Enforcement of CC&Rs

Condominium and homeowner association CC&Rs are, in many ways, similar to contracts. If one party breaches the terms of the contract, the other party may seek the help of the legal system for damages or to require the breaching party to fulfill their obligations. Most CC&Rs allow the community association to enforce the covenants and promises found in the governing documents. The association does this through its elected board of directors.  But does the association have an obligation to enforce the CC&Rs? In most cases, the answer is yes.

A careful look at the CC&Rs will determine who has enforcement authority and whether enforcement is an obligation or a right. Some governing documents require a vote of the owners prior to taking certain enforcement actions.  Other CC&Rs (where there may not be an association) require individual owners to enforce all of the provisions of the governing documents.

The question of whether or not an association may use legal proceedings to enforce its CC&Rs depends on “standing.”  Standing, in a legal sense, means that the party to the litigation has a stake or interest in the dispute, as well as the capacity to sue.  In Oregon and Washington, state law grants community associations standing and authority to enforce covenants through legal action.

Oregon law specifically authorizes community associations to initiate or intervene in matters relating to the enforcement of governing documents:

[A] homeowners association may…initiate or intervene in litigation or administrative proceedings in its own name and without joining the individual owners in the following:

      (A) Matters relating to the collection of assessments and the enforcement of governing documents[.] (ORS 94.630(e)(A))

In Washington, homeowners associations have similar authority. Unless prohibited by the governing documents, an association may:

Institute, defend, or intervene in litigation or administrative proceedings in its own name on behalf of itself or two or more owners on matters affecting the homeowners' association, but not on behalf of owners involved in disputes that are not the responsibility of the association[.] (RCW 64.38.020)

Before an association takes legal action to enforce its governing documents, ask these questions:

1. Would levying fines against a violating owner be more effective?

2. Does the cost of litigation outweigh enforcement through a lawsuit?

3. Does the association have an affirmative duty to enforce the covenant?

4. Is enforcement of the issue more appropriately handled between individual owners?

5. Is alternative dispute resolution an option to resolve the violation?

Collecting on Judgments

Sometimes owners in a community don’t pay their assessments. Often, the Board of Directors must file a lawsuit to collect the delinquent assessments. The lawsuit is filed in small claims court or the civil court in the county where the property is located. Typically, owners do not respond to the lawsuit and the Association receives a “default judgment.” But a judgment is only as good as the Association’s ability to collect the judgment.  For a more detailed overview of collections, click here. Once a judgment is secured, there are several avenues the Association may pursue. Here are some of those options:

1. Garnish Wages or Bank Accounts

At anytime after the judgment is entered in the court records, the Association’s attorney may issue garnishments. Items that are subject to garnishment include: bank accounts, wages, certain personal property, rental income or income tax returns.

The “writ of garnishment” is sent to the individual or entity that holds an interest in the owner’s assets or property.  For example, writs are sent to banks where the owner has an account or to the owner’s employer.

There are some assets or income that are exempt from garnishment, such as social security or disability income.  In those cases, the owner may challenge the garnishment and a judge will then determine what is exempt and what is subject to the garnishment.

2. Debtor Examinations

Once the judgment has been entered in the court records, the Association may obtain an order requiring the owner to appear at the court house.  On the stated day and time, the Association’s attorney may ask questions of the owner related to their finances, bank accounts, assets, or any other information relevant to collecting the judgment.  The information gathered from the debtor exam is then used to issue garnishments or take other collection action to pay off the judgment.

3. Execution on Vehicles

In some cases, a delinquent owner may own cars, boats or other vehicles that are owned free and clear.  In those circumstances, the property may be taken by the sheriff, sold at auction, and the amount received is credited toward the Association’s judgment amount. The Association’s attorney can determine if such assets are available.

4. Settlement

The threat of garnishment may be enough to cause the owner to voluntarily pay the amount of the judgment or make regular payments until the judgment is satisfied.  In those cases, the Association may want to enter into a formal settlement agreement which includes all of the costs and fees that were incurred after the judgment was entered.  This avoids having to file a “supplemental” judgment to collect those fees and costs.

Conflict Resolution In Community Associations

At some point, board members and owners within condominium or homeowner associations will face conflict. Knowing how to effectively resolve conflict will maintain civility and harmony in the community. Generally, there are four steps to resolving conflict: 1) negotiation, 2) mediation, 3) arbitration and 4) litigation. 1. Negotiation

Prior to more formal alternative dispute resolution, the parties engage in negotiation. Each party attempts to educate the other about the position they are taking, their needs and their interests. The most important part of negotiation is the ability to listen to the other side and attempt to come to a mutual understanding.

2. Mediation

Mediation involves the parties in dispute and a neutral, third-party mediator. Mediation does not require the parties to come to any formal agreement, but that’s the end goal. There are many community mediation services with trained mediators. However, if the dispute involves complicated legal issues, a mediator with a legal background is often preferable.

During mediation the parties get to explain their positions and tell their side of the story. The mediator’s job is to find common ground and see what (if anything) the parties can agree to.

Besides potentially resolving the conflict, mediation can expose your side’s weaknesses, which may influence your decision to arbitrate or litigate the dispute in the future. Keep in mind, Oregon law requires (in most circumstances) that the party initiating the claim offer mediation prior to filing an arbitration or litigation claim. (See ORS 100.405 and ORS 94.630)

3. Arbitration

Arbitration is much more formal than mediation. Some governing documents require the parties (association vs. owner or association vs. developer) to submit all disputes to binding arbitration. The arbitrator, or panel of arbitrators, conduct the arbitration similar to a court trial. If the arbitration is binding, the ruling of the arbitrator is the final ruling on the issue and the parties are bound to the decision.

Some state courts require arbitration of all cases less than a certain dollar amount. In court mandated arbitration, the losing party may appeal the decision of the arbitrator and continue to a judicial or jury trial.

4. Litigation

When all else fails, sometimes litigation is the only avenue to pursue. Litigation means filing a lawsuit in court and a trial in front of a judge or jury. Attorney fees for litigating an issue through trial can be very expensive. However, depending on the claim, an association may recover its attorneys fees if it’s the prevailing party.

5 Ways to Invite Lawsuits Against Board Members and Associations

1.  Violating Open Meeting Requirements Board meetings in Oregon (by statute) must be open to the membership. The same is true for Washington condominiums or any community association with open meetings requirements in the governing documents. The purpose of open meeting requirements is to allow the membership to witness the deliberation, discussion, and decision making of the board of directors.

There are exceptions to the open meetings requirements--namely, emergency meetings and executive session. But unless an exception applies, any time a majority of the board convenes and discusses association business, it's likely a "meeting". And if it's a meeting, it requires notice and observation by the membership.

Violating open meeting requirements casts a shadow on board transparency, causes suspicion among the owners, and increasingly, may cause a lawsuit against the association or board of directors.

2.  Failing to Renew Incorporation

Most associations are incorporated as nonprofit corporations. In some cases, it's legally required that the association be incorporated. Incorporation may provide a shield against liability for board members and owners.

In a 2010 Alabama case, a homeowners association attempted to enforce its architectural restrictions against an owner who constructed improvements without approval. The Alabama Court of Appeals held that the association could only enforce the governing documents if the association was incorporated.

Georgia dealt with a similar case in 2007, when an association filed suit against an owner for delinquent assessments. The owner claimed that because the association had become administratively dissolved when it filed the suit, the association was prohibited from collecting assessments. During the course of the lawsuit the association filed the appropriate renewal paperwork and was reinstated with the secretary of state. As a result, the court allowed the association to pursue collections.

For Oregon associations, visit www.filinginoregon.com to check on the association's incorporation status.

Washington associations can search here: https://www.sos.wa.gov/corps/search_advanced.aspx

3. Failing to Enforce Governing Documents

Board members have an obligation to enforce the provisions of the association's CC&Rs and Bylaws. If a board fails to enforce provisions of the governing documents for an extended period of time, many courts will find that the association has "waived" its right to enforce the same or other provisions.

In an Ohio case, an owner built an addition on his property. The association sued the owner, arguing that the additional building violated the CC&Rs. The court said that because the association had allowed other owners to build unapproved additions, the association couldn't require the defendant in this case to remove the building.

Similarly, some governing documents require the association to make architectural decisions within a certain number of days. The association may waive its right to enforce those covenants if it misses the deadline to respond. In a different Ohio case, the association's documents required the board to respond to architectural applications within 30 days. When the owner didn't receive a response, he proceeded with construction. When the association told the owner he could not proceed, the owner sued and prevailed because the association didn't make a decision within the 30 day window.

4. Violating the Fair Housing Act

There are literally hundreds of court cases involving lawsuits against associations for violations of the Federal Fair Housing Act. Here are some examples:

Auburn Woods I Homeowners Association v. Fair Employment and Housing Comm., 121 Cal App 4th 1578 (2004). A married couple suffered from depression and other disorders. The association's governing documents prohibited all animals. The couple bought a small companion dog to accommodate their mental condition and a lawsuit ensued. The association was found liable of discrimination.

Jacobs v. Concord Village Condominium X Association, Inc., 2004 U.S. Dist. LEXIS 4876 (S.D. Fla., 2004). The court found that the defendant condominium association had violated the Fair Housing Act by refusing to allow a physically handicapped resident to install a ramp so that the plaintiff could freely store, access and charge her motorized tricycle in a storage closet in the condominium building.

Sabal Palm Condominiums of Pine Island Ridge Association, Inc. v. Fischer, No. 12-60691-Civ-SCOLA (S.D. Fla. March 19, 2014). A Florida district court ruled that a condominium association violated the Fair Housing Act by its unreasonable delay in granting a request by a physically disabled resident to keep a service dog.

Hollis v. Chestnut Bend Homeowners Association, No. 13-6434 (6th Cir. July 29, 2014). A Tennessee homeowners association may have violated the Act when it denied owners from constructing an exterior sun room which was designed to accommodate two children with Downs Syndrome.

Board of Directors of Cameron Grove Condominium, II v. State of Maryland Commission on Human Relations, No. 47 (Md. Mar. 28, 2013). A Maryland appeals court ordered a condominium board to pay damages to unit owners who were denied reasonable accommodation of their disabilities. Bhogaita v. Altamonte Heights Condominium Association, Inc., No. 6:11-cv-1637-Orl-31DAB (M.D. Fla. Dec. 17, 2012). A Florida court found that a condominium association's intrusive search for more information regarding a unit owner's medical condition constituted a denial of his requested accommodation under the Fair Housing Act.

5. Filing Incorrect Liens / Collecting Inconsistent Assessments

May lawsuits involve associations levying assessments which are inconsistent with the governing documents. In a 2004 Texas case, an association's governing documents capped assessments at $50 per month. Nevertheless, the board unilaterally raised assessments to $75 per month. An owner sued the association and the court ordered the association to reimburse the owner for the overpaid assessments, plus pay the owner's attorney fees.

In another case, the owner of a commercial condominium unit in Georgia filed a lawsuit when the association levied assessments against the commercial unit to pay for expenses related exclusively to the residential units. The court's review of the governing documents concluded that the association was prohibited from assessing the commercial unit owners for residential unit expenses.

Make sure you read the assessment provisions of your governing documents carefully, and that all assessments are properly apportioned among the owners!

Deschutes River Ranch landowners sue for $9 million

http://www.bendbulletin.com/home/2738115-151/deschutes-river-ranch-landowners-sue-for-9-million#

Suit claims developer falsely represented land

By Claire Withycombe / The Bulletin / @kcwithycombe

Published Jan 3, 2015 at 12:02AM

Landowners in Deschutes River Ranch envisioned a working cattle ranch with open spaces where they could ride horses, fish and enjoy mountain views unobstructed by power poles.

According to a $9,041,000 claim filed Dec. 16 in Deschutes County Circuit Court against the land’s developer, the vision was never realized.

The suit, filed by landowners in the planned community north of Bend, alleges defendant Deschutes River Ranch Group LLC, a property development company, and its managing member, Craig S. Morton, falsely represented ranch amenities to buyers.

Amenities were slated to include recreational areas allegedly advertised as low-cost and accessible to residents of Deschutes River Ranch, according to the complaint. In a 2003 declaration of easement recorded in Deschutes County, the complaint alleges, Morton granted the plaintiffs perpetual access to those areas.

Morton, who declined to comment Wednesday, sold the individual lots and created the marketing materials and website used in their sale, according to the complaint.

The plaintiffs claim Morton promised to renovate an old barn, build an equestrian center and a casting pond. Morton also promised to bury a power pole and plant native grasses.

Instead, landowners have access to a single trail, according to the Dec. 16 complaint. The Deschutes River Ranch Group and Morton erected barriers and posted signs denying access and charged residents tens of thousands of dollars each in usage fees, the plaintiffs allege. Furthermore, they allege those fees went to paying the ranch’s operational expenses, including cattle and haying operations and Morton’s salary, “despite representations to the contrary.”

Six parties are claiming damages ranging from $500,000 to about $3.5 million.

This is not the first time the business has gone head-to-head with residents in court. The Deschutes River Ranch Group is plaintiff in an ongoing civil suit, claiming $5,568 against the Deschutes River Ranch Community Association, according to the Oregon Judicial Information Network.

— Reporter: 541-383-0376,

cwithycombe@bendbulletin.com