Recent Cases in Community Association Law
Law Reporter provides a brief review of key court decisions throughout the U.S. each month. These reviews give the reader an idea of the types of legal issues community associations face and how the courts rule on them. Case reviews are illustrations only and should not be applied to other situations. For further information, links to the full court rulings are found after each summary.
CAI’s College of Community Association Lawyers selects the cases for Law Reporter through its work associated with the Case Law Database. CCAL prepares a legal analysis of each case with additional facts, holding and reasoning, and significance for the database. Portions of the legal analysis are included in Law Reporter and combined with summaries developed in part with artificial intelligence. Full court decisions are entered into ChatGPT and summarized for a nonlegal audience. Each summary is edited for style, clarity, and content.
Resale Certificate Preparation Fees OK in North Carolina
Civil Procedure: Assessments: The issue concerned the propriety of fees charged to produce a resale certificate of assessments prior to the sale of a unit and whether the applied fees violated North Carolina’s transfer fee statute, unfair trade practices, and debt collection statutes.
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In April 2020, Susan Carpenter sold two properties in North Carolina, each governed by homeowners associations. Prior to the sales, each of the properties were managed by William Douglas Management, which used a software platform provided by NextLevel Association Solutions d/b/a HomeWiseDocs.com to prepare resale certificates. Carpenter was charged $175 for a resale certificate for the first property; $150 was paid to the manager and $25 was paid to HomeWise. The charge for the second property totaled $215 with $175 to be paid to the manager and $40 to be paid to HomeWise. Both properties closed.
Carpenter then sued the manager and HomeWise in a class action lawsuit. She alleged the fees were excessive under North Carolina’s law prohibiting transfer fee covenants. She argued managers provide the service of tracking and issuing assessments and that by using HomeWise’s software, those services were diminished. She also alleged violations of the state unfair trade practices and debt collection statutes along with negligent misrepresentation, unjust enrichment, and civil conspiracy.
On appeal, the court upheld the trial court’s grant of dismissal, finding the disputed fees were not transfer fees under state law, and the companies were not deceptive or unfair in charging them.
Here, the applicable state statute on transfer fee covenants is defined and exempts certain items from its reach, including any reasonable charges for the preparation of statements of unpaid assessments or resale certificates. The court found the documents demonstrated the charges were due upon preparation, not on transfer of the property and ultimately were not applied to transfer the property interests. Therefore, the fees did not meet the definition to qualify as transfer fees.
The court then turned to the unfair trade practices claim and found the claim failed as the subject fees are not transfer fees. In 2023, the North Carolina Court of Appeals ruled on the same issue with similar facts and set precedent establishing that a fee of $395 was not excessive. Therefore, the argument that the manager and HomeWise “unfairly leveraged their role in the real estate transactions to charge excessive fees” was denied.
Carpenter agreed the remaining claims rise or fall with the transfer fee and unfair trade practices claims. Various states may impose statutory limits on the fees that can be charged for a resale certificate. Those statutes that use a reasonableness standard may be subject to interpretation, and this case provides strong precedent and an example for determining what courts find to be reasonable.©2025 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.
Mortgage Lienholder Must Pay Attention to Association’s Foreclosure Actions, Condo Sale
Super-Priority Liens: The case discusses whether a senior mortgage survives an association’s foreclosure on a super-priority lien. This case clarified the legal principles regarding foreclosure sales, unconscionability, and the statute of limitations for rebuttals to affirmative defenses. Additionally, this case demonstrated that just because the sale price is significantly lower than the tax-assessed value, the legal uncertainty surrounding survival of a lien may justify the low price.
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In 1991, the District of Columbia enacted a statute granting condominium associations a super-priority lien for six months of assessments even over the first deed of trust. In 2014, over 20 years after enactment, the court heard a case where the condo association foreclosed. The lender sought to unwind the sale on the grounds that the sale price was unconscionably low, and the sale purported to extinguish its first lien. The court rejected these claims based on the statute. In 2018, the court held in a later case that the association’s foreclosure extinguished the first lien, even if the terms of sale state that the sale is subject to the first lien.
In 2009, Salvador Rivas purchased a condo unit and financed the purchase through Flagstar Bank. Rivas subsequently fell into arrears on his association assessments, and the association noticed a foreclosure in 2014. At the sale, the notice and announcement indicated that the sale was subject to Flagstar’s first lien on the property of approximately $250,000. Advanced Financial Investments purchased the property for $26,000 even though it had a tax-assessed value of approximately $240,000. The sale took place after the first case had been decided, but prior to the second case. In January 2017, when the mortgage payments were in arrears, Flagstar filed suit to foreclose.
The court overruled the trial court’s dismissal of foreclosure but found that summary judgment was still appropriate. The court held that Flagstar was not required in its complaint to assert the affirmative defense for the extinguished lien. Only when Advanced pled were they required to counter that the sale was void for unconscionability. Because it had been raised as a rebuttal to an affirmative defense, it was not subject to the statute of limitations.
As to the 2014 sale, the court found it was not unconscionable. Substantive unconscionability considers the circumstances as they existed at the time of the sale. Here, at the time of the foreclosure sale, any purchaser would have been subject to uncertainty regarding whether Flagstar’s lien would survive the association’s foreclosure. The court noted all parties had the same information before and after the 2014 sale. Advanced took a gamble in purchasing, but the court stated that just because it worked out in their favor does not mean the sale was unconscionable.
As to procedural unconscionability, the court determines whether one party gained an unfair advantage over another. In making their determination, the court relied on a prior case with similar facts that held no procedural unconscionability existed. The court similarly reasoned here that the parties all could have determined whether a foreclosure would extinguish Flagstar’s lien and act accordingly. The fact that a later case came out is immaterial to the circumstances that existed at the time of the sale. Therefore, summary judgment was appropriate on dismissal of the foreclosure claim.
While under the assumption that its lien survived, Flagstar continued to pay taxes on the condo. Because the payments continued through the filing of the amended complaint, they were within the statute of limitations. Advanced offered no evidence that it made any tax payments on the property. The court found that Flagstar survived summary judgment, and the count moved to trial.
As to the declaratory relief, breach of duty, and unjust enrichment claims against the association, the court determined they were time-barred. Flagstar had three years from the 2014 foreclosure to raise those claims and chose not to do so until 2018. The court found the discovery rule inapplicable as it deals with unknown facts. Here, Flagstar only raised interpretations and applications of the law.
Finally, equitable tolling was found to be inappropriate due to Flagstar’s lack of protection of their interests. They did not bid at the foreclosure sale, and the sale was over a decade old at the time of suit. All factors weighed against Flagstar.
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Covenants in South Dakota Communities Need Diligent, Consistent Enforcement
Covenant Enforcement: This case presents a doctrinally significant expansion of waiver and abandonment as equitable defenses to restrictive covenant enforcement. The decision is an aggressive application of equitable principles to challenge the viability of longstanding restrictions. It also highlights the risk to associations and homeowners who tolerate noncompliance without formal amendment or enforcement activity.
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Homeowners in a subdivision governed by 1976 restrictive covenants began construction of a single-family home with a large three-car garage. Neighboring owners sued, asserting violation of covenants requiring setbacks and limiting garage size. Defendants counterclaimed, asserting that widespread nonenforcement and existing violations throughout the subdivision rendered any enforcement inequitable. After bench trial, the court found numerous violations had gone unchallenged since 1976 and declared the covenant void and unenforceable.
The South Dakota Supreme Court affirmed, holding the trial court acted within its equitable discretion in declaring the covenant void. The court applied a broad interpretation of waiver, relying on evidence that dozens of covenant violations (setback encroachments, detached and oversized garages, and commercial activity) occurred without challenge. The court concluded it would be inequitable to enforce the covenant solely against the defendants considering all the other violations. Further, the court endorsed the judicial power to declare covenants void when their continued enforcement became impractical or unjust due to consistent inaction.
The case broadens the doctrine of waiver and abandonment in covenant enforcement by allowing a court to declare a covenant void in its entirety, not merely unenforceable as to certain plaintiffs or circumstances. This creates a real risk for associations and owners who allow violations to pile up without formal enforcement.
The decision is more impactful because South Dakota lacks a comprehensive common interest development statute. Instead, the South Dakota Condominium Act only governs condominiums and does not extend to other forms of common interest developments such as planned developments. Because the governance of common interest developments in South Dakota relies heavily on their governing documents, the court’s willingness to invalidate recorded covenants outright serves as a sharp warning. Without diligent and consistent enforcement, even legally recorded covenants may lose their force entirely.
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Motocross Course Violates Montana Community’s Restrictive Covenants
Covenant Enforcement: A motocross course is not a permissible residential or agricultural use, violating the purpose of restrictive covenants that are meant to preserve the community’s character and prevent disruptive uses. In addition, the court determined that even partial success entitles the prevailing party to attorneys’ fees.
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Scott and Karen Larsen owned two adjoining lots in the McGuiness Tracts subdivision in Silver Bow County, Mont. They purchased their first lot in the late 1980s with plans to later build a retirement home there. They began construction in 2017 and moved into their home in late 2019.
In 2012, Keith and Danielle Sayers purchased a lot where they resided in the same subdivision. They purchased a second adjoining lot in 2016 or 2017, which Keith used to build a freestyle motocross course. The course included features such as a "figure-8" track, an 8-foot-tall metal ramp with an 11-foot-tall dirt landing, and a meandering course with small dirt jumps. Keith Sayers also was driving golf balls into the Larsens’ property and retrieving them without permission.
The Larsens began complaining the noise from the motocross bikes severely disrupted the peaceful enjoyment of their home and property. They subsequently made the decision to forego constructing a deck and living space above their garage and stopped entertaining guests outdoors due to the noise and other disturbances. They also took their own measures to mitigate the disturbances caused by the motorcross course.
The Larsens sent a cease-and-desist letter to the Sayerses, which was ignored. Consequently, the Larsens filed a lawsuit seeking injunctive relief for breach of restrictive covenant, nuisance, and trespass. The Sayerses counterclaimed for intentional infliction of emotional distress.
A district court held a bench trial and ruled that the Sayerses' motocross activities did not violate the restrictive covenants of the subdivision, denying the Larsens' claims for injunctive relief and nuisance. However, the court granted the Larsens' request to enjoin Keith Sayers from hitting golf balls onto their property. The court also denied the Sayerses' counterclaim for intentional infliction of emotional distress. The Larsens' motion for attorney’s fees was not ruled upon by court.
The Montana Supreme Court reviewed the case and concluded that the Sayerses' motocross course constituted a breach of the restrictive covenants limiting the use of the property to residential or agricultural purposes. The court reversed the district court's ruling on this basis and remanded the case to award the Larsens reasonable attorney’s fees as the prevailing party.In its analysis, the court relied on precedent when determining whether the motorcross course qualified as a “residential purpose” within the declaration. In a prior case, the court held that a 3,200-square-foot storage building was “not an appurtenance necessary for the enjoyment of a dwelling house” and was therefore inconsistent with residential purposes. Here, the court similarly reasoned that although Keith Sayers is a professional motorcross rider, the motorcross course is not necessary for the enjoyment of his residence nor does it serve an agricultural purpose. In addition, the court found the motocross course was in violation of the declaration because the activity “unreasonably disturb(s)” other landowners.
The supreme court affirmed the lower court's determination that Keith's ramp-building activities did not violate the covenants' restriction against commercial activity since the construction was not “manufacturing for the sale of goods.”
©2025 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.
Register Today for the 2026 Community Association Law Seminar!
The College of Community Association Lawyers is excited to host the 2026 Community Association Law Seminar, Jan. 13–16, in San Diego. The program is designed specifically for common interest attorneys and Community Insurance and Risk Management Specialists who need a solid understanding of the laws and regulations impacting the community association housing model. Plan to join nearly 1,000 attendees to discuss emerging trends and legislative issues.
Board Acted Beyond Its Authority to Require Window Replacements
Board Authority: The case discusses whether the board may exercise authority to enforce a policy requiring unit owners to replace in-unit windows under the business judgment rule. This case stands for the proposition that a board cannot contradict a declaration, including the elements it defines as part of a unit under the owner’s control.
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In 2023, the Meadow Court Condominium board amended the bylaws to grant the board authority to require unit owners to replace their windows in the New York community even though the declaration defined the windows as part of the unit. The board then engaged Skyline Windows to replace the unit owners’ windows. Some unit owners voluntarily replaced their windows prior to the conclusion of other unit owners’ legal challenge to the board’s actions.
The court rejected the board’s argument that its conduct was not protected by the business judgment rule. The court ruled the Meadow Court Condominium board acted beyond its authority by mandating window replacements, voided the bylaw amendment and agreement with Skyline Windows, and enjoined further work except for owners who voluntarily sought replacements.
©2025 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.
Communities Not Liable for Injuries Caused by Known or Obvious Conditions
Premises Liability: The case discusses whether uneven sidewalk slabs are sufficient to establish liability for a property owner under various theories of law.
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An owner within the Diamondhead Country Club & Property Owners Association in Diamondhead, Miss., tripped over an uneven sidewalk seam at the community pool. The owner retained an expert witness who prepared a report indicating the sidewalk was unreasonably dangerous, did not comply with international building codes, and was an unreasonable safety hazard for pedestrian and Americans with Disabilities Act traffic.
The court of appeals affirmed the trial court’s ruling that the half inch difference did not constitute a dangerous condition. Further, they rejected plaintiff’s argument that although extensive case law demonstrates sidewalk differentials in excess of a half inch are not unreasonably dangerous conditions, the context of this situation was not one normally encountered and therefore unreasonable.
The Mississippi Court of Appeals demonstrated a pragmatic approach in protecting businesses and communities from residents who fail or refuse to pay attention when using the common elements. Further, communities are not liable for injuries caused by known or obvious conditions and are not required to keep the premises safe.
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Case Illustrates How Courts Award Attorneys’ Fees
Attorneys’ Fees: The attorneys’ fees awarded to an association was reversed despite the plaintiff’s failure to comply with statutory pre-suit mediation requirements. The association failed to request its fees at the trial level.
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Gary Steinberg, a homeowner, asked to inspect specific official records from the Fiesta Homeowners Association in South Florida. A dispute arose between Steinberg and the association regarding this records request, leading Steinberg to file a lawsuit seeking statutory damages and declaratory relief related to the association's alleged failure to make the requested records available. The trial court granted the association's motion to dismiss.
The court of appeals affirmed the dismissal for failure to comply with the pre-suit mediation requirement but reversed the award of attorneys’ fees. The court found that "the question of whether the homeowner's claim is derivative is an arguable one; thus, sanctions were not appropriate." While the trial court referenced prior orders finding that Steinberg's previous suits were derivative, those suits did not involve attempts to obtain official records.
Even though Steinberg failed to comply with pre-suit mediation requirements, the court held that the trial court erred as that section "does not encompass a litigant's failure to satisfy a condition precedent."
The court additionally emphasized that Section 57.105(1) is designed "to deter meritless filings" and must be applied "with restraint” to discourage baseless claims without casting a chilling effect. The court also cited precedent stating that "[w]here there is an arguable basis in law and fact for a party's claim, a trial court may not sanction that party under section 57.105."
This case provides clarity on the Florida statute regarding sanctions. Even though the association was forced into litigation when mediation should have occurred, the fees and costs associated with its defense could not be recovered. It is important to note the association failed to request its fees at the trial level and instead, the trial court awarded those fees sua sponte (when a court takes an action on its own initiative).
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Association Governance Isn’t Immune from Federal Anti-Discrimination Laws
Fair Housing: The U.S. Court of Appeals for the Eleventh Circuit affirmed the Fair Housing Act’s and Civil Rights Act’s applicability to conduct by homeowners associations. The ruling emphasizes that association governance is not immune from federal anti-discrimination laws. This case broadens the reach of fair housing protections and sends a clear message that community associations must apply their rules and privileges equitably.
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A Black homeowner and former board member of the Joggers Run community in Florida alleged the association and its leadership subjected her and her family to racially discriminatory treatment. This included selectively enforcing parking and pet rules, denying access to common amenities like the basketball court, issuing unjustified citations, publicly disparaging her, towing and auctioning her son’s vehicle without proper notice that ultimately forced her to sell her home and leave the community.
The 11th Circuit reversed the district court’s dismissal, holding that the owner plausibly alleged racial discrimination in violation of the Fair Housing Act. Importantly, the court clarified that the act applies to discriminatory conduct even after property acquisition including denial of community amenities and selective rule enforcement. Because the owner plausibly alleged these harms as related acts of interference like harassment and service denial were actionable. The court also held the owner adequately pleaded claims emphasizing post-contractual interference with housing-related benefits and denial or equal property use based on race fall within their scope. Supporting this interpretation, the court gave weight to Department of Housing and Urban Development regulations and rejected the district court’s narrow reading as inconsistent with precedent and the act’s remedial goals.
Overall, the decision reaffirmed that homeowners associations can be held liable under federal civil rights law when enforcing rules or providing services in a discriminatory way.
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Associations Don’t Have the Means to Maintain Common Elements Like a Business
Premises Liability: This case discusses the standard of care a common interest community owes to a unit owner’s guest injured in the common elements.
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Tiffini Willis was a guest of an owner in the Twin Shores Master Owner Association in Westminster, Colo. Willis slipped and fell on property owned by the association. Colorado’s Premises Liability Act provides that licensees may recover if the landowner failed to exercise reasonable care with respect to dangers created and known by the landowner or if the landowner unreasonably failed to warn of dangers not ordinarily present on the property. Invitees may only recover if the injury was caused by the landowner’s failure to exercise reasonable care to protect against dangers that should have been known about.
A licensee is someone “who enters or remains on the land of another for the licensee’s own convenience or to advance the licensee’s own interests pursuant to the landowner’s permission or consent.” This includes a social guest. In contrast, an invitee is present to transact business of mutual interest or as the result of an invitation extended to the public.
The court of appeals held that a unit owner's guest receives an invitee status under the Premises Liability Act in areas within the common elements owned and controlled by the association. Further, the court reasoned that regardless of the relationship between the guest and the unit owner, the association operates as a business. Unit owners are classified as patrons when utilizing the common elements, therefore making them invitees under the Premises Liability Act. The court reversed and remanded the case to the trial court to determine the location of the injury.
©2025 Community Associations Institute. All rights reserved. Reproduction and redistribution in any form is strictly prohibited.