Daily Development for
Thursday, September 25, 1997

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

ASSOCIATIONS; RESTRICTIONS; VIOLATIONS; ENFORCEMENT: Provision in declaration permitting association to record notice of violation of architectural restrictions in public land records is void because such notices are not authorized under recording acts.

Ward v. Beverlywood Homes Assoc., 63 Cal. Rptr. 2d 731 (Cal. App. 1997)

Homeowner painted his house a blue color that the chair of the association architecural committee found "hideous" and "offensive." The Architectural Committee found the homeowner in violation of the Declaration and sent him notice that he had been fined $50 and that more fines would accrue if he didn't repaint his house. It also informed him that a "notice of violation" would be recorded against his property in the county land records. The Declaration permitted the filing of such notice, and the Association in fact followed through and recorded it.

When the homeowner attempted the refinance, he was able to get the title company to "insure over" the notice only by posting a $10,000 bond. He then brought suit to expunge the record and for various other damage claims against the association.

In this simple opinion, the court concludes that the homeowner had a right to have the notice expunged, as such notices are not authorized by the recording act, and only authorized instruments may be recorded. The court held that if the association was subject to the rules of the Real Estate Commissioner in California, the notice would have been "an abridgement of a homeowners right to full use and enjoyment " which is a remedy available to associations only when they have obtained a judgment. But the court did not need the Real Estate Commissioner's rules to reach the result in this case.

Comment: The case is correct. Why should an association have the right to use a clouded title as a weapon to bring a homeowner to his knees in a dispute that the Association has elected not to pursue in court. Presumably if the Association had sued the homeowner and won, the Declaration provided for attorney's fees. If the Association lacked the courage of its convictions to pursue a legal remedy, it had no business interfering with the homeowner's property rights, any more than any other party can cloud title of another as a weapon in an unrelated dispute. There is a public interest in readily marketable title that limits the ability of disputants to cloud title as a weapon.

ASSOCIATIONS; DECLARATION; VIOLATIONS; REMEDIES: Homeowners cannot obtain attorney's fees when they prevail in lawsuit brought by association for waiver of supermajority voting requirements.

Blue Lagoon Community Assoc. V. Mitchell, 64 Cal Rptr. 2d 81 (Cal. App. 1997)

The Declaration had been set up by the Developer so that some homeowners had greater voting power than others (presumably reflecting the initial value and size of their units.) The Declaration also provided, however, that maintenance costs were to be distributed equally to all units. The owners with the greater voting power owned property that was on a beach and protected by a seawall. The other owners were up on a hillside and the seawall was of no benefit to them. Over the 35 years of its existence the 119 member association had spent over one and a half million dollars on maintaining that seawall.

The uphill owners sought to change the Declaration to provide that costs of seawall maintenance would be allocated on the basis of benefit realized, rather than per capita. They also sought to change the "super majority" provisions of the Declaration to permit other changes. When the powerful group of beachfront homeowners blocked the necessary seventy five percent approval for amendments to the Declaration, the Association board, representing a simple majority, took the issue to court under a statutory procedure authorizing courts to set aside supermajority provisions in the interests of equity. The beachfront owners hired their own lawyer and opposed the Association in this action. The trial court refused to order the change here, apparently, in the view of the appeals court, concerned about whether the result would be a deterioration of the wall.

The sole focus of the appeal here was the question of whether the beachfront owners were entitled to attorney's fee. The Declaration did not provide for attorney's fees to prevailing parties, but the homeowners argued that they were justified in seeking an equitable award of fees because the majority had violated its fiduciary duty to the minority shareholders by attempting to alter the protection provided for them in the Declaration. If minority shareholders in such a position were not able to recover fees, their argument went, the Association could "financially overwhelm them through the continuous filing of frivolous petitions [to alter the voting requirements.]

The appeals court was not symphathetic, characterizing the position of the minority homeowners as seeking a "pound of flesh" even after they had succeeded in keeping the seawall maintenance financing intact. The court concluded that if it were to conclude here that the homeowners were entitled to fees under this statute, then in a subsequent similar action action an association that prevailed might be able to obtain fees from dissident minority homeowners. Thus the homeowner's position here actually was not strictly in the interests of minority association members generally.

Comment 1: The editor would have cut off the argument simply by concluding that the Declaration and statutes did not provide for attorney's fees in this situation. This dispute is not sufficiently distinct from the many other disputes that come before our courts to warrant any special approach on the attorney's fee issue. The appeals court was generous in giving the plaintiffs' analysis such an extended response.

Comment 2: The issue concerning maintenance costs for the sea wall also is intriguing. There is case law (not necessarily in California) that supports imposing an equitable lien on homeowners to pay for the cost of vital maintenance activities from which the all benefit - such as repairs to a dam. Would the minority owners have any kind of equitable argument here? The editor supposes they would not, since they had accepted the unusual arrangement in the Declaration when they bought their units, and that establishes the "equities" by contract. But focussing on a narrow equitable approach such as this might preserve the Declaration while still accomplishing greater fairness in light of the unanticipated high cost of seawall maintenance.

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 six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1-6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Stacy Walter at the ABA. (312) 988 5260 or stacywalter@staff.abanet.org I

tems 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.