October 2008
In This Issue:
Board of Directors Must Act Within Scope of Authority
Association Has Authority to Prohibit Private Irrigation Wells
Tenants' Names May Be Requested During a Lawsuit
Plans Must Be Approved By Architectural Review Committee and Conform to Design Guidelines
Association Must Accept Partial Payments on Claim for Unpaid Assessments
Associations Must Act Timely and Decisively to Enforce Covenants
If Conditional Approval Given, Condominium Association Cannot Seek Permanent Injunction
Association Has Right to Toll Statute of Limitations on Construction Defects
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Board of Directors Must Act Within Scope of Authority

Bosco v. Arrowhead by the Lake Association, Inc., No. CV054007579S, Conn. Super. Ct., May 7, 2008

Powers of the Association: In an unreported opinion, a Connecticut superior court ruled that when an association's board of directors takes an action, that action must be i) within the board's scope of authority, and ii) must reflect reasoned decision-making.

In August 1995, Arrowhead by the Lake Association, Inc. ("association") sued the developer of the condominium, seeking to prevent the developer from amending the condominium declaration to alter the rights of existing unit owners. The court granted the association's petition for a temporary injunction on the condition that the association posted a $300,000 bond to protect the developer's interests. The association was initially unable to secure a bond and sought assistance from its members. Twenty-two unit owners agreed to pledge their own assets to secure the bond. Approximately four years after the initial injunction was granted, the court granted a permanent injunction and ordered the bond to be released. The developer appealed the decision.

In April 2001, the association's board of directors met in an executive session and passed a resolution that allowed for the disbursement of funds gained from the potential settlement with the developers. The resolution provided for $120,000 of the proceeds of the sale of the development rights to be divided among the 22 unit owners who pledged assets to secure the bond. The funds disbursed would serve as compensation to the unit owners for the loss of revenues and risk associated with securing the bond. On September 1, 2001, Alan Needleman, in his capacity as president of the board, executed a note in the amount of $120,000 to be used to pay the unit owners. In March 2002, the board overturned the decision to pay compensation to the unit owners, and this case resulted from that action.

The association argued that the board did not have the authority to pass the initial resolution, and, as a result, the execution of the note by the board members was outside the board's authority. In Connecticut, the Common Interest Ownership Act ("Act") contemplates the drafting of a declaration, creation of bylaws, establishment of a unit owner's association, and creation of an executive board to act on behalf of the association. In addition, the Act anticipates group decision-making for creation of a budget to provide for maintenance and replacement of common elements and common expenses. The court cited Weldy v. Northbrook Condominium Association, 279 Conn. 728, 904 A.2d 188 (2006), which stated that when assessing the validity of an action taken by a board of directors a court must first determine whether the board acted within its scope of authority and, second, whether the action taken reflects reasoned or arbitrary and capricious decision-making.

In determining whether the board's actions were outside the scope of the board's authority, the court first looked to whether the board was authorized to pass the resolution compensating the unit owners while in executive session. Article XXV of the community's declaration governs meetings of the association's board and states:

"All meetings of the Executive Board, at which action is to be taken by vote at such meeting shall be open to the Unit Owners, except . . . [m]eetings of the Executive Board may be held in executive session, without giving notice and without the requirement that they be open to Unit Owners, but only if either: (a) No action is taken at the executive session requiring the affirmative vote of Directors; or (b) The action taken at the executive session involves personnel, pending litigation, or enforcement actions."

Bosco argued that as the lawsuit had not yet settled, the executive meeting at which the resolution was passed pertained to pending litigation and was therefore within the scope of the board's authority. The court looked at a letter from the association's attorney addressed to all unit owners that stated that the suit with the developers had settled and that all claims had been dropped. From that letter, the court inferred that the board's vote in executive session was made with the knowledge that litigation was no longer pending and noted that the board acted in an inappropriate manner when it passed the resolution in executive session. The court also determined that the declaration provided for a means for the board to have the association ratify the decision made at the executive session to assign future income. The declaration provides:

"Upon an affirmative majority vote of the Unit Owners in attendance at a meeting at which quorum is present . . . the association may assign its future income, including its right to receive Common Expense assessments."

The declaration requires that a vote by unit owners to ratify a proposal from the board must occur within 30 days of the board's adoption of such a proposal. The board failed to mention anything at the association meeting following adoption of the resolution, and the budget did not contain language about the debt.

The court noted that the board may have had the ability to adopt the resolution in question, but that it did not follow the required procedures set out in the Act, the declaration, or the association's bylaws. Therefore, the court ruled in favor of the association.

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

Association Has Authority to Prohibit Private Irrigation Wells

Eastgate Village Water and Sewer Association, Inc. v. Davis, 343 Mont. 108, 183 P.3d 873 (2008)

Powers of the Association: A Montana appeals court upheld a ruling that an association responsible for maintaining a subdivision's public water and sewer system can prohibit owners' construction of private irrigation wells.

Eastgate Village Subdivision is located near East Helena, Mont. The subdivision was formed in 1978 subject to the declaration of covenants, conditions and restrictions. Eastgate Village Water and Sewer Association ("association") was formed in 1978, and it entered into an agreement with Lewis and Clark County to maintain and operate the water and sewage systems within Eastgate Village. The association is responsible for supplying potable water to more than 600 homes located in the subdivision.

The association's bylaws empowered the board of directors to adopt rules and regulations governing the use of water and the handling and disposition of sewage. The bylaws also give the board the authority to "adopt reasonable rules for water use."

During the summer of 2003, the Helena Valley area experienced a drought, and Eastgate's water system had to be shut down temporarily to allow its water tank to refill. In response, the board instituted temporary watering restrictions that limited the number of days residents could water their lawns.

Joseph and Gloria Davis own a double lot in Eastgate Village that has an expansive lawn and other vegetation. Because of the watering restrictions, they could not use their underground sprinkler system. Residents, including the Davises, explored the possibility of drilling their own wells for irrigation purposes to offset the effects of the water shortages and ensure that they could maintain their lawns and gardens.

At its August 2003 meeting, the board banned private wells in Eastgate for all purposes. The board's action was published in the association's December newsletter, which was delivered to all lot owners with their assessment statements.

In June 2004, the Davises contracted to have a well drilled on their lot to provide an additional source of water for lawn and garden irrigation. The Department of Natural Resources and Conservation issued them a "Certificate of Water Right," that permitted them to use up to 35 gallons of water per minute from their well, not to exceed ten acre-feet per year. The water right was limited to lawn and garden use between April 1 and Oct. 1 each year. Although the well was not connected to the association's water system, it was drilled into the same aquifier used by the association and was only 39 feet from the hose bib on the Davis' house. It was not constructed under applicable regulatory requirements to deliver domestic or potable water, and the water did not comply with the county's drinking water standards.

When the association learned of the well, it sent a letter to the Davises demanding that they abandon the well. When they refused, the association sued them, seeking declaratory judgment that the rule prohibiting the construction of irrigation wells was valid and enforceable. It also sought an order that the Davises abandon their well in accordance with guidelines established by the Department of Environmental Quality.

The Davises moved for summary judgment, denying that the association had authority to burden any property it did not own or to require them to abandon their well. The trial court found that the association's rule banning private wells was "valid and legal." It determined that the declaration did not override the association's articles and bylaws, and that, as members of the association, the Davises were contractually bound by the association's governing documents. The court further concluded that the rule banning private irrigation wells was reasonably related to the association's responsibility to preserve the health, safety, and financial viability of Eastgate's water system. The court ruled in favor of the association and ordered the Davises to permanently abandon their well. The Davises appealed and asked for a stay of execution pending the outcome of the appeal. The court granted the stay with the provision that the judgment prohibiting use of the well remain in effect.

At trial and on appeal, the Davises asserted that the association did not have the power to forbid privately operated irrigation wells that are not connected to the association's water system. They argued that the association's powers must derive from the declaration. They maintained that the declaration did not grant authority to the association over the property of the lot owners and did not prohibit private wells or specify that the sole source of water for residents of Eastgate Village is the system maintained by the association.

The association asserted that the bylaws grant the board broad powers to govern the use of water within the subdivision, including the power to adopt rules to safeguard and maintain the water system. It argued that the rule was adopted to protect the public water system from the risk of cross-contamination from wells not in compliance with mandatory public health standards.

The appeals court agreed with the trial court that, as members of the association, the Davises are in a contractual relationship with the association and are bound by the rules adopted by the association to protect and preserve Eastgate's public water system. Further, it agreed that the rule prohibiting the use of private wells was directly related to the protection of the public water system and, therefore, was within the scope of the association's responsibility and powers under the bylaws.

The court cited Montana case law to illustrate that it was a well established precedent that bylaws of a corporation, together with the articles of incorporation, constitute a contract between members and the corporation. While members of a corporation (or an association) are entitled to the benefits of membership, they are also subject to the obligations of membership. When duly enacted, bylaws are binding on all members of the corporation.

The Davises contended that because their well was not physically a part of the property the association governed, the association could not act to prevent contamination to the system unless the source of the potential harm laid within the physical structures of the system. The court disagreed, stating that the bylaws extended the board's rulemaking authority to all matters necessary or incidental to the use of water and sewer. Furthermore, the court found that the rule met the standard of reasonableness by which the validity of such rules for homeowners associations is measured.

The court noted that the Davis' well was not constructed to public drinking water standards and was untreated. Because the well was situated close to the hose bib on the Davis’ house, it would be simple to connect the untreated well to the Eastgate's water system by running a hose from the well to the hose bib on the house. Although the Davises maintained that they had no intention of connecting their well to Eastgate's water system, the court found that even the possibility that the well could be attached posed a threat. The court reviewed affidavits from an array of experts, all of whom expressed the opinion that the Davis' well posed an unacceptable risk of cross-contamination to Eastgate's water system.

Based on the foregoing, the court affirmed the trial court's judgment.

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

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Tenants' Names May Be Requested During a Lawsuit

Miller v. Savanna Maintenance Association Inc., 979 So. 2d 1235 (Fla. Dist. Ct. App. 2008)

Covenants Enforcement: To determine whether a homeowner who ran an assisted living facility in her home violated a rule against multiple families living in one dwelling, a court may request the names and addresses of the residents or the families of residents who live in the facility.

Savanna Maintenance Association, Inc. ("association") sued Una Miller, a homeowner in the subdivision, to prevent her from running a licensed assisted living facility in her home. The association alleged that its rules prohibited Miller from operating the assisted living facility. One of Miller's defenses was that the rule violated the Florida Fair Housing Act ("Act") because the residents were disabled under the terms of the Act. Miller asked the trial court for summary judgment based on that defense.

The association sought the names and addresses of current and former residents in order to take their depositions, arguing that the information was necessary to help determine whether the individuals were indeed disabled and fell within the purview of the Act or within the scope of Miller's license to operate an assisted living facility. Miller had previously produced certain residents' Department of Elder Affairs health forms, but the forms had the names and personal information redacted. On Nov. 2, 2007, the court ordered Miller to disclose the names and addresses of her current and former residents from the date the complaint was filed to the date of the order.

Miller objected to the court order. The court ruled that the names and addresses of the residents or known relatives had to be disclosed, that only written questions would be permitted, and that the court would have to approve the questions before the residents would be required to answer. According to the judge's reasoning, the only issue that could be discovered was whether the patients were "properly disabled" in order to need assistance in their daily living activities. In addition, the trial judge's order required Miller to provide for an in camera inspection of un-redacted copies of the Department of Elder Affairs Health Averment Form for all of the residents at issue. Miller appealed, seeking to quash the trial court's order.

On appeal, Miller argued that the trail court did not comply with Amente v. Newman, 653 So. 2d 1030 ( Fla. 1995) when it ordered her to produce the redacted forms. Amente required redaction of identifying information for medical records on non-party patients in a medical malpractice case. Miller claimed that the trial court's second order violated Amente because requiring her to reveal names and addresses of her residents or their relatives undid the protections afforded by the prior order and violated the residents' and their relatives' privacy rights.

The appeals court agreed with the association that Amente did not apply in this case. In Amente, a patient sued a doctor for medical malpractice in the birth of her child and sought discovery of medical records of the doctor's other patients to see if their children suffered from the same injuries as those alleged by the plaintiff. The purpose of the information was to determine whether the doctor had notice of the particular medical requirements needed. The trial court ordered production of the medical records.

In this case, the appeals court made a distinction between the order by the court in Amente and the order of the trial court in this case. Because the trial court's order did not require the production of medical records but instead required Miller to produce names and addresses, unconnected to any medical forms, the appeals court determined that Amente did not apply. Further, the court ruled that the privacy interests of the residents and their relatives and their names and addresses were not insignificant, but such information contained no damaging or sensitive information as would medical records. According to the court, the trial court balanced the privacy interests of the residents with the necessity of obtaining relevant information. Therefore, the court denied Miller's petition.

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

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Plans Must Be Approved By Architectural Review Committee and Conform to Design Guidelines

Na Pali Haweo Community Association v. Grande, No. CV NO 04-00413 DAE/BMK, U.S. Dist. Ct., Dist. of Haw., March 20, 2008

Architectural Control/Covenants Enforcement: A U.S. district court ruled in favor of a homeowners association to enforce design guidelines imposed by the association's architectural review committee.

Na Pali Haweo is a luxury subdivision located on the east end of Oahu on the summit of a ridge line of Hawaii Kai in Maunalua, Honolulu, Hawaii. The subdivision was developed with the goal of allowing access to views of the surrounding landscape, and all lot owners are bound by Na Pali Haweo's declaration of covenants, conditions, and restrictions. The subdivision's architectural design committee ("ARC") was created pursuant to the declaration to review all architectural plans for proposed construction in the subdivision. The ARC adopted design guidelines that apply to all construction activities within the subdivision. The Na Pali Haweo Community Association ("association") is responsible for enforcing the declaration, including the design guidelines.

Anthony and Narindar Grande purchased their lot in March 2000. In October, they submitted construction plans for a house to the ARC. Included with the plans was a letter from Edward Resh, their architect, acknowledging his use of the design guidelines in the plans. The ARC approved the plans, subject to a modification of the trash enclosure and clarification of the design for skylights. However, the Grandes submitted a different set of plans, which the ARC had not approved, to the City of Honolulu Department of Planning and Permitting.

The Grandes started building their house in 2003. During the initial stages of construction, the Grandes' next-door neighbor, Glen Moribe, complained to the association that the house appeared to exceed the height limit imposed by the design guidelines. The association, after receiving a growing number of similar complaints, contacted Resh in July 2003 to verify that construction of the house was in accordance with the plans the ARC approved. In a letter, Resh responded that all items were the same. Subsequently, Ronald Awa, president of the association, inspected the house and concluded that the construction appeared to conform to the approved plans. At the time, the roof framing above the master bedroom and garage had not been completed. However, during his inspection, he noticed a set of plans that indicated proposed plumbing fixtures in the room intended for storage and plumbing rough-ins in the garage.

In September 2003, the association informed the Grandes of continued complaints by neighbors about the height and front setbacks of their house. Moribe retained an attorney and demanded actual "as-built" measurements of the house. The following month, the ARC met with Grande and his design team. At the meeting, Resh produced a drawing dated Sept. 29, 2003, which included the notation, " MOVE COL,?" which referred to the columns constructed within the building envelope. Approximately a week after the meeting, the property was inspected by a county building inspector, the subdivision project manager, Moribe and his attorney.

Measurements of the property, including the front setback, second floor balcony, and garage roof taken during the inspection confirmed that portions of the second floor balcony and the garage roof extended beyond the building envelope and the front façade of the house breached the front setback restriction established by the design guidelines. Resh then submitted revised plans to the ARC and a letter requesting a building envelope and front-yard setback variance for the house. The ARC denied the request.

The ARC informed the Grandes that the committee did not have the authority to grant a variance and advised them to cease further construction on non-compliant areas of the house. A follow-up letter was also sent informing them that the ARC could not grant a height setback variance and that their garage storage area differed from the approved plans and violated the design guidelines. In late October, the Grandes ceased construction of the house.

In November, Resh submitted revised plans showing that two columns had been removed. The removal and reconstruction of the columns was approved by the ARC, but it was noted that other portions of the house would have to be moved before the plans conformed to the building envelope restriction set out in the declaration and design guidelines.

Resh submitted yet another set of plans dated Jan. 9, 2004, attempting to address the ARC's concerns, but the ARC also rejected those plans. However, the Grandes resumed construction. The association then made repeated demands that construction cease on non-compliant portions of the house and that revised plans be submitted to the ARC. The Grandes continued work. The association offered to mediate with the Grandes if they ceased all unauthorized construction, but the Grandes would not agree.

The association sued the Grandes in June 2004, requesting an injunction compelling them to comply with the design guidelines. The Grandes removed the case to federal court and filed a counterclaim against the association and Awa. The association then asked the court for summary judgment, alleging numerous violations of the declaration and design guidelines. In July 2006, the court granted summary judgment to the association on the issues of the building envelope, the front setback, the front wall and the sliding garage gate. However, it denied the motion for the skylights, air conditioning equipment, roof exhaust vents, garage, entry features, and concrete pad between the trash storage area and the driveway. The court also denied in part the Grandes' counter motion for summary judgment. After a new trial date was set, the Grandes filed a motion for reconsideration of the order, which the association opposed and the court denied.

Settlement negotiations were renewed in late 2006, and a new trial date was set. In January 2008, the counterclaim defendants (the association, Awa and several John Does) filed a motion for summary judgment. The association also filed its own motion for summary judgment and permanent injunction. The Grandes opposed the motions.

Recognizing that the moving party has the burden of demonstrating that there is no genuine issue of material fact in a motion for summary judgment, the court also noted that the requirements for issuing a permanent injunction are, "the likelihood of substantial and immediate irreparable injury and the inadequacy of remedies at law." Hawaii case law supports injunctive relief as appropriate when restrictive covenants are violated, and when enforcement of established legal rights embodied in the covenants is involved, relative hardships of the parties is irrelevant to granting injunctive relief.

The association sought summary judgment on the issues denied in the court's 2006 order. The Grandes argued that this second motion should be denied because it was essentially an untimely and inappropriate motion for reconsideration. The court disagreed. It found that the association was not precluded by the rule from bringing a subsequent motion for summary judgment to resolve remaining claims and determined that the motion was properly before the court.

The Grandes next argued that the association failed to comply with mandatory prerequisites to filing suit set forth in the declaration. The declaration requires that the association give 30 days' written notice to members before initiating enforcement action. The court noted that the association had provided the Grandes with numerous written notices of the violations and made extensive efforts to rectify the problems with the house.

The court denied, as moot, the association's claims as to the skylights (but not the framing), the roof exhaust vents, and the exterior light fixtures because the parties agreed that the items had been changed to meet the association's standards.

The association charged that the frames of the skylights violated the design guidelines because they did not match the adjacent roof. The Grandes did not dispute this allegation but stated that they were financially unable to perform the additional work on the house. While the court was sympathetic, it found that their argument was irrelevant for purposes of its ruling and granted the association's motion on the skylight frame issue.

The court addressed each of the alleged violations in turn and granted the association's motion as to the remaining claims pertaining to the air conditioning equipment, garage, exterior fenestrations, and the concrete pad between the trash area and the garage.

The motion for summary judgment filed by the counterclaim defendants was based on the grounds that (1) the Grandes, and not the counterclaim defendants, violated the governing documents; (2) the Grandes built their home from a different set of plans than the ones approved by the ARC; (3) the Grandes refused to submit revised plans to the ARC for approval; (4) the association and its president did not act unreasonably or beyond the scope of their powers; and (5) the declaration immunized the president of the association from personal liability.

The court found the facts in the first two counts sufficient to grant the motion but nevertheless addressed the Grandes' other arguments.

Anthony Grande admitted that he never submitted revised plans to the ARC because he did not want to pay the required fee. The claim that Awa refused to speak with the Grandes unless they agreed to pay the fee was not supported by any evidence and was contradicted by Grande's sworn testimony. The court found that the burden of compliance lay with the Grandes, not the counterclaim defendants. The declaration provides that members of the ARC are not personally liable to any owner for damage, loss, or prejudice issues related to the approval or disapproval of construction plans for lots in the subdivision. Awa sued the Grandes in his capacity as a member of the ARC and was immunized from the Grandes' counterclaims.

The court granted the association's request for a permanent injunction, stating that the protracted litigation originated from the Grandes' construction of a house that differed substantially from the plans submitted to the ARC for approval. Although the Grandes had many opportunities to address the violations, they failed to do so. Furthermore, the court noted that when the Grandes purchased their lot, they agreed to be bound by the community's governing documents. Based on relevant Hawaii case law, the court ordered the Grandes to undertake one of two options:

(1) By Sept. 30, 2008, submit revised plans to correct the front building envelope encroachment; and by Dec. 31, 2008, perform all remedial work to correct the front building envelope and complete remedial work on the house to bring it into strict compliance with the approved plans; or

(2) By Sept. 30, 2008, submit revised plans to the ARC for approval that resolve the violations and strictly conform to the requirements of the governing documents and complete the remedial work to correct all violations by Dec. 31, 2008.

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

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Association Must Accept Partial Payments on Claim for Unpaid Assessments

Ocean Two Condominium Association, Inc. v. Kliger 983 So. 2d 739 (Fla. Dist. Ct. App. 2008)

Assessments/Association Operations: A condominium association that refused to accept partial payments on a claim for assessments was denied foreclosure of the lien.

Gregory and Faina Kliger owned three units in Ocean Two Condominium. The Kligers used a direct debit bank account to pay the condominium assessments for their units to Ocean Two Condominium Association, Inc. ("association"). In January 2004, the association's management company inadvertently debited their account for three months of assessments on a unit they had sold, which caused the balance in their debit account to be insufficient to cover the charges for their two remaining units. When they received notice of insufficient funds in their account, the Kligers delivered checks to the association's management company to replace the automatic debits, but because the checks were drawn on the same account, they were returned unpaid.

When they realized this, the Kligers delivered new "good" checks to the management company. The management company, having referred their account to the association's attorneys for collection, refused to accept the new checks. In an attempt to keep their account current, the Kligers made direct deposits to the association's bank account; however, Florida law requires that such payments be applied only on account. In March 2004, the Kligers tendered partial payments to the association's attorneys. Each of their checks was returned with a statement that the attempted payment did not represent payment in full. The association sued for foreclosure.

The trial court denied foreclosure of the liens, finding that the suit was premature because the association and its management company improperly refused partial payments tendered by the Kligers in the early part of the dispute. The association appealed.

The appeals court noted that the problem underlying the case was a common one. The court found that statutory lien rights and the power to prosecute foreclosure actions give associations ample leverage in assessment disputes, while condominium unit owners have very little. Because of this, unit owners who have a good faith argument for disputing billings, interest, late charges or attorney's fees, often settle above what they actually owe rather than continue the dispute.

The court found the trial court's determination was supported by competent and substantial evidence. It agreed that if the association had accepted and applied the tendered payments, the dispute would have been reduced to an inconsequential amount. It was the court's opinion that the receipt and application of a payment less than the amount at issue, though it may not completely resolve the dispute, reduces the amount in controversy, reduces accrued interest, and increases the likelihood that a resolution can be negotiated for the balance of the dispute.

The court rejected the association's argument that the trial court's ruling would make it necessary for other unit owners to shoulder the responsibility for legal fees incurred by the association but not recovered from the Kligers. Stressing the duty of all litigants in Florida to mitigate damages and make a good faith effort to settle a matter before commencing a lawsuit, and noting the association attorney's refusal to accept the partial payments tendered by the Kligers, the court questioned whether the association's legal fees were valid.

The appeals court affirmed the trial court's ruling.

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

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Associations Must Act Timely and Decisively to Enforce Covenants

Pacific Hills Homeowners Association v. Prun, No. G038244, Cal. App. Ct., March 20, 2008

Covenants Enforcement: If an association does not act timely and decisively in enforcing covenants, then the association may face penalties if the dispute goes to court.

Jon and Linda Prun live in a planned community in Mission Viejo, Calif. Their property is subject to a declaration of covenants, conditions, and restrictions, which is enforced by the Pacific Hills Homeowners Association ("association"). The declaration requires that prior written approval from the association's architectural committee is needed before construction of any improvement, including a fence or wall, can commence. The association also adopted architectural guidelines that limit fences to six feet in height unless the fence is within 20 feet of the front property line, in which case the maximum height is three feet.

In late 2000, the Pruns erected a mechanical gate, connected to a fence, across their driveway. Jon Prun testified at trial that they reviewed the copy of the declaration and guidelines they received when they purchased the home and found no mention of setbacks. He also testified after the lawsuit was filed that he noticed that his copy of the guidelines contained only odd-numbered pages; he stated that the version he had was missing the page containing setback requirements. The court noted, however, that the guidelines and amended guidelines in the record show the setback requirements were on odd-numbered pages.

After reviewing the declaration and guidelines, Jon Prun called the property management company for the community and asked about setbacks. He testified at trial that Bill Scales, the management company's architectural administrator, told him that neither the association nor the City of Mission Viejo had setback requirements. According to Prun, Scales only said that color was critical and that the gate should be of high quality. Scales assured him "there won't be any problem" after Prun told him a professional contractor was installing the gate. Prun also testified that Scales said he would fax the forms the Pruns needed for the association's approval and that receiving approval from the association should take only a couple of weeks. Prun testified at trial that he understood that obtaining approval was merely a formality. Scales testified that he did not remember the call with Prun and would not have checked a city setback requirement for a homeowner because he had no copy of those codes.

In the meantime, the Pruns began building the gate. When Scales learned of it, he sent a letter informing them that the construction violated the declaration because prior approval was required and asked the Pruns to submit plans. In late November 2000, Jon Prun completed the forms he had received from Scales and sent the forms both to Scales and to the committee; he did not enclose plans.

In January 2001, the association sent a letter to the Pruns asking for the plans for the gate. The Pruns re-sent their application with a drawing that did not show the specifics of the gate as required by the declaration and guidelines. Consequently, the association returned their application stamped "disapproved as submitted" with another request that the Pruns submit clear drawings of their plans. The Pruns proceeded to submit clear drawings of their plans to the association, showing the gate within three feet of the front property line. In mid-February 2001, the committee denied approval of the Pruns' proposed fence and gate because they did not comply with the setback requirements in the declaration and guidelines; however, the Pruns had already completed the gate.

In July and August 2001, the association sent letters to the Pruns, first asking them to comply with the declaration and guidelines, and then inviting them to attend a board meeting in October 2001. Thereafter, the association sent a letter giving the Pruns a November deadline to move the gate to comply with the setback requirements and advising that it would assess a $100 fine if they did not comply; the association also invited them to a meeting in December to "discuss the situation."

At some point, the association contacted the City of Mission Viejo to advise it of the problem with the Pruns. In May 2002, the city sent written notice to the Pruns that their gate and fence violated its setback requirements. Between November 2002 and January 2003, the association sent four more letters to the Pruns, assessing fines and inviting them to association meetings, which they attended.

In March 2003, the association's lawyer sent a letter to the Pruns, stating it was the association's last effort to resolve the matter and insisting that the gate be moved. The letter gave the Pruns 10 days to advise whether they intended to comply; if they did not comply, the letter threatened legal action. Jon Prun testified at trial that he called the association's lawyer and explained his side of the story. He also testified that the association's counsel told him he thought his story sounded "logical" and "plausible." The lawyer stated he wanted to research the matter and that if he did not get back to the Pruns, they should consider the matter closed.

Thirteen months later, in April 2004, a different lawyer for the association sent a letter to the Pruns inviting them to submit the matter to alternative dispute resolution and advising them if they did not respond in 30 days, the association might authorize a lawsuit. When Jon Prun called that lawyer he was told, "We're going to make you move the gate." Nothing happened until almost one year later, in March 2005, when the association's lawyer sent another letter suggesting mediation.

The Pruns did not mediate and in April 2005, the association sued them for breach of the declaration and guidelines, nuisance, and declaratory and injunctive relief. One of the Pruns' defenses was that the statute of limitations had run on the action, and in the alternative, the five-year statute of limitations for suits regarding covenants running with the land did not apply if such covenants were not recorded in the land records.

The court ruled in favor of the association. It ruled, in part, that the five-year statute of limitations applied and thus the action was filed timely. The court also found that the Pruns had not proven their other affirmative defenses of estoppel, laches or waiver. The judgment ordered the Pruns to lower their fence and gates to a maximum of three feet, or, in the alternative, to set them back to at least 20 feet from the front property line. In that case, the height could be up to six feet. If the Pruns chose the latter alternative and gave the association timely written notice of their decision, the association would be required to pay two-thirds of the cost of the relocation of the fence and gate. If the Pruns did not give timely notice to the association of their intentions, they had to pay the entire cost of the ordered corrections. If the Pruns gave such notice, and the association did not agree in writing to pay two-thirds of the cost, the injunction ordered by the court would dissolve, and the Pruns would be allowed to keep the gates and fence as built. The association appealed.

On appeal, the appeals court upheld the trial court's decision that the statute of limitations had not run on the action. While the dispute in question did fall under the applicable statutory provision, the association filed the action more than four years, but less than five years, after the Pruns erected the fence and gate; and thus, the action was filed within the time limit required under the law.

The court also considered whether the association's claim against the Pruns was barred by laches. Laches is a defense that requires unreasonable delay in asserting one's rights or prejudice to the defendant in the lawsuit as a result of the delay. The Pruns argued that the association's more than four-year delay in filing the action was "patently unreasonable" and that the delay showed that the association acquiesced in the Pruns' placement of the gate. The Pruns pointed to three one-year periods in which the association did virtually nothing with respect to the Pruns' gate.

The court did agree with the Pruns that the association delayed in enforcing the setback restriction, and the association could not explain the lengthy gaps in its contact with the Pruns and its extended inactivity. While the court did not condone the association's conduct, it did not find support for a finding of laches because the Pruns could not show prejudice to them that stemmed from the association's delay. According to the record, they began building the gate before the Pruns submitted an application for approval of their project and before the committee got involved. The evidence at trial showed that construction was finished as early as November 2000 and no later than February 2001. According to the court, it would not have mattered if the association was diligent in filing the suit. The court also remarked that despite the delays, the Pruns could not show that the association acquiesced to their actions. According to the facts, the association made its opposition to the gate known from the moment it was built and never changed its position or communicated to the Pruns that it had changed its position. Furthermore, Jon Prun testified that, from February 2001 on, he understood that the association wanted the gate moved.

The Pruns also argued that the association waived its right to enforce the guidelines because it did not apply them fairly, reasonably or uniformly. The court disagreed, stating that there was evidence the association followed its ordinary procedures in attempting to enforce the setback requirement. It sent letters demanding that the Pruns comply with the guidelines, invited them to meet with the board of directors of the association, imposed fines and eventually filed suit. Therefore, the court ruled in favor of the association on the issue of whether it waived its right to enforce the guidelines.

Finally, the court responded to the association's cross-appeal, which claimed that the trial court abused its discretion in ordering it to pay for two-thirds of the cost of moving the Pruns' gate.  The trial court ordered this payment because it viewed the association as being sloppy in its pursuit of this case. The court stated that it saw no abuse of discretion in the result the trial court fashioned. The court confirmed the trial court's decision in all respects, and in order to serve "justice," each of the parties were required to bear their respective costs on appeal.

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

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If Conditional Approval Given, Condominium Association Cannot Seek Permanent Injunction

Powder Farm Park Assoc., Inc. v. SKF Leeder Hill, LLC, No. CV084031022S, Conn. Super. Ct., June 5, 2008

Use Restrictions: In an unreported opinion, a Connecticut superior court ruled that when an association grants a conditional approval for a change of use of a unit and an owner acts in reliance of that conditional approval, the association cannot pursue an action to seek a permanent injunction.

SKF Leeder Hill, LLC ("SKF") owned a unit at the Powder Farm Park Condominium. Powder Farm units are subject to a declaration, bylaws and rules. Powder Farm Park Association ("association") enforces those governing documents. The documents provide that all units in Powder Farm are limited to light industrial use. In May 2007, SKF petitioned the association's board for a change of use exception to the requirement for light industrial use. SKF sought to use its unit as a daycare and learning center. The association granted SKF conditional approval for the change.

SKF subsequently applied to the Town of Hamden, Conn., for a zoning variance, which the town approved. With the conditional approval from the association and a zoning variance from the town, SKF obtained building permits and began construction. Unit owners adjacent to SKF's unit notified the association of the construction SKF was doing. The association's manager reported that SKF's construction included changes to limited common elements. The association sued SFK, seeking a temporary injunction to prevent SKF from causing any additional harm to the limited common elements. The court granted the motion.

The association then sought a permanent injunction against SKF. At the hearing associated with the permanent injunction, the court heard expert testimony describing the changes SKF made to the limited common elements. The expert testified that none of the construction undertaken by SKF compromised the integrity of the building. In making its decision, the court looked to Rustici v. Malloy, 60 Conn. App. 47, 758 A.2d 424 (2000), in which the court determined that a temporary injunction preserves the status quo until the parties' rights can be sorted out at a hearing on the merits. The court also looked to another Connecticut case in noting that for injunctive relief to be appropriate there has to be a substantial probability that without a permanent injunction the party seeking it will suffer irreparable harm.

The court denied the association's request for a permanent injunction for several reasons: The association and the town had both given at least conditional approval to the remodeling SKF requested; SKF acted in reliance upon those approvals; and an expert witness testified that there is little likelihood that the association would suffer irreparable harm because of the remodeling in SKF's unit. The court also found that if the association was damaged as a result of the remodeling it could seek monetary damages from SKF.

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

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Association Has Right to Toll Statute of Limitations on Construction Defects

Saltponds Condominium Association Inc. v. Walbridge Aldinger Co., 979 So. 2d 1240 (Fla. Dist. Ct. App. 2008)

Powers of the Association/Construction Defect: The statute of limitations for a condominium association to file suit on latent construction defects does not begin until the defect is discovered or would have been discovered with the exercise of due diligence, and such period may be tolled until control of the association has been turned over from the developer to the owners.

Walbridge Aldinger Company ("Walbridge") served as the general contractor on the Saltponds Condominium project, developed by SPC Developers ("SPC"). After control of the condominium association was turned over to the owners in August 2002, the association retained an engineer to inspect the construction. The engineer issued a report in August 2005 that identified various defects resulting from improper design and construction. The association then served notice of a claim upon Walbridge, SPC and the project architect, Charles McCoy, advising them of the discovery of the defective work and providing an opportunity to inspect and repair the work.

In August 2006, after the parties were unable to reach a resolution regarding the reported problems, the association sued Walbridge. The original complaint was amended in September 2006 to state that the owners and the association, in exercising reasonable diligence, had not discovered the defects until after the units had been purchased and occupied because the defects were latent and could not have been readily recognizable without special knowledge or training.

Walbridge asked the court to dismiss the case, claiming that the statute of limitations barred any suit by the association. Walbridge argued that the association's claim was barred by the three-year Florida statute of limitations period on warranties for construction of the roof, structural components, and mechanical and plumbing elements of a building or improvement. The trial court dismissed the association’s amended complaint.

On appeal, the appeals court concluded that, because of the various factual issues regarding the latency of the defects and the various tolling provisions that might be applicable, the amended complaint should not have been dismissed. According to Florida case law, when a condominium association brings a case against a developer and contractor based on negligence and breach of warranties, the defects are still applicable "when the action involves a latent defect, the time run[ning] from the time the defect is discovered or should have been discovered with the exercise of due diligence."

The court also considered a Florida statute that provides that the statute of limitations for actions by a condominium association does not run until the owners elect a majority of the members of the board. In addition, a Florida Supreme Court decision held that a condominium association had a statutory right to file suit on behalf of its unit owners for breach of implied warranty of fitness and merchantability for construction defects, and that the statute of limitations for such a suit would not begin tolling until control of the association had passed from the developer to unit owners. For these various reasons, the court reversed the trial court's order dismissing the amended complaint.

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

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