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Daily Development for Thursday, June 19,
2003
by: Patrick A. Randolph,
Jr.
Elmer F. Pierson Professor of
Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper
Martin
Kansas City, Missouri
dirt@umkc.edu
There's a second part to this opinion that we'll
discuss as
tomorrow's DD, but this
holding is significant enough to stand on its
own.
SERVITUDES; MODIFICATION; ASSESSMENTS:
Association
has power to add new
provisions to declaration pursuant to a general
power to amend, including provisions authorizing, for the first
time,
mandatory assessments.
Evergreen Highlands Assoc. v. West, 2003 WL 21373175
(6/16/03)
The community, developed in the early 1970's,
consisted of homes
surrounding a
substantial park to which all residents had access.
An
association had been formed at the
time the subdivision was developed,
and
ultimately the developer, pursuant to the recorded plat, conveyed
the
park to the association. The
association was created for the purpose of
enforcing the restrictive provisions in the Declaration and
maintaining
the common areas, including
the park. Unfortunately, befuddled by the
high mountain air, the developers did not put into the Declaration
any
power in the association to level
mandatory assessments to carry out its
functions.
The association for years relied upon voluntary
assessments from lot
owners to pay for
such expenses as property taxes, insurance for the park
area and its structures, weed spraying, tennis court
resurfacing, and barn
and stable
maintenance (yes, this was a really substantial park.)
The covenants did provide that upon vote of 75% of the
lot owners, the
covenants could "change
or modify any one or more of said restrictions."
In 1995, The requisite number of owners adopted an
amendment
providing for mandatory
assessments, backed by the power to impose
liens.
Upon challenge by a lot owner, a trial court upheld
the assessments and
liens, but the court
of appeals reversed, holding that the declaration's
language authorizing changes or modifications
did not permit the
addition of whole new
provisions to the set of covenants. In its view
the
term "change or modify" indicated an
intent only to permit alteration of
existing covenants.
The Colorado Supreme Court here reversed, holding that
the power to
modify the "restrictions"
included the power to add a whole new
provision for mandatory assessments backed by liens. Just to
make sure
that no one misunderstood, the
court went on to hold that the association
also had the implicit power to impose mandatory assessments to
carry
out its functions even if there had
been no power to amend in the
Declaration. (This second aspect of the case is discussed
under the
heading: "Associations;
Assessments; Implied Power to Assess.")
The court noted that there appears to be a split in
the jurisdictions on the
point, with some
of the cases making their decisions based upon the
specific language of the amendment provisions.
The court rejected this
approach,
commenting that "we find the court of appeals' reliance on a
liguistic analysis to distinguish covenant
modification language
unsatisfactory." It pointed to an anomalous result that such
an approach
might require - if the
declaration contained a provision prohibiting
assessments, the lot owners vote could have changed it to
permit
assessments, while if the
declaration was silent, no assessment provision
would be permitted.
Having found that the homeowners association did have
the power to add
new provisions, the
court then turned to the question of whether it had
the authority to adopt a new provision that
authorized assessments and
liens.
It answered this question in very summary fashion, analyzing
only
whether this specific assessment
provision was reasonable. It doesn't
actually say that amendments must meet some standard of
reasonableness or what that standard might be, but
simply finds the
impact of the new
provision in this case to be unobjectionable:
"[I]t is undisputed that
Respondent [the objecting homeowner]
was on actual notice of [the amendment
clause] when he
purchased his lot in 1986. In addition, we note that, at
fifty
dollars
per year, the mandatory assessment imposed on
Respondent is neither unreasonable nor
burdensome. To the
contrary, the existence of a
well-maintained park area
immediately adjacent to Respondent's lot
undoubtedly enhances
Respondent's property value."
Comment 1: Although the editor does not quarrel with
the court's
conclusion that the power to
"modify" would include the power to add
new provisions to the Declaration, the editor thinks that there
was
another "linguistic" argument that
the court ignored. This was the fact
that the Declaration stated that there was a power to "change or
modify
*said restrictions.*"
(emphasis added) Arguably, at least, there is a
difference between covenants imposing building setbacks,
architectural
rules, or other use
restrictions and a provision authorizing the imposition
of a lien to support association activities. Is
such a provision a
"restriction?"
It is in Colorado.
Comment 2: Note that the court does acknowledge that
there is still an
implied limit on the
power to add new restrictions. It analyzed here
whether the new provision operated unfairly to the
homeowner. Clearly
it did
not. In fact, the propriety of the assessment provision in this case
is
difficult to dispute. The
developers should have drafted the assessment
power into the Declaration to begin with.
Comment 3: Thus there is still an open question as to
what kinds of
amendments the Colorado
court is prepared to allow. Would it, for
instance, allow the creation of a new association with the power to
pave a
road and impose significant
assessments to pay for that road when there
never was any association with maintenance authority or
responsibility in
the original
assessment? Another recent case Windemere
Homeowner's
Assoc. v. McCue, 990 P.2d 769
(Mont. 1999) (the DD for 10/25/00),
does
just that. The editor, in the DD on the Court of Appeals case
here
(the DD for 1/11/02), concurred with
the result in the Court of Appeals in
this case because it rejected the possibility of a Windemere
result. If the
Colorado courts
later find some other way to limit the potential reach of
the power to amend, the editor has no quarrel with
its recognition that
when the declaration
permits amendment, it permits new provisions
consistent with the probably overall intent of the development
scheme as
well as revisions of existing
provisions.
Readers are encouraged to respond to or criticize this
posting.
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