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Committee Activity 2018

March 2018

erdogan, et al. v. preserve at Charleston Park homeowners association, et al.

The lawsuit appears to involve seven named plaintiffs, those plaintiffs' seven community associations, and those seven community associations' community management companies and association law firms. The original complaint suggested that both the named plaintiffs and named defendants were representative of larger classes and might be expanded.

The Amended Complaint asserts claims for:

(1) violation of the FDCPA by defendants arising out of the filing of liens for unpaid assessments and subsequent foreclosure actions;

(2) a declaratory judgment to the effect that restrictive covenants do not create a mortgage or mortgage-like relationship, and the act (or threat) of foreclosure should not be available to community associations for the nonpayment of assessments;

(3) intentional interference with a contractual relationship between owners and their mortgages; and

(4) abuse of process.

Damages sought include actual, compensatory and consequential damages, statutory damages and attorney's fees, and punitive damages.

South Carolina has not adopted a planned community type statute. Plaintiffs argue that the actions or threats of action by community associations and their representatives are not supported by contract or common law. It appears that Plaintiffs are not arguing that Defendants have improperly followed the process, but that there is no legal process to be followed for collection of assessments and that Defendants' actions violate the law and should be stopped. This federal lawsuit and its outcome are relevant to all states where there is no community association statutory scheme as the same allegations could be made elsewhere and a bad decision in South Carolina would impact elsewhere.

Brief
Prior Opinions: Amended Complaint
Brief Author: Marvin Nodiff, Esq.
CAI Amicus Review Panel: Mr. Robert Diamond, Esq., Chair of Amicus Committee, Mr. Edmund Allcock, Esq. (MA), Mr. Marc Markel, Esq. (TX), Ms. Karyn Branco, Esq. (NJ), and Mr. Steven Sugarman, Esq. (PA)

January 2018

Orchard Estate Homes, Inc. v. The Orchard Homeowner Alliance

The lower court found that the “voter apathy" is not a requirement under 4275, and that the association acted in accordance with election laws and granted the petition. The objectors filed an appeal.

The appeal concerns whether “voter apathy" is a requirement that must be met in order for a Court to grant a 4275 petition to approve a CC&Rs amendment. This is an issue that community association counselors encounter regularly when petitioning the court under Civil Code section 4275. Many courts are confused when faced with this issue because every published appellate case concerning a 4275 petition mentions “voter apathy" in the opinion based off a reference to a practice guide by Rosenberry and Sproul. However, the Code does not require a finding of “voter apathy" and such a requirement would greatly hinder community associations from getting their 4275 petitions granted. For example, if voter apathy was a requirement, the Association would need to hope for nearly 100% of the votes to be in favor of the CC&Rs amendment for a supermajority requirement because if 85% of owners in a 100-Unit CID turn out to vote on an amendment requiring 75% approval, is it voter apathy if 74 owners vote in favor and 11 owners vote against? This is why the most current practice guide by Rosenberry and Sproul “Advising Community Associations" lists this as an unresolved issue for a 4275 petition. If the appeal is successful, we would move to have the court published, thereby eliminating this argument in the future.

The Association argues that “voter apathy" is not a requirement to file a 4275 petition and would create disincentives to get owners to vote. Additionally, “voter apathy" is vague and has no definition thus subject to varying determinations by courts.

Brief
Prior Opinions: Final Order and Judgment Granting Petition to Reduce the Required Voting Percentage to Amend the CC&Rs
Brief Author: Laurie Poole, Esq., CCAL Fellow
CAI Amicus Review Panel: Robert Diamond, Esq., Chair of Amicus Committee (VA), Jennifer Loheac, Esq. (GA), Greg Daddario, Esq. (NH), Gary Kessler, Esq. (CA), Tom Moriarity, Esq. (MA) 

Stroh Ranch Development v. Stroh Ranch Business Circle

The case involves a declarant who consented to the annexation of real estate into a common interest community in 1999. Disputes arose overassessments on the property over the following years, which prompting the association to record a lien in 2017. The lien appeared to be proper under both the community's recorded covenants and the Colorado Common Interest Ownership Act (“CCIOA"), which our legislature adopted in 1991 based on the 1982 uniform act. The declarant responded by suing the association under Colorado's spurious lien statute, which allows property owners to make expedited challenges to frivolous liens that were neither approved by the owner nor authorized by law. After a short hearing, a district court judge granted the petition. He examined the 1999 annexation form and concluded that it did not comply with the requirements that the Colorado Supreme Court's would recognize seventeen years later in Ryan Ranch Community Association v. Kelley, 380 P.3d 137 (Colo. 2016).

CAI previously participated in the Ryan Ranch case, in which the court ultimately ruled against an association seeking to enforce covenants stating that units identified on a plat would be automatically annexed to a community upon recording of a deed. In that case, the court largely agreed with the property owners' argument that units could only be annexed by recording a declaration amendment in strict compliance with all statutory requirements, including a mathematical calculation of reallocated common interests. The court invalidated the common practices of “annexation by deed" and automatic reallocation of common interests by reference to other recorded documents.

The Stroh Ranch case asks the court of appeals to decide how broadly the Ryan Ranch opinion should be applied. The district court has interpreted Ryan Ranch to mean that all annexations recorded since 1991 are subject to challenge at any time by disgruntled property owners, and that any community association that attempts to enforce its covenants may be subject to penalties for recording a spurious document.

We do not think this is reasonable or what the supreme court intended when it announced Ryan Ranch last year. Although many community association lawyers were disappointed by the outcome of Ryan Ranch, the case was limited to a fairly unique fact pattern, wherein two developers had reached a side agreement to exempt nine units in a community from annexation or payment of assessments. The association argued that their agreement was superseded by the community's annexation-by-deed covenants, but the court disagreed and suggested that annexation requires strict compliance with CCIOA procedures for declaration amendment. 

The effect of the Ryan Ranch holding on other communities remains unclear. The supreme court ruled that certain methods of annexation are invalid, but it never suggested that it intended to open the door for the judiciary to examine the documents of every declaration recorded in the twenty-seven years since CCIOA's passage. On the contrary, the court remanded the case for determination of whether the statute of limitations precluded such review. The case settled before this question was ever answered.

Brief
Prior Opinions:
Brief Authors: Jerry Orten, Esq., CCAL Fellow, Aaron Goodlock, Esq. and Jonah Hunt, Esq. of the Orten, Cavanagh & Holmes law firm. 
CAI Amicus Review Panel: Robert Diamond, Esq., Chair of Amicus Committee (VA), Henry Goodman, Esq. (MA), Laurie Poole, Esq. (CA), James Strichartz (WA).

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