Post by BagLady on Apr 5, 2014 9:59:51 GMT -5
I had asked Fr ed O'N eal question about "implied contracts" attaching to property:
Attachment DeletedFr ed Answered, in his usual detailed manner:
Below is Fr ed's attachment (partial). In a nutshell, what it tells me is that the courts are deciding that there IS an implied contract to pay for ALL common property that was initially included in the original Declaration and used by all owners AND requires money to maintain the common properties provided the HOA is a Common Interest Community, as defined herein.
This memorandum is a survey of cases decided in various states across the country on the issue of whether less than 100% of the homeowners in a subdivision can legally adopt an amendment to the original covenants and restrictions (“Original C&R’s”) of that subdivision so as to either create a mandatory homeowners’ association (“HOA”) or to impose mandatory HOA dues, assessments, and/or liens on all homeowners in the subdivision.
The “good” cases (those cases finding such amendments to be invalid) are Dreamland Villa Community Club v. Raimey, 224 Ariz. 42, 226 P.3d 411 (2010) (“Dreamland”), Armstrong v. Ledges Homeowners Association, Inc., 360 N.C. 547, 633 S.E.2d 78 (2006) (“Ledges”), Webb v. Mulliken, 142 S.W.3d 822 (Mo. 2004) (“Webb”), Popponesset Beach Association, Inc. v. Marchillo, 39 Mass.App.Ct. 586, 658 N.E.2d 983 (1996) (“Popponesset”), Holiday Pine Property Owners Association, Inc. v. Wetherington, 596 So.2d 84 (Fla. 4th DCA 1992) (“Holiday Pines”), and Lakeland Property Owners Association v. Larson, 121 Ill.App.3d 805, 459 N.E.2d 1164 (1984) (“Lakeland”).
A synopsis of each of the “good cases” is attached hereto as Appendix “A.”
The “bad” cases (those cases finding such amendments to be valid) are Alln v. Timberlake Ranch Landowners Association, 138 N.M. 318, 119 P.3d 743 (2005) (“Timberlake Ranch”), Evergreen Highlands Association v. West, 73 P.3d 1 (Colo. 2003) (“Evergreen”), Windemere Homeowners Association v. Cue, 297 Mont. 77, 990 P.2d 769 (1999) (“Windemere”), Sunday Canyon Property Owners Association v. Annett, 978 S.W.2d 654 (Texas 1998) (“Sunday Canyon”), Zito v. Gerken, 25 Ill.App.3d 797, 587 N.E.2d 1048 (1992) (“Zito”), and Meadow Run and Mountain Lake Park Association v. Berkel, 409 Pa.Super. 637, 598 A.2d 1024 (1991) (“Meadow Run”).
A synopsis of each of the “bad cases” is attached hereto as Appendix “B.”
Introduction
Put simply, in both the “good” and “bad” cases, the court’s key considerations were (1) whether, as part of the original scheme of development, the developer of the subdivision created common areas or property that were actually used by and a benefit to all homeowners and (2) whether the mandatory HOA or mandatory HOA dues, assessments or liening powers were necessary for the HOA to maintain the original common areas or property created by the developer.
In all the “good” cases, the answer to at least one of the above questions was “no.”
In all the “bad” cases, the answer to both of the above questions was “yes.”
For example, of the “good” cases, in Ledges, Dreamland, and Webb, there were, essentially, no common areas or property created by the developer. In Holiday Pines, there is no mention of there being any common property. In Popponesset and Lakeland, though there were common areas or property, the courts invalidated the amendments because no evidence was presented that the homeowner in question used or actually benefited from the common areas or property involved.
In Ledges, the only common property created by the developer was the entrance sign to the development and the Original C&R’s already provided a method for homeowners to proportionately share in the utility bills necessary to keep the sign lit. In Dreamland and Webb, there were no common areas or property. In each case, though there were recreational facilities (e.g. clubhouse, swimming pool, tennis courts, shuffleboard courts) available to homeowners, those facilities were made available to homeowners on a voluntary basis. In each case, a separate corporation had been set up as a recreation club to run the recreational facilities and, under the original scheme of development, only those homeowners who chose to take advantage of membership in the recreation club were responsible for the upkeep of those facilities.
In all the “bad” cases, common areas or common property had been developed as part of the original scheme of development. For example, in Timberlake Ranch, the development originally included as common areas a bath house, equestrian trails, hiking trails, a community center, and the roads within the development. In Evergreen, the development originally included as common areas hiking and equestrian trails, a barn and stables, a ball field, a fishing pond, and tennis courts. In Meadow Run, the development originally included as common areas lakes, dams and the roads within the development. In Windemere, the mandatory assessment in question was levied in order to maintain the common roads of the development. Similarly, in Sunday Canyon, the assessment in question was instituted to maintain the roads, water system and other common areas in the development. In Zito, the existence of common areas in need of maintenance is expressly mentioned as the reason for the mandatory assessments in question there.
In Evergreen, Sunday Canyon and Timberlake Ranch, the homeowners originally tried to rely on voluntary contributions to maintain the common areas and only amended the Original C&R’s to impose mandatory assessments after voluntary contributions had become insufficient to maintain the common areas.
In each of the “bad” cases, the courts, essentially, found as part of the homeowners’ original contractual obligation an implied duty to pay their proportionate share of the costs necessary to maintain the common areas or property which were originally part of the subdivision.
Additionally, some of the courts found the homeowners to be on “notice” at the time they purchased that someday there would be a need for mandatory assessments to maintain the common areas or property of the development they were buying into.
In all cases, both “good” and “bad,” the courts approached the issue of the validity of the amendment from a contract law perspective, i.e. was the subject matter of the amendment merely a logical extension of the original bargain.
In the “good” cases, the courts said that the Original C&R’s were a contract between the homeowners and the developer and that no additional obligations not already contained in the Original C&R’s could be imposed on the homeowner by an amendment to the C&R’s.
In the “bad” cases, the courts “implied” a contractual obligation on the part of each homeowner to pay for the maintenance of the common areas they knew existed at the time of the Original C&R’s. Put another way, the courts “implied” a contractual obligation on the part of each homeowner to pay his proportionate share of the burden created by the benefit bestowed on all by the maintenance of the original common areas.
Restatement (Third) of Property
In 2000, the Restatement (Third) of Property, Servitudes, chapter 6 (“Common-Interest Communities”) was published, codifying much of the rationale stated in those “bad” cases decided prior to 2000. This “Common-Interest Community” chapter starts off by defining what constitutes a “common-interest community:”
“(1) A ‘common-interest community’ is a real estate development or
neighborhood in which individually owned lots or units are burdened by a
servitude that imposes an obligation that cannot be avoided by nonuse or
withdrawal (a) to pay for the use of, or contribute to the maintenance of, property
held or enjoyed in common by the individual owners, or (b) to pay dues or
assessments to an association that provides services or facilities to the common
property or to the individually owned property, that enforces other servitudes
burdening the property in the development or neighborhood.”
The key, therefore, to whether a particular subdivision qualifies as a “common-interest community” is whether, when it originated, the developer created common areas or common property or an HOA which provided common services or facilities to all homeowners or which was created by the developer to enforce the Original C&R’s.
If such was part of the developer’s original scheme of development, then the subdivision qualified as a “common-interest community,” and the rest of chapter 6 applied to the subdivision. Conversely, if such was not part of the developer’s original scheme of development, then the subdivision did not qualify as a “common-interest community,” and the rest of Chapter 6 did not apply to the subdivision.
As for what the rest of Chapter 6 says, Section 6.3 (“Power to Create a Common-Interest-Community Association”), for example, provides that an HOA can be created by the homeowners or a court at some point down the road, unless such creation is expressly prohibited by the Original C&R’s.
The comments to Section 6.3 explain the rationale for allowing the creation of such an after-the-fact HOA in a common-interest community. The comments state that creating such an HOA is necessary for maintenance of the common areas:
“The basis for creation of an association is the need for management of common
property the lot owners are obligated to maintain. That obligation is normally expressly created in the declaration or other governing documents, but is sometimes implied from the circumstances surrounding creation of the development. Once the obligation to support the common property is established, owners of a majority of the lots have the power to create as association with the powers set forth in this Chapter.”
Section 6.5 (“Power to Raise Funds: Assessments, Fees, and Borrowing”) states that an HOA in a common-interest community has the implied power to levy assessments against individual homeowners and to secure those assessments with liens. However, the assessments “must be reasonably related to the costs of providing the [common] service, or providing and maintaining the common property, or the value of the use or service”
In the comments to Section 6.5, the authors clarify that such implied power to levy assessments and file liens is limited only to those subdivisions which qualify as “common-interest communities:
“Application of this section, like the other provisions of this Chapter, presupposes
that there is a common-interest community within the meaning of Section 6.2. It
does not purport to authorize the imposition of assessments by property-owner
groups that are not common-interest communities.” (emphasis supplied).
In the comments to Section 6.5, the rationale for the implied power of an HOA to levy assessments and file liens is explained as follows:
“Under the rule stated in this section, the power to raise funds reasonably necessary to carry out the functions of a common-interest community will be implied if not expressly granted by the declaration or by statute. … Purchasers in common-interest communities have a reasonable expectation that the common property and facilities will be maintained and that the association will carry out its other functions. Implying a power to raise the funds necessary for those purposes meets the reasonable expectations of the purchasers as well as furthering the fiscal interests of the public.”
As an aside, the courts in both “bad” cases decided after 2000 relied heavily on the above sections of the Restatement. See, Evergreen, 73 P.3d at 4, 8 and 9; see also, Timberlake Ranch, 119 P.3d at 750.
Of the “good” cases decided after 2000, the Dreamland court specifically refers to the above sections of the Restatement, but then says those sections are inapplicable to the case before it since the subdivisions in question were not “common-interest communities:”
“FN 14. [The HOA] contends that Restatement (Third) of Property (Servitudes)
Section 6.3(10 (2000) allows for the creation of an association to manage common property and levy assessments in a common-interest community by majority vote of lot owners. However, Because Dreamland Villas never had common areas, this argument is unavailing.” (the court’s emphasis) Dreamland, 226 P.3d at 418, n. 14.
Summary
In short, the make or break distinctions between the “bad” cases which allow for the creation by amendment of a mandatory HOA or the creation by amendment of the power of an HOA to levy mandatory assessments, dues and liens and the “good” cases which don’t allow for the creation by amendment of such things are (1) the presence or absence of “common areas or property” which were created as part of the original scheme of development and (2) a current need of ongoing maintenance of the common areas or property by the HOA.
If either is lacking, then the amendment creating the mandatory HOA or creating the power of an HOA to levy mandatory dues, assessments, or liens is invalid.
Let's see if i "got it": Expired owners have obligation to pay essential services utilized to serve the lot. Owners who are expired who do not use optional amenities such as swimming pool, clubhouse, etc have no implied contract to pay these things? Then there is that other gray area such Property Management company, grounds maintenance around un-used amenities, tree trimming in common areas, employee expenses, legal fees for corporation, Financial audits etc.
Has this been implemented anywhere in Florida or anywhere--is there a working model?
Has this been implemented anywhere in Florida or anywhere--is there a working model?
Nothing in Florida on the implied contractual duty. However, there is a respected legal authority called the Restatement of the Law. The Restatement is put together by law professors by accumulating the results of all cases on a particular subject and then coming up with general rules of law which run thru those cases. There is a particular section of the Restatement called the Restatement (Third) of Property: Servitudes, Section 6.2. This section talks about the implied obligation to pay an HOA to maintain common property. I'm attaching a survey of law on this area I did awhile back. It discusses that section of the Restatement beginning on page 3.
Below is Fr ed's attachment (partial). In a nutshell, what it tells me is that the courts are deciding that there IS an implied contract to pay for ALL common property that was initially included in the original Declaration and used by all owners AND requires money to maintain the common properties provided the HOA is a Common Interest Community, as defined herein.
This memorandum is a survey of cases decided in various states across the country on the issue of whether less than 100% of the homeowners in a subdivision can legally adopt an amendment to the original covenants and restrictions (“Original C&R’s”) of that subdivision so as to either create a mandatory homeowners’ association (“HOA”) or to impose mandatory HOA dues, assessments, and/or liens on all homeowners in the subdivision.
The “good” cases (those cases finding such amendments to be invalid) are Dreamland Villa Community Club v. Raimey, 224 Ariz. 42, 226 P.3d 411 (2010) (“Dreamland”), Armstrong v. Ledges Homeowners Association, Inc., 360 N.C. 547, 633 S.E.2d 78 (2006) (“Ledges”), Webb v. Mulliken, 142 S.W.3d 822 (Mo. 2004) (“Webb”), Popponesset Beach Association, Inc. v. Marchillo, 39 Mass.App.Ct. 586, 658 N.E.2d 983 (1996) (“Popponesset”), Holiday Pine Property Owners Association, Inc. v. Wetherington, 596 So.2d 84 (Fla. 4th DCA 1992) (“Holiday Pines”), and Lakeland Property Owners Association v. Larson, 121 Ill.App.3d 805, 459 N.E.2d 1164 (1984) (“Lakeland”).
A synopsis of each of the “good cases” is attached hereto as Appendix “A.”
The “bad” cases (those cases finding such amendments to be valid) are Alln v. Timberlake Ranch Landowners Association, 138 N.M. 318, 119 P.3d 743 (2005) (“Timberlake Ranch”), Evergreen Highlands Association v. West, 73 P.3d 1 (Colo. 2003) (“Evergreen”), Windemere Homeowners Association v. Cue, 297 Mont. 77, 990 P.2d 769 (1999) (“Windemere”), Sunday Canyon Property Owners Association v. Annett, 978 S.W.2d 654 (Texas 1998) (“Sunday Canyon”), Zito v. Gerken, 25 Ill.App.3d 797, 587 N.E.2d 1048 (1992) (“Zito”), and Meadow Run and Mountain Lake Park Association v. Berkel, 409 Pa.Super. 637, 598 A.2d 1024 (1991) (“Meadow Run”).
A synopsis of each of the “bad cases” is attached hereto as Appendix “B.”
Introduction
Put simply, in both the “good” and “bad” cases, the court’s key considerations were (1) whether, as part of the original scheme of development, the developer of the subdivision created common areas or property that were actually used by and a benefit to all homeowners and (2) whether the mandatory HOA or mandatory HOA dues, assessments or liening powers were necessary for the HOA to maintain the original common areas or property created by the developer.
In all the “good” cases, the answer to at least one of the above questions was “no.”
In all the “bad” cases, the answer to both of the above questions was “yes.”
For example, of the “good” cases, in Ledges, Dreamland, and Webb, there were, essentially, no common areas or property created by the developer. In Holiday Pines, there is no mention of there being any common property. In Popponesset and Lakeland, though there were common areas or property, the courts invalidated the amendments because no evidence was presented that the homeowner in question used or actually benefited from the common areas or property involved.
In Ledges, the only common property created by the developer was the entrance sign to the development and the Original C&R’s already provided a method for homeowners to proportionately share in the utility bills necessary to keep the sign lit. In Dreamland and Webb, there were no common areas or property. In each case, though there were recreational facilities (e.g. clubhouse, swimming pool, tennis courts, shuffleboard courts) available to homeowners, those facilities were made available to homeowners on a voluntary basis. In each case, a separate corporation had been set up as a recreation club to run the recreational facilities and, under the original scheme of development, only those homeowners who chose to take advantage of membership in the recreation club were responsible for the upkeep of those facilities.
In all the “bad” cases, common areas or common property had been developed as part of the original scheme of development. For example, in Timberlake Ranch, the development originally included as common areas a bath house, equestrian trails, hiking trails, a community center, and the roads within the development. In Evergreen, the development originally included as common areas hiking and equestrian trails, a barn and stables, a ball field, a fishing pond, and tennis courts. In Meadow Run, the development originally included as common areas lakes, dams and the roads within the development. In Windemere, the mandatory assessment in question was levied in order to maintain the common roads of the development. Similarly, in Sunday Canyon, the assessment in question was instituted to maintain the roads, water system and other common areas in the development. In Zito, the existence of common areas in need of maintenance is expressly mentioned as the reason for the mandatory assessments in question there.
In Evergreen, Sunday Canyon and Timberlake Ranch, the homeowners originally tried to rely on voluntary contributions to maintain the common areas and only amended the Original C&R’s to impose mandatory assessments after voluntary contributions had become insufficient to maintain the common areas.
In each of the “bad” cases, the courts, essentially, found as part of the homeowners’ original contractual obligation an implied duty to pay their proportionate share of the costs necessary to maintain the common areas or property which were originally part of the subdivision.
Additionally, some of the courts found the homeowners to be on “notice” at the time they purchased that someday there would be a need for mandatory assessments to maintain the common areas or property of the development they were buying into.
In all cases, both “good” and “bad,” the courts approached the issue of the validity of the amendment from a contract law perspective, i.e. was the subject matter of the amendment merely a logical extension of the original bargain.
In the “good” cases, the courts said that the Original C&R’s were a contract between the homeowners and the developer and that no additional obligations not already contained in the Original C&R’s could be imposed on the homeowner by an amendment to the C&R’s.
In the “bad” cases, the courts “implied” a contractual obligation on the part of each homeowner to pay for the maintenance of the common areas they knew existed at the time of the Original C&R’s. Put another way, the courts “implied” a contractual obligation on the part of each homeowner to pay his proportionate share of the burden created by the benefit bestowed on all by the maintenance of the original common areas.
Restatement (Third) of Property
In 2000, the Restatement (Third) of Property, Servitudes, chapter 6 (“Common-Interest Communities”) was published, codifying much of the rationale stated in those “bad” cases decided prior to 2000. This “Common-Interest Community” chapter starts off by defining what constitutes a “common-interest community:”
“(1) A ‘common-interest community’ is a real estate development or
neighborhood in which individually owned lots or units are burdened by a
servitude that imposes an obligation that cannot be avoided by nonuse or
withdrawal (a) to pay for the use of, or contribute to the maintenance of, property
held or enjoyed in common by the individual owners, or (b) to pay dues or
assessments to an association that provides services or facilities to the common
property or to the individually owned property, that enforces other servitudes
burdening the property in the development or neighborhood.”
The key, therefore, to whether a particular subdivision qualifies as a “common-interest community” is whether, when it originated, the developer created common areas or common property or an HOA which provided common services or facilities to all homeowners or which was created by the developer to enforce the Original C&R’s.
If such was part of the developer’s original scheme of development, then the subdivision qualified as a “common-interest community,” and the rest of chapter 6 applied to the subdivision. Conversely, if such was not part of the developer’s original scheme of development, then the subdivision did not qualify as a “common-interest community,” and the rest of Chapter 6 did not apply to the subdivision.
As for what the rest of Chapter 6 says, Section 6.3 (“Power to Create a Common-Interest-Community Association”), for example, provides that an HOA can be created by the homeowners or a court at some point down the road, unless such creation is expressly prohibited by the Original C&R’s.
The comments to Section 6.3 explain the rationale for allowing the creation of such an after-the-fact HOA in a common-interest community. The comments state that creating such an HOA is necessary for maintenance of the common areas:
“The basis for creation of an association is the need for management of common
property the lot owners are obligated to maintain. That obligation is normally expressly created in the declaration or other governing documents, but is sometimes implied from the circumstances surrounding creation of the development. Once the obligation to support the common property is established, owners of a majority of the lots have the power to create as association with the powers set forth in this Chapter.”
Section 6.5 (“Power to Raise Funds: Assessments, Fees, and Borrowing”) states that an HOA in a common-interest community has the implied power to levy assessments against individual homeowners and to secure those assessments with liens. However, the assessments “must be reasonably related to the costs of providing the [common] service, or providing and maintaining the common property, or the value of the use or service”
In the comments to Section 6.5, the authors clarify that such implied power to levy assessments and file liens is limited only to those subdivisions which qualify as “common-interest communities:
“Application of this section, like the other provisions of this Chapter, presupposes
that there is a common-interest community within the meaning of Section 6.2. It
does not purport to authorize the imposition of assessments by property-owner
groups that are not common-interest communities.” (emphasis supplied).
In the comments to Section 6.5, the rationale for the implied power of an HOA to levy assessments and file liens is explained as follows:
“Under the rule stated in this section, the power to raise funds reasonably necessary to carry out the functions of a common-interest community will be implied if not expressly granted by the declaration or by statute. … Purchasers in common-interest communities have a reasonable expectation that the common property and facilities will be maintained and that the association will carry out its other functions. Implying a power to raise the funds necessary for those purposes meets the reasonable expectations of the purchasers as well as furthering the fiscal interests of the public.”
As an aside, the courts in both “bad” cases decided after 2000 relied heavily on the above sections of the Restatement. See, Evergreen, 73 P.3d at 4, 8 and 9; see also, Timberlake Ranch, 119 P.3d at 750.
Of the “good” cases decided after 2000, the Dreamland court specifically refers to the above sections of the Restatement, but then says those sections are inapplicable to the case before it since the subdivisions in question were not “common-interest communities:”
“FN 14. [The HOA] contends that Restatement (Third) of Property (Servitudes)
Section 6.3(10 (2000) allows for the creation of an association to manage common property and levy assessments in a common-interest community by majority vote of lot owners. However, Because Dreamland Villas never had common areas, this argument is unavailing.” (the court’s emphasis) Dreamland, 226 P.3d at 418, n. 14.
Summary
In short, the make or break distinctions between the “bad” cases which allow for the creation by amendment of a mandatory HOA or the creation by amendment of the power of an HOA to levy mandatory assessments, dues and liens and the “good” cases which don’t allow for the creation by amendment of such things are (1) the presence or absence of “common areas or property” which were created as part of the original scheme of development and (2) a current need of ongoing maintenance of the common areas or property by the HOA.
If either is lacking, then the amendment creating the mandatory HOA or creating the power of an HOA to levy mandatory dues, assessments, or liens is invalid.