December 2008
In This Issue:
Restrictions Not Signed By Property Owner Not Binding On Lot Purchasers
Association's Leasing Restriction Doesn't Violate Fair Housing Act
Homeowners Must Remove Perimeter Fence Not Approved by Association
Amending Unit's Par Value, Interest in Common Areas Not a Clerical Change
Homeowners Must Remove a Shed Constructed in Violation of Covenants
Declaration's Automatic Renewal Period Enforceable
City Requirement that Condominium Associations Maintain Roads Not Discriminatory, Not a Violation of Equal Protection Rights
Special Assessment to Replace Deteriorating Siding Not Authorized by Common Area Provision
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Restrictions Not Signed By Property Owner Not Binding On Lot Purchasers

Birdwood v. Bulotti Construction, Inc., 175 P.3d 179 (Idaho 2007)

Documents: An Idaho appeals court upheld a trial court's determination that recorded restrictive covenants not signed by the owner of the property were not binding on purchasers of lots in the subdivision.

In 1979, W. Pauline Bird purchased property in the City of Hailey, Blaine County, Idaho. In 1981, a plat of the subdivision, signed by Bird's three children, was recorded in the Blaine County recorder's office. The children had no ownership interest in the property, and nothing in the record showed that they had authority to plat the property on Bird's behalf. The CC&Rs of Bird Wood Subdivision ("1981 covenants") was recorded earlier the same day. The declaration was not signed by Bird, but instead was signed by two of her children. There was no indication that the children were authorized to execute this document on her behalf.

Between November 1980 and November 1992, Bird sold several parcels of land in the subdivision by reference to the recorded plat. In early 2003, Bulotti Construction, Inc. ("Bulotti") contracted to purchase Lot 15 and sent a letter to each lot owner in the subdivision asking for consent to subdivide Lot 15 into four lots on which he intended to build homes. The 1981 covenants provided that, "Only one (1) single-family dwelling, including guest and/or service quarters may be erected upon each such lot."

In June 2003, an application to subdivide the lot was submitted to the City of Hailey. The application was signed by Bird, as owner, and Bulotti, as Bird's representative. On the same day, Bulotti sent a letter to each lot owner in the subdivision stating that he intended to subdivide Lot 15 into four lots, and that subdividing Lot 15 was not expressly prohibited by the 1981 covenants. The letter requested that each lot owner consent to an amendment of the 1981 covenants to expressly permit the subdivision of Lot 15 into four lots in order to avoid court action. Bulotti did not obtain the consents to the amendment.

Bulotti purchased the property in September 2003. In October, the Birdwood Subdivision Homeowners' Association ("association") recorded the Amended and Restated CC&Rs for Birdwood Subdivision ("2003 covenants"), which prohibited further subdivision of lots. In March 2006, the association sued Bulotti to enforce the covenants and sought to enjoin Bulotti from subdividing Lot 15. Bulotti filed a counterclaim seeking a determination that the 1981 covenants and the 2003 covenants did not apply to its actions. Both parties moved for summary judgment. The trial court ruled that neither the 1981 covenants nor the 2003 covenants governed Lot 15 because the original 1981 covenants were not signed by anyone in the chain of title. The association appealed.

The appeals court relied upon Idaho case law which provides that restrictions on the free use of land are valid and enforceable; however, since restrictive covenants derogate the common law right to use land for all lawful purposes, the court should not extend by implication any restriction that is not clearly expressed, and all doubts should be resolved in favor of the free use of land. The court first noted that Bird did not sign the 1981 covenants, and no evidence was presented by the association to indicate that she authorized her children to sign on her behalf. Therefore, the 1981 covenants, signed by Bird's children, did not bind the land.

The association argued that because the deeds used by Bird to convey other lots in the subdivision contained references to the plat, those references constituted ratification of the 1981 covenants. The court found, however, that platting of property and adoption of restrictive covenants are two different and separate actions. References contained in Bird's deeds ratified the plat but did not show that she ratified the 1981 covenants.

The association argued that reference to "covenants" or "restrictions" in three of the deeds executed by Bird indicated that she ratified the 1981 covenants. The court considered that although restrictions on the use of land can be included in a deed, none of the deeds included any reference to the 1981 covenants. The court concluded that provisions contained in three of the nine deeds used by Bird that provided that the conveyance was subject, variously, to easements, restrictions and encumbrances, constituted generic contract language that was typically included to create exceptions to the covenants of warranty deeds. Because none of the deeds expressly referred to the 1981 covenants, they could not reasonably be interpreted to incorporate those covenants by reference. The court found that the 1981 covenants did not apply to Lot 15; therefore, the 2003 covenants did not apply because other lot owners had no authority to adopt covenants applicable to Lot 15.

The association contended that Bulotti should be estopped from denying that the 1981 covenants applied to Lot 15 because it initially took the position that the 1981 covenants did apply. The court cited Idaho case law which provides that quasi-estoppel prevents a party from successfully asserting a position inconsistent with a previous position, "with knowledge of the facts and of its rights, to the detriment of the person seeking to invoke it." The court noted that for quasi-estoppel to apply, unconscionability must be shown in addition to the change of position.

The association argued that it was unconscionable that Bulotti changed its position regarding application of the 1981 covenants to Lot 15. The association argued that Bulotti assumed its initial position with knowledge of the facts and of its rights because, as the purchaser of Lot 15, it was aware of the 1981 covenants and charged with notice of matters affecting title to the lot. The court found that there was no dispute that Bulotti was not aware that the 1981 covenants did not apply to Lot 15 when it sent letters to the other lot owners. If Bulotti had imputed knowledge from the county records for purposes of quasi-estoppel, then the court could assume that the association also had that imputed knowledge and would have known that Bulotti was mistaken in believing that the 1981 covenants applied to Lot 15. In the court's opinion, the association failed to establish that Bulotti's change of position was unconscionable. It did not show Bulotti gained an advantage or caused the association any disadvantage by changing its position or that the association was induced to change its position by any statements in Bulotti's letters. The court also disagreed with the association's assertion that the doctrine of quasi-estoppel should apply to Bird to prevent Bulotti, her successor in title, from denying that the 1981 covenants apply to Lot 15.

The association next argued that Bird may have benefited from the 1981 covenants because the lots may have been more saleable if purchasers believed the 1981 covenants applied to the subdivision. The court responded that assuming that Bulotti would be bound if quasi-estoppel applied to Bird, there was no evidence to suggest that Bird knew about the 1981 covenants or took any position regarding them.

The association contended that there should be an equitable servitude preventing further subdivision of any lots, including Lot 15. The court considered that even though restrictive covenants may arise from the language of deeds or from conduct of parties, implied covenants are not favored, and the association failed to present facts that supported their argument for equitable servitude.

The association's request for an award of attorney's fees was based on a provision in the 2003 covenants entitling the prevailing party to an award of attorney's fees in an action brought to enforce the covenants. Because the association was not the prevailing party, and Bulotti was not a party to the 2003 covenants, the request was denied.

Bulotti sought an award of attorney's fees pursuant to section 12-121 of the Idaho Code, which provides for an award of attorney's fees if an appeal is brought frivolously, unreasonably, or without foundation. The court found that the association's appeal was without foundation.

The court affirmed the trial court's ruling and awarded costs, including reasonable attorney's fees, to Bulotti.

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

Association's Leasing Restriction Doesn't Violate Fair Housing Act

Clark v. Oakhill Condominiums Association, Inc., No. 3:08-CV-283 RM, U.S.D.C., N. Dist. Ind., Sept. 15, 2008

Sale and Lease Restrictions/Covenants Enforcement/Federal Law and Legislation/State and Local Legislation and Regulations: An association that amended its bylaws to limit to three the number of times unit owners could lease their units to unrelated third parties did not create a discriminatory effect that violated the federal Fair Housing Act.

Oakhill Condominiums is a 101-unit development built in 1991 and is located in South Bend, Ind., less than one mile from the University of Notre Dame campus. Oakhill Condominiums Association, Inc. ("association") was created by the developer to manage the property. Until 1996, units were primarily occupied by owners, and leases to unrelated third parties were unrestricted as long as they were for a term of at least six months. In 1996, unit owners became concerned about the number of units that were leased to university students. Their concern led them to adopt an amendment to the bylaws that limited to one the number of leases between unit owners and unrelated third parties, but provided that the association's board of directors had authority to grant exceptions. The limitation did not apply to the 101 current owners, who were "grandfathered" under the previous leasing policy.

In June 2004, Laura S. Clark, Stephen R. Clark and their corporation SEJCO, bought Unit D-2 from John Clark, Stephen's father, to use solely as a rental property. They informed Sherry Scott, the property manager, that they bought the unit as a rental property, and she told them that the board was empowered to grant exceptions to the leasing restriction. They engaged Kelly Foster, an area realtor and property manager, to manage the unit.

In October 2004, the Clarks leased the unit to Dilip and Mitha Pal, who were from India, for a nine-month term. At the end of the term, the Clarks asked the board to allow the lease to be extended for another year, and the association approved the request. When the extension expired, the Pals vacated the unit.

In May 2006, another unit owner requested an exception to the one-lease limit. The request triggered discussion among board members about whether exceptions to the rule should be capped.

When the Pals moved out, Stephen Clark spoke with Scott, the property manager, about renting his unit to a prospective tenant and told her that he thought any restriction on his request was illegal, and he alluded to the board's liability in granting the exceptions. When the board received Clark's request for an exception, they discussed an amendment to the bylaws that would increase the minimum number of allowed leases from one to three and also provide that there would be no exceptions to the policy. The board approved Clark's request and in December 2006, Scott informed him about the three-lease, no-exception bylaw amendment that had been proposed.

In March 2007, the board sent the owners notice of the annual meeting and proposed amendment to the bylaws. On March 17, 2007, Clark sent an e-mail to the owners citing an Indiana Court of Appeals decision and informing them that the current bylaws restricting leases violated federal law and likely Indiana law. He went on to say that the proposed amendment also violated the law, and he urged the owners to vote against the amendment.

On March 19, 2007, the association responded to Clark's e-mail in a letter sent to all unit owners. The letter stated that an amendment to the existing bylaws was being proposed because legal counsel had reviewed the existing bylaws and concluded that, while the current bylaws were lawful, it would be in the association's best interest for the board not to have discretionary power over requests for exceptions to the leasing restriction in order to avoid the appearance of favoritism.

On March 31, 2007, the association passed the amendment by a vote of 63 to five, with one abstention. In May, the association evicted Clark's current tenant, who vacated the unit. The Clarks and SEJCO sued the association and its board members alleging violations of the Fair Housing Act ("Act"). They asserted both a federal claim under the Act and state claims that included tortious interference with contact and business, breach of fiduciary duty, fraud, declaratory judgment and slander of title. They sought preliminary injunction only on the federal and state housing claims.

The court noted that a party seeking preliminary injunction must demonstrate (i) that he is reasonably likely to succeed on the merits of his case; (ii) that he is suffering irreparable harm that exceeds any harm his opponent would suffer if the injunction issues; (iii) that he lacks an adequate remedy at law; and (iv) that the injunction would not harm the public interest. In the first analysis, the court decides only whether the plaintiff has a likelihood of success, but in the second phase, the court balances the likelihood on a sliding scale in an effort to minimize the hardship to the parties pending ultimate resolution of the lawsuit.

The Act provides that it is unlawful to, "refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status or national origin. The Act was intended to promote "open, integrated residential housing patterns and to prevent the increase of segregation in ghettos, of racial groups whose lack of opportunities the Act was designed to combat." Claimants under the Act may proceed under two theories: disparate treatment (intentional discrimination) or disparate impact. The Clarks argued their claims under the theory of disparate impact. They sought to show a discriminatory effect without the showing of discriminatory intent. The court agreed that a showing of discriminatory intent was not required under the Act; however, the court refused to conclude that every action that produces discriminatory effects is illegal. Metropolitan Housing Development Corp. v. Village of Arlington Heights, 558 F2d 1283 (7TH Cir. 1997) establishes four "critical factors" that enable the court to determine what circumstances produce a discriminatory impact, but when taken without discriminatory intent, violate the Act.

The Indiana Fair Housing Act borrows heavily from the federal Act. The Indiana courts had recently addressed a claim that Clark considered to be similar to his own, Villas West II of Willowridge Homeowners Association, Inc. v. McGlothin, 841 N.E. 2d 584 ( Ind. Ct. App. 2006). In Villas West II, the court held that the no-lease covenant had a greater adverse effect on racial minorities and that there was no legitimate nondiscriminatory reason for the no-lease covenant. The appeals court affirmed the ruling. In May 2008, the Indiana Supreme Court reversed on the issue of disparate impact. The court concluded that to establish a right to recover for disparate impact under the Act, a party must demonstrate that a policy or practice actually or predictably has a significant adverse or disproportionate impact on a protected class. The Supreme Court also noted that there is a very strong presumption of validity for restrictions found in a declaration or master deed which arises from the fact that purchasers are aware of and have accepted the restrictions imposed on the property by the declaration.

The court analyzed the preliminary injunction motion solely under federal law, noting that if the motion failed under federal law, it could not succeed under Indiana's more restrictive law. 

Although Clark wanted the court to enjoin the association from enforcing any restriction on his ability to lease his unit, he did not seek an affirmative requirement that anyone lease to minority tenants. Given the overwhelming vote of owners who were not grandfathered under the previous rental policy, the court found that the association's interest in adopting the 2007 amendment was to maintain the character of the Oakhill Condominiums. Evidence of alleged discriminatory statements by property manager Sherry Scott was conflicting. Clark testified that Scott telephoned him on two occasions and complained about the smell of curry frequently coming from his unit during the time the Pals leased the unit. Scott said, however, that she had no animus toward the Pals. The court decided that she had reported the odor to Clark as a business-related factual statement. Clark also testified about an accusation of theft by Scott against the Pals. Scott said that when a shopping cart was found in the development, she called Clark and asked him to ask Mrs. Pal to return the shopping cart to the store in the future because she had seen Mrs. Pal (who didn't drive) walking from a nearby grocery store on prior occasions and thought she might have brought the cart to the development. The court posed the question to Clark whether a suggestion that a cart was stolen by a student of Swedish descent would constitute evidence of bias against Swedes. Clark replied that the shopping cart incident is only proof of discrimination if viewed in the context of the curry odor complaint.

Clark considered that the fact that discussion of the amendment began when the Pals were his tenants was further proof of the association's discrimination. He argued that the 2007 amendment departed from the association's standard practice because it did not grandfather owners, and applied the amendment retroactively to owners, in the sense that the pre-2007 leases counted against the three-lease limit. The court found that one prior amendment to the bylaws that grandfathered existing owners, hardly established a standard practice. The court found that the proposition that the 2007 amendment was proof of discriminatory intent because it amounted to a turnabout of the board's previous approvals of leases was the epitome of bootstrapping. The court credited the reversal to the board's wish not to have to consider any more requests for exceptions. The court found that none of the board's actions amounted to even minimal evidence of intentional discrimination.

The Clarks asked Dr. Nathaniel Lauster, an assistant professor at the University of British Columbia, to assess the likely impact of the 2007 bylaw amendment on demography and housing. He found that minorities were more likely than whites to rent homes in the Oakhill area and that policies restricting rental of housing units disproportionately restricted minorities from moving into that housing unit. In his opinion, given the Oakhill's proximity to Notre Dame and the high proportion of renters, the lack of ethnic diversity in Oakhill's census tract implied that a selective force outside the scope of statistical analysis had prevented minority persons from moving into the area. However, the court found that a regression analysis, or something designed to accomplish the same thing, was needed to isolate the impact on minorities of a restriction on leasing at Oakhill. The court found that Dr. Lauster's disparate impact analysis was too blunt to provide any assistance to the court in determining whether the 2007 amendment to Oakhill's bylaws impacts minorities and non-minorities differently.

The court ruled that the Clarks had shown no probative evidence whatsoever of discriminatory effect or discriminatory intent. Because they did not prevail under the federal act, they had no chance of success under the Indiana act, given the Supreme Court's view of disparate impact.  Their request for preliminary injunction was denied.

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

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Homeowners Must Remove Perimeter Fence Not Approved by Association

Foonberg v. Thornhill Homeowners Association, Inc., 975 So. 2d 601 (Fla. Dist. Ct. App. 2008)

Covenants Enforcement/Architectural Control: A Florida appeals court upheld a ruling that homeowners must remove a perimeter fence that was not approved by the homeowners association.

Ephraim Foonberg, Batya Foonberg, and Frank K. Feinberg ("purchasers") purchased a home in the Thornhill Green community. The builder's approved plan of the house did not include a perimeter fence; however at the purchasers' request, a white aluminum perimeter fence was installed on the property.

The covenants governing the community prohibit improvements to the property that have not been approved by Thornhill Homeowners Association, Inc. ("association"). After the sale closed, the association notified the purchasers that the fence had not been approved and that it did not comply with the rules, which only allowed wood or stucco-covered concrete fences. Of the 78 lots that had fences in the community, 74 were wood and three were stucco. The association sued to enforce the covenants.

The trial court ruled in favor of the association and ordered the purchasers to immediately remove the fence and obtain prior approval from the association before constructing a new fence. The purchasers appealed. 

Much of the purchasers' argument on appeal relied on the observation by the trial court that its ruling might have been different if the purchasers had made appropriate application to the association for approval of the fence they constructed. They argued that there was evidence that the association would not have approved the white aluminum fence if they had made proper application for approval. They took the position that, in light of the general principal that the law does not require a person to perform a useless act, the trial court erred in not considering their claim of arbitrary enforcement. Considering the argument, the court found that they presented insufficient evidence to show that the association unreasonably or arbitrarily exercised its power to enforce the covenants. The association provided evidence that supported the trial court's finding of no selective enforcement.

The court affirmed the trial court's ruling, finding other issues that were raised in the purchasers' appeal to be without merit.

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

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Amending Unit's Par Value, Interest in Common Areas Not a Clerical Change

Gall v. The Mariemont Windsor Square Condominium Association, 175 Ohio App. 3d 689, 888 N.E.2d 1144 (2008)

Powers of the Association: Amending the declaration to change a unit's par value and its interest in the common area is not a clerical change and requires the unanimous consent of all unit owners.

Jeffrey B. Gall owns a condominium in Mariemont Windsor Square Condominiums ("Windsor"). He sued Mariemont Windsor Square Condominium Association ("association") alleging that: (1) the owners of Unit 10 were not paying the full amount of their assessment; (2) the association planned to amend the Windsor declaration to change the par values and percentage interests in the common areas of Unit 10 and other units, which was in violation of Ohio law; (3) an individual who did not own a condominium was on the board in violation of the declaration and bylaws; and (4) he came in third in elections for the board of trustees and would have been elected if a non-owner wasn’t on the board.

Gall asked the trial court to order the association to assess and collect the correct amount from Unit 10, to remove the non-owner from the board of trustees and to recognize his election to the board. He also sought an injunction to prohibit the association from amending the declaration to change par values and percentage interests in the common areas without the unanimous vote of the unit owners. Finally, he sought damages and attorney fees for the association's alleged breaches of fiduciary and statutory duties.

The association filed a motion for summary judgment. At the hearing on the motion, Gall acknowledged that some of the issues he had raised in his complaint were moot. For instance, the trial court noted that the non-owner was no longer a member of the board. Gall also acknowledged that the court was without jurisdiction to appoint him to the board. The court then inquired "whether the amendment of the par values for certain units was not done pursuant to the Revised Code." Gall replied that was correct. The trial court held that Gall did not have standing to challenge the assessments of the other units because his par value and percentage interest in the common areas had not changed. The court granted summary judgment to the association on all claims. Gall appealed the ruling.

Gall presented two assignments of error for the appeals court to review. First, he contended that the trial court erred in granting summary judgment in favor of the association because, as a unit owner, he was affected by the association's failure to collect the proper assessment from Unit 10 and by the amendment of the par values contained in the declaration. The appeals court found that Gall had standing to bring the action because R.C. 5311.19(A) requires that a condominium association and all unit owners comply with all restrictions in the condominium declaration and bylaws. The statute states that violations of those restrictions "shall be grounds for the unit owners association or any unit owner to commence a civil action for damages, injunctive relief, or both, and an award of court costs and reasonable attorney's fees in both types of actions." Similarly, the appeals court found that R.C. 5311.23(A) allows a unit owner to commence, in his own name, a declaratory-judgment action to determine legal obligations under the condominium instruments and to seek injunctive relief. Therefore, the court held that Gall had standing to appeal the trial court's verdict.

The declaration listed the par values and percentage of interests in the common areas. The association used the par values to determine the unit owners' assessments for the common areas. The par value of Unit 10 was listed as 4.05 percent, higher than that of other three-bedroom units. Laura Cruickshank, president of the board or trustees, testified that the board considered it unfair that Unit 10's par value was so much higher than that of similar units. Most of the unit owners voted to allow Unit 10's owner to pay at the lower value of 3.3 percent.

At that time, the board also proposed to amend the declaration to change the par value of Unit 10 and some other units, but the amendment did not get enough votes to pass. The board later passed the amendment, claiming that it was an amendment to correct a clerical error in the declaration.

Ohio law provides that a board of directors may amend the declaration, "to correct clerical or typographical errors or obvious factual errors in the declaration" without a vote of the unit owners. The appeals court agreed with Gall that the board could not amend the declaration because the proposed change was not "clerical" in nature.

The appeals court found that a clerical error is a "mistake or omission, mechanical in nature that does not involve a legal decision or judgment." The association argued at trial that par value was directly related to the unit's area in square feet, and it was determined by a simple mathematical calculation. However, the record showed otherwise. Cruickshank testified that she did not understand how par value was determined in the declaration and that the par values did not always make sense. She stated that she did not know why Unit 10's par value was so much higher than that of other three-bedroom units. The court found that the amendment did not involve a clerical or factual error, and the board could not use the clerical-error provision to circumvent the statute that required a unanimous vote of the unit owners to amend the declaration.

The failure to collect Unit 10's full assessment and the amendment's lowering of the par value of some units affected the par value of all the unit owners in relation to each other. The court found that even though the par value of Gall's unit did not change, the overall amount assessed from all the unit owners was less, and, thus, the total amount of money collected to maintain the common areas was less.

The appeals court concluded that Gall was affected by the association's alteration of Unit 10's par value and that he was aggrieved by the amendment of the declaration. The court believed that the trial court's interpretation of the statutes, although reasonable, would effectively neutralize those statutes and prevent unit owners from obtaining relief in many situations. It held that Gall had standing to bring his action; therefore the court sustained his first assignment of error.

In his second assignment of error, Gall contended that the trial court erred in "issuing a final appealable order," granting judgment in favor of the association. He argued that the trial court failed to decide his claims for an injunction prohibiting the board from amending the declaration and for damages and attorney fees. The appeals court disagreed and overruled the second assignment of error.

The appeal's court reversed the trial court's ruling and remanded the case for further proceedings consistent with its findings.

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

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Homeowners Must Remove a Shed Constructed in Violation of Covenants

Glisson v IRHA of Loganville, Inc., 289 Ga. App. 311, 656 S.E.2d 924 (2008)

Covenants Enforcement: A Georgia appeals court upheld a trial court ruling that enjoined a homeowner from maintaining a structure that violated the subdivision's restrictive covenants.

IRHA of Loganville ("IRHA") is a nonprofit corporation representing the homeowners of Ivy Ridge subdivision. Deborah Glisson purchased a home in Ivy Ridge and constructed a fenced dog pen with a metal roof on her property. The restrictive covenants provide that "each lot shall be landscaped and maintained by the owner who shall…erect no barns or sheds." The president of IRHA received complaints about Glisson's dog pen from three of her neighbors. IRHA contacted Glisson and notified her that the metal building on her property violated the covenants and demanded that she remove it within 30 days. Glisson refused to comply, contending that the structure did not violate the covenants. 

IRHA then brought a complaint of equitable relief and an injunction against Glisson. The trial court found that the structure in question was a "shed" within the meaning of the restrictive covenants and ruled that it be removed within two weeks. Glisson appealed the ruling and asserted that the trial court misapplied the rules of contract construction and should have found that IHRA's enforcement of the restrictive covenants was arbitrary and capricious. The rules of contract construction determine how the court construes contract ambiguities. The appeals court applied the following rules to interpret the restrictive covenants:

"Initially, construction is a matter of law for the court. First, the trial court must decide whether the language is clear and unambiguous. If it is, the court simply enforces the contract according to its clear terms; the contract alone is looked to for its meaning. Next, if the contract is ambiguous in some respect, the court must apply the rules of contract construction to resolve the ambiguity. Finally, if the ambiguity remains after applying the rules of construction, the issue of what the ambiguous language means and what the parties intended must be resolved by a jury or other fact finder. The existence or nonexistence of an ambiguity is a question of law for the court. If the court determines that an ambiguity exists, however, a jury question does not automatically arise, but rather the court must first attempt to resolve the ambiguity by applying the rules of construction in the Official Code of Georgia Annotated (OCGA) section 13-2-2." Mitchell v. Cambridge Property Owners Assn., 276 Ga. App. 326, 326-327 (1) (623 SE2d 511) (2005). 

Glisson agreed that the term "shed" as used in the covenants, is ambiguous, but challenged the definition adopted by the trial court. The trial court applied the rule that "words generally bear their usual and common signification." Therefore, the court adopted the definition found in the American Heritage Dictionary of the English Language, 4th Edition: "[a] small structure, either freestanding or attached to a larger structure, serving for storage or shelter." The appeals court agreed with the trial court that "the structure in dispute is a 'shed' within the common meaning of that term and within the meaning of the covenant." Glisson failed to demonstrate how the choice of another definition of "shed" would change the outcome of the case.

Glisson argued that the trial court failed to resolve any doubts as to construction of the covenants in favor of the homeowner. The general rule in Georgia is that restrictions on an owner's use of land "must be clearly established and must be strictly construed," and any doubt as to restrictions on the use of land shall be construed in favor of the landowner. The court must examine the entire document that gives effect to the parties' intentions. In this instance, the covenants prohibit, among other things, the construction of a shed on a homeowner's property.

Glisson argued that IRHA's enforcement of the restrictive covenants was arbitrary and capricious. She argued that other violations of the restrictive covenants existed in the subdivision, but IRHA did nothing to address them. She argued that IRHA waived its authority to enforce the restrictions. Waiver requires a showing that the association had received complaints about other similar violations and, thus was on notice of them, yet did not act. Glisson testified that she never complained about these alleged violations and she offers no evidence that any complaint was reported. The president of IRHA testified that the association does not act upon a violation until it receives a complaint. In this case, the IRHA enforced a specific provision of the restrictive covenants. No evidence was presented that IRHA was aware of other alleged violations. Therefore, it had not waived its right to enforce the covenants.

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

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Declaration's Automatic Renewal Period Enforceable

Golden v. Venditti, NC-2006-0143, R.I. Super. Ct., March 14, 2008

Covenants Enforcement/Documents: Since the declaration specifies a fixed time period by which a majority of lot owners may amend or abolish restrictions, it is not "unlimited in time in the instrument," under Rhode Island statutes.

Forest B. Golden, one of 29 plaintiffs, and Francis A. Venditti are homeowners in Sea Meadow Farms, a residential subdivision in Portsmouth, R.I. The subdivision is subject to a comprehensive declaration of restrictions recorded in the Portsmouth Land Evidence Records on May 12, 1972. The declaration provides that its covenants and restrictions remain in force for 25 years, and thereafter, automatically extend for successive periods of 10 years unless the majority of owners vote to change or terminate the covenants. Although the initial 25-year period ended in 1997, and the first 10-year period ended in 2007, no vote was taken to abolish or amend the restrictions.

Venditti acquired his property by deed dated March 26, 1993. The deed states that the property is "[s]ubject to the restrictions and easements of record." The declaration provides that the lot owners may sue to enforce the restrictions. Golden sued Venditti seeking to enforce a restriction that prohibited the use of asphalt mineral-surfaced shingles.

Venditti asserted that the declaration was unenforceable because it was more than 30 years old. Golden moved for partial summary judgment arguing that the provision did not apply, or, if it did apply, that section 34-11-41 of Rhode Island Statues re-established the expired restrictive covenants. Venditti filed a cross-motion for summary judgment asserting that section 34-11-41 did not apply, and that the declaration was void.

This section provides that "[i]f a covenant or restriction concerning the use of land…is created by an instrument taking effect after May 11, 1953, the covenant or restriction, if unlimited in time in the instrument, shall cease to be valid and operative 30 years after the execution of the instrument creating it." The parties did not dispute the meaning of the statute. They also did not dispute that the declaration was recorded May 12, 1972. However, they did dispute whether the declaration was "unlimited in time."

The court found that the question of whether the restrictive covenants were "unlimited in time in the instrument" depended upon the language in the declaration, which states:

"[T]hese declared limitations, restrictions, and uses...shall be binding on us and all persons claiming under us and be for the benefit of and limitation on all future owners of lots of land as shown on said plat for a period of 25 years…Said covenants and restrictions shall, at the expiration of said period ending on the 25th anniversary of the enactment of this declaration, be automatically extended for successive periods of 10 years each, unless by a vote of the owners of a majority of the lots when the vote is taken, it is agreed to change or terminate said covenants and restrictions in whole or in part."

Venditti argued that no affirmative act by the lot owners is required to renew the restrictive covenants "unlimited in time in the instrument." Therefore, the restrictions ceased to be valid 30 years after execution of the declaration on May 12, 2002. The court found that the declaration, by its plain and ordinary language was not "unlimited in time in the instrument," because rather than remaining silent on its duration or declaring its enforceability infinite, it specifies a fixed time period by which a majority of lot owners may amend or abolish the restrictions. According to the court, if a majority of the owners do not vote to alter the restrictions at the appropriate time, the restrictions are presumed to be ratified for another 10 years. The court found that the plain and ordinary meaning of the declaration evidenced that the restrictive covenants were not "unlimited in time in the instrument." Because the declaration was not "unlimited in time," the restrictions were enforceable. The court granted Venditti's motion for partial summary judgment and denied Golden's motion for summary judgment.

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

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City Requirement that Condominium Associations Maintain Roads Not Discriminatory, Not a Violation of Equal Protection Rights

Pheasant Run Condominium Homes Association v. City of Brookfield, No. 07-C-0082, U.S.D.C., E. Dist. of Wisc., Sept. 30, 2008

State and Local Legislation and Regulations/Municipal Relations: A U.S. district court ruled that a city did not discriminate against subdivision-style condominium communities in requiring the associations to maintain and provide service for the roads in those communities despite the city providing such maintenance and services in traditional single-family subdivisions.

Pheasant Run Condominium Homes Association, Chateau-in-the Wood Homeowners Association, Meadow Wood Condominium Association and Wilderness North Condominium Association, Inc. manage condominium communities in Brookfield, Wisc. All the communities look like subdivisions rather than typical condominium projects. Because of their physical structures, the projects contain roads. The respective condominium associations maintain those roads and provide snow removal. In their lawsuit, the associations claimed that the city permitted subdivision developers to dedicate roads to the city, but it had an unwritten policy that precluded spending tax dollars on roads within condominium developments while using tax dollars to maintain, and provide services such as snow removal for roads located within single-family subdivisions.

The associations specifically claimed that the city's alleged policy violated the associations' Fourteenth Amendment rights to due process and equal protection under the Constitution and a Wisconsin statute. The city denied that it had any such policy.

The court first addressed the Constitutional claims and rejected the associations' contention that condominium unit owners in subdivision-style developments did not have equal protection. In its opinion, the alleged policies did not discriminate on the basis of gender, race or any other classification. Types of residential property and forms of ownership are not protected by the Fourteenth Amendment. Citing case law, the court also pointed out that property owners do not have a fundamental right to snow removal from streets. Because the alleged policy did not implicate a fundamental right or a suspect classification, the court analyzed it under the rational basis standard.

When applying the rational basis standard, courts must determine if a relationship exists between the issue in the case and a legitimate governmental interest. In this case, the court noted that the associations themselves defeated their equal protection argument by acknowledging that the city differentiated between single-family subdivisions and subdivision-style condominium developments in order to save money. The associations contended that the city was motivated to save money by requiring the associations to pay for their own services, thus conserving tax dollars. However, the court pointed out that conserving tax dollars is a legitimate interest for a government.

Because the Constitution grants legislators broad authority to decide who receives the benefit of tax expenditures, the city's decision to burden condominium associations but not single-family homeowners associations with road services and maintenance did not discriminate.

Regarding the associations' due process claim, the court noted that the claim was nearly incomprehensible. The associations argued that the due process violation was twofold: (1) the city's taking from the associations a city-created interest (road services and maintenance) to be treated like other homeowners, and (2) indirect double taxation of condominium unit owners who pay assessments to the associations and pay city taxes. The court did not agree, stating again that governments can distribute tax burdens as they see fit.

The associations also claimed that they were due equal protection under Wisc. Stat. section 703.27, which provides:

"(1) A zoning or other land use ordinance or regulations may not prohibit the condominium form of ownership or impose any requirements upon a condominium that it would not impose if the development were under a different form of ownership."

"(2) No county, city, or other jurisdiction may enact any law, ordinance, or regulation that would impose a greater burden or restriction on a condominium or provide a lower level of services to a condominium than would be imposed or provided if the condominium were under a different form of ownership."

The associations contended that the statute effectively barred the city from distinguishing between subdivision-style condominiums and single-family subdivisions even if the city had a rational reason to do so. Again, the court disagreed, noting that the associations did not cite any authority to demonstrate that a state statute can create a suspect classification or a fundamental right. Citing Village of Willowbrook v. Olech, 120 S. Ct. 1073, 528 U.S. 562 (2000), the court noted that the Supreme Court cautioned against transforming violations of city ordinances or state statutes into constitutional violations.

Because the associations' Constitution-based claims failed, the court had to determine whether to exercise supplemental jurisdiction over the state statutory claim. The court is authorized to decline to exercise supplemental jurisdiction if a claim raises a novel or complex issue of state law, if the claim predominated over the claim that the district court had original jurisdiction, the district court dismissed all claims over which it had original jurisdiction, or there were other compelling reasons to decline jurisdiction. In this case, the court declined to implement jurisdiction.

The judge in the case found no Wisconsin case law that interpreted the state statute on which the associations based their claim. The court also noted that the statute governed a "law, ordinance or regulation." In this case there was, at most, an unwritten policy, not a law, ordinance or regulation. Noting that perhaps the statute "should be read to bar unwritten discriminatory policies," the court dictated that Wisconsin courts were the ones to decide that issue.

Because of its findings, the court ruled in favor of the city.

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

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Special Assessment to Replace Deteriorating Siding Not Authorized by Common Area Provision

Powell v. Cedar Tree Village Homeowners Association, No. 8-088/07-11-09, Iowa App. Ct., March 14, 2008

Assessments: An association required by covenants to maintain exterior building surfaces had the authority to charge a special assessment to all townhome owners for replacement of wood siding with vinyl siding even though a small number of the units did not require siding replacement. The authority to do so could not be found merely in a provision that authorized repair of common areas because the townhome units were not common areas for purposes of that section.

Several homeowners owned six townhome units in Cedar Tree Village, a planned-unit development in Bettendorf, Iowa, that were constructed in 1996 with vinyl siding. The remaining 185 units in the development were constructed in the 1970s with wood siding that had deteriorated in condition since their construction. All units were subject to a set of restrictive covenants recorded by the developer in 1976, which identified certain lots in the development as common areas. The Cedar Tree Village Homeowners Association ("association") established a "re-siding committee" in 1991 to deal with the deterioration of the wood siding, but the committee was unsure whether the association was required to repair the exterior siding. In 1995, the association's attorney advised that the association was responsible for maintaining the exteriors of the townhomes. In 2006, the association approved a special assessment of $1,000 per unit to replace the wood siding on the 185 units with vinyl siding. Owners of the six units with vinyl siding refused to pay the special assessment, and filed a petition for declaratory judgment seeking a determination as to whether or not the association had the authority to levy the special assessment.

The court held that the covenants provided that the association was required to paint and maintain exterior building surfaces. Article IV, paragraph 4 of the covenants required the association to provide, "exterior maintenance upon each lot…as follows: paint and maintain gutters, downspouts, exterior building surfaces…and other exterior improvements….The association shall replace the roofs on dwelling buildings when necessary due to age." The article also authorized the association to collect special assessments for the construction, reconstruction, repair or replacement of a capital improvement upon the common area. The court agreed with the district court that the provision allowed the association to use the assessments collected from its members for installation of vinyl siding. However, the court disagreed with the district court's finding that the assessment charged by the association for vinyl siding was authorized by the same section, because the townhome units themselves were not common areas within the meaning of the section. The lots and the common areas are two separate items, and the townhome units are not common areas. The court, therefore, held that the district court erred in determining that Article IV, paragraph 4 authorized the assessment charged by the association.

The court concluded that the district court did not err in finding that the replacement of the siding was within the association's responsibility and authority, but that the district court did err in finding that Article IV, paragraph 4 of the covenants authorized the assessment, because townhome units are not common areas as defined by the covenants. The court affirmed the district court's judgment in part, reversed in part, and remanded for further proceedings.

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

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