Judicial Review of Revised Covenants

Yes, I know of two in Colorado. Neither has had their amendment to the Covenants challenged in court. To my knowledge both were advised it was legal by their attorneys. They used a process similar to what you described.

I am not an attorney and this is not legal advice. It merely reflects my findings from my research into governance of CIDs and POAs.

What RogerB describes is a good example of abuse by a board using an attorney's opinion as justification. RandalR's post shows that legal opinions are not unique. In his case, the BOD essentially "opinion shopped" until the BOD got the opinion it wanted. That doesn't mean that the opinion is valid under the law.

What likely happens as described by RogerB is that owners acquiesce to the action of the board, since the only avenue available is to file a complaint against the association claiming that the action is invalid under the law. That probably only happens if an owner has "deep pockets" or if a group of owners file the lawsuit to share the cost.

When a proposed amendment is a major change in the restrictive covenants, some courts have ruled that unanimous approval of the owners is required. Changing from a voluntary association to a mandatory association may be treated as a major change in the "bargain" that owners have with one another. See Armstrong v Ledges for an example of such a ruling. The opinion cites similar rulings in other states.

If RandalR wants to challenge the action of the BOD, a lawsuit is likely required. If not challenged in court, the actions of the BOD will likely prevail, as in the situations described by RogerB. I believe the only judicial review is obtained by filing a lawsuit.

My view is that legislation is needed establishing an ombudsman in the office of attorney general to render legal opinions on interpretation of the governing documents and the law. In Michigan, opinions of the attorney general are binding unless overturned by a court.

We should all be working with our legislators to enact legislation establishing the ombudsman in the office of attorney general. The issue is consumer protection.

My association has recently gone through something that sounds almost exactly like what you had written... prolonged signature collecting, switching lawyers to find one willing, not disclosing information to homeowners, changing to affirmative covenants, etc. etc. etc...

It is currently going through the courts in FL.

Hi Mary,

So, are you saying it was a NC Court of Appeals that ruled a 100% vote is required to change from voluntary to mandatory? I seem to recall that statement being made by you but I thought it was the VA Court of Appeals.

I would think that the main determinant in this issue is the questions of what liabilities does the association have responsibilty for?

If there are obligations that MUST be cared for, then everyone MUST participate (financially) in its care - mandatory. A corporation is the legal set up for this, run by a board, and having "members" who are members simply because they participate financially.

This is not a bunch of people who volunteer to take care of a garden or have parties, but rather a membership of residents who must collectively be the caretakers of the assets of the corporation. No choice about it, it's mandatory.

Mary,
We also thought of a "test" to see who knew what, mainly as a bit of humor, because we are pretty sure there would be a variety of answers for the same question. One thing I just found out yesterday, via this lovely site, is the FCC Telecommunications Law of 1995, prohibiting anyone from restricting anyone else's access to reception via satellite. Our CC&R's were written in 1992, and prohibit those big, space-ship looking satellites, and have other restrictions regarding view from street, etc. This was one of the "easier" covenants to update - or so I thought. Now, I get to tell the HOA that we cannot prohibit satellites, and if the only reception a homeowner can get is through the street-side placement of the dish, we cannot prohibit that either! HA!

But I am eager to see what the attorney has to say about our CC&R's. One can't enforce an unenforceable document, and when 75% is needed for any change we pretty much need everyone on the same page.

Dorothy

Robert,

You are correct in saying that a member of a condo assn cannot install a satellite dish antenna on any common property areas. However, that does not mean he cannot have a satellite dish antenna. He can install one on his own property, which I know can be limited, but I don't believe it's impossible. Is the patio his property or is that a limited common area?

Don, in the cases of which I am aware I do not believe there was abuse by the Board. I believe the legality depended on the Declaration of CC&Rs and was not just shopping until there was agreement by one attorney. In each case the current owner could opt out of paying manditory assessment but when the property was sold the new owner was manditory.

Dorothy,

I suggest you download a copy of the FCC fact sheet. It can be found at:

www.fcc.gov/mb/facts/otard.html

This is a q&a fact sheet that should answer all your questions. There is one question in particular: "I'm a board member ofa HOA and we want to revise our restrictions so that they will comply with the FCC rule. Do you have guidelines you can send me?" In the answer, it's stated: "The residents should comply with the placement preferences provided the preferred placement does not impose unreasonable delay or expense or preclude reception of an acceptable quality signal." So, you see, the key points are not to impose unreasonable delay or expense or preclude reception of a quality signal". I wouldn't be surprised that some installers would say the installed location IS the best location.

All,
Want to read FCC, use search feature this page, plug in FCC................Wheeeeeeeeeeeeeeeeeeeee!!!!!!!

Mary,
Yes, I went to that site, which is how I found out that if the best place for the dish is in the front that's where it will go. As for the written confirmation that can be done at the time of the initial appointment and given to the homeowner, so there won't be any unreasonable delay etc.

I spoke to our local dish guy who told me that you only need 60% of reception to receive full access to the satellite. So even if the "best" place is in the front directly facing the southeast direction where the satellite around here is positioned, it doesn't necessarily mean it's the "only" place to receive all 150 billion channels. What is surprising to me is in this 30 minute conversation I had with the guy he never mentioned the FCC regulation, specifically in regards to those common prohibitions in CC&R's. Perhaps I shall ring him again!

Dorothy

Mary,

I'm a little confused about there not being a DECLARATION and how that figures into the scheme of things. Can you clarify that in a little more detail? I'd also like some more details on how the BOD made a huge mess of things. With court rulings against the voluntary HOA's that attempted to enforce mandatory dues in both VA and NC I would think that could be used a precedent in any TN case too. But then again I don't think our state has anything on the books having to do with HOA's, it's all considered to fall in a gray area under real estate law. It's amazing how many real estate attorneys just scratch their heads when you try to get their opinion on an HOA question. The best any of them can seem to come up with is that "it should be spelled out in your covenants!"

Sounds somewhat different from our situation. We were set up as a voluntary organization and things ran quite well for 20+ years. On average 225 of the 263 households always paid their dues. Had a pool/tennis that cost extra if you wanted to join the "rec association". They made the mistake of allowing a swim team to startup and they took control of our pool managing to close it to the membership from 5pm-7pm during the week. The rec memberships started to decline so then the pool became a millstone around the HOA's neck and they got desperate and decided mandatory dues would be the solution to everything! Supposedly our covenants weren't legal anyway as they didn't have an expiration date? But who knows, so many things were misrepresented in order to get the votes they spent 18 months collecting.

Have you seen any sort of links that would help me pull up any of the rulings in the NC or VA cases?

Thanks,

Randal

Kirk,
Hope I didn't say they didn't (how's that for a sentence). There are also restrictions on the use of Limited Common. One of them would be if the antenna interfered with anyone else's view, another could be the height of the antenna.

If you really have any specifics, the FCC phone # I listed seems very knowledgeable about all the details. But bear in mind that if any of this results in Lawsuits that does not include the FCC they will direct that resolutions be sought in the court. I take that to mean; if a problem comes up between the owner and the association that is a local problem between the two parties.

MaryN, I hope your computer problems get fixed soon. You have your head on straight and would be a welcome addition to the forum here.

However your name may have to be altered. I don't think we can handle two Hail Marys'. And I say that fondly, the other Mary is a fierce competitor and knows her P's and Q's. She has a natural (I suppose) flair for digging up all sorts of things from different states. I am lucky to get information from the SC website, she can find out the who your grand pappy was.

I don't suppose I would be far out if I assumed you have a difficult, if not entrenched Board. Our change out came last Saturday and I swear the air is clearer around here. Do you have plans on making some changes with your board? If you can get attrition to do the job for you, all the better, but I got my doubts.
Their resistance to put this court business behind them and move on is disturbing, nothing to be gained now, cut your loses and look to the future. Dr. Phil calls folks like that "right fighters", all that is important is that they be right, whatever the cost.
My son, a VP at a large corp. labels this kind of stuff as "posturing." Nothing to be gained, lots to be lost, but always make yourselve look good. Would I be wrong if I concluded you would not be out of line if you questioned the Board to explain how all this time and money is going to make your association a better place. Does that fit?

Don, you raise several valid questions.
Armstrong v Ledges states: 2. Deeds_restrictive covenants_amendments ..."the trial court did not err by refusing injunctive relief. Petitioners accepted their deeds with the knowledge that the restrictive covenants could be amended in the future." I believe the attorney was guided by the existing Covenants when making amendments. The amendment does apply to all existing owners at the time it was filed with the county.

I would agree with you that to determine the validity, in Colorado, would require a decision by the Court of Appeals.

I agree with your article on believing a legal opinion. I think it important that all Board members use good business judgement and challenge any opinion with which they question. Meanwhile, so long as the Board members act in good faith and have adequate D&O insurance coverage they will always need to make decisions and move forward.

RogerB

While legal opinions are difficult, the legal requirements for certain kinds of amendments/changes to CC&Rs are even more difficult. However, a good approach is almost always the same: (1) read and understand the CC&Rs and other governing documents; (2) read and understand the statutory law; (3) read and understand the applicable case law. It is the third part that is the most difficult. The case law is incomplete in many cases. Courts of Appeals typically refer to case law on similar cases in other states. So, there are many reasons to be skeptical of a singular legal opinion.

My posts are intended to provide food for thought. Without knowing all the specifics, specific advice on results cannot be given.

The NC case, Armstrong v Ledges, provides a comprehensive analysis that may apply to a range of amendments/changes to CC&Rs. The Court opined that any change that fundamentally changes the character of the CID requires unanimous approval It references similar opinions from other states. In the Armstrong case, the proposed amendment expanded to scope of the CID which required large changes in dues/assessments. The NC Supreme Court set aside the amendment/change to the CC&Rs because it was not unanimously approved.

The changes from voluntary to mandatory membership is likely a fundamental change in character of the CID, and one that may result in a large increase in dues/assessments. It may be a roll of the dice to predict how a state court of appeals would rule. My bet is that, absent state statute or precedent, the CofA would defer to opinions from other states if the legal reasoning applies.

The Naples, Florida, lawsuit over a proposed change from voluntary to mandatory membership would result in a large change in dues/assessments for those not currently members of the golf course. For them, the change is a large change and could result in some having to sell their homes and move to escape the burden of a large increase in dues/assessments. Saleability of homes would also be affected with the higher dues/assessments

Because of the litigation costs to individual owners, actions that are likely invalid under the law and governing documents may be accepted. This certainly creates a potential for abuse by the board. The board has the resources from all the members to get it right, and not to proceed if there is doubt. I favor a requirement in statutory law so stating.

My research indicates that Louisiana has solved the amendment/change issue by a statutory requirement that any amendment that imposes more stringent requirements requires unanimous approval.

RobertR1

The questions you raise should be part of a new thread. Since effective owners associations solve their own problems, a place to start is the research on "self-regulating organizations". Try an internet search with the term. Successful self-regulating organizations have many characteristics in common.

I'm still somewhat confused about the the "Armstrong vs. Ledgers" case. I read a link to it (http://www.aoc.state.nc.us/www/public/sc/opinions/2006/640-05-1.htm) but I can't understand where some are coming up with the opinion that it's a basis for requiring 100% approval to change from a voluntary to mandatory association. Anyone know a case reference where it specifically says it requires 100% approval to go mandatory? Maybe I'm just doing brain dead reading legal briefs and missing it!

After some residents had their attorney threaten to sue the HOA should they ever try to file a lien against them for non-payment of dues, the BOD put in a grandfather clause. This "supposedly" exempted current owners from having liens filed against them and made association fees mandatory only on new residents as they moved into the neighborhood. But they do refer to us as a mandatory association now.

As expected the BOD promised at the annual meeting to address the issue of having a "judicial review" of our covenants to make sure the change was legal. In the BOD minutes (which are always posted way late) they kept referring to it as a "Judicial Review of the Bylaws" and it kept getting deferred. Now they're saying they've discussed it with an attorney and there's not a problem so they're closing the action. Can't wait to see if it's the same attorney they told them we could go mandatory even though 6 others said we couldn't.

Just to make it more interesting I found out that they're now concerned over the declining number of residents that are paying their dues. Since I lead the "opposition party" one board member actually contacted me to see what I thought could be done about it. Last year they managed to collect from ~220 (out of 264). This year only ~200 have signed up! To address this they're now talking about how to "legally" make everyone have to pay towards the neighborhood upkeep! We've got a pool that continues to suck us dry. So much for the BOD keeping it's word on the grandfather clause.

Randal

IMO, this is a matter than can only be resolved in a court of law, unless your state has a specific statute addressing conversion from mandatory to voluntary HOA. Common sense tells me it should be a 100% vote of the property owners, but, also, common sense is not so common. And, attorneys just looking for a legal fee will most likely tell the BOD a majority of the prop owners can make the switch. What I would like to ask these attorneys is to quote the law which says this. I wouldn't be afraid to bet that in most instances there isn't one!

I suspect that most of these voluntary vs. mandatory proposals are about money. The people who want an expensive facility or activity want mandatory membership to pay the dues and assessments. "I want my lifestyle and want more people to pay for it!"

That is certainly the thrust of the litigation in Naples, Florida Dispute over mandatory membership at Kensington heads to court.

A quotation from the article

"A number of communities on Florida’s east coast succeeded in getting mandatory membership overturned in court because it would “destroy the general scheme or plan of the development,” said Altieri, 59, who has lived in Kensington for four years."

is consistent with the opinion in Armstrong v Ledges.

MaryA1, certainly a court of law could decide, but the legal costs are more than people are willing to pay in some cases. If the association's attorney doesn't represent the common interest of the members and conduct the research you suggest, the result is that the attorney defends what the board wants to do. That is what attorneys do when they advocate for a client.

RobertR1, political theory is that minorities need protection from the tyranny of the majority. In our country, those protections stem from the Bill of Rights. Majority rule gives too much power to the majority. See Statement of Rights for my thoughts on fundamental rights of members of owners associations chartered by CC&Rs.

In addition to Armstrong, there are other cases that require unanimous approval for any amendment that creates non-uniform requirements. My recollection is that statutory law in Louisiana requires unanimous approval for any amendment of CC&Rs that creates a more stringent requirement. That requirement may go too far and create gridlock and inability to correct obvious errors.

Because litigation is often expensive, I favor empowering the office of attorney general to provide binding legal opinions, until decided otherwise by a court of appeals, on such fundamental questions. I believe there would be very strong secondary effects on the actions of association attorneys if they knew their opinions could be. or would likely be, reviewed by the AG.

Don,
Thanks for you response.
I suppose my question stems from the perception that associations are created to serve the majority. In my experience, there seems to be great weight put on: "if the majority want it, that rules the day. Extrapolated that means: the BOD has to abide by the majority, when in fact Boards seldom consider the majority and in my mind shouldn't.

The lead dog is the Association and what is best for the whole. Therefore, do the words minority and majority belong in the documents. I understand that a court of law has to determine intent, would the intent to serve the majority prevail over the intent to protect the associations , or, am I just creating scenarios that take care of themselves.

I understand the part about “The law will not subject a minority of landowners to unlimited and unexpected restrictions on the use of their land merely because the covenant agreement permitted a majority to make changes in existing covenants.”

Let's play "devil's advocate" here. Since there is a grandfather clause which "supposedly" only makes new homeowners subject to liens for nonpayment of dues, then only they truly fall under the mandatory dues. Paying dues is theoretically still an option for those residents that lived here prior to the new mandatory covenants passing. New residents buy into the neighborhood know they're expected to pay. So have the prior residents really been subjected to unlimited and unexpected restrictions on the use of their land?

Thanks,

Randal

Robert,

Restrictive covenants (CCRs) "run with the land". This has nothing to do with the common areas, it has to to with ALL the property contained w/i the HOA that is bound by CCRs; i.e., all the condo units and/or all the single family homes. "Running with the land" means the restrictive covenants are passed on to each succeeding property owner, i.e., when I sell my home to you, the CCRs remain with the property and you are not subject to them. This goes on and on until the period that the covenants shall remain in effect (as stated in the CCRs) runs out or until an amendment makes them null and void.

Don has posted the opinion of the Supreme Court of Nebraska, which in effect states a 100% vote is required to change from a voluntary to a mandatory assn. Mary from VA posted info awhile back that the Supreme Court of VA ruled the same way. The newspaper article about the Kensington case from Naples, FL (posted by Don)went on to say FL courts have overturned several cases because a 100% vote was not obtained. All these cases reinforce my thoughts that "this is a matter that can only be resolved in a court of law." I think we all agree that any attorney who works with a voluntary assn to change to mandatory only do so for the money or because that's what the BOD wants. I know of no state that has a law describing the process to be undertaken. Anyone please correct me if I'm wrong about this! It's not uncommon for the attorney to advise the BOD that the requirement is the same as the requirement to amend the CCRs. Not all assn's will decide to grandfather those who vote against the change. Instead, if the required % is attained, then all the property owners become members of the assn. It's these assn's that court cases challenging the validity of the vote stem from.