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.

Inexperienced Developer Liable for Financial Mismanagement of Commercial Condominium

Ironman Medical Properties, LLC v. Chodri, No. COA18-108 (N.C. Ct. App. Dec. 3, 2019)

White Oak Medical Properties, LLC (White Oak) developed Premier Medical Center as a 10-unit commercial condominium in Asheboro, N.C. White Oak sold one unit to Ironman Medical Properties, LLC (Ironman), and it retained the other nine units. Premier Medical Center Condominium Association, Inc. (association) was organized to govern the project.

Dr. Tanvir Chodri (Chodri) and his wife owned White Oak, and Chodri served as the sole officer and director of the association. Chodri practiced medicine and had no experience managing real estate or condominium associations. He also relied upon the officer manager for his medical practice, Julie Trollinger, to handle the financial affairs of White Oak and the association. Like Chodri, Trollinger was inexperienced and had no knowledge about managing associations.

In 2010, Ironman leased its unit to Hodges Family Practices, Inc. (HFP). In June 2012, Ironman quit paying its association assessments. In December 2012, HFP requested a breakdown of the association's expenses. Ironman also requested all of the financial documentation available for the association.

The investigation by HFP and Ironman into the association's finances revealed numerous improprieties. The association had never held elections or annual meetings and kept no separate corporate records. The association had no bank account, and the association's money was intermingled with White Oak's money in a White Oak account. The association had never prepared any financial reports and did not set aside funds for reserves.

Assessments were improperly calculated, being based on the occupied square footage rather than the total project square footage as required by the declaration of condominium (declaration). White Oak never paid assessments to the association. Instead, Trollinger deposited the rents from White Oak's leased units into the comingled account. As such, no separate payments were made for White Oak's vacant units. Trollinger paid both the association's and White Oak’s expenses from the comingled account.

The result of the financial mismanagement was that Ironman initially overpaid assessments but subsequently owed $37,582 to the association after it quit paying assessments. In addition, the improper accounting caused an underpayment by White Oak to the association of approximately $207,345.

In 2015, Ironman and HFP (collectively, plaintiffs) sued the association, White Oak, and Chodri (collectively, defendants), alleging breach of the declaration, breach of fiduciary duty, and constructive fraud (breach of fiduciary duty with an intent to benefit from the wrongdoing). The defendants filed a counterclaim seeking to collect the unpaid assessments from Ironman. The trial court entered a directed verdict (order preventing jury consideration of a claim because the plaintiff failed to present the evidence necessary to proceed with the claim) in favor of the defendants on all of the plaintiffs' claims except for breach of the declaration.

The jury found that both the plaintiffs and the defendants breached the declaration. It awarded plaintiffs $1 in damages and defendants $51,472 in damages due to Ironman's suspension of its payment obligations. However, the trial court denied the defendants' motion for attorneys' fees and costs. Both sides appealed.

The defendants argued that any claims of breach of fiduciary duty and constructive fraud were claims accruing to the association and could not be enforced by Ironman, an association member, or HFP, a party with no rights in the association. The North Carolina Condominium Act (act) establishes a fiduciary duty owed by association officers and directors to both the association and the unit owners.

The appeals court stated that the act imposes a very high standard of duty because the association's board of directors has great power over the owners' property interests and because there is great potential for conflicts between the developer and the owners. As such, Ironman had standing to claim a breach of fiduciary duty against Chodri, but HFP could not pursue such claim because neither the act nor any contract established a fiduciary duty owed by any of the defendants to HFP.

To prove constructive fraud, the plaintiff must show the defendant sought to benefit himself in the transaction in addition to proving that a breach of fiduciary duty occurred. The appeals court could not discern from the evidence whether Chodri intended to benefit personally from the financial mismanagement or whether he was merely negligent in his duties. In any event, Ironman presented sufficient evidence that the claim should have been decided by the jury rather than the judge.

The act requires that any judgment related to the collection of assessments include an award of costs and reasonable attorneys' fees to the prevailing party. With respect to the assessment collection claim, the trial court must determine whether the association was the prevailing party and, if so, award the association its attorneys' fees and costs in pursuing the collection.

Accordingly, the trial court's orders were affirmed in part and reversed in part, and the case was remanded for further proceedings.

Judicial Deference Rule Protects Association Board from Damage to Lots Caused by Common Area Subsidence

Jongerius v. Sun Lakes Country Club Homeowners Association, No. E071715 (Cal. Ct. App. Nov. 1, 2019)

Sun Lakes Country Club Homeowners Association (association) governed a community in Banning, Calif. Lavonne Jongerius, Edward and Denise Cosgrove, Gordon Jensen, and Shumei Chen (collectively, the owners) owned lots in the community.

At the rear of the owners' lots was a common wall. The wall sat at the top of a slope, running downhill into a pond. The association maintained the common wall, the slope, and the pond as part of the common area. The community declaration of covenants, conditions, and restrictions (declaration) obligated the association to maintain the common area in a safe and attractive condition, suitable for the uses and purposes for which it was intended. The declaration further provided that neither the association, its board of directors (board), nor any association officer or director would be liable for any failure to perform any duty, function, or responsibility designated in the declaration unless caused by willful misconduct.

In 2004, the association became aware of slope subsidence and installed crack meters to measure the cracks between the owners' side yard walls and the common wall. In 2006, the association sued the community developer to recover damages for excessive slope creep, slope movement, and subsidence. The association also retained a civil engineer, Dale Hinkle, to analyze the subsidence. Between 2006 and 2010, Hinkle reported on the matter at least once a year. Hinkle found no evidence of slope instability. He observed considerable lateral movement of the site soil fill near the top of the slope, but he found no damage to the houses because they were approximately 20 feet from the top of the slope. He reported that the fill may continue to settle for as much as 10 years.

Each of Hinkle's reports indicated only very slight movement from the previous report, but he found such movement to be typical and saw no cause for alarm. He indicated that the perfect repair would involve installing a caisson-supported wall and grade beam system (caisson wall system) at the top of the slope, but the caissons would need to be installed about 30 feet deep. Hinkle observed that it did not seem reasonable to undertake such a costly, disruptive repair for a slope that was inherently unstable and likely near the end of its creep cycle.

In January 2011, the association settled its lawsuit with the developer for $300,000. It retained a second engineer, Helfrich & Associates, Inc. (Helfrich), to investigate and develop a recommendation for alleviating the damage the slope creep was causing the common wall. Helfrich disagreed with Hinkle's suggested caisson wall system and instead advised that it would be more appropriate to repair the common wall by filling and patching the cracks every few years.

The board concluded that Helfrich's proposed cosmetic repair approach was the most economically feasible since a caisson wall system was estimated to cost over $4 million. It determined that there was no option to prevent slope creep/movement that was of reasonable cost. There also was no option to prevent slope creep/movement that was free of risk of harming the owners' lots during the construction process. As such, the board determined to continue repairing cracks and separations in the common wall as they occurred.

In January 2017, the slope failed, causing substantial damage to the owners' properties, including about 6 inches of lateral movement. The owners sued the association, alleging that the association negligently failed to maintain the slope as required by the declaration. The trial court determined that the California rule of judicial deference (akin to the business judgment rule) barred the owners' claims and dismissed the case. The owners appealed.

The rule of judicial deference applies to the reasoned decision-making of association boards concerning ordinary maintenance decisions. Where a board, upon reasonable investigation, in good faith and with regard to the best interests of the association and its members, exercises discretion within the scope of its authority to select among means for discharging the association's obligation to maintain and repair the common areas, courts should defer to the board's authority and presumed expertise on the matter.

The owners argued that the judicial deference rule applied only to decisions involving common area maintenance and did not apply to damage to private property caused by the association's actions. The appeals court disagreed, stating that anyone who buys in a common interest development is on notice of the association's discretionary power and accepts the risk that such power may be used in a way that benefits the community generally but harms the individual owner.

The appeals court analyzed whether the association satisfied the criteria for the judicial deference rule to apply. It determined that the board extensively investigated the slope creep/movement issue over several years and engaged two engineers to assist it. Hinkle repeatedly reported that there was no cause for alarm, neither engineer thought it reasonable to install a caisson wall system, and the board ended up following Helfrich's advice. There was no evidence of willful misconduct by any board member, nor was there any evidence that the decision was made in bad faith or without regard for the community's best interests. As such, the court must defer to the board's judgment.

Accordingly, the trial court's judgment was affirmed.

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Association Liable for Refusing to Grant Parking Accommodation to Disabled Resident

Lau v. Honolulu Park Place, No. 18-cv-00295-DKW-RT (D. Haw. Dec. 3, 2019)

HPP Association of Apartment Owners (association) governed Honolulu Park Place, a condominium in Honolulu, Hawaii. Wilson and Mabel Lau (the Laus) owned two units where they lived with their adult son, Garrick Lau. Garrick was a quadriplegic and depended on a wheelchair for mobility. The Laus drove a minivan that had been modified to accommodate the wheelchair, which caused the vehicle's undercarriage to sit closer to the ground than an unmodified vehicle.

Unit owners had assigned parking spaces near their respective units, and the Laus' parking spaces were on the third level of the parking garage. To reach their assigned spaces, the Laus had to drive up several ramps, which allegedly caused the vehicle's undercarriage to scrape the ground. The condominium's 44 guest parking spaces were located on the ground level, but the association did not permit residents to park in guest spaces. The association rules provided that parking violators could have their vehicles towed at the owner's expense.

Regardless of the parking rules, the Laus regularly parked in the guest parking for some time without consequence. In 2017, Garrick was allegedly told that the Laus could no longer park in the guest parking, but they continued to do so. As a result, the Laus' vehicle was towed.

Following this incident, the Laus asked the association's board of directors (board) for permission to park in the guest parking as an accommodation. The board denied the request, explaining that they could not grant a resident the right to use parking dedicated for guests in the declaration of condominium regime (declaration) without a vote of the association membership. The association's president offered to trade spaces with the Laus since his space was closer to the building, but the Laus rejected this offer since it still would not give them the ground floor parking they desired.

In 2018, the Laus sued the association, alleging a violation of the Fair Housing Act (FHA). After the suit was filed, the parties agreed that Garrick could use a guest space to park his modified wheelchair accessible vehicle if a space was available; no guest space would be reserved for his exclusive use. The Laus agreed that this was a reasonable accommodation under the FHA.

The association then filed a motion for summary judgment (judgment without a trial based on undisputed facts), arguing that the case was moot since they had satisfied the Laus' request. The Laus argued that the claim was not moot since the association could revoke its permission, particularly since the association had already claimed that it could not grant permission for a resident to park in the guest parking without violating the declaration. The Laus asked the court to bar the association from revoking the accommodation.

The court determined that the association's grant of a non-exclusive right to use the guest parking represented a permanent change in Garrick's parking arrangements at the condominium rather than a temporary policy that the board could then refute once the lawsuit was dismissed. As such, the court held that the Laus' claim seeking an order requiring future action by the association was moot.

That left only the Laus' claims for damages for emotional distress, the costs to recover the towed vehicle, and damage to the vehicle caused by the parking garage ramps. The association denied that the towing recovery cost bore any relation to the board's denial of the Laus' request for an accommodation under FHA. The court agreed because the Laus' only documented request for a parking accommodation occurred after the vehicle had already been towed. The Laus also failed to produce any evidence of damage to their vehicle, so they could not recover monetary damages for such.

However, the court found that a genuine issue of material fact existed as to whether the Laus suffered emotional distress as a result of the board's denial of their request for a parking accommodation. Although the Laus admitted that they did not receive or pay for any mental or psychological treatment as a result of the board's action, in the Ninth Circuit, damages for emotional distress may be awarded based on the plaintiff's testimony alone or appropriate inference from the circumstances.

Each of the Laus testified about their emotional distress over the parking situation. Wilson had a medical condition that was exacerbated when he was upset. He said he could not sleep, and his blood pressure was elevated as a result of the board's decision. Mabel was worried that Wilson might die due to his medical condition, and she was unable to eat or sleep for days and became depressed. Garrick said he felt oppressed and was depressed and deeply disturbed by the board's actions. The court stated that this was sufficient evidence to overcome a motion for summary judgment. A jury must weigh the credibility of the witnesses and the evidence and decide whether emotional distress damages should be awarded.

Accordingly, the association's motion for summary judgment was granted in part and denied in part.

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Association is Not Liable for Injuries to Child Caused by Climbing on Community Signage

Macias v. Summit Management, Inc., No. 1130, Sept. Term 2018 (Md. Ct. Spec. App. Nov. 21, 2019)

Council of Unit Owners of Waters House Condominium (association) governed the Waters House Condominium in Germantown, Md. Summit Management, Inc. (manager) managed the condominium.

In 2013, 8-year-old Damien Macias went with his mother and his two younger siblings, Gabrial (6 years old) and Olivia, to visit his grandparents, who owned a unit in the condominium. Damien and Gabrial went to play outside. They were not supervised by an adult, although their grandmother was gardening with Olivia, and their grandfather could see the boys from a window.

The boys decided to climb the community signage, a 5-foot-tall stone wall in which a flat stone sign was embedded. Gabrial was scared to jump down from that height, so Damien suggested they climb down using the stones for handholds and footholds. Damien grabbed onto the top of the flat stone sign, but it dislodged from the wall, causing both boys to fall to the ground. Damien was able to push Gabrial out of the way, but the sign fell on Damien, causing serious injuries to this chest and legs.

Damien, through his father (also named Damien Macias), sued the association and the manager for negligence. The parties disputed the standard of care owed by the association to Damien. The association asserted that Damien was a trespasser at the time of the injury since there was no express or implied invitation to climb the sign. Mr. Macias argued that the association had a duty to use reasonable care to ensure that the sign was safe. He insisted that there was an implied invitation to climb the sign since there were no warning signs or barriers to prevent climbing.

The trial court categorized Damien as a bare licensee because he was on the sign without the owner's consent, but it steered away from calling him a trespasser, finding that harsh for the little boy. The trial court found it unreasonable that the association would be forced to put a warning on the sign that it should not be climbed. As a bare licensee, the trial court ruled that the association owed Damien only a duty to refrain from willful injury or entrapment. Finding no evidence of such, the trial court granted summary judgment (judgment without a trial based on undisputed facts) in the association's favor. The Maciases appealed.

With respect to entrants onto private property, the property owner owes the highest duty to an invitee, which is a party invited or permitted to enter or remain on another's property for purposes connected with or related to the owner's business. It is expected that a business host will make far greater preparation to secure the safety of its patrons than a homeowner will make for its social guests. A step below the invitee is a social guest, and the lowest duty is owed by the property owner to a trespasser or bare licensee.

The Maryland courts had not previously determined the duty owed by a condominium association to unit owners or their guests since the association is not a property owner. However, the appeals court found that landlord-tenant law was the best approach for dealing with the condominium common areas since the association controls the common areas. As such, the appeals court held that unit owners and their guests have the legal status of invitee when they are in the condominium common areas over which the association maintains control.

Barring any agreements or waivers to the contrary, the association is obligated to exercise reasonable and ordinary care to keep the common areas safe for the invitee and to protect the invitee from injury caused by unreasonable risk which the invitee, by exercising ordinary care for his or her own safety, would not discover. However, a claimant still must show that the association had notice of a dangerous condition or could have discovered the dangerous condition through the exercise of ordinary care.

Therefore, the appeals court ruled that Damien was an invitee while playing in the common areas, and there was no evidence to suggest there were any limits on which portion of the common areas children could or could not play in. There was no barrier or demarcation separating the area around the sign from the rest of the common areas. The appeals court found it reasonable to conceive of children climbing the signage since children have a propensity to climb.

The appeals court cautioned against inferring from the ruling that a property owner must put up signs and barriers all around its property to avoid liability. It was simply that the mere act of climbing an object in a portion of the common areas where Damien was allowed to be did not change Damien's status from invitee to trespasser.

However, even under the most demanding standard of care owed to invitees, some evidence that the property owner knew or should have known of the dangerous condition is required to impose liability on the owner. There was no evidence that the stone sign was loose or likely to fall from its framework or that the association could have discovered a problem with the sign through use of reasonable care. As such, the trial court properly granted summary judgment in favor of the association and the manager.

Accordingly, the trial court's judgment was affirmed.

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Owners Barred from Using Outbuilding as a Permanent Residence for Parents

Napa Valley Owners Association v. Goplerud, No. 18-0918 (Iowa Ct. App. Nov. 6, 2019)

Napa Valley Owners Association (association) governed the Napa Valley Estates community in Dallas County, Iowa. John Goplerud and Leslie Clemenson (the Gopleruds) owned a home in the community.

The community's declaration of covenants, conditions, and restrictions (declaration) required approval from the association's architectural control committee (ACC) prior to making improvements or additions to the lot. The declaration permitted an outbuilding to serve as a guest house but prohibited it from being used as permanent living quarters.

In 2014, the Gopleruds submitted an application to the ACC for approval to construct an outbuilding. They submitted general plans for the building but not interior plans. They also failed to mention that the outbuilding would function as both a garage and as a retirement residence for Clemenson's parents, Lyle and Dorothy Hale. The ACC approved the application, and the Gopleruds commenced construction. The Hales began using the outbuilding as their permanent residence in January 2015.

By June 2015, the association began receiving complaints about the Hales' residence in the outbuilding and the sloppy appearance of the lot. The association’s board of directors (board) requested a meeting to inspect the outbuilding. At the meeting, Clemenson admitted her parents used the outbuilding as their permanent residence and had no plans to leave. The board also observed a problem with the deck attached to the outbuilding, unapproved landscaping, a shed, and a second septic system. The Gopleruds agreed to submit an application for approval of the landscaping, shed, second septic system, and deck.

The ACC approved the applications for the deck and landscaping, but it denied approval for the already constructed shed. The ACC then discovered that a bridge and a berm were being constructed on the property without approval. The association sent several letters to the Gopleruds asking that they comply. When the Gopleruds did not respond, the association filed suit against the Gopleruds, seeking to prohibit use of the outbuilding as a permanent residence and removal of the unapproved structures. The trial court granted the association's request and awarded the association $129,340 in attorneys' fees and $4,140 in costs. The Gopleruds appealed.

The Gopleruds argued that injunctive relief (ordering a party to take or refrain from taking certain action) was an inappropriate remedy. They insisted that the trial court should have considered the harm to both the Gopleruds and the Hales. The Hales had paid for the construction of the outbuilding and did not have other financial resources to obtain other housing.

The appeals court noted that injunctive relief is an extreme remedy and should be granted only when necessary to prevent irreparable harm. While the Hales would be harmed by the order, the appeals court also stated that failing to enforce the declaration would be detrimental to the association and the community. Allowing a second residence on the lot would increase the community's density without the benefit of receiving an additional assessment. Also, the owners relied upon the declaration's enforcement to maintain the community's character. If unapproved structures were allowed to remain, it would inform other owners that they are free to violate the declaration without consequence.

The declaration clearly prohibited a second residence on the lot and also contained an express right to seek injunctive relief to enforce the requirements. The appeals court held that injunctive relief was the appropriate remedy for the declaration violations. 

The Gopleruds complained that the attorneys' fees awarded to the association were excessive, particularly since the association was not successful in its claim regarding the septic system. The trial court found that the total number of hours worked by the association's attorneys and the hourly rate were reasonable based on the number and complexity of the issues, which resulted in thousands of pages of exhibits and an eight-day trial. While the trial court did not order the Gopleruds to correct the septic system because they had already made the correction requested by the ACC, the association could still recover its attorneys' fees in prosecuting this claim because the Gopleruds failed to notify the ACC that they performed the necessary work.

Accordingly, the trial court's judgment was affirmed.

Owners Liable to Association for Filing Illegal Amendments

Roddy v. Holly Lake Ranch Association, Inc., No. 12-18-00261-CV (Tex. Ct. App. Dec. 11, 2019)

Holly Lake Ranch was a planned community comprised of 32 subdivisions in Wood County, Texas. Each subdivision had its own set of deed restrictions, but the deed restrictions required every lot owner to be a member of the same association—Holly Lake Ranch Association, Inc. (association). The deed restrictions provided that they could be amended by a majority vote of the subdivision lot owners, with each owner having one vote per lot in the subdivision.

The association's bylaws empowered the board to exercise all of the association's powers, subject to the Texas Business Organizations Code (corporate code), other governing statutes, the association's articles of incorporation, and the deed restrictions. The bylaws established that each member had one vote in the association, regardless of the number of lots owned. However, the bylaws also specified that the rule in the deed restrictions of one vote per lot owned would be followed with respect to voting on amendments to the deed restrictions.

The bylaws allowed the association's board of directors (board) to adopt dues subject to an annual 10% cap, but required a vote of 51% of the members for special assessments. However, the bylaws gave the board the discretion to waive a fee or dues. The bylaws further established an association lien to secure payment of amounts due to the association.

Between 2014 and 2017, the owners in multiple subdivisions voted to amend their respective deed restrictions. The amendments required a 51% vote for any association dues, assessments, or fees, confirmed that each owner was entitled to one vote per lot, waived the dues and assessments for additional lots for owners of multiple lots, and limited the association's lien to only dues, fees, and assessments approved by the owners.

The association sued Ronald Roddy, Jay Blint, Patsy Jones, Kenneth Mangham, and Shonna Mulkey, the owners who recorded the amendments (collectively, the defendants), seeking a declaratory judgment (judicial determination of the parties' legal rights) that the amendments were illegal and void. The association asserted that the amendments violated the corporate code, which provided that the rights, privileges, and obligations of the corporation's members shall be set forth in the bylaws.

The trial court held that the amendments were void and of no legal effect. The trial court also interpreted the unamended deed restrictions as providing one vote for each member, regardless of the number of lots owned or the number of persons sharing ownership of the lot. The trial court further ordered the defendants to pay the association's attorneys' fees. The defendants appealed.

The appeals court held that the deed restrictions unambiguously allotted votes based on the number of lots owned where voting on amendments was concerned, which was supported by the bylaws. So, it reversed the trial court's judgment with respect to voting.

The appeals court found that the amendments requiring a membership vote for dues and assessments were void because they placed requirements on the association that ran afoul of the bylaws. The amendments created a requirement for the board's ability to levy dues or assessments on a subdivision basis, which divested the members in all subdivisions of their right to vote on assessments.

In addition, the amendment waiving dues for owners of multiple lots conflicted with the bylaws, which stated that dues were to be calculated on a per lot basis. This amendment also undermined the authority of the board by removing the board's discretion to waive fees or dues. The appeals court held that the amendments were invalid since they contravened the authority granted to the board in accordance with the corporate code.

The defendants argued that it was unjust to require them to pay all of the associations' legal fees and costs because hundreds of owners had approved the amendments, whereas the defendants were merely the ones who filed the amendments. Moreover, the trial court acknowledged that the defendants could not have known they were doing anything wrong. Nonetheless, the defendants had the opportunity to join the other owners to the lawsuit but chose not to.

The Texas Declaratory Judgment Act gives the trial court the discretion to award reasonable and necessary attorneys' fees in an amount that is just and equitable. Since the decision of the appeals court with respect to voting substantially affected the trial court's judgment, the appeals court found that a partial remand was warranted so the trial court could address whether the attorneys' fees it awarded to the association were still equitable and just.

Accordingly, the trial court's judgment was reversed in part, affirmed in part, and remanded with instructions.

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Developer's Conduct Transforms Access Easement Rights into More Than Just Ingress and Egress

Sea Watch at Kure Beach Homeowners' Association, Inc. v. Fiorentino, No. COA19-64 (N.C. Ct. App. Nov. 5, 2019)

Sea Watch, LLC (developer) developed Sea Watch at Kure Beach, an oceanfront subdivision in New Hanover County, N.C. Sea Watch at Kure Beach Homeowners' Association, Inc. (association) governed the community.

The developer retained an access easement over Lot 6 in the recorded subdivision plat. Before a residence was constructed on Lot 6, the developer constructed a wooden walkway, deck area, bathrooms, and a tiki bar (the amenities) in the easement area. John and Penelope Fongers (the Fongerses) purchased Lot 6 in 2001, after the amenities were completed. In 2011, the Fongerses sold Lot 6 to Thomas and Leah Fiorentino (the Fiorentinos).

In 2016, the association planned additional improvements to the easement area. The Fiorentinos objected to the contemplated improvements, but the association responded that it did not need their permission to proceed. As tensions between the parties mounted, the Fiorentinos threatened to restrict access to the easement area.

In May 2017, the Fiorentinos disabled the lock on the bathroom door at the tiki bar, wrapped the bar in yellow tape, and posted signs indicating that the bar was closed. The association removed the tape and repaired the lock. The Fiorentinos responded by calling the police. The developer subsequently transferred its easement rights to the association.

The association sued the Fiorentinos, seeking a determination as to the ownership of the easement, an order barring the Fiorentinos' interference with the easement, and damages for trespass and property damage. The Fiorentinos claimed that they owned the amenities and that the association had no easement rights. They sought damages for trespass by the association and its members as well as an order barring the association's use of the easement area.

The trial court found that the marketing for the subdivision specifically mentioned the amenities and that the association had continuously maintained the amenities. In addition, the Fiorentinos had previously acknowledged the rights of other lot owners to use the amenities and had requested that the association repair the amenities.

The trial court determined that since the "access easement" was not defined on the recorded plat, the developer had established the easement's scope by constructing and marketing the amenities. The trial court held that the easement was reserved for the benefit of the association and its members, the association owned property benefitted by the easement, and the association was entitled to sue to enforce the easement for the benefit of its members, although it also ruled that the developer's transfer of its easement rights to the association was of no effect. The trial court further held that the Fiorentinos owned the amenities as part of the land, but the association and its members had the right to use the amenities and that the association had the obligation to maintain the amenities. The Fiorentinos appealed.

The Fiorentinos contended that the easement was only for the benefit of individual lot owners, which did not include the association since it was not a lot owner. The appeals court determined that the plat clearly intended that the easement benefit the other lots in the community by offering access over Lot 6. However, the association also had an ownership interest in the easement since it owned the community common area.

The Fiorentinos argued that the easement rights were limited solely to access—that is, ingress and egress, and the construction of amenities was not authorized. Although it was labeled as an "access easement" on the plat, the appeals court found that it was not limited solely to ingress and egress. It was possible for the parties' conduct to imply the dedication of additional conditions or benefits on the easement.

The appeals court agreed with the trial court that the plat dedication, along with the developer's marketing materials, created not only a right of access, ingress, and egress but also a right to construct and maintain the amenities. Such conduct was not inconsistent with the access easement label. By the time the Fiorentinos purchased Lot 6, the amenities had been in use for about a decade. Further, the Fiorentinos had accepted the use and maintenance of the amenities by others for nearly five years before the dispute arose.

The appeals court ruled that, although the Fiorentinos owned the amenities as fixtures upon the land, they did so subject to the rights of other owners to use the amenities. Accordingly, the trial court's judgment was affirmed.

Debt Collector's Adherence to Generic Forms Were Inaccurate and Misleading

Truhn v. EquityExperts.org, LLC, No. 18-12698 (E.D. Mich. Nov. 20, 2019)

Landsdowne Community Association (association) governed a community in Virginia. Chad and Caitlin Truhn (the Truhns) owned a home in the community.

In 2017, the Truhns missed two quarterly assessment payments due to the association. The declaration of covenants, conditions, and restrictions provided that the association was entitled to recover its costs of collection, including interest, costs, and reasonable attorneys' fees. As of October 2017, the association's ledger showed that the Truhns owed $577, including late fees.

In November 2017, the association retained EquityExperts.org, LLC (Equity Experts) to pursue collection of the Truhns' account. That same month, Equity Experts sent a collection notice informing the Truhns that they owed $847. The letter did not itemize the charges but stated that the debt "may consist of regular association assessments, special assessments, interest, fees, fines and costs, which include amounts incurred by the association to collect the debt." The letter further stated that, if the debt was not paid within 15 days, a lien would be filed against their property.

In January 2018, Equity Experts sent the Truhns another letter stating that a lien had been mailed for recording against their property, and a $395 fee for the attorney's lien preparation charges and the actual lien recording fees had been charged to the account. The letter provided instructions on how to make a payment to obtain a lien release.

Virginia law required that liens be signed by an attorney, so Equity Experts drafted a lien and sent it to an attorney for execution. However, the lien was never filed. In February 2018, Equity Experts sent another notice to the Truhns, stating that a lien remained on the property until the debt was satisfied.

In March 2018, the Truhns paid $2,232 to Equity Experts to satisfy the debt and have the lien removed. They subsequently sued Equity Experts, alleging a violation of the Fair Debt Collection Practices Act (act). The act prohibits a debt collector from using any false, deceptive, or misleading representation or means in connection with the collection of a debt.

The Truhns argued that the November letter was misleading because it failed to itemize the charges or otherwise distinguish the collection charges from the association assessments. Equity Experts argued that the act did not require charges to be itemized. However, the Seventh Circuit Court of Appeals has held that it is misleading to lump an attorney fee charge in with the principal debt as part of an account balance in a collection letter. Equity Experts also created ambiguity in the letter by stating that the debt "may consist of" rather than what it actually consisted of.

The Sixth Circuit Court of Appeals has required that an act violation be materially misleading in order to be actionable. The trial court determined that a jury must decide whether Equity Experts' letter was just sloppy writing or amounted to trickery. Accordingly, it denied summary judgment (judgment without a trial based on undisputed facts) to the Truhns on this claim.

The trial court found that the statements about the lien violated the act. Equity Experts falsely represented that it was actively in the process of recording a lien. This would lead an unsophisticated consumer to believe that legal action was authorized, likely, and imminent. However, a lien still had not been filed more than six weeks after Equity Experts stated that it had been mailed. The letter implied imminence and urgency, but the trial court found Equity Experts' actions displayed nonchalance. The misrepresentation was material because it tended to give the Truhns the false impression that time was of the essence and that severe consequence could ensue without immediate actions, which is precisely the sort of pressure tactics the act prohibited.

Moreover, Equity Experts admitted that the association had not incurred any lien recording costs or attorneys' fees for lien preparation because the charges were refunded to the association. However, what was important was the statement in the letters—that lien fees actually incurred had been added to the debt.

The trial court found such statement to be a material misrepresentation in violation of the act because it led the Truhns into believing their debt was greater than it actually was and that payment was required to release the lien. The trial court granted summary judgment to the Truhns on this claim, but it was not an act violation to include Equity Experts' $350 lien preparation charge in the collection notice. Equity Experts did actually draft a lien, and it did charge the association for such work.

The Truhns further argued that it was illegal to charge them a $100 charge for drafting a release of the never-recorded lien. Equity Experts alleged that the association ordered its bundled "lien preparation package," which included drafting a lien release. The trial court stated that Equity Experts could not charge for not-yet-performed services or recover fees that exceed the actual costs of the work. The trial court stated that it strained incredulity as to whether the association could charge a lien release fee under such circumstances, but it would allow a jury to decide the question.

The act provides that a debt collector may not be held liable if it shows that the violation was an unintentional bona fide error, even though the debt collector maintained procedures reasonably designed to avoid any such error. However, such defense protects debt collectors against liability only for clerical and factual errors, not for legal errors. Equity Experts stood firmly behind its practices and collection forms and never acknowledged any errors.

Accordingly, summary judgment in the Truhns' favor was granted in part and denied in part.