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Ambiguous Organizing Documents Can Be Costly for Homeowners’ Associations

on Tuesday, 27 May 2014 in Dirt Alert: David C. Levy, Editor

On April 1, 2014, the Nebraska Court of Appeals decided Oak Hills Highlands Association, Inc. v. Estate of LeVasseur. The case involved interesting facts and a lesson for homeowners’ associations. Bylaws, declarations, and other organizing documents need to be written in unambiguous language. Specifically, if a homeowners’ association intends to adopt the Nebraska Condominium Act (the “Act”), ensure the language of adoption is clear.

In Estate of LeVasseur, LeVasseur allegedly fell asleep smoking a cigarette near his oxygen tank. The resulting fire destroyed his condominium, causing approximately $245,000 in damages. The Oak Hills Highlands Association (the “Association”) claimed LeVasseur’s misconduct caused the fire, which resulted in dramatically increased insurance premiums—over $15,000 annually. First LeVasseur and then his estate refused to pay, so the Association filed a notice of assessment with the Register of Deeds for Douglas County for the premiums, attorney fees, and other charges. The Register of Deeds filed a lien on the property. The Association then sued to foreclose the lien.

The key issue in the lawsuit was whether the Association had successfully adopted the Act, allowing it to specially assess LeVasseur for the premiums. The opinion is silent regarding the reasons the Association wanted to adopt the Act. In contrast to a private declaration, the Act gives statutory authority for associations’ enforcement actions, and its adoption can bolster poorly drafted organizing documents.

The District Court for Douglas County decided against the Association. Specifically, the court held that the Association’s Revised Declaration and Master Deed was insufficient to adopt the Act. The court found—”the Association desires to adopt the provisions of the [Act] in its entirety”—was only a declaration of intent. Thus, the district court held that the bylaws precluded the special assessment and dismissed the lawsuit.

The Nebraska Court of Appeals reversed. The court found that the district court’s decision rested on the Association’s use of the word “desires” and that the Condominium Property Act also utilizes the word “desires” in reference to establishing a condominium property regime. The court held, therefore, that the Association had adopted the Act in its entirety, which authorized the special assessment.

A full copy of the opinion is available here.

Anthony D. Todero

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