July 2012
In This Issue:
Injunction Requiring Owner to Get Insurance Denied
Public Doesn’t Have Easement to Use Private Beach
Owners Sue to Enforce Lake Access Easement
Overbroad Sign Restriction Is Unconstitutional
Income from Members-Only Facilities Not Tax-Exempt
Treasurer Authorized to Pay Husband for Services
Owner Not Personally Liable for Assessments on Trust Property
Revoking Parking Privilege Not Discrimination
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Injunction Requiring Owner to Get Insurance Denied

Alorda v. Sutton Place Homeowners Association, Inc., No. 2D10-3966, Fla. App. Ct., Jan. 6, 2012

Powers of the Association/Risks and Liabilities/Attorneys Fees: A Florida appeals court reversed an award of attorney’s fees to a homeowners association, finding that the association could not obtain an injunction to enforce its declaration because the declaration provided an alternative remedy to the dispute.

Robert Alorda owned a townhome in Sutton Place subdivision in Tampa, Fla. The subdivision is governed by a declaration of covenants, conditions, restrictions and easements that is administered by Sutton Place Homeowners Association, Inc. (association). The declaration requires that owners maintain insurance on their property and provide evidence of such coverage to the association annually on their purchase anniversary date.

In June 2008, on the first anniversary of Alorda’s purchase, he failed to provide proof of insurance coverage to the association. After making several unsuccessful attempts to obtain the required proof of coverage, the association sued him on April 9, 2009, seeking an injunction (a court order requiring a person or entity to permanently refrain from certain activities or take certain actions) that would require him to obtain the necessary insurance. On May 6, 2009, Alorda e-mailed a copy of the declaration page of an insurance policy to the association and requested that it dismiss the suit to avoid further legal fees.

When the association refused to drop its suit, Alorda filed a motion to dismiss the case, arguing that the association failed to plead sufficient facts to establish a cause of action (the legal grounds on which a party can file a lawsuit) for the injunction. He asserted the association could only obtain injunctive relief to prevent threatened harm; because he had obtained insurance coverage effective March 2009, prior to the association filing its complaint, there was no threatened harm to be enjoined (a court order requiring a person or entity to do or refrain from doing (some act), especially by issuing an injunction) and the issue was moot. The trial court denied the motion to dismiss.

The court granted the association’s request that the issue be referred to mediation (dispute resolution with a neutral third party that is held outside of court and not legally binding). When that ultimately resulted in an impasse, the association requested a non-jury trial, and Alorda filed a motion for summary judgment (a judgment by the court prior to a verdict because no material issue of fact exists and one party is entitled to a judgment as a matter of law). The trial court denied Alorda’s motion for summary judgment, but dismissed the association’s complaint as moot and held a hearing to determine the award of attorney’s fees. The court determined the association was the prevailing party and awarded the association $10,725.00 in attorney’s fees and $2,106.40 in costs. Alorda appealed.

Alorda argued on appeal that because injunctive relief was never available to the association, the dispute should have been resolved on the original motion to dismiss, and the association could not be the prevailing party.

The appeals court agreed with Alorda, concluding that the association failed to state a cause of action for injunctive relief in its complaint. The declaration provided the association with procedures if an owner failed to provide the required notice of insurance coverage; it authorized the association to obtain the required insurance coverage and assess the owner for the cost. The assessment could then be recorded as a lien against the owner’s property, enforceable by the courts if not paid within 30 days. Accordingly, the court concluded that the trial court should have dismissed the association’s complaint at the September 2009 hearing because it failed to state a cause of action for injunctive relief.

In reaching its conclusion, the appeals court was not unsympathetic to the association incurring unnecessary fees and costs in its attempt to enforce the declaration. However, since it was impossible for the association to have prevailed on its complaint, the court was compelled to reverse the award.

©2012 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

Public Doesn’t Have Easement to Use Private Beach

Clickner v. Magothy River Association, Inc., No. 35 A.3d 464 (Md. App. Ct. 2012)

State and Local Legislation and Regulations/Use Restrictions: Owners of a private island have the right to fence off their beach at the mean high water shoreline to prevent public use of their property.

David and Diana Clickner own Dobbins Island, a seven-acre parcel surrounded by the Magothy River near Annapolis, Md. The island was held in a family trust since the 1850s until it was conveyed to Dutchship Island, LLC, which marketed the island for single-family residential use.

Clickner purchased the island in 2003 and planned to build a home on the property. The marketing literature described the property as “an idyllic, unspoiled natural retreat surrounded by deep pristine waters. . .” According to the sales brochure, the property formed “a gentle crescent ideal for a protected boat anchorage.” A photograph of the “idyllic sandy beach” along the crescent was also included. A letter enclosed with the brochure invited prospective purchasers to look into the opportunity to build a “dream home . . . on the last remaining unbuilt private island on the Western shore of the Chesapeake Bay near Annapolis Maryland.”

The sales brochure, however, also presented a brief history of the island, with the introductory sentence, “[t]his delightful island-jewel, has been a magnet for picnickers and boaters as they enter the mouth of the Magothy River for more than 250 years, serving as a beacon for pleasure boaters, crabbers, fishermen, and duck hunters alike.”

Although the marketing materials suggested a conflict between the island’s public use and its private ownership, Clickner did not discuss public use of the property with the seller and was not aware of its use prior to the purchase.

After Clickner bought the island and became aware of its extensive public use, he posted “No Trespassing” signs along the perimeter and was granted a county building permit to erect a 1,200-foot fence along the shoreline. In reaction to the fence installation, Magothy River Association, Inc. (association), a volunteer group representing the communities along the Magothy River Watershed, sued Clickner to establish the public’s right to continue to use the beach as it had in the past.

At trial, testimony revealed that the general public was never given permission to use the island and that visitors did not necessarily know who owned it. In addition, documented evidence suggested that use of the island was adverse to or by permission of the owner. The association alleged that an easement existed as a result of implied dedication (a public easement created through a history of use), custom, prescription (a method of acquiring a nonpossessory interest in land through the long, continuous use of the property), and an expansion of the public trust doctrine (a common law doctrine creating the public’s legal right to use certain lands and waters). The trial court found that the association successfully demonstrated the existence of a prescriptive easement on behalf of the public, and it ordered Clickner to remove portions of the fence. Clickner appealed.

On appeal, both parties recognized that the State of Maryland owned, in public trust, the navigable waters surrounding the island and the beach up to the mean high water line (the intersection of land and water at high tide); therefore, the mean high water line marked the division between state and privately owned shoreline. Clickner admitted that public trust doctrine protected a significant part of the island’s historic use, which guaranteed the public rights to anchor in the cove, swim in the waters and conduct other water activities on the sand that lay below the mean high water line. Pictures taken of the beach after Clickner installed the fence showed that a large area of beach remained open to public use.

The association argued, however, that when the tide was high, Clickner’s fence left little or no visible beach, which precluded public use. Accordingly, the association asserted a right to use the area above the mean high water line fenced off by Clickner.

Under Maryland law, the use of another person’s land without permission is adverse. However, when an easement is claimed on unimproved land in its natural state, there is a “woodlands exception” to the general presumption of adverse use and a legal presumption that the use is allowed by the owner.

Applying this “woodlands exception” to the general presumption of adverse use, the court found that the public’s recreational use of the dry-sand portion of the island was presumed to have been a permissive indulgence by its owners. Therefore, the trial court’s application of a general presumption of adverse use was in error since the beach was unimproved and the proper presumption was that the owner permitted public use.

The trial court’s judgment and its order mandating Clickner to remove portions of the fence were reversed.

©2012 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Owners Sue to Enforce Lake Access Easement

Lasecki v. Lake LeAnn Property Owners Association, No. 293723, Mich. App. Ct., May 31, 2011

Contracts/Use Restrictions: Whether lots that do not front a subdivision lake are entitled to benefit from an easement across association property for “waterfront lots” is an issue of fact to be determined at trial.

Lake LeAnn Indian Hills Subdivision No. 2 in Hillsdale County, Mich., surrounds an artificial lake. Daniel and Mary Lasecki own two lots in the subdivision. Lake LeAnn Property Owners Association (association) owns a parcel, designated on the subdivision plat (a map showing the actual or planned features of land) as Outlot B, which consists of approximately 2.75 acres of beach and park area reserved for Lake LeAnn property owners. The subdivision plat expressly provides that “[o]wners of all waterfront lots shall have the right of ingress and egress to and from the water between their side lot lines.”

Lasecki’s lots do not front the lake, but a channel approximately 200 feet long runs very near and parallel to the eastern lot lines. Lasecki received permission from the association in 1997 to dredge the channel to provide boat access from his lots to the lake. When the dredging was complete, he created a beach area and placed docks in the water in front of his property as well as on Outlot B’s shoreline.

In 2005, the association demanded that Lasecki remove all the improvements he had placed on any portion of Outlot B. He then sued the association, seeking a determination that he was entitled to the benefit of an easement allowing him to use the western edge of Outlot B in the same manner as other owners were allowed to use their lake front lots.

The trial court reasoned there was an agreement between the parties that, in exchange for Laseki’s substantial and costly dredging of the channel, the association would treat him as a lake front property owner and ruled in Lasecki’s favor. The association appealed.

The appeals court reversed the ruling because it concluded that an alleged oral agreement to allow Lasecki to use Outlot B in exchange for dredging the channel did not create a valid contract. The appeals court sent the case back to the trial court to determine whether a valid contract between the parties existed.

On remand, Lasecki argued that the developer had marketed and sold the lots as waterfront property. Accordingly, he was entitled to the same benefit of the easement as other waterfront lots in the subdivision. He submitted affidavits (written declarations made under oath before a notary public or other authorized officer) that established the lots were advertised and sold as waterfront lots, with access to the water depicted on the plat. Additionally, he provided evidence that his lots had been taxed and treated as waterfront lots since the subdivision’s inception.

Despite the evidence, the trial court ruled that the lots were not waterfront property, and the easement did not grant Lasecki access across Outlot B to the lake. Lasecki appealed.

The appeals court observed that the easement was valid; hence, if Lasecki’s lots were found to be waterfront lots within the meaning of the easement, he was entitled to the same right of access over Outlot B as water front property owners. The language of the easement did not limit it to lots fronting the lake; rather, it provided a right of access to the water for all owners of waterfront lots. Had the planners of the subdivision intended to limit the easement to owners of lots fronting the lake, they could have done so, but did not.

Evidence that the lake was created after the plat was prepared might indicate that the planners were uncertain as to where the contours of the lake would ultimately lie; and, therefore, they used the term “waterfront” rather than “lake front” intentionally, to afford the lot owners fronting all water on the plat the benefit of the easement, wherever it would exist after the lake was created.

Similarly, evidence that the channel was formed from a streambed that filled with water when the lake was dammed might also favor a finding that Lasecki’s lots were waterfront lots as well.

Finally, and perhaps most significantly, the fact that the lots were marketed and sold as waterfront lots provided strong evidence that the planners themselves viewed the lots as waterfront lots within the meaning of the easement. The fact that the lots were taxed as waterfront property since they were first sold and treated as waterfront property by all relevant parties preceding the lawsuit also had a bearing on the issue.

The court concluded that Lasecki had presented sufficient evidence to establish an issue of fact (a factual issue not authoritatively answered by law) to be determined at trial. It, therefore, reversed the trial court’s ruling and remanded the case for further proceedings.

©2012 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Overbroad Sign Restriction Is Unconstitutional

Mazdabrook Commons Homeowners’ Association v. Kahn, No. 067094, N. J. Supr. Ct., June 13, 2012

Architectural Control/Covenants Enforcement: The New Jersey Supreme Court affirmed a ruling that a restrictive covenant banning all signs except “For Sale” signs violated a property owner’s right to free speech.

Wasim Khan purchased a townhome in Mazdabrook Commons, a townhome community in Parsippany-Troy Hills, N.J., in 2003. In 2005, Kahn ran for a position on the Parsippany Town Council and posted two signs in the windows of his townhome supporting his candidacy. The Mazdabrook Commons Homeowners’ Association (association) notified him that the signs violated the declaration, which prohibited all signs except “For Sale” signs. Kahn complied and removed the signs.

In a second dispute, the association requested that Khan remove a rose vine growing in front of his home because it constituted a fire hazard in violation of the declaration. The association levied a $25 dollar per-day fine for the violation and sued Kahn to collect the unpaid fines, interest and late fees. As part of his counterclaim, Kahn argued that the association’s sign restriction violated his free speech rights under the New Jersey and federal Constitutions. The trial court ruled in the association’s favor with regard to the rose vine and dismissed Kahn’s counterclaim for free speech violations. Both parties appealed.

The appeals court adopted an analytical framework, used in State v. Schmid, 84 N.J. 535, 423 A.2d 615 (1990), that requires courts to consider: (1) the nature, purposes and primary use of the private property; (2) the extent and nature of the public’s invitation to use the property; and (3) the purpose of the expressional activity being done on the property in relation to private and public use.

In an unpublished opinion, two of the three-member appeals panel concluded that the association’s sign restriction was unconstitutional. In a dissenting opinion, Judge Miniman disagreed, finding that Mazdabrook residents agreed to restrictions to maintain a uniform aesthetic look throughout the development. He considered the sign restriction to be a covenant upon the land, which did not unreasonably burden Khan’s freedom of speech. The association appealed the decision, limited to the issues raised by the dissent.

The association argued that the restriction fairly reflected the concerns of architectural and aesthetic uniformity in a common interest community, and the limits imposed were reasonable and afforded Kahn alternative avenues of expression. The association also claimed that Khan could have sought permission from the board to post the signs.

Kahn urged the court to uphold the appeals court decision, arguing that the restriction prevented homeowners from exercising their freedom of speech on their own property. There was no comparable alternative channel of communication, and the association’s interest in architectural uniformity was minor when weighed against a homeowner’s right to free speech.

In New Jersey, an individual’s right to speak freely “is protected not only from limitation by government, but also from unusually restrictive conduct by private entities.” The court found that the association’s restriction of political speech lay at the core of the state’s constitutional free speech protections, which assume particular importance for a person campaigning for public office. The court further observed that residential signs, precisely because of their location, connect the message directly to the resident and, thus, add to the words on display.

The association’s ban on all political signs could not be considered a minor restriction, particularly to Kahn. For him, it hampered his most basic right to speak about the political process and his own candidacy for office. In weighing the decision, the importance of Khan’s right to promote his candidacy for office and the relatively minor interference his conduct posed to private property outweighed the association’s interests. The court found that the association’s sign policy violated the Constitution’s guarantee of free speech. It, therefore, affirmed the appeals court judgment.

In a dissenting opinion, Judge Wefing asserted that, in spite of the state and national commitment to free and vigorous debate of public questions, individuals are equally entitled to seek shelter from political debate and division. He agreed with Judge Miniman’s dissent in the appeals court that the mutually agreed upon covenants of Mazdabrook Commons ran with the land, were reasonable and enforceable.

©2012 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Income from Members-Only Facilities Not Tax-Exempt

Ocean Pines Association, Inc. v. Commissioner of Internal Revenue, No. 11-1029, U. S. App. Ct., 4th Circuit, March 2, 2012

Federal Law and Legislation: A U.S. appeals court affirmed a tax court’s ruling that income derived from a community association’s members-only beach club and parking lots was not tax-exempt.

Ocean Pines Association, Inc. (association) is a Maryland corporation that manages Ocean Pines Subdivision in Berlin, Md. The association is exempt from federal income taxation because it is an organization that is “not organized for profit but operated exclusively for the promotion of social welfare,” as defined in Section 501(c)(4)(A) of the Internal Revenue Code.

The association maintains numerous recreational facilities and common areas in Ocean Pines—such as swimming pools, a golf course, marinas, sports facilities, roadways and parking lots—that both association members and the general public may use. The association also owns and maintains two parking lots and an ocean-front beach club approximately eight miles from the subdivision. These facilities are open only during the summer. During the day, the parking lots are made available only to members of the association who purchase weekly or seasonal permits. Non-members cannot purchase parking permits. During the winter and after 4:00 p.m. during the summer, the parking lots are leased to third parties. The beach club has restrooms and food and beverage services that are open to the general public, but the swimming pool, lockers and showers are only open to association members.

In tax years 2003 and 2004, the association’s net income from the parking lots totaled $111,487 and $178,115, respectively. In 2007, the Commissioner of Internal Revenue issued a notice of deficiency to the association and determined that it owed taxes on this net income, and the association petitioned for a redetermination of the deficiencies in tax court.

An organization generally exempt from income taxes under Section 501(c)(4) still must pay income tax on its “unrelated business taxable income.” The Internal Revenue Code defines “unrelated business trade or business” as any trade or business that is not substantially related to providing charity, education or other tax-exempted activities.

Section 501(c)(4) provides a tax exemption for “[c]ivic leagues, or other organizations not organized for profit but operated exclusively for the promotion of social welfare.” The Treasury Department regulations clarify that, “[a]n organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community.” Therefore, to be exempt from taxation, the organization’s trade or business must advance the common good and welfare of the general public.

The tax court determined that the parking lots and beach club did not contribute to the social welfare of the general public. Rather, they served only the private interests of the association members. Unlike the roadways and bulkheads within Ocean Pines, which provided needed quasi-governmental services and civic betterments to anyone passing through the community, the parking lots and beach club benefitted only those who owned property in Ocean Pines and their guests.

The court, therefore, concluded that the income was not “substantially related” to the association’s purpose of promoting social welfare, but rather was taxable as “unrelated business taxable income.” An appeals court later affirmed the judgment of the tax court.

©2012 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Treasurer Authorized to Pay Husband for Services

Park Place Estates Neighborhood, LLC v. Oyola, No. 25291, Ohio App. Ct., 9th Dist., March 7, 2012

Association Operations: An Ohio appeals court affirmed a magistrate’s finding that a woman serving as her homeowners’ association treasurer was authorized by the members to pay her husband’s invoice for installing lighting in the subdivision.

Park Place Estates Neighborhood, LLC (Park Place) is an organization of homeowners in Park Place Estates, a subdivision in Summit County, Ohio. Tammy Oyola was treasurer in July 2010 when the Park Place members met informally and voted to replace the lighting at the entrance of the subdivision.

Oyola’s husband, Robert, volunteered to install the new lighting. He estimated materials would cost $100. According to the meeting minutes, his explanation of the costs was interrupted, and he was told to install the light and send the bill to Park Place.

When the installation was complete, Oyola sent an e-mail to members and attached a copy of her husband’s invoice for the work. The total amount of the invoice was $815.37, nine hours of labor at $26 an hour and $581.37 in materials. Her e-mail stated that she needed a majority of the members to approve the invoice, and she would make receipts available to anyone who questioned the amount of the bill.

It appeared residents were satisfied with the completed work; however, the president, David Modarelli, informed Oyola that he had not received a majority vote to authorize payment because of the substantial difference in the estimated cost and the amount of the invoice. He also expressed concern that she planned to pay the invoice out of the Park Place bank account, since not all the members had been paying into the account.

Later in the month, Oyola notified Modarelli that she had received majority approval to pay her husband. The following day, she transferred $521.74 from the Park Place bank account to her husband and resigned as treasurer. The sum transferred covered the cost of materials but did not include Mr. Oyola’s labor costs.

Park Place sued Oyola for breach of fiduciary duty and conversion (wrongfully exerting control over the personal property of another), seeking a return of the transferred funds, punitive damages in the amount of $1,043.48 and attorney’s fees.

Following a hearing, the magistrate (judge) determined that Park Place failed to demonstrate that Oyola breached her fiduciary duty by self-dealing or that she illegally converted Park Place funds. Park Place objected to the magistrate’s findings, but the trial court overruled its objections and adopted the magistrate’s decision. Park Place appealed.

Park Place argued that the magistrate’s decision against its breach of fiduciary duty claim was not supported by the evidence. Evidence presented at the hearing supported a finding that Oyola made the transfer only after obtaining authorization from a majority of members. Park Place argued that the five households that did approve the payment did not constitute a majority of the members.

Park Place alleged one household that approved the lighting replacement invoice was behind in its dues and, therefore, no longer a member. There are 11 homes in the Park Place Estates but only 10 homes that paid the optional dues. A household becomes a member of the association if it pays a monthly fee; however, the point in which the household would lose its membership privileges due to delinquent dues was not established by the Park Place organizing documents. The court determined that, although the household was behind in its dues, it was still receiving services from Park Place, such as lawn care and snow removal. Therefore, the court upheld the magistrate’s determination that the household was still a voting member.

Park Place also argued that a husband and wife who made up one of the households that approved the invoice disagreed about whether the payment should be approved, and, therefore, their vote should not be counted. Park Place submitted an e-mail from the husband expressing his feeling that Mr. Oyola should have informed the members of the increased cost of the lighting; however, his e-mail did not state that he was voting against authorizing payment for the work. Accordingly, the evidence supported a determination that the household had voted to release the funds.

Finally, Park Place argued that the money in the organization’s bank account actually belonged to four households who voted against paying the invoice. However, no witness was able to state that the money accumulated in the bank account was from any particular source or that distribution of the funds was handled differently than any other payment made by the organization.

The appeals court found there was competent, credible evidence that suggested five out of nine member households, excluding the Oyolas, approved the money transfer. Given the members’ practice of approving transactions with a majority vote, the court found that Oyola, as treasurer, was authorized to make the transfer. Accordingly, it concluded that the trial court did not abuse its discretion when it overruled Park Place’s objections to the magistrate’s decision.

The trial court’s ruling was affirmed.

©2012 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Owner Not Personally Liable for Assessments on Trust Property

River Oaks Homes Association v. Lounce, No. WD73608, Mo. App. Ct., Jan. 17, 2012

Assessments: A Missouri appeals court ruled that a homeowner—after transferring her property to a revocable living trust via quitclaim deed—was not liable for assessments personally as the owner, but was liable for assessments as trustee.

River Oaks subdivision is located in Jackson County, Mo, and is part of the River Oaks Homes Association’s (association). The subdivision was created in November 1973 and was intended to be named Merrywood; “Merrywood Homes Association” is the name recorded in the association’s covenants. The association officially changed its name to River Oaks in February 1976. The association’s covenants provide that “[e]ach owner of any Lot within The Properties by acceptance of a deed therefore whether or not it shall be so expressed in any such deed or conveyance, shall be deemed to covenant and agree to pay to the Association . . . annual assessments or charges.”

Zeria Lounce purchased a home in River Oaks in 1993, subject to “all covenants, conditions, restrictions easements, rights-of-way and other matters of record.” She paid all assessments due on the property at that time. In April 1994, she transferred interest in the property to her revocable living trust (a trust designed to dispose of the deceased's assets to avoid the probate process), with herself as trustee. In 2004, she stopped paying assessments on the property.

In 2010, the association sued Lounce, individually, to collect the unpaid assessments. Upon becoming aware of the transfer of property to the trust, the association amended its claim to include Lounce, as trustee. The trial court awarded a judgment of $17,397.62 to the association. Lounce appealed.

Lounce argued that the trial court erred in finding her individually liable for the unpaid assessments because she was not the owner of record when the assessments became due. She deeded the property to the trust in April 1994 and continued to pay assessments until 2004. Therefore, when the default occurred, she indisputably was not the owner of record. The covenants provide that assessments shall be a charge on the land and act as a continuing lien upon the property. “Owner” is defined as “the record owner . . . of the fee simple title.”  Since the property was owned by the trust, it was the trust, not Lounce individually, that was liable for the unpaid assessments.

The association argued that Lounce was personally liable because she did not disclose her status as trustee. However, the court noted that she recorded a quitclaim deed (a deed that transfers all of the conveyor’s property rights, title and interest, but with no warranty or assurances that the conveyor has good and legal title) that constituted clear evidence of her property transfer and her status as trustee. Under Missouri law, any instrument filed in the official land records constitutes “notice to all persons of the contents thereof.”  Because the obligation to pay assessments continues with the land, it transfers with the property to a new owner. The court held that the trust, as the new owner, was solely responsible for paying the post-transfer assessments. Therefore, Lounce was not personally liable, and the trial court erred in ruling otherwise.

Lounce also contended that the trial court erred in its determination that either she personally or the trust was liable for the assessments because: (1) the association did not have authority to impose assessments because the name “Merrywood Homes Association” was on the covenants, not “River Oaks Homes Association”; (2) there were no ascertainable standards for calculating the assessments; and (3) the association did not follow the mandatory procedures set forth in the governing documents for setting assessments. The appeals court rejected all three arguments.

The court determined that the covenants and restrictions signed by the developer obligated owners to pay assessments to the association, and a change in the association’s name did not alter its authority to levy and collect the assessments.

Although Lounce maintained that the covenants failed to establish a clear and equitable method for calculating assessments, she failed to demonstrate to the court how they were lacking. The court observed that the documents identified the types of expenses to be considered in establishing the assessments and provided a means to divide them equally among the subdivision properties.

Because Lounce was not the record owner of the River Oaks property when the assessments became due, the court reversed the trial court’s judgment against her, individually, but the judgment against Lounce as trustee was upheld.

©2012 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Revoking Parking Privilege Not Discrimination

Shearn v. Victoriana Condominium Association, No. A-1327-10T2, N.J. Super. Ct., App. Div., Nov. 23, 2011

Association Operations/Federal Law and Legislation: A New Jersey appeals court ruled that a condominium association that refused parking privileges to a disabled unit owner who was delinquent in assessments did not violate federal housing discrimination laws.

Robert Shearn owns a unit in Victoriana Estate Condominiums in Voorhees, N.J. The condominium is managed by Victoriana Condominium Association (association). The association’s bylaws provide that owners must pay monthly assessments to maintain the common areas. In addition, the bylaws provide that an owner’s membership and voting rights may be suspended when the required assessments are unpaid.

In July 2009, the association filed a lien against Shearn’s unit for unpaid assessments. Despite the lien, he failed to make payments in September 2009 and from November 2009 to March 2010. In April 2010, the association filed a collection action against Shearn in the amount of $5,418.59, and the court awarded a judgment to the association in the full amount.

Meanwhile, in the spring of 2009, the association informed Shearn that he was no longer permitted to park in the association parking lot because he was delinquent on his assessment payments. Shearn was one of 22 owners restricted from using the parking lot because of unpaid assessments. In the fall of 2009, Shearn informed the association that he was disabled and asked for permission to resume parking in the association’s parking lot. The association requested that he provide medical documentation of his disability. He provided a notice from the Social Security Administration indicating it considered him disabled under its criteria. In addition, he provided documents from the Motor Vehicle Commission, indicating he was considered a disabled driver. He provided a statement from a physician in May 2010.

According to his physician, Shearn has epilepsy and another medical condition that causes chronic neuropathy in his legs. Because of this, the physician said Shearn should not walk more than 150 feet; therefore, it would be important that he be allowed to park near his unit. While the dispute was pending, the association informed Shearn on numerous occasions that he would be permitted to park in the condominium lot if he agreed to a payment plan for his delinquent assessments.

In February 2010, Shearn filed a housing discrimination complaint with the U.S. Department of Housing and Urban Development’s Division of Civil Rights (division), alleging that the association had denied his request for a reasonable accommodation to his disability. The division concluded that Shearn’s claim was not substantiated by the facts and issued a finding of “no probable cause” in October 2010. Shearn appealed the final agency decision.

The appeals court observed that the association collected assessments to maintain the condominium’s common areas, including the parking spaces. Indisputably, Shearn failed to pay the assessments he owed. The association had the right under the condominium bylaws to prohibit Shearn from using the parking area while he was delinquent.

The court noted that the association had used this enforcement mechanism on numerous occasions and did not single out Shearn unreasonably. He was not declared disabled until after the association informed him he was not permitted to park in the parking area. He also did not reply promptly to the association’s request for medical documentation of his disability. The association had to consider not only Shearn’s interests, but also the interests of other unit owners who paid their assessments on time. The association’s offer to Shearn of a payment plan to address his mounting delinquencies, which he refused, also weighed in the association’s favor.

The appeals court found that the division did not abuse its discretion in finding the absence of probable cause and sustained the division’s final agency decision.

©2012 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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