November 2020
In This Issue:
Recent Cases in Community Association Law
Association Not Bound by Later-created Road Maintenance Agreement but Still Obligated to Share in Road Maintenance Costs
Association Not Liable for Faulty Wiring Inside Unit of Which it Had No Knowledge
Large Detached Structure Qualifies as a Garage
Prohibition on Business Use of Lots Did Not Forbid Leasing
Association Did Not Have to Grant Unnecessary Accommodations for Owners' Disabilities
Noisy Pool Pump is a Common Law Nuisance
No Constitutional Violation Occurred When Foreclosure of Association Superpriority Lien Extinguished Mortgage
Maryland Condominium Act Suggests that Notice of Board Meetings Must be Given to Owners
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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, CAI’s College of Community Association Lawyers prepares a case law update annually. Case law summaries along with their references, case numbers, dates, and other data are available online.

Association Not Bound by Later-created Road Maintenance Agreement but Still Obligated to Share in Road Maintenance Costs

Bayberry Group, Inc. v. Crystal Beach Condominium Association, 349378 (Mich. Ct. App. Oct. 22, 2020)

Risks and Liabilities: The Court of Appeals of Michigan held that a reference to a road easement in a condominium master deed was insufficient to make the road part of the common elements, but the association had an obligation under common law to share in the road maintenance costs.

The Homestead was a recreational resort on the shores of Lake Michigan in Leelanau County, Mich. The resort's development began in the 1970s with the construction of five condominiums, four of which were governed by Crystal Beach Condominium Association, Gentle Winds Condominium Association, Great Lakes Condominium Association, and Tall Timber Condominium Association (collectively, the defendants).

Bayberry Group, Inc. (Bayberry) was the successor developer for the resort. Additional condominium projects as well as a beach club were added to the resort over the years. South Homestead Road (SH Road) connected the defendants' condominiums and other properties in the resort to a public highway. Portions of SH Road crossed the properties for three of the defendants' condominium projects.

In 2013, Bayberry began talking to the various associations operating in the resort about entering into a common area maintenance agreement (CAM agreement) to share costs of maintaining SH Road and other shared areas in the resort. The CAM agreement provided for maintenance of all "roadway areas" in the resort, including SH Road, other roads, lawns, and planting beds or other landscaping lying within the roadway easement. A majority of the associations signed the CAM agreement, but the defendants did not.

In 2017, Bayberry sued the defendants after they refused to pay the fees under the CAM agreement. Bayberry alleged that an easement over SH Road was a common element of each condominium project and that the condominium master deeds made the defendants responsible for the maintenance, repair, and upkeep of SH Road.

The trial court held that an SH Road easement was not a common element of the defendants' condominiums and that the defendants had no contractual obligation for SH Road's maintenance, repair, or decoration. The trial court determined that Bayberry was entitled to future expenses for the maintenance of SH Road under common law. However, the doctrines of waiver and laches (unreasonable delay to assert a claim that caused prejudice to the party against whom the claim is made) barred Bayberry's claim for past maintenance costs since no one had ever asked the defendants to pay for such in the 35 years since their creation.

The trial held that the defendants were obligated under common law to contribute their proportionate share of the costs of maintaining and repairing that portion of SH Road necessary for their residents' safe ingress and egress based on usage. The trial court stated that the defendants' responsibility was limited to the costs associated with salting, sanding, snowplowing, keeping SH Road clear of debris, and repair, replacement, and repaving the road and road drains. In particular, the defendants were not responsible for landscaping, mowing, irrigation, lighting, or signage along SH Road since they were not essential to maintain safe passage. The trial court said that the future repair and maintenance costs were to be distributed among all users of SH Road in proportions that closely approximated such parties' usage, and it created a formula to calculate costs. Bayberry appealed.

The Michigan condominium act (act) requires that the master deed or other condominium documents include specific details about any easements for the condominium. The defendants' master deeds referenced an easement over SH Road for ingress and egress to the condominium from the highway. However, the master deeds did not indicate that the easement was a common element, nor did they include any reference to maintenance, repair, or other financial obligations for the easement as required by the act.

Bayberry argued that SH Road could be considered a common element because the master deeds indicated that the common elements included other such project elements not enclosed within a unit's boundaries and are intended for common use or are necessary to the existence, upkeep, and safety of the project, including but not limited to, stairs, laundry rooms, and storage areas. Bayberry argued that the SH Road easement was necessary because the residents would not have access to the condominiums without the easement.

Although the master deeds did not provide an exhaustive list of the "other elements" in the projects, the appeals court found that the examples given were all located within a building and were not of the same category as a road. Thus, the generic reference could not be read as including SH Road.

This did not mean that the defendants had no obligations with respect to SH Road. Under common law, the holder of an easement is responsible for making the repairs and improvements necessary to the effective enjoyment of the easement. Therefore, the defendants were obligated to share in the costs of making such repairs and improvements to SH Road that were incidental to and part of the residents' ability to safely enter and leave their respective condominiums.

Bayberry argued that the responsibility should extend outside of the road's paved area to include the streetscape elements such as grass, irrigation, landscape beds, trees, lighting, signage, and curbs. The appeals court failed to see how maintaining the ornamental streetscape assisted the residents with safely entering and leaving their condominiums.

Under common law, the costs of maintaining an easement enjoyed by multiple property owners are to be shared by the parties in proportion to each party's use. The trial court crafted a formula based on the quantity of units in each condominium and the distance that the residents had to travel over the road. The trial court also found that the road was used by owners of other properties outside of the defendant condominiums and by employees and service providers of the resort as well as visitors. The trial court fashioned an allocation formula that attributed such parties' road use to Bayberry.

The appeals court found no error in the basic allocation methodology, but some of the specific numbers may have been based on speculation. Extensive testimony was presented concerning the amount of traffic on the road, but no traffic study or actual traffic count had been conducted. The proportion attributable to each party must be reasonably based on actual use rather than speculation.

The trial court erred in ruling that laches prevented Bayberry from recouping compensation from the defendants for past SH Road maintenance because it was necessary to first determine that Bayberry's extensive delay in seeking compensation caused prejudice to the defendants.

Accordingly, the trial court's judgment was affirmed in part and vacated in part. The case was remanded for the trial court to make factual findings concerning the parties' actual use of the road and whether the defendants had been prejudiced by the delayed request for compensation.

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Association Not Liable for Faulty Wiring Inside Unit of Which it Had No Knowledge

Bergeson v. West Frontier Condominiums HOA, Inc., No. 2 CA-CV 2019-0117 (Ariz. Ct. App. Oct. 30, 2020)

Risks and Liabilities: The Court of Appeals of Arizona held that a condominium association was not responsible for defective wiring in a unit that caused a fire when it had no knowledge of a defect or reason to open walls inside a unit for inspection.

West Frontier Condominiums HOA, Inc. (association) governed a condominium in Payson, Ariz. David and Joan Levengood (the Levengoods) owned a unit in the condominium, which they rented to Lynn Bergeson (Bergeson).

In 2006, Bergeson asked the Levengoods for permission to replace an overhead living room light fixture in the unit with a ceiling fan, which the Levengoods granted. No one asked the association for permission for the alteration. The following year, a smoldering fire ignited in the wiring above the fan, which produced lethal levels of carbon monoxide that killed Bergeson.

In 2008, Bergeson's children, Christopher and Amy Bergeson (the children), brought a wrongful death suit against the Levengoods and the association. Prior to trial, the case made its way to the Arizona Court of Appeals twice on procedural and technical matters and to a federal court to determine whether the Levengoods' insurance covered the claim.

When the case made its way back to the trial court, the association moved for judgment as a matter of law (judgment in favor of party when the opposing party has presented insufficient evidence to reasonably support its case). The trial court denied the association's motion, and the case proceeded to a jury trial. The jury determined that the association had negligently caused Bergeson's death and returned a verdict in favor of the children. The jury apportioned 75% of the fault to the association and 25% to other persons who were not part of the lawsuit.

The association appealed, contending that the trial court erred by denying its motion for judgment as a matter of law. The children's claim was based on an assertion that the association had negligently failed to use reasonable care to discover and fix faulty wiring above the ceiling fan. To prove negligence, a party must show that a duty was owed by the defendant to the plaintiff, a breach of that duty occurred, and an injury was proximately caused by such breach. The association asserted that there was no evidence that it breached a duty to Bergeson.

The children's expert opined that electrical code violations in the ceiling, specifically the lack of a junction box and unsecured electrical wiring, could have created a short circuit and caused the fire. By contrast, the association's expert said that it was the ceiling fan's improper installation that caused the fire.

The trial court instructed the jury that a business owner has a duty to use reasonable care to warn of or remedy an unreasonably dangerous condition of which it has notice. The jury could find that the association has notice of an unreasonably dangerous condition if (1) the association or its employees created the condition, (2) the association or its employees knew of the condition, or (3) the condition existed for a sufficient length of time that the association or its employees, in the exercise of reasonable care, should have known of it.

In 1985, the condominium was completed, and the electrical work was inspected and approved by the Town of Payson. The children asserted that the association should be deemed to stand in the builder-developer's shoes, and any negligent construction should be attributed to the association.

The children presented no legal theory as to how the initial construction was deficient or negligent when the developer obtained the necessary permits and the construction passed all required inspections. In addition, there was no evidence that the association assumed the developer's liabilities or that the association was a continuation of the developer. Thus, neither the association nor its employees or contracts could be considered to have created the defective condition in the unit.

Even the children's expert said there would have been no reason for the association to have known or suspected that there was faulty wiring in the ceiling. The children presented evidence of several electrical code violations discovered in the kitchen after the walls were cut open, including exposed wiring, missing nail plates, and the wrong kind of electrical outlet. However, there was no evidence that the association knew or could have known about the electrical deficiencies hidden in the walls inside the unit.

Absent any reason to suspect faulty wiring, it would not have been reasonable for the association to enter a privately owned unit and cut open walls and ceilings. Also, even the children's expert testified that the kitchen wiring issues had nothing to do with the fire. The appeals court found that it was unfairly prejudicial to the association for the irrelevant kitchen electrical issues to be presented to the jury, because it allowed them to conclude that the association was at fault for Bergeson's death due to electrical issues of which the association was entirely unaware.

The children insisted that, even if the association lacked notice of the dangerous condition, it remained liable because it improperly ceded responsibility for a "non-delegable duty." This was based on the legal principle that a property owner cannot avoid liability for the negligence of its contractors, regardless of whether the owner had notice of the negligent condition. The appeals court said that, absent any evidence of negligence by the association or any of its agents, the instruction to the jury about liability for non-delegable duties was not supported by the facts.

The children maintained that the association should be viewed as entrusting the unit owners with the responsibility of altering the common elements since the association "allowed" the common elements to be altered without enforcing the notice and approval requirements established in the condominium documents. However, the condominium declaration made each unit owner responsible for maintaining and repairing any electrical fixtures that served only the owner's unit.

The appeals court vacated the trial court's judgment because it permitted the jury to rely on irrelevant evidence and gave inappropriate instructions to the jury, which effectively held the association to an improper standard approaching strict liability for a tragic accident. The case was remanded with instructions for the trial court to enter judgment in favor of the association.

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Large Detached Structure Qualifies as a Garage

Buehrens v. Schave, No. 2019AP1649 (Wis. Ct. App. Oct. 7, 2020)

Use Restrictions: The Court of Appeals of Wisconsin held that a restriction permitting a detached garage was broad enough to encompass a large structure to house larger vehicles and trailers, since the covenants clearly contemplated the existence of larger vehicles and equipment.

Michael and Rochelle Schave (the Schaves) owned a home in a community in Fond du Lac County, Wis. The community was subject to restrictive covenants (covenants).

After the Schaves began constructing a building on their property detached from the home, several neighboring lot owners, including Daniel and Wendy Buehrens (collectively, the neighbors), contacted the Schaves, asserting that the building violated the covenants because its size rendered it something other than a garage. The Schaves continued on with construction.

The completed structure was 36 feet by 80 feet and 16 feet high and contained an electric garage door. The Schaves said that they intended to use the building as a garage for parking vehicles and trailers. The covenants provided that the only building allowed on the lot besides a residence was a garage.

The neighbors sued the Schaves, claiming that the structure was a pole barn, pole shed, or post-framed building but not a garage. They sought to enforce the building restriction and for an order requiring the building's removal. The trial court granted summary judgment (judgment without a trial based on undisputed facts) in favor of the Schaves, finding that the structure was permissible because the covenants did not qualify the term "garage." The neighbors appealed.

For restrictive covenants that limit the free use of property to be enforceable, the restriction must be expressed in clear, unambiguous terms. Courts should not look to the general intent of the document's drafters and should determine the meaning of the restriction from the words actually used. Where words are not defined in the covenant, they are given their ordinary meanings.

The covenants did not define the term "garage," but the dictionary defined the term as a building or compartment of a building used for housing an automotive vehicle. The appeals court found that the common and ordinary meaning of "garage" was not limited to a certain size or material. The only requirement was that the building be used to store vehicles.

The appeals court found other provisions of the covenants helpful in determining the scope of the garage restriction. The covenants prohibited parking or garaging a truck larger than three-quarter tons anywhere in the subdivision. No trailer, farm vehicle, or farm equipment could be parked outside. Also, only one boat could be parked outside, and it could not exceed 20 feet.

Therefore, the covenants contemplated that certain vehicles and equipment larger than a passenger vehicle would be parked "inside." These vehicles and equipment were not prohibited in the community, only that they could not be parked outside. The appeals court stated that it followed that large garages must be allowed for inside storage of these larger items.

The neighbors contended that just because the large items could not be parked outside did not necessarily mean that they could be parked inside of a garage. However, the provision precluding large trucks addressed both parking and garaging. As such, the covenant drafters clearly knew how to preclude inside parking or garaging of large vehicles but chose not to prohibit them except in the case of large trucks. The failure to restrict such use explicitly and unambiguously favored the free and unencumbered use of the property.

The appeals court noted that the covenants specified the permitted dimensions for homes but said nothing about any size limitations on garages. The appeals court thought the absence of any such restrictions spoke volumes about the drafters' intent.

The neighbors urged that the post-framed building was not a typical garage. The appeals court declined to add building restrictions that were not unambiguously stated in the document. The ordinary meaning of "garage" did not contain size or construction requirements but focused on the purpose of the structure—to store vehicles. Moreover, since the covenants clearly contemplated that larger items might be stored inside of a garage, the covenants should not be read as limiting construction to only materials customarily used for building a typical two-car garage.

The neighbors protested hypothetical future uses of the large structure, such as an airplane hangar. However, the Schaves testified that they intended to use the building as a garage, and the appeals court had to limit its analysis to the facts presented.

Accordingly, the trial court's judgment was affirmed.

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Prohibition on Business Use of Lots Did Not Forbid Leasing

The Golf Club of Wentzville Community Homeowners Association v. Real Homes, Inc., No. ED108554 (Mo. Ct. App. Oct. 20, 2020)

Use Restrictions: The Court of Appeals of Missouri held that a declaration's prohibition on using lots for commercial or business purposes did not include a prohibition on leasing, particularly where the declaration expressly permitted “for lease” signs and required tenants to comply with the declaration.

The Golf Club of Wentzville Community Homeowners Association (association) governed a community in St. Charles County, Mo. The community was subject to an amended and restated declaration of covenants, conditions, and restrictions adopted in 2000 (2000 declaration).

Roy and Stephanie Jumps (the Jumps) purchased a home in the community in 2003. They lived in the home until 2010, when they began renting it out without objection from the association. The association issued pool passes for the Jumps' tenants on an annual basis during this time. Between 2004 and 2007, the Real Homes, Inc. and Amirali and Janet Jabrani (collectively, the Jabranis) purchased four homes in the community, which they rented out.

In 2018, the association sued the Jumps and the Jabranis (collectively, the defendants), asserting that leasing their homes violated the 2000 declaration. The 2000 declaration provided that no lot shall be used for any business or commercial purpose, and each lot shall be used solely for residential purposes. It contained several references to tenants or rent, but the association suggested that these terms were merely left behind in the restated document in error by the drafters.

The trial court agreed with the association and held that the 2000 declaration's prohibition on business or commercial use included a prohibition on rentals. The trial court issued a permanent injunction (order prohibiting or mandating certain action) barring the defendants from further renting their homes.

The defendants appealed, arguing that the 2000 declaration did not prohibit renting their homes because renting a home as a single-family residence did not constitute a business or commercial purpose. The appeals court held that, absent express language in the 2000 declaration indicating otherwise, the rental of residential property to tenants for living purposes constituted a residential purpose.

The 2000 declaration contained no express prohibition on renting the homes. In fact, it expressly permitted a “for lease” sign to be posted on the lot. It also required each owner to comply with the provisions of the 2000 declaration and to cause its family, guests, tenants, and invitees to comply with such provisions. The appeals court found the references to tenants and “for rent” signs to be a clear indication that renting the homes was permitted. The association merely speculated that the references to tenants and rentals were a drafting mistake, but it could provide no evidence of a mistake. The association had the burden of proving that the use being made of the property was in violation of the 2000 declaration, and it could not meet that burden by merely suggesting a drafting error.

Shortly before the lawsuit was filed, the association adopted a second amended and restated declaration (2017 declaration) for the purpose of including an express prohibition on leasing. This showed that the association knew the 2000 declaration did not prohibit leasing. The defendants were already renting their homes at the time of the 2017 declaration, and the association did not attempt to enforce the 2017 declaration's leasing prohibition against the defendants. Rather, it insisted that leasing had been prohibited since before the defendants purchased their lots.

Accordingly, the trial court's judgment was reversed, and the case was remanded for further proceedings.

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Association Did Not Have to Grant Unnecessary Accommodations for Owners' Disabilities

Phillips v. Acacia on the Green Condominium Association, Inc., No. 1:19CV1277 (N.D. Ohio Oct. 7, 2020)

Federal Law and Legislation: The U.S. District Court for the Northern District of Ohio found that unit owners were not entitled to accommodations under the federal Fair Housing Act because their requested accommodations were merely convenient and did not address the effects of their disabilities.

Acacia on the Green Condominium Association, Inc. (association) governed a 273-unit condominium in Lyndhurst, Ohio. Gene Phillips (Phillips) and Stephen Weiss (Weiss) lived next door to one another in the condominium.

The association rules prohibited residents from keeping grills on their patios and balconies. The grill ban was in place due to concerns about open flames in close proximity to a multiunit building, to prevent rodents and small animals from being attracted to grease and food droppings often associated with grilling, and to prevent unwanted odors and smoke from grills spreading to other units. However, the association maintained a pavilion with grills in the common area for the residents to use.

In 2013, Weiss asked the association for permission to use a gas grill on his patio and promised to keep the grill at least 10 feet away from the building as required by the fire code and to have a fire extinguisher available. Weiss gave a number of reasons related to convenience for wanting a personal grill. The association denied the request. Over the years, Weiss renewed his request, which the association continued to reject.

Five years after his original request, Weiss again asked for permission to keep a grill on his patio, but this time he asked for a reasonable accommodation under the federal Fair Housing Act (FHA) for people with disabilities. His letter did not identify any disability, and the association denied the request.

Weiss later sent the association a letter from his treating immunologist, explaining that it was necessary for Weiss to have a grill on his patio due to his disability from lymphoma and circular vascular immunodeficiency. The two diseases substantially affected Weiss' ability to walk. Weiss did not use a cane or other mobility aid. In fact, he parked in the condominium garage and regularly walked to his car, which was about the same distance from his unit as the common area grilling pavilion. However, the combined effect of the diseases and their treatments periodically left him extremely exhausted and too weak to walk more than a few steps within his unit.

In 2018, Phillips also asked the association for permission to have a grill on her patio after getting aggravated because her friends who lived elsewhere had their own grills. After the association denied her request, Phillips spoke to Weiss about the situation. Phillips then submitted another request asking for a grill based on the FHA's protection against disability discrimination. The letter did not identify any disability, and the association rejected the request again.

In 2019, Weiss and Phillips filed suit against the association and seven current and former members of the association's board of directors (collectively, the defendants). Weiss and Phillips alleged, among other things, that the defendants violated the FHA and the Ohio fair housing act.

After the case was filed, Phillips provided a letter from her doctor stating that she had arthritis, osteoarthritis, and chronic pain syndrome. The doctor explained that Phillips had difficulty walking prolonged distances without a cane and would have difficulty walking long distances with a cane while carrying food and supplies for outdoor cooking. The doctor said Phillips would benefit from having a grill near her unit or having some method of carrying food and supplies to the grilling pavilion. The association proposed that Phillips could call the gatehouse anytime she wanted to go to the grilling pavilion, and a gate attendant would bring her a shopping cart. If Phillips needed assistance pushing the cart, the attendant would take the cart to the grilling pavilion for her. Phillips rejected the offer because she would still have to walk to the pavilion.

In order to prevail on an FHA claim, the plaintiff must show the requested accommodation is necessary to afford the plaintiff an equal opportunity to use and enjoy the dwelling and that the accommodation is reasonable. In order for an accommodation to be necessary, it must be effective in ameliorating the effects of the disability. The court found that neither Weiss nor Phillips could satisfy these requirements.

It was not necessary for Phillips to have a personal grill because she was capable of walking to the grilling pavilion. In fact, she frequently and almost daily during summer walked to the pool adjacent to the grilling pavilion because her doctor recommended swimming in heated water as therapy. Phillips' doctor stated that Phillips merely needed assistance carrying food and supplies to the grilling pavilion, and the association's offered accommodation met that criteria. The fact that Phillips preferred to grill on her patio did not entitle her to an accommodation under the FHA.

The court also determined that it was not necessary for Weiss to have a personal grill because he was generally capable of walking to the grilling pavilion. On the days when he suffered a bout of extreme exhaustion, a grill on his patio would not address the effects of his disability because Weiss testified that he could only walk a few steps within his unit on such days. Thus, Weiss still would not be able to use a grill kept on his patio at least 10 feet away from the building.

Accordingly, the court granted summary judgment (judgment without a trial based on undisputed facts) in favor of the defendants with respect to the FHA and Ohio fair housing claims.

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Noisy Pool Pump is a Common Law Nuisance

Roebuck v. Sills, No. 1D19-1434 (Fla. Ct. App. Oct. 7, 2020)

Attorneys' Fees; Use Restrictions: The Court of Appeal of Florida held that average annoyances do not amount to a legal nuisance, and the Florida Homeowners' Association Act provisions for an award of attorneys' fees to the prevailing party in litigation relate only to declaration-related claims.

Julian Roebuck (Roebuck) owned a home in a community in Okaloosa County, Fla. Vernon and Sara Sills (the Sillses) owned the home next door.

The Sillses installed exterior lighting, two variable speed pumps, and a heater for their swimming pool on the side of the house near Roebuck's master bedroom window. Roebuck complained to the Sillses about noise from the equipment and that the lighting would come on throughout the night, both of which disturbed his sleep.

Unfortunately, the neighbors could not resolve their differences about the equipment. Roebuck sued the Sillses, alleging that the pool equipment and lighting created a common law nuisance and violated the community's declaration of covenants, conditions, restrictions, and easements (declaration). Roebuck sought injunctive relief (requiring a party to take or refrain from taking certain action) and attorneys' fees under the Florida Homeowners' Association Act (act).

The trial court determined that the Sillses did not violate the declaration but did create a common law nuisance. The trial court awarded Roebuck $10,280 to build a wall on his property to abate the noise and barred the Sillses from using the exterior lighting and pool equipment between 9:30 p.m. and 9:30 a.m., except for once a year, when the pool could be acid-washed for up to 48 continuous hours. The trial court ruled that each side would be responsible for their own attorneys' fees and costs. Both sides appealed.

Under common law, neighbors have a duty not to interfere with or render each other unsafe or insecure in life or in the use of their property. However, everyday annoyances and disturbances do not amount to actionable legal nuisance claims. There is no exact formula for determining when noise rises to the level of a legal nuisance. Courts are to consider the reasonableness of the use under the facts and circumstances of the particular case.

The evidence showed that the pool equipment was located about 12–14 feet from Roebuck's bedroom window, and the equipment was loud enough that it interfered with Roebuck's use of his property. The Sillses' outdoor lighting also would come on outside Roebuck's bedroom window at all hours of the night. Roebuck had to adjust his sleep schedule or move to other rooms in the house. He also could not enjoy many of the outdoor activities that he once did.

The appeals court found no basis for overturning the trial court's judgment regarding the nuisance claims. The trial court appropriately weighed important property interests of both parties—that is, the Sillses' ability to have a pool and use pool equipment as well as Roebuck's right to not have his property invaded by unreasonable noise and lights during the night. The trial court also crafted a remedy that took both parties' needs into consideration.

Roebuck insisted that the Sillses created a nuisance under the declaration, which prohibited anything from being done on a lot that is an annoyance or nuisance to the occupants of any other lot. The declaration did not define what was meant by "annoyance or nuisance," but it empowered the association's board of directors (board) to resolve nuisance complaints based on the declaration. The declaration provided that any dispute as to whether a nuisance existed was to be submitted to the board, and the written decision of the board would be final on the matter.

There was no evidence that Roebuck filed a nuisance complaint with the board. The Sillses complied with the declaration's design review process for their lot improvements, but there was no evidence that the design review process evaluated more than just appearance. In the absence of any decision by the board on the nuisance issue, the appeals court found no basis for determining that a declaration violation occurred. Courts cannot assume that the standards for determining the existence of a common law nuisance and a declaration-related nuisance are the same.

The act provides for the party prevailing in litigation to recover its reasonable attorneys' fees and costs. The appeals court interpreted this provision as applying only to declaration-related claims and not to other types of claims that might exist outside of the community governing documents. With respect to the claims based on the declaration, the Sillses were the prevailing parties, and the trial court should have awarded them attorneys' fees with respect to those claims.

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

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No Constitutional Violation Occurred When Foreclosure of Association Superpriority Lien Extinguished Mortgage

Wells Fargo Bank, N.A.v. Mahogany Meadows Avenue Trust, No. 18-17320 (9th Cir. Nov. 5, 2020)

State and Local Legislation and Regulations: The U.S. Court of Appeals for the Ninth Circuit held that no unconstitutional taking or due process violation occurred when an association foreclosed its superpriority lien as provided in the Nevada Uniform Common-Interest Ownership Act.

Copper Creek Homeowners Association (association) governed a community in Las Vegas. In 2008, Luis Carrasco and Janet Kongnalinh (collectively, the owners) purchased a home in the community, financing the purchase with a loan from Wells Fargo, N.A. (Wells Fargo). A deed of trust (mortgage) in favor of Wells Fargo was recorded against the home to secure the loan's repayment.

By 2011, the owners had become delinquent in paying association assessments, and the association recorded a lien against the property. The Nevada Uniform Common-Interest Ownership Act (UCIOA) grants superpriority status for that portion of an association's lien consisting of the last nine months of unpaid association fees and maintenance and nuisance-abatement charges. With a few exceptions, the superpriority portion of the lien is superior to all other liens on the property, including a mortgage.

Prior to foreclosing a superpriority lien, the UCIOA requires the association to provide all subordinate lien holders with notice of (1) the owner's default and the association's election to sell the property to satisfy the lien, (2) the amount of the assessments and other sums that are due for the property, and (3) the time and place of the foreclosure sale. The association provided the required notice to Wells Fargo, but Wells Fargo did not take any action.

In 2013, the property was sold for $5,332 to Mahogany Meadows Avenue Trust (Mahogany) at a foreclosure auction to satisfy the association's lien. The foreclosure of the superpriority lien extinguished Wells Fargo's mortgage on the property. Wells Fargo sued Mahogany, the association, and the association's agent, seeking a determination that the foreclosure was invalid and that its mortgage (worth about $200,000) continued as a lien against the property.

Wells Fargo asserted that the UCIOA's superpriority lien provisions violated the Fifth Amendment's Takings Clause and the Due Process Clause of the U.S. Constitution. The district court held that UCIOA did not violate the Takings Clause, and Wells Fargo received actual notice of the delinquent assessment and the foreclosure sale sufficient to satisfy due process. The district court dismissed the case, and Wells Fargo appealed.

The Takings Clause governs the conduct of the government, not private parties such as the association. The appeals court had previously held that an association foreclosure sale was private action, even though it may have been authorized by state legislation. (See Bourne Valley Court Trust v. Wells Fargo Bank, 832 F.3d 1154 (9th Cir. 2016), reported in the October 2016 issue of Law Reporter). The UCIOA was enacted in 1991. Wells Fargo acquired its interest in the 2008 mortgage subject to the UCIOA, so it could not later claim that the adoption of the act took away one of its property interests.

Wells Fargo argued that it could not have known about the potential impairment of its lien because it was not until 2014 that the Nevada Supreme Court "radically reinvented" the UCIOA to determine that foreclosure of an association lien could destroy all other liens on the property. (See SFR Inves. Pool I, LLC v. U.S. Bank, N.A., 334 P.3d 408 (Nev. 2014), reported in the June 2015 issue of Law Reporter). The appeals court disagreed, finding that the Nevada Supreme Court did not invent new law in SFR that took away Wells Fargo's existing rights. Rather, it simply interpreted existing law. Since the UCIOA predated the mortgage, Wells Fargo could not establish that it suffered an uncompensated taking of its property interest by an action of the government.

The Due Process Clause requires the government to provide notice reasonably calculated, under the circumstances, to apprise interested parties of the action and afford them an opportunity to present their objections. Wells Fargo received the precise notice required by the UCIOA. However, it argued that the notice was constitutionally insufficient because the notice did not state that the association was foreclosing the superpriority portion of its lien, the amount of the superpriority portion, or that Wells Fargo's security under the mortgage was at risk.

The appeals court determined that the UCIOA's notice provisions did not pose a due process problem. Wells Fargo received the required notice, and it could have easily taken action to protect its security, such as paying the association lien to prevent foreclosure.

Accordingly, the trial court's judgment was affirmed.

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Maryland Condominium Act Suggests that Notice of Board Meetings Must be Given to Owners

Willoughby Condominium of Chevy Chase v. Dillin, No. 2647, Sept. Term 2018 (Md. Ct. Spec. App. Oct. 14, 2020)

State and Local Legislation and Regulations: The Court of Special Appeals of Maryland interpreted the Maryland Condominium Act's open meeting requirements as inferring a duty to provide notice of all board meetings to owners, even though no such obligation was expressly stated.

The Willoughby of Chevy Chase Condominium Council of Unit Owners, Inc. (association) governed an 815-unit high-rise condominium in Montgomery County, Md. The building's 50-year fire alarm system had to be updated to comply with the county code.

To bring the system up to code, the association's engineer proposed installing additional pull stations, smoke detectors, and strobe alarms every 40 feet along the hallways on each floor. The engineer discussed three design options for installing the necessary wiring with the association's board of directors (board). Two of the options were problematic and not considered viable. The design selected involved mounting the wiring vertically on the walls and then encasing it within a pilaster, a shallow, rectangular column that would project slightly beyond the wall.

The board was set to meet on November 21, 2017, to approve a contract for the project, but decided to meet earlier in a special meeting. On the morning of Tuesday, October 31, 2017, a notice was posted on the lobby bulletin board and on the association's website that a special board meeting would be held on Thursday, November 2, 2017, at 6:00 p.m. Three of the five board members attended the special meeting as well as about 20 unit owners. At the meeting, the board approved a nearly $1.2 million contract for the fire alarm project.

One week later, owners Lawrence Dillin and Cecilia Casale (collectively, the plaintiffs) filed a complaint against the association with the Montgomery County Commission on Common Ownership Communities (CCOC) as provided in the Montgomery County Code. The two primary issues concerned whether adequate notice of the special meeting was given to owners and whether the pilaster design constituted a repair or replacement or an improvement. Under the association's bylaws, the board was responsible for the maintenance, repair, and replacement of the common elements. However, any additions, alterations, or improvements to the common elements that cost more than $10,000 in any given year required approval from a majority of the owners.

The CCOC determined that the Maryland Condominium Act (act) required 10 days notice to the owners before a special board meeting. It also concluded that the fire alarm project constituted an improvement that required a vote of the owners. The board was ordered not to take any action to advance the fire alarm project without a properly noticed meeting and a majority vote of the owners. It also ordered the board to include in the meeting notice a discussion of the advantages and disadvantages of the alternative designs and to compare the costs in a reasonably clear statement.

The association appealed to the trial court. The trial court determined that only three days notice of the special board meeting was required but that the notice provided of the special meeting did not meet this requirement. The trial court affirmed the CCOC's ultimate ruling that the fire alarm contract was not properly approved but vacated the decision about the amount of notice required. The association appealed.

The association argued that notice of board meetings was only required to be given to directors, and nothing required notice to owners. The bylaws required a notice of three business days be given to directors regarding special board meetings. The association admitted that it did not give the required three business days' notice, but all of the directors had waived the notice requirement.

Although the act did not explicitly require notice of board meetings to owners, the appeals court stated that implying such a requirement was the only logical conclusion. The act requires that all board meetings be open to all owners and that the board designate a time during the meeting to allow owners an opportunity to comment on any matter relating to the condominium. The act further limits the circumstances in which the board may go into a closed session meeting. Such provisions clearly establish a legislative policy for open meetings and transparency, which would not make sense if the board did not have to notify owners about special meetings.

While the directors waived receipt of proper notice, the owners had not. The association complained that the plaintiffs would not have attended the special meeting even if they had received three days notice because they were in Europe at the time. The appeals court found this argument irrelevant since compliance with the notice requirement was a prerequisite to a proper meeting. The meeting notice had not been posted for three business days. Under Maryland law, when computing a period of time described in a statute, the first day of the period is not counted, but the last day is counted.

The appeals court found that there was inherent overlap in the terms "repair and replacement" and "improvement" because any repair or replacement should constitute an improvement over the current circumstance. The full context and structure of the bylaws suggested that the board was delegated the duty to make repairs and replacements with respect to the sort of obligatory, routine, or non-transformative work that must be made when a common element component became defective or fell into disrepair. However, the bylaws requirement regarding improvements might refer to significant, non-routine changes in the building construction and/or discretionary decisions that may not be strictly necessary from a structural or regulatory standpoint.

The appeals court declined to rule on whether the fire alarm work constituted an improvement to avoid creating a precedent requiring owners to start voting on all kinds of work. The appeals court acknowledged that the work would constitute a major upgrade to the building, but it also appeared to be necessary. The appeals court said it would be helpful to know whether the owners had historically been required to approve analogous upgrades to other structural or mechanical building elements, such as the elevators or boilers. The association's previous handling of such matters might provide insight as to how the bylaws’ provision was commonly understood by the board and the owners.

Accordingly, the trial court's judgment was affirmed, and the case was remanded for further proceedings.

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