December 16, 2019
Where is Virginia on Selective Enforcement of HOA Covenants?
In Greek mythology, Procrustes was a robber who deceived his victims into entering his house by offering a free bed for the night. Once inside, if the visitor was too short, he violently stretched them to the full length of the bed. If the visitor was too tall, he would chop off their legs to fit them. Either way, Procrustes ended up with their valuables. Procrustes met his end when the hero, Theseus “fitted” Procrustes to the length of the bed in his own guest room. In the law, judges, lawyers and professors sometimes deride arbitrary or unwise legal standards as “Procrustean.”
Subdivision deed restrictions often seem “Procrustean.” But at least Procrustes held all visitors to the same “standard.” When a HOA or condominium seeks to enforce a restrictive covenant against a particular owner, often there are other properties for which the board has failed to enforce that covenant against for a number of years. The owner, reading her notice of violation, may wonder if the HOA had effectively abandoned enforcement of the restriction or if the notice is an unfair “selective enforcement” against some lots but not others. The Supreme Court of Virginia considered this question in the 1992 decision, Raintree of Albemarle Homeowners Association v. Charles & Glenda Jones. Raintree brought suit against the Jones family, seeking an order prohibiting them from keeping a “wrecker” tow truck on their residential property. The HOA’s enforcement was a sore subject. Two other owners, Gordon Nicely and Dennis Powell parked pickup trucks owned by a utility company at their homes without HOA objection. The disputed covenant prohibited lot owners from parking trucks “of any nature” overnight on property in the subdivision, except in an enclosed garage. The section also prohibited, “school buses, commercial vehicles or habitable motor vehicles” outside of an enclosed garage. The Supreme Court disagreed with the HOA’s view that the utility company pickup trucks were not commercial trucks or “trucks of any nature” prohibited by the covenant. The HOA also argued that its failure to enforce the covenant against Messrs. Nicely or Powell, did not constitute a waiver of the enforceability of that covenant in the Jones case. The Supreme Court of Virginia’s longstanding rule says that the right to enforce a restrictive covenant may be lost by “waiver, abandonment or acquiescence” by the association to violations thereof. But the party relying on such waiver must show that the previous conduct or violations had affected, “the architectural scheme and general landscaping of the area so as to render the enforcement of the restriction of no substantial value to the property owners.” The Supreme Court found that the HOA’s failure to enforce the covenant against Nicely and Powell did not substantially devalue of the covenant in the context of the overall architectural scheme of the development.
The Supreme Court found that the Circuit Court properly denied the HOA’s request for an order prohibiting the Joneses from parking their wrecker truck on Old Brook Road. The Supreme Court observed that Old Brook Road is State Route 652, not a private right of way. The HOA had no authority to regulate parking on Old Brook Road because it had been incorporated into the state system of highway maintenance. If VDOT didn’t have a problem with the truck, then there wasn’t anything that could be done against it. This is one reason why many HOAs like to own their own roads.
Many HOA declarations prohibit the keeping of commercial vehicles or motor homes in the subdivision. These rules can be onerous to small business owners who need a commercial vehicle to earn a living. Usually, owners are permitted to use their home as an office for professional work that does not impact the curbside views of the lot. Commercial vehicle or home business restrictions can hit working class people harder than professionals. Enforcement of such rules often “drives” small business owners further away from their service areas, require them to pass on “overhead” garage costs to their customers in higher prices, or force them out of business. This can discourage useful economic growth between services and consumers of ordinary means.
“Selective Enforcement” is a difficult defense to prove when relying upon the rule in Raintree. Motor vehicles are transitory by nature. If this was a case where a majority of the lot owners violated a covenant prohibiting sheds in the front yards for many years, then it would be much more likely to be found to render the prohibition useless. Or if the original declaration called for the association or developer to establish bridle paths across the front of each lot for equestrian activity, and instead of doing so, many lot owners built fences and other structures in the areas originally contemplated for horse trails.
There are other rules which lot owners may be able to use to assert a “selective enforcement” defense other than the “defeat of common scheme” rule discussed in Raintree. For example, federal or state fair housing laws may prohibit certain enforcement actions related to race, religion or other criteria.
Supreme Court of Virginia seem receptive to “textualist” challenges to HOA enforcement actions. Under this approach, set out in Tvardek and Sainani, interpreting the specific language in covenants or statute narrowly to limit enforcement, is more likely to result in a successful challenge. For example, in this case, if the Jones used unmarked mini or compact vans for a house cleaning business that they parked overnight at their property, then such a practice might not violate the covenants, because the minivans look no different than those used by large families.
The covenant at issue in the Raintree strikes me as unreasonable, in its prohibition against “trucks of any nature” being “parked overnight.” Pickup trucks are commonly used by passenger vehicles, and many automobiles used by families are classified as a kind of truck. It doesn’t make sense to put a covenant in a declaration that treats ordinary pickup trucks, SUV’s, vans, etc. like commercial service vehicles. Also, the “overnight” temporal limitation seems unreasonable. By this rule, a commercial vehicle could sit in an open driveway all day and go elsewhere at night. This doesn’t protect onlookers from the “eyesore” of the commercial vehicle. A literalistic enforcement of this covenant would require lot owners to ask their friends, who come to visit using compact pickups, to leave as soon as the sun sets.
Many people want HOA disputes to be resolved based on what others in the subdivision are doing or on “common sense” arguments. However, the courts in Virginia have explained that what the declaration and the statutes actually say is often more important than what some people may be doing. Different lawyers and judges often disagree as to what particular HOA covenants actually mean. At least with Procrustes, people trapped inside his house knew how tall they needed to be to get out unscathed. There were no arguments as to how long the bed was. When the legal standard is unclear as to what compliance would actually look like, then there is a greater problem. This is why the recent trend in Virginia whereby courts refuse to enforce overly general or ambiguous covenants makes sense.
Selected Legal Authority:
Raintree of Albemarle Homeowners Ass’n, Inc. v. Jones, 243 Va. 155 (1992)
Tvardek v. Powhatan Vill. Homeowners Ass’n, 291 Va. 269 (2016)
Sainani v. Belmont Glen Homeowners Ass’n, 831 S.E.2d 662 (2019)
photo credit: akahawkeyefan RADIATOR SPRINGS? via photopin (license)
This photo does not depict anything discussed in the blog post.
December 10, 2019
Judicial Limitations on HOA Fining Authority
It’s December. Santa is coming. But for many, Santa isn’t the only person leaving things at homes. Many households using outdoor decorations to share holiday cheer will receive, in addition to gifts from their friends and family, HOA violation notices. Fortunately, Christmas came early in 2019, bringing Virginia landowners new, owner-friendly legal precedent.
Years ago, state legislatures made it easier for HOAs to use handbooks of architectural standards to enforce private land use restrictions. Upon proper observation of certain formalities, HOAs can make up rules adding to those in the declaration and impose fines and liens for violation of those rules.
Why is this controversial? It allows boards to bypass the normal, difficult process of obtaining votes of 1/2 to 2/3 of the owners to amend the restrictive covenants in the declaration. The power to adopt and enforce such rules (or the discretion not to do so) can make owners feel like someone is controlling their life or the value of their investment. When such power falls in the hands of an association board, owners are one election away from (1) a civic-minded group doing their best to help the community, (2) a controlling group of bullies acting out of self-interest, or (3) a board that is unengaged or incompetent.
Many people have a mistaken belief that the law empowers these organizations, the language of the documents doesn’t matter, and there is no real way to protect oneself. This is false. In August of 2019, the Supreme Court of Virginia explained in Sainani v. Belmont Glen Homeowners Association, Inc. that the law strictly construes HOA statutes, declarations and rules when Boards try to enforce such rules, and in favor of free use of property. This blog post explains what happened in the Sainani case, and how the legal method outlined in that case can be used to resist other efforts by HOAs to fine owners for violating rules and regulations.
SanJay and Sona Sainani owned a home in Belmont Glen HOA in Loudoun County, Virginia. For several years, the HOA sent them violation letters for the stringed holiday lights that adorned their front door and deck most days of the year. For the months of September through April, the Sainanis would leave up lights for several Hindu, Sindhi, and Sikh religious holidays. The HOA’s notices referred to its Handbook of Architectural Design Guidelines. That document limited display of holiday lights to certain days around Halloween, Thanksgiving, Winter Holidays, and the Fourth of July. Beyond that, the Handbook required owners to obtain written approval from the HOA’s Architectural Review Board. At a hearing that the Sainanis did not attend, the HOA imposed a fine of $10.00 per each day that the violations continued. The ARB suspended the Sainanis voting privileges and their use of common facilities. The HOA filed suit in the General District Court and obtained a default judgment. The Sainanis retained counsel, appealed the GDC order, and filed counterclaims against the HOA on appeal in the Circuit Court of Loudoun County.
The Sainanis took the position that the seasonal display guidelines in the Handbook were unenforceable because their adoption was not authorized by the subdivision’s amended declaration of covenants. The Circuit Court decided that the holiday light rules were enforceable, and entered judgment against the Sainanis for $884.17 in unpaid fines and almost $40,000.00 in attorney fees and court costs. The Supreme Court of Virginia granted the Sainanis an appeal.
Justice D. Arthur Kelsey wrote the opinion of the Supreme Court. The “strict construction” analysis of HOA covenants follows the approach taken in Tvardek v. Powhatan Village HOA which I have written about previously. The general rule of strict construction is that restrictive covenants, “are not favored, and the burden is on [the party] who would enforce such covenants to established that the activity objected to is within their terms.” Covenants, “are to be construed most strictly against the grantor and persons seeking to enforce them, and substantial doubt or ambiguity is to be resolved in favor or the free use of property and against restrictions.” A longstanding principle of the English common law is protection of the free use, enjoyment and disposal of property without restriction except by the laws of the land.
Most HOA covenants include lists of prohibited activities that range from the specific to the general, using terms that may or may not be clearly defined. Under the rule of “ejusdem generis,” when a particular class of things is enumerated, and general words follow, the general words are construed in a sense similar to the more specific language. The corollary to this is the rule, “noscitur a sociis”, states that when general and specific words are grouped, the general words will be construed to embrace only objects similar in nature to the specific things mentioned.
Because the language of restrictive covenants is construed in favor of free use, covenants are only enforced where the intention of the covenant is clear and the restrictions are reasonable. Virginia courts are required to determine the meaning of covenants by considering the instrument taken as a whole. Parties are not permitted to cherry-pick bits and pieces of language that, if taken out of context, support their arguments.
The HOA pointed to several sections of the Declaration which they contended allowed for enforcement of anti-holiday light rules against the Sainani family:
- The Declaration prohibited nuisances. A section provided: “No exterior lighting on a Lot shall be directed outside the boundaries of the Lot. Exterior lighting which results in an adverse visual impact to adjacent Lots, whether by location, wattage or other features, is prohibited.” Because this covenant concerned the “adverse visual impact” of lighting on one lot to an adjoining lot, the Handbook rules about which days and times one could display decorative holiday lights, the activity objected to fell outside the scope of the light nuisances restrictions. The Court was not persuaded that the general prohibition against nuisances could apply to lighting features that were not proscribed by the “lights” subsection or any other subparts.
- The Declaration required lot owners to obtain approval of the HOA’s ARB before any “modification or “alteration” of any lot or structure shall be made, installed, constructed, erected, placed, altered and/or externally improved. The Supreme Court used “strict construction” principles to limit the scope of this section to permanent changes to a lot, and not seasonal displays. The Court approved a section of the Restatement (Third) of Property: Servitudes § 6.7 which provides that design-control powers do not include an implied power to impose controls for purely aesthetic purposes, absent express authorization by statute or the declaration. Restatements are treatises where academic experts attempt to summarize and clarify common law doctrines.
- The Declaration gave the ARB the authority to regulate the external design and appearances of the property so as to enhance property values and to maintain harmonious relationships. The Supreme Court found this grant of authority in the declaration to be overly general and found that it failed to specifically enumerate rulemaking powers beyond the “light nuisance” section previously considered.
The Sainani opinion does not mean that owners can just throw HOA violation notices into the trash. Fines are not now abolished. Owners ought to consult with qualified legal counsel whenever served with a notice to appear in a hearing at the HOA or courthouse. Sainani will prompt lawyers who draft HOA covenants to be more specific in describing prohibited conduct and grants of power to HOA boards and committees. This may avoid having the “void for generality” Sainani principle prevent covenant enforcement.
The court quotes a section of the HOA Handbook which states that the purpose of the holiday guidelines was, in addition to other purposes, “to avoid religious issues in the community.” This opinion doesn’t mention whether or not the Sainanis presented any arguments that any orders of the GDC or Circuit Court’s orders functioned as a restraint on free speech or exercise of religion. The Sainani opinion shows that it is not necessary to frame an issue in terms of first amendment rights for an owner to prevail.
What does the Supreme Court’s approach in the Sainani case mean for lot owners who are concerned about how the board is enforcing rules in the community? Since the Boards are the usual enforcing authority of HOA governing documents, the new opinion is a blow to many board or committee adopted systems of notices of violations, hearings and liens that rely heavily upon thick handbooks only loosely supported by the recorded covenants. The principles of strict construction shine light through loopholes in the HOA fine systems that may be offensive. The Court is 100% correct that interpretation of HOA statutes and covenants ought to look through a lens focused on the free use of property by landowners. The practical value of land comes from its free, un-interfered with use.
What the Sainani case (like the Tvardek case and others before it) introduce into the community associations system is substantial uncertainty about whether sections of governing documents are enforceable, and if so, how. The Supreme Court is not saying that the declaration or the exterior lighting provisions are invalid or that the Board may simply be ignored. The opinion says that the HOA cannot enforce particular sections of a Handbook adopted by the board by imposing fines through a statutory process. This enforcement uncertainty is of great interest to lawyers looking to enable or resist an Association’s rulemaking and enforcement practices. There are active owners in every community who will continue to strive to make other owners lots look a certain way, even if the judiciary raises the banner of private property rights higher. Lobbyists, specialist lawyers and professional managers who represent HOAs will go back and draft new legislation, covenants, rules, and procedures, trying to strengthen the authority of HOA boards and committees The uncertainty imposed by “strict construction” strengthens the rights of owners in the face of Boards and legislators who would like to limit those rights. However, this may be unhelpful to an owner who wants to be able to make plans and decisions now without months or years of litigation. That’s why I would like to see the 2020 Virginia General Assembly take action to reform HOA fines.
Selected Legal Authority:
Sainani v. Belmont Glen Homeowners Ass’n, 831 S.E. 2d 662 (Va. Aug. 26, 2019)
Va. Code § 55.1-1819, formerly, Va. Code § 55-513 (Adoption & enforcement of rules)
Photo Credit:
NathalieSt Christmas Flowers via photopin (license)(for decorative purposes only, does not depict anything featured in text of blog post)
October 31, 2019
Appeals Court Deems Association Street a First Amendment Public Forum
Disputes between individuals and HOAs frequently occur on the roads or sidewalks owned by the Association. The rights of way are usually the HOA’s largest budgetary and operational responsibility. The lot owners and their invitees rely upon the roads to access properties. State and local governments benefit financially by shifting the maintenance burden of the roads, sidewalks and drainage features onto an association that assesses dues on lot owners. Despite this public function, many associations or their residents want to use the roads’ “private” status to exclude undesired visitors or limit the roads’ use by lot owners. Representatives of the board may accost visitors as unwelcome. Managers may try to stop owners from communicating with residents on the sidewalks.
The declaration of covenants will contain provisions that define the respective rights of owners and the board with respect to common areas such as right of ways. By deed or “contract,” a lot owner may find that she has rights or duties with respect to these private roads that vary in scope or character from government-owned streets. However, owners are not the only parties that use HOA roads. HOA boards and committees are not the only authorities that regulate use of land in subdivisions. While the answers to most HOA problems are in the governing documents, sometimes broader legal principles apply. When do courts treat HOA roads or common areas as public forums for purposes of free speech analysis under the Bill of Rights? In July 2019, the U.S. Court of Appeals for the Sixth Circuit considered such a case.
5325 Summer Avenue Property Owners Association, Inc. owns Virginia Run Cove, a two-lane asphalt street in Memphis, Tennessee. The public uses Virginia Run Cove to access a gas station, a church, a federal government office, and, since May 1, 2017 a Planned Parenthood Clinic. John Brindley, who does not live or work in this subdivision, decided to stand on this private street near Planned Parenthood’s parking lot to share with others his pro-life, anti-abortion message. In his Complaint, Brindley explained that he wanted to speak with Planned Parenthood patrons about alternatives to abortion without having to shout at a distance. His Complaint states that he wanted to share his views about abortion, as informed by his religious faith, in a nonviolent and non-harassing manner. Planned Parenthood complained to the Memphis police department that Mr. Brindley was trespassing on a private street in front of their business. The police arrived. Based on Planned Parenthood’s explanation that this was private property, they instructed Brindley to relocate. Under fear of arrest, Brindley left.
Mr. Brindley filed suit against the City of Memphis and representatives of its police department for infringing upon his First Amendment rights because Virginia Run Cove functions as a “public forum” for purposes of Free Speech analysis under the Constitution. Mr. Brindley did not name Planned Parenthood or the Association as co-defendants.
The case went up to the Sixth Circuit Court of Appeals after the federal trial-level court denied Mr. Brindley’s motion for a preliminary injunction.
On appeal, the outcome turned on how “public” Virginia Run Cove is for purposes of the First Amendment. Brindley contended that the road was a “traditional public forum,” requiring the court to strictly scrutinize governmental restriction on speech activities. The City of Memphis contended that it was a non-public forum, and the courts ought to defer to the police department’s actions.
Under federal case law, there is a strong presumption that public streets are traditional public forums. Also, the Supreme Court has held that a street does not lose its status as a traditional public forum simply because it is privately owned. If the street looks and functions like a public right of way, it suffices as a traditional public forum regardless as to who may hold ownership of it. The emphasis in this analysis is on how the road, sidewalk, park or other public space functions in the daily commerce and life of the neighborhood
The District Court for the Western District of Tennessee denied Brindley’s Motion for a Preliminary Injunction. The District Court Judge wrote:
When property is privately owned, it is subject to the First Amendment in proportion with the owner’s authorization of public use. “The more an owner, for his advantage, opens up his property for use by the public in general, the more do his rights become circumscribed by the statutory and constitutional rights of those who use it.” Marsh, 326 U.S. at 506. Inversely, where a property owner invites the public for a more limited use, reflected in a utilitarian design facilitating only the specific commercial purpose of the invitation, the balance tips in favor of the owner, as the limited invitation results in the retention of some of the property’s private nature. See Lloyd Corp. v. Tanner, 407 U.S. 551, 569 (1972).
Brindley v. City of Memphis, 2:17-cv-02849-SHM-dkv, 2018 U.S. Dist. Lexis 117481 (W. D. Tenn, Jul. 13, 2018)
The district judge denied the motion on the grounds that at the hearing, Brindley failed to carry his burden of establishing that the present or historic uses of Virginia Run Cove made it a “traditional public forum.”
On appeal, the Sixth Circuit Court of Appeals took up the question of how “public” Virginia Run Cove is for purposes of the First Amendment. Brindley contended that the road was a “traditional public forum,” requiring the court to strictly scrutinize governmental restriction on speech activities. The City of Memphis contended that it was a non-public forum, and the courts ought to defer to the police department’s actions.
Under federal case law, there is a strong presumption that public streets are traditional public forums. Also, the Supreme Court has held that a street does not lose its status as a traditional public forum simply because it is privately owned. If the street looks and functions like a public right of way, it suffices as a traditional public forum regardless as to who may hold ownership of it. The emphasis in this analysis is on how the road, sidewalk, park or other public space functions in the daily commerce and life of the neighborhood or community. The Sixth Circuit summarized the judicial opinions regarding whether a private street is a traditional public forum according to a two-part test: (1) is the privately-owned street physically indistinguishable from a public street and (2) does the street function like a public street. If both of these criteria are met, it is a “traditional public forum.” The Sixth Circuit observed that Brindley did not need to prove the past and present history of the use of Virginia Run Cove because consideration of its objective characteristics is sufficient. The appeals court arrived at a different result because it applied the First Amendment with greater generosity than the trial-level court.
The Sixth Circuit reversed the District Court. The appeals court found Virginia Run Cove physically indistinguishable from a public street. There were no signs or visual indicators that it was privately owned. The Court also found that the Cove functioned like public streets in the way it gave cars and pedestrians access to the businesses on that street. The City of Memphis argued that Virginia Run Cove was distinguishable from a public street because its street sign was blue, unlike the green signs used for public streets. The Sixth Circuit found that this open but subtle indicator to be insufficient to make Virginia Run Cove “distinguishable” as a nonpublic forum. This suggests that the “indistinguishable” requirement is not a rigid one.
The Court considered the effect of recorded land instruments. Under the Constitution, courts do not defer to state-law definitions whether the street is a publicly dedicated right of way to decide whether it is a traditional public forum. However, if such a dedication exists, that may be used in support of a free-speech argument. The final plat of the development contained a certification of dedication of the streets for public use.
The Sixth Circuit found that Virginia Run Cove is a “traditional public forum” for First Amendment purposes. The City admitted that under a strict scrutiny standard, they could not identify a compelling governmental interest in excluding demonstrators. The appeals court reversed the denial of the preliminary injunction and remanded the case to the District Court. On October 15, 2019, the District Court entered a consent order enjoining the city of Memphis police from infringing upon Brindley’s constitutionally protected right of self-expression on Virginia Run Cove.
Notice that the HOA was not party to this lawsuit. The complaint and opinion don’t mention HOA involvement. However, this case illustrates how the legal status of HOA common areas affect the rights of visitors and residents. This can be confusing if someone tells a visitor that they must leave because the right of way or common area is “private property.” Bill of Rights protections might not apply. This is further confused by the fact that HOAs often enjoy status as a tax-exempt entity because they perform a public benefit by maintaining roads, playgrounds and other public open spaces that would otherwise fall upon the government. HOA roads, easements and playgrounds are commonly used by persons who don’t reside or work in the community.
When people feel threatened in the HOA or condominium setting, they often call the local police department. While the police may have the authority to detain, arrest or summon someone under certain circumstances, they may not want to get involved in neighbor disputes. Also, the accused will have constitutional protections against governmental officers not ordinarily available in civil disputes. Its often unclear to whom an aggrieved party ought to state their claims in the event of a dispute involving an association.
The growing body of case opinions defining privately owned roads or other open spaces as “traditional public forums” shapes the way that developers and HOA boards treat common areas and rights of way. Desires to have the government take over maintenance of roads for financial reasons runs contrary to restrictions on use for free speech. HOA boards may erect signage viewable to the public that may not be consistent with the terms of recorded instruments regarding the road or other common area. In fact, in some subdivisions, people may make a road or open space appear private when in fact the land instruments show that it is publicly dedicated. The signs may suggest that land is controlled by the HOA as a common area when in fact it is part of lots.
The City of Memphis did not attempt to appeal the adverse decision up to the U.S. Supreme Court. I see nothing to suggest that the Brindley case was incorrectly decided on appeal. This is good news, because every year more and more rights of way and park-like open spaces are developed as common areas of HOAs and condominiums. Citizens ought not to lose recourse to protections for speaking with others on public forums because they are developed as privately-owned land.
Judicial Opinions Discussed:
Brindley v. City of Memphis, 934 F.3d 461 (6th Cir. 2019).
Brindley v. City of Memphis, 2:17-cv-02849, 2018 U.S. Dist. Lexis 117481 (W. D. Tenn, Jul. 13, 2018).
October 24, 2019
Do I Even Have a HOA?
It’s usually clear to home buyers whether a HOA governs their subdivision. A well-maintained sign adorns the entrance. The community manager emails the buyer’s agent an official-looking disclosure packet. For many other landowners, especially in rural areas, it is not clear at the settlement table whether any HOA is active. Months or years after purchase, the owner may receive mysterious notices in the mail with demands to pay money or correct architectural features. This can come as an unpleasant surprise. The landowner may wonder whether this board or committee is for real or a rogue nonprofit. Does the owner have to obey the assessment or violation notice or can it be discarded as junk mail? The truth may not be revealed in the envelope enclosing the notice. The answer to this question is found by ordering a current title report for the property which will pull up all the declarations, easements, master deeds, amendments, plats, etc. This article focuses on problem solving for owners of lots in subdivisions. Questions about whether various legislative or bureaucratic acts are sound public policy fall outside the scope of today’s blog post.
Virginia courts treat the declaration of covenants as the “contract” to which all the lot owners and HOA are party. Recorded instruments may govern a lot even if the current owner didn’t sign anything, so long as the developer caused the covenants to encumber the subdivision. Courts enforce restrictive covenants where the intention of the parties is clear, and the restrictions are reasonable. In Virginia, restrictive covenants deemed doubtful or ambiguous are construed against the party seeking to enforce them. Without an act of the General Assembly facilitating enforcement, anyone (including the HOA) trying to impose the covenants against anyone else, likely must pursue several months or years of litigation with an uncertain outcome. Years ago, the General Assembly adopted the Property Owners Association Act and the Virginia Condominium Act. This legislation loosens the common law policies against restrictive covenants and provides procedures and powers that make it easier for a statute-qualifying association to collect assessments and enforce restrictions. For this reason, anyone that wants rules for the subdivision to be enforced without prohibitive cost, needs to confirm that the declaration qualifies for the POAA.
Whether the POAA applies matters in reality and is not a merely academic question or legal technicality. Without recourse to the POAA’s arsenal of remedies, the Association may not be able to impose and record fines through an internal hearing process for architectural violations and may be forced to bring a civil suit instead. The POAA allows HOA boards (where the declaration authorizes) to impose rules not stated in the recorded instruments on the community without amending the declaration. Without use of the POAA’s debt collection remedies, the HOA may abandon efforts to obtain assessments from owners because of fees associated with suing unpaying owners. Many abuses of power that cause consumers to complain about HOAs are enabled by these statutes that abrogate protections afforded to landowners under the common law.
The POAA includes the legal definition for an association or declaration to qualify for the rights and duties it provides. If the POAA doesn’t apply, there may still be a board or committee of some sort, but it will have less power. Without recourse to the POAA, covenants may still be enforceable, just not easily. The POAA “applies to a “Development” subject to a “Declaration.” To qualify under the POAA, the Declaration must contain terms such that the Association possesses both the power to (1) collect a fixed assessment or to make variable assessments and (2) a corresponding duty to maintain the common area. This must be expressly stated in the recorded documents and may not be inferred or implied. This legal test looks to what the recorded instruments say, not how things are actually functioning in the subdivision. For property to qualify as a “common area” under the POAA, it does not necessarily have to be conveyed, leased, or owned by an association. The POAA requires the court to construe how the declaration discusses any common areas.
This may seem like a simple definition that developers can easily fulfill by writing up the documents in accordingly. However, many declarations fail to meet this definition because they may impose on the lot owners the duty to pay assessments but fail to obligate the association to spend them on maintaining the common areas. Many developers may want to limit their maintenance obligations in the community while retaining effective control over the association. By failing to obligate the association to maintain the common areas, a developer may unwittingly put the community outside the POAA. This can be good or bad for a particular lot owner, depending upon how dependent they are on HOA services to enjoy their own lot. It is not always in a lot owner’s best interest for their subdivision to fall outside of regulation by the POAA. The POAA allows for reasonable attorney’s fees to a prevailing party. The lot owner may need to rely upon some other provision of the POAA to make their case. Sometimes, the aggrieved owner is the one who needs to enforce the covenants to vindicate their property rights. For example, if a lot owner needs the HOA to take responsibility for a problem with maintenance or operation of a common area, it may be counterproductive to undercut the boards authority to make repairs.
An “association” cannot unilaterally confer upon itself the POAA’s privileges simply by recording an instrument stating that it has the authority to assess the lot owners for common area maintenance and obligating the association to perform such maintenance. That would require an amendment. At common law, any amendment requires consent of 100% of the owners subject to the covenants. The POAA has its own “default” amendment provisions. Most declarations include amendment provisions that vary from the 100% common law requirement or the POAA’s 2/3 amendment provisions. Consultation with qualified counsel is necessary to determine what requirements apply. Lot owners must be wary about amendments because if the statute of limitations in the POAA for challenge to an amendment applies, the dissenting lot owner would need to file the challenge within one year of the effective date.
Do HOA covenants become unenforceable after lot owners get away with disobeying them for many years? Under Virginia law, the right to enforce a restrictive covenant may be lost by waiver, abandonment or acquiescence in violations. The party relying on such waiver must show that the previous conduct or violations had affected the architectural scheme and general landscaping of the area to render the enforcement of the restriction of no substantial value to the property owners. This legal standard sets a high bar for asserting such a defense.
In Virginia, there are procedural requirements for sellers to disclose a host of materials to buyers, including the governing documents of any association to which the POAA applies. The seller does this by paying a fee to the association to send the buyer the materials. Then, the buyer has three days to review these materials and exercise a right to cancel the sale if they are not acceptable. However, the current disclosure system does not adequately protect buyers. Three days is insufficient for a buyer to obtain counsel to review and answer questions about the covenants. If there is something deficient about the disclosure process or dissatisfactory about the covenants, the buyer’s only remedy is to cancel the deal timely. Few purchasers ever do this. The practical effect of this disclosure packet system is to protect sellers and associations from subsequent claims of surprise by purchasers. For insurance purposes, the title company will provide the purchaser with a list of covenants, easements and other encumbrances on the title of the land. Few buyers pay attention to this information.
Virginia law requires associations to register with the Virginia Common Interest Community Board. These registration requirements obligate HOAs and Condominiums to submit annual reports of basic information about the association each year. However, a declaration of covenants may still be enforceable against a lot owner even if the association leadership fails to keep their registration current. Also, HOAs incorporated under the Virginia Nonstock Corporation Act must make submissions and pay fees to the State Corporation Commission each year to keep the corporate status from being cancelled. However, even if a HOA is listed as “automatically terminated” in its official corporate status, this is unlikely to nullify terms of the governing documents. Lot owners should consult with qualified counsel before disregarding HOA notices because they haven’t observed registration formalities with the government.
If covenants and easements pop up in the exceptions to a purchaser’s title insurance, it’s likely that lots in the subdivision are encumbered. This is not always a bad thing, when someone needs to be held responsible for maintaining roads and drains. Some people like the amenities that their HOA offers and want the restrictions to be vigorously enforced so that they don’t have to suffer what they consider eyesores. Other landowners are uncomfortable about paying assessments to a HOA who inadequately maintains the common areas and roads and enforces the covenants in an uneven and erratic fashion. Determining whether the subdivision and its association fall within the scope of the POAA, is essential for evaluating whether certain provisions are practically enforceable. Everyone wants peace of mind and a sense of certainty about what debts they are obligated to pay and what they can or cannot do on their land. Determining whether the association enjoys the powers and duties found in the POAA is the first step to achieving that peace of mind or taking the next step to vindicate their rights.
Selected Legal Authorities:
White v. Boundary Ass’n, Inc., 271 Va. 50 (2006)
Scott v. Walker, 274 Va. 209 (2007)
Anderson v. Lake Arrowhead Civic Ass’n, 253 Va. 264 (1997)
Dogwood Valley Citizens Ass’n v. Winkelman, 267 Va. 7 (2004)
Dogwood Valley Citizens Ass’n, Inc. v. Shifflett, 275 Va. 197 (2008)
Shepherd v. Conde, 293 Va. 274 (2017)
Village Gate Homeowners Ass’n v. Hales, 219 Va. 321 (1978)
Property Owners’ Association Act, Va. Code §§ 55.1-1800 through 55.1-1836
photo credit: Editor B Surreal Suburban Subdivision via photopin (license)
May 24, 2019
Injunctions in HOA Cases
Some people like to talk about awards of money damages or attorneys’ fees that the courts order losing parties to pay. Litigation involving landowners, HOA or condominium boards revolve around what remedies the court may apply if it sees things the same way as one of the parties. Contrary to the focus of many news articles, monetary awards may not be the essential remedy available in property rights or corporate governance cases. In Virginia, and elsewhere, the law makes awards of money damages or possession of property preferred remedies. However, in many cases, an award merely of money damages is insufficient to properly vindicate the rights of an aggrieved party. In disputes between owners and HOA boards or neighbors involving the use of land, claimants frequently ask for the court to order the defendant to do certain things or to stop performing improper actions. This is called an “injunction.” For example, a neighbor or the HOA may be causing a nuisance on a lot or common area (e.g., improperly diverting drainage water), that unreasonably damages or interferes with the adjoining landowner’s rights. There are other examples which do not involve nuisances. An aggrieved owner could just sue for money, but the offending party may continue with the wrongful behavior, which results in more damage or interference justifying another suit. A succession of suits for money damages doesn’t solve the root of the problem. Community associations and their members have ongoing relationships that usually only end if someone sells their property or dies. While courts apply high standards for aggrieved parties to obtain injunctive relief, the scope of subject-matter to which injunctions may apply is as broad as the topics addressed in the governing documents, the applicable statutes or other controlling legal principles, such as the doctrine of nuisance. Cases where structural failure may cause catastrophic injury to person or property absent corrective action often include requests for injunctive relief. The ongoing character of neighborhood disputes makes an injunction a powerful remedy. The purpose of this blog post is to summarize how injunctive relief may work in HOA, condominium or adjoining landowner disputes.
Community associations revolve around a declaration of covenants, and any amendments, that function as a “contract” between the association board, committees, the developer and the lot or unit owners. To interpret and enforce this “contract”, Virginia courts apply statutes and judge-made doctrines pertaining to restrictive covenants, easements and deeds. Under the judicial doctrines, if a party requests a court to enter an injunction against conduct that violates a covenant, they must show that the covenant is not ambiguous or presents other enforcement problems. Courts traditionally apply heightened skepticism towards enforcement of covenants and easements. This is why lobbyists asked the General Assembly to enact the Property Owners Association Act (POAA) and the Virginia Condominium Act (Condo Act) and their amendments. This legislation made it easier for association boards to enforce HOA covenants and powers. The POAA and Condo Act provide for injunctions (not excluding money damages or other relief) as a remedy available to lot or unit owners for breach of the association covenants by the board or an adjoining owner. If those statutes don’t apply, a claimant must go to the Circuit Court to obtain an injunction. The association statutes provide an exception, allowing HOAs, condominium boards or owners to go to the local Circuit Court or the General District Court for money damages or injunctions for violation of the declaration of covenants.
In Virginia state courts, to obtain an injunction, the complainant must show irreparable harm and lack of an adequate remedy at law. The Supreme Court of Virginia has held that when an injunction is sought to enforce a real property right, a continuing trespass may be enjoined even though each individual act of trespass is in itself trivial, or the damage is trifling, nominal or insubstantial, and despite the fact that no single trespass causes irreparable injury. The injury is deemed irreparable and the owner is protected in the enjoyment of his property whether such be sentimental or pecuniary. An injunctive order must be specific in its terms, and it must define the exact extent of its operation so that there may be compliance. The declaration of covenants, like other contracts, require parties to perform as prescribed. The entry of an order granting a motion for an injunction based on HOA or condominium covenants takes this a step further, because disobedience to a court order allows the aggrieved party to file a subsequent request with the court to hold the party bound by the injunction to be held in contempt. This is why attorneys seek to avoid having their clients become subject to injunction orders.
There are two main kinds of injunctive relief. One is a “permanent injunction” which the judge enters at the end of the case should she agree that such a remedy is proper in a final order. The other kind is a “preliminary” or “temporary” injunction which the court may enter on motion for the time between when the suit is filed and the trial. Preliminary injunctions provide immediate relief, subject to revision at the end of the case. In Virginia, different judges apply different legal standards for preliminary injunctions. Many draw from common law cases which do not articulate a uniform standard. Some judges apply the strict federal standard for preliminary injunctions, requiring a showing that (1) the plaintiff is likely to succeed on the merits, (2) the plaintiff is likely to suffer irreparable harm in the absence of preliminary relief, (3) the balance of equities tips in his favor, and (4) an injunction is in the public interest. Preliminary injunction orders are unusual because waiting until the case is decided on the merits affords more due process to the defendant.
Association boards can sue for injunctions, but they don’t have to. The POAA and the Condo Act allow associations to fine property owners for violating covenants or rules when the declaration allows fines and the board strictly fulfills the requirements of the declaration and the statute. I don’t agree with these fine statutes because they enable HOAs to get a free pass from having to plead and prove breach of the covenants or the appropriateness of an injunction enforceable by contempt. In a sense, HOAs and condominiums are able to skip over months of litigation “due process” to determine if a remedy is proper for breach of the governing documents and instead, just enact a kind of contempt penalty. Owners don’t have the ability to jump ahead of the process and fine people without having to litigate for a year or more. Nonetheless, preliminary and permanent injunctive relief are powerful weapons for owners aggrieved by the wrongful actions of association boards or adjoining owners. Owners can draw from the governing documents, statutes and common law doctrines to achieve a judicial remedy or favorable settlement that resolves the dispute without forcing the owner to sell or engage in endless lawfare. Understanding what court remedies may be available, such as money damages, attorneys’ fees or injunctions is necessary in order to chart a legal strategy to resolve the dispute and achieve peace of mind.
2022 Update:
In 2022 I posted a new article, “Homeowner Injunction Claims Against HOAs.” This new article contains additional information regarding this important topic.
Selected Legal Authority:
Scott v. Walker, 274 Va. 209 (2007)
Va. Code § 55-515 (POAA – Compliance with declaration)
Va. Code § 55-513 (POAA – Adoption and enforcement of rules)
Farran v. Olde Belhaven Towne Owners’ Ass’n, 83 Va. Cir. 286 (Fairfax 2011)
Unit Owners Ass’n of Buildamerica-1 v. Gillman, 223 Va. 752 (1982).
Winter v. N.R.D.C., Inc., 555 U.S. 7 (2008)
Levisa Coal Co. v. Consolidation Coal Co., 276 Va. 44 (2008)
April 10, 2019
How to Fire a Contractor
Property owners often have bad experiences with contractors and desire to end the relationship. In such instances, knowing just how to fire a contractor is important. An owner “invests” in the contractor by signing a written agreement, paying substantial amounts of money, and allowing demolition and construction to begin. At this time, the owner is vulnerable, and the true character and competence of the contractor, or lack thereof, becomes evident. If the contractor is good, the work continues diligently. There are many great contractors out there; this blog post isn’t about them. If the contractor is bad, the owner may see signs of a lack of commitment to the owner and supervision of the work, such as piles of dirt or trash, apparent workmanship defects or unapproved changes, communication problems and disputes over payment. After this happens, it’s all too common for the relationship to deteriorate. Sometimes the owner is to blame, in part. Many owners experiencing a breakdown in the relationship wonder if they should cut ties with the contractor or continue to make payments in the hope that the situation will improve. Be aware that unless the owner is the government, getting out of a contract may not be easy. Firing a contractor is more akin to getting a divorce than letting an employee go. An owner wanting to know how to fire a contractor will likely need an attorney and expert witness.
We all experience contracts daily, when we purchase retail goods, sign up for an online service, or summon an Uber driver. Contracts are like the air we breathe – something that happens without much ceremony: part of day-to-day living in a post-agrarian society. Many “contracts” are easily undone or abandoned without large consequences. A defective microwave oven may be returned with a swipe of a card. If they miss stains, dry cleaners will usually re-do garments for no extra charge. Signed builder contracts are not so easy to avoid. Part of this is practical or logistical. The contractor pulls permits, the county approves the owner’s drawings, subcontractors demolish existing structures, and the owner makes significant payments. The parties are usually bound by a written agreement. This agreement determines many issues during the course of the relationship, including how easily either party may get out of the deal.
Property owners want contractors who have the character, capability and competency to do the work properly without undue delay, for the agreed upon price. It is easier to choose the right contractor for the job before anything else happens than to try to make big changes in the middle of a project. For many owners, such preparation is easier said than done.
This blog post focuses on the rights and responsibilities of owners considering whether to unilaterally end their relationship with a contractor before the work is complete. The details may come as a surprise to anyone accustomed to having businesses bend over backwards to keep them as patrons.
- Any Contract May be Terminated by Mutual Agreement. Ordinarily, a contract may only be undone by agreement of all the parties. Many legal disputes may be avoided if the contractor and the property owner mutually agree to terms cancelling the agreement.
- Many Written Agreements Include Termination Provisions. There may be language in the contract that spells out how a party may terminate the contract for breach and which actions do not constitute a breach. Many agreements contain language limiting the ability of owners to terminate a construction contract unilaterally. For example, the owner may be required to give notice of the perceived defect, triggering a lengthy opportunity for the builder to cure. Experienced builders have been through this before. They know that it is in their interest to secure owners’ payment obligations and to restrict termination by the owner. If the termination clause is ambiguous, the court may resolve ambiguity contrary to the interests of the contractor who prepared it. Many sophisticated property owners retain an attorney to review the ten- to thirty-page contract before responding to the contractor. Professional assistance with the contract is imperative when the price is six or seven figures.
- It’s Called “Contracting” Because Parties Get a Contract: Many owners sign builders’ proposals under a false sense of security. The owner might get the results that they bargained for. Or they may simply bind themselves to papers. Generally, a contract is only as good as the character, competence and solvency of the contractor. If a contractor violates the regulations of the state licensing board, he may be fined or suspended. That proceeding won’t fix the defects in the work on the owners’ property, but it may interfere with that contractor’s ability to later pay a money judgment awarded by an arbitrator or court. Many states require contractors to pay into a fund or purchase a bond to provide some protections. For example, the Commonwealth of Virginia has a fund that can pay up to $20,000.00 for predatory practices with contracting. However, claims to this fund usually require the owner to first get a money judgment for fraud or misrepresentation. There are other technicalities that the board requires that may be used to deny a claim. Egregious problems usually exceed $20,000. To litigate a case to judgment may cost over $20,000.00 in attorney’s fees, let alone the damages for repairs. Many claims by owners against contractors aren’t covered by insurance. Many contractors organize as small limited liability companies or mom and pop corporations that don’t have many assets. The law obligates a contractor to maintain sufficient financial resources to keep the promises made in the contract. If the contractor is unable to perform the contract due to illiquidity, this may be grounds to terminate. This is of little consolation to an owner prejudiced by the impecuniousness of the contractor. Mistaken views of how regulatory safeguards work impairs owners’ ability to properly assess risks presented by various opportunities.
- Misrepresentation or Concealment. If one party commits fraud or the intentional concealment of facts to induce the other into signing the contract, then the court or arbitrator may “undo” the contract and relieve the parties of its terms. Even if a contractor blatantly failed to fulfill the contract terms, the building codes or professional regulations, it may not constitute fraud. Fraud is difficult to prove. The facts of the case may look like deceit to one person, and simple incompetence to another.
- Unilateral Right of Termination for Material Breach of Contract. When the contract does not outline terms for termination for breach, the law of contracts provides an answer. Sometimes, a contractor’s breach of the contract justifies the owner’s decision to terminate the contract. Whether a contractor’s breach is significant enough to justify termination presents an issue of fact to be proven later by the owner. Submitting a termination letter to a contractor with the sounds of construction work in the background is a drastic move. If the owner’s termination is unjustified, the contractor may have a claim for money damages or lost profits. The owner and the contactor should make a diligent effort to resolve any disputes amicably to avoid litigation. Even if the contractor materially breaches the contract, the contractor may eliminate the right to terminate by curing the breach. A material breach is one that “goes to the root of the contract” and defeats the contract’s essential purposes. For example, a breach by a contractor may be of great annoyance to the owner and require considerable cost to correct and still not be “material breach”. A material breach is so great that the work actually provided could be counted as nothing. One example is when the contractor causes a defect to the structural integrity of the building, eliminating all value of work done. The burden to obtain a money judgment for breach of a contract is significantly easier.
- Abandonment of the Job by the Contractor. Repudiation is a kind of, “material breach”. Sometimes, the contractor’s abandonment is obvious. He convinces the owner to pay the full price in advance (“Help me keep things going”), and then slowly winds down work on the project, removes his equipment, and stops responding to calls and emails. Or the contractor may directly refuse to do more work. Often, abandonment is less clear. Experienced contractors, even the unscrupulous kind, know that blatant abandonment gives the owner a clearer claim of repudiation. When contractors “ghost” a jobsite, it’s often in slow motion (with promises that the crews will be back soon) or by picking fights with the owner seeking any pretext to stop work.
- Owner Interference. Contractors frequently complain that owners interfere with their performance. For example, an owner might pressure a subcontractor to do something contrary to the general contractor’s instruction. There is a human tendency to try to hold things “hostage” to get demands met in a dispute. For example, upset owners may bar the contractor from the jobsite. Or, the contractor may try to misuse the “right to cure” in efforts to achieve milestones for additional progress payments. Such efforts may backfire if it appears in litigation that one side prevented the other from performing or mitigating damages.
A property owner with ongoing construction problems wants to know how to fire a contractor if necessary. In many cases, this is the best move for the owner because of the severity of the situation. It’s not impossible, but it will most likely test the owner’s patience, like going through any other “divorce.” The best way to avoid these problems is to make smart choices in “dating” a contractor before signing a high-priced deal, by asking good questions during meetings, checking out the contractor’s background and work history, and retaining other consultants as necessary to help with negotiating the agreement and inspecting the work. Because practical considerations make owners often vulnerable in such matters, and contractors highly motivated to make sales, it is usually not the owner’s fault for finding herself bound to a contract with the wrong builder and out lots of money with a half-finished project. In such situations, owners need legal, financial and technical advice to chart a pathway out of the mess in order to avoid potentially materially breaching the contract themselves or giving the contractor carte-blanche to make things worse.
photo credit: WSDOT A glimpse into the waterfront’s future via photopin (license) This photograph is provided to depict a construction site. The author of this post has no evidence of any defects on the depicted job site and contracting company
March 27, 2019
Rain, Rain, Go Away: Drainage Problems in the HOA
Drainage disputes among adjoining property owners are common anywhere developers subdivide and build on land. Raw land’s natural grading channels surface water into streams and rivers. Development plans frequently ignore potential drainage problems and construction disturbs drainage patterns, often causing water to divert or accumulate. When buildings and hardscapes replace trees and grass, soil cannot absorb water. Instead, the grading of the road, sidewalk, eaves or gutters channel water. All rainwater has to go somewhere. Unless a house or other building is on the top of a hill, a property owner may suffer from surface water diverted from adjoining parcels.
State common law governs the rights and responsibilities of adjoining property owners regarding surface water diversion. In residential neighborhoods, HOA roads, greenspace and other common areas encompass owners’ lots. Many lots lie at lower elevations from neighbors or common areas. Even if a developer constructs the subdivision according to an acceptable drainage design, all it takes is one neighbor or HOA board that improperly maintains or modifies drainage features to cause nuisances at lower-lying homes.
In Virginia and elsewhere, adjoining property owners are not strictly liable for damage or interference caused by changes they make to drainage conditions on their own property. Courts apply a reasonableness standard, but the burden is on the aggrieved neighbor to prove that the diversion of water is improper. The Supreme Court of Virginia’s judicial precedents provide guidance as to whether damaging changes to grading conditions on an adjoining property subject that owner to liability.
One leading Virginia case is Kurpiel v. Hicks. In 2011, Patricia and George Kurpiel of Stafford County sued their adjoining neighbors, Tammy and Andrew Hicks. The Kurpiels alleged that the Hicks stripped their land of vegetation, changed the elevation of their land, brought in additional fill dirt and caused stormwater, sediment and siltation to flow onto the Kurpiel lot. The Kurpiels sued the Hicks for trespass, requesting the Circuit Court to enter an injunction against the flooding.
Under Virginia’s common law, the courts view surface water as a “common enemy.” By general rule, owners may “fight off” surface water by construction or changing drainage conditions to their own property, even if this discharges additional water onto an adjoining parcel. This recognizes the higher landowners’ freedom to make changes to their land, within reason. The focus of this blog post are the exceptions to the common enemy doctrine, and how such exceptions may be tools to adjoining owners.
Unreasonableness:
The “common enemy” doctrine’s main exception provides that diversion of surface waters may not be done wantonly, unnecessarily, or carelessly, must not injure the rights of another, and must be a reasonable use of the land exercised in good faith. Whether any exception applies will depend upon each case’s unique facts. Many cases require the testimony of an engineer or another expert to professionally evaluate the sufficiency of drainage. Because the exception to the “common enemy” doctrine is fact specific, the reasonableness of the adjoining owner’s changes present a factual question to be decided at trial.
To sue an adjoining owner for flooding, the aggrieved party must choose one or more claims or “causes of action.” The “common enemy” doctrine applies regardless to whether the lawsuit is for trespass, nuisance or negligence. The adjoining owner may also be able to sue for violation of restrictive covenants recorded in the land records. The Kurpiels only sued for trespass, which provides that every owner is entitled to the exclusive and peaceful enjoyment of their own land, and redress if such enjoyment shall be wrongfully interrupted by another.
The Circuit Court of Stafford County dismissed the Kurpiels’ lawsuit on the grounds that it failed to allege sufficient facts to establish the “reasonableness” exception. The Supreme Court of Virginia reversed the decision, finding that the Circuit Court improperly short circuited the case, finding reasonableness of surface water diversion to be a factual issue for trial.
No Artificial Channels:
“Unreasonableness” is not the only exception available to flooded neighbors. The Supreme Court of Virginia held in other cases that a landowner cannot collect water into an artificial channel or volume and pour it upon the land of another to his injury. As one example, an owner cannot drain surface water into a ditch or pipe and aim that artificial channel onto an adjoining property.
Eaves of Buildings:
Sometimes disputed stormwater is from the eaves or gutters of a building. The water that drips from the eaves or downspouts of a building is not treated as “surface water” per the “common enemy” doctrine. Stormwater from a roof or downspout is another exception. There is no natural right of drainage from the roof of a building. This is consistent with the other exception, because gutters and downspouts are “artificial channels.”
Disturbing Existing Watercourses:
An additional exception is where the flow of water is in a defined channel or watercourse. In that instance, a landowner may not injure another by interfering with its natural flow.
HOA Covenants:
The afore described rule and exceptions define the obligations that adjoining property owners have to one another that arise where there are no covenants of record regarding nuisances and drainage. Most residential subdivisions have restrictive covenants, and many establish HOAs. Those covenants may include provisions regarding nuisances or other restrictions on how an owner may divert water. Those covenants will define the HOA’s rights and obligations to maintain common areas and rights of way. Some covenants contain provisions inserted in attempts to limit the liability of the homeowners association for property damage from stormwater problems. If the flooding comes from an adjoining lot or an HOA common area or road, the aggrieved lot owner needs copies of the declaration of covenants and any amendments to determine how they may add or subtract from the adjoining owners’ rights and responsibilities in dealing with the “common enemy.”
Courts do not apply local government-type legal standards in evaluating HOA actions. Also, courts do not interpret restrictive covenants encumbering real estate according to the general rules regarding garden-variety contracts. There are a few basic principles to consider when interpreting HOA covenants:
- Courts treat HOA covenants like “contracts” to which each party owning land in the subdivision are party, including the lot owners, the HOA, possibly the declarant and/or holders of easement rights such as utility companies.
- Courts interpret covenants according to conditions existing at the time the developer recorded the document. HOAs or lot owners commonly change grading and drainage on their lots to fend off the accumulation of rainwater in the cheapest means possible.
- The courts treat interpretation of what HOA covenants mean as “matters of law” discernable on motion or appeal without taking evidence. Applying them to disputable facts requires evidence at trial.
- The courts interpret covenants “as a whole,” resisting the tendencies of trial lawyers to quote language out-of-context.
- The courts enforce restrictive covenants where the intentions are clear and the restrictions are reasonable.
- While ambiguous covenants may be a challenge to enforce, courts may find that a party has a right that may not be explicit but is plainly implied by the language.
- Covenants are construed strictly against persons seeking to enforce them, and substantial doubt or ambiguity is resolved in favor of free use and against restrictions.
HOA directors frequently misunderstand their rights and duties. Many falsely believe that once the members elect the board of directors, they enjoy unfettered exercise of business judgment. Some believe that a lot owner can’t challenge decisions outside of the next election. Many HOA boards believe that when they award a contract to maintain or renovate a road or drainage system to the lowest bidder, lot owners can’t complain. This is not true. The HOA must fulfill the requirements imposed upon it by the declaration. The HOA, as a fiduciary, cannot show favoritism towards certain owners over others, and divert flooding away from one lot onto another lot. The HOA is liable in contract for failure to fulfill obligations clearly established by the declaration.
Under Virginia law, the fundamental purpose of a property owners association is to collect assessments from lot owners and spend those receivables on maintaining the common areas, such as roads, greenspace and drainage improvements. The Supreme Court of Virginia has held that if the declaration fails to require this, the governing body established by the covenants may not qualify for the various remedies and powers established by the Property Owners Association Act. This rule is consistent with federal law requiring community or public purpose for the spending of HOA assessments to preserve tax exempt status. It is often difficult for a HOA board evade its duties to maintain the common areas it owns.
If an HOA or adjoining neighbor makes changes to their property that causes a flood, the damaged landowner has rights. When the stormwater diversion is harmful, usually there is at least one legal theory by which the adjoining owner or HOA may be held accountable. Flooding of houses, yards and driveways is a nuisance that no landowner should have to live with.
Selected Legal Authorities:
Kurpiel v. Hicks, 284 Va. 347 (2012)(rule of reasonableness)
Third Buckingham Community, Inc. v. Anderson, 178 Va. 478 (1941)(channels)
Noltemeier v. Higginbotham, 32 Va. Cir. 388 (Spotsylvania Co. 1994)
Raleigh C. Minor, The Law of Real Property (1908)
Scott v. Walker, 274 Va. 209 (2007)(how to read covenants)
photo credit: r.nial.bradshaw 160404-neighborhood-sidewalk-morning-clouds.jpg via photopin (license)
February 6, 2019
Rental Restrictions in Virginia Condominiums
Teachers often compare property rights to a “bundle of sticks.” Each stick represents a discernable owner’s right such as the right to occupy, the right to use the community swimming pool, the right to live free of water intrusion, the right of access, and so on. One powerful right is the ability to rent out possession of the property. A property that cannot be conveniently rented is less useful, and therefore, less valuable.
Neighbors often view renters in a negative light. They view a community predominantly composed of owner-occupants as more vibrant than that of a community full of renters. Many view owner-occupants as wealthier, more committed to maintaining their property and more engaged in the community. Individual owners may desire the privilege of renting their own property while at the same time wanting their neighbors to be owner-occupants.
This conundrum readily manifests itself in condominium developments. High-rise condominium complexes often look and feel like rental buildings. Some investors shop for condominium units because they make great rental units during a housing shortage. However, condominium developers and managers frequently insert rental restrictions into covenants, bylaws or board-adopted regulations. While buyers and owners want the sale of their units to qualify for FHA-sponsored financing, current mortgage market conditions place pressure on the resale values for condominium units and the FHA imposes owner–occupant ratio threshold requirements for certain types of desirable financing options. For example, if the current applicable threshold is 51% owner-occupants, the current owners, as a group, will want to suppress rentals in the building to protect the resale value of their units. At the same time, those owners will individually have a personal interest in the option to rent their units if so desired. Therefore, rental restrictions in condominium governing documents are breeding grounds for conflict.
Many perceive short-term rentals as a threat to condominium communities since most condominiums are not set up to be operated as hotels or resorts. For example, a condominium concierge is not the same as a hotel receptionist, the amenities in a residential condominium differ from those found at a resort, and parking passes are often in short supply. In addition, short-term renters have a reputation for treating condominium units like hotel rooms, adding noise and traffic. To that end, it’s common for covenants or regulations of a condominium to contain provisions forbidding, discouraging or restricting the rights of owners to list and operate their units using Airbnb, HomeAway or other short-term rental websites.
Here we will discuss rental restrictions in Virginia condominiums. Every condominium association has different rental restrictions. In addition, the city or county may have separate rules (ordinances) of its own regulating short term rentals, which a short-term rental landlord must be aware of. This article focuses on where to look to find the applicable association rules and how to determine their enforceability. Frequently, rental restrictions cannot be enforced as clearly and certainly as management argues. For that reason, condominium unit owners owe it to themselves to fully understand the meaning and possible enforceability of the rental restriction rules they are bound by.
In condominium matters, one starts with the careful review of the declaration of covenants and bylaws. The condominium association is charged with administering the declaration of covenants. The Supreme Court of Virginia held that a condominium declaration is in the nature of a contract between the condominium association and the unit owners (including the unit owners among each other). One must look to Virginia law to determine how to interpret the declaration and what remedies may be available. The declaration and plats define the shape of the property rights that the owner can pass on to the tenant in a lease. The owner cannot convey rights to a tenant that the owner does not enjoy under the governing documents. Owners commonly incorporate the condominium instruments into the lease by reference to avoid situations where the tenant insists that they have a right to do something which the covenants do not allow.
The principal authority for interpreting covenants is the Virginia Condominium Act. Between 2015 and 2016, the General Assembly added provisions limiting the authority of a condominium association to restrict the rental of units. Va. Code § 55-79.87:1(A) provides a broad list of restrictions that a condominium board cannot impose unless provided for in the declaration or bylaws. Even if the amendments weren’t adopted, the Supreme Court of Virginia has held that a condominium association cannot do anything that isn’t explicitly or implicitly authorized in the governing documents. The legislature adopted this legislation during the emergence of short-term rentals. Let’s take a look at these restrictions that are permitted only if expressed in the governing documents or other parts of the Condominium Act:
- Condition or prohibit the rental of a unit to a tenant by a unit owner or make an assessment or impose a charge (except as otherwise provided by the statute). This seems helpfully broad to a unit owner challenging a board-adopted restriction.
- Charge a rental fee, application fee or other processing fee in excess of $50.00.
- Charge an annual or monthly rental fee.
- Require the unit owner to use a lease or addendum form prepared by the association.
- Charge any deposit from the unit owner or the tenant.
- Have the authority to evict the tenant or require the owner to delegate eviction power to the association. Buyers ought to be disturbed by provisions in condominium documents giving condominiums such authority.
Va. Code § 55-79.87:1(B) authorizes the association to require the unit owners to provide the names and contact information of tenants. Without such information, the association’s practical ability to enforce any rental restrictions in the covenants is limited. The authority to mandate registration is necessary to effectively regulate. This amendment made it easier to sort out what restrictions may be enforced without a deep dive into the case law.
Where the terms of restrictive covenants are clear and unambiguous, the duty of the court is to interpret them in accordance with their plain meaning. The association’s board or committee may not act in contravention of its governing documents. Unfortunately, many association governing documents are unclear, ambiguous or uncertain in meaning or effect, such that experienced judges, lawyers or professors may favor conflicting interpretations.
Attempts to use recorded covenants to restrict rental rights predates the rise of short-term rental websites. In Scott v. Walker, the Supreme Court of Virginia considered case precedents in deciding whether an HOA covenant requiring real property be used only for “residential purposes” would prohibit short term rental of a single-family dwelling. The Supreme Court of Virginia found the covenant ambiguous and for that reason construed it in favor of free use of land.
William Scott and Suzanna Scott owned a lot in the Harbor Village HOA on Smith Mountain Lake. Their lot was located near Roanoke. After purchase, the Scotts began to use their property as a short-term rental. Donald and Charlotte Walker, their neighbors, were unhappy about the Scotts’ short-term renting. They sued the Scotts. The Circuit Court of Bedford County found that rental on a nightly or weekly basis is not “residential” because the property is not being used as a domicile. Understanding the Circuit Court’s view is not difficult. A hotel or bed and breakfast is a business, not a collection of homes. If a hotel guest doesn’t pay, then the hotel probably won’t need to file an eviction lawsuit.
The Supreme Court of Virginia construed the covenant according to the plain meaning rule and the rule that errs on the side of free use when there is doubt or ambiguity.
It is . . . the general rule that while courts of equity will enforce restrictive covenants where the intention of the parties is clear, and the restrictions are reasonable, they are not favored, and the burden is on him who would enforce such covenants to establish that the activity objected to is within their terms. They are to be construed most strictly against the grantor and persons seeking to enforce them, and substantial doubt or ambiguity is to be resolved in favor of the free use of property and against restrictions.
Scott v. Walker, 274 Va. 209 (2007).
Given the limitations imposed by the Condominium Act and the series of decisions by the Supreme Court of Virginia, condominium unit owners owe it to themselves to not take their board or manager’s word for it when they waive a board-enacted “Policy Resolution” regarding the rental of units. The rules may not be enforceable or may not be enforceable in the manner that the board of directors wants. The right to rent out a condominium unit may determine whether the owner can keep the property. The Supreme Court of Virginia’s method of interpreting ambiguous covenants in favor of free use is something that any attorney dealing with rental restrictions in Virginia condominiums must fully understand.
Discussed Authorities:
Sully Station II Community Ass’n v. Dye, 259 Va. 282 (2000).
Va. Code § 55-79.87:1 (Condominium Act – Rental of Units).
Scott v. Walker, 274 Va. 209 (2007).
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