Carefree Condominium Living and the "Illusion" of Home Ownership

by: Jeffrey A. Goldberg for condolawyers.com 

Congratulations!  You have just purchased a condominium home.  Now that you are a "unit owner" you are probably wondering to yourself: Exactly what was it that I just purchased?  

Basically, you have just purchased some air space.  The "real estate" that you "own" is, technically, the air located between the floors, ceilings, and perimeter walls.  You also own, as a tenant in common with every other unit owner, the building(s) and land that surround the air spaces, according to the undivided percentages set forth in the condominium declaration.  

Many condominium buyers are surprised to learn just how abstract is the concept of a condominium "unit."  Due to the enabling State condominium statutes, a person may own, encumber, or transfer air space (a "unit") as if it were real estate.  The condominium declaration defines the units by setting forth the unit boundaries in the accompanying plat, and it assigns each units' percentage interest in the common elements (all of the land, structures, and property that are not defined as part of a unit).  The existence of the unit itself is created and depends upon the condominium declaration.  Without the declaration, there would be no unit.  The boundaries often are not what physically you would assume to be the "apartment" in which you live.  For example, typically, structural portions of the building, pipes, ducts and conduits that serve more than a single unit, are considered part of the common elements even though they run through the unit boundaries.  Likewise, structures, pipes, ducts and conduits that serve a single unit are often deemed to be part of a unit even though they are not physically located within unit boundaries.  Thus, the unit is essentially a legal abstraction.  

But you don't just own air space!  Bundled along with, and inextricably linked to, your unit is a whole body of statutory law relating to condominiums and the covenants of the declaration.  Since all of the unit owners are co-owners of the land and buildings, it is necessary to have a board of directors elected by the unit owners to administer and maintain the property.  Because condominium living is a cooperative venture in which the rights of one owner may have an impact upon the other, it is necessary to have various rules, standards and safeguards in order for the unit owners to live together and to keep the property properly maintained.  For this reason, the declaration often contains a number of use and occupancy restrictions, sets forth the obligation for unit owners to make payment of common expenses and maintenance costs to the association, and provides remedies and rights in the board of directors to promulgate house rules and to enforce such rules and the covenants of the declaration.  In other words, this condominium will rule your life!  

Too many times a person will buy a condominium unit without realizing what are the rights and obligations that go with ownership.  Unlike a single family home whose owner has almost unfettered rights to use a home as he or she deems fit, you must use your unit only in accordance with the declaration and rules of your association.  This inescapable fact means that you are not right for condominium ownership if you are unwilling to conform to the standards and practices imposed by your neighbors as represented by the board.  

You are probably thinking that none of this matters because the board would be powerless to force you to comply with its standards and procedures.   As many owners find out sooner or later, your belief that you can violate the condominium rules with impunity is simply incorrect.  In order to understand how you are subject to enforcement of all of these procedures and obligations, it is necessary to understand the law generally applicable to "real covenants."  

Real covenants are written promises either to do something or not to do something with respect to land, and which “run with the land,” meaning that subsequent owners are bound by the promises.  For example, a condominium association’s declaration of condominium, and a homeowners’ association “declaration of covenants, conditions and restrictions” (often referred to as CCR's) set forth real covenants that run with the land.  An obvious example of a real covenant is the enforceable promise to pay maintenance assessments to an association.  

In order for a written promise to be binding upon future owners, the covenanting parties must have intended it, and future owners must have notice of the promise (see below). A covenant  runs with the land only when the benefit or burden (or both) of the promise “touches and concerns” the land.  Promises unrelated to the use and enjoyment of the real estate are not real covenants.  

A covenant can only be enforced against an owner with notice of the covenant.  It is not necessary, however, that the owner have actual knowledge of the covenant.  Equally valid are record notice and inquiry notice.  Record notice means that the terms of the covenant are set forth in a recorded instrument within the chain of title, such as a declaration of covenants referenced in the deeds.  In a condominium setting, there is certainly notice of the provisions of the condominium declaration since that is the very instrument that created your unit.  Inquiry notice means that the appearance of the neighborhood seems to conform to a scheme of common restrictions.  In condominiums, it is almost always the case that the appearance demonstrates a uniform and regulated standard.  It does not matter whether you understand the nature of the organization or that you have read the documents recorded against the property. You will be responsible for knowing what the covenants contain.  

The most numerous form of covenants that involve associations are equitable servitudes (those promises capable of being enforced by a court order requiring compliance).  An equitable servitude is enforceable in equity, or in a chancery court.  Instead of an award of money damages, the servitude is enforced by a court order affirmatively requiring an owner to comply with a covenant or prohibiting certain conduct.  Failure to obey the court order can result in civil or criminal remedies for contempt of court.  

Most association declarations set forth a remedies procedure.  Typically, these sections allow for the association’s board to enforce the covenants and establish a procedure for the board to follow.  The procedures usually provide for a series of notices to the owner with a set time period in which the violation must be cured.  These sections often provide that the court may issue an injunction (a court order requiring compliance) or a forced judicial sale of the home and termination of the owner’s membership in the association.  Attorneys’ fees and other costs of enforcement are often allocated to the defaulting owner.  Some State statutes also permit the board to hold hearings and to levy fines for violations of the covenants or rules.  

Although an owner may resent being forced to comply with the covenants, the requirement that each owner abide by the covenants is generally a fair and appropriate one because each owner, by accepting a deed, is entering into a contract with all other owners to abide by the provisions of the recorded covenants.  It is unfair, when most persons conform their behavior to the requirements of the governing documents, to allow a few persons to violate the requirements. For example if ten families in the association have wanted in the past to have large dogs, but they have kept only small animals as pets because of a prohibition against large pets, it would be very unfair to fail to enforce the provision against an owner who simply decides to keep a large dog in his home and flagrantly violates the requirements of the community.  

Of course, as a condominium unit owner, you also have certain rights that arise out of the declaration and applicable statutes.   For example, you have a right to vote to elect or remove board members, run for office, and to be heard on issues facing the association.  You have the right to vote on major issues facing the association and to vote on any proposed changes to the declaration or bylaws.  You have the right to be fully informed of the board's actions and decisions, and to review pertinent books and records of the association (if you have a proper purpose for doing so).  You have the right to see the budget of the association and to have the property maintained in an appropriate manner.  You have the right to some kind of accounting of the money received and spent by the board.  You have the right to be treated fairly, and to be able to rely on the association to uniformly apply and enforce the rules in a reasonable manner.   

In addition, you have some rights and defenses if the board pursues action against you for an alleged violation of the declaration.  Because equitable servitudes are enforced by a court order punishable by contempt of court proceedings (instead of a mere award of money damages like most judgments), the courts have certain safeguards or equitable defenses to ensure fairness.   

The basic equitable defenses are:  

1. Unclean Hands.  If the association is engaged in wrongful conduct with respect to the covenant, then it may not enforce the covenant.  For example, if the board members are violating or allowing others to violate the same or similar covenant with impunity, they would not be able to enforce it against you.  Likewise, action taken with malice or for the purpose of singling out a particular owner for punishment would not be allowed.  This defense is sometimes referred to as “selective enforcement.”  
   

2.  Waiver.   If the association were to simply excuse and allow violations of the covenants, then it arguably would be waived (at least for the purposes of court enforcement).  It should be noted that the board’s acquiescence to a violation would probably amount to a breach of the board’s duties to the members.  It also should be understood that acquiescence need not be a permanent condition.  Even if the board loses an enforcement action on this theory, it can begin to uniformly enforce the covenants against all of the owners at any time, merely by giving notice of its intention to enforce them and then following through in a formal, comprehensive, fair and uniform manner to take enforcement action.  
   

3. Estoppel.   Similar to wavier, some form of this defense is almost always raised by owners who face association enforcement action.  The gist of this defense is that the board has acted in some manner that is inconsistent with enforcement of the covenant, and the owner has reasonably relied upon this apparent waiver of the covenant.  If the covenants state that all cars must be parked in garages, but an owner moves into an association in which almost everybody is allowed to park on the driveway, then it would be reasonable for the owner to rely on this lack of enforcement and proceed to park on his or her driveway.  The board might then be “estopped” from an attempt to enforce the restriction as it has allowed everyone else to break it.  Unlike waiver (which is a voluntary and known relinquishment of its rights) estoppel may not necessarily be intended by the board.  In the real world of association living, it is not always clear, obvious, or known to the board when owners violate a restriction, and there are degrees of violation that may be tolerated under some circumstances.  Therefore an owner who attempts to rely on this defense will have a considerable burden to prove that the association’s conduct is inconsistent with enforcement.   In addition, since the board has a fiduciary duty to enforce the covenants and has no legal authority to waive them, it is difficult for an owner to demonstrate that he or she “reasonably” relied upon such waiver.  

4. Laches.  This defense is similar to estoppel, but asserts that the board waited too long to enforce the covenants, and the owner relied upon this delay.  For example, if you decided to build out your unit into the common elements and appropriate a portion of the common property as your own, the board cannot simply look the other way for an unreasonable period of time.  If the board does not take action until after the work is complete, and you have already invested a substantial amount of money making the improvements, you may be able to show that enforcement of the covenants would be unfair.  For this reason, the board must take quick action to enforce its governing documents or it may forever lose the ability to enforce them  
   

5. Change of Circumstances.  This defense is powerfully effective although little understood.  Because covenants exist from generation to generation, societal changes and changes to the neighborhood can render the covenants meaningless or unfair.  One of the most striking examples of this is the rapid increase in the number of persons engaging in home business and telecommuting.  Traditional covenants that prohibit non-residential uses of the property are coming under attack because they were written at a time when home businesses were not commonplace.  Likewise, racially discriminatory rules, covenants that restrict occupancy to persons related in a nuclear family, or provisions which require allegiance to certain political or religious beliefs, are no longer enforceable.  

In summary, then, you are not the proud owner of some dirt, clay, wood and metal (like the owner of a single family home).  What you own is some air space, and whether or not you know it, you also own a comprehensive and complicated set of rights, regulations, and obligations that go with it.  Now that you know what are the obligations of membership in a condominium, you must decide whether you will accept them.  If you are unwilling or unable to conform to the requirements of a unit owner, you may want to consider selling that air space to somebody else.