June 2008
In This Issue:
Architectural Review Committee Has Right to Determine a Lot's Ocean View Status
Articles of Incorporation and Bylaws Do Not Equate to a Declaration
Restrictive Covenants Consider Bobcat a Wild Animal
Large Garage Not a Violation of Residential Use Covenant
Board Has Standing to Sue Developer-Appointed Board Members without First Pursuing Arbitration
Change in Planned Community Act Gives Association Authority to Foreclose on Home
Owners Awarded Costs, Attorney Fees Despite Their Initiation of Suit
Assessments Are Debt Under Florida, Federal Collection Practices Laws
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Architectural Review Committee Has Right to Determine a Lot's Ocean View Status

Andrews v. Sandpiper Villagers, Inc., 215 Ore. App. 656, 170 P.3d 1098 (2007)

Architectural Control: Because a declaration did not define "designated ocean view lots," an Oregon appeals court looked at extrinsic evidence of the meaning of the phrase to determine that every subdivision lot with a view of the ocean was a designated ocean view lot.

Sandpiper Village, located in Lincoln County, Ore., was subjected to a declaration of covenants and restrictions in 1968, which prohibited trees, hedges, shrubbery, plants or fences that were over 6 feet tall. In 1993, the declaration was amended by the board of directors of Sandpiper Villagers, Inc. and approved by a majority of homeowners in accordance with the declaration. The 1993 amendment to the declaration prohibited trees, hedges, shrubbery, plants or fences from obstructing ocean views without board approval. The community's architectural review committee ("ARC") was responsible for determining view impairment. If the ARC determined that an owner impaired a view, it notified the owner to trim the vegetation or remove the obstruction within 30 days. If the owner failed to remove the obstructing item, the ARC had the right to have the obstruction removed at the owner's expense.

In 1994, the declaration was amended again ("1994 declaration"), and most of the amendments were approved by the homeowners. Other amendments and reorganization and renumbering of the declaration were termed stylistic changes by the association's lawyer. For example, the ocean view obstruction provision was revised to provide that views from "ocean view lots" could not be obstructed without board approval.

Gail Andrews purchased property in Sandpiper Village in 1997. She reviewed the 1994 declaration as part of her title report, including the certification that the declaration had been approved by a majority of the homeowners. In June 2003, an association member sent notice to Andrews and the ARC, requesting that Andrews trim trees on her property to preserve his ocean view. Eight months later, after Andrews had failed to trim the trees, the ARC requested in writing that she do so within 45 days. Andrews then sued the association, asking the court to determine that the association had no authority to require her to trim the trees because there was no documentation or evidence showing that the complaining owner's property was designated as an ocean view lot.

The association answered Andrew's complaint and asked the court for summary judgment, stating that because the phrase "designated ocean view lot" was drafted as a stylistic change and was never approved by the homeowners, it should be disregarded and that the 1994 declaration, without that phrase, had the same effect as the 1993 declaration. The association maintained that even if the court deemed the phrase to be a valid part of the 1994 declaration, the phrase was ambiguous. The association contended that the court should either defer to the ARC's interpretation of the phrase or determine—based on extrinsic evidence—that it was not intended to effect a substantive change to the 1993 declaration, under which all lots were entitled to view protection.

Andrews argued that a material issue of fact existed as to whether the 1994 declaration had been properly enacted, that the meaning of the phrase "designated ocean view lots" was not ambiguous, and that there was no evidence that the complaining owner's lot had been so designated. She also argued that if the phrase was ambiguous, the board was entitled to interpret the declaration, not the ARC. The trial court ruled in favor of the association, and Andrews appealed.

The appeals court determined that the phrase "designated ocean view lots" was indeed ambiguous because the term was not defined by the declaration. It also determined that the dictionary meanings of the word "designated" indicated that a "designated ocean view lot" was one that had been in the past declared, identified, labeled, named, or chosen and set apart as such, but that nothing in the 1994 declaration expressly delegated the performance of such task to any entity. Therefore, the court considered extrinsic evidence of the phrase's meaning and in light of the drafter's assertion that the "stylistic changes" to the 1994 declaration were not intended to change the substance of the 1993 declaration, the court agreed with the association that the 1993 declaration was intended to protect all lots with an ocean view and that there was no genuine issue of material fact pertaining to the meaning of the provision. The court affirmed the trial court's decision to grant summary judgment to the association.

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

Articles of Incorporation and Bylaws Do Not Equate to a Declaration

Dogwood Valley Citizens Association, Inc. v. Shifflet, 275 Va. 197, 654 S.E.2d 894 (2008)

Covenants Enforcement: Under Virginia's Property Owners Association Act, a citizens association did not qualify as a property owners association because filing articles of association and bylaws is not the same as recording a declaration, which imposes on the association operational or maintenance responsibilities for the common areas of the development.

In this appeal, the Virginia Supreme Court addressed whether the trial court erred in determining that Dogwood Valley Citizens Association, Inc. ("association") did not qualify as a property owners association under the Virginia Property Owners Association Act ("Act") and, therefore, was not permitted to levy special assessments against the homeowners in the Dogwood Valley development.

The court first considered whether the association was a property owners association under the Act in Dogwood Valley Citizens Association, Inc. v. Winkelman, 267 Va. 7 (2004). Qualification as a property owners association under the Act requires that a declaration impose on an association both the power to assess fees for road and common facilities maintenance and the duty to perform such maintenance. In Winkelman, the court ruled that although the covenants filed against the development conferred upon the developers and their assignees the power to assess an annual fee for upkeep of the roads and common facilities, those covenants did not require the association to maintain the roads or common area of the development.

Moreover, the court stated that the association had failed to identify any recorded document that expressly required the association to maintain the roads or common areas. Accordingly, the court concluded that since such powers and duties were not contained in a recorded declaration, the association was not a property owners association as defined by the Act and thus did not have the ability to enforce a special assessment on landowners in Dogwood Valley.

Following the court's decision in Winkelman, the association's president filed an affidavit and a copy of the association's articles of incorporation and bylaws in the Virginia land records. The bylaws contained a provision stating, "It shall be the duty of the Board of Directors to: …cause the roads and common facilities to be maintained according to the extent that the funds collected permit." The association then levied special assessments against its members. When some of the landowners refused to pay these special assessments, the association filed warrants in debt, claiming that the landowners were indebted to the association for the special assessments. The trial court denied the association's claims. The appeals court upheld the trial court's decision, stating that filing articles of incorporation and bylaws did not qualify the association as a property owners association under the Act. Therefore, the association did not have the right to levy special assessments, charge interest, charge penalties, or collect attorneys' or docketing fees under the Act. The association then appealed to the Virginia Supreme Court.

On appeal, the association argued that the defect that prevented it from qualifying as a property owners association under the Act in Winkelman was the failure to have a document on file in the land records that imposed on it the responsibility to maintain the roads and common areas. The association maintained that this defect was cured by recording the articles of incorporation and bylaws in the land records because those documents provided the requisite duty to maintain the roads and common areas of the development.

The court rejected the association's argument that the definition of "declaration" under the Act included instruments such as articles of incorporation and bylaws, if such documents are filed in the appropriate land records and if they create either certain assessment authority or maintenance duties for the property owners association. According to the court, such a literal application of the phrase "any instrument" in the definition of "declaration" is inconsistent with the concept of "declaration" used in other provisions of the Act. The court further stated that the Act applies to "developments subject to a declaration," defines "development" as "real property…subject to a declaration which contains both lots…and common areas with respect to which any person, by virtue of ownership of a lot…is obligated to pay assessments provided for in a declaration." Accordingly, the court ruled that these two definitions, along with the definition of "declaration" in the Act reflect the intent of Virginia's legislature to apply the Act to real property subject to certain benefits and burdens that are part of the bundle of property rights conveyed with the transfer of ownership of the property. Such benefits and burdens are generally described as restrictive covenants that run with the land and are included in a declaration.

Applying well-known real property legal principles, the court stated that articles of incorporation and bylaws are not instruments that apply to real property and are not instruments that subject real property to certain burdens and benefits that pass as part of the property rights in the conveyance of the property. Thus, according to the court, the association's articles of incorporation and bylaws could not be a "declaration" for the purposes of development under the Act.

The court also listed four additional reasons why recording the articles of incorporation and bylaws did not give the association the power to levy special assessments against its members: (i) other provisions of the Act treat declarations as distinct from articles of incorporation and bylaws; (ii) if the court allowed the association to proceed with its arguments, changes in existing duties and responsibilities of an association and its members could occur without any notice to, or concurrence by, the property owners, despite the fact that the Act considers a declaration to be a document that can be changed only if the lot owners have notice and agree to the change, which is a condition consistent with the method of altering restrictive covenants applicable to real property; (iii) the Act allows unilateral action only in limited circumstances—such as a scrivener's error, a mathematical mistake, or an inconsistency—and any other kind of change must have a two-thirds vote of the association's board of directors, which did not happen in this case; and (iv) the responsibility for maintenance of common areas and roads must be "imposed" on the association; voluntary assumption of this duty under the Act is insufficient.

Therefore, the court affirmed the appeals court's ruling that the association did not have the authority to levy special assessments since the association did qualify as a property owners association under the Act.

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Restrictive Covenants Consider Bobcat a Wild Animal

Lineberry v. Riley Farms Property Owners Association, 95 Ark. App. 286, 236 S.W.3d 534 (2006)

Covenants Enforcement: An Arkansas appeals court affirmed a trial court's decision that an owner keeping a bobcat violated the subdivision's covenants as did a fence the owner constructed on her lot.

In April 2004, Margie Lineberry purchased property in the Riley Farm subdivision in Fort Smith, Ark. Prior to Lineberry's moving into the subdivision, the developer of Riley Farm recorded a document that contained a number of restrictive covenants, two of which are relevant in this case. The first covenant prohibited any resident of Riley Farm from keeping "cattle, swine, poultry, fowl, wild animals, or exotic animals" in the subdivision. The second covenant required that plans for all fencing, whether on lot lines or surrounding patios, pools, barns, or other areas of a lot must be submitted to, and approved by, the architectural control committee ("ARC") before construction began. The second covenant also provided that if the ARC did not approve or disapprove a fence plan within 14 days, the plan was deemed approved. If a dispute occurred, Riley Farm Property Owners Association's ("association") resolution of the dispute was binding unless the resolution was arbitrary and capricious.

Shortly after Lineberry moved into the subdivision, members of the association discovered that she kept a bobcat at her residence. On May 27, 2004, the association sent Lineberry a certified letter informing her that keeping a bobcat at her residence violated the restrictive covenant's prohibition on wild or exotic animals and that she needed to remove it. Lineberry never retrieved the letter from the post office.

On May 21, 2004, Lineberry faxed a letter and a drawing to Lucas Wilkes, the association's office manager, requesting approval of a plan to erect a fence around her home. After receiving the fax, Wilkes placed a stamp on the Lineberry's letter that read, "Approved," with two blank lines below the word "approved" for the signatures of two ARC members that were required for fence construction in the subdivision. In response to the request, on June 1, 2004, the ARC chairman made notations on the drawing submitted by Lineberry highlighting aspects of her fence construction plan that did not comply with the subdivision's covenants. Lineberry's faxed notice was not signed by two ARC members.

On June 3, 2004, Wilkes spoke with Lineberry by telephone and informed her that her fence application had not been approved and the board members wanted her to remove the bobcat from her property. The following day, Wilkes and Lineberry met in person to discuss the fence and the bobcat. During this meeting, Wilkes retrieved a copy of the May 27, 2004, certified letter the association sent Lineberry, read it to her, and encouraged her to pick up the copy waiting for her at the post office. Lineberry never picked up the letter, continued to house the bobcat, and began building her fence.

On June 15, 2004, a member of the ARC visited Lineberry's home and told her that the fence she was building violated the subdivision's restrictive covenants. Lineberry responded that she believed her construction plan had been approved. Wilkes confirmed that Lineberry's plans had not been approved. Lineberry indicated that she was willing to work with the ARC to bring her fence into compliance. Subsequently, several members of the ARC drafted an agreement stating that Lineberry could build a fence, but the fence had to comply with the "set-back line" provision of the covenants. The ARC members then signed the agreement, and Lineberry agreed to comply with the agreement. Instead, she continued building the fence according to her original construction plan.

On July 23, 2004, the association sued Lineberry, asking the court to require Lineberry to remove her bobcat from the subdivision and either remove the fence she had built or bring it into compliance with the covenant. The case was tried before a jury in December 2004. The jury returned a unanimous verdict in favor of the association on the question of whether Lineberry's housing a bobcat on her property violated the terms of the covenant. By a vote of 11-1, the jury returned a verdict in favor of the association on the question of whether Lineberry's fence violated the covenants. The trial court ruled in favor of the association on January 3, 2005. On January 6, 2005, the association filed a motion requesting that Lineberry pay the costs and attorney's fees it incurred litigating the case. On January 20, 2005, the trial court ordered Lineberry to pay $22,989.70 in attorney's fees and $382.75 in costs. Lineberry subsequently appealed.

On appeal, Lineberry argued that she did not violate the two restrictive covenants and appealed the court's award of attorney's fees and costs. The appeals court first considered Lineberry's argument that the trial court erred by refusing to give jury instructions that she had proposed, which set out a test for determining whether an animal should be considered wild. Lineberry contended that the jury should have been given instructions that animals normally living in the wild could be domesticated and that "wildness" should be determined on an individual basis.

However, according to the appeals court, as a matter of law, litigants are entitled to a jury instruction when it is a correct statement of the law and there is some basis in the evidence to support it. The court also pointed out that an appeals court will not reverse a trial court's refusal to give a proffered instruction unless there was an abuse of discretion. In this case, the appeals court found that the statement given to the jury, which was based on the Restatement (Second) of Torts, Section 506 (1977), was supported in the law and the evidence presented at trial. The court ruled that since Lineberry failed to prove that her instruction was supported by the law or evidence presented at trial, stating, "it cannot be said that the trial court abused its discretion in its failure to give the instruction."

Next, Lineberry argued that there was insufficient evidence for the jury to find that the commission disapproved her request to erect a fence. However, since Lineberry did not move for a directed verdict on this issue, it was not preserved for appeal, and the appeals court did not address the issue.

Finally, Lineberry argued that the trial court erred in its award of attorney's fees and costs to the association as the prevailing party. However, an award of attorney's fees will not be set aside absent abuse of discretion by the trial court. Since the trial court based its decision to award attorney's fees and costs on a previous case and considered factors such as the experience and ability of the attorney involved, the time and labor required properly to perform the legal service, and the nature of the issue involved, the trial court did not abuse its discretion. Therefore, the court upheld the trial court's decision on this issue as well.

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Large Garage Not a Violation of Residential Use Covenant

Micklon v. Dudley, No. DV-15-85, Mont. Dist. Ct., May 3, 2006

Covenants Enforcement: Defendant built a large two-car garage on an adjacent lot to use as a workshop, and plaintiffs sued claiming it was a violation of a covenant that required all buildings on a lot to have a residential purpose. The court ruled that since the building was built adjacent to his home on the neighboring lot, the residential requirement had been met.

Arthur and Lynn Dudley purchased two adjoining lots in a subdivision located near Libby, Mont. When purchased in 2004, a 2,000-square-foot home with an attached two-car garage was located on one lot, and the other was vacant. After purchase, the Dudleys built a 3,000-square-foot shop. The shop had steel siding, no windows, two 14-feet-high garage doors, a motor-home service bay with a walk-under pit, and a hydraulic lift for automobiles. Although the house has an attached two-car garage, it was insufficient to house the Dudley's motor home, two ATVs, and dune buggy.

Dennis Micklon, another lot owner, sued the Dudleys, claiming that the shop violated a provision of the original CC&Rs for the subdivision filed in 1983. Micklon argued that the shop violated a clause in the declaration that stated that lots could only be used for residential purposes.

The court's analysis stated that restrictive covenants are to be strictly construed. Moreover, if they are clear and unambiguous, the language of the restrictive covenants controls. When the covenant is ambiguous, however, restrictive covenants should be strictly construed and ambiguities resolved to allow free use of the property. The main issue before the court was whether the building qualified as residential use of real property. The court compared this case to two specific Montana cases with similar sets of facts.

In the first case, Hillcrest Homeowners Association v. Wiley, 239 Mont. 54, 778 P.2d 421 (1989) (CALR, April 1990), the defendants purchased a lot in a subdivision in which a restrictive covenant provided that "no lot shall be used except for single family residential purposes." The defendants built a steel-sided garage on their lot and did nothing further with their property until the homeowners association sued seven years later, asking that it be removed. The district court ruled that the garage, by itself, was a permissible "residential purpose." However, the Montana Supreme Court disagreed, stating that a garage, by itself, is not consistent with "single family residential purposes" when the garage is not used in conjunction with a residential dwelling.

The second case evaluated by the court, Tipton v. Bennett, 281 Mont. 379 (1997), ended with similar results. In that case, the trial court ruled that the defendants violated a "residential purposes only" restriction for building a 3,200-square-foot building described as a large garage without a residence. In that case, the court ruled that the defendants could keep the storage building on the condition that a residential dwelling be constructed within one year.

In this case, the court concluded that although the structure was approximately the same size as the building constructed in the second case, this structure was not the same. Instead of being a large storage building, this building was used in the defendant's daily routine and actively used in conjunction with a residential building. The court reasoned that no house could hide the shop without rendering it unusable as a garage. As a result, the court concluded that the defendant's shop qualified as a residential use and was not in violation of the declaration.

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Board Has Standing to Sue Developer-Appointed Board Members without First Pursuing Arbitration

Board of Trustees of the Old Stone Bridge Acres Condominium Trust v. Longview Realty Trust, 23 Mass. L. Rep. 449 (2008)

Documents/Powers of the Association: Where a board of trustees has demonstrated that a majority of owners has consented to amend a declaration of trust for a condominium to remove an arbitration requirement, the defendant, as original members of the board appointed by the condominium developer, cannot move to dismiss or compel arbitration for lack of standing on the part of the board of trustees.

The developer of Old Stone Bridge Acres Condominium appointed Richard Terrill, Lawrence Doane, and Paul Beattie as the original members of the condominium's board of trust. In accordance with the condominium's declaration of trust, Terrill and Beattie resigned from the board at a set time. Eventually, the majority of the board sued Terrill, individually and in his capacity as trustee, along with Doane and Beattie, alleging negligent construction.

Relying on a provision from the declaration, Terrill, Doane and Beattie filed a motion to dismiss the case for lack of standing or, alternatively, to compel arbitration. When the condominium's declaration was first recorded, it provided that the trustees were prohibited from suing any party unless 90 percent of the unit owners consented to the lawsuit. The board was also prohibited from suing the developer without first pursuing arbitration. Terrill, Doane and Beattie argued, therefore, that the board lacked standing to pursue the claim for damages due to negligent construction.

The board, however, asserted that the declaration of trust was properly amended so that it no longer required owner approval before commencing a lawsuit. The issue before the court, therefore, was whether the original declaration of trust empowered the board to amend the terms of the declaration with approval from a majority of the unit owners. Because the declaration granted the board authority to amend with the consent of unit owners holding more than 50 percent of the interests in the condominium, and such majority of owners provided written consent to the amendment that removed the requirement for arbitration from the declaration, the court ruled in favor of the board and noted that Terrill, Doane and Beattie had failed to show that the board lacked standing to bring the suit and consequently denied the motion to dismiss.

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Change in Planned Community Act Gives Association Authority to Foreclose on Home

RiverPointe Homeowners Association v. Mallory, No. COA07-127, N.C. App. Ct., February 19, 2008

Covenants Enforcement/State and Local Legislation and Regulation: Because an association assessed a fine to a homeowner for violations of the declaration, filed a lien when the fine went unpaid, and tried to foreclose on the lien after the North Carolina legislature revised the planned community act, the association had the authority to foreclose.

Tanya Mallory purchased a home in RiverPointe, a residential community in Charlotte, N.C. Lots in RiverPointe were subject to CC&Rs. The covenants included the requirement that land, including any lawns and shrub beds, be kept "well maintained and free of trash, uncut grass [no] more than six inches in height and [free of] weeds." In May 2005, the RiverPointe Homeowners Association ("association") sent Mallory a letter, described as a friendly reminder, which stated that her lawn was in serious need of maintenance, and other residents had complained about its condition. Mallory did not conduct the requested maintenance, and the association sent her notice that the executive board would hold a hearing in August 2005 to determine whether she had failed to maintain her property in accordance with the declaration.

Following the hearing, which Mallory attended, the association determined that Mallory had violated two provisions of the declaration, fined her, and required her to submit an application for architectural review and a landscape plan. Mallory failed to comply with these requirements or pay the fine. In October 2005, the association sent her a statement showing the amount of fines owed and in November 2005 it filed a lien against her property. In December 2005, the association initiated a foreclosure proceeding and posted notice on Mallory's door. It stated that the foreclosure hearing was scheduled in January 2006, and she could redeem her property by paying the fines and expenses associated with the lien.

At a court hearing, the clerk entered an order denying foreclosure of claim of lien, which the association appealed to the superior court. The superior court entered an order preventing foreclosure and removing the claim of lien, which the association appealed again.

The association argued that the superior court erred by finding that the declaration did not permit levying fines as a means to enforce the declaration; and, therefore, the association did not have the power to foreclose. The association also argued that the superior court erred in concluding that the North Carolina Supreme Court's decision in Wise v. Harrington Grove Community Association, Inc., 357 N.C. 396, 584 S.E.2d 731 (2003), precluded the association from pursuing relief. The decision in Wise was based on a prior version of the North Carolina Planned Community Act, which stated, "Subject to the provisions of the articles of incorporation or the declaration and the declarant's rights therein, the association may" impose reasonable fines for violations of the association's rules. Because the words "subject to" and "may" required a permissive reading, fines could only be imposed so long as an association's declaration, articles of incorporation, and/or bylaws were altered to permit such enforcement. Since the association in Wise had not amended its documents to permit the association to fine anyone, the court held that the homeowners association could not levy fines on its residents.

The court in this case, however, noted that the North Carolina legislature had since amended that provision, replacing the permissive language with explicit terms stating that a homeowners association had the right to exercise the listed powers unless its articles of incorporation or declaration expressly provided otherwise. Because all the events in question had occurred after the North Carolina Planned Community Act was amended, the court ruled that the association possessed the power to levy fines against Mallory, to file a claim of lien, and to foreclose upon that claim of lien.

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Owners Awarded Costs, Attorney Fees Despite Their Initiation of Suit

United Bank, Inc. v. Stone Gate Homeowners Association, 220 W. Va. 375; 647 S.E.2d 811 (2007)

Attorney Fees: A specific West Virginia statute provided new homeowners relief for costs and attorney's fees when an association pursued the new owners for fees the former owners owed.

On May 4, 1999, Joseph and Bonnie Stever purchased a home in the Stone Gate Subdivision in Putnam County, W.Va. from Raymond and Joanie Brainard. At the time of closing, the Stevers were unaware that the Brainards were delinquent in their payment of a $1,500 buy-in fee to the Stone Gate Homeowners Association, Inc. ("association"). The association repeatedly tried to collect the buy-in fee from the Stevers; and, in 2003, the Stevers sued the association, asking the court to enjoin the enforcement of the assessment against them. The Stevers alleged they did not have knowledge of the assessment when they purchased the home, and the former owners should be responsible for the assessment.

The trial court ruled that the Stevers could not challenge the association's assessment of the delinquent fee because they filed their claim beyond the one-year statute of limitations. The court also ruled that the association could not enforce its liens against the Stevers because the three-year time period for such enforcement had expired. The court denied the Stevers' request for costs and attorney's fees based on a section of the West Virginia Uniform Common Interest Ownership Act ("Act"), which states, "a lien for unpaid assessments is extinguished unless proceedings to enforce the lien are instituted within three years after the full amount of the assessments becomes due."

The Stevers appealed the trial court's decision, requesting costs and attorney's fees and claiming that a prevailing party can recover its costs. The association disagreed, contending that an award of costs and attorney's fees is available to a prevailing party only when that party has prevailed in a suit to recover assessments initiated by a homeowners association. Both the Stevers and the association agreed that the plain language of the provision rendered such an award mandatory. Instead, the parties' disagreement was deciding who precisely should recover the award. Specifically, the issue was whether any prevailing party may recover costs and reasonable attorney's fees, as argued by the Stevers, or whether such an award was available only to a party who prevails in an action initiated by an association to enforce the levy of assessments, other charges, fines, and/or interest.

The exact language of Section 36B-3-116(f) of the Act states, "a judgment or decree in any action brought under this section must include costs and reasonable attorney's fees for the prevailing party." The court determined that the plain language of the Act grants a prevailing party his/her costs and reasonable attorney's fees regardless of how or by whom the referenced action was brought. The court reasoned that the statutory language did not make a distinction between actions initiated by a homeowner to challenge the propriety of an association's assessment and noted that the plain language required a judgment or decree in any action brought under the statute to include an award of costs and reasonable attorney's fees for the prevailing party. The appeals court ruled that the trial court had erred in not awarding costs and reasonable attorney's fees to the Stevers when they prevailed in their action against the association. As a result, the case was remanded for proceedings consistent with the appeals court's findings.

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Assessments Are Debt Under Florida, Federal Collection Practices Laws

Wright v. Bush Ross, P.A., No. 8:07-cv-1885-T-23MAP, U.S.D.C., Middle Dist. of Florida, January 18, 2008

Assessments: Assessments are considered "debt" under the Florida Consumer Collection Practices Act and the federal Fair Debt Collection Practices Act.

In January 2006, Lake Padgette Estates East Property Owners Association, Inc. ("association") sent a letter to collect assessments on Kimberly Wright's property, which was subject to recorded restrictions that included the obligation of property owners to pay assessments to the association. When Wright sued the association for violating the Florida Consumer Collection Practices Act ("Act"), the association asked the court to dismiss the case for failure to state a claim on which relief may be granted. The court denied the association's motion, stating that the assessments qualified as a form of consumer debt as defined by the Act as well as by the federal Fair Debt Collection Practices Act ("Federal Act").

Although the association argued that the Act did not apply because the association was not a "debt collector" under the purview of the Act, the court noted that the Florida Act, unlike the Federal Act, did not require that the wrongdoer be a "debt collector" but rather any person who performs certain prohibited acts while collecting consumer debts. The association also argued that the assessments charged to Wright were not "consumer debt" under the Act. To support this contention, the association cited Bryan v. Clayton, 698 So. 2d 1236 ( Fla. Dist. Ct. App. 1997) (CALR, October 1997), which held that assessments were not included in the definition of "consumer debt" under both the Florida Act and the Federal Act.

The court noted that the federal courts' decisions cited in Bryan declared that only transactions involving the offer or extension of credit to a consumer created a "debt" under the Federal Act, stating that such analysis had been thoroughly discredited, and federal courts now consistently rule that condominium assessments and homeowners' association fees are indeed "debts" under the Federal Act. The court in this case rejected the federal courts' decisions upon which Bryan was based and noted that, if the Florida Supreme Court ruled today in that case, it would disapprove Bryan, would determine that that homeowner association and condominium association assessments are "debt" under the Act, and would conclude that, under the Act, debt is created by a consumer's obligation to pay money "as a result of a transaction whose subject is primarily for personal, family or household purposes."

Because the court determined that, under the Act, a "debt" is created whenever a consumer is obligated to pay money as a result of a transaction whose subject is primarily for personal, family, or household purposes and homeowner and condominium owners' assessments qualify as "debt" under the Florida Act, it consequently denied the association's motion to dismiss.

©2008 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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