April 2013
In This Issue:
Purchaser Did Not Forfeit Developmental Rights
HOA’s Arrest of Homeowner Is Malicious Prosecution
HOA Doesn’t Have Authority to Restrict Lot Usage
Unequal Enforcement of No-Business Restriction May Constitute Racial Discrimination
Certain Owners Exempt from Special Assessment
Association Had Legal Authority to Create New Parking Spaces
Association Entitled to Compensation for Loss of Riparian Rights
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Purchaser Did Not Forfeit Developmental Rights

19650 NE 18th Ave. LLC v. Presidential Estates Homeowners Association, 103 So.3d 191 (Fla. Dist. Ct. App. 2012)

Developmental Rights: A Florida appeals court held that a violation of a restrictive covenants’ controlled density provision did not negate the property owners’ developmental rights under the covenant.

Presidential Estates is a community in Miami-Dade County, Fla., that is managed and maintained by Presidential Estates Homeowners Association (association). The development sits on 158 acres, 104 acres of which were originally owned by Hasam Realty Corporation. In 1986, Hasam had the property rezoned and recorded a declaration of restrictive covenant (original covenant) with Miami-Dade County that contained, among other things, a provision that limited the total number of residential units to 850. The original covenant also required subsequent deeds conveying the property to reflect the number of residential units allocated to the parcel and required that the county be notified of the number of units allocated.

In 1987, Hasam recorded a supplemental declaration of restrictive covenant (supplemental covenant), which reduced the density limitation to 800 residential units, but it did not contain other provisions regarding the information required to be in deeds or notice to the county.

Several conveyances followed. In 1987, Hasam sold the parcel to Presidential Golf Estates. Ten years later, Presidential Golf Estates sold the property to Coscan Presidential, Inc., which developed the property into 173 homes. Presidential Country Club, Inc., Presidential Golf, LLC, and Presidential Club also took title to the property. None of the deeds in this chain of title showed the number of units being allocated, nor was the county ever notified of the number of units allocated.

In 2007, Presidential Club sued the association, seeking a determination of its developmental rights under the original covenant and the supplemental covenant. The association counterclaimed, after which Presidential Club voluntarily dismissed its complaint. Presidential Club’s lender subsequently foreclosed its mortgage on the property. 19650 NE 18th Ave. LLC (19650) acquired the property following the foreclosure. The association then amended its counterclaim and sought a determination that 19650 did not have the right to develop the property under the original covenant’s density control provisions.

The association argued that 19650 could not construct any dwelling units because such rights were not described in the deeds and the county did not receive proper notice. Furthermore, no future development could be contemplated or authorized because the recorded deeds did not transfer the right to construct any units. The trial court entered a judgment in the association’s favor on the basis that the development rights had been forfeited. 19650 appealed.

In its appeal, 19650 argued the trial court had erroneously construed that the covenant provided that failure to specify in the deed the number of allocated units mandated that the developmental rights were forfeited.

The court found that the covenant was neither ambiguous nor contradictory and gave no indication that failure to follow its terms would result in forfeiture of the owner’s developmental rights. The court observed, however, that the trial court had effectively added a forfeiture provision to the covenant that would confiscate the buyer’s rights if the covenant’s requirements were not met. However, the covenant specifically provided that, in the event an owner violated the covenant’s provisions, the county could withhold building permits, inspections or approvals pending correction of the violation. Nothing in the covenant provided for the buyer’s developmental rights to be forfeited.

Thus, the appeals court declined to construe the provision to preclude future development altogether simply because a density unit allocation was absent from the purchaser’s deed. The court concluded that the original parties clearly identified a remedy for failure to comply with the covenant. Additionally, the trial court interpreted the provision against the free and unrestricted use of real property. This is contrary to the general rule of covenant interpretation, which requires courts to strictly construe restrictive covenants in favor of the free and unrestricted use of real property.

The appeals court reversed the trial court’s judgment and remanded the case to the trial court for entry of judgment in favor of 19650.

©2013 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

HOA’s Arrest of Homeowner Is Malicious Prosecution

Alamo Country Club Owners Association v. Shelton, No. 13-10-00300-CV (Tex. App. 2012)

Association Operations: A Texas appeals court affirmed judgment in favor of a homeowner who was arrested by the association for attempting to use the community golf course.

James and Cheryl Shelton own a lot in Alamo Country Club, a community in Corpus Christi, Texas. The subdivision is subject to restrictive covenants that provide that each owner is a member of the Alamo Country Club Owners Association (association) and entitled to use the amenities, including the golf course.

In 1998, James Shelton executed a deed conveying the lot to Dale Winter, but reserved voting and common ground rights for himself. Shelton continued to live on the property. In 2003, the association became aware of the deed and questioned whether the reservation was valid. It wrote Winter asking about Shelton’s status and sent a renter’s form to clarify whether the property was leased. Winter moved into the house while Shelton was gone on a long vacation. Winter sent the association a letter stating he was the resident, but he had executed a power-of-attorney in Shelton’s favor. The association advised Winter and Shelton that Shelton had no membership or ownership rights under the power-of-attorney or the deed reservation. The letter also advised that if Shelton could not prove he resided on the property, he would only be allowed to play golf as a paying guest accompanied by an association member. If Shelton tried to play golf as a member, he would be reported to the police.

In 2004, Shelton went to play golf, and a board member attempted to tell Shelton that he was no longer entitled to use the course. Shelton refused to discuss the issue and proceeded to tee off. The board member then asked another member to sponsor Shelton as a guest, but the member refused and the police were called. The responding officer tried to persuade Shelton to leave but Shelton refused. The officer then arrested Shelton for trespass.

Shelton sued the association for breach of contract, false imprisonment and malicious prosecution. The court ruled in his favor and awarded substantial monetary damages and legal costs. The association appealed.

In its appeal, the association maintained that it knew Shelton had conveyed his lot to Winter, who claimed to own 100 percent of the property, but Shelton was still using the golf course. Shelton refused to discuss his amenities usage with the association and was warned that if he did not explain his member status or if he attempted to use the golf course, the police would be summoned.

Shelton asserted that the evidence proved the association could not have believed he was a trespasser. The association knew he purchased his lot in 1995, and no board member personally saw him move out of the subdivision. And the association was aware Cheryl Shelton had not signed the deed, therefore, as an owner, she was entitled to use the amenities, including the golf course. Moreover, the association’s rules require that three infraction letters are to be sent before legal action is taken, and none were sent to Shelton.

The association argued Shelton could not prove criminal prosecution because the complaint against him was never filed in court. The fact that the association consulted legal counsel about his membership status also showed a lack of malice on its part.

Texas law provides that even when an indictment (a formal charge or accusation of a crime) is not issued, a criminal proceeding may be initiated by arresting the accused on a criminal charge. The court deemed the information the association provided to the police that Shelton was trespassing constituted initiation of a criminal proceeding.

The record reflected that the board member who called the police admitted he did not like Shelton and that his failure to disclose mitigating information to the arresting officer, including that Shelton had been a resident for more than 10 years, sufficiently supported the trial court’s finding of malicious prosecution.

The association argued that Shelton failed to prove false imprisonment, but irrefutable evidence in the record showed that the association called the police, accused Shelton of trespassing and had him arrested.

Although the trial court awarded damages to Shelton on the basis that he suffered substantial harm as a result of the association’s malice, the appeals court concluded the association acted with what it believed was valid authority to enforce the declaration based on its limited knowledge of the facts and did not act with a specific intent to harm Shelton.

The conveyance to Winter was void because the lot was community marital property, and Cheryl Shelton was not a signatory. Thus, Shelton had a legal right to be on the golf course.

The court affirmed the trial court’s judgment with the exception of its award to Shelton of $201,500 in exemplary damages (damages over and above what will compensate the plaintiff for his loss where the wrong done to him was aggregated, also called punitive damages).

©2013 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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HOA Doesn’t Have Authority to Restrict Lot Usage

Estates at Desert Ridge Trails Homeowners’ Association v. Vazquez, Nos. 30, 944; 31,590 (N.M. Ct. App. Feb. 8, 2013)

Powers of the Association: In a case of first impression, a New Mexico appeals court affirmed a ruling that, unless the declaration provides otherwise, an association has limited ability to restrict the use or occupancy of individual units or the behavior within those units.

In 2006, David Vazquez purchased a lot in Estates at Desert Ridge Trails subdivision in Albuquerque, N.M.. The development is subject to a declaration of covenants, conditions and restrictions recorded in 2004. The subdivision is managed and maintained by Estates at Desert Ridge Homeowners’ Association (association). Rules prohibiting owners from renting their homes for less than a 30-day term were adopted by the association in 2007 to supplement the declaration.

In 2010, Vazquez began renting his home on a short-term basis and advertised that the home had a three-night rental minimum. The association notified him that the short-term rentals violated the declaration and requested that he cease his short-term rental activity. When he refused, the association sought and received a temporary restraining order and sued for a permanent order barring him from renting his home on a short-term basis.

The trial court ruled in Vazquez’s favor, finding that the declaration did not prohibit short-term rentals. The trial court also found that the 2007 rules were not enforceable because they constituted an unreasonable interference with owners’ use and enjoyment of their property. The trial court dissolved the temporary restraining order and denied the association’s request for permanent relief. The association appealed.

The association board resolved to amend the declaration to prohibit rentals for less than 90 days. A vote was held at an association special meeting in January 2011, and at least two-thirds of the association members voted to approve the amendment. The board considered the vote of two-thirds of the association members sufficient to approve the amendment under the declaration provisions.

After the amendment was recorded, the association sued Vazquez, again seeking to prevent him from engaging in short-term rentals as prohibited by the amended declaration. The trial court concluded, however, that a valid amendment to the declaration required the unanimous agreement of the lot owners, which the association did not have. Consequently, the trial court denied the association’s claims, finding that all of the alleged violations fell under the amendment provisions. The trial court concluded that the amendment was void, and the association appealed.

The appeals court considered both cases together, first examining whether Vazquez’s use violated the original declaration’s terms. The association argued that the declaration prohibited short-term rentals by providing that “[n]o Lot or any portion thereof shall be used except for single-family residential purposes.” The association drew a distinction between short- and long-term rentals, arguing that while long-term rentals were permissible, short-term rentals, by the nature of their duration, were more akin to business or commercial uses such as a hotel or lodging facility.

The appeals court observed that in a restrictive covenant, the phrases “residential use” or “residential purposes”—when not followed by further limiting language—have routinely been interpreted as the intent to use a unit for “living purposes, or a dwelling, or a place of abode.” Once the appeals court established that the home was a proper dwelling, it declined to attach any requirement regarding a resident’s permanency or length of stay. The fact that the homeowner derives an economic benefit from renting the home does not, by itself, constitute an impermissible business or commercial activity under the “residential purposes” restriction.

The appeals court found that the general interpretation for restrictive covenants compelled the conclusion that Vazquez’s short-term rentals did not violate the declaration. The appeals court refused to interpret that the declaration had a distinction between long- and short-term rentals by implication. Rather, if a restrictive covenant is to preclude short-term rentals, it must be stated with sufficient specificity in the covenant.

Next, the appeals court examined whether the 2007 rule that prohibited leases for less than 30 days was valid. Noting that the association’s permissible scope for  rulemaking is a matter of first impression (a legal issue that has never been decided by an appeals court and, therefore, there is no precedent for the court to follow) in New Mexico, the appeals court elected to follow the approach described in Section 6.7 of the Restatement (Third) of Property (Servitudes), which provides that an association has the implied power to adopt reasonable rules to:

(a)      “govern the use of the common property” (§ 6.7(1)(a));

(b)      “govern the use of individually owned property to protect the common property” (§ 6.7(1)(b)); and

(c)      “protect community members from unreasonable interference in the enjoyment of their individual lots or units and the common property caused by the use of other individually owned lots or units” (§ 6.7(2)(a)).

The comments to the Restatement note that Section 6.7(2)(a) is limited to preventing “nuisance-like activities” because the homeowners have a reasonable expectation that they will be protected “from neighborhood nuisances by adoption of preventative rules.” The appeals court held that, unless specific authorization is granted to the association by the declaration, an association has no authority to “restrict the use or occupancy of, or behavior within, individually owned lots or units” beyond those rules permissible under Restatement Section 6.7(1)-(2).

The appeals court could find no evidence or authority that short-term rentals constitute a nuisance or unreasonable interference to the subdivision’s common property or neighboring properties. As such, the association had no authority to adopt the rules that restricted short-term leasing, and the appeals court declared those rules unenforceable.

Finally, the appeals court examined whether the 2011 amendment was valid. The declaration did not contain general amendment provisions. Rather, the declaration only contained a duration clause, which provided that the covenants would run with and bind the land for an initial term of 25 years, after which the declaration would automatically be extended for successive periods of 10 years each unless a supplemental declaration that amended, modified or terminated the declaration was approved by two-thirds of the then-owners and recorded in the land records.

The appeals court held that—where the declaration provides an initial duration period, like the 25-year term here—amendments to the declaration during that initial period are void unless the unanimous consent of all property owners is obtained, provided the declaration doesn’t have provisions stating otherwise.

For the foregoing reasons, the appeals court affirmed the trial court’s denial of the association’s request for an injunction against Vazquez.

©2013 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Unequal Enforcement of No-Business Restriction May Constitute Racial Discrimination

Fielder v. Sterling Park Homeowners Association, No. C11-1688RS (D. Wash. 2012)

Federal Law and Legislation/State and Local Legislation and Regulations: A Washington district court held that the business judgment rule does not protect an association or the individual board members from liability for civil rights and fair housing violations.

Elizabeth Fielder is one of two African-American residents in Sterling Park Subdivision, which is governed by Sterling Park Homeowners Association (association) and located in King County, Wash. Fielder moved into her home in 1997 and opened a daycare center there in 1998. Sterling Park is subject to a declaration of covenants, conditions and restrictions that prohibits commercial use of a unit. In 1993, the board adopted an “invisibility clause” that permitted “invisible home-based business within Sterling Park.” However, the invisibility clause was not passed by the mandatory majority of owners, which is required to amend the declaration, but the board adopted it as a guideline for enforcing the declaration.

Before opening her daycare center, Fielder received permission from the association president and obtained a state license to operate her business. She provided daycare in her home until 2009 without incident. In the fall of 2009, she cared for six children from three different families. Her home is on a cul-de-sac, and parents would drop off and pick up their children between 7 a.m. and 5:30 p.m. Some of the parents using the daycare were African-American, and one was Muslim and wore a headscarf and non-Western clothing.

In the summer of 2009, two of Fielder’s neighbors, Ms. Van Bramer and Mr. Shoemaker, were often seen congregating and staring at parents picking up their children from Fielder’s daycare center. They blocked access to the cul-de-sac and forced the parents to drive around them. They photographed parents and children and yelled and cursed at them. Van Bramer’s son and the son of another neighbor, Ms. Hagen, hit golf balls at Fielder’s home. One of Fielder’s clients stopped using her daycare center because of the harassing behavior.

At a monthly association meeting, a complaint about Fielder’s daycare center was made to the board, alleging excessive noise, speeding cars and irregular parking. Fielder was never notified about the complaint. In January 2010, Hagen, who was one of the association board’s directors, sent letters on behalf of the board to three home businesses within Sterling Park, including Fielder: Ms. Ronning, who also operated a daycare center; and Ms. Atkins, who operated a salon. The January letter was the first time Fielder was aware of the complaints. She sent a notice to her clients, stating they must obey traffic rules and be courteous about noise. She also wrote to the association addressing the board’s concerns.

On February 12, 2010, Ronning, who ran the other daycare center, responded to the board  that she provided occasional daycare for family and friends and had visits between 9 a.m. and 4.p.m. Atkins, the salon operator, responded that she worked from 9 a.m. to 5 p.m. three days a week and saw five to eight people per day. In April, the board sent a letter of noncompliance to Fielder only.

Fielder attended a board meeting in May to discuss the complaints. The complainants were identified as Van Bramer and Shoemaker. The board suggested that Fielder talk to them to resolve the issue, but Van Bramer and Shoemaker refused to speak with her. In June, Fielder received a letter from the association directing her to close her daycare center.

Fielder filed a complaint with the Department of Housing and Urban Development and the King County Office of Human Rights. OHR notified the association that at least 10 registered businesses were operating from homes in Sterling Park and issued a finding of racial discrimination based on unequal treatment by the association.

The association’s members voted to amend the declaration to permit businesses within the community with certain limitations. The amendment provides that “[t]he business must not include more than four persons per day coming to the subject property for goods or services with hours of operation limited from 7 a.m. to 6 p.m.” The board asserted that Fielder was still not in compliance with the amended declaration and that she must close the business or relocate it out of the neighborhood.

In October 2011, Fielding sued the association, Hagen and Shoemaker, asserting federal claims for violations of the Civil Rights Discrimination and Fair Housing statutes. Hagen and Shoemaker filed a motion to dismiss the complaint. They claimed they were shielded from personal liability under the Washington Nonprofit Corporation Act and were protected under the business judgment rule (a legal presumption that a company’s management is acting in the company's best interest with due care and in good faith and, therefore, its decisions are protected from judicial review).

Fielder asserted that her federal claims preempted state law, and sufficient facts supported Hagen’s and Shoemaker’s individual liability for civil and housing discrimination claims.

The courts have found that directors who participate in, authorize or ratify the commission of civil rights or fair housing discrimination acts may be held individually liable. The business judgment rule immunizes corporate directors and officers who act in the corporation’s best interest and when there is a reasonable indication that the transaction was made in good faith. However, officers and directors are not immunized from liability when they fail to exercise proper care, skill and diligence. The court found no merit in Hagen’s and Shoemaker’s immunity argument.

The court determined that Fielder was asked to close or relocate while no other business received that treatment. The board cited the “invisibility clause” as the basis for the unequal enforcement, but the board never articulated any standards by which the clause could be interpreted, and the clause was never passed as a valid amendment to the declaration.

The court deemed Fielder had alleged facts sufficient enough for the court to infer that Hagen and Shoemaker (1) unequally enforced the declaration; (2) intentionally discriminated against Fielder based on race; and (3) were personally involved in the unequal enforcement. The court, therefore, denied their motion to dismiss and allowed the case to proceed to trial.

©2013 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Certain Owners Exempt from Special Assessment

Green v. Lake Montowese Association, 387 S.W.3d 413 (Mo. Ct. App. Dec. 18, 2012)

Assessments: A Missouri appeals court affirmed a ruling that homeowners who were denied access to a central water system were exempt from a special assessment to replace the system.

In 1942, Lake Montowese Development Company Inc. began developing the Lake Montowese subdivision in Jefferson County, Mo. The developer installed a water delivery system to provide water to homes that would eventually be constructed on lots in the subdivision. Over the next 70 years, the water system became increasingly unreliable and unable to meet residents’ needs. In 1990, Lake Montowese Association (association) acquired the developer’s property interest in the subdivision, including control of the water system.

In 1996, Lynn and Patrick Lynch purchased an existing home in Lake Montowese, which was connected to the central water system at the time of purchase. Over the next 10 years, they experienced problems with the water system, including low water pressure, broken water pipes and discolored water. The Lynches informed the association about the problem, but the board did not repair the outdated system. In 2006, the water delivery system could no longer supply the home with adequate water, so the Lynches disconnected from the system and dug a private well, which cost $6,111.

In 1997, Dennis and Kathy Becker purchased a lot in the subdivision. The association denied them access to the central water system when they began building their home. The association approved their building plans contingent upon an agreement that they would not connect to the subdivision water delivery system. The Beckers agreed and dug a private well at an approximate cost of $8,700.

In 1999, Reynold and Tracy Green purchased a lot in the subdivision. The association similarly denied them access to the central water system when they began to build their home. The association informed the Greens that their building plans would not be approved until they agreed not to connect to the water delivery system. The Greens also agreed and dug a well, which cost $5,185.

In 2007, the association voted to replace the inadequate water delivery system and transfer control of the new system to Jefferson County. Pursuant to recorded deed restrictions, the association levied a special assessment on homeowners to pay for the improved water system. The association assessed properties not yet connected to the system $2,000 and assessed those that were already connected $1,750.

The Lynches, Beckers, and Greens (collectively, homeowners) were not connected to the central water system and refused to pay the special assessment. The association filed liens against their properties for the unpaid amounts. The homeowners sued the association, seeking a declaration from the court stating that they were exempt from paying the special assessment. The trial court ruled in favor of the homeowners. The association appealed.

The association presented three points on appeal: First, the association argued that the trial court erred in determining that the association did not have authority to levy the special assessment. Second, the association asserted that the trial court erred in finding the special assessment void as it applied to the homeowners because it was inequitable (something that is unbalanced, unfair or unjust). Finally, the association contended that the trial court erred in awarding the homeowners attorney’s fees.

The appeals court’s review of the trial court order showed that the association misconstrued the substance of the trial court’s decision. The trial court articulated the following conclusions:

  1.   The homeowners were subject to the deed restriction.
  2. Pursuant to the deed restrictions, assessments are limited for the upkeep and maintenance of the dam, roads and other improvements.
  3. The water delivery system assessment was inequitable for the homeowners, in that the Greens and the Beckers were denied access to the system, and the Lynches were forced to leave the system due to inadequate water pressure.

Because they were denied access to the central water system, the Beckers and the Greens were forced to incur substantial costs in digging their own wells. Although the Lynches were initially connected to the subdivision system, they were forced to disconnect, thereby incurring the substantial cost of digging an individual well.

The appeals court did refuse, however, to read into the trial court’s conclusions that the water system was not one of the improvements subject to special assessments under the deed restrictions. To the contrary, the basis of the trial court’s judgment was the inequity of subjecting the homeowners to the special assessment when they had been denied access to and deprived benefit from the central water system.

Ordinarily, a special assessment levied against a property owner is not objectionable on grounds that the owner received a reduced benefit compared to others subject to the same assessment. However, in Missouri, courts have the authority to deny the imposition of a special assessment based on principles of equity.

After reviewing the entire record, the appeals court found substantial evidence supporting the trial court’s judgment that equity demanded the homeowners be exempt from the special assessment given the costs they incurred as a result of being actually or constructively denied access to the central water system.

The trial court’s judgment was affirmed.

©2013 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Association Had Legal Authority to Create New Parking Spaces

Harnett v. Washington Harbour Condominium Unit Owners’ Association, 53 A.3d 1298 (D.C. 2012)

Powers of the Association: A Washington, D.C., appeals court affirmed that a condominium association did not exceed its authority by creating new parking spaces in the condominium common elements and auctioning them to residents with the highest bids.

Washington Harbour Condominium Complex is a residential and commercial development in Washington, D.C., that is managed and maintained by Washington Harbour Condominium Unit Owners’ Association (association). The condominium includes 36 residential units and 48 parking units. Unit owners own both the residential units and parking units. Unit owners also hold an undivided interest in the condominium common elements.

Many owners would like to be able to park two cars. When William Harnett purchased his residential unit, he elected to purchase two parking units—P-112 and P-116—because of their large size, location near the elevator and ease of access. Parking unit P-112 was easily accessible via open common area across an aisle. Harnett frequently accessed his parking unit by driving through the open common area, and he began to park his car in P-112 to prevent others from blocking the common area.

In 2004, the association created a parking committee to analyze and address the issue of inadequate parking. The committee surveyed owners to determine if they would favor creating additional parking spaces. Subsequently, the board created five new spaces from areas previously designated as common area and auctioned them to unit owners with the highest bids.

Prior to the auction, the board sent a memorandum to unit owners, informing them of its decision to auction the parking spaces. The memo specified the place and date the auction would take place and included a diagram of the new parking layout.

The five new parking units were auctioned to the highest bidders. Each purchaser entered into a Parking Spaces Revocable License Agreement (agreement) with the association. When the new owner of parking unit P-2, located across from P-112, parked in P-2, Harnett claimed that he could no longer use parking unit P-112 because the aisle abutting his unit did not give him sufficient room to maneuver his car into the space. In addition, following the auction, the association placed a sign on the wall next to parking unit P-116 directing pedestrians to the elevator. Harnett objected to the sign, complaining that his car had been scratched by people pushing shopping carts to and from the elevator.

Harnett sued the association, alleging the association’s creation and auction of the new parking units violated the Condominium Act and local zoning ordinances, breached the association’s fiduciary duty to him and intentionally interfered with his use of the property. The trial court proceedings spanned nearly four years. The association filed a motion to dismiss all claims in 2006, and the court dismissed Harnett’s claims for violations of the Condominium Act and zoning ordinances. Harnett appealed.

On appeal, Harnett argued the agreement signed by the new purchasers was a lease, not a license. The association’s bylaws state that the association “may grant and accept easements and licenses.” Harnett maintained that because the bylaws  did not expressly grant the association the power to grant leases, the association was not authorized to enter into the parking space agreements.

The appeals court found that characterizing the agreement as a lease or license, despite being titled a “license,” was not as significant as Harnett argued; therefore, his claim was not legally well grounded.

The Condominium Act provides that certain powers shall be accorded to owners associations, except to the extent expressly prohibited by the condominium’s governing documents. The act provides that an association shall have the power to “impose on and receive from individual unit owners any payment, fee or charge for the use, rental or operation of the common elements.”

Harnett next alleged that the new parking spaces were clear violations of zoning laws; were dangerous or unsafe in some instances; and, in other instances, would make it impossible for him to use his parking units or the common areas.

The trial court found Harnett did not have standing to enforce the local municipal parking code violations and that the alleged zoning violations were a legal matter between the association and the municipal government. In parallel proceedings before the district’s zoning board in 2007, Harnett challenged the building permit issued to the association to create the new parking spaces. The zoning board rejected his claims and affirmed the administrator’s decision to issue the permit.

The appeals court refused to address Harnett’s zoning claim because it was barred by principles of res judicata and collateral estoppel. “Res judicata” precludes re-litigation in a subsequent proceeding that arise from the same cause of action between the same parties. “Collateral estoppel” applies when an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment. In such cases, the determination is conclusive for subsequent actions between the parties, whether on the same or different claim.

At the close of Harnett’s case-in-chief (the portion of a trial where the party who must show proof of the allegations presents its evidence), the association moved for dismissal of the remaining claims, which alleged the association breached its fiduciary duty by furthering and satisfying individual interests with respect to the parking spaces. Based on the trial court’s detailed factual findings, the appeals court upheld its finding that Harnett failed to prove the association had breached its fiduciary obligations or interfered with the use of his property.

The appeals court affirmed the trial court’s judgment.

©2013 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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Association Entitled to Compensation for Loss of Riparian Rights

Lynnhaven Dunes Condominium Association v. City of Virginia Beach, 284 Va. 661 (2012)

State and Local Legislation and Regulations/Municipal Relations: The Virginia Supreme Court determined that a condominium association was entitled to compensation for the loss of its riparian rights when sand from a dredging project was placed on the beach to improve navigation of the Chesapeake Bay.  

Lynnhaven Condominium is located on Cape Henry Beach in Virginia Beach, Va., and governed by Lynnhaven Dunes Condominium Association (association). In 2009, in connection with a plan to replenish Cape Henry Beach, the City of Virginia Beach filed a condemnation petition (the process where the government takes private property for public use through eminent domain) seeking to acquire or affirm title to a recreational easement and a shore protection easement to the beachfront property.

The association objected to the petition on the ground that the city did not have the legal authority to condemn the property because the city had not complied with the required condemnation procedures. It asserted the city’s beach replenishment project created an artificial strip of land owned by the state that cut off the condominium property from Chesapeake Bay. Thus, regardless of who actually owned the easements, the city was required to compensate the association for loss of its riparian rights (rights with respect to land that is adjacent to a body of water).

A trial was held to determine ownership of the easements, and the city presented evidence that the public had used all of Cape Henry Beach extensively since the 1940s. The city had regulated the beach as early as 1938, and its police force had patrolled the beach since at least 1976. In addition, from at least 1980, the city had maintained the beach by removing garbage from city-provided trash barrels, raking the beach to remove litter, grading the beach, annually planting new beach grass and removing dead sea life.

The court granted the city’s petition, ruling that it had acquired easements by implied dedication (an appropriation of land for public use) and acceptance, pursuant to a plat recorded in 1926 that depicted the beachfront as “Ocean Avenue.” In addition, the city’s continued beach maintenance over the years was evidence of its implied dedication and acceptance of the easements.

Because the condominium was cut off from the Bay as a result of navigational improvements by the U.S. Corps of Engineers, the court ruled that the association was not entitled to compensation for the loss of its riparian rights. The association appealed.

The association argued on appeal that, because the city had not passed an ordinance authorizing the property’s acquisition by quieting title (a lawsuit filed to establish ownership of real estate when ownership is in question), it could not bring an action to quiet title in conjunction with a condemnation proceeding. The association maintained that the condemnation proceeding was necessarily void and that the trial court did not have jurisdiction to hear the case. In addition to its ordinance argument, the association argued that the city could not condemn rights to property that it also claimed to own.

The appeals court noted the ordinance at issue was passed in 2008 when the City Council recognized that “there are unresolved issues regarding title to the sandy beaches along Cape Henry Beach, the rights of the City to maintain, monitor and exert control over these beaches.” The ordinance went on to state that the council believed the city had rights to protect the beaches and preserve them for public use. It authorized the easements’ acquisition, by purchase or condemnation, for public recreation and shore protection.

The appeals court noted that a plat recorded in 1999 re-subdividing certain lots contained no reference either to Ocean Avenue or any public interest in Cape Henry Beach. In light of the city’s abandonment of Ocean Avenue in 1954, the city did not acquire the easements as a result of the 1926 plat. However, the Supreme Court applied the “right for the wrong reason” doctrine in affirming the trial court’s findings.

Regardless of the city’s abandonment of Ocean Avenue, there was ample evidence demonstrating that the public had open access to Cape Henry Beach since at least 1954 and that the city patrolled and maintained the beach. The association never objected to the city’s exercise of dominion and control over the easements. Thus, there was an implied dedication and acceptance of the easements.

The association argued that the trial court erred in ruling its riparian rights were non-compensable because they were destroyed to improve navigation. It conceded that dredging Lynnhaven Inlet was necessary to improve navigation, but putting the dredged sand on the beach was not. It objected to the fact that, by replenishing the beach, the city created an artificial strip of land that severed the condominium property from the Bay.

Under Virginia law, the only reason a municipality may cut off a property owner’s riparian rights without compensation is for the regulation and improvement of navigation. The court noted that the connection between the city’s dredging project and the beach replenishment project was dubious at best. Cape Henry Beach was not even originally designated to receive the sand from the dredging; thus, it could not be said that the dredging project would have been impaired if Cape Henry Beach were unavailable for sand placement.

The authorizing ordinance had fully encompassed the city’s actions in bringing the condemnation proceeding, and the evidence was sufficient to support the trial court’s ruling that the city had acquired the easements by implied dedication and acceptance. However, the appeals court ruled that the trial court had erred in holding that the association’s loss of riparian rights was non-compensable.

The case was affirmed in part, reversed in part, and remanded for a just compensation hearing to determine the value of the association’s riparian rights.

©2013 Community Associations Institute. All rights reserved. Reproduction and redistribution by CAI members or nonmembers are strictly prohibited.

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