November 2012
In This Issue:
Leaking Pipe Damage Not Covered by Insurance
Court Erred in Granting Summary Judgment to Owner Who Refused to Pay Assessments
Manager Owes Restitution for Misappropriated Funds
Not Repairing Common Elements is a Breach of Fiduciary Duty
Prevailing Party Entitled to Attorney’s Fees in Action to Enforce Covenants
Developer Can't Unilaterally Amend Covenants After 80 Percent of Lots Are Sold
Assessment to Fund Repairs is Proper and Valid
“No Dogs” Policy Did Not Violate Fair Housing Act
Quick Links:
E-mail Our Editor
Visit Our Home Page
View Archives
View Credits
printer friendly
 

Leaking Pipe Damage Not Covered by Insurance

Audubon Hill South Condominium Association v. Community Association Underwriters of America, Inc., No. 11-P-1546, Mass. App. Ct., Sept. 20, 2012

Risks and Liabilities: A Massachusetts appeals court affirmed a ruling that a leak below a condominium unit that caused the gradual collapse of the unit’s floor was excluded from coverage under the association’s comprehensive insurance policy.

Audubon Hill South Condominium development is a 22-story building containing 40 residential units and is located in Acton, Mass. Community Association Underwriters of America, Inc. (CAU) provided Audubon Hill South Condominium Association (association) with a comprehensive condominium policy from June 1, 2006, through May 31, 2007. Coverage included, among other risks, loss or damage to the association’s buildings and grounds.

Marilyn Barstow moved into her unit in September 2005. She noticed a slight depression in the floor at her entryway and kitchen. During the next 17 months, she also detected an additional depression in the floor in the master bedroom. She reported her observations to the association president. He inspected the floor and consulted an engineer to examine the problem.

The association submitted a claim to CAU reporting that a broken pipe under the basement slab of Barstow’s unit had caused the slab to sink several inches. An engineer investigated the claim for CAU and concluded that the sinking of the foundational slab had likely resulted from an ongoing leak from a water pipe below the unit that had been undetected for an extended period of time. The resulting damage was excluded from coverage under the policy, which did not include damage resulting from movement of water or earth.

The association’s consulting engineer submitted a written opinion that hydrogen compaction related to a leak  had caused a two-inch deviation in the 150-square-foot basement slab along the foundational wall. The report indicated that the slab had cracked and deviated “suddenly” rather than by gradual settlement because it did not crack in the vicinity of the water leak.

The parties submitted requests for a panel of three referees to determine the amount of damages. CAU provided the association and each referee with a letter reserving the issue of coverage and liability (a notification that the insurance company retains the right to raise defenses against the claim) from the referees. The panel determined the amount of loss was $63,090, but no settlement was reached.

The association sued CAU, claiming breach of contract. CAU continued to assert the claim wasn’t covered. Both parties moved for summary judgment (a determination made by a court without a trial). The court found that the referees’ decision had no effect on the insurance company’s liability, and the association’s policy excluded coverage of water damage. The association appealed.

Massachusetts arbitration law provides that “[a] company . . . which joins in reference proceedings shall not thereby be held to have waived any legal defense to the claim [subject to] the reference proceedings . . . .”

CAU maintained that the terms of the policy placed the loss outside its coverage. Its reservation of rights letter stated seven times in five paragraphs that it was withholding all issues of liability from the referees. It specifically referred to policy language that excluded claims of loss by peril such as collapse.

The policy expressly assigned the covered causes of loss to one section of the policy and the excluded causes to another section. One of the policy’s exclusions included losses resulting from “earth movement,” defined as “including soil conditions which cause settling, cracking, or other disarrangement of foundations or other parts of realty. Soil conditions include contraction, erosion, improperly compacted soil and the action of water under the ground surface.”

The court noted that the association’s engineer reported that a leaking pipe had caused soil changes and earth movement under the foundation slab. Once the engineer acknowledged the causal role of earth movement, the damages were no longer covered.

The appeals court concluded that the summary judgment record placed the claimed loss indisputably outside the policy’s covered losses because damage by earth movement was expressly excluded. The court found that the motion judge correctly awarded summary judgment to CAU.

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

Court Erred in Granting Summary Judgment to Owner Who Refused to Pay Assessments

Baywood Estates Property Owners Association, Inc. v. Caolo, No. 12-12-00063-CV, Tex. App. Ct., Sept. 28, 2012

Covenants Enforcement: A Texas appeals court reversed a ruling that a homeowners association lacked the authority to collect assessments for common area maintenance, and remanded the case for further proceedings to establish whether the restrictive covenant authorizing the assessment applied to all lot owners.

In 1971, Southwest Resorts Company recorded a subdivision plat (detailed map establishing the boundaries of individual lots and common property) and restrictive covenants for Baywood Estates. It set aside lots 253 and 254 as common area for parks and a boat ramp on Cedar Creek Reservoir in Henderson County, Texas. Deeds conveying lots in the subdivision contained the following restrictive covenant:

Grantees herein do mutually agree and bind themselves with other present and future property owners of said Baywood Estates to an individual assessment of Ten and No/100 ($10.00) Dollars per year for the maintenance of parks and ramp area in said Baywood Estates.

Baywood Estates Property Owners Association, Inc. (association) was formed in 1974 as a nonprofit corporation. Part of its stated purpose was to maintain the parks and boat ramp. After its incorporation, Southwest transferred title of lots 253 and 254 to the association.

Since its formation, the association has continuously maintained the parks and boat ramp for the benefit of the property owners. In 2008, Jack Caolo sued the association, alleging that it did not have the authority to collect assessments from lot owners to maintain the parks and boat ramp. The association filed a cross motion for summary judgment (a determination made by a court without a trial), seeking to collect unpaid assessments from Caolo.

The trial court ruled that the association had no right to collect assessments to maintain the parks and boat ramp because it was not a mandatory membership corporation. It declared that all the lot owners had a right to use the parks and boat ramp, regardless of whether they paid dues or maintenance fees to the association. The association appealed.

In its appeal, the association contended that the trial court erred in granting Caolo’s motion for summary judgment. It maintained the restriction contained in the Baywood Estates deeds authorized assessment collection to maintain the parks and boat ramp.

Caolo argued that the subdivision plat indicated that Southwest intended to dedicate the parks and boat ramp to the public. The “Owners Certificate” filed with the plat states that Southwest “does hereby dedicate to public use forever, the streets, roads, alleys and easements as shown.” Caolo provided a document entitled “Baywood Estates Property Restrictions,” filed in May 1971, which set out the community’s building restrictions and referenced utility easements but did not mention the parks or the boat ramp. However, the court could not presume from this document that Southwest considered the parks to be included in the term “easement.” Accordingly, Caolo’s argument that the association had no authority over the parks was not valid.

Caolo asserted that to acquire authority, an association must be created in compliance with the law. He contended that the deeds conveying the subdivision lots did not express a plan to form a mandatory property owners association that would collect an assessment to maintain the park area. Therefore, the association did not acquire authority through the Baywood Estates deeds.

Caolo argued that when Southwest began to sell lots in 1971, it did not have a plan to form the association. He pointed out that not all the deeds executed by Southwest contained the restrictive covenant requiring payment of the annual assessment.

The appeals court concluded that Southwest had created the parks and boat ramp to benefit the subdivision but recognized that they would need to be maintained. The deeds in Caolo’s chain of title provided that lot owners would pay for the maintenance. Caolo’s deed contained the restriction binding him to pay the assessment.

However, Southwest sold 299 lots in the subdivision, but only a few deeds that included the restriction were presented as evidence. There was no evidence establishing that Southwest did or did not have a general development plan for the entire subdivision. Accordingly, since Caolo could not present evidence that some lots were not subject to the restriction, he failed to demonstrate entitlement to summary judgment as a matter of law.

Likewise, the association failed to show that all lots were subject to the restriction, so it also failed to demonstrate entitlement to summary judgment as a matter of law.

The court reversed the trial court’s summary judgment 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.

[ return to top ]

Manager Owes Restitution for Misappropriated Funds

Club Chalet Homeowners' Association, Inc. v. Matthews, No. E2011-02237-COA-R3-CV, Tenn. App. Ct., Sept. 19, 2012

Association Operations: A Tennessee appeals court affirmed a judgment that awarded a homeowners association $50,000 in damages when the property manager concealed a co-worker’s misappropriation of association funds.

Kimberly Matthews was employed as property manager by Club Chalet Homeowners Association, Inc. (association) from 1990 until 2006. She was responsible for the association’s day-to-day operations, including its financial matters; and she supervised other employees, including the office manager, Cindy Giles. As office manager, Giles paid the association’s monthly bills. Giles also had access to a credit card, which she typically signed in Matthews’ name.

In 2004, the association’s president received a report that Giles was misusing the association credit card. He instructed Matthews to investigate the allegation. Matthews reported that, after reviewing the most recent bank and credit card statements, she discovered that Giles had forged her name to checks and credit charges. Statements from the preceding year revealed further abuses by Giles.

The board of directors instructed Matthews to contact the local police department. Giles was prosecuted and pled guilty to a felony theft charge. The association then filed a civil action against Giles, alleging that she had embezzled more than $100,000 of association funds.

Giles responded in the civil suit that any and all questionable charges had been approved by Matthews. Shortly thereafter, Matthews resigned her position as property manager.

The association then sued Matthews to recover the misappropriated funds. Giles testified at trial that many of the purchases and payments made with association funds were not for her, but were for Matthews. Matthews testified that the improper charges and payments were all made by and for Giles. Matthews also testified that before 2004 she questioned Giles about some of the charges, but believed Giles when she explained them away as honest mistakes.

The jury held Matthews liable for her involvement in Giles’ misappropriation of funds, including (1) intentional misrepresentations; (2) concealing relevant facts; and (3) breaching contractual duties owed to the association. The court awarded the association $50,000 in compensatory damages but declined to award punitive damages.

Well in advance of the trial, Matthews filed a motion to dismiss the case on the ground that the three-year statute of limitations for property torts (a private or civil wrong or injury) had expired before the action was filed. The court denied the motion and granted Matthews leave to renew the motion if she found any new evidence to dismiss the case. Matthews did renew the motion, which the court denied by entering a judgment based on the jury’s verdict. Matthews appealed.

The appeals court reviewed the renewed motion as the denied motion for a directed verdict (a verdict entered by the court in a trial without consideration by the jury). It noted that Matthews’ argument was based on two faulty legal conclusions. First, regardless whether a complaint is based on a contract, if the suit seeks to recover damages for injuries to the plaintiff’s property, the applicable statute of limitations is three years. However, the court agreed with the association that even if the three-year statute of limitations for property torts had expired, the judgment must be sustained on the breach-of-contract claim.

Second, Matthews argued that since the association knew by August 2004 it had sustained a loss through misappropriation, the cause of action (a collection of facts that, if true, would entitle a party to be awarded a remedy from another party by a court) accrued as a matter of law. The court found numerous reasons this argument lacked merit, mentioning only a few. Accrual does not happen under the discovery rule until the plaintiff discovers both the nature of the injury and the perpetrator’s identity. Additionally, whether the cause of action has accrued under the discovery rule is a question of fact. The jury found that Matthews’ actions with regard to the misappropriated funds included concealment and intentional misrepresentation. Under the review standard for directed verdicts, the appeals court could not disturb or ignore those findings. Accordingly, the appeals court found no error in the trial court denying a motion for directed verdict.

The judgment of the trial court was affirmed. Costs were charged to Matthews, and the case was remanded to the lower court to enforce the judgment and collect assessed costs.

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

[ return to top ]

Not Repairing Common Elements is a Breach of Fiduciary Duty

Duffy v. Orlan Brook Condominium Owners’ Association, No. 1-11-3577, Ill. App. Ct., Sept. 28, 2012

Covenants Enforcement: An Illinois appeals court ruled that a condominium association and its board of directors breached their fiduciary duty by failing to repair promptly structural defects that caused unit damage.

Norma Duffy owns a condominium unit in Orlan Brook Condominium, managed and maintained by Orlan Brook Condominium Owners’ Association (association). In May 2009, Duffy informed the association of damage to her unit caused by soil settlement beneath and around the unit. She stated that the soil under her unit—as well as the foundation, slab, walls and ceiling of her unit—were common elements and therefore the association’s responsibility to maintain. The association confirmed in a letter to Duffy that the cost to repair the damage was the association’s responsibility.

In September 2009, the association instructed Duffy to remove her personal property from the unit prior to starting the repairs, which were scheduled in October 2009. Duffy complied and relocated to another residence. Subsequently, however, the association failed to make the needed repairs.

The association removed the carpeting, utilities, cabinets and other furnishings, and completely stripped the floors and walls, rendering the unit uninhabitable. It solicited bids for the work as late as April 2010. The association also had actual knowledge that the interior work proposed would not remedy the existing sinking exterior wall or repair the foundation.

In August 2011, Duffy sued the association, alleging a breach of fiduciary duty and intentional and negligent infliction of emotional distress. The association moved to dismiss the action on the ground that Duffy failed to state a cause of action. The trial court ruled in the association’s favor, finding that Duffy failed to present facts that would entitle her to recover a judgment. Duffy appealed.

In her appeal, Duffy contended that her complaint sufficiently pled a cause of action. She asserted that the association failed to maintain and repair the common elements, thereby proximately causing the damage to her unit.

Pursuant to the Illinois Condominium Property Act, the board has a duty to “provide for the operation, care, upkeep, maintenance, replacement and improvement of the common elements,” of a condominium building. The act further provides that board members owe individual unit owners a fiduciary duty. The association is similarly required to exercise a fiduciary duty toward the individual unit owners. Therefore, the court concluded that the association and its board members were required to “act in a manner reasonably related to the exercise of that duty and their failure to do so resulted in liability for the board and its individual members.”

The appeals court concluded that Duffy’s complaint sufficiently brought a claim against the association and its board of directors when she alleged that they: (1) knowingly and willfully failed to comply with the act and the condominium governing documents by failing to start repairs for more than one year; and (2) refused to make the requisite repairs that had caused and continued to cause the damage to her unit.

The board pled the business judgment rule as a defense. Pursuant to the business judgment rule, “[a]bsent evidence of bad faith, fraud, illegality, or gross overreaching, courts are not at liberty to interfere with the exercise of business judgment of corporate directors.” The rule is intended to protect directors, who are diligent and careful in performing their duties, from exposure to liability from honest mistakes. If directors fail to exercise due care, they may not use the business judgment rule as a shield for their conduct.

Duffy repeatedly alleged that the association failed to exercise due care by instructing her to move herself and her belongings out of her home a full year before work commenced, as well as by performing merely cosmetic repairs that did not remedy the cause of damage.

She argued that she essentially put her faith in the association, and it had held her condominium for ransom by failing to making the necessary repairs. In light of these facts, the court concluded that the business judgment rule did not defeat Duffy’s cause of action.

In sum, the appeals court found that the trial court erred in dismissing Duffy’s breach of fiduciary duty claims, where she sufficiently stated causes of action upon which relief could be granted.

The court, however, dismissed Duffy’s allegation of intentionally inflicting emotional distress because it failed to rise to a level of extreme and outrageous conduct.  

The court affirmed the trial court’s ruling in part and reversed in part, remanding the case for further proceedings consistent with its findings.  

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

[ return to top ]

Prevailing Party Entitled to Attorney’s Fees in Action to Enforce Covenants

Goldberg v. Astor Plaza Condominium Association, No. 1-11-0620, Ill. App. Ct., March 23, 2012

Covenants Enforcement: A statute that awards attorney’s fees to the prevailing party in actions that enforce restrictive covenants is mandatory, and it cannot be waived at the discretion of the trial court.

Astor Plaza is a condominium building in Chicago, Ill., that is managed by Astor Plaza Condominium Association (association). Margaret Goldberg purchased a unit in Astor Plaza in 1983.

In 2005, Goldberg expressed a number of concerns about the association’s operation. She was concerned about problems with the units’ internal and external structure, including problems with windows and balconies, a lack of common area maintenance, and the absence of reserves. She was also concerned that she was not being provided notice or minutes of association meetings. The association met to discuss her concerns and inspected the windows in her unit.

In March 2006, a meeting was held to elect a new board of directors. The board held a few informal gatherings shortly after the election but did not hold another meeting until September 2006, when a meeting was held to discuss proposed improvements. The proposed improvements were estimated at approximately $450,000. Since the association did not have sufficient reserves, it proposed a bank loan to fund the improvements. Although the other unit owners approved the financing proposal, Goldberg refused, fearing she might ultimately be held responsible for other unit owners’ shares. One of her grievances involved replacing the bay window in her unit. However, the board informed her that pursuant to the declaration, unit owners were responsible for repairing windows in their units.

Goldberg rejected the board’s decision and also objected to the renovation project. She argued that the declaration prohibited the association from financing the renovation with a bank loan.

In November 2006, a motion to increase the monthly assessments for the building renovation project was passed by a majority of the members, with Goldberg casting the only vote against the motion. She sued the association, alleging that it failed to maintain the common elements and acted in bad faith by refusing to repair her windows and by procuring financing for the renovation project. She further alleged that the association failed to keep, maintain and produce board meeting minutes.

The court entered a written opinion, finding that (1) the association’s bylaws stated that windows and interior surfaces of units were to be maintained, repaired and replaced by the unit owners; (2) the association’s board had the power to enter into the renovation loan and levy assessments to pay the loan; and (3) the board members were entitled to indemnification (compensation for loss or damage) because they acted in good faith and in the best interests of the association.

Concerning Goldberg’s allegation that the association failed to comply with its statutory obligation to keep board meeting minutes, the court entered judgment in Goldberg’s favor and ordered the association to produce “proper minutes for all meetings subsequent to July 2007” within 90 days of the judgment order.

Finally, the court considered Goldberg’s motion requesting attorney’s fees for the association’s failure to produce properly requested documents. The court found that the association failed to produce a very large quantity of documents until the “virtual eve of trial,” despite Goldberg’s numerous motions to compel and court orders requiring the association to produce them. The court accepted Goldberg’s representation that had the association provided the documents in a timely manner, the litigation’s direction may have been altered. The court sanctioned the association in the amount of $25,000 to reimburse Goldberg for stenographer fees.

Goldberg appealed the court’s ruling on the ground that the court erred by not awarding her attorney’s fees and costs after entering judgment in her favor. Illinois Condominium Property Act provides, “[a]ny member who prevails in an enforcement action to compel examination of the records . . . shall be entitled to recover reasonable attorney’s fees and costs from the association.” The issue the appeals court addressed was whether the statute is mandatory. If a statute is mandatory, a trial court has no discretion in applying the statute.

Since the appeals court affirmed the trial court on all counts except this one, the court directed that the trial court consider what fees and costs Goldberg incurred in relation to the count in which she prevailed.

In all other respects, the trial court’s judgment was affirmed.

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

[ return to top ]

Developer Can't Unilaterally Amend Covenants After 80 Percent of Lots Are Sold

Grassy Meadows Sky Ranch Landowners Association v. Grassy Meadows Airport, Inc., No. 20100925-CA, Utah App. Ct., July 6, 2012

Covenants Enforcement: A Utah appeals court affirmed that a developer forfeited the right to amend a subdivision’s restrictive covenants after 80 percent of lots in the community were sold.

Grassy Meadows Sky Ranch Development (Grassy Meadows) is located near Hurricane, Utah, and governed by the Grassy Meadows Sky Ranch Landowners Association (association). Many of the lot owners are pilots or airplane owners who were attracted to this residential community because of its proximity to a private airstrip. The airstrip is owned by Grassy Meadows Airport and leased to the association for a 99-year term.

The developer, Sky Ranch Development, Inc. (Sky Ranch), recorded a declaration of restrictive covenants in 1990. Pursuant to the covenants, Sky Ranch was entitled to unilaterally (exercise of a right without seeking other approval)amend the covenants “until eighty percent (80%) of the lots in the Development (including additional phases as may be added) have been sold to purchasers.”

In 2001, Sky Ranch submitted an application to the Washington County Planning Commission for a zoning change that would allow it to construct a fixed base operation (a commercial business granted the right to operate an airport and provide aeronautical services) within Grassy Meadows, including an on-site residence for the operator, a large aircraft hangar and 10 to 15 lodging units to accommodate potential purchasers. In June 2002, the association notified Sky Ranch that 81.5 percent of the platted lots in Grassy Meadows had been sold, and its right to amend the covenants had terminated.

Nevertheless, in October 2002, Sky Ranch amended the 1990 covenants to authorize its right to pursue commercial improvements and amend the voting rights of different categories of lot owners. It also added several other provisions aimed at facilitating development of a new planned community adjacent to the Grassy Meadows property, which was also owned by Sky Ranch.

The association sued Sky Ranch, seeking a determination whether the 2002 amended declaration was valid. Sky Ranch responded with several counterclaims, including one alleging the association improperly interfered with its legitimate business interests by opposing the proposed zoning ordinance change.

The trial court ruled in the association’s favor. It determined that the 2002 covenants were void because Sky Ranch had lost its ability to unilaterally amend the 1990 covenants when 81.5 percent of the lots were purchased. Furthermore, the court dismissed Sky Ranch’s counterclaim for tortious interference, concluding there was no basis to hold the association liable. Sky Ranch appealed.

In the appeal, Sky Ranch argued that the annexation provisions (the legal process of subjecting additional property to the covenants) in the 1990 covenants demonstrated a clear intent that the developer retained power to amend the covenants until development was completed. However, it acknowledged that its right to annex land was limited in the 1990 covenants to 15 years and 150 total residential lots.

The court found that this interpretation was not reasonably supported by the covenants’ language. The court noted that Sky Ranch’s interpretation of the 80 percent provision indicated the developer’s right to amend the covenants would terminate when 150 lots were available and 120 lots were sold. The 1990 covenants would have been unambiguous had they stated the exact number of lots rather than the percentage of sales needed before Sky Ranch lost the right to amend the covenants unilaterally. The court refused to interpret the covenants the way Sky Ranch had interpreted them.

The use of a percentage in the annexation provisions indicated to the court that the number of sold lots was not 120—a sum calculable from the day the covenants were drafted—but rather a figure related to the number of lots available in proportion to the number of lots sold. The percentage might vary throughout the community’s development and might also suggest a pace at which Sky Ranch, as the developer, should take more of a background role in the community’s ongoing function.

The appeals court affirmed the trial court’s determination that the 2002 covenant was invalid because Sky Ranch’s ability to amend the 1990 covenant unilaterally terminated when 80 percent of the lots then available in the community were sold.

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

[ return to top ]

Assessment to Fund Repairs is Proper and Valid

Lowery v. Allenmore Ridge Condominium Association, No. 41571-2-II, Wash. App. Ct., Oct. 2, 2012

Assessments/Powers of the Association: A Washington appeals court affirmed a finding that repairs to a condominium building for water intrusion damage did not require the approval of unit owners.

Ray Pederson owns a unit in Allenmore Ridge, a condominium in Tacoma, Wash. The community is governed by Allenmore Ridge Condominium Association (association), and its declaration empowers the association to pay for maintenance and repairs out of the common expense fund.

In 2006, the condominium suffered significant water damage. The association retained a project engineer to install a $2 million “rain screen” to replace the deteriorating building envelope (the physical separator between a building’s interior and exterior environments). A special homeowners meeting was held to discuss the project and to introduce the homeowners to the project manager and general contractor.

Before the meeting, the association issued a “Notice of Members Meeting,” which informed members they would be provided with consent forms that stated each member’s proportionate share of the special assessment for repairs, which was estimated to be $4.2 million. Although the board ultimately concluded it didn’t need 75 percent of the homeowners’ approval to levy the assessment, it nonetheless sought homeowner approval because it would be a “better way to go.”

The consent forms were distributed to members on December 5, 2006, and were due by December 31, 2006. Although the board did not receive signed consent forms from 75 percent of the owners by December 31, 2006, it continued to collect consents after the deadline and eventually received approval from more than 90 percent of the owners.

After the project had begun, the general contractor discovered extensive, unanticipated water damage to the buildings. He submitted change orders, which were approved by the project manager, before performing additional repairs and replacements. Ultimately, the project cost $1.2 million more than the original estimate and took approximately three years to complete.

In 2008, the board held a special meeting to vote on an assessment to fund the additional construction costs. It failed to obtain the 75 percent member approval rate required by the lender, and the lender refused to advance the funds to finish the project.

After the lender’s refusal, the association sued Ray Pedersen and several other owners, alleging they failed to pay their initial assessments. Pedersen filed a counterclaim, seeking a declaration that the association lacked authority to collect the assessment. The association moved for summary judgment (a determination made by a court without a trial), which the court denied because there was an issue of material fact (a disagreement between opposing parties on facts legally relevant to a claim): it was unclear whether the construction project was a repair, which did not require approval of 75 percent of the unit owners, or a capital addition, which did.

The association filed a renewed motion for summary judgment on the alleged voting requirement. It argued that the rain screen installed during the initial construction was a repair, and the necessary owner approval had been obtained, making it irrelevant whether the rain screen was a capital improvement. Pedersen opposed the motion, arguing that the association did not have authority to enter into the construction contract or impose the initial assessment.

The association sought summary judgment against Pedersen for his unpaid assessment. Pedersen responded that the association breached its fiduciary duties by making misrepresentations to the unit owners, failing to obtain the necessary owner approvals for levying the assessments and improperly allocating the assessments.

The trial court granted the association’s motion for summary judgment against Pedersen. The court found no issues of fact and believed the assessment was appropriate. The court ruled that Pedersen did not have standing to oppose the association’s motion for summary judgment because he had not paid the initial assessment. The court also ruled that the association was not negligent, did not breach its duty in the way it managed the restoration and repair project—including not requiring approval from 75 percent of the homeowners—and the declaration did not require the association to obtain approval for the project’s necessary obligations or overage costs. Accordingly, the trial court dismissed Pedersen’s counterclaims. Pedersen appealed.

On appeal, Pedersen argued that the trial court erred when it concluded that he did not have standing to challenge the assessment because he had not paid the assessment in full. Since the trial court had ruled that the assessment was proper, the appeals court declined to address his argument.

After reviewing depositions of unit owners who testified that the restoration project was necessary, the appeals court concluded that the project was a necessary repair authorized by the declaration. Because there was no issue of material fact that the project was for the repair and restoration of the condominium, and the board was not required to obtain member approval, the trial court did not err by granting summary judgment to the association.

The trial court’s judgment was affirmed.

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

[ return to top ]

“No Dogs” Policy Did Not Violate Fair Housing Act

Sun Harbor Homeowners Association, Inc. v. Bonura, No. 4D10-3038, Fla. App. Ct., June 13, 2012

Federal Law and Legislation/Covenants Enforcement: A Florida appeals court ruled that a homeowners association did not violate the federal Fair Housing Act’s disability discrimination provision by enforcing its “No Dogs” policy.

Vincent Bonura owns a townhome in Sun Harbor, a community in Broward County, Florida. In 1997, the Sun Harbor Homeowners Association’s (association) declaration was amended to enact a “no dogs” policy. Bonura purchased his townhome after the amendment was adopted.

In 2009, Bonura’s fiancée, Natalie Vidoni, moved into his townhome with her dog. The association sent Bonura a letter advising him that the dog violated its policy. Bonura responded that the association was misinformed and that no dog was living in his residence. After other residents reported the dog was living in Bonura’s townhome, the association sent another letter demanding the dog be removed within 25 days.

Bonura subsequently admitted in a letter to the association that his fiancé’s dog was living in his townhome, but that it was a “registered service dog” needed to assist his fiancé with an unspecified handicap. The letter included a “Registered Service Dog” certificate purchased from an online vendor.

The association promptly advised Bonura in writing that he needed to make a formal request for accommodation at the next scheduled association meeting. The letter explained that he would be required to provide evidence that his fiancé suffered from a medical handicap and demonstrate how the dog would reasonably accommodate that handicap. He would also be required to show that the dog had special skills or training that would set it apart from an ordinary pet.

Bonura did not request an accommodation, but the parties subsequently participated in unsuccessful mediation proceedings. When an agreement couldn’t be reached, the association sued Bonura to enforce the policy.

Bonura filed a counterclaim, alleging the association violated the federal Fair Housing Act (act) by failing to make a reasonable accommodation to Vidoni’s handicap. The court ruled in Bonura’s favor, finding that Vidoni was a disabled person as defined under the act. Accordingly, the court ruled that she was entitled to keep her dog. The association appealed.

The association argued on appeal that Bonura had made no request for accommodation before the suit was filed. Thus, he could not demonstrate a request and denial of an accommodation, which is required to make a claim under the act. The association also asserted that there was neither substantial, competent evidence that Vidoni suffered from a disability, as defined in the act, nor evidence that the dog was a qualified service dog.

The act defines “handicap” as “. . . a physical or mental impairment which substantially limits one or more of such person’s major life activities. . . .” Federal regulations interpret “major life activities” as “functions such as caring for one’s self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning and working.” The appeals court observed that the duty to make a reasonable accommodation does not simply spring from the fact that the handicapped person wants such an accommodation to be made. A plaintiff must first establish that, at the time the accommodation is requested, the handicap exists. Once the handicap is established, a violation occurs if the disabled person is denied a reasonable accommodation. Without the denial of an accommodation request, there is no discrimination under the act.

Bonura argued that evidence of Vidoni’s handicap was presented in letters sent to the association in March and May 2009 by his attorney, the medical testimony at trial, and Vidoni’s testimony during mediation. Furthermore, he asserted that the association’s refusal to accommodate was evidenced by the failed mediations.

The association maintained that neither letter provided by Bonura contained any evidence of a need or request for an accommodation. It further contended that the medical testimony did not support the statutory definition of a handicap. The association further argued that the communications taking place during the mediations were privileged and barred at trial.

The appeals court concluded that the letters failed to establish Vidoni’s handicap and the trial’s medical testimony didn’t establish a handicap. Reviewing the record, the court found no evidence that indicated a substantial limitation on one or more of Vidoni’s major life activities. Based on this, the court reversed the trial court’s order and remanded the case for entry of judgment in the association’s favor.

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

[ return to top ]

 

6402 Arlington Blvd. | Suite 500 | Falls Church, VA  22042 | (888) 224-4321
This e-mail was sent to inform you of CAI products, services or events.
For more information, please visit www.caionline.org.
Change your e-mail address