May 2013
In This Issue:
Unreasonable Demand for Medical Records Violates Fair Housing Act
Board Discriminated Against Handicapped Owners
Insurer Has No Duty to Defend Association in Negligence Suit
Lot Owner Bound by Implied Covenant
Renting Garage Units to Public Violates Declaration and Zoning Laws
HOA's Refusal to Approve Boathouse Breached Declaration
Association Can Enforce Its Own Traffic Rules
Declarant May Not Withdraw Lots from Subdivision
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Unreasonable Demand for Medical Records Violates Fair Housing Act

Bhogaita v. Altamonte Heights Condominium Association, Inc., No. 6:11-cv-1637-Orl-31DAB (M.D. Fla. Dec. 17, 2012)

Federal Law and Legislation: A Florida court found that a condominium association’s intrusive search for more information regarding a unit owner’s medical condition constituted a denial of his requested accommodation under the Fair Housing Act.

Ajit Bhogaita purchased a unit in Altamonte Heights, a condominium complex in Altamonte Springs, Fla., in May of 2001. Bhogaita, a veteran of the U.S. Air Force, suffers from post-traumatic stress disorder, resulting in chronic anxiety and depression. To help with his PTSD, Bhogaita has an emotional support dog, Kane, who weighs more than 25 pounds.  The governing documents of the Altamonte Heights Condominium Association, Inc. (association) only allow pets that weigh less than 25 pounds. In May 2010, the association sent Bhogaita a notice demanding that he remove Kane because he exceeded the weight limit. Bhogaita responded with a note from his physician, Dr. Li, which stated:

[d]ue to mental illness, [Bhogaita] has certain limitations regarding social interaction and coping with stress and anxiety. In order to help alleviate these difficulties, and to enhance his ability to live independently and to fully use and enjoy the dwelling unit, I am prescribing an emotional support animal that will assist [Bhogaita] in coping with his disability.

Bhogaita hand-delivered the note to the association during a board meeting, but was subsequently informed that the note needed to name the dog specifically. A few days later, Dr. Li authored another note that specifically named Kane as the prescribed emotional support animal. In July 2010, the association requested additional information. Bhogaita responded by providing a third letter from Dr. Li. In August 2010, Bhogaita sent the association another letter, in which he claimed an additional disability related to knee problems.

After receiving these letters and notice of Bhogaita’s new disability, the association sent another request for more detailed medical information. Bhogaita did not respond to this request. In November 2010, the association sent a third letter requesting a sworn statement from Dr. Li of specific facts regarding Bhogaita’s disabilities. The letter stated that if Bhogaita did not respond by December 6, 2010, the letter would serve as a formal demand for him to remove any dog over 25 pounds from his unit no later than December 20, 2010.

Bhogaita sued the association for violation of the Fair Housing Act (FHA). Both parties moved for summary judgment (a judgment by the court without a trial). A party is entitled to summary judgment when it can show there is no genuine issue of material fact (a dispute over an important fact which could influence or determine the outcome of a legal case) and that the party is entitled to judgment as a matter of law.

The parties disputed only two issues: (1) whether Bhogaita was handicapped within the meaning of the FHA; and (2) whether the association had denied his requested accommodation. The FHA defines a person as handicapped if he or she has (a) a physical or mental impairment that substantially limits one or more major life activity; (b) an established record of the impairment; or (c) is "regarded" as having such impairment.

The association did not dispute that Bhogaita suffered from impairment, nor did it dispute that working and interacting with others were major life activities. Its only issue was whether Bhogaita was substantially limited in those activities. The court held that even if viewed in the light most favorable to the association, Bhogaita was unable to work in any job that required significant interaction with other people. However, the association pointed out that Bhogaita had held several jobs in the years leading up to the suit, with only sporadic periods of unemployment. This disputed issue of material fact prohibited summary judgment for either party.

Under the FHA, refusal to make accommodation for a disability can be both actual (directly expressed) and constructive (based on an interpretation; inferred or implied), and an indeterminate delay has the same effect as an outright denial.

In this case, the association had three letters from Dr. Li explaining that Bhogaita had a mental illness that resulted in stress and anxiety, which in turn limited his ability to work and interact with other people. Bhogaita’s therapeutic relationship with Kane, an emotional support animal, served to ameliorate his day-to-day psychiatric symptoms, which Bhogaita found otherwise difficult to manage. Specifically, without Kane, social interactions would be so overwhelming that Bhogaita would be unable to perform work of any kind.

The court found that Dr. Li’s first letter sufficiently affirmed Bhogaita’s legitimate need for accommodation. Yet, the association sent three more letters requesting additional documentation. Even assuming the second request was necessary, the third letter sent by the association in November 2010 went beyond the scope of a "reasonable inquiry."

The association pointed out that it never attempted to evict Bhogaita, nor did it require him to remove his dog or otherwise punish him for the dog’s presence. However, the court concluded that by persisting in its intrusive quest for more— and largely irrelevant— information, the association had constructively refused Bhogaita’s request for accommodation. Bhogaita’s motion for summary judgment was granted, and the association’s motion was denied.

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

Board Discriminated Against Handicapped Owners

Board of Directors of Cameron Grove Condominium, II v. State of Maryland Commission on Human Relations, No. 47 (Md. Mar. 28, 2013)

State and Local Legislation and Regulations: A Maryland appeals court ordered a condominium board to pay damages to unit owners who were denied reasonable accommodation of their disabilities.

Peggy Daniel and Albert Doby (unit owners) are disabled residents of Cameron Grove Condominium, II, which is part of a retirement community in Prince George’s County, Md. The unit owners suffer from disabilities that are painful and greatly limit their physical mobility. Because of this, they are limited in carrying out daily activities that require walking longer distances. Condominium residents are required to enter the building through the front doors. The rear and side doors are kept locked due to security concerns because several acts of vandalism had occurred on the property.

The unit owners requested that the Cameron Grove board  provide them with keys to the side and back doors so they could more fully use and enjoy their dwellings, including a resort center that offers various activities. The unit owners submitted written requests accompanied by physician statements affirming that the requested keys would help them with their disabilities. However, Cameron Grove denied their requests based on security and cost concerns.

Cameron Grove maintained that providing keys to any resident would undermine its legitimate interest in ensuring the other residents’ safety since the keys could be duplicated. It also argued that the side and rear doors posed a safety hazard since people could inadvertently push the very heavy doors into each other and cause injury. Finally, Cameron Grove argued that installing a security and pass code system on the doors for secure access would cost nearly $19,000, which the board considered unreasonable.

The unit owners filed complaints with the Maryland Commission on Human Relations (Commission), claiming that Cameron Grove discriminated against them by refusing to provide the requested keys, which in turn violated Maryland’s fair housing statutes. Maryland law provides that it is unlawful “[t]o refuse to make reasonable accommodations in rules, policies, practices, or services when the accommodations may be necessary to afford a handicapped individual equal opportunity to use and enjoy a dwelling.”

The case was assigned to an administrative law judge, who ruled that the unit owners failed to prove that having keys to the side and back doors was a necessary and reasonable accommodation. The matter was appealed to a Commission Appeal Board, which  disagreed with the ruling and determined that Cameron Grove needed to establish that providing keys was an unreasonable financial burden, which it failed to do.

The Appeal Board determined that the unit owners did not request the costly security and passcard systems suggested by Cameron Grove, only keys to the doors, which were an insubstantial cost. The Appeals Board noted that any increased risk of security breaches due to the unit owners’ increased access was not  substantial enough to render their request  unreasonable. These concerns could be met by posting signs or issuing warnings. Further, there was no evidence that previous security breaches were caused by nonresidents.

The Appeals Board ordered Cameron Grove to pay $25,000 to Daniel and $10,000 to Doby as actual damages and $5,000 to the state as a civil fine. The Appeals Board also exempted the unit owners from any assessment that Cameron Grove might impose on its members to satisfy the fines and damage awards. The case then was appealed for judicial review to the circuit court, the Court of Special Appeals and finally, the Maryland Court of Appeals (appeals court).

The appeals court concluded that Cameron Grove was required to demonstrate that providing keys to the unit owners would be unreasonable due to the high cost. The court found that the Appeal Board had correctly performed the proper balancing test when it concluded that Cameron Grove unreasonably denied the unit owners’ requests.

After reviewing different policies on burden of proof (the duty of proving a claim) in various federal circuits, the appeals court was inclined to follow the reasoning of the Court of Appeals for the Third Circuit, which held that a defendant sued under the Federal Fair Housing Act bears the burden of proving that the requested accommodation is not reasonable. The appeals court noted that “[c]omplainants alleging housing discrimination will rarely, if ever, have the financial information to prove the defending party has the resources to afford an accommodation.” Due to this imbalance of information, the appeals court held that a fair housing complainant must make an initial showing that the requested accommodation is generally reasonable, but the defendant must ultimately prove the request is unreasonable, given the accommodation’s cost and the defendant’s financial status.

The appeals court affirmed the judgment of the Appeal Board.

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

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Insurer Has No Duty to Defend Association in Negligence Suit

Commodore Plaza Condominium Association, Inc. v. QBE Insurance Corporation, No. 12-22534-CIV-Seitz/Simonton (S.D. Fla. Jan. 14, 2013)

Risks and Liabilities/Association Operations/Contracts: A Florida district court ruled that a condominium association was not entitled to a defense of negligence suit under its directors and officers insurance policy because all of the claims in the underlying lawsuit were excluded by the policy.  

Neil Bacher owns a unit in Commodore Plaza Condominium, a townhome community in Aventura, Fla. When Hurricane Wilma struck south Florida in October 2005, it damaged Bacher’s roof, windows and screens. Commodore Plaza Condominium Association, Inc. (association) sent workers into Bacher’s townhome, who caused additional damage. The association also failed to keep Bacher’s townhome clean and sanitary during the restoration process and dropped debris inside, causing additional damage to the walls, ceiling and roof.

In June 2007, Bacher sued the association for negligence, violation of the Florida Building Code, breach of contract and breach of fiduciary duty (all four accusations collectively referred to as the “underlying action”).

Travelers Casualty and Surety Company of America issued a directors and officers liability policy (insurance that provides financial protection in the event the association is sued in conjunction to their performance) to the association for the period of June 20, 2006 through June 20, 2007. In accordance with the terms of the policy, the association notified Travelers of Bacher’s suit and requested that Travelers defend it. Travelers denied coverage under the policy and refused to provide the association’s defense. The association subsequently sued Travelers for breach of contract.

In the underlying action, Bacher asserted that the association failed to use reasonable care when repairing his townhome and that it had violated the Florida Building Code by failing to make an application to the proper building officials before starting repairs; failing to obtain the required permits; failing to perform the repairs; and failing to perform the repairs in accordance with construction industry standards. Bacher alleged that the association breached the condominium declaration by failing to fulfill its maintenance, repair and restoration obligations under the declaration. He also alleged that the association owed a fiduciary duty to him, which it breached by failing to properly perform its obligations under the declaration.

Travelers moved for summary judgment (judgment by the court without a trial) based on a policy exclusion for claims “for or arising out of any damage, destruction, loss of use or deterioration of any tangible property….” Summary judgment is appropriate when the pleadings show that there is no genuine issue of material fact (a dispute over an important fact which could influence or determine the outcome of a legal case) and the moving party is entitled to judgment as a matter of law.

Travelers argued that the underlying action arose entirely from the damages, destruction and loss of use or deterioration to Bacher’s townhome, which resulted from Hurricane Wilma. The association argued that only part of the underlying complaint arose from damages caused by Hurricane Wilma. The association also pointed to Bacher’s allegations of statutory violations (which don’t focus on what caused the need for the repair work, but rather whether the violations were committed) as well as the claims for negligence and breach of fiduciary duty—all of which would have allegedly arose from the association’s actions. Therefore, the association argued, the policy exclusion did not apply because some of the damages alleged in the underlying action were not excluded by the policy.

Based on the complaint in the underlying action, the court determined that all of Bacher’s claims arose from damages his townhome sustained in Hurricane Wilma. Thus, the issue before the court was the definition of “arising out of” in the policy exclusion.

The Florida Supreme Court has held that the term “arising out of” should be interpreted broadly, and means “originating from,” “having its origin in,” “growing out of,” “flowing from,” “incident to” or “having a connection with.” Under this definition, there should be some causal connection between the conduct and the injury, but proximate cause is not required.

While the association argued that some claims in the underlying action were wholly independent from allegations of property damage, the court’s reading of Bacher’s complaint as a whole led it to the opposite conclusion. The court concluded, quite simply, that all of the accusations in Bacher’s complaint flowed from the damage to his property. Had there been no property damage, there would not have been a need for repairs, to hire qualified workers, to obtain permits, to follow the Florida Building Code and zoning ordinances, or to timely complete repairs. Thus, all of the claims in the underlying action flowed from, grew out of and had their origin in the property damage.

Accordingly, the court concluded that the policy exclusion applied to all of Bacher’s claims, and Travelers was entitled to summary judgment.

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

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Lot Owner Bound by Implied Covenant

Farris v. The Estates of Millbrook Homeowners Association, Inc., No.2-12-0432 (Ill. App. Ct. Mar. 20, 2013)

Covenants Enforcement: An Illinois appeals court found that although restrictive covenants were not properly recorded with subdivision plats, the lots were subject to the implied restrictive covenants referenced by the plats.

The Estates of Millbrook is a subdivision located in Kendall County, Ill., and governed by The Estates of Millbrook Homeowners Association, Inc. (association). In 2000, the developer platted sections One and Two of the subdivision and recorded a declaration of covenants and restrictions which included legal descriptions of sections One and Two.

In 2004, the developer platted sections Three and Four. Although plats of all four sections referenced the “covenants conditions and restrictions recorded contemporaneously with the plat,” the declaration was not simultaneously re-recorded to include the legal descriptions of sections Three and Four.

Dave Farris, Anthony Robinson and Robert Lamphere (the plaintiffs) purchased lots in section Four in 2005 and 2006. Each plaintiff’s warranty deed provided that the lot was conveyed subject to “restrictions, conditions, and covenants of record.” The title insurance policy for each lot also included an exception from coverage for any “covenants and restrictions... relating in part to association, assessments, and lien therefor, contained in the document recorded April 3, 2000.” The recording information for the original declaration was included in the policy.

In 2007, the developer disposed of all of its interest in the subdivision. In 2008, the association’s board became aware that the developer had failed to include sections Three and Four in the recorded declaration. Accordingly, in February 2009, the board recorded a “Resolution Regarding Correction of Scrivener’s Error and Re-Recording of Declaration of Covenants, Conditions, and Restrictions,” which included the legal descriptions of sections Three and Four.

The majority of homeowners in sections Three and Four signed waivers acknowledging the declaration’s existence and applicability. However, the plaintiffs sued the association, seeking a declaration that the re-recorded declaration was void and not applicable to their lots. The association argued that the plaintiffs had acknowledged the covenants and restrictions not only when they purchased their lots, but also throughout the duration of their ownership.

The evidence indicated that the plaintiffs had acknowledged an obligation to pay association assessments in both their purchase contracts and at the closings of the sales. In their mortgage documents, the plaintiffs acknowledged that their lots were subject to the association’s rules, and each plaintiff paid assessments to the association following closing. The record also reflects that Farris had applied to the association for permission to construct improvements to his property and had also run for the board; Robinson had previously served  as association president.

The trial court granted summary judgment (judgment without a trial) to the association, finding that the plaintiffs’ properties were bound by and subject to the declaration. The court also found that the evidence established that the plaintiffs believed they were bound by the declaration. The plaintiffs appealed.

On appeal, the plaintiffs argued that the trial court’s findings were contrary to law since no declaration had been recorded against their lots at the time of purchase. The association contended that the declaration was implied by references in the chain of title and was further enforceable due to the plaintiffs’ affirmative acts and constructive acceptance of the declaration’s terms.

The association’s position was that the plaintiffs’ actions and acknowledgments of the declaration precluded them from arguing that it did not exist. In addition, the association asserted that a court may find existence of an implied restrictive covenant where a general plan of development exists.

In determining whether a general development plan exists, one must consider whether: “(1) the restrictions are included in all deeds to the subdivision; (2) the restrictions have been previously violated; (3) the burdens imposed are generally equal and for the mutual benefit and advantage of all lot owners; and (4) notice of the restrictions is given in the recorded plat of subdivision.”

The appeals court found that at least three of these factors were satisfied. Since the title insurance included a citation to the recorded declaration and the deed referred to the restrictions, conditions and covenants of record, the appeals court found that the declaration restrictions were sufficiently included in the deeds. The burdens imposed by the declaration were generally equal and for the mutual benefit and advantage of all lot owners. The plats for all sections also referenced the covenants, conditions and restrictions, even though the declaration was not recorded simultaneously with the plats. Moreover, the enforcement of a general plan would not pose a great hardship on the plaintiffs since they had been complying with the declaration throughout their respective ownerships. Therefore, the appeals court concluded that the facts were sufficient to establish that there was an implied restrictive covenant.

The appeals court affirmed the judgment of the trial court.

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

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Renting Garage Units to Public Violates Declaration and Zoning Laws

Noxsel v. Boquet Estates Owners Association, No. E053305 (Cal. Ct. App. Mar. 8, 2013)

Covenants Enforcement/State and Local Legislation and Regulation: A developer violated municipal zoning laws and the condominium declaration by renting garage units to the public.

In 1977, E. Ray Noxsel began to develop Boquet Estates, a condominium development consisting of 64 residential lots and 60 separate garage lots in Upland, Calif. Each residential lot included an attached two-car garage. The development also contained garage lots located in a separate row and not attached to the residential lots. Each garage lot contained a single-car garage. Noxsel obtained a conditional use permit from the City of Upland that required the declaration to include a provision that all one-car garages are under the association’s control, and that no garage could be conveyed to a nonmember of the condominium association.

The 64 residential lots were sold, but Noxsel retained ownership of all garage lots. Over the years, he offered the garage lots for sale to the public and also began renting the garage lots. Noxsel rented the garage lots as storage space for $100 per month.

In 1982, the city twice notified Noxsel that he was violating the zoning laws by selling or renting the garage lots to anyone other than residential lot owners. In 2004, it once again notified him that third-party rentals were never intended under the use permit. The city, however, never pursued legal action against Noxsel for selling and renting the garage lots.

According to the Boquet declaration, garage lot owners are responsible for 10 percent of the total annual assessments, while residential lot owners are responsible for the remaining 90 percent. Any increase in the total assessment is limited to 20 percent annually.

Between 1978 and 2003, when Noxsel served on the association’s board of directors, the 90/10 allocation of the total assessments was never made. Instead, the assessments imposed were based on a consultant’s recommendation. During this time, the regular monthly assessment on garage lots ranged from $1.27 to $3.40.

In 2004, the board increased the total assessments from $70,560 to $82, 416 (less than 20 percent). It assessed the garage lots at 10 percent and the residential lots at 90 percent, as required under the declaration. As a result, the residential lot assessment increased from $90 to $97 per month, and the garage lot assessment increased from $2 to $11 per month.

Noxsel tried to pay the association $2 per month for each of the garage lots, but the association refused to accept his tender and Noxsel stopped paying altogether. The association billed Noxsel for assessments at the higher $11 rate and placed liens on the garage lots when he refused to pay.

In 2007, Noxsel sued the association, seeking to enjoin (a court to order prohibiting a specific act) the association from charging him the higher assessments. The association filed a cross-claim, seeking to foreclose the assessment liens and to obtain a declaration prohibiting the sale or lease of the garage lots to the public. The trial court held that Noxsel had violated the municipal zoning laws and the declaration, which prohibit commercial operations.

The trial court ordered Noxsel to stop renting the garage lots and declared that the association’s increased annual assessments and the 90/10 assessment allocation were valid. The association could not obtain judicial foreclosure for the delinquent assessment amounts, but the trial court awarded the association $25,254 in past due assessments and attorney’s fees in the amount of $82,272.21. Noxsel appealed.

Noxsel argued that the conditional use permit and the declaration were susceptible to varying interpretations. The appeals court did not agree. The 1977 conditional use permit expressly stated that the garage lots could not be transferred to a nonmember of the association, and the declaration did not expressly provide for a nonmember to own or rent a garage lot.

The appeals court held that there was no lack of clarity or ambiguity in the governing documents that would justify Noxsel’s strained interpretation of them. Noxsel complained that he would suffer economic loss because he could not rent or sell the garage lots. However, the appeals court noted that Noxsel could sell or rent the garage units to the association or its members, as was originally contemplated.

The California condominium statute requires associations to assess fees on the individual owners  to maintain the units. The statutory provisions reflect the legislature’s recognition of the importance of assessments for the proper functioning of condominiums. The appeals court found the increase in the garage assessments from $2 per unit to $11 per unit—after many years of assessments that were too low—did not violate the statute, since the increase in total assessments was less than 20 percent and did not require member approval. Noxsel also challenged the trial court’s award of attorney’s fees to the association, but the appeals court affirmed the award.

The appeals court affirmed the trial court’s judgment in its entirety.

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

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HOA's Refusal to Approve Boathouse Breached Declaration

Pointe II on Semiahmoo Owners Association v. Nauman, No. 67762-4-I, 67960-I (Wash. Ct. App. Feb. 19, 2013)

Architectural Control/Association Operations: A Washington appeals court upheld a ruling that a homeowners association’s refusal to approve an owner’s boathouse plans was arbitrary, capricious and in bad faith.

Clynt and Jan Nauman own Lots 10 and 11 in Pointe on Semiahmoo Phase II, a 12-lot development in Blaine, Wash. Dean and Rosemarie Francis own Lot 12, which is adjacent to the Naumans’ lots. The subdivision is subject to a declaration of covenants, conditions and restrictions enforced by Sunset Pointe Owners’ Association (association). Lots are accessed by a private road that does not directly abut the lots, so owners must cross a “common area” to access their lots. Two areas within the common area are described on the subdivision plat as “Gravel Access Drive” (GAD).

Nauman initially planned to construct a boathouse on Lot 10. The association informed him that no accessory structure could be constructed on a lot unless there was also a primary residence on the lot. He decided to locate the boathouse on the northeast corner of Lot 11, on which his residence was located. This location would require that he use a portion of the GAD to reach the boathouse.

The declaration provides that owners must obtain approval from an architectural review committee before making improvements to their property. Nauman presented his plans for approval in 2007. Afterward, the association met with legal counsel to discuss the plans and outsourced a review of his proposal to an independent architectural reviewer. Outsourcing was atypical; the committee had previously used an informal and friendly process to approve similar projects.

While awaiting approval, Nauman cleaned and leveled the proposed construction site. He deposited the excess dirt onto the common area under a tarp used for temporary storage. He believed this was acceptable because it was common practice among other association members to use the common area when doing work on their property.

The board enacted a resolution that Nauman’s actions were a “flagrant breach” of the declaration and directed the association’s attorney to “take the maximum permissible and/or remedial action ... allowed.” The board approved a $10,000 fine and sued Nauman for trespass and violation of the declaration.

Nauman counterclaimed, alleging that the association’s denial of his boathouse application was unreasonable and in bad faith. He asserted that the association had failed to preserve the common area for the benefit of all members, thereby breaching its fiduciary duties and its duty to uphold the declaration.

The trial court sided largely in Nauman’s favor, concluding that although his actions “technically” amounted to trespass, they were “reasonable and in good faith.” On Nauman’s counterclaims, the trial court rejected the association’s defense that it had “no choice but to file suit against the Naumans.” Instead, the trial court found the association’s actions were “retaliatory against the Naumans in response to prior years of animosity between the parties....” The association acted in bad faith by applying standards and protocols not previously required; it also acted in bad faith by taking the faulty legal position that the GAD, which Nauman would have to use to access his proposed boathouse, was an exclusive easement for Francis’ benefit. The trial court also found the association breached its fiduciary duties and its duties to uphold the declaration by failing to preserve the common areas for the benefit of all members.

The trial court ordered that Nauman’s boathouse plans be approved. It awarded the association a small amount of damages for Nauman’s trespass, and awarded Nauman fees and costs for his counterclaims. The trial court also ordered that an exclusive easement granted to Francis in 2011 by the association was subordinate to the judgment in this case. The association appealed.

The trial exhibits and testimony established to the court that no owner was granted greater access rights to their respective lots than other owners. The subdivision plat’s reference to “Gravel Access Drive” for Lot 12 did not create an easement, but rather appeared to show the extended access drive necessary to access that lot. The appeals court found that the association had never previously asserted that the GAD to Lot 12 was an exclusive easement prior to Nauman’s boathouse application. The appeals court found that the association’s position that Lot 12 had easement rights to the GAD was adopted purposely, deliberately and in bad faith by the association, as well as in collusion with and at the urging of Francis to improperly deny Nauman’s boathouse application.

The appeals court further concluded that the association, directly and through its designated architectural reviewer, imposed setback requirements (the distance between a property line and the area where building can take place) beyond those imposed on other members. The association also refused to grant Nauman variances or authorize reasonable use of the common areas that has been previously granted to other members. The association had allowed other members to use portions of the common area in the past, and had shown favoritism toward influential members, particularly to the Alfreds and the Francises, when approving projects in the common areas.

The court found that the association’s inconsistent and purposely selective enforcement of the declaration and its motives for denying Nauman’s boathouse application were in bad faith, arbitrary and capricious. Although the association challenged these findings, they were amply supported by substantial evidence in the record.

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 Can Enforce Its Own Traffic Rules

Poris v. Lake Holiday Property Owners Association, 983 N.E. 2d 993 (Ill. Jan. 25, 2013)

Powers of the Association: The Illinois Supreme Court held that a homeowners association was entitled to enforce its speeding regulations on its private roads, and that the association had the power to issue citations to association members.

Lake Holiday, a residential community in La Salle County, Ill., is governed by Lake Holiday Property Owners Association (association). The association’s bylaws authorize the board to adopt “such rules and regulations relating to the use of association property as they may deem reasonably necessary for the best interests of the association and its members.”

The rules and regulations provide that the speed limit on all Lake Holiday roads is 25 miles per hour unless otherwise posted. The association employs security officers to enforce the speeding regulation.

Kenneth Poris owns property in the subdivision and is a member of the association. In 2008, he was stopped after a security officer measured his speed at 34 miles per hour. The officer activated flashing lights on his security vehicle and pulled Poris over. The officer instructed Poris to remain in his car for safety reasons and asked for his membership card and driver’s license. He told Poris that he was being recorded and issued him a citation for speeding.

Poris initially sued the association, its board of directors and the chief of security in February 2009, seeking a temporary restraining order that prohibited the association from pursuing his speeding citation. In March 2010, he filed an amended complaint, seeking, among other things, a declaration that the practices and procedures of the association’s security department were unlawful.  He also sought a finding that the rules and regulations in effect on the date of his traffic stop were void. The association filed a motion for summary judgment (a determination made by a court without a trial) on all counts of his complaint, and the trial court granted summary judgment in the association’s favor on all counts. Poris appealed.

On appeal, Poris argued that the association was not authorized to stop vehicles and detain drivers; that the association’s use of amber oscillating flashing lights on its vehicles was unlawful; that the practice of recording drivers with audio and video recording equipment violated the eavesdropping statute; and that the Lake Holiday security department was prohibited from using radar units to determine the speed of vehicles on association property.

The Appellate Court held that (1) recording drivers was not a violation of the eavesdropping statute and (2) the Lake Holiday security department was not prohibited from using radar units. However, the Appellate Court found that the association was not authorized by the Illinois Vehicle Code to use amber lights on its vehicles. The court concluded that security officers are without legal authority to stop and detain drivers for violating association rules because those rules were enacted by the association, not the Illinois General Assembly. The appeals court reversed the trial court’s decision and remanded the case for entry in Poris’ favor on the liability portion of his claims. The association appealed.

In its appeal, the association argued that the Appellate Court erred in ruling that the association’s private security officers did not have the authority to stop and detain drivers for violating association rules and regulations; it also argued against the Appellate Court’s ruling that the association’s use of amber oscillating lights on its security vehicles was unlawful.

Poris argued that the association’s security department was improperly attempting to assert police powers. He contended that the association did not have the authority to create the security department or to create enforcement mechanisms for the department.

The Supreme Court determined that the trial court had properly declined to interfere in the association’s internal affairs. Regulating and enforcing traffic rules was reasonably necessary to maintain the roadways, and the association retained the right to enforce its own traffic rules and regulations under Illinois law. In doing so, the security officers were not attempting to unlawfully assert police powers. In addition, the Supreme Court found that the association’s security vehicles fit within the framework intended by the 2008 amendment of the Vehicle Code, and that the statutes did not support Poris’ claim that the association’s security department was not a security company. Therefore, the association did not improperly use amber oscillating lights on its security vehicles.

The Supreme Court reversed the decision of the Appellate Court with regard to the declaratory judgment (a judgment in a civil case that declares the rights, duties or obligations of one or more parties). The rest of the Appellate Court’s decision was affirmed.

Editor’s Note: The Illinois Appellate Court’s opinion in this case was reported in the March 2012 issue of CAI Law Reporter (Poris v. Lake Holiday Prop. Owners Ass’n, 965 N.E.2d 464 (Ill. App. Ct. 2012).

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

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Declarant May Not Withdraw Lots from Subdivision

Vista Ridge Master Homeowners Association, Inc. v. Arcadia Holdings at Vista Ridge, LLC, No. 12CA0967 (Col. Ct. App. Feb. 28, 2013)

Developmental Rights/Covenants Enforcement/State and Local Legislation and Regulation: A Colorado appeals court affirmed a ruling that a declarant was prohibited from withdrawing and de-annexing lots from a platted portion of a common interest community after other lots in that portion had been sold.

Vista Ridge is a common-interest community subject to a declaration of covenants, conditions and restrictions drafted in accordance with the Colorado Common Interest Ownership Act (act). The declaration reserved the right to withdraw or de-annex (remove) any portion of the community in accordance with the act. However, Article V provides that “no portion of the Property may be withdrawn or de-annexed after a Lot or Unit in that portion of the Property has been conveyed to an Owner other than Declarant or a Builder.”

Arcadia Holdings at Vista Ridge, LLC’s (Arcadia) is the successor to the developer that recorded Vista Ridge Filing No. 9, which platted 94 single-family lots. Those lots were annexed (added) to Vista Ridge by recording the declaration of annexation and amendment to the declaration, which expressly describes the property as “Lot 1 through Lot 94, Vista Ridge Filing No. 9.” Arcadia remained the owner of 70 of the 94 lots; at least eight of the other lots listed in Filing No. 9 were sold to parties who were neither the declarant nor a builder. Arcadia recorded an amendment to the declaration that purported to withdraw and de-annex its remaining 70 lots from the subdivision.

The association sued Arcadia, challenging the de-annexation and seeking damages based on the declaration and the act. The trial court granted summary judgment (judgment without trial) in the association’s favor, declaring that the de-annexation was invalid. The trial court subsequently entered a judgment against Arcadia for past due assessments on the 70 lots and attorneys’ fees, plus 18 percent interest on the assessments and attorneys’ fees. Arcadia appealed both the summary judgment and the application of interest to the attorneys’ fees.

The appeals court concluded that the act was the determining factor of this issue because: (1) the declaration reserved the right to withdraw property from the association in accordance with the act; (2) the declaration contained additional language concerning the right to withdraw or de-annex and the restrictions on that right, all of which are essentially identical to the act; and (3) the act provides that, except as expressly provided in the act, the act’s provisions may not be waived. Thus, if the act prohibited the withdrawal and de-annexation of the declarant’s lots, the court did not need to separately consider language in the declaration.

The act provides that no portion of the real estate subject to withdrawal may be withdrawn after a unit in that portion has been conveyed to a purchaser. However, the parties disagreed on the act’s meaning of the term “portion”. The association argued that “portion” referred to the 94 lots constituting Filing No. 9. Arcadia argued that the association’s definition was arbitrary and that the statute was ambiguous. The appeals court concluded that the statute, when viewed in context, was clear and unambiguous.

Filing No. 9 and the subsequent declaration of annexation described a separate portion of Vista Ridge— 94 lots— and stipulated that this portion is subject to the declaration, which included the right of withdrawal in accordance with the act. Therefore, Lots 1 through 94 constituted a portion of real estate subject to withdrawal, and that portion could not be withdrawn after one lot was conveyed to a purchaser. It was irrelevant that there might be smaller portions within Filing No. 9 because the act applied to any portion, not just the smallest portion.

Thus, the appeals court pointed out, the act provides predictability for lot owners: they know that the surrounding lots will remain a part of the common interest community, that those lots will conform to the community’s covenants and restrictions, and that the owners will pay assessments to fund common improvements in the community. The act, therefore, balances the lot owners’ rights while also protecting the rights of the community’s developers who own portions of the subdivision other than Filing No. 9.

Arcadia argued that the trial court erred in awarding attorneys’ fees along with an accrued annual interest rate of 18 percent. The declaration provides that any unpaid assessment is subject to interest from the due date at the rate of eighteen percent per year. The declaration refers to attorney’s fees as “assessments” three times and specifically provides that attorneys’ fees shall be charged as additional assessments. Thus, the appeals court held that, according to the declaration’s plain language, attorney’s fees were clearly a type of assessment. Because the declaration states that any assessment is subject to an annual interest rate of 18 percent, the appeals court concluded that the trial court did not err in ordering a monetary judgment in which attorney’s fees were subject to the 18 percent interest rate.

The trial court’s judgment was affirmed.

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