by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
CONDOMINIUMS; UNIT OWNER'S RIGHTS'; POST-ACQUISITION CHANGES IN RULES: Restriction on renting condominium units is valid and not an unreasonable restraint on alienation, even when voted into bylaws subsequent to affected unit owner's acquistion of the unit. Breezy Point Holiday Harbor Lodge v. B.P. Partnership, 531 N.W.2d 917 (Minn. 1995)
The restriction in question prohibited renting units for more than fourteen days cumulatively in any year. The case was decided under a superceded version of the Minnesota Condominium Act. Minnesota has now enacted the Uniform Condominium Act.
Unit owners attempted to argue that the provision in question was invalid as an unreasonable restraint on alienation.
The court first held that this was a use restriction and not a restraint on alienation, citing other cases that had so held.
The court went on to point out that partial restraints on alienation (as the parties conceded this to be), are invalid only when they are unreasonable. It found that the restriction in this case was not unreasonable.
Comment: Obviously, no matter how one slices it, the real issue here is whether the condominium owners are being caught be surprise by such a significant alteration in the terms and conditions of ownership. Applying simple contract principles, the unit owners are stuck. But is this the appropriate method of evaluation for a consumer contract like a residential condominium declaration?
Further, applying "community" notions to the concept of the condominium, the unit owners in any event should bow to the will of the community. But is there another condominium issue - the degree to which condominium owners should be viewed as placing their investment at risk due to the whimsical changes in taste on the part of the majority of the owners?
The restriction on leasing here obviously can affect significantly the value of the unit owner's investment. Should there be a "good faith and fair dealing" duty on the part of the majority not to make changes that are inconsistent with legitimate investment expectations of the other owners? (Just asking.)
Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. Contact Shawn Kaminsky at the ABA. (312) 988 5260.
Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.