responsibility." The court also stated that, under the Act, an association's board is specifically authorized to seek injunctive relief to enforce its bylaws.
       
The association cited Floral Park Tenants Association v. Project Holding, Inc., 152 N.J. Super. 581 (Ch. Div. 1977) in support of its position. Floral Park is a landlord-tenant case in which a landlord required tenants to temporarily vacate their premises for substantial renovations. In Floral Park, the tenants argued that the landlord's position violated the state's Anti-Eviction Act, but the court disagreed -- the Anti-Eviction Act was created to prevent arbitrary and unreasonable evictions. The court held that the temporary eviction requirement in Floral Park was not arbitrary, unfair, or permanent subject to the terms of the Anti-Eviction Act.
 
Mayor and the other owners argued that the Act and Forrestal's declaration of covenants did not convey to the association the authority to require owners to "abandon" their homes. The court likened the term "abandon" to "eviction," stating that both contemplate the "permanent relinquishing…with the intent of never again resuming one's right or interest therein," which clearly does not fit the facts in this case. Noting the condominium's hybrid nature, the court stated that, in exchange for the benefits of living in a condominium subject to association regulation, owners must give up an unfettered freedom of choice they might otherwise enjoy elsewhere. The court stated that it will not interfere with an association's decisions unless they violate the business-judgment rule. The court compared an association's relationship with owners to the fiduciary relationship between a corporate board and its stockholders.
 
To determine whether the association's decision met the business-judgment rule, the court applied a two-pronged test: (1) whether the action was authorized by statute or bylaws, and (2) if so, whether the action was fraudulent, self-dealing, or unconscionable. Mayor and the owners did not assert a claim of fraud, bad faith, or self-dealing. The cost of remediation was the main factor in the association's determination of how best to proceed. The court also found the engineer reports that led to the remediation project to be credible and well-founded.
 
Although the Act does not expressly grant an association the right to force an owner to vacate a unit, it includes a catch-all giving the association powers under the declaration or bylaws. The association's declaration contained a similar catch-all phrase.
 
Based on the engineer reports and expert testimony, the court determined that the association's actions were well-founded and the remediation project was necessary to protect the interests of all owners. The court noted that the association weighed its options and held several meetings regarding possible solutions. The court declined, however, to issue injunctive relief for the association, stating that if the owners still did not comply, the association could sue the individual owners and require such owners to be individually responsible for any and all increased costs of construction remediation, including engineering fees and other related costs. The court denied injunctive relief and dismissed the complaint with prejudice.
 
Editor's Observation: Thanks to E. Richard Kennedy of The Kennedy Law Firm, in Sea Girt, New Jersey, for contributing this case.

©2006 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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