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.

Condominium Owners Are Responsible for Maintaining Unit Exteriors

Alexander v. Becker, No. COA 20-802 (N.C. Ct App. Nov. 2, 2021)

Courtyards of Huntersville Condominium Association, Inc. (association) governed The Courtyards of Huntersville Condominium in Mecklenburg County, N.C. The condominium contained 51 detached homes. Each condominium unit consisted of the interior space within the dwelling structure, while the outer building surfaces and land were part of the common elements.

The units varied in size, with some units being twice as large as others. David Alexander and other owners of smaller units (collectively, the plaintiffs) sued the association and its board of directors (collectively, the defendants), contending that the outer walls, roof, and gutters serving a particular unit were limited common elements under the declaration of condominium (declaration) and the North Carolina Condominium Act (act). As such, each owner was responsible for maintaining and repairing the building containing its unit.

The defendants took the position that the association was responsible for maintaining and repairing the structures and that the costs were common expenses to be shared equally by all owners. The trial court agreed with the defendants and entered summary judgment (judgment without a trial based on undisputed facts) in the defendants' favor. The plaintiffs appealed.

The declaration described the unit boundaries as the unit interiors, so the outer walls (including siding), roof, and gutters constituted common elements by default. However, the act created limited common elements as a subset of the common elements, indicating that the limited common elements included any portion of the common elements specifically allocated as such by the declaration or any portion for the exclusive use of one or more, but fewer than all, units.

The appeals court said it was somewhat unclear as to whether the outer walls, roof, and gutters were designated as limited common elements under the declaration because bearing walls and fixtures that lay partially within and partially outside the unit boundaries and served only one unit were included as limited common elements. The appeals court found that the building siding, roof, and gutters seemed to be wholly outside the unit boundaries and did not fit the declaration's limited common element definition.

However, these building portions clearly fit within the act's definition of limited common elements because each building's outer walls, roof, and gutters served only one unit. The act specifically provided that all exterior doors and windows or other fixtures designed to serve a single unit but located outside the unit's boundaries were limited common elements unless the declaration provided otherwise. The declaration did not include language clearly negating the act's default limited common element provisions. As such, the roofs, gutters, and building exteriors were limited common elements by default.

Based on the limited common element status, the association was responsible for providing insurance coverage for the exterior walls, roofs, and gutters against certain perils. However, the declaration specified that each unit owner was responsible for maintaining and repairing all the limited common elements serving its unit except for two parking spaces outside each unit and the private exterior entrance and front porch of each unit. Therefore, individual unit owners, rather than the association, were responsible for maintaining most of their building exteriors at their own individual expense.

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

Nearby Commercial Development Does Not Defeat Neighborhood's Residential Use Restriction

Capital Farmers Market, Inc. v. Ingram, No. 1200688 (Ala. Dec. 3, 2021)

John and Judith Huddleston (the Huddlestons) owned property in Montgomery County, Ala. The Huddlestons recorded a declaration of restrictive covenants (declaration) against the property (neighborhood). Among other things, the declaration prohibited property in the neighborhood from being subdivided into or sold in parcels of less than five acres. It also permitted only one single-family dwelling on each 5-acre parcel, which could be used solely for residential purposes.

The declaration further provided that the owners reserved the right to waive, release, amend, or annul the provisions of the declaration by unanimous agreement (revocation provision) for themselves and the grantees of other platted tracts within the subdivision and their heirs or assigns.

In 2003, Cindy Delongchamp purchased two adjacent parcels, which were subject to the declaration. In 2015, Capitol Farmers Market, Inc. (CFM) acquired two adjacent parcels abutting Delongchamp's property. One of the CFM parcels was subject to the declaration, but the other was not.

In 2017, Delongchamp sued CFM, asserting that CFM planned to subdivide its property into a high-density subdivision of lots smaller than the 5-acre minimum, with most of the lots being smaller than one-eighth of an acre. She sought a judgment declaring the one CFM parcel was subject to the declaration and requiring CFM to abide by the declaration.

The trial court held that the CFM parcel was subject to the declaration and was enforceable by any owner of property subject to the declaration. It found no change in condition or use of any of the properties in the neighborhood that precluded the enforcement of the declaration's restrictions. CFM appealed.

CFM first argued that the revocation provision was ambiguous, which made the entire declaration unenforceable. Although the Huddlestons went to great lengths to define terms in the declaration, the term "grantees" was not defined. CFM argued this was inconsistent with the rest of the document and made it ambiguous. The appeals court said that when text is not of doubtful meaning, it is given its plain and ordinary meaning. It was clear that the term "grantees" referred to the persons to whom the Huddlestons or their successors conveyed property.

CFM contended that the phrase "grantees of other platted tracts within the subdivision" created ambiguity because there were no platted tracts when the declaration was recorded. The appeals court found no ambiguity and interpreted the phrase to mean the owners of property subject to the declaration.

CFM urged that its property should be relieved of the declaration's restrictions based on the "change-in-the-neighborhood" test because the area in the immediate vicinity of the property had dramatically changed from farmland and large estate lots to high-density residential and commercial development. A restrictive covenant will not be enforced under the change-in-the-neighborhood test if the neighborhood's character has changed so radically that the covenant's original purpose can no longer be accomplished. The change must be so great as to defeat the covenant's purpose and eliminate its benefits. If the covenant's original purpose can still be effectuated, changes outside the neighborhood subject to the covenant do not defeat its purpose.

The appeals court found that the property within the neighborhood was largely unchanged and continued to be used for single-family dwellings on lots of five acres or more. Outside of the neighborhood, the character of the properties to the west, south, and east had not changed since 1982 and continued to be primarily farmland or large estate lots. It was only the area north of the neighborhood that had changed to high-density residential, commercial, office parks, and malls. The appeals court did not find that the change in the character of the property to the north of the neighborhood was so great as to neutralize the benefits of the declaration to the neighborhood to the point of defeating its objective and purpose. Moreover, Delongchamp had relied on the benefits derived from the declaration when deciding to purchase property in the neighborhood.

Accordingly, the trial court's judgment was affirmed.

Association Manager Does Not Qualify as Debt Collector

Cornell v. HOA Management, Inc., No. 3:21-cv-298 (E.D. Tenn. Dec. 1, 2021)

Berkeley Park Homeowners Association (association) governed the Berkeley Park community in Knox County, Tenn. Richard and Joyce Cornell (the Cornells) owned a home in the community.

The association contracted with HOA Management, Inc. (manager) to manage the association's operations, including collecting assessments from owners. The management contract required the association to indemnify the manager for any claims relating to the omissions, statements, or representations by the manager regarding its contractual duties.

At the association's annual meeting in October 2019, the association distributed the proposed budget for 2020, which included an increase in the quarterly assessments from $425 to $495. The association did not distribute the budget or the proposed assessment increase in advance or to owners who did not attend the meeting as required by the association's governing documents.

In February 2020, the Cornells were notified that the assessment rate would increase in April. In April, the Cornells paid $425 but refused to pay the higher rate because they believed the assessment had not been properly adopted. The manager assessed a late fee and administrative fee against the Cornells for not paying the full assessment. The Cornells continued to pay the old assessment rate for the next two quarterly payments.

In October 2020, the manager sent the Cornells a demand for $172 in past due assessments. The demand included a "Fair Debt Collection Act Notice" stating that it was a communication made to collect a debt and providing notice of various consumer rights under the federal Fair Debt Collection Practices Act (FDCPA). The Cornells refused to pay the amount requested, and their attorney demanded that the manager cease and desist with its debt collection efforts on the grounds that the Cornells did not owe the alleged debt.

The association continued to demand payment of $495 each quarter, but the Cornells continued to pay only $425. The manager continued to assess late fees each quarter. In August 2021, the Cornells sued the manager and the association for violating the FDCPA.

The manager claimed it was not a debt collector under the FDCPA and not subject to the FDCPA's requirements. The FDCA defines "debt collector" as any person who uses the mail or any instrumentality of interstate commerce (such as email or phone) in any business where the principal purpose is the collection of any debts, or who regularly collects or attempts to collect debts owed or due to another person.

The manager contended that two of the FDCPA's exceptions applied to its activities. The FDCPA specifically excludes from the debt collector definition any person collecting or attempting to collect any debt owed or due to another person to the extent such activity (1) is incidental to a bona fide fiduciary obligation or bona fide escrow arrangement, or (2) concerns a debt that was not in default at the time it was obtained by the collecting party.

Tennessee recognizes two categories of fiduciary relationships: relationships that are fiduciary per se (such as attorney-client, guardian-ward, or conservator-incompetent) and relationships that are confidential due to one party's ability to exercise dominion and control over the other party. The court examined the management contract and found that the manager had contractual obligations to the association, but the management contract did not establish either a fiduciary or confidential relationship.

The manager was collecting assessments on the association's behalf both before the 2019 annual meeting, when the assessment rate was purportedly adopted, and before the Cornells refused to pay the increased assessment amount. A debt not yet payable cannot be in default. Therefore, the Cornells' debt was not in default at the time the manager assumed responsibility for collecting the Cornells' assessments, which also meant that the manager was not a debt collector for purposes of the FDCPA.

The Cornells argued that the manager was equitably estopped (bar that prevents one from asserting a claim) from arguing that it was not a debt collector by representing itself as a debt collector in the collection notice. Among other things, the party asserting equitable estoppel must show that it justifiably and detrimentally relied on the representation. To prevail on this claim, the Cornells must have relied on the manager's statement in such a manner as to change their position for the worse. However, the only detriment they alleged to have suffered is that they believed that negative information would be reported to credit reporting agencies. They did not allege that they were induced into changing their position because the manager referred to itself as a debt collector. Further, the manager's self-identification as a debt collector did not automatically transform it into one.

The FDCPA claim against the manager was dismissed because it was not a debt collector. The Cornells admitted that the only basis for their FDCPA claim against the association was the association's obligation to indemnify the manager under the management contract. Therefore, this claim also was dismissed.

The case was dismissed in its entirety.

Innkeeper Laws Apply to Condo-Hotel

Goldstein v. Chateau Orleans, LLC, No. 2020-CA-0401 (La. Ct. App. Nov. 12, 2021)

Chateau Orleans (the Chateau) was a condominium located in the New Orleans French Quarter that included timeshare units. Some units were owned entirely by a single owner, but other units were divided into one-week timeshare interests. When the units were not being used by their owners or timeshare interest owners, they were rented out as a hotel. Leisure Management, Ltd. (Leisure) maintained and operated the condominium building and managed the rental operations.

Jody Goldstein's family owned a one-week timeshare interest in unit 13. Goldstein arrived at the Chateau for a one-week stay in the unit on the Friday before Mardi Gras in 2005. When he arrived, he observed a nearly 4-foot-long crack in the center of the unit's front door. Goldstein immediately reported the damage to the manager on duty and allegedly was told that the door would be replaced. Goldstein inquired about the door multiple times during his stay, but it was never replaced or repaired. Due to it being Mardi Gras week, the Chateau had no employees on-site from 5:00 p.m. on Lundi Gras (Monday) until the morning of Ash Wednesday.

In the early morning hours of Ash Wednesday, Goldstein awoke to his unit being broken into. Goldstein was confronted by three assailants who beat him severely and robbed him. This was during the period when the Chateau had no staff on-site, and the assailants were never identified. Goldstein was left with severe, permanent injuries, including breathing problems, vertigo, dislodged teeth and root fractures, blurred vision, and headaches.

Goldstein sued Leisure to recover damages for his injuries. A jury returned a verdict in favor of Goldstein, apportioning 100% of the fault to Leisure. The jury awarded Goldstein more than $1.5 million in damages from Leisure as follows: $500,000 for pain and suffering, $800,000 for mental anguish, $200,000 for scarring and disfigurement, and $75,000 for past medical expenses. Leisure appealed.

Leisure argued that it was not liable for Goldstein's injuries because it owned no duty to protect him since the crime was not foreseeable. Generally, businesses have no duty to protect patrons from the criminal actions of third parties, but a hotel owes a duty to its guests to exercise reasonable and ordinary care, including maintaining the premises in a reasonably safe and suitable condition. Leisure contended that it did not operate the Chateau as a hotel but simply rented out available space when the timeshare and unit owners were not in residence.

The appeals court found that the Chateau operated as a hotel and that Louisiana innkeeper laws applied even though Goldstein or his family was an owner rather than a hotel guest. Under the condominium documents, Leisure was tasked with maintaining the entire property, whether a timeshare interest or a condominium unit, and had sole control over security, repairs, and improvements. Timeshare owners were prohibited from repairing or altering the property and had no ability to change the unit locks, set up security cameras or alarms, or take similar measures for their safety. The appeals court said it would be illogical to find that Leisure had a duty to protect a unit rented out to strangers in a particular week but not timeshare owners occupying the same unit in a different week.

The greater the foreseeability and gravity of the harm, the greater the duty of care imposed on the hotel operator. The appeals court said that the trial court erred by looking only at crimes that had happened on the premises when considering the foreseeability of crime. Courts must instead consider the property location as well as the nature and condition of the property. Even though no violent crimes had previously occurred in the Chateau, the appeals court found that the most basic form of security Goldstein could expect was that the severely damaged door would be replaced or secured. Leisure knew of the damage but failed to provide this most basic security measure.

Moreover, while the Chateau did have security cameras, they were live feed only, meaning that someone had to be physically on-site to watch the camera footage as it occurred; there were no recordings of the footage. The appeals court thought it reasonable for Goldstein and other patrons to expect that someone was on duty to watch the cameras. The security cameras along with security gates were installed to deter criminals, so Leisure had some expectation of crime. Further, the French Quarter is well recognized as a high-crime area, particularly during Mardi Gras. As such, the crime was foreseeable.

Louisiana requires that fault be apportioned among those responsible for the harm. The appeals court found it was wrong for the jury to apportion 100% of the fault on Leisure while leaving the unknown assailants faultless. Although apportioning blame is not an exact science, there are factors that courts must apply in undertaking this analysis. After analyzing the factors, the appeals court determined that Leisure was 50% at fault and the unknown assailants were 50% at fault. Goldstein was found to bear no fault because he did not in any way incite, cause, or contribute to his injuries. The appeals court also reduced some of the damage awards because there was no justification or evidence to support some of the large amounts awarded.

The appeals court reduced the total damages awarded to Goldstein to $618,658. The trial court's judgment was reversed, and the case was remanded for further proceedings.

Adjacent Owners Cannot Complain About Home Construction After Board Approval

Heritage Village II Homeowners Association v. Weinberg, No. 1 CA-CV 20-0637 (Ariz. Ct App. Oct. 26, 2021)

Heritage Village II Homeowners Association (association) governed the Heritage Village II neighborhood in Scottsdale, Ariz. Richard and Laine Weinberg (the Weinbergs) owned a home in the neighborhood.

In 2013, the Weinbergs tore down their home and constructed a new home that was larger than the old structure. In 2014, the association sued the Weinbergs for violating the neighborhood's declaration of covenants, conditions, and restrictions (declaration), which prohibited any addition, improvement, or modification altering the exterior appearance of the lot without prior written approval of the architectural committee and the association's board of directors (board).

The trial court determined that the Weinbergs had violated the declaration and ordered them to undertake specific work to bring the home into compliance. Months later, the association and the Weinbergs still had not agreed on the work required for compliance, but the composition of the board changed following an election. The new board debated on whether to continue with the litigation, and ultimately reached a settlement with the Weinbergs in 2017.

Unhappy that the association had agreed to settle the case, fellow owners John Norman and Gerry Molotsky (intervenors) intervened in the case and filed claims against the Weinbergs to enforce the declaration. The trial court dismissed the intervenors' claims, and the intervenors appealed.

The settlement agreement with the association required the Weinbergs to make some changes to the new home, pay for cosmetic modifications to the adjoining lot, and consent to various provisions. The settlement agreement specified that, once these actions were taken, the Weinbergs' lot would be deemed in compliance with the declaration. The intervenors argued that the Weinbergs still would not be in compliance with the declaration because the modifications were not properly approved, and the board did not have the power to approve modifications that were expressly prohibited by the declaration.

The declaration provided for the architectural committee to recommend action on home modifications to the board, but the board had final approval. However, the board did not have the discretion to approve a modification that violated an express requirement of the declaration. The declaration prohibited the erection or maintenance of any hedges or walls except those that were installed in accordance with the original construction of buildings. The intervenors argued that the Weinbergs' new home was not in accordance with the original construction of the building because the building footprint was about one foot larger along the rear wall.

The appeals court instructed that a covenant should not be read in such a way that defeats the restriction's plain and obvious meaning. The appeals court categorized the restrictions contained in the declaration into two categories: those activities that are prohibited without exception and those actions that are prohibited without board approval. The declaration did not expressly prohibit enlarging the building footprint. Since the declaration gave the board broad power to approve additions, improvements, or modifications that altered the exterior appearance of the lot, whether a building, fence, wall, or other structure on the lot, the appeals court determined that the board had the authority to approve changes to the building footprint.

The intervenors complained that the new home's roof height of 19 feet violated the 17-foot limit. However, no roof height limit was included in the declaration. The 17-foot measure was simply a building height that was preliminarily approved by the board prior to the settlement agreement.

The appeals court noted that the declaration gave the intervenors the right to enforce the declaration, but this did not give the intervenors the ability to substitute their judgment for that of the board. Because the board had approved the Weinbergs' new home after they completed the actions required by the settlement agreement, the home did not violate the declaration.

The trial court was obligated to award attorneys' fees to the Weinbergs with respect to the intervenors' claims. The declaration gave individual owners the right to enforce the declaration against other owners, and it stated that the prevailing party shall be entitled to recover its reasonable attorneys' fees from the other party. As between the Weinbergs and the intervenors, the Weinbergs were the prevailing parties because the home was not in violation at the time the intervenors brought their claims.

However, intervention is a distinct procedural right to become involved in a lawsuit. Both the association and the Weinbergs unsuccessfully opposed the intervenors' petition to intervene. The appeals court should not have awarded the association and the Weinbergs attorneys' fees for work done in opposition to the intervention.

Accordingly, the award of attorneys' fees to the association and the Weinbergs with respect to work in opposing the intervention was reversed, but the trial court's judgment was affirmed in all other respects.

Former Association Member Cannot Sue for Breach of Fiduciary Duty

Kato v. Media and Financial Consulting Group, Inc., No. 01-20-00836-CV (Tex. Ct App. Nov. 9, 2021)

Wilcrest Park Townhomes Owners Association, Inc. (association) governed a townhome community in Houston. Miklos Kato owned a unit in the community. In 2014, Kato was elected to the board of directors (board) and became the association's president and treasurer. Later that year, Kato's unit and two other units were destroyed by a fire.

The association carried insurance on the units, and it received insurance proceeds for the fire loss. However, the association decided not to rebuild the damaged units. In May 2017, the association entered into a confidential settlement agreement (CSA) with the owners of the damaged units. The CSA was signed by Kato (as association president and as an owner) and by the other two affected owners.

In the CSA, the association agreed to pay Kato $30,500 for his interest in the unit; $25,500 was paid in a lump sum, and the remaining $5,000 was to be disbursed in payments of variable amounts based on the association's budget. The CSA provided that each owner would retain all rights in the association detailed in the bylaws but without any assessment liability to the association. When the settlement amount for each owner was paid in full, the owner would forfeit all rights granted in bylaws relating to the unit. Kato remained president of the association even after the fire. As the president, he authorized the $25,500 payment to himself, but he never authorized payment of the remaining $5,000.

In 2019, the association and another owner, Bihn Nguyen, sued Kato, alleging that Kato stole or misappropriated hundreds of thousands of dollars from the association while acting as president and treasurer. In 2020, Nguyen was elected to the board instead of Kato and replaced him as president and treasurer. Soon thereafter, the association retained Media and Financial Consulting Group, Inc. doing business as Reliant Management (Reliant) to manage the community. Nguyen had an ownership interest in Reliant, but the contract was approved by the board after Nguyen informed the board of his interest in the company.

Later that year, Kato sued Reliant, Nguyen, Jeana Tran (then current association secretary), and the association's attorney (collectively, the defendants). Kato asserted that Nguyen and Tran breached their fiduciary duties to the association by entering contracts with and making payments to Reliant and the attorney. The association then paid the remaining $5,000 due to Kato. Kato did not deposit the check.

The defendants asserted that Kato no longer had any standing to bring his claims. They contended that all of Kato's claims belonged to the association, not to Kato personally, and any claims Kato might have had were extinguished when the last $5,000 payment was made. The trial court agreed and dismissed all of Kato's claims. Kato appealed.

Standing is a necessary component for any litigant to bring a lawsuit. The general test for standing requires that there be a real controversy between the parties that will be determined by the judicial ruling sought. A plaintiff must have standing throughout the legal proceedings. If the plaintiff loses a cognizable interest in the outcome of the case, the case becomes moot, which in turn causes the plaintiff to lose its standing.

Kato contended that as a unit owner and member of the association, he had standing to pursue the claims against the defendants. The bylaws provided that every unit owner shall be an association member so long as he or she owned a unit, and association membership automatically terminated when this ownership ceased.

Even though Kato's unit was destroyed, the appeals court held that he continued to hold an association membership until all his rights in the association were relinquished. The CSA permitted Kato to retain his association membership until he received the final $5,000 payment, but his membership was automatically forfeited once he received full payment. The appeals court found that Kato no longer had a legally cognizable interest in the outcome of the case once he received full payment.

Kato argued that he was still an association member because he had not accepted the $5,000 check. The appeals court stated that a valid "tender" of payment is an unconditional offer by an obligor to pay a certain sum to an obligee. It was undisputed that the association paid Kato the full amount due under the CSA; the CSA did not require that Kato accept payment. As such, Kato's membership in the association was terminated automatically upon the association making the final payment.

If proven, the claims for breach of fiduciary duty would result in a recovery to the association and its members. Once Kato was no longer an association member, he had no right to participate in any such recovery. Thus, Kato lost standing to pursue the claims.

Accordingly, the trial court's judgment was affirmed.

Lake Access Easement Established by Prior Use and Developer's Original Intent

Park Place Boat Dock Association, Inc. v. Gary Phillips Construction, LLC, No. E2021-00160-COA-R3-CV (Tenn. Ct App. Nov. 29, 2021)

Jerold Howard developed Park Place, a residential community planned around Boone Lake in Washington County, Tenn. Park Place Community Association, Inc. (association) governed the community.

Tennessee Valley Authority (TVA) owned the lake but gave Howard a permit to construct a fixed dock or "sun deck" and a floating dock (boat dock) with up to 66 boat slips. Howard constructed 16 boat slips and sold 14 of them for about $10,000 each to lot owners. A boat slip buyer received a deed for the boat slip.

The association owned a common area parcel that was adjacent to the water when the lake was at normal or full level, but when the water level was down, a small strip of land about 2.4 acres in total size (2.4-acre parcel) separated the common area from the water. The boat dock was physically attached to the common area by cables, but it floated over the 2.4-acre parcel. The sun deck also was within the 2.4-acre parcel. The common area included a playground, gazebo, parking lot, and large grassy area.

A long set of stairs along the side of the common area led to the sun deck. There also were stairs down the common area bank leading to a floating walkway that provided access to the boat dock and the boat slips. The owners of the boat slips were all association members, but they also were members of Park Place Boat Dock Association, Inc. (dock association), which maintained the boat dock and generally oversaw common issues relating to the boat dock. When Howard conveyed the common area to the association, he reserved a right-of-way for access over the common area from the 2.4-acre parcel that he still owned.

Howard later filed for bankruptcy, and his remaining property, including the 2.4-acre parcel and two boat slips, was sold at auction. Gary Phillips Construction, LLC (GPC) purchased the 2.4-acre parcel for $5,500. Gary Phillips, GPC's owner, had owned the lot next to the common area for about 10 years and was in the process of constructing a home on it. After purchasing the 2.4-acre parcel, Phillips placed a "No Trespassing" sign next to the common area and purportedly told boat slip owners that they could not access their boat slips across his property. He also would not let the boat association make repairs to or maintain the boat dock.

In 2019, the association and the dock association (collectively, the associations) sued GPC and Phillips, alleging easements by necessity and implication over the 2.4-acre parcel for access to the lake. The trial court granted judgment in favor of the associations. It found that the associations had easement rights over the 2.4-acre parcel to maintain and use the sun deck, the boat dock, and the associated stairs as well as the cables, electricity, and anchors for the boat dock, access rights for the boat slip owners and their invitees to use the boat dock, and access rights for all association members and their invitees to use the sun deck. Phillips appealed.

Phillips contended that the associations did not have any property rights in the 2.4-acre parcel and lacked standing to seek relief on behalf of their members. To establish standing, an association must show that its members would otherwise have standing to sue in their own right, the interests it seeks to protect are germane to the organization's purpose, and neither the claim asserted nor the relief requested requires the participation of individual members in the suit.

The appeals court found that the associations had standing to represent the owners' interests in the lawsuit to retain lake access. Each boat slip owner was a member of the dock association, with membership being appurtenant to and inseparable from the boat slip. In addition, the association owned the common area abutting the 2.4-acre parcel.

This case involved two types of implied easements: one based on prior use and one by necessity. Three criteria must be satisfied to establish an implied easement. First, the properties benefitted by and burdened by the easement must have been in common ownership at one point. Second, before the properties were separated, a use giving rise to the easement must have been long established and obvious or manifest as to show it was meant to be permanent. Third, the easement must be essential to the beneficial enjoyment of the land granted or retained by the original common owner.

An easement based on prior use may be implied to protect a purchaser's reasonable expectations that its use of an easement will be a continuation of a predecessor's use. There was no question that Howard originally owned both the common area and the 2.4-acre parcel. He planned a lakefront community and built lakefront amenities with the knowledge that lake access was one of the primary amenities that interested buyers.

Phillips argued that mere recreational enjoyment are insufficient bases for establishing either an implied easement or easement by necessity. However, the appeals court found lake access to be essential because it was tied directly to the community's home values and was the very reason many owners purchased homes in the community. Further, without access to the boat dock, the boat slip owners cannot use their property. As such, all the elements of implied easements were established.

Accordingly, the trial court's judgment was affirmed.

Association Liable for Recording Invalid Documents

Watson v. Leisure World Community Association, No. 1 CA-CV 20-0592 (Ariz. Ct App. Dec. 2, 2021)

Leisure World Community Association (association) served as the property owners association for nearly two dozen neighborhoods in Mesa, Ariz. Each neighborhood was subject to its own declaration of covenants, conditions, and restrictions (declaration), although the declarations for the different neighborhoods were nearly identical. Watson-McKinley Residence Revocable Trust (trust) owned a lot in the neighborhood for plat 24. The plat 24 declaration required that any amendment be approved by at least 75% of the owners in the neighborhood.

In 2013, the association recorded a consolidated declaration that brought all the declarations under a single consolidated and restated document. The association did not seek approval from the owners because it did not consider the document to be an amendment.

In 2014, the association sought to amend the declaration to permit amendments to be approved by a 75% vote of the owners across all neighborhoods rather than a 75% vote within each neighborhood. The association distributed owner consent forms. The trust did not consent to the amendment. After receiving consents from 87% of the owners in the plat 24 neighborhood, the association recorded the amendment.

In 2017, the trust demanded that the association release the consolidated declaration and the amendment as encumbrances against the trust's lot. After the association refused, the trust sued the association, seeking a release of the documents and asserting a claim for failure to release invalid property claims.

The trial court found that the consolidated declaration was a mere restatement and did not require approval of the owners. Although the trial court determined that the Arizona Planned Communities Act's absentee ballot requirements did not apply to the vote conducted on the amendment, it found the consent form to be inadequate to approve the amendment. The trial court ordered the release of the amendment and awarded the trust damages for the association's wrongful recordation and refusal to release the document, plus attorneys' fees and court costs. Both parties appealed.

The appeals court determined that the consolidated declaration constituted an amendment and was invalid because no owner approval was obtained. The declarations originally stated that no amendment could eliminate or alter the rights of the association with respect to the community facilities. This text was eliminated in the consolidated declaration. The association contended that there was no intent to delete this provision, and it was merely a clerical error.

The declarations originally required that amendments be approved by at least 75% of the record owners of the property described in Exhibit A, which described only the lots subject to the individual declaration. The consolidated declaration retained this same wording, but Exhibit A incorporated descriptions for all the neighborhoods, thus redefining the properties that could vote on amendments and greatly expanding the pool of voters for amendments.

The association said there was no intent to change the declaration and never believed it was doing so since the association did not conduct an owner vote. Despite the association's intention, it did alter the voting requirements by eliminating plat 24's ability to amend its declaration autonomously without the involvement of owners in other neighborhoods. Therefore, the consolidated declaration was invalid.

The appeals court further determined that the owner consents obtained for the amendment did not qualify as proper consents. The planned communities act required an affirmative vote or written consent of the percentage of owners specified in the declaration for amendments to the declaration. The Arizona nonprofit corporation act permitted the association's members to take action outside of a meeting by written ballots setting forth each proposed action or written consents describing the action taken.

The appeals court concluded that the association's consent form did not meet these requirements because it did not refer to amending the plat 24 declaration or summarize the amendment's effect on voting rights. The association said it described the amendment on its website. However, statements made elsewhere do not comply with the requirements for the form itself. Therefore, the amendment also was invalid.

The Arizona recording statutes penalize those responsible for recording invalid documents, but proof that the wrongdoer knew or had reason to know of the document's invalidity is required. The association explained that it did not have a reason to know that the consolidated declaration was invalid because it never intended to amend the declaration. The appeals court found that the association had reason to know the consolidated declaration was invalid because the text was substantially different than the original declaration. As such, the association was liable for both recording the document and refusing to release it after receiving the trust's demand.

However, the appeals court concluded that the association acted in good faith in recording the amendment, even though it ultimately proved invalid. There was confusion concerning which statute governed the content of the consent forms, and the association did inform the owners of the substance of the amendment through its website.

Accordingly, the trial court's judgment was affirmed in part and reversed in part. The case was remanded for a recalculation of the attorneys' fees and costs considering the appeals court's opinion.

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