Granting fractional interests---Legal problem

I live in a HOA in Hawaii. We have community tennis courts for use by owners only. One owner granted several 1/100,000 interests [for $10 each] to his friends and now claims that they have the right to use our tennis courts because they are legally owners. He plans to do this with a lot more of his friends. They will end up monopolizing the tennis courts [that the legitimate owners just paid $60,000 to renovate] and make it very difficult for the real owners to use the courts. We are going to mediation over this in a couple of weeks.

My question is this: Are there any legal precedents in which an HOA owner has granted a minuscule ownership to a friend so that this friend could use the recreation facilities whenever and the courts have struck this down as being illegal? If it is legal, then this guy can grant $10 shares to 100,000 people and they will take over our tennis courts. Sounds crazy, but that's where we are.

Any info would be appreciated.

Mahalo from the Big Island.

Without reading the governing documents, it sounds like it would be legal.
However, the Association should contact the individual and demand full names and addresses of all owners.
The Association can then inform those owners that any assessments are also their responsibility.

Bruce C8 You state past tense that an owner "granted".

Respectfully, if that were the case wouldn't they have had to magically obtain planning approval to subdivide the planning unit or convert the whole complex into a form of fractional ownership ?

Or else have had to register a transfer document (onto title) from themselves to themselves and the named new co-owners , name by name, onto the new multiple ownership single unit ? ( And pay land transfer tax if you're like my tax-burdened jurisdiction )

And all that for $ 10 each ? ?

Interesting what the person did. I doubt the typical association Covenants cover it in any way. One immediate thing that pops in my mind is if he has a mortgage, would any mortgage company allow such? Also for taxing purposes would there not have to be defined owners?

I think his plan can be stopped but not sure how. Might well be time to lawyer up.

Here are the details. I live in a Community Association in Kailua Kona, HI. There are 67 houses. An owner is defined as a person having a deeded ownership interest in a house here. The tennis courts are defined as common elements. The use of common elements is limited to owners, renters, and the overnight guests of owners. The president of the HOA has some friends who like to play tennis but don't live in our development and are having a hard time finding courts on which to play. So he allowed his friends to use our courts and even allowed a professional instructor, not a resident, to give commercial lessons 5 times a week to groups of 4-6 non-residents. The residents were having a tough time gaining access to our own courts because the non-residents had basically taken over. The owners were up in arms and circulated a petition to change our CC&R's to reflect that no non-residents are allowed to use the courts unless accompanied by an actively participating owner at all times. Further, no commercial lessons are allowed unless all the students are owners. The board faced a contentious recall and voted to amend the CC&R's to reflect the demands of the owners. This was done legally and became part of our CC&R's as few months ago.

So, in order to circumvent the new rules, the president granted to one of these non-residents a 1/85,000 interest in his house for the consideration of $10. He granted this interest via a recorded warranty deed---all legal. So now he says that this person is an owner and can use our courts at any time and can invite her friends from outside the community to use the courts. He has stated that he plans to grant similar interests in his house to a bunch of his other non-resident friends and to the tennis instructor so that she can continue to use our courts for commercial lessons.

The remaining 4 members of the board met with the board attorney and sanctioned the board president, stating that his transfer of 1/85,000 of his house was done in bad faith and that it may be a legal transfer of ownership, but that the person he granted to is not a bona fide owner and does not have common element privileges. The president got an attorney and began to sue all the homeowners and the board but the rules state that he must first go thru mediation, which is taking place in a couple of weeks.

It is the position of our attorney and of other legal counsel the we have contacted that the owner in any HOA anywhere can simply deed out minuscule interests to hundreds of his non-resident friends and then they and their friends can come over and use the pool, rec center, tennis courts, etc., at their leisure.

Our CC&R's do prohibit any fractionalized interests in property and what the board will do within the next few days is change the definition of "owner" to anyone who has a 25% interest or more in a house or lot.

What I'm looking for is any legal court precedent in which this matter has been heard in court. Thanks.

Oh, and by the way, the president will not be running for reelection. Nobody in our association will even talk to him anymore.

Yes, paid for a copy of the warranty deed. Lawful consideration was $10, properly executed, % interest conveyed represents 1/85,000 ownership. He could theoretically do the same with 85,000 of his closest friends. Really frustrating.

I have heard of this technique being used to circumvent HOA or condo rental restrictions. The renter is given this fractionalized ownership, and so qualifies as an owner instead of a renter, thus doing an end run around rental prohibition. It was subject to court review, in Illinois I think, and I think the courts found in favor of the HOA.

This is the info from Illinois Bar Association, but it is only available for $7.50 and only if you are a member of the Illinois Bar.

No-Leasing Restrictions on Condominium Owners: The Legal Landscape ...
... It also looks at how courts have responded to some of the creative "end runs"
owners have used to try to get around these restrictions. ... 
www.isba.org/ibj/2006/02/noleasingrestrictionsoncondominiumo - 47k

The info was also on this law firm's website, but the page is gone now. http://www.ksnlaw.com/

Sorry I don't have more for you.

NO ~ he AND the 1/85,000 owner could.

IN THE MEANTIME, figure out the hours of the tennis court and schedule it into time slots and require that people need to sign up for times. If needed, hire someone to manage the courts and ensure that everyone gets some kind of playing time.

Good luck on the other part. Let us know what happens.

Trying again... the link is here.

By the way, now that the Pres has assigned partial ownership to others persons, the Pres may no longer have the standing (or whatever the right term is) to sue the association. In other words, the Pres may need the other owners of the unit to join the lawsuit or else the lawsuit may not be valid since the Pres is not the only owner of the unit.