July 20, 2017
Supreme Court Justice Anthony Kennedy recently wrote in an opinion that, “Property rights are necessary to preserve freedom, for property ownership empowers persons to shape and to plan their own destiny in a world where governments are always eager to do so for them.” Murr v. Wisconsin, 198 L.Ed.2d 497, 509 (U.S. Jun. 23, 2017). This principle goes beyond the eminent domain issues in Murr v. Wisconsin. Many HOAs and condominiums boards or property managers are eager to make decisions for (or ignore their duties to) owners. In the old days, legal enforcement of restrictive covenants was troublesome and uncertain. In recent decades, state legislatures made new rules favoring restrictive covenants. Sometimes owners seek to do something with their property that violates an unambiguous, recorded covenant. I don’t see that scenario as the main problem. What I dislike more is community associations breaching their specific obligations to owners, as enshrined in governing documents or state law. Is the ability to enforce the covenants or law mutual? Are legal remedies of owners and HOAs equitable?
Why HOAs Wanted the Power to Fine:
Take an example. Imagine a property owner decides that it would be easier to simply dump their garbage in the backyard next to a HOA common area than take it to the landfill. Let’s assume that does not violate a local ordinance. Or substitute any other example where a property owner damages the property rights of others and the problem cannot be solved by a single award of damages. Before legislatures adopted certain statutes, the association would have to bring a lawsuit against the owner, asking the court to grant an injunction against the improper garbage dumping. This requires a demand letter and a lawsuit asking for the injunction. The association would have to serve the owner with the lawsuit. The owner would have an opportunity to respond to the lawsuit and the motion for the injunction. An injunction is a special court remedy that requires special circumstances not available in many cases. The party seeking it must show that they cannot be made whole only by an award of damages. The plaintiff must show that the injunction is necessary and would be effective to solve the problem. The legal standard for an injunction is higher than that for money damages, but it is not unachievably high. Courts grant injunctions all the time. However, the injunction requires the suit to be filed and responded to and the motion must be set for a hearing. Sometimes judges require the plaintiff to file a bond. Injunction cases are quite fact specific. The party filing the lawsuit must decide whether to wait for trial to ask for the injunction (which could be up to one year later) or to seek a “preliminary” or “temporary” injunction immediately. If the judge grants the injunction against the “private landfill,” the defendant may try to appeal to the state supreme court during these pretrial proceedings. These procedures exist because property right protections run both ways. Those seeking to enjoin the improper dumping have a right, if not a duty, to promote health and sanitation. Conversely, the owner would have a due process right to avoid having judges decide where she puts her trash on her own property. If the court grants the injunction, the judge does not personally supervise the cleanup of the dumping himself. If an order is disobeyed, the prevailing party may ask for per diem monetary sanctions pending compliance. That money judgment can attach as a lien or be used for garnishments. These common law rules have the effect of deterring the wrongful behavior. This also deters such lawsuits or motions absent exigent circumstances. Owners best interests are served by both neighbors properly maintaining their own property and not sweating the small stuff.
Giving Due Process of Court Proceedings vs. Sitting as both Prosecutor and Judge:
If association boards had to seek injunctions every time they thought an owner violated a community rule, then the HOAs would be much less likely to enforce the rules. The ease and certainty of enforcement greatly defines the value of the right. Boards and committees do not have the inherent right to sit as judges in their own cases and award themselves money if they determine that an owner violated something. That is a “judicial” power. Some interested people lobbied state capitals for HOAs to have power to issue fines for the violation of their own rules. To really give this some teeth, they also got state legislatures to give them the power to record liens and even foreclose on properties to enforce these fines.
Statutory Freeways Bypass the Country Roads of the Common Law:
Let’s pause for a second and pay attention to what these fine, lien & foreclosure statutes accomplish. The board can skip over this process of litigating up to a year or more over the alleged breach of the covenants or rules. Instead, the board can hold its own hearings and skip ahead to assessing per diem charges for the improper garbage dumping or whatever other alleged infraction. Instead of bearing the burden to plead, prove and persevere, they can fast track to the equivalent of the sanctions portion of an injunction case. Instead of enjoying her common law judicial protections, the owner must plead, file and prove her own lawsuit challenging the board’s use of these statutory remedies. Do you see how this shifts the burden? Of course, the HOA’s rule must meet the criteria of being valid and enforceable. In Virginia, the right to fine must be in the covenants. The statute must be strictly complied with. But the burden falls on the owner to show that the fast track has not been complied with.
Statehouse lobbying and clever legal writing of new covenants has helped the boards and their retinue. Let’s take a moment to see what remedies the owner has. Imagine reversed roles. The board decided that they could save a lot of money if they dumped garbage from the pool house onto the common area next to an owner’s property. The board ignores the owners’ request to clean and maintain that part of the common area. Let’s assume that the governing documents require the board to maintain the common area and do not indemnify them against this kind of wrongful action. The owner can sue for money damages. If the case allows, the owner may pursue an injunction against the board to clean up the land and stop dumping trash. The owner must follow the detail-oriented procedures for seeking an injunction. The owner does not have a fast-track remedy to obtain a lien against any property or bank accounts held by the board.
Fine Statutes Should be Legislatively Repealed:
In my opinion, community association boards and owners should both be subject to the same requirements to enforce restrictive covenants. If state legislatures repealed their fine and foreclosure statutes, the boards would not be left without a remedy. They would not go bankrupt. Chaos would not emerge. They would simply have to get in line at the courthouse and play by the same rules as other property owners seeking to protect their rights under the covenants or common law.
“But Community Association Lawsuits are a Disaster:”
Many of my readers are skeptical of leaving the protection of property rights to the courts. They don’t like people who sue or get sued. They argue that whether you are defending or suing, the process is laborious and expensive. The outcome is not certain. I don’t agree that property owners should surrender their rights to associations or industry-influenced state officials. What if there was a controversy-deciding branch of government that the constitution separates from special-interest influence and the political winds of change? Wouldn’t that be worth supporting? I know that there are legal procedures that drive up the time and expense of the process without adding significant due process value. That does not mean that the courts should be divested of the power to conduct independent review and award remedies not available anywhere else.
Judicial Remedies Are Better Options Than Many Owners Think:
Fortunately, owners have many rights that their boards and managers are not informing them about. Many common law protections have not been overruled. In Virginia, restrictive covenants are disfavored. Any enforcement must have a firm footing in the governing documents, statutes and case law. The statutes adopted by the legislature limiting the common law protections are strictly (narrowly) interpreted by the courts. It is not necessary, and may be counterproductive to run to some elected or appointed bureaucratic official. Under our constitutional structure, the courts have the power to enforce property rights. Many owners cannot wait for the possibility that a future legislative session might repeal the fine statutes. If they are experiencing immediate problems (like improper dumping of garbage or whatever) they need help now. In rare cases law enforcement may be able to help. In most cases working with a qualified attorney to petition the local court for relief is the answer.
May 31, 2017
The proponents and critics of HOAs and Condominiums both tend to over-simplify the law and governing documents in a way that ignores many rights of owners (and boards). Some are explaining community associations law the wrong way. This area of the law is confusing, even to law school graduates and real estate professionals. Among the governing documents are declarations, bylaws, rules & regulations, architectural guidelines, articles of incorporation and amendments. Virginia law includes the Condominium Act, Property Owners Association Act, Nonstock Corporation Act, for the state Common Interest Community Board. This is not to mention federal laws such as the Fair Housing Act. On top of this you have the state and federal constitutions and published court opinions. If a legal dispute emerges between a board and an owner, the parties will struggle to determine which, if any of these statutes and documents apply to the situation. If more than one speaks to the problem, how do you reconcile ambiguities or discrepancies. Given the rat’s nest of law and governing documents, it is a challenge for anyone to quickly sort out these things without the assistance of legal counsel.
So how do you begin to explain community associations law? Most people are visual learners. They sort out complex matters faster with cartoons, charts and other graphics. Some lawyers practicing community associations law have tried to do this for association laws and governing documents. For example, an attorney in Washington State created this graphic. I’ve seen similar graphics for other states prepared by others. Charts like this don’t explain the hierarchy of authorities in a way that reduces confusion. I don’t want my readers to think that I’m picking on the author of this chart. Perhaps this is useful for Washington State. I will explain why this approach is unhelpful with respect to Virginia law.
The General Assembly enacts legislation and private parties join covenants and other contracts. The legislature declares what statutes say. The same can be said for private parties and contracts. Under our constitutional system, the judiciary’s mandate is to declare what legislation and contracts mean in the controversies brought in litigation. Sometimes this is easy because the “plain meaning” of a statute or contract is apparent on the face of the document. Often adversaries bring with them conflicting interpretations of documents or laws when they come into the courtroom. The contract or statute may not be clear on what remedies are available for breach of a statute or contract.
Often, the courts enforce claims, defenses and remedies that aren’t memorialized in any constitution, statute, regulation, contract, etc. Someone can read all community association legislative enactments and the association’s governing documents and not identify fundamental legal rights or duties that the owner (or board) may hold. This is because Virginia, like almost all other states, has “common law” legal doctrine enshrined in older case decisions that applies, except where abolished or superseded by statute:
The common law of England, insofar as it is not repugnant to the principles of the Bill of Rights and Constitution of this Commonwealth, shall continue in full force within the same, and be the rule of decision, except as altered by the General Assembly. Va. Code § 1-200.
American judges further interpreted the common law in case decisions applying it from 1776 to the present day. The common law includes a highly-developed set of doctrines regarding property rights, covenants, defenses and court remedies. The Supreme Court recently published an opinion in Tvardek v. Powhatan Village HOA discussing how the common law disfavors restrictive covenants. Here is a link to my previous post discussing the Tvardek case. That case is still important even though the General Assembly enacted legislation in 2017 in response. Enactments of the General Assembly that strengthen the enforcement of covenants are narrowly interpreted by Virginia courts because they limit owners’ common law property rights. This means that the statutes are not interpreted to give HOAs broad powers. The authority must be sufficiently articulated. This is why the proponents of community associations are so active in state capitals.
What are these common law rights, defenses and remedies and why do they matter? There are too many to summarize in this blog post. I will provide one example. A declaration of covenants is a type of real estate contract. The Property Owners Association Act makes it easier for covenants to be legally enforced against owners (and associations) that allegedly breach them. But common law defenses to breach of contract are still available to oppose the legal action. For example, if a board is found to have clearly or consistently failed to enforce the architectural guidelines, then an owner may be able to assert common law defenses such as waiver, estoppel, abandonment of the restriction or acquiescence in the alleged violation. Common law defenses like waiver and estoppel don’t need to be in the governing documents or statutes to be asserted by the owner. Where applicable, the owner just needs to understand the definition of the common law defenses and whether they have been abrogated by statute or the covenants themselves. This is just one example of common law defenses. The Washington state community associations law graphic fails to show common law rights, defenses and remedies that are valuable to boards and owners alike.
The common law is a secret treasure trove to property owners defending themselves against board or neighbor overreach. Property owners have legal rights that aren’t described in the statutes or governing documents. These rights don’t require wing-and-prayer appeals to various state officials or convoluted constitutional arguments. They are already there in legal treatises available in law libraries. In the fast-pace of litigation where parties don’t have months or years to sort out the diverse array of legal authorities and governing documents, owners need qualified legal counsel to help them identify and protect their rights.