May 2020
In This Issue:
Recent Cases in Community Association Law
Association and Developer Liable for Neglecting Responsibilities
Tenant Had to Explain Need for Emotional Support Cat
Condominium Unit Used for Short-term Leasing Became Subject to New Short-term Leasing Ban
Association Sanctioned for Attempting to Circumvent Bankruptcy Discharge
Declaration Amendments Must be Reasonable and Foreseeable
Revocation is Substantially Different than Amendment
Separately Billed Water Charges Were Not Levied as Assessments
Association Insurance Did Not Cover Defense of Wrongful Foreclosure Suit
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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.


Association and Developer Liable for Neglecting Responsibilities

Brown v. Compass Harbor Village Condominium Association, 2020 ME 44, No. BCD-19-298 (Me. Apr. 9, 2020)

Association Operations: An association and a developer in control of the association were liable to unit owners for neglecting the property and corporate functions, rendering the common areas unusable and causing the units to lose value.


Compass Harbor Village Condominium Association (association) governed a 24-unit condominium in Bar Harbor, Maine. Compass Harbor Village, LLC (developer) developed the condominium, still owned 15 units, and controlled the association. In 2007, Kathy Brown (Brown) purchased a unit for $133,502, and Charles Maples (Maples) purchased a unit for $168,250.

Brown and Maples (collectively, the owners) claimed that the association had not properly maintained the common areas or unit exteriors for years. The pool had algae in it, the roads had potholes, trash was allowed to accumulate in the common areas, and the community laundry appliances did not function. Brown's unit had a rotten place that allowed mice to enter, which the association did not repair for years. Maples' unit had a broken window that was never repaired.

The association refused to provide financial information to the owners, did not hold meetings, or conduct votes on association affairs. In 2013, the association hired a property manager to handle common area maintenance. The manager purchased a unit from the developer, and the developer agreed to deduct $10,000 from the outstanding balance of the manager's promissory note for each year that he served as property manager. The developer then gave itself a $10,000 annual credit from the association to compensate it for the loan forgiveness. The developer also did not regularly pay association assessments for its units.

The owners sued the association and the developer (collectively, the defendants), alleging violations of the Maine Condominium Act (condominium act), the Maine Unfair Trade Practices Act (UTPA), and damages. The owners stated that the lack of maintenance and governance caused them such frustration and mental anguish that they wanted to sell their units. However, the four units sold since 2013 sold at an average loss of $53,000. Maples' unit had not sold after being listed for sale for 297 days. Brown had not listed her unit for sale because she feared the balance still owing on her mortgage exceeded the unit's value.

The developer argued that the failure to hold formal votes on association affairs was harmless because it held a majority of the votes and could decide any matter that might have been put to a vote. The trial court determined that the defendants breached their contractual obligations to the owners, the developer violated its fiduciary duties to the owners, and the defendants violated UTPA.

The trial court awarded $134,900 to Maples and $106,801 to Brown to compensate them for the loss of use and enjoyment of their units and the common areas, devaluation of their units, mental anguish, and frustration. Further, the defendants were ordered to promptly come into substantial compliance with the Compass Harbor Village governing documents, the condominium act, and the Maine Nonprofit Corporation Act (specific performance order). The defendants appealed.

The defendants argued that they were not engaged in any trade or commerce subject to UTPA. UTPA declares unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce to be unlawful. The trial court found that the developer's inconsistent payment of association fees for its 15 units and decision to engage a property manager without a formal association vote to be UTPA violations.

However, transactions made on a private, nonprofessional basis are outside UTPA's scope. The appeals court stated that the UTPA violations identified by the trial court concerned only the association's internal governance or were private actions and did not occur in the conduct of trade or commerce.

Nonetheless, the owners were still entitled to damages for their breach of contract and breach of fiduciary duty claims, and the appeals court found no clear error in how the trial court calculated the damages. The overwhelming evidence showed that the defendants' neglect deprived the owners of the use and enjoyment of their properties and the diminished value of the units.

The defendants further complained that the specific performance order would be difficult or impossible for the trial court to supervise and enforce, and it was an improper double recovery for the owners. A court should order specific performance only when it can dispose of the matter by an order capable of being enforced at once. The appeals court determined that this case did not lend itself to a specific performance order because it would require the trial court to continuously supervise in minute detail whether the defendants were adequately maintaining the property and properly governing the association.

Accordingly, the appeals court vacated the specific performance order and the judgment in the owners' favor on the UTPA claim, but it affirmed the damages awards to the owners.

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Tenant Had to Explain Need for Emotional Support Cat

Furbee v. Wilson, No. 19A-PL-1756 (Ind. Ct. App. Mar. 30, 2020)

State and Local Legislation and Regulations: The Indiana Court of Appeals held that a party requesting a disability accommodation under the Indiana Fair Housing Act and the federal Fair Housing Act to keep an emotional support animal must, at a minimum, inform the housing provider of the nature of the disability and the disability-related need for an emotional support animal.


In October 2016, Shelley Linder (Linder) entered into a lease with Furbee Properties, LLC (Furbee) for an apartment in Muncie, Ind. The lease specified that no dogs, cats, or other animals or pets were permitted on the premises. If a pet was discovered, the lease gave Furbee the right to charge a $500 fine and evict the tenant.

In March 2017, Linder asked Furbee if she could keep an emotional support animal, and she provided a letter from a licensed family and marriage therapist stating that Linder had a disability and needed an emotional support animal to help alleviate her symptoms. The letter did not identify the disability or Linder's symptoms.

Furbee responded that it needed more information to enable Furbee to make an informed decision. Furbee said it needed to know Linder's disability. It also asked how many sessions Linder had with the therapist and how long each session lasted. Furbee asked for Linder's permission to send a questionnaire to the therapist and provided a copy of the proposed questionnaire. The questionnaire asked the therapist whether she had conducted a physical examination or interviewed Linder in person and to describe the nature of the mental or physical impairment and the major life activity with which the disability interfered.

Linder did not provide any additional information to Furbee or sign the consent authorizing Furbee to contact the therapist. As a result, Furbee took no action on Linder's request. In August 2017, Linder brought a cat into her apartment. Furbee imposed a fine and told Linder she had seven days to remove the cat or else face further fines or actions. Linder did not remove the cat. Furbee evicted Linder in December.

In July 2018, Linder sued Furbee, alleging discrimination on the basis of a disability in violation of the Indiana Fair Housing Act. Furbee moved for summary judgment (judgment without a trial based on undisputed facts), arguing that it was not provided with sufficient information to evaluate Linder's disability accommodation request. The trial court denied Furbee's request, finding that Furbee's questions about the extent of Linder's examinations exceeded the reasonable injury to which Furbee was entitled. Furbee appealed.

The appeals court noted that the Indiana Fair Housing Act contained similar language to the federal Fair Housing Act (act), so it examined the federal requirements and case law to evaluate Linder's claim. Under the act definitions, Linder must establish that she was disabled; that she requested an accommodation for that disability; that the requested accommodation was necessary to afford Linder an equal opportunity to use and enjoy the dwelling; and that Furbee refused to make the accommodation. Furbee denied that it refused Linder's request, stating that it could not even meaningfully review the request because it was not given sufficient information.

The appeals court noted that a housing provider's decision as to whether to grant or deny a requested disability accommodation necessarily includes the ability to conduct a meaningful review to determine whether the act requires the requested accommodation. Generally, housing providers need only the information necessary to inform them of the disability and the possible need for an accommodation. Guidance from the Department of Housing and Urban Development indicate that, in most cases, an individual's medical records or detailed information about the nature of the disability are not necessary to make an informed decision.

The appeals court determined that the act contemplated a dialogue in which both parties participated in good faith, and neither party should be able to cause a breakdown in the process. Linder's letter requesting the accommodation neither identified the disability nor explained the limitations or symptoms of the disability. At the very least, Furbee was entitled to know Linder's disability and the disability-related need for the cat. As such, Furbee was justified in trying to open a dialogue with Linder and requesting more information from her.

Linder claimed that she did not respond because Furbee's requests went well beyond what it was permitted to ask. She claimed that Furbee was the one being unreasonable by causing a breakdown in the process. The appeals court stated that, while Furbee's questions about Linder's sessions with the therapist may have been overbroad, its questions about Linder's disability were not. Linder could have answered the relevant questions and ignored the rest. The appeals court held that the overbreadth of Furbee's questions did not relieve Linder from providing the required information. Without such information, Furbee could not have meaningfully considered Linder's request.

Accordingly, the appeals court reversed the trial court's ruling and remanded the case with instructions for the trial court to enter summary judgment in Furbee's favor.

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Condominium Unit Used for Short-term Leasing Became Subject to New Short-term Leasing Ban

Highfield Beach at Lake Michigan v. Sanderson, Nos. 343968, 345177 (Mich. Ct. App. Mar. 24, 2020)

Use Restrictions: The Court of Appeals of Michigan held that the Michigan Condominium Act did not protect a condominium unit under a rental management agreement for short-term leasing from having to comply with an amendment to association bylaws prohibiting short-term leasing.


Highfield Beach at Lake Michigan (association) governed a condominium in South Haven, Mich. The condominium was established in 2007 by the recording of a master deed and association bylaws. The original bylaws prohibited renting a unit for a term of less than 14 days.

In 2008, the association attempted to amend the bylaws to raise the minimum lease term to 90 days. The owners unanimously consented to the amendment, but it did not receive the required approval of mortgagees. Believing that the amendment was not properly approved, the association never recorded it in the land records.

In 2013, Scott Sanderson (Sanderson) purchased a unit in the condominium. In 2015, he signed a 15-year contract with CRA Management, LLC (CRA), authorizing CRA to manage the unit's rentals. The contract was labeled a "Lease Agreement," and it stated that CRA was leasing the unit from Sanderson. However, the contract also stated that the nature of the agreement was for rental management services to satisfy Sanderson's need for revenue for the duration of his mortgage while limiting the scope of CRA's leasing activities to fully comply with the master deed. The contract obligated CRA to pay Sanderson a minimum of $96,000 per year based on a percentage of gross rental proceeds that CRA collected from renters. It also prohibited CRA from leasing the unit for terms of less than 14 days.

In November 2016, the association obtained the consent of two-thirds of the owners and mortgagees to amend the bylaws to prohibit leasing for terms of less than four months. Sanderson claimed the amendment did not apply to his unit because the Michigan Condominium Act (act) provided that an amendment could not affect the rights of any lessors or lessees under a written lease executed before the amendment date. Sanderson and CRA continued to lease the unit for 14-day terms.

In 2017, the association sued Sanderson, seeking a declaratory judgment (judicial determination of the parties' legal rights) and injunctive relief (order mandating or prohibiting certain action). The association asserted that the CRA contract constituted a property management agreement rather than a lease and was not protected under the act. Sanderson counterclaimed against the association and its board members (board) for breach of contract, negligence, and breach of fiduciary duty. Sanderson alleged that the 2008 amendment was properly approved, and the board was obligated to record it. Had it done so, Sanderson said he would have had notice that short-term rentals were disfavored and would have proceeded differently.

The trial court granted summary judgment (judgment without a trial based on undisputed facts) in favor of the association and the board. It also determined that, regardless of whether the 2008 amendment was properly approved, it was never recorded, so the amendment never became effective under the act. The trial court ordered Sanderson and his agents not to lease the unit in violation of the amended bylaws.

The association requested its attorneys' fees and expenses incurred in enforcing the bylaws. The trial court granted the request but deducted 10% from the amount requested because the fees had improperly included the representation of the individual board members. Sanderson appealed.

The act allows the master deed and bylaws to be amended with the consent of at least two-thirds of the owners and mortgagees, even if the amendment materially alters or changes the rights of the owners or mortgagees, but the amendment cannot affect the rights of lessors or lessees under an existing written lease. The act also allows the bylaws to contain restrictions on the sale, lease, and occupancy of a unit.

The appeals court concluded that CRA had no actual right to possess, use, or occupy the unit. It had the authority to rent the unit to others, but when the unit was not rented to third parties, Sanderson retained the right to use it. The contract required Sanderson to furnish and maintain the unit, so CRA had no onsite presence for upkeep. The contract also specified that CRA was in the rental management business. The appeals court held that the contract was clearly a rental management agreement and not a lease. Therefore, the act did not protect Sanderson's rights under the contract.

The appeals court stated that the current board could not be held liable for an alleged breach that did not occur during the board members' terms. The appeals court further found that the association was entitled to recover its attorneys' fees in pursuing Sanderson for breach of the amended bylaws.

Accordingly, the trial court's judgment was affirmed.

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Association Sanctioned for Attempting to Circumvent Bankruptcy Discharge

In re Terrell, No. 19-07629 (Bankr. N.D. Ill. Apr. 8, 2020)

Federal Law and Legislation: The U.S. Bankruptcy Court for the Northern District of Illinois held that an association violated a bankruptcy discharge order when it attempted to evict an owner with the knowledge that the owner's personal liability for delinquent assessments had been discharged by the bankruptcy court.


Beaufort of Gordon Terrace Condominium Association (association) governed a condominium in Cook County, Ill. Ann Terrell (Terrell) owned a unit in the condominium. Terrell became delinquent in paying assessments to the association, and the association filed a forcible entry and detainer action (eviction action) against her in the county circuit court.

In March 2019, Terrell filed a Chapter 7 bankruptcy petition with the bankruptcy court listing the association as a creditor with a claim for past due, pre-petition assessments in the amount of $16,866. The association did not object to the bankruptcy petition, and it dismissed the eviction action against Terrell. In July 2019, the bankruptcy court issued an order fully discharging all of Terrell's pre-petition debts, including the pre-petition association assessments. Notice of the discharge order was sent to the association.

Terrell was current in paying all of her post-petition assessments to the association. Nonetheless, the association reinstated the eviction action, seeking to evict Terrell for nonpayment of $1 in personal liability as well as $17,688 in pre-petition assessments plus legal fees subject to the association's lien. In October 2019, the association obtained an order of possession in the eviction action indicating that Terrell owed $1 in personal liability and $17,688 in rem liability (action taken against property). The circuit court also set a hearing date to consider granting attorneys' fees to the association.

Terrell filed a motion with the bankruptcy court seeking sanctions against the association for violating the bankruptcy discharge order. The Illinois Condominium Property Act (act) provides that the failure to pay association common expenses when due constitutes a lien on the unit, and the act allows the lien to be foreclosed. The act also allows an association to file an eviction action against the defaulting owner with respect to the owner's personal liability to pay the assessments. The only way to avoid eviction is for the defaulting owner to pay the outstanding assessments.

However, Terrell was not in default, and she did not personally owe any assessments because her personal liability for pre-petition assessments had been discharged by the bankruptcy order. A bankruptcy discharge relates to the debtor's personal liability only, and it does not discharge or remove a lien on the debtor's property. Thus, the lien for unpaid assessments remained a lien on Terrell's unit and was subject to foreclosure in accordance with the act.

The bankruptcy court stated that a foreclosure action against Terrell's unit would not violate the bankruptcy discharge order, but an action against Terrell herself (as in eviction) would violate the order. The association argued that it also could pursue eviction to collect on the in rem lien. The bankruptcy court disagreed, finding that the act permitted an association to pursue eviction only with respect to an owner's failure to pay his or her share of the common area expenses. Terrell's pre-petition assessment liability was discharged, and she was current in paying her post-petition assessments. Therefore, there was no basis for an eviction action against Terrell. The bankruptcy court stated that a creditor may not undertake a state law enforcement action to collect a personal liability that was discharged by the bankruptcy court.

The association insisted it was entitled to pursue the eviction as a means to enforce its lien on the property. The bankruptcy court found no legal basis for pursuing an eviction for personal liability based solely upon the property lien. The bankruptcy court ruled that the association's eviction action violated the discharge order.

A bankruptcy court may hold a creditor in contempt for violating a discharge order where there is not a "fair ground of doubt" as to whether the creditor's conduct might be lawful under the discharge order. The bankruptcy court determined that the association clearly understood that pursuing pre-petition assessments was prohibited because it dismissed the original eviction action. Nonetheless, immediately after receiving notice of the bankruptcy discharge order, the association reinstated the eviction action to collect the then-discharged personal debt.

The association could provide no plausible explanation for why it reinstated the eviction action. The bankruptcy court found the association's pursuit of $1 for Terrell's purported delinquent assessments to be further evidence that the association knew it had no basis for pursuing an eviction action. As such, the association was ordered to pay attorneys' fees to Terrell as sanctions for violating the discharge order.

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Declaration Amendments Must be Reasonable and Foreseeable

Kalway v. Calabria Ranch Homeowners Association, LLC, No. 2 CA-CV 2019-0106 (Ariz. Ct. App. Mar. 13, 2020)

Documents: The Court of Appeals of Arizona upheld amendments to a community declaration that were reasonable and foreseeable.


Calabria Ranch Homeowners Association, LLC (association) governed Calabria Ranch Estates, a subdivision in Pima County, Ariz. Maarten Kalway (Kalway) owned one of the five lots in the subdivision.

The lots were subject to a declaration of covenants, conditions, restrictions, and easements (declaration). In January 2018, the three other lot owners in the subdivision (one owner owned two lots) adopted and recorded an amendment to the declaration (amendment). Kalway alleged he was not informed of the amendment until after it had been adopted.

In March 2018, Kalway sued the association and the other owners, seeking a determination that the amendment was invalid since it had not been unanimously adopted. The association disputed that there was any requirement that amendments be approved by all owners.

The trial court determined that both the declaration and the Arizona statutes governing planned communities (act) allowed the declaration to be amended by a majority vote of the owners, but the trial court held that any amendment had to reasonable and foreseeable under the lens of the declaration's statement of residential community purpose—to protect the value, desirability, attractiveness, and natural character of the community.

The trial court concluded that certain changes were invalid because they would unreasonably and unforeseeably alter the nature of the covenants contained in the declaration. In particular, the trial court struck changes involving a prohibition on the subdivision of or improvements to a lot without a majority vote of the owners; a restriction on lot and dwelling size; authorization for a special assessment against specific lots as determined in the sole discretion of the association's manager; authorization of sanctions; and self-help remedies by the manager. The trial court found the remaining changes to be validly adopted. Kalway appealed.

The appeals court agreed that the declaration could be amended by a majority vote of the owners. When an owner takes a lot subject to a declaration that allows for amendment by the vote of a majority of the owners, the owner implicitly consents to the subsequent majority vote. The appeals court also agreed that an otherwise properly amended declaration could be invalid if the amendment unreasonably altered the nature of the declaration's covenants or if the original declaration did not contain or provide for later adoption of a particular restriction. In other words, an owner can only be bound by what he or she had notice of when accepting the property.

The appeals court found that new definitions for "garage," "dwelling," and "improvement" added by the amendment gave clarity to the declaration and neither altered the declaration's nature nor were unforeseeable. The amendment limiting the size of non-dwelling structures and avoiding obstruction of mountain views was reasonable and consistent with the desire to protect the subdivision's value, attractiveness, and natural character.

The appeals court also stated that it was reasonable to anticipate that the declaration's limits on the type and number of animals that could be kept on lots and setback limitations might be further restricted or expanded. The declaration originally provided that owners could construct structures of any kind on lots. The appeals court determined that the amendment restricted "structures of any kind" to align with the declaration's purpose of protecting the subdivision's value, desirability, attractiveness, and natural character. Thus, the amendment's additional restrictions on construction and animals were both foreseeable and reinforced the declaration.

Kalway argued that the new livestock restriction was invalid against his lot because it had a peculiar effect on his lot rather than uniform application against all lots. The amendment prohibited keeping more than six livestock animals per 3.3 acres, and chickens, horses, and cattle were the only permitted livestock. The appeals court determined that the livestock restriction applied to and was valid against all lots. The appeals court further determined that the amendment adding special assessments was proper because it applied to all lots and was an expansion of the annual assessment provisions in the original declaration.

Accordingly, the trial court's judgment was affirmed.

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Revocation is Substantially Different than Amendment

Sciara v. Edwards, 839 S.E.2d 876 (N.C. Ct. App. Apr. 7, 2020)

Documents: The Court of Appeals of North Carolina held that a developer could not use its right to amend a declaration in order to revoke an individual lot from the declaration's coverage.


Gwen and William Edwards (collectively, the developer) developed the Ban Branch Development in Jackson County, N.C. In 2005, the developer recorded a declaration of protective covenants (declaration) against the development.

In 2014, Nancy and Steven Sciara (the Sciaras) purchased Lot B in the development. In 2017, the developer recorded an amendment to the declaration (amendment) granting a "variance" to Lot A from adhering to the declaration. The developer then sold Lot A to Alane Siem (Siem).

The Sciaras filed suit against the developer and Siem. The Sciaras alleged that the declaration granted a septic easement over Lot A for the benefit of Lot B and permitted the owners of Lot B to take water from a well on Lot A. The Sciaras argued that the amendment would deprive them of these rights. They sought a declaratory judgment (judicial determination of the parties' legal rights) as to their septic easement, water rights, and the validity of the amendment.

The trial court determined that the amendment was valid and that Lot B was not subject to the declaration, but it ruled that the Sciaras had valid septic and water rights, which were not dependent upon Siem's permission. The Sciaras appealed.

The Sciaras argued that the declaration was intended to enhance the development's value and that it was improper for the developer to unilaterally revoke the declaration's application to an individual lot. The developer specifically reserved in the declaration the rights to grant variances and to amend or add additional covenants and restrictions. The declaration specifically stated that the intent was to "grant variances and add terms, restrictions, and covenants which may not have been included in this document that may protect and enhance the quality and value of the development or which may cause undue hardship to a lot owner."

The Sciaras contended that removing the declaration's application to Lot A did not constitute an amendment or variance, did not benefit the development, and may actually diminish the development's value based on actions Siem might take on the unrestricted Lot A.

The appeals court noted that, while any amendments adopted by a homeowners association must comport with the intent of the original declaration, a developer who has specifically reserved a right to unilaterally amend or vary the declaration's terms in its discretion has much broader authority. In such a case, the developer may have the authority to change even the nature of the development as needed.

However, the appeals court determined that the amendment was no variance from the declaration's terms or an amendment to the declaration. Rather, the developer completely revoked the covenants and restrictions with respect to Lot A. The appeals court stated that a revocation and an amendment are distinctly different. Although the developer reserved the right to grant variances, to amend the existing covenants and restrictions, and to add additional covenants and restrictions, nowhere did the developer reserve the right to completely revoke the declaration with respect to an individual lot. As such, the developer acted beyond its authority, and the amendment was void.

The appeals court emphasized that its ruling that the amendment was void was strictly limited to the facts and circumstances in this case. The appeals court stated that the ruling should not be read to imply that a developer cannot properly reserve the power to revoke covenants and restrictions or to withdraw property from a declaration's coverage. The authority to do so was simply not reserved in this case.

Accordingly, the trial court's judgment upholding the amendment was reversed, but the judgment ruling that the Sciaras had valid water and septic rights was affirmed.

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Separately Billed Water Charges Were Not Levied as Assessments

Sherwood Commons Townhome Owners Association, Inc. v.DuBois, 2020 IL App. (3d) 180561, No. 3-18-0561 (Ill. App. Ct. Apr. 2, 2020)

Assessments: The Appellate Court of Illinois held that an association could not evict an owner for failure to pay water charges because the water charges were never included in the association's common expense budget or levied as an assessment.


Sherwood Commons Townhome Owners Association, Inc. (association) governed a condominium in Will County, Ill. Ricardo DuBois (DuBois) owned a unit in the condominium.

In December 2017, the association notified DuBois that he owed $1,263 to the association. The declaration of condominium for Sherwood Commons (declaration) provided that any assessment not paid within 30 days after the due date was delinquent. It stated that the association could bring an action against the unit owner personally obligated to pay assessments to recover delinquent sums plus interest, costs, and reasonable attorneys' fees for such action. The association also could enforce and foreclose any lien it had on the owner's unit.

In May 2018, the association sued DuBois to collect the past due amounts under the Illinois Condominium Property Act (condominium act) and to evict DuBois under the Illinois Forcible Entry and Detainer Act (FEDA). The association submitted a ledger showing DuBois' delinquent amount was for charges from American Utility Management (AUM). The association's manager testified that AUM was the third-party water billing vendor that separately billed each unit for water charges. DuBois testified that he had contacted the manager to find out why his monthly water charge had nearly doubled, and he was told he had to contact AUM. DuBois said AUM told him that it was just the billing company, and there was not anything it could do about the water bill.

DuBois disputed that the water bill was a common expense or assessment, and he felt that the legal action was unfair considering that he had been trying to get information about the water charges. The declaration authorized the association to assess and collect from owners amounts necessary to pay the association's common expenses.

The trial court determined that the water charges were not assessments and that DuBois had paid all of the assessments due to the association. The declaration obligated the association's board of directors to adopt a budget for the estimated annual common expenses and to levy an assessment accordingly. The water charges were neither part of the association's annual budget nor were they adopted by the board. The trial court ruled that FEDA did not permit eviction for charges other than assessments. DuBois still owed the water charges, but the association was not permitted to pursue eviction because of water charges that were not assessments. The trial court ruled in DuBois' favor, and the association appealed.

The association argued that it had broad authority to determine its expenses, and the water charges should have been considered common expenses. The condominium act obligates each unit owner to pay a proportionate share of the common expenses, and it defines "common expenses" as the proposed or actual expenses affecting the property. The condominium act obligates the board to adopt a detailed annual budget setting forth, with particularity, all anticipated common expenses by category as well as anticipated assessments based on such common expenses. Then, the board must provide each owner with notice of the budget and assessment.

The condominium act allows an association to file a forcible entry and detainer action (eviction) against a defaulting owner based upon the failure of an owner to pay his or her proportionate share of the common expenses. The appeals court held that, while the condominium act gave the board broad authority to determine the common expenses, the board did not include water charges among the association's common expenses in the adopted budget in order to consider it an assessment. The appeals court also concluded that the AUM ledger was not an actual bill and did not include any evidence showing how the water charges were actually owed to the association as opposed to AUM or any other separate utility provider.

The association asserted that the failure to pay the water charges constituted a breach of contract because the declaration obligated DuBois to pay the water charges. The appeals court stated that the association had presented no evidence that it had established the water charges pursuant to the declaration. The declaration allowed the association to levy "user charges" separate and apart from assessments. However, the association did not prove how much DuBois owed for water and provided no information about how the bill was calculated after DuBois disputed the charges. In any breach of contract claim, the plaintiff has the burden of establishing the correct measure of damages based on the defendant's breach of the contract.

Accordingly, the trial court's judgment was affirmed.

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Association Insurance Did Not Cover Defense of Wrongful Foreclosure Suit

Travelers Indemnity Company of Connecticut v. University Hall Condominium Owners Association, No. 18-2551 (JDB) (D. D.C. Mar. 30, 2020)

Risks and Liabilities: The U.S. District Court for the District of Columbia ruled that an association did not have insurance coverage to cover its defense in a wrongful foreclosure lawsuit by an owner.


Hazel Thomas (Thomas) owned a unit in the University Hall Condominium in Washington, D.C., which was governed by University Hall Condominium Owners Association (association). The association foreclosed on Thomas' unit.

In 2013, Thomas sued the association, James Buckley (Buckley), and Tilton Bernstein Management Company (collectively, the defendants), alleging that the association wrongfully foreclosed on her unit in a scheme that allowed Buckley to purchase the unit for a significantly reduced price (the Thomas suit). Thomas alleged that the defendants effected the scheme by filing a lien and notice of a foreclosure sale without providing notice to her.

The association was insured by Travelers Indemnity Company of Connecticut (Travelers), and Travelers initially defended the association in the Thomas suit, subject to a reservation of rights. Travelers filed suit against the association, seeking a determination that it was not obligated to provide coverage to the association under the insurance policy with respect to the Thomas suit.

An insurance company's duty to defend the insured depends on the allegations of the plaintiff's complaint. If the facts alleged in the complaint would give rise to liability under the policy if the plaintiff were to prevail, the insurer must defend the insured. The analysis is based entirely on the plaintiff's complaint, and the defenses available to the defendant do not enter into the analysis.

The association's insurance policy provided two types of coverage. Coverage A provided coverage for bodily injury or property damage caused by an occurrence. Coverage B covered personal injury arising out of offenses specified in the policy.

The policy defined "occurrence" as an accident, including continuous or repeated exposure to substantially the same general harmful conditions. Travelers argued that Thomas alleged only intentional conduct, not an accident. The policy did not define "accident," but the D.C. courts previously determined that accidents do not include injuries that were a natural or probable result of the insured's actions and were reasonably foreseeable by the insured or by a reasonably prudent person in the insured's position.

The court determined that Thomas' complaint alleged intentional conduct rather than anything unintentional or unforeseeable. She described a deliberate scheme whereby the association deprived Thomas of her unit through improper means. The injuries Thomas alleged as a result of being deprived of her home were all reasonably foreseeable results, and even the intended results, of the association's foreclosure. The court found nothing in Thomas' complaint that could be construed as anything close to an accident. Thus, Travelers had no duty to defend the association under Coverage A.

One of the specified offenses covered under Coverage B was malicious prosecution (maliciously pursuing legal action without probable cause). The association asserted that, while Thomas did not allege malicious prosecution, she did allege abuse of process (misuse of the legal process with an ulterior motive), and the two types of claims are similar and overlap in meaning and purpose. The association argued that Thomas' abuse of process claim should be covered under the policy's coverage for malicious prosecution.

The court stated that, under D.C. law, claims for malicious prosecution and abuse of process are distinct and not interchangeable, and the policy's coverage for malicious prosecution cannot simply be read to include abuse of process claims. A majority of other courts around the country have determined that abuse of process claims are not covered under insurance policies providing coverage for malicious prosecution. The court decided to take the majority position and ruled that Coverage B did not include coverage for Thomas' abuse of process claims.

The court ruled that Travelers did not have a duty to defend the association with respect to the Thomas suit, and it granted summary judgment (judgment without a trial based on undisputed facts) in Travelers’ favor.

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