HOA, condo & co-op case law and litigation highlights (July 2019)

By Deborah Goonan, Independent American Communities, debgoonan@icloud.com

This month: court decisions affecting amendment of CC&Rs, HOA priority liens, foreclosure standards, Fair Housing Act accommodations, and much more. 

 


Court approves reduction of percentage membership vote needed for amending CC&Rs (CA)

Did you know that sometimes a judge can make it easier for your HOA-governed community to amend its restrictions?

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The case of Orchard Estate Homes, Inc. v. Orchard Homeowners Alliance is one example.

The Owners’ Association wanted to change its governing documents to prohibit short-term rentals in its community. Orchard Estates’ CC&Rs required 67% of membership to vote in favor of the amendment, and 62% of owners voted for a restriction against short-term rentals.

But, instead of accepting defeat, the HOA asked the court to allow the amendment with a 62% vote. In the court’s opinion, since the Association provided adequate notice of their appeal, and made a good faith effort to get out the vote, the 67% approval requirement was reduced to 62% in this case.

Sources:

PROHIBITING SHORT-TERM RENTALS (CA)
By Morgan
Posted July 10, 2019 In Real Estate
CC&R/ Getting Around Super Majority Requirements

Voter Apathy Not a Required Showing in a Petition to Reduce Percentage of Affirmative Votes Required to Amend CC&Rs
APRIL 16, 2019
Posted by Steven J. Tinnelly, Esq.


Fair Housing Accommodation allows HOA to offer reasonable alternative (MI)

In an unpublished opinion, the Michigan Court of Appeals ruled an HOA does not have to fully accommodate a disabled resident who owns a service dog, on the matter of the type of fence that can be installed according to CC&Rs.

The resident, Janis Creswell, owns a service dog and an emotional support dog. In 2016, she installed a fence to contain her animals, without seeking prior approval of the HOA.

Fox Bay Civic Association told Creswell she’d have to remove the fence, but that she would be permitted to install a dog run or an invisible fence as alternatives. Creswell refused to remove her fence, and the Association sued.

In FOX BAY CIVIC ASSOCIATION, INCORPORATED v JANIS CRESWELL the court recognized that Creswell, though seeking a fair housing accommodation, could have installed an invisible fence or a dog run, but she refused to do so. Therefore, the court ruled in favor of the HOA, rejecting Creswell’s Fair Housing claim.


New reading of CC&Rs — Homeowners have no right to unobstructed views (CA)

In Eisen v. Tavangarian, the Second Appellate Court reversed its previous decision in the case of Zabrucky v. McAdams.

A decade ago, the court opined that Marquez Knolls restrictive covenants (Pacific Palisades) prohibited any homeowner from making property improvements that might block the scenic views of their neighbors.

But in Eisen, the court re-read the covenants, and decided that they only apply to new construction, not existing homes.

Which means that homeowners in Marquez Knolls can increase the height of their home or landscape improvements, thus blocking the view of adjacent neighbors.

Source:

CC&R You Kidding Me?: CA Appellate Court Rules Earlier Court Misread Restrictive Covenant Prohibiting Alterations to Existing Homes
Sarkis Haroutunian, James Swearingen
Greenberg Glusker Fields Claman & Machtinger LLP


Appeals Panel: Developer, HOA have rights to dig drainage ditches in easement (TX)

Homeowners: beware of easement rights on private property. In many planned communities, the developer retains the right to enter the easement zones for alteration of storm drainage ditches.

That was the case in Bolleter v.Grand Lake Estates Prop. Owners’ Ass’n., where an appeals court ruled in favor of the HOA’s request for dismissal of the homeowners’ claims of trespass on private property.

Source:

Appeals panel sides with property owners’ association in drainage dispute
APPEALS, By Scott Holland | Jun 17, 2019


New “due diligence” standards for nonjudicial foreclosure actions? (MA)

A Massachusetts Appeals Court decision in April sets the stage for homeowners to challenge nonjudicial foreclosures by mortgage lenders.

In Property Acquisition Group, LLC v. Ivester, the court ruled that Fannie Mae failed to exercise due diligence in considering the fair market value of property owned by Ivester. Ivester claims that his home was sold at a price far below its value for alternative use as the site of 2 to 4 housing units.

While the court did not void the foreclosure sale, it did send the case back to Superior Court. If the sale price is found to be insufficient, Ivester might be able to seek a money judgment to collect additional money, based upon the property’s true value.

Now the question is: will the courts hold HOAs to the same due diligence standards as mortgage lenders?

Source:

APPEALS COURT DECISION HOLDS THAT NO DILIGENCE IS NOT REASONABLE DILIGENCE IN FORECLOSURE SALES (MEEB, April 18, 2019)


Are past due HOA assessments dischargeable in Chapter 13 bankruptcy?

Trade group Community Associations Institute (CAI) is up in arms about a Ninth Circuit Court ruling that allows property owners to discharge their past due HOA assessments in a Chapter 13 bankruptcy.  (See Goudelock v. Sixty-01 Ass’n of Apartment Owners)

The Ninth Circuit decision conflicts with a District Court ruling in Oaks at North Brunswick v. Spradley. There, the court sided with the Association’s right to collect past due assessments, with priority over the mortgage lien, in spite of the Chapter 13 bankruptcy.

CAI submitted an Amicus (Friend of the Court) brief on behalf of the condo Association, in their appeal to the U.S. Supreme Court. USSC denied the petition, leaving the HOA-industry to doubt whether they can count on collecting past due assessments in future Chapter 13 cases.

Source:

Condominium Assessments and Bankruptcy: What Can Associations Collect?
by Phoebe E. Neseth, Esq. | Feb 21, 2019 | Court Cases

See also:

U.S. Supreme Court Sidesteps Condo Assessment Dispute, MARYLAND CONDOMINIUM & HOA LAW BLOG, July 8, 2019


Appeals court overrules ‘nonsuit’ in breach of contract case against condo association (CA)

Here’s a case that many condo owners can relate to. A pipe bursts (or a roof or window leaks) causing water damage to the owner’s unit. That creates a huge headache for the condo owner, insurance claims for damages, and expenses for the HOA and the unit owner.

Had the Association taken care to maintain the common elements, the leak and property damage would not have occurred.

In SANDS v. WALNUT GARDENS CONDOMINIUM ASSOCIATION INC, a trial court declared the condo association’s motion for a ‘nonsuit,’ claiming the unit owner did not present enough evidence to support her claims of negligence on the part of the HOA.

An Appeals Court disagreed, stating that the Association bears contractual obligations to maintain common elements under the governing documents, and sending the case back to the lower courts for trial.

Source:

Sands v. Walnut Gardens Condominium Association, Inc.  (Davis-Stirling.com)


First Liberty Institute says judge was wrong to overturn jury verdict on religious discrimination case (Idaho)

First Liberty Institute asks the court to reaffirm the jury’s verdict on Jeremey Morris’ Christmas display in Hayden HOA. In a rare move, a judge threw out the jury’s verdict last spring.

Source:

Religious law firm files appeal after judge overrules verdict on Hayden Christmas display
KHQ6 | May 6, 2019 Updated May 6, 2019


Another Priority Lien case decision in Nevada

In this case, the HOA notified the bank of its entire lien, but not the super priority portion. The bank calculated the priority portion and tendered it, but the HOA foreclosed anyway.

The Court ruled that the bank’s tender did satisfy the super priority lien portion, and that the HOA erred by going through with the foreclosure.

The bank received notice of the lien, and therefore its due process rights were not violated.

See: UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT, No. 17-15796
D.C. No. 2:16-cv-00650- JCM-CWH
OPINION
BANK OF AMERICA, N.A., Plaintiff-Appellant, v. ARLINGTON WEST TWILIGHT HOMEOWNERS ASSOCIATION; THOMAS JESSUP, LLC; THOMAS JESSUP, LLC, SERIES IV; ALESSI & KOENIG, LLC, Defendants-Appellees.

The court ultimately opined that Nevada statute with regard to HOA super lien is Constitutional, regardless of whether or not the loan is insured by FHA.

Source:

9th Circuit Holds Nevada HOA Super Lien Statute is Constitutional and Not Preempted by FHA Mortgage Insurance Program
by Weiner Brodsky Kider PC | May 1, 2019 ♦