July 2021
In This Issue:
Recent Cases in Community Association Law
References to Statute in a Declaration Insufficient to Bring Community Under the Statute
Business Judgment Rule Does Not Bar Breach of Declaration Claims
Association Entitled to Recover its Attorneys' Fees in Pursuing Violation Even Though Small Number of Damages Were Awarded
Developer Could Not Sell Condominium Common Elements to Third Party
A Lawful Business Cannot Constitute a Nuisance
Right to Enforce Restrictive Covenants May be Lost When Not Pursuing Violations
Association Can Represent Owners in Property Tax Contest
Short-Term Rentals Qualify as Residential Use
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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.

References to Statute in a Declaration Insufficient to Bring Community Under the Statute

Accetta v. Brooks Towers Residences Condominium Association, Inc., No. 19CA2076 (Colo. Ct. App. July 1, 2021)

State and Local Legislation and Regulations: The Court of Appeals of Colorado held that merely filing an amended and restated declaration referencing the Colorado Common Interest Ownership Act was insufficient to qualify as an election by a condominium created prior to the act to become subject to it.

In the 1970s, Magna Associates (Magna) acquired an apartment building containing 518 units in Denver. Magna decided to convert the building to a condominium in contemplation of potentially selling the units. In 1979, Magna recorded a declaration of condominium (original declaration) subjecting the property to the Colorado Condominium Ownership Act (COA). However, Magna continued to rent the units, and it never created the condominium association referenced in the original declaration.

Magna finally decided to sell the units in the 1990s. It remodeled the common areas and divided the property to create an additional 336 units. In its capacity as the declarant and owner of all units, Magna recorded an amended and restated declaration (amended declaration) in 1995, which specified that it totally replaced and superseded the original declaration. It also created Brooks Tower Residences Condominium Association, Inc. (association) to govern the property.

Three years before the amended declaration was recorded, the Colorado Common Interest Ownership Act (CIOA) was adopted. The CIOA applied to all condominiums created after its effective date, but little of it applied to pre-existing condominiums unless the association elected to opt-in to the entirety of the CIOA. Otherwise, the COA continued to apply to pre-existing condominiums.

The amended declaration included several references to the CIOA. It provided that the declarant submitted the project to condominium ownership pursuant to the CIOA. It also stated that the provisions of the amended declaration were in addition and supplemental to the CIOA. An exhibit to the amended declaration allocated a percentage of undivided interest in the common elements to each unit, and each unit was obligated to share in the common expenses in accordance with such percentage interest.

In 2005, Anthony and Nancy Accetta (the Accettas) purchased a unit that was allocated less than 0.3% undivided interest, which was less than some but significantly higher than many units. As a result, the Accettas paid much more in assessments than many units. The Accettas admitted that they received a copy of the amended declaration at the time of their purchase, but they claimed they never received a copy of the exhibit showing the percentage allocations.

In 2017, after learning of their unit's percentage allocation, they sued the association and its board members (collectively, the defendants), claiming that the amended declaration's allocations were invalid under the CIOA. They also asserted various common law claims against the board members.

The trial court determined that the condominium was not subject to the CIOA because there was never an opt-in election through the CIOA's procedures. The trial court stated that the references to the CIOA in the amended declaration were insufficient to satisfy the procedures stated in the CIOA for a pre-existing condominium to elect to be subject to the CIOA. The trial court also concluded that the board had no duty to adjust the allocations set forth in the amended declaration, and the Accettas were on record notice of the allocations when they purchased the unit. Summary judgment (judgment without a trial based on undisputed facts) was granted in favor of the defendants. The Accettas appealed.

The appeals court held that the amended declaration's statement that it "totally replaced and superseded" the original declaration meant that the amended declaration supplanted the original declaration, but it did not nullify the original declaration as if the original declaration had never existed. As such, the condominium was not created after the CIOA's effective date to automatically bring it under the CIOA.

The appeals court also held that the references to the CIOA in the amended declaration were insufficient to satisfy either of the two opt-in methods under the CIOA. If there were association members entitled to vote, the question of submission to the CIOA could be approved by a vote of the association board and members entitled to cast at least 67% of the votes at an association meeting. If there were no members entitled to vote, the election could be made by the association board. In either case, the association had to execute and record a statement of election setting forth the fact that it was electing to accept the provisions of the CIOA and information concerning the required vote(s) for election under one of the two methods. Only when the statement of election was recorded would it become effective.

The appeals court stated that the amended declaration did not qualify as the required statement of election. The Accettas complained that there was no association in place prior to the amended declaration, so there was no one to make the election. The appeals court was not persuaded, finding that, had Magna intended to opt-in to the CIOA, it could have easily formed the association earlier, conducted the required vote (as the owner of all units), and executed a statement of election.

Accordingly, the trial court's judgment was affirmed.

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Business Judgment Rule Does Not Bar Breach of Declaration Claims

Burt v. Snowberry Cobble Village Association, No. CV186090973S (Conn. Super. Ct. Jul. 1, 2021)

Association Operations: The Superior Court of Connecticut held that an association was liable for ignoring and failing to investigate damage to the common elements that caused damage to a unit’s interior.

Snowberry Cobble Village Association (association) governed a condominium in Unionville, Conn. Julie Burt owned a duplex unit in the condominium, which included two floors above a basement. The unit shared a wall with another unit, and there was open space and grass on the opposite side and in the back. The basement was unfinished, although Burt and her children used it for laundry, exercise, and storage as well as a study space and lounge area.

In May 2014, the first spring that Burt lived in the unit, she began to experience water in the basement. Burt advised the association that she had discovered cracks in her foundation coming from the outside of the building into the unit interior. She said the cracks were causing water to leak behind a circuit breaker and into the basement. Under the declaration of condominium (declaration), the association was responsible for maintaining, repairing, and replacing all portions of the common elements (including the buildings) except for the area within the unit boundaries. Burt requested that the association repair the cracks.

The association did not conduct any investigation and simply responded that any cracks in the basement were Burt's responsibility. Burt said she understood any cracks in the basement interior were her responsibility, but she was asking that the outside crack be repaired. The association refused to consider the matter further and continued to deny responsibility for another four years. Burt continued to press her claim. Meanwhile, she had to throw away carpet, a bed, and other belongings that were damaged by the ongoing leak.

In 2017, the association's manager asked an attorney with whom she shared office space in passing whether he thought the foundation crack was the association's responsibility. The association claimed that the attorney said it was not the association's responsibility, although the attorney was not engaged to provide a legal opinion nor were any of the governing documents or evidence of the leak provided to him for consideration.

In February 2017, the association discovered a 2010 email regarding unresolved foundational issues in multiple units. Nonetheless, the association continued to deny responsibility. At some point, the association contracted for foundation repairs to Burt's unit but canceled the contract at the last minute when it, once again, denied responsibility.

In the spring of 2017, the leak worsened, and Burt continued to ask for help. It was not until other owners began to complain of leaks that the association ever investigated the issue or took the matter seriously. In 2018, the association engaged an attorney who provided a written opinion that, under the declaration, it was the association's responsibility to remedy the water infiltration because it originated from outside of the unit. It turned out the problem was the failure of drainage measures outside of the unit.

Burt sued the association and its managers for violations of the declaration, seeking to recover the amount she paid to remedy cracks and water damage. The trial court found that the association breached the declaration by not taking responsibility for the leak. It awarded Burt $12,587 for amounts she had to spend related to repairs and cleanup.

The association insisted that all of Burt's claims were barred by the business judgment rule. The trial court first noted that the business judgment rule does not apply to breach of contract claims. The association clearly breached the declaration and was liable for that breach.

Second, the business judgment rule insulates officers and directors from liability for their business decisions made with due care. The trial court found that the association failed to show that the directors and officers acted with due care in making decisions relating to the foundation cracks. The association waited four years to even investigate the matter. It claimed it relied on the legal advice given by an attorney made in passing, but the trial court did not find the witness testifying about the so-called legal advice credible since she recalled very little about the incident and there was no evidence that the attorney actually advised the association.

Accordingly, judgment was entered in favor of Burt.

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Association Entitled to Recover its Attorneys' Fees in Pursuing Violation Even Though Small Number of Damages Were Awarded

Country Glen Oak Park Homeowners Association v. Garrett, No. B303220 (Cal. Ct. App. Jul. 6, 2021)

Covenants Enforcement: The Court of Appeal of California held that an association provided ample notice of violation and opportunities to meet with the board to owners who continued to pursue unapproved improvements on their lot and in the adjacent common area.

Country Glen Oak Park Homeowners Association (association) governed a subdivision of 239 lots overlooking the Conejo Valley in California. Brett and Laurie Garrett (the Garretts) owned a home in the community that backed up to a common area hillside. A fence ran across the Garretts' backyard but it did not mark the lot boundary line, and the fence was mostly in the common area. The hillside fell steeply away past the fence.

The Garretts applied to the association's architectural committee requesting approval for a pool and related equipment in their backyard. The declaration of covenants, conditions and restrictions (declaration) and the association rules required committee approval prior to beginning any construction. The plans showed an unlabeled straight line perpendicular to the pool. The property line was straight, but the fence line was not. The Garretts stated that the application was for the pool only and that other improvements might be considered later. The committee approved the application.

After construction began, the Garretts' neighbor, Randy Hermes, noticed that the workers removed the fence, pushed dirt out toward the slope, and regraded part of the Garretts' property. Hermes also saw pipes sticking out of the ground near the pool, which protruded into the common area, and presumed this was for pool equipment.

Hermes expressed his concerns to Mr. Garrett, who said he would make things right. Hermes provided Garrett with documents showing the location of the lot boundary. Hermes notified the community manager when Garrett had not made any changes after several weeks. On August 1, 2016, the manager emailed Garrett about the construction. When she received no response, a letter was sent demanding that the Garretts cease and desist any unapproved construction. The letter referenced changes to the slope and encroachment of the pool equipment into the common area.

Mr. Garrett called the manager and was angry and verbally abusive. On Aug. 11, some of the association's board members met with the Garretts on-site to inspect the property. Mr. Garrett became aggressive. On Aug. 22, the board sent the Garretts another letter demanding that they return the slope to its original condition, retain an engineer to ensure that the slope was properly reconstructed, reinstall the fence to its original placement and height, move the pool equipment to within their lot, and provide the board with as-built plans for the pool. The board scheduled an executive session to meet with the Garretts, but the Garretts did not attend.

Undeterred, construction continued on a now much more expansive backyard renovation, including retaining walls, stairs, a drainage system, patio pavers, and planter beds, none of which were included in the Garretts' architectural application. On Oct. 3, the manager wrote to the Garretts about the expanded project and their refusal to cease work. She invited the Garretts to meet the board on three more occasions.

The Garretts met with the board once, but Mr. Garrett became hostile and angry and left the meeting early. Mrs. Garrett remained and initially agreed to move the pool equipment if a surveyor found it was over the property line but retracted that agreement within hours. On Oct. 31, Mr. Garrett informed the manager that construction was complete and requested certification by the board that all work was correct and legal. In December, the Garretts agreed to allow an expert retained by the board to conduct an inspection and survey, but they ultimately refused to allow access to the property.

The association sued the Garretts. The trial court ordered the Garretts to remove the equipment and concrete pad from the common area within 60 days and to pay the association $820 for damaging the fence plus $318,426 in attorneys' fees. The trial court also issued a restraining order against Mr. Garrett barring him from confronting, intimidating, annoying, harassing, threatening, challenging, provoking, or assaulting any association member or its agents, employees, or contractors.

The Garretts appealed, contending that the damage award violated the Davis-Stirling Common Interest Development Act (act), which required 10 days written notice of the board's intent to consider or impose a charge on a member to reimburse the association for common area damage caused by the member or the member's tenant or guest. The appeals court determined that the association went far beyond any duty it had under the act. The Garretts had notice of and four opportunities to meet with the board. They left one meeting early and refused to attend the other meetings. The Garretts made it abundantly clear that they were going to do what they wanted and had no interest in talking.

The Garretts complained that the association did not handle the violation in a fair and reasonable manner. They said that the committee required that the plans be drawn from the fence line and claimed that they believed the straight line shown on the plans was the fence line. However, the plans showed the property line, and Hermes provided the Garretts with documents showing the property line. The appeals court did not find the Garretts' protests credible, stating that Mr. Garrett was a general contractor and not naïve about such matters.

The Garretts insisted that the work was approved by default under the declaration because the architectural committee did not notify the Garretts that the work was not in compliance with the approved application within 60 days after they served the association with notice of completion. The appeals court found that the association gave the Garretts multiple written notices of noncompliance. The Garretts were well aware of the association's position, and the association was not required to perform the useless act of providing more notices.

The Garretts contended that the association was not entitled to recover its attorneys' fees because it did not prevail on the issue of whether they destabilized the slope and were awarded only $820 in damages. The appeals court noted that the association prevailed on all of the key issues in the case, and it was not awarded all of its attorneys' fees.

Accordingly, the trial court's judgment was affirmed.

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Developer Could Not Sell Condominium Common Elements to Third Party

The Lakes of Ville Du Parc Condominium Association, Inc. v. City of Mequon, No. 2020AP600 (Wisc. Ct. App. Jun. 30, 2021)

Developmental Rights: The Court of Appeals of Wisconsin held that a condominium declaration recorded against the property put a purchaser on notice that the property was designated as common elements and no longer owned by the developer.

Ville du Parc Country Club, Inc. (developer) developed the Ville du Parc Country Club (club) and The Lakes of Ville du Parc condominium in Ozaukee County, Wis.

The condominium was established in 1984 pursuant to a declaration of condominium (declaration) in accordance with the Wisconsin Condominium Ownership Act (act). A survey map was recorded, which showed Lots 1, 2 and 3 and a portion of Outlot 1 (the subject property) as condominium common elements. The declaration provided that each unit owner had an undivided interest in the common elements as tenant-in-common with all other unit owners.

However, the declaration reserved the right for the developer to use a designated portion of the subject property (the expansion property) for expansion of the adjacent golf course. The declaration provided that, in the event the land was used for such expansion, it could be conveyed back to the developer by deeds the developer was authorized to execute on behalf of each of the unit owners.

In 1987, the developer recorded a new survey that reconfigured and combined Lot 1 and Outlot 1 into a new Outlot 1A. The original portions of the subject property were assigned separate property identification numbers by the Ozaukee County Register of Deeds. In 1993, the developer executed a deed on behalf of all unit owners transferring the expansion property to itself.

The owners were aware of the transfer and understood that the property was subject to a golf course use restriction, although there was no evidence that the expansion property was used to expand the golf course. The Lakes of Ville Du Parc Condominium Association, Inc. (association) mowed and generally maintained the subject property and put up "no trespassing" signs on it.

In 2014, Thomas Weickardt acquired all of the club property and the subject property. Two days later, he conveyed the subject property to the City of Mequon (city). The city removed the "no trespassing" signs.

The association sued the city, Weickardt, and prior owners of the subject property, asserting that the subject property remained part of the condominium common elements. The trial court ruled that the association owned the subject property because no removal instrument was filed as required by the act to withdraw the property from the condominium regime.

Weickardt appealed, arguing that Wisconsin law allows a person who purchases property for value without notice of adverse interests to take the property free of those interests. The appeals court found that Weickardt took the property with notice of the association's and the unit owners' interests because the declaration and map were recorded against the subject property. Through the declaration, the subject property was designated as common elements and conveyed to the unit owners in undivided interests.

The declaration permitted the developer to convey the expansion property to itself, but only if the property was being used to expand the golf course, and there was no evidence the property was used for such purpose. Furthermore, the developer did not have the authority to convey the remaining subject property to anyone. There was no evidence that the unit owners or the association relinquished their interest. Thus, the conveyance of the subject property by the developer was invalid since it no longer owned the subject property.

The appeals court stated that a reasonable title search would have revealed the existence of the declaration as an encumbrance on the subject property. This was more than enough to put a cloud on title to the subject property and Weickardt on notice of a title problem.

Accordingly, the trial court's order was affirmed.

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A Lawful Business Cannot Constitute a Nuisance

McBrayerv. Governors Ridge Office Park Association, No. A21A0262 (Ga. Ct. App. Jun. 14, 2021)

Covenants Enforcement: The Court of Appeals of Georgia held that it was not a nuisance for an OB-GYN practice providing abortion services to lawfully operate in a business park zoned for medical services, even though the medical practice attracted protesters to the public road outside the business park.

Governors Ridge Office Park Association, Inc. (association) governed a condominium office park in Cobb County, Ga. Since the 1990s, Dr. Daniel McBrayer operated an obstetrics and gynecology medical practice in a building in the office park owned by McBrayer Family Ltd. Partnership (collectively, McBrayer).

Among the services offered by the practice were abortions. This attracted protestors to the public street in front of the office park. Often there were only a few protesters, but sometimes there were hundreds. Some of the protestors harassed employees and visitors to the office park. Sometimes they displayed signs with images of terminated fetuses. Other building owners and business operators complained to the association that the presence of protestors disrupted their businesses and made it more difficult to sell or lease their buildings. In 2012, a suspicious fire was started in McBrayer's building.

In 1997, the association began to correspond with McBrayer concerning the impact of the medical practice on the office park given acts of violence against abortion clinics in other parts of the country. The association also complained that persons accompanying patients to the practice loitered in the parking lot and alleged several instances of littering, public urination or defecation.

In 2009, the association notified McBrayer that the medical practice was a nuisance in violation of the declaration of covenants, easements, conditions, and restrictions (declaration). The association started levying daily fines for the violation beginning in 2010, but McBrayer did not pay them. In 2013, the association filed suit against McBrayer, seeking to recover the fines, an injunction prohibiting the continued operation of the medical practice, punitive damages, and attorneys' fees.

The case was tried by a jury, which found in favor of the association and awarded it more than $1.17 million in damages plus attorneys' fees of more than $311,000. McBrayer requested a new trial, contending that the evidence was insufficient to support the verdict. The trial court denied the request, and McBrayer appealed.

The association argued that the medical practice constituted a nuisance under common law and the declaration. A nuisance is anything that causes hurt, inconvenience, or damage to another. The inconvenience must be such that it would affect an ordinary, reasonable person. An essential element for liability under Georgia law is that the party allegedly causing the nuisance has control over the cause of the harm. The party charged with nuisance must be either the cause or a concurrent cause of the creation, continuation, or maintenance of the nuisance.

Georgia law also recognizes that, where the act itself is lawful, it becomes a nuisance only when conducted in an illegal manner to hurt, inconvenience, or damage another. It is not sufficient that the business is offensive to some or that the property in the vicinity of the business is adversely affected.

There was no evidence that the medical practice was operating illegally or that the abortion services were provided in a way that unnecessarily intruded on the surrounding businesses. The medical practice was located in a commercial office park zoned for medical services and that contained other medical practices. As such, the medical practice itself could not constitute a nuisance, the evidence presented at trial did not support the verdict, and McBrayer was entitled to a new trial.

The appeals court noted that numerous businesses have experienced protests from time to time, including police departments, gun shops, fur retailers, adult entertainment establishments, restaurants, churches, and synagogues. To hold that a legally operated business could not be operated in a business park zoned for such use would effectively mean that such businesses could not be operated anywhere. The appeals court further noted that property ownership did not guarantee only ideologically aligned neighbors whose businesses and occupancy cause no upset and attract no controversy.

The association said that other business owners feared potential violence due to violence at abortion clinics in other parts of the country. The appeals court said there was no law authorizing the finding of nuisance based on something that occurred somewhere else, and to hold otherwise would have dangerous implications.

The association complained about littering, public urination, and defecation, which it blamed on McBrayer's patients and their companions. However, the only evidence provided of such acts was based on speculation made in a single letter from 1998, and there was no evidence that the persons allegedly committing such acts were in any way related to McBrayer.

Furthermore, the so-called loitering consisted only of companions of McBrayer's patients waiting in their cars. A person is loitering or prowling only when he or she is in a place at a time or in a manner not usual for law-abiding individuals under circumstances that warrant a justifiable and reasonable alarm or immediate concern. The appeals court stated that the act of waiting in the parking lot of a medical practice for a patient to receive medical treatment did not qualify as loitering.

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

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Right to Enforce Restrictive Covenants May be Lost When Not Pursuing Violations

Rubio v. BB&J Holdings, No. E2020-00355-COA-R3-CV (Tenn. Ct. App. Jun. 25, 2021)

Covenants Enforcement: The Court of Appeals of Tennessee refused to enforce restrictive covenants barring commercial uses where the area had largely turned commercial.

Severiano and Maria Rubio (the Rubios) owned lots 21 and 22 in the Sunset Addition, a neighborhood in Morristown, Tenn. Restrictive covenants placed on the Sunset Addition property in 1950 required that the lots be used for residential purposes only and prohibited any commercial activities. In 1999, the restrictions were released for four lots that fronted the highway.

In 2013, BB&J Holdings (BB&J) purchased two lots in the subdivision. The restrictive covenants were noted in the title opinion for the lots. BB&J bought the property for the sole purpose of using it for a road (Sandstone Drive) to connect the Masengill Springs shopping center to Walters Drive, the main road through Sunset Addition. The lead tenant in Masengill Springs was Food City, which required a secondary ingress and egress from the shopping center.

BB&J knew about the restrictive covenants when it purchased the property but did not view them as an impediment. BB&J tore down the existing structures on the lots and constructed Sandstone Drive. The Rubios sued BB&J, asserting that the road violated the restrictive covenants and interfered with the Rubios’ use of their property. They sought closure of the portion of the road located on the two subdivision lots (the remainder of the road was outside of the subdivision) and removal of a commercial sign on the property.

The Rubios claimed that the construction of a turn lane leading to Sandstone Drive created hazardous conditions and impaired the safe entrance and exit from their property. They also contended the road resulted in increased traffic and noise, and the additional street lighting was bothersome. The Rubios sought compensatory and punitive damages as well as damages for pain and suffering.

BB&J argued that the area had changed over the years from a rural section outside the city limits to a largely commercial hub in the city. There were now several stores and a shopping center in the immediate area in addition to Masengill Springs, including a gas station, Home Depot, and CVS Pharmacy. The property also had been rezoned from residential to planned commercial district. The trial court found that the changes to the area were of such degree that it would not be equitable to order closure of the road. The subdivision was originally intended to be a quiet residential subdivision outside the city, but lost its character over the years and was completely encapsulated by commercial activity. What used to be a subdivision entrance was now a heavily used thoroughfare with an average daily traffic count of more than 6,000.

The trial court also found that the Rubios failed to prove their damages due to the covenant violation, so it determined that nominal damages of $500 were appropriate under the circumstances. The Rubios appealed.

The appeals court stated that restrictive covenants can lose their force when they fail to serve a useful purpose and may be rendered unenforceable if radical changes in the entire neighborhood completely defeat the covenants' purpose. The appeals court added: "When determining whether a restrictive covenant continues to serve any useful purpose, the courts must be concerned primarily with the continuing value of the restrictive covenant to the entire neighborhood, not the hardship to the parties attempting to avoid the restriction."

However, the appeals court was persuaded that not only had the area around Sunset Addition changed but the subdivision itself had changed. Four lots released from the restrictive covenants by the developer were used for commercial uses. In addition, since the 1990s, several lots in the neighborhood subject to the restrictive covenants had been converted to commercial uses, including a shopping center.

The right to enforce a restrictive covenant may be forfeited due to acquiescence by waiver or estoppel. Neither the Rubios nor any other subdivision residents took action to prevent any of the other commercial development within Sunset Addition. Moreover, the Rubios acknowledged that they did not read the restrictive covenants when they purchased the property, so they had no expectations as to permissible uses within the subdivision.

The appeals court found that any harm suffered by the Rubios was minimal and said the trial court was generous in awarding the Rubios $500 in recognition of a technical injury.

Accordingly, the trial court's judgment was affirmed.

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Association Can Represent Owners in Property Tax Contest

Sunnyside Elgin Apartments, LLC v. Miller, No. 2-20-0614 (Ill. App. Ct. Jun. 29, 2021)

Taxes and Tax Regulation: The Appellate Court of Illinois held that a condominium association had the standing to contest the property taxes charged to the individual unit owners.

Sunnyside Elgin Apartments, LLC, Brookside Meadows Condominium Association, Inc. (Brookside), and other condominium, townhome, and homeowners associations (each, an association) filed suit, against Glenda Miller, in her official capacity as Treasurer of McHenry County, Ill. (county) and other public officials. The associations sued on behalf of their homeowner members, contesting property taxes levied against the homeowners.

Each association was authorized by statute or a declaration of covenants that allowed the association to petition for tax relief, in a representative capacity on behalf of its members, based on state law. The Board of Education of Riley Community Consolidated School District No. 18 (school district) intervened in the case, arguing that the county could not adequately represent its interests.

The school district asserted that, under the property tax code (tax code), only the person who pays the property tax may file a tax-objection complaint. Since Brookside did not pay the property taxes on behalf of its unit owners, the school district claimed that Brookside lacked standing to sue on behalf of the individual owners. The school district also noted that the tax code prohibited class action tax-objection suits.

Brookside contended that the Illinois Condominium Property Act (act) allowed condominium associations to act on behalf of their unit owners in seeking relief from tax assessments and levies. The school district insisted that the act's provisions applied only when the tax relief concerned common property and did not extend to the tax relief Brookside sought concerning property taxes owed by individual owners. The trial court agreed with the school district and dismissed Brookside's claim. Brookside appealed.

The tax code provides that, if any person desires to object to the property for any year, he or she shall first pay all of the taxes due. Then, the person paying the taxes due may file a tax objection complaint. The act provides that the association's board of managers shall have standing and capacity to act in a representative capacity in relation to matters involving the common elements or more than one unit on behalf of the unit owners. Also, the board, acting on behalf of all owners, shall have the power to seek relief from or in connection with the assessment or levy of taxes and to collect all expenses incurred in connection with such action as common expenses.

The appeals court held that the act provisions gave the association standing to bring a tax challenge with respect to property taxes charged to more than one unit. The appeals court stated that the school district's interpretation would leave Brookside unable to challenge the property taxes on common elements. The act specified that the common elements were not to be separately assessed, and the value was to be included in the values of the individual units. Thus, the taxes levied against each unit not only related to the individual unit but also included a proportionate share of taxes against the common elements. The appeals court stated that such interpretation was the only one that allowed the tax code and the act to be harmonized and for both to be given effect.

The appeals court also noted that, even if the act did not give Brookside standing, it would have associational standing to sue as a representative on behalf of its members. The doctrine of associational standing grants an association standing when (1) its members would otherwise have standing to sue in their own right, (2) the interests it seeks to protect are germane to the organization's purpose, and (3) neither the claim asserted nor the relief requested requires the participation of individual members in the suit.

The appeals court stated that Brookside met all three criteria. The owners had the right to contest their property taxes, and all of the evidence needed to establish each owner's entitlement to a refund was the amount paid by each unit, which was a matter of public record and did not require the participation of the individual owners.

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

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Short-Term Rentals Qualify as Residential Use

Wilson v. Maynard, No. 29307 (S.D. Jun. 16, 2021)

Use Restrictions: The Supreme Court of South Dakota held that short-term rentals satisfied a restriction that the property be used for residential purposes.

In 2016, Rory and Kristen Maynard (the Maynards) purchased a lot adjacent to Robert and Sharlene Wilson (the Wilsons) in the 33-lot Shirt Tail Gulch subdivision in Deadwood, S.D. That same year, the Maynards started constructing a house for short-term rentals with large groups in mind. The three-story house had five master bedrooms, five bathrooms, and could host up to 14 people.

The subdivision was subject to a declaration of restrictive covenants (declaration) prohibiting any lot from being used for anything other than residential purposes, which specifically included normal home occupations, offices of recognized professions, and bed and breakfast use allowed under state and county law. The declaration also restricted all construction to family or residential-recreation type dwellings and garages.

In 2017, Rory Maynard confirmed to Robert Wilson that they intended to rent the property to short-term guests and did not intend to use it for a bed and breakfast. The Wilsons then filed suit asking for declaratory judgment (judicial determination of the parties' legal rights), seeking a determination that Maynards' use of the property for short-term rentals was prohibited by the declaration.

In 2018, the Maynards began renting to short-term guests, housing as many as 20 guests at a time. The Wilsons argued that short-term rentals were an unambiguous commercial purpose that violated the residential purpose provision of the declaration. The Maynards asserted that short-term rentals were a residential purpose and not prohibited by the declaration.

The trial court granted summary judgment (judgment without a trial based on undisputed facts) in favor of the Maynards. It held that the property's design and use for residential, recreational activities such as cooking, eating, drinking, sleeping, and gathering was consistent with residential purposes and that these ordinary living activities were a normal home occupation permitted by the declaration. The fact that the Maynards made a profit from renting the property did not change the character of how renters used and enjoyed the property. Nothing in the declaration prohibited short- or long-term rentals. It expressly allowed the property to be rented on a short-term basis as a bed and breakfast. The trial court said that short-term rentals were not a nuisance merely because the individuals occupying it differ on a given night.

The Wilsons appealed. The declaration did not define "residential purposes," but the appeals court found the word "residential" was commonly understood to pertain to dwelling in a place for some time. Therefore, "residential purposes" may be plainly understood to include the occupation of a home or dwelling for an indefinite length of time. The appeals court concluded that the term "residential purposes" plainly included short-term rentals. Most every other jurisdiction that has examined this issue has held that receipt of income does not transform residential use of property into commercial use.

If the declaration had intended the term "residential purposes" to prohibit profit-making activity, as the Wilsons suggested, then it would even prohibit a long-term lease of the property that generated a profit. There was nothing in the declaration that suggested a homeowner may not lease a residence on a short- or long-term basis or that limits the occupancy of a home to a single family.

It was undisputed the property was used to eat, sleep, and enjoy recreational activities. Therefore, short-term vacation rentals were a residential purpose consistent with the declaration.

Accordingly, the trial court's judgment was affirmed.

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