November 2019
In This Issue:
Recent Cases in Community Association Law
Legislation Did Not Apply Retroactively to Community
Developer Loses Architectural Control Because It Cannot Enforce Architectural Requirements
Developer's Lender Failed to Acquire any Declarant Rights in Connection with Foreclosure
Sales Agent Breached Duty by Failing to Adequately Inform Buyer of Club Membership Terms
Architectural Variance for One Lot Does Not Waive Requirements for Other Lots
Condominium Unit Sellers Could Not Sue for Excessive Fees Charged for Electronic Disclosure Documents
County Ordinance Retroactively Requiring Associations to Maintain Stormwater Facilities is Not Unconstitutional
Requiring a Golf Course Owner to Operate a Golf Course is Not Slavery
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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.


Legislation Did Not Apply Retroactively to Community

Artemis Exploration Company v. Ruby Lake Estates Homeowner's Association, No. 75323 (Nev. Oct. 3, 2019)

State and Local Legislation and Regulations: The Supreme Court of Nevada held that the Nevada Uniform Common-Interest Ownership Act's requirement that the association be formally established before the sale of the first lot did not apply retroactively to a subdivision established long before the act was adopted.


Ruby Lakes Estates was established in 1989 as a rural subdivision in Elko County, Nev. The community contained private roads, fences, culverts, cattle guards, and entrance signage (collectively, common area). Artemis Exploration Company (Artemis) purchased one lot from the developer in 1994 and a second lot in 2010. The last lot was sold by the developer in 1997. Elizabeth Essington was the sole officer and director of Artemis. Mrs. Essington and her husband built their home on one of Artemis' lots.

Until 2006, an informal homeowners association existed and collected assessments from lot owners to maintain the common area. In 2005, Mr. Essington lobbied other owners to formalize the homeowners association to assure the subdivision's aesthetic qualities and perform common area maintenance. In 2006, Ruby Lakes Estates Homeowner's Association (association) was incorporated and its bylaws were adopted, which included a provision for annual assessments on property owners for maintenance, roads, fire protection, and other expenditures.

In 2007, Mr. Essington was elected to the association's board of directors (board). He filed a declaration of certification as a common-interest community board member with the Nevada Real Estate Division, certifying that he had read and understood the association's governing documents and the provisions of the Nevada Uniform Common-Interest Ownership Act (act). While on the board, Mr. Essington voted to levy assessments, and the Essingtons paid assessments to the association on behalf of Artemis.

Several years later, a dispute arose between Mrs. Essington and the board concerning the construction of a building in the subdivision. As a result, Artemis stopped paying assessments and sued the association, challenging its authority to levy assessments.

The trial court determined that the association was a common interest community because its declaration of covenants (declaration) sufficiently described community common elements and provided notice to owners that they would be financially responsible for maintaining common areas. Although the act required that the association be organized before the sale of the first lot, the act was not adopted until after the subdivision was created, and the trial court determined such requirement should not apply retroactively.

Artemis appealed, arguing that the declaration contained neither a description of common elements nor an obligation for owners to pay for common elements as required by the act. The act defines "common interest community" as real estate described in a declaration for which unit owners are obligated to pay for a share of the maintenance or improvement of, or services and expenses related to, common elements or other real estate described in the declaration. "Real estate" is further defined in the act as an interest in land and other improvements that pass with a conveyance of land by custom, usage, or law.

The appeals court noted that, although the real estate at issue is commonly owned by an association, that does not have to be the case; the only requirement is that the real estate be described in the declaration. The declaration provided for the development and maintenance of an aesthetically pleasing and harmonious community. To that end, it established an architectural review committee (ARC) to maintain a high standard of construction, development, and maintenance in the subdivision.

The subdivision plat attached to the declaration also showed streets and street monuments. On the plat, the county board of commissioners expressly rejected responsibility for maintaining the streets. The appeals court determined that such rejection of maintenance responsibility necessarily implied that lot owners would be responsible for the maintenance.

The act does not require that a declaration expressly explain that owners may be subject to assessments or otherwise financially responsible for maintaining common elements, and the appeals court declined to read such requirement into the act. The appeals court also looked to the Restatement (Third) of Property (Servitudes) for further support. It provides that an implied obligation to contribute to the maintenance of common property may be found where a declaration creates an association to manage common property or enforce standards but fails to include a mechanism for providing the funds necessary to carry out these functions.

Moreover, the act instructs that its terms must be applied so as to effectuate its general purpose. The appeals court noted that to retroactively apply the requirement that the association had to be formally created prior to the first lot sale on the community would thwart the act's purpose. The appeals court held that such requirement did not apply to communities established before the act was adopted.

Accordingly, the trial court's judgment was affirmed.

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Developer Loses Architectural Control Because It Cannot Enforce Architectural Requirements

Assured Administration, LLC v. Young, No. CA2019-04-039 (Ohio Ct. App. Sept. 30, 2019)

Developmental Rights: The Court of Appeals of Ohio held that a developer did not have architectural control over the subdivision after control of the association had been turned over to the owners because only the association had the power to enforce the declaration's architectural requirements.


Assured Administration, LLC (Assured) developed The Greens of Kings Meadows subdivision in Kings Meadows, Ohio. As the developer, Assured controlled The Greens of Kings Meadows Homeowners Association (association) until December 2016. Upon turnover of control, Thomas Young, Bethany Sarchet, Steve Yeoman, and Marc Davis were elected to the association's board of directors (board).

In March 2017, Assured submitted plans to the board requesting approval for construction of a home on Assured's last remaining unsold lot. The home Assured wanted to build was below the minimum size requirements set forth in the subdivision's design review guidelines (guidelines) and contained a nonconforming front-facing garage. The board denied Assured's request.

In April 2018, Assured sued the individual board members and the association for negligence and tortious interference with a contract, claiming the board had negligently interfered with Assured's contract with a buyer who had contracted to purchase a home on the lot matching the building plans submitted to the association. Assured claimed that the association's rejection of the building plans represented to the buyer that Assured had not complied with the subdivision's declaration of covenants, conditions, restrictions, liens, and reservation of easements (declaration).

Assured also asked the trial court to rule that the declaration granted Assured, as the developer, the discretion to build any home it desired, including a home that was not in compliance with the guidelines. The declaration provided that no structure could be commenced on a lot until a detailed set of plans and specifications were approved by the board.

However, the declaration also provided that, until all dwellings were built on lots, the right of architectural control was vested in the developer, and the initial construction of dwellings by a builder was under the exclusive control of the developer. The declaration required that each builder obtain approval from the developer prior to the initial construction of a dwelling or accessory structure on a lot.

The declaration further provided that the developer would serve as the design review committee (DRC). The DRC also had complete authority to deny approval of a structure if it reasonably determined that the size, scale, or character of the proposed structure was incompatible with the lot or with neighboring structures. Further, the declaration gave the association the right to enforce the declaration. If the association failed to enforce the declaration's terms, the developer had the right to enforce the terms after prior written notice to the association.

The trial court granted summary judgment (judgment without a trial based on undisputed facts) in favor of the association. The trial court ruled that Assured could not have sole discretion in how it wished to build a home but give the enforcement authority to the association. The trial court also stated that it made no sense for Assured to have submitted its construction plans to the association for approval if Assured had sole discretion to approve the plans. Assured appealed.

The appeals court agreed with the trial court's findings for the same reasons articulated by the trial court. Accordingly, judgment in the association's favor was affirmed.

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Developer's Lender Failed to Acquire any Declarant Rights in Connection with Foreclosure

Chisolm v. Danforth, LLC, No. A19A1438 (Ga. Ct. App. Oct. 29, 2019)

Developmental Rights: The Court of Appeals of Georgia held that a successor developer who purchased property that had been foreclosed upon by the original developer's lender did not acquire any declarant rights, because neither the security deed given to the lender nor the foreclosure deed given by the lender mentioned that declarant rights were part of the collateral pledge for the loan.


Le Jardin, LLC (original developer) developed the Le Jardin master planned community in Fulton County, Ga. Le Jardin Community Association, Inc. (master association) served as the association governing the entire community pursuant to a declaration of covenants, conditions, and restrictions (master declaration). The Tapestry neighborhood within Le Jardin was governed by an additional association, Tapestry at Le Jardin Owners Association, Inc. (subassociation) in accordance with a neighborhood declaration of covenants, conditions, and restrictions (neighborhood declaration).

Both the master declaration and the neighborhood declaration (collectively, the declarations) reserved certain rights for the "declarant." The declarations defined the "declarant" as the original developer or any successor, successor-in-title, or assign who holds or takes title to any portion of the property for the purpose of development or sale and who is designated as the declarant in a recorded instrument executed by the immediately preceding declarant. The declarations also specified that there shall be only one party entitled to exercise the declarant's rights and powers at any time.

The declarant rights specifically included the right to appoint the boards of directors of the master association and the neighborhood association (collectively, the associations) until the earlier of the date that all of the lots had been developed, Dec. 31, 2020, or when the declarant voluntarily relinquished that right.

The original developer financed the project through loans from Fairfield Financial Services (Fairfield), which were secured by several deeds to secure debt on various properties (security deeds). However, before the development was finished, Fairfield went bankrupt and foreclosed its security deeds. Fairfield transferred portions of the property to Ridge Road, LLC (Ridge Road) and portions to EvaBank under separate deeds under power of sale (foreclosure deeds). In addition to the land described in the foreclosure deed, each foreclosure deed indicated that the transfer included all personal property of every kind.

In 2010, Ridge Road transferred its property to First State Bank of Northwest Arkansas (FSB). At the same time, Ridge Road recorded an assignment of declarant's rights assigning its rights as the successor declarant under the declarations to FSB. In 2012, FSB's property was sold to Danforth, LLC (Danforth). FSB also recorded an assignment assigning its rights as the declarant to Danforth.

In 2013, EvaBank sold its property to Danforth and recorded an assignment of its declarant rights to Danforth. In 2014, the original developer also recorded a quitclaim deed purporting to convey all of its declarant rights, if any, to Danforth.

Danforth appointed members of the associations' boards of directors, who levied assessments on the lot owners. Tuneen Chisolm and two other owners (collectively, the owners) refused to pay the assessments, and the associations filed liens on the owners' properties. The owners sued Danforth, alleging that Danforth had not acquired any declarant rights. Thus, they asserted that the boards were not legally appointed and the assessments were not validly adopted.

The trial court determined that all of the original developer's rights, including the declarant rights, were pledged as collateral to Fairfield, and Fairfield acquired the declarant rights upon foreclosure. Fairfield then transferred the declarant rights to FSB, who transferred them to Danforth. The trial court found that the only competitor for the declarant rights was EvaBank, who assigned any declarant rights it may have received to Danforth. Thus, only Danforth had the authority to act as the declarant since it was the only party owning lots for development or sale as required under the declarations.

The trial court granted summary judgment (judgment without a trial based on undisputed facts) in favor of Danforth. Chisolm appealed.

The appeals court found that no transfer of declarant rights ever occurred. When the original developer executed the assignment of its declarant rights in 2014, the original developer had been dissolved. The original developer's manager, who executed the quitclaim deed, also testified that his involvement with the original developer ended in 2007, and he could not explain why he had signed a quitclaim deed on the entity's behalf some seven years after he left the company.

In addition, neither the security deeds given to Fairfield nor the foreclosure deeds given by Fairfield designated a successor declarant, as required by the declarations. The security deeds and the foreclosure deeds described in great detail the collateral being pledged or transferred, and the appeals court found nothing in such language could be interpreted as including the declarant's rights and duties. In particular, the security deeds did not mention that the rights being pledged came with a duty that the property be held for the purpose of development or sale, as required for a successor declarant.

Moreover, Ridge Road and EvaBank could not have jointly acquired or exercised declarant rights since the declarations specified that there could be only one party entitled to exercise the declarant rights at any time. As such, Danforth was not a successor declarant, and Chisolm was entitled to summary judgment in her favor.

Accordingly, judgment was reversed in part and vacated in part. The case was remanded for further proceedings.

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Sales Agent Breached Duty by Failing to Adequately Inform Buyer of Club Membership Terms

Dubasso v. LQR Resort Desert Real Estate, Inc., No. E069952 (Cal. Ct. App. Sept. 17, 2019)

Sales and Leases: The Court of Appeal of California determined that a real estate agent and a broker may have breached their fiduciary duties to a homebuyer by failing to disclose that membership in the community's golf club was not automatic but subject to an application and vetting process.


In January 2016, Michael and Jenny Dubasso (collectively, the Dubassos) purchased a $2 million home in the Tradition community in LaQuinta, Calif. LQR Resort Real Estate, Inc. (broker) and Kathleen O'Keefe served as the real estate broker and agent, respectively, in connection with the transaction.

While O'Keefe was helping the Dubassos search for a retirement home, the Dubassos told O'Keefe that they were worried that living in a country club community might be lonely and isolating. O'Keefe told them they should not be concerned because the Tradition Golf Club (club) was amazing, and there would be plenty of people around. She suggested that the Dubassos visit the club to see what it had to offer and to meet with its general manager. O'Keefe never informed them that membership was contingent upon acceptance by the club.

The Dubassos met with the club manager several times. The manager gave them a tour of the facilities and emphasized the many club amenities, but she never informed the Dubassos that club membership was subject to an application and approval process. Following these meetings, the Dubassos had the impression that, upon purchase of a home in Tradition, they would automatically become members of the club.

About a week after escrow closed, the Dubassos took a check to the club for their membership. It was at that point that the manager explained the application process. They submitted an application, but the club membership committee decided the Dubassos were not a “good fit” for club membership.

The Dubassos sued the broker and O'Keefe (collectively, defendants) for failing to disclose that club membership was not automatic for Tradition lot owners prior to signing the purchase contract but was instead subject to a vetting process. The Dubassos alleged the defendants breached their fiduciary duties to them by failing to inquire whether they would want to purchase the home without a club membership and to advise the Dubassos to make the contract contingent upon acceptance for club membership.

The defendants moved for summary judgment (judgment without a trial based on undisputed facts) on the ground that the Tradition declaration of covenants, conditions, and restrictions (declaration) provided that rights to use the club facilities would be granted only to those persons, and on those conditions, as may be determined by the club. The declaration further provided that no right to use the club facilities arose from ownership of a lot but arose, if at all, only from a membership agreement with the club.

The Dubassos did not dispute that they received a copy of the declaration, but they argued that the declaration did not mention that membership was anything other than automatic upon submission of an application or that it was subject to a vetting process. They asserted that a reasonable buyer would conclude from the declaration's disclosure that a person interested in club membership simply needed to enter into a membership agreement with the club.

O'Keefe believed the club manager would tell the Dubassos all they needed to know about club membership and the application process. O'Keefe knew that club membership was not automatic, but she did not know what was entailed in the vetting process. O'Keefe also said it was her practice to make purchase contracts contingent on acceptance for club membership where the buyers told her they did not want the home without club membership, but she did not do so in this case because the Dubassos consistently told her they were unsure whether they wanted to join the club. The Dubassos, however, said they made it clear to O'Keefe that they intended to join the club in addition to purchasing the home.

The trial court granted summary judgment in the defendants' favor and dismissed the case. The Dubassos appealed.

As fiduciaries, brokers and agents have a duty to investigate and discover, and to advise the client concerning all material facts that may bear upon and allow them to make a well-informed decision concerning the real estate transaction. The broker and agent are hired for their knowledge and skill. They are expected to perform the necessary research and investigation in order to know those important matters that will affect the client's decision. This obligation may require investigation of facts not known to the broker or agent and disclosure of all material facts that might reasonably be discovered.

The appeals court determined that the declaration's disclosure was not sufficient to excuse the defendants' obligation to inform the Dubassos, in some manner, of the fact that the defendants were well aware that the club might reject the Dubassos' membership application even if they met any articulated membership requirements.

Since O'Keefe testified that her main concern was to make sure the transaction closed, there was sufficient evidence that O'Keefe negligently, or perhaps intentionally, breached her duty to the Dubassos to ascertain whether club membership was an important matter affecting their decision to purchase the home. There was conflicting evidence on whether club membership was material to their purchase decision, so summary judgment should not have been granted.

Accordingly, the judgment in the defendants' favor was reversed, and the case was remanded for further proceedings.

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Architectural Variance for One Lot Does Not Waive Requirements for Other Lots

Eagle Springs Homeowners Association, Inc. v. Rodina, No. 46323 (Idaho Nov. 7, 2019)

Architectural Control: The Supreme Court of Idaho held that an association's granting of variances from architectural requirements did not amount to a waiver of the requirements for all purposes.


Eagle Springs Homeowners Association, Inc. (association) governed the Eagle Springs subdivision in Boise, Idaho. Jan Rodina owned a corner lot in the subdivision. His home faced Big Springs Boulevard, and North Cayuse Way ran along the side of the lot.

Under the Eagle Springs declaration of covenants, conditions, and restrictions (declaration), owners must obtain approval from the association's architectural committee (AC) for any improvements to the lot or home exterior. The declaration specifically listed fences, walls, and landscaping among the improvements requiring approval.

The declaration also included specific requirements for certain improvements. In particular, fences and walls could not sit closer than 20 feet to any street, and fences could not exceed 6 feet in height. The declaration authorized the AC to grant variances from compliance with the architectural requirements when circumstances such as topography, natural obstructions, hardship, aesthetic, or environmental considerations merited.

The declaration further stated that the AC's approval of an improvement did not waive its right to deny any similar proposed improvement in the future; granting a variance did not operate as a waiver of any requirement except for the lot granted the waiver, and the failure to enforce any requirement did not constitute a waiver of the right to enforce such requirement in other instances (the non-waiver provisions).

In May 2016, Rodina submitted an application to the AC (first application) for approval of a fence repair and landscaping. As part of the fence repair, Rodina stated that the fence facing North Cayuse Way would be extended to cover the full length of the house. He also stated in the first application that, in order to repair the fence and level it with the house, some landscaping would be needed at the back and side of the house. The AC conditionally approved the first application, stating that the fence was to be stained to match and all repairs were to be in compliance with the declaration and the applicable building codes.

Rodina then proceeded to construct a 3-foot retaining wall to level the lot's severe slope, a new fence was constructed on top of the retaining wall, and the fence was moved closer to North Cayuse Way. When the AC discovered the change, it asked Rodina to submit a second application for the new work. He did so, but the AC denied approval, stating that the as-built project violated the declaration. The AC indicated that it would consider a new application if the fence dimensions were fixed, and Rodina obtained assurances that grading and drainage changes would not burden other properties.

After Rodina refused to fix the property, the association sued him, asking that he be ordered to restore the property to its previous condition. Rodina asserted that the association had violated its good faith and fiduciary duties and waived its ability to reject the improvements because the AC had approved similar construction on other lots.

The trial court concluded that improvements exceeded the scope of the first application and violated the declaration. It also held that the association did not waive any of the requirements due to the declaration's non-waiver provisions. Rodina also failed to prove that the AC had approved similar projects and, even if it did approve such projects, the AC's decisions were within its discretion. The trial court ordered Rodina to remove the unapproved construction and restore the property. Rodina appealed.

Rodina argued the first application should be read to cover his as-built project. The AC approval of the first application indicated that all repairs were to be in compliance with the declaration, but what Rodina constructed was not in compliance. The retaining approval did not fall under the AC's approval for landscaping because the declaration treated landscaping and walls as separate improvements.

Also, there was no suggestion in the first application of any retaining wall or that a new fence would be constructed. Building a separate retaining wall and a wholly new fence did not fall under "repairing" or "leveling" the existing fence. While leveling the fence may have included raising one side, it did not include raising the entire fence and moving it closer to the street. The original fence was already closer than 20 feet to North Cayuse Way, but the AC believed that the developer had granted a variance for the original fence's construction. That existing variance did not give a subsequent owner of the property liberty to enlarge the variance.

Rodina insisted that the new fence was only 6 feet tall and that only the ground level was changed because he had covered the retaining wall with fill dirt. The appeals court found that, without the unapproved fill dirt, the fence sitting on top of the retaining wall base was unquestionably around 9 feet tall.

Rodina produced evidence of four fence waivers granted by the AC. Waiver requires a clear and unequivocal act manifesting an intent to waive, inducing another party to act in reliance upon the waiver. However, granting a variance excuses the owner from compliance with a declaration requirement. It does not waive the association's ability to deny a variance in the future.

In one case, the AC granted a variance from the 20-foot setback rule after the fence was completed. Even if this could reasonably be construed as waiving the requirement for pre-approval of improvements and the setback rule, there was no inference that the 6-foot height limit was waived. In addition, where the association did not pursue a declaration violation, the board of directors evaluated the severity of the violation and the cost to enforce it and chose not to proceed with enforcement. Exercising such discretion in selected instances did not amount to a waiver.

Accordingly, the trial court's judgment was affirmed.

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Condominium Unit Sellers Could Not Sue for Excessive Fees Charged for Electronic Disclosure Documents

Horist v. Sudler and Company, 941 F.3d 274 (7th Cir. Oct. 21, 2019)

State and Local Legislation and Regulations: The U.S. Court of Appeals for the Seventh Circuit held that condominium unit sellers could not sue the condominium association manager or an online document service provider for charging allegedly excessive fees for electronic disclosure documents, because the defendants did not have an independent duty to the sellers and there was no private right of action under the Illinois Condominium Property Act.


Keith Horist owned a unit in a condominium in Chicago. Joshua and Lori Eyman (collectively, the Eymans) owned a unit in a different Chicago condominium. Both owners were members of the condominium associations governing their respective condominiums. Both associations engaged Sudler and Company (Sudler) to manage their operations.

In 2017, Horist and the Eymans put their units up for sale and found buyers. The Illinois Condominium Property Act (act) requires selling owners to obtain the condominium governing documents, association financial information, and other disclosure information (disclosure documents) from their association's board of managers and make them available to the prospective purchaser.  

The act obligates the association's principal officer or another specifically designated officer to furnish the required disclosure documents to the owner within 30 days of the owner's request. The act allows the association to charge the owner a reasonable fee covering the direct out-of-pocket cost of providing such information and copying.

Sudler contracted with HomeWiseDocs.com (HomeWise), an online document service that assembled the disclosure documents in an electronic format (electronic documents). Sudler's website provided a link to HomeWise's site so owners could easily click their way through and order downloadable electronic documents instantaneously. However, the convenience carried a cost. HomeWise charged Horist $240 for electronic documents, and the Eymans paid $365 for their electronic documents.

Horist and the Eymans (collectively, plaintiffs) sued Sudler and HomeWise (collectively, defendants), seeking to represent a proposed class of condominium unit owners who paid fees to HomeWise for disclosure documents. Among other claims, they alleged that the fees charged by HomeWise violated the act's reasonable fee limit and the Illinois Consumer Fraud and Deceptive Business Practices Act (consumer fraud statute). HomeWise removed the case to federal court.

The trial court found that the act's disclosure requirements provided no private right of action, either express or implied, for unit sellers. The trial court also found no viable claim for unfair trade practice in violation of the consumer fraud statute. It dismissed the case, and the plaintiffs appealed.

The appeals court noted that the plaintiffs did not sue their associations, only Sudler and HomeWise. The act did not expressly provide a remedy for enforcing its disclosure provisions. The Illinois courts will recognize an implied right of action only if four factors are met: (1) the plaintiff is within the class of persons the statute was enacted to benefit; (2) the plaintiff's injury is one the statute was designed to prevent; (3) a private right of action is consistent with the statute's underlying purpose; and (4) inferring a private right of action is necessary to provide an adequate remedy for statutory violations.

The Illinois Appellate Court had twice determined that the act's disclosure requirements were designed to protect unit purchasers. No Illinois court had determined that the disclosure requirements were intended for the benefit of the sellers, and the appeals court (a federal court) was not inclined to extend Illinois law in such manner. The act's disclosure requirements were plainly designed to protect unit purchasers against fraud (of the concealment variety) by unit sellers. Thus, as sellers, the plaintiffs were not within the class of persons the act's disclosure requirements were designed to protect, nor were their injuries the type the disclosure requirements were designed to prevent.

The consumer fraud statute was designed to protect consumers against fraud, unfair methods of competition, and other unfair and deceptive business practices. To prevail on a claim, a plaintiff must show that the defendant committed a deceptive or unfair act with the intent that others rely on the deception, that the act occurred in the course of trade or commerce, and that it caused actual damages.

The appeals court found no deception in this case. The plaintiffs claimed that the defendants could be liable for violating the consumer fraud statute because they acted on behalf of the associations to breach the associations' duties under the act. For the defendants, as agents for the associations, to have tort liability to a third party harmed by the agents' conduct, the defendants must have breached an independent duty owed to the third party.

Under the act, the associations, not the defendants, were responsible to the plaintiffs for providing the disclosure documents. The was no independent duty owed by the defendants to the plaintiffs. This left the consumer fraud claim resting on nothing more than a generic allegation that HomeWise charged too much for its services. However, the Illinois courts have held that charging an unconscionably high price generally is insufficient to establish a claim for unfairness.

Accordingly, the trial court's judgment was affirmed.

Editor’s note: CAI filed an amicus brief in support of the association in this case.  

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County Ordinance Retroactively Requiring Associations to Maintain Stormwater Facilities is Not Unconstitutional

Polo Golf & Country Club Homeowners Association, Inc.v. Cunard, No. S19A0655 (Ga. Sept. 23, 2019)

State and Local Legislation and Regulations: The Supreme Court of Georgia held that a county ordinance requiring existing and new homeowners associations to maintain all stormwater facilities within the subdivision was not unconstitutional.


Polo Golf and Country Club Homeowners Association, Inc. (association) governed the Polo Fields subdivision in Forsyth County, Ga. The subdivision stormwater facilities, including a dam shoring up a lake, began to fail due to age. Such failures caused flooding, sinkholes, and other property damage to individual lots, including the lot owned by John and Diane Rymer (collectively, the Rymers).

The association disagreed with Forsyth County (county) about who was responsible for repairs to the stormwater facilities. In 1996, the county adopted a stormwater management ordinance that authorized its engineering department to determine how stormwater facilities within the county would be operated. In 2004, the engineering department adopted a stormwater management design manual (design manual) requiring homeowners associations to take responsibility for stormwater management facilities within their subdivisions.

The Rymers sued the association and the county, seeking to require one of them to repair the Rymers' property. The association contended that the design manual's requirements were unconstitutional. In Polo Golf and Country Club Homeowners' Association, Inc. v. Rymer, 294 Ga. 489 (2004) (Polo I) (reported in the February 2014 Law Reporter), the Georgia Supreme Court determined that the design manual maintenance requirement, as then written, applied only to subdivisions established after its adoption, not to existing subdivisions like Polo Fields.

In January 2014, before the supreme court issued its ruling in Polo I, the county enacted a new stormwater ordinance requiring any new or existing subdivision that had a homeowners association be responsible for maintenance of all drainage easements and all stormwater facilities within the entire subdivision (2014 ordinance). The association sued John Cunard and Benny Dempsey, director and manager, respectively, of the county engineering department (collectively, the stormwater officials), in their individual capacities to determine their constitutional authority to enforce the new stormwater ordinance.

The association argued that the 2014 ordinance impaired its contractual obligations with owners because the subdivision's declaration of covenants, restrictions, and easements (declaration) recorded in 1987 required each owner to maintain and repair any stormwater facilities located within his or her lot. The trial court held that the 2014 ordinance was constitutional and that the stormwater officials were immune from suit based on the doctrine of sovereign immunity (the government is immune from liability unless immunity is expressly waived by statute or inferred by legislative enactment). The trial court entered judgment in favor of the stormwater officials, and the association appealed.

The supreme court held that the stormwater officials were not immune from suit based on the doctrine of sovereign immunity. However, it also held that the 2014 ordinance was not unconstitutional. To determine whether a law impairs a contractual relationship in violation of the contracts clause of the U.S. Constitution, a court must consider whether a contractual relationship exists, whether the new law impairs the contractual relationship, and whether the impairment is substantial. Even if the impairment is substantial, the law may nonetheless still be constitutional if it is a reasonable way to advance a significant and legitimate public purpose.

The supreme court determined that the 2014 ordinance did not prescribe the means by which an association must meet its responsibility to maintain drainage easements and stormwater facilities. It also did not prohibit an association from using its contractual relationships with owners to effect compliance with the 2014 ordinance. The 2014 ordinance did not preclude the association from using the declaration to effect action by owners in order to comply with the county's maintenance requirements.

The association conceded that it could use the declaration's self-help/abatement remedy to compel owners to undertake the required maintenance. The supreme court characterized the impediments to enforcement identified by the association as the vagaries of dealing with time constraints, the bureaucracy of the association's board of directors, and the difficulty of dealing with individual owners. It found that none of these amounted to an actual inability by the association to exercise its remedies under the declaration. As such, there was no violation of the U.S. Constitution.

To establish a violation of the impairment clause of the Georgia Constitution, a party must show that it has a vested right that will be impaired by the law. The association contended that all of its rights under the declaration were vested rights but could cite no legal authority for such a proposition. The supreme court also failed to see how the association's rights were impaired since the 2014 ordinance did not prohibit the association from compelling owners to perform the maintenance. As such, there was no violation of the Georgia Constitution.

Accordingly, the trial court's judgment was affirmed.

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Requiring a Golf Course Owner to Operate a Golf Course is Not Slavery

Swain v. Bixby Village Golf Course Inc., No. 1 CA-CV 18-0397 (Ariz. Ct. App. Sept. 19, 2019)

Use Restrictions: The Court of Appeals of Arizona held that a use restriction prohibited a golf course owner from using the property for something other than a golf course and required that a golf course be operated on the property.


Ahwatukee is a planned community in Phoenix comprising about 5,200 homes around two golf courses. A number of the homes either border or feature prominent views of at least one of the golf courses. Linda Swain and Eileen Breslin each owned lots abutting the Lakes Golf Course.

Beginning in the 1980s, the original developer recorded a deed restriction on the Lakes Golf Course property. In 1992, the deed restriction was converted to a declaration of covenants, conditions, restrictions, and easements (declaration) covering both golf courses. It restricted the property's use to a golf course, facilities, and improvements. The declaration stated that it was established for the mutual benefit of the developer and all present and future owners of property located within Ahwatukee, defined as the "benefitted persons."

The declaration stated that the purpose was to comply with the requirements and obtain the benefits of the Arizona tax code establishing a special valuation method for golf course property. The declaration further provided that the property could be developed for purposes other than a golf course only if 51% of all Ahwatukee owners approved removing the use restriction, or if a court found a material change in conditions or circumstances that justified removing the restriction.

Bixby Village Golf Course, Inc. (Bixby) acquired both golf courses in 2006. In 2013, Bixby closed and dismantled the Lakes Golf Course. It placed barbed-wire fencing around the perimeter, drained the lakes, shut off the electricity, stripped the sod off the greens, and removed the heads from the irrigation system.

In 2014, Swain and Breslin (collectively, the plaintiffs) sued Bixby, asserting the golf course closure violated the declaration. While the lawsuit was still pending, Bixby contracted to sell the Lakes Golf Course property to TTLC Ahwatukee Lakes Investors, LLC (TTLC). The contract acknowledged that Bixby had closed the golf course and that a lawsuit about that decision was pending. The sale was conditioned on the successful results of a study examining the feasibility of converting the property to residential use. Satisfied with the results of the feasibility study, TTLC completed the purchase for $9 million in June 2015, which was the value of the property without the golf course use restriction.

The plaintiffs amended their lawsuit to add claims against TTLC. TTLC responded that the declaration did not require it to operate a golf course on the property and that to do so would violate the 13th Amendment to the U.S. Constitution's prohibition against slavery. The trial court ruled that the declaration required the operation of a golf course for the benefit of the benefitted persons described in the declaration. It also ruled that the use restriction did not violate the 13th Amendment.

In the meantime, TTLC sought to persuade the owners to modify the declaration to eliminate the golf course requirement, but despite an intensive lobbying campaign, only 28% of the owners had signed consents after two years. TTLC filed a counterclaim asserting that it was entitled to a modification of the use restriction because a material change in conditions or circumstances had occurred, since a golf course would not be profitable.

TTLC's expert testified that it would cost at least $14 million to restore the now barren property to a golf course, and there was no certainty of ever making a profit. The plaintiff's expert, Buddie Johnson, disagreed, opining that golf course restoration would cost $4–6 million. Johnson stated that a shorter, less-difficult "executive" golf course was likely to prosper based on the area's demographics.

Johnson also explained that the property was the "perfect site" for an executive golf course because it was amid a dense, affluent population with quick and easy access to the golf course. Johnson added that the golf course failed during Bixby's ownership only because it was very poorly operated and marketed. At least five capable buyers had recently expressed a strong interest to Johnson in buying the Lakes Golf Course. Swain stated that she paid a premium for her home because of the view. Since Bixby closed the course and drained the lakes, the wildlife began to perish, and the property emitted an "overwhelming" stench.

The trial court ruled that the circumstances had not materially changed, so the use restriction was not eligible for removal. The trial court ordered TTLC to restore and operate a golf course on the property. It further ruled that TTLC had breached both the declaration and an implied covenant of good faith and fair dealing, which required TTLC not to impair the rights of those entitled to receive the declaration's benefits. TTLC appealed.

TTLC argued that the declaration was a restrictive covenant that simply restricted the property's use rather than an affirmative covenant that imposed a duty on the owner to actively operate a golf course. TTLC insisted that it could choose to let the property remain idle without violating the declaration.

The appeals court stated that the cardinal principles in interpreting covenants are to give effect to the parties' intentions, as ascertained from the covenants' language or the circumstances surrounding their creation, and to carry out the purposes for which the covenants were created. The appeals court found that the circumstances surrounding the declaration's creation showed that it was intended to require the continuous operation of a golf course. The course was a part of the original development from the 1970s and an important amenity for the owners.

The declaration confirmed its purposes of maintaining the golf course to qualify for tax benefits and to protect the interests of the benefitted persons living next to, or having views of, a golf course. The special tax valuation could only be achieved if golf can be played or practiced on the property. Allowing the property to remain as a dead, desolate wasteland would frustrate those purposes.

The declaration stated that the property owner had the right to redesign or reconfigure the golf course or remove, modify, alter, relocate, replace, abandon, demolish, cease the use of, or rebuild any improvements relating to the use of the property for golf courses. The appeals court held that this gave TTLC the right to abandon, demolish, or cease operation of any of the facilities related to the golf course but not the golf course itself. The language pointedly only gave the property owner the right to redesign or reconfigure the golf course, not remove or abandon it.

TTLC insisted that the declaration gave it the unfettered discretion to determine whether a material change in conditions or circumstances had occurred and that the court must defer to TTLC's determination. The appeals court rejected this notion, stating that the declaration would not have required the owner to seek court permission if the owner could decide the matter on its own.

To obtain relief from the restriction, TTLC needed to show that changes had occurred that were so fundamental or radical that they defeated or frustrated the restriction's purpose. No such changes had occurred at Ahwatukee. The appeals court stated that TTLC could not purchase an already failing business and then try to claim its unprofitability was a material change in circumstances.

TTLC argued that it was economically unfeasible to require it to restore the golf course. The appeals court stated that TTLC brought the hardship upon itself because its predecessor chose to destroy the course and allow it to turn into a barren, stench-filled wasteland. No remedy but requiring the golf course's restoration would protect the plaintiffs from the continuation of such harm. Finally, the appeals court held that requiring TTLC to restore the golf course did not constitute slavery. TTLC bought the property with full knowledge of the risks involved.

Accordingly, the trial court's judgment was affirmed.

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