May 2009
In This Issue:
Homeowner Cannot Sue Association if Master Association Fails to Approve Plans
Association Cannot Exempt Palm Trees from Tree Height and View Restriction
Refusing to Fumigate Inflicts Damages on Adjacent Owner
Association Not Liable for Damage Caused by Owners' Defective Water Heater
Unit Owner Has No Basis to File Discrimination Action
Condominium Association Has Right to Ban Dogs
Declarant Cannot Unilaterally Amend Declaration after Divesting Interest
Caveat Emptor Does Not Apply to Sale of New Residences
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Homeowner Cannot Sue Association if Master Association Fails to Approve Plans

Bibi v. Royal Hidden Cove at the Polo Club Homeowners Association, Inc., 974 So. 2d 619 (Fla. Dist. Ct. App. 2008)

Architectural Control: A Florida appeals court affirmed a ruling that a homeowner could not proceed with a suit for damages against a homeowners association for the failure of both the association and the master association to approve building plans for his home by the deadline in a settlement agreement.

Jason Bibi sued Royal Hidden Cove at the Polo Club Homeowners Association, Inc. ("association") because it failed to approve his building plans. The problem arose because he had to have approval of both the association and the master association. At the association's request, he agreed to participate in mediation on the condition that the master association, which was not a party to the suit, would also participate. The master association attended some but not all of the mediation proceedings.

Bibi and the association entered into a settlement agreement that allowed Bibi to continue his lawsuit if his plans were not approved by Aug. 19, 2005. The association approved his plans by that deadline, but the master association did not. Although he was able to build his house, Bibi believed that because both approvals were not obtained by the Aug. 19 deadline, he did not have to dismiss his suit for damages. The issue at trial was the interpretation of the following paragraph of the settlement agreement:

If both the defendant association and the master association do not provide approvals as specified herein by Aug. 19, 2005, either party may void this settlement agreement and proceed with the lawsuit.

Bibi argued that the intent of the agreement as a whole was to require approvals of both associations by Aug. 19, because it was necessary that he have both approvals before he could move forward with construction. The association argued that the master association was not a party to the suit, and the association had no control over the actions of the master association. The appeals court affirmed the trial court's ruling in favor of the association because the condition did not occur whereby both associations failed to approve the plans.

In a dissenting opinion, one judge found that the relevant paragraph of the agreement, in isolation and in conjunction with the overall intent of the settlement agreement, was unambiguous and provided that Bibi had the option to void the agreement and proceed with the lawsuit on damages. That Bibi needed to have both approvals in order to proceed with building his home was clear, according to the dissenting judge.

Other parts of the agreement clearly contemplated that the association would seek the approval of the master association by the Aug. 19 deadline, and that Bibi would have six months from the deadline to seek governmental approval and commence construction. The dissenting judge found that the fact that Aug. 19 was the triggering time period for Bibi to be able to proceed with construction begged the question of why a triggering date would be included in the agreement if it did not contemplate the requirement that both associations approve the plans.

In the dissenting judge’s opinion, Bibi could void the settlement and proceed with the suit. If the majority ruling's interpretation was correct, the association could deny approval of the plans and the master association could approve them, and Bibi still could not proceed with his damages claim. That interpretation would make the entire mediation procedure a futile exercise. Therefore, the dissenting judge would have reversed and remanded the case so that Bibi could proceed with his claim for damages.

©2009 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

Association Cannot Exempt Palm Trees from Tree Height and View Restriction

Ekstrom v. Marquesa at Monarch Beach Homeowners Association, 168 Cal. App. 4th 1111, 86 Cal. Rptr. 3d 145 (2008)

Use Restrictions: In ruling that a homeowners association had to enforce a restriction in a declaration regarding the height of all trees in a community, a California appeals court determined that the association could not rely on the rule of judicial deference—the homeowners association equivalent of the corporate business judgment rule.

Marquesa at Monarch Beach is a common interest development in Dana Point, Calif. The community is comprised of single-family homes, many with ocean and beach views and is managed by the Marquesa at Monarch Beach Homeowners Association ("association"). The association is governed by the Davis-Stirling Common Interest Development Act. Ocean and beach views of several homeowners in the community were blocked by palm trees in the development, some of which were planted by the original developer and some by individual homeowners. Because trimming a palm tree effectively means removing the tree, the association took the position that the declaration's tree trimming requirement did not apply to palm trees.

Several homeowners whose views were blocked by the trees sued the association for enforcement of the height restriction. The trial court ruled in favor of the owners and ordered the association to enforce the declaration. The association appealed, contending that: (1) the business judgment rule precluded judicial intervention in the matter; (2) the judgment was overbroad and void for vagueness; and (3) the judgment was void because the individual homeowners whose trees might be affected by the judgment had not joined as defendants.

The appeals court rejected those arguments and affirmed the trial court's decision. The court agreed with the trial court that the judicial deference rule did not apply. The court found that nothing in the declaration permitted the association to exclude an entire species of trees from the height and view restrictions simply because the association favored the aesthetic benefit of those trees to the community.

The court also determined that the new rules adopted by the association to circumvent the declaration, which so narrowly defined "view" so as to render the prohibition against excessive tree height moot, were not entitled to judicial deference because the new rules directly conflicted with the declaration. The court stated that the board was not free to fashion a definition of "view" that rendered the declaration meaningless. Because the board's interpretation of the declaration was inconsistent with the declaration's plain meaning and because the declaration did not grant the board the right to adopt rules and regulations that were inconsistent with the declaration itself, the court found that the judicial deference rule did not apply.

The court also rejected the association's contention that the trial court's judgment was void for vagueness and overbreadth. The court disputed the association's arguments that the trial court's order to the association to use every enforcement mechanism available to the association under the declaration and the law to enforce the declaration's prohibition against trees exceeding rooftop height was too broad and that it interfered with the association's discretion to determine how to enforce the declaration. The court noted that the association's historical refusal to enforce the declaration with regard to the palm trees required a strong directive that the association utilizes all enforcement mechanisms available to it.

The court affirmed the trial court's decision that the trial court's judgment was sufficiently clear regarding the association's responsibility—to exercise its good faith discretion in determining which trees obstructed owners' views and deciding how to enforce the declaration as to such trees.

©2009 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Refusing to Fumigate Inflicts Damages on Adjacent Owner

Kim v. Weston, No. B201424, Cal. App. Ct., Dec. 18, 2008

Risks and Liabilities: In an unpublished decision, a California appeals court ruled that adjacent unit owners were negligent in failing to permit fumigation of their unit in order to treat a termite infestation.

Heesoon Kim and Margaret and Patrick Weston each owned a condominium unit in a two-unit building in Redondo Beach, Calif. In August 2003, Kim obtained termite inspections and reports from three companies that revealed visible termite damage in the living area, garage and her front balcony, which shared a common wall with the Westons' rear balcony. The reports all concluded that the only effective treatment would be tenting and fumigating the entire building with vikane gas.

In September 2003, Kim called the Westons to request that both properties be inspected, but Margaret Weston denied that her side of the property was termite-infested and said she was not interested in fumigating her unit. This back-and-forth continued for three years, with the Westons repeatedly denying Kim's requests for termite inspections and fumigation until Kim finally sued the Westons for negligence, nuisance and intentional infliction of emotional distress.

The court ruled in favor of Kim, stating that she had proven by a preponderance of the evidence that the Westons were negligent in failing and refusing to permit simultaneous fumigation of the two units. The court also determined that the Westons had acted with reckless disregard to the probability that Kim would suffer emotional distress as a result of her home being infested and swarmed with termites and that her property would be damaged due to the termite infestation. The court found that the Westons' conduct was malicious and oppressive and in knowing disregard of the rights and safety of Kim and her family. The court awarded Kim $60,000 in emotional distress damages, $30,000 in punitive damages, and $3,150 in actual damages. The Westons appealed, arguing that there was insufficient evidence to support the nuisance claim, the award of damages for emotional distress and the award of punitive damages.

One argument the Westons made was that they rightfully resisted fumigation of their unit. Citing Lamden v. La Jolla Shores Condominium Homeowners Association, 21 Cal. 4th 249, 87 Cal Rptr. 2d 237, 980 P.2d 940 (1999) (CALR November 1999), the Westons maintained that they were under no legal obligation to use a particular method of termite treatment. The court said that the Westons' reliance on Lamden missed the mark. Contrary to their position, Lamden did not address an individual's right to refuse a specific type of treatment.

The appeals court reversed the punitive damages award but otherwise affirmed the trial court's decision. The court explored the nuisance argument, citing a California law that defines nuisance as anything that "is injurious to health, indecent or offensive to the senses, or an obstruction to the free use of property." In order to establish a nuisance action, the following elements must be proven: (1) an interference with the plaintiff's use and enjoyment of his or her property; (2) that the interference was substantial, that is, it caused substantial actual damage; and (3) that the interference was unreasonable.

In this case, all three elements were met. A biannual invasion of flying termites into Kim's home was an interference with the enjoyment of property; the seasonal swarming of flying termites inside Kim's home and the knowledge that termites were destroying the wooden floors and baseboards in the home constituted a substantial interference; and the interference was unreasonable due to the fact that the Westons continually refused to allow testing or fumigation for a period of three years.

The Westons claimed that in order for nuisance liability to attach, their activity had to be the proximate cause of the unreasonable interference. The court disagreed, stating that the fact that the Westons' misconduct was the result of an omission—their unreasonable refusal to allow fumigation—rather than an affirmative act did not preclude nuisance liability. Because the Westons had not even suggested an alternative method of treatment, the court ruled that nuisance liability had attached.

The court also rejected the Westons' argument that Kim had not suffered emotional distress, noting that for three years Kim had endured periods of swarming termites, dealt with her children's fears and insecurities, worried that her home was being destroyed, and experienced anger and frustration because she knew there was nothing she could do to ameliorate the situation. The court therefore declined to revisit the award of damages for emotional distress but did reverse the award for punitive damages, as the record was insufficient for the court to evaluate the Westons' ability to pay $30,000 in damages.

©2009 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Association Not Liable for Damage Caused by Owners' Defective Water Heater

McAleb v. McFarland, 996 So. 2d 629 (La. App. 2008)

Risks and Liabilities: A condominium association does not have a duty or responsibility to care for and maintain each unit's water heater. Therefore, when a defective water heater leaks and causes damage to a neighbor's condominium unit, the association is not liable.

Kim and William McAleb own a unit in Audubon Trace Condominium. The McAlebs' unit is located beneath a unit owned by James, Cathie and Jason McFarland. The project is controlled by a declaration of condominium ownership and by a restatement of that declaration. The declaration and the restatement are enforced by Audubon Trace Condominium Association, Inc. ("association"). On Sept. 27, 2005, a defective water heater located in the McFarlands' unit leaked water, causing damage to the McAlebs' unit. On July 13, 2006, the McAlebs sued the McFarlands, their insurer and the association, claiming that they were responsible for repairing the damage.

The association subsequently filed a motion for summary judgment stipulating to the facts as described in the McAlebs' complaint but arguing that there was no legal basis to the claim that the association was liable to the McAlebs for damages resulting from water leaking from their unit. The trial court agreed with the association's argument and dismissed the case.

The McAlebs appealed the decision. The appeals court first looked to the declaration and the restatement and determined that the language in those documents was clear and unambiguous and should be given its plain meaning. Both the declaration and the restatement define a unit in the condominium as:

a part of the property, including one or more rooms and occupying one or more floors or part or parts thereof, designated or intended for individual ownership and use as a singular unit of space for residential purposes, all of which units and their respective locations and dimensions are shown on the plat annexed hereto…. Each unit shall consist of the space enclosed and bounded by the horizontal and vertical planes constituting the boundaries of such unit as shown on the plat; provided, however that no foundations, main walls, roofs or other principal structural parts of a unit, and no pipes, wires, conduits, ducts, flues, shafts, or public utility lines situated within a unit and forming part of any system serving one or more units or the common elements shall be deemed to be part of said unit.

The appeals court found that the declaration and the restatement further provided that a unit owner is liable to the association and other unit owners for damage resulting from an act of neglect if the damage is caused to the common elements or to a unit owned by others. The negligent owner is liable for the damage and any maintenance, repair or replacements.

The declaration and the restatement provide that the association has a duty to maintain the common elements of the condominium, defined as a "portion of the condominium property not a part of the individual units." Because the damage to the McAlebs' unit was the result of a faulty water heater in the McFarlands' unit, the court found that the documents expressly provide that maintenance, repairs and replacements within a unit are that unit owner's responsibility. Specifically, the court found that the damaged areas of the McAlebs' unit were within the unit boundaries and therefore were expressly not the association's responsibility.

The McAlebs also argued that the association was aware of a problem with water heaters in the project and even distributed fliers warning unit owners of potential problems with their water heaters and offering maintenance suggestions. The association's manager discussed the fact that other water heaters had leaked. The court ruled that the statement by the association's manager and the distribution of maintenance tips together did not give rise to an actionable duty. The association's maintenance tip flier was intended to be informational only and the court determined that the flier "did not create a duty or responsibility for the care and maintenance of each unit's water heater." The court stated, "Helpful advisories do not give rise to the imposition of a duty absent some contractual provision between the parties creating it." If the association becomes aware of a maintenance issue, the declaration and the restatement merely provide the association with the right to take action, not the duty to take action.

The appeals court affirmed the trial court's decision.

©2009 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Unit Owner Has No Basis to File Discrimination Action

Monopoli v. Ocean Spray Condominium Unit Association, No. 104862, Mass. Super. Ct., Sept. 15, 2008

State and Local Legislation and Regulation: A Massachusetts superior court dismissed a unit owner's gender discrimination suit against a condominium association that there was no allegation of government action, no specific facts on which to base federal claims, and no claim that the condominium was a place of public accommodation.

In August 1993, Barbara Monopoli purchased a unit at Ocean Spray Condominiums in Salisbury, Mass. Ocean Spray was governed by Ocean Spray Condominium Unit Association ("association") and subject to the community's bylaws and other regulations. In January 2000, Monopoli, who planned to install a dormer on the roof of her unit, spoke with several other unit owners (who expressed no objection), obtained the necessary permits for the installation, and hired an engineer and contractor.

In April 2000, the board voted to remove the dormer, although they had allowed another unit owner to keep skylights that had been installed in 1997. Monopoli claimed that she overheard a conversation between two other owners who discussed their desire to have the dormer removed while allowing the owner—who allegedly used vulgar and disparaging sexual references regarding those owners—to keep his skylights.

In 2003, the association sued Monopoli, seeking equitable and monetary relief in connection with the construction of the dormer. Monopoli counterclaimed, based on her assertion that she had been treated unfairly with regard to the enforcement of the regulations. In February 2006, a jury found that she was in violation of several condominium regulations and that she had wrongfully constructed the dormer in the common area of the condominium. The court ordered Monopoli to remove the dormer. In October 2006, the condominium notified Monopoli they would demolish the dormer, and Monopoli refiled a discrimination action, seeking equitable relief.

The court dismissed Monopoli's claims of gender discrimination based on state and federal law, stating that there was no allegation of government action, that there were no specific facts on which to base federal claims, and that there could be no claim that the condominium was a place of public accommodation. Although, as the court noted, state law might have provided Monopoli with other avenues of relief, she had pursued other claims of relief, and the exclusivity provision of the statute under which she might have sued barred her from pursuing any other claims for discrimination in private housing.

Finally, because the statute of limitations had already run on any remaining discrimination claims based on the Equal Rights Act and the Civil Rights Act, and because Monopoli had failed to specify any facts on which to base a specific claim for equitable relief, the court granted the condominium's motion for summary judgment and dismissed all of Monopoli's claims.

©2009 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Condominium Association Has Right to Ban Dogs

Stamford Landing Condominium Association, Inc. v. Lerman, 109 Conn. App. 261, 951 A.2d 642 (2008)

Covenants Enforcement: A condominium association's rule banning dogs fell within the association's power to promulgate the rule, as enumerated in Connecticut's Common Interest Ownership Act.

Charlene Lerman bought a unit at The Village at Stamford Landing in 1991. Stamford Landing Condominium Association, Inc. ("association") enforces the declaration and the association's rules.

In 2003, Lerman began renting her unit to Georgia Harbison. In August 2003, the association's board of directors received a complaint that Harbison had a dog in the unit in violation of the rules. After an investigation and confirmation that Harbison had a dog, the board sent a letter to Lerman notifying her that Harbison was keeping a dog and warning her that if the dog was not removed by Sept. 1, 2003, the association would impose a fine of $25 per day. On Sept. 5, 2003, Francis Browne, Lerman's attorney, telephoned Harbison about the Aug. 21, 2003 letter. Immediately thereafter, Browne sent the association a letter contesting the enforceability of the rules regarding pets.

On Sept. 9, 2003, the association sent Browne a letter reiterating that Harbison did not have the right to have a dog at the unit. The association extended a grace period to Lerman, giving her until Oct. 10, 2003 to have the dog removed from her unit after which the association would impose the fine. On Oct. 14 and Oct. 24, 2003, the association sent additional letters to Lerman advising her that fines were being imposed but that the she could be heard on the matter at the board meeting scheduled for Nov. 3, 2003. Lerman did not attend the board meeting, and the association informed her that the fines continued to accrue, that legal fees were being added to her account, and that foreclosure proceedings would be instituted on the accumulating fines if the dog was not removed from her unit. On July 1, 2004, the association commenced an action, pursuant to Connecticut's Common Interest Ownership Act ("Act"), to foreclose a statutory lien on Lerman's unit. Eventually, the association sued Lerman to foreclose its liens against her unit. The trial court ruled in favor of the association and ordered a foreclosure sale.

Lerman appealed, arguing that the association did not comply with the condominium declaration. She also asserted that the association violated the Act by failing to provide her with proper notice and an opportunity to attend a hearing before levying fines against her. Section 47-244(a)(11) of the Act provides that that an association may:

[I]mpose charges or interest or both for late payments of assessments and, after notice and opportunity to be heard, levy reasonable fines for violations of the declaration, bylaws, rules and regulations of the association…

The court disagreed, pointing out that the association provided Lerman notice of the impending fines in its Aug. 23, 2003 letter. The letters sent October 14 and Oct. 24, 2003 provided Lerman the opportunity to attend a board meeting and an invitation to speak at the meeting. The court cited Twenty-Four Merrill Street Condominium Association, Inc. v. Murray, 96 Conn. App. 616, 902 A.2d 24 (2006) (CALR November 2006) in noting that it found "[t]he concept of notice concerns notions of fundamental fairness, affording parties the opportunity to be apprised when their interests are implicated in a given matter…" The court found that while the letters mailed to Lerman may not have only included the date of the meeting and an invitation to speak, Lerman was familiar with the location, layout and procedures of the association's board. The letters' omission of the exact time and location of the meeting was not problematic and the association provided Lerman an opportunity to be heard. Finally, the court noted that Browne's contact with Harbison about the potential fines related to the dog in the unit was evidence of actual notice.

Next, Lerman argued that the association's rule prohibiting tenants from housing dogs at Stamford Landing was not valid because it comprised a restriction on use that was not contained in the declaration and was barred from enforcement by the Act. The court noted that this claim hinged on the construction of Section 47-244(c)(1) of the Act and found that when reviewing construction of a statute, its fundamental objective is to ascertain and give effect to the apparent intent of the legislature. The Act provides:

[U]nless otherwise permitted by the declaration or this chapter, an association may adopt rules and regulations that affect the use or occupancy of units that may be used for residential purposes only to: (A) Prevent any use of a unit which violates the declaration; (B) Regulate any occupancy of a unit which violates the declaration or adversely affects the use and enjoyment of other units or the common elements by other unit owners.

The court found that rules concerning pets fell squarely within a condominium association's powers and specifically noted Section 47-244(c)(1)(B) of the Act. The record indicated that the association received numerous complaints about dogs, experienced problems relating to dog waste, and experienced damage to the common areas caused by dogs. The court found that it was clear that the ban on dogs, which served to regulate occupancy of units that adversely affected other owners' enjoyment of the common elements, was valid under the Act.

Lerman also contended that the damages were not calculated accurately because the association's claim did not cite a continuing failure to pay common charges and late fees. The allegations listed in a complaint proposed to limit the issues to be decided in order to prevent surprise to the opposing parties. The trial court found that at the time of the filing of the complaint in 2004, the damages owed to the association were a minimum of $3,936.56, an amount that consisted of two months common charges and late fees, $2,225 of fines and $1,310 in legal fees, all of which were enforceable against Lerman under of the declaration. As a significant amount of time passed between filing of the action and the conclusion of the trial, the trial court permitted the association to prepare a post-trial affidavit to provide the accurate amounts owed by Lerman. The post trial affidavit calculated the amount Lerman owed the association but also included an assessment for a garage not raised in the complaint or trial. The appeals court found that Lerman was not adequately notified of the garage assessment and ruled that it could not be part of the judgment. The appeals courts affirmed the trial court's judgment in all charges except for the garage assessment. On that matter, the court reversed the trial court's decision and remanded the case to eliminate that debt.

©2009 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Declarant Cannot Unilaterally Amend Declaration after Divesting Interest

Walker v. 90 Fairlie Condominium Association, Inc., 290 Ga. App. 171, 659 S.E.2d 412 (2008)

Developmental Rights/Covenants Enforcement: A Georgia appeals court ruled that after a declarant relinquishes control of the association, it cannot reassign an amenity from a common element to a limited common element assigned to one unit.

Fairlie Condominium is located in Atlanta. It consists of 18 residential units, three business units, one commercial unit, common elements and limited common elements. 90 Fairlie, LLC developed the condominium, and Cole Walker was 90 Fairlie's managing member. Cole and Ashley Walker own penthouse unit 902, which adjoins the 10th floor rooftop terrace.

A floor plan of the 10th floor rooftop terrace was attached to and incorporated into the declaration. Most of the condominium roof consists of the 10th floor rooftop terrace and the 11th floor elevated roof deck. The floor plan designates most of the 10th floor rooftop terrace as a common element; only the small portion of the terrace immediately adjacent to unit 902 is designated as limited common element assigned to unit 902. However, the floor plan shows that most of the terrace is surrounded by a gated fence and is designated as a "no build area subject to [a] façade easement."

Before the Walkers purchased their unit, the developer installed guardrail fencing and a locked gate around most of the terrace, restricting access to anyone other than the residents of unit 902 and their guests. The Walkers' purchase agreement describes the entire fenced area as a limited common element assigned for the exclusive use of unit 902.

When all the residential and business units were sold, the developer recorded an amendment to the declaration that changed the designation of the terrace from the previous unassigned common element to a limited common element assigned to unit 902 for the exclusive use of its owner(s).

After the Walkers purchased unit 902, counsel for 90 Fairlie Condominium Association, Inc. ("association") advised Ashley Walker that, pursuant to the declaration, the bulk of the 10th floor rooftop terrace was not the exclusive property of the Walkers and demanded that she immediately remove the locked gate that restricted access. The association's board of directors later began making claims that the terrace was a common element belonging to the association and removed the fence and locked gate.

The Walkers eventually moved out and listed unit 902 for sale. Because the board's actions constituted a cloud on their title, the Walkers sued the association and its board of directors seeking an injunction, a declaratory judgment and damages. The association filed a counterclaim, asking the court for partial summary judgment on the issue of whether the terrace was a common element. The Walkers filed a cross-motion for summary judgment on issues concerning the status of the terrace and the necessity for a perimeter fence.

The Walkers acknowledged that in marketing the condominium units, Cole Walker informed prospective purchasers that they would have access to the 10th floor rooftop terrace. However, applicable building and safety codes limit the amount of space that can be occupied on a rooftop to 750 square feet and require that a fence and gate guide users of this space to the exit.

The trial court concluded that the developer lacked authority to amend the declaration to designate the terrace as a limited common element reserved for the exclusive use of unit 902 because: (1) the floor plan incorporated into the declaration designated the space as a common element for the use of all unit owners; and (2) the developer could not effect a unilateral amendment to the declaration after it sold all the units. Consequently, the court granted the association's motion for partial summary judgment on that issue.

However, because the guardrail fence surrounding the terrace is reflected on the declaration's original floor plans and is required by applicable building and safety codes, the court ordered the association to reinstall the fence and locked gate, making the area accessible to the association for maintenance purposes only until the association could satisfy all code requirements for use of the space; thus granting the Walkers' motion for summary judgment on the issue of whether condominium unit owners have general access to the terrace. The Walkers appealed the partial grant of the association's motion for summary judgment.

Under the Georgia Condominium Act ("Act"), "common elements" means all portions of the condominium other than the units. "Limited common elements" means a portion of the common elements reserved for the exclusive use of one or more, but not all, of the units. The Act requires that the condominium declaration allocate an undivided interest in the common elements to each unit; however, all the interests are subject to reallocation. The Act provides that a common element can be reassigned by the association as a limited common element through the declaration or an amendment to the declaration. Unless the governing documents provide otherwise, no vote of the unit owners is necessary to amend the declaration.

The Georgia Supreme Court adopted the rule that, "a developer who reserves the authority to waive restrictions running with the land no longer possesses the authority after divesting himself of his interest in the subdivision."

In their appeal, the Walkers argued that the terrace floor plan attached to the declaration depicts the fenced area of terrace as adjoining and only accessible to unit 902, so that the entire area was a limited common element as defined in the declaration. The appeals court did not agree for two reasons. First, because the depiction of the area on the floor plans as fenced or gated does not necessarily mean that the area was not accessible to residents of other units. Second, the floor plan expressly assigned the greatest part of the terrace as a common element except for a small portion immediately adjacent to unit 902, what the association described as its patio.

The appeals court acknowledged that the floor plans depicted most of the area as a "no build area subject to the façade easement" and that the declaration grants owners the right to use common elements only "for purposes for which they are intended." The court concluded that clearly the declaration did not intend a deck for the use of unit owners to be built on the terrace, even though an elevated roof deck benefitting all residential and business units was built in the 750 square feet of usable space on the 11th floor. Nonetheless, the original declaration designates most of the 10th floor terrace as a common element.

The Walkers argued that the Section 6(b) of the declaration authorized the declarant to amend the declaration to assign a common element not previously assigned as a limited common element without the approval of the association or board of directors.

The court disagreed because Section 6(b) of the declaration was in conflict with that portion of Section 5 of the declaration that required common elements to remain undivided. The court construed ambiguities in the declaration against the drafter, the declarant. In addition, the court found that Section 6(b) ran afoul of part of the Act that requires such an amendment to be prepared and executed by the association, noting that any inconsistency between the Act and the declaration would be controlled by the Act. Although the declarant may have had unilateral authority to amend the declaration when it controlled the association; that control had ended by the time it sought to amend the declaration to assign the terrace to unit 902 as a limited common element.

The appeals court affirmed the trial court's ruling.

©2009 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Caveat Emptor Does Not Apply to Sale of New Residences

Westlake View Condominium Association v. Sixth Avenue View Partners, LLC, No. 60167-9-I, Wash. App. Ct., Aug. 11, 2008

Developer Liability: A Washington appeals court ruled that when a builder sells a new home to its first occupant, there is an implied warranty of habitability. Whether the implied warranty is implicated by a specific construction defect is a case-by-case determination.

Sixth Avenue View Partners built Westlake View Condominiums in 1999. The city of Seattle issued a certificate of occupancy for the condominium project on June 10, 1999, and all of the condominium units sold between June and September 1999. Soon after the units sold, the Westlake View Condominium Association ("association") began notifying the builder, Rick Hunter, about construction problems. The door leading to the deck for Unit 101 had not been installed properly. The deck on Unit 201 did not have sufficient drainage, and as a result, there were large puddles after it rained. The builder wrote to the owner of Unit 201, stating that he would ask his superintendent to look into the problems. The trial record contained no information as to any subsequent communication between the association and the builder.

The association sued the builder in February 2004 for breach of contract, express warranties and implied warranty of habitability, but several of the homeowners experienced ongoing water intrusion problems in their units. In March 2004, the association hired a contractor, McBride Construction, to investigate how water was getting into the units. Following a two-day inspection, the contractor prepared a report stating that water damage was evident in the interior wallboards of two units, in the structural framing of the deck surface and in the deck handrail attachments on Unit 301. The metal deck railing moved about six inches in and out when grasped. The report identified visibly bowed and damaged window frames in all other units as another area of concern.

The contractor identified several areas of poor workmanship that likely contributed to the water intrusion: poor installation of weather resistant barrier paper, poor installation of metal coping on the deck railing and the failure to seal or properly shim the windows. The association sent the builder a copy of the contractor's report in April 2004. The builder responded that he would have his construction superintendent review the report and make recommendations, but he believed that the condos were "out of warranty" and that any repairs should be made through an insurance claim.

The association also hired Bridge Planning Architecture to investigate the conditions of the building and develop a repair plan. The architect's report stated that the decks were inadequately sloped to drain, which contributed to the leaking condition in Unit 201. The report also stated that the railing was loose at the upper decks due to its being poorly anchored. Mold was also found. The architect made several recommendations, including rebuilding the upper decks, stripping the siding and paper from the columns, repairing the decay, and applying a weather resistant barrier. The architect also recommended that upper deck railings be removed and reset with proper materials to prevent water intrusion and further decay and that all windows be replaced with proper flashing and seals, pointing out that the siding installed at the windows without sealant created a direct pathway for water.

The building's seismic system was a potential area of concern as well. The architect noted a large crack at the garage/basement level, cracks above the doors and nail heads popping through the ceiling in almost every unit. The repairs recommended in the architect's report were estimated to cost $341,000.

The trial court ruled in favor of the developer and dismissed the association's claims. The association subsequently appealed, claiming that the trial court erred by dismissing its warranty of habitability claim. The developer argued that the trial court's decision was proper because the alleged defects did not involve fundamental building code violations or structural problems. According to the appeals court, the sole issue on appeal was whether the homeowners made a record sufficient to merit a trial on implied warranty of habitability.

In analyzing the case, the court reviewed the status of caveat emptor, or "buyer beware," in Washington. The court cited the seminal case concerning implied warranties in the sale of new residential dwellings, Carpenter v. Donohoe, 154 Colo. 78 (1964), in which the Colorado Supreme Court ruled that builder-vendors of residential dwellings impliedly warranted that the homes they constructed complied with applicable building code requirements, were built in a workmanlike manner and were suitable for habitation.

According to the court, Washington followed Carpenter in abandoning the doctrine of caveat emptor as applied to the sale of new residential dwellings by builder-vendors and in recognizing an implied warranty. Citing Washington case law, the court noted that when a vendor-builder sells a new house to its first intended occupant there is an implied warranty that the house is structurally safe.

The court explained that the problems at Westlake are similar to the problems found in other Washington cases. In one case, condominium unit owners sued the builder for construction defects. In that case, the court relied on the argument that the implied warranty of habitability applied only to severe defects in the fundamental structure of a home. The Washington Supreme Court criticized that reasoning as being an unnecessarily constrictive reading of the implied warranty of habitability and instead stated that the applicability of warranties should be on a case-by-case basis. According to the supreme court, the facts of the case clearly demonstrated the wisdom of applying the implied warranty of habitability because the claimed violations, if proved true, had the potential to severely restrict the habitability of the condominium units.

In this case, the implied warranty of habitability did not cover defects that were merely defects in workmanship or aesthetic concerns. The developer characterized the water-related damage as mere defects in workmanship and claimed that the applicable test was whether the evidence showed that the developer deviated from the fundamental aspects of the building code. The court stated that the developer's attempt to use the building code as a litmus test to confine the types of cases under the protection of the implied warranty was inconsistent with Washington case law.

The court pointed out that the construction defects, regardless of whether they violated building codes, allowed water to infiltrate most of the units. The court also noted that the architect and contractor reports identified possible causes of the water intrusion, such as the failure to seal the windows or properly to apply a weather resistant barrier paper. The court found it important that the failure to properly install the windows caused the frames to bow, necessitating the replacement of almost all the windows.

The court also found it important that the association presented evidence that mold infestation was a problem in many of the units because the mold demonstrated that water was getting into the units and causing damage. The court stated that whether those problems rose to the level of breaching the implied warranty of habitability was a question for a jury; however, it remarked that the association did not have to wait until windows caved in or portions of decks rotted off before the warranty applied.

Accordingly, the court concluded that the association presented sufficient evidence of construction defects that were neither trivial nor merely aesthetic to indicate the possibility that the developer breached the implied warranty of habitability. Therefore, the court reversed the trial court's decision.

©2009 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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