Harbour Island Condominium Owners Association, Inc. v. Alexander, No. B285755 (Cal. Ct. App. Jan. 24, 2019)

Summary

In Harbour Island, the Court of Appeals of California held that tenants renting a unit that was part of a condominium association did not have standing before the board concerning meeting attendance and fines imposed for violations. The association did not have to give the tenants an opportunity to be heard, unlike the rights of actual unit owners.
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Courts across the country have been hearing cases about short-term rentals of homes and condominium units, and there is not much consistency in the decisions made. Sometimes, it is the homeowners’ association that is trying to enforce its covenants in a manner that prohibits short-term rentals, and sometimes it is a municipality trying to enforce its zoning ordinances.  In the two cases discussed below, we have one of each—and in both cases, the language of the covenant and the ordinance made all the difference.
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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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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?
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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.
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A unit owner, who is also an attorney, was renting his unit to his mother and believed that the condominium association board, the association, the property manager and the association’s attorney didn’t like him because of his Russian nationality. His mother, who allegedly had asthma and could not tolerate smoking, was upset because her Armenian neighbor would smoke inside her own unit and on her limited common element patio and the smoke would seep through the mother’s open windows. The unit owner demanded that the association board prohibit smoking inside of all of the units. When the board refused, he brought a 200-paragraph lawsuit alleging seven various causes of action, including discrimination, breach of fiduciary duty, and breach of various alleged laws.
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An association in southeastern Wisconsin is made up of condominiums that are also rented out for the owners (condotels). In this particular case, a unit owner, who lived in Illinois, was in financial difficulty and wanted to file bankruptcy and turn their condominium over to their bank.  The bank’s attorney prepared a deed in lieu and sent it to the unit owner, which the unit owner then had recorded.  The bank became the owner and was responsible for not only the dues from that date forward, but also what was owed by the unit owner.  The bank did not want to acknowledge this.
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Those of us involved in condominium management, whether as board members, officers, property managers or attorneys, know that VRBO and AirBnB have changed the way units are rented. Short term rentals are viewed by many associations as a problem that should be solved.  Specifically, these associations and managers would prefer that short rentals (most often defined as less than six months or one year, but I have seen it defined as less than 30 days) be prohibited.  The problem is getting enough people to agree on the various issues:
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Yes! Thankfully, if the association has not been doing so, there is a way to reduce your back-tax liability, interest and penalties.

  • Do you have parking that is rented out by the Association?
  • Do you charge different monthly assessments for those with a parking spot?
  • Do you charge a fee for a boat dock or storage of a boat, canoe or similar water craft?

Of course you do. No worries, the Wisconsin Department of Revenue, like most states, would be happy to perform an audit for you.  Unfortunately, they will then also seek to collect all of the taxes due. 
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Governing Documents for Condominium and Homeowner Associations don’t age well. They are not like a fine wine.  They are more like cheap cheese.  Remember, they were likely written by a developer who really only cared about them until it had sold all of its units or lots (assume 10 years or less).  So if your documents were written before 2008, it is unlikely that they have anything in them to deal with:

  1. Emotional Support Animals;
  2. Drones;
  3. Short Term Rentals (AirBnB was founded in 2008 in San Francisco);
  4. Medical Marijuana; or
  5. Unit or Lot Owners buying insurance to cover a large insurance deductibles that could be assessed against them if their actions cause an insured loss.


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