Issue:  If your association was destroyed by fire or some other hazard, and it did not make sense to rebuild, how would the funds be divided?

Problem.  Odds are that you don’t know the answer.  The fact that you don’t know should scare you.  Is every unit in your association worth the same amount?   I doubt it.  Do you each pay the same amount in assessments?  Does that control?  What does your declaration say about the distribution of insurance proceeds if the unit owners elect not to rebuild?  Do you understand what it says? Does it even make sense? Continue Reading Why You NEED to Amend Your Association Declaration Insurance Provision Before You Have a Loss

IMPRESSION: A recent Minnesota Court of Appeals ruling served as a stiff reminder to investor-purchasers of condominium units: request of association resale disclosure certificates should be undertaken as a matter of course (in Wisconsin this is essentially the Section 703.165(4) Wis. Stat. statement of the amount of unpaid assessments).

DETAILS: In Bridge Investments, LLC v. Lowry Ridge Townhomes Assoc., LLP, A17-1221 (Minn. Ct. App. 2018) the owner of a condo unit in the Lowry Ridge Townhomes community defaulted on association payments owing over $3,500.00 in assessments.  After foreclosure proceedings, the condo was purchased by the owner’s bank at a sheriff’s sale.  Later, the defaulting owner reacquired the condo via redemption and on the same day sold the unit to Bridge Investments (“Bridge”)—a venture capital and private equity firm.  Bridge recorded its purchase with no knowledge of Lowry Ridge’s assessment lien; which was junior to the bank’s mortgage, but not eliminated by the redemption, and remained attached to the condo when sold. By this time, the outstanding balance reached over $9,000.00 prompting Lowry Ridge to record a lien for the unpaid balance, late fees, attorney’s fees, and costs.  Lowry Ridge attempted to amicably collect its debt rather than foreclose on the unit; however, Bridge felt it was not responsible for payment since it had no notice of the preexisting lien prior to purchasing the condo. Continue Reading Request Resale Certificates Rather than Roll the Dice

Harrison v. Casa de Emdeko, Incorporated, No. SCWC-15-0000744 (Haw. Apr. 26, 2018)

Holding

The Supreme Court of Hawaii held that, under the Hawaii Condominium Property Act, expenses for building components that served only particular units (residential units in this case) in a mixed-use project had to be allocated as limited common expenses to the units served, even though the declaration of the association did not assign the components as limited common elements.

The Facts

Harrison purchased two commercial condominium units out of a mixed use condominium project consisting of both residential and commercial units. The residential units were completely separate from the commercial units. Even though she only owned commercial units, Harrison was assessed expenses for elevators, lanai railings, and drains for the residential buildings. After Harrison brought suit for being improperly charged, alleging that the items were limited common elements, the association responded that Harrison never objected to the costs during her 30 years of ownership or her tenure on the association’s board of directors. Continue Reading Commercial Units in Mixed-Use Condominium Not Responsible for Residential Unit Costs

The Condominium Statutes are written such that associations can collect their actual attorneys’ fees if they proceed in a lien enforcement action for unpaid assessments. But, as in many things law-related, there are traps for the unwary, and if your attorney is not savvy, you may miss out on collecting everything you are owed…

Facts.  In a 2017 case, a unit owner was delinquent in paying assessments and the Association hired an attorney to file a lawsuit against the owner seeking collection of the assessments.  The attorney filed suit, seeking a “breach of contract” cause of action against the owner, since he violated the portion of the condominium documents that says owners must timely pay assessments. The attorney was successful in getting a judgment in favor of the association for the unpaid assessments, but when he asked the court for an award of his attorneys’ fees, the Court’s answer was no. Continue Reading Think You Will Get Your Attorneys’ Fees Paid in a Successful Collection Action? That May Depend on Your Attorney…

The Business Judgment Rule can be a great protection for condo and HOA boards—but only if the board is following the documents.

Facts.  The Declaration for an HOA stated that the Board had the discretion to raise the “maximum annual assessment” without a vote of the homeowners as long as it was “in an amount equal to 150% of the rise, if any, of the [CPI] for the preceding month of July.” Higher increases required the vote of the homeowners. The Association’s Bylaws contained a formula for calculating this “maximum annual assessment” raise, but the formula allowed the Board to accumulate the CPI increases year over year in calculating the maximum assessment. The Board followed the Bylaws formula, and owners sued, contending (1) that the increase to the maximum annual assessment was higher than the Board had authority to do under the Declaration; and (2) that the Bylaws formula conflicted with the Declaration. The HOA Board argued that it exercised good Business Judgment in following the Bylaws formula. Continue Reading How is the Business Judgment Rule Applied to Board Actions?

Condominium associations generally have a number of legal remedies to pursue when an owner stops paying assessments. An Ohio court recently found that associations may collect assessments as they come due during a lien foreclosure action by and through a court-appointed receiver.

Facts.  In a 2017 case, an investor owner of a condominium unit, who had a rent-paying tenant living in the unit, failed to pay a special assessment to the association. The association filed a lien for the unpaid special assessment and started a lien foreclosure action. While the foreclosure action was in progress, the association also asked the court to appoint a receiver who would collect the rents from the tenant, as well as the current assessments as they come due. The unit owner argued that having the receiver collect assessments was a stretch of the statute, which only allowed a receiver to collect “reasonable rental” during the pendency of a foreclosure action. Continue Reading Can a Court-Appointed Receiver Collect Assessments Coming Due While a Unit is in Lien Foreclosure?

A defense owners can raise if the Board claims the owner has violated the rules is “selective enforcement,” meaning the Board arbitrarily picks on some violators and not others. In addition, owners oftentimes like to rely on approval given by one board member, taking that as “Board approval” of the owner’s actions.  The case below tackles both of these issues, in the context of a dispute over an owner’s installation of hard-surface flooring.

Facts.  In a 2017 case, an owner who lived in an upper-level condominium unit replaced her carpeting with laminated flooring.  The problem is, the Association’s Declaration prohibited the installation of any flooring other than carpet, without prior Board approval. The owner had not received approval from the Board prior to installation of the flooring, but she did allegedly have an email exchange with the Board president wherein he said it would be ok. Continue Reading Hard-Surface Flooring in Upper Units—A Lesson in Selective Enforcement and Officer’s Authority

An owner violates the rules. The Board assesses fines to the unit owner.  Will the fines hold up in a court of law? In this case, they did—and your Association can take note of what this Court says the HOA did right.

Facts.  In a 2017 case, an owner who lived in a subdivision with an HOA planted bamboo in their yard, which then spread and infested a neighboring owner’s yard and some common areas.  When the owner failed to remove the offending plants after notice, the HOA Board started to fine the owner, rather than to exercise “self-help” and take care of the bamboo infestation for the owner.  Continue Reading A Board of Directors’ Right to Fine for Violations

In a 2017 New York case, a dispute arose over what authority the Association had to perform landscaping maintenance on an individual homeowner’s lot (Minkin v. Board of Directors of Cortlandt Ridge Homeowners’ Association, Inc., 149 A. D.3d 723 (2017)).  When the owner refused to pay the assessment for the landscaping services, the Board started assessing fines.  The owner sued the Board.  The New York Supreme Court (the lowest level court in New York) decided that the Board did have the authority to perform the landscaping services on the front lawn and the homeowner was required pay the assessment as well as the fines.  Unfortunately for the Association, there was also a larger issue dealing with the work performed and assessed on the side and rear of the house.  The problem was that the Board and managing agent could not provide backup or evidence for exactly what work was done in each area, and accordingly, the assessments and fines were not upheld in those areas. Continue Reading Know Your Governing Documents

A Court in Colorado recently dealt with a developer who placed a provision in the declaration of a condominium association prohibiting amendment of the declaration – ever – without the declarant’s written consent, and requiring that all construction defect claims be resolved through arbitration (Vallagio at Inverness Residential Condominium Association, Inc. v. Metropolitan Homes, Inc. (395 P.3d 788)). Continue Reading Developers Sometimes Draft Documents for Their Own Benefit