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.

Board Must Reasonably Work with Owner to Provide Time and Date for Violation Hearing

The Board of Directors of Winnitt Park Condominium Association v. Bourdage, No. 1-19-2536 (Ill. App. Ct. May 6, 2021)

Winnitt Park Condominium Association (association) governed a condominium in Cook County, Ill. Sherri Bourdage owned a unit in the condominium.

On June 22, 2017, the association's board of directors (board) sent Bourdage a violation notice. Apparently, the board had received a number of complaints from owners about Bourdage harassing, defaming, and using profanity and confrontational words against several owners and service professionals and threatening violence. The notice said that Bourdage could request a hearing by sending a notice to the board by July 10. It further said that if a hearing was requested, the board would notify Bourdage of the time and date of the hearing, and a reasonable accommodation would be made if requested within a reasonable time.

Bourdage requested a hearing. The board responded that the hearing would be held either on Aug. 17 or Aug. 22 at 6:30 p.m. and asked Bourdage to let them know which date she preferred. Bourdage emailed the board that 6:30 p.m. did not work because she owned a store that was open until 7:00 p.m. She also stated that she was done with the harassment and to leave her alone.

On Aug. 22, the board sent an email to all owners notifying them of a board meeting on Aug. 24 at 6:30 p.m. The notice said that it was a general board meeting but that the board would adjourn to a private session to hear a violation matter. No additional information was provided.

On Aug. 24, the board issued a "final order," stating that it had conducted a hearing on the complaints against Bourdage. The order adopted the entirety of the complaining witnesses' statements. The board determined that Bourdage had violated the association's governing documents and ordered her to pay a $50 fine as well as attorneys' fees from the June 22 notice until the final resolution of the matter.

In October, the association notified Bourdage that she was in default due to her failure to pay $5,109 in common expenses and fines. Bourdage had paid all regular assessments, so the amounts at issue related solely to the alleged violation. On Nov. 2, Bourdage complained to the association that it had never provided a date that worked for a hearing. She said she needed a hearing time that was outside of her work hours. In addition, at the time of the Aug. 24 hearing she was out of town on a trip that had been planned for months. She requested a hearing as soon as possible.

On Nov. 7, the board sent Bourdage another violation notice for additional incidents involving alleged harassment, defamation, using profanity and confrontational words against owners, and threatening violence and sending emails with false statements. A couple of weeks later, the board responded to Bourdage's earlier request for a hearing, stating that it believed that she had been given proper notice but the board would be willing to vacate the Aug. 24 order if Bourdage requested a hearing by Nov. 27 and provided three dates on which she would be available for a 7:30 p.m. hearing.

Bourdage provided three potential dates, but she did not commit because she was trying to find out the availability of someone else in the building that she intended to call as a witness. The board took this as a non-response. Bourdage hired an attorney, who told the board that Bourdage felt that she was being singled out due to personality conflicts with board members. In January 2018, the board sent a notice of a board meeting with a closed hearing listed as part of the agenda. Bourdage was not notified that the hearing was for her alleged violations.

On Jan. 21, the board issued another final order with regard to the second batch of complaints against Bourdage. Again, the board adopted the complaining witness' statements. This time, the board ordered Bourdage to pay a $700 fine and suspended her use of the limited common elements for three months.

In June 2018, the association filed a complaint for eviction against Bourdage. It alleged that she failed to pay assessments totaling $5,109 despite repeated delinquency notices and that the total due for assessments, late fees, and attorneys' fees was $10,033. The association sought an eviction order granting it possession of the unit as well as an award of attorneys' fees and costs. Bourdage asserted that she did not receive proper notice of the hearing as required by the association's governing documents.

The trial court concluded that Bourdage did not receive proper notice of the hearing, so the fines and legal fees were wrongfully assessed against Bourdage. The trial court denied the association's eviction request, and the association appealed.

The appeals court agreed that Bourdage was not afforded an opportunity for a hearing as required by the governing documents. The board said that the hearing would be on either Aug. 17 or 22, but it was not held on either date. The notice of the Aug. 24 meeting was not a hearing notice at all but rather a general board meeting notice directed to all owners. The notice said that a violation matter would be considered, but Bourdage was not informed that it was a hearing for her.

Moreover, the hearing took place during Bourdage's work hours when she had already informed the board that she was not available. The original violation notice said that a reasonable accommodation would be made if Bourdage requested a hearing, but the board did not actually make an accommodation.

Accordingly, the trial court's judgment was affirmed.

Owner Did Not Acquire Right to Keep Deck that Encroached onto Common Area

Close v. Yarrow Hill Homeowners Association, No. 80882-6-I (Wash. Ct. App. Apr. 26, 2021)

Yarrow Hill Homeowners Association (association) governed a community of 66 townhomes in Kirkland, Wash. In 2004, Malcom Close contracted to purchase a townhome. At the time, the association was in the midst of rebuilding the deck on the townhome. The association issued a resale certificate stating that there were no alterations to the home or the limited common elements assigned to the home that violated the Yarrow Hill governing documents. The deck's reconstruction was not completed until five months after Malcom purchased the home. Malcom later married Laura (collectively, the Closes).

In 2014, the association commissioned a study into the townhome decks. The study revealed that many of the decks had not been rebuilt according to the original plans and extended into the common area. The association decided to offer each owner of a deck that constituted significant encroachment into the common area (50 or more square feet) the option of allowing the association to remove and rebuild the deck to the proper size at its expense, or the owner could agree to take over responsibility for maintaining and repairing the expanded deck. The Closes were offered these options since their deck extended into the common area by 266 square feet, but they declined both options.

In 2015, the Closes' deck developed soft spots and rot, and they requested that the association repair the deck. The Yarrow Hill declaration of covenants, conditions and restrictions (declaration) made the association responsible for repairing and replacing exterior building surfaces. The association's policies included decks within its maintenance responsibility.

In 2017, the Closes filed suit against the association because it still had not repaired their deck. They alleged breach of contract for not repairing the deck as required by the declaration and sought declaratory relief (judicial determination of the parties' legal rights). The Closes also asserted ownership of the common area under the expanded deck by adverse possession (method of acquiring title by satisfying statutory criteria) or an easement by prescription (method of acquiring an easement to use another's property by satisfying criteria) to use such property.

The trial court dismissed the adverse possession claim because the Washington Growth Management Act (GMA) barred adverse possession claims against a bona fide homeowners association's open spaces. The trial court ruled in favor of the association on the Closes' remaining claims. However, the trial court found that the association was not the prevailing party, so it declined to grant attorneys' fees to the association. Both sides appealed.

The appeals court determined that the GMA clearly barred the Closes' adverse possession claim since the land at issue was open space owned by a bona fide homeowners association. A party claiming a prescriptive easement must establish, among other things, that they have used another's land for at least 10 years in a manner adverse to the owner. The use is not adverse if the property was used with the permission of the owner. The appeals court concluded that the association had consented to the Closes' use of the expanded deck by building the deck to its current size and allowing the Closes to use the deck without argument for more than a decade. Therefore, the Closes did not acquire a prescriptive easement over the expanded deck area.

The Closes contended that the association acted arbitrarily by requiring them to maintain their deck in contravention of the declaration's mandate that the association maintain building exteriors. The appeals court determined that the association exercised its authority reasonably and did not apply a more burdensome restriction on the Closes than other owners. The association adopted a policy that it would not disturb decks that encroached on the common area by less than 50 square feet. For all decks that exceeded that amount, the association gave the owner two choices. The appeals court found this to be a reasoned policy, and 10 other owners had agreed to have the association remove and rebuild their overly large decks.

The appeals court further found that the association was the substantially prevailing party and should have been awarded its attorneys' fees. The prevailing party does not have to prevail on every claim; it just needs to substantially prevail on the claims. Although the Closes did prevail on one claim on another issue, the trial court found in favor of the association on the Closes' remaining six claims. Under the declaration, the association was entitled to recover its fees and costs if the suit resulted in the enforcement of a covenant. The appeals court determined that the association sought to enforce the covenant providing for the collective right to use and enjoy the common areas.

Accordingly, the trial court's judgment was affirmed except with respect to the association's request for attorneys' fees. The case was remanded to the trial court to determine the amount of attorneys' fees and costs to award the association.

Sober Living Facility Must be Permitted with Some Limits to Operations

Harmony Haus Westlake, L.L.C. v. Parkstone Property Owners Association, Inc., No. 20-50185 (5^th Cir. Apr. 13, 2021)

Parkstone Property Owners Association, Inc. (association) governed the Parkstone community in Austin, Texas. Harmony Haus Westlake, LLC (Harmony Haus) operated a six-bedroom home in the community as an integrative transitional sober living residence for persons recovering from alcoholism and drug addiction. The Harmony Haus sober living model was self-run and self-supported by the residents. It used a phasing system to allow those further in recovery to supervise and hold the newer residents accountable.

Harmony Haus obtained permission from the City of Austin for a rooming house license for up to 12 residents. It specifically sought permission for 12 residents so that each bedroom would be filled to reduce the risk of isolation and to ensure that there were enough residents in the home for the phasing model to work—that is, to allow an appropriate ratio of newer residents to existing residents who were further in recovery.

Harmony Haus requested an exemption from the association’s declaration of covenants, conditions and restrictions (declaration) and any association rules to allow its residents to have an equal opportunity to use and enjoy the housing under the federal Fair Housing Act (FHA). The declaration allowed homes to be used solely for single-family residential purposes and prohibited any business, trade, or commerce and any lodging house in the community.

The association said it would waive the restrictions on business and single-family residential use, but it would permit only six unrelated adults to live in the home. Harmony Haus sued the association, seeking injunctive relief (requiring a party to take or refrain from taking certain action) and costs against the association under the FHA. The FHA makes it unlawful to discriminate in the sale or rental, or to otherwise make unavailable or deny, a dwelling to any buyer or renter because of a handicap.

The trial court determined that the Harmony Haus residents qualified as handicapped because their addictions substantially limited their ability to live independently and to care for themselves (See 440 F. Supp. 3d 654, reported in the April 2020 issue of Law Reporter and related case in 468 F. Supp. 3d 800, reported in the August 2020 issue of Law Reporter). The trial court found that the association discriminated against Harmony Haus in violation of the FHA, and it prohibited the association from enforcing the single-family use restriction against Harmony Haus. Both sides appealed.

Under the FHA, a handicap is a physical or mental impairment which substantially limits one or more major life activities. "Major life activities" include functions such as caring for one's self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, and working. A person recovering from alcoholism or drug addiction may be considered handicapped if the alcoholism or addiction substantially limits one or more of the person's major life activities, but the current use of or addiction to alcohol or a controlled substance is not permitted.

The association argued that the Harmony Haus residents were not handicapped because their major life activities were only substantially limited when they were abusing alcohol or drugs or in a treatment center. The residents typically came directly from an in-patient treatment center. However, there was evidence that transitioning from a treatment center to a sober living home helped with recovery by reducing relapses. The appeals court concluded that the risk of a relapse constituted a substantial limitation on the residents' ability to care for themselves.

The association insisted that Harmony Haus must prove that each of its current and future residents is handicapped. The appeals court found that Harmony Haus' admissions criteria was sufficient evidence of handicap status since the future residents had to be admitted to and complete an in-patient treatment program prior to coming to Harmony Haus.

However, the appeals court found that Harmony Haus did not show that allowing 12 residents was necessary to provide an equal opportunity to use and enjoy the home. The FHA requires that a reasonable accommodation be provided if necessary to allow the handicapped individuals to have usage and enjoyment of a dwelling equal to individuals who are not handicapped. "Necessary" means indispensable, essential, or that which cannot be done without.

Harmony Haus contended that 12 residents were necessary for the sober living model to work, but the association presented evidence of effective sober living homes with only 6 to 8 residents, including some operating in Austin. Harmony Haus argued that 12 residents were necessary to ensure that its phasing system worked where more established residents mentored newer ones and each resident had a roommate to help ensure accountability and avoid isolation. The appeals court emphasized that the FHA's focus was not on whether 12 residents were necessary for Harmony Haus' chosen operating model but on whether the accommodation was necessary to afford the handicapped persons an equal opportunity to use and enjoy the dwelling.

The appeals court found that Harmony Haus did not show that 12 residents were necessary to accommodate the handicapped residents. In particular, Harmony Haus did not show that it was necessary to use all six bedrooms or that a phasing system using 12 residents was necessary to accommodate handicapped individuals. As such, the appeals court declined to evaluate whether the association's offer to permit six residents was reasonable, and it held that the six resident accommodation should be enforced.

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

Association Not Liable for Insufficient Guest Parking

Issakhani v. Shadow Glen Homeowners Association, Inc., No. B301746 (Cal. Ct. App. Apr. 30, 2021)

Shadow Glen Homeowners Association, Inc. (association) governed the 68-unit Shadow Glen condominium in Sun Valley, Calif. The 1979 City of Sun Valley ordinance permitting the project's development (development ordinance) imposed conditions the city deemed necessary to assure that the development was compatible with the surrounding neighborhood. In particular, the required ratio of guest-to-resident parking resulted in 34 guest parking spaces being required.

When construction was completed, the city issued a certificate of occupancy for a total of 170 parking spaces, which was 13 more spaces than required by the building code. By 2014, the project still had 170 parking spaces, but only six were marked as visitor spaces.

In June 2014, Anaeis Issakhani drove to the project after nightfall to visit a friend. She tried to find a visitor parking space inside the project's gates but could not do so after driving around for a few minutes. She ended up parking on the far side of the five-lane street next to the project. Issakhani decided to jaywalk across the street rather than walk to the next marked crosswalk several hundred feet away. Issakhani was struck by a car and suffered a traumatic brain injury and skull fractures.

In 2016, Issakhani sued the association for negligence and premises liability based on the association's failure to maintain the number of guest parking spaces required by the development ordinance, which she alleged created a foreseeable risk of harm for guests of the project. Both of the claims required that Issakhani establish that the association owed her a legal duty of care, that it breached that duty, and that the breach was the main cause of her injury.

The trial court granted summary judgment (judgment without a trial based on undisputed facts) in the association's favor after determining that the association owed Issakhani no duty under common law or the development ordinance. Issakhani appealed.

Under common law, a landowner has a duty to maintain the property in its possession and control in a reasonably safe condition to avoid exposing others to an unreasonable risk of injury. A property owner's duty of care encompasses a duty to avoid exposing people to the risk of injury that occurs offsite if the owner's property is maintained in a manner that exposes people to an unreasonable risk of injury outside the premises.

The appeals court concluded a property owner's common law duty of care did not encompass a duty to provide on-site parking for invitees to protect them from traffic accidents occurring offsite as they travel to and from the premises. The California Supreme Court previously held that a property owner that maintained an offsite parking lot requiring invitees to cross a public street to reach the owner's premises did not have a duty to protect those invitees from the obvious dangers of the public street.

The appeals court considered the extent of the connection between the association's conduct and Issakhani's conduct, noting that it was Issakhani's decision to select an offsite parking space on the far side of a very busy street that made the risk of injury foreseeable rather than any conduct of the association. The appeals court also found it unreasonable to impose a duty on every property owner to provide sufficient on-site parking for every possible guest to avoid injury to those guests trying to access the property from outside the premises.

Issakhani argued that the association owed her a duty of care to provide the number of guest parking spaces required by the development ordinance and that it was liable to her for failing to maintain the required number of spaces. The appeals court concluded that the aim of the development ordinance was to preserve the aesthetic character of the surrounding neighborhood, not to protect invitees from traffic accidents. As such, the development ordinance did not impose a duty on the association to protect the general public from traffic accidents outside of the property.

Issakhani insisted that the association engaged in active misfeasance by reducing the number of guest parking spaces from 34 to 6. The appeals court said that this argument confused the standard of care with a duty of care. A standard of care is relevant only when a duty of care exists, and Issakhani had not established that the association owed her a duty of care to protect her against traffic accidents.

Accordingly, the trial court's judgment was affirmed.

Adding Short-Term Rental Restrictions to Declaration Could be Accomplished by Majority Vote

Nicdon 10663 LLC v. Desert Mountain Master Association, No. 1 CA-CV 20-0129 (Ariz. Ct. App. Apr. 29, 2021)

Desert Mountain Master Association (association) governed a planned community with 2,397 lots in Scottsdale, Ariz. Desert Mountain Golf Club (club) also operated in the community. Lot owners were not required to join the club, although many did. The club also accepted members from outside of the community. The club owned a lot, so it was an association member.

In 2015, Nicdon 10633, LLC (Nicdon) purchased a lot with the intention of using it as rental property until its principals retired. At the time, short-term rentals were prohibited by a city ordinance. The community's master declaration of covenants (declaration) contained various restrictions on rentals but did not prohibit short-term leasing.

In 2017, the association's board of directors (board) began considering a declaration amendment to prohibit rentals of fewer than 61 days. However, the final proposal adopted by the board prohibited rentals of fewer than 31 days to "ineligible renters," defined as any party who was not a member of the association or the club. The proposed amendment was put to a vote of the association's members. Ballots were returned by 73% of the members, and 75% of the ballots were cast in favor of the amendment. The favorable votes represented 55% of the entire community. The amendment was recorded, and the short-term rental restriction became effective in 2019.

Nicdon filed suit against the association, asserting that the amendment was invalid under the declaration and Arizona law. Nicdon contended that the association was not permitted to add new and material use restrictions that were not foreseeable under the existing declaration. It argued that the amendment was a material change that required the unanimous consent of all members.

The trial court found that the amendment did not violate Arizona law and complied with the declaration's amendment requirements. It granted summary judgment (judgment without a trial based on undisputed facts) in the association's favor. Nicdon appealed.

The declaration required that the board adopt a resolution approving the proposed amendment. The board then had to give notice to all members of their right to object to the amendment. If more than 10% of the members objected within 45 days of the notice, the amendment had to be approved by members holding two-thirds of the eligible votes in the association who were present in person or by absentee ballot at an association meeting called for such purpose.

Nicdon contended that the two-thirds vote requirement meant that two-thirds of all members had to approve the amendment. The association argued that it required only that two-thirds of those voting at the meeting approve the amendment. The appeals court agreed with the association, stating that the "in person or by absentee ballot" language would be superfluous under Nicdon's interpretation. In other areas, the declaration required vote counting based on all members. Since similar language was not used in the amendment requirements, the amendment provisions could not reasonably be interpreted to mean two-thirds of the entire membership.

The appeals court also found that the amendment complied with the Arizona Planned Communities Act, which allowed a declaration to be amended by the number of eligible votes specified in the declaration, although it imposed more stringent requirements for amendments that applied to fewer than all lots. Nicdon contended that the rental restriction did not apply uniformly to all members, so it required the consent of the affected owners.

The appeals court found that the amendment clearly applied uniformly to all owners—it prohibited anyone, whether the association, the club, or any other owner from renting their homes for 30 days or fewer unless the renter was a member of the association or the club. Therefore, all owners had access to the same pool of renters. Although the club owned a lot, it did not have a home for rent and did not participate in rentals.

The board stated in correspondence with members prior to the vote that prospective club members would be considered eligible renters even though they had not yet joined the club. However, the exception was not incorporated into the amendment, and it was not clear how the board would regulate such rentals. The appeals court stated that Arizona law required uniform application, not uniform effect, so it was inconsequential that the club might receive some incidental benefit from the rental restriction.

Nicdon insisted that it was unreasonable to allow a simple majority to create requirements that "markedly changed" the owners' obligations. However, the declaration specifically provided a process by which the declaration's use restrictions could be amended, repealed, or added to. The declaration already contained some restrictions on rentals, so rental restrictions were within the contemplated scope of the declaration.

Given the comprehensive nature of the existing rental restrictions and the declaration's amendment procedures, the appeals court stated that a prospective purchaser was reasonably put on notice that its home would be regulated by extensive use restrictions, including limits on rentals. Moreover, the declaration stated that any violation of the law also was a violation of the declaration itself, so the city's rental restriction was already incorporated into the declaration when Nicdon purchased the home.

Accordingly, the trial court's judgment was affirmed.

Unit Owners Not Obligated to Pay Amenity Fees Due to Noncompliant Amenity Agreement

Phyle v. Scheppe Investments, Inc., Nos. 353045, 355283 (Mich. Ct. App. Apr. 22, 2021)

Traverse Bay RV Park Condominium Association (association) governed the Traverse Bay Recreational Vehicle Park, which was established as a condominium. Charles Phyle was a condominium unit owner.

Scheppe Investments, Inc. (Scheppe) was the successor developer of the project. It owned several condominium units as well as recreational facilities adjacent to the condominium. The association's bylaws gave the developer the right to construct various recreational facilities and amenities. If the developer chose to construct the amenities, it had the right to implement a shared use membership arrangement for the condominium owners and other owners in adjacent property or projects. The developer also reserved the right to charge a reasonable usage or other fee to cover the cost of maintaining and repairing the amenities.

Since 2008, Scheppe had charged every owner an annual flat fee, adjustable for inflation, in connection with the amenities. After protests from owners, Scheppe had attempted to "clarify" the owners' obligations by agreements with the association in 2012 and 2017.

Phyle sued the association and Scheppe, arguing that he should not be forced to pay the amenity fees. The trial court found that Scheppe violated the Michigan regulations governing condominiums (regulations) by imposing the fees, and it ordered Scheppe to reimburse Phyle for the amounts he paid. The trial court also determined that Scheppe violated the association's bylaws by imposing a flat fee because the bylaws permitted only a fee that covered the amenities' maintenance and repairs. Both sides appealed.

The Michigan condominium act (act) provides that all recreational facilities and other amenities that a condominium is obligated to support must comply with the regulations to assure equitable treatment of all users. The regulations impose several conditions when the amenities are owned by a third party, including disclosure requirements to prospective purchasers, giving unit owners an equitable vote on the amenities' operation and management, and keeping separate financial records.

Scheppe argued that the amenity arrangement was not subject to the regulations because the association was not obligated to pay any fees. Rather, owners were billed directly by Scheppe. There was no dispute that all owners were obligated by the bylaws to pay the amenity fees, so the appeals court held that the condominium clearly had an obligation to support the amenities and the rules regarding the equitable treatment of all users of the amenities applied.

Scheppe contended that the regulations dealt only with amenities owned by a third party, but it was not a third party since it was the developer and a unit owner. The appeals court determined that Scheppe qualified as a third party in this instance because the amenities were not owned by the association or by the unit owners collectively.

Although Scheppe admitted that the owners in an adjacent tiny house project also used the facilities, Scheppe asserted that these owners were not third parties because those homes were always intended to be part of the condominium but had to be made a separate development due to a lawsuit. The appeals court determined that the owners of the tiny homes were third parties since they were not condominium unit owners. In addition, the bylaws gave the developer the right to offer the amenities to owners in other projects. The reserved authority alone brought the arrangement under the regulations.

Scheppe then argued that the association had to comply with the regulations rather than it as the developer. The disclosure requirement specifically applied to the developer, and Scheppe was both the developer and the amenity owner. Scheppe argued that its violations of the regulations could not void the contractual obligation of owners set out in the bylaws. When validly adopted, an entity's bylaws and other governing documents will constitute a binding contractual agreement between the entity and its members. However, the appeals court found that there was no valid contractual obligation to pay the amenity fees since the fee provisions were not validly adopted.

Accordingly, the appeals court affirmed the trial court's judgment, except that the case was remanded for the trial court to recalculate the amount of attorneys' fees and costs due by Scheppe.

Rezoning Property to Permit Commercial Use Was Ineffective Since Restrictive Covenants Prohibited Commercial Use

Rivault v. America Homeland, LLC, No. 2020 CA 1251 (La. Ct. App. Apr. 26, 2021)

Audubon Terrace Resident Homeowners Association (association) governed the 79-lot Audubon Terrace Subdivision in the Parish of East Baton Rouge, La. The subdivision was subject to building restrictions (restrictions) recorded in 1959, which limited development and use of the lots to single-family construction and use.

James and Catherine Olinde (the Olindes) had owned six lots in the subdivision and engaged in litigation with the association concerning the nature and extent of the restrictions. The litigation resulted in a judgment that the lots were subject to the restrictions and could only be used for single-family residences. America Homeland, LLC (America Homeland) purchased the six lots from the Olindes. America Homeland obtained a rezoning of the lots by the parish to a general low-rise office.

The association and lot owners Charles Rivault, Arthur and Claudia Lejeune, and William Gibson sued America Homeland, alleging that it intended to build something other than single-family residences in violation of the restrictions. America Homeland responded by seeking a declaratory judgment (judicial determination of the parties' legal rights) that the restrictions had been abandoned due to the lack of enforcement by the association. The trial court determined that the restrictions were still applicable to America Homeland's lots. The trial court entered summary judgment (judgment without a trial based on undisputed facts) in the association's favor and dismissed the case. America Homeland appealed.

Restrictive covenants can terminate by abandonment of the whole development plan or by a general abandonment of a particular restriction. Where there have been frequent and substantial violations of the restrictions without objection by those with the power to enforce them, the restrictions are generally considered as having been abandoned. However, for the rule to be applicable, the party against whom abandonment is asserted must have known of the alleged violations or had a duty to know. Additionally, the restrictions are not considered abandoned unless the violations have resulted in a substantial change in the intended nature of the subdivision.

Rivault had been an owner in the subdivision since 1964 and had served at different times on the association's board of directors or architectural control committee. He testified that questions about the single-family use restriction had arisen only twice during his time in the subdivision—during the Olinde litigation and the current litigation. He said that at no time had any commercial activity been permitted on a lot. Gibson was the current association president and had examined more than 30 years' worth of association records. He testified that he could only find records involving alleged commercial activity in the same two instances.

America Homeland argued that the Catholic church's use of two lots in the community violated the restrictions. It used a home in the subdivision for a kindergarten and tore down a home on another for a parking lot. Rivault admitted that one home in the community might be used as a halfway house and that his neighbor gave guitar lessons out of his house, but Mr. Lejeune thought it was in another subdivision.

Another home was listed with the Louisiana Secretary of State and on Google Maps as the address of a car repair business, but none of the association representatives were aware of such or had seen any car repairs being made on a lot, and there was no other evidence of any auto repairs within the community. Mr. Lejeune acknowledged that he used to work from his home carving wildlife scenes on gun stocks, mostly for friends.

The appeals court found the alleged commercial activities to be insubstantial, technical, or infrequent violations, which did not contravene the general subdivision plan and should be given little effect. The appeals court concluded that America Homeland did not produce sufficient evidence to establish a genuine issue of material fact as to the continued application of the restrictions to America Homeland's lots.

The trial court's judgment was affirmed with respect to the viability of the restrictions and their application to America Homeland's lots. However, the trial court's judgment was reversed as to the application of the Olinde litigation to America Homeland since all of the activity that was the subject of the current litigation took place after the Olinde litigation was concluded.

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

Developer Cannot Control Board by Electing or Removing Directors After Turnover of Control

Volovnik v. Bridge Plaza Condominium Association, Inc., No. A-2154-19 (N.J. Super. Ct. App. Div. May 11, 2021)

In 1998, Michael Volovnik developed the Bridge Plaza commercial condominium in Manalapan, N.J. Bridge Plaza Condominium Association, Inc. (association) governed the condominium. Volovnik and his two companies, Peoplemover, Inc., and Re-Hold, Inc., owned 12 of the 33 units in the condominium.

In 2012, eight unit owners sued Volovnik on behalf of the association. In 2013, the parties agreed to settle the case. The settlement agreement provided for the association's board of directors (board) to hold elections within 60 days where the non-developer owners would elect four directors to the board, and Volovnik (as the developer) would continue to hold the right to appoint one director.

That lawsuit proved to be the tipping point for a series of lawsuits involving Volovnik, the board, and the association, which led to long and protracted litigation. In 2018, Volovnik and his two companies (collectively, developer parties) sued the association and others. Among other things, the developer parties demanded a special meeting of the owners to vote on the removal of the elected board members.

The developer parties asserted that the association had ignored their written request for a special meeting under the association's bylaws. The bylaws mandated that a special meeting of the owners be called upon the written request of owners representing not less than 25% of the votes in the association. The developer parties alleged that they held more than 25% of the association votes.

The New Jersey Condominium Act (act) provides that, when some of the units in a condominium have been conveyed to purchasers and no other units are being constructed or offered for sale by the developer in the ordinary course of business, the unit owners other than the developer are entitled to elect all of the members of the board. The association argued that Volovnik, as the developer, was not permitted to vote on replacement board members and, as such, his companies could not request a special meeting to remove the four directors elected by the owners.

The trial court concluded that the developer parties were not permitted to demand or call a special meeting to oust board members that Volovnik was not permitted to elect. The developer parties appealed.

The developer parties argued that Volovnik was no longer the condominium's developer or sponsor and that the fact the developer parties could not participate in the 2013 election as part of the transition from developer control did not bar them from participating in any subsequent votes to remove board members.

The appeals court held that, where a developer is prohibited from voting to elect new board members, the developer also is prohibited from voting to remove board members. By allowing Volovnik's companies to call a special meeting for the purpose of removing board members would contravene the association's governing documents and the court's prior decisions interpreting the act. As the trial court explained, when the developer is not permitted to control who is on the board by picking them, it also cannot control who is on the board by kicking existing members off the board.

Accordingly, the trial court's judgment was affirmed.