June 2017
In This Issue:
Recent Cases in Community Association Law
Quorum Requirement Waived by Continued Practice
Association Attempt to Reduce Allocated Votes Held Invalid
Challenge to Amendment Not Barred by Statute of Limitations
Imprecise Drafting and Document Approval Creates Confusion
Architectural Committee Qualified as Property Owners’ Association
Association Ban on Short-Term Rentals Upheld
Association Can Deny Records Access to Member with an Improper Purpose
Foreclosed Unit Buyer Can Extinguish Pre-Foreclosure Assessment Liens
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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 illustrations 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.


Quorum Requirement Waived by Continued Practice

Williams v. Randall, No. 115,586 (Kan. Ct. App. Apr. 14, 2017)

Association Operations: The Kansas Court of Appeals held that association members waived the quorum requirement by continually disregarding it and acquiescing in the association’s operations.


Bob and Barbara Williams owned a home in a community in Cowley County, Kan., governed by The Cherokee Strip Homeowners Association (association). The association’s bylaws required the presence of one-half of the members to establish a quorum at association meetings. For years, the association regularly held meetings and conducted elections and other business without a quorum.

There was also a misunderstanding about how the quorum was calculated. The association had always allowed absentee ballots to count towards the quorum, and there was confusion about whether a quorum was based on lots or people.

The association continued these practices at its meeting in May 2013 at which 12 of the 40 members were present. No proxies were submitted, and neither Bob nor Barbara Williams attended the meeting. No one at the meeting objected to the lack of a quorum.

The association proceeded with an election, and 20 ballots were cast, including seven anonymous absentee ballots. There was no mechanism in place to determine whether more than one ballot was cast for a lot, even though the bylaws allocated only one vote per lot.

Several days later after the May meeting, Williams objected to the lack of a quorum and requested that the association deem the meeting invalid. After consulting an attorney, the newly elected board adopted the position that the meeting was valid.

The board also met in May and set the annual assessment with a June 1 due date. If not paid by July 1, interest would apply. For more than 30 years, the Williams had paid their assessments by making small payments throughout the year rather than a lump sum payment, and this was permitted by the board. When Williams did not pay by July 1, the association applied interest.

Its dealings with Williams prompted the board to propose changes to the bylaws and the community’s declaration of covenants (declaration), including reducing the quorum requirement and amending assessment provisions. The bylaws could be amended at an association meeting by a vote of two-thirds of the members. At a March 2014 meeting, the board determined that the bylaws amendment had passed, although it did not actually receive the vote of two-thirds of the members. The board signed and recorded the bylaws amendment.

A declaration amendment required that 75 percent of the members sign the amendment. The members voted on the amendment at a meeting in April 2014. The board signed and recorded the amendment, but it was not signed by 75 percent of the members.

New directors were elected at an annual meeting in May 2014. Only 13 members were present, and the Williams did not attend. No one objected to the lack of a quorum.

The 2014 assessment was due in August 2014. Williams paid the assessment the following month, but the secretary notified him that he still owed interest. The Williams sued the association, asserting that all board actions taken at and following the May 2013 meeting were void because the board was not properly elected and that the bylaws and declaration amendments were void because the requisite approvals were not obtained. They also asked the court to direct how a quorum was to be calculated for future meetings.

The trial court held that the amendments were void and that a quorum must be established by the physical presence of or proxy by one-half of the members. Absentee ballots could not be counted toward a quorum, although they could be used for voting under the Kansas Uniform Common Interest Owners Bill of Rights Act (act).

However, the trial court did not invalidate the elections or board actions. It found that the Williams had waived their objections to the lack of a quorum by not attending the meetings. It determined that no one had properly followed the association’s documents for years, and both sides were at fault for the “mess.” Therefore, the trial court declined to award attorney’s fees to either side. The Williams appealed.

Bylaws are an agreement between the corporation and its members to conduct business in a particular way. However, they may be waived by a continued disregard by the members for whose benefit the bylaws were enacted. Bylaws may also be amended informally by continued conduct inconsistent with the bylaws. Further, a party acquiescing in a corporate act for an unreasonable length of time is barred from complaining about the act.

The appeals court held that both sides waived the quorum requirement by continually disregarding the requirement. The Williams also acquiesced to such practice for an extended time.

Although there was rarely a quorum, the association proceeded with elections, established and collected assessments, and conducted other business. Absentee ballots had also been counted toward the quorum for the association’s entire history. Thus, the Williams had notice that meetings could proceed and elections held without a quorum. In fact, Barbara Williams served on the board for several years.

Further, the amendment problems could have been resolved without litigation. The act gives members the right to sue and the court the discretion to award attorney’s fees, but attorney’s fees are not mandatory. Given Williams’ participation in disregarding the quorum requirement and the failure to bring the amendment problems to the board’s attention before filing suit, the appeals court found no error in the trial court’s refusal to award the Williams attorney’s fees.

The trial court’s judgment was affirmed.

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Association Attempt to Reduce Allocated Votes Held Invalid

Serota v. London Towne Homeowners Association, No. 2073 C.D. 2016 (Pa. Commw. Ct. Apr. 27, 2017)

Documents:The Commonwealth Court of Pennsylvania held that an association could not diminish its members’ voting rights without the unanimous consent of the members affected.


London-Towne Homeowners Association (association) governed a community of 70 townhouses in Allegheny County, Pa. Matthew Serota owned 12 units in the community.

The declaration of covenants, conditions, and restrictions (declaration) governing the community provided that each owner was entitled to one vote for each unit owned. The bylaws further provided that each unit was entitled to a single vote.

In August 2014, the association amended the declaration to provide for one vote per owner. Consents to the amendment were signed by 53 of the 59 owners. Serota did not consent since the amendment would reduce his voting strength from 12 out of 70 votes to 1 out of 59 votes.

At the next association meeting, the association refused to allow Serota to cast more than one vote. Serota sued the association, asserting that the amendment was invalid for various reasons, including that it was not unanimously adopted by the owners as required by the Pennsylvania Uniform Planned Community Act (act). The association answered that the act did not apply since the community was created before the act’s effective date.

The trial court determined the amendment was invalid and ordered the association to remove it from the association’s books and the county’s records. The trial court concluded that Serota had obtained a property and/or contractual right to one vote for each unit through the declaration in effect when Serota purchased, and the association could not diminish that right without Serota’s consent. The association appealed.

The association argued that the act could not invalidate existing provisions in the declaration, which allowed the declaration to be amended with a vote of 75 percent of the owners. The act provides that its amendment provisions apply to all planned communities created prior to the act’s enactment, but it does not invalidate specific provisions contained in an existing declaration or bylaws. However, the appeals court held that the result of that amendment must be authorized by the act or some other law existing before the act was enacted.

The act provides that no amendment may change the voting allocation without the unanimous consent of all unit owners affected. The amendment clearly changed Serota’s voting strength, so it was not authorized by the act. The appeals court then examined whether other law existing before the act would authorize the amendment.

The association argued that the Pennsylvania Nonprofit Corporation Law in effect when the act was adopted empowered a corporation to modify its articles of incorporation as desired. However, the Pennsylvania Supreme Court previously held that an amendment to a corporation’s governing documents could not diminish the property or contractual rights that a member acquired under previous governing documents without the member’s consent. The association asserted that voting rights were an internal governance matter and did not involve the financial interest with which prior case law was concerned.

Corporate governing document provisions are generally divided into two categories. Regulations governing the corporation’s internal affairs may be repealed, altered, or amended by a majority member vote, unless the document or a statute requires a greater vote. However, provisions that vest property rights in the members are contractual and cannot be repealed or changed unless the parties whose rights are affected consent.

The appeals court held that voting rights are a member’s basic and fundamental right and fall into the latter category. In addition, the declaration and bylaws’ one-vote-per-unit provisions ran with the land and bound all owners and their successors and assigns. Moreover, Serota was still obligated to pay assessments for 12 units. Changes in his proportional vote regarding association financial decisions certainly impacted Serota’s financial interests.

Accordingly, the appeals court held that the amendment was invalid, and the trial court’s judgment was affirmed.

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Challenge to Amendment Not Barred by Statute of Limitations

QRK, LLC v. Kenilworth Court Residents Association, Inc., No. 592 C.D. 2016 (Pa. Commw. Ct. Apr. 19, 2017)

Documents; State and Local Legislation and Regulations: The Commonwealth Court of Pennsylvania held that the Pennsylvania Uniform Planned Community Act did not bar a challenge to a declaration amendment because the amendment ran with the land and the amendment would detrimentally affect the owner’s rights.


Kenilworth Court Residents Association, Inc. (association) governed a community of 59 townhouses in East Petersburg, Pa. The project was subject to a declaration of covenants, conditions and restrictions (declaration). Margery Dana, Michael Glass, and Dana Glass (collectively, the Dana Glass Family) owned and rented 18 units in the community.

In 2011, the association amended the declaration to prohibit a single owner from owning more than two units. The amendment also authorized the association to terminate ownership rights and force a judicial sale of the unit(s) belonging to an owner that was in “egregious, continuous, and frequent” violation of the declaration.

In June 2013, the Dana Glass Family sued the association, seeking to invalidate the amendment. The association moved for summary judgment (judgment without a trial based on undisputed facts), asserting that the Pennsylvania Uniform Planned Community Act (act) required a challenge to a declaration amendment to be made within a year.

The trial court held the suit was not barred by the one-year statute of limitations since the Dana Glass Family did not consent to the amendment. The act provides that amendments may not restrict how a unit is used unless all owners who are affected agree. The association argued that the Dana Glass Family could not vote on the amendment since its voting rights were suspended for delinquent assessments.

While the case was pending, the Dana Glass Family defaulted on its mortgage, and its lender foreclosed on the 18 units. In 2015, the lender assigned its interest in the mortgage to QRK, LLC (QRK). QRK also purchased the 18 units at the foreclosure sale.

Several months later, the Dana Glass Family assigned its claims against the association and rights in the lawsuit to QRK. QRK sold two of the units, but retained the remaining 16. Based on the assignment, the trial court approved the substitution of QRK for the Dana Glass Family in the case.

The association moved for summary judgment a second time, claiming that QRK lacked standing to pursue the claims and that the case was moot. The association asserted that the Dana Glass Family lost standing upon foreclosure since it was no longer aggrieved by the amendment and had no interest to assign to QRK once its association membership was terminated. It further argued that QRK was bound by the amendment since it was not an association member when the amendment was adopted, but had notice of the amendment before purchasing.

The trial court granted the association’s motion and dismissed the case. QRK appealed.

The appeals court held that the amendment affected and adhered to the property, not just the owner, since it ran with the land. QRK had standing to challenge the amendment since its rights would be substantially affected by the amendment. If left unchallenged, the amendment would require QRK to sell 14 of its 16 units.

The appeals court also held that QRK did not consent to the amendment when it purchased the units. Since it purchased while the litigation was ongoing, it acquired a beneficial interest in the litigation. Moreover, even if the Dana Glass Family had not assigned its interest in the case to QRK, QRK had standing to intervene as a mortgagee to protect and preserve its security interest in the units.

The appeals court held that, even if the dispute were somehow moot, the detrimental exception would apply. The amendment threatened to impair QRK’s equity and security interest by forcing the immediate sale of most of its units, without regard to market conditions.

Accordingly, the trial court’s dismissal of the case was reversed, and the case was remanded for proceedings to determine the amendment’s validity.

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Imprecise Drafting and Document Approval Creates Confusion

Conleys Creek Limited Partnership v. Smoky Mountain Country Club Property Owners Association, Inc., No. COA16-647 (N.C. Ct. App. Apr. 4, 2017)

Documents: The North Carolina Court of Appeals held that a declarant and an association could sue one another concerning the association’s obligation to charge owners dues for declarant’s privately owned clubhouse under a declaration that was not properly approved by the owners.


The Cornblum family owned partially developed property in Swain County, N.C. Single-family lots were subject to a Phase I declaration, and townhouses were subject to a townhouse declaration. The remaining property was undeveloped and not subject to any declaration.

In 1999, a Cornblum-owned company, Conleys Creek Limited Partnership (declarant), recorded a new declaration (1999 declaration) consolidating all lots, townhouses, and some undeveloped land into a new community. Smoky Mountain Country Club Property Owners Association, Inc. (association) was established to govern the community.

The 1999 declaration allowed owners to use the declarant’s clubhouse and obligated the association to collect clubhouse dues from the owners and pay them to the declarant.

In 2013, the clubhouse was conveyed to another Cornblum entity, SMCC Clubhouse, LLC (Clubhouse LLC). The association collected clubhouse dues until 2014, when the declarant relinquished association control.

The newly elected association board notified the owners that it would no longer be collecting clubhouse dues and that they could opt out of clubhouse membership. About one-third of the owners began paying dues to Clubhouse LLC, but about two-thirds stopped paying.

The declarant sued the association and its board, and the association counterclaimed against the declarant and Michael and Carolyn Cornblum.

The trial court granted summary judgment (judgment without a trial based on undisputed facts) to the association for some claims, but dismissed others, determining that claims concerning the 1999 declaration could only be brought for up to a year of its being recorded under the North Carolina Planned Community Act (PCA). Both parties appealed.

The PCA provides that the validity of a declaration amendment may not be challenged more than one year after the amendment is recorded. The 1999 declaration specified that it was amending the Phase I and townhouse declarations, but the appeals court determined that it did not constitute an amendment.

The PCA allows two or more planned communities to be merged into a single community. To terminate a declaration requires the approval of 80 percent of the owners. The 1999 declaration was approved by 99 percent of the owners in one original community and 75 percent in the other. While this was not sufficient to terminate one declaration, all parties had operated as if the 1999 declaration was valid for almost 20 years.

The 1999 declaration stated that the two prior declarations were of no further force or effect and were replaced in their entireties by the 1999 declaration. The appeals court also found that submitting additional property to the 1999 declaration suggested a new planned community was being formed rather than an the original declarations being amended.

The association contended that it had no duty to collect clubhouse dues and to pay them to a third party since the clubhouse was not part of the association common elements. However, the PCA empowers an association to impose and collect fees for services provided to owners by third parties.

The appeals court determined that the obligation to pay clubhouse dues linked to each owner’s right to use the clubhouse, not whether the owner actually used it, and owners who had never used the clubhouse were not entitled to reimbursement.

The association argued that the townhouses were subject to the North Carolina Condominium Act and that the 1999 declaration should be reformed to provide that the townhouse common areas belong to the townhouse owners rather than the association. A condominium is not created unless the common areas are owned in common by the owners rather than by an association. Although the 1999 declaration referred to the townhouses as condominiums, a condominium was not formed because the association owned all the common areas.

The breach of fiduciary claim against the declarant was properly dismissed since the declarant’s relationship with the association was contractual. The declarant did not owe a fiduciary duty to the association, and it was not required to put the association’s interests ahead of its own.

However, the trial court erred in dismissing claims against the Cornblums since there were allegations that the Cornblums diverted association funds for their own benefit. As association officers and directors, the Cornblums owed a fiduciary duty to the association.

Both parties brought claims for breach of the covenant of good faith and fair dealing. The trial court wrongly dismissed the association’s claims and wrongly granted summary judgment to the association on the declarant’s claims. A breach of covenant claim requires action by the defendant injuring the plaintiff’s right to receive the benefits for which the plaintiff contracted.

Since the 1999 declaration set up a contractual relationship between the parties regarding the clubhouse, each party was allowed to pursue its claims on such matter. The PCA allows an association to terminate a contract made while the declarant controlled the association if the contract was not bona fide or was unconscionable. However, the association did not prove either.

The trial court’s judgment was affirmed in part, reversed in part, and remanded for further proceedings.

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Architectural Committee Qualified as Property Owners’ Association

Shepherd v. Conde, No. 160606 (Va. Apr. 13, 2017)

State and Local Legislation and Regulations: The Virginia Supreme Court held that an unincorporated architectural control committee qualified as a property owners’ association under the Virginia Property Owners’ Association Act since it had the obligation to maintain common area and the power to levy maintenance assessments.


The Saddle Ridge Farm subdivision encompassed six lots and a private road in Fauquier County, Va. The subdivision was subject to a declaration of protective covenants and restrictions (declaration), which established an architectural control committee (committee) comprising the six lot owners to enforce the declaration.

In April 2014, five of the owners signed and recorded an amended declaration (first amendment), which, for the first time, mentioned Saddle Ridge Farm Home Owners Association (association), an unincorporated entity. It also asserted that the association was governed by the Virginia Property Owners’ Association Act (act).

In June 2014, the owners of the sixth lot, Rachelle and Norman Conde, sued the association and the owners of the five other lots (collectively, the defendants). The Condes sought a declaratory judgment (judicial determination of the parties’ legal rights) that neither the association nor the committee had any authority under the act and that the first amendment was invalid because it was not adopted with unanimous owner consent.

In October 2014, the same five owners signed and recorded a second amended declaration (second amendment), stating that the association was created by the declaration. The Condes also challenged the second amendment’s validity.

The defendants counterclaimed, seeking a declaratory judgment that the amendments were valid and binding on all owners. The defendants asserted that the committee constituted a property owners’ association under the act and that the amendments transferred the committee’s authority to the association. They maintained that the association had been maintaining the private road as common area and collecting the road maintenance assessments.

The trial court ruled that neither the committee nor the association had any authority under the act and that only the five owners were bound by the amendments. The defendants appealed.

The declaration provided that the covenants were to remain in force for 25 years and automatically extended for successive 25-year periods. The next sentence provided that changes to the declaration could not be made unless adopted by a vote of two-thirds of the owners.

The defendants argued that the amendment authority related to the entire declaration, while the Condes contended that it referred only to amending the declaration’s duration or automatic renewals. The appeals court concluded that the declaration was the focus of the second sentence and that “changes” referred to the entire declaration, not just the previous sentence. As such, the amendments were validly adopted, and the trial court erred in ruling that the Condes were not subject to them.

The defendants argued that the act was ambiguous because each definition of “declaration,” “common area,” and “property owners’ association” incorporated the other two terms but were inconsistent with one another. Due to the inconsistency, the defendants urged that the definition of “declaration” should control over the definition of “property owners’ association.”

The act required a declaration either to obligate an association to maintain or operate common areas or authorize an association to assess lots or owners. By comparison, a property owners’ association was required to have both common area maintenance responsibility and assessment authority.

The Condes asserted that the road could not be common area because the declaration allowed the owners to dedicate the road to public use in the future. The appeals court disagreed, finding that even property not owned by an association can qualify as common area under the act if an association is obligated to maintain or operate it and a declaration designates the property as common area. The appeals court determined that since the subdivision plat identified the road as an easement, that was sufficient to designate the road as common area.

The appeals court did not find the act to be ambiguous; while a declaration did not have to create both a maintenance obligation and assessment authority for it to qualify as a declaration under the act, it did have to impose both elements before an entity could qualify as a property owners’ association.

The declaration obligated the committee to enforce the declaration, required the road to be maintained, and obligated owners to pay the maintenance costs. Therefore, the appeals court concluded that the committee qualified as a property owners’ association under the act.

However, the declaration did not mention the association. The amendments retained the declaration’s original language that each owner was automatically a member of the committee. They did not establish the association’s membership or provide how to become a member. The amendments also did not impose any duties or powers on the association but continued to confer powers and duties on the committee.

Moreover, while the second amendment did obligate each owner to pay assessments to the association, it provided that the assessments were to be determined by the committee. The association was not given the authority to levy assessments, only to collect assessments levied by the committee. The appeals court affirmed the trial court’s ruling that the association did not qualify as a property owners’ association under the act.

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Association Ban on Short-Term Rentals Upheld

New Jax Condominiums Association, Inc. v. Vanderbilt New Orleans, LLC, No. 2016-CA-0643 (La. Ct. App. Apr. 26, 2017)

State and Local Legislation and Regulations: The Louisiana Court of Appeal held that the Louisiana Condominium Act permitted an association to adopt a short-term rental restriction by less than unanimous consent.


New Jax, LLC (New Jax) developed the New Jax Condominiums in New Orleans, La. New Jax Condominiums Association, Inc. (association) governed the project.

Earl Weber was the managing member of New Jax as well as two related entities, Vanderbilt New Orleans, LLC (Vanderbilt) and The Penthouse at Jax, LLC (PAJ). PAJ and Vanderbilt each owned units in the condominium that they used for short-term rentals.

The association’s board of directors received numerous complaints about the short-term renters, including that the renters had harassed owners, had trespassed into other units, and had provoked violence that prevented owners from using and enjoying their property. The board met with Weber in an effort to curb the problem behavior, but Weber declined to stop the short-term rentals.

In June 2014, the board sent a letter to all owners stating that the city code and zoning ordinances prohibited short-term rentals in the district. The city code prohibited renting for fewer than 60 days. The zoning ordinance prohibited timeshare buildings, transient vacation rentals, bed and breakfast facilities, and guest houses.

The letter ordered owners to cease short-term rentals by September 2014. Vanderbilt and PAJ ignored the demand as well as a second notice.

The board proposed an amendment to the association’s bylaws specifically prohibiting short-term rentals and announced an association meeting for voting on the amendment. Two weeks before the scheduled meeting, Vanderbilt leased the two units to New Jax to continue the short-term rental enterprise.

At a January 2015 association meeting, 75.5 percent of the owners approved the bylaws amendment. The amendment prohibited owners and tenants from using units for overnight rental, bed and breakfast, guest house, hotel, or transient purposes. The amendment further stated that violating the restriction would leave owners and tenants liable jointly, severally, and in solido (each is separately liable for the whole obligation) to the association for all rental revenues plus costs, expenses, and legal fees, which would be secured by an association lien. The association also had the right to seek an injunction (a court order prohibiting or mandating certain action).

In March 2015, the board sent a third notice to PAJ and Vanderbilt and scheduled a hearing before the board. At the hearing, Weber asserted that the original bylaws exempted New Jax from a requirement for board approval for leases lasting fewer than six months. The board denied that the exemption applied.

The association filed suit against PAJ and Vanderbilt for an injunction and damages. The trial court issued a temporary injunction, ordering PAJ and Vanderbilt to cease short-term rentals and restricting persons participating with them from operating short-term rentals. PAJ, Vanderbilt, and New Jax (the Weber entities) ignored the injunction and continued the short-term rentals. New Jax also intervened in the lawsuit.

The trial court entered a permanent injunction prohibiting the Weber entities from participating in short-term rentals. The trial court also awarded the association damages in the amount of $250,991, which was equal to the Weber entities’ rental revenue collected since the bylaws were amended in September 2015. Moreover, the Weber entities were held liable in solido for the damage award. The Weber entities appealed.

The Weber entities argued that the rental restriction was not properly adopted because it was a building restriction. Louisiana law requires a building restriction to be approved by every owner who will be subject to it. The appeals court held that, if the Louisiana Condominium Act (act) and building restriction law conflicted, the act superseded. Furthermore, the act permitted bylaws to be amended by less than unanimous consent.

Under the act, bylaws govern condominium property’s use. The bylaws may also contain rules “deemed necessary or desirable” for the condominium’s operation and administration. The appeals court held that the bylaws approval requirements trumped the building restriction’s unanimous consent requirement, and the bylaws could be amended with the approval of two-thirds of the owners.

The trial court properly permanently barred the Weber entities from short-term rentals since all three were in violation. However, the trial court erred in awarding damages in solido against New Jax since the association had not sued New Jax. A plaintiff cannot recover judgment against a party the plaintiff never sued.

The trial court’s judgment was affirmed in part and reversed in part.

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Association Can Deny Records Access to Member with an Improper Purpose

Tract No. 7260 Association, Inc. v. Parker, No. B271111 (Cal. Ct. App. Mar. 24, 2017)

State and Local Legislation and Regulations: The California Court of Appeal held that an association could deny its membership list to a member who was suspected of aiding a party that the association was suing.


Tract No. 7260 Association, Inc. (association) governed a community in Los Angeles County, Cal. Don Parker owned a home in the community.

Parker was treasurer of the association, and Michael Eveloff was president. Eveloff created Fix the City and, with Parker’s help, convinced the association to transfer funds to Fix the City. Fix the City used the funds for purposes that were of no benefit to the association. In January 2015, the association sued Fix the City, alleging that Fix the City usurped its business opportunity.

On the same day the association filed suit, Parker asked to inspect the association’s membership list and other corporate records. The association believed that Parker was aligned with Fix the City and intended to use the records against it. The association let Parker review some of the records, but not everything he requested and not the membership list.

Parker filed a petition asking the trial court to order the association to permit the inspection. California Corporations Code (code) grants access to a corporation’s membership list and other corporate records by a corporation member with a purpose related to his or her membership interest.

The association argued that the corporate records would give Fix the City an unfair advantage in the litigation. The trial court concluded that Parker did not have a proper purpose for the records since the evidence suggested that he was helping Fix the City. Parker approved the funds transfer to Fix the City, and Parker’s lawyer was also representing Fix the City in the lawsuit.

The trial court denied Parker the right to access corporate books and records, but it did order the association to disclose the membership list. The code requires that the membership list be provided upon request by members holding five percent of the votes. The corporation must seek a court order within 10 business days to avoid complying with the demand. Otherwise the members may ask a court to compel disclosure, and no inquiry is made into whether the members’ request is proper.

The trial court concluded that the membership list had to be disclosed since the association did not seek a court order within 10 business days. Both parties appealed.

A corporation has the burden of proving that the member will use the information for purposes unrelated to the membership interest. Parker claimed he wanted to inspect the financial records to make sure the association was following generally accepted accounting principles. He also wanted the membership list to communicate with other members about possible misdeeds by the association.

Parker asserted that it was coincidence that his records request coincided with the lawsuit filing since he only learned of the lawsuit weeks later. The appeals court was unpersuaded. Parker and Eveloff both stepped down from the board immediately after convincing the association to fund Fix the City. In addition, before Parker resigned as treasurer, he paid the association’s former lawyer with an emergency cashier’s check. That lawyer went on to represent Fix the City on other matters.

Parker further claimed that his purpose related to his membership interest sufficiently to justify the request, even if there was a secondary improper purpose. The appeals court held that a proper purpose did not undermine the substantial evidence supporting the trial court’s finding of an improper purpose.

The code applies different procedures for a membership list demand, depending upon whether the corporation believes there is an improper purpose. The corporation may deny a membership list demand made by a single member if the corporation believes the member has an improper purpose. The member has the burden of filing suit to enforce its inspection rights, but the corporation has to prove the member’s improper purpose in a suit.

By contrast, if the required number of members makes the request, the corporation has only 10 business days to petition the court if it believes the demand is for an improper purpose. The corporation bears the burden of filing suit to prevent the inspection and of proving the members’ improper purpose. If the corporation does not file a petition within the required time, it must comply with the members’ request.

Since Parker sought inspection rights as a single member, the trial court erred in applying the 10-day rule. The trial court’s order that the membership list be disclosed was reversed. The remainder of the trial court’s order was affirmed.

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Foreclosed Unit Buyer Can Extinguish Pre-Foreclosure Assessment Liens

5510 Sheridan Road Condominium Association v. U.S. Bank, No. 1-16-0279 (Ill. App. Ct. Mar. 31, 2017)

State and Local Legislation and Regulations: The Illinois Appellate Court held that the Illinois Forcible Entry and Detainer Act did not specify when a purchaser had to pay post-foreclosure assessments to extinguish the association’s lien for pre-foreclosure assessments.


5510 Sheridan Road Condominium Association (association) governed a condominium in Chicago, Ill. Thomas and Marilyn Hoffman owned a unit in the condominium.

In February 2012, U.S. Bank sued to foreclose on its mortgage on the Hoffmans’ unit. U.S. Bank named the association as a defendant in the foreclosure action, but the association never answered the complaint. In June 2012, the trial court entered default judgment against the association and ordered the foreclosure.

In December 2012, before the unit was sold, the association sued the Hoffmans for delinquent assessments under the Illinois Forcible Entry and Detainer Act (act). In April 2013, the trial court in this case awarded unit ownership to the association.

In May 2014, the unit was sold by judicial sale pursuant to the foreclosure order, and U.S. Bank was the successful bidder. In June 2014, the foreclosure court confirmed the foreclosure sale and granted possession to U.S. Bank. The deed transferring the unit to U.S. Bank was issued in July 2014.

In October 2014, the association notified U.S. Bank that it was delinquent in assessments and demanded $81,400 for assessments, parking fees, and late fees accruing between October 2012 and October 2014. In January 2015, U.S. Bank paid the association $14,968, which it calculated as the post-foreclosure assessments that had accrued between August 2014 and January 2015.

In January 2015, the association sued U.S. Bank for pre-foreclosure assessments and fees, asserting that the association’s lien for all past due assessments remained valid because U.S. Bank failed to pay the assessments and fees the month following the foreclosure sale as required by the act. The association demanded $94,873 for pre- and post-foreclosure assessments, fees, and attorney’s fees.

U.S. Bank argued that the act does not specify a time requirement and that its January 2015 payment was sufficient to extinguish the association’s lien for pre-foreclosure assessments. U.S. Bank paid the association an additional $25,816, which was the amount the association asserted was due for post-foreclosure assessments between June 2014 and September 2015.

Both parties filed motions for summary judgment (judgment without a trial based on undisputed facts). The trial court granted the association’s motion and denied U.S. Bank’s motion. The trial court also awarded the association the unit, $73,364 in damages for unpaid pre- and post-foreclosure assessments, and $15,788 for attorney’s fees.

U.S. Bank appealed, arguing that its January 2015 payment extinguished the association’s lien for pre-foreclosure assessments. The act provides that the purchaser of a unit at a foreclosure sale has the duty to pay assessments “from and after the first day of the month after the date of the judicial foreclosure sale.” Such payment confirms the association’s lien for pre-foreclosure assessments is extinguished.

The appeals court held that the phrase “from and after the first day of the month after the date of the judicial foreclosure sale” did not create a deadline by which a purchaser must pay in order to extinguish the association’s pre-foreclosure lien. Rather, the phrase identifies the precise moment in time when the purchaser becomes liable for post-foreclosure assessments.

The fact that U.S. Bank did not pay the full post-foreclosure assessments until several months after the association filed suit was immaterial to the question of U.S. Bank’s liability. The association’s lien for pre-foreclosure assessments was extinguished in September 2015, when U.S. Bank fully paid all post-foreclosure assessments owed.

The appeals court also determined that U.S. Bank was not liable for attorney’s fees to the association following its September 2015 payment. To recover attorney’s fees under the act, assessments or fines must be due by the owner to the association.

The trial court’s order was reversed, summary judgment was entered in U.S. Bank’s favor, and the case was remanded for further proceedings.

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