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.
Board Must Uphold Proprietary Lease Terms, Can’t Reject Reasonable Requests for No Reason
Board Authority: A cooperative in New York denied a request to convert a professional unit into a residential unit in its building and refused to provide a reason for the denial. The appellate court determined the cooperative acted unreasonably and violated terms of the proprietary lease.
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195 North Village Avenue purchased shares in a professional unit within a cooperative complex in Rockville Centre, N.Y., in 2005. The cooperative corporation, 195 Apts. Inc., owns the building, which contains 77 residential apartments and two subterranean professional units. North Village entered a proprietary lease with the co-op for one of these professional units. The lease stipulated North Village could apply for a revised certificate of occupancy to convert the unit from professional to residential use, and the co-op would not unreasonably withhold consent for such a conversion.
In 2018, North Village applied to the co-op's board for approval to convert the unit into a residential unit. The board denied the application stating it was not required to provide a reason for its denial and that certain reasons for the denial might not be disclosed. North Village filed an action for breach of the proprietary lease. The Supreme Court, Nassau County, denied the petition and dismissed the proceeding, leading North Village to appeal.
The appellate division reversed the supreme court's decision, holding that the co-op's denial of the conversion application was unreasonable. The court emphasized that under the proprietary lease, the co-op was required to act in good faith and not unreasonably withhold consent for the conversion. The board's failure to provide a reason for the denial and its assertion that certain reasons would not be divulged were deemed insufficient to justify the denial. The court concluded the co-op's actions were arbitrary and capricious, violating the terms of the proprietary lease.
This decision underscores the principle that cooperative corporations must act in good faith and not unreasonably withhold consent for actions permitted under proprietary leases. The ruling reinforces the enforceability of lease provisions that require cooperative boards to provide reasons for their decisions, ensuring transparency and accountability in the governance of cooperative housing.
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Property Dispute Highlights How a Common Interest Community Is Identified
Contracts and Easements: A planned unit development created prior to the Colorado Common Interest Ownership Act was required to form a homeowners association but never did. An appellate court determined that the PUD didn’t legally bind owners to an association or common property obligations; it also found that later homeowners can’t be forced into the association or its covenants.
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In 1909, the Giberson family received a 188-acre tract of land in Summit County, Colo., under the Homestead Act. Eighty years later, owners of the Giberson property (Sandri and Ferrari) recorded a plat creating 13 lots and a large open space and obtained approval of a planned unit development designation from the county. The PUD required formation of a homeowners association, but none was formed.
In 2017, most owners recorded a declaration to encumber all 13 lots. Shortly thereafter, the “association” took action to collect past-due assessments from Sandri and Ferrari. In response, Sandri and Ferrari filed suit against the association, all members, and development parties (collectively, defendants) seeking to void the 2017 declaration arguing it was not applicable to their properties, the association did not govern their lots, the association improperly stored snow on their lots, and Sandri and Ferrari were entitled to water service regardless of association membership.
The trial court granted Sandri and Ferrari’s motion for summary judgment. The trial court held that Sandri and Ferrari’s lots were not part of the common interest community, the plat and PUD did not create a declaration, the association did not govern their lots, and Sandri and Ferrari’s rights could not be unilaterally changed by the defendants.
Prior Colorado case law created the concept of an implied common interest community where a declaration created a maintenance but not a payment obligation. The court declined to determine whether the PUD created an implied common interest community due to potential maintenance and financial obligations. In this case, there was no declaration, and no common areas were being maintained.
The decision provides a clear test for determining whether subdivisions created before the Colorado Common Interest Ownership Act’s enactment qualify as common interest communities, offers guidance for similar future disputes, and underscores the importance of adhering to procedural rules that ensure fairness and clarity in legal arguments. The case sets a precedent for how courts may handle issues related to CCIOA's applicability and the proper structuring of appellate briefs in Colorado.
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All Contractors Are Liable for Maintaining Safety and Preventing Injuries on the Job
Contracts and Easements: A contractor hired by an association to perform work will be held liable for any injury stemming from the work even if it subcontracts the work to another entity. The decision underscores strict liability provisions and the importance of providing adequate safety measures to protect workers from gravity-related risks. It also highlights the necessity for clear and convincing evidence to claims of inadequate safety provisions in construction and maintenance work.
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Eduardo Barreto, a window washer, sustained injuries while performing work on the exterior of an 11-story building owned by the board of managers of 545 West 110th Street Condominium. The company contracted by the community’s management company to wash the building's windows subcontracted the work. Barreto brought a labor law claim against the condominium, its board of directors, and the management company arguing they failed to adequately protect him from a gravity-related risk. There were questions about whether Barreto used safety equipment properly.
The supreme court denied summary judgment to all parties in the case. The defendants' experts and Barreto's coworker's testimony raised factual issues regarding whether Barreto's failure to use a rope guard and his alleged improper positioning of the rope grab were the causes of the accident. The court remanded the matter for further determination.
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Transfer and Scope of Special Declarant Rights Clarified
Developer Control: The Alaska Supreme Court addressed a dispute over special declarant rights within a fly-in common interest community. The case clarified the interpretation and enforcement of declarations particularly concerning the transfer and scope of special rights associated with a unique lot.
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Sky Ranch at Pioneer Peak is a planned community in Palmer, Alaska, centered around a shared airstrip. Original developers Rexford and Ingeborg Turner reserved special declarant rights for Lot 13, known as the hangar lot. These rights included the ability to subdivide the lot into as many as 14 condominium-hangar units, engage in commercial activities, and sell aircraft fuel without the approval of the homeowners association.
The association held the right of first refusal to Lot 13. This meant that before the declarant could transfer special rights to anyone outside the declarant’s family, the declarant was required to give the association 45 days’ notice in writing and the opportunity to purchase Lot 13 on identical terms to any other prospective buyer.
In 2019, the Turners sold Lot 13 to David and Jan Meyers, who subsequently formed Sky Ranch Aer Services. The deed did not explicitly transfer the special declarant rights, and the association was not notified of the sale. A dispute arose when the Meyers sought to exercise these rights, leading to a lawsuit filed by the association.
The Meyers began construction on Lot 13 without architectural approval and rented living space and hangars to nonassociation members that could use the airstrip — all of which was objectionable to the association. In 2021, the Meyers and the developer executed a corrective deed clarifying special declarant rights that were transferred to the Meyers.
The court ruled that the 2021 corrective deed was invalid and did not clearly convey special declarant rights. Additionally, the association was not informed of the transfer, which is required under the community's declaration. Therefore, the Meyers did not acquire these rights through the sale.
The court also ruled the Meyers were permitted to rent aircraft facilities on Lot 13 to non-lot owners and allow them to use the airstrip. This decision emphasized the commercial nature of Lot 13, and the rights associated with it.
The court affirmed the Meyers were obligated to provide tie-downs to secure aircraft on Lot 13 for other community members as stipulated in the community's declaration, and it vacated the superior court's award of attorney's fees to the association.
The high court's interpretation of the community's declaration provides guidance on the scope of rights and obligations within such communities. The case underscores the importance of clarity in drafting deeds, of clearly transferring special declarant rights, and notifying the association to ensure the rights are enforceable. Errors in the language cannot be corrected without approval from the holder of the right of first refusal. The case sets a precedent for resolving disputes over special declarant rights and the enforcement of community declarations in Alaska.
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Priority of Liens in Foreclosures Involving Associations and Reverse Mortgages Clarified
Foreclosure: The Pennsylvania Superior Court addressed the priority of liens in foreclosure actions involving homeowners associations and reverse mortgages.
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Raechelle Eventoff owned a condominium in the Foxfield at Naaman's Creek community in Pennsylvania. The association filed a foreclosure action against Eventoff due to unpaid assessments. The Delaware County sheriff sold the property, and the proposed distribution of proceeds paid the association but did not divest the reverse mortgage held by Reverse Mortgage Funding (RMF). The association filed exceptions, and the trial court ruled in favor of the association, determining the mortgage did not have priority over the association's lien under the Uniform Planned Community Act.
The trial court granted the exceptions to the association, finding RMF did not have priority under the Pennsylvania Uniform Planned Community Act and divested the mortgage. RMF appealed.
In Pennsylvania, liens normally obtain priority based on order of recording, but there are exceptions. State law provides for an association lien from the time the assessment becomes due, and a foreclosure does not affect the lien of a prior mortgage. The court concluded the state legislature’s use of the phrase “first mortgage” applied to the first mortgage existing on the record at the time of sale.
The superior court reversed the trial court's decision. The court found the association's lien, while perfected under the uniform act, did not automatically take precedence over RMF's reverse mortgage. The court emphasized the need to balance the interests of associations in collecting assessments with the rights of mortgage lenders particularly in the context of reverse mortgages, which are federally insured and have specific protections.
This ruling clarifies the priority of liens in foreclosure actions involving associations and reverse mortgages in Pennsylvania. It underscores the importance of considering both state statutes and federal regulations when determining lien priority. The decision serves as a precedent for similar cases, guiding courts in balancing the interests of associations and mortgage lenders.
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Clarifying Insurance Coverage When False Statements Are Made
Insurance: Insurance companies are not obligated to provide coverage when the insured knowingly engages in wrongful conduct as specified in the policy's exclusions.
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Between 2009 to 2015, Telluride owned roughly 80% of the Peaks, a mixed-use condominium project. The remaining 20% were owned by various other parties. The residential units could be rented like hotel rooms through the Peaks’ Hotel, a subsidiary of TSG Ski & Golf (TSG). Telluride paid all the Peaks Owners Association’s (association) common expenses. At the end of each year, the parties reconciled the expenses and assessments among the owners.
In 2015, TSG purchased most of Telluride’s interests and embarked on a campaign to coerce Telluride to pay amounts it did not owe, including orchestrating a sham audit.
TSG and the association circulated a letter falsely claiming Telluride owed over $15 million in assessments.
In 2020, Telluride sued TSG, the association, and others alleging a fraudulent scheme by the TSG parties to coerce Telluride into paying over $15.5 million in assessments that were not actually owed. TSG, along with Peaks Hotel, and the association (collectively, the TSG parties) were insured under general and excess liability. The policies covered defamation or disparagement but excluded coverage for false publications made knowingly. The TSG parties sought coverage for the lawsuit.
The insurers denied coverage, citing knowledge-of-falsity exclusions. The insurers also sought reimbursement for defense costs. The TSG parties counterclaimed for breach of contract and bad faith. The policies defined “personal and advertising injury” to include slander and libel, and the parties agreed the complaint’s allegations fit this definition, even though it did not assert those specific claims.
The complaint alleged the TSG parties knowingly made false statements. The court rejected the argument that the duty-to-defend exclusion applied only when willful falsehood is an element of a claim. Instead, coverage is determined by allegations, not by claim elements. It also dismissed the TSG parties’ claim that the complaint did not clearly allege knowingly false statements, finding the allegations sufficient.
The U.S. District Court for Colorado granted summary judgment in favor of the insurers, concluding the policy’s knowledge-of-falsity exclusions precluded coverage. The court found the allegations in the underlying complaint fell entirely within the exclusions, and the insurers had no duty to defend or indemnify the defendants. The court also granted summary judgment on the defendants' counterclaims for breach of contract and bad faith, as these claims were contingent on the existence of coverage.
The 10th circuit affirmed the district court's decision, holding the knowledge-of-falsity exclusions applied because the defendants knowingly published false statements. The court also found the evidence at trial established that the defendants knew the statements in the debt collection letter were false when published, precluding indemnity coverage. Consequently, the insurers had no duty to defend or indemnify, and the defendants' counterclaims for breach of contract and bad faith were dismissed.
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2025 Community Association Law Seminar Best Manuscript: Award Winners
Each year, the CAI Law Seminar Planning Committee reviews dozens of community association law presentation submissions by CAI members to determine the breakout sessions for the following year's event. In addition to presentation slides, the final selection of presenters submit a comprehensive manuscript to accompany their session, citing case studies and offering templates.
After Law Seminar, a subcommittee analyzes all of the manuscripts and nominates the Best Manuscript, which is then approved by the full planning committee and the College of Community Association Lawyers' Board of Governors. The Best Manuscript sets the benchmark for all future Law Seminar submissions.
Congratulations to the 2025 Best Manuscript Award Winners: Nicholas R. Barnes, Esq., Timothy J. Krupnik, Esq., and Ellen R. Schuster, Esq., for their work on 50 Shades of Gray: Identifying and Navigating Ethical Issues in Community Associations.
Adherence to Statutory Guidelines in Property Partition Cases Clarified
Miscellaneous: A Hawaii court addressed the legality of partitioning family-owned property through the creation of a condominium property regime. It reinforced a core principle that partition actions are meant to disentangle co-owners and addressed a growing practical issue where physical division is difficult, but family members wish to retain occupancy.
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The case involves a long-running partition dispute over a 2.35-acre oceanfront property in Lahaina, Maui, inherited and co-owned by five families. The property contained four freestanding homes. Three of the homes were inhabited and constructed by family members; one was uninhabitable. Over several decades, the families attempted to divide or sell the property without success.
Formal partition litigation began in 2010. A commissioner ultimately recommended sale due to significant regulatory, cost, and fairness issues with any physical division. However, the circuit court instead ordered a partition in kind by converting the property into a four-unit condominium property regime, assigning units to the co-owners’ families. The defendants opposed this, arguing the court lacked authority to impose a CPR under Hawaii’s partition statute.
The Hawaii Supreme Court held that partition by CPR is not a lawful form of partition in kind. The court emphasized the statutory and historical purpose of partition is to sever co-ownership relationships and allow parties to hold separate interests, not impose new shared governance and contractual obligations.
The high court rejected the trial court’s interpretation and held the imposition of a CPR created more entanglements rather than providing relief from unwanted co-ownership. The supreme court vacated the circuit court’s judgment and remanded the case with instructions to unwind the CPR and order a partition by sale.
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Right of First Refusal Standards Explained
Miscellaneous: A Massachusetts appeals court determined that associations need to present reasonable evidence that the majority of residents support decisions. The court also recognized that financial continencies in purchase agreements do not necessarily invalidate the right of first refusal claim.
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The case addresses the statutory right of first refusal for residents of manufactured housing communities. The central issue is whether the Pocasset Park Association Inc., representing resident owners in a manufactured housing park in Bourne, Mass., properly exercised its right to purchase the land.
When the seller accepted the association’s offer, Crown Communities (Crown) challenged the claim arguing the association failed to meet statutory requirements and obtain sufficient resident support and financing timeliness. The trial court ruled in favor of Crown, finding the association failed to meet necessary statutory requirements.
The appeals court identified two key errors in the trial court's judgment. First, the trial judge miscounted the number of valid signatures on the petition submitted by the association. This miscalculation affected the determination of whether the association had the support of resident owners. Second, the trial judge imposed an improper heightened burden on the association by requiring verification or sworn statements to support the petition. The appeals court held the statute requires only "reasonable evidence," which includes documents signed by resident owners, and does not necessitate additional verification.
As a result of these errors, the appeals court vacated the trial court's judgment and remanded the case for further proceedings.
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