January 2017
In This Issue:
Recent Cases in Community Association Law
Bank Waits Too Long to Challenge Association’s Foreclosure
Covenants Insufficient to Establish Interest Rate or Late Charges
Developer Obligated to Pay Reserve Assessments During Deficit Funding
Hawaii Association Law Does Not Penalize Association for Filing Proof of Claim in Owner’s Bankruptcy Case
Failure to Pay Small Legal Bill Proves Costly
Development Scheme Upheld Despite Ambiguous Language
Basketball Court Not Regulated by Covenants
General Conveyance of Personal Property Is Sufficient to Assign Declarant Rights
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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.



Bank Waits Too Long to Challenge Association’s Foreclosure

U.S. Bank National Association v. Woodland Village, No. 3:16-cv-00501-RCJ-WGC (D. Nev. Dec. 6, 2016)

Assessments: The United States District Court for the District of Nevada found that several different statutes of limitations applied to claims related to foreclosure of an association lien.


Woodland Village Homeowners Association (association) governed the Woodland Village subdivision in Cold Springs, Nev. U.S. Bank National Association (U.S. Bank) held a mortgage on a unit in the subdivision.

In February 2010, the association recorded a lien on the unit after the owners failed to pay association assessments. In February 2011, the association foreclosed on the unit and then purchased the unit at the foreclosure sale for $5,562, which was the total amount of unpaid assessments plus foreclosure costs and fees.

In April 2013, the association conveyed the unit to Westland Real Estate Development and Investments (Westland). In August 2013, Westland transferred the unit to Thunder Properties Corp. (Thunder).

In August 2016, U.S. Bank sued the association, Westland, and Thunder for quiet title (definitively establishing the property’s ownership), violation of the good faith obligation under the Nevada Uniform Common-Interest Ownership Act (act), and wrongful foreclosure. The association moved to dismiss the claims against it based on the statute of limitations since the suit was brought more than five years after the foreclosure.

The association argued that a five-year statute applied to the quiet title claim and a three-year statute of limitations applied to the act violation and wrongful foreclosure claims. U.S. Bank asserted that Nevada’s six-year statute of limitations for contract claims applied.

When determining whether a statute of limitations has run, the time must be computed from the day the claim accrued. When facts giving rise to a claim are a matter of public record, the recording of the document in the public record is sufficient to start the clock running on the limitations period.

U.S. Bank argued that the limitations period had not begun to run because it had not yet been established that its mortgage was extinguished by the foreclosure. The court disagreed, finding that U.S. Bank’s security interest in the unit was called into question at the time of the foreclosure because the act gave priority to an association lien for nine months of unpaid assessments. Therefore, U.S. Bank’s claims against the association related to the foreclosure’s effect on the mortgage began to run when the foreclosure deed was recorded.

Nevada has a five-year statute of limitations for quiet title claims. Therefore, U.S. Bank’s quiet title claim against the association was barred. However, U.S. Bank could still pursue quiet title claims against Westland and Thunder since they acquired their interests in the unit within the five-year limitations period.

A three-year statute of limitations applies to liabilities created by statute. The court held that U.S. Bank’s claim for violation of the act’s good faith obligation was subject to the three-year statute of limitations for liabilities created by statute. Therefore, the act violation claim was also dismissed.

The court found that two different statutes of limitations might apply to a wrongful foreclosure claim, depending upon the exact complaint. A wrongful foreclosure claim based on an alleged failure to comply with the act’s requirements is subject to the three-year statute of limitations for statute-created liability. Accordingly, the court dismissed U.S. Bank’s claim for wrongful foreclosure under the act.

However, a wrongful foreclosure claim based on an alleged violation of the association governing documents is subject to the six-year statute of limitations for claims based on a contract or written instrument. An association’s governing documents may not lessen the act’s procedural requirements or alter the act’s substantive effect, but they may impose additional procedural requirements to foreclose.

While U.S. Bank’s claim was brought within the six-year limitations period, the court determined that U.S. Bank failed to make a plausible claim for wrongful foreclosure based on the association’s declaration of covenants, conditions and restrictions (declaration). U.S. Bank failed to identify any declaration provision that the association allegedly breached. Instead, U.S. Bank merely recited a declaration provision purporting to subordinate the association’s lien to any recorded first mortgage. The court held that such mortgagee protection in the declaration was ineffective since the act gave the association a super-priority lien that could not be waived.

Moreover, the court held that U.S. Bank failed to complete mediation as required by Nevada law for claims involving common-interest communities. The statute required that mediation be completed within 60 days after a written claim is filed, unless the parties agree otherwise. U.S. Bank asserted that it filed a mediation demand with the Nevada Real Estate Division (NRED), but NRED failed to schedule the mediation within 60 days. The court held that nothing in the statute relieved the parties of mediation obligation based on NRED’s failure to schedule the mediation within a certain time. As such, U.S. Bank must mediate any claim against the association before initiating a court action.

Accordingly, all claims against the association were dismissed.

©2017 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.

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Covenants Insufficient to Establish Interest Rate or Late Charges

English Turn Property Owner’s Association v. Short, Nos. 2016-CA-0460, 2016-CA-0532 (La. Ct. App. Nov. 30, 2016)

Assessments: The Louisiana Court of Appeal held that an association was entitled only to legal interest on unpaid assessments because the covenants did not establish a definite interest rate, and the association was not entitled to collect late charges since there was insufficient evidence to establish the late charge rate. 


English Turn Property Owner’s Association (association) governed a subdivision in New Orleans, La. Donald and Karen Short purchased two adjacent lots in the subdivision. They constructed a home on one lot (house lot) but the second lot was left vacant (vacant lot). The property was subject to the subdivision’s covenants, conditions and restrictions (covenants).

In January 2006, the Shorts sold the house lot and moved to North Carolina, but they retained the vacant lot. In March 2013, the association filed suit against the Shorts for failing to pay annual and grass cutting assessments for the vacant lot. The grass cutting assessments were charged because the Shorts failed to maintain the vacant lot. The association sought to recover the unpaid assessments plus late charges, interest and attorney’s fees.

The trial court entered judgment in the association’s favor, awarding the association $14,190 for annual assessments through January 2015, $3,919 for grass cutting assessments through December 2015, $1,810 in late charges, and $6,791 in attorney’s fees. Both parties appealed.

The Shorts did not dispute that they owed annual or grass cutting assessments, but they disputed the annual assessment rate. The covenants provided that the association was to levy annual assessments equally against lots and dwellings. The Shorts asserted that a vacant lot was to pay one assessment and a lot with a dwelling was to pay two assessments—one for the lot and one for the dwelling.

The covenants defined “dwelling” as improved property intended for single-family use, and “lot” was defined as unimproved property intended for construction of a dwelling. The covenants specified that a parcel of land would be considered a lot until the improvements were sufficiently complete for habitation; upon such completion, the parcel and the improvements would collectively be considered a dwelling.

The Shorts asserted that the terms “lot” and “dwelling” were ambiguous, but the appeals court disagreed. Finding the language explicit and precise, the appeals court held that the covenants unambiguously required that vacant lots pay the same amount as lots with dwellings.

The Shorts alleged they were induced to buy the second lot by assurances that they would be charged only one assessment for both lots. The Shorts submitted a 2004 letter from the association’s treasurer indicating that, although multiple lot owners had been charged only one assessment in the past, the association would not continue the one assessment policy since the covenants expressly provided that lot and dwelling owners would pay equal assessments. The letter advised that the Shorts could avoid paying assessments for two lots if they replatted to combine the property into one lot. The Shorts never replatted the property.

The association asserted that the trial court erred in awarding it four percent legal interest (provided by law) rather than 12 percent conventional interest (provided by contract). The covenants provided for interest at the maximum rate of 18 percent per year but not to exceed the maximum rate allowed by Louisiana law. Louisiana law allowed conventional interest up to 12 percent, provided the interest was “fixed in writing.” The appeals court held that this meant the interest rate must be fixed.

Moreover, the Louisiana Homeowners Association Act provided that the association’s lien would secure unpaid charges plus legal interest from the due date and reasonable attorney’s fees. The appeals court held that the covenants did not fix a definite interest rate since the board had the discretion to adopt a rate up to 18 percent or the legal maximum. Accordingly, the appeals court held that the trial court did not err in awarding only four percent legal interest. However, the appeals court did amend the judgment to reflect that interest applied from the assessments’ due dates rather than the date the complaint was filed.

The Shorts complained that imposing late fees plus interest was usurious. While the appeals court disagreed with this assertion, it found no authority for the late charges. The covenants provided that a delinquent assessment would incur a late charge in an amount set by the board. An association officer testified that a 10 percent late fee was charged, but the association provided no evidence of any board resolution or other documentation adopting the rate. Without evidence substantiating an exact method by which late charges were to be determined, there was no basis for imposing late fees, and the appeals court vacated the late fee award.

The Shorts argued that attorney’s fees equal to 35 percent of the total award for assessments and penalties was unreasonable. This percentage was based on the association’s contract with its attorney, which provided for the attorney to receive 35 percent of all amounts collected. The appeals court found no abuse of the trial court’s discretion in awarding such fees.

Accordingly, the trial court’s judgment was partially amended, partially affirmed and partially vacated.

©2017 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.

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Developer Obligated to Pay Reserve Assessments During Deficit Funding

MacKenzie v. Centex Homes, No. 5D16-1254 (Fla. Dist. Ct. App. Dec. 22, 2016)

Assessments: The Florida Court of Appeal held that the Florida Homeowners’ Association Act did not excuse a developer from reserve funding obligations while it was funding the association’s operating deficits.


Centex Homes (Centex) developed Sullivan Ranch, a 692-lot community in Lake County, Fla., and organized Sullivan Ranch Homeowners’ Association (association). In 2007, Sara and Ralph MacKenzie purchased a home in the community.

In April 2015, the MacKenzies sued Centex, claiming that it had failed to make capital contributions to the association’s reserve account as required by the Florida Homeowners’ Association Act (act). In 2007, Centex made an initial reserve contribution of $32,300, but then it stopped contributing reserve funds. Centex controlled the association’s board of directors until December 2015. During such time, the board was charging reserve assessments to owners other than Centex.

The MacKenzies alleged that Centex owed about $993,988 to the association, and they sought an order that Centex was obligated to make capital contributions during the time it controlled the board. The trial court granted summary judgment in Centex’s favor (judgment without a trial based on undisputed facts). The MacKenzies appealed.

Centex first argued that the MacKenzies lacked standing to bring the claim because any amount that might be owed would go to the association, and the MacKenzies were not entitled to any of the funds. The appeals court disagreed. The act gave every owner the right to bring an action against the association or another owner with respect to an alleged failure or refusal to comply with the act. In addition, if the reserve fund was larger, then there would be less need for future assessment increases or special assessments to fund capital needs, so there could be indirect benefits to the MacKenzies.

Centex next asserted that the act excused it from making reserve contributions while it was funding the association’s operating deficit. The act excused a developer that controlled the association from paying “operating expenses and assessments” for its lots if the developer funded the difference between the assessments received from lot owners and the “operating expenses incurred that exceed[ed] the assessments receivable.”

The appeals court determined that the act was unclear as to whether a developer was excused from all assessments or merely from operating assessments while it was deficit funding. In light of the ambiguity, the appeals court applied the rule of statutory interpretation that requires that statutes be interpreted in a manner that harmonizes provisions within the same act.

The act requires an association to fund reserve accounts once they have been established. If no reserve accounts are established, the statute requires the budget to indicate that no reserves are being provided for in conspicuous font. In addition, the act allows an association to cease reserve funding once established by an owner vote.

Reading these statutes together, the appeals court determined that a developer had to either make reserve contributions or follow the act’s procedures to properly waive reserve funding through an owner vote at an association meeting and conspicuously note the absence of reserves in the budget. Here, Centex did neither.

Centex asserted that the act only dealt with budgeting for reserves, not reserve funding. The appeals court rejected this notion. The appeals court held that the act’s deficit funding provisions did not excuse a developer from making reserve contributions once reserve accounts were established.

Accordingly, the trial court’s summary judgment grant in Centex’s favor was reversed and the case remanded.

©2017 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.

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Hawaii Association Law Does Not Penalize Association for Filing Proof of Claim in Owner’s Bankruptcy Case

Village Park Community Association v. Faitalia, BAP No. HI-16-1170-JuTaKu (B.A.P. 9th Cir. Dec. 6, 2016)

Attorney’s Fees: The United States Bankruptcy Appellate Panel for the Ninth Circuit held that a debtor was not entitled to attorney’s fees under Hawaii law from an association who filed a proof of claim in the debtor’s bankruptcy case.


Village Park Community Association (association) governed the Village Park planned community in Honolulu, Hawaii. Onenoa Faavevela Faitalia and Soi Faitalia owned a home in the community.

The Faitalias failed to pay association assessments for several years, and the association filed a lien against the home in 2009. In October 2010, the association filed suit to foreclose its lien.

In August 2011, J.P. Morgan Mortgage Acquisition (J.P. Morgan), the Faitalias’ mortgage company, also filed suit to foreclose its mortgage, but J.P. Morgan did not pursue the foreclosure further because it entered into a loan modification with the Faitalias.

In May 2015, the association filed a motion for a default judgment (judgment against a party who has failed to defend against a claim) and a foreclosure decree. Instead of responding to the motion, the Faitalias filed a petition for Chapter 13 bankruptcy. The Faitalias asserted that J.P. Morgan’s secured first priority mortgage lien exceeded the home’s value, and they sought to “strip off” the association’s secured lien, which would leave the association’s claim unsecured. The Faitalias also proposed a bankruptcy plan by which they would make monthly payments of $380 over three years, which would pay only about 6.6 percent of amounts due to the unsecured creditors.

The association filed a proof of claim asserting a secured claim for $11,579, consisting of delinquent assessments and fees. The association objected to the bankruptcy plan, claiming it was filed in bad faith because, among other things, the Faitalias failed to commit all of their disposable income to plan payments.

The Faitalias filed a motion for summary judgment (judgment without a trial based on undisputed facts), contending that the J.P. Morgan mortgage lien had grown to $613,419, and the property’s value was $530,000. The association asserted that the loan modification was invalid and contended that its lien was senior to the approximately $164,000 in additional loan debt created by the loan modification. The association also presented an appraisal showing the property was worth $545,000.

The bankruptcy court found that the $164,000 of additional loan debt consisted of added interest and unpaid monthly payments and that no further money had been loaned. As such, the bankruptcy court determined that such loan modification was not the type that would allow a junior lienholder to move up in the priority schedule. The bankruptcy court also accepted the association’s appraisal of the home’s value, which meant that the association’s lien was wholly unsecured.

The bankruptcy court confirmed the bankruptcy plan and ordered the association to pay the Faitalias $26,350 in attorney’s fees and $1,047 in appraisal costs based on Hawaii law applicable to planned community associations (act). The association appealed.

The act provided that, if the association is not the prevailing party in an action by the association against an owner to collect delinquent assessments, to foreclose its lien on the unit, or to enforce any provision of the association documents or the act, then all costs and expenses (including reasonable attorney’s fees) incurred by the owner as a result of the association’s action shall be promptly paid by the association.

The bankruptcy court determined that the association’s filing of a proof of claim in the bankruptcy case was essentially an action to collect delinquent assessments or to foreclose on the unit. The appeals court disagreed, relying on the plain meanings of the terms “enforce,” “collect” and “foreclose” in the act.

The Hawaii Supreme Court had previously found “enforce” to mean some affirmative course of action to put into execution or to compel obedience. The appeals court determined that collect and foreclose also required some affirmative conduct by the association against the Faitalias. Yet, the association was prohibited from undertaking any of these actions by the automatic stay imposed when the Faitalias filed their bankruptcy petition. Thus, the appeals court concluded that the mere filing of a proof of claim did not entail the affirmative acts contemplated by the act to warrant attorney’s fees.

Moreover, the act allowed attorney’s fees only to the prevailing party, and the appeals court determined that the Faitalias were not the prevailing parties in any sense. The Faitalias did not object to the association’s proof of claim, and the bankruptcy court never found that the association’s lien was invalid. In fact, if the Faitalias fail to complete the bankruptcy plan, the association’s lien remains in place.

The appeals court further opined that one should not be penalized under state law for filing a proof of claim in a federal bankruptcy case, which is a requirement to receive any distribution from the bankruptcy estate, nor should anyone be penalized for exercising rights under the bankruptcy code.

Accordingly, the appeals court reversed the award of attorney’s fees and appraisal costs to the Faitalias.

©2017 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.

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Failure to Pay Small Legal Bill Proves Costly

Board of Managers, Blackbriar v. Linwood, LLC, No. 4-16-0145 (Ill. App. Ct. Dec. 6, 2016)

Attorney’s Fees: The Illinois Appellate Court determined that the Illinois Condominium Property Act authorized an association to recover its attorney’s fees incurred in hiring a lawyer to inquire of an owner’s intent to pay.


51 Blackbriar was a six-unit condominium in Danville, Ill. Linwood, LLC (Linwood) owned one of the units.

Beginning in 2012, the condominium’s board of managers (board) passed several resolutions to replace building siding and levied an assessment to fund each of the four project phases. Linwood paid the assessments for the first three phases on time. The phase four assessment was split into two installments: the first installment of $3,145 was due in July 2014 and the second installment of $3,717 was due in February 2015.

When Linwood failed to pay the July 2014 installment, the board president called the board’s attorney, Gilbert Saikley, to discuss the delinquency. Saikley informed the president that he could not represent the board in such matter since Linwood’s agent, Nathan Byram, was also his client. However, Saikley did offer to give Byram a call about the delinquency.

Shortly after Saikley’s call to Byram, Linwood mailed the assessment payment. Since the payment was late, a $100 late fee was imposed as provided in the declaration of condominium (declaration). In addition, Saikley billed the board $180 for his call with the president.

In October 2014, the board notified Linwood that it owed an additional $280 for the late fee plus Saikley’s fees. Linwood paid the late fee but not the attorney’s fees. In January 2015, the board began charging Linwood monthly late fees for its ongoing $180 delinquency.

Linwood was also late paying the second assessment installment, but it did pay the assessment the following month plus the $100 late fee.

In March 2015, the board sent Linwood a demand for $2,104 for the $180 Saikley bill, $75 in late fees on this amount and $1,849 for attorney’s fees charged by the board’s new lawyer hired to address Linwood’s payment issues. Linwood did not respond.

In June 2015, the board filed a complaint for forcible entry and detainer (request for money judgment and possession of the unit). The trial court entered judgment in the board’s favor and ordered Linwood to pay $7,780 to the board for late fees and attorney’s fees. Linwood appealed.

Linwood argued that the $180 legal fee was not authorized under the Illinois Condominium Property Act (act) because the fee did not arise out of a default. Linwood also asserted that the fee was not authorized under the declaration because it was not incurred in enforcing any of the condominium documents.

The act provides that, if an owner fails to pay any amount due to the association when due, then the unpaid amount together with interest, late charges, reasonable attorney fees incurred in enforcing the condominium documents, and collection costs shall constitute a lien on the unit. The act further provides that any attorney’s fees incurred by the association arising out of a unit owner’s default in the performance of any provision of the condominium documents shall be deemed a part of the owner’s share of the common expenses.

Linwood argued that the trial court never found that it was in default under the condominium documents. The appeals court disagreed, finding that “default” meant the omission or failure to perform a legal or contractual duty, especially the failure to pay a debt when due. Linwood did not dispute that it did not pay the assessment installments on time. Accordingly, Linwood was in default, and the board was authorized to recover its legal expenses arising from such default.

Linwood further argued that the Saikley bill did not qualify as legal fees incurred in enforcing the declaration because no collection suit was filed to collect the assessment. Again, the appeals court disagreed, finding that “enforce” meant to give force or effect to (such as a law) or to compel obedience to. The appeals court concluded that the ordinary meaning of “enforce” included hiring an attorney to inquire of a defaulting party’s intent to comply with the declaration.

The appeals court affirmed the trial court’s order awarding fees and costs to the board in the amount of $7,780.

©2017 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.

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Development Scheme Upheld Despite Ambiguous Language

Ortego v. Lummi Island Scenic Estates Community Club, Inc., No. C14-1840RSL (W.D. Wash. Nov. 21, 2016)

Covenants Enforcement: The U.S. District Court for the Western District of Washington held that association membership was mandatory, even though the covenants creating the obligation referenced a different association name.


Covenants Enforcement: The U.S. District Court for the Western District of Washington held that association membership was mandatory, even though the covenants creating the obligation referenced a different association name.

The Lummi Island Scenic Estates development on Lummi Island, Wash., contained nine subdivisions created by plats recorded between 1959 and 1965. The plats imposed various covenants and restrictions on the lots, but there was some variation among the plats.

The plats for subdivisions 1 through 5 specified that the lot owners would be members of Lummi Island Scenic Estates Holding, Inc. (association), that the association would own the common areas shown on the plats, and that all owners in the development would have rights in all common areas.

However, the association was never formed. Instead, Lummi Island Estates Community Club, Inc. (club) was created in 1962 for the purpose of managing the development’s common areas, creating a water system for its members, assessing fees necessary to provide the services, and enforcing liens, restrictions and covenants. The plats for subdivisions 6, 7, 9 and 10 (there was no subdivision 8) referenced the club instead of the association.

The plats for subdivisions 3 through 7, 9 and 10 provided that the lots would be subject to the restrictions for 25 years (sunset date) from a plat’s recording (sunset clause), but the plats for subdivisions 1 and 2 contained no sunset clause.

Charles Ortego and other owners (plaintiffs) sued the club, arguing: (1) that the owners in subdivisions 1 through 5 were never club members; (2) that the club had no authority to assess owners in subdivisions 1 through 5; and (3) to the extent such owners were deemed club members, that membership had expired for owners in subdivisions 3 through 7, 9 and 10 due to the sunset clause. Both sides moved for summary judgment (judgment without a trial based on undisputed facts).

The court stated that the primary objective was to determine the intent or purpose of the covenants’ drafter, with special emphasis being placed on protecting the owners’ interests. The court determined that the developer clearly intended for each owner to be a member of a homeowners association, and that intent would not be thwarted simply because the developer decided on a different name for the entity as development progressed.

The court was unpersuaded to alter the development’s course since the club had acted as the homeowners association for at least 50 years without complaint from owners. The club had constructed a water system and operated substantial recreational facilities for the development, including a marina, clubhouse, lake and cabana. The court found the plat language regarding mandatory membership in a homeowners association sufficient to obligate the owners to pay reasonable fees imposed by the club.

The plaintiffs argued that all plat provisions constituted restrictions subject to termination under the sunset clause. The club asserted that the sunset clause applied only to the covenants that restricted conduct.

The court agreed there was merit in both arguments. However, the club’s articles of incorporation contained no mechanism for forfeiting or withdrawing from club membership other than by transferring the lot. In particular, there was no reference to anticipated changes in membership size or provisions for funding the club if its membership were to drop substantially.

In 1968, when the club developed the water system, it recorded a notice against all nine subdivisions providing that the lots were subject to annual assessments. The club took further action to assert its rights after the sunset clause was supposed to take effect. In 1990, the club recorded a notice regarding its lien rights, and, in 1995, the club recorded a notice that it would strictly enforce the architectural restrictions. Moreover, lot deeds issued after the sunset date continued to indicate that the lot was subject to the plat’s restrictions.

Finally, the court found the plaintiffs’ interpretation about expired club membership to be unreasonable. Membership termination would cause owners in seven of the nine subdivisions to lose a voice in how the common areas were managed or maintained and to lose water service. The club would also be left holding all of the community assets but with less than a quarter of its funding. The plaintiffs asserted that owners desiring water service could contract with the club to obtain the service, but the court viewed this suggestion as illustrative of the chaos that would result if the plaintiffs’ view were adopted.

Accordingly, the club’s motion for summary judgment was granted, and the plaintiffs’ motion was denied.

©2017 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.

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Basketball Court Not Regulated by Covenants

Bedows v. Hoffman, No. 4-16-0146 (Ill. App. Ct. Nov. 22, 2016)

Covenants Enforcement: The Illinois Appellate Court determined that a basketball court did not constitute a structure in violation of the subdivision covenants and basketball playing did not constitute a nuisance.


Rob Bedows and Trudy Gordon (collectively, Bedows) owned a home in the Devonshire subdivision in Champaign, Ill. In 2012, John and Rose Hoffman (collectively, Hoffman) and their six children moved into the home next door.

In April 2013, Hoffman began constructing a lighted concrete basketball court in his backyard on the side closest to Bedows’ property. Construction was complete by November 2013. Bedows objected to the noise from the basketball court and balls coming into his property, so he asked Hoffman to move the court to the other side of the property.

The basketball goal was very close to Bedows’ bedroom window, and the basketball playing sometimes went on until 10:00 pm. Hoffman refused to move the court, but he did install a 12-foot net behind the basketball goal to help catch errant balls.

In 2015, Bedows filed suit against Hoffman, asserting that the basketball court encroached upon his property, violated the subdivision covenants’ setback requirement, was a structure prohibited by the covenants, and constituted both a nuisance under the covenants and a private common law nuisance. Hoffman removed the portion of the court that allegedly encroached upon Bedows’ property, but the court was still within 10 feet of the shared property line.

The covenants prohibited any structures on the lot other than one single-family dwelling and “other accessory buildings incidental to residential use of the premises.” The covenants also required that any main or accessory building be located at least 10 feet from the side lot line. “Accessory building” was defined in the covenants as a separate building which was incidental to the main building or to the premises’ main use.

Hoffman filed a motion to dismiss the claims. The trial court dismissed the encroachment, setback violation, and covenant violation claims based on laches (unreasonable delay to assert a claim, causing prejudice to the other party).

The trial court also dismissed the nuisance claims, concluding that typical children’s sporting activities were not objectively noxious or offensive. The trial court explained that nuisance was based on a reasonable person standard, and, unless Bedows pled special circumstances, children playing basketball in a residential neighborhood could not constitute a nuisance. Bedows appealed.

The dictionary defined “building” as a roofed and walled structure built for permanent use. Based on this, the appeals court concluded that the 10-foot setback restriction did not apply to the basketball court because it was not a building.

The appeals court also concluded that the basketball court was not a structure. The dictionary defined “structure” as “any construction, production, or piece of work artificially built up or composed of parts purposefully joined together.” Since the basketball court was concrete poured flat on the ground, the appeals court concluded it was not built up. The appeals court also determined that the basketball court was not composed of parts since it was a contiguous mass. As such, the basketball court could not violate the covenant prohibiting structures.

The covenants further prohibited any noxious or offensive activity or anything which may be or may become an annoyance to the neighborhood. For an activity to constitute a private common law nuisance, the activity must be a substantial invasion of another’s use and enjoyment of his or her property. In particular, the invasion must be unreasonable and substantial, either negligent or intentional.

The appeals court explained that excessive noise can constitute a nuisance, but the standard for determining nuisance is the conduct’s effect on a normal person of ordinary habits and sensibilities. Protection is not afforded to hypersensitive individuals.

The appeals court agreed with the trial court that children playing basketball is not objectively offensive. In addition, Bedows did not sufficiently distinguish the Hoffman children’s basketball playing from the sort generally expected in a residential neighborhood like Devonshire. So, Bedows did not adequately show how the activity constituted a nuisance.

Accordingly, the trial court’s judgment was affirmed.

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General Conveyance of Personal Property Is Sufficient to Assign Declarant Rights

Civis Bank v. Willows at Twin Cove Marina Condominium and Home Owners Association, Inc., No. E2016-00140-COA-R3-CV (Tenn. Ct. App. Dec. 28, 2016)

Developmental Rights: The Tennessee Court of Appeals held that a general conveyance of personal property was sufficient to transfer declarant rights, but a bank that foreclosed only on a portion of the developer’s property did not acquire the declarant rights.


In 2004, Twin Cove Acquisition Company, Inc. (TCAC) began developing The Willows at Twin Cove Marina project on Norris Lake in Campbell County, Tenn. TCAC obtained construction financing from Civis Bank (Civis) and other lenders.

TCAC recorded a security deed granting Civis a security interest in the bulk of project property as well as TCAC’s personal property interests in the development. Other lenders were given security interests in other portions of the project. In 2007, Civis assigned its interest in the TCAC security deed to BankEast.

In 2008, TCAC recorded a declaration of covenants, conditions, and restrictions (declaration) and established The Willows at Twin Cove Marina Condominium and Home Owners Association, Inc. (association). The declaration defined the “declarant” as TCAC, the owner of all property submitted to the declaration, together with any successor in title who comes to stand in relation to the submitted property as his predecessor. However, the declaration specifically excluded a mortgagee from the declarant definition unless the mortgagee acquired the declarant’s entire interest in the submitted property through foreclosure and expressly assumed the declarant position.

The declaration further specified that any or all of the declarant rights could be assigned, but no assignment would be effective unless signed by the declarant and recorded. The declaration provided that the declarant would not be responsible for paying association assessments for its lots which did not contain occupied residential units.

TCAC eventually defaulted on its loans, and BankEast foreclosed on the collateral remaining under the security deed in January 2012. BankEast had its own financial troubles and closed, and BankEast’s assets were sold to U.S. Bank.

In 2012, the association began assessing U.S. Bank’s lots. When U.S. Bank failed to pay, the association filed a lien against the property. In March 2013, Civis purchased all of U.S. Bank’s interests in the project. In June 2013, TCAC assigned any rights it still had as the declarant to Twin Cove Resort and Marina, LLC (TCRM).

In May 2014, Civis filed an amendment to the declaration stating that it was the declarant and that it was exercising the declarant’s right to withdraw The Pointe and Willows Court neighborhoods from the declaration. Civis also filed a document stating that the declaration was terminated and revoked as to Willows Court.

In February 2015, Civis filed suit against the association, asking for a declaration that Civis held the declarant rights, that the association lien was invalid, and that the association had no authority to levy assessments against it. The association asserted that Civis was not the declarant and was liable for $51,300 in past due assessments plus additional late fees and interest.

The trial court determined that Civis did not acquire the declarant rights because it did not expressly assume the position of declarant and because TCAC had assigned the rights to TCRM. The trial court also held that a mortgagee could only become the declarant by foreclosing on all of the declarant’s interest in the submitted property, and it was undisputed that other lenders had foreclosed on other portions of the project. In addition, Civis did not qualify as the declarant since it was a banking institution and not primarily engaged in developing the project.

The trial court granted judgment in the association’s favor, awarding it $68,113, and declared the declaration amendment and the Willows Court termination invalid. Civis appealed.

The association argued that Civis could not be the declarant because title documents transferring ownership of the real and personal property never specifically mentioned declarant rights. The appeals court disagreed, holding that declarant rights could be transferred by general language. Declarant rights are personal rights which do not run with the land to which they may relate. The appeals court held that a general transfer of all personal property or all contract rights can be effective to transfer declarant rights, provided the intent to transfer declarant rights is evident from the parties’ conduct and the relevant documents.

The appeals court also disagreed that the declarant rights had been transferred to TCRM. It was evident from the foreclosure documents that all of TCAC’s personal interests in the development and the real property given as security were transferred to BankEast in 2012. When TCAC purported to assign declarant rights to TCRM in 2014, TCAC had no further rights to assign, and the assignment was ineffective.

The appeals court further disagreed that Civis did not expressly assume the declarant position, holding that Civis’ statement in the declaration amendment that it was the declarant was sufficient to operate as a recorded assumption of rights.

However, the appeals court agreed that Civis did not qualify as the declarant because BankEast did not foreclose on all of TCAC’s interest in the project. Civis admitted that TCAC had other lenders, who also foreclosed on other portions of TCAC’s property, but it argued that BankEast was not a mortgagee subject to the declaration’s limitation when it acquired the declarant rights. The appeals court rejected this notion, finding that it was abundantly clear that BankEast was a foreclosing mortgagee.

The appeals court stated the importance of there being only one declarant and that chaos would ensue if any mortgagee who foreclosed on any portion of the declarant’s rights or property could qualify as the declarant. Thus, while the appeals court disagreed with the trial court’s rationale, it agreed with the trial court’s conclusion that Civis did not acquire the declarant rights and was subject to association assessments.

The trial court’s summary judgment grant was affirmed.

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