May 2011
In This Issue:
Condominium Statute Does Not Trump Fair Housing Act
Amendment to Condominium Bylaws Not Valid
Association Responsible for Gutters and Driveway
Developer Doesn't Retain Rights to Assigned Parking
Association May Enforce Commercial Use Restrictions
Developer Liable for Common–Area Construction Defects
Association’s Liability for Personal Injury Is Jury Question
Pesticides Used on Common Areas Might Be Health Risk
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Condominium Statute Does Not Trump Fair Housing Act

Astralis Condominium Association v. Secretary, United States Department of Housing and Urban Development, on behalf of Carlos Garcia-Guillen, No. 09-2497, 09-2589, U.S. App. Ct., 1st Circuit, Sept. 16, 2010

Federal Law and Legislation/Covenants Enforcement: A U.S. appeals court denied a condominium association’s request for judicial review of an order granting handicapped parking spaces to disabled condominium owners.

Carlos Garcia-Guillen and Sonia Velez-Aviles (complainants) own a unit in Astralis Condominium Association in Carolina, Puerto Rico. They also own two appurtenant parking spaces located approximately 230 feet from the entrance to their unit. The association maintains a large number of unallocated parking spaces, including 10 handicapped spaces. Two of the handicapped spaces are located 45 feet from the entrance to the complainants’ unit. Under the condominium governing documents, the unallocated parking spaces are time-limited and are common elements to be used by residents and visitors on a first-come, first-served basis.

The complainants both suffer from medical conditions that affect their legs, knees and hips. Their impairments make physical activity, including the use of their assigned parking spaces, difficult. In 2006, they requested that the association grant them the exclusive, non-limited use of the two handicapped parking spaces nearest their unit. They discussed their request at various times with members of the board of directors and offered to provide pertinent medical information to support their request. After several attempts to reach an agreement with the board, they occasionally used the nearby handicapped parking spaces without authorization and without regard to the time limits. Because their use violated the association’s parking policy, security guards cited them for the infractions.

Frustrated by the board’s inaction, the complainants filed an administrative action with the U.S. Department of Housing and Urban Development (HUD) in 2007. HUD assigned an investigator to the case, who spoke with several members of the association’s board. As a result, the board held a meeting to address the parking issue at which it denied accommodation to the complainants.

In 2008, HUD filed a charge of discrimination pursuant to the Fair Housing Amendments Act of 1988. Following a hearing on the matter, the judge found that the association had violated the act by refusing to grant a reasonable accommodation and by unlawfully retaliating against the complainants. The judge directed that the complainants receive exclusive use of the two handicapped parking spaces at issue in exchange for the originally assigned parking spaces they owned. He also awarded money damages to the complainants for the association’s retaliatory actions. The judge assessed a civil penalty against the association and enjoined it from any further interference with the complainants’ rights. The association petitioned for judicial review, and HUD cross-applied for enforcement of the order.

The act prohibits discriminatory housing practices based on a person’s handicap. It contemplates three types of claims: disparate treatment; disparate impact; and failure to make reasonable accommodation. The adverse findings in this case were premised on the association’s failure to make reasonable accommodation.

The association argued that the court was required to make a finding of disparate treatment and disparate impact as a predicate to liability under the act. The appeals court determined that the administrative law judge correctly concluded that a failure to make reasonable accommodation paved the way to liability under the act.

To establish a prima facie case of failure to accommodate under the act, a person must show that he is handicapped within the purview of the Americans with Disabilities Act and that the party charged knew or should have known of his handicap. Next, he must show that he requested a particular accommodation that is both reasonable and necessary to allow him an equal opportunity to use and enjoy his home. Finally, he must show that the party charged refused to make the requested accommodation.

The record provided substantial evidence to support the judge’s findings that the complainants were handicapped, that the association knew of their handicaps, that the complainants requested a reasonable accommodation (exclusive use of the two handicapped parking spaces) and that the association refused to honor their request.

The association disputed these findings at every turn. It asserted that the complainants were not handicapped within the meaning of the act and that, in any event, it had no knowledge of their handicaps. The appeals court found that the association’s denials did not withstand even the most cursory scrutiny. The association offered no coherent counter-argument as to the second element of a prima facie case, since the complainants had doggedly requested the parking space accommodation. Moreover, it was plain that a rational person could logically infer that the requested accommodation was both reasonable and necessary to allow the complainants equal use and enjoyment of their residence.

The association argued that its actions were legitimized by Puerto Rico’s condominium law. The argument was moot since the administrative law judge never found intentional discrimination to be a basis for the association’s liability under the act. In a variation on this theme, the association argued that the judge’s order could not stand because the condominium law contained specific prerequisites for the transfer of common elements in condominium developments.

Under Puerto Rico’s condominium law, the transfer of common elements after construction of the property requires the unanimous consent of the condominium owners. The appeals court held that even though this provision could conceivably be construed to preclude compliance with the secretary’s order, the association was duty bound not to enforce a statutory provision if doing so would cause unlawful discrimination.

For the reasons elucidated, the appeals court denied the association’s petition for judicial review and granted HUD’s cross-application for enforcement of the secretary’s final order.

©2011 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

Amendment to Condominium Bylaws Not Valid

Bretton Woods Condominium I v. Bretton Woods Homeowners Association, Inc., No. 09-36820, N.Y. Supr. Ct., Oct. 25, 2010

Covenants Enforcement: A New York court granted summary judgment to condominium members who challenged the validity of an amendment to the association bylaws that adversely affected the voting rights of members, finding that the amendment was null and void because it was not recorded as an amendment to the declaration.

Bretton Woods Condominium I and Bretton Woods Condominium II are two of nine condominiums that form Bretton Woods Homeowners Association, a common–interest community in Suffolk County, N.Y. Although the association has four classes of members, only two are relevant to this case: Class A members, who consist of the owners of homes within each condominium, and Class B members, who are the respective board of managers of each condominium. The voting rights of Class B members are set forth in identical clauses in Article III of the declaration and Article VI of the bylaws, which read:

Each Class B member shall be entitled to the number of votes corresponding to the number of homes in its condominium. No Class B member shall split or divide its votes on any motion, resolution or ballot, other than for the cumulative voting procedure which shall be employed in the election of directors.

In August 2009, the association held a special meeting for the sole purpose of amending Article VI and Article VIII of the bylaws to change the cumulative voting system for the election of directors to a system in which each condominium board of managers would appoint one director to the board of the homeowners association. In accordance with the bylaws, the amendments were passed by a vote of almost 67 percent of the votes of the membership.

The condominiums sued the association, contending that the amendment adversely affected their interests in violation of Article XIII of the bylaws, which states, “[N]o amendment . . . shall affect or impair the validity or priority of the members’ interests and the interests of holders of a mortgage encumbering a member’s home.” The association filed a cross motion for an order dismissing the complaint, and the condominiums filed a cross motion seeking summary judgment on the first and fourth counts in their action for an order declaring that the amendments were null and void.

Bretton Woods Condominium I contained 164 homes (16 percent of the total owners) and Bretton Woods Condominium II contained 172 homes (17 percent of the total owners). Because the bylaws required cumulative voting for a nine-member board of directors, the condominiums argued that their voting power was reduced from 33 percent to 22 percent under the amended voting and electing system, by which they would be entitled to appoint only two of the nine members of the board.

Additionally, the condominiums contended that in order to properly amend the bylaws, pursuant to the declaration, the declaration would also have to be amended by a vote of 80 percent of the members. The declaration provides that:

Unless specifically prohibited herein, Articles I through Article III . . . may be amended by an instrument signed by members . . . holding not less than 80 percent of the votes of the membership. Any amendment must be properly recorded to be effective.

The court found it was undisputed that Article III of the declaration was not properly amended, and no such amendment was recorded.

Pursuant to New York’s rules of civil procedure, a defendant must bring a motion to dismiss before the time to answer the complaint; otherwise, the defendant is deemed to have waived that right. The court denied the association’s motion to dismiss because the time to answer the complaint had expired. However, the court observed that the result would have been the same if the association had submitted its motion to dismiss in a timely manner because the documents submitted did not conclusively resolve all factual issues of the case, nor did they establish a defense as a matter of law.

The condominiums limited their motion for summary judgment to the first and fourth counts of their complaint. The first alleged that the August amendments to the bylaws affected and impaired the interests of the Class A members residing in the condominiums as well as the condominiums’ Class B members, in violation of Article XIII of the bylaws. However, they did not present evidence to show how cumulative voting determined the outcome of prior elections, how elimination of cumulative voting would impact their representation on the board, or how the new system would adversely affect and impair the interests of the Class A and Class B members. Consequently, the court found that they failed to make a prima facie showing of entitlement to summary judgment and denied their motion as to the first cause of action.

The condominiums were successful in establishing their entitlement to summary judgment on the fourth cause of action. In that action, they alleged that the amendment conflicted with Article III of the declaration. Relying on New York case law, the court observed that no modification of or amendment to the bylaws of a homeowners association is valid unless it is set forth in an amendment to its declaration, and the amendment is then recorded in the land records. In addition, the association’s bylaws state that, “In the case of any conflict between the declaration and these bylaws, the declaration shall control.” The association failed to submit sufficient evidence in admissible form to require a trial of the material issues of fact. It was undisputed that the declaration was not amended, nor had any amendment been recorded. Accordingly, the court ruled that the condominiums were entitled to summary judgment declaring that the August 2009 amendment of the bylaws was of no effect.

As final disposition of the case, the court granted complete relief to the condominiums in their action, which rendered the other counts of their complaint moot.

©2011 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Association Responsible for Gutters and Driveway

Buckbinder v. The Woods at Smithtown Homeowners Association, Inc., No. 04-15801, N.Y. Supr. Ct., Sept. 28, 2010

Covenants Enforcement/Attorney’s Fees: Pursuant to its declaration, a condominium association was not exempted from the obligation to maintain and repair the eaves, leaders and driveways of the unit owners.

Marvin and Laura Buckbinder own a townhome in The Woods at Smithtown Homeowners Association, a condominium complex located in Nesconset, N.Y. that they purchased in 1989. The Buckbinders’ residence was the middle unit of three attached townhome units, and had a longstanding, recurring problem with leaking gutters that damaged the inside of the unit. The problem first occurred in 1990 and recurred in 1995 and 1997. Each time, the Buckbinders notified the managing agent, and each time the agent sent someone to repair the gutters.

In 2002, the managing agent notified that Buckbinders that their gutters and leaders were the responsibility of the unit owner. The association refused to repair the Buckbinders’ gutters and leaders stating the repairs were outside the scope of its obligations under the declaration and bylaws.

The Buckbinders sued the association in small claims court, but the suit was dismissed because of questionable jurisdiction. The association added its legal fees to the Buckbinders’ monthly assessment for common charges. The Buckbinders continued to pay their regular monthly assessments, but refused to pay the legal fees. The association then imposed late fees and refused to cash the Buckbinder’s checks for the monthly charges.

In 2004, the association filed a lien on the Buckbinders’ unit for the unpaid legal fees and late charges and commenced action to foreclose the lien. The trial court granted summary judgment to the Buckbinders and dismissed the association’s lien because the association was not entitled, under the declaration, to recover the costs of defending a small claims action.

The Buckbinders then sued the association, listing nine causes of action. Since the association had provided the Buckbinders with a certificate of lien satisfaction, it asked the court to dismiss the Buckbinder’s entire suit. The court looked at the nine counts in the Buckbinder’s suit and ruled on them separately.

The Buckbinders’ suit claimed that the association was responsible to maintain and repair (1) the gutters, leaders and (2) driveway; therefore it was an error for the association to place those responsibilities on the homeowners. They cited Article IV of the declaration, which provides:   

The maintenance and repair of the common properties shall include, but not be limited to, the repair of damage to roadways, walkways, buildings, pool, tennis court, outdoor lighting and fences, landscape maintenance, exterior home and building maintenance to all homes which will consist of staining or painting the exterior of the homes and roof repairs.

They also cited Article IX of the declaration, which provides that “the association shall also be responsible for . . . maintenance of any pipes, wires or conduits located outside of any home . . .” The court concluded that since gutters and leaders are located outside of the unit and function as conduits for water draining away from the unit, the association was responsible for maintaining the gutters and leaders.

As to the driveway, Article IX of the declaration listed roadways as part of the common properties; in addition, the Buckbinders submitted the original Offering Plan that stated “[o]wnership and maintenance of roadways and exterior parking areas will be retained by the association.” Therefore, the court concluded that the association failed to demonstrate that the repair and maintenance of driveways were not a responsibility of the association.

The court determined that the association failed to show why the Buckbinder’s suit regarding gutters, leads and driveway maintenance should be dismissed. Therefore, the court denied the association’s motion to dismiss these causes of action.

The Buckbinders also claimed the association board wrongfully and improperly filed a lien for unpaid common charges against them. Therefore, they asked the court to direct the association to (3) vacate the notice of lien and (4) pay damages. The association asked for these two causes of action to be summarily dismissed.

The certificate of lien satisfaction provided to the Buckbinders rendered their claim to vacate the lien moot. Therefore, the court dismissed this portion of the suit. However, the association failed to demonstrate, in view of the prior judicial decision, that the lien for attorney’s fees was properly filed or that the Buckbinders did not sustain damage as a result of the association’s actions.

Another cause included in the Buckbinders’ suit was for (5) slander. They claimed the board willfully and maliciously filed a false and defamatory notice of lien. The association asked for this point to be dismissed, arguing there was no evidence that the board acted unreasonably or with intent to harm the Buckbinders or that they suffered resulting damages. The court refused to dismiss this cause stating the association failed to establish a lack of malice on the board’s part.

The Buckbinders suit asked that the association (6) pay their attorney’s fees, and the association asked the courts to dismiss this cause as well.  Inasmuch as the association failed to establish a lack of malice on the part of the board, the court denied the association’s motion to dismiss.

The Buckbinders also sued for (7) defamation stating that the requirement to report the lien to his employer impugned Marvin Buckbinder’s business integrity. They also claimed they suffered humiliation in their relations with friends and family. However, the Buckbinders’ testimony revealed that Marvin Buckbinder did not tell his fellow employees, friends or family members about the foreclosure; and, although he mandatorily informed his employer of the lien, he was not aware if any action was taken with respect to the information. He was not treated any differently than other employees who were let go in 2005 due to a reduction in work force. The court, thus, dismissed the Buckbinder’s claim of defamation.

The Buckbinder’s suit also claimed (8) tortious conduct by the association by wrongfully denying them use of the common amenities and refusing to accept their payment of the proper amount of common charges. The association argued that its relationship with the Buckbinders was primarily contractual, and that the Buckbinders’ claims were essentially a breach of contract claims. Because this cause of action did not identify a duty of care owed by the association distinct from its contractual obligations and did not allege that the board engaged in tortious conduct separate from its alleged failure to comply with the governing documents, the court dismissed this count.

Finally, the Buckbinders sought damages for (9) intentional infliction of emotional distress. The association sought to dismiss the claim on the ground that the board’s actions did not rise to the level of extreme and outrageous conduct so as to be intolerable. The court agreed and dismissed this count.

The court granted the association’s motion to dismiss three claims and part of a fourth. The remaining parts of the Buckbinders’ suit were severed and continued.

©2011 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Developer Doesn't Retain Rights to Assigned Parking

First Equitable Realty III, Ltd. v. Grandview Palace Condominium Association, No. 3D09-3129, Fla. App. Ct., Oct. 27, 2010

Conversions/Miscellaneous Association Operations: A Florida appeals court upheld a finding that a developer did not retain the right to be assigned parking spaces within the boundaries of commercial units conveyed in fee simple to the condominium association.

First Equitable Realty III, Ltd. is the developer of Grandview Palace Condominium Association. An amendment to the condominium’s declaration provided that at the discretion of First Equitable, certain commercial units could either be (1) developed into retail or other commercial uses and conveyed without the association’s consent; (2) converted into a “limited common element parking area, in which event the parking spaces located within the boundaries of the commercial spaces would be assigned to First Equitable”; or (3) conveyed to the association, in which event the conveyance carried with it the transfer to the association of common expenses and common elements relating to the unit. The amendment further provided that “dues previously paid for un-built commercial units or portions thereof which do not exist at the time of conveyance will be returned to [First Equitable].”

Shortly before control of the association was turned over to the unit owners, First Equitable executed and recorded a warranty deed conveying three commercial units to the association. When the deed was signed and recorded, the units had not been developed or converted into parking spaces. The units were conveyed “together with all the tenements, hereditaments and appurtenances thereto belonging or in anywise appertaining.” The deed conveyed fee simple interest in the units and warranted that they were owned and conveyed “free of all encumbrances except those accruing subsequent to December 31, 2007.”

First Equitable reimbursed itself approximately $38,000 in prior maintenance payments for the units, but asserted that it retained a contingent right to any parking spaces “within the boundaries of the commercial spaces” in the event the association later converted the units into parking spaces. The association denied that First Equitable retained such right.

The association sued First Equitable, seeking a declaratory judgment to resolve the question. The trial court ruled that the fee simple deed transferred all of First Equitable’s rights in the commercial units to the association, including any contingent rights to parking spaces created within the boundaries of the units. First Equitable appealed.

The appeals court determined that the trial court’s conclusion was correct for two independently sufficient reasons.

First, the right retained by First Equitable was a contingent right that had not been exercised at the time the units were conveyed. Under the amended declaration, First Equitable’s right to be assigned parking spaces within the unit boundaries would have arisen only in the event First Equitable had already converted the units into parking spaces. That event and conversion had not occurred at the time the units were conveyed.

Second, the language in the deed warranted that the conveyance was in fee simple, inclusive of all rights appurtenant to the units, and free of encumbrances. Even if the amended declaration reserved a future right to parking spaces upon the contingent conversion of the units into parking area, the amendment itself would be an encumbrance accruing before December 31, 2007. The amendment was adopted and recorded before that date, and the deed expressly disclaims, therefore, the existence or effectiveness of any such retained right.

Accordingly, the appeals court affirmed the trial court’s order.

©2011 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Association May Enforce Commercial Use Restrictions

Franklin Commons, L.L.C. v. Helman Woods Subdivision Homeowners Association, No. 292952, Mich. App. Ct., Nov. 4, 2010

Covenants Enforcement/Use Restrictions: A homeowners association may sue to enforce a restrictive covenant that limits construction on each lot to one single-family dwelling and associated structures.

Helman Woods Subdivision was established in 1951. The property was composed of Lots 1-78 and Outlot A. In 1952, the developer recorded use restrictions that limited construction to one single-family dwelling and associated structures on each lot. The restrictions provided for amendment upon the approval of both the seller and adjoining lot owners.

In 1953, the seller divided Outlot A into lots 79-84, naming the re-subdivision “Helman Woods No. 1.” In 1974, two of the lots were rezoned from residential to commercial use, despite objections from other homeowners in the subdivision. Michigan National Bank purchased the lots and worked with Helman Woods Subdivision Homeowners Association to reach an agreement to protect the residential nature of the subdivision.  

In 2002, Franklin Commons, L.L.C. purchased Lots 79-84 and Lot 73. Intending to commercially develop the lots, it sued the association, seeking a judicial declaration, injunction and other equitable relief to establish that the association could not enforce any deed restrictions or covenants that would limit the use of the property to residential purposes. Both parties moved for summary disposition. The trial court granted summary judgment to the association, finding that the restrictions recorded in 1952 were enforceable as to the lots owned by Franklin Commons. Franklin Commons appealed.

Franklin Commons first argued that the association lacked standing to enforce the restrictions. The court observed that it is well established that those who have ownership interests in property that benefits from restrictive covenants have standing to enforce those covenants.

The association became a landowner in the subdivision as a result of the 1994 transaction with Michigan National Bank, when portions of Lots 45 and 48 were deeded to the association for use as green space. However, even if it were not a landowner, it was able to enforce the restrictions because it actively represented the interests of the other lot owners. Michigan case law has established that a voluntary association—the sole purpose of which is to represent the interest of its members—may sue to effectuate that purpose, regardless of whether the association itself owns any land. Here, the association was active in representing the interests of its members; in fact, the purpose listed in its articles of incorporation is “[t]o protect and exercise the rights provided in the building and use restrictions of Helman Woods Subdivision.”

Franklin Commons argued that the association lacked standing because its articles of incorporation only referred to “Helman Woods Subdivision,” with no reference to “Helman Woods Subdivision No. 1.” The court held that the distinction had no bearing on enforcement of the deed restrictions because the restrictions were created for the benefit of all of the Helman Woods lots. Thus, those lot owners, acting through the association, were able to enforce any binding restrictions on Helman Woods Subdivision No. 1.

Franklin Commons argued that the restrictive covenants did not apply to its lots because they were formerly Outlot A. There was no dispute that the developer recorded a restriction providing that “No building shall be erected, altered or used on any lot whatsoever . . . for any purpose whatsoever, other than one single detached dwelling occupied by the purchaser . . .” When the restrictions were recorded, Helman Woods consisted of Lots 1 through 78 and Outlot A. Franklin Commons maintained that because the restriction used the word “lot,” it did not refer to an outlot; thus Outlot A was not covered by the restriction. The court found this argument unavailing because the developer’s intent was readily apparent from reviewing the words used in the restriction. In ordinary and generally understood language, an outlot is a type of lot. Moreover, the court deemed that the phrase “any lot whatsoever” left no doubt regarding the drafter’s intent that the restriction was to apply to the entire subdivision, including Outlot A.

Franklin Commons also argued that the restriction did not apply to Outlot A because it was subdivided into the six lots that comprised Helman Woods No. 1, and no restrictions were recorded with respect to Helman Woods No. 1. The court observed that although no restrictions were recorded for Helman Woods No. 1, the text of the original restrictive covenants established that the covenants “run with the land.” Because the covenants were in effect for Outlot A before it was subdivided, they continued to remain in effect after the re-subdivision. Accordingly, the appeals court determined that the trial court properly granted summary judgment in favor of the association.

Franklin Commons then raised equitable and legal defenses, arguing that even if the restrictions were valid and enforceable, the association waived enforcement by consenting to the commercial construction of Michigan National Bank. The court held that even if a party does not challenge a particular deed restriction, the restriction does not become unenforceable when a violation of a more serious degree occurs. Here, enlarging the commercial activity to encompass Lots 79 through 84 constituted a more serious violation of the deed restrictions. The court noted that the present commercial activity consisted of the bank and a driveway; however, the bank was effectively segregated from the rest of the neighborhood by a treed berm on the two adjacent lots. The fact that a majority of the remainder of Lots 45 and 48, on which the bank and driveway were situated, were conveyed to the association as park area showed that a significant buffer existed between commercial activity and the rest of the neighborhood.

On the other hand, Franklin Commons proposed to expand commercial activity to an additional six or seven lots, substantially increasing the commercial-use impact on the neighborhood. If Franklin Commons were allowed to proceed, approximately 10 residential lots would become adjacent to commercial activity. Unlike the bank, the lots comprising Outlot A are accessible by roadway from the subdivision, meaning traffic within the subdivision could increase. Accordingly, because the proposed commercial use would constitute a more serious violation of the existing deed restrictions, the association’s consent to construction of the bank did not provide a means for Franklin Commons to bypass the restrictions.

Franklin Commons argued that technical violations of restrictive covenants are permitted. The court, however, observed that constructing commercial buildings where only residential ones are permitted could not be considered a mere “technical violation.” The court iterated that the undisputed purpose of the restrictions was to maintain a residential character to the neighborhood. Clearly, Franklin Common’s proposed commercial activity ran afoul of that purpose.

Franklin Commons next argued that the circumstances surrounding the subdivision had changed to a degree that rendered the covenants unenforceable. The court acknowledged that changes in neighborhood conditions can make enforcement of restrictive covenants inequitable if a covenant’s purpose can no longer be accomplished. However, the evidence in this case did not establish that the covenant’s purpose could no longer be accomplished. It was clear that the character of the neighborhood as a whole had not changed, and the court observed that evaluation of the overall character of a neighborhood determined whether it was inequitable to enforce a restrictive covenant.

The court found that none of the legal or equitable defense raised by Franklin Commons had merit and, accordingly, it affirmed the trial court’s grant of summary judgment in the association’s favor.

©2011 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Developer Liable for Common–Area Construction Defects

Lakeview Reserve Homeowners v. Maronda Homes, Inc, No. 5D09-1146, Fla. App. Ct., Oct. 29, 2010

Warranties/Developer Liability: A Florida developer is liable to homeowners under the common law of implied warranties of fitness and merchantability for construction defects in a subdivision’s common areas.

Lakeview Reserve Homeowners Association, located in Orange County, Fla., sued Maronda Homes, Inc., the developer, for breach of the warranties of fitness and merchantability. The claim was based on latent defects in the subdivision’s common areas. The trial court ruled against the association, holding that the common law implied warranties of fitness and merchantability did not extend to construction and design of private roadways, drainage systems, retention ponds and underground pipes, or any other common elements of the subdivision because the structures did not immediately support the residences in the subdivision. The association appealed.

In its ruling, the court cited the two cases relied upon by Maronda: Conklin v. Hurley, 428 So.2d 654 (Fla. 4th DCA 1983) and Port Sewall Harbor & Tennis Club Owners Association, Inc. v. First Federal Savings and Loan Association of Martin County, 463 So.2d 530 (Fla. 4th DCA 1985).

Observing that for centuries, the principle of caveat emptor (“buyer beware”) was the rule of law when parties were deemed to be on equal footing and neither had a significant advantage in discerning potential defects to goods sold in the marketplace, the court noted that this theory was persistent in land sales when buyers could inspect land to ensure it was suitable for its intended use. Initially, the theory carried over into the construction and sale of homes and commercial buildings when early building construction and land development were relatively simple.

As mass production of goods became more complicated, courts began to impose liability on manufacturers and sellers who were in a superior position to know of or discover defects than were consumers. Following this trend, courts have shown a willingness to reject the notion of caveat emptor and impose liability on developers and sellers of real property.

In Gable v. Silver, 258 So.2d 11 (Fla. 4th DCA 1972), the court held that, without drastically affecting legitimate developers, the doctrine of implied warranties in the sale of new homes could be very effective in reducing the number of unethical developers in the industry who fail to stand behind the quality of their work. The Gable court also noted that legitimate builders were much more capable of distributing the costs of their mistakes than innocent home buyers. In addition, the Florida Supreme Court upheld a Fourth District ruling that “the implied warranties of fitness and merchantability extend to the purchase of new homes and condominiums in Florida from builders.”

The court distinguished Conklin from the instant case because in that case, purchasers of vacant lots sought to recover for defects in a seawall abutting the lots, and the lots were bought primarily for investment purposes to be resold to other investors or builders. Here, the association sought a remedy under the implied warranties not as an investor, but on behalf of the homeowners who purchased their homes mainly for their own residential purposes. Thus, the homeowners were clearly within the ambit of public policy extending consumer protection. Additionally, the defects in the case were distinguishable from Conklin. The structures here were complex site improvements, some of which were underground. The court observed that the planning, permitting, site work and construction of the improvements required expertise far beyond that of the average home buyer. The defects were not readily discernable even upon diligent inspection.

The court disagreed with conclusions reached by the Port Sewall court that roads and drainage in a subdivision do not immediately support residences, and it interpreted the Conklin decision to encompass essential services that obviously support the home by making it habitable, including roads, drainage systems, retention ponds and underground pipes. The test used by the court to distinguish essential services from non-essential services—such as landscaping, security systems, sprinkler systems and recreational facilities—was to determine whether, in the absence of the service, the home would be inhabitable; if so, the implied warranties apply.

The court held that the services at issue in this case were essential to the habitability of the homes for purposes of application of the implied warranties. The court emphasized that its holding was limited to the facts of this case since the association and/or the homeowners could bring the claim for these privately owned structures.

The court considered its ruling was in keeping with Florida’s strong public policy of protecting consumers in situations where (1) they must rely on the expertise of a builder or developer for proper construction of these complex structures; (2) they are in an inferior position to inspect the work and correct the defects; and (3) the defects are not readily discernable to the average home buyer.

Addressing collateral issues raised by Maronda, the court disagreed that the association could not bring a claim for implied warranties for defects in the common elements, but rather that individual homeowners must bring the claims. The court held that a homeowners association represents individual homeowners, and any costs of repairs to the defects in the common areas are passed along to the homeowners in the form of assessments, regardless of whether the individual homeowner has damage to his or her own property. To require each homeowner to maintain a separate suit for damages would be contrary to public policy in that it contemplates a multiplicity of lawsuits for the same issues.

In addition, the court rejected Maronda’s argument that the Conklin court intended that the structures be physically attached to the homes. The court concluded that the Conklin court essentially illustrated services essential to supporting the residence in terms of habitability; attachment to the structure was only incidental to providing the service.

Finally, the appeals court rejected Maronda’s argument that extending the implied warranties was a matter for the legislature, observing that courts are free to apply common law in the absence of a legislative pronouncement. The court also rejected the association’s application of cases extending implied warranties to the common areas of condominiums, as it found those cases inapplicable precisely because they were decided on statutory grounds not available here.

The court found that the association had a valid claim for breach of the common law implied warranties of fitness and merchantability against Maronda for defects in the construction of the subdivision’s common areas and, therefore, reversed the trial court and remanded the case for further proceedings.

©2011 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Association’s Liability for Personal Injury Is Jury Question

Villano v. Strathmore Terrace Homeowners Association, Inc., No. 2010-02719, N.Y. Supr. Ct., App. Div., Sept. 28, 2010

Risks and Liabilities: A New York appeals court affirmed a ruling denying an association’s motion to dismiss a personal injury claim, finding that the question of whether the premises were maintained in a safe condition was a matter for a jury.

Rose Villano owns a home in Strathmore Terrace Community Homeowners Association in East Norwich, N.Y. During the afternoon of June 9, 2007, Villano fell over a sprinkler head located on her front lawn that had failed to retract into the ground, despite the fact the sprinkler was not operating at the time. The black sprinkler head was approximately four inches high and located in the corner of her front lawn, immediately adjacent to the black asphalt driveway and the curb. Villano paid a monthly assessment to the association for landscaping, including the sprinkler system. She sued the association to recover damages for personal injuries she suffered in the fall. The association moved for summary judgment dismissing her complaint, and the trial court denied the motion. The association appealed.

To demonstrate entitlement to summary judgment in a trip-and-fall case, the association needed to establish that it maintained the premises in a reasonably safe condition and did not create a dangerous or defective condition on the property or have either actual or constructive notice of a dangerous of defective condition for a time sufficient to remedy it.

The appeals court found that the association failed to meet the burden of establishing that it maintained the premises in a reasonably safe condition. Although the association argued that the unretracted sprinkler head was an open and obvious condition that was not inherently dangerous, the court could not determine, as a matter of law, that the association was entitled to summary judgment dismissing the complaint.

The court observed that, “The issue of whether a dangerous condition is open and obvious is fact-specific and usually a question for a jury.” Moreover, a condition that is ordinarily apparent may be rendered dangerous for the unwary if the condition is obscured or the victim distracted. Given the dimensions of the sprinkler head and its location on the lawn in an area close to where pedestrians would be walking, the appeals court concluded that triable issues of fact existed as to whether the unretracted sprinkler head was an open and obvious danger. Moreover, proof that a dangerous condition is open and obvious merely negates a defendant’s obligation to warn of the condition and does not preclude liability for failure to maintain the property in a safe condition.

Even though the association was aware of the location of the sprinkler head, it failed to retract it into the ground as it should have. Thus, the association failed to establish that it was not inherently dangerous. The court noted, in addition, that the association failed to submit evidence establishing that no question of fact existed as to whether its employees lacked either actual or constructive notice of the defective sprinkler head.

The court concluded that the trial court properly denied the association’s motion for summary judgment dismissing the complaint and affirmed its ruling.

©2011 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Pesticides Used on Common Areas Might Be Health Risk

Zopatti v. Rancho Dorado Homeowners Association, No.10CV1091 DMS (WVG), U.S.Dist.Ct., S. Dist. Calif., March 4, 2011

Miscellaneous Association Operations: A trial court denied an association’s motion for summary judgment in a suit filed by a homeowner who claimed that the pest control chemicals used by the association to treat common areas endangered her health.

Karen Zopatti owns a home in Rancho Dorado, a community in San Marcos, Calif. She was diagnosed with various medical conditions that cause her to experience an immune-system response when exposed to various chemicals. Due to her autoimmune state, exposure to pesticides, insecticides, fungicides, fertilizers and herbicides is dangerous to her health and potentially life threatening.

In 2010, Zopatti sued Rancho Dorado Homeowners Association, seeking relief on 17 claims. Subsequently, she filed a motion for a temporary restraining order enjoining the association from spraying or otherwise applying pesticides, fungicides, fertilizers or herbicides within a quarter mile radius of her home. The association responded that it had voluntarily postponed application of the pesticide to the common areas until a ruling on the restraining order was decided.

After a hearing, the court denied Zopatti’s motion for injunction, finding that the evidence presented did not sufficiently show a causal relationship between her exposure to the association’s pest control chemicals and a potential worsening of her medical condition. Relying on the court to deny Zopatti’s motion, the association moved for summary judgment, arguing there was no triable issue of fact because the lack of a causal connection between her exposure and worsening of her medical condition was essential to each of her causes of action.

The association pointed to the court’s finding that Zopatti “failed to establish a likelihood of irreparable harm.” However, the association did not address the court’s finding that Zopatti “demonstrated the possibility of irreparable harm in the absence of preliminary relief.”

The association described various administrative proceedings initiated by Zopatti with state and county regulatory agencies. It argued that records of the proceedings indicated that the true nature of the dispute between Zopatti and the association was the fact that Zopatti believed pest control measures used by the association were environmentally unsound. The association seemed to assert that because Zopatti had previously initiated various administrative proceedings, and because no such proceedings resulted in a finding of a causal relationship between the association’s application of various chemicals and pesticides and Zopatti’s injuries, the association was entitled to summary judgment.

The association’s motion, without setting forth the governing standard for summary judgment, stated that Zopatti’s five statutory discrimination claims required a causal connection between a defendant’s conduct and a plaintiff’s actual harm. The association contended that to support each of her remaining claims, Zopatti bore the burden of proving, through medical evidence, to show a causal relationship between her exposure to pesticides and chemicals and the association’s pest control policies.

In opposition to the association’s motion for summary judgment, Zopatti submitted declarations of two physicians and herself. According to her own declaration, she was diagnosed with various medical conditions that caused her to experience an immune-system response when exposed to various chemicals. She stated that after being exposed to the application of pesticides in her neighborhood on March 31, 2009, she experienced stinging eyes, body aches, weakness and fatigue, which continued to worsen until she was admitted to the hospital on April 30 with internal bleeding. She stated further that within a few days of a pesticide application on June 18, 2008, she began to experience aches, pain, fatigue, weakness and a rash on her face, and her symptoms continued to worsen over the following month, causing her to seek treatment from a doctor on July 16. After the association’s application of pesticides on July 28, 2008, and Aug. 6, 2008, she experienced chest pain—a usual symptom of a flare-up in her mixed connective tissue disease—on Aug. 28, 2008, and again visited a doctor. Finally, she stated that certain toxins were applied to the common areas near her home in early 2007, and during that time she experienced numbness and pain, body aches, chest pain, shortness of breath and weakness. Medical tests performed at the time indicated that she suffered from reactive airway disease.

In his declaration, Zopatti’s treating physician stated that due to her autoimmune state, exposure to pesticides and other chemicals caused her immune system to attack her body. Her condition is such that exposure to pesticides and/or other chemicals could result in serious, irreversible health problems or death. He testified that Zopatti had near-fatal experiences induced by her pesticide and chemical exposures at her home by airborne applications and fumes released by the granules as the heat and humidity fluctuated and caused aerosolation of the chemicals previously applied by the association. Another physician testified that the health effects Zopatti described were consistent with her diagnosed medical conditions.

The association objected to Zopatti’s declaration as irrelevant, lacking foundation and improper expert opinion. However, the court found that her testimony related to facts she had personal knowledge of and found that she demonstrated the existence of a triable issue of fact as to the existence of evidence of a causal connection between the association’s pest control measures and her injuries, including interference with her use and enjoyment of her residence. Because the court found her testimony sufficient to raise a triable issue of fact as to the causal relationship, the court did not address objections raised by the association to the testimony presented by her physicians.

Zopatti argued that, while the evidence presented in connection with her motion for preliminary injunction might not have been sufficient for the court to enjoin the particular pesticide application planned at the time, the court’s finding was a far cry from a finding that there was no genuine issue of material fact on all 15 counts asserted against the association. The court agreed.

The court found genuine issues of material fact existed so as to preclude summary judgment and denied the association’s motion.

©2011 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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