DD 11/6/06 Owner Can Form Association Twenty Years After Declaration - And Assess.

Daily Development for Monday, November 6, 2006
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


ASSOCIATIONS; FORMATION: Where developer establishes a development scheme by which common areas are to be transferred to an owner’s association, but does not form such an association, individual owner may form such an association 20 years later and such association shall have ownership of common areas and assessment rights.

Bordelon v. Homeowners Assoc. Of Lake Ramsey, Inc., 916 So. 2d 179 (La. App. 2005)

Developer platted a subdivision in 1983, and recorded a set of CC&R’s known as the “Intrepid Act.”  The Intrepid Act, which was stated to bind all subsequent owners of lots in the subdivision, also stated that an owner’s association had been formed, “to which will be delegated the powers and duties of owning, operating, maintaining and administering the common areas, facilities and services [within the subdivision.]” The Act gave the association the right to impose charges and assessments to carry out its duties of maintaining the common areas and enforcing other restrictions.

Unfortunately, the developer did not in fact form the association and (presumably), after selling some lots, failed, and the unsold property and, presumably, the common areas, passed to a bank and thus through several other owners before it passed to a new developer in 1995.  That developer imposed new CC&R’s containing the same language fouondin the Intrepid Act. 

Although some homeowners formed an “association” in 1996, it did not function as the owner’s association. 

Finally, in 2002, a single lot owner formed the Homeowner’s Association of Lake Ramsey, HALRI, the association at issue here, and became the President. The association, as the original Act required, had as members all the owners of the association, and undertook to determine the needs of maintenance of the common areas.  It sent an assessment invoice to all homeowners and 96% of owners paid at least some of the assessment, while 82% made full payment. The association did spend $70,000, alleged to be the receipts from the assessments, on maintenance of common area property.

HALRI then undertook to build a security gate at an entrance to the subdivision, blocking public access to the lake. 

Homeowners who objected to HALRI and its activities challenged its authority to act as the “official” association for the subdivision, arguing that an amendment to the Declaration (requiring 80% approval) was necessary.  A trial court disagreed with them.

On appeal: Held: Affirmed.  The association is a proper representative of the homeowners and has the right to control the common areas and levy the assessments. 

The appeals court held that the subsequent actions of the new developer in republishing the original provisions of the Act indicated that the developer assented to the formation of an association, and that prior authority had held that subsequent developers themselves had the power to form associations long after the CC&R’s authorizing an association had been recorded.  It was a short step to conclude that the new developer implicitly authorized the formation of HALRI here. 

As to the security gate, the dissidents argued that the streets within the subdivisions had been treated as public roads for twenty years, and that there was no authority in the association to block the road.  Again, the court disagreed, saying that the right to maintain and administer the common areas, including the streets, included the right to install such gates.

Comment 1: This is a practical accommodation of a difficult issue.  But it fails to address a number of issues that are likely to arise later.  For instance:  What would happen if there were dueling associations - one formed by the new developer and one formed by the homeowner?  How soon after formation of the association should there be a free election, so as to avoid improper control by the parties forming the association?  Is the association the “owner” of the common areas - even before any deed from the developer? 

Comment 2: As a comparison, look at  Evergreen Highlands Assoc. v. West, 73 P. 3d 1 (Colo. 2003), (the DIRT DD for 6/20/03) where the Colorado Supreme Court upheld the formation of an association that should have been authorized by the CC&R’s but wasn’t, holding that the existence of the various common amenities implicitly justified the creation of an assessment empowered association, and stating that it would be bound by the provisions of the Colorado version of the Uniform Common Interest Ownership Act, even though the Act was enacted subsequent to the formation of the subdivision and the creation of an “implied contract.” The editor criticized portions of the Colorado opinion, but clearly the need to maintain common easement property justifies the creation of some equitable device. 

Readers are encouraged to respond to or criticize this posting.

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