HOA, condo, & co-op case law and legal highlights (July 2018)

By Deborah Goonan, Independent American Communities
This month’s highlights seem to have a common theme. HOA, condo/co-op statutes offer limited protection for housing consumers, and are a source of mass confusion.

 

Judge: Illinois condo law not meant to control ‘reasonable’ fees for electronic condo sale documents

Excerpts:

A Chicago federal judge has tossed a putative class action lawsuit by a trio of onetime suburban condominium owners, who alleged they paid excessive fees for state-required documents when they sold their units, saying Illinois condo laws are not meant to control fees.

The July 16 ruling was laid down by U.S. District Judge Manish Shah, dismissing a suit by plaintiffs John Murphy and husband and wife Cecil and Nirupa Mathew, against Foster Premier and HomeWise.

Foster Premier is a property management company in suburban Buffalo Grove, which oversees 20,000 condominium units around Chicago, including units in La Grange for Villa Venice Condominium Association and units in Wheeling for Timberleaf Homeowners Association.

Shah is permitting plaintiffs to replead their case, but said they could wait on the outcome of appeals in Horist v. Sudler & Co. and Friedman v. Lieberman, both Chicago area condo cases involving document fees.

Plaintiffs have been represented by the Fish Law Firm and the Law Office of Thomas J. Homer, both of Naperville; and Guin, Stokes & Evans, and Barrett Wylie LLC, both of Chicago.

Defendants have been represented by Schmidt & Barbrow, of Wheaton and Squire, Patton & Boggs, of Cleveland.

Source:

cookcountyrecord.com/stories/511494684-judge-illinois-condo-law-not-meant-to-control-reasonable-fees-for-electronic-condo-sale-documents

The judge in this case refused to consider whether or not document fees were “reasonable,” as required by statute. Apparently, the judge believes that the intent of IL statute was to require condo-sale disclosures, but not to limit the fees charged for disclosure documents. 

RULE blackboard authority Know the rules
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Illinois Court Imposes New Requirements for Condominium Rule Violation Hearings
by Saul Ewing Arnstein & Lehr LLP

Excerpts:
A recent decision of the Illinois Appellate Court has significantly expanded the rights of Illinois condominium unit owners who are charged with rule violations, as well as the obligations of the board members who conduct those hearings.


Two of the three judges of a panel of the Illinois Appellate Court … [held] that condominium board members have an obligation of “full, fair, complete and timely disclosure of material facts” concerning allegations against a unit owner that may provide a basis for a fine or other penalty. On this basis, the Court determined that the board’s failure to provide Boucher with a copy of the video recording of the first incident and a copy of the employee’s written complaint concerning the second incident was sufficient to state a claim for breach of fiduciary duty against the members of the board.

The Court also addressed the extent to which rule violation proceedings are subject to the provisions of Section 19 of the ICPA, which governs unit owner access to association documents and records. The Court ruled that even though rule violation hearings may be conducted in a closed session, if a quorum of the board is present at a violation hearing, the board must (1) prepare a record of what transpired – that is, meeting minutes – whether in writing or in the form of an audio or video recording, and (2) make those minutes or recordings available to any unit owner, and not just the accused unit owner. In addition, the Court ruled that any unit owner is entitled to see and copy (a) the documents and records on which any notice of violation is based, (b) the evidence that the board considered at the violation hearing, and (c) a record of the penalties imposed.


The Boucher decision also addressed other important issues, holding for the first time that the First Amendment applies to Illinois condominium associations, even though a condominium association is not a federal, state or municipal government.

Source:

www.jdsupra.com/legalnews/illinois-court-imposes-new-requirements-64272/

This Appellate Opinion strikes fear in the hearts of attorneys for association-governed communities. However, it is yet another step toward court recognition of the need for condo boards to be held accountable in proportion to their broad powers, while also acknowledging and upholding Constitutional rights for owners and residents. 

In response to the Boucher v. 111 East Chestnut Condominium Association Appellate Court Opinion, the attorney for 111 East Chestnut Condo Association filed the following petition for leave to appeal — in hopes that IL Supreme Court will consider the case and reverse the Appellate Court Opinion.

The gist of the 111 East Chestnut appeal: if the Supreme Court does not reverse the Appellate Court’s ruling, no one will want to be serve on the board of trustees for a condo association. 

But, what about the argument for housing consumers? If condo residents cannot count on the Supreme Court to uphold their Constitutional rights, or to hold board members accountable as responsible fiduciaries, who will choose to live under the unfettered rule of condominium or homeowners’ associations? 

Crime scene tape
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COURT HOLDS THAT CONDOMINIUM TRUST MIGHT HAVE LEGAL OBLIGATION TO NOTIFY OWNERS ABOUT THE EXISTENCE OF SEX OFFENDERS LIVING AT CONDOMINIUMS AND LAIBILITY FOR FAILING TO DO SO

Published on: July 20, 2018 (Ed Allcock)

MEEB has repeatedly advised condominium associations to adopt amendments barring Level 3 sex offenders from being able to live within a condominium. There is case law out of New Jersey upholding a prohibition of Level 3 sex offenders. MEEB believes that such a prohibition would be upheld in Massachusetts, as Level 3 sex offenders are not a protected class and that the protection of women and children in condominiums is a more legitimate concern. While some condominium associations have proceeded with a sex offender ban, many have been reticent to do so. That may change based on a recent trial court decision.

A Massachusetts Superior Court Judge has denied a Condominium Trust’s request to be dismissed from a lawsuit brought by the estate of a man who was killed in his condominium unit with a baseball bat by a Level 3 sex offender. According to the lawsuit, on March 23, 2012, John Dacey Looney, a tenant in a condo in a Yarmouthport condominium assaulted the victim and a female companion after they rebuffed Dacey Looney’s invitation to “hang out.”

Read more:
meeb.com/newsletter/court-holds-that-condominium-trust-might-have-legal-obligation-to-notify-owners-about-the-existence-of-sex-offenders-living-at-condominiums-and-laibility-for-failing-to-do-so/

A condo association may have a duty to warn its residents of the presence of a sex offender living in the community, according to a MEEB attorney. Allcock argues that, since Level 3 sex offenders are not a protected class under the Fair Housing Act, condominium associations may legally prohibit their residency within their communities. 

Cartoon HOA bill collection

Ninth Circuit Concludes HOA Attorneys’ Post-Judgment Debt Collection Practices Were Misleading

July 1, 2018 Jonathan Dessaules

The Ninth Circuit Court of Appeals in McNair v. Maxwell & Morgan, P.C., recently held that a law firm that files a judicial foreclosure action to collect unpaid homeowner association assessments is acting as a “debt collector” and engaging in “debt collection” activities subject to the Fair Debt Collection Practices Act (“FDCPA”).

The FDCPA applies to “debts” and regulates the conduct of “debt collectors.” A “debt” is defined in the FDCPA as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes.” 15 U.S.C. § 1692a(5). A debt collector is any entity or person who “regularly collects or attempts to collect … debts owed or due … another.’” The district court had concluded that filing a judicial foreclosure action was not “debt collection” activity and the law firm that filed it and a subsequent writ of special execution to conduct the sale of Ms. McNair’s home was not engaged in “debt collection” activities.

The Ninth Circuit rejected this conclusion. In holding that judicial foreclosure actions constitute debt collection activities, the Court distinguished judicial foreclosure actions from non-judicial foreclosure actions. Because the object of the action is “to retake and resell the security,” not to collect money, and deficiency judgments following non-judicial foreclosures are prohibited in many states, the Ninth Circuit held that the latter are not debt collection activities subject to the FDCPA.

Read more:
dessaules.com/blog/2018/7/1/ninth-circuit-concludes-hoa-attorneys-post-judgment-debt-collection-practices-were-misleading-f3pb8-lelp7

The conclusion of the Ninth Circuit Court is significant, because it has ruled that FDCPA applies to judicial foreclosures, but not non-judicial foreclosures. 

However, there are split decisions among the courts as to whether or not FDCPA applies to non-judicial foreclosures, prompting a formal request for the U.S. Supreme Court to consider the issue, and settle the matter once and for all. 

In the Supreme Court of the United States
DENNIS OBDUSKEY, PETITIONER
v.
MCCARTHY & HOLTHUS LLP
ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT
PETITION FOR A WRIT OF CERTIORARI

 

Tile-floor
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APPELLATE COURT CLARIFIES MATERIAL ALTERATION APPROVAL REQUIREMENTS FOR CONDOMINIUMS

…in the recent case of Lenzi v. Regency Tower Association, Inc.,Case No. 4D17-2507, June 20, 2018. The Firm of Kaye Bender Rembaum provided representation to the Association in this case, which prevailed in its position.

The Regency Tower Association, Inc. (“Association) had decided, by a vote of the Board of Directors, to alter certain common element flooring from marble to tile. Unit owner Lenzi objected to the Board making that decision, claiming it was a material alteration, requiring a vote of the unit owner. The Declaration of Condominium for Regency Tower expressly authorizes the Board of Directors to make “alterations or improvements” to the common property without requiring a vote of the unit owners. Lenzi claimed that because the Declaration did use the phrase “alteration” over “material alteration” required a vote of the owners. When the Board declined to accept Lenzi’s interpretation, Lenzi filed for arbitration with the Division of Condominium to challenge the decision of the Board.

In arbitration, the arbitrator sided with the Association, issuing a ruling that the language of the Declaration is sufficiently clear to encompass the limitations set forth in the Statute. Lenzi was not satisfied with the decision of the arbitrator so he appealed the decision to the Circuit Court, which likewise decided that the documents clearly provide for the authority in the Board of Directors and that decision was in compliance with the Statute. The Circuit Court further found that the term “alteration” includes material alterations.

In its recent decision, the Appellate Court agrees with these conclusions, ruling that words of common usage should be given their plain and ordinary meaning. The Appellate Court expressly stated that it would not arbitrarily limit the word “alteration” to exclude material alterations, finding that the word included all alterations and concluded that the Board had the authority in accordance with the Statute to make the change to the common element.

Read more:

www.kbrlegal.com/appellate-court-clarifies-material-alteration-approval-requirements-for-condominiums/

The interesting thing about this court decision is that it highlights that a condo association’s governing documents can overrule state law. The author also points out that in Florida, the Homeowners Association Act (applied to planned communities) does not mirror the state’s Condominium Act. So, although homeowners may think state laws are written in their favor, those laws might not apply in their specific case. 

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