March 2017
In This Issue:
Recent Cases in Community Association Law
Club Ordered to Repay Membership Deposits
Golf Community’s Development Scheme Creates Rights in Association
Person Not Obligated for Debt Not Protected by Fair Debt Collection Practices Act
Association’s Foreclosure of Super-Lien Does Not Violate Due Process
Federal and State Courts at Odds Over Constitutionality of Foreclosure Requirements
Owner Charged for Insurance Deductible for Fire Originating in Unit
Actual Foreclosure Notice Cures UCIOA’s Constitutional Defect
Association Not Entitled to Attorney’s Fees in Collection Action
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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. In addition, the College of Community Association Lawyers prepares a case law update annually. Summaries of these cases along with their references, case numbers, dates, and other data are available online.


Club Ordered to Repay Membership Deposits

Hirsch v. Jupiter Golf Club, LLC, No. 13-80456-CIV (S.D. Fla. Feb. 1, 2017)

Contracts: The U.S. District Court for the Southern District of Florida ruled that a golf club owner effectively recalled the memberships when it tried to restructure membership rights without the members’ consent.


Norman Hirsch, Matthew Dwyer, and Ralph Willard (collectively, plaintiffs) acquired refundable memberships in the Ritz-Carlton Golf Club & Spa Jupiter (club) in Jupiter, Fla. Each plaintiff paid a membership deposit and entered into a membership agreement with the club, which granted the plaintiff a revocable license to use the club facilities in accordance with the club’s membership plan and rules.

The membership plan obligated club members to pay regular dues as well as fees and charges to use particular facilities or services based on actual use or consumption (e.g., cart and caddie fees and food and beverage charges). The membership agreement also provided that members would be entitled to a return of the membership deposit paid within 30 days after recall of the membership by the club.

Under the membership plan, a member could provide written notice to the club of his or her desire to resign. However, the member remained obligated to pay dues, fees and other charges until the membership was reissued. The member would be placed on a resignation waiting list until there was an interested buyer. As long as the club had unissued memberships in a particular category, every fifth membership issued in that category would come from the resignation waiting list.

The plaintiffs notified the club of their desire to resign and went on the waiting list. In the meantime, they continued to use the club facilities and pay dues, fees, and other charges as had always been the club’s practice. The resignation waiting list was lengthy, and it could take 10 years or more to reach the top of the list.

In 2012, Jupiter Golf Club, LLC d/b/a Trump National Golf Club Jupiter (Trump Golf) purchased the club and sought to make numerous changes in an effort to turn around the struggling club. In December 2012, Trump Golf sent a letter to all members on the resignation waiting list. They were given until the end of the month to select one of three options: opt-in, opt-out, or remain on the resignation waiting list.

Members who opted in were given reduced club dues for three years and reciprocal use rights in other Trump-owned clubs in exchange for forfeiting their rights to membership deposit refunds. Members who opted out kept their refund rights, but they could not remain on the resignation waiting list and would pay the regular dues, with no cap on dues increases.

The plaintiffs chose to remain on the resignation waiting list. Trump Golf’s letter clearly indicated that the members who chose to remain on the resignation waiting list would be “out”; Trump Golf did not want members on the list to use the club and did not want their dues. Beginning January 1, 2013, the plaintiffs were denied access to the club.

However, in February 2013, Trump Golf charged the plaintiffs dues, even though they were still denied club access. The plaintiffs filed a class action lawsuit against Trump Golf on behalf of themselves and 65 other members on the resignation waiting list (class members).

The membership plan clearly provided that a member on the resignation waiting list must continue to pay dues, fees, and other charges until the membership was reissued, but it did not have specific provisions dealing with use rights during this period.

The court determined that the intent was for members on the resignation waiting list to retain active memberships affording them continued club access. Since fees and charges were based on actual use and consumption, a member’s obligation to continue to pay such fees and charges must mean that the member had use rights. It would be impossible to incur fees and charges if the member was prohibited from using the club.

Moreover, prior to Trump Golf buying the club, the club had always allowed members on the resignation waiting list to use the club facilities so long as their accounts remained current. Courts can give considerable weight to the parties’ long standing interpretation of a contract’s terms.

The membership agreement expressly allowed the club, in its discretion, to recall memberships at any time for any reason. The court found that Trump Golf consistently and clearly delivered the message that those members who chose to remain on the resignation list would no longer be club members. The court ruled that, when Trump Golf cut off the class members’ access rights, it effectively recalled the class members’ memberships.

Under the membership agreement’s terms, the class members were entitled to refunds of their membership deposits by January 30, 2013. Since Trump Golf refused to issue any refunds, Trump Golf materially breached the membership agreements. Trump Golf was ordered to pay the class members refunds totaling $4,849,000 plus $925,010 in prejudgment interest.

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

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Golf Community’s Development Scheme Creates Rights in Association

Canewood Homeowners Association, Inc. v. Wilshire Investment Properties, LLC, No. 2015-CA-001779-MR (Ky. Ct. App. Feb. 10, 2017)

Covenants Enforcement; Use Restrictions: The Court of Appeals of Kentucky held that an association had a right to enforce clubhouse use restrictions based on the residential golfing community’s original development scheme, even though the association was not a party to the restrictions.


In 1994, Canewood LLC (developer) created the Canewood Subdivision in Scott County, Ken. The developer recorded a declaration of covenants, conditions, restrictions, reservations and easements (declaration) and established Canewood Homeowners Association, Inc. (association). The declaration made provisions for the use, enjoyment, and maintenance of the golf course and other common areas. The “golf course” was defined as including a clubhouse, pool, and other recreational facilities constructed for the lot owners’ common use and enjoyment.

In December 2007, the developer carved out a clubhouse lot from the larger golf course tract adjacent to the golf course and pool facilities. The developer recorded a declaration of reciprocal easements and restrictions (restrictions) that integrated use of the clubhouse lot with the golf and pool facilities. The restrictions limited the clubhouse lot to use as a restaurant and gave the developer, the association, and the clubhouse lot owner the right to enforce the restrictions.

That same day, the developer conveyed the clubhouse lot to Wilshire Investment Properties, LLC (Wilshire), who intended to operate a restaurant in the clubhouse. The developer retained ownership of the remaining golf course tract and the pool facilities.

In January 2014, the developer leased the golf course to the association for five years. A few weeks later, the developer conveyed additional property to Wilshire to expand the clubhouse lot.

At the same time, Wilshire and the developer executed amended restrictions, which expanded the permitted uses of the clubhouse lot to include retail, bed and breakfast, tourist or historic attraction, office, and residential. The amended restrictions also removed the association’s right to enforce the restrictions. The association did not join in executing the amended restrictions.

The developer also conveyed the pool and pool facility property (lot 1) to the association. The deed provided that the property was subject to the amended restrictions.

In May 2014, the association sent Wilshire notice that it believed a landscaping business was being operated on the clubhouse lot in violation of the amended restrictions. In July 2014, the association filed suit against Wilshire and others related to Wilshire or the landscaping business (collectively, defendants) for violating the amended restrictions.

The defendants moved for summary judgment on the pleadings (judgment without a trial based on undisputed facts). The defendants asserted that the original restrictions were rescinded by the amended restrictions, the association had no authority to enforce the amended restrictions, and the association ratified the amended restrictions by accepting the deed to the pool and lot 1, which referenced the amended restrictions.

The trial court agreed with the defendants and granted judgment on the pleadings in the defendants’ favor. The association appealed.

The appeals court found the trial court’s interpretation of the pool deed overly broad and erroneous. The deed provided that the association agreed to accept lot 1 and use it in compliance with the amended restrictions. The appeals court determined that such language only bound the association with respect to lot 1. It did not mean that the association agreed to accept the amended restrictions as to any other lot or that it was a party to the amended restrictions.

The appeals court further held that the association did not surrender its rights under the restrictions. The appeals court found that to conclude otherwise would undermine the original scheme of development to promote a residential subdivision in conjunction with a golf course. It found that the development’s entire focus was to be a residential golfing community.

In addition, since the golf course was leased to the association at the time the amended restrictions were executed, the appeals court found that the development scheme provided for the association to retain the right to enforce the clubhouse use restrictions. Accordingly, the appeals court reversed the trial court’s judgment and remanded the case for further proceedings.

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

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Person Not Obligated for Debt Not Protected by Fair Debt Collection Practices Act

Hill v. Bayside Woods HOA, Inc., No. 1:16-cv-00916-JMS-DKL (S.D. Ind. Feb. 9, 2017)

Federal Law and Legislation: The U.S. District Court for the Southern District of Indiana held that a unit occupant who paid the unit’s assessments to the association was not a consumer protected by the Fair Debt Collection Practices Act, and the occupant could not complain about problems with the online payment system since other payment methods were available.


Bayside Woods HOA, Inc. (association) governed a condominium in Carmel, Ind. In March 2012, Robert Ritter purchased a unit in the condominium.

In April 2012, the association sent Ritter notice that the unit’s siding had been damaged by a barbeque grill on the patio, and it was the owner’s responsibility to repair the damage. Ritter’s daughter, Kristin Hill, informed the association that no one was living in the unit, the grill had been left by the prior owner, and they had never used the grill. She asserted that they were not responsible for the damage since they did not cause it.

In May 2012, Hill moved into the unit. By September, Hill discovered that the damage had been repaired. In October, the association sent Ritter an invoice for $355.48 to cover the repair cost.

Over the next few months, Hill continued to dispute the charge, but the association did not waiver from its original position. The association’s manager sent numerous delinquent account notices to Ritter.

Over the next two years, Hill paid the $185 monthly assessment by depositing a money order in the manager’s office deposit box in Carmel, but she did not pay the repair charge. By late 2014, other payment methods were available to owners. They could pay through an online portal operated by PayLease Web (PayLease) or by mailing payment to an Arizona address.

From December 2014 until March 2015, Hill paid the monthly assessment online, but still did not pay the repair charge. Twice in April 2015, Hill attempted to pay only the monthly amount online, but she claimed that the computer automatically took the entire amount of the unit account balance from her bank account without giving her the opportunity to confirm the payment. Hill was able to dispute the charge with her bank.

In March 2016, the association’s attorney sent Ritter notice that the association intended to file a lawsuit unless the entire account balance was paid. Hill notified the attorney that she disputed various charges shown in the account statement and requested proof of the debt in accordance with the federal Fair Debt Collection Practices Act (act). The attorney informed Hill that he could only communicate with Hill’s brother since she was not the unit owner, and the association had been informed that the brother held power of attorney over Ritter.

In April 2016, Hill sued the association, the attorney, the manager, and PayLease. The manager and PayLease filed motions to dismiss the claims against them. The manager asserted that it never tried to collect any debt from Hill, and all fees were charged only to Ritter. Hill responded that she had implied authority to act on Ritter’s behalf because she was the only one living in the unit, she received a lot of letters from the manager, and she made the payments.

Each of the act’s provisions has to be analyzed to determine who falls within the scope of that provision’s protection. The act is designed to protect consumers from debt collection abuses. “Consumer” is defined as a person obligated or allegedly obligated to pay a debt. The act’s protection generally does not extend beyond the consumer to third parties who might have a consequential role in the debt-collection process. The court determined that Hill could not sue the manager for the alleged collection violations because there was no dispute that Hill was not the consumer.

Hill also asserted act violations against the manager and PayLease based on her attempts to pay less than the full account balance online. PayLease maintained that it was not subject to the act because it was not a debt collector; it simply provided a method for making online payments. PayLease emphasized that Hill voluntarily used its online portal even though other payment methods were available to her.

The act prohibits a debt collector from using unfair or unconscionable means to collect or attempt to collect a debt. Anyone aggrieved by the unfair practices can sue for his or her own injuries, even if he or she is not the consumer from whom the debt collector sought to collect. Since Hill was the one who made the payments through PayLease’s website, she had standing to sue PayLease for its unfair practices. However, the court found nothing unfair about PayLease’s practices since Hill had other payment options where she could control the exact amount of the payment.

Accordingly, the court dismissed all claims against the manager and PayLease.

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

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Association’s Foreclosure of Super-Lien Does Not Violate Due Process

Saticoy Bay LLC Series 350 Durango 104 v. Wells Fargo Home Mortgage, No. 68630 (Nev. Jan. 26, 2017)

Federal Law and Legislation; State and Local Legislation and Regulations: In contrast to a recent ruling by the Ninth Circuit Court of Appeals, the Nevada Supreme Court held that an association’s nonjudicial foreclosure under the Nevada Uniform Common-Interest Ownership Act without actual notice to the mortgagee did not implicate due process concerns or a taking.


Roy and Shirley Senholtz granted Wells Fargo Bank, N.A. (Wells Fargo) a deed of trust (mortgage) on their home in a planned community in Summerlin, Nevada to secure an $81,370 loan. The Senholtzes failed to pay the mortgage as well as assessments due to the community’s homeowners association (association). Both the association and Wells Fargo recorded notices of default and election to sell.

The association conducted a nonjudicial foreclosure sale and sold the property to Saticoy Bay LLC Series 350 Durango 104 (Saticoy Bay) for $6,900. Saticoy Bay then sued Wells Fargo to prevent Wells Fargo from foreclosing on the property. Saticoy Bay asserted that it owned the property free and clear of the mortgage and other liens.

Wells Fargo moved to dismiss, arguing that the Nevada Uniform Common-Interest Ownership Act’s (UCIOA) foreclosure procedures violated the Due Process Clause and the Takings Clause of both the United States and Nevada Constitutions. The trial court agreed with Wells Fargo and dismissed the case. Saticoy Bay appealed.

UCIOA established an association lien that takes priority over the mortgage. UCIOA required an association to send a notice of default and election to sell to each security interest holder who had notified the association of its security interest at least 30 days prior to the default notice being recorded. Wells Fargo argued that such an “opt-in” notice scheme was unconstitutional because it did not require an association to give a first mortgagee actual notice of a foreclosure that would extinguish the mortgagee’s security interest.

Saticoy Bay argued that the association’s foreclosure did not violate due process because no state actor participated in the foreclosure. The Due Process Clause protects individuals from state actions that deprive them of life, liberty, or property without due process of law.

The U.S. Supreme Court established a two-part test for determining whether the deprivation of a property interest is the result of state action: (1) the deprivation must have been caused by the exercise of some right or privilege created by the state; and (2) the party causing the deprivation must be a state actor.

The Nevada Supreme Court agreed that the first part of the test was satisfied because the state created the association’s super-priority lien as well as its right to conduct a nonjudicial foreclosure through UCIOA’s enactment. Also, Wells Fargo’s security interest was extinguished because the association exercised its statutory right to conduct a nonjudicial foreclosure.

However, the Nevada Supreme Court did not agree that the association constituted a state actor when it conducted the foreclosure. In a foreclosure case unrelated to homeowners associations, the U.S. Supreme Court had previously held that, although the state had enacted the foreclosure statute, due process was not implicated because the state did not compel the sale, and the state was not otherwise involved in the sale.

The Nevada Supreme Court found that, while UCIOA established a super-priority lien, it did not mandate that the association foreclose its lien. UCIOA made foreclosure permissible and further provided that an association was not prohibited from suing to collect the unpaid assessments or from accepting a deed in lieu of foreclosure. Accordingly, the Nevada Supreme Court held that due process was not implicated.

The Nevada Supreme Court acknowledged that the Ninth Circuit Court of Appeals had recently drawn the opposite conclusion in Bourne Valley Court Tr. v. Wells Fargo Bank, N.A., 832 F.3d 1154 (9th Cir. 2016) [October 2016 Law Reporter]. However, the Nevada Supreme Court stated that it declined to follow the federal court’s holding.

Wells Fargo further argued that UCIOA effectuated a governmental taking without compensation since it allowed the association to destroy Wells Fargo’s property interest. The Takings Clause prohibits the state from taking private property for public use without just compensation. The U.S. Supreme Court has found there are two ways in which a state may effectuate a taking: (1) through a “direct government appropriation or physical invasion of private property”; or (2) by adopting a regulation that is “so onerous that its effect is tantamount to a direct appropriation or ouster.”

The Nevada Supreme Court found that the state neither directly appropriated Wells Fargo’s mortgage nor directly appropriated the property subject to the mortgage, so the first type of taking was not implicated. For the second type of taking, the U.S. Supreme Court established several factors to consider—the economic impact on the property owner, interference with investment-backed expectations, and the character of the government action.

The Nevada Supreme Court determined that UCIOA did not interfere with any legitimate investment-backed expectation because Wells Fargo acquired its security interest more than 10 years after UCIOA’s adoption and nine years after the community covenants, conditions, and restrictions were recorded. Therefore, Wells Fargo was on notice that its security interest might become subordinate to a super-priority lien if the owner failed to pay the association. Moreover, the state did not participate in the association’s nonjudicial foreclosure. Accordingly, the Nevada Supreme Court held that the Takings Clause was not implicated.

The trial court’s order dismissing Saticoy Bay’s claim was reversed and the case remanded for further proceedings.

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

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Federal and State Courts at Odds Over Constitutionality of Foreclosure Requirements

Bank of America, N.A. v. Sonrisa Homeowners Association, No. 2:16-CV-848 JCM (D. Nev. Feb. 15, 2017)

Federal Law and Legislation; State and Local Legislation and Regulations: The U.S. District Court for the District of Nevada held that the Nevada Uniform Common-Interest Ownership Act’s foreclosure provisions violated the U.S. Constitution’s due process requirement, in direct contravention with a Nevada Supreme Court’s recent ruling.


Sonrisa Homeowners Association (association) governed a community in Henderson, Nev. In 2010, Rick and Jennifer Watkins borrowed $152,192 to purchase a unit. In April 2012, Bank of America, N.A. (bank) acquired the mortgage on the unit securing the loan’s repayment.

The Watkins failed to pay assessments to the association. In October 2012, the association recorded a notice of delinquent assessment for the unit. In January 2013, the association recorded a notice of default and election to sell, stating an amount due of $2,765.

In April 2013, the bank calculated $1,125 as the amount it believed to be the super-priority portion of the lien (equal to nine months’ assessments) and paid this amount to the association. In August 2013, the association recorded a notice of trustee’s sale, stating an amount due of $4,443. The trustee’s sale was held in September 2013, and SFR Investments Pool 1, LLC (SFR) purchased the unit at the sale for $18,000.

In April 2016, the bank sued the association and SFR for wrongful foreclosure, breach of the good faith obligation under the Nevada Uniform Common-Interest Ownership Act (UCIOA), quiet title (definitively establishing property ownership), and injunctive relief (order compelling a party to take action or refrain from taking action).

The association moved to dismiss the case, arguing that the bank failed to complete mediation as UCIOA required. The bank argued that it satisfied UCIOA’s requirement because it submitted a mediation demand to the Real Estate Division of the Nevada Department of Business and Industry (NRED), but NRED failed to schedule the mediation within the required time frame.

UCIOA requires that mediation be completed within 60 days after a written claim is filed. However, UCIOA does not provide that failing to appoint a mediator within 60 days satisfies statutory requirements. The court determined that UCIOA requires that the parties actually participate in mediation.

The court dismissed the wrongful disclosure, breach of good faith and injunctive relief claims, holding that these claims had to be mediated before suit could be filed. However, UCIOA exempts the bank’s quiet title claim from the mediation requirement, so the court denied the association’s motion to dismiss with respect to this claim.

SFR moved to stay (suspend) the case, arguing that the Nevada Supreme Court’s decision in Saticoy Bay LLC Series 350 Durango 104 v. Wells Fargo Home Mortgage, No. 68630 (Nev. Jan. 26, 2017) [reported elsewhere in this Law Reporter issue] created a split between the state and federal courts’ rulings on the constitutionality of UCIOA’s foreclosure provisions.

A state court’s interpretation of the state’s statutes is binding on the federal courts unless the state law is inconsistent with the U.S. Constitution. However, the Ninth Circuit Court of Appeals already determined in Bourne Valley Court Trust v. Wells Fargo Bank, N.A., 832 F.3d 1154 (9th Cir. 2016) [October 2016 Law Reporter] that Nevada’s foreclosure provisions were unconstitutional. The association also agreed for all issues to be stayed except determining Bourne Valley’s effect.

The court elected to follow federal precedent rather than state precedent on this issue, and it found no need to stay the case awaiting further judicial analysis of the issue. Accordingly, the parties’ requests for a stay were denied.

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

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Owner Charged for Insurance Deductible for Fire Originating in Unit

Gelinas v. The Barry Quadrangle Condominium Association, No. 1-16-0826 (Ill. App. Ct. Feb. 14, 2017)

Risks and Liabilities; State and Local Legislation and Regulations: The Appellate Court of Illinois held that, under the Illinois Condominium Property Act, an association could assess an owner for the insurance deductible for a fire originating in the owner’s unit under the Illinois Condominium Property Act, even though the association’s bylaws had a different method for allocating damage costs.


The Barry Quadrangle Condominium Association (association) governed a condominium in Chicago, Ill. In June 2012, a fire originated in a unit owned by Matthew Gelinas. The fire damaged some of the building’s structure and common areas.

The association filed a claim with its insurance company, which paid the claim less the $10,000 deductible. In September 2013, the association notified Gelinas that he was being charged $10,000 to reimburse the association for the deductible. Gelinas requested a hearing to contest the charge. The hearing was held, but the association did not change its position about Gelinas’ responsibility for the deductible.

In February 2014, Gelinas paid $10,000 to the association, but then he filed suit against the association the following month. Gelinas alleged that the insurer estimated the claim’s value as $202,000 and tendered $192,000 to the association (the full claim amount minus the deductible). Gelinas further alleged that the repairs cost only $152,000, which resulted in a $40,000 windfall to the association. Thus, Gelinas asserted he should not be responsible for reimbursing the association for the deductible since it was not actually out-of-pocket any money.

The association responded that it had actually incurred $371,815 for the repairs, of which the insurer had paid $369,279. So, the association was out-of-pocket not only the deductible amount but also the repair amount not paid by insurance. The association further asserted that it was allowed to charge Gelinas the deductible under the Illinois Condominium Property Act (act).

The act provided that, when an association files an insurance claim for damage to a unit or the common elements, the board may: (1) pay the deductible as a common expense; (2) after notice and an opportunity for a hearing, charge the deductible to the owner who caused the damage or from whose unit the damage or cause of loss originated; or (3) require the owners of the affected units to pay the deductible.

The association moved to dismiss the case. The trial court granted the motion, finding that the association properly charged Gelinas the deductible in accordance with the act. Gelinas appealed.

Gelinas argued that the association had adopted a different charge-back method than allowed by the act, so it could not take advantage of the act’s insurance deductible provisions. The association’s bylaws provided that, if damage is caused to the common elements or units owned by others due to an owner’s act or neglect, then such owner shall pay for the damage, to the extent not covered by insurance.

Gelinas maintained the association had confused “covered” with “indemnified,” explaining that the fact that the association was not indemnified by the insurer for the full amount of the loss did not mean that the risk was not covered. Gelinas asserted that the loss was covered by the association’s insurance, so the association could not charge the deductible to him based on the bylaws.

The association urged the court not to limit the word “covered” only to the meaning used in insurance industry vernacular. The association claimed that it spent more than $10,000 related to the fire in the form of the deductible plus amounts not reimbursed by insurance and that such amounts were not “covered” by insurance since they were still out-of-pocket those amounts.

The appeals court agreed with the association, finding that Gelinas’ argument was contrary to common sense.

Gelinas further argued that the act’s use of the term “may” meant that the association had to adopt the statutory language before it could use the statutory deductible allocation method. The association maintained that the word “may” meant that the association could choose one of the act’s methods for handling the deductible, but it was not required to exercise such authority. The appeals court agreed, finding that the association’s argument reflected the act’s plain meaning.

The appeals court also determined that the bylaws provision meant that amounts not paid for by insurance could be charged to an owner, and it was abundantly clear that insurance did not pay for the deductible. In the insurance industry, the deductible is always the insured’s responsibility.

Accordingly, the appeals court affirmed the trial court’s dismissal of the case.

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

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Actual Foreclosure Notice Cures UCIOA’s Constitutional Defect

Nationstar Mortgage, LLC v. Berezovsky, No. 2:15-CV-909 JCM (D. Nev. Feb. 13, 2017)

State and Local Legislation and Regulations: The U.S. District Court for the District of Nevada held that actual notice to a mortgagee of an association’s scheduled foreclosure of its superpriority lien cured any constitutional defect in the Nevada Uniform Common-Interest Ownership Act’s foreclosure provisions.


Tanglewood Homeowners Association (association) governed a community in Las Vegas, Nev. Gayle Ann and Curtis Barschdorf obtained a $230,800 loan from Countrywide Bank, N.A. (Countrywide) to purchase a home in the community. The loan was secured by a mortgage which named Mortgage Electronic Registration Systems, Inc. (MERS) as Countrywide’s nominee-beneficiary.

The Barschdorfs became delinquent to the association, and the association recorded a lien against the home in 2010. In February 2013, the mortgage was assigned to Nationstar Mortgage, LLC (Nationstar), but the assignment was not recorded until April 2013.

In March 2013, the association recorded a notice of default and election to sell, stating an amount due of $2,933. The association mailed copies of the default notice to the Barschdorfs, MERS, and Countrywide. In May 2013, Nationstar recorded a notice of default and election to sell for nonpayment of the mortgage, stating that the Barschdorfs owed $268,170.

In August 2013, the association sent notice of its scheduled foreclosure sale to the Barschdorfs, MERS, Countrywide, and Nationstar. The notice stated an amount due of $4,112. The foreclosure sale took place in October 2013, and Alex Berezovsky purchased the unit for $5,100.

In May 2015, Nationstar sued Berezovsky and the association for quiet title (definitively establishing property ownership), unjust enrichment (request for restitution of money or benefits received by defendant from plaintiff), and injunctive relief (requiring a party to take action or refrain from taking action).

Nationstar asserted that the foreclosure sale violated the Nevada Uniform Common-Interest Ownership Act (UCIOA) and was commercially unreasonable and that UCIOA’s foreclosure provisions violated the U.S. Constitution’s procedural due process requirements. All parties sought summary judgment (judgment without a trial based on undisputed facts).

Nationstar asserted that the association was not allowed to proceed with foreclosure after Nationstar recorded its default notice. UCIOA provides that an association may not foreclose its lien if the association has received notice that the unit is subject to foreclosure mediation unless a mediation certificate is recorded. The association responded that, when this UCIOA provision was enacted, the legislative act stated that the provision applied only to notices of default and election to sell recorded on or after October 1, 2013. However, when the legislative act was incorporated into UCIOA and published in the Nevada Revised Statutes (codified), the codified version left out the effective date.

The court agreed that there was a difference between the legislative act and the codified version and that the omission changed the provision’s effect. The court also determined that the legislative act controlled over what was published in Nevada Revised Statutes. Thus, since Nationstar recorded its notice of default prior to October 1, 2013, Nationstar was not entitled to the statute’s protection.

Nationstar argued that the foreclosure sale was commercially unreasonable. The Nevada Supreme Court previously held that a foreclosure sale may be set aside where there is (1) a grossly inadequate sales price, and (2) fraud, oppression, or unfairness. The general rule for determining grossly inadequate sale price is 20 percent of fair market value.

Berezovsky paid $5,100 for the unit, which was about 4 percent of Nationstar’s appraised value for the unit of $126,500. Nationstar further maintained that the timing of the foreclosure sale, days after the statute’s effective date, demonstrated unfairness. The court disagreed.

The legislative act was adopted on June 12th but did not become effective until October 1st. While Nationstar had only eight days between the statute’s effective date and the association’s foreclosure to take action, the court determined that Nationstar had ample time after the statute’s enactment to understand the change in the law and prepare accordingly. Plus, Nationstar had notice since August of the association’s scheduled October foreclosure.

Nationstar argued that Berezovsky was not a bona fide purchaser since he had notice of Nationstar’s competing interest at the time of the foreclosure sale. The court agreed with Nationstar on this point, finding that it created a material fact dispute that precluded granting summary judgment.

Nationstar further urged that the foreclosure sale should be voided since UCIOA’s provisions allowing an association to foreclosure without giving actual notice to the mortgagee has been found by the federal courts to be unconstitutional (see Bourne Valley Court Trust v. Wells Fargo Bank, N.A., 832 F.3d 1154 (9th Cir. 2016). [October 2016 Law Reporter] However, the court held that Nationstar’s receipt of actual notice of the association’s scheduled foreclosure sale cured any constitutional defect in UCIOA’s procedures.

Accordingly, the court granted summary judgment to the association related to compliance with UCIOA’s prerequisites for a foreclosure sale, but the court denied summary judgment with respect to the remaining claims.

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

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Association Not Entitled to Attorney’s Fees in Collection Action

Blackstone Condominium Association v. Speights-Carnegie, No. 1-15-3615 (Ill. App. Ct. Feb. 3, 2017)

State and Local Legislation and Regulations: The Appellate Court of Illinois held that the Illinois Condominium Property Act did not provide a right to recover attorney’s fees in a collection action by an association against an owner.


Blackstone Condominium Association (association) governed a condominium in Chicago, Ill. Maya Speights-Carnegie owned a unit in the condominium.

In October 2011, the association filed a forcible entry and detainer action against Speights-Carnegie after she became delinquent with assessments. The trial court granted an order for possession to the association.

However, while the case was pending, the mortgage holder foreclosed on the unit. The association decided not to continue with the forcible entry case since Speights-Carnegie had moved out of the unit.

In April 2014, the association sued Speights-Carnegie to collect the assessments that were due between February 2010 and January 2012. The association alleged that Speights-Carnegie owed $6,396 plus attorney’s fees and costs in accordance with the Illinois Condominium Property Act (act). The trial court awarded the association $2,913 for unpaid assessments.

The association then filed a petition for attorney’s fees. The trial court determined that the association had to produce a condominium declaration or a written contract establishing a right to recover attorney’s fees. The association did not have any documents establishing such right in writing, so the trial court denied the association’s request. The association appealed.

The association argued that the act established a right to recover attorney’s fees. The act provides that, attorney’s fees for pursuing an owner’s default would be considered part of the owner’s share of the common expenses.

However, the act does not explicitly indicate how the association is to recover these amounts. The act indicates that delinquent amounts become a lien on the unit, which may be foreclosed upon by the association. The act also provides that the association may pursue a forcible entry and detainer action. However, the act does not clearly provide for attorney’s fees in a suit for money damages only.

Since the association abandoned its forcible entry and detainer case and instead pursued only the breach of contract claim, the appeals court held that the act provided no right to recover attorney’s fees. Accordingly, the appeals court affirmed the trial court’s denial of the association’s attorney’s fee petition.

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