IMPRESSION: Unit owners who initiate litigation over common elements do not necessarily recoup attorney fees from the association—even when their lawsuit is successful, and benefits the association as a whole.

DETAILS: A shared sewer system in Adams County, Wisconsin, was the focus of a recent dispute between the Sunset Condominiums at Northern Bay Owners Association (“Sunset Condo Assoc.”), and a unit owner of the Sunset Condominiums. Larson v. Castle at the Bay, LLC, 2018 WI App 71, 384 Wis.2d 633, 2018 WL 5307100.  Prior to 2013, the area’s local sewage system was mutually utilized by neighboring developments Timber Shores and Castle at the Bay—despite being considered a common element of Sunset Condominiums.  In 2013, Castle at the Bay declared partial ownership of the sewer system, and proceeded to impose a usage fee upon Sunset Condo Assoc. Rather than respond by threatening litigation, the Sunset Condo Assoc. chose a two-tiered amicable and less expensive approach: (1) agree to shared ownership of the sewer system; and (2) consent to Castle at the Bay’s obligatory usage fees. 
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Castilian Hills Homeowners Association v. Chaffins, (Wash. Ct. App. Oct. 22, 2018)

The Facts

Homeowner bought home in 2004. In 2016, the homeowner failed to pay his $147 assessment.  The homeowners association (“HOA”) assessed a $20 late fee. The homeowner still did not pay, despite the normal language in the HOA governing documents about interest, the right to lien and reasonable attorney fees. After more notices, the HOA filed a lien for $525.52 and then a complaint against the homeowner seeking the $525, plus interest and attorney fees.   The homeowner argued to the court that the HOA was “required by statute to provide notice and an opportunity to be heard” prior to filing a foreclosable lien.
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Some states have statutes that require that Associations provide a notice and opportunity to be heard to a resident before the Association can fine them for a violation of the governing documents. Even though Wisconsin does not have such a statute, providing residents a notice of the alleged violation and opportunity to give their side of the story is an important component of providing due process—which will help make your fines ultimately enforceable.
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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.
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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.
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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.
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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.
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A Maryland Court recently ruled on the extent of powers a Condominium Board had in dealing with a unit owner who was delinquent in assessments (Elvation Towne Condominium Regime II, Inc. v. Rose, 162 A.3d 1027). The Association at issue adopted a policy by which delinquent unit owners would be deprived of their right to enjoy certain common elements – namely the pool and parking of the Association. When they suspended those rights for the delinquent unit owner, the unit owner filed suit alleging the policy was unlawful, since the Association’s declaration did not provide for the Board to withhold common element use rights.
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A Court in Arizona recently provided one more reason for your association to have a fine schedule and late fee policy (Turtle Rock III Homeowners’ Association v. Fisher, 2017 WL4837821 and 2017 Ariz. App. LEXIS 187). This particular Homeowners’ Association (“HOA”) required their owners to maintain their property in various ways relative to cleanliness and attractiveness, via the HOA’s declaration. The declaration allowed the HOA to assess daily fines if the violations were not corrected. The HOA sent a particular owner 90 separate notices but started fining the owner less than 30 days from the relevant notice.
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A Court in Louisiana recently took up the issue of what to award in interest, late fees, attorneys’ fees and costs when a Unit Owner paid the underlying assessments, but refused to pay anything more. (English Turn Property Owners Association v. Contogouris, 228 So.3d 793 (2017)). In this case, a Unit Owner and its Homeowners’ Association (“HOA”) were embroiled in litigation concerning four years of unpaid assessments, along with interest, late fees, attorneys’ fees and costs, the latter being authorized by the Association’s governing documents. The parties agreed to a payoff concerning the regular assessments, and that a trial would decide what other amounts were owed as a result of the Unit Owner’s failure to regularly and timely pay assessments.
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