HOA, condo & co-op case law and litigation highlights (April/May 2019)

By Deborah Goonan, Independent American Communities

Spring highlights: Fair Housing Act violations, important HOA priority lien opinions, reversal of an Idaho jury decision, and more proof that HOAs and developers must abide by their own governing documents.

 

HOA, CC&Rs cannot banish Adult Foster Care home from community

Unpublished opinion, State of Michigan Court of Appeals

Appellate Court rules that Michigan HOAs cannot use deed restrictions on use of property to exclude certain Adult Group Homes, because such restrictions go against the public interest. Therefore, in this case, the HOA’s restrictions against “commercial” activity are not enforceable.

Sources:

State, federal laws support ‘group homes’ in residential communities
Robert Meisner, Guest Columnist Published 12:59 p.m. ET May 31, 2017

Court of Appeals Affirms Public Policy in Favor of Adult Care Facilities

Case Reference: David Saunders v. Candice Counts

 


 

Real Estate Developer cannot short HOA on Reserve Funding without membership consent by vote

Indiana Court of Appeals

A developer amended the Declaration while still in control of the HOA. The amendment reduced the amount of assessment it was obligated to pay the Associations, to fund its Reserve account.

The Appellate Judge ruled that the homeowner members of the Association should have had a vote on the amendment, and since a vote did not occur, the amendment was not valid.

Also, as a result of the improper amendment, and a reduction in the Delarant-Developer’s share of HOA assessment reserve payments, the HOA incurred monetary damages, to be determined by the court.

Source:
Greenwood HOA fight goes back to trial court for damages hearing
April 11, 2019, Dave Stafford

Case reference:

The Village Pines at the Pines of Greenwood Homeowners’ Association, Inc., v.
Pines of Greenwood, LLC, and Arbor Homes, LLC

 


 

Associations must follow proper Architectural Control Committee procedures to enforce restrictive covenants

North Carolina Court of Appeals — Unpublished

A North Carolina developer-controlled HOA denied homeowners approval to install a fence that did not meet the height restrictions in the governing documents. The owners were fined $50 to $100 per day, which they refused to pay. Ultimately, the HOA filed a lien in excess of $25,000 on the owner’s property. A lower court ruled in favor of the HOA, ordering the homeowners to pay off the lien, plus the HOA’s attorney fees.

The homeowners appealed, arguing that the HOA did not follow proper procedure in reviewing their request for a fence. According to the governing documents for the Association, its Architectural Control Committee (ARC) must consist of at least 3 members, and, if a request is not answered within 45 days, it is deemed to be approved.

At the time the Makars submitted their ACC request for a fence on their property, the ACC consisted of one person, who also happened to be the Declarant-developer. The Appellate Court ruled that the ACC decision was not valid, since it was not made by a committee of at least three members.

Therefore, no valid ACC decision was rendered within 45 days, and the Makar’s fence is deemed to be approved, per the governing documents. The homeowner prevails in this case.

Source:

YES – Wisconsin Condos And HOAs Have to Follow Their Association Documents
by Husch Blackwell LLP, pril 10, 2019 (one board member cannot make decisions alone, courts won’t recognize it as a valid decision)

Case reference:

Maker v. Mimosa Bay Homeowners Association, Inc. (NC)

 


 

Federal court awards $635K plus attorney fees to plaintiffs in egregious Fair Housing Act lawsuit

United States Court of Appeals — Unpublished

A federal court ruled in favor of the plaintiffs in a Fair Housing case, imposing a judgment of $350,000 in compensatory damages, $285,000 in punitive damages and awarding the plaintiffs attorney’s fees and costs against their homeowners association.

A Las Vegas (Nevada) HOA refused to allow a disabled homeowner to bring a service animal to the community clubhouse on three separate occasions. The Court ruled that the HOA denied a request for a reasonable accommodation.

The HOA also imposed fines against the homeowner for bringing her “pet” to the clubhouse, against HOA rules.  The homeowner and her husband refused to pay the fines, and the HOA filed liens and foreclosed on the property, forcing the Plaintiffs to lose their home and declare bankruptcy.

Furthermore, the investigation revealed that the HOA and management company disparaged the homeowners, which led to neighbors harassing the plaintiffs, and defacing their property. The HOA did nothing to discourage the hostile environment.

Because the Federal court found reckless disregard of the plaintiff’s rights by the HOA, the court also awarded punitive damages.

Incredibly, this dispute began in 2009, when a Nevada Real Estate Division Arbitrator ruled in favor of the HOA. The case was appealed all the way up to the Nevada Supreme Court, but neither the state Appellate court nor Supreme Court would overturn the Arbitrator’s decision.

The plaintiffs moved their complaint to Federal court, where they ultimately prevailed after nearly a decade of litigation.

HOA VIOLATES THE FAIR HOUSING ACT BY DENYING A SERVICE ANIMAL IN THE CLUBHOUSE (NV)
Posted on April 4, 2019 by Kevin Hirzel

Case reference:

Deborah SANZARO and Michael Sanzaro, Plaintiffs, v. ARDIENTE HOMEOWNERS ASSOCIATION, LLC et al., Defendants.

 


 

Federal judge overturns jury decision in Hayden, Idaho Christmas house lawsuit

U.S. District Court-Idaho

A few months ago, we learned that Jeremy Morris prevailed on his lawsuit against his HOA. A jury agreed with Morris’ claims that his HOA opposed his elaborate Christmas display, and tried to stop him from buying his house, because they discriminated against Christians.

The court awarded Morris $75,000. But that holiday victory was short-lived.

The HOA appealed to federal court, and earlier this month, Idaho District Court Judge B. Lynn Winmill, (reportedly an appointee of Bill Clinton), overruled the jury and reversed the court’s decision.

Justice Winmill ruled that the HOA did not engage in religious discriminate against Morris — the HOA was merely respecting the rights of other homeowners of different faiths.

The Judge also decided that Morris is barred from future Christmas displays, and must reimburse the HOA for its attorney fees.

Morris vows to appeal to the Ninth Circuit Court.

Winmill also makes the case that, if the jury verdict were not overturned, the HOA should be granted a new trial, or damages awarded to Morris should be reduced to a mere $4.

The Judge’s reasons for the reversal are fully explained in the article referenced below, but here’s a brief preview of Winmill’s arguments:

  • The pre-purchase letter Morris used as evidence of discrimination was not written by the board, and not ultimately approved by the board.
  • The HOA was not discriminating against Christians, it was simply respecting the ‘religious pluralism’ of its community
  • The reference to the Christmas display attracting ‘undesirables’ and strangers was merely a concern for neighborhood safety
  • Morris’ own secret recordings show his ‘confrontational’ approach toward his neighbors
  • Winmill was sympathetic to the HOA President’s testimony against Morris
  • The HOA cannot be held responsible for the hostile actions of a non-board member
  • The Christmas extravaganza broke a bunch of HOA rules

 

Source, with case reference:

Why an Idaho judge just undid the controversial Hayden Christmas house jury verdict
by Daniel Walters, The Inlander | April 08, 2019

 


 

Nevada Supreme Court upholds a bank’s rights to preserve a deed of trust to avoid losing its interest due to foreclosure of an HOA priority lien

Nevada Supreme Court

Two Supreme Court opinions hold that if a bank attempts to pay off the HOA priority lien, that’s enough to preserve the deed of trust on the property. In other words, the auction buyer of property at HOA foreclosure cannot expect to extinguish the lender’s lien, and get a mortgage-free house.

The decision should help eliminate perverse incentives for rushing to HOA foreclosure. Ditto for questionable deals where auction winners wind up with windfall real estate profits after paying off relatively small HOA liens.

That’s good news for banks, and potentially good news for home buyers and homeowners.

Now, if only the courts would rule that when a homeowner makes an attempt to pay off the assessment portion of a lien, the HOA or its collection agent must accept it and must not proceed with HOA foreclosure, in an attempt to shake down the homeowner for thousands in attorney fees.

Any Nevada attorneys willing to take on this legal challenge? ♦

Source article with links to case references:

Nevada Supreme Court Rules Bank Tender Defeats HOA Superpriority Lien
by Bradley Arant Boult Cummings LLP (April 4, 2019)

Published Nevada Supreme Court Cases:

Bank of America v. SFR Investments Pool 1

Bank of America v. Thomas Jessup