Posts Tagged ‘litigation’

Where Your California Bar Membership Won’t Get You…

June 19, 2013

In a week marked by an interesting US Supreme Court ruling on “the right to remain silent”, California’s Fourth District Court of Appeal has found that an owner’s right to attend an HOA meeting does not equate to the right to bring counsel along.

I find this especially interesting as the owner is an LLC, not your average Joe.

http://www.metnews.com/articles/2013/sb061913.htm
http://www.leagle.com/xmlResult.aspx?xmldoc=In%20CACO%2020130522049.xml&docbase=CSLWAR3-2007-CURR

Rocky Mountain Rumble

January 30, 2013

A law blog post from Colorado highlights some interesting HOA declaration policy.  First some background.

When a developer wants to build a condominium, he (and they are almost always he’s) starts by recording a declaration of covenants, conditions, and restrictions on the property.  In Idaho and most states, this declaration puts the property under the Condominium Act, and, as implied in the title, binds future owners to the covenants, conditions and restrictions stated.   The Colorado case highlights two common clauses.

One is an arbitration clause that demands that all disputes be resolved by arbitration rather than in the courts.  Arbitration is very much preferred by developers and builders as it is seen as much more friendly than the courts.  Conversely, associations prefer to use courts.

The second clause at issue is an amendment clause.  These allow condominium owners to amend their declarations, usually with a super-majority vote.  Developers almost always retain veto power, in one way or another, over the amendment provisions, so that owners cannot take control of  the declaration amendment process before developers are finished building and selling units, etc.  Otherwise, the developer-friendly terms in the declaration might be amended out to the detriment of the developer.  Owners are presumed to have read, understood, and agreed to all the terms included by their decision to purchase.

With that background in place, it is easier to see why the arguments made in Colorado are interesting.  Per Messrs. Berg and Mill:

Residents began reporting the alleged defects, and the Residential Association (the “Association”) retained construction defect counsel. Shortly thereafter, the Association voted to amend the declarations to remove the arbitration clause without seeking the developer’s or GC’s consent. The Association then filed a construction defect suit against the developer and general contractor.

From this association-side lawyer’s point of view, the developers’ position is nearly comical.  The developers unilaterally drafted a document with total control of the language it contains.  Then they retain absolute control of the association while they build the condominiums and sell them.  Finally they turn over the condominium to the owners’ control and exit stage left.  When the owners discover defects, they amend the declaration in their favor.  Now the developers challenge the legality of the amendment, saying their interests were not fairly represented in the amendment process.  Remember, these are the folks that drafted the entire original document with absolutely no give-and-take with the future owners.

I’ll have to try to get a copy of the opinion and briefing, but it sounds like the Colorado judge got it right, finding that there was no language in the Declaration requiring developer consent to amendments, so the owners were free to amend the Declaration under its explicit language.  Good luck to those condo plaintiffs in Colorado fighting the good fight.

http://www.lexology.com/library/detail.aspx?g=b768d3c2-c021-4701-83eb-59bdc1998b87

 

The Pink Playhouse Returns

September 25, 2012

 

A covenant fight in Georgia is getting press coverage all over the South.  It appears that the homeowner, Ms. Peck, really, really, wants to keep a pink playhouse she built in her backyard for her granddaughter.  Unfortunately, the board of her homeowner association has decided that it violates the restrictions.

So, now the neighborhood association is taking Ms. Peck to court.  They really have no other choice if they want to keep pink playhouses from proliferating.  They also have to prove they aren’t just whistling Dixie. As the cost of removing a pink playhouse is minimal, these lawsuits quickly become a fight over legal fees.

 

 

 

Covenants usually provide that the owner has to pay all legal fees for the association.  While this may seem harsh, it would not be fair to make the neighbors foot the bill for Ms. Peck’s hijinks.  Ms. Peck, on the other hand, is not above inflaming local prejudices in her favor.  “This is the United States, last time I checked. I’m a little redneck Georgia girl. They aren’t going to tell me what to do,” she said.

 

 

Sources:

http://www2.wjbf.com/news/2012/sep/24/are-homeowner-associations-good-or-bad-ar-4618716/

http://wtvr.com/2012/09/24/homeowners-association-sues-over-pink-playhouse/

From Scranton: How not to act at the office

August 24, 2012

In case you needed one, from Scranton, setting of TV’s “The Office,” we now have another reminder not to commit sexual discrimination at work.   HOAs, just like any other work environment, are subject to federal workplace harassment law.

Explore the history of The Office on the updated Facebook Timeline. Check out key dates, plus tons of clips and photos.

No kidding.  I don’t know what else to say about that.

From The Times-Tribune:

According to the lawsuit, Bushkill resident and former public safety employee Heike Obergantshnig is suing Saw Creek Estates Community Association Inc. claiming she has been harmed by “sex-based harassment, sex-based discrimination (and) a hostile work environment” from a Saw Creek watch commander, Brian Kaiser.

What I can’t tell from the article is the nature of employment of a “public safety employee” in a Pennsylvania HOA, or what a “watch commander” is.  Sounds like a professional neighborhood watch is used there.  As a former direct employee of the HOA, it sounds like Ms. Obergantshnig’s claim will have to be addressed, and an attorney paid for, by the association.  Maybe they needed a more active HR.    Toby Flenderson will have his day.

Arbitration Clauses Binding On HOAs In California (!?)

August 23, 2012

Courts: The Judicial Branch of California

On August 16, the California Supreme Court issued a ruling in Pinnacle Museum Tower Association v. Pinnacle Market Development (US), LLC, et al.  that could affect Idaho HOA cases and others here in the Ninth Circuit as well.  It could effectively strip the right to jury trial from condominium owners and associations.

As the Court summarized:

Petition for review after the Court of Appeal affirmed an order denying a motion to compel arbitration in a civil action. This case presents the following issues: (1) Is a homeowners association bound by an arbitration provision contained in the covenants, conditions and restrictions for a common interest development that were executed and recorded prior to the time the association came into existence? (2) Did the Court of Appeal err by applying the state law doctrine of unconscionability only to the arbitration provision, and not to other provisions in the covenants, conditions and restrictions, in light of federal law prohibiting the application of state law to treat arbitration provisions differently from other provisions of the same agreement? (See Allied-Bruce Terminix Cos. v. Dobson (1995) 513 U.S. 265.)

Historically, many have argued against the application of arbitration clauses to HOAs.  A developer creates the HOA, after all, and drafts the CC&Rs, representing both his own interests and (to a much lesser extent) those of the future HOA.  The future owners and future association have little or no say in any of the terms that the developer inserts into the CC&Rs.  As a result, many courts have found that it would be unconscionable to enforce arbitration clauses against the party that had no representation in the drafting of the documents.

The Pinnacle opinion held, to the contrary:

…even though the association did not exist as an entity independent of the developer when the declaration was drafted and recorded, it is settled under the statutory and decisional law pertaining to common interest developments that the covenants and terms in the recorded declaration reflect written promises and agreements that are subject to enforcement against the association.  We conclude that the arbitration clause binds the association and is not unconscionable.

What is interesting for those of us outside of the Golden State is that the California Supreme Court based its opinion on provisions in the Federal Arbitration Act.  The same federal provisions would apply to any state.  In particular, the Court held:

…the FAA pre-empts state laws which ‘require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration…Likewise, the FAA precludes a court from construing an arbitration agreement “in a manner different from that in which it otherwise construes nonarbitration agreements under state law.  Nor may a court rely on the uniqueness of an agreement to arbitrate as a basis for a state-law holding that enforcement would be unconscionable, for this would enable the court to effect what . . . the state legislature cannot.

I will leave it to the courts and legal scholars to analyze the strength of California’s analysis.  However, if the arguments relied on by this Court are seen as persuasive, we may be seeing a major shift in how condominium and association construction defects are handled across the country.

Thanks to California’s Miller Law Firm for summarizing the decision.

Childcare Vs. Business Use Covenant

August 3, 2012

The courts in Nebraska are reviewing at a conflict that we often see here in Idaho.

Residential covenants sometimes restrict business use.  While this is not controversial when it prevents, say, a Maverick from opening next door, it is common in this part of Idaho for people to run some kind of child care out of their home.  Sometimes it is a “pre-school”, sometimes it has some other name, but the basic facts involve groups of children getting dropped off each day and the homeowner getting paid.  Neighbors face increased traffic and noise, and occasionally, un-permitted use of common property playgrounds and related liability.

According to this article, the Nebraska court found that the homeowners could go to trial on their defense that the association had permitted them to run the business for over 12 years without enforcing the rule.  I am not sure that defense would fly here in Idaho.  Most CC&R declarations explicitly allow for spotty enforcement, and we have a couple of cases that recognize that.  From the local NBC news coverage:

The Wolfs said the association allowed them to run the day care for 12 years and continues to allow others in the neighborhood to runbusinesses from their homes, including the association’s president.

The Nebraska Supreme Court on Friday found that the Wolfs make what a jury might find to be a valid argument.