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

Most states, including Wisconsin, follow the American Rule when it comes to attorney fees.  In simple terms, it provides that each side in a lawsuit is responsible for their own attorney fees (win or lose) unless:

  1. A statute or law provides otherwise; or
  2. A contract provides otherwise.

Because the law recognizes your Association documents as contracts between the Association and it owners or members, a provision allowing attorney fees may be found there. Continue Reading Attorney Fees – How Do I Get a Court to Award Them to My Association and What is a Fee Shifting Provision?

In Welsh v. McNeil, 162 A.3d 135 (2017) a board member and unit owner (“Board Member”) sued another unit owner (“Landlord Unit Owner”) for violation of the Association documents claiming that the Landlord Unit Owner violated the leasing provisions by allowing someone (the “Tenant”) to occupy the premises who was not on the lease.  The lease was only to an unincorporated entity, and did not name who would be occupying the premises.  Before suit was filed the Landlord Unit Owner and Tenant asked the Board to waive the bylaw provision as a reasonable accommodation under the Fair Housing Administration (“FHA”) to afford recovering alcoholics an equal opportunity to use and enjoy a single family dwelling of their choice. Continue Reading Can Your Association End a Unit Owner’s Suit by Post-Suit Filing Actions?

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 recent New York Court dealt with an issue on leasing (Olszewski v. Cannon Point Association, Inc., 148 A.D.3d 1306 (2017)).  The Board adopted rules and regulations that placed restrictions on leasing that contradicted relevant portions of the Association’s Bylaws.  The Association then fined the owner for violating these restrictions and the owner sued.  The owner won at the circuit court level and the Association appealed.  On appeal, the Court again ruled in favor of the owner, upholding the trial court’s decision.  Why? Continue Reading Can the Association’s Documents be Contradictory and Still Enforceable?

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

A Court in Louisiana recently tackled the issue of short-term rentals (New Jax Condominium Association, Inc. v. Vanderbilt New Orleans, LLC, 219 So.3d 471). A Condominium Association adopted an amendment to its bylaws during its annual meeting prohibiting short term rentals. When a Unit Owner continued to engage in short-term rentals, the Association sued and received a permanent injunction, preventing the Unit Owner from continuing to engage in short-term rentals. The Unit Owner appealed, alleging that the amendment to the bylaws was invalid because certain board members had conflicts of interest, and because one board member changed his vote during the voting. Continue Reading Banning Short-Term Rentals