Daily Development for
Monday, August 31, 1998

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

CONDOMINIUMS; ASSESSMENTS; AMENDMENTS TO BYLAWS: Condominium association bylaw amendment that requires that special assessment be allocated equally among all units, rather than imposed only against units benefited is an unreasonable amendment, notwithstanding compliance with amending provisions, and cannot cannot be enforced.

Buckingham v. Weston Village Homeowner's Association, 571 N.W.2d 842 (N.D. 1997).

Plaintiffs, the new owners, were the owners of seven condominium units that, in 1985 had been added to an existing condominium development constructed in 1973. In 1996, when streets in the older portion of the condominium needed repair and improvement, the condominium association amended its bylaws to require special assessments to be allocated equally among all units, rather than assessed only against units benefited by the work for which the assessment was imposed, and then levied a special assessment for street repairs to the older portions of the condominium. It appears that the bylaw was regularly adopted in accordance with existing provisions for amendment.

The North Dakota Supreme Court noted that it had ruled previously that decisions of condominium associations ought to be governed by the "business judgment" rule. Here, however, it concludes that it is not prepared to apply this standard to actions which "adversely affect a minority of unit owners."

The court then ruled that the bylaw amendment changing the assessment procedure was unreasonable, arbitrary, capricious or discriminatory thus violating a "reasonableness" test which it describes as prevailing in a number of other jurisdictions. As a result, the court overturned the bylaw amendment.

Comment 1: Narrowly speaking, the court departs from the business standard test only when judging association changes in assessment burden. Its earlier statement that the business judgment rule is inappropriate whenever "a minority of unit owners" will be affected, however, suggests that the court really is dumping the business judgment test entirely for most purposes. The most common tests of the validity of changes in association rules is going to come from "a minority of unit owners" because they feel adversely affected.

Comment 2: Many jurisdictions have statutes that would specially limit the authority of an association to change the method of assessment. And the obvious danger of "piling on" when a majority sees an opportunity to impose some of their cost burdens on their neighbors indicates why this is an important area for a special rule.

Comment 3: In general, however, is it wise to measure changes in association policies, even when expressly authorized by the Declaration and bylaws, by a standard so general as "reasonableness?" Doesn't this give rise to the same kind of ad hoc decision making that caused such a ruckus in the "cats in condominium case" a few years ago? Judges not well equipped to make judgments in each case about the overall reasonableness of a condominium policy, and to invite them to do so will encourage endless litigation by dissatisfied unit owners who really should be seeking a more communitarian and less adversarial approach. The editor, however, has advocated that where "vested expectations" are at stake, courts might want to provide some ad hoc decision making to insure justice and fair treatment by withholding injunctive relief or otherwise fashioning a special rule that respects the decision making rights of the majority while insuring fair treatment for good faith expectancies.

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 16, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

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