January 2016
In This Issue:
Recent Cases in Community Association Law
Each Prevailing Party Is Entitled to Attorney’s Fees
Attorney’s Fees Likely Excessive
Expanded Backyard Not Subject to Subdivision Restrictions
Acknowledgement Too Vague to Be Effective Waiver
Declaration Amendment Cannot Extinguish Easement
Name Change Doesn’t Eliminate Liability
New Condominium Difficult to Insure
Discrimination against College Students Permissible
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Recent Cases in Community Association Law

Law Reporter provides a brief review of key court decisions throughout the U.S. each month. These reviews give the reader an idea of the types of legal issues community associations face and how the courts rule on them. Case reviews are for information only and should not be applied to other situations. For further information, full court rulings can usually be found online by copying the case citation into your web browser.


Each Prevailing Party Is Entitled to Attorney’s Fees

Environ Towers I Condominium Association, Inc. v. Hokenstrom, No. 4D14-3376, 40 Fla. Weekly D 2586 (Fla. Dist. Ct. App. Nov. 18, 2015)

Attorney’s Fees: The Florida Court of Appeal held that there could be more than one prevailing party in litigation involving distinct issues.


Environ Towers I Condominium Association, Inc. (association) governed a condominium in Broward County, Fla., where the declaration restricted occupancy to those age 55 or older. The association sued mother and daughter unit owners, Virginia and Holly Hokenstrom, seeking to require Holly to vacate the unit because she was not 55 or older. The association also sought attorney’s fees for enforcing the restriction (i.e., if the association prevailed, the Hokenstroms would have to pay the association’s attorney fees).

In November 2011, the trial court issued an injunction (order mandating certain action) ordering Holly to vacate the unit within 30 days. The Hokenstroms appealed the injunction.

While the injunction appeal was pending, Holly continued to stay in the unit after the 30-day deadline. The association asked the trial court to hold Holly in contempt (willful disregard or disobedience) of the injunction. The trial court found Holly to be in contempt, and the Hokenstroms appealed the contempt order.

The appeals court affirmed the injunction and granted the association’s motion for its attorney’s fees for the injunction appeal, if the trial court determined that the association was the prevailing party. In July 2013, the trial court awarded the association $36,000 for attorney’s fees. Of this amount, $24,390 was for the injunction appeal, $9,306 was for the contempt proceeding, and $2,304 was unspecified.

The appeals court reversed the contempt order because the injunction was worded too imprecisely to support a contempt finding. The appeals court pointed out that the term “vacate” could be interpreted in ways that might impair Holly’s ability to fulfill her responsibilities as co-owner of the unit. The appeals court granted the Hokenstroms’ motion for attorney’s fees for the contempt appeal, if the trial court determined that they were the prevailing parties.

Florida statutes allow attorney’s fees to the prevailing party in an action for injunctive relief. The declaration allowed attorney’s fees to the prevailing party in an action to enforce the declaration.

After prevailing in the contempt appeal, the Hokenstroms moved for its attorney’s fees for the contempt appeal and sought to vacate the July 2013 fee order to the extent it awarded the association attorney’s fees for the contempt issue. The association argued that it was the overall prevailing party since the entire case was about getting Holly to vacate the unit. The association asserted the Hokenstroms were not entitled to any attorney’s fees or to have the July 2013 fee order vacated.

The trial court vacated the July 2013 fee order in its entirety after deciding that the Hokenstroms were the prevailing parties on the contempt issue. The trial court awarded the Hokenstroms $41,529 for attorney’s fees from the association. The association appealed.

The association argued that the entire litigation was essentially a breach of contract case where there can be but one prevailing party. The appeals court rejected this argument, viewing the injunction appeal and the contempt appeal as two different cases where there could be a prevailing party in each case. A civil contempt action arises from different facts than those involved in the original injunction case.

The appeals court held that the association was entitled to recover its legal fees for the injunction, and the Hokenstroms were entitled to recover their fees for the contempt action. The trial court’s judgment was reversed and the case remanded to the trial court with instructions for new attorney’s fee awards.

©2016 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.

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Attorney’s Fees Likely Excessive

Stewart Beach Condominium Homeowners Association, Inc. v. Gili N Prop Investments, LLC, No. 01-15-00169-CV (Tex. App. Nov. 17, 2015)

Attorney’s Fees: The Texas Court of Appeals upheld temporary injunctions halting foreclosures pending a determination whether the attorney’s fees that the association charged the delinquent owners were reasonable.


Stewart Beach Condominium Homeowners Association, Inc. (association) governs a condominium in Galveston County, Texas. The association filed collection actions against the owners of four units, Gili N Prop Investments, LLC; Baryo Investments, LLC; Rami Barnea; Simca and Ahuva Heled; and Pavel Gorbulski (collectively, the owners), for breach of the condominium documents and to foreclose on its liens on the units.

The owners did not dispute that they owed the assessments covered by the liens, but they contested the amount of attorney’s fees included in the liens. Initially, the attorney’s fees ranged from $1,600 to $2,150. By the time the liens were filed, the total attorney’s fees for all the owners were $16,000. The owners did not pay the assessments or the attorney’s fees.

The owners argued the attorney’s fees were excessive, unconscionable and unauthorized by the condominium documents. They filed counterclaims for fraudulent liens and excessive demand. The excessive demand doctrine provides that, if a party makes an unreasonable demand, the other party should not be forced to pay the demand or else risk having to pay the claiming party’s attorney’s fees.

The owners sought temporary injunctions (orders prohibiting certain action) to stop the foreclosures until the attorney fee claims could be litigated. The trial court granted the temporary injunctions, and the association appealed.

A temporary injunction merely preserves the status quo until a trial determines the outcome of a claim. To obtain a temporary injunction, a claimant must show a probable right to the relief sought and a probable, imminent and irreparable injury in the interim. Thus, the owners had to present evidence that indicated the attorney’s fees were excessive and were either unreasonable or sought in bad faith.

The appeals court found that the evidence provided substantial support for the owners’ claims, and the association did not present any contrary evidence besides its attorney testifying about his fees.

The engagement agreement between the association and its attorney provided for a hybrid fee for collections that consisted of: (1) flat fees of $75 for demand letters and $225 for filing lien notices; (2) a contingency fee equal to 20 percent of the collection amount; plus (3) hourly fees of $195 for the attorney’s time and $65 for paralegal time. All three fees applied at the same time. For example, for a demand letter, the $75 flat fee would apply plus the hourly rates for the attorney’s and paralegal’s time to prepare the letter plus the contingency fee based on the delinquent amount.

The owners’ expert witness testified that charging an hourly rate on top of a flat fee on top of a contingency fee was clearly excessive. Since the association did not present any expert testimony to the contrary, the appeals court held that the owners were likely to succeed in challenging the fee amounts.

The appeals court noted that the evidence did not support attorney’s fees in excess of the flat fee. To justify the hourly fees charged to the owners, the attorney would have to present evidence that he spent several hours reviewing what he admitted was a two-page form letter. To determine whether fees are reasonable, the trial court must consider both how many hours the attorney spent and at what hourly rate.

The appeals court also stated that, even if the client finds the attorney’s fees reasonable and agrees to pay them, the fees are not necessarily reasonable when they’re charged to a third party, like the owners. The attorney’s fee agreement with his client is not binding on a third party.

The association argued that the owners would not be irreparably harmed if the foreclosure was wrongful because they would be protected by the redemption remedy afforded by the Texas Condominium Act. The appeals court was not persuaded, holding that the right to money damages in a lawsuit for wrongful foreclosure is not an adequate remedy. The appeals court noted that, even if the owner can later recover the property through the redemption process, foreclosure can be a substantial burden on the owner because it can ruin the owner’s reputation and credit.

Accordingly, the temporary injunctions on the foreclosures were affirmed.

©2016 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.

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Expanded Backyard Not Subject to Subdivision Restrictions

Goulechi v. Serra, No. 322489 (Mich. Ct. App. Nov. 17, 2015)

Covenants Enforcement: The Michigan Court of Appeals held that a landlocked lot adjacent to a subdivision was not subject to the subdivision restrictions, even though a subdivision lot owner purchased the lot to expand his yard.


Donald and Carolyn Todd owned Lot 7 in the Buckingham Forest Subdivision in Shelby Township, Mich. In 2002, the Todds purchased a landlocked lot (the back lot) that abutted their backyard but was not part of the platted subdivision. In 2011, the Todds sold Lot 7 and the back lot to Phillip and Candy Serra “[s]ubject to easements and building and use restrictions of record.”

When the Serras moved in, the back lot was wooded, but they soon dramatically altered the landscape. They installed a second driveway along the side of Lot 7 that extended to the back lot, and they removed 150 to 200 trees from the back lot over the course of about six months. Removing the trees changed the landscape grade and revealed a shed on the back lot. Next to the shed, the Serras parked a tractor and large trailer, which they used to transport snowmobiles.

William and Joanne Goulechi and the owners of eight other lots in Buckingham Forest (the plaintiffs) felt that removing the trees completely changed their once tranquil residential neighborhood into an unpleasant environment. The process of removing the trees disrupted their lives; they had to deal with dust, noise and vibrations. With the trees gone, the unsightly equipment was exposed to view.

The plaintiffs filed suit against the Serras in December 2012, alleging nuisance, gross negligence and violations of the subdivision restrictions. The plaintiffs sought injunctive relief (requiring a party to take certain action or refrain from action). The subdivision restrictions prohibited constructing a shed without architectural control committee approval and forbid parking any vehicle outside of a garage other than regular passenger vehicles.

The trial court determined that the back lot was not subject to the subdivision restrictions and dismissed the plaintiffs’ claims. The plaintiffs appealed.

Nuisance is an interference with the use and enjoyment of a property interest, but relief is appropriate only when interference is substantial and unreasonable and causes significant harm.

The plaintiffs described the tractor as commercial-grade equipment. They also accused the Serras of leaving the work on the back lot incomplete, with mounds of dirt and an open trench that maintained standing water. However, the appeals court found no evidence that the plaintiffs were significantly harmed. The plaintiffs made no attempt to point to any particular harm, such as impaired health, structural damage or reduced property values.

The plaintiffs argued that the common ownership of Lot 7 and the back lot brought the entire property under the Buckingham Forest covenants and restrictions pursuant to the reciprocal negative easement doctrine. The appeals court held that, when there are no express restrictions in the chain of property title, the reciprocal negative easement doctrine may impose restrictions on property if there is proof of a common scheme of restrictions originating from a common owner. The scheme cannot be created by other owners conforming to a general plan.

The appeals court found no evidence that there was ever a common owner that could have created a common restriction scheme. The recorded subdivision restrictions expressly provided that they applied to Lots 1 through 16 in the platted Buckingham Forest Subdivision. There was no evidence that the original subdivision developer, who created the subdivision restrictions, contemplated that the back lot might be brought into the subdivision.

While the deed from the Todds to the Serras did state that the property was conveyed subject to the restrictions of record, there simply were no recorded restrictions for the back lot, and the conveyance language was insufficient to make the back lot subject to the Buckingham Forest restrictions.

Finally, the plaintiffs asserted that the second driveway on Lot 7 violated the subdivision setback requirements; however, the appeals court found no violation since the setback requirements applied only to buildings, and the second driveway was not a building. Nothing in the restrictions precluded driveways, shrubbery or similar features in side yards.

The trial court’s judgment was affirmed.

©2016 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.

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Acknowledgement Too Vague to Be Effective Waiver

Weinstein v. Leonard, 2015 VT 136, No. 15-075 (Vt. Nov. 13, 2015)

Documents: The Supreme Court of Vermont held that a broad acknowledgment in a declaration was ineffective as a waiver of the right to participate in municipal development review proceedings and judicial review of such proceedings.


Jeanmarie Leonard and Carol Sayour (the defendants) owned Lot 10 in the Rocking Stone Farm Subdivision in Manchester, Vt., which was subject to a declaration of covenants and restrictions (declaration). In May 2012, the defendants obtained a zoning permit from the Manchester zoning administrator allowing them to construct a barn on their property. They also received approval from the Rocking Stone Farm homeowners association as required by the declaration.

The owners of the adjacent Lot 9, Jennifer and Lloyd Weinstein, appealed the permit to the Manchester Development Review Board (DRB), which upheld the permit. In August 2012, Jeanmarie Leonard was walking the property with her husband and a landscape contractor when Mrs. Weinstein began yelling at them. Mrs. Weinstein then entered Lot 10 with a very large dog and became physically confrontational. Two days later, Mrs. Weinstein appealed the zoning permit to the superior court’s environmental division. Mrs. Weinstein, a trained attorney, initially represented herself in the appeal, but Mr. Weinstein and his law firm, The Weinstein Group, P.C., appeared as her counsel by December 2012.

In November and December, both the association and the defendants’ counsel warned Mrs. Weinstein by letter that her opposition to the permit was a violation of the declaration’s non-interference restriction, which prohibited an owner from taking “any action to contest or interfere with any development in the Community so long as such development is consistent with the Land Use Approvals.”

In February 2013, the environmental division rendered judgment in favor of the defendants. Mrs. Weinstein appealed that decision to the Vermont Supreme Court, which upheld the permit in September 2013.

Mrs. Weinstein filed a separate lawsuit against the defendants claiming, among other things, that the barn violated the declaration. The defendants filed counterclaims against Mrs. Weinstein for trespass, civil assault, breach of the declaration, invasion of privacy and abuse of process. The defendants also filed third-party claims against Mr. Weinstein and The Weinstein Group for abuse of process and breach of the declaration.

The Weinsteins and The Weinstein Group filed motions for summary judgment (judgment without a trial based on undisputed facts) with respect to the counterclaims and third-party claims against them. Mrs. Weinstein dismissed all of her claims against the defendants.

The trial court granted some of the summary judgment motions, dismissing all claims against Mrs. Weinstein except the civil assault and trespass claims and dismissing all claims against Mr. Weinstein and The Weinstein Group. The defendants dismissed their civil assault and trespass claims against Mrs. Weinstein, but they appealed the summary judgment grant to the Supreme Court.

The defendants’ primary argument was that Mrs. Weinstein’s efforts to stop the barn permit through the DRB and the courts were violations of the declaration’s non-interference clause. They argued that the clause was an exculpatory waiver (contract clause releasing a party from liability for wrongful acts) in which lot owners waived their rights to participate in municipal development review proceedings and judicial review of such proceedings.

The Supreme Court held that waiving the important right to participate in adjudicatory proceedings, whether in an administrative process or in the courts, must be done knowingly and intentionally. The Supreme Court found that the non-interference clause did not give purchasers fair notice of its meaning. It did not explicitly address municipal land proceedings or judicial review of municipal action. The clause was also placed under the ambiguous title “Acknowledgements” in a long and detailed document. As such, the clause was ineffective as a waiver of the right to participate in the type of proceedings involved in this case. Accordingly, the trial court did not err in granting summary judgment to Mrs. Weinstein on the declaration breach claim.

©2016 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.

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Declaration Amendment Cannot Extinguish Easement

Majestic Oaks Home Owners Association, Inc. v. Majestic Oaks Farms, Inc., No. 2014-CA-000492-MR (Ky. Ct. App. Nov. 20, 2015)

Powers of the Association: The Kentucky Court of Appeals held that an amendment to a subdivision declaration could not extinguish an easement without the easement holder’s consent.


In 1995, Rudy and Sharon Lewis purchased a farm in Simpsonville, Ky., and established Majestic Oaks Farms, Inc. (developer) to develop the property as Majestic Oaks Equestrian Estates (the Estates). The farm was divided into five sections. Sections 1 through 4 were developed as residential lots. Section 5 was designated for agricultural use only and reserved for future development. Majestic Oaks Home Owners Association, Inc. (association) was organized to govern the Estates.

The developer kept Section 5, which contained a horse breeding and training facility. In November 2009, Joseph and Ashley O’Brien sought to purchase a tract within Section 5 containing an access road (the road tract). If the road tract was sold and the road closed, the only remaining access to Section 5 would be the private road traversing Sections 1 through 4 (Estates road).

The association filed suit against the developer and the O’Briens seeking to block the sale, to require the developer to retain a perpetual access easement over the road tract, to prohibit the use of the Estates road for any purpose not related to residential development, and to compel the developer to contribute annual assessments to the association.

In the declaration of covenants for the Estates, the developer reserved an access easement through the Estates for so long as the developer or its successors or assigns owned a lot in the Estates. The association asserted that the easement was extinguished when it amended the declaration in 2006 because this language was removed.

All parties filed motions for summary judgment (judgment without a trial based on undisputed facts). The trial court denied the association’s motion and granted the O’Briens’ and the developer’s motions. The trial court held that the sale could go through and that the developer held an access easement over the Estates road. The association appealed.

The appeals court agreed with the trial court that amending the declaration did not extinguish the easement. Easements and restrictive covenants are entirely different and are not interchangeable concepts of property law. “A covenant only restricts the use of property, while an easement confers a right to enter the property upon which the easement is held.”

The owner of the property burdened by an easement (in this case, the association acting through a vote of its members) does not have the authority to alter or terminate the easement without the easement holder’s consent. Thus, the easement could not be extinguished without the developer’s consent. Since the developer still owned two undeveloped lots in Section 4, the appeals court held that the developer still had an easement over the Estates road. Accordingly, the trial court’s decision was affirmed.

©2016 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.

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Name Change Doesn’t Eliminate Liability

The Dan J. Sheehan Company v. Fairlawn on Jones Condominium Association, Inc., No. A15A1222 (Ga. Ct. App. Nov. 17, 2015)

Risks and Liabilities: The Georgia Court of Appeals held that a homeowners association could not avoid liability for a judgment by forming a new association with a different name.


The Fairlawn on Jones Homeowners’ Association (HOA) managed a condominium in Chatham County, Ga. The HOA hired The Dan J. Sheehan Company (Sheehan) to perform repairs. A dispute arose over payment for the work, and Sheehan sued the HOA in 2009.

In June 2012, while the lawsuit was pending, the unit owners voted to begin the process of amending the governing documents to conform to the Georgia Condominium Act (act). This included amending and restating the condominium declaration, adopting a plat, identifying common elements and forming an association with the word “condominium” in its name as required by the act.

In September 2012, the HOA asked the trial court to postpone the trial, and the trial was rescheduled for December. On November 2nd, articles of incorporation were filed creating The Fairlawn on Jones Condominium Association, Inc. (COA). On November 13th, the HOA board members voted to cease HOA operations on November 27th. On November 27th, the owners voted to adopt the amended and restated declaration, which transferred responsibility for governing the condominium to the COA. Neither the trial court nor Sheehan was notified about the change.

The HOA participated in the trial that began on December 3rd. The jury awarded Sheehan damages in the amount of $122,159.95 plus $47,097.11 in attorney’s fees.

In October 2013, when the judgment still had not been paid, Sheehan filed suit against both the HOA and the COA, alleging successor liability based on a corporate continuation theory, successor liability based on fraudulent attempt to avoid liability, and fraudulent transfer.

All parties filed motions for summary judgment (judgment without a trial based on undisputed facts). The trial court granted summary judgment to the HOA and the COA. Sheehan appealed.

“Ordinarily, a successor entity does not assume the liabilities of its predecessor unless “(1) there is an agreement to assume liabilities; (2) the transaction is, in fact, a merger; (3) the transaction is a fraudulent attempt to avoid liabilities; or (4) the [successor] is a mere continuation of the predecessor corporation.” This last situation is referred to as the corporate continuity doctrine. The doctrine applies when there is a substantial identity of ownership and a complete identity of the objects, assets, shareholders and directors.

The appeals court held that the corporate continuity doctrine applied to the COA because it had exactly the same purpose, board of directors, officers, members, unit owners, physical location, registered office and authority to govern and manage the condominium as the HOA. For practical purposes, nothing had changed except the name.

The trial court held that the corporate continuity test failed because there was no transfer of assets from the HOA to the COA. However, the appeals court recognized that the HOA never owned any property. As a condominium, all property belonged to the unit owners as tenants-in-common, so there was no property to be transferred to the COA. Moreover, the corporate continuity doctrine merely requires an “identity” of assets. The appeals court found the identity of the assets to be the same because there was no real distinction between the HOA’s assets and the COA’s assets.

In addition, the COA continued to operate under the HOA’s accounts and contracts. While the utility accounts remained in the HOA’s name, the COA paid the bills. The COA also continued to pay the insurance premiums, even though the insurance policy remained in the HOA’s name. The trial court found these facts irrelevant, stating that the bills were liabilities that were not transferred to the COA. However, the appeals court held the COA could not informally and unilaterally choose to assume some HOA liabilities but not others. Accordingly, the trial court erred when it granted summary judgment to the HOA and the COA on the corporate continuity doctrine.

The appeals court also held that the trial court erred when it granted summary judgment on the fraud claim. The appeals court noted that the timing of the COA’s formation on the eve of trial was suspicious. This could support an inference that it was done to avoid liability, especially since the HOA could have simply changed its name to conform to the act instead of creating an entirely new entity. However, there was also evidence that the HOA had been planning to make this change for some time. Whether the HOA attempted to defraud Sheehan was a factual question that should be resolved by a jury.

Finally, the appeals court held that the trial court did not err in granting summary judgment to the HOA and the COA on the fraudulent transfer claim because the Uniform Fraudulent Transfers Act requires an actual asset transfer, which did not occur here.

Judgment was affirmed in part and reversed in part.

©2016 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.

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New Condominium Difficult to Insure

The Windward on Lake Conway Condominium Association, Inc. v. United National Insurance Company, No. 6:14-cv-607-Orl-37KRS (M.D. Fla. Nov. 13, 2015)

Risks and Liabilities: The U.S. District Court for the Middle District of Florida held that a vacancy requirement in a new condominium’s insurance policy did not make the policy deceptive, even though the insurer knew that some units were occupied when the policy was issued.


The Windward on Lake Conway Condominium Association, Inc. (association) was organized to manage a new condominium complex in Belle Isle, Fla. The association worked with Underwood Insurance Agency (agent) to obtain commercial insurance, including wind coverage, for the then-vacant buildings. In the insurance application, the association described its primary operation as operating five condominium buildings containing 29 units, which were to be sold.

The agent worked with Appalachian Underwriters, Inc. (broker) to obtain a policy from United National Insurance Company (United) for an initial term from June 2011 to June 2012. The association paid a $20,000 premium for the initial term. The policy provided that the property would be covered only if it remained vacant during the term. The policy stated that a building is not vacant if any portion is used for any activity except showing it to prospective buyers or renters. The developer began selling units.

When the association applied for a policy renewal in 2012, the agent advised the broker that the complex was 35 to 40 percent occupied, and the broker relayed this to United. United renewed the policy for a second term for another $20,000 premium. United did not remove the vacancy requirement from the policy, despite knowing that the property was not vacant. In March 2013, the agent advised the broker by e-mail that the buildings were 85 percent occupied and asked that the applications be updated to reflect this major change in the underwriting.

Four days after the agent’s e-mail, a tornado hit one of the buildings, causing roof damage and water intrusion. The association spent more than $100,000 to repair the damage and submitted a claim to United. United denied the claim because the building was not vacant. Several weeks after the denial, the broker again asked United to remove the vacancy requirement, which United did effective May 1, 2013.

The association sued United in April 2014 for refusing to cover the loss. United moved for summary judgment (judgment without a trial based on undisputed facts). The association argued that the vacancy requirement was ambiguous because it could be interpreted in more than one way. Ambiguity in insurance contracts must be resolved in favor of providing coverage. The association argued that the premises covered were just the common elements, which could be considered vacant since it is the units that were occupied by residents. The court was not persuaded, finding that there was no evidence that the common elements were not used for any activity other than for showing to prospective buyers and renters.

The association next argued that the vacancy requirement rendered the policy illusory (based on a deception). In other words, it alleged that United took the insurance premiums but did not actually provide any insurance. If the policy exclusions or limitations completely contradict the insuring provisions, the policy is considered illusory. Further, if the insurance application and the policy provisions conflict, the policy provisions apply unless relying on the application would result in greater coverage.

The association argued that in the application, it described the property as residential and clearly indicated that the units would be sold to individual buyers. The association argued that the policy terms permitted it to show the property to prospective buyers, but the policy would be voided if it followed through with a sale.

The court disagreed, finding that the occupancy of one building would not prevent the policy from covering another unoccupied building. The court granted summary judgment to United for the breach of contract claims, but it denied summary judgment for the association’s claims for reforming or rescinding the insurance contract.

The court found that, since United knew the property was occupied when it issued the renewal policy and since the agent asked United to remove the vacancy requirement prior to the tornado, there were factual questions that still needed to be resolved that precluded summary judgment.

©2016 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.

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Discrimination against College Students Permissible

The SPUR at Williams Brice Owners Association, Inc. v. Lalla, No. 5362 (S.C. Ct. App. Nov. 18, 2015)

Use Restrictions: The South Carolina Court of Appeals upheld a restriction prohibiting rentals to college students.


The SPUR at Williams Brice Owners Association, Inc. (association) governed The SPUR at Williams Brice condominium adjacent to the University of South Carolina (USC) Williams-Brice Stadium in Columbia, S.C. The condominium master deed prohibited renting a unit to a student enrolled in a two- or four-year college, institute or university.

In 2007, Sunil and Sharon Lalla purchased a unit to use while enjoying USC football games. The Lallas also intended for their daughter to live there if she decided to attend USC and for the daughter to have roommates, who would pay rent.

When the recession hit in 2008, the Lallas put the unit on the market, but were not able to sell it. In 2010, the Lallas began renting the unit to college students. In July 2010, the association sent a notice to all owners reminding them of the student rental restriction. The notice gave owners until May 2011 to terminate student leases.

The association sued the Lallas in October 2011, seeking interpretation and enforcement of the master deed rental restriction. The Lallas answered that the restriction was null and void due to changed economic circumstances that depressed unit values substantially below their 2007 purchase price.

The trial court ruled in the association’s favor. The Lallas appealed, asserting that the restriction discriminated against a class of people (college students). They also argued that the restriction was unreasonable since there was no damage to other owners.

A restriction must not discriminate on the basis of a classification that contravenes the Equal Protection Clause of the state or federal Constitutions. “To satisfy the equal protection clause, a classification must: (1) bear a reasonable relation to the purpose sought to be achieved; (2) members of the class must be treated alike under similar circumstances; and (3) the classification must rest on some rational basis.”

The appeals court noted that college students are not part of a class that is inherently suspect. They haven’t faced a long history of discrimination, are not an insular minority, and have not been classified according to an immutable trait acquired at birth. “A classification bears a rational relationship to its purpose as long as there is some evidence that it will further a legitimate purpose,” but the classification must not be arbitrary.

The appeals court found the rental restriction to be rationally related to protecting the safety, comfort and investment of owners. The restriction minimized the risk of creating a dormitory-like atmosphere by barring those who have a tendency to engage in disruptive and disorderly behavior. The fact that some prospective college students are not disruptive or disorderly does not make the classification arbitrary or a violation of the Constitution.

State and federal fair housing laws prohibit discrimination in housing sales or rentals based on a person’s race, color, religion, sex, familial status or national origin. Under both state and federal law, “familial status” refers to a person under the age of 18 who lives with a parent or custodian. Since the restriction did not involve any of these criteria, the appeals court found no fair housing violation.

For a restrictive covenant to be invalidated due to changed conditions, the party seeking invalidation must show that the changed conditions represent so radical a change that the original purpose of the covenant can no longer be realized. The units’ decreased value had no effect on the need to protect against a dormitory-like atmosphere. Therefore, the changed conditions did not support invalidating the restriction.

Finally, the Lallas argued that the trial court ignored evidence that the association allowed other college students to live in the condominium. The appeals court was not persuaded that the association had waived its right to enforce the restriction. While the association may have previously failed to monitor rentals, once it received a complaint, the association took enforcement action.

The appeals court affirmed the trial court’s decision upholding the rental restriction.

©2016 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.

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