The South Carolina Community Association Law Blog - By D. Ryan McCabe
Covering the law of homeowners associations, property owners associations, condominium associations, cooperatives and other community associations.
South Carolina Community Association Law Blog

HOA’s Arrest of Homeowner is Malicious Prosecution

Alamo County Club Owners Association v. Shelton, 12-1—00300-VB (Tex. App. 2012)

Sometimes personal disregard for a fellow homeowner can overlap and have a costly effect when enforcing covenants.  In this case, a board member called the police on a known resident, alleging he’d trespassed on the community’s golf course.

Pursuant to the restrictive covenants for Alamo Country Club, homeowners are members of the association and permitted use of the community’s golf course. However, this homeowner (the “Plaintiff”), had signed a deed giving his interest in the property to a third party, but reserving his right to vote and use the amenities, specifically the golf course. In addition, the Plaintiff and his wife continued residing on the property. Nevertheless, once the association learned of the deed, they question its validity and determined that the Plaintiff no longer had voting rights, and any continued use of the golf course required payment and accompaniment by an association member. The Plaintiff was informed by letter of the associations’ position and given notice that if he didn’t comply and tried to play golf as a member, the police would be called.

Despite this notice, while playing golf one day, a board member attempted to prevent the Plaintiff from freely using the golf course, resulting in Plaintiff’s arrest and charges for trespass. At trial, the court granted judgment in favor of the Plaintiff for malicious prosecution. The Texas Court of Appeals upheld the judgment, stating that the deed from the Plaintiff to a third-party was void. The court held that the property was marital property and without the signature of Plaintiff’s wife, it was invalid. Additionally, the court determined that the association failed to follow its own rules, which state that three written warnings will be provided prior to any legal action. Under Texas Law, arrests on criminal charges constitute legal action. Lastly, the board member who called the police acted with malice: (1) because of his dislike for the Plaintiff and (2) for failing to disclose to the police that the Plaintiff had been a resident for over ten years.  

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Certain Owners Exempt from Special Assessment

Green v. Lake Montowese Association, 387 S.W. 3d 413 (Mo. Ct. App. 2012)

Here, the Missouri Court of Appeals determined that it was unfair to force homeowners to pay special assessments on a central water system for which they received no benefit.

The original water system constructed in 1942 became inadequate to service the existing homes in the community. In 1996 one family, after 10 years of inadequate water supply, was forced to disconnect from the central water system. As a result, they dug a private well at a cost in excess of six thousand dollars. As the community continued to grow, the association approved building plans for new lot owners on the contingency that they agree to dig their own wells instead of accessing the central water system.

In 2007, the association approved the replacement of the water system and levied special assessments on all lot owners to cover the expense. However, homeowners that incurred the costs of imputing private wells opposed the assessments and the court agreed. In ordinary circumstances homeowners are not given special treatment because their benefit may have been reduced as compared to other lot owners. Nevertheless, under Missouri law, courts will not enforce assessments against homeowners who have been denied or deprived the option of receiving a benefit all together. 

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.  

HOA Doesn't Have Authority to Restrict Lot Usage

Estates at Desert Ridge Trails Homeowner’s Association v. Vazquez, Nos. 30, 944; 31, 590 (N.M. Ct. App. Feb. 8, 2013)

The New Mexico Court of Appeals affirmed a ruling that a Homeowners’ Association’s power is limited in restricting the use or occupancy of individual units or the behavior within said units, absent proper provisions within the declaration.

In this case, the Homeowners’ Association (“HOA”) sued a unit owner (“Vazquez”) for failing to comply with the declaration. In 2007, a year after Vazquez purchased his property, the association adopted a rule barring owners from renting their units for a period shorter than 30-days. Despite this rule and notice of the violation from the HOA, Vazquez began renting his unit for terms as short as three days.

At trial, the court determined that short-term rentals were not prohibited under the declaration. In addition, the court held the HOA’s 2007 rule to be unenforceable because it unreasonably interfered with an owner’s use and enjoyment of his property. As a result, the trial court ruled in favor of Vazquez.

In an attempt to properly implement a short term rental requirement, the HOA amended its declaration pursuant to a two-thirds vote by its members. It then filed suit a second time against Vazquez for failure to comply with the amended declaration. However, the court again ruled in favor of Vazquez, holding that the amended declaration was void because it required the unanimous approval of all owners.

The HOA appealed both rulings of the trial court. First, the HOA argued the declaration provided that property was limited to “residential use or purposes” and that short term leasing was a business and therefore a violation. However, the appellate court affirmed the trial court’s ruling. It held that the owner’s monetary benefit, alone, did not constitute a business in violation of the “residential purposes” restriction. Therefore, the HOA’s argument that Vazquez was in violation because of an implied restriction was insufficient. The appellate court stated that the declaration must specifically include a provision barring short term rentals.

Secondly, the appellate court found that the HOA’s power to adopt rules was limited in scope and for the purpose of protecting common property and preventing nuisances to community members. The evidence in this case did not allege that the short-term rentals caused injury to common property or created a nuisance. As a result, the appellate court found the adoption of the 2007 rule, barring short term rentals of less than 30 days, went beyond the HOA’s scope of power.

Lastly, the appellate court affirmed that the amended declaration was void because the declaration did not provide for general amendments. Instead, the declaration contained a duration clause of 25 years; as a result, any amendments must be approved by all owners. Consequently, the two-thirds vote approving the amendment was insufficient to meet this requirement.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Punitive Fining is Outside Board's Authority

Fairfax Co. Redevel. and Housing Auth. v. Shadowood Condo. Ass'n,
No. CL-2010-13282, Va. Cir. Ct., May 12, 2011.

In this case, a condo association levied more than $20,000 in fines against a housing authority, which owned several units to rent to low income families. The fines were related to rules violations by the authority's tenants and failure to provide the association with paperwork relating to the units.

The court held that the fine amount was unreasonable and punitive in nature. After analyzing the association's governing documents, the court determined that the board's authority to fine was limited to maintenance of common area property and association operations. The board lacked authority to issue fines as a penalty.

Before levying fines, a board of directors must ensure that the association's governing documents permit monetary fines. The board should also draft a policy outlining fine procedures and provide notice of the policy to association members.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Court Finds Developer not in Contempt for Stormwater Damage to HOA

Ex Parte: Lipscomb v. Stonington Devel., No. 4961 

Respondents/property owners filed suit against a developer for property damage caused by stormwater runoff. The circuit court judge issued an order granting a permanent injunction to the property owners, which enjoined the developer “from discharging sediment-laden stormwater onto [Respondents] property and causing damage thereto.”   Respondents later filed a motion to hold the developer in civil contempt for violation of the order. The circuit court held a hearing to determine if the developer was in contempt.  At the hearing, evidence was presented illustrating efforts the developer had taken to prevent the stormwater runoff, albeit unsuccessfully. The court found the developer in contempt and this appeal followed. 

The court of appeals reversed the order of civil contempt.  “Contempt results from the willful disobedience of a court order, and before a court may find a person in contempt, the record must clearly and specifically reflect the contemptuous conduct . . . . A willful act is one . . . done voluntarily and intentionally with the specific intent to do something the law requires to be done; that is to say, with bad purpose either to disobey or disregard the law.” 

The evidence in this case showed that the developer had taken steps to alleviate the runoff by hiring consultants and workers to monitor the property, and erecting silt fences, rock dams, and hay bales. Although these efforts did not completely stop the stormwater from entering onto Respondents’ properties, the court held that the developer’s “good faith attempt to comply with the order [did] not warrant a finding of contempt.”

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter. 

Liability of a Parent Corporation for Construction Defects

Magnolia N. Prop. Owners Ass’n, Inc. v. HeritageComm. Inc., No. 4943.

A property owners association (POA) filed suit for construction defects in a condominium complex. Appellants are three corporations: HCI (parent corporation), HMNI (seller) and Buildstar (general contractor).  HCI created separate corporations for every development it constructed for the purpose of operating as cost centers. HMNI was the cost center for Magnolia North POA and Buildstar supervised construction at Magnolia North.            

The POA board of directors initially consisted of officers of the Appellant corporations.  During this time, unit owners discovered various construction defects. The officers assured POA members that the defects would be timely cured.  The POA filed suit after turnover of the board from the developer to the unit owners. The POA asserted causes of action of negligence, breach of express warranty, breach of warranty of workmanlike services, and breach of fiduciary duty.  The court affirmed the jury’s award of $6.5M in actual damages and $2M in punitive damages. 

Amalgamation

Amalgamation is a theory of holding a parent corporation liable in place of its subsidiary where evidence shows that corporate interests, entities and activities are blurred to the point that separate legal distinctions can be ignored.  This is not piercing the corporate veil, as fundamental unfairness and fraud are not required elements. The court compared the instant case with Kincaid v. Landing Devel. Corp. where amalgamation was found between three distinct corporations.  In the instant case, the court pointed to the following facts for upholding the trial court’s finding of amalgamation:

1.     HCI, HMNI and Buildstar “shared officers, directors, office space and a phone number”

2.     The corporations shared employees

3.     HCI held itself out to the POA as the corporation responsible for construction defects in its written warranty

 Equitable Tolling

A three-year statute of limitations applied to the POA’s causes of action. Appellants argue the statute of limitations started when construction defects were discovered, marked by the POA’s first meeting on March 8, 2000.  The court disagreed and held that the statute did not begin to run until the date of turnover.

The court relied on the recent case of Hooper v. Ebenezer Senior Svcs and Rehab. Ctr., where the supreme court described equitable tolling as a “doctrine to suspend or extend the statutory period to ensure fundamental practicality and fairness . . . It has been observed that equitable tolling typically applies in cases where a litigant was prevented from filing suit because of an extraordinary event beyond his or her control . . . To deny [equitable tolling] would permit one party to suffer a gross wrong at the hands of the other.”

The POA board consisted of the corporations’ officers until turnover, so it is unreasonable to expect that the POA would have brought suit before the homeowners gained control of the board. As soon as turnover occurred, the POA promptly filed suit.  The court upheld the trial court’s ruling on equitable tolling.

Equitable Estoppel

The Appellant corporations were equitably estopped from asserting the statute of limitations as a bar to the POA’s claim because the Appellants induced the POA’s delay in filing suite.  The court held that deceit is not an essential element of estoppel; it is enough that the party “reasonably relied on the words and conduct of the party to be estopped in allowing the limitations period to expire.”  Appellants assured the unit owners that the construction defects would be repaired, so it was reasonable for the unit owners to give the Appellants time to make good on these promises before filing suit. 

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter. 

Use Caution When Reviewing Leases

Many governing documents provide the association with the authority to review and either approve or deny the leases of community members. This authority can be helpful in that the association can ensure the lease document complies with the association’s governing documents, the association can have a record of the new tenant’s name and contact information, and the association can be sure that the number of units or homes leased does not exceed a set percentage if there is such a requirement in the governing documents.

However, with this authority comes great responsibility. Associations must use caution not to violate the Federal Fair Housing Act when reviewing leases.  By enacting a reasonable policy for lease reviews and applying it evenhandedly to all leases, the association can avoid the pitfalls of discrimination complaints.

A tenant cannot be rejected on the basis of her race, color, religion, age, sex, ethnicity, national origin, family status, or handicap. If the tenant participates in the Section 8 Voucher Program, denying the lease could be a violation of the Fair Housing Act on the basis of disparate impact. Similarly, conducting criminal background checks for tenants may also be a disparate impact violation under the Fair Housing Act in some circumstances.

The best approach for community associations is to formulate and enact a reasonable leasing policy and stick with it. Making exceptions in some cases and not others can open the door to litigation.  Leasing policies should focus on length of the lease and compliance with the governing documents rather than the background and identity of the tenant. However, having the tenant’s contact information and a copy of the lease on file will promote better communication within the community. 

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter. 

Property Maintenance Company Cannot Foreclose on Condo Units

Parc Central Aventura E. Condo. v. Victoria Group Serv., LLC, 54 So. 3d 532 (Fla. Dist. Ct. App. 2011).

A Florida court of appeals determined that a company providing cleaning, concierge and security services to a condo association could not foreclose on individual units when the association failed to pay $290,737.27 for services under three separate contracts.  The trial court issued a judgment in favor of the maintenance company and an order of foreclosure on the basis that the individual owners consented to and authorized the services through the contracts entered into by the association. The trial court relied on Florida’s mechanic’s lien statute to order the foreclosure of condo units.

On appeal, the court held that the maintenance company did not have a valid lien under the mechanic’s lien statute.  The court held that the services provided by the company were not permanent improvements, and maintenance of property is non-lienable.  Under Florida’s Condominium Act,if a valid lien encumbers multiple condominium parcels, each owner of an encumbered parcel may exercise the rights of a property owner . . . .”  The court reversed and remanded the case with instructions to issue a monetary judgment instead of foreclosure.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.

Self-Help and Covenant Enforcement- Drawing a Line in the Sand

Frustrated board members often find themselves in a predicament: how far is too far in covenant enforcement?  Oftentimes, the governing documents of an association will allow the board to use self-help to enforce the covenants in a handful of situations.  For example, the covenants may state that if an owner refuses to maintain his or her yard the board may hire a landscaper to mow and then charge the owner for the service.  Unfortunately, boards sometimes go too far in seeking enforcement measures and step into the realm of vigilante justice.  This was the situation in a Florida case where the board of Palomino Lakes Subdivision literally blocked access to the subdivision on three occasions to prevent an owner from delivering what they thought was a mobile home.  Parton v. Palomino Lakes Prop. Owners Ass’n, Inc., 928 So. 2d 449 (Fla. Dist. Ct. App. 2006).

The covenants for Palomino Lakes prohibited mobile homes, but the owner was actually delivering a modular home, which was to be attached to a concrete slab and was permitted by the covenants.  By blockading access to the neighborhood, the board violated the covenants.  The owner later sued the association and the board members individually for breach of contract and injunctive relief. 

At trial, a jury determined that the owner was entitled to $5,000 in compensatory damages and punitive damages of $60,000 against one board member, $50,000 against another board member, and $40,000 against a third.  As the prevailing party, the owner was also entitled to reasonable attorney’s fees.

Board members should think twice before taking self-help measures and subjecting themselves to personal liability.  Always ensure that board actions are permitted by the governing documents.

This site and any information contained herein is intended for informational purposes and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.

ADA Pool Regulations and Community Associations

In 2010, the Department of Justice (DOJ) issued revised requirements for the Americans with Disabilities Act (ADA) regarding accessible swimming pools.  In light of these new regulations, many community associations have approached me with questions regarding their association’s compliance.  This article seeks to address those concerns and provide a brief summary of the scope of the 2010 Standards for Accessible Design.

The ADA strives to provide equal opportunity to people with disabilities.  Title II of the ADA applies to state and local government services and Title III applies to public accommodations and commercial facilities.  The updated swimming pool accessibility provisions are intended to affect all newly constructed, altered and existing swimming pools with very limited exceptions.  However, privately owned community associations are generally not encompassed under the ADA. 


Title III defines a public accommodation as a facility owned by a private entity whose operations affect commerce. In order to fall under the purview of the ADA, a community association must be engaged in commerce.  This would include, by way of example, selling memberships to the general public, providing a place of lodging to the public (e.g. hotels, “condotels,” and resorts), offering swimming lessons to the general public, or hosting swim meets or events where the public is invited to access the pool.

           
If the community association is a public accommodation, there must be an accessible means of entry and exit on all newly constructed and altered swimming pools, wading pools and spas on or after March 15, 2012.  Existing pools must be brought into compliance to the extent that it is readily achievable on or after March 15, 2012.  This readily achievable standard takes into consideration financial constraints and overall feasibility.

                       
Larger pools, those with more than 300 linear feet of pool wall, are required to have two accessible means of entry, one of which must be a sloped entry.  Smaller pools are only required to have one accessible means of entry, which can be either a lift or a sloped entry.  Public accommodations also must consider maintenance and staff training as it relates to the accessible features.  Tax credits and deductions are available through the IRS for small businesses making these accessible means of entry.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.

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